UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended February 28, 2007

Commission File Number: 1-9852

CHASE CORPORATION

(Exact name of registrant as specified in its charter)

Massachusetts

 

11-1797126

(State or other jurisdiction of incorporation
of organization)

 

(I.R.S. Employer Identification No.)

 

26 Summer Street, Bridgewater, Massachusetts 02324

(Address of Principal Executive Offices, Including Zip Code)

(508) 279-1789

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
YES
x   NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer o

Accelerated filer o

Non-accelerated filer x

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES
o  NO x

The number of shares of Common Stock outstanding as of March 31, 2007 was 4,094,175.

 




CHASE CORPORATION

INDEX TO FORM 10-Q

For the Quarter Ended February 28, 2007

Part I - FINANCIAL INFORMATION

 

 

 

Item 1 – Unaudited Financial Statements

 

 

 

Consolidated Balance Sheets as of February 28, 2007 and August 31, 2006

 

 

 

Consolidated Statements of Operations for the three and six months ended February 28, 2007 and 2006

 

 

 

Consolidated Statement of Stockholders’ Equity for the six months ended February 28, 2007

 

 

 

Consolidated Statements of Cash Flows for the six months ended February 28, 2007 and 2006

 

 

 

Notes to Consolidated Financial Statements

 

 

 

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

 

 

 

Item 4 – Controls and Procedures

 

 

 

Part II – OTHER INFORMATION

 

 

 

Item 1 – Legal Proceedings

 

 

 

Item 1A – Risk Factors

 

 

 

Item 6 – Exhibits

 

 

 

SIGNATURES

 

 

2




Part 1 – FINANCIAL INFORMATION

Item 1 – Unaudited Financial Statements

CHASE CORPORATION
CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

February 28,

 

August 31

 

 

 

2007

 

2006

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash

 

$

2,537,306

 

$

2,416,097

 

Accounts receivable, less allowance for doubtful accounts of $635,406 and $512,317

 

14,729,906

 

15,573,669

 

Inventories

 

19,097,848

 

16,627,393

 

Prepaid expenses and other current assets

 

2,456,971

 

526,874

 

Deferred income taxes

 

535,294

 

535,294

 

Total current assets

 

39,357,325

 

35,679,327

 

 

 

 

 

 

 

Property, plant and equipment, net

 

17,958,891

 

18,470,875

 

 

 

 

 

 

 

Other Assets

 

 

 

 

 

Goodwill

 

14,333,958

 

12,983,323

 

Intangible assets, less accumulated amortization of $2,570,419 and $2,116,873

 

5,823,085

 

6,093,678

 

Cash surrender value of life insurance

 

4,136,218

 

4,074,619

 

Restricted investments

 

1,345,078

 

1,355,005

 

Other assets

 

76,139

 

180,270

 

 

 

$

83,030,694

 

$

78,837,097

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Accounts payable

 

$

8,012,647

 

$

8,033,683

 

Accrued payroll and other compensation

 

2,655,042

 

2,029,357

 

Accrued expenses - current

 

2,550,248

 

2,721,528

 

Accrued income taxes

 

379,035

 

1,134,617

 

Accrued pension expense - current

 

384,000

 

384,000

 

Current portion of long-term debt

 

2,010,000

 

2,935,000

 

Total current liabilities

 

15,990,972

 

17,238,185

 

 

 

 

 

 

 

Long-term debt, less current portion

 

10,791,108

 

10,288,179

 

Deferred compensation

 

2,186,976

 

2,271,903

 

Accrued pension expense

 

1,288,838

 

830,838

 

Accrued expenses

 

968,052

 

446,202

 

Deferred income taxes

 

1,742,604

 

1,688,038

 

 

 

 

 

 

 

Commitments and Contingencies (Notes 7 and 8)

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

First Serial Preferred Stock, $1.00 par value: Authorized 100,000 shares; none issued

 

 

 

 

 

Common stock, $.10 par value: Authorized 10,000,000 shares; 4,091,675 at February 2007 and 3,899,423 at August 2006 issued and outstanding

 

409,166

 

389,942

 

Additional paid-in capital

 

2,531,863

 

1,267,508

 

Accumulated other comprehensive income

 

1,268,429

 

893,887

 

Retained earnings

 

45,852,686

 

43,522,415

 

Total stockholders’ equity

 

50,062,144

 

46,073,752

 

Total liabilities and stockholders’ equity

 

$

83,030,694

 

$

78,837,097

 

 

See accompanying notes to the consolidated financial statements

3




 

CHASE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 

 

 

Three Months Ended February 28,

 

Six Months Ended February 28,

 

 

 

2007

 

2006

 

2007

 

2006

 

Revenue

 

 

 

 

 

 

 

 

 

Sales

 

$

27,082,315

 

$

24,133,339

 

$

57,767,743

 

$

48,763,593

 

Royalty and commissions

 

421,373

 

205,298

 

980,541

 

426,268

 

 

 

27,503,688

 

24,338,637

 

58,748,284

 

49,189,861

 

Costs and Expenses

 

 

 

 

 

 

 

 

 

Cost of products and services sold

 

20,031,761

 

17,942,469

 

41,827,359

 

35,463,171

 

Selling, general and administrative expenses

 

5,133,211

 

4,558,718

 

10,348,989

 

10,326,802

 

Deferred compensation expense, net

 

 

 

 

814,034

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

2,338,716

 

1,837,450

 

6,571,936

 

2,585,854

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(246,423

)

(284,816

)

(491,351

)

(490,272

)

Other income, net

 

85,000

 

48,102

 

140,737

 

89,461

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

2,177,293

 

1,600,736

 

6,221,322

 

2,185,043

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

805,598

 

647,055

 

2,301,889

 

213,464

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

1,371,695

 

$

953,681

 

$

3,919,433

 

$

1,971,579

 

 

 

 

 

 

 

 

 

 

 

Net income per common and common equivalent share

 

 

 

 

 

 

 

 

 

Basic

 

$

0.34

 

$

0.25

 

$

0.99

 

$

0.51

 

Diluted

 

$

0.33

 

$

0.24

 

$

0.95

 

$

0.50

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

Basic

 

4,015,835

 

3,886,110

 

3,978,653

 

3,866,865

 

Diluted

 

4,169,459

 

3,977,958

 

4,133,635

 

3,957,375

 

 

See accompanying notes to the consolidated financial statements

4




 

CHASE CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

SIX MONTHS ENDED FEBRUARY 28, 2007

(UNAUDITED)

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

Other

 

 

 

Total

 

 

 

 

 

Common Stock

 

Paid-In

 

Comprehensive

 

Retained

 

Stockholders’

 

Comprehensive

 

 

 

Shares

 

Amount

 

Capital

 

Income

 

Earnings

 

Equity

 

Income

 

Balance at August 31, 2006

 

3,899,423

 

$

389,942

 

$

1,267,508

 

$

893,887

 

$

43,522,415

 

$

46,073,752

 

 

 

Exercise of stock options

 

348,320

 

34,833

 

3,729,523

 

 

 

 

 

3,764,356

 

 

 

Common stock received for payment of stock option exercise

 

(117,492

)

(11,751

)

(3,067,837

)

 

 

 

 

(3,079,588

)

 

 

Common stock retained to pay statutory minimum withholding taxes on common stock

 

(46,066

)

(4,607

)

(1,440,245

)

 

 

 

 

(1,444,852

)

 

 

Tax benefit from exercise of stock options

 

 

 

 

 

1,929,730

 

 

 

 

 

1,929,730

 

 

 

Common stock grant pursuant to fully vested restricted stock units

 

7,490

 

749

 

113,184

 

 

 

 

 

113,933

 

 

 

Cash dividend paid, $0.40 per share

 

 

 

 

 

 

 

 

 

(1,589,162

)

(1,589,162

)

 

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

381,890

 

 

 

381,890

 

$

381,890

 

Net unrealized loss on restricted investments, net of tax

 

 

 

 

 

 

 

(7,348

)

 

 

(7,348

)

(7,348

)

Net income

 

 

 

 

 

 

 

 

 

3,919,433

 

3,919,433

 

3,919,433

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

$

4,293,975

 

Balance at February 28, 2007

 

4,091,675

 

$

409,166

 

$

2,531,863

 

$

1,268,429

 

$

45,852,686

 

$

50,062,144

 

 

 

 

See accompanying notes to the consolidated financial statements

5




 

CHASE CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 

 

Six Months Ended February 28,

 

 

 

2007

 

2006

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net income

 

$

3,919,433

 

$

1,971,579

 

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

 

 

Gain on sale of equipment

 

 

(600

)

Gain on settlement of life insurance policies

 

 

(404,833

)

Depreciation

 

1,178,224

 

1,030,539

 

Amortization

 

431,483

 

257,583

 

Provision for losses on trade receivables

 

122,471

 

146,551

 

Stock issued for compensation

 

 

1,520,073

 

Deferred taxes

 

 

(496,980

)

Increase (decrease) from changes in assets and liabilities

 

 

 

 

 

Accounts receivable

 

1,151,144

 

(575,487

)

Inventories

 

(2,156,784

)

(2,077,146

)

Prepaid expenses & other assets

 

(1,760,262

)

734,681

 

Accounts payable

 

(219,646

)

10,632

 

Accrued expenses

 

1,376,476

 

(24,762

)

Income taxes payable

 

(776,314

)

(42,064

)

Deferred compensation

 

(84,927

)

1,062,669

 

Net cash provided by operating activities

 

3,181,298

 

3,112,435

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Purchases of property, plant and equipment

 

(565,109

)

(1,108,143

)

Purchases of intangible assets

 

(5,999

)

(8,860

)

Payments for acquisitions, net of cash acquired

 

(1,690,000

)

(7,930,905

)

Proceeds from sale of equipment

 

 

600

 

Investment in restricted investments, net of withdrawals

 

2,579

 

(70,771

)

Distributions from investment in minority interests

 

 

1,065

 

Proceeds from settlement of cash surrender value life insurance policies

 

 

1,787,540

 

(Increase) in net cash surrender value of life insurance, net

 

(61,599

)

(112,532

)

Net cash used in investing activities

 

(2,320,128

)

(7,442,006

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Borrowings on long-term debt

 

19,460,749

 

21,192,415

 

Payments of principal on debt

 

(19,882,820

)

(14,832,491

)

Dividend paid

 

(1,589,162

)

(1,358,251

)

Proceeds from exercise of common stock options

 

684,768

 

72,534

 

Excess tax benefit from exercise of stock options

 

1,929,730

 

96,934

 

Payments of statutory minimum taxes on stock options and restricted stock

 

(1,444,852

)

(562,950

)

Net cash used in financing activities

 

(841,587

)

4,608,191

 

 

 

 

 

 

 

INCREASE IN CASH

 

19,583

 

278,620

 

Effect of foreign exchange rates on cash

 

101,626

 

(47,129

)

CASH, BEGINNING OF PERIOD

 

2,416,097

 

847,001

 

 

 

 

 

 

 

CASH, END OF PERIOD

 

$

2,537,306

 

$

1,078,492

 

 

 

 

 

 

 

Non-cash Investing and Financing Activities

 

 

 

 

 

Issuance of stock based compensation previously accrued for

 

$

113,933

 

 

Common stock received for payment of stock option exercises

 

$

3,079,588

 

$

172,526

 

Accrued contingent payments related to acquisitions

 

$

110,000

 

$

446,202

 

 

See accompanying notes to the consolidated financial statements

6




CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1 - Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting and instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Therefore, they do not include all information and footnote disclosure necessary for a complete presentation of Chase Corporation’s financial position, results of operations and cash flows, in conformity with generally accepted accounting principles.  Chase Corporation (“Chase” or the “Company”) filed audited financial statements which included all information and notes necessary for such presentation for the three years ended August 31, 2006 in conjunction with the Company’s 2006 Annual Report on Form 10-K.

The accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring items) which are, in the opinion of management, necessary for a fair presentation of the Company’s financial position as of February 28, 2007, the results of operations and cash flows for the interim periods ended February 28, 2007 and 2006, and changes in stockholders’ equity for the interim period ended February 28, 2007.

The financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All intercompany transactions and balances have been eliminated in consolidation.  The Company uses the U.S. dollar as the reporting currency for financial reporting.  Foreign currency translation gains and losses are determined using current exchange rates for monetary items and historical exchange rates for other balance sheet items.

Certain amounts reported in prior years have been reclassified to be consistent with the current year presentation.  These reclassifications had no effect on the Company’s financial position or results of operations.

The results of operations for the interim period ended February 28, 2007 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.  These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended August 31, 2006, which are contained in the Company’s 2006 Annual Report on Form 10-K.

Note 2 – Inventories

Inventories consist of the following as of February 28, 2007 and August 31, 2006:

 

February 28, 2007

 

August 31, 2006

 

Raw materials

 

$

10,208,327

 

$

8,840,258

 

Finished and in process

 

8,889,521

 

7,787,135

 

Total Inventories

 

$

19,097,848

 

$

16,627,393

 

 

7




Note 3 – Net Income Per Share

Net income per share is calculated as follows:

 

 

Three Months Ended February 28,

 

Six Months Ended February 28,

 

 

 

2007

 

2006

 

2007

 

2006

 

Net income

 

$

1,371,695

 

$

953,681

 

$

3,919,433

 

$

1,971,579

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

4,015,835

 

3,886,110

 

3,978,653

 

3,866,865

 

Additional dilutive common stock equivalents

 

153,624

 

91,848

 

154,982

 

90,510

 

Diluted shares outstanding

 

4,169,459

 

3,977,958

 

4,133,635

 

3,957,375

 

 

 

 

 

 

 

 

 

 

 

Net income per share - Basic

 

$

0.34

 

$

0.25

 

$

0.99

 

$

0.51

 

Net income per share - Diluted

 

$

0.33

 

$

0.24

 

$

0.95

 

$

0.50

 

 

Note 4 – Stock Based Compensation

At a meeting of the Board of Directors of Chase Corporation held in February 2007, the Compensation and Management Development Committee approved a grant of 3,324 restricted stock units to members of the Board of Directors for service for the period February 2007 through January 2008.  These restricted stock units will be issued in the form of common stock at the conclusion of this service period. The Company is amortizing this expense over the twelve month period beginning February 2007 to January 2008.

On February 3, 2006 the Board of Directors of Chase Corporation approved a performance and service based restricted stock unit grant of 41,317 shares to key members of management based on the fiscal year 2006 results.  These restricted stock units are vesting over the period February 2006 through August 31, 2008.  Based on the fiscal year 2006 financial results 20,659 additional restricted stock units (for a total of 61,976 restricted stock units) were granted in accordance with the performance measurement criteria. Compensation expense is being recognized over the vesting period on a ratable basis.

In February 2006 the Board of Directors of Chase Corporation also approved a plan for issuing a performance and service based restricted stock unit grant of approximately of 44,315 shares to key members of management with an issue date of September 1, 2006 and a vesting date of August 31, 2009.  These shares are subject to a performance measurement based upon the results of fiscal year 2007 which will determine the final calculation of the number of shares that will be issued. Compensation expense is being recognized over the vesting period on a ratable basis and based on quarterly probability assessments.

Note 5 – Segment Information

The Company operates in two business segments, a Specialized Manufacturing segment consisting of protective coatings and tapes and an Electronic Manufacturing Services segment.  Specialized Manufacturing products include insulating and conducting materials for wire and cable manufacturers, protective coatings for pipeline applications and moisture protective coatings for electronics and printing services.  Electronic Manufacturing Services include printed circuit board and electromechanical assembly services for the electronics industry.  The Company evaluates segment performance based upon income before income taxes and minority interest.

8




The following table summarizes information about the Company’s reportable segments:

 

 

Three Months Ended February 28,

 

Six Months Ended February 28,

 

 

 

2007

 

2006

 

2007

 

2006

 

Revenues from external customers

 

 

 

 

 

 

 

 

 

Specialized Manufacturing

 

$

22,725,032

 

$

21,361,912

 

$

49,609,001

 

$

43,404,367

 

Electronic Manufacturing Services

 

4,778,656

 

2,976,725

 

9,139,283

 

5,785,494

 

Total

 

$

27,503,688

 

$

24,338,637

 

$

58,748,284

 

$

49,189,861

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

 

 

 

 

 

 

 

Specialized Manufacturing

 

$

2,964,768

 

$

2,682,246

 

$

8,059,196

 

$

6,452,679

 

Electronic Manufacturing Services

 

578,850

 

196,279

 

951,454

 

412,823

 

Total for reportable segments

 

3,543,618

 

2,878,525

 

9,010,650

 

6,865,502

 

Corporate and Common Costs (a)

 

(1,366,325

)

(1,277,789

)

(2,789,328

)

(4,680,459

)

Total

 

$

2,177,293

 

$

1,600,736

 

$

6,221,322

 

$

2,185,043

 

 


(a) Includes deferred compensation expense net of $814,034 for the six months ended February 28, 2006.

 

February 28, 2007

 

August 31, 2006

 

Total assets

 

 

 

 

 

Specialized Manufacturing

 

$

57,554,365

 

$

54,261,266

 

Electronic Manufacturing Services

 

13,169,170

 

12,098,862

 

Total for reportable segments

 

70,723,535

 

66,360,128

 

Corporate and Common Assets

 

12,307,159

 

12,476,969

 

Total

 

$

83,030,694

 

$

78,837,097

 

 

Note 6 – Goodwill and Other Intangibles

The Company has two reporting units with goodwill, the Specialized Manufacturing unit and the Electronic Manufacturing Services unit.  These reporting units are also reportable segments (see Note 5).   Management is still finalizing the purchase price allocation for the Company’s acquisition of Capital Services (see Note 7).  Accordingly, the amount allocated to goodwill below as well as other identifiable intangible assets will be finalized in the near future.

The changes in the carrying value of goodwill, by reporting unit, are as follows:

 

 

Specialized
Manufacturing

 

Electronic
Manufacturing
Services

 

Consolidated

 

Balance at August 31, 2006

 

$

6,984,435

 

$

5,998,888

 

$

12,983,323

 

Acquisition of Capital Services Joint Systems

 

1,185,081

 

 

1,185,081

 

Foreign Exchange translation adjustment

 

165,554

 

 

165,554

 

Balance at February 28, 2007

 

$

8,335,070

 

$

5,998,888

 

$

14,333,958

 

 

The Company evaluates the possible impairment of goodwill annually each fourth quarter and whenever events or circumstances indicate the carrying value of goodwill may not be recoverable.

9




Intangible assets subject to amortization consist of the following at February 28, 2007 and August 31, 2006:

 

 

Weighted-Average

 

Gross Carrying

 

Accumulated

 

Net Carrying

 

 

 

Amortization Period

 

Value

 

Amortization

 

Value

 

February 28, 2007

 

 

 

 

 

 

 

 

 

Patents and agreements

 

13.5 years

 

2,038,898

 

1,573,193

 

465,705

 

Formulas

 

9.1 years

 

1,093,485

 

195,481

 

898,004

 

Trade names

 

4.1 years

 

188,294

 

80,894

 

107,400

 

Customer lists and relationships

 

10.9 years

 

5,061,212

 

720,851

 

4,340,361

 

 

 

 

 

 

 

 

 

 

 

August 31, 2006

 

 

 

 

 

 

 

 

 

Patents and agreements

 

13.5 years

 

2,032,898

 

1,461,213

 

571,685

 

Formulas

 

9.1 years

 

1,093,485

 

128,091

 

965,394

 

Trade names

 

4.1 years

 

188,294

 

56,730

 

131,564

 

Customer lists and relationships

 

10.9 years

 

4,884,259

 

470,839

 

4,413,420

 

 

In addition to the intangible assets summarized above, the Company also has corporate trademarks with an indefinite life and a carrying value of $11,615.

Aggregate amortization expense related to intangible assets for the six months ended February 28, 2007 and 2006 was $431,483 and $257,583, respectively.  Estimated amortization expense for the remainder of fiscal year 2007 and for each of the five succeeding fiscal years is as follows:

Years ending August 31,

 

 

 

2007 (remaining six months)

 

 

$

393,149

 

2008

 

 

775,409

 

2009

 

 

735,172

 

2010

 

 

665,958

 

2011

 

 

612,895

 

2012

 

 

605,314

 

 

 

 

$

3,787,897

 

 

Note 7 – Acquisitions

Capital Services

On September 1, 2006, Chase Corporation acquired all of the capital stock of Capital Services Joint Systems of Schenectady, New York (“Capital Services”) for approximately $1,800,000 subject to adjustments and holdbacks including balance sheet retentions, and retentions for warranty and indemnifications and tax retentions. The value of the holdbacks and retentions total $110,000.  The assets acquired by the Company include inventories, trade receivables, cash, and other current assets.   The purchase agreement for this acquisition requires additional contingent payments to be made by the Company if certain revenue targets are met with respect to the Capital Services and E-poxy products over the four years ending August 31, 2010.

Capital Services is a leading manufacturer of waterproofing sealants, expansion joints and accessories for the transportation, industrial and architectural markets.  This new acquisition joins Chase’s Royston and E-poxy Engineered Materials brands to form the Construction Products group of Chase Specialty Coatings.

10




The effective date for this acquisition was September 1, 2006 and the results of Capital Services operations have been included in the Company’s financial statements since then.  The purchase price was funded through a loan from Bank of America (See Note 9).

Management is still finalizing the purchase price allocation as it relates to the value of the intangible assets acquired.  All assets, including goodwill, acquired as part of Capital Services are included in the Company’s Specialized Manufacturing segment.

Note 8 – Commitments and Contingencies

From time to time, the Company is involved in litigation incidental to the conduct of its business. The Company is not party to any lawsuit or proceeding that, in management’s opinion, is likely to seriously harm the Company’s business, results of operations, financial conditions or cash flows.

The Company is one of over 100 defendants in a personal injury lawsuit, pending in Ohio, which alleges personal injury from exposure to asbestos contained in certain Chase products.  The plaintiff in the case issued discovery requests to Chase in August 2005, to which Chase timely responded in September 2005.  The trial had initially been scheduled to begin on April 30, 2007.  However, that date has since been postponed and no new trial date has been set.  Since that time, the Ohio lawsuit has been inactive with respect to Chase.

Note 9 – Long Term Debt

The Company borrowed $1,800,000 from Bank of America in September 2006 in order to fund the acquisition of Capital Services.  This borrowing involved an unsecured, five year term note with interest payments due monthly and principal payments due quarterly.  Interest is calculated at the applicable LIBOR rate plus a margin of 1.5% per annum.  Interest payments are due on the first day of each month.  In addition to monthly interest payments, Chase Corporation must make quarterly payments of principal in the amount of $112,500 on each quarterly anniversary of the first interest payment date during the term of the note.

Note 10 - Pensions and Other Post Retirement Benefits

The components of net periodic benefit cost for the three and six months ended February 28, 2007 and 2006 are as follows:

 

 

Three Months Ended

 

Six Months Ended

 

 

 

February 28, 2007

 

February 28, 2006

 

February 28, 2007

 

February 28, 2006

 

Service cost

 

$

104,220

 

$

118,263

 

$

208,440

 

$

236,526

 

Interest cost

 

125,320

 

121,661

 

250,640

 

243,322

 

Expected return on plan assets

 

(110,778

)

(85,475

)

(221,556

)

(170,950

)

Amortization of prior service cost

 

21,996

 

21,996

 

43,992

 

43,992

 

Amortization of unrecognized loss

 

12,242

 

35,861

 

24,484

 

71,722

 

Net periodic benefit cost

 

$

153,000

 

$

212,306

 

$

306,000

 

$

424,612

 

 

As of February 28, 2007, the Company has contributed $0 in the current fiscal year to fund its obligations under the pension plan. The Company plans to contribute $384,000 to fund pension plan obligations in the fiscal year ending August 31, 2007.

