UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.)
Filed by the Registrant¨x
Filed by a Partyparty other than the Registrant¨
Check the appropriate box:
¨Preliminary Proxy Statement |
¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
x | Definitive Proxy Statement |
¨Definitive Additional Materials |
¨Soliciting Material Pursuant to |
H.B. Fuller Company
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x | No fee |
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i) |
(1) | Title of each class of securities to which transaction applies: |
(2) | Aggregate number of securities to which transaction applies: |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 |
(4) | Proposed maximum aggregate value of transaction: |
(5) | Total fee paid: |
¨ | Fee paid previously with preliminary materials. |
¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: |
(2) | Form, Schedule or Registration Statement No.: |
(3) | Filing Party: |
(4) | Date Filed: |
Office: | 1200 Willow Lake Boulevard | |
St. Paul, Minnesota 55110-5101 | ||
Mail: | P.O. Box 64683 | |
St. Paul, Minnesota 55164-0683 | ||
Phone: | (651) |
Dear Shareholder:
Our 20082011 Annual Meeting of Shareholders will be held on Thursday, April 3, 2008,14, 2011, at the H.B. Fuller Company headquarters in St. Paul, Minnesota. The meeting will begin promptly at 2:00 p.m. Please join us. Parking at our headquarters building for attendance at the meeting is complimentary.
The Notice of Annual Meeting of Shareholders and the Proxy Statement that follow describe the business to be conducted at the meeting. Also enclosed is a copy
For the second consecutive year, we have elected to take advantage of the “notice and access” rules of the Securities and Exchange Commission to furnish most of our 2007 Annual Report, including our Annual Report on Form 10-K. You can also view theseshareholders with proxy materials onover the Internet atwww.hbfuller.com inInternet. We believe that this method of delivery allows us to provide you with the Investor Relations section.
information you need, while reducing printing and delivery expenses.
Your vote on the proposals is important, so please sign and returnimportant. Whether or not you attend the enclosedAnnual Meeting of Shareholders, we encourage you to vote your shares to make certain that you are represented at the meeting. You may vote via the Internet or if you received a printed copy of the proxy card in the postage-paid envelope or instruct usmaterials, by telephone or viaby mailing a proxy or voting instruction card.
I look forward to seeing you at the Internet as to how you would like to vote your shares.Annual Meeting.
Sincerely, | ||
/s/ James J. Owens | ||
President and Chief Executive Officer |
March 2, 2011
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Office: | 1200 Willow Lake Boulevard | |
St. Paul, Minnesota 55110-5101 | ||
Mail: | P.O. Box 64683 | |
St. Paul, Minnesota 55164-0683 | ||
Phone: | (651) |
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date and Time: | Thursday, April | |
Place: | H.B. Fuller Company | |
1200 Willow Lake Boulevard | ||
St. Paul, Minnesota | ||
Items of Business: | The election of three directors named in the attached Proxy Statement for a three-year term. | |
A non-binding advisory vote to approve the compensation of our named executive officers disclosed in the attached Proxy Statement. | ||
A non-binding advisory vote on the frequency of an advisory vote on executive compensation. The ratification of the appointment of KPMG LLP as H.B. Fuller’s independent | ||
Any other business that may properly be considered at the meeting or any adjournment thereof. | ||
Record Date: | You may vote at the meeting if you were a shareholder of record at the close of business on February | |
Voting by Proxy: | It is important that your shares be represented and voted at the meeting. Whether or not you plan to attend the meeting in person, we encourage you to submit your proxy as soon as possible. For specific instructions on how to vote your shares, please | |
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By Order of the Board of Directors | ||
/s/ Timothy J. Keenan | ||
Timothy J. Keenan | ||
Vice President, General Counsel and Corporate Secretary |
March 2, 2011
February 27, 2008
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PROPOSAL 4—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 65 | |||
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ANNUAL MEETING OF SHAREHOLDERS
APRIL 3, 200814, 2011
The Board of Directors of H.B. Fuller Company is soliciting proxies to be used at the Annual Meeting of Shareholders to be held on April 3, 2008,14, 2011, and at any adjournment and reconvening of the meeting. We will begin mailingfirst made this Proxy Statement and the enclosed form of proxyAnnual Report for the fiscal year ended November 27, 2010 available to our shareholders on or about February 27, 2008.
March 2, 2011.
QUESTIONS AND ANSWERS ABOUT THE MEETING
What is the purpose of the meeting?
At our annual meeting, shareholders will act upon the matters disclosed in the Notice of Annual Meeting of Shareholders that precededaccompanies this Proxy Statement. These include the election of three directors, a non-binding advisory vote to approve the compensation of our named executive officers as disclosed in this Proxy Statement (the “Say on Pay Proposal”), and a non-binding advisory vote on frequency of an advisory vote on executive compensation (the “Frequency of Say on Pay Proposal”) and ratification of the appointment of our independent auditors and approval of the Amended and Restated H.B. Fuller Annual and Long-Term Incentive Plan.
registered public accounting firm.
We will also consider any other business that may properly be presented at the meeting, and management will report on H.B. Fuller’s performance during the last fiscal year and respond to questions from shareholders.
How does the Board recommend that I vote?
The Board of Directors recommends a vote “FOR” alleach of the nominees for director, “FOR” the Say on Pay Proposal, for the “THREE YEAR” frequency for the Frequency of Say on Pay Proposal and “FOR” the ratification of the appointment of KPMG LLP as our independent auditorsregistered public accounting firm for the fiscal year ending November 29, 2008 and “FOR” the approval of the Amended and Restated H.B. Fuller Annual and Long-Term Incentive Plan.
December 3, 2011.
Who is entitled to vote at the meeting?
If you were a shareholder of record at the close of business on February 8, 2008,16, 2011, you are entitled to vote at the meeting.
As of the record date, 56,340,50249,417,369 shares of Common Stock were outstanding and eligible to vote.
It is your designation of another person to vote stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. When you designate a proxy, you also may direct the proxy how to vote your shares. We refer to this as your “proxy vote.” Three executive officers, James J. Owens, James R. Giertz and Timothy J. Keenan, have been designated as the proxies to cast the votes of our shareholders at our 2011 Annual Meeting of Shareholders.
What is the difference between a shareholder of record and a street name holder?
If your shares are registered directly in your name, you are considered the “shareholder of record” with respect to those shares.
If your shares are held in a stock brokerage account or by a bank or other nominee, such as the H.B. Fuller Company 401(k) Thrift& Retirement Plan (sometimes referred to as the “401(k) Plan” in this Proxy Statement), you are considered the beneficial owner of those shares, and your shares are held in street name. If you are a “street name holder”,holder” you will receive a voting instructionsinstruction card, which appears very similar to a proxy card. Please complete that card as directed in order to ensure your shares are voted at the meeting.
What are the voting rights of the shareholders?
Holders of Common Stock are entitled to one vote per share. Therefore, a total of 56,340,50249,417,369 votes are entitled to be cast at the meeting. There is no cumulative voting for the election of directors.
How many shares must be present to hold the meeting?
A quorum is necessary to hold the meeting and conduct business. The presence of shareholders who can direct the voting of at least a majority of the outstanding shares of Common Stock as of the record date is considered a quorum. A shareholder is counted as present at the meeting if the shareholder is present and votes in person at the meeting or the shareholder has properly submitted a proxy by mail, telephone or via the Internet.
If you are a shareholder of record, you canmay give a proxy to be voted at the meeting either:
overelectronically, by following the telephone by calling 1-800-560-1965;instructions provided in the Notice of Internet Availability of Proxy Materials or proxy card; or
if you received printed proxy materials, you may also vote by mail or telephone as instructed on the |
by mailing the enclosed proxy card.
If you hold shares beneficially in street name, you may also vote by proxy over the Internet by following the instructions provided in the Notice of Internet Availability of Proxy Materials or, if you received printed proxy materials, you may also vote by mail or telephone by following the instructions provided in the voting instruction card provided to you by your broker, bank, trustee, or nominee.
If you hold shares in the 401(k) Plan, please refer to the voting instructions that are provided to you. The Plan trustee will vote your shares as you instruct.
The telephone and Internet voting procedures have been set up for your convenience. The procedures have been designed to authenticate your identity, to allow you to give voting instructions, and to confirm that those instructions have been recorded properly. If you are a shareholder of record and you would like to vote by telephone or by using the Internet, please refer to the specific instructions on the enclosed proxy card. If you wish to vote using the paper proxy card, please return your signed proxy card to us before the meeting. You may also vote in person at the meeting.
If you hold yourmeeting as described in “Can I vote my shares in street name, you must vote your shares followingperson at the procedures indicated to you by your broker or nominee on the enclosed voting instructions card.
meeting?” below.
What does it mean if I receive more than one Notice of Internet Availability of Proxy Materials, proxy card or voting instructionsinstruction card?
It means you hold shares of H.B. Fuller stock in more than one account. To ensure that all of your shares are voted, sign and return each proxy card or voting instruction card or, if you vote by telephone or via the Internet, vote once for each proxy card, voting instruction card or Notice of Internet Availability of Proxy Materials you receive.
Can I vote my shares in person at the meeting?
Yes. If you are a shareholder of record, you may vote your shares at the meeting by completing a ballot at the meeting. However, even if you currently plan to attend the meeting, we recommend that you submit your proxy ahead of time so that your vote will be counted if, for whatever reason, you later decide to not attend the meeting.
If you hold your shares in street name, you may vote your shares in person at the meeting only if you obtain a signed proxy from your broker, bank, trustee or other nominee giving you the right to vote such shares at the meeting.
What vote is required for the proposals to be approved?
With respect to the election of directors, the three director nominees receiving the most votes for their election will be elected directors. With respect to approval of all other matters to come before the meeting, including the ratification of the appointment of KPMG LLP as our independent auditorsregistered public accounting firm and the approval of the Amended and Restated H.B. Fuller Amended and Restated Annual and Long-Term Incentive Plan,Say on Pay Proposal, the affirmative vote of a majority of the shares of Common Stock represented and entitled to vote on each matter is required, provided that the total number of shares of Common Stock that vote on eachthe proposal represents a majoritymore than 25% of the shares outstanding on the record date. With respect to the Frequency of Say on Pay Proposal, the frequency selected by shareholders will be determined based on a plurality of the votes cast. This means that the option of one year, two years or three years that receives the highest number of votes cast by shareholders will be the frequency that has been selected by shareholders.
Shareholders may either vote “FOR” or “WITHHOLD” authority to vote for each nominee for the Board of Directors. Shareholders may vote “FOR,” “AGAINST” or “ABSTAIN” on the ratification of the appointment of KPMG LLP.LLP and on the Say on Pay Proposal. Shareholders may vote “FOR,“ONE YEAR,” “AGAINST”“TWO YEARS,” “THREE YEARS” or “ABSTAIN” on the approvalFrequency of the Amended and Restated H.B. Fuller Annual and Long-Term Incentive Plan.
Say on Pay Proposal.
If you vote ABSTAIN or WITHHOLD, your shares will be counted as present at the meeting for the purposes of determining a quorum. If you ABSTAIN from voting on athe Frequency of Say on Pay Proposal, this will have no effect on the frequency that is selected by shareholders. If you ABSTAIN from voting on any other proposal, your abstention has the same effect as a vote against that proposal. If you WITHHOLD authority to vote for one or more of the nominees for director, this will have no effect on the election of any director from whom votes are withheld.
If you hold your shares in street name and do not provide voting instructions to your broker or nominee, your shares maywill be considered to be “broker non-votes” and will not be voted. In this situation, a “broker non-vote” may occur.voted on any proposal on which your broker or nominee does not have discretionary authority to vote under the rules of the New York Stock Exchange. Shares that constitute broker non-votes will be present at the meeting for the purpose of determining a quorum, but are not considered as entitled to vote on the proposal in question, and, therefore, willquestion. Your broker or nominee has discretionary authority to vote your shares on the ratification of KPMG LLP as our independent registered public accounting firm even if your broker or nominee does not affectreceive voting instructions from you. Your broker or nominee may not vote your shares on the outcomeelection of directors, the vote with respect to that proposal.
Say on Pay Proposal, or the Frequency of Say on Pay Proposal without instructions from you.
What if I do not specify how I want my shares voted?
If you do not specify on your returned proxy card or voting instruction card (or when giving your proxy by telephone or via the Internet) how you want to vote your shares, we will vote them:
FOR all of the nominees for director;
FOR the Say on Pay Proposal;
for theTHREE YEARSfrequency on the Frequency of Say on Pay Proposal;
FOR the ratification of the appointment of KPMG LLP as our independent auditorsregistered public accounting firm for the 2008 fiscal year;
FOR the approval of the Amended and Restated H.B. Fuller Company Annual and Long-Term Incentive Plan;year ending December 3, 2011; and
with respect to such other matters that may properly come before the meeting, in accordance with the judgment of the persons named as proxies in the enclosed proxy card or voting instructions card.proxies.
Yes. If you are a shareholder of record, you may change your vote and revoke your proxy at any time before it is voted at the meeting in any of the following ways:
by sending a written notice of revocation to our Corporate Secretary;
by submitting another properly signed proxy card at a later date to our Corporate Secretary;
by submitting another proxy by telephone or via the Internet at a later date; or
by voting in person at the meeting.
If you are a street name holder, please consult your broker, bank, trustee or nominee for instructions on how to change your vote.
Who pays for the cost of proxy preparation and solicitation?
We pay for the cost of proxy preparation and solicitation, including the charges and expenses of brokerage firms or other nominees for forwarding proxy materials to beneficial owners of shares held in street name. We have retained Morrow & Co.,The Proxy Advisory Group, LLC to assist in the solicitation of proxies for a fee of approximately $5,500$10,000 plus associated costs and expenses.
We are soliciting proxies primarily by mail. In addition, proxies may be solicited by telephone or facsimile, or personally by our directors, officers and regular employees. These individuals will receive no compensation (other than their regular salaries) for these services.
Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of paper copies?
In accordance with rules adopted by the Securities and Exchange Commission (the “SEC”), we may furnish proxy materials to our shareholders by providing access to these documents on the Internet instead of mailing printed copies. In general, you will not receive printed copies of the materials unless you request them or you are a participant in the H.B. Fuller Company 401(k) & Retirement Plan. Instead, we mailed you the Notice of Internet Availability of Proxy Materials (unless you have previously consented to electronic delivery or already requested to receive paper copies), which instructs you as to how you may access and review all of the proxy materials on the Internet. The Notice of Internet Availability of Proxy Materials explains how to submit your proxy over the Internet. If you would like to receive a paper copy or e-mail copy of the proxy materials, please follow the instructions provided in the Notice of Internet Availability of Proxy Materials.
Are the proxy and related materials available electronically?
Yes. All proxy-related materials have also been sent via mail.
Important Notice Regarding the Availability of Proxy Materials
for the Shareholder Meeting to be held on April 3, 200814, 2011
Our Proxy Statement and 20072010 Annual Report, including our Annual Report on Form 10-K, are available on the H.B. Fuller Company website atwww.hbfuller.comwww.proxyvote.com in the “Financial” section of the “Investor Relations” page..
