Exhibit 10.86

 

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CODE OF EMPLOYEE

BUSINESS CONDUCT AND ETHICS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2005

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CONTENTS

 

          PAGE

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INTRODUCTION    2 1.    PAYMENTS BY AND TO THE COMPANY AND ITS EMPLOYEES    2  
   A. GIFTS, FAVORS, AND ENTERTAINMENT    3      B. PAYMENTS TO GOVERNMENT
EMPLOYEES    3      C. PAYMENTS RELATED TO SALES    3      D. PAYMENTS RELATED
TO PURCHASES    4      E. GIFTS AND PAYMENTS TO EMPLOYEES    5 2.    CONFLICTS
OF INTEREST    5 3.    SERVICE IN OUTSIDE ORGANIZATIONS    7 4.    BUSINESS
INFORMATION PROTECTION    7 5.    FAIR DEALING    8 6.    INSIDER TRADING    8
7.    ELECTRONIC INFORMATION    9 8.    COMPLIANCE WITH THE LAW    9      A.
ANTITRUST LAWS    9      B. ANTIBOYCOTT LAWS    9      C. ENVIRONMENTAL AND
SAFETY AND HEALTH LAWS    10      D. EQUAL EMPLOYMENT OPPORTUNITY & HARASSMENT
   10 9.    POLITICAL CONTRIBUTIONS    10 10.    TRAVEL AND ENTERTAINMENT    11
11.    ACCOUNTING STANDARDS AND DOCUMENTATION    11 12.    PROTECTION AND PROPER
USE OF COMPANY ASSETS    12

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CONTENTS

 

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13.    CORPORATE OPPORTUNITIES    12 14.    ANNUAL REPORTING    12 15.   
COMPLIANCE    13 16.    OTHER POLICIES    13

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INTRODUCTION

 

It always has been and continues to be the intent of CONSOL Energy Inc.
(“CONSOL”) and its subsidiary companies (together with CONSOL, the “Company”)
that all who conduct business on behalf of the Company maintain the highest
ethical and legal standards in conducting such business. The essence of this
Code of Business Conduct (the “Code”), which has been adopted by CONSOL and each
of its subsidiaries, is that each employee will conduct all Company business
with integrity, in compliance with applicable laws, and in a manner that
excludes considerations of personal advantage.

 

This Code applies to all executives and other officers, employees, consultants,
independent contractors and agents (collectively, “employees”) of the Company
(including, specifically, CONSOL’s principal executive officer and its principal
financial officer). Only the Board of Directors or an authorized Committee of
the Board may grant waivers of this Code for executive officers.

 

If employees have any questions regarding acceptable conduct or the
interpretation of this Code, or if they are in doubt about the best course of
action in a particular situation, it is their responsibility to seek
clarification from their line management or, if necessary, from CONSOL’s Legal
or HR Department or Internal Auditing management.

 

1.1. 1. PAYMENTS BY AND TO THE COMPANY AND ITS EMPLOYEES

 

A. GIFTS, FAVORS, AND ENTERTAINMENT

 

(i) GENERALLY

 

Gifts, favors, and entertainment may be provided to others at Company expense or
for the benefit of the Company or its employees in their capacity as employees
only if they meet all of the following criteria:

 

  •   They are consistent with customary business practices;

 

  •   They are not excessive in value and cannot be construed as a bribe,
pay-off or kickback;

 

  •   They are not in contravention of applicable law or ethical standards; and

 

  •   Public disclosure of the facts will embarrass neither the Company nor the
employee.

 

(ii) RECORDS AND DOCUMENTATION

 

Accounting records and supporting documentation reflecting gifts, favors, and
entertainment to others must be accurately stated, including appropriate, clear
and descriptive text. Departments are encouraged to establish policies and
procedures for approval in advance of gifts, favors, or entertainment of unusual
monetary value (U.S. tax law limits the deduction for business gifts per
recipient per year).