11




Note 11 – Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (FAS 158). FAS 158 requires employers to fully recognize the obligations associated with single-employer defined benefit pension, retiree healthcare and other postretirement plans in their financial statements. The provisions of FAS 158 are effective as of the end of the fiscal year ending August 31, 2007. The Company is currently evaluating the impact of the provisions of FAS 158.

In September 2006, the FASB issued Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”, which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment.  The Company will be required to initially apply SAB No. 108 during fiscal year 2007. The Company is assessing the impact, if any, the adoption of SAB No. 108 will have on its financial position and results of operations.

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. FIN 48 prescribes that a company should use a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the more-likely-than-not threshold should be measured in order to determine the tax benefit to be recognized in the financial statements. FIN 48 is effective for fiscal years beginning after December 15, 2006.  The Company is currently evaluating the impact of FIN 48 on its results of operations, financial position and cash flows.

12




Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion provides an analysis of the Company’s financial condition and results of operations and should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K filed for the fiscal year ended August 31, 2006.

Recent Developments

On March 14, 2007 Chase Corporation expanded its international presence with the formation of HumiSeal Europe SARL in France.  This business will be part of the Company’s HumiSeal® division (www.humiseal.com), the global leader in conformal coatings for the protection of high reliability printed circuit boards and electronic assemblies.

HumiSeal Europe SARL will operate a sales/technical service office and warehouse near Paris.  In conjunction with establishing the new company certain assets were acquired from Metronelec SARL, a former distributor of HumiSeal products. The new business will work closely with the HumiSeal operation in Camberley, Surrey, England allowing direct sales and service to the French market.  Additionally, it is a key step in developing the supply of HumiSeal products on the European continent.

The purchase price for this acquisition was €885,000 (approximately US $1,150,000) plus additional contingent payments to be made by the Company if certain revenue targets are met during the five year period ending February 28, 2012.  The purchase price was financed out of cash flow from the Company’s European operations.

Not included in the acquisition was the equipment and other materials of Metronelec.  That business, which is unrelated to the HumiSeal business, will continue to operate independently under the Metronelec name.

On September 1, 2006, Chase Corporation acquired all of the capital stock of Capital Services Joint Systems of Schenectady, New York (“Capital Services”) for approximately $1,800,000 subject to adjustments and holdbacks including balance sheet retentions, and retentions for warranty and indemnifications and tax retentions. The value of the holdbacks and retentions total approximately US $110,000.  The assets acquired by the Company include inventories, trade receivables, cash, and other current assets.   The purchase agreement for this acquisition requires additional contingent payments to be made by the Company if certain revenue targets are met with respect to the Capital Services and E-poxy products over the four years ending August 31, 2010.

Capital Services is a leading manufacturer of waterproofing sealants, expansion joints and accessories for the transportation, industrial and architectural markets.  This new acquisition joins Chase’s Royston and E-poxy Engineered Materials brands to form the Construction Products group of Chase Specialty Coatings.

Overview

Continued benefit from strategic acquisitions, efficiency improvements and strong demand in the first half of fiscal year 2007 has resulted in significant revenue and profit increases in both the quarter and year to date periods.   Revenue for the Specialized Manufacturing segment achieved solid results in the current quarter especially in light of the fact that the Company’s second fiscal quarter is typically the slowest due to the decreased demand for construction related products in the winter months.  The acquisition of

13




Capital Services in September 2006 added to the organic sales growth seen from existing facilities and product lines, while close attention to the manufacturing cost structure helped increase profitability.  During the remainder of the fiscal year, the Company expects that stabilization of raw material costs and continued attention to the manufacturing cost structure will assist it in leveraging its fixed costs.

The Chase Electronic Manufacturing Services segment continued to have robust demand from both its existing and new customers and had significant revenue and profit increases in the second quarter compared to the same period in the prior year. The current demand for this service offering is high and has helped offset increased material costs in this segment.

T he Company continues to identify and pursue efficiency enhancements to its manufacturing operations as a means of better positioning its businesses and maximizing resources.

The Company has two reportable segments summarized below:

Segment

 

Divisions

 

Manufacturing Focus and Products

Specialized Manufacturing Segment

 

·       Chase Coating & Laminating

·       Chase Specialty Coatings

·       NEQP

 

Produces protective coatings and tape products including insulating and conducting materials for wire and cable manufacturers, protective coatings for pipeline applications and moisture protective coatings for electronics and printing services, bridge deck waterproofing systems, reflective cracking and waterproofing membranes, as well as high performance polymeric asphalt additives.

 

 

 

 

 

Electronic Manufacturing Services Segment

 

·       Chase EMS

 

Provides assembly and turnkey contract manufacturing services including printed circuit board and electromechanical assembly services to the electronics industry operating principally in the United States.

 

Results of Operations

Revenues and Operating Profit by Segment are as follows (dollars in thousands)

 

 

 

 

Income Before

 

% of

 

 

 

Revenue

 

Income Taxes

 

Revenue

 

Three Months Ended February 28, 2007

 

 

 

 

 

 

 

Specialized Manufacturing

 

$

22,725

 

$

2,965

 

13

%

Electronic Manufacturing Services

 

4,779

 

579

 

12

 

 

 

$

27,504

 

3,544

 

13

 

Less corporate and common costs

 

 

 

(1,367

)

 

 

Income before income taxes

 

 

 

$

2,177

 

 

 

Three Months Ended February 28, 2006

 

 

 

 

 

 

 

Specialized Manufacturing

 

$

21,362

 

$

2,682

 

13

%

Electronic Manufacturing Services

 

2,977

 

196

 

7

 

 

 

$

24,339

 

2,878

 

12

 

Less corporate and common costs

 

 

 

(1,277

)

 

 

Income before income taxes

 

 

 

$

1,601

 

 

 

P

14




Total Revenues

Total revenues increased $3,165,000 or 13% to $27,504,000 for the quarter ended February 28, 2007 compared to $24,339,000 in the prior year quarter.  Total revenues increased $9,558,000 or 19% to $58,748,000 in the fiscal year to date period compared to $49,190,000 in the same period in fiscal 2006.  Revenues from the Company’s Specialized Manufacturing segment increased $1,363,000 and $6,205,000, in the current quarter and year to date periods, respectively.

The increase in revenues is primarily due to the following for the quarter and year to date periods, respectively (a) $561,000 and $1,648,000 from the October 2005 acquisition of the Humiseal Europe business, (b) $241,000 and $769,000 from the September 2006 acquisition of Capital Services, and (c) $567,000 and $1,432,000 from increased sales of the Coating & Laminating division’s transportation and specialty laminate products.  Additionally the Specialty Coatings division’s Rosphalt50® product accounted for increased sales of $889,000 in the first fiscal quarter due to increased highway projects.

Revenues from the Company’s Electronic Manufacturing Services segment increased $1,802,000 and $3,354,000, in the current quarter and year to date periods, respectively.  The increase in revenues in both the quarter and year to date periods is a result of increased order activity from existing customers as well as higher volume due to several new customers added in the latter half of fiscal 2006.  Additionally, the softness in the assembly market seen in prior periods continues to rebound contributing to overall demand.

Cost of Products and Services Sold

Cost of products and services sold increased $2,090,000 or 12% to $20,032,000 for the quarter ended February 28, 2007 compared to $17,942,000 in the prior year quarter.  Cost of products and services sold increased $6,364,000 or 18% to $41,827,000 in the fiscal year to date period compared to $35,463,000 in the same period in fiscal 2006.

Cost of products and services sold in the Company’s Specialized Manufacturing segment were $16,065,000 and $34,234,000 in the current quarter and year to date periods compared to $15,398,000 and $30,589,000 in the comparable periods in the prior year.  Cost of products and services sold in the Company’s Electronic Manufacturing Services segment were $3,967,000 and $7,593,000 in the current quarter and year to date periods compared to $2,544,000 and $4,874,000 in the comparable periods in the prior year.

The following table summarizes the relative percentages of revenues for costs of products and services sold for both the Company’s reporting segments:

 

Three Months Ended February 28,

 

Six Months Ended February 28,

 

 

 

2007

 

2006

 

2007

 

2006

 

Specialized Manufacturing

 

71

%

72

%

69

%

70

%

EMS

 

83

%

85

%

83

%

84

%

Total

 

73

%

74

%

71

%

72

%

 

The majority of the dollar value increase in the Specialized Manufacturing segment was a direct result of increased revenues during the first half of fiscal 2007.  In spite of increases and fluctuations in the price of raw materials, management’s continued focus on improving manufacturing efficiencies and emphasis on strategic purchases helped maintain solid margins on most of the Company’s key product lines.

The increase in dollar value of cost of products and services sold in the Company’s Electronic Manufacturing segment was a direct result of higher revenues in the first six months of fiscal 2007.  The

15




percentage decrease in cost of products and services sold in this segment reflects the Company’s ability to leverage its fixed overhead costs on a higher revenue base and offset the increasing raw material costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $574,000 or 13% to $5,133,000 for the quarter ended February 28, 2007 compared to $4,559,000 in the prior year quarter.    Selling, general and administrative expenses increased $22,000 to $10,349,000 in the fiscal year to date period compared to $10,327,000 in the same period in fiscal 2006.

The increase in the current quarter includes approximately $300,000 related to professional services for compliance with the internal control reporting requirements of Section 404 of the Sarbanes-Oxley Act.  Due to the increased market value of the Company’s public float, the deadline for complying with the internal control provisions of Sarbanes-Oxley has been accelerated as the Company will be considered an accelerated filer under SEC regulations beginning with its annual report for the fiscal year ending August 31, 2007.  Accordingly, increased costs in the current quarter and the remainder of fiscal 2007 will be incurred in order to comply with the internal control provisions as of August 31, 2007.   The increase in selling, general and administrative expenses is also in part due to stock based compensation of approximately $210,000 in the current quarter compared to $120,000 in the prior year period.

Interest Expense

Interest expense decreased $39,000 or 13% to $246,000 for the quarter ended February 28, 2007 compared to $285,000 in the prior year quarter.  The decrease in interest expense is a direct result of the Company’s ability to reduce its overall debt balances through principal payments from operating cash flow.    The Company expects to continue to pay down its debt through operating cash flow in fiscal 2007 and receive the benefits from favorable borrowing rates from its financial institutions.

Other Income (Expense)

Other income increased $37,000 to $85,000 for the quarter ended February 28, 2007 compared to $48,000 in the prior year quarter.  Other income includes monthly rental income of $14,875 on property (building and land) owned by the Company and leased to Sunburst Electronic Manufacturing Solutions, Inc. under a thirty-six month rental agreement commencing on December 1, 2006 and expiring on November 30, 2009.

Income Taxes

In the quarter ending November 30, 2005, the Company concluded that it was more likely than not that the deferred tax asset in the form of capital loss carryforwards totaling $1.7 million would be realized prior to its expiration beginning in fiscal 2009 as a result of the anticipated sale of real property currently owned by the Company.  Accordingly, the valuation allowance previously recorded against this deferred tax asset was reversed in the quarter ending November 30, 2005 resulting in a tax benefit of $635,000 which is reflected in the fiscal 2006 year to date results.  The gain on the sale of this property will be recorded for both financial reporting and tax purposes in the period in which title is transferred from the Company to the buyer of the property.  The anticipated effective tax rate in fiscal year 2007 is 37%.  This compares to a rate of 38% with a net effective rate after reversal of the valuation allowance of approximately 32% in fiscal 2006.

