Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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Performance Shares with Relative Total Return on Capital Performance Goal
On December 20, 2017, the Compensation Committee of the Board of Directors of National Fuel Gas Company (the Company) made the following
grants of performance shares with a performance goal related to relative total return on capital (ROC Performance Shares) to the named executive officers of the Company: R. J. Tanski, 32,162; D. P. Bauer, 4,729; C. M. Carlotti,
6,622; J. P. McGinnis, 7,567; and J. R. Pustulka, 14,189. The grants were made under the Companys 2010 Equity Compensation Plan (the 2010 Plan). A brief description of the principal terms and conditions of the ROC Performance
Shares is provided below.
The number of ROC Performance Shares awarded to a named executive officer is referred to as the officers ROC Target
Opportunity. The performance cycle for the ROC Performance Shares is October 1, 2017 through September 30, 2020. Each ROC Performance Share will make the officer eligible to receive, no later than March 15, 2021 but in any event
as soon as practicable after the Compensation Committee determines the extent to which the performance goal has been achieved, up to two shares of common stock of the Company (or the equivalent value in cash, as determined by the Committee),
provided that the ROC Performance Shares will not vest and will be forfeited to the extent the performance goal is not achieved. No dividend equivalents will be provided in respect of the ROC Performance Shares.
The performance goal for the October 1, 2017 to September 30, 2020 performance cycle is the Companys total return on capital relative to the
total return on capital of other companies in a group selected by the Compensation Committee (the Report Group). The Report Group consists of the following companies:
Atmos Energy Corporation
Cabot
Oil & Gas Corporation
Energen Corporation
EQT Corporation
MDU Resources
Group Inc.
National Fuel Gas Company
New Jersey Resources Corporation
Range Resources Corporation
SM
Energy Company
Southwest Gas Corporation
Southwestern Energy Co.
Spire,
Inc.
UGI Corporation
WGL
Holdings Inc.
Whiting Petroleum Corporation
Total return on capital for a given company means the average of the companys returns on capital for each twelve month period corresponding to each of
the Companys fiscal years during the performance cycle, based on data reported for the company in the Bloomberg database at the time of analysis (or, if the Bloomberg database ceases to be available, such alternative publication or service as
the Compensation Committee shall designate).
The number of ROC Performance Shares that will vest and be paid will depend upon the Companys performance
relative to the Report Group, and not upon the absolute level of return achieved by the Company. The Compensation Committee established five percentile rankings that will determine the number of ROC Performance Shares to vest and be paid:
(i) less than 45
th
, (ii) 45
th
, (iii) 60
th
, (iv) 75
th
, and (v) 100
th
. These percentile rankings will result in vesting and payment of a percentage of the ROC Target Opportunity, as follows: (i) 0%,
(ii) 50%, (iii) 100%, (iv) 150%, and (v) 200%, respectively. For example, if the Companys performance were to place it at the 60
th
percentile of the Report Group, then 100% of the
ROC Target Opportunity would vest and be paid. For performance between two established performance levels, the percentage of ROC Performance Shares to vest and be paid will be determined by mathematical interpolation. Notwithstanding the above, if
the Companys total return on capital is negative, then the percentage of the ROC Target Opportunity to be paid will be capped at 100%. ROC Performance Shares that do not vest will be automatically forfeited when the Compensation Committee
makes its determination as to the extent to which the performance goal has been achieved, but no later than March 15, 2021.
Performance Shares
with Relative Total Shareholder Return Performance Goal
On December 20, 2017, the Compensation Committee of the Company made the following grants
of performance shares with a performance goal related to relative total shareholder return (TSR Performance Shares) to the named executive officers of the Company: R. J. Tanski, 32,162; D. P. Bauer, 4,729; C. M. Carlotti,
6,622; J. P. McGinnis, 7,567; and J. R. Pustulka, 14,189. The grants were made under the 2010 Plan. A brief description of the principal terms and conditions of the TSR Performance Shares is provided below.
The number of TSR Performance Shares awarded to a named executive officer is referred to as the officers TSR Target Opportunity. The
performance cycle for the TSR Performance Shares is October 1, 2017 through September 30, 2020. Each TSR Performance Share will make the officer eligible to receive, no later than March 15, 2021 but in any event as soon as practicable
after the Compensation Committee determines the extent to which the performance goal has been achieved, up to two shares of common stock of the Company (or the equivalent value in cash, as determined by the Committee), provided that the TSR
Performance Shares will not vest and will be forfeited to the extent the performance goal is not achieved. No dividend equivalents will be provided in respect of the TSR Performance Shares.
The performance goal for the October 1, 2017 to September 30, 2020 performance cycle is the Companys three-year total shareholder return
relative to the three-year total shareholder return of the other companies in the Report Group. Three-year total shareholder return for a given company will be based on the data reported for that company (with the starting and ending stock prices
over the performance cycle calculated as the average closing stock price for the prior calendar month and with dividends reinvested in that companys securities at each
ex-dividend
date) in the Bloomberg
database at the time of analysis (or, if the Bloomberg database ceases to be available, such alternative publication or service as the Compensation Committee shall designate).
