Item 5.02.
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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At the Annual Meeting of Shareholders of Quaker Chemical Corporation (Quaker) held on May 4, 2016 (the 2016 Annual
Meeting), Quakers shareholders, upon the recommendation of Quakers Board of Directors (the Board of Directors), among other things, approved the adoption of the following: (i) the Quaker Chemical Corporation Global
Annual Incentive Plan (the GAIP) to allow bonus awards under the GAIP to qualify as performance-based compensation not subject to a limit on deductibility under Section 162(m) of the Internal Revenue Code; and (ii) the Quaker Chemical
Corporation 2016 Long-Term Performance Incentive Plan (the 2016 LTIP).
The GAIP
The GAIP is intended to provide employees of Quaker or a subsidiary of Quaker, including its named executive officers, with an opportunity to
receive incentive bonuses based on the achievement of objective, pre-established criteria and performance targets. Currently, awards are made annually and payment is based on performance during the fiscal year. However, the Compensation/Management
Development Committee of the Board of Directors (the Committee) may designate performance periods that are longer or shorter than a fiscal year. For the 2016 calendar year performance period, 487 employees are eligible to participate in
the GAIP. At the beginning of each performance period, the Committee intends to identify the employees who are eligible to participate and each participants maximum award, which typically is a specified percentage of his or her base salary.
The Committee also intends to establish a schedule or matrix of one or more performance criteria and performance targets for each participant (or group of participants), which will show the percentage of the target and maximum award payable under
various levels of achieved performance. The Committee may select one or more performance criteria for each participant (or group of participants) from the following list: profit before taxes, profit after taxes, earnings before or after taxes,
interest, depreciation and/or amortization, stock price, market share, gross revenue, net revenue, pre-tax income, operating income, cash flow, earnings per share, return on equity, return on invested capital or assets, cost reductions and savings,
return on revenues or productivity, or any variations of these business criteria. The Committee may also modify the business criteria to take into account significant non-recurring items or provide for adjustment to reflect business costs and
expenses as the Committee deems appropriate, but any modification or adjustment may not increase the amount payable to any covered employee under Section 162(m) of the Internal Revenue Code (i.e., Quakers Chief Executive Officer
and its three most highly compensated officers other than the Chief Executive Officer or the Chief Financial Officer), unless the modification is specified during the period in which the performance goals are established. The criteria may be applied
to the individual, a division, a regional business unit, Quaker or a subsidiary of Quaker. Additional business criteria on which an individuals performance may be measured are: implementing policies and plans, negotiating transactions and
sales, developing long-term business goals and exercising managerial responsibilities.
The maximum bonus that an eligible employee may
earn under the GAIP for a year is set as a percentage of the employees base salary. The bonus earned is based on achievement of both corporate financial and individual objectives. Corporate financial objectives are typically determined based
on the budget for the coming year with the target bonus set at or around budgeted consolidated net income. The actual bonus will vary depending on actual performance. The individual objectives are further divided into regional objectives for
regional associates and individual objectives for non-regional associates. The total amount of an individuals GAIP bonus can never exceed his or her overall maximum bonus opportunity. If the sum of the actual corporate bonus earned and the
regional bonus earned exceeds the overall maximum opportunity, the regional bonus earned will be limited to the individuals overall maximum opportunity. Depending upon the performance level achieved, the bonus amount can be as high as the
maximum or, if performance in a particular year is at expected levels, then payout will be at target. If performance is below the threshold level(s) of financial performance, no bonus will be paid other than what, if any, may be earned on attainment
of individual goals.
At the end of the performance period, the Committee will determine the extent of achievement of the pre-established
performance targets for each criterion. The level of achievement attained will be applied to the schedule or matrix to determine the percentage (if any) of the participants target award earned for the performance period. The Committee may not
increase the amount of compensation that would otherwise be payable to a covered employee upon achievement of performance targets, but it may reduce a participants award if it believes such action would be in the best interests of Quaker and
its shareholders. Bonuses will be paid as soon as practicable after the close of the performance period for which they are earned, in cash or common stock equal in value to the cash otherwise payable. No bonus will be paid to any participant who is
not an employee on the date the bonus is scheduled to be paid, with certain exceptions in the event of death, disability, retirement or other circumstances determined by the Committee. Under the GAIP, if there is a change in control (as defined in
the GAIP) of Quaker, any earned and unpaid bonus for the prior performance period and the target bonus for the current period will be paid to the participant. Also, if a participant terminates employment before the bonus is paid, the Committee has
the discretion to pay the bonus, in full or in part (except that a covered employee may not receive more than a pro rata portion based on active service during the performance period). Except with respect to covered employees, the Committee also has
the discretion to pay a bonus if performance targets were not achieved for the performance period.
