CNX Gas 8-K 2006
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 11, 2006
CNX GAS CORPORATION
(Exact name of registrant as specified in its charter)
Registrants telephone number, including area code:
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
Adoption of the Long-Term Incentive Program under the CNX Gas Corporation Equity Incentive Plan (as amended, the Plan)
On October 11, 2006, the Board of Directors (the Board) of CNX Gas Corporation (the Company) approved, adopted and otherwise ratified, upon the recommendation and approval of the Independent Subcommittee (the Independent Subcommittee) of the Compensation Committee of the Board (the Compensation Committee), a new program under the Plan called the Long-Term Incentive Program (the Program), effective October 11, 2006, and the form of award agreement thereunder, copies of which are filed as Exhibits 10.1 and 10.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
The primary purpose of the Program is to provide long-term incentive compensation to key employees of the Company and its affiliates in order to further align their interests with those of the Companys stockholders. Upon being selected to participate in the Program, each participant is awarded a certain number of performance share units (including dividend rights, the Units). The Units represent a contingent right to receive a cash payment, determined by reference to the value of one share of the Companys common stock, to the extent such Unit is earned and becomes payable pursuant to the terms of the Program. The total number of Units earned, if any, by a participant will be based on the Companys total stockholder return relative to the total stockholder return of each company in a peer group of companies (the Performance Condition) for the period of October 11, 2006 to December 31, 2009 (the Performance Period).
A determination of total stockholder return for the Performance Period will be calculated as follows: (i) a beginning point will be established for the Company and each company in the peer group which will be defined as one share of stock with a value equal to the average closing price as reported in The Wall Street Journal for the ten (10) business day period beginning on October 11, 2006 (or the first business day immediately thereafter) for each company (the Beginning Point), (ii) dividends paid for each company will be cumulatively added to the Beginning Point as additional shares of such companys stock (the total number of shares accumulated during the Performance Period, if any, plus the Beginning Point will be referred to as the Total Units Held at Ending Point), (iii) an Ending Point will be defined as Total Units Held at Ending Point for each company times the average closing stock price as reported in The Wall Street Journal for the last ten (10) business days of the Performance Period for each company (in the event of a Change in Control (as then defined in the Plan), the Ending Point will be defined as the Total Units Held at Ending Point times the average of the closing price as reported in The Wall Street Journal for the ten (10) business days preceding the closing of the Change in Control transaction), (iv) total stockholder return will be expressed as a percentage and is calculated by dividing the Ending Point by the Beginning Point and then subtracting 1 from the result (each company, including the Company, will be ranked in descending order by the total stockholder return so calculated), (v) the Units earned by a participant will be determined by multiplying the participants Units by the applicable Percent of Performance Share Units Earned that corresponds to the Companys Percentage Ranking in Total Stockholder Return for the Performance Period, as set forth in the schedule shown below.
OUTCOME RELATIVE TO PEER GROUP
Note: Interpolation between points will be made on a straight line basis. Below the 25th percentile and above the 90th percentile, there will be no interpolation.
After the end of the Performance Period, the Independent Subcommittee will certify in writing the extent to which the Performance Condition and any other material terms of the Program have been achieved. Any Units earned by a participant will be settled and paid in cash by the Company or its affiliates, as applicable, with the amount calculated to be based on each Unit being equal in value to a corresponding share of Company common stock on the last day of the Performance Period. In the event of a Change in Control, the value of such Units will be distributed in cash on the closing date of the Change in Control transaction and such value will be determined as of the closing date of the transaction with the closing date of such transaction being deemed the last day of the Performance Period and calculated in accordance with the formula described above.
Notwithstanding the foregoing, the Units will be forfeited and cancelled in the event (i) a participants employment with Company or any affiliate terminates prior to the applicable payment date, for any reason other than death or disability of the participant, whether or not payable, without payment by the Company or any affiliate or (ii) a participant breaches the confidentiality, non-competition or non-solicitation provisions of the Program. If a participants employment with the Company or any affiliate is terminated due to death or disability during the Performance Period, such participant will be entitled to a prorated portion of the Units, to the extent earned pursuant to the provisions of the Program, determined at the end of the Performance Period and based on the ratio of the number of complete months the participant is employed or serves during the Performance Period to the total number of months in the Performance Period (or the number of remaining months in the Performance Period if such participant is admitted after the start of the Performance Period).
Unit Awards under the Program
The Independent Subcommittee granted and approved, and upon the Independent Subcommittees recommendation, the Board approved and ratified, effective October 11, 2006, the following grants of Unit awards to the Companys executive officers: (i) for Nicholas J. DeIuliis, the Companys President and Chief Executive Officer and a director on the Companys Board, an award of 73,306 Units, (ii) for Ronald E. Smith, the Companys Executive Vice President and Chief Operating Officer, an award of 43,440 Units, (iii) for Stephen W. Johnson, the Companys Senior Vice President and General Counsel, an award of 27,150 Units; and (iv) for Gary J. Bench, the Companys Senior Vice President and Chief Financial Officer, an award of 23,892 Units.
Each of the Unit awards listed above is subject to the terms and conditions of the Plan, the Program and the related Award Agreement; the Program document and the form of Award Agreement are filed as Exhibits 10.1 and 10.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
Amendment to the Plan
On October 11, 2006, the Board, upon approval and recommendation by the Compensation Committee, approved and adopted an amendment to the Plan to increase the maximum amount that participants may receive in awards (paid in cash) from $1,200,000 to an amount in equivalent value equal to no more than 250,000 shares of the Companys common stock for each full or partial fiscal year of the Company contained in the performance period of a particular performance award (the Amendment). A copy of the Amendment is attached hereto as Exhibit 10.3, and is incorporated herein by reference.
Compensation of Non-Employee Directors
The form and amount of compensation paid to non-employee directors of the Company is to be reviewed annually by the Compensation Committee of the Board. On October 11, 2006, upon the recommendation of the Compensation Committee of the Board, the Board approved a new compensation arrangement for non-employee directors (other than the non-executive Chairman of the Board, whose compensation arrangements with the Company remain unchanged), which will be effective as of November 1, 2006 on a prospective basis, and which is summarized in Exhibit 10.4 to this Current Report on Form 8-K and is incorporated herein by reference. As part of these changes to non-employee director compensation, the Board approved an increase in the initial election grants received by such directors and, in light of the fact that such increase was under review at the time of the appointment of Joseph T. Williams to the Board, the Board approved the grant to Mr. Williams of an additional option to purchase the Companys common stock with an aggregate dollar value of $20,000 (using a Black-Scholes value determined as of the grant date of such option) under the Plan, in consideration for his service as a director on the Board.
Item 9.01 Financial Statements and Exhibits.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: October 17, 2006