The number of TSR Performance Shares that will vest and be paid will depend upon the Companys performance relative to the Report Group, and not upon the
absolute level of return achieved by the Company. The Compensation Committee established five percentile rankings that will determine the number of TSR Performance Shares to vest and be paid:
(i) 30
th
or below, (ii) 40
th
, (iii) 50
th
, (iv) 70
th
, and (v) 90
th
or above. These percentile rankings will result in vesting and payment of a percentage of the TSR Target Opportunity, as follows:
(i) 0%, (ii) 50%, (iii) 100%, (iv) 150%, and (v) 200%, respectively. For example, if the Companys performance were to place it at the 50
th
percentile of the Report Group, then 100% of
the TSR Target Opportunity would vest and be paid. For performance between two established performance levels, the
percentage of TSR Performance Shares to vest and be paid will be determined by mathematical interpolation. Notwithstanding the above, if the Companys three-year total shareholder return is
negative, then the percentage of the TSR Target Opportunity to be paid will be capped at 100%. TSR Performance Shares that do not vest will be automatically forfeited when the Compensation Committee makes its determination as to the extent to which
the performance goal has been achieved, but no later than March 15, 2021.
Restricted Stock Units
On December 20, 2017, the Compensation Committee of the Company made a grant of 4,731 restricted stock units (RSUs) to D. P. Bauer, a named
executive officer of the Company. The grant was made under the 2010 Plan. A brief description of the principal terms and conditions of the RSUs is provided below.
An RSU is a right to receive one share of common stock of the Company (or the equivalent value in cash or in a combination of shares and cash, as determined
by the Committee) at the end of a specified period of time (the restricted period). Except as otherwise specified in the 2010 Plan or determined by the Compensation Committee, the restricted period will lapse, and the RSUs will vest, in
three annual installments, commencing on December 20, 2018. If an officer retires prior to a vesting date, the portion of the officers RSU grant associated with that vesting date and with all subsequent vesting dates will be automatically
forfeited. No dividend equivalents will be provided in respect of the RSUs.
Annual At Risk Compensation Incentive Plan
On December 20, 2017, the Compensation Committee adopted specific written performance goals for fiscal year 2018 under the 2012 Annual At Risk
Compensation Incentive Plan (AARCIP) for named executive officers R. J. Tanski, D. P. Bauer, C. M. Carlotti, J. P. McGinnis and J. R. Pustulka. These executives will earn cash compensation in fiscal 2018 under the AARCIP depending
upon their performance relative to their goals. Compensation amounts pursuant to these arrangements can range up to 200% of fiscal-year salary for Mr. Tanski, up to 140% of fiscal-year salary for Mr. Bauer, up to 140% of fiscal-year salary
for Mr. Carlotti, up to 170% of fiscal-year salary for Mr. McGinnis, and up to 200% of fiscal-year salary for Mr. Pustulka. Target compensation is 110% of fiscal-year salary for Mr. Tanski, 70% of fiscal-year salary for
Mr. Bauer, 70% of fiscal-year salary for Mr. Carlotti, 85% of fiscal-year salary for Mr. McGinnis, and 100% of fiscal-year salary for Mr. Pustulka. The Compensation Committee may approve other compensation or awards at its
discretion.
The goals for Mr. Tanski relate to Company EBITDA (weighted as 25% of the formula), EBITDA of the Companys pipeline and storage
subsidiaries and utility subsidiary (weighted as 20% of the formula), EBITDA of the Companys exploration and production subsidiary (weighted as 20% of the formula), finding and development costs (weighted as 15% of the formula), safety
(weighted as 10% of the formula), and health, safety and environmental (weighted as 10% of the formula).
The goals for Mr. Bauer relate to Company
EBITDA (weighted as 25% of the formula), EBITDA of the Companys pipeline and storage subsidiaries and utility subsidiary (weighted as 25% of the formula), EBITDA of the Companys exploration and production subsidiary (weighted as 15% of
the formula), finding and development costs (weighted as 15% of the formula), safety (weighted as 10% of the formula), and health, safety and environmental (weighted as 10% of the formula).
The goals for Mr. Carlotti relate to Company EBITDA (weighted as 25% of the formula), EBITDA of the
Companys pipeline and storage subsidiaries and utility subsidiary (weighted as 25% of the formula), operational safety measures and leak reduction (weighted as 20% of the formula), safety (weighted as 10% of the formula), health, safety and
environmental (weighted as 10% of the formula), and customer service (weighted as 10% of the formula).
The goals for Mr. McGinnis relate to Company
EBITDA (weighted as 25% of the formula), EBITDA of the Companys exploration and production subsidiary (weighted as 25% of the formula), finding and development costs (weighted as 20% of the formula), health, safety and environmental (weighted
as 10% of the formula), lease operating expense (weighted as 10% of the formula), and general and administrative expense of the Companys exploration and production subsidiary (weighted as 10% of the formula).
The goals for Mr. Pustulka relate to Company EBITDA (weighted as 25% of the formula), EBITDA of the Companys pipeline and storage subsidiaries and
utility subsidiary (weighted as 25% of the formula), EBITDA of the Companys exploration and production subsidiary (weighted as 20% of the formula), safety (weighted as 10% of the formula), health, safety and environmental (weighted as 10% of
the formula), and operational safety measures and leak reduction (weighted as 10% of the formula).
For purposes of the goals, EBITDA is defined in
general as operating income plus depreciation, depletion and amortization, and any
period-end
impairment charges. For each named executive officer, the performance level achieved on each earnings goal will be
averaged with the performance level achieved on the prior years corresponding earnings goal.