Item 5.02 — Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On August 20, 2019, the Compensation and Management Development Committee of the Board of Directors of Chase Corporation (the “Company”) approved the Chase Corporation Annual Incentive Plan and the Chase Corporation Long Term Incentive Plan, in each case for the Company’s fiscal year ending August 31, 2020.
Consistent with prior years, the Annual Incentive Plan for fiscal 2020 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 year 2020, 103.5% of fiscal year 2019 Adjusted 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 80% of the EBITDA based target, at which point 50% of the target bonus would be paid. The maximum award of 200% of the target bonus would be paid if the actual EBITDA based results 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 and Chief Financial Officer, the performance share portion represents 50% of the total award (at target) and the time-based restricted stock and stock option awards represent 25% each. The performance-based restricted stock is granted subject to achieving certain preset goals relating to the Company’s earnings per share (EPS) and return on invested capital (ROIC) and can be adjusted up or down depending on performance. The EPS and ROIC related goals are weighted for 80% and 20% of the total award, respectively. For any of the performance-based shares to vest, 80% of either the EPS or ROIC target must be met, at which point 50% of the award (weighted applicably) would vest. The full award would vest at achievement of 100% of both the EPS and ROIC target and the award may be adjusted upward to a maximum of 200% of the target award if 120% of each target is achieved. For purposes of the plan, EPS is determined using the number of weighted average diluted shares outstanding on August 31, 2019, the last day of fiscal year 2019. For purposes of the plan, ROIC is determined using the 3-year average ROIC, calculated as earnings before interest and tax, divided by the sum of equity and debt less cash. The time-based restricted stock awards will vest on the last day of the Company’s 2022 fiscal year if continued employment conditions are met. Stock options are valued using a Black-Scholes calculation, and vest in three equal annual installments beginning on the last day of fiscal 2020.
On August 20, 2019, the Committee approved an amendment to the Fiscal 2019 Chase Corporation Annual Incentive Plan and Fiscal 2019 Chase Corporation Long Term Incentive Plan for Christian J. Talma, Chief Financial Officer. Both plans were amended to calculate on a 60% of base salary award opportunity at target for the portion of the fiscal year during which Mr. Talma served as the Chief Financial Officer. No other changes have been made to the plans.
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.