 

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B. PAYMENTS TO GOVERNMENT EMPLOYEES

 

Payments to Government personnel to facilitate the rendition of services are
prohibited. However, the Company does not prohibit customary expediting
payments, properly recorded in the Company’s books, which are not excessive in
amount, if and only if:

 

  •   The making of such payments does not violate the applicable laws of any
country and is an established, well-recognized practice in the applicable
country;

 

  •   The action to be facilitated by the payment is essentially of an
administrative nature (such as obtaining customs clearances, visas, and work
permits) to which the Company is clearly entitled;

 

  •   The payment does not violate the provisions of the U.S. Foreign Corrupt
Practices Act which prohibits (among other things) direct or indirect gifts or
payments to foreign government officials for the purpose of securing business;
and

 

  •   The payment to be made is not for expediting (1) any decision by
government personnel whether, or on what terms, to award new business to or to
continue business with any particular party, or (2) any action taken by
government personnel involved in the decision making process to encourage a
decision to award new business to or continue business with a particular party.

 

The form or manner of payment is irrelevant in determining whether a payment is
permissible.

 

In case of doubt as to the legality of any payment, gift, favor, or
entertainment proposed to be given by or on behalf of the Company, a CONSOL
Legal Department representative should be consulted in advance of commitment.

 

C. PAYMENTS RELATED TO SALES

 

In connection with sales by the Company, commissions, rebates, discounts,
credits, and allowances should be paid or granted only by the Company on whose
books the related sale is recorded, and such payments should:

 

  •   Bear a reasonable relationship to the value of goods delivered or services
rendered;

 

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  •   Be by check or bank transfer to the specific business entity with whom the
agreement is made or to whom the original related sales invoice was issued-not
to individual officers, employees or agents of such entity, or to a related
business entity;

 

  •   Be made only in the country of the entity’s place of business; and

 

  •   Be supported by documentation that is complete and that clearly defines
the nature and purpose of the transaction.

 

Agreements for the Company to pay commissions, rebates, credits, discounts, or
allowances should be in writing; however, when this is not feasible, the payment
arrangement should be supported by an explanatory memorandum for the file
prepared by the approving department and reviewed by the CONSOL Legal
Department.

 

The intent of the above policy applicable to the payment or granting of
commissions, rebates, discounts, credits and allowances in connection with sales
by the Company is to avoid illegal or unethical payments, or establishing an
environment where these may inadvertently be made. The business world is
complex, however, and there may be unusual situations in apparent conflict with
one or more of the policy guidelines. Such situations may nevertheless be
acceptable business practice and warrant an exception. Any such exceptions,
including those arising outside the United States and its territories, should be
reviewed with the CONSOL Treasury and Legal Departments. In all cases, however,
CONSOL Internal Auditing must be informed in advance. There must be no
falsification, misrepresentation, or deliberate overbilling reflected in any
document (including invoices, consular documents, letter of credits, etc.)
involved in the transaction. This includes suppression or omission of documents
or of information in the documents, or deliberate misdirection of documents.

 

D. PAYMENTS RELATED TO PURCHASES

 

In connection with Company purchases of goods and services, including
commissions related thereto, payments shall:

 

  •   Bear a reasonable relationship to the value of goods received or services
rendered;

 

  •   Be by check or bank transfer to the specific business entity that provided
the goods or services – not to individual officers, employees or agents of such
entity, or to a related business entity;

 

  •   Be made only in the country of the entity’s place of business; and

 

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  •   Be supported by documentation that is complete and that clearly defines
the nature and purpose of the transaction.

 

All such payments shall be consistent with corporate and trade practice.

 

Payments for goods and services purchased by the Company are otherwise subject
to the same considerations noted above in the procedures with respect to payment
of commissions, etc., in connection with sales by the Company. Payments for
goods and services made in the country in which the product was delivered or
service rendered by the vendor are not, per se, considered subject to special
review or a requirement for a written request for payment from an officer of the
payee unless circumstances suggest the manner of payment might be illegal or
unethical.