Net Income

Net income increased $418,000 or 44% to $1,372,000 in the quarter ended February 28, 2007 compared to $954,000 in the prior year quarter. The increase in the current quarter is a direct result of increased revenue growth coupled with the Company’s ability to leverage its fixed costs.

16




Liquidity and Sources of Capital

The Company’s cash balance increased $121,000 to $2,537,000 at February 28, 2007 from $2,416,000 at August 31, 2006.  Generally, the Company manages its borrowings and payments under its revolving line of credit in order to maintain a low cash balance.  The higher cash balance at February 28, 2007 was primarily the result of the cash acquired during the Humiseal Europe acquisition a portion of which was being held for the acquisition of certain assets from Metronelec in establishing HumiSeal Sarl in early March 2007.   Management continues to review its current cash balances denominated in foreign currency in light of current tax guidelines and potential acquisitions.

 

Cash flow provided by operations was $3,181,000 in the first six months of fiscal year 2007 compared to $3,112,000 in the prior year period.  Cash provided by operations during the first half of fiscal 2007 was primarily due to operating income offset by purchases of raw materials and income tax payments.

The ratio of current assets to current liabilities increased to 2.5 as of February 28, 2007 from 2.1 as of August 31, 2006.  Increases in inventory, due to increased demand and overall sales volume, along with decreases in accrued income taxes and the current portion of long-term debt were the primary contributors to the increased working capital.

Cash flow used in investing activities of $2,320,000 was primarily due to the $1,690,000 cash paid for the acquisition of Capital Services and purchases of property, plant and equipment.

Cash flow used in financing activities of $842,000 was primarily due to the new term loan of $1,800,000 from Bank of America used to fund the Company’s acquisition of Capital Services offset by net payments of long-term debt and the annual dividend payment.

On December 4, 2006 the Company paid a cash dividend of $0.40 per share (totaling $1,589,000) to shareholders of record on October 31, 2006.

The Company continues to have long-term unsecured credit available up to a maximum amount of $10 million at the bank’s base lending rate or, at the option of the Company, at the effective London Interbank Offered Rate (LIBOR) or “Eurodollar rate” plus 1.5 percent, or at the effective 30-day LIBOR rate plus 1.75 percent.  The outstanding balance and weighted average interest rate of outstanding balances on this credit facility was $5.1 million and 6.82%, respectively, at February 28, 2007.  The Company had $4.9 million in available credit at February 28, 2007 under this credit facility and plans to use this availability to help finance its cash needs in fiscal 2007 and future periods. The outstanding balance on this long-term unsecured credit facility is included in scheduled principal payments at its maturity (March 2009).

As of March 31, 2007, the Company had $5.0 million in available credit under this credit facility.

Under the terms of the Company’s credit facility, the Company must comply with certain debt covenants related to (a) the ratio of total liabilities to tangible net worth and (b) the ratio of operating cash flow to debt service on a rolling twelve month basis.  The Company was in compliance with its debt covenants as of February 28, 2007.

In September 2006 (fiscal 2007), the Company borrowed $1.8 million from Bank of America in order to fund its acquisition of Capital Services Joint Systems.  This borrowing involved an unsecured, five year term note with interest payments due monthly and principal payments due quarterly.  Interest is calculated at the applicable LIBOR rate plus a margin of 1.5% per annum.  Interest payments are due on the first day of each month.  In addition to monthly interest payments, Chase Corporation must make quarterly payments of principal in the amount of $112,500 on each quarterly anniversary of the first interest payment date during the term of the note.  The loan is subject to certain debt covenants similar to the

17




Company’s credit facility as discussed above.  Prepayment of the note is allowed at any time during the term of the loan.

To the extent that interest rates increase in future periods, the Company will assess the impact of these higher interest rates on the financial and cash flow projections of its potential acquisitions.

The Company does not have any significant off-balance sheet arrangements.

The Company has no significant capital commitments in fiscal 2007 but plans on adding additional machinery and equipment as needed to increase capacity or to enhance operating efficiencies in its manufacturing plants.  Additionally, the Company may consider the acquisitions of companies or other assets in fiscal 2007 which are complementary to its business.  The Company believes that its existing resources, including its primary credit facility, together with cash generated from operations and additional bank borrowings, will be sufficient to fund its cash flow requirements through at least the next twelve months.  However, there can be no assurances that such financing will be available at favorable terms, if at all.

Recently Issued Accounting Standards

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (FAS 158). FAS 158 requires employers to fully recognize the obligations associated with single-employer defined benefit pension, retiree healthcare and other postretirement plans in their financial statements. The provisions of FAS 158 are effective as of the end of the fiscal year ending August 31, 2007. The Company is currently evaluating the impact of the provisions of FAS 158.

In September 2006, the FASB issued Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”, which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment.  The Company will be required to initially apply SAB No. 108 during fiscal year 2007. The Company is assessing the impact, if any, the adoption of SAB No. 108 will have on its financial position and results of operations.

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. FIN 48 prescribes that a company should use a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the more-likely-than-not threshold should be measured in order to determine the tax benefit to be recognized in the financial statements. FIN 48 is effective for fiscal years beginning after December 15, 2006.  The Company is currently evaluating the impact of FIN 48 on its results of operations, financial position and cash flows.

Forward Looking Information

The part of this Quarterly Report on Form 10-Q captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains certain forward-looking statements, which involve risks and uncertainties. These statements are based on current expectations, estimates and projections about the industries in which we operate, management’s beliefs and assumptions made by management. Readers should refer to the discussions under “Forward Looking Information” and “Risk Factors” contained in the Company’s Annual Report on Form 10-K for the year ended August 31, 2006 concerning certain factors that could cause the Company’s actual results to differ materially from the results anticipated in such forward-looking statements. These discussions and Risk Factors are hereby incorporated by reference into this Quarterly Report.

18




Item 3 - Quantitative and Qualitative Disclosures about Market Risk

The Company limits the amount of credit exposure to any one issuer.  At August 31, 2006, other than the Company’s restricted investments (which are restricted for use in a non qualified retirement savings plan for certain key employees and Directors), all of the Company’s funds were in demand deposit accounts.  If the Company places its funds in other than demand deposit accounts, it uses instruments that meet high credit quality standards such as money market funds, government securities, and commercial paper.

The Company’s domestic operations have limited currency exposure since all invoices are denominated in U.S. dollars. With the addition of the Company’s UK operations (Humiseal Europe) in fiscal 2006, the exposure to currency exchange fluctuation has increased.  The Company is reviewing its policies and procedures to reduce this exposure while maintaining the benefit from this operation and sales to other European customers.  Historically, the Company has maintained minimal cash balances outside the U.S.  As of February 28, 2007, the Company had cash balances in the United Kingdom for its Humiseal Europe division denominated primarily in pounds sterling and equal to US $2,092,000.   The Company expects to reduce this balance in fiscal 2007 by using the cash to pay down debt or for other strategic acquisitions.

The Company incurred a foreign currency translation gain in the six months ended February 28, 2007 in the amount of $382,000 related to its Humiseal Europe division which is recorded in other comprehensive income (loss) within the Company’s Statement of Stockholders’ Equity.  The Company does not have or utilize any derivative financial instruments for speculative or trading purposes.

Item 4 - Controls and Procedures

Evaluation of disclosure controls and procedures

Our management evaluated, under the supervision and with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in internal control over financial reporting

There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

19




Part II – OTHER INFORMATION

Item 1 – Legal Proceedings

From time to time, the Company is involved in litigation incidental to the conduct of its business. The Company is not party to any lawsuit or proceeding that, in management’s opinion, is likely to seriously harm the Company’s business, results of operations, financial conditions or cash flows.

The Company is one of over 100 defendants in a personal injury lawsuit, pending in Ohio, which alleges personal injury from exposure to asbestos contained in certain Chase products.  The plaintiff in the case issued discovery requests to Chase in August 2005, to which Chase timely responded in September 2005.  The trial had initially been scheduled to begin on April 30, 2007.  However, that date has since been postponed and no new trial date has been set.  Since that time, the Ohio lawsuit has been inactive with respect to Chase.

Item 1A – Risk Factors

Please refer to Item 1A in the Company’s Form 10-K for the fiscal year ended August 31, 2006 for a complete discussion for the risk factors which could materially affect the Company’s business, financial condition or future results.

Item 6 - Exhibits

Exhibit
Number

 

Description

10.1

 

Severance agreement between Chase Corporation and Terry M. Jones (Chief Marketing Officer)

10.2

 

Severance agreement between Chase Corporation and Adam P. Chase (Chief Operating Officer)

10.3

 

Severance agreement between Chase Corporation and Kenneth L. Dumas (Chief Financial Officer)

10.4

 

Form of restricted stock unit award issued under the Chase Corporation 2005 Incentive Plan for members of the Board of Directors

10.5

 

Form of restricted stock unit award issued under the Chase Corporation 2005 Incentive Plan for members of Executive Management.

31.1

 

Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

 

Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

 

Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

 

Certification of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

20




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 thereunto duly authorized.

 

Chase Corporation

 

 

 

 

 

 

Dated: April 13, 2007

 

By:

/s/ Peter R. Chase

 

 

 

 

Peter R. Chase,

 

 

 

Chairman, President and Chief Executive Officer

 

 

 

 

 

 

 

 

Dated: April 13, 2007

 

By:

/s/ Kenneth L. Dumas

 

 

 

 

Kenneth L. Dumas

 

 

 

Chief Financial Officer and Treasurer

 

21



Exhibit 10.1

SEVERANCE AGREEMENT

This Agreement dated as of July 10, 2006 is by and between Chase Corporation, a Massachusetts corporation (the “Company”), and Terry M. Jones, (the “Executive”),

WHEREAS, the Company has determined that it is desirable, to induce the Executive to remain in the employ of the Company and also to place him in a position to act in the best interests of the Company and its stockholders in the event of a proposal for transfer of control of the Company, to provide certain severance benefits to the Executive if his employment with the Company terminates under the circumstances described below.

NOW, THEREFORE, the Company and the Executive hereby agree as follows:

1.              Definitions .  For purposes of this Agreement only, the following definitions shall apply:

(a)            “Cause” for termination of the Executive’s employment by the Company shall mean and be limited to

(i)             the Executive’s willful and continued failure to substantially perform his duties to the Company (other than any such failure resulting from the Employee’s incapacity due to physical or mental illness), provided that the Company has delivered a written demand for substantial performance to the Executive specifically identifying the manner in which the Company believes that the Executive has not substantially performed his duties and that the Executive has not cured such failure within 30 days after such demand;

(ii)            willful conduct by the Executive which is demonstrably and materially injurious to the Company;

(iii)           material violation of any Company policy, including any code of conduct or standard of ethics of the Company applicable to the Executive;

(iv)           the Executive’s conviction of, or pleading of guilty or nolo contendere to, a felony; or

(v)            the Executive’s willful violation of any material provision of any confidentiality, nondisclosure, assignment of invention, noncompetition or similar agreement entered into by the Executive in connection with his employment by the Company.

For purposes of this definition, no act or failure to act on the Executive’s part shall be deemed “willful” unless done or omitted to be done by the Executive not in good faith and without reasonable belief that his action or omission was in the best interests of the Company.




(b)            “Change in Control” means the occurrence of any of the following events:

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 45% or more of the combined voting power of the Company’s then outstanding securities;

(ii) during any period of twenty-four (24) consecutive months (not including any period prior to the date of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in subparagraphs (i), (ii) or (iii)) whose election by the Board or nomination for election by the Board or by the stockholders of the Company was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “person” (as hereinabove defined) acquires 45% or more of the combined voting power of the Company’s then outstanding securities; or

(iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.