Will the meeting consider any other business?business be considered at the meeting?
Our Bylaws provide that a shareholder may present a proposal at the annual meeting that is not included in this Proxy Statement only if proper written notice was received by us beforeus. No shareholder has given the close of business on November 5, 2007. Since no shareholder provided thetimely notice required by our Bylaws in order to present a proposal at the Bylaws priorannual meeting. Our Board of Directors does not intend to that deadline, we do not anticipate thatpresent any other proposals will be presentedmatters for considerationa vote at the annual meeting. If you wish to present a proposal at the 20092012 Annual Meeting, please see“How can a shareholder present a proposal at the 20092012 Annual Meeting?”
As of the date of this Proxy Statement, we do not know of any other business to be presented for consideration at the Annual Meeting.annual meeting. If any other business does properly come before the meeting, the persons named as proxies on the enclosed proxy card will vote in accordance with their best judgment as to the best interests of H.B. Fuller and its shareholders.
How can a shareholder present a proposal at the 20092012 Annual Meeting?
In order for a shareholder proposal to be considered for inclusion in our Proxy Statement for the 20092012 Annual Meeting, the written proposal must be received at our principal executive offices by the close of business on October 30, 2008.November 3, 2011. The proposal must comply with Securities and Exchange Commission (SEC)SEC regulations regarding the inclusion of shareholder proposals in company-sponsored proxy materials.materials and with the requirements set forth in our Bylaws. Please contact our Corporate Secretary for a copy of such regulations.
regulations and for a description of the steps outlined in our Bylaws that must be taken to present such a proposal.
If a shareholder wishes to present a proposal at the 20092012 Annual Meeting that would not be included in our Proxy Statement for such meeting, the shareholder must provide notice to us no later than October 30, 2008.January 15, 2012 and no earlier than December 16, 2011. Please contact the Corporate Secretary for a description of the steps to be taken to present such a proposal.
How can a shareholder get a copy of the Company’s 20072010 Annual Report on Form 10-K?
Our 20072010 Annual Report, including our Annual Report on Form 10-K for the year ended December 1, 2007,November 27, 2010, accompanies this Proxy Statement. The 20072010 Annual Report, andincluding our Form 10-K is also available in the “Financial” section of our “Investor Relations”Investor Relations page of our website,www.hbfuller.com. If requested, we will provide you copies of any exhibits to the Form 10-K upon payment of a fee covering our reasonable expenses in furnishing the exhibits. You can request exhibits to the Form 10-K by writing to the Corporate Secretary, H.B. Fuller Company, 1200 Willow Lake Boulevard, P.O. Box 64683, St. Paul, Minnesota 55164-0683.
Who is the Corporate Secretary?
The Corporate Secretary is Timothy J. Keenan. The mailing address is the Office of the Corporate Secretary, P.O. Box 64683, St. Paul, Minnesota 55164-0683.
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows how much H.B. Fuller Common Stock each director and executive officer listed in the Summary Compensation Table in this Proxy Statement beneficially owned as of January 15, 2008 (unless otherwise noted).28, 2011. The table also shows the beneficial ownership of H.B. Fuller Common Stock byof all directors and executive officers of H.B. Fuller as a group. In general, “beneficial ownership” includes those shares of our Common Stock which a director or executive officer has the power to vote or transfer, as well as stock options that are exercisable currently or within 60 days and stock underlying phantom stock units that may be acquired, in certain circumstances, within 60 days. The detail of beneficial ownership is set forth in the following table. In addition, the table shows all shareholders known to us to be the beneficial owners of more than 5% of H.B. Fuller Common Stock.
In addition to the shares listed in this table, certain executive officers and directors hold phantom stock units under our deferred compensation plans that will be paid out in shares of H.B. Fuller Common Stock. These units are subject to the same economic risk as a direct investment in H.B. Fuller Common Stock. Information regarding the phantom stock units held by these executive officers and directors is set forth in the footnotes below.
Unless otherwise noted, the shareholders listed in the table have sole voting and investment powerspower with respect to the shares of Common Stock owned by them, and such shares are not subject to any pledge.
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Common Stock Outstanding | ||||||
| 3,928,099 | (1) | 7.97 | % | ||||
| 3,783,558 | (2) | 7.67 | % | ||||
| 3,720,233 | (3) | 7.55 | % | ||||
| 2,870,605 | (4) | 5.82 | % | ||||
The Vanguard Group, Inc. | 2,588,741 | (5) | 5.25 | % | ||||
Juliana L. Chugg | 12,571 | * | ||||||
| 4,893 | * | ||||||
J. Michael Losh | 65,991 | |||||||
| * | |||||||
Lee R. Mitau | 85,449 | * | ||||||
Alfredo L. Rovira | 25,078 | * | ||||||
John C. van Roden, Jr. | 26,274 | * | ||||||
R. William Van Sant | 27,459 | * | ||||||
James J. Owens | 94,440 | (8) | * | |||||
Michele Volpi | 124,798 | * | ||||||
James | 103,757 | * | ||||||
| 23,986 | * | ||||||
Ann B. Parriott | 101,702 | * | ||||||
| 72,701 | |||||||
| * | |||||||
All directors and executive officers as a group | 980,111 | 1.96 | % |
* | Indicates less than 1%. |
(1) | This information is based on a Schedule 13G/A filed by the holder with the SEC on February 8, 2011 reporting beneficial ownership as of December 31, 2010. Mairs and Power, Inc., an investment advisor, reported that it has sole voting power over 3,304,800 shares and sole dispositive power over all of the shares. The interest of one entity, Mairs and Power Growth Fund, Inc., an investment company registered under the Investment Company Act of 1940, in the Common Stock of H.B. Fuller Company amounted to 2,980,000 shares at December 31, 2010. The holder’s address is W-1520 First National Bank Building, 332 Minnesota Street, Saint Paul, Minnesota 55101. |
(2) | This information is based on a Schedule 13G/A filed with the SEC on February 4, 2011 reporting beneficial ownership as of December 31, 2010. BlackRock, Inc., a parent holding company, reported that it has sole voting power and sole dispositive power over all of the shares. The holder’s address is 40 East 52nd Street, New York, New York 10022. |
(3) | This information is based on a Schedule 13G filed with the SEC on February 11, 2011 by Artisan Partners Holdings LP (“Artisan Holdings”) reporting beneficial ownership as of December 31, 2010. The report was also filed on behalf of Artisan Investment Corporation (“Artisan Corp.”), Artisan Partners Limited Partnership (“Artisan Partners”), Artisan Investments GP LLC (“Artisan Investments), ZFIC, Inc. (“ZFIC”), Andrew A. Ziegler, Carlene M. Ziegler and Artisan Funds, Inc. (“Artisan Funds”). Artisan Partners is an investment adviser registered under the Investment Advisers Act of 1940. Artisan Funds is an investment company under Section 8 of the Investment Company Act. Artisan Holdings is the sole limited partner of Artisan Partners; Artisan Investments is the general partner of Artisan Partners; Artisan Corp is the general partner of Artisan Holdings; ZFIC is the sole stockholder of Artisan Corp.; Mr. Ziegler and Ms. Ziegler are the principal stockholders of ZFIC. The report states that the shares reported therein were acquired on behalf of discretionary clients of Artisan Partners. Persons other than Artisan Partners and Artisan Holdings are entitled to receive all dividends from, and proceeds from the sale of, those shares. The holder reported that it has shared voting power over 3,567,033 shares, and shared dispositive power over all of the shares. The holder’s address is 875 East Wisconsin Avenue, Suite 800, Milwaukee, WI 53202. |
(4) | This information is based on a Schedule 13G/A filed by the holder with the SEC on February 14, |
execution of a shareholders’ voting agreement, members of the Johnson family may be deemed to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Edward C. Johnson 3d has the sole power to vote or direct the voting of the shares owned by the Fidelity Funds. Fidelity carries out the voting of the shares under written guidelines established by the Funds’ Boards of Trustees. |
(5) | This information is based on a Schedule 13G/A filed |
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Juliana Chugg | 1,690 | Lee R. Mitau | 60,456 | 11,207 | Alfredo L. Rovira | 23,139 | ||||||||||
Knut Kleedehn | 16,900 | Alfredo L. Rovira | 13,140 | |||||||||||||
Thomas W. Handley | 3,585 | John C. van Roden, Jr. | 11,313 | |||||||||||||
J. Michael Losh | 39,230 | John C. van Roden, Jr. | 1,690 | 62,217 | R. William Van Sant | 9,253 | ||||||||||
Richard L. Marcantonio | 15,698 | William R. Van Sant | 31,020 | |||||||||||||
Lee R. Mitau | 42,799 |
Excludes phantom stock units credited to the accounts of directors who participate in the Directors’ Deferred Compensation Plan, described under the heading “Director Compensation” that are not able to be acquired within 60 days. The number of units credited to each director participating in this plan that are excluded from the table is as follows:
Lee R. Mitau | 52,255 | William R. Van Sant | 44,220 | |||||||
John C. van Roden, Jr. | 3,584 |
None of the phantom stock units are entitled to vote at the meeting.
(7) | Includes the following shares of restricted Common Stock awarded under either the 1998 Directors’ Stock Incentive Plan or the 2009 Director Stock Incentive Plan, including shares acquired upon reinvestment of dividends: |
Juliana L. Chugg | 1,309 | Lee R. Mitau | 15,907 | |||
Richard L. Marcantonio | 2,699 | John C. van Roden, Jr. | 2,746 |
Juliana Chugg | 1,364 | Lee R. Mitau | 16,575 | |||||||
Thomas W. Handley | 1,309 |
(8) | Includes |
(9) | Includes 124,798 shares that could be issued pursuant to stock options which are exercisable as of January 28, 2011. Excludes |
(10) | Includes |
(11) | Includes 19,975 shares that could be issued pursuant to stock options which are currently exercisable. Excludes |
(12) | Includes |
(13) | Includes |
(14) | Includes |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) requires the Company’s directors and executive officers to file initial reports of ownership and reports of changes in ownership of H.B. Fuller’s securities with the SEC. These reports are available for review on our website:www.hbfuller.com, in the “Financial” section of the Investor Relations page. Directors and executive officers are required to furnish us with copies of these reports. Based solely on a review of these reports and written representations from the directors and executive officers, we believe that all directors and executive officers complied with all Section 16(a) filing requirements for fiscal year 2007,2010 except for Mr. van Roden, whotwo Form 4 filings that were not timely filed due to administrative error: (a) one late report in January 2007 reporting the conversion of Common Stock units under the Directors’ Deferred Compensation plan into Common Stock and Mr. Kleedehn,relating to a filing that was amended for Mr. Losh to correct the originally reported number of securities acquired on Table II on June 30, 2010, and (b) another filing for Mr. Marcantonio, Mr. Mitau and Mr. Van Sant, who each filed one late report in June 2007 reporting the deferralKenny relating to a grant of second quarter retainer fees.stock options on October 1, 2010.
PROPOSAL 1—ELECTION OF DIRECTORS
The Board of Directors is currently composed of nineeight directors and divided into three classes. Each year one class of directors stands for election for a three-year term. The term of office for Class III directors, consisting of J. Michael Losh, Lee R. Mitau and R. William Van Sant, will expire at the annual meeting.
At the annual meeting, three persons are to be elected as Class III directors to hold a three-year term of office from the date of their election until the 20112014 annual meeting and until their successors are duly elected and qualified. The three nominees for election as Class III directors are J. Michael Losh, Lee R. Mitau and R. William Van Sant, all of whom are currently directors. All of the nominees have agreed to serve as a director if elected. Following the annual meeting, the Board will be comprised of nineeight directors. Pursuant to our Company’s Bylaws, no more than 15 persons may serve on the Board. For information on how a shareholder may suggest a person to be a nominee to the Board, see“How can a shareholder suggest a candidate for election to the Board?”
TheUnless earlier terminated due to retirement or resignation, the term of office for Class I directors, currently consisting of Richard L. Marcantonio, Alfredo Rovira and Juliana L. Chugg, Thomas W. Handley and Alfredo L. Rovira, will expire at the annual meeting in 20092012 and the term of office for Class II directors, consisting of Knut Kleedehn, John C. van Roden, Jr. and Michele Volpi,James J. Owens, will expire at the annual meeting in 2010.2013. All of the directors except Mr. Handley and Mr. Owens, who were appointed during fiscal 2010, were elected to the Board of Directors by the shareholders, except Ms. Chugg who was appointed to the Board of Directors effective April 2007.shareholders.
We will vote your shares as you specify when providing your proxy. You may either vote FOR or WITHHOLD authority to vote for each nominee for the Board of Directors. If you submit your proxy without voting instructions, we will vote your shares FOR the election of the three nominees. If, for any reason, any nominee becomes unable to serve before the election, we will vote your shares for a substitute nominee selected by the Board of Directors. Alternatively, the Board of Directors, at its option, may reduce the number of directors constituting Class III directors.
The three director nominees receiving the most votes for their election will be elected directors.
The Board of Directors recommends a vote FOR election of each of the nominees.
The nominees provided the following information about themselves as of January 31, 2008.2011.
Class III (Term Ending in 2008)2011)
J. Michael Losh | ||
Age: | ||
64 | ||
Director Since: | 2001 | |
Principal Occupation: | Private Investor | |
Business Experience: | Mr. Losh was the interim Chief Financial Officer of Cardinal Health, Inc., a provider of products and services for the health care market, located in Dublin, Ohio, from July 2004 to May 2005. He was the Chairman of Metaldyne Corporation (now a wholly-owned subsidiary of Asahi Tec Corporation), a global designer and supplier of high quality, metal-formed components, assemblies and modules for the transportation industry headquartered in Plymouth, Michigan, from 2000 to 2002. Prior to that position, Mr. Losh was employed by General Motors Corporation from 1964 to 2000. | |
The Board of Directors has determined that Mr. Losh is an audit committee financial expert as that term is defined under the rules of the SEC. | ||
Other Directorships: |
In addition to H.B. |
Lee R. Mitau | ||
Age: | ||
62 | ||
Director Since: | 1996, Chairman of the Board since December 2006. | |
Principal Occupation: | Executive Vice President and General Counsel, U.S. Bancorp, a bank holding company headquartered in Minneapolis, Minnesota. | |
Business Experience: | Mr. Mitau has been Executive Vice President and General Counsel of U.S. Bancorp since 1995. Mr. Mitau, also our Chairman of the | |
Board, Chair of our Corporate Governance and Nominating Committee and a member of our Compensation Committee, has extensive public company legal and governance expertise. He is widely recognized as an expert in the area of corporate governance and is a highly regarded and sought after speaker in this discipline. He has gained expertise in the areas of corporate governance, corporate finance and mergers and acquisitions through his career as a practicing attorney with a global law firm, where he headed the firm’s corporate and securities practice, and as the Executive Vice President, General Counsel and Secretary of U.S. Bancorp. In addition, since 1990, Mr. Mitau has served on the board of Graco Inc., where he is currently Chairman of the Board. Mr. Mitau has served on the Board of H.B. Fuller Company since 1995 and has developed an in-depth knowledge of our Company and its businesses. Mr. Mitau’s unique combination of experiences makes him particularly well-qualified to serve as our Chairman. | ||
Other Directorships: | Mr. Mitau is Chairman of the Board of Graco Inc. |
R. William Van Sant | ||
Age: | ||
72 | ||
Director Since: | 2001 | |
Principal Occupation: | Operating Partner, Stone Arch Capital, LLC, a private equity fund based in Minneapolis, Minnesota. | |
Business Experience: | Mr. Van Sant joined Stone Arch Capital, LLC as an Operating Partner | |
Other Directorships: | Mr. Van Sant is a director of Graco Inc. |
How can a shareholder suggest a candidate for election to the Board?
