UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
x
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
FOR
THE QUARTERLY PERIOD ENDED DECEMBER 31, 2008
OR
o
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 1-8359
NEW
JERSEY RESOURCES CORPORATION
(Exact
name of registrant as specified in its charter)
New
Jersey
|
|
22-2376465
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
Number)
|
|
|
|
1415
Wyckoff Road, Wall, New Jersey 07719
|
|
732-938-1480
|
(Address
of principal
executive
offices)
|
|
(Registrant’s
telephone number,
including
area code)
|
|
Securities
registered pursuant to Section 12 (b) of the
Act:
|
Common
Stock - $2.50 Par Value
|
|
New
York Stock Exchange
|
(Title
of each class)
|
|
(Name
of each exchange on which
registered)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes:
x
No:
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated, or a smaller reporting company. See
definition of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer:
x
Accelerated
filer:
o
Non-accelerated
filer:
o
Smaller
reporting company:
o
(Do
not check if a smaller
reporting
company)
|
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act)
Yes:
o
No:
x
The number
of shares outstanding of $2.50 par value Common Stock as of February 4, 2009
was
42,318,558.
NEW
JERSEY RESOURCES CORPORATION
Part
I
Page
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53
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NEW
JERSEY RESOURCES CORPORATION
Part
I
INFO
RMATION CONCERNING FORWARD-LOOKING
STATEMENTS
|
Certain
statements contained in this report, including, without limitation, statements
as to management expectations and beliefs presented in Part I, Item 2.
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” Part I, Item 3. “Quantitative and Qualitative Disclosures about
Market Risk,” Part II, Item I. “Legal Proceedings” and in the notes to the
financial statements are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements can
also be identified by the use of forward-looking terminology such as “may,”
“intend,” “expect,” “believe” or “continue” or comparable terminology and are
made based upon management’s expectations and beliefs concerning future
developments and their potential effect upon New Jersey Resources Corporation
(NJR or the Company). There can be no assurance that future developments will be
in accordance with management’s expectations or that the effect of future
developments on the Company will be those anticipated by
management.
The
Company cautions readers that the assumptions that form the basis for
forward-looking statements regarding customer growth, customer usage, financial
condition, results of operations, cash flows, capital requirements, market risk
and other matters for fiscal 2009 and thereafter include many factors that are
beyond the Company’s ability to control or estimate precisely, such as estimates
of future market conditions, the behavior of other market participants and
changes in the debt and equity capital markets. The factors that could cause
actual results to differ materially from NJR’s expectations include, but are not
limited to, those discussed in Risk Factors in Item 1A, as well as the
following:
Ÿ
|
weather
and economic conditions;
|
Ÿ
|
demographic
changes in the New Jersey Natural Gas (NJNG) service
territory;
|
Ÿ
|
the
rate of NJNG customer growth;
|
Ÿ
|
volatility
of natural gas commodity prices and its impact on customer usage, cash
flow, NJR Energy Services’ (NJRES) operations and on the Company’s risk
management efforts;
|
Ÿ
|
changes
in rating agency requirements and/or credit ratings and their effect on
availability and cost of capital to the Company;
|
Ÿ
|
continued
volatility or seizure of the credit markets that would result in the
decreased availability and access to credit at NJR to fund and support
physical gas inventory purchases and other working capital needs at NJRES,
and all other non-regulated subsidiaries, as well as negatively affect
access to the commercial paper market and other short-term financing
markets at NJNG to allow it to fund its commodity purchases and meet its
short-term obligations as they come due;
|
Ÿ
|
the
impact to the asset values and funding obligations of NJR’s pension and
postemployment benefit plans as a result of a continuing downturn in the
financial markets;
|
Ÿ
|
increases
in borrowing costs associated with variable-rate debt;
|
Ÿ
|
commercial
and wholesale credit risks, including creditworthiness of customers and
counterparties;
|
Ÿ
|
the
ability to obtain governmental approvals and/or financing for the
construction, development and operation of certain non-regulated energy
investments;
|
Ÿ
|
risks
associated with the management of the Company’s joint ventures and
partnerships;
|
Ÿ
|
the
impact of governmental regulation (including the regulation of
rates);
|
Ÿ
|
conversion
activity and other marketing efforts;
|
Ÿ
|
actual
energy usage of NJNG’s customers;
|
Ÿ
|
the
pace of deregulation of retail gas markets;
|
Ÿ
|
access
to adequate supplies of natural gas;
|
Ÿ
|
the
regulatory and pricing policies of federal and state regulatory
agencies;
|
Ÿ
|
the
ultimate outcome of pending regulatory proceedings, including the possible
expiration of the Conservation Incentive Program (CIP);
|
Ÿ
|
changes
due to legislation at the federal and state level;
|
Ÿ
|
the
availability of an adequate number of appropriate counterparties in the
wholesale energy trading market;
|
Ÿ
|
sufficient
liquidity in the wholesale energy trading market and continued access to
the capital markets;
|
Ÿ
|
the
disallowance of recovery of environmental-related expenditures and other
regulatory changes;
|
Ÿ
|
environmental-related
and other litigation and other uncertainties;
|
Ÿ
|
the
effects and impacts of inflation on NJR and its subsidiaries
operations;
|
Ÿ
|
change
in accounting pronouncements issued by the appropriate standard setting
bodies; and
|
Ÿ
|
terrorist
attacks or threatened attacks on energy facilities or unrelated energy
companies.
|
While
the Company periodically reassesses material trends and uncertainties affecting
the Company’s results of operations and financial condition in connection with
its preparation of management’s discussion and analysis of results of operations
and financial condition contained in its Quarterly and Annual Reports, the
Company does not, by including this statement, assume any obligation to review
or revise any particular forward-looking statement referenced herein in light of
future events.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
1. FINANCIAL
STATEMENTS
|
CO
NDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
Three Months Ended
December 31,
|
(Thousands, except per share data)
|
2008
|
2007
|
|
|
|
|
|
|
OPERATING
REVENUES
|
$801,304
|
|
$811,138
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
Gas
purchases
|
698,145
|
|
684,694
|
|
|
Operation
and maintenance
|
36,408
|
|
32,179
|
|
|
Regulatory
rider expenses
|
13,561
|
|
12,165
|
|
|
Depreciation
and amortization
|
7,361
|
|
9,403
|
|
|
Energy
and other taxes
|
23,633
|
|
18,160
|
|
|
Total
operating expenses
|
779,108
|
|
756,601
|
|
|
OPERATING
INCOME
|
22,196
|
|
54,537
|
|
|
Other
income
|
858
|
|
1,528
|
|
|
Interest
expense, net
|
6,547
|
|
7,810
|
|
|
INCOME
BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF AFFILIATES
|
16,507
|
|
48,255
|
|
|
Income
tax provision
|
5,245
|
|
18,494
|
|
|
Equity
in earnings of affiliates, net of tax
|
514
|
|
424
|
|
|
NET
INCOME
|
$11,776
|
|
$
30,185
|
|
|
|
|
|
|
|
|
EARNINGS
PER COMMON SHARE
|
|
|
|
|
|
BASIC
|
$0.28
|
|
$0.72
|
|
|
DILUTED
|
$0.28
|
|
$0.72
|
|
|
DIVIDENDS
PER COMMON SHARE
|
$0.31
|
|
$0.27
|
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
|
|
|
|
|
BASIC
|
42,170
|
|
41,678
|
|
|
DILUTED
|
42,495
|
|
41,928
|
|
|
See Notes
to Unaudited Condensed Consolidated Financial Statements
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
1. FINANCIAL STATEMENTS (Continued)
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
|
Three
Months Ended
|
|
|
|
December
31,
|
|
(Thousands)
|
|
2008
|
|
|
2007
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net
income
|
|
|
$
11,776
|
|
|
|
$
30,185
|
|
Adjustments
to reconcile net income to cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
Unrealized
loss on derivative instruments
|
|
|
7,086
|
|
|
|
3,080
|
|
Depreciation
and amortization
|
|
|
7,581
|
|
|
|
9,478
|
|
Allowance
for funds (equity) used during construction
|
|
|
—
|
|
|
|
(373
|
)
|
Deferred
income taxes
|
|
|
(4,794
|
)
|
|
|
8,549
|
|
Manufactured
gas plant remediation costs
|
|
|
(5,875
|
)
|
|
|
(4,041
|
)
|
Equity
in earnings from investments, net of distributions
|
|
|
(514
|
)
|
|
|
1,512
|
|
Cost
of removal – asset retirement obligations
|
|
|
(19
|
)
|
|
|
(177
|
)
|
Contributions
to employee benefit plans
|
|
|
(182
|
)
|
|
|
(150
|
)
|
Changes
in:
|
|
|
|
|
|
|
|
|
Components
of working capital
|
|
|
(41,153
|
)
|
|
|
(57,844
|
)
|
Other
noncurrent assets
|
|
|
(38,448
|
)
|
|
|
2,423
|
|
Other
noncurrent liabilities
|
|
|
27,582
|
|
|
|
833
|
|
Cash
flows used in operating activities
|
|
|
(36,960
|
)
|
|
|
(6,525
|
)
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Expenditures
for
|
|
|
|
|
|
|
|
|
Utility
plant
|
|
|
(18,207
|
)
|
|
|
(13,526
|
)
|
Real
estate properties and other
|
|
|
(145
|
)
|
|
|
(168
|
)
|
Cost
of removal
|
|
|
(1,462
|
)
|
|
|
(1,208
|
)
|
Investments
in equity investees and other
|
|
|
(21,000
|
)
|
|
|
(2,998
|
)
|
Withdrawal
from restricted cash construction fund
|
|
|
4,200
|
|
|
|
—
|
|
Cash
flows used in investing activities
|
|
|
(36,614
|
)
|
|
|
(17,900
|
)
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
|
6,196
|
|
|
|
4,192
|
|
Tax
benefit from stock options exercised
|
|
|
972
|
|
|
|
547
|
|
Proceeds
from sale-leaseback transaction
|
|
|
6,268
|
|
|
|
7,485
|
|
Payments
of long-term debt
|
|
|
(30,973
|
)
|
|
|
(937
|
)
|
Purchases
of treasury stock
|
|
|
(1,126
|
)
|
|
|
(10,071
|
)
|
Payments
of common stock dividends
|
|
|
(11,776
|
)
|
|
|
(10,633
|
)
|
Net
proceeds from short-term debt
|
|
|
87,350
|
|
|
|
32,547
|
|
Cash
flows from financing activities
|
|
|
56,911
|
|
|
|
23,130
|
|
Change
in cash and temporary investments
|
|
|
(16,663
|
)
|
|
|
(1,295
|
)
|
Cash
and temporary investments at beginning of period
|
|
|
42,626
|
|
|
|
5,140
|
|
Cash
and temporary investments at end of period
|
|
|
$
25,963
|
|
|
|
$
3,845
|
|
CHANGES
IN COMPONENTS OF WORKING CAPITAL
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
$(96,726
|
)
|
|
|
$(194,958
|
)
|
Inventories
|
|
|
108,055
|
|
|
|
33,940
|
|
Underrecovered
gas costs
|
|
|
25,017
|
|
|
|
(18,883
|
)
|
Gas
purchases payable
|
|
|
(43,369
|
)
|
|
|
96,217
|
|
Prepaid
and accrued taxes, net
|
|
|
43,830
|
|
|
|
31,043
|
|
Accounts
payable and other
|
|
|
(6,541
|
)
|
|
|
(1,017
|
)
|
Restricted
broker margin accounts
|
|
|
(51,882
|
)
|
|
|
(881
|
)
|
Customers’
credit balances and deposits
|
|
|
(24,957
|
)
|
|
|
7,299
|
|
Other
current assets
|
|
|
5,420
|
|
|
|
(10,604
|
)
|
Total
|
|
|
$(41,153
|
)
|
|
|
$
(57,844
|
)
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOWS INFORMATION
|
|
|
|
|
|
|
|
|
Cash
paid for
|
|
|
|
|
|
|
|
|
Interest
(net of amounts capitalized)
|
|
|
$4,185
|
|
|
|
$6,434
|
|
Income
taxes
|
|
|
$1,427
|
|
|
|
$2,661
|
|
See
Notes to Unaudited Condensed Consolidated Financial Statements
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
1. FINANCIAL STATEMENTS (Continued)
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited)
ASSETS
|
|
December
31,
|
|
|
September 30,
|
|
(Thousands)
|
|
2008
|
|
|
2008
|
|
|
|
|
|
PROPERTY,
PLANT AND EQUIPMENT
|
|
|
|
|
|
|
Utility
plant, at cost
|
|
|
$1,384,312
|
|
|
|
$1,366,237
|
|
Real
estate properties and other, at cost
|
|
|
29,953
|
|
|
|
29,808
|
|
|
|
|
1,414,265
|
|
|
|
1,396,045
|
|
Accumulated
depreciation and amortization
|
|
|
(385,879
|
)
|
|
|
(378,759
|
)
|
Property,
plant and equipment, net
|
|
|
1,028,386
|
|
|
|
1,017,286
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
Cash
and temporary investments
|
|
|
25,963
|
|
|
|
42,626
|
|
Customer
accounts receivable
|
|
|
|
|
|
|
|
|
Billed
|
|
|
258,827
|
|
|
|
227,132
|
|
Unbilled
revenues
|
|
|
75,008
|
|
|
|
9,417
|
|
Allowance
for doubtful accounts
|
|
|
(5,140
|
)
|
|
|
(4,580
|
)
|
Regulatory
assets
|
|
|
21,080
|
|
|
|
51,376
|
|
Gas
in storage, at average cost
|
|
|
370,488
|
|
|
|
478,549
|
|
Materials
and supplies, at average cost
|
|
|
5,116
|
|
|
|
5,110
|
|
Prepaid
state taxes
|
|
|
9,641
|
|
|
|
37,271
|
|
Derivatives,
at fair value
|
|
|
224,123
|
|
|
|
208,703
|
|
Broker
margin account
|
|
|
74,884
|
|
|
|
41,277
|
|
Other
|
|
|
12,517
|
|
|
|
12,785
|
|
Total
current assets
|
|
|
1,072,507
|
|
|
|
1,109,666
|
|
|
|
|
|
|
|
|
|
|
NONCURRENT
ASSETS
|
|
|
|
|
|
|
|
|
Investments
in equity investees and other
|
|
|
139,970
|
|
|
|
115,981
|
|
Regulatory
assets
|
|
|
407,014
|
|
|
|
340,670
|
|
Derivatives,
at fair value
|
|
|
27,226
|
|
|
|
24,497
|
|
Restricted
cash construction fund
|
|
|
—
|
|
|
|
4,200
|
|
Other
|
|
|
12,284
|
|
|
|
13,092
|
|
Total
noncurrent assets
|
|
|
586,494
|
|
|
|
498,440
|
|
Total
assets
|
|
|
$2,687,387
|
|
|
|
$2,625,392
|
|
See Notes
to Unaudited Condensed Consolidated Financial Statements
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
1. FINANCIAL STATEMENTS (Continued)
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited)
CAPITALIZATION
AND LIABILITIES
|
|
December
31,
|
|
|
September 30,
|
|
(Thousands)
|
|
2008
|
|
|
2008
|
|
|
|
|
|
CAPITALIZATION
|
|
|
|
|
|
|
Common
stock equity
|
|
|
$
736,496
|
|
|
|
$
726,958
|
|
Long-term
debt
|
|
|
460,708
|
|
|
|
455,117
|
|
Total
capitalization
|
|
|
1,197,204
|
|
|
|
1,182,075
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Current
maturities of long-term debt
|
|
|
30,844
|
|
|
|
60,119
|
|
Short-term
debt
|
|
|
265,550
|
|
|
|
178,200
|
|
Gas
purchases payable
|
|
|
272,147
|
|
|
|
315,516
|
|
Accounts
payable and other
|
|
|
43,375
|
|
|
|
61,735
|
|
Dividends
payable
|
|
|
13,099
|
|
|
|
11,776
|
|
Deferred
and accrued taxes
|
|
|
27,491
|
|
|
|
24,720
|
|
New
Jersey clean energy program
|
|
|
12,513
|
|
|
|
3,056
|
|
Derivatives,
at fair value
|
|
|
204,174
|
|
|
|
146,320
|
|
Broker
margin account
|
|
|
10,797
|
|
|
|
29,072
|
|
Customers’
credit balances and deposits
|
|
|
38,500
|
|
|
|
63,455
|
|
Total
current liabilities
|
|
|
918,490
|
|
|
|
893,969
|
|
|
|
|
|
|
|
|
|
|
NONCURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Deferred
income taxes
|
|
|
232,038
|
|
|
|
239,703
|
|
Deferred
investment tax credits
|
|
|
7,112
|
|
|
|
7,192
|
|
Deferred
revenue
|
|
|
8,910
|
|
|
|
9,090
|
|
Derivatives,
at fair value
|
|
|
20,315
|
|
|
|
25,016
|
|
Manufactured
gas plant remediation
|
|
|
120,230
|
|
|
|
120,730
|
|
Postemployment
employee benefit liability
|
|
|
53,846
|
|
|
|
52,272
|
|
Regulatory
liabilities
|
|
|
61,820
|
|
|
|
63,419
|
|
New
Jersey clean energy program
|
|
|
34,030
|
|
|
|
—
|
|
Asset
retirement obligation
|
|
|
24,768
|
|
|
|
24,416
|
|
Other
|
|
|
8,624
|
|
|
|
7,510
|
|
Total
noncurrent liabilities
|
|
|
571,693
|
|
|
|
549,348
|
|
Commitments
and contingent liabilities (
Note
13
)
|
|
|
|
|
|
|
|
|
Total
capitalization and liabilities
|
|
|
$2,687,387
|
|
|
|
$2,625,392
|
|
See Notes
to Unaudited Condensed Consolidated Financial Statements
NEW
JERSEY RESOURCES CORPORATION
NO
TES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
|
|
The
accompanying unaudited condensed consolidated financial statements have been
prepared by New Jersey Resources Corporation (NJR or the Company) in accordance
with the rules and regulations of the Securities and Exchange Commission (SEC).
The September 30, 2008 balance sheet data is derived from the audited financial
statements of the Company. These unaudited condensed consolidated financial
statements should be read in conjunction with the financial statements and the
notes thereto included in NJR’s 2008 Annual Report on Form 10-K.
The
unaudited condensed consolidated financial statements include the accounts of
NJR and its subsidiaries, New Jersey Natural Gas Company (NJNG), NJR Energy
Services Company (NJRES), NJR Retail Holdings Corporation (Retail Holdings), NJR
Energy Investment Corporation (NJREI) and NJR Service Company (NJR Service).
Intercompany transactions and accounts have been eliminated. NJREI’s primary
subsidiaries are NJR Energy Corporation (NJR Energy) and NJR Steckman Ridge
Storage Company. NJR Energy invests primarily in energy-related ventures through
its subsidiary, NJNR Pipeline Company (Pipeline), which holds the Company’s 5.53
percent ownership interest in Iroquois Gas and Transmission System, L.P.
(Iroquois). NJR Steckman Ridge Storage Company holds the Company’s 50 percent
combined interest in Steckman Ridge GP, LLC and Steckman Ridge, LP
(collectively, Steckman Ridge), a natural gas storage facility that was acquired
and is being developed with a partner in western Pennsylvania. Retail Holdings’
two principal subsidiaries are NJR Home Services Company (NJRHS) and Commercial
Realty & Resources Corporation (CR&R).
In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments necessary for a fair
presentation of the results of the interim periods presented. These adjustments
are of a normal and recurring nature. Because of the seasonal nature
of NJR’s utility and wholesale energy services operations, in addition to other
factors, the financial results for the interim periods presented are not
indicative of the results that are to be expected for the fiscal year ended
September 30, 2009.
Customer
Accounts Receivable
Customer
accounts receivable include outstanding billings from the following subsidiaries
as of:
|
|
December
31,
|
|
|
September
30,
|
|
(Thousands)
|
|
2008
|
|
|
2008
|
|
NJNG
|
|
|
$
62,824
|
|
|
|
24
|
%
|
|
|
$
21,398
|
|
|
|
9
|
%
|
NJRES
|
|
|
188,135
|
|
|
|
73
|
|
|
|
198,902
|
|
|
|
88
|
|
NJRHS
and other
|
|
|
7,868
|
|
|
|
3
|
|
|
|
6,832
|
|
|
|
3
|
|
Total
|
|
|
$258,827
|
|
|
|
100
|
%
|
|
|
$227,132
|
|
|
|
100
|
%
|
Accounts
receivable related to estimated unbilled revenues and allowance for doubtful
accounts are associated with NJNG only.
Gas
in Storage
The
following table summarizes Gas in storage by company as of:
|
|
December
31,
|
|
|
September
30,
|
|
|
|
2008
|
|
|
2008
|
|
($
in thousands)
|
|
Assets
|
|
|
Bcf
|
|
|
Assets
|
|
|
Bcf
|
|
NJNG
|
|
|
$163,808
|
|
|
|
19.4
|
|
|
|
$189,828
|
|
|
|
22.1
|
|
NJRES
|
|
|
206,680
|
|
|
|
30.6
|
|
|
|
288,721
|
|
|
|
27.6
|
|
Total
|
|
|
$370,488
|
|
|
|
50.0
|
|
|
|
$478,549
|
|
|
|
49.7
|
|
NEW
JERSEY RESOURCES CORPORATION
Part
I
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
New
Accounting Standards
Recently
Adopted
Effective
October 1, 2008 NJR adopted Statement of Financial Accounting Standards (SFAS)
No. 157,
Fair Value
Measurements
(SFAS 157) for its financial assets and liabilities, with
the exception of its pension assets. NJR will apply the provisions of SFAS 157
to its pension assets and non-financial assets and liabilities that are not
measured at least annually prospectively on October 1, 2009. SFAS 157 defines
fair value as the amount that would be exchanged to sell an asset or transfer a
liability in an orderly transaction between market participants, and establishes
a fair value hierarchy of market and unobservable data that is used to develop
pricing assumptions. The adoption of SFAS 157 did not have a material impact on
NJR’s financial position or results of operations. See
Note 4, Fair Value
Measurements
, for more information on the adoption of SFAS 157, as well
as the required disclosures.
On April
10, 2007, the FASB issued FASB Staff Position No. FIN 39-1 (FSP FIN 39-1),
Amendment of FASB Interpretation No. 39. FSP FIN 39-1 provides additional
guidance for parties that are subject to master netting arrangements.
Specifically, for transactions that are executed with the same counterparty, it
permits companies to offset the fair values of amounts recognized for
derivatives as well as the related fair value amounts of cash collateral
receivables or payables, when certain conditions apply. FSP FIN 39-1 became
effective for fiscal years beginning after November 15, 2007. As NJR’s policy
has been to present its derivative positions and any receivables or payables
with the same counterparty on a gross basis, FSP FIN 39-1 had no impact on its
statement of financial position and results of operations.
Other
Recently Issued Standards
In
February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial
Assets and Financial Liabilities
(SFAS 159). SFAS 159 permits entities to
elect to measure eligible items at fair value as an alternative to hedge
accounting and to mitigate volatility in earnings. A company can elect either
the fair value option according to a pre-existing policy, when the asset or
liability is first recognized, or when it enters into an eligible firm
commitment. Changes in the fair value of assets and liabilities, for which the
Company chooses to apply the fair value option, are reported in earnings at each
reporting date. SFAS 159 also provides guidance on disclosures that are intended
to provide comparability to other companies’ assets and liabilities that have
different measurement attributes and to other companies with similar financial
assets and liabilities. SFAS 159 became effective for NJR as of October 1, 2008;
however, since the Company did not elect the fair value option for any items,
the provisions of SFAS 159 do not impact our results of operations or financial
condition.
On
December 4, 2007, the FASB issued SFAS No. 160,
Non-controlling Interests in
Consolidated Financial Statements
(SFAS 160). SFAS 160 is an amendment of
Accounting Research Bulletin (ARB) No. 51 and was issued to improve the
relevance, comparability and transparency of the financial information that a
reporting entity provides in its consolidated financial statements. This
Statement applies to all entities that prepare consolidated financial
statements, except not-for-profit organizations, but will affect only those
entities that have an outstanding non-controlling interest in one or more
subsidiaries. SFAS 160 clarifies that a non-controlling interest in a subsidiary
is an ownership interest in the consolidated entity that should be reported as
equity in the consolidated financial statements and that a parent company must
recognize a gain or loss in net income when a subsidiary is deconsolidated. SFAS
160 is effective for fiscal years beginning after December 15, 2008, and early
adoption is prohibited. The Company has concluded that this statement will have
no impact on its statement of financial position and results of
operations.
In March
2008, the FASB issued SFAS No. 161,
Disclosures about Derivative
Instruments and Hedging Activities
, (SFAS 161). SFAS 161 requires
enhanced qualitative and quantitative disclosures on the objectives and
accounting for derivatives and related hedging activities, as well as their
impacts on the financial statements. SFAS 161 is effective for fiscal years
and interim periods beginning after November 15, 2008. NJR will adopt SFAS 161
during the second quarter of fiscal year 2009 and is evaluating the effect of
adoption on its footnote disclosures.
NEW
JERSEY RESOURCES CORPORATION
Part
I
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
October
Base Rate Order
As a
result of increases in NJNG’s operation, maintenance and capital costs, on
November 20, 2007, NJNG petitioned the New Jersey Board of Public Utilities
(BPU) to increase base rates for delivery service by approximately $58.4
million, which included a return on NJNG’s equity component of 11.5 percent.
This request was consistent with NJNG’s objectives of providing safe and
reliable service to its customers and earning a market-based return on its
regulated investments.
On
October 3, 2008, the BPU unanimously approved and made effective the settlement
of NJNG’s base rate case. As a result, NJNG received a revenue increase in its
base rates of $32.5 million, which is inclusive of an approximate $13 million
impact of a change to the Conservation Incentive Program (CIP) baseline usage
rate, received an allowed return on equity component of 10.3 percent, reduced
its depreciation expense component from 3.0 percent to 2.34 percent and reduced
its annual depreciation expense by $1.6 million as a result of the
amortization of previously recovered asset retirement obligations.
Conservation
Incentive Program (CIP)
The CIP
allows NJNG to recover utility gross margin variations related to both weather
and customer usage. Recovery of such utility gross margin variations (filed for
annually and recovered one year following the end of the CIP usage year) is
subject to additional conditions, including an earnings test and an evaluation
of Basic Gas Supply Service (BGSS) related savings.
In May
2008, NJNG filed its Petition for the Annual Review of its CIP Program for
recoverable CIP amounts for fiscal 2008, requesting an additional $6.8 million
and approval to modify its CIP recovery rates effective October 1, 2008. The
additional amount brought the total recovery requested to $22.4 million. On
October 3, 2008, the BPU approved the CIP petition on a provisional basis,
effective the date of the Board Order. It is anticipated that NJNG will
file a petition in the spring of 2009 to extend its CIP or implement a similar
mechanism on a permanent basis, to be effective October 1, 2009.
In
conjunction with the CIP, NJNG incurs costs related to its obligation to fund
programs that promote customer conservation efforts during the three-year term
of the CIP pilot program. As of December 31, 2008, NJNG had a remaining
liability of $662,000 related to these programs.
Basic
Gas Supply Service (BGSS)
BGSS is a
BPU approved rate mechanism designed to allow for the recovery of natural gas
commodity costs. NJNG periodically adjusts its periodic BGSS rates for its
residential and small commercial customers to reflect increases or decreases in
the cost of natural gas sold to customers.
In May
2008, NJNG filed for an increase to the periodic BGSS factor to be effective
October 1, 2008, that would increase an average residential heating customer’s
bill by approximately 18 percent due to an increase in the price of wholesale
natural gas. Subsequent to the time of the filing, wholesale natural gas prices
moderated, and on September 22, 2008, NJNG, the Staff of the BPU and the
Department of the Public Advocate, Division of Rate Counsel (Rate Counsel)
signed an agreement for an increase to the periodic BGSS factor that would
increase an average residential heating customer’s bill by approximately 8.9
percent. On October 3, 2008, the BPU approved the BGSS increase on a provisional
basis, effective the date of the Board Order.
On
December 17, 2008, NJNG provided notice that it would implement a $30 million
BGSS-related rate credit that will lower sales customers’ bills in January and
February 2009. This rate credit was due primarily to a decline in wholesale
commodity costs subsequent to the October 2008 BGSS price change.
NEW
JERSEY RESOURCES CORPORATION
Part
I
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Other
Incentive Programs
NJNG is
eligible to receive financial incentives for reducing BGSS costs through a
series of utility gross margin-sharing programs that include off-system sales,
capacity release, storage incentive and financial risk management (FRM)
programs. In October 2007, the BPU reduced the sharing percentage of the margin
generated by the FRM program retained by NJNG from 20 percent to 15 percent
effective November 1, 2007. In October 2008, the Board’s base rate order
provided for the extension of the incentive programs through October 31, 2011,
along with a moderate expansion of the storage incentive and FRM
programs.
Societal
Benefits Charge (SBC) and Weather Normalization Clause (WNC)
The SBC
is comprised of three primary components: a Universal Service Fund rider (USF),
a Manufactured Gas Plant (MGP) Remediation Adjustment (RA), and the New Jersey
Clean Energy Program (NJCEP). In February 2008, NJNG filed an application
regarding its SBC proposing no change to the rates previously approved in
October 2007 (February 2008 SBC filing). On January 27, 2009, NJNG filed an
application regarding its SBC to increase its RA factor and its NJCEP factor
while maintaining its effective rate on USF (January 2009 SBC filing). The
January 2009 SBC filing is subject to BPU staff and Rate Counsel review and must
be approved by the BPU prior to implementing the new SBC rates.
USF
Through
the USF, eligible customers receive a credit toward their utility bill. The
credits applied to eligible customers are recovered through the USF rider in the
SBC. NJNG recovers carrying costs on deferred USF balances.
In June
2008, the natural gas utilities in the State of New Jersey collectively filed
with the BPU to increase the statewide USF recovery rate effective October 1,
2008. In the BPU’s October 21, 2008 Order, the USF increase was approved on a
provisional basis, effective October 24, 2008 and it also approved interest on
USF deferred balances at the Treasury Constant Maturity 2-year rate, plus 60
basis points, net of tax, with the rate changing on a monthly basis. NJNG
believes the increase has a negligible impact on customers.
MGP
In
October 2007, the BPU approved $14.7 million in eligible costs to be recovered
annually for MGP remediation expenditures incurred through June 30, 2006.
The February
2008 SBC filing included MGP remediation expenditures incurred through June 30,
2007, resulting in an expected annual recovery of $17.7 million. The January
2009 SBC filing included MGP remediation expenditures incurred through June 30,
2008 resulting in an expected annual recovery of $20.7 million.
New
Jersey Clean Energy Program (NJCEP)
In
October 2008, the BPU released a final Order, updating state utilities’ funding
obligations for NJCEP for the period from January 1, 2009 to December 31, 2012.
NJNG’s share of the total funding requirement of $1.2 billion is $50.8
million. Accordingly, as of December 31, 2008 NJNG recorded the obligation
and a corresponding regulatory asset at a present value of $44.3 in the
Unaudited Condensed Consolidated Balance Sheets. NJNG’s annual obligation
gradually increases from $10.3 million in fiscal 2009 to $15.9 million in fiscal
2012. As of December 31, 2008, NJNG also has a $2.2 million obligation remaining
from the January 1, 2005 to December 31, 2008 period. The January 2009 SBC
filing included an increase to the NJCEP factor. The proposed factor is expected
to recover $12.9 million annually.
WNC
As of
December 31, 2008, NJNG has a $629,000 unrecovered balance related to gross
margin variations incurred during the fiscal 2006 winter period. On October 3,
2008, the BPU provisionally approved a decrease to NJNG’s WNC rate, effective
the date of the Board Order, to fully recover its remaining WNC
balance.
NEW
JERSEY RESOURCES CORPORATION
Part
I
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Economic
Stimulus
On
January 20, 2009, NJNG filed two petitions with the BPU seeking approval to
implement programs designed to both stimulate the state and local economy
through infrastructure investments and encourage energy efficiency. If approved,
the Accelerated Infrastructure Investment Program (AIP) will allow NJNG to
accelerate $70.8 million of previously planned infrastructure projects,
maintaining safe and reliable service to NJNG’s customers while increasing
workforce development. Proposed as a 2-year program, the AIP will be funded
through an annual adjustment to customers’ base rates. The second filing, for an
Energy Efficiency (EE) Program and associated cost recovery mechanism, requests
BPU approval to implement various programs to encourage energy efficiency for
residential and commercial customers. NJNG proposed to recover the EE costs of
approximately $22.9 million over a 4-year period through a clause mechanism
similar to the SBC. Both programs include the recovery of NJNG’s overall cost of
capital.
Regulatory
Assets & Liabilities
The
Company had the following regulatory assets, all related to NJNG, on the
Unaudited Condensed Consolidated Balance Sheets:
(Thousands)
|
December
31,
2008
|
September
30,
2008
|
|
Recovery
Period
|
|
Regulatory
assets–current
|
|
|
|
|
|
|
|
|
|
Underrecovered
gas costs
|
|
|
$
2,977
|
|
|
|
$
27,994
|
|
|
Less
than one year
(1)
|
|
WNC
|
|
|
629
|
|
|
|
919
|
|
|
Less
than one year
(2)
|
|
CIP
|
|
|
17,474
|
|
|
|
22,463
|
|
|
Less
than one year
(3)
|
|
Total
current
|
|
|
$
21,080
|
|
|
|
$
51,376
|
|
|
|
|
Regulatory
assets–noncurrent
|
|
|
|
|
|
|
|
|
|
|
|
Remediation
costs (Notes 2 and 13)
|
|
|
|
|
|
|
|
|
|
|
|
Expended,
net of recoveries
|
|
|
$
91,346
|
|
|
|
$
92,164
|
|
|
(4
)
|
Liability
for future expenditures
|
|
|
120,230
|
|
|
|
120,730
|
|
|
(5
)
|
CIP
|
|
|
1,275
|
|
|
|
2,397
|
|
|
(6
)
|
Deferred
income and other taxes
|
|
|
12,624
|
|
|
|
12,726
|
|
|
Various
(7)
|
|
Derivatives
(Note 3)
|
|
|
77,528
|
|
|
|
49,610
|
|
|
(8
)
|
Postemployment
benefit costs (Note 10)
|
|
|
52,472
|
|
|
|
52,519
|
|
|
(9
)
|
SBC/Clean
Energy
|
|
|
51,539
|
|
|
|
10,524
|
|
|
Various
(10)
|
|
Total
noncurrent
|
|
|
$407,014
|
|
|
|
$340,670
|
|
|
|
|
|
(1)
|
Recoverable,
subject to BPU approval, through BGSS, without
interest.
|
(2)
|
Recoverable
as a result of BPU approval in October 2008, without interest. This
balance reflects the net results from winter period of fiscal 2006. No new
WNC activity has been recorded since October 1, 2006 due to the existence
of the CIP.
|
(3)
|
Recoverable
or refundable, subject to BPU annual approval, without interest. Balance
includes approximately $6.6 million relating to the weather component of
the calculation and approximately $10.9 million relating to the customer
usage component of the calculation. Recovery from customers is designed to
be one year from date of rate approval by the BPU.
|
(4)
|
Recoverable,
subject to BPU approval, with interest over rolling 7-year
periods.
|
(5)
|
Estimated
future expenditures. Recovery will be requested when actual expenditures
are incurred (see
Note
13. Commitments and Contingent Liabilities – Legal
Proceedings).
|
(6)
|
Recoverable
or refundable, subject to BPU annual approval, without interest. Balance
includes approximately $523,000 relating to the weather component of the
calculation and approximately $752,000 relating to the customer usage
component of the calculation.
|
(7)
|
Recoverable
without interest, subject to BPU approval.
|
(8)
|
Recoverable,
subject to BPU approval, through BGSS, without
interest.
|
(9)
|
Recoverable
or refundable, subject to BPU approval, without interest. Includes
unrecognized service costs recorded in accordance with SFAS No. 158,
Employers’ Accounting for
Defined Benefit Pension and Other Postemployment Plans
that NJNG
has determined are recoverable in rates charged to customers (see
Note 10. Employee Benefit
Plans).
|
(10)
|
Recoverable
with interest, subject to BPU
approval.
|
If there
are any changes in regulatory positions that indicate the recovery of regulatory
assets is not probable, the related cost would be charged to income in the
period of such determination.
NEW
JERSEY RESOURCES CORPORATION
Part
I
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
The
Company had the following regulatory liabilities, all related to NJNG, on the
Unaudited Condensed Consolidated Balance Sheets:
(Thousands)
|
December
31,
2008
|
September
30,
2008
|
Regulatory
liabilities–noncurrent
|
|
|
|
|
Cost
of removal obligation
(1)
|
$61,820
|
|
$63,419
|
|
Total-noncurrent
|
$61,820
|
|
$63,419
|
|
(1)
|
NJNG
accrues and collects for cost of removal in rates. This liability
represents collections in excess of actual expenditures. Approximately
$21.3 million, including accretion of $370,000 for the three months ended
December 31, 2008, of regulatory assets relating to asset retirement
obligations have been netted against the cost of removal obligation as of
December 31, 2008 (see
Note 11. Asset Retirement
Obligations).
|
The
Company and its subsidiaries are subject to market risk due to fluctuations in
the price of natural gas. To manage the risk of such fluctuations, the Company
and its subsidiaries enter into financial futures and forward contracts, option
agreements and swap agreements to economically hedge future purchases and sales
of natural gas. Due to the nature of these arrangements, they qualify as
derivatives in accordance with FAS 133.
Effective
October 1, 2007, the Company changed the treatment of its physical commodity
contracts at NJRES, such that the changes in fair value of new
contracts are included in earnings, and are not accounted for using the
“normal purchase normal sales” (normal) scope exception of SFAS 133. As well,
effective October 1, 2008, due to changes in the Company’s ability to assert
physical delivery, the Company is no longer treating physical commodity
contracts executed prior to October 1, 2007 as normal. Therefore, all NJRES
physical commodity contracts are accounted for at fair value in the Unaudited
Condensed Consolidated Balance Sheets, with changes in fair value included as a
component of gas purchases in the Unaudited Condensed Consolidated Statements of
Income. All physical commodity contracts at NJNG and NJR Energy continue to be
designated as normal and accounted for under accrual accounting.
All of
the Company’s financial derivative instruments (financial futures, options or
swaps), are accounted for in accordance with SFAS 133 and recorded at fair
value in the Unaudited Condensed Consolidated Balance Sheets. Changes in fair
value are recorded as a component of Gas purchases or Operating revenues, for
NJRES and NJR Energy, respectively, in the Unaudited Condensed Consolidated
Statements of Income as unrealized gains or losses. Changes in fair value of
NJNG’s financial derivative instruments are recorded as a component of
Regulatory assets or liabilities in the Unaudited Condensed Consolidated Balance
Sheets, as these amounts will be recovered through future BGSS amounts as an
increase or reduction to the cost of natural gas in NJNG’s tariff.
The
Company enters into financial derivative instruments as an economic hedge of the
purchase and sale of natural gas. These derivatives are marked at fair value and
recognized in the Unaudited Condensed Consolidated Statements of Income as a
component of Gas purchases, or Operating revenues, as appropriate, in the
current period. However, the change in value of the actual physical natural gas
purchase is recognized in income only when that natural gas has been sold, which
is normally in a future period. Therefore, mismatches between the timing of
recognizing gains or losses on the derivative instruments and the timing of the
actual sale of the natural gas that is being economically hedged creates
volatility in the results of NJR, although the Company’s true economic results
are unaffected.
Generally,
exchange-traded futures contracts require a deposit of margin cash, the amount
of which is subject to change based on market price movements and in accordance
with exchange rules. The Company maintains broker margin accounts for NJNG and
NJRES. The balances are as follows:
(Thousands)
|
December
31,
2008
|
|
September
30,
2008
|
|
NJNG
broker margin deposit
|
$
|
74,884
|
|
|
$
|
41,277
|
|
|
NJRES
broker margin (liability)
|
$
|
(10,797
|
)
|
|
$
|
(29,072
|
)
|
|
NEW
JERSEY RESOURCES CORPORATION
Part
I
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
As noted
in Note 1,
General,
NJR adopted SFAS 157
and has applied the provisions to its financial assets and liabilities, which
include financial derivatives, physical commodity contracts qualifying as
derivatives, available for sale securities and other financial assets and
liabilities. SFAS 157 defines and establishes a framework for measuring fair
value. SFAS 157 requires that companies consider assumptions market participants
would make when pricing assets and liabilities that are required to be
recognized at fair value in accordance with previously issued accounting
pronouncements.
SFAS 157
also requires additional disclosures that are intended to convey the reliability
of price inputs used to determine fair value. To facilitate this, SFAS 157
established a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value based on the source of the data used to
develop the price inputs. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities and the
lowest priority to inputs that are based on unobservable market data and include
the following:
|
Level 1
|
Unadjusted
quoted prices for identical assets or liabilities in active markets; NJR’s
Level 1 assets and liabilities include primarily exchange traded financial
derivative contracts and listed equities;
|
|
|
|
|
Level 2
|
Significant
price data, other than Level 1 quotes, that is observed either directly or
indirectly; NJR’s level 2 assets and liabilities include over-the-counter
physical forward commodity contracts and swap contracts
or derivatives that are initially valued using observable quotes and
are subsequently adjusted to include time value, credit risk or estimated
transport pricing components. These additional adjustments are not
considered to be significant to the ultimate recognized
values.
|
|
|
|
|
Level 3
|
Inputs
derived from a significant amount of unobservable market data; these
include NJR’s best estimate of fair value and are derived primarily
through the use of internal valuation methodologies. Certain of NJR’s
physical commodity contracts that are to be delivered to inactively traded
points on a pipeline are included in this
category.
|
NJNG’s,
NJRES’ and NJR Energy’s financial derivatives portfolios can consist of futures,
options and swaps. NJR primarily uses the market approach and its policy is to
use actively quoted market prices when available. The principal market for its
derivative transactions is the natural gas wholesale market, therefore, the
primary source for its price inputs is the New York Mercantile (NYMEX) exchange.
NJRES also uses Natural Gas Exchange (NGX) for Canadian delivery points and
Platts and NYMEX ClearPort for certain over the counter physical forward
commodity contracts. However, NJRES also engages in transactions
which result in transporting natural gas to delivery points for which there is
no actively quoted market price. In these cases, NJRES’ policy is to use the
best information available to determine fair value based on internal pricing
models, which include estimates extrapolated from broker quotes or pricing
services. As of December 31, 2008, less than 1 percent of total fair value of
NJRES’ derivative assets and liabilities was derived using such
inputs.
NJR Energy
uses NYMEX settlement prices to value its long-dated swap contracts. NJR also
has available for sale securities and other financial assets that include listed
equities, mutual funds and money market funds for which there are active
exchange quotes available.
When NJR
determines fair values, we adjust measurements, as needed, for credit risk
associated with counterparties, as well as our own credit risk. NJR determines
these adjustments by using historical default probabilities that correspond to
the applicable Standard and Poor’s issuer ratings, while also taking into
consideration collateral and netting arrangements that serve to mitigate
risk. As of December 31, 2008, NJR further adjusted certain fair values, based
on the change in a market index that tracks the credit default swaps of
investment grade companies, to factor in the current instability in the credit
markets.
NEW
JERSEY RESOURCES CORPORATION
Part
I
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
The
adoption of SFAS 157 did not have a material impact to NJR’s financial condition
or results of operations. Assets and liabilities measured at fair value on a
recurring basis as of December 31, 2008 are summarized as follows:
|
Quoted
Prices
in
Active
Markets
for
Identical Assets
|
Significant
Other
Observable
Inputs
|
Significant
Unobservable
Inputs
|
|
|
|
(Thousands)
|
(Level
1)
|
(Level 2)
|
(Level
3)
|
Total
|
ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Physical
forward commodity contracts
|
|
|
$
—
|
|
|
|
$
20,678
|
|
|
|
$123
|
|
|
$
|
20,801
|
|
Financial
derivative contracts
|
|
|
148,973
|
|
|
|
81,575
|
|
|
|
—
|
|
|
|
230,548
|
|
Available
for sale securities
(1)
|
|
|
8,887
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,887
|
|
Other
assets
|
|
|
1,690
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,690
|
|
Total
assets at fair value
|
|
|
$159,550
|
|
|
|
$102,253
|
|
|
|
$123
|
|
|
$
|
261,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Physical
forward commodity contracts
|
|
|
—
|
|
|
|
$
19,946
|
|
|
|
$
—
|
|
|
$
|
19,946
|
|
Financial
derivative contracts
|
|
|
$
166,068
|
|
|
|
38,475
|
|
|
|
—
|
|
|
|
204,543
|
|
Other
liabilities
|
|
|
1,690
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,690
|
|
Total
liabilities at fair value
|
|
|
$167,758
|
|
|
|
$
58,421
|
|
|
|
$
—
|
|
|
$
|
226,179
|
|
(1)
Included
in Investments in equity investees and other in the Unaudited Condensed
Consolidated Balance Sheets.
|
|
A
reconciliation of the beginning and ending balances of NJRES’ derivatives
measured at fair value based on significant unobservable inputs is as
follows:
|
Fair
Value Measurements Using
|
|
Significant
Unobservable Inputs
|
|
(Level
3)
|
(Thousands)
|
Derivatives
|
Other
|
Total
|
Beginning
balance – October 1, 2008
|
$5,342
|
|
$
—
|
$5,342
|
|
Total
gains (losses) realized and unrealized
|
136
|
|
—
|
136
|
|
Purchases,
sales, other settlements, net
|
(899
|
)
|
—
|
(899
|
)
|
Net
transfers in and/or out of level 3
|
(4,448
|
)
|
—
|
(4,448
|
)
|
Ending
balance - December 31, 2008
|
$ 131
|
|
$ —
|
$ 131
|
|
NJR will
prospectively apply the provisions of SFAS 157 to its pension assets and
non-financial assets and liabilities beginning on October 1, 2009.
5.
|
I
NV
ESTMENTS IN EQUITY INVESTEES AND
OTHER
|
NJR’s
Investments in equity investees and other include the following
investments:
(Thousands)
|
December
31,
2008
|
September
30,
2008
|
|
Steckman
Ridge
|
$106,457
|
|
$ 84,285
|
|
|
Iroquois
|
24,497
|
|
23,604
|
|
|
Other
|
9,016
|
|
8,092
|
|
|
Total
|
$139,970
|
|
$115,981
|
|
|
NEW
JERSEY RESOURCES CORPORATION
Part
I
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
NJR’s
investment in Steckman Ridge increased $22.2 million during the three months
ended December 31, 2008, including cash investments of $21 million and
capitalized costs of $1.2 million.
NJR uses
the equity method of accounting for its investments in Steckman Ridge and
Iroquois.
Other
investments represent investments in equity securities of publicly traded energy
companies, all of which are immaterial on an individual basis, and are accounted
for as available for sale securities, with any change in the value of such
investments recorded as Accumulated other comprehensive income, a component of
Common stock equity.
The
following is summarized financial information for Iroquois:
|
|
Three
Months Ended
|
|
|
December
31,
|
(Millions)
|
|
2008
|
|
2007
|
Operating
revenues
|
|
|
$41.8
|
|
|
|
$38.8
|
|
Operating
income
|
|
|
$21.7
|
|
|
|
$19.3
|
|
Net
income
|
|
|
$
9.5
|
|
|
|
$
7.6
|
|
(Millions)
|
December
31,
2008
|
September
30,
2008
|
Current
assets
|
$ 52.6
|
|
|
$
64.2
|
|
Noncurrent
assets
|
$753.4
|
|
|
$729.2
|
|
Current
liabilities
|
$ 49.8
|
|
|
$
39.3
|
|
Noncurrent
liabilities
|
$334.9
|
|
|
$348.9
|
|
The
following table presents the calculation of the Company’s basic and diluted
earnings per share:
|
|
Three
Months Ended
December
31,
|
|
(Thousands,
except per share amounts)
|
|
2008
|
|
|
2007
|
|
Net
Income, as reported
|
|
|
$11,776
|
|
|
|
$30,185
|
|
Basic
earnings per share
|
|
|
|
|
|
|
|
|
Weighted
average shares of common stock outstanding–basic
|
|
|
42,170
|
|
|
|
41,678
|
|
Basic
earnings per common share
|
|
|
$0.28
|
|
|
|
$0.72
|
|
Diluted
earnings per share
|
|
|
|
|
|
|
|
|
Weighted
average shares of common stock outstanding–basic
|
|
|
42,170
|
|
|
|
41,678
|
|
Incremental
shares
(
1
)
|
|
|
325
|
|
|
|
250
|
|
Weighted
average shares of common stock outstanding–diluted
|
|
|
42,495
|
|
|
|
41,928
|
|
Diluted
earnings per common share
|
|
|
$0.28
|
|
|
|
$0.72
|
|
(1)
|
Incremental
shares consist of stock options, stock awards and performance
units.
|
NJR
On
December 13, 2007, NJR entered into a $325 million, five-year, revolving,
unsecured credit facility. As of December 31, 2008, NJR had $62 million in
borrowings outstanding under the facility.
As of
December 31, 2008, NJR had one letter of credit outstanding for $675,000 on
behalf of CR&R, which will expire on December 3, 2009. The letter of credit
is in place to support development activities.
NEW
JERSEY RESOURCES CORPORATION
Part
I
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
On
February 15, 2008, NJR entered into an agreement for a stand-alone letter of
credit that may be drawn upon through February 15, 2009 for up to $15 million.
No amounts have been drawn under this letter of credit as of December 31,
2008.
NJNG
On
November 1, 2008, upon maturity, NJNG redeemed its $30 million, 6.27
percent, Series X First Mortgage bonds.
In
October 2007, NJNG entered into an agreement for standby letters of credit that
may be drawn upon through December 15, 2009 for up to $50 million. As of
December 31, 2008, no letters of credit have been issued under this agreement.
These letters of credit would not reduce the amount available to be borrowed
under NJNG’s credit facility.
As of
December 31, 2008, NJNG has a $250 million committed facility with several
banks, with a 5-year term expiring in December 2009. This facility is used to
support NJNG’s commercial paper program.
NJNG
received $6.3 million and $7.5 million in December 2008 and 2007, respectively,
in connection with the sale-leaseback of its natural gas meters. This
sale-leaseback program is expected to be continued on an annual
basis.
NJNG is
obligated with respect to loan agreements securing six series of variable rate
bonds totaling approximately $97.0 million of variable-rate debt backed by
securities issued by the New Jersey Economic Development Authority (EDA). The
EDA bonds are commonly referred to as auction rate securities (ARS) and have an
interest rate reset every 7 or 35 days, depending upon the applicable
series. On those dates, an auction is held for the purposes of determining
the interest rate of the securities. The interest rate associated with the NJNG
variable-rate debt is based on the rates on the EDA ARS. For the three months
ended December 31, 2008, all of the auctions
surrounding
the EDA ARS have failed, resulting in those bonds bearing interest at their
maximum rates, defined in the EDA ARS as the lesser of (i) 175 percent of 30-day
LIBOR or (ii) 10 to 12 percent per annum, as applicable to such series of ARS.
As of December 31, 2008, the 30-day LIBOR rate was 0.44 percent. While the
failure of the ARS auctions does not signify or constitute a default on
NJNG, the EDA ARS does impact NJNG’s borrowing costs of the variable-rate debt.
As such, NJNG currently has a weighted average interest rate of 0.8 percent as
of December 31, 2008, compared with a weighted average interest rate of 4.6
percent as of September 30, 2008. There can be no assurance that the EDA ARS
will have enough market liquidity to return interest rates below their maximum
rate.
In
October 2005, NJNG entered into a loan agreement under which the EDA loaned NJNG
the proceeds from $35.8 million of tax-exempt EDA Bonds. NJNG deposited $15.0
million of the proceeds into a construction fund to finance subsequent
construction in the northern division of NJNG’s territory. NJNG drew down $10.8
million from the construction fund prior to fiscal year 2008 and drew down the
remaining $4.2 million during the first quarter of fiscal 2009.
Neither
NJNG nor the results of its operations are obligated or pledged to support the
NJR or NJRES credit facilities.
NJRES
As of
December 31, 2008, NJRES had a 3-year, $30 million committed credit facility
that expires in October 2009 with a multinational financial institution. There
were no borrowings under this facility as of December 31, 2008.
NEW
JERSEY RESOURCES CORPORATION
Part
I
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Consolidated
There
were no issuances or redemptions of long-term debt securities for NJR or NJRES
during the three months ended December 31, 2008.
A summary
of NJR’s and NJNG’s long-term debt, committed credit facilities which require
commitment fees on the unused amounts, and NJRES’ committed facility that does
not require a fee, are as follows:
|
December
31,
|
September
30,
|
(Thousands)
|
2008
|
2008
|
NJR
|
|
|
|
|
Long
- term debt
(1)
|
$ 75,000
|
|
$ 75,000
|
|
Bank
credit facilities
|
$325,000
|
|
$325,000
|
|
Amount
outstanding at end of period
|
$
62,000
|
|
$ 32,700
|
|
Weighted
average interest rate at end of period
|
0.78
|
%
|
2.46
|
%
|
NJNG
|
|
|
|
|
Long
- term debt
(2)
|
$349,800
|
|
$379,800
|
|
Bank
credit facilities
|
$250,000
|
|
$250,000
|
|
Amount
outstanding at end of period
|
$203,550
|
|
$145,500
|
|
Weighted
average interest rate at end of period
|
1.19
|
%
|
2.31
|
%
|
NJRES
|
|
|
|
|
Bank
credit facilities
|
$30,000
|
|
$30,000
|
|
Amount
outstanding at end of period
|
—
|
|
—
|
|
Weighted
average interest rate at end of period
|
—
|
|
—
|
|
(1)
|
Amounts
are comprised of $25.0 million issued in March 2004, maturing in
March 2009, and $50.0 million issued in September 2007, maturing in
September 2017.
|
(2)
|
Long-term
debt excludes lease obligations of $66.7 million
and $60.4 million
at
December 31, 2008 and September 30, 2008,
respectively.
|
8.
|
CAPI
TALIZED FINANCING COSTS AND DEFERRED
INTEREST
|
Allowance
for Funds Used During Construction, (AFUDC) included in Utility plant, and
capitalized interest included in Real estate properties and other and
Investments in equity investees and other on the Unaudited Condensed
Consolidated Balance Sheets, are as follows:
(Thousands)
|
Three
Months Ended
December
31,
|
2008
|
2007
|
AFUDC
– Utility plant
|
$258
|
|
$535
|
|
Weighted
average rate
|
4.00
|
%
|
8.31
|
%
|
|
|
|
|
|
Capitalized
interest – Real estate properties and other
|
$—
|
|
$36
|
|
Weighted
average interest rates
|
—
|
%
|
5.08
|
%
|
|
|
|
|
|
Capitalized
interest – Investments in equity investees and other
|
$843
|
|
$855
|
|
Weighted
average interest rates
|
5.50
|
%
|
5.98
|
%
|
The AFUDC
amounts shown in the table above for the three months ended December 31, 2007
include an equity component based on NJNG’s prior return on equity rate of 11.5
percent. As a result of the BPU’s Base Rate Order issued in October 2008, NJNG
implemented certain rate design changes, including a change to its AFUDC
calculation and a return on equity rate of 10.3 percent (see
Note 2.
Regulation
)
. Effective October 3, 2008,
NJNG is allowed to recover an incremental cost of equity component during
periods when its short-term debt balances are lower than its construction work
in progress. For the three months ended December 31, 2008, AFUDC only includes a
debt component.
NEW
JERSEY RESOURCES CORPORATION
Part
I
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
NJR,
through its CR&R subsidiary, capitalizes interest associated with the
development and construction of its commercial buildings. Interest is also
capitalized associated with the acquisition, development and construction of a
natural gas storage facility through NJR’s equity investment in Steckman Ridge
(see
Note 5. Investments in
Equity Investees
and
other
).
Pursuant
to a BPU order, NJNG is permitted to recover carrying costs on uncollected
balances related to SBC program costs, which include NJCEP, RAC and USF
expenditures. Accordingly, Other income included $563,000 and $738,000 of
deferred interest related to these SBC program costs for period ended December
31, 2008 and 2007, respectively.
9.
|
STO
CK-BASED
COMPENSATION
|
On
November 11, 2008, the Company granted 106,730 restricted shares that vested
immediately. On the same date the Company also granted 8,481 shares that vested
immediately and were issued on November 17, 2008. As of December 31, 2008,
2,448,586 and 107,203 shares, respectively, remain available for future awards
to employees and directors.
During
the first three months of fiscal 2009, included in operation and maintenance
expense is $711,000 related to stock-based compensation. As of December 31, 2008
there remains $1.9 million of deferred compensation related to unvested shares
and options, which is expected to be recognized over the next 3
years.
Pension
and Other Postemployment Benefit Plans (OPEB)
The
components of the net periodic cost for pension benefits, including NJR’s
Pension Equalization Plan, and OPEB costs (principally health care and life
insurance) for employees and covered dependents were as follows:
|
|
Pension
|
|
|
OPEB
|
|
|
|
Three Months Ended
December 31,
|
|
|
Three Months Ended
December 31,
|
|
(Thousands)
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Service
cost
|
|
|
$
678
|
|
|
|
$
728
|
|
|
|
$
584
|
|
|
|
$
488
|
|
Interest
cost
|
|
|
1,937
|
|
|
|
1,648
|
|
|
|
1,006
|
|
|
|
821
|
|
Expected
return on plan assets
|
|
|
(2,188
|
)
|
|
|
(2,183
|
)
|
|
|
(647
|
)
|
|
|
(583
|
)
|
Recognized
actuarial loss
|
|
|
139
|
|
|
|
275
|
|
|
|
319
|
|
|
|
262
|
|
Prior
service cost amortization
|
|
|
14
|
|
|
|
14
|
|
|
|
20
|
|
|
|
20
|
|
Special
termination benefit
|
|
|
—
|
|
|
|
—
|
|
|
|
89
|
|
|
|
89
|
|
Net
periodic cost
|
|
|
$
580
|
|
|
|
$
482
|
|
|
|
$1,371
|
|
|
|
$1,097
|
|
For
fiscal 2009, the Company has no minimum pension funding requirements, however,
funding requirements are uncertain and can depend significantly on changes in
actuarial assumptions, returns on plan assets and changes in demographic
factors. It is anticipated that the annual funding level to the OPEB plans will
range from $1.2 million to $1.4 million over the next five years. Additional
contributions may be made based on market conditions and various
assumptions.
NEW
JERSEY RESOURCES CORPORATION
Part
I
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
11.
|
AS
SET RETIREMENT OBLIGATIONS
(ARO)
|
NJR
recognizes AROs related to the costs associated with cutting and capping its
main and service gas distribution pipelines of NJNG, which is required by New
Jersey law when taking such gas distribution pipelines out of
service.
The
following is an analysis of the change in the ARO liability for the period ended
December 31, 2008:
(Thousands)
Balance
at October 1, 2008
|
$24,416
|
|
Accretion
|
371
|
|
Additions
|
—
|
|
Retirements
|
(19
|
)
|
Balance
at December 31, 2008
|
$24,768
|
|
Accretion
amounts are not reflected as an expense on NJR’s Unaudited Condensed
Consolidated Statements of Income, but rather are deferred as a regulatory asset
and netted against NJNG’s regulatory liabilities, for presentation purposes, on
the Unaudited Condensed Consolidated Balance Sheet.
As of
September 30, 2008 the Company had a FIN 48 (Reserve for Uncertain Tax
Positions) balance of $6.5 million. During the first quarter of fiscal year
2009, the company settled a tax court case with the State of New Jersey, which
resulted in a decrease to the reserve balance of $2.7 million.
Over the
next twelve months the company expects to finalize the September 30, 2005
Internal Revenue Service (IRS) tax audit, which is expected to result in an
additional reduction to the remaining FIN 48 balance of $3.8 million. The $3.8
million relates to one issue which has been settled favorably and will result in
no changes to the company’s tax liability related to the issue. As such the FIN
48 reserve is expected to be released during fiscal 2009.
Currently
the company has no reason to believe that there will be any new additions to the
FIN 48 reserve.
13.
|
COM
MITMENTS AND CONTINGENT
LIABILITIES
|
Cash
Commitments
NJNG has
entered into long-term contracts, expiring at various dates through 2023, for
the supply, storage and delivery of natural gas. These contracts include current
annual fixed charges of approximately $87.6 million at current contract rates
and volumes, which are recoverable through the BGSS.
For the
purpose of securing adequate storage and pipeline capacity, NJRES enters into
storage and pipeline capacity contracts, which require the payment of certain
demand charges by NJRES, in order to maintain the ability to access such natural
gas storage or pipeline capacity, during a fixed time period, which generally
range from one to five years. Demand charges are based on established rates as
regulated by the Federal Energy Regulatory Commission (FERC). These demand
charges represent commitments to pay storage providers or pipeline companies for
the right to store and transport natural gas utilizing their respective assets.
As of December 31, 2008, NJRES had contractual obligations for current annual
demand charges related to storage contracts and pipeline capacity contracts of
$27.3 million and $52.2 million, respectively.
NEW
JERSEY RESOURCES CORPORATION
Part
I
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
As of
December 31, 2008, there were NJR guarantees covering approximately $421 million
of natural gas purchases and demand fee commitments of NJRES and NJNG not yet
reflected in Accounts payable on the Unaudited Condensed Consolidated Balance
Sheet. Commitments as of December 31, 2008 for natural gas purchases and future
demand fees, for the next five fiscal year periods, are as follows:
(Thousands)
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
Thereafter
|
NJRES
|
|
|
|
|
|
|
|
|
|
|
|
Natural
gas purchases
|
$600,177
|
|
$109,213
|
|
$ —
|
|
$ —
|
|
$
—
|
|
$
—
|
Storage
demand fees
|
27,266
|
|
18,136
|
|
12,735
|
|
9,791
|
|
2,235
|
|
1,913
|
Pipeline
demand fees
|
52,242
|
|
31,792
|
|
15,743
|
|
6,265
|
|
5,298
|
|
4,940
|
Sub-total
NJRES
|
$679,685
|
|
$159,141
|
|
$ 28,478
|
|
$16,056
|
|
$ 7,533
|
|
$ 6,853
|
NJNG
|
|
|
|
|
|
|
|
|
|
|
|
Natural
gas purchases
|
$ 76,054
|
|
$ 16,123
|
|
$
—
|
|
$ —
|
|
$ —
|
|
$
—
|
Storage
demand fees
|
21,873
|
|
18,996
|
|
10,842
|
|
7,392
|
|
7,042
|
|
2,347
|
Pipeline
demand fees
|
65,725
|
|
78,253
|
|
76,948
|
|
71,597
|
|
71,483
|
|
297,474
|
Sub-total
NJNG
|
$163,652
|
|
$113,372
|
|
$ 87,790
|
|
$78,989
|
|
$78,525
|
|
$299,821
|
Total
|
$843,337
|
|
$272,513
|
|
$116,268
|
|
$95,045
|
|
$86,058
|
|
$306,674
|
Costs for
storage and pipeline demand fees, included as a component of Gas purchases on
the Unaudited Condensed Consolidated Statements of Income, are as
follows:
|
|
Three
Months Ended
December
31,
|
(Thousands)
|
|
2008
|
|
|
2007
|
|
NJRES
|
|
|
$28.5
|
|
|
|
$27.6
|
|
NJNG
|
|
|
20.5
|
|
|
|
18.7
|
|
Total
|
|
|
$49.0
|
|
|
|
$46.3
|
|
NJNG’s
capital expenditures are estimated at $77.3 million for fiscal 2009, of which
approximately $18.4 million has been committed, and consists primarily of its
construction program to support customer growth, maintenance of its distribution
system, replacement needed under pipeline safety regulations and an automated
meter reading installation project.
