STOCK-BASED COMPENSATION:

CONSOL Energy adopted the CONSOL Energy Inc. Omnibus Performance Incentive Plan (Performance Incentive Plan) on October 30, 2017. The Performance Incentive Plan provides for grants of stock-based awards to non-employee directors and employees, including any officer or employee-director of the Company, who is not a member of the Compensation Committee. These awards are intended to compensate the recipients thereof based on the performance of the Company's stock and the recipients' continued services during the vesting period, as well as align the recipients' long-term interests with those of the Company's shareholders. CONSOL Energy is responsible for the cost of awards granted under the Performance Incentive Plan, and all determinations with respect to awards to be made under the Performance Incentive Plan will be made by the board of directors or a committee as delegated by the board of directors.

The Performance Incentive Plan limits the number of units that may be delivered pursuant to vested awards to 2,600,000 shares, subject to proportionate adjustment in the event of stock splits, stock dividends, recapitalizations, and other similar transactions or events. Shares subject to awards that are canceled, forfeited, withheld to satisfy exercise prices or tax withholding obligations or otherwise terminate without delivery will be available for delivery pursuant to other awards.

Due to the separation of ParentCo and CONSOL Energy as described in Note 2 - Separation from CNX Resources Corporation, the terms of the agreement between the companies provide for the automatic adjustment and conversion of awards originally granted under ParentCo's equity incentive plan into awards of the Performance Incentive Plan, effective as of November 28, 2017. By calculating a conversion ratio based on the share price immediately prior to the separation for both ParentCo and CONSOL Energy, the intrinsic value of the outstanding awards immediately following the separation remains the same as the intrinsic value immediately prior to the separation. At the date of conversion, employees of CONSOL Energy who were grades 14 or lower vested immediately in any non-vested restricted stock units, whereas employees above grade 14 converted their shares at the separation date. All performance share units of ParentCo owned by CONSOL Energy employees converted on the date of the separation. For every unvested share of ParentCo's award to be converted, a CONSOL Energy employee received 0.7189 shares of an unvested award in the Performance Incentive Plan. The fair value of each award was adjusted to preserve the intrinsic value of the award. Any unvested option award of ParentCo owned by a CONSOL Energy employee remained an option award of ParentCo's stock and CONSOL Energy recognized stock-based compensation expense for the remaining unamortized period of the award. For the year ended December 31, 2017, $1,436 relates to the immediate expense of the unamortized portion of ParentCo granted options for CONSOL Energy employees.While the board of directors may amend certain provisions of these awards, subject to limitations imposed by applicable law or the Performance Incentive Plan, these converted awards shall be governed by the provisions of the original award agreement applicable to the award.

For only those shares expected to vest, CONSOL Energy recognizes stock-based compensation costs on a straight-line basis over the requisite service period of the award as specified in the award agreement, which is generally the vesting term. The vesting of all awards will accelerate in the event of death and disability and may accelerate upon a change in control of CONSOL Energy. The total stock-based compensation expense recognized during the years ended December 31, 2017, 2016 and 2015 was $16,212, $10,986 and $9,205, respectively. This includes expense specifically related to the Performance Incentive Plan and also expense charged by ParentCo prior to the separation. The related deferred tax benefit relating to converted shares and new grants totaled $1,439, $607 and $609 for the years ended December 31, 2017, 2016 and 2015, respectively.

As of December 31, 2017, CONSOL Energy has $9,904 of unrecognized compensation cost related to all nonvested stock-based compensation awards, which is expected to be recognized over a weighted-average period of 2.85 years. When restricted stock and performance share unit awards become vested, the issuances are made from CONSOL Energy's common stock shares.

In March 2016, the FASB issued an Accounting Standards Update on stock compensation that was intended to simplify and improve the accounting and statement of cash flow presentation for income taxes at settlement, forfeitures, and net settlements for withholding tax. The guidance is effective for public entities for fiscal years beginning after December 31, 2016. In accordance with this Update, $384 of additional income tax expense was recognized in the Consolidated Statements of Income for the year ended December 31, 2017. Also in accordance with this Update, the value of shares withheld for employee tax withholding purposes of $2,156 for the year ended December 31, 2017 was reclassified between Net Cash Provided by Operating Activities and Net Cash Used in Financing Activities on the Consolidated Statements of Cash Flows. As permitted by this Update, the Company has elected to account for forfeitures of stock-based compensation as they occur. The cumulative effect of the policy election to recognize forfeitures as they occur was nominal.

Restricted Stock Units

CONSOL Energy grants certain employees and directors restricted stock units, which entitle the holder to shares of common stock as the award vests. Compensation expense is recognized on a straight-line basis over the requisite service period of the award. The total fair value of restricted stock units vested during the year ended December 31, 2017 was $534. The following table represents the nonvested restricted stock units and their corresponding fair value (based upon the closing share price) at the date of grant:



	Number of		Weighted Average
	Shares		Grant Date Fair Value
Nonvested at December 31, 2016	—		$—
Granted	165,967		$29.82
Converted from CNX Separation	136,790		$29.52
Vested	(11,063	)	$48.23
Forfeited	(5,903	)	$24.68
Nonvested at December 31, 2017	285,791		$29.07

Performance Share Units

CONSOL Energy grants certain employees performance share unit awards, which entitle the holder to shares of common stock subject to the achievement of certain market and performance goals. Compensation expense is recognized over the service period of awards and adjusted for the probability of achievement of performance-based goals. No performance share units vested during the year ended December 31, 2017. The following table represents the nonvested performance share units and their corresponding fair value (based upon the closing share price and/or Monte Carlo simulation) on the date of grant:



	Number of		Weighted Average
	Shares		Grant Date Fair Value
Nonvested at December 31, 2016	—		$—
Granted	—		$—
Converted from CNX Separation	273,100		$35.18
Vested	—		$—
Forfeited	(8,590	)	$25.27
Nonvested at December 31, 2017	264,510		$35.50