The Corporate Governance and Nominating Committee of the Board nominates all candidates for election to the Board. Generally, current directors or managementthird party search firms engaged by the Corporate Governance and Nominating Committee identify candidates for consideration by the Committee. No third party search firm was engaged during fiscal 2010. The Corporate Governance and Nominating Committee will review all nominees to the Board of Directors, including an assessment of a nominee’s judgment, experience, independence and such other factors as the Corporate Governance and Nominating Committee concludes are pertinent in light of the Board’s needs. The Board of Directors believes that its membership should reflect a diversity of experience, skills, geography, gender and ethnicity. The Board of Directors considers each of these factors when evaluating director nominees and evaluates the makeup of the Board of Directors with regard to these factors on an ongoing basis as it searches for and asks director nominees to join the Board. The Corporate Governance and Nominating Committee will select qualified nominees and review its recommendations with the Board, which will decide whether to invite any nominee to join or stand for reelectionre-election to the Board. If appropriate in the future, the Committee may engage a third person for a fee to assist in the process of identifying potential nominees. The Committee also will consider candidates recommended by any shareholder using the same criteria set forth above. No shareholder identified any candidate during fiscal year 2007. Any shareholder interested in suggesting a candidate for electionRecommendations may be sent to the Board should contact the Corporate Governance and Nominating Committee throughin care of the Corporate Secretary.Secretary of H.B. Fuller. No shareholder recommended any candidate during fiscal year 2010.
Two new directors were appointed during fiscal 2010. Mr. Handley was appointed to the Board of Directors in July 2010. Mr. Handley was recommended as a director candidate by our then CEO, Michele Volpi. In considering Mr. Handley, the Board of Directors looked at several factors, including that he brings a valuable operating perspective to our Board of Directors, including relevant experience in the chemical industry and managing global businesses. Mr. Owens was appointed to the Board of Directors in November 2010, at the same time he was appointed President and CEO of the Company. Mr. Owens is the voice of management on our Board of Directors and brings a wealth of adhesives industry experience to our Board of Directors.
See more information about Mr. Handley’s and Mr. Owens’ backgrounds under the heading “Who are the remaining directors?” below.
Who are the remaining directors?
The directors not standing for election at the meeting and whose service will continue until the end of their respective terms also provided the following information about themselves as of January 31, 2008.2011.
Class I (Term Ending in 2009)2012)
Age: | ||
43 | ||
Director Since: | ||
2007 | ||
Principal Occupation: | ||
Business Experience: | Ms. Chugg has been with General Mills, Inc. since September 1996. Prior to her appointment as Senior Vice President and President, Meals Division in 2010, she served as Senior Vice President, President of Pillsbury USA from June 2006 to November 2010 and as Vice President and President Baking Division from August 2004 | |
to June 2006. Prior to that appointment she served in Australia as the Managing Director of General Mills from June 1999 to August 2004. Prior to that appointment she served as the Marketing Director. Ms. Chugg has valuable expertise in the areas of developing, marketing and branding innovative products, and also in human resources development. In addition, she has a global perspective having operated significant businesses for General Mills in both Australia and the United States. Ms. Chugg has served on our Board since 2007 and she is also a current director and member of the Audit and Nominating and Governance Committees at VF Corporation, a leading apparel products company listed on the NYSE. | ||
Other Directorships: | Ms. Chugg is a director of VF Corporation. |
Thomas W. Handley | ||
Age: | 56 | |
Director Since: | 2010 | |
Principal Occupation: | President, Global Food & Beverage Sector, Ecolab Inc., a $6 billion dollar global company providing cleaning, sanitizing, food safety and infection control products and services to the foodservice, food processing, healthcare and hospitality industries located in St. Paul, Minnesota. | |
Business Experience: | Mr. |
Alfredo L. Rovira | ||
Age: | ||
65 | ||
Director Since: | 2003 | |
Principal Occupation: | Managing partner of the law firm of Brons & Salas, Abogados and | |
Business Experience: | Mr. Rovira has been associated with Brons & Salas since 1970, has served as managing partner since April 1992, and has served, first as Chairman since 1984 and later | |
Class II (Term Ending in 2010)2013)
John C. van Roden, Jr. | ||
Age: | ||
61 | ||
Director Since: | 2003 | |
Principal Occupation: | ||
gases, and hardgoods, such as welding equipment and supplies. | ||
Business Experience: | Mr. van Roden has served as Chairman of the Board of Airgas, Inc. since September 2010. Prior to this appointment, Mr. van Roden was a private investor. In February 2005, Mr. van Roden was appointed Executive Vice President and Chief Financial Officer of Glatfelter, Inc. | |
capabilities. Mr. van Roden has served on the Board of H.B. Fuller Company since 2003 and, in this capacity, has developed extensive knowledge of our Company and its businesses. | ||
Other Directorships: | Mr. van Roden is |
Age: | ||
46 | ||
Director Since: | ||
2010 | ||
Principal Occupation: | President and Chief Executive Officer, H.B. Fuller Company. | |
Business Experience: | Mr. |
Corporate Governance Guidelines
The Board, upon recommendation of the Corporate Governance and Nominating Committee, has adopted Corporate Governance Guidelines, which summarize many of the corporate governance principles that the Board has followed in governing H.B. Fuller. The guidelines are available for review on our website:www.hbfuller.com, in the “Governance”“Governance” section of the Investor Relations page. A printed copy of the guidelines may also be obtained by sending a request to the Office of the Corporate Secretary, P.O. Box 64683, St. Paul, Minnesota 55164-0683.
We have a Code of Business Conduct applicable to all of our directors and employees, including our principal executive officer, principal financial officer and principal accounting officer. A copy of this Code of Business Conduct is available for review on our website atwww.hbfuller.com, in the “Governance”“Governance” section of the Investor Relations page. A printed copy of the Code of Business Conduct may also be obtained by sending a request to the Office of the Corporate Secretary, P.O. Box 64683, St. Paul, Minnesota 55164-0683.
Any shareholder or other interested party may contact the Board, independent directors as a group, any committee or an individual director, by mailing a letter addressed to the Board, independent directors, committee or individual director in care of the Corporate Secretary. The Corporate Secretary reviews all communications, and after ascertaining whether such communications are appropriate to the duties and responsibilities of the Board, will forward such correspondence to the directors for their information and consideration. The Board has requested that the Corporate Secretary not forward the following types of communications to the Board: general solicitations for business or products, job applications or resumes, and any material that does not relate to the responsibilities of the Board.
Pursuant to our Corporate Governance Guidelines and the listing standards of the New York Stock Exchange (NYSE)(“NYSE”), the Board has determined that all current Board members, other than Mr. Volpi,Owens, are independent. No director is considered independent unless the Board affirmatively determines that such director has no material relationship with H.B. Fuller. In assessing the materiality of any person’s relationship with H.B. Fuller, the Board considers all relevant facts and circumstances, including not only direct relationships between H.B. Fuller and each director but also any relationships between H.B. Fuller and any entity with which a director is affiliated.
The Board of Directors reviewed certain transactions between H.B. Fuller and our directors their immediate family members and entities with which they are affiliated and determined that they were made or established in the ordinary course of business and that the directors had no direct or indirect material interest in the transactions. All ofMr. Mitau and Ms. Chugg recused themselves from this review and determination as it related to the transactions were either banking or lending type transactions or standard customer-supplier transactions.
entities with which they are affiliated. The Board considered lending, trustee and credit card services between the Company and the following company at which a current director is an officer:
U.S. Bank (a commercial bank providing banking, brokerage, insurance, investment, mortgage, trust and payment services), the holding company of which Lee R. Mitau is the Executive Vice President and General Counsel.
The Board also considered customer-supplier transactions between the Company and the following companies at which a current director is an employee or officer:
Les Services G&K (Quebec) Inc., G&K Services Inc.’s Canadian subsidiary (a provider of uniform and facility services), of which Richard L. Marcantonio is Chairman of the Board and Chief Executive Officer, and
General Mills, Inc. (a manufacturer and marketer of consumer food products), of which Juliana Chugg is a Senior Vice President. After consideration of these relationships, the Board of Directors determined that the directors had no direct or indirect material interest in the transactions. In addition, the dollar amounts involved in the transactions with U.S. Bank and General Mills, Inc. fall below the thresholds set by the NYSE for director independence.
Meetings of the Board and Board Committees
Directors are expected to attend the annual meetingAnnual Meeting of shareholdersShareholders and all meetings (including teleconference meetings) of the Board and each committee on which they serve. The Board, and the Compensation Committee each held four scheduled meetings duringand the 2007 fiscal year. The Corporate Governance and Nominating Committee each held threefive scheduled meetings during the 20072010 fiscal year. The Audit Committee held tenfourteen meetings during the 20072010 fiscal year, sixfive of which were teleconference meetings. During the fiscal year, the directors attended greater than 75% of the meetings of the Board and Board committees on which the directors served. In addition, all but one of the then-serving directors attended our Annual Meeting of shareholdersShareholders held on April 4, 2007.
15, 2010.
What are the roles of the Board’s committees?
The Board of Directors is responsible for the overall affairs of H.B. Fuller. The Board conducts its business through meetings of the Board and three standing committees: Audit; Compensation; and Corporate Governance and Nominating. The Board has adopted a written charter for each committee. The charters for each of these committees are available for review on our website:www.hbfuller.com in the “Governance”“Governance” section of the Investor Relations page. Printed copies of these charters may also be obtained by sending a request to the Office of the Corporate Secretary, P.O. Box 64683, St. Paul, Minnesota 55164-0683. When necessary, the Board may also establish ad hoc committees to address specific issues.
Audit Committee
J. Michael Losh ( | ||
| Alfredo L. Rovira |
Number of Meetings in fiscal year 20072010: TenFourteen
Functions: The Audit Committee appoints the independent auditorsregistered public accounting firm to audit our consolidated financial statements, oversees the audit and the independence and performance of our independent registered public auditors,accounting firm, determines and pre-approves the type and scope of all audit, audit-related and non-audit services provided by our independent auditors,registered public accounting firm, oversees our internal audit function, reviews the performance of our retirement plans and reviews the annual audited consolidated financial statements, accounting principles and practices and the adequacy of internal controls. In addition, the Audit Committee reviews the Company’s risk management policies and procedures to assess their adequacy and appropriateness in the context of the Company’s business and operating environment. This Committee also monitors compliance with our Code of Business Conduct and our Policy and Procedures Regarding Transactions with Related Persons.
All of the members of the Audit Committee are considered independent as that term is defined by our Corporate Governance Guidelines, the listing standards of the NYSE and the applicable rules and regulations of the SEC. Independence is considered and determined by the Board of Directors. The Board of Directors has also determined that Mr. J. Michael Losh satisfies the
requirements of an audit committee financial expert as such term is defined under the rules and regulations of the SEC. The Audit Committee Report for fiscal year 20072010 is included in this Proxy Statement.
Compensation Committee
R. William Van Sant(Chair) | Juliana L. Chugg | |||
Thomas W. Handley | Lee R. Mitau | |||
| John C. van Roden, Jr. |
Number of Meetings in fiscal year 20072010: FourFive
Functions: The Compensation Committee establishes overall compensation programs and practices for executives and reviews and approves compensation, including salary, incentive programs, stock-based awards, retirement plans, perquisites and other supplemental benefits, employment agreements, severance agreements, change in control provisions and other executive compensation items for executives who report to the Chief Executive Officerour executive officers. The Compensation Committee monitors the competitiveness, fairness and equity of our retirement plans and administers our stock-based compensation plans and individual awards.
The Compensation Committee annually reviews and approves compensation for our non-employee directors compensation including retainers, fees, stock-based awards, and other compensation and expense items.
The Compensation Committee may delegate its authority to the Chair of the Compensation Committee to accelerate vesting of outstanding awards. The Committee intends this delegation of authority to be for situations of retirement or termination, and where it is impractical to obtain participation by all Committee members.
The Compensation Committee may use outside compensation consultants to provide compensation advice, competitive survey data and other benchmarkreference market information related to trends and competitive practices in executive compensation. Beginning in April 2010, the Compensation Committee hired Buck Consultants, LLC, a wholly owned subsidiary of Xerox Corporation, to provide ongoing advice and information regarding design and implementation of the Company’s executive compensation programs as requested by the Compensation Committee.
A representative of the independent compensation consultant firm may attend Compensation Committee meetings from time to time to serve as a resource for the Compensation Committee. In order to encourage independent review and discussion of executive compensation matters, the Compensation Committee and the committee chair may request meetings with the independent compensation consultant in executive session without management present.
During 2007, management usedfiscal 2010, the Compensation Committee asked Buck Consultants to conduct a review and analysis of non-employee director compensation. Buck Consultants presented information regarding director compensation to the Compensation Committee, provided a market data report on director compensation and presented its findings and recommendations for discussion. Buck Consultants provided these services and reported directly to the Compensation Committee Chair.
Prior to the hiring of Buck Consultants, the Compensation Committee hired compensation consultants on an ad hoc basis, using Towers, Perrin, Forster & Crosby, Inc. (“(now Towers Perrin”Watson Pennsylvania Inc.) as an outsideand Mercer (US) Inc. (a wholly-owned subsidiary of Marsh & McLennan Companies, Inc.) during fiscal year 2009. The Compensation Committee retained Buck Consultants to be its independent compensation consultant for fiscal 2010, due to their independence and industry experience. This firm advises the Committee on director and executive compensation, but does no other work for the Company. The Company continues to use Towers Watson for actuarial, benefits, medical plan and employee engagement survey consulting services. In addition, management has also used Hewitt Associates to provide a Black-Scholes value of H.B. Fuller stock to be used in stock option calculations. During fiscal 2010, we purchased broad-based market compensation survey information from Towers Watson and Hewitt Associates. On certain occasions, we also paid Towers Watson to provide us with regression analysis on the knowledgegeneral survey information we purchased. See discussion in the “Compensation Discussion and agreementAnalysis” section of this Proxy Statement.