The
Company’s future minimum lease payments under various operating leases are less
than $3.2 million annually for the next five years and $1.6 million in the
aggregate for all years thereafter.
Legal
Proceedings
Manufactured
Gas Plant Remediation
NJNG is
responsible for the remedial cleanup of three Manufactured Gas Plant (MGP)
sites, dating back to gas operations in the late 1800s and early 1900s, which
contain contaminated residues from former gas manufacturing operations. NJNG is
currently involved in administrative proceedings with the New Jersey Department
of Environmental Protection (NJDEP), as well as participating in various studies
and investigations by outside consultants to determine the nature and extent of
any such contaminated residues and to develop appropriate programs of remedial
action, where warranted, under Administrative Consent Orders or Memoranda of
Agreement with the NJDEP.
NEW
JERSEY RESOURCES CORPORATION
Part
I
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
NJNG may,
subject to BPU approval, recover its remediation expenditures, including
carrying costs, over rolling 7-year periods pursuant to a Remediation Adjustment
(RA) approved by the BPU. In October 2007, the BPU approved $14.7 million in
eligible costs to be recovered annually for MGP remediation expenditures
incurred through June 30, 2006. In February 2008, NJNG filed an application
regarding its SBC which included MGP remediation expenditures incurred through
June 30, 2007, resulting in an expected annual recovery of $17.7 million. On
January 27, 2009, NJNG filed an application regarding its SBC including MGP
remediation expenditures incurred through June 30, 2008 resulting in an expected
annual recovery of $20.7 million. As of December 31, 2008, $91.3 million of
previously incurred remediation costs, net of recoveries from customers and
insurance proceeds, are included in Regulatory assets on the Unaudited Condensed
Consolidated Balance Sheet.
In
September 2008, NJNG updated an environmental review of the MGP sites, including
a review of potential liability for investigation and remedial action. NJNG
estimated at the time of the review that total future expenditures to remediate
and monitor the three MGP sites for which it is responsible will range from
approximately $120.2 million to $177.2 million. NJNG’s estimate of these
liabilities is based upon known facts, existing technology and enacted laws and
regulations in place when the review was completed. However, NJNG expects actual
costs to differ from these estimates. Where it is probable that costs will be
incurred, but the information is sufficient only to establish a range of
possible liability, and no point within the range is more likely than any other,
it is NJNG’s policy to accrue the lower end of the range. Accordingly, NJNG has
recorded an MGP remediation liability and a corresponding Regulatory asset of
$120.2 million on the Unaudited Condensed Consolidated Balance Sheet. The actual
costs to be incurred by NJNG are dependent upon several factors, including final
determination of remedial action, changing technologies and governmental
regulations, the ultimate ability of other responsible parties to pay and any
insurance recoveries.
NJNG will
continue to seek recovery of MGP-related costs through the RAC. If any future
regulatory position indicates that the recovery of such costs is not probable,
the related cost would be charged to income in the period of such determination.
However, because recovery of such costs is subject to BPU approval, there can be
no assurance as to the ultimate recovery through the RAC or the impact on the
Company’s results of operations, financial position or cash flows, which could
be material.
General
The
Company is party to various other claims, legal actions and complaints arising
in the ordinary course of business. In the Company’s opinion, other than as
disclosed in Part II Item 1 of this Form 10-Q, the ultimate disposition of these
matters will not have a material adverse effect on its financial condition,
results of operations or cash flows.
NEW
JERSEY RESOURCES CORPORATION
Part
I
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
14.
|
BUS
INESS SEGMENT AND OTHER OPERATIONS
DATA
|
Information
related to the Company’s various business segments and other operations,
excluding capital expenditures, which are presented in the Unaudited Condensed
Consolidated Statements of Cash Flows, is detailed below.
The
Natural Gas Distribution segment consists of regulated energy and off-system,
capacity and storage management operations. The Energy Services segment consists
of unregulated wholesale energy operations. The Retail and Other operations
consist of appliance and installation services, commercial real estate
development, investments and other corporate activities.
|
|
Three
Months Ended
|
|
|
|
December
31,
|
|
(Thousands)
|
|
2008
|
|
|
2007
|
|
Operating
Revenues
|
|
|
|
|
|
|
Natural
Gas Distribution
|
|
$
|
340,908
|
|
|
$
|
284,360
|
|
Energy
Services
|
|
|
463,094
|
|
|
|
520,211
|
|
Segment
Subtotal
|
|
|
804,002
|
|
|
|
804,571
|
|
Retail
and Other
|
|
|
(2,654
|
)
|
|
|
6,631
|
|
Intercompany
revenues
(1)
|
|
|
(44
|
)
|
|
|
(64
|
)
|
Total
|
|
$
|
801,304
|
|
|
$
|
811,138
|
|
Depreciation
and Amortization
|
|
|
|
|
|
|
|
|
Natural
Gas Distribution
|
|
$
|
7,161
|
|
|
$
|
9,233
|
|
Energy
Services
|
|
|
51
|
|
|
|
53
|
|
Segment
Subtotal
|
|
|
7,212
|
|
|
|
9,286
|
|
Retail
and Other
|
|
|
149
|
|
|
|
117
|
|
Total
|
|
$
|
7,361
|
|
|
$
|
9,403
|
|
Operating
Income (Loss)
|
|
|
|
|
|
|
|
|
Natural
Gas Distribution
|
|
$
|
42,186
|
|
|
$
|
31,602
|
|
Energy
Services
|
|
|
(9,378
|
)
|
|
|
22,563
|
|
Segment
Subtotal
|
|
|
32,808
|
|
|
|
54,165
|
|
Retail
and Other
|
|
|
(10,658
|
)
|
|
|
372
|
|
Intercompany
expenses
(1)
|
|
|
46
|
|
|
|
—
|
|
Total
|
|
$
|
22,196
|
|
|
$
|
54,537
|
|
Interest
Income
(
2
)
|
|
|
|
|
|
|
|
|
Natural
Gas Distribution
|
|
$
|
658
|
|
|
$
|
1,202
|
|
Energy
Services
|
|
|
17
|
|
|
|
107
|
|
Segment
Subtotal
|
|
|
675
|
|
|
|
1,309
|
|
Retail
and Other
|
|
|
6
|
|
|
|
55
|
|
Total
|
|
$
|
681
|
|
|
$
|
1,364
|
|
Interest
Expense, net
|
|
|
|
|
|
|
|
|
Natural
Gas Distribution
|
|
$
|
6,460
|
|
|
$
|
6,119
|
|
Energy
Services
|
|
|
(24
|
)
|
|
|
877
|
|
Segment
Subtotal
|
|
|
6,436
|
|
|
|
6,996
|
|
Retail
and Other
|
|
|
111
|
|
|
|
814
|
|
Total
|
|
$
|
6,547
|
|
|
$
|
7,810
|
|
Income
Tax Provision (Benefit)
|
|
|
|
|
|
|
|
|
Natural
Gas Distribution
|
|
$
|
13,336
|
|
|
$
|
10,045
|
|
Energy
Services
|
|
|
(3,727
|
)
|
|
|
8,666
|
|
Segment
Subtotal
|
|
|
9,609
|
|
|
|
18,711
|
|
Retail
and Other
|
|
|
(4,364
|
)
|
|
|
(217
|
)
|
Total
|
|
$
|
5,245
|
|
|
$
|
18,494
|
|
(1)
Consists
of transactions between subsidiaries that are eliminated and reclassified
in consolidation
(2)
Included
in Other income in the Unaudited Condensed Consolidated Statement of
Income
|
|
NEW
JERSEY RESOURCES CORPORATION
Part
I
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
The chief
operating decision maker of the Company is the Chief Executive Officer (CEO).
The CEO uses net financial earnings as a measure of profit or loss in measuring
the results of the Company’s segments and operations. A reconciliation of Net
financial earnings to consolidated Net Income, for the three months ended
December 31, 2008 and 2007, respectively, is as follows:
|
|
Three
Months Ended
|
|
|
|
December
31,
|
|
(Thousands)
|
|
2008
|
|
|
2007
|
|
Reconciliation
of net financial earnings to consolidated net income:
|
|
|
|
|
|
|
Natural
Gas Distribution
|
|
|
$23,074
|
|
|
|
$16,670
|
|
Energy
Services
|
|
|
9,383
|
|
|
|
19,092
|
|
Retail
and Other
|
|
|
21
|
|
|
|
545
|
|
Consolidated
Net Financial Earnings
|
|
|
32,478
|
|
|
|
36,307
|
|
Less:
|
|
|
|
|
|
|
|
|
Unrealized
loss from derivative instruments, net of taxes
|
|
|
4,122
|
|
|
|
3,080
|
|
Realized
loss from derivative instruments related to natural gas inventory, net of
taxes
|
|
|
16,580
|
|
|
|
3,042
|
|
Consolidated
Net Income
|
|
|
$11,776
|
|
|
|
$30,185
|
|
The Company’s
assets for the various business segments and business operations are detailed
below:
|
December
31,
|
September 30,
|
(Thousands)
|
2008
|
2008
|
Assets
at end of period:
|
|
|
|
|
|
|
Natural
Gas Distribution
|
|
|
$1,868,319
|
|
|
|
$1,761,964
|
|
Energy
Services
|
|
|
629,310
|
|
|
|
689,992
|
|
Segment
Subtotal
|
|
|
2,497,629
|
|
|
|
2,451,956
|
|
Retail
and Other
|
|
|
232,246
|
|
|
|
231,551
|
|
Intercompany
Assets
(1)
|
|
|
(42,488
|
)
|
|
|
(58,115
|
)
|
Total
|
|
|
$2,687,387
|
|
|
|
$2,625,392
|
|
(1)
Consists of transactions between subsidiaries that are eliminated and
reclassified in consolidation
|
|
For the
three months ended December 31, 2008, NJRES had one customer who represented
more than 10 percent of its total revenue. Management believes that the loss of
this customer would not have a material effect on its financial position,
results of operations or cash flows as an adequate number of alternative
counterparties exist.
At
December 31, 2008, there were 42,256,517 shares of common stock outstanding and
the book value per share was $17.43.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM 2
. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
Management’s
Overview
New
Jersey Resources Corporation (NJR or the Company) is an energy services holding
company providing retail natural gas service in New Jersey and wholesale natural
gas and related energy services to customers in states from the Gulf Coast and
Mid-Continent regions to the New England region and Canada through its two
principal subsidiaries, New Jersey Natural Gas Company (NJNG) and NJR
Energy Services Company (NJRES).
Comprising
the Natural Gas Distribution segment, NJNG is a natural gas utility that
provides regulated retail natural gas service in central and northern New Jersey
and also participates in the off-system sales and capacity release markets. NJNG
is regulated by the New Jersey Board of Public Utilities (BPU).
NJRES
comprises the Energy Services segment. NJRES maintains and transacts around a
portfolio of physical assets consisting of natural gas storage and
transportation contracts. In addition, NJRES provides wholesale energy services
to non-affiliated utility and energy companies.
The
retail and other business operations (Retail and Other) includes NJR Energy
(NJRE), an investor in energy-related ventures, most significantly through NJNR
Pipeline Company, which holds the Company’s 5.53 percent interest in Iroquois
Gas and Transmission System, LP (Iroquois), a 412-mile natural gas pipeline from
the New York-Canadian border to Long Island, New York, and NJR Steckman Ridge
Storage Company, which has a 50 percent equity ownership interest in Steckman
Ridge GP, LLC and Steckman Ridge, LP (collectively, Steckman Ridge), a planned
17.7 billion cubic foot (Bcf) natural gas storage facility, with up to 12 Bcf
working capacity, which is being jointly developed and constructed with a
partner in western Pennsylvania; NJR Investment Company, which makes
energy-related equity investments; NJR Home Services Company (NJRHS), which
provides service, sales and installation of appliances; Commercial Realty and
Resources Corporation (CR&R), which holds and develops commercial real
estate; and NJR Service Corporation (NJR Service), which provides support
services to the various NJR businesses.
Net
income and assets by business segment and business operations for the three
months ended December 31, 2008 and 2007, respectively, are as
follows:
|
Three
Months Ended
December
31,
|
(Thousands)
|
2008
|
2007
|
Net
Income (Loss)
|
|
|
|
|
|
|
|
|
Natural
Gas Distribution
|
$23,074
|
|
196
|
%
|
$16,670
|
|
55
|
%
|
Energy
Services
|
(5,614
|
)
|
(48
|
)
|
13,150
|
|
44
|
|
Retail
and Other
|
(5,684
|
)
|
(48
|
)
|
365
|
|
1
|
|
Total
|
$11,776
|
|
100
|
%
|
$30,185
|
|
100
|
%
|
|
December 31,
|
September 30,
|
(Thousands)
|
2008
|
2008
|
Assets
|
|
|
|
|
|
|
|
|
Natural
Gas Distribution
|
$1,868,319
|
|
70
|
%
|
$1,761,964
|
|
67
|
%
|
Energy
Services
|
629,310
|
|
23
|
|
689,992
|
|
26
|
|
Retail
and Other
|
232,246
|
|
9
|
|
231,551
|
|
9
|
|
Intercompany
Assets
(1)
|
(42,488
|
)
|
(2
|
)
|
(58,115
|
)
|
(2
|
)
|
Total
|
$2,687,387
|
|
100
|
%
|
$2,625,392
|
|
100
|
%
|
(1)
Consists of transactions between subsidiaries that are eliminated and
reclassified in consolidation
|
NJRES and
NJR Energy account for certain of their derivative instruments (financial
futures, swaps and options) used to economically hedge the forecasted purchase,
sale and transportation of natural gas at fair value, as required under
Statement of Financial Accounting Standards No. 133,
Accounting for Derivative
Instruments and Hedging Activities
(as amended and interpreted, SFAS
133). Effective October 1, 2007, the Company changed the treatment of its
physical commodity contracts at NJRES, such that the changes in fair
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
value
of new contracts are included in earnings, and are not accounted for using
the “normal purchase normal sales” (normal) scope exception of SFAS 133. In
addition, effective October 1, 2008, due to changes in the Company’s ability to
assert physical delivery, the Company is no longer treating physical commodity
contracts executed prior to October 1, 2007 as normal. Therefore, all NJRES
physical commodity contracts are accounted for at fair value on the Unaudited
Condensed Consolidated Balance Sheets, with changes in fair value included as a
component of gas purchases on the Unaudited Condensed Consolidated Statements of
Income. All physical commodity contracts at NJNG and NJR Energy continue to be
designated as normal and accounted for under accrual accounting.
The
change in fair value of these derivative instruments at NJRES and NJR Energy
over periods of time, referred to as unrealized gains or losses, can result in
substantial volatility in reported net income under generally accepted
accounting principles of the United States of America (GAAP). When a financial
instrument settles the result is the realization of these gains or losses. NJRES
utilizes certain financial instruments to economically hedge natural gas
inventory placed into storage that will be sold at a later date, all of which
were contemplated as part of an entire forecasted transaction. GAAP requires
that when a financial instrument that is economically hedging natural gas that
has been placed into inventory, but not yet sold, has been settled, the realized
gain or loss associated with that settlement must be reflected currently in the
income statement. While NJRES will recognize the same economic impact from the
entire planned transaction, this also leads to additional volatility in NJRES’
reported earnings.
Unrealized
losses and gains at NJRES and NJR Energy are the result of changes in the fair
value of natural gas futures and fixed and basis swaps, as applicable, used to
economically hedge future natural gas purchases, sales and transportation.
Realized gains and losses at NJRES include the settlement of natural gas futures
instruments used to economically hedge natural gas purchases in inventory that
have not been sold.
Included
in Net income are unrealized gains and (losses) in the Energy Services segment
of $1.6 million and $(2.9) million, after taxes, for the three-month period
ended December 31, 2008 and 2007, respectively. Also included in Net
income are realized (losses) of $(16.6) million and $(3.0), after taxes,
for the three-month period ended December 31, 2008 and 2007, respectively, which
are related to derivative instruments that have settled and are designed to
economically hedge natural gas that is in storage inventory at December 31, 2008
and 2007, respectively.
Included
in Net income are unrealized (losses) in the Retail and Other business
operations of $(5.7) million and $(180,000), after taxes, for the three-month
period ended December 31, 2008 and 2007, respectively.
Natural
Gas Distribution Segment
Natural
Gas Distribution operations have been managed with the goal of growing
profitably through several key initiatives including:
Ÿ
|
Earning
a reasonable rate of return on the investments in its natural gas
distribution system, as well as recovery of all prudently incurred costs
in order to provide safe and reliable service throughout NJNG’s service
territory.
|
Ÿ
|
Working
with the BPU and the Department of the Public Advocate, Division of Rate
Counsel (Rate Counsel), on the implementation and continuing review of the
Conservation Incentive Program (CIP). The CIP allows NJNG to promote
conservation programs to its customers while maintaining protection of its
utility gross margin associated with reduced customer usage. CIP usage
differences are calculated annually and are recovered one year following
the end of the CIP usage year;
|
|
|
|
|
Ÿ
|
Managing
its new customer growth rate, which is expected to be approximately 1.3
percent over the next two years. In fiscal 2009 and 2010, NJNG currently
expects to add, in total, approximately 12,000 to 14,000 new customers.
The Company believes that this growth would increase utility gross margin
under its base rates as provided by approximately $3.6 million annually,
as calculated under NJNG’s CIP tariff;
|
|
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
Ÿ
|
Generating
earnings from various BPU-authorized gross margin-sharing incentive
programs; and
|
|
|
Ÿ
|
Managing
the volatility of wholesale natural gas prices through a hedging program
designed to keep customers’ Basic Gas Supply Service (BGSS) rates as
stable as possible.
|
Based
upon increases in NJNG’s operation, maintenance and capital costs, NJNG
petitioned the BPU, on November 20, 2007, to increase base rates for its natural
gas delivery service. This base rate filing was consistent with NJNG’s
objectives of providing safe and reliable service to its customers and earning a
market-based return.
On
October 3, 2008, the BPU unanimously approved and made effective the settlement
of NJNG’s base rate case. As a result, NJNG received a revenue increase in its
base rates of $32.5 million, which is inclusive of an approximate $13 million
impact of a change to the CIP baseline usage rate, received an allowed return on
equity component of 10.3 percent, reduced its depreciation expense component
from 3.0 percent to 2.34 percent and reduced its annual depreciation expense of
$1.6 million as a result of the amortization of previously recovered asset
retirement obligations.
The CIP
allows NJNG to recover utility gross margin variations related to both weather
and customer usage. Recovery of such margin variations is subject to additional
conditions including an earnings test, which includes a return on equity
component of 10.3 percent, and an evaluation of Basic Gas Supply Service
(BGSS)-related savings achieved. An annual review of the CIP must be filed in
June of each year, coincident with NJNG’s annual BGSS filing. In October
2007, the BPU provisionally approved NJNG’s initial CIP recovery rates, which
are designed to recover approximately $15.6 million of accrued margin amounts.
In October 2008, the BPU provisionally approved recovery of an additional $6.8
million of accrued margin for the CIP. It is anticipated that NJNG will
file a petition in the spring of 2009 to extend its CIP or implement a similar
mechanism on a permanent basis, to be effective October 1, 2009
In
conjunction with the CIP, NJNG is required to administer programs that promote
customer conservation efforts. As of December 31, 2008 and
September 30, 2008, the obligation to fund these conservation programs was
recorded at its present value of $662,000 and $864,000, respectively on the
Unaudited Condensed Consolidated Balance Sheets.
In
conducting NJNG’s business, management focuses on factors it believes may have
significant influence on its future financial results. NJNG’s policy is to work
with all stakeholders, including customers, regulators and policymakers, to
achieve favorable results. These factors include the rate of NJNG’s customer
growth in its service territory, which can be influenced by general economic
conditions as well as political and regulatory policies that may impact the new
housing market. A portion of NJNG’s customer growth comes from the conversion
market, which is influenced by the delivered cost of natural gas compared with
competing fuels, interest rates and other economic conditions.
As a
regulated company, NJNG is required to recognize the impact of regulatory
decisions on its financial statements. As a result, significant costs are
deferred and treated as regulatory assets, pending BPU decisions regarding their
ultimate recovery from customers. The most significant costs incurred that are
subject to this accounting treatment include manufactured gas plant (MGP)
remediation costs and wholesale natural gas costs. Actual remediation costs may
vary from management’s estimates due to the developing nature of remediation
requirements, regulatory decisions by the New Jersey Department of Environmental
Protection (NJDEP) and related litigation. If there are changes in the
regulatory position on the recovery of these costs, such costs would be charged
to income in the period of such determination.
Due to
the capital-intensive nature of NJNG’s operations and the seasonal nature of its
working capital requirements, significant changes in interest rates can also
impact NJNG’s results.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
Energy
Services Segment
NJRES
provides unregulated wholesale energy services, including base load natural gas,
peaking and balancing services, utilizing physical assets it controls through
natural gas pipeline transportation and storage contracts, as well as providing
asset management services to customers in states from the Gulf Coast and
Mid-continent regions to the Appalachian and Northeast regions and
Canada.
NJRES
incorporates the following elements to provide for growth, while focusing on
maintaining a low-risk operating and counterparty credit profile:
Ÿ
|
Providing
natural gas portfolio management services to nonaffiliated utilities and
electric generation facilities;
|
|
|
Ÿ
|
Leveraging
transactions for the delivery of natural gas to customers by aggregating
the natural gas commodity costs and transportation costs in order to
minimize the total cost required to provide and deliver natural gas to
NJRES’ customers by identifying the lowest cost alternative with the
natural gas supply, transportation availability and markets to which NJRES
is able to access through its business footprint and contractual asset
portfolio;
|
|
|
Ÿ
|
Identifying
and benefiting from variations in pricing of natural gas transportation
and storage assets due to location or timing differences of natural gas
prices to generate gross margin; and
|
|
|
Ÿ
|
Managing
economic hedging programs that are designed to mitigate adverse market
price fluctuations in natural gas transportation and storage
commitments.
|
NJRES
views “financial margin” as a financial measurement metric. NJRES’ financial
margin, which is a non-GAAP financial measure, represents revenues earned from
the sale of natural gas less costs of natural gas sold, transportation and
storage, and excludes any accounting impact from the change in fair value of
derivative instruments designed to hedge the economic impact of its transactions
that have not been settled, which represent unrealized gains and losses, and
realized gains and losses associated with financial instruments economically
hedging natural gas in storage and not yet sold as part of a planned
transaction. NJRES uses financial margin to gauge operating results against
established benchmarks and earnings targets as it eliminates the impact of
volatility in GAAP earnings that can occur prior to settlement of the physical
commodity portion of the transactions and therefore is more representative of
the overall expected economic result.
NJRES has
built a portfolio of customers including local distribution companies,
industrial companies, electric generators and retail aggregators. Sales to these
customers have allowed NJRES to leverage its transportation and storage capacity
and manage sales to these customers in an aggregate fashion. This strategy
allows NJRES to extract more value from its portfolio of natural gas storage and
pipeline transportation capacity through the arbitrage of pricing differences as
a result of locational differences or over different periods of
time.
NJRES
also focuses on creating value from underutilized natural gas assets, which are
typically amassed through contractual rights to natural gas transportation and
storage capacity. NJRES has developed a portfolio of natural gas storage and
transportation capacity in states in the Northeast, Gulf Coast, Mid-continent
and Appalachian regions of the United States and eastern Canada. These assets
become more valuable when prices change between these areas and across time
periods. NJRES seeks to optimize this process on a daily basis as market
conditions change by evaluating all the natural gas supplies, transportation and
opportunities to which it has access, to find the most profitable alternative to
serve its various commitments. This enables NJRES to capture geographic pricing
differences across these various regions as delivered natural gas prices change
as a result of market conditions. NJRES focuses on earning a financial margin on
a single original transaction and then utilizing that transaction, and the
changes in prices across the regions or across time periods, as the basis to
further improve the initial result.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
In a
similar manner, NJRES participates in natural gas storage transactions where it
seeks to identify pricing differences that occur over time, as prices for future
delivery periods at many different delivery points, are readily available. For
example, NJRES generates financial margin by locking in the differential between
purchasing natural gas at a low current or future price and, in a related
transaction, selling that natural gas at a higher current or future price, all
within the constraints of its credit and contracts policies. Through the use of
transportation and storage services, NJRES is able to generate financial margin
through pricing differences that occur over the duration of time the assets are
held.
NJRES’
portfolio management customers include nonaffiliated utilities and electric
generation plants. Services provided by NJRES include optimization of
underutilized natural gas assets and basic gas supply functions.
NJRES
also participates in park-and-loan transactions with pipeline counterparties,
where NJRES will borrow natural gas when there is an opportunity to capture
arbitrage value. In these cases, NJRES evaluates the economics of the
transaction to determine if it can capture pricing differentials in the
marketplace in order to be able to generate financial margin. In evaluating
these transactions NJRES will compare the fixed fee it will pay and the
resulting spread it can generate when considering the amount it will receive to
sell the borrowed gas to another counterparty in relation to the cost it will
incur to purchase the gas at a later date for return back to the pipeline. When
the transaction allows NJRES to generate a financial margin, NJRES will fix the
financial margin by economically hedging the transaction with natural gas
futures.
In
conducting its business, NJRES mitigates risk by following formal risk
management guidelines, including trading limits, approval processes, segregation
of duties, and formal contract and credit review and approval procedures. NJRES
continuously monitors and seeks to reduce the risk associated with various
counterparties credit exposure. The Risk Management Committee (RMC) of NJR,
oversees compliance with these established guidelines.
Retail
and Other Business Operations
As part
of the Retail and Other business operations NJR utilizes a subsidiary, NJR
Energy Holdings, to develop its investments in natural gas “mid-stream” assets.
Mid-stream assets are natural gas transportation and storage facilities. NJR
believes that acquiring, owning and developing these mid-stream assets, which
operate under a tariff structure that has either a regulated or market-based
rate, can provide a significant growth opportunity for the Company. To that end,
NJR has ownership interests in Iroquois (regulated rate) and Steckman Ridge
(anticipated market-based rate), which is currently under development, and is
actively pursuing other potential opportunities that meet its investment and
development criteria. Other businesses included as part of Retail and Other
include NJRHS, which provides service, sales and installation of appliances to
over 144,000 customers and is focused on growing its installation business and
expanding its service contract customer base, and CR&R, which seeks
additional opportunities to enhance the value of its undeveloped
land.
The
financial results of Retail and Other consist primarily of the operating results
of NJRHS and equity in earnings attributable to the Company’s equity investment
in Iroquois, as well as to investments made by NJR Energy, an investor in other
energy-related ventures through its operating subsidiaries.
On June
5, 2008, the Federal Energy Regulatory Commission (FERC) issued Steckman Ridge a
certificate of public convenience and necessity authorizing the ownership,
construction and operation of its natural gas storage facility and associated
facilities. NJR anticipates that Steckman Ridge will be placed in service during
the summer of 2009. As of December 31, 2008, NJR has invested $99.7 million in
Steckman Ridge. This amount excludes capitalized interest and other direct
costs. Total project costs related to the development of the storage facility
are currently estimated at approximately $265 million, of which NJR is obligated
to fund 50 percent or approximately $132.5 million. NJR anticipates that
Steckman Ridge will seek non-recourse financing upon completion of
the construction and development of its facilities, thereby potentially
reducing the final expected recourse obligation of NJR. There can be no
assurances that such non-recourse project financing will be secured or available
for Steckman Ridge.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
Critical
Accounting Policies
A summary
of NJR’s critical accounting policies is included in
Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations
of its Annual
Report on Form 10-K for the period ended September 30, 2008. NJR’s critical
accounting policies have not changed materially from those reported in the 2008
Annual Report on Form 10-K with the exception of the following:
Derivative
Instrument
s
Derivative
activities are recorded in accordance with SFAS No. 133,
Accounting for Derivative
Instruments and Hedging Activities
, as amended and interpreted, (SFAS
133) under which NJR records the fair value of derivatives held as assets and
liabilities. In addition, NJRES also treats contracts for the purchase or sale
of natural gas as derivatives and, therefore, records them at fair value in the
Unaudited Condensed Consolidated Balance Sheet, with changes in fair value being
recorded as a component of Gas purchases in the Unaudited Condensed Consolidated
Statements of Income.
NJRES
previously applied the “normal purchase normal sale” (normal) scope exception
for certain physical commodity contracts that were executed prior to October 1,
2007 which otherwise qualified as derivatives. Based on current conditions in
the credit markets and developments within the natural gas industry, NJRES has
determined that the probability of physical delivery with these counterparties
could potentially diminish and, therefore, these contracts meet the
requirements, outlined in SFAS 133, to continue applying the normal scope
exception. As a result, NJRES will no longer recognize these contracts at cost.
Effective October 1, 2008, NJRES will treat these contracts as derivatives and
record them at fair value in the Unaudited Condensed Consolidated Balance Sheet,
with changes in fair value being recorded as a component of Gas purchases in the
Unaudited Condensed Consolidated Statements of Income.
Effective
October 1, 2008, NJR began applying the provisions of SFAS 157
Fair Value Measurement
(see
Note 5, Fair Value
Measurements
). As a result of the adoption of SFAS 157, NJR implemented
procedures to evaluate its own credit profile to determine an appropriate
valuation adjustment to the recorded amount of its derivative liabilities. NJR
uses historical default probabilities corresponding to Standard and Poor’s
issuer ratings and considers conditions in the credit markets to further adjust
the valuation, when deemed appropriate, based on the change in a market index
that tracks the credit default swaps of investment grade companies.
Capitalized
Financing Costs
NJNG
capitalizes an allowance for funds used during construction (AFUDC) as a
component of Utility plant in the Unaudited Condensed Consolidated Balance
Sheets. Under regulatory rate practices and in accordance with SFAS No. 71,
Accounting for the Effects of
Certain Types of Regulation,
NJNG fully recovers AFUDC through base
rates. As a result of the BPU’s Base Rate Order issued in October 2008, NJNG
implemented certain rate design changes, including a change to its AFUDC
calculation. Effective October 3, 2008, NJNG is allowed to recover an
incremental cost of equity component during periods when its short-term
debt balances are lower than its construction work in progress balance.
This results in a non-cash income statement recognition that will also be
capitalized as a component of Utility plant.
Recently
Issued Accounting Standards
Refer to
Note 1. General
, for
discussion of recently issued accounting standards.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
Results
of Operations
Consolidated
Net
income for the three-month period ended December 31, 2008 decreased by 61
percent to approximately $11.8 million, compared with net income of
approximately $30.2 million for the same period in fiscal 2007. Basic and
diluted earnings per share decreased by 61 percent to $0.28 and $0.28,
compared with $0.72 and $0.72, respectively.
The
decrease in net income was due primarily to decreased gross margin at NJRES as a
result of higher realized losses on derivatives associated with economic
hedges of natural gas in inventory due primarily to declining NYMEX prices
in the current fiscal period of $16.6 million, net of tax, partially offset
by increased operating income at NJNG driven by higher utility gross margin as a
result of changes to its base rates approved by the BPU that became effective
October 3, 2008 and higher margins related to its storage incentive
program.
The
Company’s Operating revenues and Gas purchases are as follows:
|
Three
Months Ended
December 31,
|
(Thousands)
|
2008
|
2007
|
%
Change
|
Operating
revenues
|
$801,304
|
$811,138
|
(1.2)%
|
Gas
purchases
|
$698,145
|
$684,694
|
2.0 %
|
Operating
revenues decreased $(9.8) million and Gas purchases increased $13.5 million for
the three months ended December 31, 2008, compared with the same period of the
prior fiscal year due primarily to:
Ÿ
|
a
decrease in Operating revenues of $(57.1) million and Gas purchases
of $(26.8) million at NJRES due primarily to lower average prices
partially offset by slightly higher transaction
volumes;
|
|
|
Ÿ
|
a
decrease in Operating revenues of $(9.3) million at NJR
Energy due to greater unrealized losses, which were the result of
declining market prices within a portfolio of net long financial
derivative positions; partially offset by
|
|
|
Ÿ
|
an increase
in Operating revenues of $56.5 million and Gas purchases of $40.3
million at NJNG due primarily to BGSS customer refunds issued in fiscal
2008 that did not recur in fiscal 2009 and weather being 10
percent colder than the first quarter of the same period of the prior
fiscal year. In addition, the first quarter operating revenues were
favorably impacted by the base rate
increase.
|
Natural
Gas Distribution Segment
NJNG is a
local natural gas distribution company that provides regulated retail energy
services to approximately 486,000 residential and commercial customers in
central and northern New Jersey and participates in the off-system sales and
capacity release markets.
NJNG’s
business is seasonal by nature, as weather conditions directly influence the
volume of natural gas delivered. Specifically, customer demand substantially
increases during the winter months when natural gas is used for heating
purposes. As a result, NJNG receives most of its gas distribution revenues
during the first and second fiscal quarters and is subject to variations in
earnings and working capital during the year.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
The
Electric Discount and Energy Competition Act (EDECA) provides the framework for
New Jersey’s energy markets, which are open to competition from other energy
suppliers. Currently, NJNG’s residential markets are open to competition, and
its rates are segregated between BGSS (natural gas commodity) and delivery
(i.e., transportation) components. NJNG earns no utility gross margin on the
commodity portion of its natural gas sales. NJNG earns utility gross margin
through the delivery of natural gas to its customers. Under an existing order
from the BPU, BGSS can be provided by suppliers other than the state’s natural
gas utilities.
NJNG’s
financial results are summarized as follows:
|
|
Three
Months Ended
|
|
|
|
December
31,
|
|
(Thousands)
|
|
2008
|
|
|
2007
|
|
Utility
Gross Margin
|
|
|
|
|
|
|
Operating
revenues
|
|
|
$340,908
|
|
|
|
$284,360
|
|
Less:
|
|
|
|
|
|
|
|
|
Gas
purchases
|
|
|
230,452
|
|
|
|
190,148
|
|
Energy
and other taxes
|
|
|
21,587
|
|
|
|
16,363
|
|
Regulatory
rider expense
|
|
|
13,561
|
|
|
|
12,165
|
|
Total
Utility Gross Margin
|
|
|
75,308
|
|
|
|
65,684
|
|
Operation
and maintenance expense
|
|
|
24,950
|
|
|
|
23,879
|
|
Depreciation
and amortization
|
|
|
7,161
|
|
|
|
9,233
|
|
Other
taxes not reflected in utility gross margin
|
|
|
1,011
|
|
|
|
970
|
|
Operating
income
|
|
|
42,186
|
|
|
|
31,602
|
|
Other
income
|
|
|
684
|
|
|
|
1,232
|
|
Interest
expense, net
|
|
|
6,460
|
|
|
|
6,119
|
|
Income
tax provision
|
|
|
13,336
|
|
|
|
10,045
|
|
Net
income
|
|
|
$
23,074
|
|
|
|
$
16,670
|
|
The
following table summarizes Utility Gross Margin and throughput in billion cubic
feet (Bcf) of natural gas by type:
|
|
Three
Months Ended
|
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
($
in thousands)
|
|
Margin
|
|
|
Bcf
|
|
|
Margin
|
|
|
Bcf
|
|
Residential
|
|
|
$49,687
|
|
|
|
13.3
|
|
|
|
$45,400
|
|
|
|
12.7
|
|
Commercial,
Industrial & Other
|
|
|
13,381
|
|
|
|
3.2
|
|
|
|
13,796
|
|
|
|
2.8
|
|
Transportation
|
|
|
8,432
|
|
|
|
3.0
|
|
|
|
4,934
|
|
|
|
2.8
|
|
Total
Firm
|
|
|
71,500
|
|
|
|
19.5
|
|
|
|
64,130
|
|
|
|
18.3
|
|
Incentive
programs
|
|
|
3,724
|
|
|
|
12.2
|
|
|
|
1,420
|
|
|
|
9.7
|
|
Interruptible
|
|
|
84
|
|
|
|
0.9
|
|
|
|
134
|
|
|
|
1.6
|
|
Total
Utility Gross Margin/throughput
|
|
|
$75,308
|
|
|
|
32.6
|
|
|
|
$65,684
|
|
|
|
29.6
|
|
Utility
Gross Margin
NJNG’s
utility gross margin is defined as natural gas revenues less natural gas
purchases, sales tax, a Transitional Energy Facilities Assessment (TEFA) and
regulatory rider expenses, and may not be comparable to the definition of gross
margin used by others in the natural gas distribution business and other
industries. Utility gross margin is comprised of three major categories which
include utility firm gross margin, incentive programs and utility gross margin
from interruptible customers. Management believes that utility gross margin
provides a more meaningful basis than revenue for evaluating utility operations
since natural gas costs, sales tax, TEFA and regulatory rider expenses are
included in operating revenue and passed through to customers and, therefore,
have no effect on utility gross margin.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
Natural
gas costs are charged to operating expenses on the basis of therm sales at the
prices in NJNG’s BGSS tariff approved by the BPU. The BGSS tariff rate includes
projected natural gas costs, net of supplier refunds, the impact of hedging
activities and credits from non-firm sales and transportation activities. Any
underrecoveries or overrecoveries from the projected amounts are deferred and
reflected in the BGSS tariff rate in subsequent years.
TEFA,
which is included in Energy and other taxes on the Unaudited Condensed
Consolidated Statements of Income, is calculated on a per-therm basis and
excludes sales to cogeneration facilities, other utilities and off-system sales.
TEFA represents a regulatory allowed assessment imposed on all energy providers
in the state of New Jersey, as TEFA has replaced the previously used utility
gross receipts tax formula.
Regulatory
rider expenses consist of recovery of state-mandated programs and the
remediation adjustment clause costs. These expenses are offset by corresponding
revenues and are calculated on a per-therm basis.
NJNG’s
Operating revenues increased by $56.5 million, or 20 percent, and Gas purchases
increased by $40.3 million, or 21 percent, for the three months ended December
31, 2008, respectively, compared with same period in the prior fiscal year as a
result of:
Ÿ
|
an
increase in Operating revenue and Gas purchases related to a BGSS customer
refund in December 2007 that did not recur in the first quarter of fiscal
2009 in the amount of $32.1 million and $30.0 million, respectively. The
prior year customer refund was inclusive of sales tax refund of $2.1
million and was the result of anticipated reductions in cost to acquire
wholesale natural gas, as compared to the established rate included in
NJNG’s BGSS tariff;
|
|
|
Ÿ
|
an
increase in Operating revenue and Gas purchases related to firm sales in
the amount of $25.6 million and $18.1 million, respectively, as a result
an increase in BGSS rates approved by the BPU;
|
|
|
Ÿ
|
an
increase in Operating revenue and Gas purchases related to firm sales in
the amount of $14.5 million and $9.5 million, respectively, due primarily
to weather being 10 percent colder than the same period of the prior
fiscal year;
|
|
|
Ÿ
|
an
increase in Operating revenue in the amount of $4.8 million related to
fixed revenue as a result of changes approved by the BPU for restructured
tariffs; partially offset by
|
|
|
Ÿ
|
a
decrease in Operating revenue and Gas purchases related to off-system
sales in the amount of $12.8 million and $12.6 million, respectively, as a
result of lower average sale prices due to the change in the wholesale
price of natural gas;
|
|
|
Ÿ
|
a
decrease in Operating revenue related to the CIP program in the amount of
$5.3 million due primarily to a change in the CIP baseline use per
customer benchmark resulting from the October 3, 2008 base rate
case;
|
|
|
Ÿ
|
a
decrease in Operating revenue and Gas purchases related to interruptible
sales in the amount of $2.1 million and $1.8 million, respectively, due to
a decrease in sales to electric co-generation
customers;
|
|
|
Ÿ
|
a
decrease in Gas purchases related to increased amounts earned through the
financial risk management (FRM) and capacity release incentive programs of
$1.8 million in fiscal 2009 as compared to $345,000 in fiscal 2008 due
primarily to the FRM program’s increased annual cost and volume
limitations, which allowed NJNG the ability to capitalize on more hedging
opportunities; and
|
|
|
Ÿ
|
a
decrease of $1.1 million in Gas purchases related to increased amounts
received through the storage incentive program due primarily to the timing
of the incentive margins during the program's April 2008 through October
2008 injection period as compared to the same period in the prior fiscal
year.
|
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
Sales tax
and TEFA, which are presented as both components of Revenues and Operating
Expenses in the Unaudited Condensed Consolidated Statements of Income, totaled
$21.6 million and $16.4 million for the three months ended December 31, 2008 and
2007, respectively. The increase is due primarily to an increase of $68.8
million in operating revenue from firm sales for the three months ended December
31, 2008.
Regulatory
rider expenses are calculated on a per-therm basis and totaled $13.6 million and
$12.2 million for the three months ended December 31, 2008 and 2007,
respectively. The increase is due primarily to an increase in firm throughput of
1.2 Bcf for the three months ended December 31, 2008 as compared with the three
months ended December 31, 2007, as a result of the previously mentioned colder
weather and an increase in the SBC rate.
Utility
gross margin is comprised of three major categories:
Ÿ
|
Utility
Firm Gross Margin, which is derived from residential and commercial
customers who receive natural gas service from NJNG through either sales
or transportation tariffs;
|
|
|
Ÿ
|
Incentive
programs, where margins generated or savings achieved from BPU-approved
off-system sales, capacity release, Financial Risk Management (defined in
Incentive Programs, below) or storage incentive programs are shared
between customers and NJNG; and
|
|
|
Ÿ
|
Utility
gross margin from interruptible customers who have the ability to switch
to alternative fuels.
|
Utility
Firm Gross Margin
Utility
firm gross margin is earned from residential and commercial customers who
receive natural gas service from NJNG through either sales or transportation
tariffs.
As a
result of NJNG’s implementation of the CIP, utility gross margin is no longer
linked to customer usage. The CIP eliminates the disincentive to promote
conservation and energy efficiency and facilitate normalizing NJNG’s utility
gross margin recoveries for variances not only in weather but also in other
factors affecting usage, including customer conservation. Recovery of utility
gross margin for the non-weather variance through the CIP is limited to the
amount of certain gas supply cost savings achieved and is subject to an earnings
test, which contains a return on equity component of 10.3 percent.
NJNG’s
total utility gross margin is not negatively affected by customers who use its
transportation service and purchase natural gas from another supplier because
its tariff is designed so that no profit is earned on the commodity portion of
sales to firm customers. All customers who purchase natural gas from another
supplier continue to use NJNG for transportation service.
Total
utility firm gross margin increased $7.4 million, or 11.5 percent, for the three
months ended December 31, 2008, as compared to the same period in the prior
fiscal year, due primarily to an increase in residential and commercial
transport customer margin as a result of an increase in base rates effective
October 3, 2008 partially offset by a decrease in the amounts accrued through
the CIP program. The changes in customer margin were also favorably impacted by
the increase in firm and transport customers of 2,100 and 3,100, respectively,
over the same period in the prior fiscal year.
Utility
firm gross margin from residential service sales increased to $49.7 million for
the three months ended December 31, 2008, as compared with $45.4 million for the
three months ended December 31, 2007. NJNG transported 13.3 Bcf for its firm
customers in the three months ended December 31, 2008, compared with 12.7 Bcf
for the same period ended December 31, 2007.
Utility
firm gross margin from transportation service increased to $8.4 million for the
three months ended December 31, 2008, as compared to $4.9 million for the three
months ended December 31, 2007. NJNG transported 3.0 Bcf for its firm customers
in the three months ended December 31, 2008, compared with 2.8 Bcf for the same
period ended December 31, 2007.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
The
weather for the three months ended December 31, 2008 was 1.8 percent colder than
normal, based on a 20-year average, which resulted in a negative adjustment of
utility gross margin under the weather component of the CIP of $(216,000),
compared with 8.2 percent warmer-than-normal weather for the same period last
fiscal year, which resulted in an accrual of utility gross margin of $2.9
million. Under the provisions of the CIP, accruals related to the weather
portion are dependent on the occurrence of degree days and the magnitude of the
variance in relation to a normal degree day. Customer usage was lower than the
established benchmark during the first quarter of fiscal 2009, which resulted in
an accrual of utility gross margin under the CIP of $1.0 million compared with
$3.2 million in the first quarter of fiscal 2008. The change in the weather and
non-weather components of the CIP include the effect of adjustments, normal
degree days, consumption factors and benchmarks related to the baseline use per
customer, which was amended with NJNG’s new base rates approved by the BPU
effective October 3, 2008.
NJNG had
12,053 and 9,324 residential customers and 5,214 and 4,889 commercial customers
using its transportation service at December 31, 2008 and 2007, respectively.
The increase in transportation customers for the period ended December 31, 2008
was due primarily to an increase in marketing activity by third party natural
gas service providers in NJNG’s service territory.
NJNG
added 1,763 and 1,723 new customers during the three months ended December 31,
2008 and 2007, respectively. In addition, NJNG converted 162 and 104 existing
customers to natural gas heat and other services during the same periods for
fiscal 2009 and 2008, respectively. This customer growth represents an estimated
annual increase of approximately 0.53 Bcf in sales to firm customers, assuming
normal weather and usage.
Incentive
Programs
To reduce
the overall cost of its natural gas supply commitments, NJNG has entered into
contracts to sell natural gas to wholesale customers outside its franchise
territory when the natural gas is not needed for system requirements. These
off-system sales enable NJNG to reduce its overall costs applicable to BGSS
customers. NJNG also participates in the capacity release market on the
interstate pipeline network when the capacity is not needed for its firm system
requirements. NJNG retains 15 percent of the utility gross margin from these
sales, with 85 percent credited to firm customers through the BGSS.
The
Financial Risk Management (FRM) program is designed to provide price stability
to NJNG’s natural gas supply portfolio. The FRM program includes an incentive
mechanism designed to encourage the use of financial instruments to economically
hedge NJNG’s natural gas costs. NJNG retains 15 percent of the utility gross
margin, with 85 percent credited to firm customers through the
BGSS.
The
storage incentive program shares gains and losses on an 80 percent and 20
percent basis between customers and NJNG, respectively. This program measures
the difference between the actual cost of natural gas injected into storage and
a benchmark established with the purchase of a portfolio of futures contracts
applicable to the April-through-October natural gas injection
season.
On
October 3, 2008, the BPU approved the Rate Order, which extends the incentive
programs through October 31, 2011, and provides changes to certain volume and
cost limitations surrounding these incentive programs.
NJNG’s
incentive programs totaled 12.2 Bcf and generated $3.7 million of utility gross
margin for the three months ended December 31, 2008, compared with 9.7 Bcf and
$1.4 million of utility gross margin during the same period last fiscal year.
Utility gross margin from incentive programs comprised 4.9 percent of total
utility gross margin for the three months ended December 31, 2008 and 2.2
percent of total utility gross margin for the same period in fiscal 2008,
respectively. The increase in utility gross margin was due primarily
to increased amounts received through the FRM program of $1.2 million in
the first quarter of fiscal 2009 as compared with $230,000 in the first quarter
of fiscal 2008 and $1.1 million in the first quarter of fiscal 2009 from
increased amounts received through the storage incentive program as
discussed above.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
Interruptible
Revenues
As of
December 31, 2008, NJNG serves 45 customers through interruptible transportation
and sales services. Interruptible customers are those customers whose service
can be temporarily halted as they have the ability to utilize an alternate fuel
source. Although therms transported and sold to interruptible customers
represented 0.9 Bcf, or 2.8 percent, of total throughput for the three months
ended December 31, 2008, and 1.6 Bcf, or 5.4 percent, of the total throughput
during the same period in the prior fiscal year, they accounted for less than 1
percent of the total utility gross margin in each year.
Operation
and Maintenance Expense
Operation
and maintenance expense increased $1.1 million, or 4.5 percent, during the three
months ended December 31, 2008, as compared with the same period in the last
fiscal year, due primarily to:
Ÿ
|
an
increase in the bad debt expense of $325,000 as a result of an increase in
operating revenue;
|
|
|
Ÿ
|
an
increase of $180,000 in pipeline access clearing
maintenance;
|
|
|
Ÿ
|
higher
pipeline integrity costs of $130,000;
|
|
|
Ÿ
|
increased postemployment
benefit costs in the amount of $121,000; and
|
|
|
Ÿ
|
increased
reserve for unused earned vacation of
$119,000.
|
Operating
Income
Operating
income increased $10.6 million, or 33.5 percent, for the three months ended
December 31, 2008 as compared with the same period in the last fiscal year, due
primarily to:
Ÿ
|
an
increase in total Utility gross margin of $9.6 million, as discussed
above;
|
|
|
Ÿ
|
a
decrease in depreciation expense of $2.1 million, due to a rate reduction
from 3 percent to 2.34 percent and amortization of previously recovered
asset retirement obligations, both of which were part of the settlement of
the base rate case; partially offset by
|
|
|
Ÿ
|
an
increase in Operations and maintenance expense in the amount of $1.1
million, as discussed above.
|
Interest
Expense
Interest
expense increased $341,000 for the three months ended December 31, 2008 compared
with the same period in the last fiscal year, due primarily to:
Ÿ
|
an
increase of $1.8 million in long-term interest due to the new long-term
fixed rate debt issuance of $125 million in May 2008; partially offset
by
|
|
|
Ÿ
|
a
decrease of $1.4 million in short-term interest due to lower average
interest rates and short-term borrowings of commercial paper and other
variable-rate debt.
|
Net
Income
Net
income increased $6.4 million, or 38.4 percent, to $23.1 million from $16.7
million in the three months ended December 31, 2008 and 2007, respectively, due
primarily to an increase in Operating income of approximately $10.6 million as
discussed above, partially offset by higher income tax expense of $3.3 million
as a result of the higher Operating income.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
Energy
Services Segment
NJRES is
a non-regulated natural gas marketer and provides for the physical delivery of
natural gas to its customers, while managing its exposure to the price risk
associated with its natural gas commodity supply through the use of financial
derivative contracts. In order to best serve its customers, which include other
natural gas marketers, local distribution companies, industrial companies,
electric generators and retail aggregators, and to manage the continuous changes
in supply and demand that it faces in the market areas in which it participates,
so that it can maximize its margins, NJRES has physical storage and
transportation capacity contracts with natural gas storage facilities and
pipelines. NJRES purchases natural gas predominately in the eastern United
States and Canada, and transports that natural gas, through the use of its
pipeline contracts to which it has reserved capacity through the payment of a
fixed demand charge, to either storage facilities that it has reserved,
primarily in the Appalachian, Mid-Continent and Gulf regions of the United
States and eastern Canada or directly to customers in various market areas
including the Northeastern region of the United States and eastern
Canada.
When
NJRES enters into contracts for the future delivery of physical natural gas, it
simultaneously enters into financial derivative contracts at market prices to
establish an initial financial margin for each of its forecasted physical
commodity transactions. The financial derivative contracts also serve to
protect the cash flows of the transaction from volatility in commodity prices as
NJRES locks in pricing and can include futures, options, and swap contracts,
which are all predominantly actively quoted on the NYMEX.
Through
the use of its contracts for natural gas storage and pipeline capacity, NJRES is
able to take advantage of pricing differences between geographic locations,
commonly referred to as “locational spreads,” as well as over different time
periods, for the delivery of natural gas to its customers, thereby improving the
initially established financial margin result. NJRES utilizes financial futures,
forwards and swap contracts to establish economic hedges that fix and protect
the cash flows surrounding these transactions.
Accordingly,
NJRES utilizes these contractual assets to optimize its opportunities to
increase its financial margin by capitalizing on changes or events in the
marketplace that impact natural gas demand levels. NJRES generates financial
margin through three primary channels:
Ÿ
|
Storage:
NJRES
attempts to take advantage of differences in market prices occurring over
different time periods (time spreads) as follows:
|
|
|
|
*
|
NJRES
can purchase gas to inject into storage and concurrently lock in gross
margin with a contract to sell the natural gas at a higher price at a
future date; and
|
|
|
|
*
|
NJRES
can purchase a future contract with an early delivery date at a lower
price and simultaneously sell another future contract with a later
delivery date having a higher price.
|
|
|
Ÿ
|
Transportation
(Basis):
Similarly, NJRES benefits from pricing differences
between various receipt and delivery points along a natural gas pipeline
as follows:
|
|
|
|
*
|
NJRES
can utilize its pipeline capacity by purchasing natural gas at a lower
price location and transporting to a higher value location. NJRES can
enter into a basis swap contract, a financial commodity
derivative based on the price of natural gas at two different
locations, when it will lead to positive cash flows and financial margin
for NJRES.
|
|
|
Ÿ
|
Daily Sales
Optimization:
Consists of buying and selling flowing gas on a
daily basis while optimizing existing transport positions during
short-term market price movements to benefit from locational
spreads:
|
|
|
|
|
*
|
Involves
increasing the financial margin on established transportation hedges by
capitalizing on price movements between specific
locations.
|
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
Typically,
periods of greater price volatility provide NJRES with additional opportunities
to generate financial margin by optimizing its storage and transport capacity
assets, and capturing their respective time or locational spreads. The
combination of strategically positioned natural gas storage and transportation
capacities provides NJRES with a significant amount of arbitrage opportunities
that are typically more prevalent during periods of high price
volatility.
Predominantly
all of NJRES’ purchases and sales of natural gas result in the physical delivery
of natural gas. NJRES has elected not to use the normal purchase normal sale
scope exception of SFAS 133,
Accounting for Derivative Instruments and Hedging Activities,
under which
related liabilities incurred and assets acquired under these contracts are
recorded when title to the underlying commodity passes. Therefore, all NJRES
physical commodity contracts are recorded at fair value on the Unaudited
Condensed Consolidated Balance Sheets with any changes in fair value recognized
as a component of Gas purchases in the Unaudited Condensed Consolidated
Statements of Income.
The
changes in fair value of NJRES’ financial derivative instruments, which are
financial futures, swaps and option contracts are also recognized in the
Unaudited Condensed Consolidated Statements of Income, as a component of Gas
purchases.
NJRES’
financial and physical contracts will result, over time, in earning a gross
margin on the entire transaction. For financial reporting purposes under GAAP,
the change in fair value associated with derivative instruments used to
economically hedge these transactions are recorded as a component of Gas
purchases in the Unaudited Condensed Consolidated Statements of Income during
the duration of the financial instrument or commodity contract. These changes in
fair value are referred to as unrealized gains and losses. In other instances,
certain financial contracts designed to economically fix or hedge the price of
natural gas that is purchased and placed into storage, to be sold at a later
date, settle and result in realized gains, which are also recorded as a
component of Gas purchases in the Unaudited Condensed Consolidated Statements of
Income.
These
unrealized gains or losses from the change in fair value of unsettled financial
instruments and physical commodity contracts, or realized gains or losses
related to financial instruments that economically hedge natural gas inventory
that has not been sold as part of a planned transaction, cause large variations
in the reported gross margin and earnings of NJRES. NJRES will continue to earn
the gross margin established at inception of the transaction over the duration
of the forecasted transaction and may be able to capitalize on events in the
marketplace that enable it to increase the initial margin; however, gross margin
or earnings during periods prior to the delivery of the natural gas will not
reflect the underlying economic result.
NJRES
expenses its demand charges, which represent the right to use natural gas
pipeline and storage capacity assets of a third-party for a fixed period of
time. These demand charges are expensed over the term of the related natural gas
pipeline or storage contract. The term of these contracts vary from less than
one year to five years.
NJRES’
financial results are summarized as follows:
|
Three
Months Ended
December
31,
|
(Thousands)
|
|
2008
|
|
|
2007
|
|
Operating
revenues
|
|
|
$463,094
|
|
|
|
$520,211
|
|
Gas
purchases
|
|
|
467,732
|
|
|
|
494,546
|
|
Gross
(loss) margin
|
|
|
(4,638
|
)
|
|
|
25,665
|
|
Operation
and maintenance expense
|
|
|
4,360
|
|
|
|
2,840
|
|
Depreciation
and amortization
|
|
|
51
|
|
|
|
53
|
|
Other
taxes
|
|
|
329
|
|
|
|
209
|
|
Operating
(loss) income
|
|
|
(9,378
|
)
|
|
|
22,563
|
|
Other
income
|
|
|
13
|
|
|
|
130
|
|
Interest
expense, net
|
|
|
(24
|
)
|
|
|
877
|
|
Income
tax (benefit) provision
|
|
|
(3,727
|
)
|
|
|
8,666
|
|
Net
(loss) income
|
|
|
$
(5,614
|
)
|
|
|
$
13,150
|
|
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
|
Gross
margin for the three months ended December 31, 2008 decreased by $30.3 million,
as compared with the same period in the last fiscal year, due primarily to a
decrease of $14.5 million in overall values on its financial and physical
commodity contracts and lower Gross margin of $15.8 million.
The lower
fair values on financial instruments resulted primarily from a $22.0 million
increase in realized losses associated with economic hedges of natural gas in
inventory. The realized losses pertain to financial derivative instruments that
are designed to economically hedge natural gas storage injections, and as part
of a planned transaction, are awaiting subsequent sale. The lower valuation on
these financial instruments was due primarily to declining NYMEX prices in the
current fiscal period. Partially offsetting the realized losses were higher
unrealized gains of $7.5 million that resulted primarily from higher valuations
on financial instruments with short positions in the current fiscal
period.
The lower
operating results were due primarily to the expiration of a favorable physical
transport capacity asset servicing the Northeast United States market region
that was no longer available for asset optimization in the current fiscal
period, as further discussed in the Financial Margin section.
Additionally,
management of the Company uses non-GAAP measures when viewing the results of
NJRES to monitor the operational results without the impact of unsettled and
certain settled derivative instruments. These non-GAAP measures are “financial
margin” and “net financial earnings.”
The
following table is a computation of Financial margin of NJRES:
|
|
Three
Months Ended
December
31,
|
|
(Thousands)
|
|
2008
|
|
|
2007
|
|
Operating
revenues
|
|
|
$463,094
|
|
|
|
$520,211
|
|
Gas
purchases
|
|
|
467,732
|
|
|
|
494,546
|
|
Add:
|
|
|
|
|
|
|
|
|
Unrealized
(gain) loss on derivative instruments
|
|
|
(2,597
|
)
|
|
|
4,922
|
|
Realized
loss from derivative instruments related to natural gas
inventory
|
|
|
27,194
|
|
|
|
5,163
|
|
Financial
margin
|
|
|
$
19,959
|
|
|
|
$
35,750
|
|
A
reconciliation of Operating income, the closest GAAP financial
measurement, to the Financial margin of NJRES is as
follows:
|
|
Three
Months Ended
December
31,
|
|
(Thousands)
|
|
2008
|
|
|
2007
|
|
Operating
income
|
|
|
$(9,378
|
)
|
|
|
$22,563
|
|
Add:
|
|
|
|
|
|
|
|
|
Operation
and maintenance expense
|
|
|
4,360
|
|
|
|
2,840
|
|
Depreciation
and amortization
|
|
|
51
|
|
|
|
53
|
|
Other
taxes
|
|
|
329
|
|
|
|
209
|
|
Subtotal
– Gross margin
|
|
|
(4,638
|
)
|
|
|
25,665
|
|
Add:
|
|
|
|
|
|
|
|
|
Unrealized
(gain) loss on derivative instruments
|
|
|
(2,597
|
)
|
|
|
4,922
|
|
Realized
loss from derivative instruments related to natural gas
inventory
|
|
|
27,194
|
|
|
|
5,163
|
|
Financial
margin
|
|
|
$19,959
|
|
|
|
$35,750
|
|
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
A
reconciliation of Net (loss) income to Net financial earnings is as
follows:
|
|
Three
Months Ended
December
31,
|
|
(Thousands)
|
|
2008
|
|
|
2007
|
|
Net
(loss) income
|
|
|
$(5,614
|
)
|
|
|
$13,150
|
|
Add:
|
|
|
|
|
|
|
|
|
Unrealized
(gain) loss on derivative instruments, net of taxes
|
|
|
(1,583
|
)
|
|
|
2,900
|
|
Realized
loss from derivative instruments related to natural gas inventory,
net
of taxes
|
|
|
16,580
|
|
|
|
3,042
|
|
Net
financial earnings
|
|
|
$
9,383
|
|
|
|
$19,092
|
|
Financial
margin for the three months ended December 31, 2008 and 2007 was $20.0 million
and $35.8 million, respectively. The decrease of $15.8 million is due primarily
to the expiration of a highly favorable physical transport capacity contract
servicing the Northeast market region that was no longer available for asset
optimization in the current fiscal period, along with lower hedged values for
transportation and higher transportation expenses. NJRES’ total firm
transportation capacity decreased by 185,400 dth/day, to 677,000 dth/day at
December 31, 2008, from 862,400 dth/day at December 31, 2007. As a result, the
combined operating results of the basis and cash book portfolios in the current
fiscal period decreased by $11.4 million, as compared with the same period in
the last fiscal year. The storage book portfolio also decreased by $4.4 million
from the prior fiscal period, due primarily to lower average spreads on storage
positions in the current fiscal period, and less firm storage capacity, which
decreased to 25.1 Bcf in the current fiscal period from 26.9 Bcf in the prior
fiscal period.
NJRES’
operation and maintenance expense increased $1.5 million during the three months
ended December 31, 2008, compared with the same period in the last fiscal year,
due primarily to adjustments in fiscal 2008 related to fiscal 2007 performance
incentives, in addition to increased audit fees in fiscal 2009.
Future
results are subject to NJRES’ ability to maintain and expand its wholesale
marketing activities and are contingent upon many other factors, including an
adequate number of appropriate counterparties, volatility in the natural gas
market, sufficient liquidity in the energy trading market and continued access
to the capital markets.
Retail
and Other Operations
The
consolidated financial results of Retail and Other are summarized as
follows:
|
|
Three
Months Ended
December
31,
|
|
(Thousands)
|
|
2008
|
|
|
2007
|
|
Operating
revenues
|
|
|
$(2,654
|
)
|
|
|
$6,631
|
|
Operation
and maintenance expense
|
|
|
$ 7,150
|
|
|
|
$5,460
|
|
Equity
in earnings, net of tax
|
|
|
$
514
|
|
|
|
$
424
|
|
Net
(loss) income
|
|
|
$(5,684
|
)
|
|
|
$
365
|
|
Operating
revenue for the three months ended December 31, 2008 decreased $9.3 million
compared to the same period in the prior fiscal year, due primarily to greater
unrealized losses at NJR Energy, which were the result of declining market
prices within a portfolio of net long financial derivative
positions.