(c)            “Disability” means such physical or mental incapacity as to make the Executive unable to perform the essential functions of his employment duties for a period of at least six months with or without reasonable accommodation.  If any question shall arise as to whether during any period the Executive is so disabled as to be unable to perform the essential functions of his employment duties with or without reasonable accommodation, the Executive may, and at the request of the Company shall, submit to the Company a certification in reasonable detail by a physician selected by the Company to whom the Executive or the Executive’s guardian has no reasonable objection as to whether the Executive is so disabled or how long such disability is expected to continue, and such certification shall for the purposes of this Agreement be conclusive of the issue.  The Executive shall cooperate with any reasonable request of the physician in connection with such certification.  If such question shall arise and the Executive

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shall fail to submit such certification, the Company’s determination of such issue shall be binding on the Executive.

(d)            “Good Reason” means shall mean the occurrence, in connection with a Change in Control, of any of the following events (provided that the Executive shall have given the Company prior written notice describing such event and the matter shall not have been fully remedied by the Company within 30 days after receipt of such notice) :

(i)             any reduction of the Executive’s then existing annual base salary, bonus and/or other short-term incentives;

(ii)            the Company has failed to continue in effect any health, welfare, retirement, vacation and other fringe benefit plans of the Company in which the Executive participated at the time of the Change in Control (or plans providing substantially equivalent benefits) other than as a result of the normal expiration of any such plan in accordance with its terms as in effect at the time of the Change in Control, or the Company shall have taken or failed to take any action which would adversely affect the Executive’s continued participation in or the benefits receivable by the Executive under any such plan as in effect at the time of the Change in Control;

(iii)           the Company has failed to assign to him on a consistent basis executive duties performable at the location at which he worked before the Change in Control which are commensurate with the level of executive duties performed by him immediately prior to such Change in Control;

(iv)           any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company.

2.              Termination of Employment Without Cause.   If the Executive’s employment with the Company is terminated at any time without Cause (and other than by reason of death, Disability or retirement) the Executive shall receive the benefits set forth in Section 4 hereof.

3.              Change in Control .  Notwithstanding Section 2 of this Agreement, this Section 3 shall apply if, within twenty-four (24) months immediately following a Change in Control, the Executive’s employment is terminated by the Company without Cause (and other than by reason of death, Disability or retirement) or the Executive terminates his employment with the Company for Good Reason, the Executive shall be entitled to the benefits set forth in Section 4.

4. (a)        payment of his base salary, in accordance with the Company’s regular payroll practices, for a one year period commencing on his termination date, such salary to be paid at a rate equal, on an annualized basis, to the greater of his annual base salary in effect immediately prior to the Change in Control or his annual base salary in effect immediately prior to the termination of employment, provided, however, (i) no such payments shall be made until the earlier of (A) six months and one day following the termination date or (B) the earliest date as of which such payments may begin without penalty pursuant to Section 409A(a)(2) of the U.S. Internal Revenue Code of 1986 (the “Code”) and (ii) all such payments that are deferred pursuant to clause (i) shall be paid in the aggregate on the first day that such payments may be made pursuant to clause (i).  For purposes of this subsection, the term “base salary” shall include

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shall include bonuses which shall be computed by averaging the last two annual bonuses (annualizing bonuses with respect to a partial year), if any;

(b)            continued participation in the benefits in effect for Executive as of the date of termination, subject to the terms and conditions of the respective plans and applicable law, for a period of one year following the termination date; provided that to the extent that the Company’s plans, programs and arrangements do not permit such continuation of Executive’s participation following his termination, the Company shall provide the Executive with an amount which is sufficient for him to purchase equivalent benefits, such amount to be paid quarterly in advance;  provided, further, however, that if the Executive becomes employed by another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the Executive’s entitlement to participate in the Company’s medical or other welfare benefit plans or to receive such alternate payments shall, to the extent such medical or welfare benefits are offered by the other employer, cease as of the date the Executive is eligible to participate in such plans, and the Executive shall notify the Company of his eligibility under such other plans.

(c)            reasonable costs of an out-placement service used by the Executive for a period not to exceed one year following termination of employment.

5.              Death, Disability or Retirement.   If the Executive’s employment is terminated by reason of death, Disability or retirement, the Executive shall not be entitled to receive any benefits under this Agreement pursuant to Sections 2 or 3 but may be entitled to certain death, disability or retirement benefits offered by the Company pursuant to its employee benefit plans.

6.              Taxes .

(a)            All payments to be made to the Executive under this Agreement will be subject to any required withholding of federal, state and local income and employment taxes.

(b)            Notwithstanding anything in this Agreement to the contrary, if any of the payments provided for in this Agreement, together with any other payments which the Executive has the right to receive from the Company, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended), the payments pursuant to this Agreement shall be reduced to the largest amount as will result in no portion of such payments being subject to the excise tax imposed by Section 4999 of the Code.

7.              Release .  The Executive’s entitlement to receive the payments contemplated by Sections 3 hereof shall be contingent upon execution by the Executive on the date of termination of a release in form and substance reasonably satisfactory to the Company (the “Release”).  By execution of this Agreement, the Executive hereby acknowledges and agrees that such payments are and shall be good and sufficient consideration for such Release.

8.              No Duty to Mitigate .  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as contemplated by Section 4(b) hereof, any benefits payable to the Executive hereunder shall not be subject to reduction for any compensation received from other employment.

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9.              Successors and Assigns .

(a)            This Agreement is personal to the Executive and is not assignable by the Executive, other than by will or the laws of descent and distribution, without the prior written consent of the Company.

(b)            This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

(c)            The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  As used in this Agreement, “Company” shall mean the Company as defined above and any successor to its business and/or assets that assumes and agrees to perform this Agreement.

10.            No Right to Continued Employment .  Nothing contained in this Agreement shall be considered a contract of employment or construed as giving the Executive any right to be retained in the employ of the Company.  Nothing in this Agreement shall otherwise restrict in any way the rights of the Company to terminate the Executive at any time and for any reason, with or without cause.

11.            Miscellaneous .

(a)            Applicable Law .  This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to the conflict of laws principles thereof.

(b)            Amendment; Waiver .  This Agreement may not be modified or amended in any manner except by a written agreement executed by the parties hereto or their respective successors and legal representatives.  The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as waiver of any other provision of this Agreement, or of any subsequent breach by such party or a provision of this Agreement.

(c)            Entire Understanding .  This Agreement constitutes the entire understanding and agreement between the parties hereto with regard to the compensation and benefits payable to the Executive in the circumstances described herein, superseding all prior understandings and agreements, whether oral or written.

(d)            Fees and Expenses .  The Company agrees to pay as incurred and within 30 days after submission of supporting documentation, to the full extent permitted by law, all legal fees and related expenses the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement) following a Change in Control.

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(e)            Notices .  All notices and other communications hereunder shall be in writing and shall be delivered by hand delivery, by a reputable overnight courier service, or by registered or certified mail, return receipt requested, postage prepaid, in each case addressed as follows:

If to the Company:

Chase Corporation

26 Summer Street

Bridgewater, MA 02324

Attention: General Counsel

If to the Executive:

Terry M. Jones

80 Joe Long’s Road

Brewster, MA 02631

or to such other address as either party shall have furnished to the other in writing in accordance herewith.  Any notice or communication shall be deemed to be delivered upon the date of hand delivery, one day following delivery to an overnight courier service, or three days following mailing by registered or certified mail.

(f)             Headings .  The headings of paragraphs herein are included solely for convenience of reference and shall not control the meaning of interpretations of any of the provisions of this Agreement.

(g)            Severability .  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

(h)            Counterparts .  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed an original.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the date first written above.

CHASE CORPORATION

 

Terry M. Jones

 

 

 

 

 

 

By:

/s/ Peter R Chase, President & CEO

 

 

/s/ Terry M. Jones

 

 

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Exhibit 10.2

SEVERANCE AGREEMENT

This Agreement dated as of July 10, 2006 is by and between Chase Corporation, a Massachusetts corporation (the “Company”), and Adam P. Chase, (the “Executive”),

WHEREAS, the Company has determined that it is desirable, to induce the Executive to remain in the employ of the Company and also to place him in a position to act in the best interests of the Company and its stockholders in the event of a proposal for transfer of control of the Company, to provide certain severance benefits to the Executive if his employment with the Company terminates under the circumstances described below.

NOW, THEREFORE, the Company and the Executive hereby agree as follows:

1.              Definitions .  For purposes of this Agreement only, the following definitions shall apply:

(a)            “Cause” for termination of the Executive’s employment by the Company shall mean and be limited to

(i)             the Executive’s willful and continued failure to substantially perform his duties to the Company (other than any such failure resulting from the Employee’s incapacity due to physical or mental illness), provided that the Company has delivered a written demand for substantial performance to the Executive specifically identifying the manner in which the Company believes that the Executive has not substantially performed his duties and that the Executive has not cured such failure within 30 days after such demand;

(ii)            willful conduct by the Executive which is demonstrably and materially injurious to the Company;

(iii)           material violation of any Company policy, including any code of conduct or standard of ethics of the Company applicable to the Executive;

(iv)           the Executive’s conviction of, or pleading of guilty or nolo contendere to, a felony; or

(v)            the Executive’s willful violation of any material provision of any confidentiality, nondisclosure, assignment of invention, noncompetition or similar agreement entered into by the Executive in connection with his employment by the Company.

For purposes of this definition, no act or failure to act on the Executive’s part shall be deemed “willful” unless done or omitted to be done by the Executive not in good faith and without reasonable belief that his action or omission was in the best interests of the Company.




(b)            “Change in Control” means the occurrence of any of the following events:

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 45% or more of the combined voting power of the Company’s then outstanding securities;

(ii) during any period of twenty-four (24) consecutive months (not including any period prior to the date of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in subparagraphs (i), (ii) or (iii)) whose election by the Board or nomination for election by the Board or by the stockholders of the Company was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “person” (as hereinabove defined) acquires 45% or more of the combined voting power of the Company’s then outstanding securities; or

(iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.

(c)            “Disability” means such physical or mental incapacity as to make the Executive unable to perform the essential functions of his employment duties for a period of at least six months with or without reasonable accommodation.  If any question shall arise as to whether during any period the Executive is so disabled as to be unable to perform the essential functions of his employment duties with or without reasonable accommodation, the Executive may, and at the request of the Company shall, submit to the Company a certification in reasonable detail by a physician selected by the Company to whom the Executive or the Executive’s guardian has no reasonable objection as to whether the Executive is so disabled or how long such disability is expected to continue, and such certification shall for the purposes of this Agreement be conclusive of the issue.  The Executive shall cooperate with any reasonable request of the physician in connection with such certification.  If such question shall arise and the Executive

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shall fail to submit such certification, the Company’s determination of such issue shall be binding on the Executive.

(d)            “Good Reason” means shall mean the occurrence, in connection with a Change in Control, of any of the following events (provided that the Executive shall have given the Company prior written notice describing such event and the matter shall not have been fully remedied by the Company within 30 days after receipt of such notice) :

(i)             any reduction of the Executive’s then existing annual base salary, bonus and/or other short-term incentives;

(ii)            the Company has failed to continue in effect any health, welfare, retirement, vacation and other fringe benefit plans of the Company in which the Executive participated at the time of the Change in Control (or plans providing substantially equivalent benefits) other than as a result of the normal expiration of any such plan in accordance with its terms as in effect at the time of the Change in Control, or the Company shall have taken or failed to take any action which would adversely affect the Executive’s continued participation in or the benefits receivable by the Executive under any such plan as in effect at the time of the Change in Control;

(iii)           the Company has failed to assign to him on a consistent basis executive duties performable at the location at which he worked before the Change in Control which are commensurate with the level of executive duties performed by him immediately prior to such Change in Control;

(iv)           any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company.

2.              Termination of Employment Without Cause.   If the Executive’s employment with the Company is terminated at any time without Cause (and other than by reason of death, Disability or retirement) the Executive shall receive the benefits set forth in Section 4 hereof.