The Compensation Committee believes that Buck Consultants provided candid, direct and objective advice to the Compensation Committee. To ensure independence:
The Compensation Committee directly hired and has the authority to terminate Buck Consultants
Buck Consultants is engaged by and reports directly to the Compensation Committee and its chairman
Buck Consultants has direct access to all members of the Compensation Committee. Information provided by Towers Perrin to management was made availableCommittee during and between meetings
No Buck Consultants consultant works for the Company
Buck Consultants does not provide any other services, other than compensation consulting services, to the Committee. During 2007,Company
The Compensation Committee has approved direct interaction between Buck Consultants and management, requested Towers Perrinhowever, these interactions are generally limited to conduct market researchdiscussions on CEO compensation, non-employee director total compensation,behalf of the Compensation Committee and change-in-control agreements. They were asked to compare our practices regarding these areas with the prevailing market practice and to provide observations. Management provided this information that is presented to the Compensation Committee for their review. Towers Perrin also provides actuarial and benefits consulting services to H.B. Fuller. Management also used Mercer Human Resource Consulting for review of the pension plan. This is discussed in the “Benefits, Retirement Programs, Perquisites and Other Programs” section of the “Compensation Discussion and Analysis” section of this Proxy Statement. Management also used Hewitt Associates as an outside compensation consultant to provide stock grant value calculations (Black-Scholes). During 2007, Hewitt Associates also provided market compensation survey information. See discussion in the “Compensation Discussion and Analysis” section of this Proxy Statement.approval
All of the members of the Compensation Committee are considered independent as that term is defined by our Corporate Governance Guidelines and the listing standards of the NYSE. The Committee operates under a written charter adoptedIndependence is considered and determined by ourthe Board which was amended in July 2007. A copy of the charter is available on our website:www.hbfuller.com in the “Governance” section of the Investor Relations page.Directors. The Compensation Committee Report for fiscal year 20072010 is included in this Proxy Statement.
Compensation Committee Interlocks and Insider Participation
During fiscal year 2007, the following individuals served as members of our Compensation Committee: R. William Van Sant, Knut Kleedehn, Lee R. Mitau and John C. van Roden, Jr. No member of the Compensation Committee is a current or former officer or employee of H.B Fuller or any of our subsidiaries or has any relationship with H.B. Fuller requiring disclosure under “Certain Relationship and Related Transactions” below. The Compensation Committee Members have no interlocking relationships requiring disclosure under the rules of the SEC.
Corporate Governance and Nominating Committee
Lee R. Mitau ( | J. Michael Losh | |||
Alfredo Rovira | John C. van Roden, Jr. | |||
| R. William Van Sant |
Number of Meetings in fiscal year 2007: Three2010: Five
FunctionsFunctions:: The Corporate Governance and Nominating Committee reviews matters of corporate governance, including reviewing our organizational structure and succession planning. This Committee evaluates and recommends new director nominees and evaluates each current director prior to nominating such person for re-election. The Corporate Governance and Nominating Committee reviews a director’s continued service if a director’s occupation changes during his or her term. This Committee also evaluates the performance of the Chairman of the Board, the President and Chief Executive Officer, and the directors, and makes recommendations to the Board regarding any shareholder proposals.
This Committee considers shareholder recommendations for potential director nominees. Suggestions may be sent to the Corporate Governance and Nominating Committee in care of the Corporate Secretary of H.B. Fuller. See“How can a shareholder suggest a candidate for election to the Board?”
All of the members of the Corporate Governance and Nominating Committee are considered independent as that term is defined by our Corporate Governance Guidelines and the listing standards of the NYSE.
Independence is considered and determined by the Board of Directors.
Presiding DirectorBoard’s Role in Oversight of Risk
In General
Lee R. Mitau was elected non-executive ChairmanOur Board of Directors has general oversight responsibility for the business and affairs of the Board effective in December 2006,Company, including risk management, while our management is responsible for day-to-day operations. During our 2009 fiscal year, management completed a comprehensive enterprise risk assessment
whereby it identified, assessed and inprioritized a broad range of risks (e.g., financial, operational, strategic, legal and regulatory, reputational and managerial) that could affect our ability to execute on our corporate strategy and fulfill our business objectives. The results of this capacity, acted as the Presiding Director atassessment were shared with our Board of Director Meetings,Directors. Since then, we have integrated the risk assessment process into our strategic planning and executive sessionsbudgeting processes. As part of the non-management directors, during fiscal year 2007. If the Chairman ofthese processes, we regularly identify risks and uncertainties that could impact our business operations and strategic initiatives and we formulate plans to manage these risks or mitigate their effects.
At least annually, management reviews with the Board of Directors the Company’s enterprise risk management and assessment processes and their effectiveness. This review is supplemented throughout the year with regular management presentations that highlight material risks and exposures and related initiatives. In addition, oversight of risks directly relating to the responsibilities of the Board committees is undertaken at the committee level. The Audit Committee participates in regular reviews of our processes to assess and manage enterprise risk management and oversees risks and exposures associated with financial matters, internal controls and financial reporting, accounting, tax, ethics and legal matters. The Corporate Governance and Nominating Committee oversees risks and exposures related to corporate governance and compliance and management succession planning. The Compensation Committee oversees risks and exposures associated with the Company’s compensation programs and arrangements. The Board’s leadership structure, as described below in the section titled “Board Leadership Structure” supports its role in risk oversight.
Risk Assessment of Compensation Programs
In fiscal 2010, management conducted a risk assessment of the Company’s policies and programs relating to the compensation of employees, including those that apply to our executive officers. The format of this review was discussed with and approved by the Compensation Committee. This risk assessment included categorizing the Company’s compensation programs across all of our regions by type of program and potential risks in such programs, focusing on risk mitigation factors in the programs and the processes surrounding the payouts of incentive compensation in particular. A cross functional team reviewed the findings of the assessment with several members of executive management and with the Compensation Committee’s independent compensation consultant, Buck Consultants. The review was then presented to the Compensation Committee. Some of the risk mitigation factors by type of plan were as follows (noting that base salary does not the CEO orencourage risk-taking because it is a fixed amount):
Short-term incentive plan: Our short-term incentive program was designed in order to promote an appropriate balance between risk-taking and rewards for achieving results. We include caps on our short-term incentive program that prevent undue risk taking for short-term gains. In addition, our short-term incentive program uses a balance of four to five metrics addressing a combination of growth, profitability and sustainable return. We include earnings per share as one of these measures to align our executive officer incentives with our shareholders’ interests. Finally, our short-term incentive program metrics are aligned with our long-term strategic objectives.
• | Long-term incentive plan: Our long-term incentive program has an important role in managing risk in our compensation programs. When our executive officers receive stock options, restricted stock and/or restricted stock units, and when they are expected to comply with stock ownership guidelines (see discussion under the section titled “Stock Ownership Guidelines” below), they are incented to make decisions with a view toward the long-term interests of shareholders versus making decisions that would affect only short-term gain. |
Management discussed the findings of H.B. Fuller, then he/she shallthe risk assessment with the Compensation Committee and also with the Audit Committee. Based on the assessment described above, the Company believes that its compensation policies and practices create an appropriate balance between our base salary
compensation, short-term incentive compensation and long-term incentive compensation, thereby reducing the possibility of imprudent risk-taking and that its compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
Our Corporate Governance Guidelines provide that the Board of Directors has no policy with respect to the separation of the offices of Chairman and Chief Executive Officer. Separation of these offices is an issue that is to be addressed as part of the Company’s succession planning. When the Chairman and Chief Executive Officer are separate offices, the Chairman will serve as the Presiding Director. Otherwise,However, when the Chief Executive Officer also holds the position of Chairman, a Presiding Director will be appointed by the Board to further the achievement of a strong, independent Board with an appropriate balance between the Board and the Chief Executive Officer. In such cases, the Chair of the Corporate Governance and Nominating Committee shall serve as the Presiding Director.
Mr. Mitau has served as our independent Chairman of the Board since December 2006 and in this capacity has acted as the Presiding Director Retirement
A director may not be nominated to a new term if he or she would be 72 or olderat Board of Director meetings and during executive sessions of the non-management directors. Our Board has separated the roles of Chairman of the Board and CEO since 2006 because our current CEO and our previous CEO both had limited public company chief executive officer experience at the time of electioneach of their elections to the Board. In addition,Mr. Mitau serves as the Chairman of the Board of Graco Inc. and has significant public company experience. The CEO, in consultation with the Chairman, establishes the agenda for each Board meeting. At the beginning of each fiscal year the Chairman also publishes a schedule of topics to be discussed.
Directors have a mandatory retirement age of 72, unless a waiver of this retirement policy is granted by the Board of Directors. A director may not be nominatedwho is ending his or her service due to a newreaching the mandatory retirement age of 72 will end such term if he or should has served more than 15 years at the timeregular meeting of election.the Board immediately following the director’s 72ndbirthday. Mr. Van Sant reached the mandatory retirement age of 72 during fiscal year 2010. Due to his extensive knowledge and experience with the Company, the Board of Directors determined to waive the mandatory retirement age for Mr. Van Sant and asked him to remain on the Board of Directors to provide consistency during fiscal year 2010 and beyond.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 2007, the Board of Directors adopted a written policy and procedures for the review, approval or ratification of transactions with executive officers, directors and nominees for director and their immediate family members. In general, the policy provides that certain transactions with these related persons and their immediate family members and certain transactions with any person who is a security holder known to us to be the beneficial owner of more than five percent of any class of our stock, are subject to the review, approval and/or ratification of the disinterested members of the Audit Committee. If ratification of a transaction is not forthcoming, management must make all reasonable efforts to cancel or annul that transaction. If a transaction with a related party is entered into without the pre-approval of the Audit Committee, it shall not be deemed to violate these policies and procedures, or be invalid or unenforceable, so long as the transaction is brought to the Audit Committee for ratification as promptly as reasonably practical after it is entered into or brought to ourthe Company’s attention. All executive officers and directors of H.B. Fuller will beare informed in writing on an annual basis of these policies and procedures. The Audit Committee may use any process and review any information that it determines is reasonable in order to determine if a transaction is fair and reasonable and on terms no less favorable to H.B. Fuller than could be obtained in a comparable arm’s length transaction with an unrelateda third party unrelated to H.B. Fuller.
In addition, on an annual basis, each of our directors and executive officers completes a questionnaire and discloses information regarding entities with which they and their immediate family members are affiliated. Any person nominated for election as a director must complete a questionnaire no later than the date he or she becomes a member of the Board of Directors. Any person who becomes an executive officer must complete a questionnaire as soon as reasonably practicable thereafter.
Our Audit Committee annually reviews all transactions and relationships disclosed in the director and officer questionnaires and approves or ratifies, as applicable, any transactions with related persons. The Board of Directors makes a formal determination regarding each director’s independence.
During fiscal year 2007,2010, we had transactions, arrangements and relationships with entities with which some of our related persons, specifically certain of our directors, and their family members, are affiliated. However, in accordance with the procedures in the Company’s policy, the Audit Committee determined that those related persons had no direct or indirect material interest in those transactions, arrangements and relationships.
The form and amount of compensation for each director is determined and reviewed at least annually by the Compensation Committee. Such compensation reflects the philosophy and practice forpractices of boards of similar public companies and is comprised of cash and H.B. Fuller Common Stock (or its equivalents). Similar to our executive compensation policy, the practice of generally aligning to the market median/50%50th percentile also applies to our director compensation.
20072010 Review of Director Compensation
Beginning in April 2010, the Compensation Committee hired Buck Consultants, LLC, a wholly owned subsidiary of Xerox Corporation, to provide ongoing advice and information regarding design and implementation of the Company’s executive and director compensation programs as requested by the Compensation Committee. See further discussion regarding the Compensation Committee’s independent consultant under the heading “Compensation Committee” in the Corporate Governance Section in this Proxy Statement. At the July 20072010 meeting, the Compensation Committee reviewed a market analysis conducted by Towers PerrinBuck Consultants relating to overall director compensation competitiveness, including annual board retainers, board meeting fees, committee meeting fees, committee chair retainers and annual stock basedstock-based awards. The market analysis included 24 chemical companiesour peer group (see section titled “Peer Group Data” in this Proxy Statement) and a subset of our peer group with revenues under $3 billion. After a review of the $1-3 billion revenue category and 27 in the general industry $1-$3 billion category. As a result of thisreference market analysis,comparison data, the Compensation Committee approved an increase indetermined to maintain the discretionary stock-based award from 1.3 timescurrent compensation program for the annual retainer to 1.4 times the retainer to align more closely with the market. This was an increase in the target award value of Common Stock Units of $45,500 to $49,000. The Committee approved an award value of $49,000 per director to be divided by the fair market value on July 11, 2007 to establish the number of units awarded. As a result, 1,682 Common Stock Units were awarded to each director.
non-executive directors.
The following fees are paid to our non-employee directors:
Annual Board retainer | $ | 35,000 | $ | 35,000 | |||
Annual retainer for non-executive Chairman of the Board | $ | 75,000 | $ | 70,000 | |||
Special annual retainer for R. William Van Sant | $ | 30,000 | (1) | ||||
Annual retainer for Audit Committee Chair | $ | 10,000 | $ | 10,000 | |||
Annual retainer for Compensation Committee Chair and Corporate Governance and Nominating Committee Chair | $ | 7,500 | $ | 7,500 | |||
Daily attendance fee for each Board meeting | $ | 1,000 | $ | 1,000 | |||
Attendance fee for each Committee meeting, either in person or via telephone | $ | 1,000 | $ | 1,000 | |||
Attendance fee for each Committee ad-hoc telephone meeting | $ | 500 | $ | 500 |
(1) | During the July 2009 meeting, the Compensation Committee determined to approve a $100,000 retainer for the Chairman of the Board. However, at that time, the Compensation Committee decided to split the retainer for the Chairman of the Board between Lee Mitau, who receives $70,000 for his services as Chairman of the Board, and R. William Van Sant, who receives $30,000 for special assistance, oversight and guidance he provides to the Chairman of the Board in performing the duties of the Chairman. Because the assistance provided by Mr. Van Sant relates entirely to the role of Chairman of the Board, the Compensation Committee determined to split the Chairman retainer between Mr. Mitau and Mr. Van Sant. The Compensation Committee approved the same retainer fees in July 2010. |
Neither Mr. Volpi, our former President and Chief Executive Officer, does not receivenor Mr. Owens, our present President and Chief Executive Officer, received separate compensation for serving as a director noror for attendance at any meeting.
We also reimburse each director for any out-of-pocket expenses related to attendance at any meeting or arising from other H.B. Fuller business. If a non-employee director must travel to and from a meeting held in the United States on a day other than the day in which he/she receives any board or meeting fees, the director will be reimbursed $500 per day. For meetings held outside the United States and in the western hemisphere, non-employee directors are reimbursed $500 for travel each way. For meetings held outside the United States and in the eastern hemisphere, non-employee directors are reimbursed $1,000 for travel each way. The purpose of these payments is to reimburse non-employee directors fairly and equitably for significant travel time spent to and from H.B. Fuller Board of Directors meetings and/or Committeecommittee meetings.
In addition to the retainer, meeting and attendance fees described above, the Board believes it is important that each director have an economic stake in our Common Stock. As a result, the Compensation Committee typically makes an annual grant of shares of restricted Common Stock or an award of Common Stock units to each non-employee director. During fiscal year 2007,On July 7, 2010, the Compensation Committee made a discretionary grantaward of 1,6823,560.53 H.B. Fuller Common Stock units to each currently serving non-employee director under the Directors’ Deferred Compensation Plan. This plan is described below. For this award, the Committee approved an award value of $70,000 per director (based on a review of market data) which was divided by the fair market value of our Common Stock on the date of grant to determine the number of units awarded.
