UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 31, 2016
Commission File Number: 1-9852
CHASE CORPORATION
(Exact name of registrant as specified in its charter)
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Massachusetts |
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11-1797126 |
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(State or other jurisdiction of incorporation of
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(I.R.S. Employer Identification No.) |
295 University Avenue, Westwood , Massachusetts 0 2090
(Address of Principal Executive Offices, Including Zip Code)
(508) 819-4200
(Registrant’s Telephone Number, Including Area Code)
26 Summer Street, Bridgewater, Massachusetts 02324
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Section 5 - Corporate Governance and Management
Item 5.02 — Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On August 31, 2016, the Compensation and Management Development Committee of the Board of Directors of Chase Corporation (the “Company”) approved the Chase Corporation Annual Incentive Plan for the Company’s fiscal year ending August 31, 2017, the Chase Corporation Long Term Incentive Plan for the Company’s fiscal year ending August 31, 2017 and equity retention agreements with both the Chief Executive Officer and the Chief Financial Officer .
Consistent with prior years, the Annual Incentive Plan for fiscal 2017 provides participating executive team members the opportunity for cash bonuses based on the Company achieving a preset annual goal or target based on earnings before interest expense, taxes, depreciation and amortization (EBITDA). For fiscal 2017, budgeted adjusted EBITDA, less the effects of foreign transaction gain (loss), aka EBITDAX, will be used as the EBITDA based target. For each participating executive team member, target awards are valued at a specified percentage of base salary. The threshold for any payments to be made under the plan is 90% of the EBITDA based target, at which point 50% of the target bonus would be paid. The maximum award of 200% of the target would be paid if the actual EBITDA based target under the plan equals or exceeds 120% of the target.
Also consistent with prior years, the Long Term Incentive Plan provides the opportunity for participating executive team members to participate in the long term growth of the Company through three types of equity awards: performance-based restricted stock awards, time-based restricted stock awards, and stock option awards. For the Chief Executive Officer, the performance share portion represents 50% of the total award (at target) and the time-based restricted stock and stock option awards rep resent 25% each. For the Chief Financial Officer, the performance share portion represents 67% of the total award (at target) and the time-based restricted stock awards represent the remaining 33%. The performance-based restricted stock is granted subject to achieving certain preset annual goals relating to the Company’s earnings per share (EPS) for fiscal 2017, and can be adjusted up or down depending on performance. For any of the performance-based shares to vest, 90% of the EPS target must be met, at which point 50% of the award would vest. The full award would vest at 100% of the EPS target, and the award may be adjusted upward to a maximum of 200% of the target award at 120% of the EPS target. For purposes of the plan, EPS is determined using the number of weighted average diluted shares outstanding on August 31, 2016, the last day of fiscal year 2016. The time-based restricted stock awards will vest on the last day of the Company’s 2019 fiscal year if continued employment conditions are met. Stock options are valued using a Black-Scholes calculation, and vest in three equal annual installments beginnin g on the last day of fiscal 2017 .
The equity retention agreements provide the opportunity for participating executive team members to receive equity awards in exchange for their long term commitment to the Company. The Chief Executive Officer ’s equity retention agreement consists of time-based restricted stock (grant date value of $500,000) and stock options (grant date value of $500,000, based on a Black-Scholes calculation ) with both the shares and options having a grant date of September 1, 2016 and vesting on August 31, 2019 (3 years from grant date) if continued employment conditions are met . The Chief Financial Officer’s equity retention agreement consists of time-based restricted stock (grant date value of $550,000), with a grant date of September 1, 2016 and with all shares vesting in August 31, 20 21 ( 5 years from grant date) if continued employment conditions are met .
The above summaries of the Chase Corporation Annual Incentive Plan and the Chase Corporation Long Term Incentive Plan are qualified in their entirety by the copies of such plans filed as exhibits to this Current Report on Form 8-K and incorporated herein by this reference.
Item 9.01 — Financial Statements and Exhibits
(d) Exhibits
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99.1 |
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Chase Corporation Annual Inc entive Plan for Fiscal Year 2017 |
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99.2 |
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Chase Corporation Long Term Inc entive Plan for Fiscal Year 2017 |
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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.
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Chase Corporation |
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Dated: September 2 , 2016 |
By: |
/s/ Kenneth J. Feroldi |
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Kenneth J. Feroldi |
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Treasurer and Chief Financial Officer |
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CHASE CORPORATION
ANNUAL INCENTIVE PLAN
Fiscal Year 2017
The Company, in addition to salary and benefits provides further cash compensation to key employees based on achieving preset annual goals.
The plan is maintained and paid at the sole discretion of the Board of Directors and may be modified or suspended at any time by the Board.
Upon approval by the Board of Directors, the CFO will administer the plan.
It is the intent of the Board of Directors to exclude the effect of unusual events and expenses from the calculation. The Compensation and Management Development Committee is given the authority by the Board to use its discretion in determining relevant exclusions.