 

E. GIFTS AND PAYMENTS TO EMPLOYEES

 

Employees shall neither seek nor accept for themselves or others any gifts,
favors, or entertainment without a legitimate business purpose, nor seek or
accept loans (other than conventional loans at market rates from lending
institutions) from any person or business organization that does or seeks to do
business with, or is a competitor of, the Company. In the application of this
policy:

 

  •   Employees may accept for themselves and members of their families common
courtesies usually associated with customary business practices.

 

  •   An especially strict standard is expected with respect to gifts, services,
discounts, entertainment, or considerations of any kind from suppliers.

 

  •   It is never permissible to accept a gift in cash or cash equivalents
(e.g., stocks or other forms of marketable securities) of any amount.

 

In certain situations, refusal of personal gifts, favors, or entertainment
(because, for example, they have a value substantially in excess of customary
business practices) can result in awkward business situations. The propriety of
employees accepting such favors or entertainment or keeping such valuable gifts
for personal use versus turning them over to the Company, donating them to a
charity or other disposition should be discussed in each case with the
employee’s management and documented.

 

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2. CONFLICTS OF INTEREST

 

Employees should avoid any situation that involves or may involve a conflict
between their personal interests and the Company’s interests. As in all other
facets of their duties, employees dealing with customers, suppliers,
contractors, competitors or any persons doing or seeking to do business with the
Company are to act in the best interests of the Company to the exclusion of
considerations of personal preference or advantage. Each employee shall make
prompt and full disclosure in writing to his department management of a
prospective situation that may involve a conflict of interest. This includes:

 

•   Ownership by an employee or, to the employee’s knowledge, by a member of the
employee’s family of a significant financial interest* in any outside enterprise
which does or seeks to do business with or is a competitor of the Company;

 

•   Serving as a director, officer, partner, consultant, or in a managerial
position with, or employment in a technical capacity by, any outside enterprise
which does or is seeking to do business with or is a competitor of the Company;

 

•   Acting as broker, finder, go-between, or otherwise for the benefit of a
third party in transactions involving or potentially involving the Company or
its interests; and

 

•   Any other arrangement or circumstances, including family or other personal
relationships which might dissuade the employee from acting in the best interest
of the Company.

 

All information disclosed to management as required by this policy shall be
treated confidentially, except to the extent necessary to protect the Company’s
interests.

 

The key to review of potential conflicts is whether the employee’s duties for
the Company, or those of his subordinates, require making decisions that could
be influenced by the interest reported. Other considerations include, but are
not limited to whether or not:

 

•   The outside interest does business or competes with the employee’s
department, division, or site.

 

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* As a minimum standard, a “significant” financial interest is a direct or
indirect aggregate interest of an employee and family members of more than:

 

  (a) 1 percent of any class of the outstanding securities of a firm or
corporation,

  (b) 10 percent interest in a partnership or association, or

  (c) 5 percent of the total assets or gross income of such employee.

 

In questions of conflict of interest, the term “family” should be interpreted
broadly.

 

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•   The employee has an active, managerial, or decision-making role in the
outside interest.

 

•   The employee has access to Company information potentially useful to the
outside interest.

 

•   Public disclosure of the facts will embarrass the Company.

 

Conflicts of interest involving real estate, coal, oil and gas leases, and
mineral interests are particularly sensitive. All employees are prohibited from
competing with the Company in its real estate acquisition or exploration
activities, or using Company information or equipment to enable them to profit,
either directly or indirectly, through the acquisition of mineral leases,
royalty or mineral interests, or real property for the purpose of obtaining
royalty or mineral interests.

 

3. SERVICE IN OUTSIDE ORGANIZATIONS

 

Employees should not accept a directorship with any for-profit corporation
without the prior specific approval of the General Counsel of the Company.
Employees should ensure their participation or service to other organizations,
be they civic, charitable, corporate, governmental, public, private, or
non-profit in nature, do not (a) materially detract from or interfere with the
full and timely performance of their services to the Company, or (b) create
possible conflicts of interest as to the Company.