Operation
and maintenance expense for the three months ended December 31, 2008 increased
$1.7 million compared to the same period in the prior fiscal year, due
primarily to a combination of higher labor cost, increased rent and utilities
expenses and higher health care premium costs at NJRHS during the three months
ended December 31, 2008 and the fiscal 2008 true-up of fiscal 2007’s short term
incentive compensation costs at NJR in the first quarter of fiscal
2008.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
Taxes
netted in Equity in earnings from Iroquois are $339,000 and $282,000 and are
included in the Unaudited Condensed Consolidated Statements of Income for the
three months ended December 31, 2008 and 2007, respectively. Equity in earnings
from Iroquois is driven by the underlying performance of natural gas
transportation through its existing pipeline, which is based on FERC regulated
tariffs.
Net
income for the three months ended December 31, 2008 decreased $6.0 million
compared to the same period in fiscal 2008 due primarily to the decreased
operating revenue at NJR Energy, partially offset by lower income tax expense as
a result of the lower Operating income.
NJR
Energy has an economic hedge associated with a long-term fixed-price contract to
sell gas to a counterparty. Unrealized losses or gains at NJR Energy are the
result of the change in value associated with financial derivative instruments
(futures contracts) designed to economically hedge the long-term fixed-price
contract.
The
Income statement impact represents unrealized losses associated with these
derivative instruments of $9.7 million and $305,000 for the three months ended
December 31, 2008 and 2007, respectively, which are recorded, pre-tax, as a
component of Operating revenues.
Additionally,
management of the Company uses the non-GAAP measure net financial earnings, when
viewing the results of NJR Energy to monitor the operational results without the
impact of unsettled derivative instruments.
A
reconciliation of Net (loss) income to Net financial earnings, a non-GAAP
measure, is as follows:
|
|
Three
Months Ended
December
31,
|
|
(Thousands)
|
|
2008
|
|
|
2007
|
|
Net
(loss) income
|
|
|
$(5,684
|
)
|
|
|
$365
|
|
Add:
|
|
|
|
|
|
|
|
|
Unrealized
loss on derivative instruments, net of taxes
|
|
|
5,705
|
|
|
|
180
|
|
Net
financial earnings
|
|
|
$
21
|
|
|
|
$545
|
|
Net
financial earnings for the three months ended December 31, 2008, decreased
$500,000 compared to the same period in the prior fiscal year, due
primarily to increased Operation and maintenance expense as discussed
above, partially offset by lower Interest expense for NJR due to lower average
interest rates and short-term borrowings.
Liquidity
and Capital Resources
NJR’s
objective is to maintain a consolidated capital structure that reflects the
different characteristics of each business segment and provides adequate
financial flexibility for accessing capital markets as required.
NJR’s
consolidated capital structure was as follows:
|
December
31,
|
September
30,
|
|
2008
|
2008
|
Common
stock equity
|
49
|
%
|
51
|
%
|
Long-term
debt
|
31
|
|
32
|
|
Short-term
debt
|
20
|
|
17
|
|
Total
|
100
|
%
|
100
|
%
|
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
Common
stock equity
NJR
satisfies its external common equity requirements, if any, through issuances of
its common stock, including the proceeds from stock issuances under its
Automatic Dividend Reinvestment Plan (DRP) and proceeds from the exercise of
options issued under the Company’s long-term incentive program. The DRP allows
NJR, at its option, to use shares purchased on the open market or newly issued
shares.
The
Company has a share repurchase program that provides for the repurchase of up to
6.8 million shares. As of December 31, 2008, the Company repurchased
approximately 5.4 million of those shares and has the ability to repurchase
approximately 1.4 million additional shares under the approved
program.
Debt
NJR and
its unregulated subsidiaries rely on cash flows generated from operating
activities and utilization of committed credit facilities to provide liquidity
to meet working capital and external debt-financing requirements.
As of
December 31, 2008, NJR, NJRES and NJNG had committed credit facilities of $605
million with approximately $339 million available under these facilities (see
Note 7.
Debt).
NJR
believes that as of December 31, 2008, NJR, NJNG and NJRES were, and currently
are, in compliance with all debt covenants.
NJR
believes that existing borrowing availability, its current cash balances and its
cash flow from operations will be sufficient to satisfy it and its subsidiaries’
working capital, capital expenditure and dividend requirements for the
foreseeable future. NJR, NJNG and NJRES currently anticipate that its financing
requirements for the next twelve months will be met through the issuance of
short-term debt, meter sale lease-backs and proceeds from the Company’s
DRP.
NJR
On
December 13, 2007, NJR entered into a $325 million, five-year, revolving,
unsecured credit facility, which permits the borrowing of revolving loans and
swing loans, as well as the issuance of letters of credit. Swing loans are loans
made available on a same-day basis for an aggregate principal amount of up to
$50 million and repayable in full within a maximum of seven days of borrowing.
It also permits an increase to the facility, from time to time, with the
existing or new lenders, in a minimum of $5 million increments up to a maximum
$100 million at the lending banks discretion. Borrowings under the new facility
are conditional upon compliance with a maximum leverage ratio, as defined in the
new credit facility, of not more than 0.65 to 1.00 at any time. NJR used the
initial borrowings under the new credit facility to refinance its prior credit
facility. In addition, certain of NJR’s non-regulated subsidiaries have
guaranteed to the lenders all of NJR’s obligations under the new credit
facility. Depending on borrowing levels and credit ratings, NJR’s interest rate
can either be, at its discretion, the London inter-bank offered rate (“LIBOR”)
or the Federal Funds Open Rate plus an applicable spread and facility fee. As of
December 31, 2008, NJR’s effective rate was 0.8 percent on outstanding
borrowings of $62 million under this credit facility.
In
addition, borrowings under NJR’s credit facility are conditioned upon compliance
with a maximum leverage ratio, as defined in the credit facility, of not more
than 0.65 to 1.00 at any time.
NJR uses
its short term borrowings primarily to finance its share repurchases, to satisfy
NJRES’ short term liquidity needs and to finance, on an initial basis,
unregulated investments. NJRES’ use of high-injection, high-withdrawal storage
facilities and anticipated pipeline park-and-loan arrangements, combined with
related economic hedging activities in the volatile wholesale natural gas
market, create significant short-term cash requirements.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
NJNG
On
November 1, 2008, upon maturity, NJNG redeemed its $30 million, 6.27
percent, Series X First Mortgage bonds.
NJNG
satisfies its debt needs by issuing short- and long-term debt based upon its own
financial profile. The seasonal nature of NJNG’s operations creates large
short-term cash requirements, primarily to finance natural gas purchases and
customer accounts receivable. NJNG obtains working capital for these
requirements, and for the temporary financing of construction and MGP
remediation expenditures and energy tax payments, through the issuance of
commercial paper and short-term bank loans.
To
support the issuance of commercial paper, NJNG has a $250 million committed
credit facility with several banks, with a 5-year term, expiring in December
2009. NJNG had $203.6 million of commercial paper borrowings supported by the
credit facility as of December 31, 2008. In addition, borrowings under
NJNG’s credit facility are conditioned upon compliance with a maximum leverage
ratio, as defined in the credit facility, of not more than 0.65 to 1.00 at any
time and a minimum interest coverage ratio, as defined in the credit facility,
of less than 2.50 to 1.00.
Neither
NJNG nor its assets are obligated or pledged to support the NJR or NJRES
facilities.
NJRES
NJRES has
a 3-year $30 million committed credit facility with a multinational financial
institution. Borrowings under this facility are guaranteed by NJR. There were no
borrowings under this facility as of December 31, 2008.
Contractual
Obligations
The
following table is a summary of NJR, NJNG and NJRES contractual cash obligations
and financial commitments and their applicable payment due dates as of December
31, 2008.
|
|
Up to
|
2-3
|
4-5
|
After
|
(Thousands)
|
Total
|
1 Year
|
Years
|
Years
|
5 Years
|
Long-term
debt
(1)
|
$ 638,908
|
$ 44,057
|
$ 56,006
|
$ 34,975
|
$503,870
|
Capital
lease obligations
(1)
|
91,513
|
9,748
|
23,086
|
16,391
|
42,288
|
Operating
leases
(1)
|
11,735
|
3,251
|
4,301
|
2,570
|
1,613
|
Short-term
debt
|
265,550
|
265,550
|
—
|
—
|
—
|
New
Jersey Clean Energy Program
(1)
|
53,077
|
12,514
|
24,667
|
15,896
|
—
|
Construction
obligations
|
2,635
|
2,635
|
—
|
—
|
—
|
Remediation
expenditures
(2)
|
120,230
|
18,530
|
35,900
|
22,200
|
43,600
|
Natural
gas supply purchase obligations–NJNG
|
92,177
|
76,054
|
16,123
|
—
|
—
|
Demand
fee commitments–NJNG
|
729,972
|
87,598
|
185,039
|
157,514
|
299,821
|
Natural
gas supply purchase obligations–NJRES
|
709,390
|
600,177
|
109,213
|
—
|
—
|
Demand
fee commitments–NJRES
|
188,356
|
79,508
|
78,406
|
23,589
|
6,853
|
Total
contractual cash obligations
|
$2,903,543
|
$1,199,622
|
$532,741
|
$273,135
|
$898,045
|
(1)
|
These
obligations include an interest component, as defined under the related
governing agreements or in accordance with the applicable tax
statute.
|
(2)
|
Expenditures
are estimated
|
For
fiscal 2009, the Company has no minimum pension funding requirements, however,
funding requirements are uncertain and can depend significantly on changes in
actuarial assumptions, returns on plan assets and changes in demographic
factors. It is anticipated that the annual funding level to the OPEB plans will
range from $1.2 million to $1.4 million over the next five years. Additional
contributions may be made based on market conditions and various
assumptions.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
As of
December 31, 2008, there were NJR guarantees covering approximately $421 million
of natural gas purchases and demand fee commitments of NJRES and NJNG, included
in natural gas supply purchase obligations above, not yet reflected in Accounts
payable on the Unaudited Condensed Consolidated Balance Sheet.
The
Company is obligated to fund up to $132.5 million associated with the
construction and development of Steckman Ridge. Currently, NJR anticipates that
Steckman Ridge will seek non-recourse project financing for a portion of the
facility once construction activities are completed, therefore potentially
reducing the aggregate recourse amount funded by NJR. There can be no assurances
that Steckman Ridge will eventually secure such non-recourse project
financing.
Total
capital expenditures for fiscal 2009 are estimated at $77.3 million, including
expenditures of $18.4 million incurred during the three months ended December
31, 2008.
Off-Balance-Sheet
Arrangements
The
Company does not have any off-balance-sheet financing arrangements.
Cash
Flow
Operating
Activities
As
presented in the Unaudited Condensed Consolidated Statements of Cash Flows, cash
flow used in operating activities totaled $37.0 million for the three months
ended December 31, 2008, compared with cash flow used in operations of $6.5
million for the same period in fiscal 2008. Cash used in operating activities
was lower for the three month period ended December 31, 2008 as compared with
the same period in fiscal 2008, largely as a result of lower net income during
the current fiscal period, which was driven by less favorable operating results
at NJRES. NJR employs the indirect method when preparing its Unaudited Condensed
Consolidated Statement of Cash Flows. Net income is adjusted for any non-cash
items, such as accruals and certain amortization amounts that impact earnings
during the period. In addition, operating cash flows are affected by variations
in working capital and the related changes in the beginning and period end
balances, which can be impacted by the following:
Ÿ
|
seasonality
of NJR’s business;
|
|
|
Ÿ
|
fluctuations
in wholesale natural gas prices;
|
|
|
Ÿ
|
timing
of storage injections and withdrawals;
|
|
|
Ÿ
|
management
of the deferral and recovery of gas costs,
|
|
|
Ÿ
|
changes
in contractual assets utilized to optimize margins related to natural gas
transactions; and
|
|
|
Ÿ
|
timing
of the collections of receivables and payments of current
liabilities.
|
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
NJR
needed less cash for its working capital requirements during the three months
ended December 31, 2008 as compared with the same period in fiscal 2008. During
the current fiscal period, NJR used $41.2 million to satisfy liquidity needs
compared with $57.8 million during the prior fiscal quarter. The underlying
factors that contributed to the decrease in cash used to support working capital
requirements are as follows:
Ÿ
|
a
decrease in average natural gas costs at NJRES resulting in a reduction in
the value of its gas in storage;
|
|
Ÿ
|
comparatively
lower sales volumes at NJRES stemming from a reduction in transportation
capacity resulting in a decrease in its receivable
balances;
|
|
Ÿ
|
a
reduction in NJNG’s underrecovered gas costs during the current quarter as
a result of gas costs falling below the commodity component of NJNG’s BGSS
rate billed to its customers compared with the prior year when cash flows
were primarily impacted by a credit of $32 million issued to NJNG’s
customers in anticipation of the lower commodity costs; partially offset
by
|
Ÿ
|
lower
NYMEX prices during the current fiscal quarter which resulted in increased
broker margin deposits for NJNG’s financial derivatives;
and
|
|
|
Ÿ
|
Lower
payable balances at the end of the current fiscal quarter compared to
higher balances the previous year related to gas purchases at
NJRES.
|
NJNG’s
MGP expenditures are currently expected to total $17.6 million in fiscal 2009
(see
Note 13. Commitments and
Contingent Liabilities).
Investing
Activities
Cash flow
used in investing activities totaled $36.6 million for the three months ended
December 31, 2008, compared with $17.9 million in the same period in fiscal
2008. The increase in cash used was due primarily to an increase in the cash
invested in Steckman Ridge and higher NJNG utility plant expenditures offset by
the drawdown from the restricted cash construction fund.
On June
5, 2008, the Federal Energy Regulatory Commission (FERC) issued Steckman Ridge a
certificate of public convenience and necessity authorizing the ownership,
construction and operation of its natural gas storage facility and associated
facilities. NJR anticipates that Steckman Ridge will be placed in service during
the summer of 2009. As of December 31, 2008, NJR has invested $99.7 million in
Steckman Ridge. This amount excludes capitalized interest and other direct
costs. Total project costs related to the development of the storage facility
are currently estimated at approximately $265 million, of which NJR is obligated
to fund 50 percent or approximately $132.5 million. NJR anticipates that
Steckman Ridge will seek non-recourse financing upon completion of
the construction and development of its facilities, thereby potentially
reducing the final expected recourse obligation of NJR. There can be no
assurances that such non-recourse project financing will be secured or available
for Steckman Ridge.
Retail
and Other capital expenditures each year have been made primarily in connection
with investments made to preserve the value of real estate holdings. At December
31, 2008, CR&R owned 83 acres of undeveloped land and a 56,400-square-foot
building on 5 acres of land.
NJRES
does not currently anticipate any significant capital expenditures in fiscal
2009.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
|
Financing
Activities
Cash flow
from financing activities totaled $56.9 million for the three months ended
December 31, 2008, compared with $23.1 million for the same period in the prior
fiscal year. During the current fiscal quarter, NJNG redeemed its $30
million, 6.27 percent, Series X Mortgage bonds, which was offset by an
increase in short-term borrowings compared with the prior fiscal quarter. This
increase in short term debt was used to fund working capital requirements, as
well as utility plant and other investments
NJNG
provides funding for certain of its infrastructure projects through tax exempt,
variable-rate debt, which has been issued to back six series of auction rate
securities (ARS) through the Economic Development Authority of New Jersey (EDA),
and are based on the borrowing costs of the ARS. During periods of reduced
liquidity for ARS, NJNG’s rate on its variable rate debt could default to a
maximum rate of the lesser of (i) 175 percent of the 30-day LIBOR or (ii) 10 to
12 percent, as applicable to a particular series of ARS. NJNG is currently
reviewing alternatives that include the refinancing of these bonds to eliminate
any increase in interest rate risk.
NJNG
received $6.3 million and $7.5 million in December 2008 and 2007, respectively,
in connection with the sale-leaseback of its natural gas meters. This
sale-leaseback program is expected to be continued on an annual
basis.
Credit
Ratings
The table
below summarizes NJNG’s current credit ratings issued by two rating entities,
Standard and Poor’s (S&P) and Moody’s Investors Service, Inc.
(Moody’s):
|
Standard
and Poor’s
|
Moody’s
|
Corporate Rating
|
A
|
N/A
|
Commercial
Paper
|
A-1
|
P-1
|
Senior
Secured
|
A+
|
Aa3
|
Ratings
Outlook
|
Negative
|
Negative
|
On
December 12, 2008, Moody’s adjusted NJNG’s credit ratings outlook from stable to
negative.
NJNG’s
S&P and Moody’s ratings are investment-grade ratings. S&P and Moody’s
give NJNG’s commercial paper the highest rating within the Commercial Paper
investment-grade category. NJR is not a rated entity.
NJNG is
not party to any lending agreements that would accelerate the maturity date of
any obligation caused by a failure to maintain any specific credit rating. If
such ratings are downgraded below investment grade, borrowing costs could
increase, as will the costs of maintaining certain contractual relationships and
for future financing. Even if ratings are downgraded without falling below
investment grade, NJR and NJNG may still face increased borrowing costs under
their respective credit facilities. A rating set forth above is not a
recommendation to buy, sell or hold the Company’s or NJNG’s securities and may
be subject to revision or withdrawal at any time. Each rating set forth above
should be evaluated independently of any other rating.
The
timing and mix of any external financings will target a common equity ratio that
is consistent with maintaining the Company’s current short- and long-term credit
ratings.
NEW
JERSEY RESOURCES CORPORATION
Part
I
I
TEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Financial
Risk Management
Commodity
Market Risks
Natural
gas is a nationally traded commodity, and its prices are determined effectively
by the New York Mercantile Exchange (NYMEX) and over-the-counter markets.
The prices on the NYMEX and over-the-counter markets generally reflect the
notional balance of natural gas supply and demand, but are also influenced
significantly from time to time by other events.
The
regulated and unregulated natural gas businesses of the Company and its
subsidiaries are subject to market risk due to fluctuations, in the price of
natural gas. To economically hedge against such fluctuations, the Company and
its subsidiaries have entered into futures contracts, options agreements and
swap agreements. To manage these derivative instruments, the Company has
well-defined risk management policies and procedures that include daily
monitoring of volumetric limits and monetary guidelines. The Company’s natural
gas businesses are conducted through three of its operating subsidiaries. First,
NJNG is a regulated utility that uses futures, options and swaps to economically
hedge against price fluctuations and its recovery of natural gas costs is
governed by the BPU. Second, NJRES uses futures, options and swaps to
economically hedge purchases and sales of natural gas. Finally, NJR Energy has
entered into two swap transactions related to an 18-year fixed-price contract,
expiring in October 2010 to sell remaining volumes of approximately 4.3 Bcf of
natural gas (Gas Sales Contract) to an energy marketing
company.
The
following table reflects the changes in the fair market value of financial
derivatives related to natural gas purchases and sales from September 30, 2008
to December 31, 2008:
(Thousands)
|
Balance
September
30,
2008
|
Increase
(Decrease)
in Fair
Market Value
|
Less
Amounts
Settled
|
Balance
December
31,
2008
|
NJNG
|
$(49,610
|
)
|
$(32,499
|
)
|
$
(4,581
|
)
|
$(77,528
|
)
|
NJRES
|
89,571
|
|
51,366
|
|
47,909
|
|
93,028
|
|
NJR
Energy
|
20,190
|
|
(8,883
|
)
|
800
|
|
10,507
|
|
Total
|
$
60,151
|
|
$ 9,984
|
|
$44,128
|
|
$26,007
|
|
There
were no changes in methods of valuations during the year ended December 31,
2008.
The
following is a summary of fair market value of financial derivatives related to
natural gas purchases and sales at December 31, 2008, by method of valuation and
by maturity for each fiscal year period:
(Thousands)
|
2009
|
|
2010
|
2011-2013
|
After
2013
|
Total
Fair Value
|
Price
based on NYMEX
|
$22,474
|
|
$ 29
|
$(1,657
|
)
|
—
|
|
$20,846
|
|
Price
based on other external data
|
4,442
|
|
719
|
—
|
|
—
|
|
5,161
|
|
Total
|
$26,916
|
|
$748
|
$(1,657
|
)
|
—
|
|
$26,007
|
|
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(Continued)
|
The
following is a summary of financial derivatives by type as of December 31,
2008:
|
|
Volume
(Bcf)
|
Price
per
Mmbtu
|
Amounts
included
in
Derivatives
(Thousands)
|
NJNG
|
Futures
|
21.0
|
|
$ 5.64
- $ 9.16
|
$(51,076
|
)
|
|
Swaps
|
(5.8
|
)
|
$ 4.39
- $13.95
|
(28,277
|
)
|
|
Options
|
12.4
|
|
$ 5.98
- $ 9.47
|
1,825
|
|
NJRES
|
Futures
|
(10.7
|
)
|
$ 5.20
- $14.36
|
17,648
|
|
|
Swaps
|
(64.7
|
)
|
$ 4.71
- $14.41
|
72,660
|
|
|
Options
|
—
|
|
$10.22
- $13.21
|
2,720
|
|
NJR
Energy
|
Swaps
|
4.7
|
|
$ 3.37
- $ 4.39
|
10,507
|
|
Total
|
|
|
|
|
$
26,007
|
|
The
following table reflects the changes in the fair market value of physical
commodity contracts from September 30, 2008 to December 31, 2008:
(Thousands)
|
Balance
September
30,
2008
|
Increase
(Decrease)
in Fair
Market Value
|
Less
Amounts
Settled
|
Balance
December
31,
2008
|
NJRES
|
$1,714
|
|
$
13,193
|
|
$14,052
|
|
$855
|
|
The
Company uses a value-at-risk (VaR) model to assess the market risk of its net
futures, options and swap positions. VaR represents the potential loss in value
of NJRES’ trading portfolio due to adverse market movements over a defined time
horizon (NJRES utilizes holding periods of 1 day and 10 days) with a specified
confidence level (NJRES utilizes either a 95 percent or 99 percent confidence
level). As an example, utilizing a 1 day holding period with a 95 percent
confidence level would indicate that there is a 5 percent chance that the
liquidation value of the NJRES portfolio would fall below the expected trading
value by an amount at least as large as the calculated VaR.
The VaR
at December 31, 2008, using the variance-covariance method with a 95 percent
confidence level and a 1-day holding period, was $1.0 million. The VaR with a 99
percent confidence level and a 10-day holding period was $4.5 million. The
calculated VaR represents an estimate of the potential change in the value of
the net positions. These estimates may not be indicative of actual results
because actual market fluctuations may differ from forecasted
fluctuations.
Wholesale
Credit Risk
NJNG,
NJRES and NJR Energy engage in wholesale marketing activities. NJR monitors and
manages the credit risk of its wholesale marketing operations through credit
policies and procedures that management believes reduce overall credit risk.
These policies include a review and evaluation of prospective counterparties’
financial statements and/or credit ratings, daily monitoring of counterparties’
credit limits, daily communication with traders regarding credit status and the
use of credit mitigation measures, such as minimum margin requirements,
collateral requirements and netting agreements. Examples of collateral include
letters of credit and cash received for either prepayment or margin
deposit.
The
Company’s Risk Management Committee (RMC) continuously monitors NJR’s credit
risk management policies and procedures. The RMC is comprised of individuals
from NJR-affiliated companies that meet twice a month and, among other things,
evaluates the effectiveness of existing credit policies and procedures, reviews
material transactions and discusses emerging issues.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(Continued)
|
The
following is a summary of gross and net credit exposures, grouped by investment
and noninvestment grade counterparties, as of December 31, 2008. Gross credit
exposure is defined as the unrealized fair value of derivative and energy
trading contracts plus any outstanding receivable for the value of natural gas
delivered for which payment has not yet been received. Net credit exposure is
defined as gross credit exposure reduced by collateral received from
counterparties and/or payables, where netting agreements exist. The amounts
presented below exclude accounts receivable for retail natural gas sales and
services.
Unregulated
counterparty credit exposure as of December 31, 2008, is as
follows:
(Thousands)
|
Gross Credit
Exposure
|
|
Net Credit
Exposure
|
Investment
grade
|
$229,046
|
|
|
$150,020
|
|
Noninvestment
grade
|
3,169
|
|
|
—
|
|
Internally
rated investment grade
|
27,639
|
|
|
16,564
|
|
Internally
rated noninvestment grade
|
1,531
|
|
|
—
|
|
Total
|
$261,385
|
|
|
$166,584
|
|
NJNG’s
counterparty credit exposure as of December 31, 2008, is as
follows:
(Thousands)
|
Gross Credit
Exposure
|
|
Net Credit
Exposure
|
Investment
grade
|
$22,743
|
|
|
$17,471
|
|
Noninvestment
grade
|
1,700
|
|
|
4
|
|
Internally
rated investment grade
|
189
|
|
|
—
|
|
Internally
rated noninvestment grade
|
—
|
|
|
—
|
|
Total
|
$24,632
|
|
|
$17,475
|
|
Due to
the inherent volatility in the prices of natural gas commodities and
derivatives, the market value of contractual positions with individual
counterparties could exceed established credit limits or collateral provided by
those counterparties. If a counterparty failed to perform the obligations under
its contract (for example, failed to deliver or pay for natural gas), then the
Company could sustain a loss. This loss would comprise the loss on natural gas
delivered but not paid for and/or the cost of replacing natural gas not
delivered at a price higher than the price in the original contract. Any such
loss could have a material impact on the Company’s financial condition, results
of operations or cash flows.
Interest
Rate Risk–Long-Term Debt
At
December 31, 2008, the Company (excluding NJNG) had no variable-rate long-term
debt.
As of
December 31, 2008 NJNG is obligated with respect to loan agreements securing six
series of auction rate bonds totaling approximately $97.0 million of
variable-rate debt backed by securities issued by the EDA. The EDA bonds are ARS
and have an interest rate reset every 7 or 35 days, depending upon the
applicable series, when an auction is held for the purposes of determining the
interest rate pricing of the securities. The interest rate associated with the
NJNG variable-rate debt is based on the rates the EDA receives from its ARS. As
of December 31, 2008, all of the auctions surrounding the EDA ARS have failed,
resulting in the securities bearing interest at their maximum rates, as defined
in the ARS, as the lesser of (i) 175 percent of 30-day LIBOR or (ii) 10 to 12
percent per annum, as applicable to such series of ARS. While the failure of the
ARS auctions has no default impact on NJNG’s variable-rate debt, it does impact
its borrowing costs of the variable-rate debt. As such, NJNG currently has a
weighted average interest rate of 0.8 percent as of December 31, 2008. There can
be no assurance that the ARS securities of the EDA will have enough market
liquidity to return interest rates below their maximum rate.
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(Continued)
|
Effects
of Inflation
Although
inflation rates have been relatively low to moderate in recent years, any change
in price levels has an effect on operating results due to the capital-intensive
and regulated nature of the Company’s utility subsidiary. The Company attempts
to minimize the effects of inflation through cost control, productivity
improvements and regulatory actions where appropriate.
I
TEM
4. CONTROLS AND PROCEDURES
|
Disclosure
Controls and Procedures
As discussed in
"Part II. Item 9A. Controls and Procedures" in our Form 10-K for
the fiscal year ended September 30, 2008, i
n connection with the
Company’s preparation of its consolidated financial statements for the fiscal
year ended September 30, 2008, the Company identified an immaterial error in the
recording of certain physical natural gas transactions, which were not recorded
at the appropriate fair value during the interim quarters ended March 31, 2008
and June 30, 2008, as they were valued at an incorrect price. Controls were
not designed properly or operating effectively to prevent or detect these
pricing errors. Natural gas prices are volatile and it is reasonably possible
that the volume of these transactions could have been larger during any interim
period or for the fiscal year ended September 30, 2008. The Company concluded
that it was reasonably possible that this control weakness could have resulted
in a material error in its Consolidated Financial Statements had the volume of
these transactions been larger.
As of
December 31, 2008, under the supervision and with the participation of the
Company’s management, including the principal executive officer and principal
financial officer, the Company conducted an evaluation of the effectiveness of
the design and operation of its disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e)) under the Exchange Act, as of the end of the
period covered by this report. Based on this evaluation, since the material
weakness discussed above is not completely remediated, the Company’s principal
executive officer and principal financial officer concluded that, as of end of
the period covered by this report, the Company’s disclosure controls and
procedures were not effective to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act, is recorded, processed, summarized and reported, within the time
periods specified in the SEC’s rules and forms, and that such information is
accumulated and communicated to the Company’s management, including its
principal executive officer and principal financial officer, as appropriate, to
allow timely decisions regarding required disclosure.
As a
result of this conclusion, the financial statements for the period covered by
this report were prepared with particular attention to the material
weakness. Accordingly, management believes that the condensed
consolidated financial statements included in this Quarterly Report fairly
present, in all material respects, our financial condition, results of
operations and cash flows as of and for the periods presented.
The
Company continually reviews its disclosure controls and procedures and makes
changes, as necessary, to ensure the quality of its financial reporting. As
detailed below, the Company has implemented certain additional controls that it
believes will significantly reduce the potential for similar issues to arise in
the future.
Changes
in Internal Control over Financial Reporting
Management
and the Board of Directors are committed to the remediation of the material
weakness set forth above as well as the continued improvement of the Company’s
overall system of internal control over financial reporting. Management is
in the process of actively addressing and remediating the material weakness in
internal control over financial reporting described above. Subsequent to the
quarter and fiscal year ended September 30, 2008, in connection with the
material weakness in internal control over financial reporting detailed above,
the Company has implemented or will implement the following controls designed to
substantially reduce the risk of a similar material weakness occurring in the
future:
Ÿ
|
expand
training, education and accounting reviews for all relevant personnel
involved in the accounting treatment and disclosures for the Company’s
commodity transacting;
|
|
|
Ÿ
|
invest
in additional resources with appropriate accounting technical
expertise;
|
NEW
JERSEY RESOURCES CORPORATION
Part
I
ITEM
4. CONTROLS AND PROCEDURES (Continued)
|
Ÿ
|
expand
the review of the design of the internal control over financial reporting
related to the accounting of commodity transacting, which will incorporate
an analysis of the current staffing levels, job assignments and the design
of all internal control processes for the accounting for commodity
transacting and implement new and improved processes and controls, if
warranted; and
|
|
|
Ÿ
|
increase
the level of review and discussion of significant accounting matters and
supporting documentation with senior finance
management.
|
As part
of the Company’s fiscal 2009 assessment of internal control over financial
reporting, management will conduct sufficient testing and evaluation of the
controls to be implemented as part of this remediation plan to ascertain that
they are designed and are operating effectively. The effectiveness of
remediation efforts will not be known until the Company can test those controls
in connection with the management tests of internal control over financial
reporting that the Company will perform during fiscal 2009. Management believes,
however, these measures will fully remediate the above identified material
weakness in internal control over financial reporting.
These were the only
changes in the Company’s internal control over financial reporting (as such term
is defined in Exchange Act Rule 13a-15(f)) that occurred during the quarter
ended December 31, 2008, that have materially affected, or are reasonably likely
to materially affect, internal control over financial reporting.
Subsequent to the end of the first fiscal quarter, the Company’s
Corporate Controller position was vacated. The Company has temporarily delegated
the responsibilities of the function to other senior accounting managers while
it conducts an employment search for a new Controller. These employees are
qualified and capable of managing the additional responsibilities in the interim
and will be doing so under the direction of the principal financial
officer.
NEW
JERSEY RESOURCES CORPORATION
Part
II
ITEM
1. LEGAL PROCEEDINGS
|
Info
rmation regarding reportable legal proceedings is contained in
Part I, "Item 3. Legal Proceedings" in NJR’s Annual Report on Form 10-K for the
year ended September 30, 2008, and is set forth in
Part I, Item 1, Note
12,
Commitment and
Contingent Liabilities—Legal Proceedings
in the Unaudited Condensed
Consolidated Financial Statements. No legal proceedings became reportable during
the quarter December 31, 2008 and there have been no material developments
during such quarter regarding any previously reported legal proceedings, which
have not been previously disclosed.
While NJR
attempts to identify, manage and mitigate risks and uncertainties associated
with its business to the extent practical, under the circumstances, some level
of risk and uncertainty will always be present. Part I, Item 1A, "Risk Factors,"
of NJR’s 2008 Annual Report on Form 10-K includes a detailed discussion of NJR’s
risk factors. These risks and uncertainties have the potential to materially
affect NJR’s financial condition and results of operations. There have not been
any material changes from the risk factors as previously disclosed by NJR in the
2008 Annual Report on Form 10-K.
ITEM
2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
|
In 1996,
the NJR’s Board of Directors (“Board”) authorized the Company to implement a
share repurchase program, which has been expanded several times since the
inception of the program. On November 14, 2007, the Board authorized an increase
to the plan to permit the repurchase, in the open market or in privately
negotiated transactions, of 1.5 million shares, bringing the total permitted
repurchases to 6.8 million shares as of that date. As of December 31, 2008, the
Company has 1.4 million shares of its common stock still available for
repurchase.
The
following table sets forth NJR’s repurchase activity for the quarter ended
December 31, 2008:
Period
|
Total
Number
of
Shares
(or
Units)
Purchased
|
Average
Price
Paid
per Share
(or
Unit)
|
Total
Number of Shares
(or
Units) Purchased
as
Part of Publicly
Announced
Plans
or
Programs
|
Maximum
Number (or Approximate
Dollar
Value) of Shares (or Units)
That
May Yet be Purchased
Under
the Plans or Programs
|
10/01/08
– 10/31/08
|
40,000
|
$28.15
|
40,000
|
1,369,171
|
11/01/08
– 11/30/08
|
—
|
—
|
—
|
1,369,171
|
12/01/08
– 12/31/08
|
—
|
—
|
—
|
1,369,171
|
Total
|
40,000
|
$28.15
|
40,000
|
1,369,171
|
NEW
JERSEY RESOURCES CORPORATION
Part
II
I
TEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
(a)
|
An
annual meeting of shareholders was held on January 21,
2009.
|
|
|
|
(b)
|
The
shareholders voted upon the following matters at the January 21, 2009
annual shareholders meeting:
|
|
|
|
(i)
|
The
election of four directors to the Board of Directors for terms expiring in
2012. The results of the voting were as
follows:
|
|
DIRECTORS UNTIL
2012
|
FOR
|
WITHHELD
|
|
|
|
|
|
Donald
L. Correll
|
34,374,623
|
607,318
|
|
M.
William Howard, Jr.
|
34,462,959
|
518,982
|
|
J.
Terry Strange
|
32,542,250
|
2,439,691
|
|
George
R. Zoffinger
|
34,152,002
|
829,939
|
In
addition to the directors elected at the annual meeting, the terms of the
following members of NJR’s Board of Directors continued after the
meeting:
|
Nina
Aversano
|
|
Lawrence
R. Codey
|
|
Laurence
M. Downes
|
|
Jane
M. Kenny
|
|
Alfred
C. Koeppe
|
|
David
A. Trice
|
|
William
H. Turner
|
|
(ii)
|
Approval
of the action of the Audit Committee in retaining Deloitte & Touche
LLP as NJR’s independent registered public accounting firm. The results of
the voting were as follows:
|
|
FOR
|
AGAINST
|
ABSTAIN
|
|
|
|
|
34,305,957
|
566,008
|
109,976
|
There
were no broker non-votes in either of the matters voted upon by our
shareholders.
NEW
JERSEY RESOURCES CORPORATION
Part
II
Exhibit
Number
|
Exhibit
Name
|
|
|
10.4
|
Amended
and Restated Supplemental Executive Retirement Plan Agreement between the
Company and Laurence M. Downes dated December 31, 2008.
|
|
|
10.4(a)
|
Schedule
of Supplemental Executive Retirement Plan Agreements
|
|
|
10.4(b)
|
Form
of Amendment of Supplemental Executive Retirement Plan Agreement between
the Company and Named Executive Officer (for future
use)
|
|
|
10.12
|
Employment
Continuation Agreement between the Company and Laurence M. Downes dated
December 31, 2008
|
|
|
10.12(a)
|
Schedule
of Employment Continuation Agreements
|
|
|
10.17
|
The
Company’s 2007 Stock Award and Incentive Plan (as amended and restated
January 1, 2009)
|
|
|
10.18
|
2007
Stock Award and Incentive Plan Form of Stock Option
Agreement
|
|
|
10.19
|
2007
Stock Award and Incentive Plan Form of Performance Units
Agreement
|
|
|
10.20
|
2007
Stock Award and Incentive Plan Form of Restricted Stock
Agreement
|
|
|
10.21
|
2007
Stock Award and Incentive Plan Form of Performance Share
Agreement
|
|
|
10.25
|
New
Jersey Resources Corporation Directors’ Deferred Compensation
Plan
|
|
|
10.26
|
New
Jersey Resources Corporation Officers’ Deferred Compensation
Plan
|
|
|
10.27
|
New
Jersey Resources Corporation Savings Equalization Plan
|
|
|
10.28
|
New
Jersey Resources Corporation Pension Equalization Plan
|
|
|
31.1
|
Certification
of the Chief Executive Officer pursuant to section 302 of the
Sarbanes-Oxley Act
|
|
|
31.2
|
Certification
of the Chief Financial Officer pursuant to section 302 of the
Sarbanes-Oxley Act
|
|
|
32.1
|
Certification
of the Chief Executive Officer pursuant to section 906 of the
Sarbanes-Oxley Act*
|
|
|
32.2
|
Certification
of the Chief Financial Officer pursuant to section 906 of the
Sarbanes-Oxley Act*
|
*This
certificate accompanies this report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by NJR for purposes of
Section 18 or any other provision of the Securities Exchange Act of 1934, as
amended.
NEW
JERSEY RESOURCES CORPORATION
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.
|
NEW
JERSEY RESOURCES CORPORATION
|
|
(Registrant)
|
|
|
Date:
February 5, 2009
|
|
|
By
:/s/ Glenn C.
Lockwood
|
|
Glenn
C. Lockwood
|
|
Senior
Vice President and
|
|
Chief
Financial Officer
|
EXHIBIT
31.1
CERTIFICATION
OF THE CHIEF EXECUTIVE OFFICER
PURSUANT
TO SECTION 302
OF
THE SARBANES-OXLEY ACT OF 2002
I,
Laurence M. Downes, certify that:
|
(1)
|
I
have reviewed this Quarterly Report on Form 10-Q of New Jersey Resources
Corporation;
|
(2)
|
Based
on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Quarterly Report;
|
(3)
|
Based
on my knowledge, the financial statements, and other financial information
included in this Quarterly Report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this Quarterly
Report;
|
(4)
|
The
Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f) for the Registrant and have:
|
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this Quarterly Report is
being prepared;
|
|
b.)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
c.)
|
evaluated
the effectiveness of the Registrant's disclosure controls and procedures
and presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this Quarterly Report based on such
evaluation;
|
|
d.)
|
disclosed
in this report any change in the Registrant’s internal control over
financial reporting that occurred during the Registrant’s most recent
fiscal quarter that has materially affected, or is reasonably likely to
adversely affect, the Registrant’s internal control over financial
reporting; and
|
(5)
|
The
Registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the Registrant's auditors and the audit committee of Registrant's board of
directors (or persons performing the equivalent
functions):
|
|
a.)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Registrant's ability to record,
process, summarize and report financial information;
and
|
|
b.)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal control
over financial reporting.
|
|
|
|
Date:
February 5, 2009
|
|
|
|
By:
/s/
Laurence M.
Downes
|
|
|
Laurence
M. Downes
Chairman,
President and
Chief
Executive Officer
|
EXHIBIT
31.2
CERTIFICATION
OF THE CHIEF FINANCIAL OFFICER
PURSUANT
TO SECTION 302
OF
THE SARBANES-OXLEY ACT OF 2002
I,
Glenn C. Lockwood, certify that:
|
(1)
|
I
have reviewed this Quarterly Report on Form 10-Q of New Jersey Resources
Corporation;
|
(2)
|
Based
on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Quarterly Report;
|
(3)
|
Based
on my knowledge, the financial statements, and other financial information
included in this Quarterly Report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this Quarterly
Report;
|
(4)
|
The
Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f) for the Registrant and have:
|
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this Quarterly Report is
being prepared;
|
|
b.)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
c.)
|
evaluated
the effectiveness of the Registrant's disclosure controls and procedures
and presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this Quarterly Report based on such
evaluation;
|
|
d.)
|
disclosed
in this report any change in the Registrant’s internal control over
financial reporting that occurred during the Registrant’s most recent
fiscal quarter that has materially affected, or is reasonably likely to
adversely affect, the Registrant’s internal control over financial
reporting; and
|
(5)
|
The
Registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the Registrant's auditors and the audit committee of Registrant's board of
directors (or persons performing the equivalent
functions):
|
|
a.)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Registrant's ability to record,
process, summarize and report financial information;
and
|
|
b.)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal control
over financial reporting.
|
|
|
|
Date: February
5, 2009
|
By
:
/s/
Glenn C.
Lockwood
|
|
|
Glenn
C. Lockwood
Senior
Vice President and
Chief
Financial Officer
|
EXHIBIT
32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The
undersigned, Laurence M. Downes, hereby certifies as
follows:
|
(a)
|
I
am the Chief Executive Officer of New Jersey Resources Corporation (the
“Company”);
|
(b)
|
To
the best of my knowledge, the Company’s Quarterly Report on Form 10-Q for
the period ended December 31, 2008 (the “Report”) fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
|
(c)
|
To
the best of my knowledge, based upon a review of the Report, the
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
|
Date:
February 5, 2009
|
|
|
By:
/s/
Laurence M.
Downes
|
|
Laurence
M. Downes
Chairman,
President
and
Chief Executive Officer
|
EXHIBIT
32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The
undersigned, Glenn C. Lockwood, hereby certifies as
follows:
|
(a)
|
I
am the Chief Financial Officer of New Jersey Resources Corporation (the
“Company”);
|
(b)
|
To
the best of my knowledge, the Company’s Quarterly Report on Form 10-Q for
the period ended December 31, 2008 (the “Report”) fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
|
(c)
|
To
the best of my knowledge, based upon a review of the Report, the
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
|
Date: February
5, 2009
|
By:
/s/
Glenn C.
Lockwood
|
|
Glenn
C. Lockwood
Senior
Vice President and
Chief
Financial Officer
|
Supplemental
Executive Retirement Plan Agreement
Amended
and Restated
THIS
AGREEMENT is entered into as of the
28th day of November, 2008
and
effective as of
January 1, 1987
, (hereinafter
called the “Effective Date”) by and between
NEW JERSEY RESOURCES
CORPORATION
, a corporation of New Jersey (hereinafter called the
"Company"), and
LAURENCE M.
DOWNES
(hereinafter called the “Employee”).
W I T N E S S E T
H
WHEREAS,
the Employee is employed by the Company and is presently
CHAIRMAN & CHIEF EXECUTIVE
OFFICER;
WHEREAS,
the Company desires to continue to employ the Employee as a key
employee;
WHEREAS,
the Company previously entered into an Agreement, dated
January 1, 1987
(referred to,
with any amendments thereto, as the “Prior Agreement”), with the Employee as a
part of his/her employment agreement or arrangement as an incentive for his/her
continued loyal service to the Company;
WHEREAS,
the Company and the Employee now desire to amend and restate the Prior Agreement
to comply with Section 409A of the Internal Revenue Code and applicable guidance
issued thereunder (“Code Section 409A”);
WHEREAS,
the Company and the Employee desire this Agreement (also referred to as the
“SERP Agreement”) to apply to the Employee’s entire benefit under the Prior
Agreement and no portion of the benefit hereunder is to be “grandfathered” as
such term is used under Code Section 409A.
NOW, THEREFORE, in consideration of the
premises and of the covenants and agreements herein set forth, and for other
good and valuable consideration, the receipt whereof is hereby acknowledged, the
parties hereto do covenant and agree as follows:
1.
|
It
is agreed that the Company’s normal retirement age is sixty-five (65) and
that the Employee may retire from the Company upon the last day of the
month in which his/her sixty-fifth (65
th
)
birthday occurs; provided however, that the Employee may remain in active
employment after his/her sixty-fifth (65
th
)
birthday. In either event, no benefits shall be paid to the
Employee under this Agreement until the later of the Employee’s attainment
of age sixty-five (65), or his Separation from Service (as defined herein
in accordance with
Code Section
409A). A Separation from Service shall occur where it is
reasonably anticipated that no further services will be performed after a
particular date or that the level of bona fide services the Employee will
perform after a particular date (whether as an employee or independent
contractor to the Company or an affiliate that is treated as the Company
under Code Section 409A (an “Affiliate”) will decrease permanently to less
than 50% of the average level of bona fide services performed over the
immediately preceding thirty-six (36) month period.
An
Employee shall be considered to continue employment and to not have a
Separation from Service while on a leave of absence if the leave does not
exceed six (6) consecutive months (twenty-nine (29) months for a
disability leave of absence) or, if longer, so long as the Employee
retains a right to reemployment with the Corporation or Affiliate under an
applicable statute or by contract. For this purpose, a
“disability leave of absence” is an absence due to any medically
determinable physical or mental impairment that can be expected to result
in death or can be expected to last for a continuous period of not less
than 6 months, where such impairment causes the Employee to be unable to
perform the duties of his job or a substantially similar
job. Continued services solely as a member of the Board of
Directors of the Company or an Affiliate (the “Board”) shall not prevent a
Separation from Service from
occurring.
|
2.
|
The
Company agrees that upon the Employee’s Separation from Service at or
after attainment of age sixty-five (65) for reasons other than death, it
will pay to the Employee the sum of
TWO-HUNDRED FIFTY THOUSAND
DOLLARS ($250,000)
(hereinafter referred to as the "SERP Benefit”),
payable in sixty (60) equal monthly installments. The
installments shall be paid upon the first day of each calendar month
commencing with the month next following the date of such Separation from
Service, and shall continue until the aggregate of such payments equal the
SERP Benefit, at which time such monthly installments shall
terminate. In the event that the SERP Benefit has not been
fully paid to the Employee during his/her lifetime following his/her
Separation from Service, the balance of such monthly installments shall be
paid to his/her designated beneficiary as provided in Paragraph 13
hereof. In no event shall any distribution occur earlier than
permitted under Code Section 409A. The SERP Benefit may increase based
upon a change in the Employee’s position. Such increase shall be set forth
on an addendum to this Agreement. Such increase in the SERP Benefit shall
not change the time and form of payment of the SERP Benefit as provided in
this Agreement except as allowed under Code Section
409A.
|
3.
|
In
the event that the Employee dies while in active employment with the
Company but prior to his or her Separation from Service, and such death is
due to a cause other than suicide, the Company shall pay a Death Benefit
in the amount of
TWO-HUNDRED FIFTY THOUSAND
DOLLARS ($250,000)
to his/her designated beneficiary, in sixty (60)
equal monthly installments. The installments shall be paid on
the first day of each calendar month commencing with the month following
the date of death, and shall continue until such Death Benefit has been
fully paid. If the Employee commits suicide, the Company shall
not be obligated to pay any portion of the Death Benefit or any increases
in such benefit granted herein or by any amendment or addendum to this
Agreement made within two (2) years next preceding the date of death, but
such portion of the Death Benefit as was granted or accrued under this or
any similar prior SERP agreement with the Company more than two (2) years
before the death by suicide shall be paid in the manner provided
above.
|
4.
|
No
SERP or other benefits shall be payable hereunder to the Employee, or to
any other person in the event the employment relationship between the
Employee and the Company is terminated within six (6) years from the
Effective Date for any reason other than by death, or by Separation from
Service of the Employee at or after attainment of age sixty-five
(65). In the event that the employment relationship between the
Employee and the Company continues for a period of at least six (6) years
from the Effective Date, and is thereafter terminated for any reason other
than by death prior to the Employee’s attainment of age sixty-five (65),
upon the later of his/her Separation from Service or the Employee’s
attainment of age sixty-five (65), the Company will pay to the Employee
the Cumulative Termination Benefit for the year in which such termination
occurs, as shown in Schedule A which is attached hereto and made a part
hereof (hereinafter referred to as the “Applicable Cumulative Termination
Benefit”), in sixty (60) equal monthly installments payable on the first
day of each calendar month, commencing with the month following the later
of the Employee’s Separation from Service or the Employee’s attainment of
age sixty-five (65). Such Schedule A may be changed from time
to time to reflect changes in the SERP Benefit. Such
substitution of a new Schedule A shall not change the time and form of
payment of the Cumulative Termination Benefit except to the extent allowed
by Code Section 409A.
|
5.
|
If
the Employee dies after termination of employment as provided in Paragraph
4 above, and before any or all of the applicable Cumulative Termination
Benefit has been paid to him, then such Cumulative Termination Benefit, or
the balance of installments thereof as the case may be, shall be paid to
his/her designated beneficiary in sixty (60) equal monthly installments
(less the number of installments previously paid, if any), payable on the
first day of each calendar month commencing with the month following the
date of death, until the applicable Cumulative Termination Benefit shall
have been paid in full.
|
6.
|
Notwithstanding
anything to the contrary contained in the original Agreement or in any
amendment or addendum thereto, it is hereby agreed that upon the
occurrence of a Change In Control (as defined herein), the Employee shall
immediately become fully vested in the SERP Benefit set forth in Paragraph
2 of this Agreement, or in the then most recent amendment or addendum
thereto (whichever amount is greater), and that in the event the
Employee’s employment is thereafter terminated for any reason or if the
Employee resigns for any reason within two years of the Change in Control,
said SERP Benefit shall be paid to the Employee in sixty (60) equal
monthly installments payable on the first day of each calendar
month commencing with the month following the date of termination, until
the applicable Cumulative Termination Benefit shall have been paid in
full. In the event that the Employee dies after termination of employment
pursuant to this Paragraph 6, and before any or all of the SERP Benefit
has been paid to him, then such SERP Benefit, or the balance of
installments thereof, as the case may be, shall be paid to his/her
designated beneficiary in sixty (60) equal monthly installments (less the
number of installments previously paid, if any), payable on the first day
of each calendar month commencing with the month following the date of
death, until the applicable Cumulative Termination Benefit shall have been
paid in full.
|
7.
|
For the purposes of this
Agreement:
|
(a)
|
a "Change In Control" shall be deemed to have occurred
if:
|
|
(i)
|
Any
Person (as defined below) has acquired Voting Securities (as defined
below), of the Company and, immediately thereafter, is the "beneficial
ownership" (within the meaning of Rule 13d-3, as promulgated under Section
13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of Voting Securities of the Company representing fifty percent
(50%) or more of the combined Voting Power (as defined below)
of the Company's securities; or
|
|
(ii)
|
Within
any 12-month period, the persons who were members of the Board of the
Company immediately before the beginning of such period (the
"Incumbent Directors") shall cease (for any reason other than death) to
constitute at least a majority of the Board or the board of directors of
any successor to the Company, provided that any Board member who was not a
Board member at the beginning of such period shall be deemed to be an
Incumbent Director if such director was elected to the Board by, or on the
recommendation of or with the approval of, at least a majority of the
Board members who then qualified as Incumbent Directors either actually or
by prior operation of this Section 7(a)(ii);
or
|
|
(iii)
|
the
consummation of a merger, consolidation, share exchange, division, sale or
other disposition of all or substantially all of the assets of the Company
(a "Corporate Event"), except that a Corporate Event shall not trigger a
Change in Control under this clause (iii) if the shareholders of the
Company immediately prior to such Corporate Event shall hold, directly or
indirectly immediately following such Corporate Event a
majority of the Voting Power of (
x
) in the case
of a merger or consolidation, the surviving or resulting corporation,
(
y
) in
the case of a share exchange, the acquiring corporation or (
z
) in the case
of a division or a sale or other disposition of assets, each surviving,
resulting or acquiring corporation.
|
(b)
|
For
purposes of this Section 7, "Person" shall have the meaning ascribed to
such term in Section 3(a)(9) of the Exchange Act, as supplemented by
Section 13(d)(3) of the Exchange Act; provided, however, that Person shall
not include (
i
) the Company
or any subsidiary of the Company or (
ii
) any
employee benefit plan sponsored by the Company or any subsidiary of the
Company.
|
(c)
|
A
specified percentage of "Voting Power" of a company shall mean such number
of the Voting Securities as shall enable the holders thereof to cast such
percentage of all the votes which could be cast in an annual election of
directors (without consideration of the rights of any class of stock other
than the common stock of the company to elect directors by a separate
class vote); and "Voting Securities" shall mean all securities of a
company entitling the holders thereof to vote in an annual election of
directors (without consideration of the rights of any class of stock other
than the common stock of the company to elect directors by a separate
class vote).
|
(d)
|
The
above definition of a Change in Control is intended to meet the
requirements of a permissible change in control payment event under Code
Section 409A and shall be interpreted and applied to the Employee in
accordance with Code Section 409A.
|
8.
|
Any
dispute or controversy arising out of or in connection with the
interpretation or application of the provisions of paragraphs 6 or 7 of
this Agreement shall be settled exclusively by arbitration in accordance
with the rules of the American Arbitration Association then in effect and
the applicable law of the State of New Jersey pertaining to the
arbitration of disputes, and judgment may be entered on the arbitrator’s
award in any court having jurisdiction. All costs and expenses
of such arbitration, including the reasonable counsel fees, costs and
expenses incurred by the Employee in either prosecuting or defending the
arbitration proceeding, shall be borne and paid by the
Company. Any reimbursement of costs or expenses to be paid by
the Company under this paragraph 8 shall be paid no later than the end of
calendar year following the calendar year during which the cost or
expenses are incurred.
|
9.
|
Notwithstanding
anything else herein to the contrary, payments of benefits hereunder
caused by the Separation from Service (including death) of the Employee
may be delayed for a period of no more than six (6) months following such
Separation from Service, if the Employee is determined by the Board of the
Company or its delegate to meet the definition of a “specified employee”
(as defined under Code Section 409A) but only if such delay in payment is
required in order to comply with the requirements of Code Section
409A. No interest shall accrue or be paid in the event of a
delay in payment.
|
10.
|
Any
payment otherwise due under the terms of this Agreement which would (a)
not be deductible in whole or in part under Section 162(m) of the Code, or
(b) violate Federal securities laws or other applicable law may not be
made until the earliest date on which such payment no longer is
nondeductible or violates such laws. Payment may be delayed for a
reasonable period in accordance with the provisions of Code Section 409A
(including in the event the payment is not administratively practical due
to events beyond the recipient’s control such as where the recipient is
not competent to receive the benefit payment, there is a dispute as to
amount due or the proper recipient of such benefit payment, or additional
time is needed to calculate the amount payable). No interest shall accrue
or be paid because of any delay of
payment.
|
11.
|
The
Company may not permit the acceleration of the time or schedule of any
payment or amount scheduled to be paid pursuant to this Agreement, unless
such acceleration of the time or schedule is (a) to comply with conflicts
of interest or ethics laws (as defined in Code Section 409A ), (b) to be
used for the payment of FICA, income taxes on the FICA withholding or
other approved taxes on benefits under this Agreement, (c) is necessary to
pay an amount equal to the amount included in the income of the Employee
under Code Section 409A or (d) as otherwise allowed under Code Section
409A.
|
12.
|
It
is agreed that neither the Employee nor any other person shall have any
right to commute, bequeath, pledge, sell, assign, transfer, levy upon or
otherwise encumber the rights to receive any payments hereunder, which
payments and the rights thereto are expressly declared to be
non-transferable and non-assignable, and in the event of any attempted
disposition of such payments or rights in violation hereof the Company
shall have no further liability
hereunder.
|
13.
|
The
Employee shall designate in writing, to be annexed hereto, one or more
beneficiaries to whom the benefits in the event of his/her death shall be
paid pursuant to paragraphs 2, 3, 5 or 6 hereof. In the absence
of such designation, or in the event no designated beneficiary survives
the Employee, then any such benefits shall be payable in like manner to
the Employee’s executor or administrator. In the event of the
death of all designated beneficiaries after commencement but prior to
completion of payment of the installments of benefits, the balance thereof
shall be payable in like manner to the executor or administrator of the
last surviving beneficiary.
|
14.
|
The
Company shall withhold from any amounts payable under this Agreement such
federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or
regulations.
|
15.
|
This
Agreement shall be binding upon the parties hereto, and upon the heirs,
executors, administrators, or other personal representatives and
designated beneficiaries of the Employee, and upon the successors and
assigns of the Company.
|
16.
|
This
Agreement hereby amends and restates the Prior Agreement in its entirety.
During the lifetime of the Employee, this Agreement may be amended or
terminated at any time or times, in whole or in part, by the mutual
written agreement of the Employee and the Company, and only in accordance
with Code Section 409A.
|
17.
|
The
benefits under this Agreement are designed to comply with the requirements
of Code Section 409A. The Company shall interpret and
administer this Agreement in a manner as to comply with Code Section
409A. Notwithstanding the foregoing, however, the Company shall
not be liable to the Employee or any other person if any benefit under
this Agreement does not comply with Code Section 409A or the Employee or
any other person is otherwise subject to any additional tax or penalty
under Code Section 409A. Each Employee is solely responsible
for the payment of any tax liability (including any taxes and penalties
that may arise under Code Section 409A) that may arise from any benefit
under this Agreement.
|
18.
|
This
Agreement shall be executed in duplicate, each copy of which when executed
and delivered shall be an original, but both copies shall, together,
constitute one and the same
instrument.
|
IN WITNESS WHEREOF, the parties hereto
have caused these presents to be duly executed in their respective name and
their respective seals to be hereunto affixed and attested, the day and year
first above written.
NEW
JERSEY RESOURCES CORPORATION
/s/ Glenn C.
Lockwood
|
Date:
|
11/26/08
|
GLENN
C. LOCKWOOD
|
|
|
Senior
Vice President & Chief Financial Officer
|
|
|
|
|
|
/
s/
Denise S.
Gray
|
Date:
|
11/26/08
|
Witness
|
|
|
|
|
|
/s/
Laurence M. Downes
|
Date:
|
11/26/08
|
LAURENCE
M. DOWNES
|
|
|
Chairman
& Chief Executive Officer
|
|
|
|
|
|
/s/ Denise S.
Gray
|
Date:
|
11/26/08
|
Witness
|
|
|
|
DESIGNATION
OF BENEFICIARY
|
|
I
hereby designate the following person (or persons) as my beneficiary (or
beneficiaries) to whom the benefits provided hereunder in the event of my
death shall be paid pursuant to this
Agreement:
|
|
PRIMARY
BENEFICIARY(IES):
|
Name:
|
Address:
|
Social
Security #
|
Relationship
to Employee:
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SECONDARY
BENEFICIARY(IES)*:
|
Name:
|
Address:
|
Social
Security #
|
Relationship
to Employee:
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*In
the event that primary beneficiary(ies) predecease
employee.
|
SIGNED:_________________________________
|
DATED:_____________________________
|
YEAR
|
AGE
|
|
SCHEDULE
"A"
CUMULATIVE
TERMINATION
BENEFIT
|
|
|
|
|
1998
|
|
|
$
|
1999
|
|
|
$
|
2000
|
|
|
$
|
2001
|
|
|
$
|
2002
|
|
|
$
|
2003
|
|
|
|
2004
|
|
|
|
2005
|
|
|
|
2006
|
|
|
|
2007
|
|
|
|
2008
|
|
|
|
2009
|
|
|
|
2010
|
|
|
|
2011
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
2014
|
|
|
|
2015
|
|
|
|
2016
|
|
|
|
2017
|
|
|
|
2018
|
|
|
|
2019
|
|
|
|
2020
|
|
|
|
2021
|
|
|
|
Schedule
of Supplemental Executive Retirement Plan Agreements of Named Executive Officers
dated as of January 1, 2009.
Name
|
Maximum
SERP Benefit Payable at Retirement
|
Laurence
M. Downes, President and Chief Executive Officer
|
$250,000
|
Mariellen
Dugan, Senior Vice President and General Counsel
|
$125,000
|
Kathleen
T. Ellis, Senior Vice President, Corporate Affairs and
Marketing
|
$125,000
|
Glenn
C. Lockwood, Senior Vice President and Chief Financial
Officer
|
$125,000
|
Joseph
P. Shields, Executive Vice President and Chief Operating
Officer, NJR Energy Services Company
|
$125,000
|
Exhibit
10.4(b)
[SERP
Amendment Form]
AMENDMENT
TO SUPPLEMENTAL EXECUTIVE
RETIREMENT
PLAN AGREEMENT
DATED
___________________
THIS
AGREEMENT entered into as of the ____ day of _________, ____, by and between NEW
JERSEY RESOURCES CORPORATION, a corporation of New Jersey (hereinafter called
the “Company”), and ___________________ (hereinafter called
“Employee”).
W I T N E S S E T
H
WHEREAS,
the Company and Employee entered into a Supplemental Executive Retirement Plan
Agreement dated ___________, ____ (referred to, with any amendments thereto, as
the “Original Agreement”), and desires to amend said Original Agreement in
accordance with Paragraph 16 thereof; and
WHEREAS,
Employee is employed by the Company and is presently the
_____________________________________; and
WHEREAS,
the Company desires Employee to remain in its service until retirement, and
wishes to offer him additional incentive to do so in the form of deferred
compensation and death benefits;
NOW,
THEREFORE, in consideration of the premises and of the covenants and agreements
herein contained, and as set forth in the Original Agreement, and for other good
and valuable consideration, the parties hereto do covenant and agree as
follows:
|
1.
|
The
first sentence of Paragraph 2 of the Original Agreement is hereby amended
to increase amount payable thereunder and to read as
follows:
|
|
“2.
|
The
Company agrees that following Employee’s Separation from Service at or
after attainment of age sixty-five (65) for reasons other than death, it
will pay to Employee the sum of ____________________________
($_____________) (hereinafter referred to as the “SERP Benefit”), payable
in sixty (60) equal monthly
installments.”
|
|
2.
|
The
first sentence of Paragraph 3 of the Original Agreement is hereby amended
to increase the amount payable thereunder and to read as
follows:
|
|
“3.
|
In
the event that Employee dies while in active employment with the Company
but prior to his or her Separation from Service, and such death is due to
a cause other than suicide, the Company shall pay a Death Benefit in the
amount of ________________ ($__________) to his/her designated
beneficiary, in sixty (60) equal monthly
installments.”
|
|
3.
|
Nothing
in this Agreement shall change the time and form of payment of the benefit
payable under the Original Agreement and shall only have the effect of
increasing the benefit payable under the Original
Agreement.
|
|
4.
|
Schedule
“A” annexed to and made a part of the Original Agreement is hereby amended
to read as follows:
|
|
5.
|
This
Amendment shall be effective as of
__________________.
|
IN
WITNESS WHEREOF, the parties have hereunto set their hands and seals this ____
day of ____________, _____.
ATTEST:
|
|
NEW JERSEY RESOURCES
CORPORATION
|
|
|
|
|
|
|
By:
|
By:
|
__________________________
|
|
|
LAURENCE
M. DOWNES
Chairman
and CEO
|
|
|
|
SIGNED,
SEALED, AND DELIVERED
IN
THE PRESENCE OF:
___________________________________
|
|
|
EMPLOYMENT CONTINUATION
AGREEMENT
THIS
AGREEMENT
between New Jersey Resources Corporation, a New Jersey
corporation (the "Company"), and
LAURENCE M. DOWNES
(the
"Executive"), dated as of this 28th day of November, 2008.
