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): March 9,
2021
SMITH-MIDLAND
CORPORATION
(Exact
Name of Registrant as Specified in Charter)
|
Delaware
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1-13752
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54-1727060
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(State or Other
Jurisdiction of Incorporation)
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(Commission File
Number)
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(I.R.S. Employer
Identification Number)
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P.O. Box 300, 5119
Catlett Road
Midland, Virginia
22728
(Address of
principal executive offices)
(504)
439-3266
(Registrant’s
telephone number, including area code)
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 (see General Instruction A.2.
below):
☐
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))
Securities
Registered Pursuant to Section 12(b) of the Act:
|
Title of each
class
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Trading
Symbol
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Name of each
exchange on which registered
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Common Stock, $0.01
par value per share
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SMID
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The NASDAQ Capital
Market
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Indicate by check
mark whether the registrant is an emerging growth company as
defined in Rule 405 of the Securities Act of 1933 (§230.405 of
this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934
(§240.12b-2 of this chapter).
Emerging growth
company ☐
If an emerging
growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13 (a) of the Exchange Act.
☐
Item
5.02
Departure
of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers.
On March 9, 2021, the Compensation Committee of the board of
directors (the “Committee”) of Smith-Midland
Corporation (the "Company”) adopted the Smith-Midland
Corporation Long-Term Incentive Plan (the “LTIP”).
Officers, other employees, and directors of the Company are
eligible to participate in the LTIP. The LTIP is administered by
the Committee or the full Board with respect to non-employee
directors of the Company.
The LTIP is intended to enable the
Company (a) to recruit and retain highly qualified executives,
other employees and directors who are responsible for moving the
business of the Company forward, (b) align the interests of the
Company’s executives and directors with the interests of the
Company’s stockholders by creating a direct link between
compensation and the Company’s performance, and (c)
incentivize executives, other employees and directors of the
Company to contribute to the long-term success of the Company.
Awards of restricted stock under the LTIP will be
determined based upon target percentages given to the following
five (5) performance conditions: Revenue Growth, EBITDA Margin,
Free Cash Flow, Retention and Board Discretion. These target
percentages will be applied against a base bonus amount (the
“Base Bonus Amount”). The Base Bonus Amount will be
equal to a percentage of the participant’s base salary in
effect at the commencement of the performance period (or a set
amount in the case of non-employee directors). The Committee may,
at the time of grant, adjust the percentage of base salary utilized
to determine Base Bonus Amount for any participant as it deems
appropriate. Awards of restricted stock under the LTIP will vest on
the last day of a three (3) year performance period based on
vesting percentages assigned to each performance condition and
continued employment with the Company. All LTIP awards will be granted under, and will be
subject to the terms and conditions of, the Smith-Midland
Corporation 2016 Equity Incentive Plan. Recipients of awards who
meet specified share ownership requirements may, subject to certain
conditions, elect to be paid in cash in lieu of restricted
stock.
The foregoing description of the LTIP does not purport to be
complete and is qualified in its entirety by reference to the full
text of the LTIP, a copy of which is attached hereto as Exhibit
10.1 and incorporated herein by reference.
Item
9.01
Financial
Statements and Exhibits
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Exhibit No.
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Exhibit Description
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|
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Smith-Midland
Corporation Long-Term Incentive Plan
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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 hereunto duly authorized.
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SMITH-MIDLAND
CORPORATION
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|
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Date:
March
15, 2021
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By:
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/s/ Adam J.
Krick
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Adam J.
Krick
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Chief Financial
Officer
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SMITH-MIDLAND CORPORATION
LONG-TERM INCENTIVE PLAN
The
purposes of the Smith-Midland Corporation Long-Term Incentive Plan
(the “Plan”) are to: (a) enable Smith-Midland
Corporation (the “Company”) and its affiliated
companies to recruit and retain highly qualified executives, other
employees, and directors who are responsible for moving the
business of the Company forward; (b) align the interests of the
Company’s executives and directors with the interests of the
Company’s stockholders by creating a direct link between
compensation and the Company’s performance, thereby enhancing
stockholder return; and (c) incentivize executives, other
employees, and directors to contribute to the long-term success of
the Company.
The
Plan will be administered by the Compensation Committee of the
Board of Directors (the “Committee”); provided,
however, that with respect to non-employee directors of the
Company, the Plan shall be administered by the full Board of
Directors (the “Board”).
The
Company’s officers, other employees, and directors, are
eligible to participate in the Plan, subject to selection and
appointment by the Committee.
The
Plan’s performance period will be three years (the
“Performance Period”), commencing on the first day of
the Company’s fiscal year and ending on the last day of the
third fiscal year thereafter. A new three-year Performance Period
will start with each new fiscal year, such that when the Plan is
fully-implemented, there will be three overlapping Performance
Periods at any given time.
5.
Performance
Measurement
Awards
under the Plan will be granted in accordance with the
Company’s 2016 Equity Incentive Plan (the “Equity
Incentive Plan”) and will be determined based upon five
performance conditions (percentage in parentheticals are the weight
of each factor) (the “Performance
Conditions”):
Minimum,
Target and Maximum scales will be applicable to the Revenue Growth
and EBITDA Margin Performance Conditions. Free Cash Flow
(“FCF”) will be conditional upon the achievement of the
Minimum EBITDA Margin target. Retention is targeted to drive
loyalty and encourage ownership culture. Board discretion is
designed to provide a measure of discretionary
flexibility.