Targets, awards, opportunities and associated performance award methodology and eligibility requirements will be established by the Compensation and Management Development Committee for the Chief Executive Officer, and Chief Financial Officer and approved by the Board of Directors. For senior management, the Executive Chairman and the CEO will jointly make recommendations to be approved by the Compensation and Management Development Committee. For all other employees the Executive Chairman and the CEO will be the approval authority. See schedule below for award opportunities for the executive officers:
Budgeted Adjusted EBITDA , less the effects of foreign transaction gain (loss), aka E BITDAX, is the target. Payment threshold is 90% which yields 50% of individual award opportunity. From 90% to 100% performance — award increases proportionately between 50 and 100%. Between 100 and 120% of target award is proportionate between 100% and 200%.
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Actual v. Target |
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Award Earned |
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In order for any amounts to be payable under this Annual Incentive Plan, actual results must meet a threshold level of 90% of the target. There is a cap on the incentive payments of 200% achieved at 120% of target.
Payment is made in cash no later than 75 days from the close of the fiscal year.
Award Opportunity
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Chief Executive Officer |
50% of base salary for 100% achievement of target. At 90% of target award is 25% of base salary. For results in excess of target, award increases to 100% of base salary at 120% of target. |
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Chief Financial Officer |
30% of base salary for 100% achievement of target. At 90% of target award is 15% of base salary. For results in excess of target, award increases to 60% of base salary at 120% of target. |
In addition to the financial targets the Compensation and Management Development Committee may choose to establish qualitative measurement criteria. Together with the financial measures these are referred to as critical success factors (CSF). When utilized, the CEO’s CSFs and appropriate weightings are approved by the Board. The Executive Chairman and the CEO will jointly approve all others.
Other management and non-union bonus participants will have opportunities established by the Executive Chairman and the CEO.
To be eligible an employee must be on the active payroll when the bonus is paid and for at least 6 months prior to the end of the fiscal year.
CHASE CORPORATION
Long Term Incentive Plan
Award Design and Grant Process
Fi scal Year Ending August 31, 2017
Key Provisions
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There are three reward vehicles: 1) Performance-based restricted stock, 2) Time-vested restricted stock and 3) Stock Options. At least two will be used each year. For the Chief Exe cutive Officer, Fiscal Year 2017 performance shares will be 50%, time-vested restricted stock will be 25% and stock options will be 25%. For the Chief Financial Officer, Fiscal Year 2017 performance shares will be 67%, and time-vested restricted stock will be 33%. |
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Time-vested restricted stock is fixed and not subject to performance measures and will vest at the end of the third fiscal year after the grant date (August 31, 2019 ), subject to grant date, pricing, and termination provisions listed below. |
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Stock options will be fixed based on a Black-Scholes calculation, and will vest in three equal annual allotme nts beginning on August 31, 2017 , and be exercisable for 10 years. |
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Performance shares will be in the form of restricted stock subject to performance and other criteria as follows. |
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Performance measures: Target is earnings per share (EPS) based on current year’s budget determined by dividing net income by the number of diluted share s outstanding at August 31, 2016 (end of most recent fiscal year). Actual is net income for the measurement period divided by the same number of diluted shares used in the Target. |
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Performance measur ement period: September 1, 2016 through August 31, 2017 |
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Vesting: 2 years after performance mea surement period (August 31, 2019 ) |
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Grant date: first day of measurement period |
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Stock price for award: closing price for last trading day prior to grant date |
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Threshold: the point at which an award is earned (90% of target). Between threshold and target the award increases on a linear basis. |
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Stretch area: performance in excess of target awarded at a higher rate (200% for 120% achievement) with a cap of 200%. Between target and cap award increases on a linear basis. |
Example:
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Individual opportunity is $50,000 at target; performance share opportunity (50%) is $25,000 at target |
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Stock price (8/31/2016 ) is $25.00 |
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Threshold is 90% of target |
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Performance |
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Payout % of Target |
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Vesting Shares |
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Reward Value |
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Threshold 90% |
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Target |
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Stretch at 120% |
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Plan metrics: standard performance measures are 90% threshold, 100% target and 120% maximum.
Standard award measures are 50% at threshold, 100% at target and 200% at maximum.
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Termination provisions: |
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Termination Event |
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Payment in Shares |
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Retirement |
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Pro-rated |
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Paid as scheduled |
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Voluntary |
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All shares forfeit |
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No payment |
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Without cause |
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Pro-rated |
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Paid as scheduled |
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With cause |
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All shares forfeit |
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No payment |
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Upon change of control |
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Acceleration at target |
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Paid at change of control |
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Death or disability |
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Pro-rated |
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Paid as scheduled |
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Eligibility: key executives and others |
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Participant |
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Target % of Base Salary |
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Adam P. Chase |
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% |
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Kenneth J. Feroldi |
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Award opportunities are set annually and the plan is subject to the approval of the Compensation and Management Development (C&MD) Committee and may be modified from time to time.
FY 2017 SCHEDULE
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Q4 FY16 Board approves continuance of plan and sets grant date |
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Q4 FY16 Goals and awards proposed by management for FY17 |
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Q4 FY16 C&MD Committee reviews and approves FY17 plan |
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Q1 FY17 Management presents FY16 plan achievement |
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Q1 FY17 C&MD Committee approves FY16 results |
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Q1 FY18 Manage ment presents assessment of FY17 goal achievement |
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Q1 FY18 C&MD Committee approves FY17 results |
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Q4 FY19 Vested FY17 shares are released to participant |
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