W I T N E S S E T H
:
WHEREAS
,
the Company has employed the Executive in an officer position with the Company
or affiliate thereof and has determined that the Executive holds an important
position with same;
WHEREAS
,
the Company believes that continuity of management will be essential to its
ability to evaluate and respond to a situation that could result in a change in
ownership or control of the Company in a manner that serves the best interests
of shareholders;
WHEREAS
,
the Company understands that any such situation will present significant
concerns for the Executive with respect to his financial and job
security;
WHEREAS
,
the Company desires to assure itself of the Executive's services during the
period in which it is confronting such a situation, and to provide the Executive
certain financial assurances to enable the Executive to perform the
responsibilities of his position without undue distraction and to exercise his
judgment without bias due to his personal circumstances;
WHEREAS
,
to achieve these objectives, the Company and the Executive desire to enter into
an agreement providing the Company and the Executive with certain rights and
obligations upon the occurrence of a Change in Control or Potential Change in
Control (each as defined in Section 2);
NOW,
THEREFORE
, in consideration of the premises and mutual covenants herein
contained, it is hereby agreed by and between the Company and the Executive as
follows:
1.
Operation of
Agreement
.
(a)
Effective
Date
. The effective date for purposes of this Agreement shall
be the date on which a Change in Control occurs (the "Effective Date"),
provided that
,
except as provided in Section 1(b), if the Executive is not employed by the
Company on the Effective Date, this Agreement shall be void and without effect.
This Agreement may be terminated with at least one year’s prior written notice
on December 31, 2009 or any December 31 thereafter by either the Company or
Executive, provided that no such termination of the Agreement shall occur within
24 months following a Potential Change in Control or within 24 months following
a Change in Control or at any time following a termination of employment that
triggers compensation hereunder.
(b)
Termination of Employment
Following a Potential Change in Control
. Notwithstanding
Section 1(a), if, after the occurrence of a Potential Change in Control and
prior to the occurrence of a Change in Control, (
i
) the Executive's
employment is terminated by the Company Without Cause (as defined in Section
6(c)) or Executive terminates employment for Good Reason (determined by treating
a Potential Change in Control as a Change in Control in applying the definition
of Good Reason, and treating the Effective Date as having been the date of the
Potential Change in Control) and (
ii
) a Change in
Control occurs within one year of such termination, the Executive shall be
deemed, solely for purposes of determining his rights under this Agreement, to
have remained employed until the date such Change in Control occurs and to have
been terminated by the Company Without Cause or to have terminated with Good
Reason (as the case may be) immediately after the Change in Control
occurs.
(c)
Obligation of Subsidiary of
the Company Directly Employing Executive.
If at the Effective
Date Executive is an employee of a subsidiary of the Company rather than the
Company, the Company will cause such subsidiary to become a party to this
Agreement promptly at the Effective Date. In such case, the right to employ
Executive and the obligations to pay compensation to Executive shall be
primarily those of such subsidiary, with the Company guaranteeing all such
obligations, provided that any compensation provided under plans and programs of
the Company (including equity-based compensation) will continue to be a primary
obligation of the Company, subject to the terms of this Agreement. Unless the
context shall otherwise require, references to the Company herein shall be
understood to refer to such subsidiary to the extent necessary to give effect to
this provision, provided that references to the Company in Section 2 in all
cases shall be understood to mean New Jersey Resources Corporation.
2.
Definitions
.
(a)
Change in
Control
. For the purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred if on or after November 28,
2008:
(i) any
Person (as defined below) acquires (or has acquired during the 12-month period
ending on the date of the most recent acquisition by such Person) Voting
Securities (as defined below) of the Company and, immediately thereafter, is the
"beneficial owner" (within the meaning of Rule 13d-3, as promulgated under
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of Voting Securities of the Company representing fifty percent (50%) or
more of the combined Voting Power (as defined below) of the Company's
securities;
(ii) within
any 12-month period, the persons who were directors of the Company
immediately before the beginning of such period (the "Incumbent Directors")
shall cease (for any reason other than death) to constitute at least a majority
of the Board or the board of directors of any successor to the Company,
provided that
any
director who was not a director at the beginning of such period shall be deemed
to be an Incumbent Director if such director (
A
) was elected to the
Board by, or on the recommendation of or with the approval of, at least a
majority of the directors who then qualified as Incumbent Directors either
actually or by prior operation of this Section 2(a)(ii); or
(iii) the
consummation of a merger, consolidation, share exchange, division,
sale or other disposition of all or substantially all of the assets of the
Company, or a complete liquidation of the Company (a "Corporate Event"), except
that a Corporate Event shall not trigger a Change in Control under this clause
(iii) if the shareholders of the Company immediately prior to such Corporate
Event shall hold, directly or indirectly immediately following such Corporate
Event a majority of the Voting Power of (
x
) in the case of a
merger or consolidation, the surviving or resulting corporation, (
y
) in the case of a
share exchange, the acquiring corporation or (
z
) in the case of a
division or a sale or other disposition of assets, each surviving, resulting or
acquiring corporation.
(b)
Potential Change in
Control
. For the purposes of this Agreement, a "Potential
Change in Control" shall be deemed to have occurred if:
(i) a
Person commences a bona fide tender offer for securities representing at least
20% of the Voting Power of the Company's securities;
(ii) the
Company enters into an agreement the consummation of which would constitute a
Change in Control;
(iii) proxies
for the election of directors of the Company are solicited by anyone other than
the Company in a bona fide effort to change or influence the control of the
Company through the election of one or more persons who would not be Incumbent
Directors; or
(iv) any
other event occurs which is deemed to be a Potential Change in Control by the
Board.
(c)
Person
Defined
. For purposes of this Section 2, "Person" shall have
the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act, as
supplemented by Section 13(d)(3) of the Exchange Act; provided, however, that
Person shall not include (
i
) the Company or any
subsidiary of the Company or (
ii
) any employee
benefit plan sponsored by the Company or any subsidiary of the
Company.
(d)
Voting Power
Defined
. A specified percentage of "Voting Power" of a company
shall mean such number of the Voting Securities as shall enable the holders
thereof to cast such percentage of all the votes which could be cast in an
annual election of directors (without consideration of the rights of any class
of stock other than the common stock of the company to elect directors by a
separate class vote); and "Voting Securities" shall mean all securities of a
company entitling the holders thereof to vote in an annual election of directors
(without consideration of the rights of any class of stock other than the common
stock of the company to elect directors by a separate class vote).
(e) The
above definition of a Change in Control shall be interpreted and applied in a
manner that complies with the change in control or ownership trigger event rules
under Code Section 409A.
3.
Employment
Period
. Subject to Section 6 of this Agreement, the Company
agrees to continue the Executive in its employ, and the Executive agrees to
remain in the employ of the Company, for the period (the "Employment Period")
commencing on the Effective Date and ending on the second anniversary of the
Effective Date. The foregoing notwithstanding, it shall not constitute a breach
of this Section 3 for the employment of the Executive to terminate in accordance
with Section 6 prior to the end of the Employment Period. In the event of a
termination of employment under Section 6, the Employment Period shall
end.
4.
Position and
Duties
.
(a)
No Reduction in
Position
. During the Employment Period, the Executive's
position (including titles), authority and responsibilities shall be at least
commensurate with those held, exercised and assigned immediately prior to the
Effective Date. It is understood that, for purposes of this Agreement, such
position, authority and responsibilities shall not be regarded as not
commensurate merely by virtue of the fact that a successor shall have acquired
all or substantially all of the business and/or assets of the Company as
contemplated by Section 12(b) of this Agreement except that, if Executive
has a position (including titles), authority, and responsibilities that relate
to the Company’s status as a publicly held company immediately before the
Effective Date, the Executive’s position, authority, and responsibilities shall
be deemed commensurate only if they continue to relate to the ultimate parent
corporation (whether or not that company is a publicly held
company).
(b)
Business
Time
. From and after the Effective Date, the Executive agrees
to devote substantially all of his attention during normal business hours to the
business and affairs of the Company, to the extent necessary to discharge his
responsibilities hereunder, except for (
i
) time spent in
managing his personal, financial and legal affairs, serving on corporate, civic
or charitable boards or committees or working for any charitable or civic
organization, in each case only if and to the extent not materially interfering
with the performance of the Executive’s responsibilities hereunder, and (
ii
) periods of
vacation and sick leave to which he is entitled. It is expressly understood and
agreed that the Executive's continuing to serve on any boards and committees on
which he is serving or with which he is otherwise associated immediately
preceding the Effective Date shall not be deemed to interfere with the
performance of the Executive's services to the Company.
5.
Compensation
.
(a)
Base
Salary
. During the Employment Period, the Executive shall
receive a base salary at a monthly rate at least equal to the monthly salary
paid to the Executive by the Company and any of its affiliated companies
immediately prior to the Effective Date. The base salary shall be reviewed at
least once each year after the Effective Date, and may be increased (but not
decreased) at any time and from time to time by action of the Board or any
committee thereof or by any individual having authority to take such action in
accordance with the Company's regular practices. The Executive's base salary, as
it may be increased from time to time, shall hereinafter be referred to as "Base
Salary". Neither the Base Salary nor any increase in Base Salary after the
Effective Date shall serve to limit or reduce any other obligation of the
Company hereunder.
(b)
Annual
Bonus
. During the Employment Period, in addition to the Base
Salary, for each fiscal year of the Company ending during the Employment Period,
the Executive shall be afforded the opportunity to receive an annual bonus on
terms and conditions no less favorable to the Executive (taking into account
reasonable changes in the Company's goals and objectives) than the annual bonus
opportunity that had been made available to the Executive for the fiscal year
ended immediately prior to the Effective Date (the "Annual Bonus Opportunity").
Any amount payable in respect of the Annual Bonus Opportunity shall be paid as
soon as practicable following the year for which the amount (or prorated
portion) is earned or awarded, but not later than 2 ½ months after the close of
the later of the calendar year during which the bonus is earned or the Company’s
taxable year during which the bonus is earned, unless electively deferred by the
Executive pursuant to any deferral programs or arrangements that the Company may
make available to the Executive.
(c)
Long-term Incentive
Compensation Programs
. During the Employment Period, the
Executive shall participate in all long-term incentive compensation programs
(each, an "LTICP") for key executives at a level that is commensurate with the
Executive's participation in such plans immediately prior to the Effective Date,
or, if more favorable to the Executive, at the level made available to the
Executive or other similarly situated officers at any time
thereafter.
(d)
Benefit
Plans
. During the Employment Period, the Executive (and, to
the extent applicable, his dependents) shall be entitled to participate in or be
covered under all pension, retirement, deferred compensation, savings,
medical, dental, health, disability, severance, group life, accidental death and
travel accident insurance plans and programs of the Company and its affiliated
companies at a level that is commensurate with the Executive's
participation in such plans immediately prior to the Effective Date, or, if
more favorable to the Executive, at the level made available to the Executive or
other similarly situated officers at any time thereafter.
(e)
Expenses
. During
the Employment Period, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in
accordance with the policies and procedures of the Company as in effect
immediately prior to the Effective Date. Notwithstanding the foregoing, the
Company may apply the policies and procedures in effect after the Effective Date
to the Executive, if such policies and procedures are more favorable to the
Executive than those in effect immediately prior to the Effective Date. Subject
to the above referenced procedures, reimbursements shall be made no later than
two months following the calendar year during which the reimbursements are
incurred.
(f)
Vacation, Perquisites and
Fringe Benefits
. During the Employment Period, the Executive
shall be entitled to paid vacation, perquisites and fringe benefits at a level
that is commensurate with the paid vacation, perquisites and fringe benefits
available to the Executive immediately prior to the Effective Date, or, if more
favorable to the Executive, at the level made available from time to time to the
Executive or other similarly situated officers at any time
thereafter.
(g)
Indemnification
. The
Company agrees that if at any time (including after the Employment Period) the
Executive is made a party, or is threatened to be made a party, to any action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he is or was a director, officer or
employee of the Company, the Executive shall be indemnified and held harmless by
the Company to the fullest extent legally permitted or authorized by agreement,
or by the Company's certificate of incorporation or bylaws or resolutions of the
Board or, if greater, by the laws of the State of New Jersey, against all cost,
expense, liability and loss (including, without limitation, attorney's fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by the Executive in connection
therewith. The Company agrees to continue and maintain a directors' and
officers' liability insurance policy covering Executive to the extent the
Company provides such coverage for its other executive officers.
(h)
Office and Support
Staff
. During the Employment Period, the Executive shall be
entitled to an office with furnishings and other appointments, and to
secretarial and other assistance, at a level that is at least commensurate with
that provided to the Executive immediately prior to the Effective
Date.
6.
Termination
.
(a)
Death, Disability or
Retirement
. Subject to the provisions of Section 1 hereof,
Executive’s employment under this Agreement shall terminate automatically upon
the Executive's death, termination due to "Disability" (as defined below) or
voluntary retirement under any of the Company's retirement plans as in effect
from time to time. For purposes of this Agreement, Disability shall mean the
Executive has been incapable of substantially fulfilling the positions, duties,
responsibilities and obligations set forth in this Agreement because of
physical, mental or emotional incapacity resulting from injury, sickness or
disease for a period of at least six consecutive months. The Company and the
Executive shall agree on the identity of a physician to resolve any question as
to the Executive's disability. If the Company and the Executive cannot agree on
the physician to make such determination, then the Company and the Executive
shall each select a physician and those physicians shall jointly select a third
physician, who shall make the determination. The determination of any such
physician shall be final and conclusive for all purposes of this Agreement.
The Executive or his legal representative or any adult member of his immediate
family shall have the right to present to such physician such information and
arguments as to the Executive's disability as he, she or they deem
appropriate, including the opinion of the Executive's personal
physician.
(b)
Voluntary
Termination
. Notwithstanding anything in this Agreement to the
contrary, following a Change in Control the Executive may, upon not less than 30
days' written notice to the Company, voluntarily terminate employment for any
reason (including early retirement under the terms of any of the Company's
retirement plans as in effect from time to time) (any such termination will be
referred to as a “Voluntary Termination” under this Agreement),
provided that
any
termination by the Executive pursuant to Section 6(d) on account of Good Reason
(as defined therein) shall not be treated as a Voluntary Termination under this
Section 6(b).
(c)
Cause
. The
Company may terminate the Executive's employment for Cause. For purposes of
this Agreement, "Cause" means (
i
) the Executive's
conviction of a felony or the entering by the Executive of a plea of
nolo contendere
to a
felony charge, (
ii
) the Executive's
gross neglect, willful malfeasance or willful gross misconduct in connection
with his employment hereunder which has had a significant adverse effect on the
business of the Company and its subsidiaries, unless the Executive reasonably
believed in good faith that such act or non-act was in or not opposed to the
best interests of the Company, or (
iii
) repeated
material violations by the Executive of his obligations under Section 4 of this
Agreement which have continued after written notice thereof from the Company,
which violations are demonstrably willful and deliberate on the Executive's part
and which result in material damage to the Company's business or
reputation.
(d)
Good
Reason
. Executive may terminate his employment for Good
Reason. For purposes of this Agreement, "Good Reason" means the occurrence of
any of the following, without the express written consent of the Executive,
after the occurrence of a Change in Control:
(i) (
A
) the assignment to
the Executive of any duties inconsistent with the Executive's position,
authority or responsibilities as contemplated by Section 4 of this Agreement, or
(
B
) any other
material adverse change in such position, including titles, authority or
responsibilities;
(ii) any
failure by the Company to comply with any of the provisions of Section 5 of this
Agreement;
(iii) the
Company's requiring the Executive to be based at any office or location more
than 50 miles from that location at which he performed his services specified
under the provisions of Section 4 immediately prior to the Change in Control,
except for travel reasonably required in the performance of the Executive's
responsibilities;
(iv) any
other material breach of this Agreement by the Company; or
(v) any
failure by the Company to obtain the assumption and agreement to perform this
Agreement by a successor as contemplated by Section 12(b);
provided,
however, that Good Reason shall not arise under clauses (i), (ii) or (iv) above
until the Executive has given the Company written notice of the circumstances
that would constitute Good Reason thereunder and the Company has not eliminated
or corrected such circumstances within 30 business days after receipt of such
notice.
In no
event shall the mere occurrence of a Change in Control, absent any further
impact on the Executive, be deemed to constitute Good Reason.
(e)
Notice of
Termination
. Any termination by the Company for Cause or by
the Executive for Good Reason shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 13(e). For purposes of
this Agreement, a "Notice of Termination" means a written notice given, in the
case of a termination for Cause, within 30 business days of the Company's having
actual knowledge of the events giving rise to such termination, and in the case
of a termination for Good Reason, within 60 days of the Executive's having
actual knowledge of the events constituting Good Reason giving rise to such
termination, and which (
i
) indicates the
specific termination provision in this Agreement relied upon, (
ii
) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated, and
(
iii
) if the
termination date is other than the date of receipt of such notice, specifies the
termination date of the Executive's employment (which date shall be not more
than 15 days after the giving of such notice). The failure by the Executive to
set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing his rights hereunder.
(f)
Date of
Termination
. For the purpose of this Agreement and subject to
Section 7(f), the term "Date of Termination" means (
i
) in the case of a
termination for which a Notice of Termination is required, the date of receipt
of such Notice of Termination or, if later, the date specified therein, as the
case may be, and (
ii
) in all other
cases, the actual date on which the Executive's employment terminates during the
Employment Period.
7.
Obligations of the Company
upon Termination
.
(a)
Death or
Disability
. If the Executive's employment is terminated during
the Employment Period by reason of the Executive's death or Disability, the
Employment Period shall terminate without further obligations to the Executive
or the Executive's legal representatives under this Agreement other than those
obligations accrued hereunder at the Date of Termination (and obligations under
Section 5(g)), and the Company shall pay to the Executive (or his beneficiary or
estate) (
i
) the
Executive's full Base Salary through the Date of Termination (the "Earned
Salary"), (
ii
)
any vested amounts or vested benefits owing to the Executive under the Company's
otherwise applicable employee benefit plans and programs, including any
compensation previously deferred by the Executive (together with any accrued
earnings thereon) and not yet paid by the Company and any accrued vacation pay
not yet paid by the Company (the "Accrued Obligations"), and (
iii
) any other
benefits payable due to the Executive's death or Disability under the Company's
plans, policies or programs (the "Additional Benefits").
Any Earned Salary shall be paid in cash
in a single lump sum as soon as practicable, but in no event more than 30
days (or at such earlier date required by law), following the Date of
Termination. Accrued Obligations and Additional Benefits shall be paid in
accordance with the terms of the applicable plan, program or arrangement,
subject to Section 7(f).
(b)
Cause and Voluntary
Termination
. If the Executive's employment shall be terminated
for Cause or by a Voluntarily Termination by the Executive in accordance
with Section 6(b) of this Agreement, the Company shall pay the Executive (
i
) the Earned Salary
in cash in a single lump sum as soon as practicable, but in no event more than
10 days, following the Date of Termination, and (
ii
) the Accrued
Obligations in accordance with the terms of the applicable plan, program or
arrangement, subject to Section 7(f).
(c)
Termination by the Company
other than for Cause and Termination by the Executive for Good
Reason
.
|
(i)
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Lump Sum
Payments
. If, during the Employment Period, the Company
terminates the Executive's employment other than for Cause (and not due to
a
|
Disability) or the Executive terminates his employment for Good Reason, the
Company shall pay to the Executive the following amounts:
|
(A)
|
the Executive's Earned
Salary;
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|
|
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(B)
|
a
cash amount (the "Severance Amount") equal to
THREE (3)
times the sum
of (
x
)
the Executive's annual Base Salary and (
y
) an amount
equal to the average of the annual bonuses paid or payable to the
Executive with respect to each of the last three calendar years ended
prior to the Change in Control (or, if at the Date of Termination, the
Executive has been employed for less than three full calendar years, for
the number of full calendar years during which the Executive was
employed); for purposes of this Section 7(c)(i)(B), any bonus that was
offered to the Executive but declined or reallocated by the Executive
shall be deemed to be bonus payable to the Executive;
and
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(C)
|
the
Accrued Obligations.
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The
Earned Salary and Severance Amount shall be paid in cash in a single lump sum as
soon as practicable, but in no event more than 30 days (or at such earlier
date required by law), following the Date of Termination, subject to Section
7(f) (which may require a delay in the payment of such amounts until six months
after termination). Accrued Obligations shall be paid in accordance with the
terms of the applicable plan, program or arrangement, subject to Section
7(f).
(ii)
Pro Rata Annual
Incentive.
In lieu of any annual incentive compensation under
Section 4(b) for the year in which Executive’s employment terminated, an amount
equal to the Executive’s target annual incentive compensation for the year of
termination, multiplied by a fraction the numerator of which is the number of
days Executive was employed in the year of termination and the denominator of
which is the total number of days in the year of termination payable in a single
lump sum as soon as practicable, but in no event more than 30 days following the
Date of Termination, subject to Section 7(f). In addition, for any fiscal year
that has been completed at the time of Executive’s termination, the Company
shall pay to Executive the annual incentive under Section 5(b) to the extent
earned based on performance in the completed year, without any exercise of
negative discretion except as such exercise of negative discretion may be
consistent with the exercise of negative discretion for executive officers of
the Company whose employment is not then contemplated to terminate payable in a
single lump sum as soon as practicable, but in no event more than 30 days
following the Date of Termination, subject to Section 7(f);
(iii)
Continuation of
Benefits
. If, during the Employment Period, the Company
terminates the Executive's employment other than for Cause (and not due to a
Disability) or the Executive terminates his employment for Good Reason, the
Executive (and, to the extent applicable, his dependents) shall be entitled,
after the Date of Termination until the earlier of (
1
) the
THIRD
anniversary of the Date
of Termination (the "End Date") and (
2
) the date the
Executive becomes eligible for comparable benefits under a similar plan, policy
or program of a subsequent employer, to continue participation in all of the
Company's employee and executive welfare and fringe benefit plans that the
Executive was participating in immediately prior to his Date of Termination (the
"Benefit Plans"). To the extent any such benefits cannot be provided under the
terms of the applicable plan, policy or program, the Company shall provide a
comparable benefit under another plan or from the Company's general assets,
subject to Section 7(f). The Executive's participation in the Benefit Plans will
be on the same terms and conditions that would have applied had the Executive
continued to be employed by the Company through the End Date, subject to Section
7(f). The benefits provided in this subsection (iii) during any calendar year
shall not affect the benefits to be provided to the Executive or his dependents
in any other calendar year except for medical reimbursement arrangements as
allowed under Code Section 409A. Any reimbursements shall be made no later than
two months following the calendar year during which the reimbursements are
incurred.
(iv)
Outplacement.
Subject
to Section 7(f), the Company shall provide reimbursement for reasonable
outplacement and job search expenses incurred by the Executive, from the date of
termination through the End Date or until other employment is secured, whichever
comes first, not to exceed
$25,000
, prorated between
calendar years on a time weighted basis and provided or reimbursable based on
when the expense is incurred. The amount reimbursed during any calendar year
shall not affect the amounts to be reimbursed to the Executive in any other
calendar year. Any reimbursements shall be made no later than two months
following the calendar year during which the reimbursements are
incurred.
(v)
Vesting and Exercisability
of Stock Options
. If, during the Employment Period, the
Company terminates the Executive's employment other than for Cause (and not due
to a Disability) or the Executive terminates his employment for Good Reason, all
outstanding options held by the Executive to purchase shares of Common Stock of
the Company and granted prior to the effective date of this Agreement
("Options") shall become fully vested on the date of such termination of
employment and the Executive shall have the right to exercise the Options,
whether or not such Options would otherwise be exercisable, for a period of
ninety days (provided that if this represents an extension of the applicable
period for any outstanding Option, it shall be limited to the maximum period
permitted under Code Section 409A (or, if less, until the end of the stated term
of the Options determined without regard to the termination of employment) (or
such longer period as may be provided under the plan or agreement governing the
Option). Vesting of options granted on or after the effective date of this
Agreement shall be governed by the terms of the relevant plan and any award
agreement relating to such Options.
(vi)
Vesting of Performance Share
Awards and Other Equity Awards.
Vesting and payout of
Performance Units or any other equity award shall be governed by the terms of
the relevant plan and any award agreement relating to such Performance Shares or
other equity award.
(d)
Discharge of the Company's
Obligations
. Except as expressly provided in the last sentence
of this Section 7(d), the amounts payable to the Executive pursuant to this
Section 7 (whether or not reduced pursuant to Section 7(e)) following
termination of his employment shall be in full and complete satisfaction of the
Executive's rights under this Agreement and any other claims he may have in
respect of his employment by the Company or any of its subsidiaries. Such
amounts shall constitute liquidated damages with respect to any and all such
rights and claims and, upon the Executive's receipt of such amounts, the Company
shall be released and discharged from any and all liability to the Executive in
connection with this Agreement or otherwise in connection with the Executive's
employment with the Company and its subsidiaries. Executive shall be required to
execute a release to such effect (in the Company’s standard form of release) as
a condition of receipt of payments and benefits hereunder. Nothing in this
Section 7(d) shall be construed to release the Company from its commitment to
indemnify the Executive and hold the Executive harmless as provided in Section
5(g) hereof, which provision shall survive any purported termination of this
Agreement.
(e)
Certain Further Payments by
the Company
.
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(i)
|
Application of Section
7(e)
.
In the event that any amount or benefit paid or
distributed to the Executive pursuant to this Agreement, taken together
with any amounts or benefits otherwise paid or distributed to the
Executive by the Company or any affiliated company (collectively, the
"Covered Payments"), are or become subject to the tax (the "Excise Tax")
imposed under Section 4999 of the Code or any similar tax that may
hereafter be imposed, the Company shall pay to the Executive at the
time specified in Section 7(e)(v) below an additional amount (the
"Tax Reimbursement Payment") such that the net amount retained by
Executive with respect to such Covered Payments, after deduction of any
Excise Tax on the Covered Payments and any Federal, state and local income
tax and Excise Tax on the Tax Reimbursement Payment provided for by this
Section 7(e), but before deduction for any Federal, state or local income
or employment tax withholding on such Covered Payments, shall be
equal to the amount of the Covered
Payments.
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(ii)
|
Application of Section
280G
. For purposes of determining whether any of the
Covered Payments will be subject to the Excise Tax and the
amount
|
of such Excise Tax,
|
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(A)
|
such
Covered Payments will be treated as "parachute payments" within the
meaning of Section 280G of the Code, and all "parachute payments" in
excess of the "base amount" (as defined under Section 280G(b)(3) of the
Code) shall be treated as subject to the Excise Tax, unless, and except to
the extent that, in the good faith judgment of the Company's independent
certified public accountants appointed prior to the Effective Date or tax
counsel selected by such accountants (the "Accountants"), the Company
has a reasonable basis to conclude that such Covered Payments (in whole or
in part) either do not constitute "parachute payments" or represent
reasonable compensation for personal services actually rendered (within
the meaning of Section 280G(b)(4)(B) of the Code) in excess of the "base
amount," or such "parachute payments" are otherwise not subject to such
Excise Tax, and
|
|
(B)
|
the
value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the principles of
Section 280G of the Code.
|
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(iii)
|
Calculation of Tax
Reimbursement Payment
.
For purposes of
determining the amount of the Tax Reimbursement Payment, the Executive
shall be deemed to pay:
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|
|
|
|
(A)
|
Federal
income taxes at the highest applicable marginal rate of Federal income
taxation for the calendar year in which the Tax Reimbursement
Payment is to be made, and
|
|
(B)
|
any
applicable state and local income taxes at the highest applicable marginal
rate of taxation for the calendar year in which the Tax Reimbursement
Payment is to be made, net of the maximum reduction in Federal income
taxes which could be obtained from the deduction of such state or local
taxes if paid in such year.
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(iv)
|
Adjustments in Respect
of Tax Reimbursement Payment
. In the event that the
Excise
Tax is subsequently determined by the Accountants
or
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pursuant
to any proceeding or negotiations with the Internal Revenue Service to be less
than the amount taken into account hereunder in calculating the Tax
Reimbursement Payment made, the Executive shall repay to the Company, at the
time that the amount of such reduction in the Excise Tax is finally determined,
the portion of such prior Tax Reimbursement Payment that would not have been
paid if such Excise Tax had been applied in initially calculating such Tax
Reimbursement Payment, plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in
the event any portion of the Tax Reimbursement Payment to be refunded to the
Company has been paid to any Federal, state or local tax authority, repayment
thereof shall not be required until actual refund or credit of such portion has
been made to the Executive, and interest payable to the Company shall not exceed
interest received or credited to the Executive by such tax authority for the
period it held such portion. The Executive and the Company shall mutually agree
upon the course of action to be pursued (and the method of allocating the
expenses thereof) if the Executive's good faith claim for refund or credit is
denied.
In the event that the Excise Tax
is later determined by the Accountants or pursuant to any proceeding or
negotiations with the Internal Revenue Service to exceed the amount taken into
account hereunder at the time the Tax Reimbursement Payment is made
(including, but not limited to, by reason of any payment the existence or amount
of which cannot be determined at the time of the Tax Reimbursement Payment), the
Company shall make an additional Tax Reimbursement Payment in respect of such
excess (plus any interest or penalty payable with respect to such excess) at the
time that the amount of such excess is finally determined.
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(v)
|
Payment
.
Subject to Section
7(f), the Tax Reimbursement Payment (or portion thereof) provided for in
Section 7(e)(i)
|
above
shall be paid to the Executive not later than 10 business days following the
payment of the Covered Payments; provided, however, that if the amount of such
Tax Reimbursement Payment (or portion thereof) cannot be finally determined on
or before the date on which payment is due, the Company shall pay to the
Executive by such date an amount estimated in good faith by the Accountants to
be the minimum amount of such Tax Reimbursement Payment and shall pay the
remainder of such Tax Reimbursement Payment (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 45 calendar days after payment of the
related Covered Payment. In the event that the amount of the estimated Tax
Reimbursement Payment 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 business day after written demand by the Company for
payment (together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code).
(f)
Provisions for Compliance
with Code Section 409A
. If any right to payment or benefit
under this Agreement would be deemed to be a non-exempt deferral subject to Code
Section 409A, and such payment or benefit would be distributable based upon a
termination of employment, such payment (i) shall be distributable only upon a
termination of Executive that constitutes a Separation from Service (as defined
below) and the Date of Termination shall be the date of the Separation from
Service and (ii) if Executive is a “specified employee” (as determined in
accordance with procedures adopted by the Board of Directors of the Company or
its delegate) and the distribution is required to be delayed for six months to
comply with Code Section 409A, such distribution shall occur on the first day of
the seventh month after such Separation from Service (or upon the Executive’s
death, if earlier). In the case of any delay in payment, interest shall be
credited on the unpaid amount at a rate equal to the short-term applicable
federal rate (with semiannual compounding) established by the Internal Revenue
Service under Code Section 1274(b)(2)(B) and in effect at the date the amount
would have been paid but for the delay hereunder. Any delay in payment hereunder
shall not cause a corresponding delay in the timing of any other payment that is
not specifically subject to the six-month delay rule of Code Section 409A. A
Separation from Service shall occur where it is reasonably anticipated that no
further services will be performed after that date or that the level of bona
fide services the Executive will perform after that date (whether as an employee
or independent contractor of the Company or an affiliate) will permanently
decrease to less than [50%] of the average level of bona fide services performed
over the immediately preceding thirty-six (36) month period. An Executive shall
be considered to continue employment and to not have a Separation from Service
while on a leave of absence if the leave does not exceed 6 consecutive months
(29 months for a disability leave of absence) or, if longer, so long as the
Executive retains a right to reemployment with the Company or an affiliate under
an applicable statute or by contract. For this purpose, a “disability leave
of absence” is an absence due to any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than 6 months, where such impairment causes
the Executive to be unable to perform the duties of his job or a substantially
similar job. Continued services solely as a director of the Company or an
affiliate shall not prevent a Separation from Service from occurring. [Discuss
50% requirement with each Executive.] This Agreement shall be interpreted and
applied in a manner as to comply with Code Section 409A. However, the Company
shall not be responsible for any taxes due for payments under this Agreement for
any reason including failure to comply with Code Section 409A.
8.
Nonexclusivity of
Rights
. Except as expressly provided herein, nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other plan or program provided
by the Company or any of its affiliated companies and for which the Executive
may qualify, nor shall anything herein limit or otherwise prejudice such rights
as the Executive may have under any other agreements with the Company or any of
its affiliated companies, including employment agreements or stock option
agreements. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan or program of the Company or any of
its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan or program.
9.
No Mitigation or
Offset
. The Executive shall have no obligation to seek other
employment and, except as expressly provided in Sections 7(c)(iii), there shall
be no offset against amounts due to Executive under this Agreement on account of
any remuneration attributable to subsequent employment that he may obtain. The
Company's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company may have against the
Executive or others, including, without limitation, any claim arising due to the
Executive's violation of his covenants under Section 11(a) and (b)(i) hereof. In
the event that the Executive shall in good faith give a Notice of Termination
for Good Reason and it shall thereafter be determined that Good Reason did not
exist, the employment of the Executive shall, unless the Company and the
Executive shall otherwise mutually agree, be deemed to have terminated, at the
date of giving such purported Notice of Termination, by mutual consent of the
Company and the Executive and the Executive shall be entitled to receive only
his Earned Salary and the Accrued Obligations which he would have been entitled
to receive upon a Voluntary Termination.
10.
Legal Fees and
Expenses
. If the Executive asserts any claim in any contest
(whether initiated by the Executive or by the Company) as to the validity,
enforceability or interpretation of any provision of this Agreement, the Company
shall pay the Executive's legal expenses (or cause such expenses to be paid)
including, without limitation, his reasonable attorney's fees, on a quarterly
basis, upon presentation of proof of such expenses in a form acceptable to the
Company,
provided
that
if the Executive shall not prevail as to any material issue as to
the validity, enforceability or interpretation of any provision of this
Agreement, the Executive shall reimburse the Company for such amounts paid by
the Company for the Executive’s legal expenses, plus simple interest thereon at
the 90-day United States Treasury Bill rate as in effect from time to time,
compounded annually, attributable to the litigation of such material issue by
the Executive.
11.
Non-Competition
;
Confidential
Information; Company Property
.
(a)
Non-Competition
.
As a
condition to the right of the Executive to receive severance payments hereunder,
the Executive must, upon termination of his or her employment, enter into a
binding agreement with the Company agreeing that that, without the written
consent of the Board, the Executive will not, at any time for a period of two
years following termination of employment, acting alone or in conjunction with
others, directly or indirectly (i) engage (either as owner, investor, partner,
stockholder, employer, employee, consultant, advisor, or director) in any
business
in which
he has been directly engaged on behalf of the Company or any affiliate, or has
supervised as an executive thereof, during the last two years prior to such
termination, or which was engaged in or planned by the Company or an affiliate
at the time of such termination, in the geographic area of New York, New Jersey,
Pennsylvania, or Delaware; (ii) induce any customers of the Company or any of
its affiliates with whom Executive has had contacts or relationships, directly
or indirectly, during and within the scope of his employment with the Company or
any of its affiliates, to curtail or cancel their business with the Company or
any such affiliate; (iii) induce, or attempt to influence, any employee of the
Company or any of its affiliates to terminate employment; or (iv) solicit, hire
or retain as an employee or independent contractor, or assist any third party in
the solicitation, hire, or retention as an employee or independent contractor,
any person who during the previous 12 months was an employee of the Company or
any affiliate; provided, however, that activities engaged in by or on behalf of
the Company are not restricted by this covenant. The provisions of subparagraphs
(i), (ii), (iii), and (iv) above shall be separate and distinct commitments
independent of each of the other subparagraphs. It is agreed that the ownership
of not more than one percent of the equity securities of any company having
securities listed on a securities exchange or regularly traded in the
over-the-counter market shall not, of itself, be deemed inconsistent with clause
(i) of this Section 11(a).
(b)
Confidential Information;
Company Property.
By and in consideration of the salary and
benefits to be provided by the Company hereunder, including the severance
arrangements set forth herein, the Executive agrees that:(i)
Confidential
Information
. The Executive shall hold in a fiduciary capacity
for the benefit of the Company all secret or confidential information, knowledge
or data relating to the Company or any of its affiliated companies, and their
respective businesses, (
i
) obtained by the
Executive during his employment by the Company or any of its affiliated
companies and (
ii
) not otherwise
public knowledge (other than by reason of an unauthorized act by the Executive).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company, unless compelled
pursuant to an order of a court or other body having jurisdiction over such
matter, communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. The Executive acknowledges
and agrees that the covenants and obligations of the Executive with respect to
confidentiality relate to special, unique and extraordinary matters and that a
violation of any of the terms of such covenants and obligations will cause the
Company irreparable injury for which adequate remedies are not available at law.
Therefore, the Executive agrees that the Company shall be entitled to an
injunction, restraining order or such other equitable relief (without the
requirement to post bond) restraining Executive from committing any violation of
the covenants and obligations contained in this Section 11(b)(i).
These remedies are cumulative and are in addition to any other rights and
remedies the Company may have at law or in equity.(ii)
Company
Property
. Except as expressly provided herein, promptly
following the Executive's termination of employment, the Executive shall return
to the Company all property of the Company and all copies thereof in the
Executive's possession or under his control, except that the Executive may
retain his personal notes, diaries, Rolodexes, calendars and
correspondence.
12.
Successors
.
(a) This
Agreement is personal to the Executive and, without the prior written
consent of the Company, shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal
representatives.(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors. The Company shall require any
successor to all or substantially all of the business and/or assets of the
Company, whether direct or indirect, by purchase, merger, consolidation,
acquisition of stock, or otherwise, by an 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 as the Company would be
required to perform if no such succession had taken place.
13.
Miscellaneous
.
(a)
Applicable
Law
. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey, applied without reference
to principles of conflict of laws.
(b)
Arbitration
. Except
to the extent provided in Section 11(b)(i), any dispute or controversy arising
under or in connection with this Agreement shall be resolved by binding
arbitration. The arbitration shall be held in Newark, New Jersey and, except to
the extent inconsistent with this Agreement, shall be conducted in accordance
with the Expedited Employment Arbitration Rules of the American Arbitration
Association (or such other voluntary arbitration rules applicable to employment
contract disputes) in effect at the time of the arbitration, supplemented, as
necessary, by those principles which would be applied by a court of law or
equity. The arbitrator shall be acceptable to both the Company and the
Executive. If the parties cannot agree on an acceptable arbitrator, the dispute
shall be heard by a panel of three arbitrators, one appointed by each of the
parties and the third appointed by the other two arbitrators.
(c)
Amendments
. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives and, with regard to payments and benefits subject to Code
Section 409A, shall only be amended in a manner that complies with Code Section
409A.
(d)
Entire
Agreement
. This Agreement constitutes the entire agreement
between the parties hereto with respect to the matters referred to herein. No
other agreement relating to the terms of the Executive's employment by the
Company, oral or otherwise, shall be binding between the parties unless it is in
writing and signed by the party against whom enforcement is sought. There are no
promises, representations, inducements or statements between the parties other
than those that are expressly contained herein. The Executive acknowledges that
he is entering into this Agreement of his own free will and accord, and with no
duress, that he has read this Agreement and that he understands it and its legal
consequences. In particular, the Agreement supersedes the Employment
Continuation Agreement between the Company and Executive dated June 5, 1996 (the
“Prior Agreement”), and amended December 1, 1997 and February 20, 2007. The
Prior Agreements are terminated in their entirety as of the date of this
Agreement
(e)
Notices
. All
notices and other communications hereunder shall be in writing and shall be
given by hand-delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:If to the
Executive:at the home address of the Executive noted on the records of the
Company
If to the
Company:
New
Jersey Resources Corporation
1415 Wyckoff
Road
Wall, New Jersey
07719
Attn.:
Secretary
or to
such other address as either party shall have furnished to the other in writing
in accordance herewith. Notice and communications shall be effective when
actually received by the addressee.
(f)
Tax
Withholding
. The Company shall withhold from any amounts
payable under this Agreement such Federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
(g)
Severability;
Reformation
. In the event that one or more of the provisions
of this Agreement shall become invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not be affected thereby. In the event that any of the provisions of
any of Section 11(a) or (b)(i) are not enforceable in accordance with its terms,
the Executive and the Company agree that such Section shall be reformed to make
such Section enforceable in a manner which provides the Company the maximum
rights permitted at law.
(h)
Waiver
. Waiver
by any party hereto of any breach or default by the other party of any of the
terms of this Agreement shall not operate as a waiver of any other breach or
default, whether similar to or different from the breach or default waived. No
waiver of any provision of this Agreement shall be implied from any course of
dealing between the parties hereto or from any failure by either party hereto to
assert its or his rights hereunder on any occasion or series of
occasions.
(i)
Counterparts
. This
Agreement may be executed in counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same
instrument.
(j)
Captions
. The
captions of this Agreement are not part of the provisions hereof and shall have
no force or effect.
IN WITNESS
WHEREOF
, the Executive has hereunto set his hand and the Company has
caused this Agreement to be executed in its name on its behalf, and its
corporate seal to be hereunto affixed and attested by its Secretary, all as of
the day and year first above written.
|
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NEW JERSEY RESOURCES
CORPORATION
|
|
|
|
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|
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By:
|
/s/ Glenn C.
Lockwood
|
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GLENN
C. LOCKWOOD
|
|
|
Title:
Senior Vice President & Chief Financial Officer
|
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|
ATTEST:
|
|
|
/s/ Rhonda M.
Figueroa
|
|
|
RHONDA
M. FIGUEROA
|
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|
Corporate
Secretary
|
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|
|
|
|
|
By:
|
/s/ Laurence M.
Downes
|
|
|
LAURENCE
M. DOWNES
|
|
|
Chairman
& Chief Executive Officer
|
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|
|
WITNESSED:
|
|
|
/s/ Denise S.
Gray
|
|
|
Schedule
of Employment Continuation Agreements of Named Executive Officers dated January
1, 2009.
Name
|
Termination
Benefit
|
Laurence
M. Downes, President and Chief Executive Officer
|
Three times
the sum, of
(x) his then annual base salary and (y) the average of his annual bonuses
paid or payable with respect to the last three calendar years ended prior
to the Change of Control.
|
Mariellen
Dugan, Senior Vice President and General Counsel
|
Two times
the sum, of
(x) her then annual base salary and (y) the average of her annual bonuses
paid or payable with respect to the last three calendar years ended prior
to the Change of Control (“
2x
”).
|
Kathleen
T. Ellis, Senior Vice President, Corporate Affairs and
Marketing
|
2x
|
Glenn
C. Lockwood, Senior Vice President and Chief Financial
Officer
|
2x
|
Joseph
P. Shields, Executive Vice President and Chief Operating Officer, NJR
Energy Services Company
|
2x
|
NEW
JERSEY RESOURCES CORPORATION
2007
STOCK AWARD AND INCENTIVE PLAN
As
amended and restated,
January
1, 2009
NEW
JERSEY RESOURCES CORPORATION
2007
STOCK AWARD AND INCENTIVE PLAN
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Page
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1.
Purpose
|
1
|
|
|
2.
Definitions
|
1
|
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3.
Administration
|
3
|
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4.
Stock
Subject to Plan
|
4
|
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5.
Eligibility;
Per-Person Award Limitations
|
5
|
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6.
Specific Terms
of Awards
|
5
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7.
Performance
Awards
|
9
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8.
Certain
Provisions Applicable to Awards
|
12
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9.
Change
in Control
|
12
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10.
Additional
Award Forfeiture Provisions
|
14
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11.
General
Provisions
|
14
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NEW
JERSEY RESOURCES CORPORATION
2007
STOCK AWARD AND INCENTIVE PLAN
1.
Purpose
. The
purpose of this 2007 Stock Award and Incentive Plan (the "Plan") is to aid New
Jersey Resources Corporation, a New Jersey corporation (together with its
successors and assigns, the "Company"), in attracting, retaining, motivating and
rewarding employees, non-employee directors, and other service providers of the
Company or its subsidiaries or affiliates, strengthening the Company's
capability to develop, maintain and direct a competent management team, to
provide for equitable and competitive compensation opportunities, to recognize
individual contributions and reward achievement of Company goals, and promote
the creation of long-term value for shareholders by closely aligning the
interests of Participants with those of shareholders. The Plan
authorizes stock-based and cash-based incentives for
Participants. The Plan is amended and restated effective January 1,
2009 solely to comply with the requirements of Code Section 409A.
2.
Definitions
. In
addition to the terms defined in Section 1 above and elsewhere in the Plan, the
following capitalized terms used in the Plan have the respective meanings set
forth in this Section:
(a) "Annual
Limit" shall have the meaning specified in Section 5(b).
(b) "Award"
means any Option, SAR, Restricted Stock, Deferred Stock, Stock granted as a
bonus or in lieu of another award, Dividend Equivalent, Other Stock-Based Award,
or Performance Award, together with any related right or interest, granted to a
Participant under the Plan.
(c) "Beneficiary"
means the legal representatives of the Participant's estate entitled by will or
the laws of descent and distribution to receive the benefits under a
Participant's Award upon a Participant's death, provided that, if and to the
extent authorized by the Committee, a Participant may be permitted to designate
a Beneficiary, in which case the "Beneficiary" instead will be the person,
persons, trust or trusts (if any are then surviving) which have been designated
by the Participant in his or her most recent written and duly filed beneficiary
designation to receive the benefits specified under the Participant's Award upon
such Participant's death.
(d) "Board"
means the Company's Board of Directors.
(e) "Change
in Control" and related terms have the meanings as defined in Section
9.
(f) "Code"
means the Internal Revenue Code of 1986, as amended. References to
any provision of the Code or regulation thereunder shall include any successor
provisions and regulations, and reference to regulations includes any applicable
guidance or pronouncement of the Department of the Treasury and Internal Revenue
Service.
(g) “Code
Section 409A” shall mean Section 409A of the Code and all regulations issued
thereunder.
(h) "Committee"
means the Leadership Development and Compensation Committee of the Board (or a
designated successor to such committee), the composition and governance of which
is established in the Committee's Charter as approved from time to time by the
Board and subject to other corporate governance documents of the
Company. No action of the Committee shall be void or deemed to be
without authority due to the failure of any member, at the time the action was
taken, to meet any qualification standard set forth in the Committee Charter or
this Plan. The full Board may perform any function of the Committee
hereunder (except to the extent limited under applicable New York Stock Exchange
rules), in which case the term "Committee" shall refer to the
Board.
(i) "Covered
Employee" means an Eligible Person who is a Covered Employee as specified in
Section 11(j).
(j) "Deferred
Stock" means a right, granted under this Plan, to receive Stock or other Awards
or a combination thereof at the end of a specified deferral period.
(k) "Dividend
Equivalent" means a right, granted under this Plan, to receive cash, Stock,
other Awards or other property equal in value to all or a specified portion of
the dividends paid with respect to a specified number of shares of
Stock.
(l) "Effective
Date" means the effective date specified in Section 11(p).
(m) "Eligible
Person" has the meaning specified in Section 5.
(n) "Exchange
Act" means the Securities Exchange Act of 1934, as
amended. References to any provision of the Exchange Act or rule
(including a proposed rule) thereunder shall include any successor provisions
and rules.
(o) "Fair
Market Value" means the fair market value of Stock, Awards or other property as
determined in good faith by the Committee or under procedures established by the
Committee. Unless otherwise determined by the Committee, the Fair
Market Value of Stock on a given day shall be, as specified by the Committee,
either (1) the average of the high and low sales prices of the Stock, or (2) the
closing price of the Stock, on the date on which it is to be
valued hereunder as reported for New York Stock Exchange -- Composite
Transactions. Fair Market Value relating to the exercise price or
base price of any Non-409A Option or SAR and relating to the market value of
Stock measured at the time of exercise shall conform to requirements under Code
Section 409A in order to be exempt from Code Section 409A.
(p) "409A
Awards" means Awards that constitute a deferral of compensation under Code
Section 409A and regulations thereunder. "Non-409A Awards" means
Awards other than 409A Awards. Although the Committee retains
authority under the Plan to grant Options, SARs and Restricted Stock on terms
that will qualify those Awards as 409A Awards, Options, SARs, and Restricted
Stock are intended to be Non-409A Awards unless otherwise expressly specified by
the Committee.
(q) "Incentive
Stock Option" or "ISO" means any Option designated as an incentive stock option
within the meaning of Code Section 422 and qualifying thereunder.
(r) "Option"
means a right to purchase Stock granted under Section 6(b).
(s) "Other
Stock-Based Awards" means Awards granted to a Participant under Section
6(h).
(t) "Participant"
means a person who has been granted an Award under the Plan which remains
outstanding, including a person who is no longer an Eligible
Person.
(u) "Performance
Award" means a conditional right, granted to a Participant under Sections 6(i)
or 7, to receive cash, Stock or other Awards or payments.
(v) “Preeexisting
Plan” means the Employee and Outside Director Long-Term Incentive Compensation
Plan (effective January 23, 2002).
(w) "Restricted
Stock" means Stock granted under this Plan which is subject to certain
restrictions and to a risk of forfeiture.
(x) "Stock"
means the Company's Common Stock, par value $2.50 per share, and any other
equity securities of the Company that may be substituted or resubstituted for
Stock pursuant to Section 11(c).
(y) "Stock
Appreciation Rights" or "SAR" means a right granted to a Participant under
Section 6(c).
3.
Administration
.
(a)
Authority of the
Committee
. The Plan shall be administered by the Committee,
which shall have full and final authority, in each case subject to and
consistent with the provisions of the Plan, to select Eligible Persons to become
Participants; to grant Awards; to determine the type and number of Awards, the
dates on which Awards may be exercised and on which the risk of forfeiture or
deferral period relating to Awards shall lapse or terminate, the acceleration of
any such dates, the expiration date of any Award, whether, to what extent, and
under what circumstances an Award may be settled, or the exercise price of an
Award may be paid, in cash, Stock, other Awards, or other property, and other
terms and conditions of, and all other matters relating to, Awards; to prescribe
documents evidencing or setting terms of Awards (such Award documents need not
be identical for each Participant or each Award), amendments thereto, and rules
and regulations for the administration of the Plan and amendments thereto; to
construe and interpret the Plan and Award documents and correct defects, supply
omissions or reconcile inconsistencies therein; and to make all other decisions
and determinations as the Committee may deem necessary or advisable for the
administration of the Plan. Decisions of the Committee with respect
to the administration and interpretation of the Plan shall be final, conclusive,
and binding upon all persons interested in the Plan, including Participants,
Beneficiaries, transferees under Section 11(b) and other persons claiming rights
from or through a Participant, and shareholders. The foregoing
notwithstanding, (i) the Board shall perform the functions of the Committee for
purposes of granting Awards under the Plan to non-employee directors (the
functions of the Committee with respect to other aspects of non-employee
director awards is not exclusive to the Board, however); and (ii) Committee
decisions with regard to the grant of awards [to executive officers] will be
subject to the ratification of the Board of Directors, unless otherwise
determined by the Board.
(b)
Manner of
Exercise of Committee Authority
. The express grant of any
specific power to the Committee, and the taking of any action by the Committee,
shall not be construed as limiting any power or authority of the
Committee. The Committee may act through subcommittees, including for
purposes of perfecting exemptions under Rule 16b-3 or qualifying Awards under
Code Section 162(m) as performance-based compensation, in which case the
subcommittee shall be subject to and have authority under the charter applicable
to the Committee, and the acts of the subcommittee shall be deemed to be acts of
the Committee hereunder. The Committee may delegate to officers or
managers of the Company or any subsidiary or affiliate, or committees thereof,
the authority, subject to such terms as the Committee shall determine, to
perform such functions, including administrative functions, as the Committee may
determine, to the extent (i) that such delegation will not result in the loss of
an exemption under Rule 16b-3(d) for Awards granted to Participants subject to
Section 16 of the Exchange Act in respect of the Company and will not cause
Awards intended to qualify as "performance-based compensation" under Code
Section 162(m) to fail to so qualify, and (ii) permitted under applicable
provisions of the New Jersey Business Corporation Act.
(c)
Limitation of
Liability
. The Committee and each member thereof, and any
person acting pursuant to authority delegated by the Committee, shall be
entitled, in good faith, to rely or act upon any report or other information
furnished by any executive officer, other officer or employee of the Company or
a subsidiary or affiliate, the Company's independent auditors, consultants or
any other agents assisting in the administration of the Plan. Members
of the Committee, any person acting pursuant to authority delegated by the
Committee, and any officer or employee of the Company or a subsidiary or
affiliate acting at the direction or on behalf of the Committee or a delegee
shall not be personally liable for any action or determination taken or made in
good faith with respect to the Plan, and shall, to the extent permitted by law,
be fully indemnified and protected by the Company with respect to any such
action or determination.
4.
Stock
Subject To Plan
.
(a)
Overall Number of
Shares Available for Delivery
. The total number of shares of
Stock reserved and available for delivery in connection with Awards under the
Plan shall be (i) 750,000 shares, plus (ii) the number of shares that,
immediately prior to the Effective Date, remain available for new awards under
the Preexisting Plan plus (iii) the number of shares subject to
awards under the Preexisting Plan which become available in accordance with
Section 4(b) after the Effective Date; provided, however, that the total number
of shares with respect to which ISOs may be granted shall not exceed the number
specified under clause (i) above. Any shares of Stock delivered under
the Plan shall consist of authorized and unissued shares or treasury
shares.
(b)
Share Counting
Rules
. The Committee may adopt reasonable counting procedures
to ensure appropriate counting, avoid double counting (as, for example, in the
case of tandem or substitute awards) and make adjustments in accordance with
this Section 4(b). Shares shall be counted against those reserved to
the extent such shares have been delivered and are no longer subject to a risk
of forfeiture. Accordingly, (i) to the extent that an Award under the
Plan or an award under the Pre-existing Plan is canceled, expired, forfeited,
settled in cash, settled by delivery of fewer shares than the number underlying
the Award or award, or otherwise terminated without delivery of shares to the
participant, the shares retained by or returned to the Company will not be
deemed to have been delivered under the Plan; and (ii) shares that are withheld
from such an Award or award or separately surrendered by the participant in
payment of the exercise price or taxes relating to such an Award or award shall
be deemed to constitute shares not delivered and will be available under the
Plan. The Committee may determine that Awards may be outstanding that
relate to more shares than the aggregate remaining available under the Plan so
long as Awards will not in fact result in delivery and vesting of shares in
excess of the number then available under the Plan. In addition, in
the case of any Award granted in assumption of or in substitution for an award
of a company or business acquired by the Company or a subsidiary or affiliate or
with which the Company or a subsidiary or affiliate combines, shares delivered
or deliverable in connection with such assumed or substitute Award shall not be
counted against the number of shares reserved under the Plan.
5.
Eligibil
ity; Per-Person Award
Limitations
.
(a)
Eligibility
. Awards
may be granted under the Plan only to Eligible Persons. For purposes
of the Plan, an "Eligible Person" means (i) an employee of the Company or any
subsidiary or affiliate, including any executive officer or employee
director of the Company or a subsidiary or affiliate, (ii) any person
who has been offered employment by the Company or a subsidiary or affiliate,
provided that such prospective employee may not receive any payment or exercise
any right relating to an Award until such person has commenced employment with
the Company or a subsidiary or affiliate, (iii) any non-employee director of the
Company, and (iv) any person who provides substantial services to the Company or
a subsidiary or affiliate. An employee on leave of absence may be
considered as still in the employ of the Company or a subsidiary or affiliate
for purposes of eligibility for participation in the Plan. For
purposes of the Plan, a joint venture in which the Company or a subsidiary has a
substantial direct or indirect equity investment shall be deemed an affiliate,
if so determined by the Committee. Holders of awards granted by a
company or business acquired by the Company or a subsidiary or affiliate, or
with which the Company or a subsidiary or affiliate combines, are eligible
for grants of substitute awards granted in assumption of or in substitution for
such outstanding awards previously granted under the Plan in connection with
such acquisition or combination transaction.
(b)
Per-Person Award
Limitations
. In each calendar year during any part of which
the Plan is in effect, an Eligible Person may be granted Awards intended to
qualify as "performance-based compensation" under Code Section 162(m) under the
Plan relating to up to his or her Annual Limit. A Participant's
Annual Limit, in any year during any part of which the Participant is then
eligible under the Plan, shall equal 300,000 shares plus the amount of the
Participant's unused Annual Limit relating to the same type of Award as of the
close of the previous year, subject to adjustment as provided in Section
11(c). In the case of an Award which is not valued in a way in which
the limitation set forth in the preceding sentence would operate as an effective
limitation satisfying applicable law (including Treasury Regulation
1.162-27(e)(4)), an Eligible Person may not be granted Awards authorizing the
earning during any calendar year of an amount that exceeds the Eligible Person's
Annual Limit, which for this purpose shall equal $2.5 million plus the amount of
the Eligible Person's unused cash Annual Limit as of the close of the previous
year (this limitation is separate and not affected by the number of Awards
granted during such calendar year subject to the limitation in the preceding
sentence). For this purpose, (i) "earning" means satisfying
performance conditions so that an amount becomes payable, without regard to
whether it is to be paid currently or on a deferred basis or continues to be
subject to any service requirement or other non-performance condition, (ii) a
Participant's Annual Limit is used to the extent an amount or number of shares
may be potentially earned or paid under an Award, regardless of whether such
amount or shares are in fact earned or paid, and (iii) the Annual Limit applies
to Dividend Equivalents under Section 6(g) only if such Dividend Equivalents are
granted separately from and not as a feature of another Award.
6.
Specific Terms Of
Awards.
(a)
General
. Awards
may be granted on the terms and conditions set forth in this Section
6. In addition, the Committee may impose on any Award or the exercise
thereof, at the date of grant or thereafter (subject to Sections 11(e) and
11(k)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of employment or
service by the Participant and terms permitting a Participant to make elections
relating to his or her Award. The Committee shall retain full power
and discretion with respect to any term or condition of an Award that is not
mandatory under the Plan, subject to Section 11(k) and the terms of
the Award agreement. The Committee may require payment of
consideration for an Award except as limited by the Plan.
(b)
Options
. The
Committee is authorized to grant Options to Participants on the following terms
and conditions:
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(i)
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Exercise
Price. The exercise price per share of Stock purchasable under
an Option (including both ISOs and non-qualified Options) shall be
determined by the Committee, provided that such exercise price shall be
not less than the Fair Market Value of a share of Stock on the date of
grant of such Option, subject to Section 8(a). Notwithstanding
the foregoing, any substitute award granted in assumption of or in
substitution for an outstanding award granted by a company or business
acquired by the Company or a subsidiary or affiliate, or with which the
Company or a subsidiary or affiliate combines may be granted with an
exercise price per share of Stock other than as required
above. No adjustment will be made for a dividend or other right
for which the record date is prior to the date on which the stock is
issued, except as provided in Section 11(c) of the
Plan.
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(ii)
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Option
Term; Time and Method of Exercise. The Committee shall
determine the term of each Option, provided that in no event shall the
term of any Option exceed a period of ten years from the date of
grant. The Committee shall determine the time or times at which
or the circumstances under which an Option may be exercised in whole or in
part (including based on achievement of performance goals and/or future
service requirements), the methods by which such exercise price may be
paid or deemed to be paid and the form of such payment (subject to
Sections 11(k) and 11(l)), including, without limitation, cash, Stock
(including by withholding Stock deliverable upon exercise), other Awards
or awards granted under other plans of the Company or any subsidiary
or affiliate, or other property (including through broker-assisted
"cashless exercise" arrangements, to the extent permitted by applicable
law), and the methods by or forms in which Stock will be delivered or
deemed to be delivered in satisfaction of Options to Participants
(including, in the case of 409A Awards, deferred delivery of shares
subject to the Option, as mandated by the Committee, with such deferred
shares subject to any vesting, forfeiture or other terms as the Committee
may specify).
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(iii)
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ISOs. The
terms of any ISO granted under the Plan shall comply in all respects with
the provisions of Code Section 422.
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(c)
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Stock Appreciation
Rights
. The Committee is authorized to grant SARs
to Participants on the following terms and
conditions:
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(i)
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Right
to Payment. An SAR shall confer on the Participant to whom it
is granted a right to receive, upon exercise thereof, the excess of (A)
the Fair Market Value of one share of Stock on the date of exercise over
(B) the grant price of the SAR as determined by the
Committee.
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(ii)
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Other
Terms. The Committee shall determine the term of each SAR,
provided that in no event shall the term of an SAR exceed a period of ten
years from the date of grant. The Committee shall determine at
the date of grant or thereafter, the time or times at which and the
circumstances under which a SAR may be exercised in whole or in part
(including based on achievement of performance goals and/or future service
requirements), the method of exercise, method of settlement, form of
consideration payable in settlement, method by or forms in which Stock
will be delivered or deemed to be delivered to Participants, whether or
not a SAR shall be free-standing or in tandem or combination with any
other Award, and whether or not the SAR will be a 409A Award or Non-409A
Award. Limited SARs that may only be exercised in connection
with a Change in Control or termination of service following a Change in
Control as specified by the Committee may be granted on such terms, not
inconsistent with this Section 6(c), as the Committee may
determine. The Committee may require that an outstanding Option
be exchanged for an SAR exercisable for Stock having vesting, expiration,
and other terms substantially the same as the Option, so long as such
exchange will not result in additional accounting expense to the
Company.
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(d)
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Restricted
Stock
. The Committee is authorized to grant
Restricted Stock to Participants on the following terms and
conditions:
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(i)
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Grant
and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, which restrictions may
lapse separately or in combination at such times, under
such circumstances (including based on achievement of performance
goals and/or future service requirements), in such installments or
otherwise and under such other circumstances as the Committee may
determine at the date of grant or thereafter. Except to the
extent restricted under the terms of the Plan and any Award document
relating to the Restricted Stock, a Participant granted Restricted Stock
shall have all of the rights of a shareholder, including the right to vote
the Restricted Stock and the right to receive dividends thereon (subject
to any mandatory reinvestment or other requirement imposed by the
Committee).
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(ii)
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Forfeiture. Except
as otherwise determined by the Committee, upon termination of employment
or service during the applicable restriction period, Restricted Stock that
is at that time subject to restrictions shall be forfeited and reacquired
by the Company; provided that the Committee may provide, by rule or
regulation or in any Award document, or may determine in any individual
case, that restrictions or forfeiture conditions relating to
Restricted Stock will lapse in whole or in part, including in the event of
terminations resulting from specified
causes.
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(iii)
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Certificates
for Stock. Restricted Stock granted under the Plan may be
evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of
the Participant, the Committee may require that such certificates bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Stock, that the Company retain physical
possession of the certificates, and that the Participant deliver a stock
power to the Company, endorsed in blank, relating to the Restricted
Stock.
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(iv)
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Dividends
and Splits. As a condition to the grant of an Award of
Restricted Stock, the Committee may require that any dividends paid on a
share of Restricted Stock shall be either (A) paid with respect to such
Restricted Stock at the dividend payment date in cash, in kind, or in a
number of shares of unrestricted Stock having a Fair Market Value equal to
the amount of such dividends, or (B) automatically reinvested in
additional Restricted Stock or held in kind, which shall be subject to the
same terms as applied to the original Restricted Stock to which it
relates, or (C) deferred as to payment, either as a cash deferral or with
the amount or value thereof automatically deemed reinvested in shares of
Deferred Stock, other Awards or other investment vehicles, subject to such
terms as the Committee shall determine or permit a Participant to
elect. Unless otherwise determined by the Committee, Stock
distributed in connection with a Stock split or Stock dividend, and other
property distributed as a dividend, shall be subject to restrictions and a
risk of forfeiture to the same extent as the Restricted Stock with respect
to which such Stock or other property has been
distributed.