In addition, each non-employee director typically receives a one-time grant of H.B. Fuller Common Stock (or its equivalent) upon his/her initial election to the Board. These Common Stock (or its equivalent) awards are granted under our Directors’2009 Director Stock Incentive Plan, which is described below. These shares vest three or four years from the date of grant subject to continued service during that period. In April 2007, Ms. ChuggJuly 2010, Mr. Handley received a grant of 1,300 shares of restricted Common Stock at the time of herhis initial appointment to the Board.
These shares will vest three years from the date of grant subject to Mr. Handley’s service during that period.
Directors’ Deferred Compensation Plan
Under this plan, directors may elect to defer all or a percentage of their retainer, attendance and meeting fees. Deferred amounts are credited with gains and losses based on the performance of certain mutual funds or H.B. Fuller Common Stock as elected by the director prior to deferring any fees. Directors who elect their retainer, attendance or meeting fees to be deferred into H.B. Fuller Common Stock units as an investment are credited with phantom stock units that will be paid out in shares of Common Stock. Phantom stock units are credited with dividend equivalents equal to the amount of dividends, if any, paid on an equal number of shares of H.B. Fuller Common Stock. The dividend equivalents are converted into additional phantom stock units based on the fair market value of H.B. Fuller Common Stock on the dividend payment date. If a participant elects to defer retainer, attendance or meeting fees into the H.B. Fuller Common Stock account in this plan, we make a 10% matching contribution of additional phantom stock units to the amount invested in H.B. Fuller Common Stock by the director. The additional phantom stock units credited to the directors’ accounts do not have voting rights. In addition, the Compensation Committee may make discretionary contributions to a participant’s Common Stock account under this plan. As described above, during fiscal year 2007,2010, the Committee exercised this discretion and grantedawarded each non-employee director 1,6823,560.53 H.B. Fuller Common Stock units under this plan.
Any amounts deferred under this plan are paid in shares of H.B. Fuller Common Stock or cash (depending on the election made by the director) at the earliest to occur of:
The later of the date of the director’s retirement (that is, the date of resignation or removal from the Board or the end of the director’s elected term) or such other date as elected and specified by the director, which is subject to approval by the Compensation Committee and is made only at the time of the director’s initial elections and is irrevocable;
disability;
death;
the date of a change in control of H.B. Fuller; or
the date of termination of the plan.
Directors’2009 Director Stock Incentive Plan
Under this plan, we may issue to non-employee members of the Board of Directorsdirectors restricted stock, restricted stock units, options, stock appreciation rights, performance awards or other stock-based awards. SharesIn addition, shares of H.B. Fuller Common Stock are also issued under this plan to satisfy any requirements under the Directors’ Deferred Compensation Plan. The Compensation Committee determines the type, amount and other terms and conditions of any awardawards under this plan.
Non-employee directors are reimbursed for an annual physical examination and related expenses. These amounts are shown in the “All Other Compensation” columnIn fiscal year 2010, none of the “Director Compensation Table” in this Proxy Statement.
members of the Board of Directors received physical examinations.
Matching Gifts to Education Program
Under this program, we match a non-employee director’s contributions (up to $1,000) to eligible educational institutions. These amounts are shown in the “All Other Compensation” column of the “Director Compensation Table” in this Proxy Statement.
Director Compensation Table—2007Fiscal Year 2010
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(2) ($) | All Other Compensation(3) ($) | Total ($) | ||||||
Juliana L. Chugg | 34,769 | 91,152 | -0 | - | 254 | 126,175 | |||||
Knut Kleedehn(4) | 63,750 | 48,997 | -0 | - | 7,286 | 120,033 | |||||
J. Michael Losh(5) | 77,250 | 48,997 | -0 | - | 18,397 | 144,644 | |||||
Richard L. Marcantonio(6) | 59,250 | 58,370 | -0 | - | 6,638 | 124,258 | |||||
Lee R. Mitau(7) | 144,125 | 64,874 | -0 | - | 20,161 | 229,160 | |||||
Alfredo Rovira | 67,750 | 50,464 | -0 | - | 10,405 | 128,619 | |||||
John C. van Roden, Jr.(8) | 62,750 | 58,335 | 2,276 | 7,709 | 131,070 | ||||||
R. William Van Sant(9) | 69,625 | 48,997 | -0 | - | 6,963 | 125,585 |
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | ||||||||||||
Juliana L. Chugg | 59,500 | 70,000 | 395 | 129,895 | ||||||||||||
Thomas W. Handley | 24,671 | 95,558 | 184 | 120,413 | ||||||||||||
J. Michael Losh(3) | 70,000 | 70,000 | 8,000 | 148,000 | ||||||||||||
Lee R. Mitau(4) | 133,500 | 70,000 | 19,936 | 223,436 | ||||||||||||
Alfredo L. Rovira | 60,500 | 70,000 | - | 130,500 | ||||||||||||
John C. van Roden, Jr.(5) | 56,500 | 70,000 | 717 | 127,217 | ||||||||||||
William R. Van Sant(6) | 93,500 | 70,000 | 10,350 | 173,850 |
(1) |
The aggregate number of shares of restricted H.B. Fuller common stockCommon Stock and deferred stock units held by each non-employee director as of December 1, 2007November 27, 2010 were as follows:
Name | Shares of Restricted Stock (#) | Deferred Common Stock Units (#) | Shares of Restricted Stock (#) | Deferred Common stock Units (#) | ||||||||
Juliana L. Chugg | 1,309 | 1,690 | 1,364 | 11,207 | ||||||||
Knut Kleedehn | 0 | 16,655 | ||||||||||
Thomas W. Handley | 1,309 | 3,585 | ||||||||||
J. Michael Losh | 0 | 39,034 | 0 | 61,359 | ||||||||
Richard L. Marcantonio | 2,699 | 15,502 | ||||||||||
Lee R. Mitau | 15,907 | 60,236 | 16,575 | 93,364 | ||||||||
Alfredo Rovira | 0 | 13,140 | 0 | 23,139 | ||||||||
John C. van Roden | 2,746 | 3,612 | ||||||||||
John C. van Roden, Jr. | 0 | 14,897 | ||||||||||
R. William Van Sant | 0 | 30,848 | 0 | 52,308 |
No non-employee director held any stock options as of November 27, 2010.
(2) |
These amounts represent the following: for Ms. Chugg, dividends paid on unvested restricted |
|
(3) | Mr. |
(4) | Mr. Mitau elected to receive 100% of his annual retainer and meeting fees in Common Stock units in lieu of cash. That election resulted in the conversion of $133,500 into 7,120 Common Stock units. This amount does not include any dividend equivalents or match paid by the Company. |
(5) | Mr. |
(6) | Mr. |
We have and maintain goals for stock ownership by all non-employee directors. Our goal for director stock ownership is five times the annual board retainer.retainer within five years of becoming a director. A review of director stock ownership was conducted atusing June 30, 2010 stock values. At the October Compensation Committee meeting. Alltime of this review, all directors havehad met or exceeded this goal except for Ms. Chugg, who became a director in April 2007.2007 and therefore has not been a director for five years. However, Ms. Chugg is only slightly below her ownership target. Mr. Handley was not included as part of this review as he joined the Board of Directors effective July 6, 2010.
Compensation Discussion and Analysis
OverviewExecutive Summary
This Compensation Discussion and Analysis describes the material elements of compensation awarded to each of our executive officers listed in the Summary Compensation Table in this Proxy Statement (the “named executive officers”). This discussion and analysis focuses on the information contained in the tables and accompanying footnotes and narrative for fiscal year 20072010 which follow this Compensation Discussion and Analysis. We discuss compensation actions taken during fiscal years 20062009 and 20082011 to the extent they enhance the understanding of our executive compensation program for fiscal year 2007.2010.
Fiscal 2010 Business Conditions and Results. Business conditions in fiscal 2010 were difficult. In our Annual Report on Form 10-K for fiscal year 2009, the Company indicated that it believed there was a significant amount of uncertainty for fiscal year 2010 with regard to end-market demand and that we did not anticipate a quick return to pre-recession demand levels. We also stated that we believed gross profit margin would come under pressure in fiscal 2010 because we expected raw material costs to increase. In fact raw material costs were one of the biggest issues we faced during this fiscal year. We also experienced subdued end market demand in our North America region.
In fiscal 2010, we increased our net revenues by nearly 10 percent over fiscal 2009. This increase included growth in almost every market segment and geography in the world. While most companies experienced growth in fiscal 2010 over the down year of 2009, we believe that our growth rate exceeded the market growth rate. Second, although our margins declined in fiscal 2010, in a very difficult raw material environment, we delivered an adjusted gross margin that was only 70 basis points below last year’s gross margin – a year in which we achieved a record high gross margin. Finally, we made progress in shifting our business portfolio toward future strategic growth opportunities. Our Asia Pacific region posted double digit organic revenue growth, opened a new production facility for high-technology adhesives and completed a strategic acquisition in Malaysia. Our EIMEA region had organic growth of nearly 14 percent in fiscal 2010. Also, this region’s business portfolio was enhanced as a non-core product line was discontinued and growth accelerated in strategic emerging markets. Our earnings per share were up nine percent over fiscal 2009, just short of our target range of 10 to 15 percent annual growth. Finally, for the 41st consecutive year in a row, we implemented an increase in the amount of our dividend that we pay to shareholders, with a three percent increase this year. Please also see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” section in our Annual Report on Form 10-K for more information on our fiscal year 2010 financial performance.
Fiscal 2010 Compensation Actions. In setting the financial metrics for our short-term incentives program for fiscal year 2010, our Compensation Committee reviewed company performance expectations and budgeted targets. The annual short-term incentive award targets were set based on predetermined ranges for the achievement of the established performance measures. The targets that were set were considered to be challenging, but achievable. Due primarily to the strong earnings per share performance, overall payouts for our named executive officers under the short-term incentive program ranged from 108% to 130% of target. Please see the table in the section titled “Analysis of Fiscal 2010 Short-Term Incentive Awards”below.
In February 2010, the Compensation Committee increased the pay of Mr. Volpi to align his pay with the midpoint of the CEO salary range. When Mr. Owens became CEO and President late in fiscal 2010, the Compensation Committee increased his pay in recognition of the change in role and responsibilities.
Changes to Our Executive Compensation Program. In general, the economic environment of the last two years has not changed our approach to our executive compensation program. We continue to use base salary, a short-term cash incentive program and a long-term incentive program with equity grants to attract and motivate our executive officers to achieve results that are in the long-term best interest of our shareholders. We generally align to the market median for the three main elements of compensation and we review these elements each year. However, we did make some changes to our executive compensation programs during the year, including:
Adding a performance objective into the restricted stock grant to our CEO;
Changing the mix of stock options and restricted stock/restricted stock units and the value of these grants to better reflect market practice;
The Compensation Committee of the Board of Directors oversees thehiring an independent compensation programs and practices for named executive officers, other key executive officers and directors. The Compensation Committee reviews and approves compensation, including salary, incentive programs, stock-based awards, perquisites and supplemental benefits, employment agreements, severance arrangements, change in control provisions and other executive compensation items for our executive officersconsultant, who reportreports directly to the Chief Executive Officer. The Compensation Committee monitors the competitiveness of our retirement plans. The Compensation Committee also has the authority to administer our stock-based compensation plans and to grant individual awards thereunder.
The Compensation Committee annually reviews and approves compensation for our non-employee directors, including retainers, fees, stock-based awards and other compensation and expense items. This review is discussed under the “Director Compensation” section of this Proxy Statement.
The processes and procedures for the Compensation Committee oversightand does no other work for the Company other than to provide ongoing advice and information regarding design and implementation of the Company’s executive and non-employee director compensation programs; and
Adding language to our stock award agreements that provides that such awards are discussedsubject to present and future clawback policies regarding incentive-based compensation, which the Company expects to adopt when the SEC completes final rulemaking later in the “Corporate Governance” section of this Proxy Statement.2011.
Philosophy
The philosophy behind and goal of our executive compensation program (which includes all the named executive officers) is to provide a competitive compensation package that rewards executive officers for sustained financial and operating performance thus creatingthat creates long-term value for our shareholders. To that end, weWe have designed and implemented our compensation programs for our executive officers to meet three principal objectives:goals:
Attract motivate, reward and retain executive officers;
Motivate these individuals to achieve short-term and long-term corporate goals that enhance shareholder value;value, without undue risk-taking; and
Support H.B. Fuller’s core valuesbeliefs and culture by promoting internal pay equity among executive officer positions, while considering external competitiveness and external competitiveness.job responsibilities.
To meet these objectives,goals, H.B. Fuller has the following guidelines:
Pay compensation that is competitive with the practices of companies in the general industry,a broad number of industries, as well as in the chemical industry, with revenues comparable to our revenues; and
Pay for performance by setting challenging performance goals for our executive officers and providing a short-term incentive through a bonus plan that is based upon achievement of these goals; and
Provide long-term significant incentives in the form of stock options, restricted stock and/or restricted stock units in orderthat are designed to retain those individuals with the leadership abilities necessary for increasingincrease long-term shareholder value whileby aligning the interests of our executive officers with those of our shareholders.
These guidelines are considered by the Compensation Committee when the various elements of the executive compensation program are being assessed. We strive to keep each individual element of compensation at or near the market median/50th percentile, therefore keeping our total compensation at approximately the market median/50th percentile.
Competitive Market
We use several surveys and data points when we review executive compensation as described further below.
General Survey Data. We define our market as a broad range of companies across various industries in the $1-3 billion revenue category. We chose this revenue category because revenue from our prior fiscal year was in this range and revenue from fiscal 2010 was expected to be in this range. The Compensation Committee uses published survey data from the following sources for our executive compensation analysis:
Hewitt Associates ($1—2.49 billion revenue category for corporate positions)
Towers Perrin ($1—3 billion revenue category for corporate positions)
H.B. Fuller participates in both of these surveys. The Hewitt Associates survey includes 360 companies and is titled “Total Compensation Measurement™ (TCM™) General Industry/Retail Total Compensation by Industry: Executive -2009”; the Towers Perrin survey includes 428 companies and is titled “U.S. CDB General Industry Executive Database 2009 Descriptive Statistics Report.” Towers Perrin performed chemical industry regression analysis on their survey data for several executive positions.
For Mr. Kenny in our EIMEA region, the Compensation Committee also utilized additional data from Towers Perrin that did not come from the survey referenced above. Towers Perrin provided the same type of survey data for the EIMEA region senior vice president position.
Peer Group Data. During fiscal year 2009, the Compensation Committee approved a peer group consisting of the following companies:
Albemarle Corp. | Ferro Corp. | Polyone Corp. | ||
Arch Chemicals Inc. | FMC Corp. | RPM International Inc. | ||
Ashland Inc. | Georgia Gulf Corp. | A. Schulman, Inc. | ||
Avery Dennison Corporation | Hexcel Corp. | Sensient Technologies Corp. | ||
Cabot Corp. | International Flavors & Fragrances Inc. | Sigma-Aldrich Corp. | ||
Celanese Corp. | The Lubrizol Corp. | Solutia Inc. | ||
Cytec Industries Inc. | Nalco Holding Co. | Valspar Corp. | ||
Eastman Chemical Co. | Olin Corp. | |||
Ecolab Inc. | OM Group, Inc. |
These companies represent global, publicly-traded chemical and allied products companies in the 2800 Standard Industrial Classification Code with revenues between $871.1 million to 8.1 billion. No changes were made to the composition of the peer group during fiscal 2010.
