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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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Resignation of Director; Appointment of Nominating and Corporate Governance Committee Chair
Mr. Melvin Booth retired as a director of the Company effective August 25, 2017. In light of his retirement, the Company’s Board of Directors (the “Board”) decreased the size of the Board from ten to nine members. The Board also appointed Mr. J. Martin Carroll, a current director, as a member of the Board’s Nominating and Corporate Governance Committee (the “Nominating Committee”) and as Mr. Booth’s successor as the Chair of the Nominating Committee.
Amended Employment Agreement with President and Chief Executive Officer
On August 23, 2017 (the “Effective Date”), the Company and Mr. John R. Chiminski, the Company’s Chair, President, and Chief Executive Officer, entered into an amendment (the “Amendment”) to his current employment agreement with the Company, dated October 22, 2014 (the “Original Agreement” and, as amended by the Amendment, the “Amended Agreement”), with immediate effect.
The Amendment extends the initial term of Mr. Chiminski’s employment with the Company (the “Initial Term”), which was set to expire on October 21, 2017, to August 23, 2020, with automatic extension terms for successive one-year periods thereafter unless one of the parties provides the other with written notice of non-renewal at least sixty days prior to the end of the applicable term.
The material terms of the Amended Agreement remain as described on pages 61-63 and 67 of the Company’s proxy statement for the fiscal year ended June 30, 2016, filed with the Securities and Exchange Commission (the “SEC”) on September 14, 2016 (the “2016 Proxy”), which description is hereby incorporated by reference, except for the following changes implemented by the Amendment: (1) Mr. Chiminski is entitled to an increased annual base salary of $1,025,000, effective as of the Effective Date, which may be increased from time to time at the sole direction of the Board; (2) Mr. Chiminski is eligible to earn an annual cash bonus under the Catalent, Inc. 2014 Omnibus Incentive Plan (the “Plan”) with an annualized target amount equal to $1,350,000, which bonus will be calculated using the same methodology as applies to other named executive officers of the Company and its subsidiaries (though with respect to the 2018 fiscal year, the annual cash bonus will be (a) the portion of the annual cash bonus, if any, that relates to Mr. Chiminski’s employment from July 1, 2017 through the day immediately prior to the Effective Date calculated on an annualized target amount equal to $1,500,000 and (b) the portion of the annual cash bonus, if any, that relates to Mr. Chiminski’s employment from the Effective Date through the last day of the
2018 fiscal year calculated on an annualized target amount equal to $1,350,000); and (3) Mr. Chiminski is entitled to reimbursement for the reasonable legal fees and expenses incurred in connection with negotiating and documenting the Amendment, subject to customary documentation and an aggregate cap of $20,000.
Equity-Based Awards
In addition to the foregoing, the Amended Agreement provides that Mr. Chiminski is entitled to new grants of equity-based awards in accordance with and pursuant to the terms of the Plan (1) in connection with the amendment of the Amended Agreement, with a grant date value equal to $2,025,000 (the “Incremental Fiscal 2018 Award”), which is incremental to the $3,600,000 equity-based award previously granted to Mr. Chiminski in respect of fiscal 2018, and (2) in subsequent fiscal years and subject to Mr. Chiminski’s continued employment through the grant date, with a grant date value equal to $5,625,000. The grants are expected to be a mix of performance share units, stock options and restricted stock units with 50%, 30% and 20% weightings, respectively, and subject to the same terms and conditions as equity-based awards have been allocated under the Plan to other senior executives of the Company and its subsidiaries;
provided
,
however
, that at its discretion the Company may issue restricted stock and performance-based restricted stock (“Performance Shares”) in lieu of restricted stock units and performance share units, respectively.
On August 23, 2017, the Company granted the Incremental Fiscal 2018 Award to Mr. Chiminski in the form of 50,130 Performance Shares, 61,056 stock options, and 11,602 shares of restricted stock. The Incremental Fiscal 2018 Award is subject to the same terms and conditions as the equity-based awards granted to certain officers and employees under the Company’s Long-term Incentive Plan with respect to fiscal 2018, other than with respect to the restricted stock award, which will allow for the accelerated release of restrictions for purposes of satisfying withholding obligations in the event that retirement- or disability-triggered vesting accelerates an award recipient’s income tax obligations. Attached hereto as Exhibit 10.1 and Exhibit 10.2 are forms of the restricted stock agreement for U.S. employees and Performance Shares agreement for U.S. employees, pursuant to which these grants were made and other grants may be made under the Plan.