 

4. BUSINESS INFORMATION PROTECTION

 

All Company employees shall ensure the proper handling, protection and disposal
of business information. Every employee is responsible for compliance. In
addition, supervisory employees are responsible for compliance by their
subordinate employees and non-employees under their supervision. Business
information is a valuable resource to the Company. Improperly handled or
disclosed business information (whether intentional or inadvertent), may result
in financial damage to the Company; a diminution of our competitiveness;
exposure of the company, its officers, and its directors to legal liability; or
otherwise adversely affect shareholders or other stakeholders of the Company.
The primary purpose of this policy is to ensure that employees and others
understand the need to protect business information; provide guidance in the
proper handling of business information; prevent the unauthorized disclosure; or
the loss of business information; and notify employees and others of the
possible consequences of failure to comply with this policy.

 

To this end, employees shall not:

 

•   Give or release, without proper authority, to anyone not employed by the
Company, or to another employee who has no need for information, data or
information of a confidential nature obtained while in the Company’s employment.
This information includes but is not limited to materials relating to customers,
development programs, costs, marketing, trading, investment, sales activities,
promotion, credit and financial data, manufacturing processes, financing
methods, plans or the business and affairs of the Company; and

 

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•   Use nonpublic information obtained while in the Company’s employment
(including information about customers, suppliers, or competitors) for the
profit of the employee or other person or company. This includes, but is not
limited to, taking advantage of such information by (1) trading or providing
information for others to trade in securities, (2) acquiring a real estate
interest of any kind, including but not limited to plant or office sites or
adjacent properties, (3) acquiring (or acquiring options to obtain) interests in
coal, oil and gas leases, royalties, minerals, or real property for the purpose
of obtaining mineral or royalty interests, or any interest in coal, oil or gas
production or profits from the same, or (4) retaining Company documents or using
for any purpose or revealing to anyone else Company business practices,
confidential information or trade secrets after leaving the Company’s
employment.

 

Employees shall, upon termination of their employment, return to the Company all
memoranda, books, papers, plans, information, letters and other data, including
electronic files, and all copies thereof or therefrom, which in any way relate
to the business of the Company, except that employees may retain personal notes,
notebooks and diaries.

 

Improper use of sensitive inside information can be significantly inhibited by
careful control and restriction of access to such information. Employees who
handle particularly sensitive inside information, and who may not have the
background to understand the legal and corporate implications of the misuse of
such information, should be periodically advised of corporate policy and the
severe legal penalties that can be associated with misuse of inside information.
It is important to remember that these obligations continue even though a person
is no longer employed by the Company.

 

5. FAIR DEALING

 

Every employee shall deal honestly and fairly with the Company’s directors,
officers, employees, customers, suppliers, and competitors, and shall not take
unfair advantage of others through manipulation, concealment, abuse of
privileged information, misrepresentation of material facts, or other unfair
dealing practices.

 

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6. INSIDER TRADING

 

If any employee has material nonpublic information relating to the Company,
neither that person nor any related person may buy or sell securities of the
Company or engage in any other action to take advantage (directly or indirectly,
or for another person’s benefit) of that information. Further, if an employee
acquires material, non-public information regarding other companies, including
the Company’s customers or suppliers during the course of their employment,
neither they nor any related person may buy or sell securities of the other
company or engage in any other action to take advantage (directly or indirectly,
or for another person’s benefit) that information. Transactions that may be
necessary or justifiable for independent reasons (such as the need to raise
money for an emergency expenditure) are no exception. Even the appearance of an
improper transaction must be avoided to preserve the Company’s reputation for
adhering to the highest standards of conduct. Employees should refer to the
Statement of Policy on Securities Trades by Company employees for further
information.

 

7. ELECTRONIC INFORMATION

 

The use of the Company’s computer information systems and the Company data
transmitted and/or stored electronically are assets requiring unique protection.
Standards for Electronic Information Security have been adopted and are
available through line management or CONSOL’s Information Systems & Technology
Department. Each employee is responsible for compliance with the standards and
related procedures. Additionally, employees are required by law to read and
comply with the license agreements associated with the computer software they
acquire.