Use of Market Data in Fiscal 2010
When analyzing compensation paid to named executive officers, the Compensation Committee uses specific data that matches revenue and job responsibilities from the published surveys. For fiscal 2010, the above-referenced survey data used by the Compensation Committee to review total compensation (base salary, short-term incentive compensation and long-term incentive compensation) for our executive officers showed that our total compensation was in line with the market data matched according to revenue and job responsibilities.
In fiscal year 2010, Management and the Compensation Committee began to use the peer group data, in conjunction with the general survey data that we use for reference purposes, as a reference point for compensation design considerations. This data was derived from proxy statement data
available from an Equilar database. Peer group pay level data may be reviewed using a regressed value, to provide a general perspective of compensation for a company of our size. However, the primary data sources for pay level information are the survey sources listed in the section titled “General Survey Data”.
The Compensation Committee uses survey data and peer group data because these sources of data are considered reliable market information. When we refer to market data in the rest of this Compensation Discussion and Analysis, unless otherwise noted, we are referring to the “General Survey Data” and the “Peer Group Data” discussed above.
Compensation Process
The Compensation Committee reviews and approves all elements of compensation for our Chief Executive Officer, (“CEO”), taking into account the Board of Directors’ review and assessment of the performance of the CEO as well as competitive market data and information from our human resources personnel and its independent compensation consultant. The Compensation Committee also reviews and approves all elements of compensation for our other executive officers, taking into account the recommendations of the CEO, as well as competitive market data and information from our human resources personnel and its independent compensation consultant.
In determining the particular elements of compensation that will be used to implement our overall compensation policies, the Compensation Committee takes into consideration factors related to H.B. Fuller’s performance, such as H.B. Fuller’s earnings and revenue growth, and business-unit-specific operational and financial performance. Other considerations include H.B. Fuller’s business objectives, its corporate responsibilities (including equity among executive officer positions and affordability), competitive practices and trends, and regulatory requirements. In deciding on the type and amount of compensation for each executive officer, the Compensation Committee focuses on both the current pay and the opportunity for future compensation, and combines the compensation elements for each executive officer in a manner that optimizes the executive officer’s contribution to H.B. Fuller.
The Compensation Committee on occasion meets with the CEO and/or certain other executive officers to obtain recommendations with respect to our compensation program, practices and packages for executive officers and directors. The Compensation Committee considers, but is not bound to and does not always accept, management’s recommendations with respect to executive compensation. The CEO typically attends the Compensation Committee’s meetings, except when his compensation package is discussed. In addition, the Compensation Committee also holds executive sessions not attended by any members of management.
Compensation Consultant
Beginning in April 2010, the Compensation Committee hired Buck Consultants, LLC, a wholly owned subsidiary of Xerox Corporation, to provide ongoing advice and information regarding design and implementation of the Company’s executive compensation programs as requested by the Compensation Committee. See further discussion regarding the Compensation Committee’s independent consultant under the heading “Compensation Committee” in the Corporate Governance Section in this Proxy Statement. In this Proxy Statement, we discuss the use of compensation consultants when the Compensation Committee utilized its independent consultant for a specific project. In addition, from time to time, management receives information from the compensation consultant in preparation for Compensation Committee meetings.
Key Elements of the Executive Compensation Program
The key elements of the executive compensation program are:
Element of Compensation | Type of Compensation | Purpose | How Impacted by | |||
Base Salary | Cash | Attract and retain high caliber executive talent with competitive fixed compensation | Not performance based | |||
Short-term incentive | Cash | Aligns executive performance with achievement of company strategic goals and objectives and provides financial reward for meeting or exceeding specific metrics | Payouts dependent on achievement of predetermined financial performance goals | |||
Long-term incentive | Stock Options | Attract, retain and reward high caliber executive talent; ownership of common stock encourages long-term strategic decision making that is aligned with shareholder interests | Increase in H.B. Fuller Common Stock price increases value of options | |||
Restricted Stock and Restricted Stock Units | Retention of executive talent and reward for performance | Increase in H.B. Fuller Common Stock price increases value of restricted stock and restricted stock unit awards. CEO grant contains a performance goal which must be achieved before restricted stock may vest. | ||||
Other benefits | Includes supplemental retirement and deferred compensation plans, severance, change-in-control and other perquisites | Attract and retain high caliber executive talent | Not performance-based |
Additional information regarding base salary;
salary, short-term incentive;
incentive compensation and long-term incentive compensation in the form of stock options, restricted stock and restricted stock units;follows.
retirement programs, including supplementalBase Salary. Each executive retirement plans, perquisites and other programs; and
change-in-control agreements.
Many of our compensation elements simultaneously fulfill one or more of our stated objectives. In determining the particular elements of compensation that will be used to implement our overall compensation policies, the Compensation Committee takes into consideration factors related to H.B. Fuller’s performance, such as H.B. Fuller’s earnings, revenue growth, and business-unit-specific operational and financial performance, as well as competitive practices. Other considerations include H.B. Fuller’s business objectives, its fiduciary and corporate responsibilities (including internal pay equity considerations and affordability), competitive practices and trends, and regulatory requirements. In deciding on the type and amount of compensation for each executive officer, we focus on both the current pay and the opportunity for future compensation. We combine the compensation elements for each executive officerofficer’s job is positioned in a manner we believe optimizes the executive officer’s contribution to H.B. Fuller.
Competitive Market
We define our market as a broad range of companies across general industry in the $1-3 billion in revenue category as well as companies in the chemical industry in the $1-3 billion revenue category. We use published data from Hewitt Associates and Towers Perrin for our executive compensation analysis. H.B. Fuller participates in both of these surveys. The Hewitt Associates survey includes 425 companies and is titled “2006 Hewitt TCM (Total Compensation Measurement) Executive Total Compensation by Industry”; the Towers Perrin survey includes 825 companies and is titled “Towers Perrin Executive Compensation Database 2006 Descriptive Statistics Report “. For chemical industry data, we rely on data provided by Towers Perrin for chemical companies in the $1-3 billion revenue category. The companies represented in the chemical company data vary depending on the position we are reviewing since all companies may not provide data for every position in a survey. When analyzing compensation paid to named executive officers serving in non-corporate positions, we also use specific data for comparable operating business positions from the published surveys, and/or from analysis provided by Towers Perrin. We use these surveys because they are solid sources for reliable market information. When we refer to market data in the rest of this Compensation Discussion and Analysis, unless otherwise noted, we are referring to these surveys.
Compensation Process
The Compensation Committee reviews and approves all elements of compensation for our Chief Executive Officer, Michele Volpi (CEO), taking into account the Board of Directors’ review and assessment of the performance of the CEO, competitive market data from compensation consultants and feedback from our human resources personnel. The Compensation Committee discusses the CEO’s compensation package without him present.
The Compensation Committee reviews and approves all elements of compensation (including base salaries, incentive programs, stock-based awards, perquisites, supplemental benefits, employment agreements, severance arrangements, change in control provisions and other executive compensation items) for executive officers who report to the CEO, taking into account the recommendations of the CEO, as well as competitivesalary grade based upon market data and feedback from our human resources personnel. The Compensation Committee on occasion meets withan analysis of the CEO, and/or certain other executive officers to obtain recommendations with respect to our compensation programs, practices and packages for executive officers and directors. The Compensation Committee considers, but is not bound to and does not always accept, management’s recommendations with respect to executive compensation. Mr. Volpi attends the Compensation Committee’s meetings, except when his compensation package is discussed. In addition, the Compensation Committee also holds executive sessions not attended by any membersjob responsibilities of management.
The Compensation Committee has the ultimate authority to make decisions with respect to the compensation of our named executive officers. The Compensation Committee also has authorized Mr. Volpi to make salary adjustments and short-term incentive (bonus) decisions for all employees other than executive officers under guidelines approved by the Compensation Committee.
Annual Cash Compensation
Base Salary
In General. We provide a base salary to our named executive officers to attract and retain high caliber executive talent for the position and because base salary is an element of compensation that is provided by companies that we compete with to obtain talent. Base salaries are set to reflect the complexity and importance of a position as well as the market rate paid for such positions. Merit increases in base salary are tied to annual performance reviews and are subject to salary ranges based on market data. Salary ranges are established to generally reflect competitiveness at the market median/50th percentile.
Fiscal 2007 Salary Increases. Base salaries are set to reflect the complexity and importance of a position and the experience each executive officer brings to the position, as well as the market rate paid for such positions. The Compensation Committee reviews and considers the annual performance of the CEOnamed executive officers and determines whether and to what extent a merit increase. Thesalary increase is warranted. In the past, annual merit increases have typically been considered by the Compensation Committee also reviews and considers the annual performance of, and proposed merit increases for, each executive officer who reports to the CEO in November or early December of each year and have become effective for the following fiscal year. The amount of annualized base salary and year-over-year increase for eachon December 1st regardless of the named executive officersactual date of the fiscal year-end. Beginning in fiscal year 2007 is set forth in2010, the following table:
12/1/2005 ($) | 12/1/2006 ($) | Annualized Percent Increase from FY 2006 to FY 2007 (%) | |||||||
Michele Volpi | 307,400 | 457,400 | (1) | 49 | % | ||||
James C. McCreary, Jr. | 252,353 | 262,447 | 4 | % | |||||
John A. Feenan | 368,040 | 380,922 | 3.5 | % | |||||
Ann B. Parriott | 280,000 | (2) | 292,600 | 4.5 | % | ||||
Timothy J. Keenan | 200,017 | 246,421 | (3) | 23.2 | % | ||||
Jay Scripter | 187,926 | 201,081 | 7 | % | |||||
12/1/2006 ($) | 7/1/2007 ($) | Annualized Percent Increase in July 2007 (%) | |||||||
Michele Volpi | 457,400 | 567,400 | 24 | % | |||||
12/1/2006 ($) | 3/5/2007 ($) | Annualized Percent Increase in March 2007 (%) | |||||||
Jay T. Scripter | 201,081 | 241,297 | 20 | % |
Analysis of Fiscal 2007 Base Salary. Towers Perrin conducted an analysis of CEO compensation prior to Mr. Volpi’s promotion using the market data referred to in “Competitive Market” section above combined with a selection of compensation data from proxy statements from 22 companies1. The Compensation Committee reviewed and considered the analysisperformance and decided to regularly review Mr. Volpi’s base salary and provide stagedannual merit increases to establish a salary competitive with the market for CEOs with revenue responsibility of similar-sized companies. The Compensation Committee increased Mr. Volpi’s base salary 49% from fiscal 2006 to 2007 in connection with his promotion to our Chief Executive Officer as of December 3, 2006. The Compensation Committee increased Mr. Volpi’s salary 24% effective as of July 1, 2007.
Mr. McCreary’s base salary is reflective of his role as our corporate controller. His base salary is not reflective of his role and responsibilities as interim Chief Financial Officer. Mr. McCreary took on the role of interim Chief Financial Officer as of February 16, 2007. Mr. McCreary’s fiscal 2007 base salary falls in the top quartile of his salary range based on his tenure in the role and performance. Mr. Feenan’s fiscal 2007 base salary is approximately at the midpoint of his salary range. Mr. Feenan resigned as Chief Financial Officer as of February 15, 2007. Ms. Parriott’s fiscal 2007 base salary is approximately at the midpoint of her salary range.
Mr. Keenan’s fiscal 2007 base salary falls in the bottom quartile of his salary range due to his recent promotion to Vice PresidentJanuary, and the accompanying changeeffective date of salary grade. Mr. Keenan’s 12% raise reflectsannual merit increases was February 1st, reflecting the entire 14-month period. In future fiscal years, the annual merit increases are intended to cover a merit increasetwelve-month period and promotion.become effective February 1st.
Mr. Scripter’s fiscal 2007 base salary falls in the bottom quartile of his salary range due to his recent promotion to Vice President, North America and the accompanying change of salary grade. In recognition of this promotion, he received a 20% promotional increase effective March 5, 2007.
Annual Short-Term Incentive Program
In General.Compensation. We provide an annual short-term-incentive plan (cash bonus) for our named executive officers in order to attract and retain high caliber executive talent, to motivate executive officers to achieve our corporate goals that enhance shareholder value and because similar short-term incentive awards are provided by companies that we compete with to obtain talent. Short-term incentive awards are set for each executive officer so that the expected payout at target performance levels together with the executive officer’s base salary, would result in base salary and short-term incentive compensation equal to competitive market levels of such compensation based on market data. The target percentage opportunities are established to generally reflect competitiveness at the market median/50th percentile. Payments under the short-term incentive program can range from no payment to a payment higher than the target, based upon H.B. Fuller results, businessCompany and regional operating unit or function results and individual performance.results.
Short-Term Incentive Plan Funding. Under the short-term incentive plan, the Compensation Committee annually approves a net operating income target for purposes of funding the short-term incentive plan. Net operating income was selected as the measure because it comprehensively reflects a key component of overall company performance. For the purpose of the short-term incentive plan, net operating income is defined as gross profit less sales, general and administrative expenses, less taxes at H.B. Fuller’s effective tax rate. If H.B. Fuller achieves at least 80% of the net operating income target, the plan will be funded. The funding level/pool varies based on corporate financial performance as measured by net operating income. As the funding level/pool increases, the cash bonuses paid to the named executive officers may also increase. The chart below shows the various funding levels based on corporate performance.
Corporate Financial Performance (Budgeted Net Operating Income) | Funding Level (as a percent of target) | ||
130% | 200 | %* | |
125% | 180 | %* | |
120% | 150 | % | |
115% | 138 | % | |
110% | 125 | % | |
105% | 113 | % | |
100% | 100 | % | |
95% | 88 | % | |
90% | 75 | % | |
85% | 63 | % | |
80% | 50 | % | |
<80% | 0 | % |
Short—Term Incentive Plan Targets for Named Executive Officers. Each named executive officer has a target percentage of his/her base salary for his/her award. The target percentages are set forth in the table below. Eligible base salary does not include short-term and long-term disability payments and represents the salary earned throughout the fiscal year. The annual short-term incentive plan is designed to support both individualachieve several goals, including emphasizing the Company’s commitment to competitive compensation practices, driving a high performance culture and business performance. Therefore, there are two componentsassuring accountability. The short-term incentive plan program places emphasis on achievement of a named executive officer’s award that are equally weighted, with 50% of the award based on individual performance and 50% based on business performance. The equal weighting signifies the philosophy that both components are equally importantfinancial metrics and focuses attention on performance achievement at individualbusiness results. It also reinforces the importance of measurable and business levels. To recognize individual performance,aligned goals and objectives.