3.              Change in Control .  Notwithstanding Section 2 of this Agreement, this Section 3 shall apply if, within twenty-four (24) months immediately following a Change in Control, the Executive’s employment is terminated by the Company without Cause (and other than by reason of death, Disability or retirement) or the Executive terminates his employment with the Company for Good Reason, the Executive shall be entitled to the benefits set forth in Section 4.

4. (a)        payment of his base salary, in accordance with the Company’s regular payroll practices, for a one year period commencing on his termination date, such salary to be paid at a rate equal, on an annualized basis, to the greater of his annual base salary in effect immediately prior to the Change in Control or his annual base salary in effect immediately prior to the termination of employment, provided, however, (i) no such payments shall be made until the earlier of (A) six months and one day following the termination date or (B) the earliest date as of which such payments may begin without penalty pursuant to Section 409A(a)(2) of the U.S. Internal Revenue Code of 1986 (the “Code”) and (ii) all such payments that are deferred pursuant to clause (i) shall be paid in the aggregate on the first day that such payments may be made pursuant to clause (i).  For purposes of this subsection, the term “base salary” shall include

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shall include bonuses which shall be computed by averaging the last two annual bonuses (annualizing bonuses with respect to a partial year), if any;

(b)            continued participation in the benefits in effect for Executive as of the date of termination, subject to the terms and conditions of the respective plans and applicable law, for a period of one year following the termination date; provided that to the extent that the Company’s plans, programs and arrangements do not permit such continuation of Executive’s participation following his termination, the Company shall provide the Executive with an amount which is sufficient for him to purchase equivalent benefits, such amount to be paid quarterly in advance;  provided, further, however, that if the Executive becomes employed by another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the Executive’s entitlement to participate in the Company’s medical or other welfare benefit plans or to receive such alternate payments shall, to the extent such medical or welfare benefits are offered by the other employer, cease as of the date the Executive is eligible to participate in such plans, and the Executive shall notify the Company of his eligibility under such other plans.

(c)            reasonable costs of an out-placement service used by the Executive for a period not to exceed one year following termination of employment.

5.              Death, Disability or Retirement.   If the Executive’s employment is terminated by reason of death, Disability or retirement, the Executive shall not be entitled to receive any benefits under this Agreement pursuant to Sections 2 or 3 but may be entitled to certain death, disability or retirement benefits offered by the Company pursuant to its employee benefit plans.

6.              Taxes .

(a)            All payments to be made to the Executive under this Agreement will be subject to any required withholding of federal, state and local income and employment taxes.

(b)            Notwithstanding anything in this Agreement to the contrary, if any of the payments provided for in this Agreement, together with any other payments which the Executive has the right to receive from the Company, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended), the payments pursuant to this Agreement shall be reduced to the largest amount as will result in no portion of such payments being subject to the excise tax imposed by Section 4999 of the Code.

7.              Release .  The Executive’s entitlement to receive the payments contemplated by Sections 3 hereof shall be contingent upon execution by the Executive on the date of termination of a release in form and substance reasonably satisfactory to the Company (the “Release”).  By execution of this Agreement, the Executive hereby acknowledges and agrees that such payments are and shall be good and sufficient consideration for such Release.

8.              No Duty to Mitigate .  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as contemplated by Section 4(b) hereof, any benefits payable to the Executive hereunder shall not be subject to reduction for any compensation received from other employment.

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9.              Successors and Assigns .

(a)            This Agreement is personal to the Executive and is not assignable by the Executive, other than by will or the laws of descent and distribution, without the prior written consent of the Company.

(b)            This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

(c)            The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  As used in this Agreement, “Company” shall mean the Company as defined above and any successor to its business and/or assets that assumes and agrees to perform this Agreement.

10.            No Right to Continued Employment .  Nothing contained in this Agreement shall be considered a contract of employment or construed as giving the Executive any right to be retained in the employ of the Company.  Nothing in this Agreement shall otherwise restrict in any way the rights of the Company to terminate the Executive at any time and for any reason, with or without cause.

11.            Miscellaneous .

(a)            Applicable Law .  This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to the conflict of laws principles thereof.

(b)            Amendment; Waiver .  This Agreement may not be modified or amended in any manner except by a written agreement executed by the parties hereto or their respective successors and legal representatives.  The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as waiver of any other provision of this Agreement, or of any subsequent breach by such party or a provision of this Agreement.

(c)            Entire Understanding .  This Agreement constitutes the entire understanding and agreement between the parties hereto with regard to the compensation and benefits payable to the Executive in the circumstances described herein, superseding all prior understandings and agreements, whether oral or written.

(d)            Fees and Expenses .  The Company agrees to pay as incurred and within 30 days after submission of supporting documentation, to the full extent permitted by law, all legal fees and related expenses the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement) following a Change in Control.

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(e)            Notices .  All notices and other communications hereunder shall be in writing and shall be delivered by hand delivery, by a reputable overnight courier service, or by registered or certified mail, return receipt requested, postage prepaid, in each case addressed as follows:

If to the Company:

Chase Corporation

26 Summer Street

Bridgewater, MA 02324

Attention: General Counsel

If to the Executive:

Adam P. Chase

390 Commonwealth Ave., #611

Boston, MA 02215

or to such other address as either party shall have furnished to the other in writing in accordance herewith.  Any notice or communication shall be deemed to be delivered upon the date of hand delivery, one day following delivery to an overnight courier service, or three days following mailing by registered or certified mail.

(f)             Headings .  The headings of paragraphs herein are included solely for convenience of reference and shall not control the meaning of interpretations of any of the provisions of this Agreement.

(g)            Severability .  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

(h)            Counterparts .  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed an original.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the date first written above.

CHASE CORPORATION

 

Adam P. Chase

 

 

 

 

 

 

By:

/s/ Peter R Chase, President & CEO

 

 

/s/ Adam P. Chase

 

 

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Exhibit 10.3

SEVERANCE AGREEMENT

This Agreement dated as of July 10, 2006 is by and between Chase Corporation, a Massachusetts corporation (the “Company”), and Kenneth L. Dumas, (the “Executive”),

WHEREAS, the Company has determined that it is desirable, to induce the Executive to remain in the employ of the Company and also to place him in a position to act in the best interests of the Company and its stockholders in the event of a proposal for transfer of control of the Company, to provide certain severance benefits to the Executive if his employment with the Company terminates under the circumstances described below.

NOW, THEREFORE, the Company and the Executive hereby agree as follows:

1.              Definitions .  For purposes of this Agreement only, the following definitions shall apply:

(a)            “Cause” for termination of the Executive’s employment by the Company shall mean and be limited to

(i)             the Executive’s willful and continued failure to substantially perform his duties to the Company (other than any such failure resulting from the Employee’s incapacity due to physical or mental illness), provided that the Company has delivered a written demand for substantial performance to the Executive specifically identifying the manner in which the Company believes that the Executive has not substantially performed his duties and that the Executive has not cured such failure within 30 days after such demand;

(ii)            willful conduct by the Executive which is demonstrably and materially injurious to the Company;

(iii)           material violation of any Company policy, including any code of conduct or standard of ethics of the Company applicable to the Executive;

(iv)           the Executive’s conviction of, or pleading of guilty or nolo contendere to, a felony; or

(v)            the Executive’s willful violation of any material provision of any confidentiality, nondisclosure, assignment of invention, noncompetition or similar agreement entered into by the Executive in connection with his employment by the Company.

For purposes of this definition, no act or failure to act on the Executive’s part shall be deemed “willful” unless done or omitted to be done by the Executive not in good faith and without reasonable belief that his action or omission was in the best interests of the Company.




(b)            “Change in Control” means the occurrence of any of the following events:

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 45% or more of the combined voting power of the Company’s then outstanding securities;

(ii) during any period of twenty-four (24) consecutive months (not including any period prior to the date of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in subparagraphs (i), (ii) or (iii)) whose election by the Board or nomination for election by the Board or by the stockholders of the Company was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “person” (as hereinabove defined) acquires 45% or more of the combined voting power of the Company’s then outstanding securities; or

(iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.

(c)            “Disability” means such physical or mental incapacity as to make the Executive unable to perform the essential functions of his employment duties for a period of at least six months with or without reasonable accommodation.  If any question shall arise as to whether during any period the Executive is so disabled as to be unable to perform the essential functions of his employment duties with or without reasonable accommodation, the Executive may, and at the request of the Company shall, submit to the Company a certification in reasonable detail by a physician selected by the Company to whom the Executive or the Executive’s guardian has no reasonable objection as to whether the Executive is so disabled or how long such disability is expected to continue, and such certification shall for the purposes of this Agreement be conclusive of the issue.  The Executive shall cooperate with any reasonable request of the physician in connection with such certification.  If such question shall arise and the Executive

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shall fail to submit such certification, the Company’s determination of such issue shall be binding on the Executive.

(d)            “Good Reason” means shall mean the occurrence, in connection with a Change in Control, of any of the following events (provided that the Executive shall have given the Company prior written notice describing such event and the matter shall not have been fully remedied by the Company within 30 days after receipt of such notice) :

(i)             any reduction of the Executive’s then existing annual base salary, bonus and/or other short-term incentives;

(ii)            the Company has failed to continue in effect any health, welfare, retirement, vacation and other fringe benefit plans of the Company in which the Executive participated at the time of the Change in Control (or plans providing substantially equivalent benefits) other than as a result of the normal expiration of any such plan in accordance with its terms as in effect at the time of the Change in Control, or the Company shall have taken or failed to take any action which would adversely affect the Executive’s continued participation in or the benefits receivable by the Executive under any such plan as in effect at the time of the Change in Control;

(iii)           the Company has failed to assign to him on a consistent basis executive duties performable at the location at which he worked before the Change in Control which are commensurate with the level of executive duties performed by him immediately prior to such Change in Control;

(iv)           any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company.

2.              Termination of Employment Without Cause.   If the Executive’s employment with the Company is terminated at any time without Cause (and other than by reason of death, Disability or retirement) the Executive shall receive the benefits set forth in Section 4 hereof.

3.              Change in Control .  Notwithstanding Section 2 of this Agreement, this Section 3 shall apply if, within twenty-four (24) months immediately following a Change in Control, the Executive’s employment is terminated by the Company without Cause (and other than by reason of death, Disability or retirement) or the Executive terminates his employment with the Company for Good Reason, the Executive shall be entitled to the benefits set forth in Section 4.

4. (a)        payment of his base salary, in accordance with the Company’s regular payroll practices, for a one year period commencing on his termination date, such salary to be paid at a rate equal, on an annualized basis, to the greater of his annual base salary in effect immediately prior to the Change in Control or his annual base salary in effect immediately prior to the termination of employment, provided, however, (i) no such payments shall be made until the earlier of (A) six months and one day following the termination date or (B) the earliest date as of which such payments may begin without penalty pursuant to Section 409A(a)(2) of the U.S. Internal Revenue Code of 1986 (the “Code”) and (ii) all such payments that are deferred pursuant to clause (i) shall be paid in the aggregate on the first day that such payments may be made pursuant to clause (i).  For purposes of this subsection, the term “base salary” shall include

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shall include bonuses which shall be computed by averaging the last two annual bonuses (annualizing bonuses with respect to a partial year), if any;

(b)            continued participation in the benefits in effect for Executive as of the date of termination, subject to the terms and conditions of the respective plans and applicable law, for a period of one year following the termination date; provided that to the extent that the Company’s plans, programs and arrangements do not permit such continuation of Executive’s participation following his termination, the Company shall provide the Executive with an amount which is sufficient for him to purchase equivalent benefits, such amount to be paid quarterly in advance;  provided, further, however, that if the Executive becomes employed by another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the Executive’s entitlement to participate in the Company’s medical or other welfare benefit plans or to receive such alternate payments shall, to the extent such medical or welfare benefits are offered by the other employer, cease as of the date the Executive is eligible to participate in such plans, and the Executive shall notify the Company of his eligibility under such other plans.