 

8. COMPLIANCE WITH THE LAW

 

All employees are expected to comply with all applicable laws, rules and
regulations including, but not limited to, the following:

 

A. ANTITRUST LAWS

 

The Company’s activities are subject to federal and state antitrust laws. In
general, those laws prohibit agreements or actions that may restrain trade or
reduce competition. Violations include agreements among competitors to fix or
control prices; to boycott specified suppliers or customers; to allocate
products, territories or markets; or to limit the production or sale of
products. Care must be exercised to ensure that any activities with
representatives of other companies are not viewed as a violation of any
antitrust law. Actions taken by the Company without cooperation of competitors
may also be illegal if they are intended to or tend to create monopoly power.
Because of the complexity of antitrust laws, the advice of CONSOL’s Legal
Department should be sought on all questions regarding this subject.

 

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B. ANTIBOYCOTT LAWS

 

Antiboycott laws prohibit participation in, or cooperation with, international
boycotts which U.S. law does not sanction. For example, it is a violation of
U.S. law to refrain from doing business with boycotted countries or blacklisted
persons, or to furnish information about business relationships of a U.S. person
with such countries or persons. The mere receipt of a request to engage in any
such boycotting activity becomes a reportable event by law. Such requests should
be brought to the attention of CONSOL’s Legal Department.

 

C. ENVIRONMENTAL AND SAFETY AND HEALTH LAWS

 

It is the Company’s policy to conduct all operations in such a manner as to
protect and preserve the environment and the health and safety of employees. To
that end, the Company’s policy is that all operations shall be conducted in full
compliance with all applicable state and federal environmental and health and
safety laws and regulations. These laws and regulations affect work practices at
all Company sites and the impact of our operations on the air, land and water.
Employees must be scrupulous in the observance of applicable laws and
regulations to avoid risks to the health and safety of employees and to the
environment. The advice of line and staff environmental specialists and CONSOL’s
Legal Department in these areas should be utilized as needed.

 

D. EQUAL EMPLOYMENT OPPORTUNITY AND HARASSMENT

 

(i) EQUAL EMPLOYMENT OPPORTUNITY

 

It is the Company’s policy to provide equal opportunity for all qualified
persons without regard to race, color, religion, age, sex, handicap, disability,
marital status, national origin, or veteran status. This applies to, but is not
limited to hiring, placement, upgrading, demotion, transfers, recruitment or
recruitment advertising, layoff or termination, rate of pay or other forms of
compensation, selection for training, and all other aspects of employment.

 

(ii) HARASSMENT

 

Sexual harassment or abuse of others (employees and non-employees) in the
workplace by employees is prohibited and will not be tolerated. Additionally
management will not condone affronts to the dignity of any employee, male or
female, whether under the guise of initiating new employees to the workforce or
otherwise. It is everyone’s responsibility to maintain a proper workplace for
all employees. If employees have any questions or concerns in the area of equal
employment opportunity, they should bring them to the immediate attention of
their supervisor or CONSOL’s Legal Department.

 

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9. POLITICAL CONTRIBUTIONS

 

Employees shall not make a contribution of any Company funds, property or
services to any political party or committee, domestic or foreign, or to any
candidate for or holder of any office of any government – national, state,
local, or foreign. This policy does not preclude (1) the operation of a
political action committee under applicable laws (2) Company contributions,
where lawful, to support or oppose public referenda or similar ballot issues, or
(3) political contributions, where lawful and reviewed in advance by CONSOL’s
Vice President, External Affairs, Investor and Public Relations and approved in
writing by the President and CEO of CONSOL who will advise the appropriate
Boards of Directors. No direct or indirect pressure in any form is to be
directed toward employees to make any political contribution or participate in
the support of a political party or the political candidacy of any individual.

 

This policy is not intended to affect the rights of officers, employees, and
agents of the Company to make personal political contributions to the party,
committee, or candidate of their choice as long as the donation is derived
exclusively from that individual’s personal funds or time and in no way was
compensated directly or indirectly by the Company.

