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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 21, 2006
HANOVER COMPRESSOR COMPANY
HANOVER COMPRESSION LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
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001-13071
001-31934
(Commission File Number)
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76-0625124
75-2344249
(I.R.S. Employer
Identification No.) |
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12001 North Houston Rosslyn
Houston, Texas
(Address of Principal Executive Offices)
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77086
(Zip Code) |
Registrants Telephone Number, including Area Code: (281) 447-8787
Not Applicable.
(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):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o 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.
Executive Compensation
On July 21, 2006, the Board of Directors (the Board) of Hanover Compressor Company (the
Company) approved increases to the base salary of the following named executive officers,
each of such increases to be effective as of July 1, 2006. Additionally, the Board approved long
term incentive awards to key employees, including Executive Officers. The 2006 Long Term Incentive
Awards Program is described below.
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Amount of |
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Officer |
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Title |
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Increase |
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New Salary |
John E. Jackson |
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CEO |
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$25,000 |
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$565,000 |
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Brian A. Matusek |
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Sr. VP US Operations & Global Services |
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$35,000 |
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$310,000 |
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Norman A. Mckay |
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Sr. VP Eastern Hemisphere |
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$35,000 |
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$310,000 |
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Gary M. Wilson |
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Sr. VP & General Counsel |
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$15,000 |
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$310,000 |
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Lee E. Beckelman |
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Sr. VP & CFO |
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$50,000 |
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$300,000 |
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2006 Long Term Incentive Awards Program
The 2006 Long Term Incentive Awards Program (the 2006 Awards Program) was developed
primarily to provide long term incentives to management-level employees and align managements
interests with those of the Companys shareholders. The long term incentive awards
(Awards) that participants will be entitled to receive pursuant to the 2006 Awards
Program consist of the following:
(i) Time vested restricted stock or stock-settled restricted stock units (Time Vested Stock
Awards), and
(ii) either
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performance vested restricted stock or stock-settled restricted stock units
cliff vesting after a three year performance period (Performance Awards),
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cash awards paid out over a period of 3 years (Cash Awards). |
All Executive Officers received a combination of Time Vested Stock Awards and Performance
Awards. Cash Awards were granted to non-executive personnel only. All Awards will be issued under
the Companys 2006 Stock Incentive Plan approved by the stockholders in May 2006 (the
Incentive Plan) or the Companys 2006 Long Term Cash Incentive Plan (the Cash
Plan).
The Cash Plan was adopted by the Management Development and Compensation Committee of the
Board (the Compensation Committee) on July 20, 2006 and allows for the payment of Cash Awards only. The form of the Companys
Cash Plan is filed herewith as Exhibit 10.1.
The Time Vested Stock Awards that were granted pursuant to the 2006 Program will vest in
one-third increments on each anniversary of their grant, so that 100% of these awards will have
vested within three years of July 21, 2006, the original grant date. The Cash Awards that were granted
pursuant to the 2006 Awards Program will be paid out in one-third increments on each anniversary of
their grant so that 100% of the awards will be paid out within three years of July 21, 2006.
Recipients of the Performance Awards are eligible to receive shares of Hanover common stock at
the end of three years from the original award grant date if the Company meets certain three-year
average return on capital employed (ROCE) goals as determined by the Compensation
Committee of the Board. ROCE is equal to (1) EBIT, divided by (2) short term debt plus, current
maturities of long-term debt plus, long-term debt plus, minority interest plus, stockholders
equity less, cash. The three-year average threshold ROCE goal has been set by the Compensation Committee of
the Board at 6%. The intent of the Compensation Committee is to provide incentives for
participants to achieve significant improvements in the Companys operational performance. Upon
the occurrence of material non-operational events during the performance period, the Compensation
Committee may adjust the incentive formula to exclude such event. If the Company does not meet the
threshold ROCE goals, then recipients of these Performance Awards will not be entitled to receive
any shares under the Performance Awards. If the Company meets or exceeds the threshold ROCE,
participants will be entitled to receive shares equal to a percentage of the target amount of
shares payable to each participant based upon the final three-year average ROCE as follows:
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Performance Payout |
Three-Year Average Return |
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Based Upon |
on Capital Employed (ROCE) |
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Percentage of Target |
6.0% |
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50% |
7.5% |
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100% |
9.5% or more |
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200% |
If the three-year average ROCE falls within the range set forth in the table above, the
percentage of the target Performance Award shares issued to each participant will be pro-rated
accordingly.
Vesting or actual payment of all Awards is contingent upon the participants continued
employment with the Company, with the exception of the earlier acceleration events described below.
In order to be eligible to receive payment upon vesting of the Performance Award, employees must be
employed by the Company on July 21, 2009.
Upon a change of control of the Company or in the event a participants employment is
terminated due to his or her death or disability:
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the Incentive Plan provides that all unvested Time Vested Stock Awards shall
fully vest and no longer be subject to any restrictions, and all performance
awards shall immediately vest in full and all performance criteria applicable to
such performance awards shall be deemed met at 100% of target as of the date of
such change of control of the Company or death or disability, as the case may be;
and |
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the Cash Plan provides that all unvested Cash Awards shall immediately become
payable in a lump sum cash payment (subject to applicable tax withholding). |
The form of Award Notice for the Time Vested Awards, the Performance Awards and the Cash
Awards are filed herewith as Exhibits 10.2, 10.3, 10.4, 10.5 and 10.6 are incorporated herein by
reference.
Director Compensation
On July 21, 2006, the Companys Board of Directors approved certain increases in Non-Employee
Director compensation. The increases were effective immediately.
The attached exhibit 10.8 sets forth the compensation for Non-Employee Directors.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
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Exhibit No.
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Description |
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10.1*
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2006 Long Term Cash Incentive Plan |
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10.2*
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Form of Award Notice Time Vested Restricted Stock |
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10.3*
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Form of Award Notice Time Vested Restricted Stock Units (stock settled) |
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10.4*
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Form of Award Notice Performance Vested Restricted Stock |
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10.5*
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Form of Award Notice Performance Vested Restricted Stock Units (stock settled) |
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10.6*
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Form of Award Notice Cash Incentive Plan |
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10.7
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2006 Stock Incentive Plan incorporated by reference to the Companys
Definitive Proxy Statement filed March 24, 2006 |
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10.8*
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Schedule of Compensation for Non-Employee Directors |
* Filed herewith
SIGNATURES
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.
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HANOVER COMPRESSOR COMPANY
HANOVER COMPRESSION LIMITED PARTNERSHIP
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Date: July 27, 2006 |
By: |
/s/ Gary M. Wilson
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Name: |
Gary M. Wilson |
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Title: |
Senior Vice President, General Counsel
and Corporate Secretary |
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EXHIBIT INDEX
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Exhibit No.
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Description |
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10.1*
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2006 Long Term Cash Incentive Plan |
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10.2*
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Form of Award Notice Time Vested Restricted Stock |
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10.3*
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Form of Award Notice Time Vested Restricted Stock Units (stock settled) |
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10.4*
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Form of Award Notice Performance Vested Restricted Stock |
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10.5*
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Form of Award Notice Performance Vested Restricted Stock Units (stock settled) |
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10.6*
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Form of Award Notice Cash Incentive Plan |
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10.7
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2006 Stock Incentive Plan incorporated by reference to the Companys
Definitive Proxy Statement filed March 24, 2006 |
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10.8*
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Schedule of Compensation for Non-Employee Directors |
*Filed herewith