The maximum cash bonus that may be
paid to any individual with respect to performance periods ending in any year is $3,000,000. The maximum stock bonus that may be paid to any individual with respect to performance periods ending in any year is 100,000 shares of common stock. A total
of 500,000 shares of common stock has been reserved for bonuses under the GAIP of which 304,900 shares remain available for future bonuses and have been registered with the Securities and Exchange Commission pursuant to a Registration Statement on
Form S-8. The stock limits will be adjusted to reflect certain changes in Quakers capitalization, such as stock splits and stock dividends. If an award expires, terminates, is forfeited or is settled in cash rather than common stock, the
common stock not issued under that award will again become available for grant under the GAIP.
2
The 2016 LTIP
There are six types of awards that may be granted under the 2016 LTIP:
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options to purchase common stock;
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stock appreciation rights, which give the participant the right to appreciation in the value of common stock between the date of grant and the date of exercise;
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restricted stock, which is common stock that vests on achievement of performance goals (referred to as performance stock) or other conditions such as continued employment for a stated period;
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restricted stock units, which represent the right to receive common stock (or cash) on achievement of performance goals (referred to as performance stock units) or other conditions such as continued employment for a
stated period;
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stock grants that are fully vested; and
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performance incentive units, which represent the right to receive cash on achievement of performance goals.
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Quaker has reserved 600,000 shares of common stock for issuance under the 2016 LTIP. During any calendar year, no employee may be granted:
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options covering more than 300,000 shares of common stock;
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stock appreciation rights representing appreciation on more than 300,000 shares of common stock;
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performance stock for more than 300,000 shares of common stock; or
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performance stock units representing more than 300,000 shares of common stock.
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In addition,
there are limits on the total number of shares of common stock available for certain types of awards over the life of the 2016 LTIP: restricted stock (300,000 shares); restricted stock units (300,000 shares); and stock grants (250,000 shares). Each
of these limits is subject to adjustment for certain changes in Quakers capitalization such as stock dividends, stock splits, combinations or similar events. If an award expires, terminates, is forfeited or is settled in cash rather than
common stock, the common stock not issued under that award will again become available for grant under the 2016 LTIP.
The foregoing
descriptions of the GAIP and the 2016 LTIP are qualified in their entirety by reference to the GAIP and the 2016 LTIP, copies of which are included as exhibits to this Report and are incorporated herein by reference.
Item 5.07
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Submission of Matters to a Vote of Security Holders.
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As of March 1, 2016, the record
date for the 2016 Annual Meeting, Quaker estimated that the holders of 759,416 shares of Quakers common stock were entitled to cast ten votes for each share held and that the holders of 12,475,718 shares of Quakers common stock were
entitled to cast one vote for each share held. After taking into account the information received thereafter from shareholders asserting their ten for one voting rights, shareholders present in person or by proxy at the 2016 Annual Meeting were
entitled to cast an aggregate of 32,611,273 votes. Set forth below are the matters acted upon by the shareholders at the 2016 Annual Meeting and the final voting results of each such proposal.
Proposal No. 1 Election of Directors
The shareholders elected three directors to serve a three-year term until the 2019 annual meeting of shareholders and until their respective
successors are duly elected and qualified. The results of the vote were as follows:
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Directors
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For
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Withhold
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Broker Non-Votes
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Mark A. Douglas
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24,462,888
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7,318,258
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830,127
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William H. Osborne
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31,173,524
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607,622
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830,127
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Fay West
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31,627,916
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153,230
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830,127
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3
Proposal No. 2 Approval of the Global Annual Incentive Plan
The shareholders approved the adoption of the GAIP. The results of the vote were as follows:
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For
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Against
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Abstain
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Broker Non-Votes
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26,396,897
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5,338,917
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45,332
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830,127
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Proposal No. 3 Approval of the 2016 Long-Term Performance Incentive Plan
The shareholders approved the adoption of the 2016 LTIP. The results of the vote were as follows:
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For
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Against
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Abstain
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Broker Non-Votes
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28,262,914
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3,470,280
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47,952
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830,127
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Proposal No. 4 Ratification of Appointment of Independent Registered Public Accounting Firm for Fiscal Year 2016
The shareholders voted to ratify the appointment of PricewaterhouseCoopers LLP as Quakers independent registered public
accounting firm for the fiscal year 2016. The results of the vote were as follows:
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For
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Against
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Abstain
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32,541,194
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51,613
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18,466
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