 

10. TRAVEL AND ENTERTAINMENT

 

Travel and entertainment should be consistent with the needs of the Company’s
business. Employees are expected to exercise good judgment, travel on Company
business in a cost-efficient manner, adhere to normal safety requirements, and
promptly report any expenditures incurred. The Company’s intent is that an
employee neither loses nor gains financially as a result of business travel and
entertainment. Detailed instructions related to business travel are documented
in the Travel and Entertainment Expense Policy and Procedures Manual.

 

Employees who approve travel and entertainment expense reports are responsible
for the propriety and reasonableness of expenditures, for ensuring that expense
reports of their subordinates are submitted promptly, and that receipts and
explanations properly support reported expenses.

 

11. ACCOUNTING STANDARDS AND DOCUMENTATION

 

It is the Company’s policy to comply with all financial reporting and accounting
regulations applicable to the Corporation. All accounts and records shall be
documented in a manner that:

 

•   Clearly describes and identifies the true nature of business transactions,
assets, liabilities, or equity; and

 

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•   Properly and timely classifies and records entries on the books of account
in conformity with generally accepted accounting principles.

 

No record, entry, or document shall be false, distorted, misleading,
misdirected, deliberately incomplete, or suppressed.

 

The Company has established internal control standards and procedures to ensure
that assets are protected and properly used and that financial reports are
accurate and reliable. Employees share the responsibility for maintaining and
complying with required internal controls.

 

Improper accounting and documentation are not only contrary to the Company
policy but also may be in violation of the accounting provisions of the U.S.
Foreign Corrupt Practices Act of 1977, the Public Company Accounting and
Investor Protections Act of 2002 or other laws or regulations, potentially
involving personal liability, both civil and criminal, as well as sanctions
against the Company.

 

If any employee has concerns or complaints regarding accounting or auditing
matters of the Corporation, then he or she shall submit those concerns or
complaints to the Chair of the Audit Committee of the Board of Directors
promptly.

 

12. PROTECTION AND PROPER USE OF COMPANY ASSETS

 

Employees must protect the Company’s assets and ensure their efficient use.
Theft, loss, misuse, carelessness, and waste of assets have a direct impact on
the Company’s profitability. All Company assets should be used only for
legitimate business purposes.

 

13. CORPORATE OPPORTUNITIES

 

All employees owe a duty to the Company to advance the Company’s legitimate
interests when the opportunity to do so arises. An employee shall not:
(a) receive or seek to receive a benefit from opportunities that are discovered
or developed through his or her involvement with the Company (including without
limitation, his or her use of the Company’s property or information, or his or
her position); (b) using corporate property, information or position for
personal gain; or (c) compete with the Company, directly or indirectly, for
business opportunities

 

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14. ANNUAL REPORTING

 

The Company conducts an annual review of employee compliance with the Code by
surveying management personnel and other employees who have significant
influence or approval authorization over the areas included in the Code, or who
have access to significant confidential or proprietary information.

 

Annually CONSOL’s Internal Auditing conducts an independent review of the
Company’s survey process. The results of this review will be presented annually
by Internal Auditing to CONSOL’s Audit Committee.

 

15. COMPLIANCE

 

Employees are expected to comply with this Code and underlying policies and
procedures. Strict adherence to these standards will protect the Company and its
employees from criticism, litigation or embarrassment that might result from
alleged or real conflicts of interest or unethical practices. Violations of this
Code are grounds for disciplinary action up to and including discharge and
possible legal prosecution.

 

Employees should report apparent violations of this Code through their line
organization, CONSOL’s Legal Department or, if they prefer, to the CONSOL Ethics
and Compliance Hotline by calling 1-800-544-8024. This is a toll-free service
that is available 24 hours a day, 365 days of the year and, though not intended
as a substitute for speaking directly to management, is an option that allows
you to report illegal or unethical behavior or activity anonymously. The Company
will not allow retaliation for reports made in good faith.

 

16. OTHER POLICIES

 

Nothing in this Code is intended to alter other legal rights and obligations of
the Company or its employees (such as “at will” employment arrangements.)

 

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