(c)            reasonable costs of an out-placement service used by the Executive for a period not to exceed one year following termination of employment.

5.              Death, Disability or Retirement.   If the Executive’s employment is terminated by reason of death, Disability or retirement, the Executive shall not be entitled to receive any benefits under this Agreement pursuant to Sections 2 or 3 but may be entitled to certain death, disability or retirement benefits offered by the Company pursuant to its employee benefit plans.

6.              Taxes .

(a)            All payments to be made to the Executive under this Agreement will be subject to any required withholding of federal, state and local income and employment taxes.

(b)            Notwithstanding anything in this Agreement to the contrary, if any of the payments provided for in this Agreement, together with any other payments which the Executive has the right to receive from the Company, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended), the payments pursuant to this Agreement shall be reduced to the largest amount as will result in no portion of such payments being subject to the excise tax imposed by Section 4999 of the Code.

7.              Release .  The Executive’s entitlement to receive the payments contemplated by Sections 3 hereof shall be contingent upon execution by the Executive on the date of termination of a release in form and substance reasonably satisfactory to the Company (the “Release”).  By execution of this Agreement, the Executive hereby acknowledges and agrees that such payments are and shall be good and sufficient consideration for such Release.

8.              No Duty to Mitigate .  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as contemplated by Section 4(b) hereof, any benefits payable to the Executive hereunder shall not be subject to reduction for any compensation received from other employment.

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9.              Successors and Assigns .

(a)            This Agreement is personal to the Executive and is not assignable by the Executive, other than by will or the laws of descent and distribution, without the prior written consent of the Company.

(b)            This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

(c)            The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  As used in this Agreement, “Company” shall mean the Company as defined above and any successor to its business and/or assets that assumes and agrees to perform this Agreement.

10.            No Right to Continued Employment .  Nothing contained in this Agreement shall be considered a contract of employment or construed as giving the Executive any right to be retained in the employ of the Company.  Nothing in this Agreement shall otherwise restrict in any way the rights of the Company to terminate the Executive at any time and for any reason, with or without cause.

11.            Miscellaneous .

(a)            Applicable Law .  This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to the conflict of laws principles thereof.

(b)            Amendment; Waiver .  This Agreement may not be modified or amended in any manner except by a written agreement executed by the parties hereto or their respective successors and legal representatives.  The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as waiver of any other provision of this Agreement, or of any subsequent breach by such party or a provision of this Agreement.

(c)            Entire Understanding .  This Agreement constitutes the entire understanding and agreement between the parties hereto with regard to the compensation and benefits payable to the Executive in the circumstances described herein, superseding all prior understandings and agreements, whether oral or written.

(d)            Fees and Expenses .  The Company agrees to pay as incurred and within 30 days after submission of supporting documentation, to the full extent permitted by law, all legal fees and related expenses the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement) following a Change in Control.

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(e)            Notices .  All notices and other communications hereunder shall be in writing and shall be delivered by hand delivery, by a reputable overnight courier service, or by registered or certified mail, return receipt requested, postage prepaid, in each case addressed as follows:

If to the Company:

Chase Corporation

26 Summer Street

Bridgewater, MA 02324

Attention: General Counsel

If to the Executive:

Kenneth L. Dumas

9 Heather Lane

Plainville, MA 02762

or to such other address as either party shall have furnished to the other in writing in accordance herewith.  Any notice or communication shall be deemed to be delivered upon the date of hand delivery, one day following delivery to an overnight courier service, or three days following mailing by registered or certified mail.

(f)             Headings .  The headings of paragraphs herein are included solely for convenience of reference and shall not control the meaning of interpretations of any of the provisions of this Agreement.

(g)            Severability .  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

(h)            Counterparts .  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed an original.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the date first written above.

CHASE CORPORATION

 

Kenneth L. Dumas

 

 

 

 

 

 

By:

/s/ Peter R Chase, President & CEO

 

 

/s/ Kenneth L. Dumas

 

 

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Exhibit 10.4

CHASE CORPORATION

RESTRICTED STOCK UNIT AGREEMENT

This Restricted Stock Unit Agreement (the “ Agreement ) , dated as of                 , is by and between Chase Corporation (“ Company ”) and                  (“ Unit Holder ”).

1.              Award .  Pursuant to the terms of the Chase Corporation 2005 Incentive Plan (the “Plan”), effective as of                  (“Grant Date”), the Company hereby grants to the Unit Holder [    ] Restricted Stock Units subject to the terms and conditions of this Agreement and the Plan. Restricted Stock Units are notational units of measurement denominated in shares of common stock of Chase Corporation, $.01 par value (“ Common Stock ”).  Each Restricted Stock Unit represents a hypothetical share of Common Stock, subject to the conditions relating to forfeiture and restrictions on transferability set forth below and in the Plan. The Restricted Stock Units shall be credited to the Unit Holder in an unfunded bookkeeping account established for the Unit Holder.

2.              Vesting of Restricted Stock Units .  The period of time between the Grant Date and the vesting of Restricted Stock Units (and the termination of restriction thereon) will be referred to herein as the “ Restricted Period .”

(a)            Vesting .  The Restricted Stock Units shall vest and become nonforfeitable (provided the Unit Holder’s service with the Company has not terminated at the time of vesting) in accordance with the following schedule:

Restricted Stock Units will vest on                  with adjustments to the vesting of the actual award made in accordance with the following Termination events.

Termination Event

 

Vesting

 

Payment in Shares

Retirement

 

All shares forfeited

 

No payment

Voluntary

 

All shares forfeited

 

No payment

Without cause

 

Pro-rated

 

Paid as scheduled

With cause

 

All shares forfeited

 

No payment

Upon change of control

 

Acceleration at target

 

Paid at change of control

Death or disability

 

Pro-rated

 

Paid as scheduled

 

When applying this schedule, any fractional units shall be rounded up to the next whole unit, but in the aggregate may not exceed the total number of Restricted Stock Units granted on the Grant Date.  Upon vesting, each Restricted Stock Unit will be converted into one share of Company Common Stock and the Unit Holder will be issued shares of Common Stock equal to the number of Restricted Stock Units held, free of any restrictions.




(b)            Termination of Service .  Upon termination of service from the Company either voluntarily or involuntarily for any reason other than the Unit Holder’s death or disability (as determined by the Administrator and within the meaning of Section 409A of the Code), the Unit Holder shall receive Restricted Stock Units in accordance with the Vesting Schedule above, without the payment of any consideration or further consideration by the Company.  Upon forfeiture, neither the Unit Holder nor any successors, heirs, assigns, or legal representatives of the Unit Holder shall thereafter have any further rights or interest in the unvested Restricted Stock Units or certificates therefor. For purposes of this paragraph, service will be considered as (i) continuing uninterrupted during any bona fide leave of absence approved in writing by the Company and (ii) continuing any change of employment within or among the Company and its subsidiaries as long as the Unit Holder continues to be an employee of the Company or any of its subsidiaries.  If a Unit Holder’s service is terminated as a result of his or death or disability (as determined by the Administrator and within the meaning of Section 409A of the Code), the award of Restricted Stock Units will be pro-rated based on the date service is terminated.

(c)            Acceleration of Vesting .  Notwithstanding the foregoing, upon the consummation of a transaction resulting in a Change in Control of the Company, all unvested Restricted Stock Units shall become vested and nonforfeitable immediately prior to the Change in Control, and all certificates representing such shares of Common Stock shall be delivered to the Restricted Unit Holder upon the Change in Control.

4.              Nontransferability .  This Agreement and the Restricted Stock Units may not be sold, assigned, alienated, transferred, pledged or otherwise encumbered by the Unit Holder, either voluntarily or by operation of law, except by will or the laws of descent and distribution and any attempt to sell, assign, alienate, transfer, pledge or otherwise encumber the same shall be void.

5.              No Rights as a Stockholder .  The Unit Holder shall not be entitled to vote any shares of Common Stock that may be acquired through conversion of Restricted Stock Units to Common Stock, shall not receive any dividends attributed to such shares of Common Stock, and shall have no other rights of a stockholder with respect to the Restricted Stock Units unless and until the Common Stock issuable upon conversion of the Restricted Stock Units has been delivered to the Unit Holder.

6.              No Right to Continued Employment .  This Agreement shall not confer upon the Unit Holder any right with respect to continuance of employment by, or service with, the Company, nor shall it interfere in any way with the right of the Company to terminate the Unit Holder’s service at any time.

7.              Compliance with Law and Regulations .  This Agreement and the obligation of Company to issue and deliver shares of Common Stock upon conversion of the Restricted Stock Units shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required (including without limitation the effective registration or exemption of the issuance of such shares under the Securities Act of 1933, as amended (the “ Securities Act ”) and applicable state securities laws).  Moreover, the Restricted Stock Units shall not be converted to Common Stock if such conversion would be contrary to applicable law.  The Unit Holder hereby confirms that the Unit Holder has been informed that any shares of Common Stock delivered upon conversion of the Restricted Stock Units acquired hereunder may not be resold or transferred unless such shares are

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first registered under applicable securities laws or unless an exemption from registration is available.  The Company shall in no event be obligated to register any securities for resale pursuant to the Securities Act or to take any other affirmative action in order to cause the issuance or transfer thereof to comply with any law or regulation of any governmental authority.

8.              Adjustment to Common Stock .  In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a normal cash dividend, the number and class of securities each Restricted Stock Unit shall be convertible into under this Agreement shall be appropriately adjusted and equitable adjusted so as to maintain the proportionate number of shares.

9.              Withholding .  To the extent that the vesting or receipt of the Restricted Stock Units or the lapse of any restrictions results in income to the Unit Holder for federal or state tax purposes, the Unit Holder shall pay to the Company, or make provision satisfactory to the Company for payment of, any taxes required by law to be withheld in connection with this Agreement no later than the time of such receipt or lapse, as the case may be.  The Unit Holder may satisfy such tax obligations by delivering to the Company (i) cash in the form of wire transfer or check or (ii) shares of Common Stock, including shares retained from this Agreement, valued at their fair market value as determined by (or in a manner approved by) the Company in good faith or (iii) a combination of (i) and (ii).  The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Unit Holder.

10.            Common Stock Reserved .  The Company shall at all times during the term of this Agreement reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of this Agreement.

11.            Governing Law .  This Agreement shall be construed and administered in accordance with and governed by the laws of the Commonwealth of Massachusetts (without giving effect to any conflict or choice of laws provisions thereof that would cause the application of the domestic substantive laws of any other jurisdiction).

12.            Notices . Any notice hereunder to the Company shall be addressed to the Company at its principal business office, 26 Summer Street, Bridgewater, Massachusetts 02324 and any notice hereunder to the Unit Holder shall be sent to the address reflected on the records of the Company, subject to the right of either party to designate at any time hereafter in writing some other address.

13.            Amendment of Agreement .  The Company may amend, modify or terminate this Agreement, provided that the Unit Holder’s consent to such action shall be required unless the Company determines that the action, taking into account any related action, would not materially and adversely affect the Unit Holder.

14.            Successors and Assigns; No Third Party Beneficiaries .  Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.  There are no third party beneficiaries of this Agreement.

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15.            Provisions of the Plan .  This Agreement is subject to the provisions of the Plan, a copy of which the Unit Holder hereby acknowledges receiving with this Agreement.

16.            Entire Agreement .  This Agreement and the Plan constitute the full and entire understanding and agreement of the parties with regard to the Restricted Stock Units and supersede in their entirety all other prior agreements, whether oral or written, with respect thereto.

17.            Severability .  In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby, and each provision of this Agreement shall be enforced to the fullest extent permitted by law.

18.            Waivers .  Any waiver by the Company of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of such provision or any other provision hereof.

19.            Defined Terms .  Capitalized terms used but not defined in this Agreement will have the meanings specified in the Plan.

IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed instrument as of the           day of                  , 200   .

UNIT HOLDER

 

CHASE CORPORATION

 

 

 

 

 

 

By:

 

 

 

By:

 

 

 

 

 

Signature

 

Signature

 

 

 

 

 

 

Name:

 

 

 

Name:

 

 

 

 

 

 

 

 

Address:

 

 

 

Address:

 

 

 

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Exhibit 10.5

CHASE CORPORATION

RESTRICTED STOCK UNIT AGREEMENT

This Restricted Stock Unit Agreement (the “ Agreement ) , dated as of                 , is by and between Chase Corporation (“ Company ”) and                  (“ Unit Holder ”).

1.              Award .  Pursuant to the terms of the Chase Corporation 2005 Incentive Plan (the “Plan”), effective as of                  (“Grant Date”), the Company hereby grants to the Unit Holder a Targeted award of            Restricted Stock Units subject to the terms and conditions of this Agreement and the Plan. Restricted Stock Units are notational units of measurement denominated in shares of common stock of Chase Corporation, $.10 par value (“ Common Stock ”).  Each Restricted Stock Unit represents a hypothetical share of Common Stock, subject to the conditions relating to forfeiture and restrictions on transferability set forth below and in the Plan. The Restricted Stock Units shall be credited to the Unit Holder in an unfunded bookkeeping account established for the Unit Holder.

The Restricted Stock Units are subject to a “performance measurement period” based on the actual results of the Company for the fiscal year beginning on                  and ending on                 .  The Targeted performance measure has been set as [ Earnings Before Tax (EBT) ] of $                .  If the Target is achieved then 100% of the award will paid out subject to the vesting provisions outlined in this agreement.

Additionally a “Threshold” award and a “Stretch” award have also been set.  The Threshold is the minimum point at which an award is earned and the Stretch is performance in excess of the Target as summarized below:

Performance

 

Measurement /
EBT

 

Measurement as a
% of the Target
Measurement

 

Payout % of
Target Award

 

Threshold

 

$

[     ]

 

80

%

50

%

Target

 

$

[     ]

 

100

%

100

%

Stretch

 

$

[     ]

 

120

%

150

%

 

If the actual results of the performance measurement period fall between the Threshold and the Target the award will be prorated between 50% and 100% of the Targeted award.  If the actual results fall between Target and Stretch, the award will be prorated between 100% and 150%.  Furthermore if the actual results of the performance measurement period exceed 120% of the Target, the award will increase on a similar pro rated basis with no cap on the total award.

Actual results may be adjusted at the sole discretion of the Compensation Committee of the Board of Directors for any non recurring or special items occurring during the year that impacted Revenue or EBT (either positively or negatively) during the measurement period.




2.              Vesting of Restricted Stock Units .  The period of time between the Grant Date and the vesting of Restricted Stock Units (and the termination of restriction thereon) will be referred to herein as the “ Restricted Period .”

(a)            Vesting .  The Restricted Stock Units shall vest and become nonforfeitable (provided the Unit Holder’s service with the Company has not terminated at the time of vesting) in accordance with the following schedule:

The Restricted Stock Units will vest on                with adjustments to the vesting of the actual award made in accordance with the following Termination events.

Termination Event

 

Vesting

 

Payment in Shares

Retirement

 

Pro-rated

 

Paid as scheduled

Voluntary

 

All shares forfeited

 

No payment

Without cause

 

Pro-rated

 

Paid as scheduled

With cause

 

All shares forfeited

 

No payment

Upon change of control

 

Acceleration at target

 

Paid at change of control

Death or disability

 

Pro-rated

 

Paid as scheduled

 

When applying this schedule, any fractional units shall be rounded up to the next whole unit, but in the aggregate may not exceed the total number of Restricted Stock Units granted on the Grant Date.  Upon vesting, each Restricted Stock Unit will be converted into one share of Company Common Stock and the Unit Holder will be issued shares of Common Stock equal to the number of Restricted Stock Units held, free of any restrictions.

(b)            Termination of Service .  Upon termination of service from the Company either voluntarily or involuntarily for any reason other than the Unit Holder’s death or disability (as determined by the Administrator and within the meaning of Section 409A of the Code), the Unit Holder shall receive Restricted Stock Units in accordance with the Vesting Schedule above, without the payment of any consideration or further consideration by the Company.  Upon forfeiture, neither the Unit Holder nor any successors, heirs, assigns, or legal representatives of the Unit Holder shall thereafter have any further rights or interest in the unvested Restricted Stock Units or certificates therefor. For purposes of this paragraph, service will be considered as (i) continuing uninterrupted during any bona fide leave of absence approved in writing by the Company and (ii) continuing any change of employment within or among the Company and its subsidiaries as long as the Unit Holder continues to be an employee of the Company or any of its subsidiaries.  If a Unit Holder’s service is terminated as a result of his or death or disability (as determined by the Administrator and within the meaning of Section 409A of the Code), the award of Restricted Stock Units will be pro-rated based on the date service is terminated.

(c)            Acceleration of Vesting .  Notwithstanding the foregoing, upon the consummation of a transaction resulting in a Change in Control of the Company, all unvested Restricted Stock Units shall become vested and nonforfeitable immediately prior to the Change in Control, and all

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certificates representing such shares of Common Stock shall be delivered to the Restricted Unit Holder upon the Change in Control.

4.              Nontransferability .  This Agreement and the Restricted Stock Units may not be sold, assigned, alienated, transferred, pledged or otherwise encumbered by the Unit Holder, either voluntarily or by operation of law, except by will or the laws of descent and distribution and any attempt to sell, assign, alienate, transfer, pledge or otherwise encumber the same shall be void.

5.              No Rights as a Stockholder .  The Unit Holder shall not be entitled to vote any shares of Common Stock that may be acquired through conversion of Restricted Stock Units to Common Stock, shall not receive any dividends attributed to such shares of Common Stock, and shall have no other rights of a stockholder with respect to the Restricted Stock Units unless and until the Common Stock issuable upon conversion of the Restricted Stock Units has been delivered to the Unit Holder.

6.              No Right to Continued Employment .  This Agreement shall not confer upon the Unit Holder any right with respect to continuance of employment by, or service with, the Company, nor shall it interfere in any way with the right of the Company to terminate the Unit Holder’s service at any time.

7.              Compliance with Law and Regulations .  This Agreement and the obligation of Company to issue and deliver shares of Common Stock upon conversion of the Restricted Stock Units shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required (including without limitation the effective registration or exemption of the issuance of such shares under the Securities Act of 1933, as amended (the “ Securities Act ”) and applicable state securities laws).  Moreover, the Restricted Stock Units shall not be converted to Common Stock if such conversion would be contrary to applicable law.  The Unit Holder hereby confirms that the Unit Holder has been informed that any shares of Common Stock delivered upon conversion of the Restricted Stock Units acquired hereunder may not be resold or transferred unless such shares are first registered under applicable securities laws or unless an exemption from registration is available.  The Company shall in no event be obligated to register any securities for resale pursuant to the Securities Act or to take any other affirmative action in order to cause the issuance or transfer thereof to comply with any law or regulation of any governmental authority.

8.              Adjustment to Common Stock .  In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a normal cash dividend, the number and class of securities each Restricted Stock Unit shall be convertible into under this Agreement shall be appropriately adjusted and equitable adjusted so as to maintain the proportionate number of shares.

9.              Withholding .  To the extent that the vesting or receipt of the Restricted Stock Units or the lapse of any restrictions results in income to the Unit Holder for federal or state tax purposes, the Unit Holder shall pay to the Company, or make provision satisfactory to the Company for payment of, any taxes required by law to be withheld in connection with this Agreement no later than the time of such receipt or lapse, as the case may be.  The Unit Holder

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may satisfy such tax obligations by delivering to the Company (i) cash in the form of wire transfer or check or (ii) shares of Common Stock, including shares retained from this Agreement, valued at their fair market value as determined by (or in a manner approved by) the Company in good faith or (iii) a combination of (i) and (ii).  The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Unit Holder.

10.            Common Stock Reserved .  The Company shall at all times during the term of this Agreement reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of this Agreement.

11.            Governing Law .  This Agreement shall be construed and administered in accordance with and governed by the laws of the Commonwealth of Massachusetts (without giving effect to any conflict or choice of laws provisions thereof that would cause the application of the domestic substantive laws of any other jurisdiction).

12.            Notices .  Any notice hereunder to the Company shall be addressed to the Company at its principal business office, 26 Summer Street, Bridgewater, Massachusetts 02324 and any notice hereunder to the Unit Holder shall be sent to the address reflected on the records of the Company, subject to the right of either party to designate at any time hereafter in writing some other address.

13.            Amendment of Agreement .  The Company may amend, modify or terminate this Agreement, provided that the Unit Holder’s consent to such action shall be required unless the Company determines that the action, taking into account any related action, would not materially and adversely affect the Unit Holder.

14.            Successors and Assigns; No Third Party Beneficiaries .  Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.  There are no third party beneficiaries of this Agreement.

15.            Provisions of the Plan .  This Agreement is subject to the provisions of the Plan, a copy of which the Unit Holder hereby acknowledges receiving with this Agreement.

16.            Entire Agreement .  This Agreement and the Plan constitute the full and entire understanding and agreement of the parties with regard to the Restricted Stock Units and supersede in their entirety all other prior agreements, whether oral or written, with respect thereto.

17.            Severability .  In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby, and each provision of this Agreement shall be enforced to the fullest extent permitted by law.

18.            Waivers .   Any waiver by the Company of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of such provision or any other provision hereof.

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19.            Defined Terms .  Capitalized terms used but not defined in this Agreement will have the meanings specified in the Plan.

IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed instrument as of the         day of                   , 200   .

UNIT HOLDER

 

CHASE CORPORATION

 

 

 

 

 

 

By:

 

 

 

By:

 

 

 

 

 

Signature

 

Signature

 

 

 

 

 

 

Name:

 

 

 

Name:

 

 

 

 

 

 

 

 

Address:

 

 

 

Address:

 

 

 

5



Exhibit 31.1

CERTIFICATION

I, Peter R. Chase, certify that:

1.                I have reviewed this Quarterly Report on Form 10-Q of Chase Corporation;

2.                Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.                Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.                The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)                                    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)                                   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

c)                                    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.                The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)                                    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)                                   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  April 13, 2007

/s/ Peter R. Chase

 

 

 

 

Peter R. Chase

 

Chairman, President and Chief Executive Officer

 

(Principal executive officer)

 

1



Exhibit 31.2

CERTIFICATION

I, Kenneth L. Dumas, certify that:

1.                I have reviewed this Quarterly Report on Form 10-Q of Chase Corporation;

2.                Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.                Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.                The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)                                    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)                                   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

c)                                    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.                The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)                                    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)                                   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  April 13, 2007

/s/ Kenneth L. Dumas

 

 

 

 

Kenneth L. Dumas

 

Chief Financial Officer and Treasurer

 

(Principal financial officer)

 

1



Exhibit 32.1

CERTIFICATION

PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned officer of Chase Corporation (the “Company”) hereby certifies that the Company’s Quarterly Report on Form 10-Q for the period ended February 28, 2007 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certificate is furnished solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Date:  April 13, 2007

 

/s/ Peter R. Chase

 

 

Peter R. Chase

Chairman, President and Chief Executive Officer

(Principal executive officer)

 

1



Exhibit 32.2

CERTIFICATION

PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned officer of Chase Corporation (the “Company”) hereby certifies that the Company’s Quarterly Report on Form 10-Q for the period ended February 28, 2007 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certificate is furnished solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Date:  April 13, 2007

 

 

 

/s/ Kenneth L. Dumas

 

 

 

 

Kenneth L. Dumas

 

Chief Financial Officer and Treasurer

 

(Principal financial officer)

 

 

1