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(e)
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Deferred
Stock
. The Committee is authorized to grant
Deferred Stock to Participants, subject to the following terms and
conditions:
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(i)
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Award
and Restrictions. Issuance of Stock will occur upon expiration
of the deferral period specified for an Award of Deferred Stock by the
Committee (or, if permitted by the Committee, as elected by the
Participant). In addition, Deferred Stock shall be subject to
such restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, which restrictions may
lapse at the expiration of the deferral period or at earlier specified
times (including based on achievement of performance goals and/or future
service requirements), separately or in combination, in installments or
otherwise, and under such other circumstances as the Committee may
determine at the date of grant or thereafter. Deferred Stock
may be satisfied by delivery of Stock, other Awards, or a combination
thereof (subject to Section 11(l)), as determined by the Committee at the
date of grant or thereafter.
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(ii)
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Forfeiture. Except
as otherwise determined by the Committee, upon termination of employment
or service during the applicable deferral period or portion thereof to
which forfeiture conditions apply (as provided in the Award document
evidencing the Deferred Stock), all Deferred Stock that is at that time
subject to such forfeiture conditions shall be forfeited; provided that
the Committee may provide, by rule or regulation or in any Award document,
or may determine in any individual case, that restrictions or forfeiture
conditions relating to Deferred Stock will lapse in whole or in part,
including in the event of terminations resulting from specified
causes. Deferred Stock subject to a risk of forfeiture may be
called "restricted stock units" or otherwise designated by the
Committee.
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(iii)
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Dividend
Equivalents. Unless otherwise determined by the Committee,
Dividend Equivalents on the specified number of shares of Stock covered by
an Award of Deferred Stock shall be either (A) paid with respect to such
Deferred Stock at the dividend payment date in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount of such
dividends, or (B) deferred with respect to such Deferred Stock, either as
a cash deferral or with the amount or value thereof automatically deemed
reinvested in additional Deferred Stock, other Awards or other investment
vehicles having a Fair Market Value equal to the amount of such dividends,
as the Committee shall determine or permit a Participant to
elect.
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(f)
Bonus Stock and
Awards in Lieu of
Obligations
. The Committee is authorized to grant to
Participants Stock as a bonus, or to grant Stock or other Awards in lieu of
obligations of the Company or a subsidiary or affiliate to pay cash or deliver
other property under the Plan or under other plans or compensatory arrangements,
subject to such terms as shall be determined by the Committee.
(g)
Dividend
Equivalents
. The Committee is authorized to grant Dividend
Equivalents to a Participant, which may be awarded on a free-standing basis or
in connection with another Award. The Committee may provide that
Dividend Equivalents shall be paid or distributed when accrued or shall be
deemed to have been reinvested in additional Stock, Awards, or other investment
vehicles, and subject to restrictions on transferability, risks of forfeiture
and such other terms as the Committee may specify.
(h)
Other Stock-Based
Awards
. The Committee is authorized, subject to limitations
under applicable law, to grant to Participants such other Awards that may be
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on, or related to, Stock or factors that may influence the value
of Stock, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
for Stock, Awards with value and payment contingent upon performance of the
Company or business units thereof or any other factors designated by the
Committee, and Awards valued by reference to the book value of Stock or the
value of securities of or the performance of specified subsidiaries or
affiliates or other business units. The Committee shall determine the
terms and conditions of such Awards. Stock delivered pursuant to an
Award in the nature of a purchase right granted under this Section 6(h) shall be
purchased for such consideration, paid for at such times, by such methods, and
in such forms, including, without limitation, cash, Stock, other Awards, notes,
or other property, as the Committee shall determine. Cash awards, as
an element of or supplement to any other Award under the Plan, may also be
granted pursuant to this Section 6(h).
(i)
Performance
Awards
. Performance Awards, denominated in cash or in Stock or
other Awards, may be granted by the Committee in accordance with Section
7.
7.
Performance
Awards
.
(a)
Performance
Awards Generally
. Performance Awards may be denominated as a
cash amount, number of shares of Stock, or specified number of other Awards (or
a combination) which may be earned upon achievement or satisfaction of
performance conditions specified by the Committee. In addition, the
Committee may specify that any other Award shall constitute a Performance Award
by conditioning the right of a Participant to exercise the Award or have it
settled, and the timing thereof, upon achievement or satisfaction of such
performance conditions as may be specified by the Committee. The
Committee may use such business criteria and other measures of performance as it
may deem appropriate in establishing any performance conditions, and may
exercise its discretion to reduce or increase the amounts payable under any
Award subject to performance conditions, except as limited under Sections 7(b)
in the case of a Performance Award intended to qualify as "performance-based
compensation" under Code Section 162(m).
(b)
Performance
Awards Granted to Covered Employees
. If the Committee
determines that a Performance Award to be granted to an Eligible Person who is
designated by the Committee as likely to be a Covered Employee should qualify as
"performance-based compensation" for purposes of Code Section 162(m), the grant,
exercise and/or settlement of such Performance Award shall be contingent upon
achievement of a preestablished performance goal and other terms set forth in
this Section 7(b).
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(i)
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Performance
Goal Generally. The performance goal for such Performance
Awards shall consist of one or more business criteria and a targeted level
or levels of performance with respect to each of such criteria, as
specified by the Committee consistent with this Section
7(b). The performance goal shall be objective and shall
otherwise meet the requirements of Code Section 162(m) and regulations
thereunder, including the requirement that the level or levels of
performance targeted by the Committee result in the achievement of
performance goals being "substantially uncertain." The Committee may
determine that such Performance Awards shall be granted, exercised and/or
settled upon achievement of any one performance goal or that two or more
of the performance goals must be achieved as a condition to grant,
exercise and/or settlement of such Performance
Awards. Performance goals may differ for Performance Awards
granted to any one Participant or to different
Participants.
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(ii)
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Business
Criteria. One or more of the following business criteria for
the Company, on a consolidated basis, and/or for specified subsidiaries or
affiliates or other business units of the Company shall be used by the
Committee in establishing performance goals for such Performance
Awards:
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(1)
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Revenues;
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(2)
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Expenses;
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(3)
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Gross
margin or gross profit;
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(4)
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Any
earnings or net income measure, including earnings from operations,
earnings before taxes, earnings before interest and/or taxes and/or
depreciation, statutory earnings before realized gains (losses), or net
income available to common shareholders;
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(5)
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Operating
margin or operating profit;
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(6)
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Earnings
or earnings per share (EPS), including or excluding extraordinary
items;
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(7)
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Operating
cash flow, free cash flow, cash flow return on investment, or net cash
provided by operations;
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(8)
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Return
on equity, assets, capital employed or investment;
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(9)
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Economic
profit or value created;
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(10)
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Stock
price or total shareholder return; and
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(11)
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Strategic
business criteria, consisting of one or more objectives based on meeting
specified market penetration, total market capitalization, business
retention, new product generation, rate increase actions, geographic
business expansion goals, cost targets (including cost of capital),
investment portfolio yield, customer satisfaction, employee satisfaction,
agency ratings, management of employment practices and employee benefits,
supervision of litigation and information technology, and goals relating
to acquisitions or divestitures of subsidiaries, affiliates, joint
ventures or lines of business.
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The
targeted level or levels of performance with respect to such business
criteria may be established at such levels and in such terms as the
Committee may determine, in its discretion, including in absolute terms,
as a goal relative to performance in prior periods, or as a goal compared
to the performance of one or more comparable companies or an index
covering multiple companies. Performance Goals may be
particular to a Participant, the Company or a division, subsidiary or
other business segment of the Company, or may be based on the performance
of the Company as a whole.
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(iii)
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Performance
Period; Timing for Establishing Performance Goals. Achievement
of performance goals in respect of such Performance Awards shall be
measured over a performance period of up to one year or more than one
year, as specified by the Committee. A performance goal shall
be established not later than the earlier of (A) 90 days after the
beginning of any performance period applicable to such Performance Award
or (B) the time 25% of such performance period has
elapsed.
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(iv)
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Performance
Award Pool. The Committee may establish a Performance Award
pool, which shall be an unfunded pool, for purposes of measuring
performance of the Company in connection with Performance
Awards. The amount of such Performance Award pool shall be
based upon the achievement of a performance goal or goals based on one or
more of the business criteria set forth in Section 7(b)(ii) during
the given performance period, as specified by the Committee in accordance
with Section 7(b)(iv). The Committee may specify the amount of
the Performance Award pool as a percentage of any of such business
criteria, a percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical relationship to
such business criteria.
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(v)
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Settlement
of Performance Awards; Other Terms. Settlement of Performance
Awards shall be in cash, Stock, other Awards or other property, in the
discretion of the Committee. The Committee may, in its
discretion, increase or reduce the amount of a settlement otherwise to be
made in connection with such Performance Awards, but may not exercise
discretion to increase any such amount payable to a Covered Employee in
respect of a Performance Award subject to this Section 7(b) beyond
the level of payment authorized for achievement of the performance goal
specified under this Section 7(b) based on the actual level of achievement
of such goal. Any settlement which changes the form of payment
from that originally specified shall be implemented in a manner such that
the Performance Award and other related Awards do not, solely for that
reason, fail to qualify as "performance-based compensation" for purposes
of Code Section 162(m). The Committee shall specify the
circumstances in which such Performance Awards shall be paid or forfeited
in the event of termination of employment by the Participant or other
event (including a Change in Control) prior to the end of a performance
period or settlement of such Performance
Awards.
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(c)
Written
Determinations
. Determinations by the Committee as to the
establishment of performance goals, the amount potentially payable in respect of
Performance Awards, the level of actual achievement of the specified performance
goals relating to Performance Awards, and the amount of any final Performance
Award shall be recorded in writing in the case of Performance Awards
intended to qualify under Section 162(m). Specifically, the Committee
shall certify in writing, in a manner conforming to applicable regulations under
Section 162(m), prior to settlement of each such Award granted to a Covered
Employee, that the performance objective relating to the Performance Award and
other material terms of the Award upon which settlement of the Award was
conditioned have been satisfied.
8.
Certain Provisions Applicable To
Awards
.
(a)
Stand-Alone,
Additional, Tandem, and S
ubstitute
Awards
. Awards granted under the Plan may, in the discretion
of the Committee, be granted either alone or in addition to, in tandem with, or
in substitution or exchange for, any other Award or any award granted under
another plan of the Company, any subsidiary or affiliate, or any business entity
to be acquired by the Company or a subsidiary or affiliate, or any other right
of a Participant to receive payment from the Company or any subsidiary or
affiliate; provided, however, that a 409A Award may not be granted in tandem
with a Non-409A Award. Awards granted in addition to or in tandem
with other Awards or awards may be granted either as of the same time as or a
different time from the grant of such other Awards or awards. Subject
to Sections 11(k) and (l) and subject to the restriction on repricing under
Section 11(e), the Committee may determine that, in granting a new Award, the
in-the-money value or fair value of any surrendered Award or award or the value
of any other right to payment surrendered by the Participant may be applied to
the purchase of any other Award.
(b)
Term of
Awards
. The term of each Award shall be for such period as may
be determined by the Committee, subject to the express limitations set forth in
Sections 6(b)(ii), 6(c)(ii) and 8 or elsewhere in the Plan.
(c)
Form and Timing
of Payment under Awards; Deferrals
. Subject to the terms of
the Plan (including Sections 11(k) and (l)) and any applicable Award document,
payments to be made by the Company or a subsidiary or affiliate upon the
exercise of an Option or other Award or settlement of an Award may be made in
such forms as the Committee shall determine, including, without limitation,
cash, Stock, other Awards or other property, and may be made in a single payment
or transfer, in installments, or on a deferred basis. The settlement
of any Award may be accelerated, and cash paid in lieu of Stock in connection
with such settlement, in the discretion of the Committee or upon occurrence of
one or more specified events, subject to Sections 11(k) and
(l). Subject to Section 11(k), installment or deferred payments may
be required by the Committee (subject to Section 11(e)) or permitted at the
election of the Participant on terms and conditions established by the
Committee. Payments may include, without limitation, provisions for
the payment or crediting of reasonable interest on installment or deferred
payments or the grant or crediting of Dividend Equivalents or other amounts in
respect of installment or deferred payments denominated in Stock. In
the case of any 409A Award that is vested and no longer subject to a risk of
forfeiture (within the meaning of Code Section 83), such Award will be
distributed to the Participant, upon application of the Participant, if the
Participant has had an unforeseeable emergency within the meaning of Code
Sections 409A.
9.
Change in
Control.
(a)
Effect of "Change
in Control.
"
In the event of a "Change in Control," the Committee may
provide that any of the following provisions shall apply in the Award document
or otherwise:
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(i)
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The
lapse of forfeiture conditions and other restrictions applicable to Awards
granted under the Plan, and/or the payment of such Awards as of the time
of the Change in Control or other specified time without regard to vesting
or other conditions, except to the extent of any waiver by the Participant
and subject to applicable restrictions set forth in Section 11(a);
and
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(ii)
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The
vesting and exercisability of any Award carrying a right to exercise that
was not previously exercisable and vested as of the time of the Change in
Control and, upon any termination of employment or service by the
Participant other than a termination for cause within two years after the
Change in Control, provision for such Awards to remain
outstanding and exercisable until the earlier of three years after such
termination or the stated expiration date of such Award, subject only to
applicable restrictions set forth in Section 11(a);
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(iii)
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The
lapse of any deferral of settlement terms, forfeiture conditions and other
restrictions applicable to an unvested Award granted under the Plan and
provision for such Awards to be fully payable as of the time of the Change
in Control or other specified time without regard to deferral and vesting
conditions, except to the extent of any waiver by the Participant (if
permitted under Section 409A) and subject to applicable restrictions set
forth in Section 11(a); and
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(iv)
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With
respect to an outstanding Award subject to achievement of performance
goals and conditions, such performance goals and conditions may be deemed
to be met or exceeded.
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provided,
however, that no distribution shall occur with respect to a 409A Award unless
the Change in Control also constitutes a 409A Ownership/Control
Change.
(b)
Definition of
"Change in Control
." “Change in Control" means the occurrence
of any one of the following events after the date of grant of any affected
Award:
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(i)
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Any
Person (as defined below) acquires (or has acquired during the 12-month
period ending on the date of the most recent acquisition by such Person)
Voting Securities (as defined below) of the Company and, immediately
thereafter, is the "beneficial owner" (within the meaning of Rule 13d-3,
as promulgated under Section 13(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) of Voting Securities of the Company
representing fifty percent (50%) or more of the combined Voting Power (as
defined below) of the Company's
securities;
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(ii)
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Within
any 12-month period, the persons who were directors of the Company
immediately before the beginning of such period (the "Incumbent
Directors") shall cease (for any reason other than death) to constitute at
least a majority of the Board or the board of directors of any successor
to the Company,
provided that
any director who was not a director at the beginning of such period shall
be deemed to be an Incumbent Director if such director was elected to the
Board by, or on the recommendation of or with the approval of, at least a
majority of the directors who then qualified as Incumbent Directors either
actually or by prior operation of this Section 9(b)(ii);
or
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(iii)
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The
stockholders of the Company have approved a merger, consolidation, share
exchange, division, sale or other disposition of all or substantially all
of the assets of the Company, or a complete liquidation of the Company (a
"Corporate Event"), and such Corporate Event has been
consummated, except that a Corporate Event shall not trigger a Change in
Control under this clause (iii) if the shareholders of the Company
immediately prior to such Corporate Event shall hold, directly or
indirectly immediately following such Corporate Event a majority of the
Voting Power of (
x
) in the case
of a merger or consolidation, the surviving or resulting corporation,
(
y
) in
the case of a share exchange, the acquiring corporation or (
z
) in the case
of a division or a sale or other disposition of assets, each surviving,
resulting or acquiring
corporation.
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For
purposes of this Section 9(b), "Person" shall have the meaning ascribed to such
term in Section 3(a)(9) of the Exchange Act, as supplemented by Section 13(d)(3)
of the Exchange Act; provided, however, that Person shall not include (
i
) the Company or any
subsidiary of the Company or (
ii
) any employee
benefit plan sponsored by the Company or any subsidiary of the
Company. For purposes of this Section 9(b), a specified percentage of
"Voting Power" of a company shall mean such number of the Voting Securities as
shall enable the holders thereof to cast such percentage of all the votes which
could be cast in an annual election of directors (without consideration of the
rights of any class of stock other than the common stock of the company to elect
directors by a separate class vote); and "Voting Securities" shall mean all
securities of a company entitling the holders thereof to vote in an annual
election of directors (without consideration of the rights of any class of stock
other than the common stock of the company to elect directors by a separate
class vote).
(c)
Definition of
"409A Ownership/Control Change
." A "409A Ownership/Control Change" shall
be deemed to have occurred with respect to a Participant if a Change in Control
occurs which involves transactions which constitute a change in the ownership or
effective control of the Company, or in the ownership of a substantial portion
of the assets of the Company, within the meaning of Code Section 409A with
respect to such Participant.
10.
Additional Award Forfeiture
Provisions
.
The
Committee may condition a Participant’s right to receive a grant of an Award, to
exercise the Award, to retain cash, Stock, other Awards, or other property
acquired in connection with an Award, or to retain the profit or gain realized
by a Participant in connection with an Award, including cash or other proceeds
received upon sale of Stock acquired in connection with an Award, upon
compliance by the Participant with specified conditions relating to
non-competition, confidentiality of information relating to or possessed by
the Company, non-solicitation of customers, suppliers, and employees of the
Company, cooperation in litigation, non-disparagement of the Company and its
subsidiaries and affiliates and the officers, directors and affiliates of the
Company and its subsidiaries and affiliates, and other restrictions upon or
covenants of the Participant, including during specified periods following
termination of employment or service to the Company.
11.
General
Provisions
.
(a)
Compliance with
Legal
and Other
Requirements
. The Company may, to the extent deemed necessary
or advisable by the Committee and subject to Section 11(k), postpone the
issuance or delivery of Stock or payment of other benefits under any Award until
completion of such registration or qualification of such Stock or other required
action under any federal or state law, rule or regulation, listing or other
required action with respect to any stock exchange or automated quotation system
upon which the Stock or other securities of the Company are listed or quoted, or
compliance with any other obligation of the Company, as the Committee may
consider appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be subject to such
other conditions as it may consider appropriate in connection with the issuance
or delivery of Stock or payment of other benefits in compliance with applicable
laws, rules, and regulations, listing requirements, or other
obligations. The foregoing notwithstanding, in connection with a
Change in Control, the Company shall take or cause to be taken no action, and
shall undertake or permit to arise no legal or contractual obligation, that
results or would result in any postponement of the issuance or delivery of
Stock or payment of benefits under any Award or the imposition of any other
conditions on such issuance, delivery or payment, to the extent that such
postponement or other condition would represent a greater burden on a
Participant than existed on the 90th day preceding the Change in
Control.
(b)
Limits on
Transferability; Beneficiaries
. No Award or other right or
interest of a Participant under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of such
Participant to any party (other than the Company or a subsidiary or affiliate
thereof), or assigned or transferred by such Participant otherwise than by will
or the laws of descent and distribution or to a Beneficiary upon the death of a
Participant, and such Awards or rights that may be exercisable shall be
exercised during the lifetime of the Participant only by the Participant or his
or her guardian or legal representative, except that Awards and other rights
(other than ISOs and SARs in tandem therewith) may be transferred to one or more
transferees during the lifetime of the Participant for purposes of
estate-planning, and may be exercised by such transferees in accordance with the
terms of such Award, but only if and to the extent such transfers are permitted
by the Committee and the Committee has determined that there will be no transfer
of the Award to a third party for value, and subject to any terms and conditions
which the Committee may impose thereon (which may include limitations the
Committee may deem appropriate in order that offers and sales under the Plan
will meet applicable requirements of registration forms under the Securities Act
of 1933 specified by the Securities and Exchange Commission). A
Beneficiary, transferee, or other person claiming any rights under the Plan from
or through any Participant shall be subject to all terms and conditions of the
Plan and any Award document applicable to such Participant, except as otherwise
determined by the Committee, and to any additional terms and conditions deemed
necessary or appropriate by the Committee.
(c)
Adjustments
. In
the event that any large, non-recurring dividend or other distribution (whether
in the form of cash or property other than Stock), recapitalization, forward or
reverse split, Stock dividend, reorganization, merger, consolidation, spinoff,
combination, repurchase, share exchange, liquidation, dissolution, equity
restructuring as defined under FAS 123R, or other similar corporate transaction
or event affects the Stock such that an adjustment is determined by the
Committee to be appropriate or, in the case of any outstanding Award, which is
necessary in order to prevent dilution or enlargement of the rights of the
Participant, then the Committee shall, in an equitable manner as determined by
the Committee, adjust any or all of (i) the number and kind of shares of Stock
which may be delivered in connection with Awards granted thereafter, including
the number of shares available under Section 4, (ii) the number and kind of
shares of Stock by which annual per-person Award limitations are measured under
Section 5, (iii) the number and kind of shares of Stock subject to or
deliverable in respect of outstanding Awards, (iv) the exercise price, grant
price or purchase price relating to any Award or, if deemed appropriate, the
Committee may make provision for a payment of cash or property to the holder of
an outstanding Option (subject to Section 11(l)), and (v) the performance goals
or conditions of outstanding Awards that are based on share
prices. In addition, the Committee is authorized to make adjustments
in the terms and conditions of, and the criteria included in, Awards (including
Performance Awards and performance goals and any hypothetical funding pool
relating thereto) in recognition of unusual or nonrecurring events (including,
without limitation, events described in the preceding sentence, as well as
acquisitions and dispositions of businesses and assets) affecting the Company,
any subsidiary or affiliate or other business unit, or the financial
statements of the Company or any subsidiary or affiliate, or in response to
changes in applicable laws, regulations, accounting principles, tax rates and
regulations or business conditions or in view of the Committee's assessment of
the business strategy of the Company, any subsidiary or affiliate or business
unit thereof, performance of comparable organizations, economic and business
conditions, personal performance of a Participant, and any other circumstances
deemed relevant; provided that no adjustment under this Section 11(c) shall
be authorized or made if and to the extent that the existence of such authority
(i) would cause Options, SARs, or Performance Awards granted under the Plan to
Participants designated by the Committee as Covered Employees and intended to
qualify as "performance-based compensation" under Code Section 162(m) and
regulations thereunder to otherwise fail to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder, (ii) would
cause the Committee to be deemed to have authority to change the targets, within
the meaning of Treasury Regulation 1.162-27(e)(4)(vi), under the performance
goals relating to Options or SARs granted to Covered Employees and intended to
qualify as "performance-based compensation" under Code Section 162(m) and
regulations thereunder, (iii) would cause a Non-409A Award to be subject to Code
Section 409A, or (iv) would violate Code Section 409A for a 409A
Award.
(d)
Tax
Provisions
.
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(i)
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Withholding. The
Company and any subsidiary or affiliate is authorized to withhold from any
Award granted, any payment relating to an Award under the Plan, including
from a distribution of Stock, or any payroll or other payment to a
Participant, amounts of withholding and other taxes due or potentially
payable in connection with any transaction involving an Award, and to take
such other action as the Committee may deem advisable to enable the
Company and Participants to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any
Award. This authority shall include authority to withhold or
receive Stock or other property and to make cash payments in respect
thereof in satisfaction of a Participant's withholding obligations, either
on a mandatory or elective basis in the discretion of the Committee, or in
satisfaction of other tax obligations. Other provisions of the
Plan notwithstanding, only the minimum amount of Stock deliverable in
connection with an Award necessary to satisfy statutory withholding
requirements will be withheld, unless withholding of any additional amount
of Stock will not result in additional accounting expense to the
Company.
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(ii)
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Required
Consent to and Notification of Code Section 83(b) Election. No
election under Section 83(b) of the Code (to include in gross income in
the year of transfer the amounts specified in Code Section 83(b)) or under
a similar provision of the laws of a jurisdiction outside the United
States may be made unless expressly permitted by the terms of the Award
document or by action of the Committee in writing prior to the making of
such election. In any case in which a Participant is permitted
to make such an election in connection with an Award, the Participant
shall notify the Company of such election within ten days of filing notice
of the election with the Internal Revenue Service or other governmental
authority, in addition to any filing and notification required pursuant to
regulations issued under Code Section 83(b) or other applicable
provision.
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(iii)
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Requirement
of Notification Upon Disqualifying Disposition Under Code Section
421(b). If any Participant shall make any disposition of shares
of Stock delivered pursuant to the exercise of an ISO under the
circumstances described in Code Section 421(b) (i.e., a disqualifying
disposition), such Participant shall notify the Company of such
disposition within ten days
thereof.
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(e)
Changes to the
Plan
. The Board may amend, suspend or terminate the Plan or
the Committee's authority to grant Awards under the Plan without the consent of
shareholders or Participants; provided, however, that any amendment to the Plan
shall be submitted to the Company's shareholders for approval not later than the
earliest annual meeting for which the record date is at or after the date of
such Board action if such shareholder approval is required by any federal or
state law or regulation or the rules of the New York Stock Exchange , or if such
amendment would materially increase the number of shares reserved for issuance
and delivery under the Plan, and the Board may otherwise, in its discretion,
determine to submit other amendments to the Plan to shareholders for
approval. The Committee is authorized to amend outstanding awards,
except as limited by the Plan. The Board and Committee may not amend
outstanding Awards (including by means of an amendment to the Plan) without the
consent of an affected Participant if such an amendment would materially and
adversely affect the rights of such Participant with respect to the outstanding
Award (for this purpose, actions that alter the timing of federal income
taxation of a Participant will not be deemed material unless such action results
in an income tax penalty on the Participant, and any discretion that is reserved
by the Board or Committee with respect to an Award is unaffected by this
provision). Without the approval of shareholders, the Committee will
not amend or
replace
previously granted Options or SARs in a transaction that constitutes a
"repricing," which for this purpose means any of the following or any other
action that has the same effect:
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Lowering
the exercise price of an option or SAR after it is
granted;
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Any
other action that is treated as a repricing under generally accepted
accounting principles;
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Canceling
an option or SAR at a time when its exercise price exceeds the fair market
value of the underlying Stock, in exchange for another option or SAR,
restricted stock, other equity, cash or other property; this
shareholder approval requirement will apply to any repurchase or buyout of
such an option or SAR authorized under any other provision of the
Plan;
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provided,
however, that the foregoing transactions shall not be deemed a repricing if
pursuant to an adjustment authorized under Section 11(c). With regard
to other terms of Awards, the Committee shall have no authority to waive or
modify any such Award term after the Award has been granted to the extent the
waived or modified term would be mandatory under the Plan for any Award newly
granted at the date of the waiver or modification. A cancellation and
exchange described in clause (iii) of the preceding sentence will be
considered a repricing regardless of whether the Option, Restricted Stock or
other equity is delivered simultaneously with the cancellation, regardless of
whether it is treated as a repricing under generally accepted accounting
principles, and regardless of whether it is voluntary on the part of the
Participant. Notwithstanding the above, the Board and Committee shall
have no authority to amend or modify 409A Awards in any manner that would
violate Code Section 409A.
(f)
Right of
Setoff
. The Company or any subsidiary or affiliate may, to the
extent permitted by applicable law, deduct from and set off against any amounts
the Company or a subsidiary or affiliate may owe to the Participant from time to
time, including amounts payable in connection with any Award, owed as wages,
fringe benefits, or other compensation owed to the Participant, such amounts as
may be owed by the Participant to the Company, including but not limited to
amounts owed under Section 10(a), although the Participant shall remain liable
for any part of the Participant's payment obligation not satisfied through such
deduction and setoff. By accepting any Award granted hereunder, the
Participant agrees to any deduction or setoff under this Section
11(f).
(g)
Unfunded Status
of Awards; Creation of Trusts
. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a
Participant or obligation to deliver Stock pursuant to an Award, nothing
contained in the Plan or any Award shall give any such Participant any rights
that are greater than those of a general creditor of the Company; provided
that the Committee may authorize the creation of trusts and deposit therein
cash, Stock, other Awards or other property, or make other arrangements to meet
the Company's obligations under the Plan. Such trusts or other
arrangements shall be consistent with the "unfunded" status of the Plan unless
the Committee otherwise determines with the consent of each affected
Participant.
(h)
Nonexclusivity of
the Plan
. Neither the adoption of the Plan by the Board nor
its submission to the shareholders of the Company for approval shall be
construed as creating any limitations on the power of the Board or a committee
thereof to adopt such other incentive arrangements, apart from the Plan, as it
may deem desirable, including incentive arrangements and awards which do not
qualify under Code Section 162(m), and such other arrangements may be either
applicable generally or only in specific cases.
(i)
Payments in the
Event of Forfeitures; Fractional Shares
. Unless otherwise
determined by the Committee, in the event of a forfeiture of an Award with
respect to which a Participant paid cash consideration, the Participant shall be
repaid the amount of such cash consideration. No fractional shares of
Stock shall be issued or delivered pursuant to the Plan or any
Award. The Committee shall determine whether cash, other Awards or
other property shall be issued or paid in lieu of such fractional shares or
whether such fractional shares or any rights thereto shall be forfeited or
otherwise eliminated.
(j)
Compliance with
Code Section 162(m).
It is the intent of the Company that
Options and SARs granted to Covered Employees and other Awards designated as
Awards to Covered Employees subject to Section 7 shall constitute qualified
"performance-based compensation" within the meaning of Code Section 162(m) and
regulations thereunder, unless otherwise determined by the Committee at the time
of allocation of an Award. Accordingly, the terms of Sections 7(b)
and (c), including the definitions of Covered Employee and other terms used
therein, shall be interpreted in a manner consistent with Code Section 162(m)
and regulations thereunder. The foregoing notwithstanding, because
the Committee cannot determine with certainty whether a given Participant
will be a Covered Employee with respect to a fiscal year that has not yet
been completed, the term Covered Employee as used herein shall mean only a
person designated by the Committee as likely to be a Covered Employee with
respect to a specified fiscal year. If any provision of the Plan or any
Award document relating to a Performance Award that is designated as intended to
comply with Code Section 162(m) does not comply or is inconsistent with the
requirements of Code Section 162(m) or regulations thereunder, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements, and no provision shall be deemed to confer upon
the Committee or any other person discretion to increase the amount of
compensation otherwise payable in connection with any such Award upon attainment
of the applicable performance objectives.
(k)
Certain
Limitations on Awards to Ensure Compliance with Section 409A
.
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(i)
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409A Awards and
Deferrals.
Other provisions of the Plan
notwithstanding, the terms of any 409A Award (which for this purpose means
only such an Award held by an employee subject to United States federal
income tax), including any authority of the Company and rights of the
Participant with respect to the 409A Award, shall be subject to the
following rules and limitations and shall be interpreted in a manner as to
comply with Code Section 409A:
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(A)
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If
a Participant is permitted to elect to defer an Award or any payment under
an Award, such election shall be made in accordance with the requirements
of Code Section 409A. Each initial deferral election (an
“Initial Deferral Election”) must be received by the Committee prior to
the following dates or will have no effect
whatsoever:
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(i)
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Except
as otherwise provided below, the December 31 immediately preceding the
year in which the compensation is
earned;
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(ii)
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With
respect to any annual or long-term incentive pay which qualifies as
“performance-based compensation” within the meaning of Code Section 409A,
by the earlier of (A) the December 31 immediately preceding the end of the
performance measurement period applicable to such incentive pay or (B) the
date six months prior to the end of the performance measurement period
applicable to such incentive pay provided such additional requirements set
forth in Code Section 409A are met;
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(iii)
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With
respect to “fiscal year compensation” as defined under Code Section 409A,
by the last day of the Company’s fiscal year preceding the year in which
the fiscal year compensation is earned;
or
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(iv)
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With
respect to Awards of restricted stock units or other legally binding
rights to a payment of compensation in a subsequent year that is subject
to a forfeiture condition requiring the Participant’s continued services
for a period of at least 12 months, on or before the 30
th
day following the grant of such Award, provided that the election is made
at least 12 months in advance of the earliest date at which the forfeiture
condition could lapse.
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(B)
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The
Committee may, in its sole discretion, permit Participants to submit
additional deferral elections with respect to amounts previously subject
to an Initial Deferral Election in order to delay, but not to accelerate,
a payment, or to change the form of payment of an amount of deferred
compensation (a “Subsequent Deferral Election”), but if, and only if, the
following conditions are satisfied: (i) the Subsequent Deferral Election
must not take effect until 12 months after the date on which it is made,
(ii) in the case of a payment other than a payment attributable to the
Participant’s death, the Subsequent Deferral Election further defers the
payment for a period of not less than 5 years from the date such payment
would otherwise have been made, or in the case of installment payments, 5
years from the date the first installment was scheduled to be paid, and
(iii) the Subsequent Deferral Election is received by the Committee at
least 12 months prior to the date the payment would otherwise have been
made, or in the case of installment payments, 12 months prior to the date
the first installment was scheduled to be paid. In addition,
Participants may be further permitted to revise the form of payment they
have elected, or the number of installments elected, provided that such
revisions comply with the requirements of clauses (i), (ii), and (iii)
above.
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(C)
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The
time and form of payment of a 409A Award shall be set forth in an
Applicable Award agreement. If such time and form of payment is
not set forth in the Award Agreement, the 409A Award shall be paid in a
lump sum within 75 days of a Participant’s Separation from Service (as
defined below). For purposes of 409A, the entitlement to a
series of installment payments will be treated as the entitlement to a
single payment.
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(D)
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The
Company shall have no authority to accelerate or delay or change the form
of any distributions relating to 409A Awards except as allowed under Code
Section 409A.
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(E)
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Any
distribution of a 409A Award triggered by a Participant’s termination of
employment shall be made only at the time that the Participant has had a
Separation from Service within the meaning of Code Section
409A.
A Separation from Service
shall occur where it is reasonably anticipated that no further services
will be performed after that date or that the level of bona fide services
the Participant will perform after that date (whether as an employee or
independent contractor of the Company or an Affiliate) will permanently
decrease to less than 50% of the average level of bona fide services
performed over the immediately preceding thirty-six (36) month
period.
A Participant shall be considered to continue
employment and to not have a Separation from Service while on a leave of
absence if the leave does not exceed 6 consecutive months (29 months for a
disability leave of absence) or, if longer, so long as the Participant
retains a right to reemployment with the Company or Affiliate under an
applicable statute or by contract. For this purpose, a
“disability leave of absence” is an absence due to any medically
determinable physical or mental impairment that can be expected to result
in death or can be expected to last for a continuous period of not less
than 6 months, where such impairment causes the Participant to be unable
to perform the duties of his job or a substantially similar
job. Continued services solely as a director of the Company or
an Affiliate shall not prevent a Separation from Service from
occurring;
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(F)
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Notwithstanding
the provisions of Section 11(k)(i)(C) above, any distribution of a 409A
Award that would be made within six months following a Separation from
Service of a “Specified Employee” as defined under Code Section 409A and
as determined under procedures adopted by the Board of Directors of the
Company or its delegate shall instead occur on the first day of the
seventh month following the Separation from Service (or upon the
Participant’s death, if earlier). In the case of installments,
this delay shall not affect the timing of any installment otherwise
payable after the six-month delay
period.
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(G)
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Any
payment otherwise due under the terms of the 409A Award which would (i)
not be deductible in whole or in part under Code Section 162(m) , or (ii)
violate Federal securities laws or other applicable law may not be made
until the earliest date on which such payment no longer is nondeductible
or violates such laws. Payment may be delayed for a reasonable
period in accordance with the provisions of Code Section 409A (including
in the event the payment is not administratively practical due to events
beyond the recipient’s control such as where the recipient is not
competent to receive the benefit payment, there is a dispute as to amount
due or the proper recipient of such benefit payment, or additional time is
needed to calculate the amount payable). No interest shall be
accrued or be paid because of any delay of
payment.
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(H)
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If
any portion of an Award that is scheduled to vest at a single specified
date (a vesting “tranche”) is partly deemed a 409A Award and partly deemed
exempt from Code Section 409A (as a short-term deferral or otherwise), the
time of settlement of only the portion of the Award subject to Code
Section 409A shall be subject to the provisions of this Section
11(k).
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(I)
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The
rules applicable to 409A Awards under this Section 11(k)(i) constitute
further restrictions on terms of Awards set forth elsewhere in this
Plan. Thus, for example, a 409A Option/SAR shall be subject to
restrictions, including restrictions on rights otherwise specified in
Section 6(b) or 6(c), in order that such Award shall not result in
constructive receipt of income before exercise or tax penalties under
Section 409A.
|
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(ii)
|
Rules Applicable to Non-409A
Options/SARs.
With respect to Non-409A Options/ SARs, in
applying Code Sections 1563(a)(1), (2) and (3) for purposes of determining
a controlled group of corporations under Code Section 414(b), the language
“at least 20 percent” shall be used instead of “at least 80 percent” at
each place it appears in Sections 1563(a)(1), (2) and (3), and in applying
Treasury Regulation § 1.414(c)-2 (or any successor provision) for purposes
of determining trades or businesses (whether or not incorporated) that are
under common control for purposes of Section 414(c), the language “at
least 20 percent” shall be used instead of “at least 80 percent” at each
place it appears in Treasury Regulation
§1.414(c)-2.
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(iii)
|
Distributions Upon
Vesting.
In the case of any Award providing for a
distribution upon the lapse of a risk of forfeiture, if the timing of such
distribution is not otherwise specified in the Plan or an Award agreement
or other governing document, the distribution shall be made not later than
March 15 of the calendar year following the calendar year in which the
risk of forfeiture lapsed.
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(iv)
|
Scope and Application of this
Provision.
For purposes of this Section 11(k),
references to a term or event (including any authority or right of the
Company or a Participant) being “permitted” under Code Section 409A mean
that the term or event will not cause the Participant to be deemed to be
in constructive receipt of compensation relating to the 409A Award prior
to the distribution of cash, shares or other property or to be liable for
payment of interest or a tax penalty under Code Section
409A.
|
(l)
Governing
Law
. The validity, construction, and effect of the Plan, any
rules and regulations relating to the Plan and any Award document shall be
determined in accordance with the laws of the State of New Jersey, without
giving effect to principles of conflicts of laws, and applicable provisions of
federal law.
(m)
Awards to
Participants Outside the United States
. The Committee may
modify the terms of any Award under the Plan made to or held by a Participant
who is then resident or primarily employed outside of the United States, or
establish one or more sub-plans for such participants, in any manner deemed by
the Committee to be necessary or appropriate in order that such Award shall
conform to laws, regulations, and customs of the country in which the
Participant is then resident or primarily employed, or so that the value and
other benefits of the Award to the Participant, as affected by foreign tax laws
and other restrictions applicable as a result of the Participant's residence or
employment abroad shall be comparable to the value of such an Award to a
Participant who is resident or primarily employed in the United
States. An Award may be modified under this Section 11(m) in a manner
that is inconsistent with the express terms of the Plan, so long as such
modifications will not contravene any applicable law or regulation or result in
actual liability under Section 16(b) for the Participant whose Award is
modified.
(n)
Limitation on
Rights Conferred under Plan
. Neither the Plan nor any action
taken hereunder shall be construed as (i) giving any Eligible Person or
Participant the right to continue as an Eligible Person or Participant or in the
employ or service of the Company or a subsidiary or affiliate, (ii) interfering
in any way with the right of the Company or a subsidiary or affiliate to
terminate any Eligible Person's or Participant's employment or service at any
time (subject to the terms and provisions of any separate written agreements),
(iii) giving an Eligible Person or Participant any claim to be granted any Award
under the Plan or to be treated uniformly with other Participants and
employees, or (iv) conferring on a Participant any of the rights of a
shareholder of the Company unless and until the Participant is duly issued or
transferred shares of Stock in accordance with the terms of an Award or an
Option is duly exercised. Except as expressly provided in the Plan
and an Award document, neither the Plan nor any Award document shall confer on
any person other than the Company and the Participant any rights or remedies
thereunder. Any Award shall not be deemed compensation for purposes
of computing benefits under any retirement plan of the Company or any subsidiary
or affiliate and shall not affect any benefits under any other benefit plan at
any time in effect und which the availability or amount of benefits is related
to the level of compensation (unless required by any such other plan or
arrangement with specific reference to Awards under this Plan).
(o)
Severability
. If
any of the provisions of this Plan or any Award document is finally held to be
invalid, illegal or unenforceable (whether in whole or in part), such provision
shall be deemed modified to the extent, but only to the extent, of such
invalidity, illegality or unenforceability, and the remaining provisions shall
not be affected thereby; provided, that, if any of such provisions is finally
held to be invalid, illegal, or unenforceable because it exceeds the maximum
scope determined to be acceptable to permit such provision to be enforceable,
such provision shall be deemed to be modified to the minimum extent necessary to
modify such scope in order to make such provision enforceable
hereunder. The Plan and any Award documents contain the entire
agreement of the parties with respect to the subject matter thereof and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations and warranties between them, whether written or
oral with respect to the subject matter thereof. No rule of strict
construction shall be applied against the Company, the Committee, or any other
person in the interpretation of any terms of the Plan, Award, or agreement or
other document relating thereto.
(p)
Plan Effective
Date and Termination
. The Plan shall become effective if, and
at such time as, the shareholders of the Company have approved it by a majority
of the votes cast at a meeting of shareholders by the holders of shares entitled
to vote thereon, provided that the total vote cast on the proposal represents
over 50% in interest of all securities entitled to vote on the
proposal. The date of such shareholder approval shall be the
Effective Date. Upon such approval of the Plan by the shareholders of
the Company, no further awards shall be granted under the Employee and Outside
Director Long-Term Incentive Compensation Plan, but any outstanding awards under
that plan shall continue in accordance with their terms. Unless
earlier terminated by action of the Board of Directors, the authority to make
new grants under the Plan shall terminate on the date that is ten years after
the latest date upon which shareholders of the Company have approved the Plan,
and the Plan will remain in effect until such time as no Stock remains available
for delivery under the Plan and the Company has no further rights or obligations
under the Plan with respect to outstanding Awards under the Plan. Any
termination of the Plan shall comply with the requirements of Code Section 409A
with regard to any 409A Awards.
NEW
JERSEY RESOURCES CORPORATION
2007
Stock Award and Incentive Plan
Stock
Option Agreement
This
Stock Option Agreement (the “Agreement”), which includes the attached “Terms and
Conditions of Option Grant” (the “Terms and Conditions”), confirms the grant on
_________ __, 200__ (the “Grant Date”) by NEW JERSEY RESOURCES CORPORATION, a
New Jersey corporation (the "Company"), to
("Employee")
under Section 6(b) of the 2007 Stock Award and Incentive Plan (the "Plan"), of a
non-qualified stock option (the "Option") to purchase shares of Stock (the
"Option Shares"), as follows:
Option Shares
purchasable
: __________ shares of Stock
Exercise
Price
: $
__________ per share of Stock
Option vests and becomes
exercisable
: The Option shall vest and become
exercisable as to 25% of the Option Shares, cumulatively, on each of the first,
second, third, and fourth anniversaries of the Grant Date (rounded to the
nearest whole Share); provided, however, that [the Option will become
immediately vested and exercisable upon the occurrence of certain events
relating to Termination of Employment, in accordance with Section 4 of the
attached Terms and Conditions, and] any unvested portion of the Option will
automatically become fully vested and exercisable upon a Change in
Control.
Expiration Date:
_______ __, 20__ (the
"Stated Expiration Date") or, in the event of Termination of Employment (as
defined in Section 4 of the attached Terms and Conditions), the date the Option
ceases to be exercisable under Section 4 of the attached Terms and Conditions
(the earlier of which time is the “Expiration Date”). [If, at the date on which
the Option or any portion thereof is to expire or terminate, the Fair Market
Value of an Option Share exceeds the Exercise Price and if the Option or portion
thereof that will expire or terminate is otherwise exercisable, the Option shall
be automatically exercised by the withholding of Option Shares acquired on such
exercise to pay the exercise price and applicable withholding
taxes.]
The
Option is subject to the terms and conditions of the Plan and this Agreement,
including the attached Terms and Conditions. The number and kind of shares of
Stock purchasable, the Exercise Price, and other terms and conditions are
subject to adjustment in accordance with Section 11(c) of the Plan. Capitalized
terms used in this Agreement but not defined herein shall have the same meanings
as in the Plan.
Employee
acknowledges and agrees that (i) the Option is nontransferable, except as
provided in Section 6 of the attached Terms and Conditions and Section 11(b) of
the Plan, (ii) the Option is subject to forfeiture in the event of Employee's
Termination of Employment in certain circumstances, as specified in Section
4 of the attached Terms and Conditions, and (iii) sales of shares of Stock
acquired on exercise of the Option will be subject to the Company's policy
regulating trading by employees.
IN
WITNESS WHEREOF, NEW JERSEY RESOURCES CORPORATION has caused this Agreement to
be executed by its officer thereunto duly authorized.
NEW JERSEY RESOURCES
CORPORATION
By:________________________
[Name]
[Title]
EMPLOYEE
___________________________
[Name], an individual
TERMS AND
CONDITIONS OF OPTION GRANT
The
following Terms and Conditions apply to the Option granted to Employee by NEW
JERSEY RESOURCES CORPORATION (the "Company"), as specified in the Stock Option
Agreement (of which these Terms and Conditions form a part). Certain specific
terms of the Option, including the number of shares of Stock purchasable,
vesting, the Stated Expiration Sate and Expiration Date, and Exercise Price, are
set forth on the cover page hereto, which is an integral part of this
Agreement.
1.
General
. The
Option is granted to Employee under the Company's 2007 Stock Award and Incentive
Plan (the "Plan"), which has previously been delivered to Employee and/or is
available upon request to the Corporate Benefits Department. All of the
applicable terms, conditions and other provisions of the Plan are incorporated
by reference herein. Capitalized terms used in this Agreement but not defined
herein shall have the same meanings as in the Plan. If there is any conflict
between the provisions of this document and mandatory provisions of the Plan,
the provisions of the Plan govern. By accepting the grant of the Units, Employee
agrees to be bound by all of the terms and provisions of the Plan (as presently
in effect or later amended), the rules and regulations under the Plan
adopted from time to time, and the decisions and determinations of the
Leadership Development and Compensation Committee of the Company's Board of
Directors (the "Committee") made from time to time. The Option is a
non-qualified stock option (not an incentive stock option as defined under
Section 422 of the Internal Revenue Code of 1986, as amended).
2.
Right to Exercise
Option
. Subject to all applicable laws, rules, regulations and
the terms of the Plan and this Agreement, Employee may exercise the Option only
after the time and to the extent the Option has become vested and exercisable
and prior to or on the Expiration Date of the Option.
3.
Method of
Exercise
. To exercise the Option, Employee must (a) give written notice
to the Vice President, Corporate Services or Secretary of the Company or any
other officer or agent (including any third-party administrator) as the Company
may designate, which notice shall specifically refer to this Agreement, state
the number of Option Shares as to which the Option is being exercised, and the
name in which he or she wishes the shares of Stock thereby acquired to be
issued, which notice shall be signed by Employee, and (b) pay in full to the
Company the Exercise Price of the Option for the number of shares of Stock being
purchased either (i) in cash (including by check), payable in United States
dollars, (ii) by delivery of shares of Stock by Employee
or,
if then permitted by the Company, by directing the Company to withhold shares of
Stock acquired on such exercise having a Fair Market Value, determined as of the
date the Option is exercised, equal to all or the part of the aggregate Exercise
Price being paid in this way, or (iii) in any other manner then permitted by the
Committee. Once Employee gives notice of exercise, such notice may not be
revoked. When Employee exercises the Option, or part thereof, the Company will
transfer shares of Stock to Employee in certification form or make such a
transfer (or make a non-certificated credit) to Employee's brokerage account at
a designated securities brokerage firm or otherwise deliver shares of Stock to
Employee. No Employee or Beneficiary shall have at any time any rights with
respect to shares of Stock covered by this Agreement prior to the valid exercise
as specified herein, and no adjustment shall be made for dividends or other
rights for which the record date is prior to such valid exercise.
4.
Termination
Provisions
. The following provisions will govern the vesting,
exercisability and expiration of the Option in the event of Employee's
Termination of Employment (as defined below) at a time that the Option remains
outstanding, unless the Committee determines to provide more favorable terms (in
this regard, Employee shall be entitled to any more favorable terms provided in
any valid employment agreement or other agreement with the
Company):
(a)
Death or
Disability
. In the event of Employee's Termination of
Employment due to death or Disability (as defined below), any unvested portion
of the Option, to the extent then outstanding, will vest and become immediately
exercisable in full, and the Option will remain exercisable, in accordance with
Section 11(b) of the Plan, until the earlier of one year after such Termination
of Employment or the Stated Expiration Date, at which time the Option will
terminate.
(b)
Retirement
. In the
event of Employee's Termination of Employment due to Retirement (as defined
below), the Option, to the extent then outstanding, will not be forfeited, but
will remain outstanding until the date that is the earlier of one year after
such Termination or the Stated Expiration Date, at which time the Option will
terminate; provided, however, that any portion of the Option not exercisable as
of the date of Termination will become exercisable at the date upon which it
would have vested had Employee continued to be employed by the Company through
that date if that date occurs on or before the date the Option will terminate;
and provided further, that any portion of the Option that is not vested at the
date of Termination will not become vested thereafter by operation of this
provision and will terminate upon Termination.
(c)
Termination by the Company Without
Cause.
In the event of Employee's Termination of Employment by
the Company without Cause (as defined below), the portion of the
then-outstanding Option not vested and exercisable at the date of Termination
will terminate, and any portion of the then-outstanding Option that is vested
and exercisable at the date of Termination will terminate at the earlier of
three months after Termination of Employment or the Stated Expiration
Date.
(d)
Termination by the Company for
Cause
. In the event of Employee's Termination of Employment by
the Company for Cause (as defined below), the Option, whether or not then vested
and exercisable, immediately will terminate.
(e)
Termination by the Employee
Voluntarily
. In the event of Employee's voluntary Termination
of Employment, the portion of the then-outstanding Option not vested and
exercisable at the date of Termination will terminate, and any portion of the
then-outstanding Option that is vested and exercisable at the date of
Termination will terminate at the earlier of three months after Termination of
Employment or the Stated Expiration Date.
(f)
Certain
Definitions
. The following definitions apply for purposes of
this Agreement:
(i) "Cause"
means (A) Employee’s conviction of a felony or the entering by Employee of a
plea of
nolo
contendere
to a felony charge, (B) Employee's gross neglect, willful
malfeasance or willful gross misconduct in connection with his employment
hereunder which has had a significant adverse effect on the business of the
Company and its subsidiaries, unless Employee reasonably believed in good faith
that such act or non-act was in or not opposed to the best interests of the
Company, or (C) repeated material violations by Employee of his or her
obligations under any applicable employment agreement or Company policy which
have continued after written notice thereof from the Company, which violations
are demonstrably willful and deliberate on Employee's part and which result in
material damage to the Company's business or reputation.
(ii) "Disability"
means Employee has been incapable of substantially fulfilling the positions,
duties, responsibilities and obligations of his employment because of physical,
mental or emotional incapacity resulting from injury, sickness or disease for a
period of at least six consecutive months. The Company and Employee shall agree
on the identity of a physician to resolve any question as to Employee's
disability. If the Company and Employee cannot agree on the physician to make
such determination, then the Company and Employee shall each select a physician
and those physicians shall jointly select a third physician, who shall make the
determination. The determination of any such physician shall be final and
conclusive for all purposes of this Agreement.
(iii) "Retirement"
means retirement on a normal, early or postponed retirement date within the
meaning of the Corporation's pension plan applicable to the Employee at the date
of grant.
(iv) “Subsidiary”
means any subsidiary corporation of the Company within the meaning of Section
424(f) of the Code (“Section 424(f) Corporation”) and any partnership, limited
liability company or joint venture in which either the Company or Section 424(f)
Corporation is at least a fifty percent (50%) equity
participant.
(v) "Termination
of Employment" and “Termination” means the earliest time at which Employee is
not employed by the Company or a Subsidiary of the Company and is not serving as
a non-employee director of the Company or a Subsidiary of the
Company.
5
.
Employee
Representations and Warranties Upon Exercise and Related Terms
.
As a condition
to the exercise of the Option, the Company may require Employee to make any
representation or warranty to the Company as may be required under any
applicable law or regulation.
6.
Nontransferability
. Employee
may not transfer the Option or any rights hereunder to any third party other
than by will or the laws of descent and distribution, and, during Employee's
lifetime, only Employee or his or her duly appointed guardian or legal
representative may exercise the Option, except for transfers to a Beneficiary in
the event of death or as otherwise permitted and subject to the conditions under
Section 11(b) of the Plan.
7.
Miscellaneous
.
(a)
Binding Agreement; Written
Amendments
. This Agreement shall be binding upon the heirs,
executors, administrators and successors of the parties. This Agreement
constitutes the entire agreement between the parties with respect to the Option,
and supersedes any prior agreements or documents with respect to the Option. No
amendment or alteration of this Agreement which may impose any additional
obligation upon the Company shall be valid unless expressed in a written
instrument duly executed in the name of the Company, and no amendment,
alteration, suspension or termination of this Agreement which may materially
impair the rights of Employee with respect to the Option shall be valid unless
expressed in a written instrument executed by Employee.
(b)
No Promise of
Employment.
The Option and the granting thereof shall not
constitute or be evidence of any agreement or understanding, express or implied,
that Employee has a right to continue as an officer or employee of the Company
for any period of time, or at any particular rate of compensation.
(c)
Governing Law
. The
validity, construction, and effect of this Agreement shall be determined in
accordance with the laws (including those governing contracts) of the state of
New Jersey, without giving effect to principles of conflicts of laws, and
applicable federal law.
(d)
Tax
Withholding
. Unless otherwise determined by the Committee,
Employee must make arrangements satisfactory to the Company to pay or provide
for payment of withholding taxes due upon exercise of the Option. The Committee
may require or permit Employee to elect to have the Company withhold from the
shares of Stock deliverable upon exercise of the Option the number of whole
shares of Stock having a Fair Market Value not exceeding the amount of income
and employment taxes required to be withheld under applicable laws and
regulations, and pay the Fair Market Value of such withheld shares of Stock in
cash to the appropriate taxing authorities. Employee will be responsible for any
withholding taxes not satisfied by means of such withholding and for all taxes
in excess of such withholding taxes that may be due upon exercise of the
Option.
(e)
Notices
. Any
notice to be given the Company under this Agreement shall be addressed to the
Company at its principal executive offices, in care of the Vice President,
Corporate Services, or the officer designated by the Company as responsible for
administration of this Agreement, and any notice to Employee shall be addressed
to Employee at Employee’s address as then appearing in the records of the
Company.
(f)
Shareholder Rights.
Employee and
any Beneficiary shall not have any rights with respect to shares of Stock
(including voting rights) purchasable upon exercise of the Option prior to the
valid exercise of the Option.
NEW
JERSEY RESOURCES CORPORATION
2007
Stock Award and Incentive Plan
Performance
Units Agreement
This
Performance Units Agreement (the “Agreement”), which includes the attached
“Terms and Conditions of Performance Units” (the “Terms and Conditions”) and the
attached Exhibit A captioned “
Performance Goal and Earning of
Performance Units
”, confirms the grant on _________ __, ____ (the “Grant
Date”) by NEW JERSEY RESOURCES CORPORATION, a New Jersey corporation (the
"Company"), to
("Employee"),
under Sections 6(e), 6(i) and 7 of the 2007 Stock Award and Incentive Plan (the
"Plan"), of Performance Units (the "Units"), including rights to Dividend
Equivalents as specified herein, as follows:
Target
Number Granted:
|
_________
Units (“Target Number”)
|
How Units are Earned and
Vest
: The Units, if not previously forfeited, (i) will be earned, if and
to the extent that the Performance Goal defined on Exhibit A to this Agreement
are achieved, with the corresponding number of Units earned (ranging from 0% to
150% of the Target Number) as specified on Exhibit A, and (ii) will vest as to
the number of Units earned if Employee continues to be employed by the Company
or a Subsidiary through ________ __, 200__ (the "Stated Vesting Date"). In
addition, if not previously forfeited, upon a Change in Control the Units will
be deemed earned in an amount equal to the greater of the Target Number or the
number of Units to be granted based upon the actual level of achievement if the
performance period had ended at the date of the Change in Control and will
become immediately vested, and, if the stock of the Company remains publicly
traded after the Change in Control, any Units not earned will remain potentially
earnable in accordance with the terms of this Agreement. In addition, if not
previously forfeited, the Units will be deemed earned and become vested upon the
occurrence of certain events relating to Termination of Employment to the
extent provided in Section 4 of the attached Terms and Conditions. The terms
"vest" and "vesting" mean that the Units have become non-forfeitable whether or
not there occurs a voluntary Termination of Employment by Employee. If the
Performance Goal is not met (or not fully met) and the Units are not otherwise
deemed earned by the Earning Date (as defined below), the Units (or the unearned
portion of the Units) will be immediately forfeited. If Employee has a
Termination of Employment prior to a Stated Vesting Date and the Units are not
otherwise deemed earned and vested by that date, the Units will be immediately
forfeited except as otherwise provided in Section 4 of the attached Terms and
Conditions. Forfeited Units cease to be outstanding and in no event will
thereafter result in any delivery of shares of Stock to
Employee.
Performance Goal and Earning Date:
The Performance Goal and Earning Date, and the number of Units earned for
specified levels of performance at the Earning Date, shall be as specified in
Exhibit A hereto.
Settlement
:
Units
that are to be settled hereunder, including Units credited as a result of
Dividend Equivalents, will be settled by delivery of one share of Stock, for
each Unit being settled. Settlement shall occur at the time specified in Section
6 of the attached Terms and Conditions.
The Units are subject to the
terms and conditions of the Plan and this Agreement, including the Terms and
Conditions of Performance Units attached hereto and deemed a part hereof. The
number of Units and the kind of shares deliverable in settlement and other terms
and conditions of the Units are subject to adjustment in accordance with Section
5 of the attached Terms and Conditions and Section 11(c) of the
Plan.
Employee
acknowledges and agrees that (i) the Units are nontransferable, except as
provided in Section 3 of the attached Terms and Conditions and Section 11(b) of
the Plan, (ii) the Units are subject to forfeiture in the event of Employee's
Termination of Employment in certain circumstances prior to vesting, as
specified in Section 4 of the attached Terms and Conditions, and (iii) sales of
shares of Stock will be subject to any Company policy regulating trading by
employees.
Capitalized terms used in this
Agreement but not defined herein shall have the same meanings as in the
Plan.
IN
WITNESS WHEREOF, NEW JERSEY RESOURCES CORPORATION has caused this Agreement to
be executed by its officer thereunto duly authorized.
NEW JERSEY RESOURCES
CORPORATION
By:_____________________
[Name]
[Title]
EMPLOYEE
By:_____________________
[Name],
an individual
TERMS AND CONDITIONS OF PERFORMANCE
UNITS
The
following Terms and Conditions apply to the Performance Units granted to
Employee by NEW JERSEY RESOURCES CORPORATION (the "Company") and Units resulting
from Dividend Equivalents (as defined below), if any, as specified in the
Performance Units Agreement (of which these Terms and Conditions form a part).
Certain terms of the Units, including the number of Units granted, vesting
date(s) and settlement date, are set forth on the cover page hereto and Exhibit
A, which are an integral part of this Agreement.
1.
General
. The
Units are granted to Employee under the Company's 2007 Stock Award and Incentive
Plan (the "Plan"), which has been previously delivered to Employee and/or is
available upon request to the Corporate Benefits Department. All of the
applicable terms, conditions and other provisions of the Plan are incorporated
by reference herein. Capitalized terms used in this Agreement but not defined
herein shall have the same meanings as in the Plan. If there is any conflict
between the provisions of this document and mandatory provisions of the Plan,
the provisions of the Plan govern. By accepting the grant of the Units, Employee
agrees to be bound by all of the terms and provisions of the Plan (as presently
in effect or later amended), the rules and regulations under the Plan
adopted from time to time, and the decisions and determinations of the
Leadership Development and Compensation Committee of the Company's Board of
Directors (the "Committee") made from time to time.
2.
Account for
Employee
.
The Company shall
maintain a bookkeeping account for Employee (the "Account") reflecting the
number of Units then credited to Employee hereunder as a result of such grant of
Units and any crediting of additional Units to Employee pursuant to payments
equivalent to dividends paid on shares of Stock under Section 5 hereof
("Dividend Equivalents").
3.
Nontransferability
. Until
Units become settleable in accordance with the terms of this Agreement, Employee
may not transfer Units or any rights hereunder to any third party other than by
will or the laws of descent and distribution, except for transfers to a
Beneficiary or as otherwise permitted and subject to the conditions under
Section 11(b) of the Plan.
4.
Termination
Provisions
. The following provisions will govern the vesting and
forfeiture of the Units that are outstanding at the time of Employee's
Termination of Employment (as defined below), unless otherwise determined by the
Committee (subject to Section 8(a)
hereof):
(a)
Death or
Disability.
In the event of Employee's Termination of
Employment due to death or Disability (as defined below) the Units will be
deemed earned in an amount equal to the greater of the Target Number or the
number of Units to be granted based upon the actual level of achievement if the
performance period had ended at the date of the Termination of
Employment. A Pro-Rata Portion (as defined below) of the Units
earned, to the extent not previously vested, will vest immediately, and such
Units, together with any then-outstanding Units that previously became vested,
will be settled in accordance with Section 6(a) hereof. Any portion
of the then-outstanding Units not earned or not vested at or before the date of
Termination will be forfeited.
(b)
Termination by the Company or
Voluntarily by the Employee.
In the event of Employee's
Termination of Employment by the Company for any reason or by Employee
voluntarily, the portion of the then-outstanding Units not vested at the date of
Termination will be forfeited, and the portion of the then-outstanding Units
that is vested at or before the date of Termination will be settled in
accordance with Section 6(a) hereof.
(c)
Retirement.
In the event of Employee's Termination of
Employment due to Retirement (as defined below) the Units will be deemed earned
in an amount equal to fifty percent of the Target Number. A Pro-Rata
Portion (as defined below) of the Units earned, to the extent not previously
vested, will vest immediately, and such Units, together with any
then-outstanding Units that previously became vested, will be settled in
accordance with Section 6(a) hereof. Any portion of the then-outstanding Units
not earned or not vested at or before the date of Termination will be
forfeited.
(d) C
ertain
Definitions
. The following definitions apply for purposes of
this Agreement:
(i) "Disability"
means Employee has been incapable of substantially fulfilling the positions,
duties, responsibilities and obligations of his employment because of physical,
mental or emotional incapacity resulting from injury, sickness or disease for a
period of at least six consecutive months. The Company and Employee shall agree
on the identity of a physician to resolve any question as to Employee's
disability. If the Company and Employee cannot agree on the physician to make
such determination, then the Company and Employee shall each select a physician
and those physicians shall jointly select a third physician, who shall make the
determination. The determination of any such physician shall be final and
conclusive for all purposes of this Agreement.