For
purposes of the Plan, the calculation of EBITDA (earnings before
interest, taxes, depreciation and amortization) shall exclude
restricted stock or other equity (compensation) expense incurred by
the Company in connection with grants under this Plan and shall be
subject to equitable determination by the Committee (or the Board,
if applicable) in the event of any or all items determined to be
unusual innature and/or infrequent in occurrence, which may
include, without limitation, the charges or costs associated with
restructurings of the Company or any subsidiary, discontinued
operations, other unusual or infrequently occurring items, the
cumulative effects of accounting changes or such other objective
factors as the Committee (or the Board, if applicable) deems
appropriate (“Adjusted EBITDA”).
Target
percentages shall be applied against a base bonus amount (the
“Base Bonus Amount”). The Base Bonus Amount shall be
equal to a percentage of the participant’s base salary as in
effect at the commencement of the Performance Period (or $50,000.00
in the case of non-employee directors):
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Participant
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Base Bonus Amount
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Chief Executive
Officer
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60% of Base
Salary
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Chief Financial
Officer
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45% of Base
Salary
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All
others
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40% of Base
Salary
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The
Committee may, at the time of grant, adjust the percentage of Base
Salary utilized to determine Base Bonus Amount for any participant
as its deem appropriate.
7.
Performance
Conditions
The
following sets forth the targets and vesting percentages with
respect to each Performance Condition. In the case of Revenue
Growth and EBITDA Margin, with respect to amounts that fall in
between two targets, the bonus percentage shall be determined by
proration between the two.
Revenue Growth Target:
The
Revenue Growth Target shall apply for 35% of the performance grant.
The vesting percentage shall be determined by applying a 5%
(Minimum), 7% (Target) or 10% (Maximum) compounded annual growth
rate to the revenues achieved in the fiscal year immediately
preceding the beginning of the Performance Period:
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Annual Revenue Growth During the
Performance Period
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Vesting Percentage
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Less than
5%
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0%
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5%
or greater but less than 7%
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from 25% to
35%
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7%
or greater up to 10%
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from 35% to
45%
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Greater than
10%
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45%
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For the
grant with respect to the Performance Period of January 1, 2021 to
December 31, 2023, this Percentage Condition will be measured
against Company revenues achieved in the fiscal year ended December
31, 2020.
EBITDA Margin:
The
EBITDA Margin target will apply for 25% of the performance grant
and the Minimum, Target and Maximum are 5%, 7% and 10%,
respectively, of EBITDA Margin:
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EBITDA Margin during the Performance
Period
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Vesting Percentage
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Less than
5%
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0%
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5%
or greater but less than 7%
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From 15% to
25%
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7%
or greater but less than 10%
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From 25% to
35%
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Greater than
10%
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35%
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This
Performance Condition requires that cumulative EBITDA Margin at the
end of the Performance Period must be at least 5% (as adjusted for
special items).
Free Cash Flow:
The FCF
target will apply for 15% of the performance grant.
|
FCF during the Performance
Period
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Vesting Percentage
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Less than 15% of
Adjusted EBITDA
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0%
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15% or greater of
Adjusted EBITDA
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15%
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The
Performance Condition requires that cumulative FCF at the end of
the three-year Performance Period must be at least 15% of Adjusted
EBITDA for the same period and that EBITDA Margin must be a minimum
of 5% over the entire Performance Period.
Retention:
The
retention target will apply for 10% of the performance grant. This
portion will vest completely on the last date of the Performance
Period, provided that, subject to Section 8, the recipient remains
actively employed by or be a director of the Company (or its
subsidiaries) from the grant date through the last date of the
Performance Period.
Board Discretion:
To
provide a measure of flexibility, the Committee or, with respect to
non-employee directors, the Board, will have a discretionary target
of 15% of the performance grant. Subject to Section 8, this measure
requires that the recipient remain actively employed by or be a
director of the Company (or its subsidiaries) from the date of
grant through the last date of the Performance Period.
The
foregoing targets shall apply for the three year Performance Period
ending December 31, 2023. These targets may be revised for future
Performance Periods by the Committee or, in the case of
non-employee directors, by the Board.
Any
bonus payable under the Plan shall be made in shares of restricted
stock, or other equity form, of the Company based on the price of
the Company’s common stock on the date of grant of the award.
Bonuses shall be made as soon as practicable after the end of the
last applicable fiscal year of the Performance Period and no later
than June 1st.
For
purposes of the initial award grants, the Committee will assume the
Target amounts will be achieved.
Recipients
of awards who have met the following share ownership requirements:
2x base salary for the Chief Executive Officer and 1x base salary
for all others, may elect to be paid in cash in lieu of restricted
shares of common stock, subject to the Company’s compliance
with the Company’s then existing loan agreements and other
cash needs at the sole discretion of the Committee, or in the case
of non-employee directors, the Board.
Except
as provided below, to receive an award under the Plan, participants
must be actively employed by or be a director of the Company (or
its subsidiaries) from the date of grant through the last date of
the Performance Period. No award will be earned or due for
participants who do not satisfy this employment condition.
Notwithstanding the foregoing, if a participant leaves employment
(or a directorship) with the Company (or its subsidiaries) due to
retirement (as defined below), disability (as defined in the
applicable award agreement), or death during the Performance
Period, the participant (or his or her estate in the event of
death) will be entitled to a prorated award determined by
multiplying the award amount by a fraction, the numerator of which
will be the number of full months of the Performance Period that
elapsed prior to the termination of employment and the denominator
of which will be 36. The prorated award will be paid on the date on
which the Company pays awards in the normal course for such
Performance Period. For purposes hereof, “retirement”
shall mean separation from service with the Company and its
subsidiaries and affiliates, and cessation of all full-time
employment, on or after reaching 65 years of age.
The
Board may amend or terminate this Plan at any time.