Each year, the Compensation Committee also may increase or decreaseestablishes the annual cash incentive target opportunities as a named executive officer’s short-term incentive award, with input from the CEO (other than with regard to his own award), based on the individual performancepercentage of the named executive officer. This is done to recognize individual performance that either does not meet, meets or exceeds expectations.
Analysis of Fiscal 2007 Corporate Performance and Named Executive Officer Short-Term Incentive Awards. The pool of available funds for short-term incentive awards for fiscal year 2007 was based on H.B. Fuller’s net operating income target of $102 million. This target takes into consideration a number of factors, including the prior year’s performance, expected economic environment, market conditions, performance expectations, and the desire to deliver superior results.
base salary. Under the short-term incentive plan, the Compensation Committee may also consider extraordinary circumstances that may positively or negatively impact the achievement of the total Company performance objectives. The actual net operating income for fiscal 2007 was $104.6 million—102%Board or management in their discretion, has the right at any time to enhance, diminish or terminate all or any portion of the net operating income target. However, the recently acquired Roanoke business negatively impacted overall Company net operating income. Management recommended to the Compensation Committee that the negative impact of
the Roanoke results that were inconsistent with the overall global Company results be excluded from the net operating income calculation so as not to penalize all participants eligible for short-term incentives. The Compensation Committee determined that current participants under the short-term incentive plan should not be held accountable for prior decisionsPredetermined financial performance measures and the results of these decisions related to H.B. Fuller’s acquisition of the Roanoke business. Consequently, the net operating income target and results were adjusted to exclude Roanoke’s performance.
Excluding the Roanoke business, net operating income results were at 112% of target, yielding a pool of funds for awards at 125% of target. Under the performance guidelines approvedgoals are set by the Compensation Committee in January 2007, the Compensation Committee determined to pay short-termeach year. These financial measures and goals are based on company performance expectations and budget targets. The annual cash incentive awards toare calculated based on predetermined ranges for the named executive officers in the amounts indicated in the “Non-Equity Incentive Plan Compensation” columnachievement of the Summary Compensation Table.established performance measures. The following table illustratesplan is designed so that the targeted percentage of base salary of annual incentive for each ofmaximum is earned when the named executive officers for fiscal year 2007 as well asresults exceed the actual percentage of base salary of the annual incentive payouts:
Target Payout as a % of Base Salary | Actual Payout as a % of Base Salary | |||||
Michele Volpi | 100 | % | 100 | % | ||
James C. McCreary, Jr. | 38 | % | 64.6 | % | ||
John A. Feenan | 56 | % | 0 | % | ||
Ann B. Parriott | 48 | % | 67.2 | % | ||
Timothy J. Keenan | 48 | % | 67.2 | % | ||
Jay Scripter | 38.5 | % | 38.5 | % |
For Mr. Volpi, 50% of his annual short-term incentive is based on meeting the net operating income target and 50% is based on his individual performance as determinedCompany’s goals by the Board of Directors. Mr. Volpi received 100% of his base salary as a short-term incentive due to the Compensation Committee’s evaluation of his individual performance and the overall company performance. Because of a limitation on Mr. Volpi’s short-term incentive award relating to Section 162(m) of the Internal Revenue Code, the Compensation Committee’s decision to exclude the Roanoke business from the net operating income results did not result in an increased payout amount for Mr. Volpi. The Compensation Committee, therefore, determined to pay Mr. Volpi a discretionary bonus in order to acknowledge: (1) his exceptional individual performance in his first year as Chief Executive Officer, (2) the company having exceeded its net operating income target for the year and overall positive business results in a challenging business and economic environment, and (3) his strong leadership during a transitional year which included several management changes and the alignment of businesses on a regional basis. This bonus is included in the “Bonus” column of the Summary Compensation Table.
For Mr. McCreary, who holds a corporate staff position, 50% of his annual short-term incentive is based on the finance function’s performance and 50% is based on individual performance. Mr. McCreary received 64.6% of his base salary as a short-term incentive due to the company having exceeded its net operating income target for the year and overall positive business results, the outstanding results of the finance function and his individual performance as interim Chief Financial Officer for most of the 2007 fiscal year in addition to his fulfilling his corporate controller function during a transitional year. Based on this exceptional performance, the Compensation Committee approved a short-term incentive award above his individual 57% maximum. In addition, during fiscal 2007, the Compensation Committee approved a discretionary bonus for Mr. McCreary in order to acknowledge his exceptional performance in fulfilling the role of Chief Financial Officer on an interim basis in addition to his role as corporate controller. This bonus is included in the “Bonus” column of the Summary Compensation Table.
For Ms. Parriott and Mr. Keenan, who both hold corporate staff positions, 50% of his/her annual short-term incentive is based on function performance and 50% is based on individual performance. Ms. Parriott and Mr. Keenan each received 67.2% of their base salary as a short-term incentive. Ms. Parriott received a
67.2% short-term incentive award due to the company having exceeded its net operating income target for the year and overall positive business results, introduction of a talent management process meant to support the execution of our long-term strategic plan and her instrumental efforts in solidifying the succession planning process for the Company. Mr. Keenan received a 67.2% short-term incentive award due to the company having exceeded its net operating income target for the year and overall positive business results, his pivotal role in ensuring a smooth CEO transition and his provision of proper oversight of legal, ethics and compliance programs throughout the Company.
For Mr. Scripter, who holds a regional business unit position, 50% of his annual short-term incentive is based on region performance and 50% is based on individual performance. Mr. Scripter received 38.5% of his base salary as a short-term incentive due to the company having exceeded its net operating income target for the year and overall positive business results, and for his support of the transition of the North America region to a new organizational model while facing the adversities of the Roanoke acquisition and difficult market conditions.
predetermined amount.
Long-Term Incentive ProgramCompensation.
In General. We provide a long-term incentive program to the named executive officers in order to attract and retain high caliber executive talent and because similar long-term incentive awards are provided by companies that we compete with to obtain talent. We also provide this opportunity because we believe that ownership of our common stock by executive officers encourages long-term, strategic decision-making that is aligned with the balanced best interests of our shareholders. Goals for recommended levels of executive stock ownership are discussed under the heading “Stock Ownership”.
Our long-term incentive program ties a significant portion of our executive officers’ annual total compensation to shareholder value creation, as measured by stock price performance. We currently award stock options, restricted stock and restricted stock units under the Amended and Restated H.B. Fuller Company Amended and Restated Year 2000 Stock Incentive Plan.
Plan as follows:
Stock Options. TheBeginning with grants made in fiscal 2010, the standard “time-based”“service-based” nonqualified stock options typically vest in fourthree equal installments on each anniversary date of the grant. Stockgrant which enhances retention. Vested stock options provide a benefit to an executive officer only if the market value of the stock increases over the term of the option and if the executive officer remains employed at H.B. Fuller. The multi-year vesting cycle enhances retention, because employees who resign (other than retirement) from H.B. Fuller forfeit their unvested options.Stock options are granted for a 10 year term.
Restricted Stock and Restricted Stock Units. TheBeginning with grants made in fiscal 2010, standard “time-based”“service-based” restricted stock and restricted stock unit grants typically vest in three yearsequal annual installments from the grant date.date which enhances retention. Restricted stock and restricted stock unit awards provide a benefit to an employee only if the employee remains employed until the award vests. Dividends are paidaccrued on both restricted stock and restricted stock units during the period prior to vesting.vesting and are paid in the form of additional shares once vesting has occurred. Only restricted stock has voting rights during the period prior to vesting. In addition, if the market value of the stock increases over the grant date price of the award, the employee further benefits from that appreciation in value. TheFor our CEO, beginning with restricted stock grants in fiscal 2010, a performance goal must be achieved or the restricted stock will not vest.
The value of an individual’s target award is established to generally reflect competitiveness at the market median/50th percentile for the applicable position and grade level. The CEO recommends to the Compensation Committee the number of stock options, restricted stock and/or restricted stock units are “time-based” to support retention, however, therebe granted to each executive officer. In order to emphasize a pay for performance philosophy, the
Compensation Committee retains full authority to accept, modify or reject these recommendations to increase or decrease the value of the award. The Compensation Committee also reviews total Company performance and the CEO’s individual performance to determine the award for the CEO. The number of options is no specific performance target. The multi-year vesting cycle enhances retention, because employees who resign (other than retirement) from H.B. Fuller forfeit their unvested determined based on a Black-Scholes valuation and a 30-day stock price average is applied. To determine the number of restricted stock/restricted stock units to be awarded, a 30-day stock price average is applied.
In fiscal 2010 and restricted stock units.
Ourin the past, our Compensation Committee reviewsreviewed long-term incentives for our CEO and the other named executive officers in late November or early December. TheThese grants arewere effective as of the date of the Compensation Committee meeting or the first business day of the fiscal year, whichever iswas later. This ensuresensured that only one long-term incentive grant iswas given in each fiscal year. The timing of this meeting iswas set approximatelymore than one to two yearsyear in advance. Beginning in fiscal year 2011, the Compensation Committee will review long-term incentives for our CEO and the other executive officers in January. This grant date aligns better with the annual individual performance review process. Also, a January grant date will allow the grants to occur during the open trading period for H.B. Fuller stock as provided under Company policy. The grants of stock options are made with an exercise price determined
as of the close of trading on the applicable grant day. We do not allow backdating of options, nor do we have a program, plan or practice to time stock option grants to executive officers in coordination with the release of material non-public information.
Fiscal 2010 Base Salaries
In additionGeneral. The amount of annualized base salary and year-over-year increase for each of the named executive officers in fiscal year 2010 is set forth in the following table.
Base Salary as of 12/1/2008 ($) | Base Salary as of 2/1/2010 ($) | Annualized Percent Increase from 12/1/2008 to 2/1/2010 (%) | ||||||||||
James J. Owens | 410,000 | 445,949 | 8.8 | %(1) | ||||||||
Michele Volpi | 738,400 | 815,000 | 10.4 | % | ||||||||
James R. Giertz | 428,450 | 449,873 | 5 | % | ||||||||
Steven Kenny(2) | n/a | 379,002 | n/a | |||||||||
Ann B. Parriott | 322,649 | 337,168 | 4.5 | % | ||||||||
Barry S. Snyder | 290,000 | 298,700 | 3 | % |
(1) | Mr. Owens began his employment with the Company on August 25, 2008. His annualized base salary for fiscal 2008 was $410,000. Mr. Owens did not receive a merit increase effective as of December 1, 2008 for fiscal 2009 as he was hired in the six months prior to fiscal year end. Mr. Owens received a prorated merit increase of 3% effective February 25, 2009. His base salary for the remainder of the fiscal 2009 was $422,300. Mr. Owens received a 5.6% increase on February 1, 2010. |
(2) | Non U.S.-based compensation paid to Mr. Kenny is denominated in British Pound Sterling and has been converted to U.S. dollars at the same exchange rate used for financial reporting purposes. |
Analysis of Fiscal 2010 Base Salaries. Mr. Owens’ fiscal 2010 base salary, prior to his promotion to President and CEO effective November 19, 2010, was in the third quartile of his salary range for business unit roles of similar size and responsibility based upon market data. His salary was higher than the midpoint of the salary range to reflect Mr. Owens’ extensive experience in the chemical industry. For fiscal 2010, Mr. Owens received a merit increase of 5.6% effective February 1, 2010. Effective November 19, 2010, the Board of Directors appointed Mr. Owens as President and CEO of the Company and approved a 25.6% increase in base salary to $560,000 as a reflection of his new responsibilities as CEO. This increase was based on review, analysis and discussion with the
independent compensation consultant. This included a review of the following market data: Mercer 2009 Global Premium Executive Remuneration Suite (All Industries $1—2.5 billion); Hewitt 2010 Executive Compensation Committee’s approvalDatabase (All Industries $1—2.5 billion); and, Watson Wyatt 2009/2010 Survey Report on Top Management Compensation (All Industries $1—2.5 Billion and Chemical $1—2.5 billion). The Compensation Committee also reviewed market data relating to our peer group, both the entire peer group and a subset of all other long-term incentive awards,the peer group with revenues up to $3 billion.
For fiscal 2009, the Compensation Committee must also approve anyhired Mercer to conduct an in-depth analysis of CEO compensation. As a result, the Compensation Committee determined that it was not necessary to engage an external compensation consultant to conduct an analysis of Mr. Volpi’s compensation for fiscal 2010 and instead referenced the 2009 review for perspective. After a review of Mr. Volpi’s performance, the Compensation Committee decided to award of stock options or restricted stock or restricted unitsMr. Volpi with a 10.4% increase in base salary to a newly hired executive officer.$815,000 effective February 1, 2010 based on the following factors:
Company financial performance during a difficult economic time
Progress on strategic plan
Development of Company executive leadership team
Strengthened collaboration between Board of Directors and Company leadership
Desire to move Mr. Volpi closer to the midpoint of his salary range
This increase positioned Mr. Volpi’s salary near the salary range midpoint of $811,500. On November 19, 2010, Mr. Volpi resigned as President, CEO and director of the Company, and his employment with the Company was terminated effective December 7, 2010.
Mr. Giertz’s fiscal 2010 base salary was slightly above the third quartile of the salary range for CFOs based on market data. His salary has historically been higher than the midpoint in this salary range to reflect Mr. Giertz’s extensive experience in both finance (as a CFO) and in operations with prior employers, where he held key leadership positions in several companies. For fiscal 2010, Mr. Giertz received a merit increase of 5%. Mr. Kenny’s fiscal 2010 base salary was in the second quartile of the salary range based on market data. Mr. Kenny was not eligible for an increase as of February 1, 2010 as he was hired within six months prior to the fiscal year end. Ms. Parriott’s fiscal 2010 base salary was in the third quartile of her salary range for Vice Presidents of Human Resources based on market data. Her salary has been higher than the midpoint to reflect Ms. Parriott’s prior leadership experience and her contributions in her role. Ms. Parriott received a merit increase of 4.5%. Mr. Snyder’s fiscal 2010 base salary fell in the second quartile of his salary range for Chief Technology Officers based on market data. For fiscal 2010, Mr. Snyder received a 3% merit increase.
For fiscal 2010, all merit increases for the named executive officers (except for Mr. Volpi) fell within the Company’s general merit increase guidelines for our general employee population.
PriorFiscal 2010 Short-Term Incentive Compensation
In General. For fiscal 2010, based on market data, the annual cash incentive target opportunity for our executive officers ranged from 40% to fiscal 2007,100% of base salary at a target level of performance. Potential payouts ranged from 0% to 200% of the target award based on attainment of operating unit and/or Company predetermined financial goals. The threshold level for the annual cash incentive was set at 80% of each financial target goal, except the Organic Revenue metric had a threshold amount of 85%. At these levels, the annual cash incentive would pay out at 50% of the target incentive. Higher payouts are possible if performance is above threshold levels.
In January 2010, the Compensation Committee reviewed market data providedthe weighting of financial metrics in the short-term incentive plan. The Compensation Committee approved revisions to the short-term incentive
metrics for fiscal year 2010 for the CEO and Regional Operating positions, which place more emphasis on achievement of increases in Organic Revenue. The weighting of the Operating Income and Net Working Capital metrics were decreased to offset the increased emphasis on Organic Revenue.