(ii) "Pro
Rata Portion" means a fraction the numerator of which is the number of days that
have from the Grant Date to the date of Employee's Termination of Employment and
the denominator of which is the number of days from the Grant Date to the Stated
Vesting Date.
(iii) “Retirement”
means the Employee terminates employment at or after age 65, or at or after age
55 with 20 or more years of service.
(iv) “Subsidiary”
means any subsidiary corporation of the Company within the meaning of Section
424(f) of the Code (“Section 424(f) Corporation”) and any partnership, limited
liability company or joint venture in which either the Company or Section 424(f)
Corporation is at least a fifty percent (50%) equity participant.
(v) "Termination
of Employment" and “Termination” means the earliest time at which Employee is
not employed by the Company or a Subsidiary of the Company and is not serving as
a non-employee director of the Company or a Subsidiary of the
Company.
5
.
Dividend
Equivalents and Adjustments
.
(a)
Dividend
Equivalents
. Dividend Equivalents will be credited on Units
(other than Units that, at the relevant record date, previously have been
settled or forfeited) and deemed reinvested in additional
Units. Dividend Equivalents will be credited with respect to unearned
Units, earned but not vested Units, and vested but not settled
Units. Dividend Equivalents will be credited as follows, except that
the Company may vary the manner of crediting (for example, by crediting cash
dividend equivalents rather than additional Units) for administrative
convenience:
(i)
Cash Dividends
. If
the Company declares and pays a dividend or distribution on shares of Stock in
the form of cash, then additional Units shall be credited to Employee's Account
in lieu of payment or crediting of cash dividend equivalents equal to the number
of Units credited to the Account as of the relevant record date multiplied by
the amount of cash paid per share of Stock in such dividend or distribution
divided by the Fair Market Value of a share of Stock at the payment date for
such dividend or distribution.
(ii)
Non-Share
Dividends
. If the Company declares and pays a dividend or
distribution on shares of Stock in the form of property other than shares
of Stock, then a number of additional Units shall be credited to Employee's
Account as of the payment date for such dividend or distribution equal to the
number of Units credited to the Account as of the record date for such dividend
or distribution multiplied by the fair market value of such property actually
paid as a dividend or distribution on each outstanding share of Stock at such
payment date, divided by the Fair Market Value of a share of Stock at such
payment date.
(iii)
Share Dividends and
Splits
. If the Company declares and pays a dividend or
distribution on shares of Stock in the form of additional shares of Stock, or
there occurs a forward split of shares of Stock, then a number of additional
Units shall be credited to Employee's Account as of the payment date for such
dividend or distribution or forward split equal to the number of Units credited
to the Account as of the record date for such dividend or distribution or split
multiplied by the number of additional shares of Stock actually paid as a
dividend or distribution or issued in such split in respect of each outstanding
share of Stock.
(b)
Adjustments
. The
number of Units credited to Employee's Account shall be appropriately adjusted
in order to prevent dilution or enlargement of Employee's rights with respect to
Units or to reflect any changes in the number of outstanding shares of Stock
resulting from any event referred to in Section 11(c) of the Plan, taking into
account any Units credited to Employee in connection with such event under
Section 5(a) hereof. In furtherance of the foregoing, in the event of an equity
restructuring, as defined in FAS 123R, which affects the shares of Stock,
Employee shall have a legal right to an adjustment to Employee’s Units which
shall preserve without enlarging the value of the Units, with the manner of such
adjustment to be determined by the Committee in its discretion.
(c)
Risk of Forfeiture and Settlement of
Units Resulting from Dividend Equivalents and Adjustments.
Units which
directly or indirectly result from Dividend Equivalents on or adjustments to a
Unit granted hereunder shall be subject to the same risk of forfeiture and other
conditions as apply to the granted Unit and will be settled at the same time as
the granted Unit.
6.
Settlement and
Deferral
.
(a)
Settlement
Date.
Units granted hereunder that have been earned and
vested, together with Units credited as a result of Dividend Equivalents with
respect thereto, shall be settled by delivery of one share of Stock for each
Unit being settled. Settlement of a Unit granted hereunder shall occur at the
Stated Vesting Date; provided, however, that settlement shall occur earlier (i)
within 90 days after the date of death of Employee, (ii) within 60 days after
termination due to Disability (subject to Section 6(c)(iii) hereof if Employee
is not “disabled” within the meaning of Code Section 409A), (iii) upon a Change
in Control except that, if the Units are subject to Section 6(c) hereof, no
distribution shall be triggered if the Change in Control does not involve an
event that comes within the definition under Code Section 409A), or (iv) within
60 days after a Termination of Employment if and to the extent specified in
Section 4(b) hereof; and provided further, that settlement shall be deferred if
so elected by Employee in accordance with Section 6(b) hereof. Settlement of
Units which directly or indirectly result from Dividend Equivalents on Units
granted hereunder shall occur at the time of settlement of the granted
Unit.
(b)
Elective
Deferral.
The Committee may determine to permit Employee to
elect to defer settlement (or redefer) if such election would be permissible
under Code Section 409A . In addition to any applicable requirements under Code
Section 409A , any such deferral election shall be made only while Employee
remains employed and at a time permitted under Code Section 409A. Any elective
deferral will be subject to such additional terms and conditions as the Vice
President – Corporate Services, or the officer designated by the Company as
responsible for administration of the Agreement, may reasonably
impose.
(c)
Compliance with Code Section
409A
. Other provisions of this Agreement notwithstanding, if
Units are subject to taxation under Code Section 409A (“§ 409A”) (i.e., the
Units are not excluded or exempted under Code Section 409A; Note: an elective
deferral under Section 6(b) would cause the Units to be subject to Code Section
409A), settlement shall be subject to the following rules:
(i) The
Company shall have no authority to accelerate distributions relating to such
Units in excess of the authority permitted under Code Section 409A;
(ii) Any
distribution relating to such Units triggered by Employee’s termination of
employment and intended to qualify under Code Section 409A shall be made only at
the time that Employee has had a “separation from service” within the meaning of
Code Section 409A.
A “separation from service”
will occur where it is reasonably anticipated that no further services will be
performed after that date or that the level of bona fide services the Employee
will perform after that date (whether as an employee or independent contractor)
will permanently decrease to less than 50% of the average level of bona fide
services performed over the immediately preceding thirty-six (36) month
period.
;
(iii) Any
distribution relating to such Units subject to Code Section 409A that would be
made within six months following a separation from service of a “Specified
Employee” as defined under Code Section 409A and as determined under procedures
adopted by the Board of Directors of the Company shall instead occur on the
first day of the seventh month following the Separation from Service (or upon
the Employee’s death, if earlier) . In the case of installments, this
delay shall not affect the timing of any installment otherwise payable after the
six-month delay period;
(iv) If
any portion of such Units scheduled to vest at a single specified date (a
vesting “tranche”) is partly deemed a 409A Award and partly deemed exempt from §
409A (as a short-term deferral or otherwise), the time of settlement of only the
portion of the Award subject to Code Section 409A shall be subject to the
provisions of this Section 6; and
(v) Any
rights of Employee or retained authority of the Company with respect to Units
hereunder shall be automatically modified and limited to the extent necessary so
that Employee will not be deemed to be in constructive receipt of income
relating to the Units prior to the distribution of shares to Employee and so
that Employee shall not be subject to any penalty under Code Section
409A.
7
.
Employee
Representations and Warranties Upon Settlement
.
As a condition
to the settlement of the Units, the Company may require Employee to make any
representation or warranty to the Company as may be required under any
applicable law or regulation.
8.
Miscellaneous
.
(a)
Binding Agreement; Written
Amendments
. This Agreement shall be binding upon the heirs,
executors, administrators and successors of the parties. This Agreement
constitutes the entire agreement between the parties with respect to the Units,
and supersedes any prior agreements or documents with respect to the Units. No
amendment or alteration of this Agreement which may impose any additional
obligation upon the Company shall be valid unless expressed in a written
instrument duly executed in the name of the Company, and no amendment,
alteration, suspension or termination of this Agreement which may materially
impair the rights of Employee with respect to the Units shall be valid unless
expressed in a written instrument executed by Employee.
(b)
No Promise of
Employment.
The Units and the granting thereof shall not
constitute or be evidence of any agreement or understanding, express or implied,
that Employee has a right to continue as an officer or employee of the Company
for any period of time, or at any particular rate of compensation.
(c)
Governing Law
. The
validity, construction, and effect of this Agreement shall be determined in
accordance with the laws (including those governing contracts) of the state of
New Jersey, without giving effect to principles of conflicts of laws, and
applicable federal law.
(d)
Fractional Units and
Shares
. The number of Units credited to Employee's Account
shall include fractional Units calculated to at least three decimal places,
unless otherwise determined by the Committee. Unless settlement is effected
through a third-party broker or agent that can accommodate fractional shares
(without requiring issuance of a fractional Share by the Company), upon
settlement of the Units Employee shall be paid, in cash, an amount equal to the
value of any fractional Share that would have otherwise been deliverable in
settlement of such Units.
(e)
Mandatory Tax Withholding
. Unless
otherwise determined by the Committee, at the time of vesting and/or settlement
the Company will withhold from any shares of Stock deliverable in settlement of
the Units, in accordance with Section 11(d)(i) of the Plan, the number of shares
of Stock having a value nearest to, but not exceeding, the amount of income and
employment taxes required to be withheld under applicable laws and regulations,
and pay the amount of such withholding taxes in cash to the appropriate taxing
authorities. Employee will be responsible for any withholding taxes not
satisfied by means of such mandatory withholding and for all taxes in excess of
such withholding taxes that may be due upon vesting or settlement of
Units.
(f)
Statements
. An
individual statement of each Employee's Account will be issued to Employee at
such times as may be determined by the Company. Such a statement shall reflect
the number of Units credited to Employee's Account, transactions therein during
the period covered by the statement, and other information deemed relevant by
the Company. Such a statement may be combined with or include information
regarding other plans and compensatory arrangements. Employee's statements shall
be deemed a part of this Agreement, and shall evidence the Company's obligations
in respect of Units, including the number of Units credited as a result of
Dividend Equivalents (if any). Any statement containing an error shall not,
however, represent a binding obligation to the extent of such error,
notwithstanding the inclusion of such statement as part of this
Agreement.
(g)
Unfunded
Obligations
. The grant of the Units and any provision for
distribution in settlement of Employee's Account hereunder shall be by means of
bookkeeping entries on the books of the Company and shall not create in Employee
any right to, or claim against any, specific assets of the Company, nor result
in the creation of any trust or escrow account for Employee. With respect to
Employee's entitlement to any distribution hereunder, Employee shall be a
general creditor of the Company.
(h)
Notices
. Any
notice to be given the Company under this Agreement shall be addressed to the
Company at its principal executive offices, in care of the Vice President –
Corporate Services, or the officer designated by the Company as responsible for
administration of the Agreement, and any notice to Employee shall be addressed
to Employee at Employee’s address as then appearing in the records of the
Company.
(i)
Shareholder
Rights.
Employee and any Beneficiary shall not have any rights
with respect to shares of Stock (including voting rights) covered by this
Agreement prior to the settlement and distribution of the shares of Stock as
specified herein.
Exhibit
A
NEW
JERSEY RESOURCES CORPORATION
2007
Stock Award and Incentive Plan
Performance
Goal and Earning of Performance Units
The number of Performance Units earned
by Participant shall be determined as of _______ __, 200_ [last day of
performance period] (the "Earning Date"), based on the Company’s “Total
Shareholder Return Performance" in the ___-fiscal-year period ending at that
date as compared against an established group of comparable companies (the
"Comparison Group") selected by the Committee and attached hereto as Schedule A.
The number of Units earned will then be determined based on the following
grid:
Company
Total Shareholder Return Performance -- Percentile
Achieved
|
Units
Earned as Percentage of Target Units
|
Less
than 30
th
|
0%
|
30
th
|
__%
|
40
th
|
__%
|
50
th
|
__%
|
60
th
|
__%
|
70
th
|
__%
|
80
th
|
__%
|
90
th
and above
|
150%
|
Upon
achievement of Total Shareholder Return at a percentile between 30
th
and
40
th
,
40
th
and 50
th
,
50
th
and 60
th
, or
between 60
th
and
70
th
,
70
th
and 80
th
, or
between 80
th
and
90
th
, the
Units earned will be mathematically interpolated on a straight-line
basis.
Determinations
of the Committee regarding Total Shareholder Return performance, such
performance as a percentile within the Comparison Group, the resulting Units
earned and related matters will be final and binding on Participant. The
Committee shall specify a reasonable methodology for dealing with companies in
the Comparison Group that cease to be publicly traded companies engaged in a
business comparable to that of the Company, subject to compliance with Treasury
Regulation § 1.162-27(e)(2). Total Shareholder Return shall be calculated in a
manner that reflects the economic return to shareholders, such that any equity
restructuring of the Company or any company in the Comparison Group shall not
have the effect of enlarging or reducing the rights of Employee except to the
extent of its effects on the real economic return of a shareholder.
Schedule
A
[List of
Companies in Comparison Group]
Exhibit
10.20
NEW
JERSEY RESOURCES CORPORATION
2007
Stock Award and Incentive Plan
Restricted
Stock Agreement
This
Restricted Stock Agreement (the "Agreement"), which includes the attached “Terms
and Conditions of Restricted Stock” (the “Terms and Conditions”), confirms the
grant on _________ __, 200_ (the “Grant Date”) by NEW JERSEY RESOURCES
CORPORATION, a New Jersey corporation (the "Company"), to ("Employee"), under
Section 6(d) of the 2007 Stock Award and Incentive Plan (the "Plan"), of
Restricted Stock as follows:
Number
granted:
|
______________
shares of Restricted Stock
|
Fair
Market Value at Grant Date:
|
$
_____________ per share
|
How Restricted
Stock Vests
:
|
The
Restricted Stock, if not previously forfeited, will vest on the dates and
as to the number of shares in the following table:
|
Stated Vesting
Date
|
Number of Shares That
Vest at that
Date
|
(INSERT VESTING SCHEDULE)
In
addition, if not previously forfeited, the Restricted Stock will become
immediately vested in full upon a Change in Control, and will become vested upon
the occurrence of certain events relating to Termination of Employment to
the extent provided in Section 3 of the attached Terms and Conditions. The terms
"vest" and "vesting" mean that the Restricted Stock has become transferable and
non-forfeitable. If Employee has a Termination of Employment prior to a Stated
Vesting Date and shares of Restricted Stock are not otherwise deemed vested by
that date, such Restricted Stock will be immediately forfeited. Forfeited
Restricted Stock ceases to be outstanding and in no event will thereafter result
in any delivery of shares of Stock to Employee.
The
Restricted Stock is subject to the terms and conditions of the Plan and this
Agreement, including the attached Terms and Conditions. The number and kind of
shares of Restricted Stock and other terms of the Restricted Stock are subject
to adjustment in accordance with Section 4(b)
of the attached Terms
and Conditions and Section 11(c) of the Plan. Capitalized terms used in this
Agreement but not defined herein shall have the same meanings as in the
Plan.
Employee
acknowledges and agrees that (i) Restricted Stock is nontransferable, except as
provided in Section 2 of the attached Terms and Conditions and Section 11(b) of
the Plan, (ii) the Restricted Stock is subject to forfeiture in the event of
Employee's Termination of Employment in certain circumstances prior to
vesting, as specified in Section 3 of the attached Terms and Conditions, and
(iii) sales of the shares of Stock following vesting of the Restricted Stock
will be subject to the Company's policy regulating trading by
employees,
IN
WITNESS WHEREOF, NEW JERSEY RESOURCES CORPORATION has caused this Agreement to
be executed by its officer thereunto duly authorized, and Employee has duly
executed this Agreement, by which each has agreed to the terms of this
Agreement.
EMPLOYEE
NEW
JERSEY RESOURCES CORPORATION
By:_________________________
[Employee
Name] [Name]
[Title]
TERMS AND
CONDITIONS OF RESTRICTED STOCK
The
following Terms and Conditions apply to the Restricted Stock granted to Employee
by NEW JERSEY RESOURCES CORPORATION (the "Company"), and Restricted Stock
resulting from Dividend Equivalents (as defined below), if any, as specified in
the Restricted Stock Agreement (of which these Terms and Conditions form a
part). Certain terms of the Restricted Stock, including the number of shares
granted and vesting date(s), are set forth on the preceding pages, which is an
integral part of this Agreement.
1.
General
. The
Restricted Stock is granted to Employee under the Company's 2007 Stock Award and
Incentive Plan (the "Plan"), a copy of which has been previously delivered to
Employee and/or is available upon request to the Corporate Benefits Department.
All of the applicable terms, conditions and other provisions of the Plan are
incorporated by reference herein. Capitalized terms used in this Agreement but
not defined herein shall have the same meanings as in the Plan. If there is any
conflict between the provisions of this document and mandatory provisions of the
Plan, the provisions of the Plan govern. Employee agrees to be bound by all of
the terms and provisions of the Plan (as presently in effect or later amended),
the rules and regulations under the Plan adopted from time to time, and the
decisions and determinations of the Leadership Development and Compensation
Committee of the Company's Board of Directors (the "Committee") made from time
to time.
2.
Nontransferability
. Until
such time as the Restricted Stock has become vested in accordance with the terms
of this Agreement, Employee may not transfer Restricted Stock or any rights
hereunder to any third party other than by will or the laws of descent and
distribution. This restriction on transfer precludes any sale, assignment,
pledge, or other encumbrance or disposition of the shares of Restricted Stock
(except for forfeitures to the Company).
3.
Termination
Provisions
. The following provisions will govern the vesting and
forfeiture of the Restricted Stock that is outstanding at the time of Employee's
Termination of Employment (as defined below), unless otherwise determined by the
Committee (subject to Section 7(a) hereof):
(a)
Death, Disability or
Retirement.
In the event of Employee's Termination of
Employment due to death, Disability or Retirement (as defined below), a Pro-Rata
Portion of the outstanding Restricted Stock will vest immediately. Any portion
of the outstanding Restricted Stock not vested at the date of Termination will
be forfeited.
(b)
Termination by the Company or
Voluntarily by Employee.
In the event of Employee's
Termination of Employment by the Company for any reason or by Employee
voluntarily (other than a Retirement), any portion of the outstanding Restricted
Stock not vested at the date of Termination will be forfeited.
(c) C
ertain
Definitions
. The following definitions apply for purposes of
this Agreement:
(i) "Disability"
means Employee has been incapable of substantially fulfilling the positions,
duties, responsibilities and obligations of his employment because of physical,
mental or emotional incapacity resulting from injury, sickness or disease for a
period of at least six consecutive months. The Company and Employee shall agree
on the identity of a physician to resolve any question as to Employee's
disability. If the Company and Employee cannot agree on the physician to make
such determination, then the Company and Employee shall each select a physician
and those physicians shall jointly select a third physician, who shall make the
determination. The determination of any such physician shall be final and
conclusive for all purposes of this Agreement.
(ii) "Pro
Rata Portion" means, for each tranche of Restricted Stock, a fraction the
numerator of which is the number of days that have elapsed from the Grant Date
to the date of Employee's Termination of Employment and the denominator of which
is the number of days from the Grant Date to the Stated Vesting Date for that
tranche. A "tranche" is that portion of the Restricted Stock that has a unique
Stated Vesting Date.
(iii) “Retirement”
means the Employee terminates employment at or after age 65, or at or after age
55 with 20 or more years of service.
(iv) “Subsidiary”
means any subsidiary corporation of the Company within the meaning of Section
424(f) of the Code (“Section 424(f) Corporation”) and any partnership, limited
liability company or joint venture in which either the Company or Section 424(f)
Corporation is at least a fifty percent (50%) equity participant.
(v) "Termination
of Employment" and “Termination” means the earliest time at which Employee is
not employed by the Company or a Subsidiary of the Company and is not serving as
a non-employee director of the Company or a Subsidiary of the
Company.
4.
Dividends and
Adjustments.
(a)
Dividends.
In the
event of dividends or distributions on Stock, the following terms and conditions
shall apply except as provided in Section 4(b) below:
|
|
(i) In the
event of a cash dividend or distribution on Stock or a non-cash dividend
or distribution in the form of property other than Stock payable on Stock
(including shares of a Subsidiary of the Company distributed in a
spin-off), the Company shall immediately convert such dividend or
distribution into Restricted Stock
and such
additional Restricted Stock will become vested if and to the same extent
as the original Restricted Stock with respect to which the dividend or
distribution was payable becomes vested, and shall be subject to all other
terms and conditions as applied to the original Restricted
Stock.
|
|
|
(ii) In the
event of a dividend or distribution in the form of Stock or split-up of
shares, the Stock issued or delivered as such dividend or distribution or
resulting from such split-up will be deemed to be additional Restricted
Stock and will become vested if and to the same extent as the original
Restricted Stock with respect to which the dividend or distribution was
payable becomes vested, and shall be subject to all other terms and
conditions as applied to the original Restricted
Stock.
|
(b)
Adjustments
. The
number and kind of shares of Restricted Stock, the number of such shares to be
vested and other terms and conditions of Restricted Stock or otherwise contained
in this Agreement shall be appropriately adjusted, in order to prevent dilution
or enlargement of Employee’s rights hereunder, to reflect any changes in the
number of outstanding shares of Stock resulting from any event referred to in
Section 11(c) of the Plan, taking into account any Restricted Stock or other
amounts paid or credited to Employee in connection with such event under Section
4(a) hereof, in the sole discretion of the Committee. The Committee may
determine how to treat or settle any fractional share resulting under this
Agreement.
5.
Other Terms of Restricted
Stock
.
(a)
Voting and Other Shareholder
Rights
. Employee shall be entitled to vote Restricted Stock on
any matter submitted to a vote of holders of Stock, and shall have all other
rights of a shareholder of the Company except as expressly limited by this
Agreement and the Plan.
(b)
Consideration for Grant of
Restricted Stock
. Employee shall be required to pay no cash
consideration for the grant of the Restricted Stock, but Employee's performance
of services to the Company prior to the vesting of the Restricted Stock shall be
deemed to be consideration for this grant of Restricted Stock.
(c)
Insider Trading Policy
Applicable.
Employee acknowledges that sales of shares
resulting from Restricted Stock that has become vested will be subject to the
Company's policies regulating trading by executive officers and
employees.
(d)
Certificates Evidencing Restricted
Stock
.
Restricted Stock
shall be evidenced by issuance of one or more certificates in the name of
Employee, bearing an appropriate legend referring to the terms, conditions, and
restrictions applicable hereunder, and shall remain in the physical custody of
the General Counsel of the Company or his designee until such time as such
shares of Restricted Stock have become vested and the restrictions hereunder
have therefore lapsed. In addition, Restricted Stock shall be subject to such
stop-transfer orders and other restrictive measures as the General Counsel of
the Company shall deem advisable under federal or state securities laws, rules
and regulations thereunder, and rules of the New York Stock Exchange, or to
implement the terms, conditions and restrictions hereunder, and the General
Counsel may cause a legend or legends to be placed on any such certificates to
make appropriate reference to the terms, conditions and restrictions
hereunder.
(e)
Stock
Powers
. Employee agrees to execute and deliver to the Company
one or more stock powers, in such form as may be specified by the General
Counsel, authorizing the transfer of the Restricted Stock to the Company, at the
Grant Date or upon request at any time thereafter.
6
.
Employee
Representations and Warranties and Release
.
As a condition
to any non-forfeiture of the Restricted Stock that vests upon Termination of
Employment, the Company may require Employee (i) to make any representation or
warranty to the Company as may be required under any applicable law or
regulation, and (ii) to execute a release from claims against the Company
arising at or before the date of such release, in such form as may be specified
by the Company.
7.
Miscellaneous
.
(a)
Binding Agreement; Written
Amendments
. This Agreement shall be binding upon the heirs,
executors, administrators and successors of the parties. This Agreement
constitutes the entire agreement between the parties with respect to the
Restricted Stock, and supersedes any prior agreements or documents with respect
to the Restricted Stock. No amendment or alteration of this Agreement which may
impose any additional obligation upon the Company shall be valid unless
expressed in a written instrument duly executed in the name of the Company, and
no amendment, alteration, suspension or termination of this Agreement which may
materially impair the rights of Employee with respect to the Restricted Stock
shall be valid unless expressed in a written instrument executed by
Employee.
(b)
No Promise of
Employment.
The Restricted Stock and the granting thereof
shall not constitute or be evidence of any agreement or understanding, express
or implied, that Employee has a right to continue as an officer or employee of
the Company for any period of time, or at any particular rate of
compensation.
(c)
Governing Law
. The
validity, construction, and effect of this Agreement shall be determined in
accordance with the laws (including those governing contracts) of the state of
New Jersey, without giving effect to principles of conflicts of laws, and
applicable federal law.
(d)
Mandatory Tax
Withholding
. Unless otherwise determined by the Committee, at
the time of vesting the Company will withhold from any shares of Stock
deliverable, in accordance with Section 11(d)(i) of the Plan, the number of
shares of Stock having a value nearest to, but not exceeding, the amount of
income and employment taxes required to be withheld under applicable laws and
regulations, and pay the amount of such withholding taxes in cash to the
appropriate taxing authorities. Employee will be responsible for any withholding
taxes not satisfied by means of such mandatory withholding and for all taxes in
excess of such withholding taxes that may be due upon vesting of the Restricted
Stock.
(e)
Notices
. Any
notice to be given the Company under this Agreement shall be addressed to the
Company at its principal executive offices, in care of the Vice President,
Corporate Services or the officer designated by the Company as responsible for
the administration of this Agreement, and any notice to Employee shall be
addressed to Employee at Employee’s address as then appearing in the records of
the Company.
(i)
Shareholder
Rights.
Employee and any Beneficiary shall not have any rights
with respect to shares of Stock (including voting rights) covered by this
Agreement prior to the settlement and distribution of the shares of Stock as
specified herein.
Sample
Section 83(b) Election Form
Election
Statement Under Internal Revenue Code Section 83(b)
|
|
|
Taxpayer
Name:
|
_____________
|
|
|
Address:
|
_______________________________________________
|
|
_____________
_____________________ ___________
|
|
|
Social
Security or Taxpayer ID Number:
|
______________________________
|
|
|
Description
of Property:
|
_____
[number] shares of common stock of New Jersey Resources Corporation
granted as a an award of Restricted Stock on _____ __,
200__
|
|
|
Taxable
Year for which the election is being made:
|
200__
(year of grant of Restricted Stock)
|
|
|
Nature
of the restriction:
|
Restricted
Stock is non-transferable and subject to a risk of forfeiture until
vesting, The Restricted Stock vests __% per year on the first __
anniversaries of the grant date.
|
|
|
Fair
market value of stock on date of transfer:
|
$_____
|
|
|
Amount
paid to purchase the stock:
|
$-
0 -
|
|
I
have furnished copies of this statement to persons required by U.S.
Treasury Regulation 1.83-2(d)
|
|
|
________________
Signature of Taxpayer
|
Date
_________________
|
|
|
________________
Print or type signature
|
|
This is a
sample Election Form which may be used to make a Section 83(b) election to be
taxed on a grant of Restricted Stock at the time of grant rather than at the
time of vesting. You are free to use whatever election form you and your
financial advisor deem appropriate. New Jersey Resources Corporation (the
"Company") makes no recommendation as to whether a person granted Restricted
Stock should make a Section 83(b) election, but issues the following cautionary
statements:
Cautionary
Statements:
(1)
|
If
you make a Section 83(b) election and later forfeit the Restricted Stock,
you will not be able to rescind the election, claim a capital loss
relating to the shares, receive a refund of the taxes paid, apply the
taxes paid to any other liability you may have, or otherwise get any
benefit whatsoever from your payment of taxes on the Restricted Stock.
This is a risk that you will avoid if you do not file a Section 83(b)
election, because absent the election you will be taxed at the time the
Restricted Stock vests (if it is not previously forfeited) based on the
fair market value of the shares at the time of
vesting.
|
(2)
|
You
must have cash available to pay the taxes due as a result of your making a
Section 83(b) election, including withholding taxes. You may not sell any
of the shares of Restricted Stock and you may not direct us to withhold
any of the shares of Restricted Stock to satisfy this
obligation.
|
(3)
|
In
considering whether you might benefit from a Section 83(b) election, you
should consider alternatives that might be of greater benefit. A Section
83(b) election could be advantageous if the market value of the shares of
Restricted Stock has gone up significantly at the time of vesting.
However, if you do not make a Section 83(b) election but, instead, you use
the cash that you would have paid in taxes to invest in additional shares
of Company common stock in the market, in some cases your total return,
net of taxes, would be greater. This strategy would also avoid the risk
described in (1) above.
|
(4)
|
Filing
a Section 83(b) election represents an increased financial investment in
Company common stock. As an employee and based on your other equity awards
and ownership of Company common stock, your financial well-being may
already be significantly tied to the financial success of the Company. You
should consider whether your savings and financial assets are adequately
diversified before making a Section 83(b)
election.
|
|
How
to File a Section 83(b) Election
|
(1)
|
To
be valid, the Section 83(b) Election Form must be filed with the Internal
Revenue Service within 30 days after grant of the Restricted
Stock.
|
(2)
|
To
file the Section 83(b) Election, send it to the IRS Office where you file
your income tax return. It is recommended that you send it certified mail,
return receipt requested, so that you have proof of
filing.
|
(3)
|
You
must also send a copy to the Company. Please address the copy to the
attention of Vice President, Human
Resources.
|
(4)
|
Attach
a copy of the 83(b) when you file your income
taxes.
|
Exhibit 10.21
NEW
JERSEY RESOURCES CORPORATION
2007
Stock Award and Incentive Plan
Performance
Shares Agreement
This Performance Shares Agreement (the
“Agreement”), which includes the attached “Terms and Conditions of Performance
Shares” (the “Terms and Conditions”) and the attached Exhibit A captioned
“
Performance Goal and Earning
of Performance Shares
”, confirms the grant on
_______________
(the “Grant
Date”) by NEW JERSEY RESOURCES CORPORATION, a New Jersey corporation (the
“Company”), to
_____________
(“Employee”),
under Sections 6(e), 6(i) and 7 of the 2007 Stock Award and Incentive Plan
(the “Plan”), of Performance Shares (the “Performance Shares”), including rights
to Dividend Equivalents as specified herein, as follows:
|
Target
Number Granted:
|
______
Performance
Shares (“Target Number”)
|
|
How Performance Shares are
Earned and Vest
: The Performance Shares, if not previously
forfeited, (i) will be earned, if and to the extent that the
Performance Goal
|
|
defined
on Exhibit A to this Agreement is achieved, with the corresponding
number of Performance Shares earned (ranging from 0% to 150% of the Target
Number) as specified on Exhibit A, and (ii) will vest as to the
number of Performance Shares earned if Employee continues to be employed
by the Company or a Subsidiary through September 30, 2010 (the “Stated
Vesting Date”). In addition, if not previously forfeited, upon a Change in
Control the Performance Shares will be deemed earned in an amount equal to
the greater of the Target Number or the number of Performance
Shares that would have been earned based upon the actual level
of achievement if the performance period had ended at the date of the
Change in Control and will become immediately vested, and, if (and only
if) the stock of the Company remains publicly traded after the Change in
Control, any Performance Shares not earned will remain potentially
earnable in accordance with the terms of this Agreement. In
addition, if not previously forfeited, the Performance Shares will be
deemed earned and become vested upon the occurrence of certain events
relating to Termination of Employment to the extent provided in
Section 4 of the attached Terms and Conditions. The terms “vest” and
“vesting” mean that the Performance Shares have become non-forfeitable
upon the occurrence of a voluntary Termination of Employment by Employee
(excluding a Retirement). If the Performance Goal is not met
(or not fully met) and the Performance Shares are not otherwise deemed
earned by the Earning Date (as defined below), the Performance Shares (or
the unearned portion of the Performance Shares) will be immediately
forfeited. If Employee has a Termination of Employment prior to
a Stated Vesting Date and the Performance Shares are not otherwise deemed
earned and vested by that date, the Performance Shares will be immediately
forfeited except as otherwise provided in Section 4 of the attached
Terms and Conditions. Forfeited Performance Shares cease to be outstanding
and in no event will thereafter result in any delivery of shares of Stock
to Employee.
|
|
Performance Goal and Earning
Date:
The Performance Goal and Earning Date, and the number of
Performance Shares earned for specified levels of performance
|
|
at
the Earning Date, shall be as specified in Exhibit A
hereto.
|
|
Settlement
: Performance
Shares that are to be settled hereunder, including Performance Shares
credited as a result of Dividend Equivalents, will be settled by
|
|
delivery
of one share of Stock, for each Performance Share being settled.
Settlement shall occur at the time specified in Section 6 of the
attached Terms and
Conditions.
|
The Performance Shares are subject to
the terms and conditions of the Plan and this Agreement, including the Terms and
Conditions of Performance Shares attached hereto and deemed a part hereof. The
number of Performance Shares and the kind of shares deliverable in settlement
and other terms and conditions of the Performance Shares are subject to
adjustment in accordance with Section 5 of the attached Terms and
Conditions and Section 11(c) of the Plan.
Employee acknowledges and agrees that
(i) the Performance Shares are nontransferable, except as provided in
Section 3 of the attached Terms and Conditions and Section 11(b) of the
Plan, (ii) the Performance Shares are subject to forfeiture in the event of
Employee’s Termination of Employment in certain circumstances prior to vesting,
as specified in Section 4 of the attached Terms and Conditions, and
(iii) sales of shares of Stock will be subject to any Company policy
regulating trading by employees.
Capitalized terms used in this
Agreement but not defined herein shall have the same meanings as in the
Plan.
IN WITNESS WHEREOF, NEW JERSEY
RESOURCES CORPORATION has caused this Agreement to be executed by its officer
thereunto duly authorized.
NEW JERSEY RESOURCES
CORPORATION
By:_____________________
LAURENCE M. DOWNES
Chairman & CEO
EMPLOYEE
____________________
NAME
Title
TERMS AND
CONDITIONS OF PERFORMANCE SHARES
The following Terms and Conditions
apply to the Performance Shares granted to Employee by NEW JERSEY RESOURCES
CORPORATION (the “Company”) and Performance Shares resulting from Dividend
Equivalents (as defined below), if any, as specified in the Performance Shares
Agreement (of which these Terms and Conditions form a part). Certain terms of
the Performance Shares, including the number of Performance Shares granted,
vesting date(s) and settlement date, are set forth on the cover page hereto and
Exhibit A, which are an integral part of this Agreement.
1.
General
. The
Performance Shares are granted to Employee under the Company’s 2007 Stock Award
and Incentive Plan (the “Plan”), which has been previously delivered to Employee
and/or is available upon request to the Corporate Benefits Department. All of
the applicable terms, conditions and other provisions of the Plan are
incorporated by reference herein. Capitalized terms used in this Agreement but
not defined herein shall have the same meanings as in the Plan. If there is any
conflict between the provisions of this document and mandatory provisions of the
Plan, the provisions of the Plan govern. By accepting the grant of the
Performance Shares, Employee agrees to be bound by all of the terms and
provisions of the Plan (as presently in effect or later amended), the rules and
regulations under the Plan adopted from time to time, and the decisions and
determinations of the Leadership Development and Compensation Committee of the
Company’s Board of Directors (the “Committee”) made from time to
time.
2.
Account for
Employee
.
The
Company shall maintain a bookkeeping account for Employee (the “Account”)
reflecting the number of Performance Shares then credited to Employee hereunder
as a result of such grant of Performance Shares and any crediting of additional
Performance Shares to Employee pursuant to payments equivalent to dividends paid
on shares of Stock under Section 5 hereof (“Dividend
Equivalents”).
3.
Nontransferability
.
Until Performance Shares become settleable in accordance with the terms of this
Agreement, Employee may not transfer Performance Shares or any rights hereunder
to any third party other than by will or the laws of descent and distribution,
except for transfers to a Beneficiary or as otherwise permitted and subject to
the conditions under Section 11(b) of the Plan. The foregoing notwithstanding,
if any Performance Share constitutes a deferral of compensation under Code
Section 409A, the Performance Share shall not be subject to anticipation,
alkienation, sale, transfer, assignment, pldege, encombrance, attachment, or
garnishment by creditors of Employee or any Beneficiary, and shall not be
subject to offset by the Company at any time before the settlement
date.
4.
Termination
Provisions
. The following provisions will govern the vesting and
forfeiture of the Performance Shares that are outstanding at the time of
Employee’s Termination of Employment (as defined below), unless otherwise
determined by the Committee (subject to Section 8(a) hereof):
(a)
Death or Disability.
In the
event of Employee’s Termination of Employment due to death or Disability (as
defined below) the Performance Shares will be deemed earned in an amount equal
to the greater of the Target Number or the number of Performance Shares that
would have been earned based upon the actual level of achievement if the
performance period had ended at the date of the Termination of Employment. A
Pro-Rata Portion (as defined below) of the Performance Shares earned, to the
extent not previously vested, will vest immediately, and such Performance
Shares, together with any then-outstanding Performance Shares that previously
became vested, will be settled in accordance with Section 6(a) hereof. Any
portion of the then-outstanding Performance Shares not earned or not vested at
or before the date of Termination will be forfeited.
(b)
Termination by the Company or
Voluntarily by the Employee.
In the event of Employee’s Termination of
Employment by the Company for any reason other than Disability or by Employee
voluntarily (other than a Retirement), the portion of the then-outstanding
Performance Shares not vested at the date of Termination will be
forfeited.
(c)
Retirement.
In the event of
Employee’s Termination of Employment due to Retirement (as defined below), the
Performance Shares will be deemed earned in an amount equal to fifty percent of
the Target Number. A Pro-Rata Portion (as defined below) of the Performance
Shares earned, to the extent not previously vested, will vest immediately, and
such Performance Shares, together with any then-outstanding
Performance
Shares that previously became vested, will be settled in accordance with Section
6(a) hereof. Any portion of the then-outstanding Performance Shares not earned
or not vested at or before the date of Termination will be
forfeited.
(d) C
ertain Definitions
. The
following definitions apply for purposes of this Agreement:
(i) “Disability” means Employee has
been incapable of substantially fulfilling the positions, duties,
responsibilities and obligations of his employment because of physical, mental
or emotional incapacity resulting from injury, sickness or disease for a period
of at least six consecutive months. The Company and Employee shall agree on the
identity of a physician to resolve any question as to Employee’s disability. If
the Company and Employee cannot agree on the physician to make such
determination, then the Company and Employee shall each select a physician and
those physicians shall jointly select a third physician, who shall make the
determination. The determination of any such physician shall be final and
conclusive for all purposes of this Agreement. In the case of Performance Shares
that do not constitute a deferral of compensation under Section 409A of the
Code, only the Company can initiate a Termination of Employment due to
Disability.
(ii) “Pro Rata Portion” means a
fraction the numerator of which is the number of days that have from the Grant
Date to the date of Employee’s Termination of Employment and the denominator of
which is the number of days from the Grant Date to the Stated Vesting
Date.
(iii) “Retirement” means the Employee
terminates employment at or after age 65, or at or after age 55 with 20 or more
years of service.
(iv) “Subsidiary” means any subsidiary
corporation of the Company within the meaning of Section 424(f) of the Code
(“Section 424(f) Corporation”) and any partnership, limited liability
company or joint venture in which either the Company or Section 424(f)
Corporation is at least a fifty percent (50%) equity participant.
(v) “Termination of Employment” and
“Termination” means the earliest time at which Employee is not employed by the
Company or a Subsidiary of the Company and is not serving as a non-employee
director of the Company or a Subsidiary of the Company.
5
.
Dividend
Equivalents and Adjustments
.
(a)
Dividend Equivalents
.
Dividend Equivalents will be credited on Performance Shares (other than
Performance Shares that, at the relevant record date, previously have been
settled or forfeited) and deemed reinvested in additional Performance Shares.
Dividend Equivalents will be credited with respect to unearned Performance
Shares, earned but not vested Performance Shares, and vested but not settled
Performance Shares. Dividend Equivalents will be credited as follows, except
that the Company may vary the manner of crediting (for example, by crediting
cash dividend equivalents rather than additional Performance Shares) for
administrative convenience:
(i)
Cash Dividends
. If the
Company declares and pays a dividend or distribution on shares of Stock in the
form of cash, then additional Performance Shares shall be credited to Employee’s
Account in lieu of payment or crediting of cash dividend equivalents equal to
the number of Performance Shares credited to the Account as of the relevant
record date multiplied by the amount of cash paid per share of Stock in such
dividend or distribution divided by the Fair Market Value of a share of Stock at
the payment date for such dividend or distribution.
(ii)
Non-Share Dividends
. If the
Company declares and pays a dividend or distribution on shares of Stock in the
form of property other than shares of Stock, then a number of additional
Performance Shares shall be credited to Employee’s Account as of the payment
date for such dividend or distribution equal to the number of Performance Shares
credited to the Account as of the record date for such dividend or distribution
multiplied by the fair market value of such property actually paid as a dividend
or distribution on each outstanding share of Stock at such payment date, divided
by the Fair Market Value of a share of Stock at such payment date.
(iii)
Share Dividends and Splits
.
If the Company declares and pays a dividend or distribution on shares of Stock
in the form of additional shares of Stock, or there occurs a forward split of
shares of Stock, then a number of additional Performance Shares shall be
credited to Employee’s Account as of the payment date for such dividend or
distribution or forward split equal to the number of Performance Shares credited
to the Account as of the record date for such dividend or distribution or split
multiplied by the number of additional shares of Stock actually paid as a
dividend or distribution or issued in such split in respect of each outstanding
share of Stock.
(b)
Adjustments
. The number of
Performance Shares credited to Employee’s Account shall be appropriately
adjusted in order to prevent dilution or enlargement of Employee’s rights with
respect to Performance Shares or to reflect any changes in the number of
outstanding shares of Stock resulting from any event referred to in Section
11(c) of the Plan, taking into account any Performance Shares credited to
Employee in connection with such event under Section 5(a) hereof. In furtherance
of the foregoing, in the event of an equity restructuring, as defined in FAS
123R, which affects the shares of Stock, Employee shall have a legal right to an
adjustment to Employee’s Performance Shares which shall preserve without
enlarging the value of the Performance Shares, with the manner of such
adjustment to be determined by the Committee in its discretion.
(c)
Risk of Forfeiture and Settlement of
Performance Shares Resulting from Dividend Equivalents and Adjustments.
Performance Shares which directly or indirectly result from Dividend
Equivalents on or adjustments to a Performance Share granted hereunder shall be
subject to the same risk of forfeiture and other conditions as apply to the
granted Performance Share and will be settled at the same time as the granted
Performance Share.
6.
Settlement and
Deferral
.
(a)
Settlement Date.
Performance
Shares granted hereunder that have been earned and vested, together with
Performance Shares credited as a result of Dividend Equivalents with respect
thereto, shall be settled by delivery of one share of Stock for each Performance
Share being settled. Settlement of a Performance Share granted hereunder shall
occur at the Stated Vesting Date (with shares to be delivered within five
business days after the Stated Vesting Date); provided, however, that settlement
shall occur earlier (i) within 90 days after the date of death of
Employee, (ii) within 60 days after termination due to Disability (subject
to Section 6(c)(iii), if applicable ), or (iii) upon a Change in
Control except that, if the Performance Shares are subject to Section 6(c)
hereof, no distribution shall be triggered if the Change in Control does not
involve an event that comes within the definition under
Section 409A(a)(2)(A)(v)); and provided further, that settlement shall be
deferred if so elected by Employee in accordance with Section 6(b) hereof.
Settlement of Performance Shares which directly or indirectly result from
Dividend Equivalents on Performance Shares granted hereunder shall occur at the
time of settlement of the granted Performance Share.
(b)
Elective Deferral.
The
Committee may determine to permit Employee to elect to defer settlement (or
redefer) if such election would be permissible under Section 409A of the
Code. In addition to any applicable requirements under Section 409A of the
Code, any such deferral election shall be made only while Employee remains
employed and at a time permitted under Section 409A. Any elective deferral
will be subject to such additional terms and conditions as the Vice President —
Corporate Services, or the officer designated by the Company as responsible for
administration of the Agreement, may reasonably impose.
(c)
Compliance with Code
Section 409A
. Other provisions of this Agreement notwithstanding, if
Performance Shares constitute a "deferral of compensation" under
Section 409A of the Code (“§ 409A”) as presently in effect or hereafter
amended (i.e., the Performance Shares are not excluded or exempted under § 409A
or a regulation or other official governmental guidance thereunder; Note: an
elective deferral under Section 6(b) would cause the Performance Shares to be a
deferral of compensation subject to § 409A, and reaching Retirement eligibility
under Section 4 could cause a portion of the Performance Shares to be a deferral
of compensation subject to § 409A), settlement shall be subject to the following
rules:
(i) The Company shall have no authority
to accelerate distributions relating to such Performance Shares in excess of the
authority permitted under § 409A;
(ii) Any distribution relating to such
Performance Shares triggered by Employee’s Termination of Employment and
intended to qualify under § 409A(a)(2)(A)(i) shall be made only at the time that
Employee has had a “separation from service” within the meaning of Treasury
Regulation § 1.409A-1(h) (or earlier at such time, after a Termination of
Employment, that there occurs another event triggering a distribution under the
Plan or this Agreement in compliance with § 409A);
(iii) Any distribution relating to such
Performance Shares subject to § 409A(a)(2)(A)(i) that would be made within six
months following a separation from service of a “Specified Employee” (or “key
employee”) as defined under § 409A(a)(2)(B)(i) shall instead occur at the
expiration of the six-month period under § 409A(a)(2)(B)(i). In the case of
installments, this delay shall not affect the timing of any installment
otherwise payable after the six-month delay period. During such six-month delay
period, settlement will not be accelerated upon occurrence of a Change in
Control, and otherwise accelerated settlement will only be permitted to the
extent permissible under § 409A; and
(iv) Any rights of Employee or retained
authority of the Company with respect to Performance Shares hereunder shall be
automatically modified and limited to the extent necessary so that Employee will
not be deemed to be in constructive receipt of income relating to the
Performance Shares prior to the distribution of shares to Employee and so that
Employee shall not be subject to any penalty under § 409A.
7
.
Employee
Representations and Warranties Upon Settlement
.
As a condition to the
settlement of the Performance Shares, the Company may require Employee to make
any representation or warranty to the Company as may be required under any
applicable law or regulation.
8.
Miscellaneous
.
(a)
Binding Agreement; Written
Amendments
. This Agreement shall be binding upon the heirs, executors,
administrators and successors of the parties. This Agreement constitutes the
entire agreement between the parties with respect to the Performance Shares, and
supersedes any prior agreements or documents with respect to the Performance
Shares. No amendment or alteration of this Agreement which may impose any
additional obligation upon the Company shall be valid unless expressed in a
written instrument duly executed in the name of the Company, and no amendment,
alteration, suspension or termination of this Agreement which may materially
impair the rights of Employee with respect to the Performance Shares shall be
valid unless expressed in a written instrument executed by
Employee.
(b)
No Promise of Employment.
The
Performance Shares and the granting thereof shall not constitute or be evidence
of any agreement or understanding, express or implied, that Employee has a right
to continue as an officer or employee of the Company for any period of time, or
at any particular rate of compensation.
(c)
Governing Law
. The validity,
construction, and effect of this Agreement shall be determined in accordance
with the laws (including those governing contracts) of the state of New Jersey,
without giving effect to principles of conflicts of laws, and applicable federal
law.
(d)
Fractional Performance Shares and
Shares
. The number of Performance Shares credited to Employee’s Account
shall include fractional Performance Shares calculated to at least three decimal
places, unless otherwise determined by the Committee. Unless settlement is
effected through a third-party broker or agent that can accommodate fractional
shares (without requiring issuance of a fractional Share by the Company), upon
settlement of the Performance Shares Employee shall be paid, in cash, an amount
equal to the value of any fractional Share that would have otherwise been
deliverable in settlement of such Performance Shares.
(e)
Mandatory Tax Withholding
.
Unless otherwise determined by the Committee, at the time of vesting and/or
settlement the Company will withhold from any shares of Stock deliverable in
settlement of the Performance Shares, in accordance with Section 11(d)(i)
of the Plan, the number of shares of Stock having a value nearest to, but not
exceeding, the amount of income and employment taxes required to be withheld
under applicable laws and regulations, and pay the amount of such withholding
taxes in cash to the appropriate taxing authorities. Employee will be
responsible for any withholding taxes not satisfied by means of such mandatory
withholding and for all taxes in excess of such withholding taxes that may be
due upon vesting or settlement of Performance Shares.
(f)
Statements
. An individual
statement of each Employee’s Account will be issued to Employee at such times as
may be determined by the Company. Such a statement shall reflect the number of
Performance Shares credited to Employee’s Account, transactions therein during
the period covered by the statement, and other information deemed relevant by
the Company. Such a statement may be combined with or include information
regarding other plans and compensatory arrangements. Employee’s statements shall
be deemed a part of this Agreement, and shall evidence the Company’s obligations
in respect of Performance Shares, including the number of Performance Shares
credited as a result of Dividend Equivalents (if any). Any statement containing
an error shall not, however, represent a binding obligation to the extent of
such error, notwithstanding the inclusion of such statement as part of this
Agreement.
(g)
Unfunded Obligations
. The
grant of the Performance Shares and any provision for distribution in settlement
of Employee’s Account hereunder shall be by means of bookkeeping entries on the
books of the Company and shall not create in Employee any right to, or claim
against any, specific assets of the Company, nor result in the creation of any
trust or escrow account for Employee. With respect to Employee’s entitlement to
any distribution hereunder, Employee shall be a general creditor of the
Company.
(h)
Notices
. Any notice to be
given the Company under this Agreement shall be addressed to the Company at its
principal executive offices, in care of the Vice President – Corporate Services,
or the officer designated by the Company as responsible for administration of
the Agreement, and any notice to Employee shall be addressed to Employee at
Employee’s address as then appearing in the records of the Company.
(i)
Shareholder Rights.
Employee
and any Beneficiary shall not have any rights with respect to shares of Stock
(including voting rights) covered by this Agreement prior to the settlement and
distribution of the shares of Stock as specified herein. Specifically,
Performance Shares represent a contractual right to receive shares of Stock in
the future, subject to the terms and conditions of this Agreement and the Plan,
and do not represent ownership of shares of Stock at any time before the
settlement of this Award.
Exhibit A
NEW
JERSEY RESOURCES CORPORATION
2007 Stock Award and Incentive
Plan
Performance Goal and Earning of
Performance Shares
The number of Performance Shares earned
by Participant shall be determined as of September 30, 2010 (the “Earning
Date”), based on the Company’s “Total Shareholder Return Performance” in the
33-month period ending at that date as compared against an
established group of comparable companies (the “Comparison Group”) selected by
the Committee and attached hereto as Schedule A. The number of Performance
Shares earned will then be determined based on the following grid:
|
|
|
|
Company
Total
|
|
Shareholder
Return
|
Performance
Shares Earned as
|
Performance—
|
Percentage
of
|
Percentile
Achieved
|
Target
Performance Shares
|
Less
than 27
th
|
|
0
|
%
|
27
th
(threshold)
|
|
50
|
%
|
36
th
|
|
60
|
%
|
45
th
|
|
70
|
%
|
55
th
|
|
85
|
%
|
64
th
|
|
100
|
%
|
73
rd
|
|
120
|
%
|
82
nd
|
|
135
|
%
|
91
st
and above
|
|
150
|
%
|
Upon
achievement of Total Shareholder Return at a percentile between any two
specified percentiles, the Performance Shares earned will be mathematically
interpolated on a straight-line basis.
Determinations of the Committee
regarding Total Shareholder Return performance, such performance as a percentile
within the Comparison Group, the resulting Performance Shares earned and related
matters will be final and binding on Participant. The Committee shall specify a
reasonable methodology for dealing with companies in the Comparison Group that
cease to be publicly traded companies engaged in a business comparable to that
of the Company, subject to compliance with Treasury Regulation § 1.162-27(e)(2).
Total Shareholder Return shall be calculated in a manner that reflects the
economic return to shareholders, such that any equity restructuring of the
Company or any company in the Comparison Group shall not have the effect of
enlarging or reducing the rights of Employee except to the extent of its effects
on the real economic return of a shareholder.
Schedule A
INSERT PEER GROUP
NEW
JERSEY RESOURCES CORPORATION
DIRECTORS' DEFERRED
COMPENSATION PLAN
Amended
and Restated Effective January 1, 2009
New
Jersey Resources Corporation (“NJR” or the "Corporation") hereby establishes a
deferral plan (the "Plan") for the purpose of permitting a member of the Board
of Directors of the Corporation (each an "NJR Director") and members of the
Boards of Directors of any and all subsidiaries of the Corporation (each a
“Subsidiary”) who are not employees of NJR or any Subsidiaries (each a
“Subsidiary Director” and, together with NJR Directors, “Directors”) to elect
from time to time to defer the receipt of all or a portion of the Director's
retainer and other fees. The provisions of this Plan shall apply only to those
deferred amounts that were otherwise to be earned by and paid to the Directors
subsequent to December 31, 2004. This amendment and restatement of the Plan is
to comply with the requirements of Internal Revenue Code Section 409A and
applicable guidance issued thereunder (collectively “Code Section 409A”) and is
to be effective January 1, 2009.
Section
1.
Initial Deferral
Elections.
a.
Election to
Defer
. A Director may irrevocably elect to defer (an “Initial
Deferral Election”) the receipt of all or a portion of the fees, including,
without limitation, any retainer, meeting fee or committee meeting fee ("Fees"),
that the Director will become entitled to receive for services as a member of
the NJR Board of Directors for a given Plan Year (as defined below) or for
services as a Subsidiary Director for a given Plan Year. An Initial Deferral
Election shall remain valid with respect to Fees earned in succeeding Plan Years
until revoked or revised by the Director in compliance with the deadlines and
other provisions of the Plan.
b
.
Election of Deferral
Period
. A Director who elects to defer receipt of all or a
portion of the Director's Fees for a given Plan Year shall also elect whether
the deferred Fees are to be paid, or commence to be paid,
(i) during
January of the sixth year following the calendar year in which the deferred Fees
would otherwise have been paid to the Director;
(ii) on
the first day of the second month of the calendar quarter following the calendar
quarter in which the Director’s Separation from Service occurs; or
(iii) the
earlier of clause (i) or clause (ii) above.
Initial
Deferral Elections applicable to Fees otherwise payable in different Plan Years
may specify different times and forms of payment. If the Director does not make
an election under this Section 1(b) with respect to the time of payment of his
deferred Fees for a given Plan Year, the Director's deferred Fees for that Plan
Year shall be paid on the first day of the calendar quarter following the
calendar quarter in which the Director’s Separation from Service
occurs.
A Separation from Service occurs when
the Director ceases to be a member of the Board of the Corporation and any Board
of an Affiliate (which includes any entity required to be treated as the
Corporation under Code Section 409A). A Separation from Service shall also occur
when it is reasonably anticipated that the level of bona fide Board services the
Director will perform after that date will permanently decrease to less than 50%
of the average level of bona fide Board services performed over the immediately
preceding thirty-six (36) month period.
The Deferral Period is the period
beginning on the date the deferred Fees would otherwise have been paid to the
Director and ending on the date the deferred Fees are to be paid, or commence to
be paid, pursuant to the Director's election under this Section
1(b).
c.
Election of Method of
Payment of Deferred Fees
. A Director who elects to defer the
receipt of all or a portion of the Director's Fees for a given Plan Year shall
also elect whether the deferred Fees are to be paid, subject to Section
3,
(i) in
a single sum payment at the end of the Deferral Period, or
(ii) in
the number of annual installments elected by the Director (but not more than 5)
with such installments commencing at the end of the Deferral Period. The amount
of each such installment shall
be equal to the amount
credited to the Director’s Deferred Fee Account (as defined in Section 2 below)
on the day next preceding the date of payment of the installment, divided by the
number of installments remaining to be paid. The unpaid portion of the
Director's deferred Fees shall continue to be adjusted, as provided in Section
2, during the period that the Director is receiving such installment payments.
For the purposes of Code Section 409A , the entitlement to a series of
installment payments will be treated as the entitlement to a single
payment.
A
Director shall also elect the form and number of installments of payments to be
paid in the case of Disability. “Disability” shall mean that the Director is
considered disabled as defined by the Social Security Administration. If a
Director does not make an election under this Section 1(c) with respect to the
method of payment of his deferred Fees for a given calendar year, the Director's
deferred Fees for that calendar year shall be paid in the same manner as the
Director's deferred Fees for the next preceding calendar year with respect to
which the Director made an election as to the method of payment. If the Director
has not previously elected to defer Fees, or has not previously elected the
method of payment of his deferred Fees, the Director's deferred Fees shall be
paid in a single sum paymentat after the end of the Deferral Period for such
deferred Fees.
d.
Time and Manner of
Elections
. A Director's elections shall be made by filing a
written notice with the Secretary of the Corporation (the "Secretary") on the
form prescribed by the Secretary for this purpose. The elections with respect to
the deferral of the Director's Fees for a given calendar year shall be made no
later than December 31st of the preceding year; provided, however, that for the
calendar year in which an individual first becomes a Director or, in the case of
Subsidiary Directors, such Directors first become eligible to participate in the
Plan, the Director may make the elections with respect to Fees for such year to
be earned after such elections are made within 30 days after first becoming a
Director or first becoming eligible to participate. However, if, as of the date
the Director first becomes eligible to participate in the Plan, the Director has
been eligible to participate in the Plan or any other nonqualified deferred
compensation account balance plans sponsored by the Corporation or an affiliate
(as required under Code Section 409A) within the 24 months preceding his
eligibility date, then such election shall apply to Fees earned beginning on
January 1st of the following calendar year. An Initial Deferral Election, if
submitted to the Committee earlier than the dates specified above, may be
changed by the Director at any time prior to the date specified
above.
Section
2.
Subsequent Deferral
Elections.
The Committee may, in its sole discretion, permit
participating Directors to submit additional deferral elections with respect to
amounts previously subject to an Initial Deferral Election in order to delay,
but not to accelerate, a payment, or to change the form of or number of
installments elected with respect to, the payment of an amount of deferred Fees
(a “Subsequent Deferral Election”), but if, and only if, the following
conditions are satisfied: (i) the Subsequent Deferral Election must not take
effect until 12 months after the date on which it is made, (ii) in the case of a
payment other than a payment attributable to the Director’s death, the
Subsequent Election further defers the payment for a period of not less than 5
years from the date such payment would otherwise have been made, or in the case
of installment payments, 5 years from the date the first installment was
scheduled to be paid, and (iii) the Subsequent Election is received by the
Administrator at least 12 months prior to the date the payment would otherwise
have been made, or in the case of installment payments, 12 months prior to the
date the first installment was scheduled to be paid.
Section
3.
Administration of the
Plan.
a.
Authority
. The
Nominating and Corporate Governance Committee of the Board of Directors of the
Corporation (hereinafter referred to as “the Committee) shall administer the
Plan in accordance with its terms, and shall have all powers necessary to
accomplish such purpose, including the power and authority to construe and
interpret the Plan, to define the terms used herein, to prescribe, amend and
rescind rules and regulations, agreements, forms, and notices relating to the
administration of the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. Any actions of the Committee with
respect to the Plan shall be conclusive and binding upon all persons interested
in the Plan. The Committee may appoint agents and delegate thereto powers and
duties under the Plan, except as otherwise limited by the Plan. The Committee
shall not be entitled to act on or decide any matter relating solely to members
or any of their rights or benefits under the Plan. The Committee shall not
receive any special compensation for serving in this capacity but shall be
reimbursed for any reasonable expenses incurred in connection therewith. No bond
or other security need be required of the Committee in any
jurisdiction.
b.
Limitation of
Liability
. Each member of the Committee shall be entitled to,
in good faith, rely or act upon any report or other information furnished to him
or her by any officer or other employee of the Corporation, the Corporation's
independent certified public accountants, or any executive compensation
consultant, legal counsel, or other professional retained by the Corporation to
assist in the administration of the Plan. To the maximum extent permitted by
law, no member of the Committee, nor any person to whom ministerial duties have
been delegated, shall be liable to any person for any action taken or omitted in
good faith in connection with the interpretation and administration of the
Plan.
c.
Indemnification
. To
the maximum extent permitted by law, members of the Committee shall be fully
indemnified and protected by the Corporation with respect to any action taken or
omitted in good faith in connection with the interpretation or administration of
the Plan.
d.
Plan
Year
. The Plan’s books and records and administrative
functions shall be maintained and operated on the basis of a 12-month calendar
year commencing each January 1.
Section
4.
Earnings on Deferred
Fees
.
a.
Establishment of Deferral
Accounts.
A Director's deferred Fees for a given calendar year
shall be credited to an account established and maintained to record such
deferred Fees (a "Deferred Fee Account"). Such credit shall be as of the date
such deferred Fees would otherwise have been payable to the Director. A separate
Deferred Fee Account shall be established and maintained for each calendar
year.
b.
Hypothetical Investment
Elections for Deferred Fees
. At the time a Director elects to
defer receipt of Fees, the Director shall designate in writing the portion of
such Deferred Fees, stated as a whole percentage, to be credited to the Interest
Account and the portion to be credited to the Stock Account. Any Deferred Fees
to be credited to either such Account shall be rounded to the nearest whole
cent, with amounts equal to or greater than $.005 rounded up and amounts below
$.005 rounded down. If a Director fails to elect how to allocate any Deferred
Fees between the two investment accounts, 100% of such Deferred Fees shall be
credited to the Interest Account. By written notice to the Secretary of the
Company, a Director may change the allocation of Deferred Fees previously
credited to the Interest Account to the Stock Account . Any such election shall
be effective as of the first calendar quarter commencing after receipt of such
election. No Director may make any election to change the way in which amounts
previously allocated to the Director's Deferral Account are deemed invested
within six months of the date of the last such election by such Director to
change the way in which such amounts are deemed invested. A Director may elect
to change the way Fees not yet credited to the Director’s Deferred Fee Account
are deemed invested as of the end of any calendar month by written notice to the
Company received prior to the end of such month, and may make up to three such
elections each year.
As of the end of each calendar month,
any Deferred Fees credited to the Interest Account will be credited with
interest, at an annual rate equal to (1) the Prime Rate in effect on the last
business day of such month plus two (2) percentage points, on the average daily
balance credited to the account during such month. The Prime Rate with respect
to a calendar month shall be determined by reference to the Prime Rate listed in
the Wall Street Journal as the “base rate on corporate loans” posted by at least
75% of the nation’s 30 largest banks or, if at any time such rate is not
reported in the Wall Street Journal, such comparable publicly available
measurement of the cost of corporate borrowing as the NJR Board of Directors
shall determine. If more than one Prime Rate is listed in the Wall Street
Journal for a given day, the Prime Rate for that day shall be the average of
such Prime Rates.
c.
Stock
Account
. Any Deferred Fees allocated to the Stock Account
shall be deemed invested in a number of notional shares of the Company's common
stock (the "Units") equal to the quotient of (
i
) such Deferred Fees
divided by (
ii
)
the Fair Market Value (defined below) on either the date the Deferred Fees then
being allocated to the Stock Account would otherwise have been paid or such
other date, not later than 90 days thereafter, as may be specified for deemed
investment by the Company (this provision permitting the Company to establish a
quarterly investment date, for convenient and economical administration of the
Plan). Fractional Units shall be credited, but shall be rounded to the nearest
hundredth percentile, with amounts equal to or greater than .005 rounded up and
amounts less than .005 rounded down. Whenever a dividend other than a dividend
payable in the form of shares is declared with respect to the shares, the number
of Units in the Director's Stock Account shall be increased by the number of
Units determined by dividing (
i
) the product of
(
A
) the number
of Units in the Director's Stock Account on the related dividend record date and
(
B
) the amount
of any cash dividend declared by the Company on a Share (or, in the case of any
dividend distributable in property other than common stock, the per share value
of such dividend, as determined by the Company for purposes of income tax
reporting) by (
ii
) the Fair Market
Value on the related dividend payment date. In the case of any dividend declared
on common stock which is payable in shares of common stock, the Director's Stock
Account shall be increased by the number of Units equal to the product of (
i
) the number of
Units credited to the Directors Stock Account on the related dividend record
date and (
ii
)
the number of shares (including any fraction thereof) distributable as a
dividend on a share. In the event of any change in the number or kind of
outstanding shares of common stock by reason of any recapitalization,
reorganization, merger, consolidation, stock split or any similar change
affecting such shares, other than a dividend of cash, stock or property as
provided above, the NJR Board of Directors shall make an appropriate adjustment
in the number of Units credited to the Director's Stock Account. For purposes of
this section, "Fair Market Value" on any date shall mean the closing price of a
share of Common Stock on such date as reported in the principal consolidated
transaction reporting system on which the common stock is principally
traded.
d.
Distribution from Accounts
Upon Separation from Service as a Director
. The time and form
of payments of hypothetical investment earnings shall be the same as those
applicable to the deferred Fees to which such earnings are attributable.
Notwithstanding any other provision of the Plan to the contrary, amounts
credited to a Director’s Stock Account may not be reallocated or deemed
reinvested in any other investment vehicle, but shall remain as Deferred Stock
until such time as the Deferred Fee Account is settled in accordance with
Section 1.c.
e.
Statements
. The
Committee will furnish written statements to each Participant reflecting the
amount credited to a Participant's Deferral Accounts and transactions therein
not less frequently than once each calendar quarter. Such written statements
shall be in addition to any information or communication available to a
Participant with respect to his Deferral Account through other means, such as
the internet or telephony.
Section
5. Payments
Not Specified in a Deferral Election.
a.
Method of Payment in the
Event of Death
. If a Director dies while a member of the NJR
or NJNG Board of Directors or prior to the full payment to the Director of all
of the Director's deferred Fees, as adjusted as provided in Section 2, an amount
equal to the unpaid portion of such deferred Fees, as adjusted as provided in
Section 2, shall be paid in a single sum payment to the Director's designated
beneficiary or beneficiaries. Such single sum payment shall be made within 30
days after the death of the Director.
b.
Delay of
Payments
. Any payment otherwise due under the terms of the
Plan which would (i) not be deductible in whole or in part under section 162(m)
of the Code, or (ii) violate Federal securities laws or other applicable law may
not be made until the earliest date on which such payment no longer is
nondeductible or violates such laws. Payment may be delayed for a reasonable
period in accordance with the provisions of Code Section 409A (including in the
event the payment is not administratively practical due to events beyond the
recipient’s control such as where the recipient is not competent to receive the
benefit payment, there is a dispute as to amount due or the proper recipient of
such benefit payment, or additional time is needed to calculate the amount
payable). No interest shall accrue or be paid because of any delay of
payment.
c.
Acceleration of
Payments
. The Committee may not permit the acceleration of the
time or schedule of any payment or amount scheduled to be paid pursuant to the
Plan, unless such acceleration of the time or schedule is (i) necessary to
fulfill a domestic relations order (as defined in section 414(p)(1)(B) of the
Code) or to comply with conflict of interest or ethics laws (as defined in Code
Section 409A), (ii) to be used for the payment of FICA or other approved taxes
on amounts defined under the Plan, (iii) equal to amounts included in the
federal personal taxable income of the Participant under Code Section 409A or
(iv) otherwise allowed under Code Section 409A. Other provisions of the Plan
notwithstanding, should the Director experience a Separation from Service within
60 days following the occurrence of an event or transaction constituting a
Change In Control, the participating Director shall be paid the balance of his
or her Deferred Fee Account as a lump sum within 60 days following such
Separation from Service.
d. For
the purposes of this Agreement, a “Change In Control” shall be deemed to have
occurred if:
(i)
Any
Person (as defined below) acquires (or has acquired during the 12-month period
ending on the date of the most recent acquisition by such Person) Voting
Securities (as defined below), of the Company and, immediately thereafter, is
the “beneficial ownership” (within the meaning of Rule 13d-3, as promulgated
under Section 13(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) of Voting Securities of the Company representing fifty percent
(50%) or more of the combined Voting Power (as defined below) of the Company's
securities; or
(ii)
Within
any 12-month period, the persons who were directors of the Company immediately
before the beginning of such period (the “Incumbent Directors”) shall cease (for
any reason other than death) to constitute at least a majority of the Board or
the board of directors of any successor to the Company,
provided that
any
director who was not a director at the beginning of such period shall be deemed
to be an Incumbent Director if such director was elected to the Board by, or on
the recommendation of or with the approval of, at least a majority of the
directors who then qualified as Incumbent Directors either actually or by prior
operation of this Section 5(d); or
(iii)
the
consummation of a merger, consolidation, share exchange, division, sale or other
disposition of all or substantially all of the assets of the Company (a
“Corporate Event”), except that a Corporate Event shall not trigger a Change in
Control under this clause (iii) if the shareholders of the Company immediately
prior to such Corporate Event shall hold, directly or indirectly, immediately
following such Corporate Event a majority of the Voting Power of (
x
) in the case of a
merger or consolidation, the surviving or resulting corporation, (
y
) in the case of a
share exchange, the acquiring corporation or (
z
) in the case of a
division or a sale or other disposition of assets, each surviving, resulting or
acquiring corporation.
(iv)
Person
Defined
. For purposes of this Section 7, “Person” shall have
the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act, as
supplemented by Section 13(d)(3) of the Exchange Act; provided, however, that
Person shall not include (x) the Company or any subsidiary of the Company or
(
y
) any
employee benefit plan sponsored by the Company or any subsidiary of the
Company.
(v)
Voting
Power
Defined
. A specified percentage of “Voting Power” of a company
shall mean such number of the Voting Securities as shall enable the holders
thereof to cast such percentage of all the votes which could be cast in an
annual election of directors (without consideration of the rights of any class
of stock other than the common stock of the company to elect directors by a
separate class vote); and “Voting Securities” shall mean all securities of a
company entitling the holders thereof to vote in an annual election of directors
(without consideration of the rights of any class of stock other than the common
stock of the company to elect directors by a separate class vote).
(vi)
The above
definitions shall be interpreted and applied in a manner that complies with
change in control or ownership trigger event rules under Code Section
409A.
Section
6.
Assets Placed in
Trust
.
The
Corporation may, in its discretion, establish one or more Trusts (including
sub-accounts under such Trust(s)), and deposit therein amounts of cash, Stock,
or other property not exceeding the amount of the Corporation's obligations with
respect to a Director's Deferred Fee Account established under Section 2. In
such case, the amounts of hypothetical income and appreciation and depreciation
in value of such Deferred Fee Account shall be equal to the actual income on,
and appreciation and depreciation of, the assets in such Trust(s). Other
provisions of this Section 4 notwithstanding, the timing of allocations and
reallocations of assets in such a Deferred Fee Account, and the investment
vehicles available with respect to such Deferred Feel Account, may be varied to
reflect the timing of actual investments of the assets of such Trust(s) and the
actual investments available to such Trust(s).
"Trust"
shall mean any trust or trusts established or designated by the Company to hold
Stock or other assets in connection with the Plan;
provided
,
however
, that (i)
such trust shall be sited in the United States, (ii) the funding of such trust
shall in no way be contingent upon the financial condition of the Company, and
(iii) the assets of such trust shall remain subject to the claims of the general
creditors of the Company in the event of an insolvency of the Company. The
Company shall be considered “insolvent” for purposes of this Plan and any Trust
if (i) the Company is unable to pay its debts as they become due, or (ii) the
Company is subject to a pending proceeding as a debtor under the United States
Bankruptcy Code.
Section
7.
Plan
Termination.
a.
In
General
. The Committee may, with prospective or retroactive
effect, amend, alter, suspend, discontinue, or terminate the Plan at any time
without the consent of participating Directors, stockholders, or any other
person; provided, however, that, without the consent of a participating
Director, no such action shall materially and adversely affect the rights of
such Director with respect to any rights to payment of amounts credited to such
Director's Deferred Fee Account and any such action shall comply with the
restriction under and requirements of Code Section 409A.
b.
Termination and
Payment
. Notwithstanding the provisions of section 11(a), the
Committee may, in its sole discretion, terminate the Plan (in whole or in part)
with respect to one or more participating Directors and distribute to such
affected Directors the amounts credited to their Deferred Fee Accounts in a lump
sum as soon as reasonably practicable following such termination, but if, and
only if such termination and accelerated payment complies with the requirements
of Code Section 409A.
Section
8.
Miscellaneous
.
a.
Designation
of Beneficiary.
A Director may designate a beneficiary or
beneficiaries (which may be an entity other than a natural person) to receive
any payments of the Director's deferred Fees to be made upon the Director's
death. At any time, and from time to time, any such designation may
be changed or canceled by the Director without the consent of any
beneficiary. Any such designation, change or cancellation must be by
written notice filed with the Secretary and shall not be effective until
received by the Secretary. Any such written notice may apply to (i)
only the Director's deferred Fees for a particular calendar year or years, or
(ii) all of the Director's deferred Fees, including Fees to be deferred in
future years.
If a
Director designates more than one beneficiary with respect to any portion of the
Director's deferred Fees, any payments to such beneficiaries shall be made in
equal shares unless the Director has designated otherwise, in which case the
payments shall be made in the shares designated by the Director. If
no beneficiary has been named by a Director with respect to all or a portion of
the Director's deferred Fees, or the designated beneficiaries with respect to
all or a portion of the Director's deferred Fees have predeceased the Director,
the Director's beneficiary with respect to such deferred Fees shall be the
executor or administrator of the Director's estate.
b.
Payments
Generally In Cash.
All payments of deferred Fees shall be made
in cash, provided that a Director who has elected to have all or a portion of
any of the Director’s Deferred Fee Account treated as though invested in shares
of common stock and who elects to receive a distribution of any such Account in
a single lump sum may elect to receive the portion of such Account so invested
in shares of common stock.
c.
No
Right to
Continue
as a Director
. Nothing contained in this Plan shall be
construed as conferring upon a Director any right to continue as a member of the
NJR Board of Directors or any Subsidiary Board of Directors.
d.
No
Right to Corporate Assets
. Nothing contained in this Plan
shall be construed as giving a Director, a Director's designated beneficiaries
or any other person any equity or interest of any kind in the assets of the
Corporation or creating a trust of any kind or a fiduciary relationship of any
kind between the Corporation and any such person. As to any claim for
payments due with respect to a
Director's
deferred Fees, the Director, the Director's designated beneficiaries and any
other persons having a claim for payments shall be unsecured creditors of the
Corporation.
e.
No
Limit on
Further
Corporate Action
. Nothing contained in this Plan shall be
construed so as to prevent the Corporation from taking any corporate action
which is deemed by the Corporation to be appropriate or in its best
interest.
f.
Assignment;
Successor in Interest
. The rights and benefits of a Director
with respect to the Director's deferred Fees are personal to the Director, and
neither the Director nor the Director's designated beneficiaries shall have the
power or right to transfer, assign, anticipate, mortgage, or otherwise encumber
any payments to be made with respect to the Director's deferred
Fees.
The
obligations of the Corporation with respect to deferred Fees are not assignable
or transferable except to a corporation which acquires all or substantially all
of the assets of the Corporation, or any corporation into which the Corporation
may be merged, converted or consolidated.
These
terms and provisions shall inure to the benefit of a Director's designated
beneficiaries, heirs, executors, administrators and successors in
interest.
g.
Amendment and
Termination
. The NJR Board of Directors may from time to time
and at any time alter or amend this Plan or suspend, discontinue or terminate
the deferral by Directors of their retainer and other fees;
provided
,
however
, that no such
action, which would adversely affect the amount, form or time of payment of the
retainer and other fees which, as of the effective date of such action, had been
deferred pursuant to a Director's election, shall be effective without the
Director's written consent.
h.
Compliance with Code Section
409A.
Any benefit, payment or other right provided by the Plan
shall be provided or made in a manner, and at such time, in such form and
subject to such election procedures (if any), as complies with the applicable
requirements of Code Section 409A to avoid a plan failure described in Code
Section 409A(a)(1). Notwithstanding any other provision hereof or document
pertaining hereto, the Plan shall be so construed and interpreted to meet the
applicable requirements of Code Section 409A to avoid a plan failure described
in Code Section 409A(a)(1). The Committee is authorized to adopt rules or
regulations deemed necessary or appropriate in connection therewith to
anticipate and/or comply the requirements of Code Section 409A and to declare
any election, consent or modification thereto void if non-compliant with Code
Section 409A. The Committee, the Corporation and any related parties shall not
be responsible for the payment of any taxes or related penalties or interest for
any failure to comply with Code Section 409A.
i.
Governing
Law
. This Plan shall be construed in accordance with and be
governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, New Jersey
Resources Corporation has caused this Plan to be executed this 31
st
day of
December, 2008, to be effective January 1, 2009.
|
NEW
JERSEY RESOURCES CORPORATION
|
Attest:
/s/ Rhonda M.
Figueroa
By:
/s/ Laurence M.
Downes
Rhonda M.
Figueroa Laurence
M. Downes
Corporate
Secretary Chairman
and Chief Executive Officer
NEW
JERSEY RESOURCES CORPORATION
Officers’
Deferred Compensation Plan
Amended
and Restated Effective January 1, 2009
NEW
JERSEY RESOURCES CORPORATION
Officers’
Deferred Compensation Plan
|
Page
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1.
Purposes
|
2
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|
|
2.
Definitions
|
2
|
|
|
3.
Administration
|
5
|
|
|
4.
Participation
|
5
|
|
|
5.
Initial
Deferral Elections
|
6
|
|
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6.
Deferral
Accounts
|
7
|
|
|
7.
Subsequent
Deferral Elections
|
8
|
|
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8.
Settlement of
Deferral Accounts
|
9
|
|
|
9.
Statements
|
10
|
|
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10.
Sources
of Stock: Limitation on Amount of Stock-Denominated
Deferrals
|
10
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11.
Amendment/Termination
|
11
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|
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12.
General
Provisions
|
11
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13.
Effective
Date
|
13
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NEW
JERSEY RESOURCES CORPORATION
Officers’
Deferred Compensation Plan
Amended
and Restated Effective January 1, 2009
1.
Purposes
. The
purpose of this Officers’ Deferred Compensation Plan (the "Plan") is
to provide certain members of a select group of management or highly compensated
employees of New Jersey Resources Corporation (the "Company") and its Affiliates
a means to defer receipt of specified portions of compensation and to have such
deferred amounts treated as if invested in specified investment vehicles in
order to enhance the competitiveness of the Company's executive compensation
program and, therefore, its ability to attract and retain qualified key
personnel necessary for the continued success and progress of the
Company. The provisions of this Plan shall apply only to those
deferred amounts that became vested, within the meaning of Code Section 409A (as
defined below), subsequent to December 31, 2004.
2.
Definitions.
In
addition to the terms defined in Section 1 above, the following terms used in
the Plan shall have the meanings set forth below:
(a) "Administrator"
shall mean the person or persons to whom the Committee has delegated the
authority to take action under the Plan
(b) “Affiliate”
shall mean any entity (whether or not incorporated) which, by reason of its
relationship with the Company, would be considered a single employer with the
Company under Section 414(b) or 414(c) of the Code, subject to the requirements
and definitions contained in Code Section 409A.
(c) "Beneficiary"
shall mean any person (which may include trusts and is not limited to one
person) who has been designated by the Participant in his or her most recent
written beneficiary designation filed with the Company to receive the benefits
specified under the Plan in the event of the Participant's death. If
no Beneficiary has been designated who survives the Participant's death, then
Beneficiary means any person(s) entitled by will or, in the absence thereof, the
laws of descent and distribution to receive such benefits.
(d)
For
the purposes of this Agreement, a "Change In Control" shall be deemed to have
occurred if:
(i)
Any
Person (as defined below) acquires (or has acquired during the 12-month period
ending on the date of the most recent acquisition by such Person) Voting
Securities (as defined below), of the Company and, immediately thereafter, is
the "beneficial ownership" (within the meaning of Rule 13d-3, as promulgated
under Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of Voting Securities of the Company representing fifty percent
(50%) or more of the combined Voting Power (as defined below) of the
Company's securities; or
(ii)
Within
any 12-month period, the persons who were directors of the Company
immediately before the beginning of such period (the "Incumbent Directors")
shall cease (for any reason other than death) to constitute at least a majority
of the Board or the board of directors of any successor to the Company,
provided that
any
director who was not a director at the beginning of such period shall be deemed
to be an Incumbent Director if such director was elected to the Board by, or on
the recommendation of or with the approval of, at least a majority of the
directors who then qualified as Incumbent Directors either actually or by prior
operation of this Section 7(b); or
(iii)
the
consummation of a merger, consolidation, share exchange, division, sale or other
disposition of all or substantially all of the assets of the Company (a
"Corporate Event"), except that a Corporate Event shall not trigger a Change in
Control under this clause (c) if the shareholders of the Company immediately
prior to such Corporate Event shall hold, directly or indirectly, immediately
following such Corporate Event a majority of the Voting Power of (
x
) in the case of a
merger or consolidation, the surviving or resulting corporation, (
y
) in the case of a
share exchange, the acquiring corporation or (
z
) in the case of a
division or a sale or other disposition of assets, each surviving, resulting or
acquiring corporation.
(iv)
Person
Defined
. "Person" shall have the meaning ascribed to such term
in Section 3(a)(9) of the Exchange Act, as supplemented by Section 13(d)(3) of
the Exchange Act; provided, however, that Person shall not include (
y
) the Company or any
subsidiary of the Company or (
z
) any employee
benefit plan sponsored by the Company or any subsidiary of the
Company.
(v)
Voting Power
Defined
. A specified percentage of "Voting Power" of a company
shall mean such number of the Voting Securities as shall enable the holders
thereof to cast such percentage of all the votes which could be cast in an
annual election of directors (without consideration of the rights of any class
of stock other than the common stock of the company to elect directors by a
separate class vote); and "Voting Securities" shall mean all securities of a
company entitling the holders thereof to vote in an annual election of directors
(without consideration of the rights of any class of stock other than the common
stock of the company to elect directors by a separate class vote).
(vi)
The above
definitions shall be interpreted and applied in a manner that complies with the
change in control or ownership trigger event rules under Code Section
409A.
(e) "Code"
shall mean the Internal Revenue Code of 1986, as amended. References
to any provision of the Code or regulation (including a proposed regulation)
thereunder shall include any successor provisions or regulations.
(f) “Code
Section 409A” shall mean Section 409A of the Code and any regulations issued
thereunder.
(g) "Committee"
shall mean the Leadership Development and Compensation Committee of the Board of
Directors of the Company or any other directors of the Company designated as the
Committee by the Board of Directors of the
Company. Except
as may be
otherwise required under the terms of the Plan or by applicable law, any
function of the Committee may be delegated to the Administrator.
(h) "Deferral
Account" shall mean the account or subaccount established and maintained by the
Company for specified deferrals by a Participant, as described in Section
6. A Deferral Account will be maintained solely as a bookkeeping
entry by the Company to evidence unfunded obligations of the
Company.
(i) “Deferral
Election” shall mean the form submitted by a Participant to the Administrator
instructing the Administrator as to both the type and amount of compensation
that is to be deferred and the time and form of payment of such deferred
amounts, but only if such form is filed within the time limits prescribed by the
Plan and fully complies in all other respects with the requirements of the
Plan.
(j) "Deferred
Stock" shall mean a right to receive Stock at the end of a specified deferral
period.
(k) "Disability"
or “Disabled” shall mean that the Participant (as defined below) is, by reason
of any medically determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous period of not
less than 12 months, receiving income replacement benefits for a period of not
less than 3 months under the long term disability provisions of the benefit
plans of the Company or its Affiliates, as applicable.
(l) "Exchange
Act" shall mean the Securities Exchange Act of 1934, as
amended. References to any provision of the Exchange Act or rule
thereunder shall include any successor provisions or rules.
(m) "Participant"
shall mean any employee of the Company or any Affiliate who is designated by the
Committee as eligible to participate in the Plan and who makes an election to
participate in the Plan.
(n)
“Retirement” shall mean a Participant’s Separation from Service (as defined
below) at or after attaining age 55 (including a Separation from Service at or
after age 55 due to a Disability).
(o) “Specified
Employee” shall mean any Participant who is a key employee of the Company, as
defined in Section 416(i) of the Code without regard to Section 416(i)(5) of the
Code, and who is determined to be a Specified Employee pursuant to procedures
adopted by the Board of Directors of the Company or its delegate in accordance
with Code Section 409A .
(p) “Separation
from Service” shall mean the Participant resigns, dies, retires or otherwise has
a termination of employment with the Company and its Affiliates subject to the
following additional rules and the requirements of Code Section
409A. A
Separation from Service shall
occur where it is reasonably anticipated that no further services will be
performed after that date or that the level of bona fide services the
Participant will perform after that date (whether as an employee or independent
contractor) will permanently decrease to less than 50% of the average level of
bona fide services performed over the immediately preceding thirty-six (36)
month period.
A Participant shall be considered to continue
employment and to not have a Separation from Service while on a leave of absence
if the leave does not exceed 6 consecutive months (29 months for a disability
leave of absence) or, if longer, so long as the Participant retains a right to
reemployment with the Company or an Affiliate under an applicable statute or by
contract. For this purpose, a “disability leave of absence” is an
absence due to any medically determinable physical or mental impairment that can
be expected to result in death or can be expected to last for a continuous
period of not less than 6 months, where such impairment causes the Participant
to be unable to perform the duties of his job or a substantially similar
job. Continued services solely as a director of the Company or an
Affiliate shall not prevent a Separation from Service from
occurring.
(q) "Stock"
shall mean New Jersey Resources Corporation Common Stock, or any other equity
securities of the Company designated by the Committee.
(r) "Trust"
shall mean any trust or trusts established or designated by the Company to hold
Stock or other assets in connection with the Plan;
provided
,
however
, that (i)
such trust shall be sited in the United States, (ii) the funding of such trust
shall in no way be contingent upon the financial condition of the Company, and
(iii) the assets of such trust shall remain subject to the claims of the general
creditors of the Company in the event of an insolvency of the
Company. The Company shall be considered “insolvent” for purposes of
this Plan and any Trust if (i) the Company is unable to pay its debts as they
become due, or (ii) the Company is subject to a pending proceeding as a debtor
under the United States Bankruptcy Code.
(s) "Trustee"
shall mean the trustee of a Trust.
(t) "Trust
Agreement" shall mean the agreement entered into between the Company and the
Trustee to carry out the purposes of the Plan, as amended or restated from time
to time.
3.
Administration.
(a)
Authority
. Except
where the terms of the Plan specifically provide otherwise, the Administrator
(subject to the ability of the Committee to restrict the Administrator) shall
administer the Plan in accordance with its terms, and shall have all powers
necessary to accomplish such purpose, including the power and authority to
construe and interpret the Plan, to define the terms used herein, to prescribe,
amend and rescind rules and regulations, agreements, forms, and notices relating
to the administration of the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan. Any
actions of the Committee or the Administrator with respect to the Plan shall be
conclusive and binding upon all persons interested in the Plan, except that any
action of the Administrator will not be binding on the Committee. The
Committee and Administrator may each appoint agents and delegate thereto powers
and duties under the Plan, except as otherwise limited by the Plan.
(b)
Administrator
. The
Administrator shall be appointed by, shall remain in office at the will of, and
may be removed, with or without cause, by the Committee, and may be one person
or a committee of several persons. The Administrator may resign at
any time. The Administrator shall not be entitled to act on or decide
any matter relating solely to himself or herself or any of his or her rights or
benefits under the Plan. The Administrator shall not receive any
special compensation for serving in his or her capacity as Administrator but
shall be reimbursed for any reasonable expenses incurred in connection
therewith. No bond or other security need be required of the
Administrator in any jurisdiction.
(c)
Limitation of
Liability
. Each member of the Committee and the Administrator
shall be entitled to, in good faith, rely or act upon any report or other
information furnished to him or her by any officer or other employee of the
Company or any Affiliate, the Company's independent certified public
accountants, or any executive compensation consultant, legal counsel, or other
professional retained by the Company to assist in the administration of the
Plan. To the maximum extent permitted by law, no member of the
Committee or the Administrator, nor any person to whom ministerial duties have
been delegated, shall be liable to any person for any action taken or omitted in
good faith in connection with the interpretation and administration of the
Plan.
(d)
Indemnification.
To
the maximum extent permitted by law, members of the Committee and the
Administrator shall be fully indemnified and protected by the Company with
respect to any action taken or omitted in good faith in connection with the
interpretation or administration of the Plan.
(e)
Plan
Year
. The Plan’s books and records and administrative
functions shall be maintained and operated on the basis of a 12-month calendar
year commencing each January 1.
4.
Participation.
The
Administrator will notify each person of his or her eligibility to participate
in the Plan not later than 30 days (or such lesser period as may be practicable
in the circumstances) prior to any deadline for filing an election
form.
5.
Initial Deferral
Elections.
(a) In
General. To the extent authorized by the Committee, a Participant may
submit to the Administrator a Deferral Election to defer the receipt of
compensation or awards which may be in the form of cash, Stock,
Stock-denominated awards or other property to be received from the Company or an
Affiliate, including salary, annual bonus awards, long-term awards, and
compensation payable under other plans and programs, employment agreements
or other arrangements, or otherwise, as may be provided under the terms of such
plans, programs and arrangements or as designated by the Administrator (an
“Initial Deferral Election.”) An Initial Deferral Election with
respect to compensation otherwise payable to the Participant in a given Plan
Year shall specify (i) the timing and form of deferred payment, lump sum or
installments, of such compensation subject to such Deferral Election to be made
at a future date specified by the Participant through which the Participant has
continuously remained an employee of the Company, or upon the Participant’s
Retirement, or upon the earlier of such specified date or such Retirement, and
(ii) the dollar amount or percentage of such compensation to be
deferred. Initial Deferral Elections applicable to compensation
otherwise payable in different Plan Years may specify different times and forms
of payment. In addition to any terms and conditions of deferral set
forth under plans, programs or arrangements from which receipt of the
Stock-denominated award or other compensation is deferred, the Committee may
impose limitations on the amounts permitted to be deferred and other terms and
conditions of deferrals under the Plan, including minimum and/or maximum periods
of deferral. Any such limitations, and other terms and conditions of
deferral, other than those required by Code Section 409A to be included within
this plan document, shall be set forth in the rules relating to the Plan or
election forms, other forms, or instructions published by the Committee and/or
the Administrator.
(b)
Date of
Election
. Each Initial Deferral Election must be received by
the Administrator prior to the following dates or will have no effect
whatsoever:
(i) With respect to salary, the
December 31 immediately preceding the year in which the salary is
earned;
(ii) With respect to any annual
or long-term incentive pay which qualifies as “performance-based compensation”
within the meaning of Code Section 409A, by the earlier of (A) the December 31
immediately preceding the end of the performance measurement period applicable
to such incentive pay or (B) the date six months prior to the end of the
performance measurement period applicable to such incentive pay provided such
additional requirements set forth in Code Section 409A are met;
(iii) With respect to
“fiscal year compensation” as defined under Code Section 409A, by the last day
of the Company’s fiscal year preceding the year in which the fiscal year
compensation is earned;
(iv) With respect to awards of
restricted stock units or other legally binding rights to a payment of
compensation in a subsequent year that is subject to a forfeiture condition
requiring the Participant’s continued services for a period of at least 12
months, on or before the 30
th
day
following the grant of such award, provided that the election is made at least
12 months in advance of the earliest date at which the forfeiture condition
could lapse.
Each
Initial Deferral Election shall become irrevocable at the dates specified above,
unless (i) the Participant incurs an Unforeseeable Financial Hardship (as
defined below), or (ii) as otherwise permitted both under Code Section 409A and
by the Administrator. In the case of an Initial Deferral Election
with respect to salary earned during a Plan Year, such election shall remain
valid with respect to salary earned in succeeding Plan Years until revoked or
revised by the Participant in compliance with the deadlines and other provisions
of the Plan. An Initial Deferral Election, if submitted to the
Administrator earlier than the dates specified above, may be changed by the
Participant at any time prior to the applicable date specified
above.
(c)
First Year of
Eligibility
. Notwithstanding the above, in the case of the
Plan Year in which a Participant first becomes eligible to participate in the
Plan, the Participant may make an Initial Deferral Election with respect to
salary within 30 days after becoming so eligible, but only with respect to
salary to be paid for services to be performed subsequent to the
election. However, as of the date the Participant first becomes
eligible to participate in the Plan, if the Participant has been eligible to
participate in the Plan or any other nonqualified deferred compensation account
balance plans sponsored by the Company or an Affiliate within the 24 months
preceding his eligibility date, then such election shall apply to salary earned
beginning on January 1
st
of the
following calendar year.
(d)
Permitted Elections
Regarding Timing and Form of Payment.
The Administrator shall
prescribe the form on which Initial Deferral Elections are to be
specified. With respect to the timing of payments of deferred
amounts, the Administrator may permit, in its sole discretion, Participants to
select as commencement dates for such payments (i) a specified date, (ii) the
Participant’s Retirement, or (iii) the earlier of, or later of, a specified date
or the Participant’s Retirement (collectively hereinafter referred to as
“Commencement Events”). With respect to the form of payment, the Administrator
may permit either lump sum or installments, but may not permit any form of
annuity. Further, the Administrator may permit, in its sole
discretion, Participants to select different times and forms of payment for
different Commencement Events, or different times and forms for a given
Commencement Event that may occur at different dates in the future, subject to
the requirements of Code Section 409A.
6.
Deferral
Accounts
.
(a)
Establishment; Crediting of
Amounts Deferred
. One or more Deferral Accounts will be
established for each Participant, as determined by the
Administrator. The amount of compensation or awards deferred with
respect to each Deferral Account will be credited to such Account as of the date
on which such amounts would have been paid to the Participant but for the
Participant's election to defer receipt hereunder, unless otherwise determined
by the Administrator. Stock-denominated awards deferred with respect
to each Deferral Account will be credited to the Participant's Deferral Account
as units of Deferred Stock, with one share of Stock equal to one unit of
Deferred Stock as opposed to cash amounts valued by reference to the market
price of Stock. With respect to any fractional shares of Stock or
Stock-denominated awards, the Administrator, in its sole discretion, shall pay
such fractional shares to the Participant in cash, credit the Deferral Account
with cash in lieu of depositing fractional shares into the Deferral Account, or
credit the Deferral Account with a fraction of a share calculated to at least
three decimal places. The amounts of hypothetical income and
appreciation and depreciation in value of such Account will be credited and
debited to, or otherwise reflected in, such Account from time to
time. Unless otherwise determined by the Administrator, amounts
credited to a Deferral Account shall be deemed invested in a hypothetical
investment as of the date of deferral.
(b)
Hypothetical
Investments
. Subject to the provisions of Sections 6(c),
amounts credited to a Deferral Account shall be deemed to be invested, at the
Participant's direction, in one or more investment vehicles as may be specified
from time to time by the Administrator. The Administrator may change
or discontinue any hypothetical investment vehicle available under the Plan in
its discretion;
provided, however
,
that each affected Participant shall be given the opportunity, without limiting
or otherwise impairing any other right of such Participant regarding changes in
investment directions, to redirect the allocation of his or her Deferral Account
deemed invested in the discontinued investment vehicle among the other
hypothetical investment vehicles, including any replacement
vehicle. The time and form of payments of hypothetical investment
earnings shall be the same as those applicable to the deferred amounts to which
such earnings are attributable.
(c)
Allocation and Reallocation
of Hypothetical Investments
. A Participant may allocate
amounts credited to his or her Deferral Account to one or more of the
hypothetical investment vehicles authorized under the Plan. Subject
to the rules established by the Administrator, if more than one hypothetical
investment vehicle is provided, a Participant may reallocate amounts credited to
his or her Deferral Account as allowed and provided for by the
Administrator. The Administrator may, in its discretion, restrict
allocation into or reallocation by specified Participants into or out of
specified investment vehicles or specify minimum or maximum amounts that may be
allocated or reallocated by Participants.
(d)
Trusts
. The
Administrator may, in its discretion, establish one or more Trusts (including
sub-accounts under such Trust(s)), and deposit therein amounts of cash, Stock,
or other property not exceeding the amount of the Company's obligations with
respect to a Participant's Deferral Account established under this Section
6. In such case, the amounts of hypothetical income and appreciation
and depreciation in value of such Deferral Account shall be equal to the actual
income on, and appreciation and depreciation of, the assets in such
Trust(s). Other provisions of this Section 6 notwithstanding, the
timing of allocations and reallocations of assets in such a Deferral Account,
and the investment vehicles available with respect to such Deferral Account, may
be varied to reflect the timing of actual investments of the assets of such
Trust(s) and the actual investments available to such Trust(s).
(e)
Restrictions on Participant
Direction.
The provisions of Section 6(b) and 6(c)
notwithstanding, the Administrator may restrict or prohibit reallocations of
amounts deemed invested in specified investment vehicles, and subject such
amounts to a risk of forfeiture and other restrictions, in order to conform to
restrictions applicable to Stock, a Stock-denominated award, or any other award
or amount deferred under the Plan and resulting in such deemed investment, to
comply with any applicable law or regulation, or for such other purpose as the
Administrator may determine is not inconsistent with the
Plan. Notwithstanding any other provision of the Plan to the
contrary, amounts credited as Deferred Stock to a Participant's Deferral Account
may not be reallocated or deemed reinvested in any other investment vehicle, but
shall remain as Deferred Stock until such time as the Deferral Account is
settled in accordance with Section 8.
(f)
Dividend
Equivalents
. Except as provided in Section 6(d), dividend
equivalents will be credited on Deferred Stock credited to a Participant's
Deferral Account as follows:
(i)
Cash and Non-Stock
Dividends
. If the Company declares and pays a dividend on
Stock in the form of cash or property other than shares of Stock, then a number
of additional shares of Deferred Stock shall be credited to a Participant's
Deferral Account as of the payment date for such dividend equal to (A) the
number of shares of Deferred Stock credited to the Deferral Account as of the
record date for such dividend, multiplied by (B) the amount of cash plus the
fair market value of any property other than shares actually paid as a dividend
on each share at such payment date, divided by (C) the fair market value of a
share of Stock at such payment date.
(ii)
Stock Dividends and
Splits.
If the Company declares and pays a dividend on Stock
in the form of additional shares of Stock, or there occurs a forward split of
Stock, then a number of additional shares of Deferred Stock shall be credited to
the Participant's Deferral Account as of the payment date for such dividend or
forward Stock split equal to (A) the number of shares of Deferred Stock credited
to the Deferral Account as of the record date for such dividend or split,
multiplied by (B) the number of additional shares actually paid as a dividend or
issued in such split in respect of each share of Stock.
7.
Subsequent Deferral
Elections
. The Plan Administrator may, in its sole discretion,
permit Participants to submit additional deferral elections with respect to
amounts previously subject to an Initial Deferral Election in order to delay,
but not to accelerate, a payment, or to change the form of payment of an amount
of deferred compensation (a “Subsequent Deferral Election”), but if, and only
if, the following conditions are satisfied: (i) the Subsequent Deferral Election
must not take effect until 12 months after the date on which it is made, (ii) in
the case of a payment other than a payment attributable to the Participant’s
death or on account of the occurrence of an Unforeseeable Emergency (as defined
below), the Subsequent Election further defers the payment for a period of not
less than 5 years from the date such payment would otherwise have been made, or
in the case of installment payments, 5 years from the date the first installment
was scheduled to be paid, and (iii) the Subsequent Election is received by the
Administrator at least 12 months prior to the date the payment would otherwise
have been made, or in the case of installment payments, 12 months prior to the
date the first installment was scheduled to be paid. In addition,
Participants may be further permitted to revise the form of payment they have
elected, or the number of installments elected, provided that such revisions
comply with the requirements of clauses (i), (ii), and (iii)
above.
8. Settlement
of Deferral Accounts.
(a)
Medium of
Payment
. The Company shall settle a Participant's Deferral
Account, and discharge all of its obligations to pay deferred compensation under
the Plan with respect to such Deferral Account, by payment of cash or, in the
discretion of the Administrator, by delivery of other assets (including Stock)
having a fair market value equal to the amount credited to the Deferral
Account. Notwithstanding any other provision of the Plan to the
contrary, amounts credited as Deferred Stock to a Participant's Deferral Account
shall be settled by delivery of shares of Stock.
(b)
Forfeitures Under Other
Plans and Arrangements
. To the extent that Stock or any other
award or amount (i) is deposited in a Trust pursuant to Section 6 in connection
with a deferral of Stock, a Stock-denominated award, or any other award or
amount under another plan, program, employment agreement or other arrangement
and (ii) is forfeited pursuant to the terms of such plan, program, agreement or
arrangement, the Participant shall not be entitled to the value of such Stock
and other property related thereto (including without limitation, dividends and
distributions thereon) or other award or amount, or proceeds
thereof.
(c)
Payments Under the
Plan
. No payment may be made under the Plan earlier than the
Participant’s Separation from Service, the date specified in a Deferral
Election, or the occurrence of a Change-in-Control or Unforeseeable
Emergency. Payments in settlement of a Deferral Account shall be made
on the date or dates (including upon the occurrence of specified events), as may
be directed by the Participant in his or her election relating to such deferred
amount. For the purposes of Code Section 409A, the entitlement to a
series of installment payments will be treated as the entitlement to a single
payment. Irrespective of any elections made by a Participant, all
amounts credited to a Participant’s Deferral Account will be paid out in a
single lump sum within thirty (30) days in the event of the Participant’s
Separation from Service with the Company (i) within 60 days following a
Change-In-Control or (ii) other than upon Retirement.
(d)
In-Service Payments Under
the Plan
. (i) Date Specified In A Deferral
Election. Payments will commence on any date specified by a
Participant in an Initial Deferral Election or Subsequent Deferral Election,
pursuant to the form specified in such election, to the extent payment of the
applicable deferred amounts has not already commenced as at such date pursuant
to other applicable provisions of the Plan. (ii) Unforeseeable
Emergency. Other provisions of the Plan notwithstanding, if, upon the
written application of a Participant, the Committee determines that the
Participant has an Unforeseeable Emergency, the Committee may, in its sole
discretion, direct the payment to the Participant of all or a portion of the
balance of a Deferral Account in a lump sum payment, provided that any such
withdrawal shall be limited by the Committee to the amount reasonably necessary
to meet the emergency, including amounts needed to pay any income taxes or
penalties reasonably anticipated to result from the payment. No
payment may be made to the extent that such emergency is or may be relieved
through reimbursement or compensation from insurance or otherwise, by
liquidation of the Participant’s assets, to the extent the liquidation of such
assets would not cause severe financial hardship, or by cessation of deferrals
under the Plan. For purposes of this Plan, an “Unforeseeable
Emergency” shall mean a severe financial hardship of the Participant or the
Participant’s beneficiary resulting from an illness or accident of the
Participant or beneficiary, the Participant’s or beneficiary’s spouse or
dependent (as defined in section 152(a) of the Code); loss of the Participant’s
or beneficiary’s property due to casualty; or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant or beneficiary. (iii) Change In Control. Other
provisions of the Plan notwithstanding, upon the occurrence of an event or
transaction constituting a Change In Control, the Administrator will direct the
immediate payment to the Participant of the balance of his or her Deferral
Account as a lump sum.
(e)
Payments Upon Separation
from Service
. (i) Retirement. Upon the Separation
from Service of the Participant due to his or her Retirement (including a
Disability that results in a Separation from Service at or after age 55),
payments of deferred amounts shall commence within thirty (30) days in the form
specified by the Participant on his or her Deferral Election (ii)
Separation from Service Other than Retirement. Upon the Separation
from Service of the Participant due to reasons other the Retirement (including a
Disability that results in a Separation from Service at or after age 55) ], the
entire balance of the Participant’s Deferral Account shall be paid to the
Participant in a lump sum within thirty (30) days following such Separation from
Service.
(f)
Specified
Employees
. Other provisions of the Plan notwithstanding,
payment may not be made to a Participant who is a Specified Employee before the
date that is 6 months after the date of termination of employment (other than a
termination caused by death) (the “Six Month Date”) or, if earlier, the date of
death of the Participant. To effectuate this requirement, all
payments otherwise due to the Participant under the terms of the Plan, or
pursuant to the terms of a valid Initial Deferral Election or Subsequent
Deferral Election made by the Participant, before the Six Month Date will be
paid to the Participant, with simple interest calculated at a prime rate
determined and applied by the Administrator at the Six Month Date, on the first
day following the end of the Six Month Date.
(g)
Delay of
Payments
. Any payment otherwise due under the terms of the
Plan which would (i) not be deductible in whole or in part under Section 162(m)
of the Code, or (ii) violate Federal securities laws or other applicable law may
not be made until the earliest date on which such payment no longer is
nondeductible or violates such laws. Payment may be delayed for a
reasonable period in accordance with the provisions of Code Section 409A
(including in the event the payment is not administratively practical due to
events beyond the recipient’s control such as where the recipient is not
competent to receive the benefit payment, there is a dispute as to amount due or
the proper recipient of such benefit payment, or additional time is needed to
calculate the amount payable). Except as provided in paragraph (f)
above, no interest shall accrue or be paid because of any delay of
payment.
(h)
Acceleration of
Payments
. The Administrator may not permit the acceleration of
the time or schedule of any payment or amount scheduled to be paid pursuant to
the Plan, unless such acceleration of the time or schedule is (i) necessary to
fulfill a domestic relations order (as defined in section 414(p)(1)(B) of the
Code) or to comply with conflicts of interest or ethics laws (as defined in Code
Section 409A ), (ii) to be used for the payment of FICA or other approved taxes
on amounts deferred under the Plan, (iii) equal to amounts included in the
federal personal taxable income of the Participant under Code Section 409A or
(iv) as otherwise allowed under Code Section 409A.
9.
Statements
. The
Administrator will furnish written statements to each Participant reflecting the
amount credited to a Participant's Deferral Accounts and transactions therein
not less frequently than once each calendar quarter. Such written
statements shall be in addition to any information or communication available to
a Participant with respect to his Deferral Account through other means, such as
the internet or telephony.
10.
Sources of
Stock: Limitation on Amount of Stock-Denominated
Deferrals
. If shares of Stock are deposited under the Plan in
a Trust pursuant to Section 6 in connection with a deferral of a
Stock-denominated award under another plan, program, employment agreement or
other arrangement that provides for the issuance of shares, the shares so
deposited shall be deemed to have originated, and shall be counted against the
number of shares reserved, under such other plan, program or
arrangement. Shares of Stock actually delivered in settlement of
Deferral Accounts shall be originally issued shares or treasury shares, in the
discretion of the Committee. If the Committee authorizes deemed
investments in Stock by Participants deferring cash, any shares to be deposited
under the Plan in a Trust in connection with such deemed investments in Stock
shall be solely treasury shares or shares acquired in the market by or on behalf
of the Trust. For this purpose, a total of 200,000 shares of Stock
held in treasury by the Company, offset by the number of shares issued under the
Compensation Deferral Plan of the Company, are hereby reserved for issuance
under the Plan, subject to adjustment to reflect stock splits, stock dividends,
and other extraordinary corporate events resulting in adjustments to the number
of shares reserved under stock option plans of the Company.
11.
Amendment/Termination.
(a)
In
General
. The Committee may, with prospective or retroactive
effect, amend, alter, suspend, discontinue, or terminate the Plan at any time
without the consent of Participants, stockholders, or any other person;
provided, however
,
that, without the consent of a Participant, no such action shall materially and
adversely affect the rights of such Participant with respect to any rights to
payment of amounts credited to such Participant's Deferral Account and any such
action shall comply with the restrictions under the requirements of Code Section
409A.
(b)
Termination and
Payment
. Notwithstanding the provisions of section 11(a), the
Committee may, in its sole discretion, terminate the Plan (in whole or in part)
with respect to one or more Participants and distribute to such affected
Participants the amounts credited to their Deferral Accounts in a lump sum as
soon as reasonably practicable following such termination, but if, and only if,
such termination and accelerated payment complies with the requirements of Code
Section 409A.
12. General
Provisions.
(a)
Limits on Transfer of
Awards
. Other than by will or the laws of descent and
distribution, no right, title or interest of any kind in the Plan shall be
transferable or assignable by a Participant or his or her Beneficiary or be
subject to alienation, anticipation, encumbrance, garnishment, attachment, levy,
execution or other legal or equitable process, nor subject to the debts,
contracts, liabilities or engagements, or torts of any Participant or his or her
Beneficiary. Any attempt to alienate, sell, transfer, assign, pledge,
garnish, attach or take any other action subject to legal or equitable process
or encumber or dispose of any interest in the Plan shall be void.
(b)
Receipt and
Release
. Payments (in any form) to any Participant or
Beneficiary in accordance with the provisions of the Plan shall, to the extent
thereof, be in full satisfaction of all claims for the awards or other
compensation deferred and relating to the Deferral Account to which the payments
relate against the Company or any Affiliate, the Committee, or the
Administrator, and the Administrator may require such Participant or
Beneficiary, as a condition to such payments, to execute a receipt and release
to such effect. In the case of any payment under the Plan of less
than all amounts then credited to an account in the form of Stock, the amounts
paid shall be deemed to relate to the Stock credited to the account at the
earliest time.
(c)
Unfunded Status of Awards;
Creation of Trusts
. The Plan is intended to constitute an
"unfunded" plan for deferred compensation and Participants shall rely solely on
the unsecured promise of the Company for payment hereunder. With
respect to any payment not yet made to a Participant under the Plan, nothing
contained in the Plan shall give a Participant any rights that are greater than
those of a general unsecured creditor of the Company;
provided, however
,
that the Committee may authorize the creation of Trusts, including but not
limited to the Trusts referred to in Section 6 hereof, or make other
arrangements to meet the Company's obligations under the Plan, which Trusts or
other arrangements shall be consistent with the "unfunded" status of the Plan
unless otherwise determined by the Committee.
(d)
Compliance
. A
Participant in the Plan shall have no right to receive payment (in any form)
with respect to his or her Deferral Account until legal and contractual
obligations of the Company relating to establishment of the Plan and the making
of such payments shall have been complied with in full. In addition,
the Company shall impose such restrictions on Stock delivered to a Participant
hereunder and any other interest constituting a security as it may deem
advisable in order to comply with the Securities Act of 1933, as amended, the
requirements of any stock exchange or automated quotation system upon which the
Stock is then listed or quoted, any applicable state securities laws, any
provision of the Company's Certificate of Incorporation or Bylaws, or any other
law, regulation, or binding contract to which the Company is a
party.
Any
benefit, payment or other right provided by the Plan shall be provided or made
in a manner, and at such time, in such form and subject to such election
procedures (if any), as complies with the applicable requirements of Code
Section 409A to avoid a plan failure described in Code Section
409A(a)(1). Notwithstanding any other provision hereof or document
pertaining hereto, the Plan shall be so construed and interpreted to meet the
applicable requirements of Code Section 409A to avoid a plan failure described
in Code Section 409A(a)(1). The Committee is authorized to adopt
rules or regulations deemed necessary or appropriate in connection therewith to
anticipate and/or comply the requirements of Code Section 409A and to declare
any election, consent or modification thereto void if non-compliant with Code
Section 409A. The Administrator, Committee, the Company and any
related parties shall not be responsible for the payment of any taxes or related
penalties or interest for any failure to comply with Code Section
409A.
(e)
Other Participant
Rights
. No Participant shall have any of the rights or
privileges of a stockholder of the Company under the Plan, including as a result
of the crediting of Stock-denominated units or other amounts to a Deferral
Account, or the creation of any Trust and deposit of such Stock therein, except
at such time as Stock may be actually delivered in settlement of a Deferral
Account. No provision of the Plan or transaction hereunder shall
confer upon any Participant any right to be employed by the Company or an
Affiliate, or to interfere in any way with the right of the Company or an
Affiliate to increase or decrease the amount of any compensation payable to such
Participant. Subject to the limitations set forth in Section 12(a)
hereof, the Plan shall inure to the benefit of, and be binding upon, the parties
hereto and their successors and assigns.
(f)
Tax
Withholding
. The Company and any Affiliate shall have the
right to deduct from amounts otherwise payable in settlement of a Deferral
Account any sums that federal, state, local or foreign tax law requires to be
withheld with respect to such payment. Shares may be withheld to
satisfy such obligations in any case where taxation would be imposed upon the
delivery of shares, except that shares issued or delivered under any plan,
program, employment agreement or other arrangement may be withheld
only in accordance with the terms of such plan, program, employment agreement or
other arrangement and any applicable rules, regulations, or resolutions
thereunder.
(g)
Governing
Law
. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of New Jersey, without giving effect to principles of
conflicts of laws, and applicable provisions of federal law.
(h)
Limitation
. A
Participant and his or her Beneficiary shall assume all risk in connection with
any decrease in value of the Deferral Account and neither the Company, the
Committee nor the Administrator shall be liable or responsible
therefor.
(i)
Adjustments
. In
the event that any dividend or other distribution (whether in the form of cash,
Stock, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange, liquidation, dissolution or other similar corporate transaction or any
other event or condition occurs that affects the Stock such that an adjustment
is determined by the Administrator or the Committee to be appropriate in order
to prevent dilution or enlargement of a Participant's rights under the Plan,
then the Administrator or the Committee may, in such manner as it may deem
equitable, adjust any or all of the number and kind of shares of Stock to be
issued upon settlement of Deferred Stock then credited to a Deferral Account
under the Plan.
(j)
Construction
. The
captions and numbers preceding the sections of the Plan are included solely as a
matter of convenience of reference and are not to be taken as limiting or
extending the meaning of any of the terms and provisions of the
Plan. Whenever appropriate, words used in the singular shall include
the plural or the plural may be read as the singular.
(k)
Severability
. In
the event that any provision of the Plan shall be declared illegal or invalid
for any reason, said illegality or invalidity shall not affect the remaining
provisions of the Plan but shall be fully severable, and the Plan shall be
construed and enforced as if said illegal or invalid provision had never been
inserted herein.
(l)
Status
. The
establishment and maintenance of, or allocations and credits to, the Deferral
Account of any Participant shall not vest in any Participant any right, title or
interest in and to any Plan or Company assets or benefits except at the time or
times and upon the terms and conditions and to the extent expressly set forth in
the Plan and in accordance with the terms of the Trust.
IN WITNESS WHEREOF, New Jersey
Resources Corporation has caused this Plan to be executed this 31
st
day of
December, 2008.
|
|
NEW
JERSEY RESOURCES CORPORATION
|
|
|
|
Attest:
|
|
|
|
|
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/s/ Rhonda
M. Figueroa
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By:
|
/s/ Laurence M.
Downes
|
Rhonda
M. Figueroa
|
|
Laurence
M. Downes
|
Corporate
Secretary
|
|
Chairman
and Chief Executive Officer
|
Exhibit 10.27
SAVINGS
EQUALIZATION PLAN
OF
NEW JERSEY RESOURCES CORPORATION
Originally
Effective
as of February 27, 1991
Amended
and Restated as of January 1, 2009
P54940LA-4
Exhibit 10.27
SAVINGS
EQUALIZATION PLAN
OF
NEW JERSEY RESOURCES CORPORATION
The
Savings Equalization Plan of New Jersey Resources Corporation (the "Plan") was
originally authorized and adopted by the Board of Directors of New Jersey
Resources Corporation (the "Corporation") effective as of February 27, 1991, was
amended and restated effective as of January 1, 2005, and is now amended and
restated effective January 1, 2009. The purpose of the Plan is to provide
certain supplemental benefits to certain select management or highly compensated
employees who are participants in the New Jersey Resources Corporation
Employees’ Retirement Savings Plan (the "Qualified Plan").
Benefits
provided under the Plan are employer matching contributions that would have been
made to the Qualified Plan on behalf of participating employees but for the
limitations on compensation and contributions imposed by Sections 401(a)(17),
401(k), 401(m) and 415 of the Internal Revenue Code.
All
benefits payable under the Plan, which is intended to constitute both an
unfunded excess benefit plan under Section 3(36) of Title I of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), and a
nonqualified, unfunded deferred compensation plan for a select group of
management or highly compensated employees under Title I of ERISA, shall be paid
out of the general assets of the Corporation. The Corporation may establish and
fund a trust in order to aid it in providing benefits due under the
Plan.
Benefits
payable to any participant of the Plan who terminated employment before January
1, 2005 shall be governed by the provisions of the Plan as in effect at the
relevant time, except as otherwise specifically stated elsewhere herein.
Benefits not vested as of December 31, 2004 or accruing under the Plan on or
after January 1, 2005 and respective related interest thereon are subject to the
provisions of Code Section 409A. Benefits accrued and vested under the
provisions of the Plan as of December 31, 2004 on behalf of any other
Participant (and interest credited thereon) are not subject to the provisions of
Code Section 409A, unless the provisions of the Plan relating to such benefits
are materially modified after October 3, 2004, and shall be separately accounted
for. On and before December 31, 2008, to the extent applicable, the Plan has
been administered in good faith compliance with the provisions of
Section 409A of the Code as enacted by the American Jobs Creation Act of
2004 and applicable regulations and other guidance issued thereunder, including
but not limited to the applicable transition rules (collectively “Code Section
409A”).
Exhibit 10.27
SAVINGS
EQUALIZATION PLAN
OF
NEW JERSEY RESOURCES CORPORATION
ARTICLES
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Page
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ARTICLE
I DEFINITIONS
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1
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ARTICLE
II PARTICIPATION
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5
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2.01 Participation
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5
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2.02 Termination
of Participation
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5
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ARTICLE
III EMPLOYER CONTRIBUTIONS
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6
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3.01 Accounts
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6
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|
3.02 Amount
of Supplemental Employer Matching Contributions
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6
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3.03 Deemed
Interest
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7
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|
3.04 Vesting
of Account
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8
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|
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ARTICLE
IV PAYMENT OF ACCOUNT
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9
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|
4.01 Payment
of Account Upon Termination of Employment
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9
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4.02 Death
Benefits
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9
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4.03 Timing
of Payment for a “Specified Employee”
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10
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ARTICLE
V PLAN ADMINISTRATION
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11
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5.01 Administration
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11
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5.02 Claims
Procedure
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11
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5.03 Expenses
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11
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ARTICLE
VI GENERAL PROVISIONS
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14
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6.01 Funding
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14
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6.02 Discontinuance
and Amendment
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14
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6.03 Termination
of Plan
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15
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6.04 Plan
Not a Contract of Employment
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15
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6.05 Facility
of Payment
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16
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6.06 Withholding
Taxes
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16
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6.07 Nonalienation
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16
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6.08 Construction
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17
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SAVINGS
EQUALIZATION PLAN
OF
NEW JERSEY RESOURCES CORPORATION
ARTICLE
I
DEFINITIONS
The
following terms when capitalized herein shall have the meanings assigned
below:
1.01
|
Accounts
shall mean the
Pre-2005 Account and the 409A Account maintained on the books of the
Corporation on behalf of each Participant pursuant to this
Plan.
|
1.02
|
Affiliate
shall mean any
division, subsidiary or affiliated company of the Corporation, which is an
“Affiliate” as defined in the Qualified Plan but only to the extent such
“Affiliate” is treated as the Corporation for purposes of the applicable
provisions of Code Section 409A.
|
1.03
|
Beneficiary
shall mean
the person or persons to whom a deceased Participant’s benefits are
payable, as provided in Section
4.02.
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1.04
Code
shall mean the
Internal Revenue Code of 1986, as amended from time to time.
1.05
|
Committee
shall mean the
Benefit Administration Committee of the Corporation or any successor
thereto.
|
1.06
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Corporation
shall mean
New Jersey Resources Corporation, or any successor by merger, purchase or
otherwise.
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1.07
Effective Date
shall mean
February 27, 1991.
1.08
Eligible Employee
shall mean a
person:
(a)
|
who
is employed by the Corporation or a wholly-owned subsidiary of the
Corporation;
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|
(b)
|
who
is a participant of the Qualified Plan;
and
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(c)
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whose
Employer Matching Contributions under the Qualified Plan are restricted by
the compensation limitations under Section 401(a)(17) of the Code, the
actual deferral percentage test under Section 401(k) of the Code, the
actual contribution percentage test under Section 401(m) of the Code, or
the contribution limitations under Section 415 of the
Code.
|
1.09
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Employer Matching
Contributions
shall mean “Employer Matching Contributions” as such
term is defined under the Qualified
Plan.
|
1.10
|
ERISA
shall mean the
Employee Retirement Income Security Act of 1974, as amended from time to
time.
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1.11
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409A Account
shall mean
the bookkeeping account (or subaccounts thereof) maintained for each
Participant to record all amounts credited on his or her behalf under
Section 3.02 on or after January 1, 2005 and any related deemed interest
on such amounts and all amounts credited to his or her Accounts as of
December 31, 2004 in which he or she is not vested as of December 31, 2004
and any related deemed interest on such
amounts.
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1.12
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Participant
shall mean
an Eligible Employee who is participating in the Plan pursuant to Section
2.01 hereof.
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1.13
|
Plan
shall mean the
Savings Equalization Plan of New Jersey Resources Corporation, as set
forth herein or as amended from time to
time.
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1.14
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Plan Year
shall mean the
calendar year.
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1.15
|
Pre-2005 Account
shall
mean the bookkeeping account (or subaccounts thereof) maintained for each
Participant to record the amounts credited on his or her behalf under
Section 3.02 prior to January 1, 2005 in which the Participant has a
nonforfeitable right to as of December 31, 2004 and any related deemed
interest on such amounts.
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1.16
|
Qualified Plan
shall
mean the New Jersey Resources Corporation Employees’ Retirement Savings
Plan, as amended from time to time.
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1.17
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Separation from Service
shall mean the death of a Participant or the retirement or other
termination of employment of the Participant such that he or she ceases to
be an employee of the Corporation and all Affiliates, provided that no
change in a Participant’s employment status shall be considered a
Separation from Service with respect to a Participant’s 409A Account
unless it would be treated as such pursuant to Code Section 409A .
A “separation from service” will occur where it is
reasonably anticipated that no further services will be performed after
that date or that the level of bona fide services the Participant will
perform after that date (whether as an employee or independent contractor)
will permanently decrease to less than 50% of the average level of bona
fide services performed over the immediately preceding thirty-six (36)
month period.
A
Participant will be considered to continue employment and to not have a
Separation from Service while on a leave of absence if the leave does not
exceed 6 consecutive months (29 months for a disability leave of absence)
or, if longer, so long as the Participant retains a right to reemployment
with the Corporation or Affiliate under an applicable statute or by
contract. For this purpose, a “disability leave of absence” is an absence
due to any medically determinable physical or mental impairment that can
be expected to result in death or can be expected to last for a continuous
period of not less than 6 months, where such impairment causes the
Participant to be unable to perform the duties of his job or a
substantially similar job and is subject to the applicable Corporation’s
or Affiliate’s disability leave of absence
policy.
|
1.18
|
Spouse
shall mean a
person of the opposite sex of the Participant who is the Participant’s
husband or wife as provided in the Defense of Marriage Act of
1996.
|
1.19
|
Supplemental Employer Matching
Contributions
shall mean the amount credited to an Eligible
Employee under Section 3.01.
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1.20
|
Valuation Date
shall
mean the last day of each calendar quarter and such other day or days as
the Committee may select. All distributions under the Plan shall be based
upon the value of the Participant’s Account as of the Valuation Date
specified in Article IV with respect to the
distribution.
|
ARTICLE
II
PARTICIPATION
2.01
Participation
An
Eligible Employee shall become a Participant of the Plan as of the date he or
she is entitled to a credit to his or her Account pursuant to Section
3.02.
2.02
Termination of
Participation
A
Participant's participation in the Plan shall terminate upon the Participant's
death or other termination of employment with the Corporation and all
Affiliates, unless a benefit is payable under the Plan with respect to the
Participant or his or her Beneficiary under the provisions of Article
IV.
ARTICLE
III
EMPLOYER
CONTRIBUTIONS
3.01
|
Accounts
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The
Corporation or such recordkeeper as the Corporation may designate shall
establish and maintain a separate bookkeeping Account(s) for each
Participant. For each year, the Corporation shall credit to the
appropriate Account the amounts described in this Article III. The
Corporation or the recordkeeper may maintain such additional accounts or
subaccounts as are appropriate for the administration of the Plan.
Periodically, each Participant shall be furnished with a statement setting
forth the value of his or her
Account.
|
3.02
|
Amount of
Supplemental Employer Matching
Contributions
|
|
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|
The amount of Supplemental Employer
Matching Contributions credited to a Participant’s Account for a calendar
quarter shall be equal to the excess of (a) over (b) as determined
below:
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(a)
|
the Employer Matching Contributions that would have been
made to the Participant’s “Employer Thrift Account” (as such term is
defined under the Qualified Plan) under the Qualified Plan, determined on
the basis that the Participant’s “Basic Savings” (as such term is defined
in the Qualified Plan) under the Qualified Plan were made without regard
to the limitations imposed under the Qualified Plan by Section 401(a)(17)
of the Code, by the actual deferral percentage test under Section 401(k)
of the Code, or the actual contribution percentage test under Section
401(m) of the Code, or by Section 415 of the Code;
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(b)
|
the
Employer Matching Contributions actually made to the Participant’s
“Employer Thrift Account” (as such term is defined under the Qualified
Plan) under the Qualified Plan, determined with regard to the limitations
imposed by Section 401(a)(17) of the Code, by the actual deferral
percentage test under Section 401(k) of the Code or the actual
contribution percentage test under Section 401(m) of the Code, or by
Section 415 of the Code;
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provided,
however, that any change in a Participant’s deferral or contribution
election made under the Qualified Plan during the calendar year shall not
be given effect under this Section 3.02 until the following January 1 if
to do so would violate Code Section 409A ;
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Such
amount shall generally be credited to a Participant’s Accounts on the last
day of each calendar quarter.
|
|
|
|
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As of the
last day of each calendar quarter:
|
(a)
|
the
amount credited to a Participant’s Account under the Plan as of the end of
the prior calendar quarter shall be credited with interest for that
calendar quarter at one-quarter of the prime rate as published in the Wall
Street Journal on the last day of such calendar quarter, such prime rate
first rounded to the nearest .25%;
and
|
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(b)
|
the
amount credited to a Participant’s Account under the Plan during the
calendar quarter shall be credited with interest for that calendar quarter
at one-eighth of the prime rate as published in the Wall Street Journal on
the last day of such calendar quarter, such prime rate first rounded to
the nearest .25%.
|
3.04
Vesting of
Account
(a)
|
A
Participant shall be vested in, and have a nonforfeitable right to, his or
her Account in accordance with the following schedule based on the
Participant’s years of “Service” (as such term is defined in the Qualified
Plan):
|
Years of
Service
|
Vested
Percentage
|
Less than 2
years
|
0%
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2 years but
less than 3 years
|
25%
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3 years but
less than 4 years
|
50%
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4 years but
less than 5 years
|
75%
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5 years or
more
|
100%
|
(b)
|
Notwithstanding
the provisions of paragraph (a) above, a Participant shall be 100% vested
in, and have a nonforfeitable right to, his or her Account if prior to his
or her termination of employment, the Participant either (i) attains age
65, (ii) attains age 55 and completes 20 years of “Service” (as such term
is defined in the New Jersey Natural Gas Company Plan for Retirement
Allowances for Non-Represented Employees), or dies, or becomes “Disabled”
(as such term is defined in Code Section
409A.
|
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(c)
|
Upon
the termination of Employment of a Participant who is not 100% vested in
his or her Account, the nonvested portion of the Participant’s Account
shall be forfeited.
|
ARTICLE
IV
PAYMENT
OF ACCOUNT
4.01
|
Payment
of Account Upon
Separation from
Service
|
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Subject
to Section 4.03, a Participant shall be entitled to receive payment of the
vested portion of his or her Account upon the Participant’s Separation
from Service for any reason. Payment of a Participant’s Account shall be
made in a single lump-sum payment on the first day of the calendar quarter
following the calendar quarter during which the Participant incurs a
Separation from Service.
|
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4.02
|
Death
Benefits
|
|
|
|
Upon
becoming a Participant and at any time thereafter, the Participant may
designate a Beneficiary (or change a Beneficiary designation) to receive
death benefits payable under this Section 4.02 by duly completing,
executing, and filing with the Committee before the Participant’s death
the appropriate form designated by the Committee. The Beneficiary may be a
designated person or persons, provided that, if more than one person is
named, the Participant must indicate the shares and/or precedence of each
person. In the event of the death of the Participant prior to full payment
of the vested amounts credited to the Participant’s Account (in accordance
with Section 3.04), the unpaid amount shall be paid on the first day of
the calendar quarter following the calendar quarter during which
Participant’s death occurs in a single sum cash payment to the
Participant’s Beneficiary.
|
|
|
|
In
the event that no Beneficiary has been designated in accordance with this
Section 4.02 or that no designated Beneficiary survives the Participant,
the following Beneficiaries (if then living) shall be deemed to have been
designated in the following
priority:
|
(a)
|
the
Participant’s Spouse;
|
|
|
(b)
|
the
Participant’s children, in equal shares, per
stirpes;
|
|
|
(c)
|
the
Participant’s parents;
|
|
|
(d)
|
the
person(s) designated as beneficiary by the Participant under any group
life insurance maintained by the Corporation or any of its Affiliates;
and
|
|
|
(e)
|
the
Participant’s estate.
|
4.03
|
Timing of Payment
for a “Specified Employee”
|
|
|
|
Notwithstanding
any provision of the Plan to the contrary, the actual payment of a
Participant’s 409A Account to a Participant who is classified as a
“Specified Employee” as determined under the procedures adopted by the
Board of Directors of the Corporation or its delegate in accordance with
Code Section 409A , on account of such Specified Employee’s Separation
from Service for reasons other than death shall not commence prior to the
first day of the seventh month following the Specified Employee’s
Separation from Service. Any payment to the Specified Employee which he or
she would have otherwise received under Section 3.01 during the six-month
period immediately following such Specified Employee’s termination of
employment shall be credited with interest in accordance with Section 3.03
and paid on the first day of the seventh month following his or her
Separation from Service.
|
ARTICLE
V
PLAN
ADMINISTRATION
|
(a)
|
The
administration of the Plan, the exclusive power and complete discretionary
authority to interpret it, and the responsibility for carrying out its
provisions are vested in the Committee or its designate. The Committee
shall have the complete discretionary authority to administer the Plan and
resolve any question under the Plan. The determination of the Committee as
to the interpretation of the Plan or any disputed question shall be
conclusive and final to the extent permitted by applicable law. The
Committee may employ and rely on such legal counsel, actuaries,
accountants and agents as it may deem advisable to assist in the
administration of the Plan.
|
|
|
|
|
(b)
|
To
the extent permitted by law, all agents and representative of the
Committee shall be indemnified by the Corporation and held harmless
against any claims and the expenses of defending against such claims,
resulting from any action or conduct relating to the administration of the
Plan, except claims arising from gross negligence, willful neglect or
willful misconduct.
|
|
Claims
for benefits under the Plan shall be submitted in writing to the Committee
or to an individual designated by the Committee for this
purpose.
|
(b)
|
Denial of
Claim
If
any claim for benefits is wholly or partially denied, the claimant shall
be given written notice within 90 days following the date on which the
claim is filed, which notice shall set
forth
|
(i)
|
the
specific reason or reasons for the
denial;
|
|
|
(ii)
|
specific
reference to pertinent Plan provisions on which the denial is
based;
|
|
|
(iii)
|
a
description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is necessary; and
|
|
|
(iv)
|
an
explanation of the Plan's claim review procedure (as described in
paragraph (c) below).
|
|
|
|
If
special circumstances require an extension of time for processing the
claim, written notice of an extension shall be furnished to the claimant
prior to the end of the initial period of 90 days following the date on
which the claim is filed. Such an extension may not exceed a period of 90
days beyond the end of said initial period.
|
|
|
|
If
the claim has not been granted and written notice of the denial of the
claim is not furnished within 90 days following the date on which the
claim is filed, the claim shall be deemed denied for the purpose of
proceeding to the claim review
procedure.
|
|
(c)
|
Claim Review
Procedure
|
|
|
|
|
|
The
claimant or his authorized representative shall have 60 days after receipt
of written notification of denial of a claim to request a review of the
denial by making written request to the Committee, and may review
pertinent documents and submit issues and comments in writing within such
60-day period.
|
|
|
|
|
|
Not
later than 60 days after receipt of the request for review, the Committee
or its designate shall render and furnish to the claimant a written
decision, which shall include specific reasons for the decision and shall
make specific references to pertinent Plan provisions on which it is
based. If special circumstances require an extension of time for
processing, the decision shall be rendered as soon as possible, but not
later than 120 days after receipt of the request for review, provided that
written notice and explanation of the delay are given to the claimant
prior to commencement of the extension. Such decision by the Committee
shall not be subject to further review. If a decision on review is not
furnished to a claimant within the specified time period, the claim shall
be deemed to have been denied on review.
|
|
|
|
|
(d)
|
Exhaustion of Remedy
|
|
|
|
|
|
No
claimant shall institute any action or proceeding in any state or federal
court of law or equity or before any administrative tribunal or arbitrator
for a claim for benefits under the Plan until the claimant has first
exhausted the procedures set forth in this section.
|
|
|
|
5.03
|
|
Expenses
|
|
|
|
|
|
Expenses
of the Committee attributable to the administration of the Plan shall be
paid directly by the Corporation.
|
ARTICLE
VI
GENERAL
PROVISIONS
|
|
|
|
(a)
|
All
amounts payable in accordance with the Plan shall constitute a general
unsecured obligation of the Corporation. Such amounts, as well as any
administrative costs relating to the Plan, shall be paid out of the
general assets of the Corporation, to the extent not paid from the assets
of any trust established pursuant to paragraph (b)
below.
|
|
|
|
|
(b)
|
The
Corporation may, for administrative reasons, establish a grantor trust for
the benefit of Participants in the Plan. The assets placed in said trust
shall be held separate and apart from other Corporation funds and shall be
used exclusively for the purposes set forth in the Plan and the applicable
trust agreement, subject to the following
conditions:
|
(i)
|
the
creation of said trust shall not cause the Plan to be other than
"unfunded" for purposes of Title I of ERISA;
|
(ii)
|
the
Corporation shall be treated as "grantor" of said trust for purposes of
Section 677 of the Code; and
|
(iii)
|
the
agreement of said trust shall provide that its assets may be used upon the
insolvency or bankruptcy of the Corporation to satisfy claims of the
Corporation's general creditors and that the rights of such general
creditors are enforceable by them under federal and state
law;
|
(iv)
|
the
trust shall be sited in the United States; and
|
(v)
|
the
funding of the trust shall not be contingent on the financial condition of
the Corporation.
|
6.02
|
|
Discontinuance and
Amendment
|
|
|
|
|
|
The
Board of Directors of the Corporation reserves the right to modify, amend,
or discontinue in whole or in part, benefit accruals under the Plan at any
time. However, no modification, amendment, or discontinuance shall
adversely affect the right of any Participant to receive the vested
benefits accrued as of the date of such modification, amendment or
discontinuance and any such modification, amendment or discontinuance
shall comply with the requirements of Code Section
409A.
|
|
|
|
6.03
|
|
Termination of
Plan
|
|
|
|
|
|
The
Board of Directors of the Corporation reserves the right to terminate the
Plan at any time, provided, however, that no termination shall be
effective retroactively. As of the effective date of termination of the
Plan, no further benefits shall accrue on behalf of any Participant whose
benefits have not commenced, and such Participant and his or her Spouse,
or Beneficiary shall retain the right to benefits hereunder; provided that
on or after the effective date of termination the Participant is vested
under the Qualified Plan. Benefits attributable to the Participant’s
Pre-2005 Account shall be paid to the Participant (or the Participant’s
Beneficiary if the Participant is not alive on the date of Plan
termination) as soon as administratively practicable following such Plan
termination. Benefits attributable to the Participant’s 409A Account shall
be paid in accordance with Article IV of the Plan unless such Plan
termination meets the requirements for acceleration of payment under Code
Section 409A.
|
|
|
|
|
|
All
other provisions of the Plan shall remain in
effect.
|
6.04
|
|
Plan Not a Contract of
Employment
|
|
|
|
|
|
The
Plan is not a contract of employment, and the terms of employment of any
Participant shall not be affected in any way by the Plan or related
instruments, except as specifically provided therein. The establishment of
the Plan shall not be construed as conferring any legal rights upon any
person for a continuation of employment, nor shall it interfere with the
rights of the Corporation or any Affiliate to discharge any person and to
treat him or her without regard to the effect which such treatment might
have upon him or her under the Plan. Each Participant and all persons who
may have or claim any right by reason of his participation shall be bound
by the terms of the Plan and all agreements entered into pursuant
thereto.
|
|
|
|
6.05
|
|
Facility of
Payment
|
|
|
|
|
|
In
the event that the Committee shall find that a Participant or Beneficiary
is unable to care for his or her affairs because of illness or accident,
or because such individual is a minor or has died, the Committee may,
unless claim shall have been made therefore by a duly appointed legal
representative, direct that any benefit payment due him or her, to the
extent not payable from a grantor trust, be paid on his or her behalf to
his or her spouse, a child, a parent or other blood relative, or to a
person with whom he or she resides, and any such payment so made shall be
a complete discharge of the liabilities of the Corporation, its
Affiliates, and the Plan therefore.
|
|
|
|
6.06
|
|
Withholding
Taxes
|
|
|
|
|
|
The
Corporation shall have the right to deduct from any payment to be made
under the Plan any required withholding taxes.
|
|
|
|
6.07
|
|
Nonalienation
|
|
|
|
|
|
Subject
to any applicable law, no benefit under the Plan shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to do so shall be void, nor shall
any such benefit be in any manner liable for or subject to garnishment,
attachment, execution or levy, or liable for or subject to the debts,
contracts, liabilities, engagements or torts of the person entitled to
such benefits.
|
|
|
|
6.08
|
|
Construction
|
|
|
|
|
(a)
|
The
Plan is intended to constitute an unfunded deferred compensation
arrangement maintained for a select group of management or highly
compensated employees within the meaning of Section 201(2), Section
301(a)(3), and Section 401(a)(1) of ERISA, and all rights under the Plan
shall be governed by ERISA. Subject to the preceding sentence, the Plan
shall be construed, regulated and administered under the laws of the State
of New Jersey to the extent such laws are not superseded by applicable
federal law. The Plan shall be construed and interpreted to meet the
applicable requirements of Code Section 409A to avoid a plan failure
described in Code Section 409A(a)(1). The Committee is authorized to adopt
rules or regulations deemed necessary or appropriate in connection
therewith to anticipate and/or comply the requirements of Code Section
409A and to declare any election, consent or modification thereto void if
non-compliant with Code Section 409A. The Committee, the Corporation and
any related parties shall not be responsible for the payment of any taxes
or related penalties or interest for any failure to comply with Code
Section 409A.
|
|
|
|
|
(b)
|
The
masculine pronoun shall mean the feminine wherever
appropriate.
|
|
|
|
|
(c)
|
The
illegality of any particular provision of this document shall not affect
the other provisions and the document shall be construed in all respects
as if such invalid provision were omitted.
|
|
|
|
|
(d)
|
The
headings and subheadings in the Plan have been inserted for convenience of
reference only, and are to be ignored in any construction of the
provisions thereof.
|
Exhibit
10.28
PENSION
EQUALIZATION PLAN
OF
NEW JERSEY RESOURCES CORPORATION
Originally
Effective
as of February 27, 1991
Amended
and Restated as of January 1, 2005
PENSION
EQUALIZATION PLAN
OF
NEW JERSEY RESOURCES CORPORATION
The
Pension Equalization Plan of New Jersey Resources Corporation (the "Plan") was
originally authorized and adopted by the Board of Directors of New Jersey
Resources (the "Corporation") effective as of February 27, 1991and is now
amended and restated effective January 1, 2005. The purpose of the Plan is to
provide certain supplemental benefits to certain select management or highly
compensated employees who are participants in the Plan for Retirement Allowances
for Non-Represented Employees of New Jersey Natural Gas Company (the "Qualified
Plan").
All
benefits payable under the Plan, which is intended to constitute both an
unfunded excess benefit plan under Section 3(36) of Title I of the Employee
Retirement Income Security Act of 1974, as amended, (“ERISA”), and a
nonqualified, unfunded deferred compensation plan for a select group of
management or highly compensated employees under ERISA, shall be paid out of the
general assets of the Corporation. The Corporation may establish and fund a
trust in order to aid it in providing benefits due under the Plan.
Benefits
payable to any participant of the Plan who terminated employment before January
1, 2005 shall be governed by the provisions of the Plan as in effect at the time
of termination, except as otherwise specifically stated elsewhere herein.
Benefits accruing and /or vesting under the Plan after December 31, 2004 are
subject to the provisions of Code Section 409A. Benefits that accrued and became
vested under the Plan prior to January 1, 2005 are not subject to Code Section
409A unless the provisions of the Plan relating to such benefits are materially
modified after October 3, 2004. On and before December 31, 2008, to the extent
applicable, the Plan administrator has administered the Plan in accordance with
the provisions of Section 409A of the Code as enacted by the American Jobs
Creation Act of 2004 and regulations and other applicable guidance issued
thereunder, including but not limited to the applicable transition rules
(collectively “Code Section 409A”).
TABLE
OF CONTENTS
ARTICLE
|
|
Page
|
|
|
|
ARTICLE
I DEFINITIONS
|
|
1
|
|
|
|
ARTICLE II
PARTICIPATION
; AMOUNT AND PAYMENT OF BENEFITS
|
|
2
|
|
|
|
2.01 Participation
|
2
|
|
2.02 Amount
of Benefits
|
2
|
|
2.03 Vesting
|
3
|
|
2.04 Form
of Payment
|
3
|
|
2.05 Timing
of Payment
|
4
|
|
2.06 Timing
of Payment for a “Specified Employee”
|
6
|
|
2.07 Disability
Retirement
|
6
|
|
2.08 Death
|
7
|
|
2.09 Reemployment
of Former Participant or Retired Participant
|
8
|
|
2.10 Delay
of Payments
|
8
|
|
2.11 Qualified
Domestic Relations Orders
|
8
|
|
|
|
ARTICLE
III PLAN
ADMINISTRATION
|
9
|
|
|
|
3.01 Administration
|
9
|
|
3.02 Claims
Procedure
|
9
|
|
3.03 Expenses
|
10
|
|
|
ARTICLE
IV GENERAL
PROVISIONS
|
10
|
|
|
|
|
4.01 Funding
|
10
|
|
4.02 Duration
of Benefits
|
11
|
|
4.03 Discontinuance
and Amendment
|
11
|
|
4.04 Termination
of Plan
|
11
|
|
4.05 Plan
Not a Contract of Employment
|
12
|
|
4.06 Facility
of Payment
|
12
|
|
4.07 Withholding
Taxes
|
12
|
|
4.08 Nonalienation
|
12
|
|
4.09 Construction
|
12
|
|
|
|
|
APPENDIX
A
|
|
|
APPENDIX
B
|
|
|
APPENDIX
C
|
|
|
APPENDIX
A
|
|
ARTICLE
I
DEFINITIONS
The
following terms when capitalized herein shall have the meanings assigned
below.
|
|
|
1.01
|
Accrued Basic Retirement
Allowance
shall mean a Participant’s “Accrued Retirement Allowance”
(as such term is defined in the Qualified Plan) under the Qualified Plan
attributable to the Participant’s “Basic Allowance” (as such term is
defined in the Qualified Plan) under the Qualified Plan determined, for
purposes of calculating the amount of benefits under Section 2.02, 2.08,
and Appendices A, B, C, D and E prior to the application of any offset
required pursuant to Section 4.9 (Non-duplication of benefits) of the
Qualified Plan.
|
|
|
1.02
|
Actuarial Equivalent
shall mean a benefit of equivalent value to another benefit determined
using the factors specified in the Qualified Plan for a similar
determination, unless otherwise provided in the Plan. With
regard to the Non-Grandfathered Benefit, Actuarial Equivalent will not
violate Code Section 409A.
|
|
|
1.03
|
Affiliate
shall mean any
division, subsidiary or affiliated company of the Corporation not
participating in the Plan, which is an “Affiliate” as defined in the
Qualified Plan but only to the extent such “Affiliate” is required to be
treated as the Corporation for purposes of the applicable provision of
Code Section 409A.
|
|
|
1.04
|
Beneficiary
shall mean
the person designated to receive benefits after a Participant's death;
provided, however, that if a Participant elects Option C under Section
2.04(c), he or she may elect a primary Beneficiary and a secondary
Beneficiary. A Participant may, from time to time, revoke or
change his or her Beneficiary designation without the consent of any prior
Beneficiary by filing a new designation with the Committee. The
last such designation received by the Committee shall be controlling,
provided however, that no designation or change or revocation thereof,
shall be effective unless received by the Committee prior to the
Participant’s death or the Participant’s Benefit Commencement Date, if
earlier, and in no event shall it be effective as of a date prior to such
receipt.
|
|
|
1.05
|
Benefit Commencement
Date
shall mean, unless the Plan expressly provides otherwise, the
first day of the first period following the Participant’s Separation from
Service for which an amount is due as an annuity or any other
form. The Benefit Commencement Date under the Plan is
determined without regard to any delay in payment pursuant to Section 2.06
or Section 2.10.
|
|
|
1.06
|
Code
shall mean the
Internal Revenue Code of 1986, as amended from time to
time.
|
|
|
1.07
|
Committee
shall mean the
Benefit Administration Committee of the Corporation or any successor
thereto.
|
|
|
1.08
|
Corporation
shall mean
New Jersey Resources Corporation, or any successor by merger, purchase or
otherwise.
|
|
|
1.09
|
Disabled
shall mean
totally disabled and permanently in accordance with a determination by the
Social Security Administration. Sufficient proof of such
determination shall be provided to the Administrator in order for a
Participant to be determined Disabled under the Plan.
|
|
|
1.10
|
Effective Date
shall
mean February 27, 1991.
|
1.21
|
Spouse
shall mean a
person of the opposite sex of the Participant who is the Participant’s
husband or wife as provided in the Defense of Marriage Act of
1996.
|
|
|
1.22
|
Surviving Spouse
shall
mean the Spouse of the Participant to whom the Participant has been
married throughout the one-year period ending on the date of the
Participant’s death.
|
|
|
1.23
|
Unreduced Benefit Commencement
Date
shall mean the earliest date as of which a Participant could
commence receiving his or her Accrued Basic Retirement Allowance under the
Qualified Plan without reduction for early commencement, regardless of
whether or not the Participant actually commences payment of his or her
Accrued Basic Retirement Allowance under the Qualified Plan as of such
date.
|
|
|
ARTICLE
II
PARTICIPATION;
AMOUNT AND PAYMENT OF BENEFITS
2.01
|
Participation
|
|
|
|
(a)
|
Eligible
Employees participating in the Plan on December 31, 2006 shall continue to
be a Participant in the Plan thereafter in accordance with the terms of
the Plan.
|
|
|
|
|
(b)
|
Effective
on and after January 1, 2007, except as otherwise provided in an Appendix,
an Eligible Employee shall become a Participant of the Plan on the first
day of calendar year next following the date he or she is approved for
participation in the Plan by the Committee.
|
|
|
|
|
(c)
|
A
Participant's participation in the Plan shall terminate upon the
Participant's death or other Separation from Service, unless a benefit is
payable under the Plan with respect to the Participant or his or her
Beneficiary under the provisions of this Article II.
|
|
|
|
2.02
|
Amount of
Benefits
Except
asotherwise provided in an Appendix and prior to adjustment in accordance
with Section 2.04, as of each Participant’s Benefit Commencement Date, the
Participant’s benefit under this Article II shall be a monthly payment for
the life of the Participant and shall equal the excess, if any, of (a)
over (b) as calculated as of Separation from Service (except as provided
in Section 2.07(c)) and determined as follows:
|
|
|
|
(a)
|
the
monthly Accrued Basic Retirement Allowance that would have been payable
beginning on the Participant’s Benefit Commencement Date in the form of a
life annuity under the terms of the Qualified Plan, determined without
regard to the limitations imposed by Section 401(a)(4) of the Code, the
limitation on compensation imposed by Section 401(a)(17) of the Code, or
the maximum limitation on benefits imposed by Section 415 of the Code
without regard to any election to defer compensation under the New Jersey
Resources Corporation Officer’s Deferred Compensation Plan (or a successor
plan) and without regard to any accruals under the Qualified Plan because
of a disability if such accruals relate to any period after which a
Participant has commenced his benefit under this Plan;
|
|
|
|
|
over
|
|
|
|
|
(b)
|
the
monthly Accrued Basic Retirement Allowance that would have been payable
beginning on the Participant’s Benefit Commencement Date in the form of a
life annuity under the terms of the Qualified Plan without regard to any
accruals under the Qualified Plan because of a disability if such accruals
relate to any period after which a Participant has commenced his benefit
under this Plan;
|
|
|
|
|
The
foregoing determination shall be made as of the Participant’s Benefit
Commencement Date, with any adjustment for commencement before or after
the Participant's Normal Retirement Date made using the applicable
adjustment factors under the Qualified Plan.
|
|
|
|
2.03
|
Vesting
Except
as otherwise provided in Section 4.04 or an Appendix, a Participant shall
be vested in, and have a nonforfeitable right to, the benefits payable
under this Article II upon the later of the date he or she becomes a
Participant in the Plan and the date he or she has a vested and
nonforfeitable right to an Accrued Basic Retirement Allowance under the
Qualified Plan.
|
|
|
2.04
|
Form
of Payment
|
|
|
|
(a)
|
Except
as otherwise provided in Appendix A, the benefit under Section 2.02 of a
Participant whose Benefit Commencement Date is prior to January 1, 2007
shall be paid in the same form of payment in which the Participant
receives his or her Accrued Basic Retirement Allowance under the Qualified
Plan.
|
|
|
|
|
(b)
|
Except
as otherwise provided in Appendix A, unless a Participant has made a valid
election under paragraph (c) below of an optional form of payment, the
benefit under Section 2.02 of a Participant whose Benefit Commencement
Date is on or after January 1, 2007 shall be paid in accordance with (i)
and (ii) below:
|
|
|
|
|
|
(i)
|
The
Grandfathered Benefit shall be paid in the same form of payment in which
the Participant receives his or her Accrued Basic Retirement Allowance
under the Qualified Plan.
|
|
|
(ii)
|
The
Non-Grandfathered Benefit shall be paid as follows:
|
|
|
|
|
|
|
|
(A)
|
If
the Participant does not have a Spouse on his or her Benefit Commencement
Date, a single life annuity for the life of the Participant, with no
payments after his or her death.
|
|
|
|
|
|
|
|
(B)
|
If
the Participant does have a Spouse on his or her Benefit Commencement
Date, a reduced benefit of Actuarial Equivalent value to the
Non-Grandfathered Benefit, which shall be payable for the Participant’s
life and after his or her death 50% of such reduced amount shall be
payable during the life of, and to the Spouse whom the Participant was
married on his or her Benefit Commencement Date.
|
|
|
|
|
|
(c)
|
Subject
to paragraph (d) below, except as otherwise provided in Appendix A, a
Participant whose Benefit Commencement Date is on or after January 1, 2007
may elect to convert the Non-Grandfathered Benefit otherwise payable to
him or her into an optional benefit of Actuarial Equivalent value as
provided in one of the options set forth
below:
|
|
|
Option A:
A
reduced benefit payable during the Participant’s life and after his or her
death payable during the life of, and to the Participant’s
Beneficiary.
Option B:
A
reduced benefit payable during the Participant’s life and after his or her
death 50% of such reduced amount payable during the life of, and to the
Participant’s Beneficiary.
Option
C:
Effective January 1, 2008, a reduced benefit payable
during the Participant’s life and after his or her death 75% of such
reduced amount payable during the life of, and to the Participant’s
Beneficiary.
Option D:
A
reduced benefit payable during the Participant’s life, and if the
Participant dies within 120 months of his or her Benefit Commencement
Date, the remaining balance of such 120 monthly payments shall be paid to
the Participant’s primary Beneficiary (or the Participant’s secondary
Beneficiary, if one has been designated and if the primary Beneficiary is
not then alive); provided, however, that if the primary Beneficiary (or
the secondary Beneficiary, if one has been designated, if the primary
Beneficiary is not alive on the Participant’s date of death) does not
survive the 120-month period, a lump sum payment of Actuarial Equivalent
value to the remaining payments shall be paid to the estate of the last to
survive of the Participant, the primary Beneficiary, and the secondary
Beneficiary.
Option E:
A
benefit payable for the Participant’s life with no payments after his or
her death.
Except
as otherwise provided in an Appendix, Actuarial Equivalent value shall be
determined as of the Participant’s Benefit Commencement Date for purposes
of adjusting the benefit determined under Section 2.02.
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(d)
|
Notwithstanding
the foregoing, subject to the provisions of Code Section 409A and
except as otherwise provided in Appendix A, a Participant’s election to
receive his or her Non-Grandfathered Benefit in an optional form of
payment as described in paragraph (c) above shall be effective as of the
Participant’s Benefit Commencement Date, provided that the Participant
makes and submits to the Committee his or her election of an optional form
of payment prior to his or her Benefit Commencement Date. Any election
hereunder as to an optional form of payment may be revoked prior to the
Participant’s Benefit Commencement Date. A Participant whose
Benefit Commencement Date is on or after January 1, 2007 and who does not
have a valid form of payment election on file with the Committee on his or
her Benefit Commencement Date, shall receive his or her Non-Grandfathered
Benefit in accordance with paragraph (b) of this Section
2.04.
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(e)
|
If
the Actuarial Equivalent value of the benefits to be paid under the Plan
and all plans that are required to be aggregated with the Plan under Code
Section 409A is less than or equal to the applicable dollar amount under
Section 402(g)(1)(B) of the Code, such benefit shall be paid in one lump
sum.
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2.05
|
Timing
of Payment
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|
(a)
|
Except
as otherwise provided in Appendix A and subject to Section 2.06, the
Benefit Commencement Date of a Participant whose Qualified Plan Annuity
Starting Date is prior to January 1, 2007 shall be such Qualified Plan
Annuity Starting Date.
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(b)
|
Except
as otherwise provided in Section 2.07(b) or an Appendix and subject to
Section 2.06, unless a Participant has made a valid election under
paragraph (c) below of an optional Benefit Commencement Date, the Benefit
Commencement Date of a Participant whose benefits under the Plan have not
commenced by January 1, 2007 shall be determined in accordance with (i)
and (ii) below:
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(i)
|
The
Benefit Commencement Date for the Participant’s Grandfathered Benefit
shall be the Participant’s Qualified Plan Annuity Starting
Date.
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(ii)
|
The
Benefit Commencement Date for the Participant’s Non-Grandfathered Benefit
shall be the first day of the month following the later of:
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(A)
|
the
Participant’s Separation from Service;
and
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(B)
|
(I)
|
the
first day of the month following the month in which the Participant’s
60
th
birthday occurs, if the Participant has completed at least 20 or more
years of “Credited Service” (as such term is defined in the Qualified Plan
as defined in the Qualified Plan on January 1, 2009);
or
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(II)
|
the
first day of the month following the month in which the Participant’s
65
th
birthday occurs, if the Participant has not completed at least 20 years of
“Credited Service” (as such term is defined in the Qualified Plan as of
January 1, 2009).
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(c)
|
In
lieu of the Benefit Commencement Date specified in paragraph (b) above and
subject to Section 2.06, a Participant whose benefits under the Plan have
not commenced by January 1, 2007 and who is not eligible for benefits
under Appendix A may elect to have the Benefit Commencement Date
applicable to his or her Non-Grandfathered Benefit be one of the following
dates:
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(i)
|
the
first day of the month following the Participant’s Separation from
Service; or
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(ii)
|
the
first day of the month following the later of the Participant’s Separation
from Service and the date specified by the Participant, provided that such
specified date may not be earlier than age 55 nor later than the first day
of the month following the Participant’s 65
th
birthday;
provided,
however, that unless the Participant has completed at least 20 years of
“Credited Service” (as such term is defined in the Qualified Plan on
January 1, 2009 or, if applicable, as provided in an Appendix) as of his
or her Separation from Service, the Participant’s election under this
paragraph (c) shall not be given effect.
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(d)
|
Upon
the Committee’s approval of an Eligible Employee’s initial participation
in the Plan but prior to the calendar year in which such Eligible
Employee’s participation is effective (except as otherwise provided for in
an Appendix in accordance with Code Section 409A), the Eligible Employee
may elect a Benefit Commencement Date set forth in paragraph (b) above and
such election shall become effective and irrevocable, except as allowed in
paragraph (e) below and otherwise in accordance with Code Section 409A, on
the date the Eligible Employee becomes a participant in the Plan provided
such election is received by the Committee prior to such
date.
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(e)
|
Unless
otherwise made in accordance with paragraph (d) above or as otherwise
provided under the provisions of Code Section 409A for a Participant who
is employed on or after January 1, 2008, an election pursuant to paragraph
(c) above:
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(i)
|
shall
become effective 12 months after the date such election is
made;
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(ii)
|
must
be made at least 12 months prior to the date payments to the Participant
would otherwise commence pursuant to the Plan;
and
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(iii)
|
the
new Benefit Commencement Date under such election must be at least 5 years
after the date payments to the Participant would otherwise commence
pursuant to the Plan above.
Notwithstanding
the foregoing provisions of this paragraph (e), an election pursuant to
paragraph (c) that is made in accordance with a transition rule or other
applicable provision under Code Section 409A shall become effective on the
date such election is made and shall not be subject to the 5 year
delay. For purposes of this paragraph (e), an election is
deemed to be made on the date such election is received by the
Committee.
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|
Notwithstanding
the foregoing provisions of this paragraph (e), an election pursuant to
paragraph (c) that is made in accordance with a transition rule or other
applicable provision under Code Section 409A shall become effective on the
date such election is made and shall not be subject to the 5 year
delay. For purposes of this paragraph (e), an election is
deemed to be made on the date such election is received by the
Committee.
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(f)
|
Anything
in the Plan to the contrary notwithstanding, no distribution shall be made
that would cause the Plan to violate Code Section 409A.
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2.06
|
Timing
of Payment for a “Specified Employee”
Notwithstanding
any provision of the Plan to the contrary, the actual payment of a
Non-Grandfathered Benefit to a Participant who is classified as a
“Specified Employee” as determined under procedures adopted by the Board
of Directors of the Corporation or its delegate in accordance with Code
Section 409A, on account of such Specified Employee’s Separation from
Service (for reasons other than death or disability) shall not commence
prior to the first day of the seventh month following the Specified
Employee’s Separation from Service. Except as otherwise
provided in Appendix A, any payment of a Non-Grandfathered Benefit to the
Specified Employee which he or she would have otherwise received under
Section 2.02 during the six-month period immediately following such
Specified Employee’s Separation from Service shall be paid with interest
for that six-month period at one-half of the prime rate as published in
the Wall Street Journal on the last day of the last calendar quarter that
ends within such six-month period, such prime rate first rounded to the
nearest .25%, within 30 days after the later of (a) the first day of
seventh month following the Specified Employee’s Separation from Service,
and (b) the Specified Employee’s Benefit Commencement
Date.
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2.07
|
Disability
Retirement
|
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|
(a)
|
In
the event the Participant receives a Disability Retirement Allowance under
the Qualified Plan, the Grandfathered Benefit shall be paid at the same
time and in the same form as, and subject to the same rules as (including
the suspension and termination provisions), the Participant’s Disability
Retirement Allowance under the Qualified Plan. Such benefit
shall not be reduced for early commencement.
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(b)
|
At
the time an Eligible Employee makes his election under Section 2.05(d) or,
on or prior to December 31, 2008, as otherwise allowed under Code Section
409A, the Eligible Employee may elect to receive his Non-Grandfathered
Benefit under the Plan at the time he is determined to be
Disabled. Such Non-Grandfathered Benefit is called his
“Disability Retirement Benefit”. If the Eligible Employee fails
to submit an election at this time, he
or she
shall not be
eligible to receive a Disability Retirement Benefit.
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(c)
|
In
the event a Participant who elected a Disability Retirement Benefit in
accordance with Section 2.07(b) becomes Disabled, his Benefit Commencement
Date shall be on the date he
or she
is considered
Disabled and his benefit shall be calculated in accordance with Section
2.02 as of such Benefit Commencement Date. Such benefit shall not be
reduced for early commencement.
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|
(d)
|
In
the event a Participant does not elect, or is deemed not to elect, a
Disability Retirement Benefit under Section 2.07(b) but is otherwise
Disabled or is receiving long term disability benefits under a long term
disability plan maintained by the Corporation or an Affiliate, then such
Participant shall continue to accrue benefits as provided in the Qualified
Plan until the later of his
or her
Separation from
Service or the date
his
or her non-grandfathered
benefits are scheduled to commence under
this Plan in accordance with Section 2.05.
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2.08
|
Death
|
|
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|
(a)
|
If
a Participant who is vested in a benefit under the Plan dies before his or
her Benefit Commencement Date, such Participant’s Surviving Spouse, if
any, shall receive a monthly payment for life commencing as of the month
coincident with or next following the Participant’s date of
death.
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(b)
|
Except
as otherwise provided in paragraph (c) below, the benefit payable to the
Surviving Spouse of a Participant who dies before his Benefit Commencement
Date and either (A) while in active service with the Corporation or any
Affiliate or (B) while accruing benefits under Section 2.07(c) shall be
equal to the excess, if any, of (i) over (ii) as
follows:
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|
(i)
|
50%
of the monthly Accrued Basic Retirement Allowance that would have been
payable to the Participant under the Qualified Plan in the form of a joint
and 50% survivor annuity with the Surviving Spouse as contingent annuitant
if the Participant had terminated employment on his or her date of death
and payments had commenced on the Participant’s Normal Retirement Date,
determined without regard to the limitations imposed by Section 401(a)(4)
of the Code, the limitation on compensation imposed by Section 401(a)(17)
of the Code, or the maximum limitation on benefits imposed by Section 415
of the Code, and disregarding any election by the Participant to name a
beneficiary for the pre-retirement death benefit under the Qualified Plan
other than his or her Surviving Spouse;
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over
|
|
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|
(ii)
|
(50%
of the monthly Accrued Basic Retirement Allowance that would have been
payable to the Participant under the Qualified Plan in the form of a joint
and 50% survivor annuity with the Surviving Spouse as contingent annuitant
if the Participant had terminated employment on his or her date of death
and payments had commenced on the Participant’s Normal Retirement Date,
determined with regard to the limitations imposed by Section 401(a)(4) of
the Code, the limitation on compensation imposed by Section 401(a)(17) of
the Code, and the maximum limitation on benefits imposed by Section 415 of
the Code but disregarding any election by the Participant to name a
beneficiary for the pre-retirement death benefit under the Qualified Plan
other than his or her Surviving Spouse.
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|
For
the Surviving Spouse of a Participant who does not meet the above
requirements but who dies before his Benefit Commencement Date, the
benefit payable to the Surviving Spouse shall be equal to the Actuarial
Equivalent of the excess of (i) over (ii) above, adjusted for commencement
at the Participant’s Normal Retirement Date at the time set forth in
paragraph (a) above. For this purpose, for a Participant with 20 years of
Credited Service (as such term is defined in the Qualified Plan on January
1, 2009), the Actuarial Equivalent of a benefit payable immediately at any
age from age 55 and up to age 65 shall be determined using the early
retirement factors in the Qualified Plan as of the date of
death. Actuarial Equivalence for a benefit payable immediately
that is paid before age 55 or with regard to a Participant with less than
20 years of Credited Service (as such term is defined in the Qualified
Plan on January 1, 2009) shall be determined using the definition of
Actuarial Equivalence specified in the Qualified
Plan.
|
|
(c)
|
If
within the 180-day period prior to his or her Qualified Plan Annuity
Starting Date, a Participant has elected a joint and 100% or 75% survivor
annuity form of payment with his or her Surviving Spouse as contingent
annuitant under the Qualified Plan, “100%” or “75%”, whichever applicable,
shall be substituted for “50%” and “Benefit Commencement Date” shall be
substituted for “Normal Retirement Date” in paragraph (b) above, provided
that such substitutions do not cause the Plan to incur any of the failures
under Code Section 409A.
|
|
|
|
|
|
(d)
|
Upon
the death of a Participant on or after his or her Benefit Commencement
Date, no further benefits shall be paid on behalf of such Participant
under the Plan except to the extent such Participant had elected to
receive benefits in an optional form, in which case survivor benefits
shall be paid in accordance with the option elected.
|
|
|
|
|
|
(e)
|
If
the Actuarial Equivalent value of the benefits to be paid under the Plan
and all plans that are required to be aggregated with the Plan under Code
Section 409A is less than or equal to the applicable dollar amount under
Section 402(g)(1)(B) of the Code, such benefit shall be paid in one lump
sum
|
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|
|
2.09
|
|
Reemployment
of Former Participant or Retired Participant
If
a Participant who retired or otherwise has a Separation from Service with
the Corporation and its Affiliates is reemployed by the Corporation or an
Affiliate, any payment of a Grandfathered Benefit shall cease and any
payment of a Non-Grandfathered Benefit under the Plan shall not
cease. The Participant shall not accrue any additional benefits
under the Plan. Upon the Participant’s subsequent Separation
from Service, payment of the Grandfathered Benefit shall be recomputed in
accordance with the provisions of the Qualified Plan applicable to
reemployed participants and any benefits then payable hereunder shall be
reduced by the Actuarial Equivalent value of any Grandfather Benefit
previously paid under the Plan.
|
|
|
|
|
2.10
|
|
Delay
of Payments
Any
payment otherwise due under the Plan which would (i) not be deductible in
whole or in part under Code Section 162(m), or (ii) violate Federal
securities laws or other applicable law may not be made until the earliest
date on which such payment no longer is nondeductible or violates such
laws. Payment may be delayed for a reasonable period in
accordance with the provisions of Code Section 409A (including in the
event the payment is not administratively practical due to events beyond
the recipient’s control such as where the recipient is not competent to
receive the benefit payment, there is a dispute as to amount due or the
proper recipient of such benefit payment, or additional time is needed to
calculate the amount payable).
Any benefit
delayed under this Section 2.10 shall be adjusted appropriately to
maintain its Actuarial Equivalent value in accordance with Code Section
409A.
|
|
|
|
2.11
|
|
Qualified
Domestic Relations Orders
Any
domestic relations order must be submitted to the Committee and determined
by the Committee to be qualified. Any domestic relations order
determined to be qualified by the Committee (a “QDRO”) shall only apply to
future benefits payable under the Plan. No benefits shall be
paid under the Plan pursuant to a QDRO until a Participant elects to or
otherwise begins to receive his benefit under the Plan. Any
payment to an alternate payee pursuant to a QDRO shall be based on the
time and form of payment elected by the Participant or, if applicable, the
death benefit provisions in the
Plan.
|
ARTICLE
III
PLAN
ADMINISTRATION
3.01
|
Administration
|
|
|
|
|
(a)
|
The
administration of the Plan, the exclusive power and complete discretionary
authority to interpret it, and the responsibility for carrying out its
provisions are vested in the Committee or its designate. The
Committee shall have the complete discretionary authority to administer
the Plan and resolve any question under the Plan. The
determination of the Committee as to the interpretation of the Plan or any
disputed question shall be conclusive and final to the extent permitted by
applicable law. The Committee may employ and rely on such legal
counsel, actuaries, accountants and agents as it may deem advisable to
assist in the administration of the Plan.
|
|
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|
|
(b)
|
To
the extent permitted by law, all agents and representative of the
Committee shall be indemnified by the Corporation and held harmless
against any claims and the expenses of defending against such claims,
resulting from any action or conduct relating to the administration of the
Plan, except claims arising from gross negligence, willful neglect or
willful misconduct.
|
|
|
|
3.02
|
Claims
Procedure
|
|
|
|
|
(a)
|
Submission
of Claims
|
|
|
|
|
|
Claims
for benefits under the Plan shall be submitted in writing to the Committee
or to an individual designated by the Committee for this
purpose.
|
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|
|
(b)
|
Denial
of Claim
|
|
|
|
|
|
If
any claim for benefits is wholly or partially denied, the claimant shall
be given written notice within 90 days following the date on which the
claim is filed, which notice shall set forth
|
|
|
|
|
|
(i)
|
the
specific reason or reasons for the denial;
|
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|
|
|
(ii)
|
specific
reference to pertinent Plan provisions on which the denial is
based;
|
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|
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|
|
(iii)
|
a
description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is necessary; and
|
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|
|
|
|
|
(iv)
|
an
explanation of the Plan's claim review procedure.
|
|
|
|
|
|
|
If
special circumstances require an extension of time for processing the
claim, written notice of an extension shall be furnished to the claimant
prior to the end of the initial period of 90 days following the date on
which the claim is filed. Such an extension may not exceed a period of 90
days beyond the end of said initial period.
|
|
|
|
|
If
the claim has not been granted and written notice of the denial of the
claim is not furnished within 90 days following the date on which the
claim is filed, the claim shall be deemed denied for the purpose of
proceeding to the claim review
procedure.
|
|
(c)
|
Claim
Review Procedure
|
|
|
|
The
claimant or his authorized representative shall have 60 days after receipt
of written notification of denial of a claim to request a review of the
denial by making written request to the Committee, and may review
pertinent documents and submit issues and comments in writing within such
60-day period.
|
|
|
|
|
|
Not
later than 60 days after receipt of the request for review, the Committee
or its designate shall render and furnish to the claimant a written
decision, which shall include specific reasons for the decision and shall
make specific references to pertinent Plan provisions on which it is
based. If special circumstances require an extension of time
for processing, the decision shall be rendered as soon as possible, but
not later than 120 days after receipt of the request for review, provided
that written notice and explanation of the delay are given to the claimant
prior to commencement of the extension. Such decision by the
Committee shall not be subject to further review. If a decision
on review is not furnished to a claimant within the specified time period,
the claim shall be deemed to have been denied on
review.
|
|
|
|
|
|
(d)
|
Exhaustion
of Remedy
|
|
|
|
|
No
claimant shall institute any action or proceeding in any state or federal
court of law or equity or before any administrative tribunal or arbitrator
for a claim for benefits under the Plan until the claimant has first
exhausted the procedures set forth in this
section.
|
3.03
|
Expenses
|
|
|
|
|
|
Expenses
of the Committee attributable to the administration of the Plan shall be
paid directly by the Corporation.
|
ARTICLE
IV
GENERAL
PROVISIONS
4.01
|
Funding
|
|
|
|
|
|
(a)
|
All
amounts payable in accordance with the Plan shall constitute a general
unsecured obligation of the Corporation. Such amounts, as well
as any administrative costs relating to the Plan, shall be paid out of the
general assets of the Corporation, to the extent not paid from the assets
of any trust established pursuant to paragraph (b)
below.
|
|
|
|
|
|
(b)
|
The
Corporation may, for administrative reasons, establish a grantor trust for
the benefit of Participants in the Plan. The assets placed in
said trust shall be held separate and apart from other Corporation funds
and shall be used exclusively for the purposes set forth in the Plan and
the applicable trust agreement, subject to the following
conditions:
|
|
|
|
|
|
|
(i)
|
the
creation of said trust shall not cause the Plan to be other than
"unfunded" for purposes of Title I of ERISA;
|
|
|
|
|
|
|
(ii)
|
the
Corporation shall be treated as "grantor" of said trust for purposes of
Section 677 of the Code;
|
|
|
|
|
|
|
(iii)
|
the
agreement of said trust shall provide that its assets may be used upon the
insolvency or bankruptcy of the Corporation to satisfy claims of the
Corporation's general creditors and that the rights of such general
creditors are enforceable by them under federal and state
law;
|
|
|
(iv)
|
the
trust shall be sited in the United States; and
|
|
|
|
|
|
|
(v)
|
the
funding of the trust shall not be contingent on the financial condition of
the Corporation.
|
|
|
|
|
4.01
|
Duration
of Benefits
|
|
|
|
|
|
Benefits
shall accrue under the Plan on behalf of a Participant only for so long as
the provisions of Section 401(a)(4), Section 401(a)(17), or Section 415 of
the Code limit the benefits that are payable under the Qualified
Plan.
|
|
|
|
|
4.03
|
Discontinuance
and Amendment
|
|
|
|
|
|
The
Board of Directors of the Corporation reserves the right to modify, amend,
or discontinue in whole or in part, benefit accruals under the Plan at any
time. However, no modification, amendment, or discontinuance
shall adversely affect the right of any Participant to receive the vested
benefits accrued as of the date of such modification, amendment or
discontinuance. Notwithstanding the foregoing, following any
amendment, benefits may be adjusted as required to take into account the
amount of benefits payable under the Qualified Plan after the application
of the limitations referred to in Section 2.02
hereof. Notwithstanding any of the forgoing, any modification,
amendment, or discontinuance shall comply with the requirements of Code
Section 409A.
|
|
|
|
|
4.04
|
Termination
of Plan
|
|
|
|
|
|
The
Board of Directors of the Corporation reserves the right to terminate the
Plan at any time, provided, however, that no termination shall be
effective retroactively and any such termination shall comply with the
requirements of Code Section 409A. As of the effective date of
termination of the Plan:
|
|
|
|
|
|
(a)
|
A
Participant shall become vested in, and have a nonforfeitable right to,
his or her Grandfathered Benefit;
|
|
|
|
|
|
(b)
|
the
benefits of any Participant, Spouse, Surviving Spouse, or Beneficiary
whose benefit payments have commenced shall continue to be paid, but only
to the extent such benefits are not otherwise payable under the Qualified
Plan because of the limitations referred to in Section 2.02 hereof,
and
|
|
|
|
|
|
(c)
|
no
further benefits shall accrue on behalf of any Participant whose benefits
have not commenced, and such Participant and his or her Spouse, Surviving
Spouse, or Beneficiary shall:
|
|
|
|
|
|
|
(i)
|
retain
the right to Grandfathered Benefits hereunder; and
|
|
|
|
|
|
|
(ii)
|
retain
the right to Non-Grandfathered Benefits hereunder, provided that on or
after the effective date of Plan termination the Participant is vested
under the Qualified Plan.
All
other provisions of the Plan shall remain in
effect.
|
4.05
|
Plan
Not a Contract of Employment
The
Plan is not a contract of employment, and the terms of employment of any
Participant shall not be affected in any way by the Plan or related
instruments, except as specifically provided therein. The
establishment of the Plan shall not be construed as conferring any legal
rights upon any person for a continuation of employment, nor shall it
interfere with the rights of the Corporation or any Affiliate to discharge
any person and to treat him or her without regard to the effect which such
treatment might have upon him or her under the Plan. Each
Participant and all persons who may have or claim any right by reason of
his participation shall be bound by the terms of the Plan and all
agreements entered into pursuant thereto.
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4.06
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Facility
of Payment
In
the event that the Committee shall find that a Participant or Beneficiary
is unable to care for his or her affairs because of illness or accident,
or because such individual is a minor or has died, the Committee may,
unless claim shall have been made therefore by a duly appointed legal
representative, direct that any benefit payment due him or her, to the
extent not payable from a grantor trust, be paid on his or her behalf to
his or her spouse, a child, a parent or other blood relative, or to a
person with whom he or she resides, and any such payment so made shall be
a complete discharge of the liabilities of the Corporation, its
Affiliates, and the Plan therefore.
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4.07
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Withholding
Taxes
The
Corporation shall have the right to deduct from each payment to be made
under the Plan any required withholding taxes.
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4.08
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Nonalienation
Subject
to any applicable law, no benefit under the Plan shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to do so shall be void, nor shall
any such benefit be in any manner liable for or subject to garnishment,
attachment, execution or levy, or liable for or subject to the debts,
contracts, liabilities, engagements or torts of the person entitled to
such benefits.
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4.09
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Construction
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(a)
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The
Plan is intended to constitute an unfunded deferred compensation
arrangement maintained for a select group of management or highly
compensated employees within the meaning of Section 201(2), Section
301(a)(3), and Section 401(a)(1) of ERISA, and all rights under the Plan
shall be governed by ERISA. Subject to the preceding sentence,
the Plan shall be construed, regulated and administered under the laws of
the State of New Jersey, to the extent such laws are not superseded by
applicable federal law. The Plan shall be construed and
interpreted to meet the applicable requirements of Code Section 409A to
avoid a plan failure described in Code Section 409A(a)(1). The
Committee is authorized to adopt rules or regulations deemed necessary or
appropriate in connection therewith to anticipate and/or comply the
requirements of Code Section 409A and to declare any election, consent or
modification thereto void if non-compliant with Code Section
409A. The Committee, the Corporation and any related parties
shall not be responsible for the payment of any taxes or related penalties
or interest for any failure to comply with Code Section
409A.
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(b)
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The
masculine pronoun shall mean the feminine wherever
appropriate.
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(c)
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The
illegality of any particular provision of this document shall not affect
the other provisions and the document shall be construed in all respects
as if such invalid provision were omitted.
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(d)
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The
headings and subheadings in the Plan have been inserted for convenience of
reference only, and are to be ignored in any construction of the
provisions thereof.
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APPENDIX
A
SPECIAL
PROVISIONS APPLICABLE TO PARTICIPANTS
UNDER
THE ENHANCED RETIREMENT PROGRAM
This
Appendix A, which is effective as of September 15, 2004 and constitutes an
integral part of the Plan, is applicable solely with respect to Participants who
elect to retire from the Corporation and all Affiliates pursuant to the Enhanced
Retirement Program offered from September 16, 2004 through November 10, 2004
(hereinafter referred to as an “ERP Participant”).
Amount
of Benefits
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If
an ERP Participant’s Benefit Commencement Date is prior to the earlier of
his or her Qualified Plan Annuity Starting Date and his or her Unreduced
Benefit Commencement Date:
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(a)
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prior
to the earlier of the Participant’s Qualified Plan Annuity Starting Date
and his or her Unreduced Benefit Commencement Date, the ERP Participant’s
benefit under Section 2.02, prior to adjustment in accordance with Section
2.04, shall be a monthly payment for the life of the ERP Participant and
shall equal the amount determined in accordance with Section 2.02(a),
without regard to the offset set forth in Section 2.02(b);
and
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(b)
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on
and after the earlier of the Participant’s Qualified Plan Annuity Starting
Date and his or her Unreduced Benefit Commencement Date, the ERP
Participant’s benefit under Section 2.02, prior to adjustment in
accordance with Section 2.04, shall be a monthly payment for the life of
the ERP Participant and shall equal the amount determined in accordance
with Section 2.02, including the offset set forth in Section 2.02(b),
substituting the earlier of the Participant’s Qualified Plan Annuity
Starting Date and his or her “Unreduced Benefit Commencement Date” for
“Benefit Commencement Date” in Section 2.02(b)
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Form of
Payment
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(a)
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If
an ERP Participant’s Benefit Commencement Date is on or after his or her
Qualified Plan Annuity Starting Date but prior to January 1, 2007, the
benefit under Section 2.02 shall be paid in the same form of payment in
which the ERP Participant receives his or her Accrued Basic Retirement
Allowance under the Qualified Plan.
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(b)
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If
an ERP Participant’s Benefit Commencement Date is prior to his or her
Qualified Plan Annuity Starting Date or after December 31, 2006, the
benefit under Section 2.02 shall be paid from the ERP Participant’s
Benefit Commencement Date until such Qualified Plan Annuity Starting Date
in the form of payment provided for in accordance with the
following:
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(i)
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Unless
an ERP Participant has made a valid election under paragraph (ii) below of
an optional form of payment, the benefit under Section 2.02(a) of an ERP
Participant shall be paid as follows:
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(A)
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If
the ERP Participant does not have a Spouse on his or her Benefit
Commencement Date, a single life annuity for the life of the ERP
Participant, with no payments after his or her death.
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(B)
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If
the ERP Participant does have a Spouse on his or her Benefit Commencement
Date, a reduced benefit of Actuarial Equivalent value to the benefit
payable under Section 2.02(a), which shall be payable for the ERP
Participant’s life and after his or her death 50% of such reduced amount
shall be payable during the life of, and to the Spouse whom the ERP
Participant was married on his or her Benefit Commencement
Date.
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(ii)
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Subject
to paragraph (iii) below, an ERP Participant may elect to convert the
benefit otherwise payable to him or her under the provisions of
Section 2.02(a) into an optional benefit of Actuarial Equivalent
value as provided in one of the options set forth below;
Option A:
A
reduced benefit payable during the ERP Participant’s life and after his or
her death payable during the life of, and to the ERP Participant’s
Beneficiary.
Option B:
A
reduced benefit payable during the ERP Participant’s life and after his or
her death 50% of such reduced amount payable during the life of, and to
the ERP Participant’s Beneficiary.
Option
C: Effective January 1, 2008, a reduced benefit payable during
the Participant’s life and after his or her death 75% of such reduced
amount payable during the life of, and to the Participant’s
Beneficiary.
Option D:
A
reduced benefit payable during the ERP Participant’s life, and if the ERP
Participant dies within 120 months of his or her Benefit Commencement
Date, the remaining balance of such 120 monthly payments shall be paid to
the ERP Participant’s primary Beneficiary (or the ERP Participant’s
secondary Beneficiary, if one has been designated and if the primary
Beneficiary is not then alive); provided, however, that if the primary
Beneficiary (or the secondary Beneficiary, if one has been designated, if
the primary Beneficiary is not alive on the ERP Participant’s date of
death) does not survive the 120-month period, a lump sum payment of
Actuarial Equivalent value to the remaining payments shall be paid to the
estate of the last to survive of the ERP Participant, the primary
Beneficiary, and the secondary Beneficiary.
Option E:
A
benefit payable for the ERP Participant’s life with no payments after his
or her death.
If
an ERP Participant elects to receive his or her benefit under Section 2.02
prior to his or her Qualified Plan Annuity Starting Date, Actuarial
Equivalent value shall be determined:
(A)
as
of the Participant’s Benefit Commencement Date for purposes of adjusting
the amount of benefit determined under Section 2.02(a); and
(B)
as
of the earlier of the Participant’s Unreduced Benefit Commencement Date
and his or her Qualified Plan Annuity Starting Date for purposes of
adjusting the amount of benefit determined under Section
2.02(b).
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(iii)
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Notwithstanding
the foregoing, subject to the provisions of Code Section 409A , an
ERP Participant’s election to receive his or her benefit payable under
Section 2.02 in an optional form of payment as described in paragraph
(b) above shall be effective as of the ERP Participant’s Benefit
Commencement Date, provided that the ERP Participant makes and submits to
the Committee his or her election of an optional from of payment prior to
his or her Benefit Commencement Date. Any election hereunder as
to an optional form of payment may be revoked prior to the ERP
Participant’s Benefit Commencement Date. An ERP Participant who does not
have a valid form of payment election on his or her Benefit Commencement
Date shall receive his or her benefit in accordance with subparagraph
(i)(A) or (B) above.
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Timing of
Payment
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(a)
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Unless
an ERP Participant has made a valid election under paragraphs (b) and (c)
below of an optional Benefit Commencement Date, the Benefit Commencement
Date of an ERP Participant shall be the first day of the month following
the later of:
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(i)
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the
ERP Participant’s Separation from Service; and
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(ii)
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the
earliest date the ERP Participant could receive an unreduced retirement
allowance under the Plan.
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(b)
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In
lieu of the Benefit Commencement Date specified in paragraph (a) above, an
ERP Participant may elect to commence his or her benefits under the Plan
on one of the following dates:
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(i)
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the
first day of the month following the ERP Participant’s Separation from
Service; or
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(ii)
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the
first day of the month following the later of:
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(A)
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the
ERP Participant’s Separation from Service; and
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(B)
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the
date specified by the ERP Participant (which date shall be no later than
the ERP Participant’s 60
th
birthday).
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(c)
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An
ERP Participant’s initial election under paragraph (b) above must have
been made by October 29, 2004. Unless otherwise provided under the
provisions of Code Section 409A, an ERP Participant who made an initial
election under paragraph (b) above by October 29, 2004 may revoke his or
her initial election under paragraph (b) above and make a one-time
subsequent election under paragraph (b) above or an ERP Participant who
did not make an initial election under paragraph (b) above by October 29,
2004 may make a one-time election under paragraph (b), provided such
one-time election:
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(i)
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shall
become effective 12 months after the date such election is
made;
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(ii)
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must
be made at least 12 months prior to the date payments to the ERP
Participant would otherwise commence pursuant to paragraph (a) above;
and
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(iii)
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the
newBenefit Commencement Date under such election must be at least 5 years
after the date payments to the ERP Participant would otherwise commence
pursuant to paragraph (b) above.
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Notwithstanding
the foregoing provisions of this paragraph (c), an initial election
pursuant to paragraph (b) that is made by October 29,
2004 shall become effective on the date such election is
made. For purposes of this paragraph (c), an election is deemed
to be made on the date such election is received by the
Committee.
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Vesting
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An
ERP Participant shall be vested in, and have a nonforfeitable right to,
the benefits payable under Article II of the Plan, as modified by this
Appendix A, upon his or her Separation from
Service.
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APPENDIX
B
SPECIAL
PROVISIONS APPLICABLE TO KATHLEEN T. ELLIS
This
Appendix B, which is effective as of May 15, 2005 and constitutes an integral
part of the Plan, is applicable solely with respect to Kathleen T.
Ellis.
Kathleen
T. Ellis shall be eligible to participate in this Plan as of December 31,
2004.
Amount
of Benefits
If, as of
her date of termination from the Corporation and all Affiliates, Kathleen T.
Ellis has completed at least five full years of service with the Corporation or
an Affiliate, Kathleen T. Ellis shall be entitled to a benefit under the Plan
equal to:
(a)
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the
monthly Accrued Basic Retirement Allowance that would have been payable to
Kathleen T. Ellis beginning on her Benefit Commencement Date in the form
of a life annuity under the terms of the Qualified Plan, determined
without regard to the limitations imposed by Section 401(a)(4) of the
Code, the limitation on compensation imposed by Section 401(a)(17), or the
maximum limitation on benefits imposed by Section 415 of the Code, and as
if Kathleen T. Ellis had completed five additional years of “Credited
Service” (as such term is defined in the Qualified Plan) under the
Qualified Plan without regard to any election to defer compensation under
the New Jersey Resources Corporation Officer’s Deferred Compensation Plan
(or a successor plan) and without regard to any accruals under the
Qualified Plan because of a disability if such accruals relate to any
period after which a Participant has commenced her benefit under this
Plan;
over
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(b)
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the
monthly Accrued Basic Retirement Allowance that would have been payable to
Kathleen T. Ellis beginning on her Benefit Commencement Date in the form
of a life annuity under the terms of the Qualified Plan without regard to
any accruals under the Qualified Plan because of a disability if such
accruals relate to any period after which a Participant has commenced her
benefit under this Plan;
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provided;
however, that if Kathleen T. Ellis’s Benefit Commencement Date is prior to
the earlier of her Qualified Plan Annuity Starting Date and her Unreduced
Benefit Commencement Date, the offset under paragraph (b) above shall not
be applied until the first day of the month coincident with or next
following the earlier of her Qualified Plan Annuity Starting Date and her
Unreduced Benefit Commencement Date, and by substituting “the earlier of
her Qualified Plan Annuity Starting Date and her Unreduced Benefit
Commencement Date” for “her Benefit Commencement Date” in paragraph (b)
above.
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The
determination under paragraph (a) above shall be made as of Kathleen T.
Ellis’s Benefit Commencement Date, and any adjustment to the amount
computed pursuant to paragraph (a) above for commencement before or after
her Normal Retirement Date shall be made using the applicable adjustment
factors under the Qualified Plan, determined taking the five additional
years of Credited Service into account.
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The
determination under paragraph (b) above shall be made as of the later of
Kathleen T. Ellis’s Benefit Commencement Date or the earlier of her
Qualified Plan Annuity Starting Date and her Unreduced Benefit
Commencement Date and by substituting “the earlier of her Qualified Plan
Annuity Starting Date and her Unreduced Benefit Commencement Date” for
“her Benefit Commencement Date” in paragraph (b) above. Any
adjustment to the amount computed pursuant to paragraph (b) above for
commencement before or after her Normal Retirement Date shall be made
using the applicable adjustment factors under the Qualified Plan,
determined without taking the five additional years of Credited Service
into account.
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Form
of Payment
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If
Kathleen T. Ellis elects to receive her benefit under Section 2.02 prior
to her Qualified Plan Annuity Starting Date, Actuarial Equivalent value
shall be determined:
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(a)
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as
of her Benefit Commencement Date for purposes of adjusting the amount of
benefit determined under Section 2.02(a); and
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(b)
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as
of the earlier of her Unreduced Benefit Commencement Date and her
Qualified Plan Annuity Starting Date for purposes of adjusting the amount
of benefit determined under Section 2.02(b).
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Timing
of Payment
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For
purposes of Sections 2.05(b) and 2.05(c) of the Plan, Kathleen T. Ellis’s
years of Credited Service shall include any additional years of Credited
Service she is credited with pursuant to paragraph (a) of the “Amount of
Benefits” provisions of this Appendix
B.
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