All performance measures for the named executive officers, and the percentage of the incentive based on these measures as established by Towers Perrin, including general industry data as wellthe Compensation Committee, are set forth in the table below:
Performance Measure | CEO1 | CFO and Corporate Positions2 | Regional Operating Unit3 | |||||||||
EPS4 | 30 | % | 30 | % | 30 | % | ||||||
Company Organic Revenue5 | 40 | % | ||||||||||
Company Operating Income6 | 20 | % | ||||||||||
Company Net Working Capital7 | 10 | % | ||||||||||
Region Organic Revenue | 40 | % | ||||||||||
Region Operating Income | 20 | % | ||||||||||
Region Net Working Capital | 10 | % | ||||||||||
North America Composite | 25 | % | ||||||||||
Europe, Middle East & Africa Composite | 20 | % | ||||||||||
Asia Pacific Composite | 12.5 | % | ||||||||||
Latin America Composite | 12.5 | % |
1 | Includes Mr. Volpi for fiscal 2010. This weighting of performance metrics also applied to Mr. Owens after he was appointed CEO. The short-term incentive for Mr. Owens for fiscal 2010 was calculated using prorated amounts for the time periods he held the relevant positions during fiscal 2010. |
2 | Includes Mr. Giertz, Ms. Parriott and Mr. Snyder. |
3 | Includes Mr. Owens for the time period for which he held a regional operating position. Also includes Mr. Kenny. |
4 | Earnings Per Share (“EPS”) is defined as net income divided by common stock shares outstanding (diluted). |
5 | Organic Revenue is defined as Revenue, excluding the effects of changes due to foreign currency exchange rates and acquisitions/divestitures. |
6 | Operating Income (“OI”) is defined as gross profit less selling, general and administrative expenses. For administrative purposes, OI is used as a proxy for Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”). |
7 | Net Working Capital as a percentage of annualized trade revenue (“NWC”) is used as a proxy for Return on Gross Investment (“ROGI”) and is defined as: (Trade Receivables, net + (plus) Inventories—(minus) Trade Payables) and divide that by the (Quarterly Net Revenue X (times) 4). This percentage is calculated at the end of each quarter and then the average of the four quarters is the short-term incentive plan metric performance for the year. |
Analysis of Fiscal 2010 Short-Term Incentive Awards. The financial performance measures approved by the Compensation Committee in January 2010 were selected because management believed they were the most representative measurements of our financial results and were key financial measures that linked to our long-term strategic plan. This year, NWC was used as a subsetproxy for ROGI (which we used last year) because employees at all levels have more impact on NWC than ROGI. In addition, persons who are eligible for short-term incentives are able to better relate to NWC. For example, employees at a plant are able to see inventory levels going up or down, so they can more directly see how their actions impact NWC versus ROGI.
For fiscal 2010, the financial performance measures and both the target and the actual performance were as set forth below (amounts for EIMEA Region are in Euros or U.S. Dollars as noted). Amounts shown in the table below may differ from reported results due to adjustments which are allowed under the short-term incentive plan as set forth in footnotes 2 and 3 below.
Performance Measure ($ or€ amounts in thousands as noted, except EPS) | CEO | CFO and Corporate Positions | Americas Regional Operating Unit1 | EIMEA Regional Operating Unit | ||||||||||||
EPS | ||||||||||||||||
Target | $ | 1.46 | $ | 1.46 | $ | 1.46 | $ | 1.46 | ||||||||
Actual2 | $ | 1.61 | $ | 1.61 | $ | 1.61 | $ | 1.61 | ||||||||
Company Organic Revenue | ||||||||||||||||
Target3 | $ | 1,322,328 | ||||||||||||||
Actual3 | $ | 1,345,891 | ||||||||||||||
Company Operating Income | ||||||||||||||||
Target3 | $ | 114,773 | ||||||||||||||
Actual3 | $ | 109,029 | ||||||||||||||
Company NWC | ||||||||||||||||
Target | 16.5 | % | ||||||||||||||
Actual | 16.8 | % | ||||||||||||||
Region Organic Revenue | ||||||||||||||||
Target3 | $ | 800,637 | € | 269,852 | 4 | |||||||||||
Actual3 | $ | 795,486 | € | 287,274 | 4 | |||||||||||
Region Operating Income | ||||||||||||||||
Target3 | $ | 88,391 | € | 14,348 | 4 | |||||||||||
Actual3 | $ | 85,095 | € | 12,859 | 4 | |||||||||||
Region NWC | ||||||||||||||||
Target | 17.3 | % | 17.4 | % | ||||||||||||
Actual | 18.1 | % | 18.1 | % | ||||||||||||
North America Composite | * | *5 | ||||||||||||||
Europe, India, Middle East & Africa Composite | * | *5 | ||||||||||||||
Asia Pacific Composite | * | *5 | ||||||||||||||
Latin America Composite | * | *5 |
1 | Mr. Owens’ role was expanded to include both North America and Latin America effective January 25, 2010. Based on this expanded role, the short-term incentive plan metrics were changed effective the same date to include both Latin America and North America. From the beginning of fiscal 2010 through late January 2010, Mr. Owens was measured on the North America targets only. These targets were as follows ($ amounts in thousands, except for EPS): EPS of $1.46, NA Operating Income of $73,260, NA NWC of 15.2% and NA Organic Revenue $564,917. After his appointment as President and CEO, the CEO targets were applied for the remainder of the performance period. |
2 | Actual EPS differs from reported EPS due to adjustments or exclusions which are allowed under our short-term incentive plan, including (a) individual legal settlements (payments or receipts) with a value (net of insurance) of $3 million or greater will not be included in metric calculations, (b) unbudgeted reorganization or restructuring related items which cannot be offset by related benefits in the fiscal year will not be included in metric calculations, (c) unbudgeted acquisitions and divestitures are excluded from all actual and target metric calculations, as applicable, and (d) any unbudgeted asset write-downs in excess of $2 million will not be included in metric calculations. |
3 | The amounts listed for Actual or Target Company Operating Income, Operating Income for the Americas Regional Operating unit and Operating Income for the EIMEA Regional Operating unit may differ from reported numbers due to adjustments or exclusions that are allowed under our short-term incentive plan. See footnote two above for further explanation. |
4 | The amounts in Euros have been converted into U.S. Dollars at the same exchange rate used for financial reporting purposes as follows($ amounts in thousands): (a) Region Organic Revenue Target: $384,624, (b) Region Organic Revenue Actual: $385,609, (c) Region Operating Income Target: $20,450, and (d) Region Operating Income Actual: $17,238. The Company does not calculate these target and actual numbers in U.S. Dollars in determining whether the metric has been met. Local currency is used for these calculations. |
5 | The composite metrics are a weighted composite of the region’s organic revenue, operating income and NWC targets. The actual payouts for the composite metrics for each of the regions for Mr. Giertz were as follows: North America: 14.4% of base salary; Europe, India, Middle East & Africa: 14.3% of base salary; Asia Pacific: 7.4% of base salary; and Latin America: 4.3% of base salary. The actual payout for the composite metrics for each of the regions for Ms. Parriott and Mr. Snyder were as follows: North America: 12.3% of base salary; Europe, Middle East & Africa: 12.3% of base salary; Asia Pacific: 6.3% of base salary; and Latin America: 3.7% of base salary. |
The short-term incentive target and actual payment as a percent of their market data relatingbase salary for fiscal 2010 for each of our named executive officers is set forth in the table below:
Named Executive Officer | Target Payment as a % of Base Salary | Actual Payment as a % of Base Salary* | ||||||
James J. Owens | 56/100 | % | 60/114 | % | ||||
Michele Volpi | 100 | % | 114 | % | ||||
James R. Giertz | 56 | % | 63 | % | ||||
Steven Kenny | 40 | % | 52 | % | ||||
Ann B. Parriott | 48 | % | 54 | % | ||||
Barry S. Snyder | 48 | % | 54 | % |
* | The actual payment that was made is found in the Non-Equity Incentive Plan Compensation column of the “Summary Compensation Table” in this Proxy Statement. Mr. Owens has two percentages noted: the first percentage in each column relates to the time period he was covered by regional operating metrics; the second percentage relates to the time period during which he was the CEO. |
The short-term incentive award payment opportunity at each level of performance for our named executive officers for fiscal 2010 is shown in the “Grants of Plan-Based Awards During Fiscal Year 2010” table in this Proxy Statement. The specific performance goals for the target level are considered to select high-growth companies (which were defined as those companies which grant bothbe challenging but achievable.
Fiscal 2010 Long-Term Incentive Compensation
In General. The fiscal 2010 long-term incentive plan design called for grants with a mix of 50% nonqualified stock options and restricted stock/restricted stock units and that had stock price improvement of 20% or greater over the last twelve months)1, regarding the mix of stock options andoptions/50% restricted stock/restricted stock units. The Compensation Committee determined to implementThis was a change from the prior year mix of 60% nonqualified stock options/40% restricted stock/restricted stock unit mix for all participants based on its review of the data, the desire to provide significant focus on increasing the share price and the belief that it was appropriate to treat all long-term incentive participants consistently. In October 2007, in order to emphasize a pay for performance philosophy, the Compensation Committee decided that discretion could also be applied to the future stock option grants under the long-term incentive program.
units. The Compensation Committee determines the aggregate dollar value of long-term incentives to be awarded to each named executive officer based on the executive officer’s position and grade level at H.B. Fuller. Once the projected dollar value is establishedtarget values for each named executive officer, to determine the number of options to be awarded, an estimated Black-Scholes value as of the date of grant is applied. To determine the number of restricted stock/restricted units to be awarded, a 30-day stock price average is applied. The CEO then recommends to the Compensation Committee the number of stock options, restricted stock and/or restricted stock units to be granted to each named executive officer. The Compensation Committee retains full authority to accept, modify or reject these recommendations. The Compensation Committee also reviews total Company performance and individual performance to determine the award for the CEO.
Analysis of Fiscal 2007 Long-Term Incentive Awards. In fiscal 2007, the long-term incentive program was entirely stock-based and consisted of annual grants of stock options, restricted stock and restricted stock units. The aggregate amount of these long-term incentive awards was set for executive officers so that the expected payout would result in compensation equal to competitive market levels of such compensation based on market data. For awards made December 4, 2006, the plan was designed to deliver an expected target value with 60% based on stock options and 40% based on restricted stock or restricted stock units. If discretion is exercised in awards, the 60%/40% mix may vary.
For Mr. Volpi, the target award granted in December 2006 was $1,000,000 in projected value. This target was arrived at by utilizing the same information discussed in the “Analysis of Fiscal 2007 Base Salary” section above relating to Mr. Volpi. The Compensation Committee determined to provide Mr. Volpi with aofficer’s long-term incentive award at approximately 200% of his base salary. Therefore, Mr. Volpi’s target award for fiscal 2007 was $1,000,000are set forth in projected value.
For Mr. McCreary, Mr. Feenan, Ms. Parriott, Mr. Keenan and Mr. Scripter, the target awards granted in fiscal year 2007 were $150,000, $425,000, $250,000, $250,000 and $75,000 respectively. Thetable below (the differences in target awardsaward values are due to the named executive officers being in different job grades at the end of fiscal year 2006.2009). It is the general practice of the Compensation Committee to make awards to executive officers in a range of 80% to 120% of the target value below.
Target Value of Long-Term Incentive for FY 2010 ($) | ||||
James J. Owens | 500,000 | |||
Michele Volpi | 2,000,000 | |||
James R. Giertz | 500,000 | |||
Steven Kenny | 500,000 | |||
Ann B. Parriott | 275,000 | |||
Barry S. Snyder | 275,000 |
Analysis of Fiscal 2010 Long-Term Incentive Awards. In October 2009, prior to the grant of awards for fiscal 2010, the Compensation Committee reviewed the plan design for the long-term incentive awards. At that time, the Compensation Committee approved changes for awards made for fiscal 2010. The Compensation Committee utilized Towers Perrin as a consultant on this review. Towers Perrin provided information using the peer group set forth under the “Peer Group Data”heading above. Based on this review and to better align with market practices, for fiscal year 2010 the Compensation Committee decided to take the following actions:
change the percentage value of stock option awards from 60% to 50% and to change the percentage value of restricted stock and/or restricted stock unit awards from 40% to 50%
change the stock option award vesting from a 4-year ratable schedule to a 3-year ratable schedule
change the restricted stock/restricted stock unit vesting from a three-year cliff vesting schedule to a three-year ratable vesting schedule
provide retirement eligible employees with restricted stock units as opposed to restricted stock
adjust the economic value of the long-term incentive awards to better align with the median of market practice and ensure appropriate differentiation by pay grade
For the grant of restricted stock to our CEO during fiscal year 2010, we also added a performance measure. The grant of restricted stock to Mr. Volpi contains a requirement that the restricted stock will vest in three equal installments on January 31, 2011, December 3, 2011 and December 3, 2012 only if (1) one or more of the performance measures in the CEO’s short-term incentive program are met (except for the net working capital metric) for fiscal 2010 as determined by the Compensation Committee and (2) Mr. Volpi continues to be employed by the Company on the respective vesting date. Since Mr. Volpi’s employment with the Company ended on December 7, 2010, the shares of restricted stock did not vest and were forfeited.
During fiscal year 2010, all long-term incentive awards to NEOs fell within 80% to 120% of the target value above. Fiscal year 20072010 long-term incentive awards of stock options, restricted stock and restricted stock units are set forth in the Grant“Grants of Plan-Based Awards TableDuring Fiscal Year 2010” table in this Proxy Statement.
Actions Taken for Fiscal Year 2008
On December 6, 2007, the Compensation Committee approved the following compensation for Mr. Volpi: an annual base salary of $710,000 effective December 1, 2007; andKenny received a grant of stock-based awards in an amount equalstock options on October 1, 2010 pursuant to approximately $1,420,000 underterms agreed to when he was hired by the Company’s AnnualCompany. This grant of stock options was not a part of the long-term incentive plan and Long-Term Incentive Plan and the Company’s Amended and Restated Year 2000 Stock Incentive Plan, resulting inhad a grant date fair market value of 80,653 shares of non-qualified stock options$250,000.
Other Executive Benefits and 20,206 shares of restricted stock. No changes were made in Mr. Volpi’s incentive opportunity under the short-term incentive plan at that time. Mr. Volpi will continue to be eligible to receive a target incentive opportunity of 100% of his base salary with a maximum incentive opportunity of up to 200% of his base salary under the short-term incentive plan for the 2008 fiscal year. However, in January 2008, the Compensation Committee determined to increase Mr. Volpi’s maximum short-term incentive opportunity to 250% of his base salary in the event of exceptional overall company performance.
Benefits, Retirement Programs, Perquisites and Other Programs
In General. We provide named executive officers a market competitive retirement, perquisite and other benefits program inIn order to attract and retain high caliber executive talent, we provide executive officers market competitive perquisite and because similar programs are provided by companies that we compete with to obtain talent.other benefit programs. We also provide some of these benefits to assist our named executive officers so that they are able tomay efficiently use their time on H.B. Fuller business. Our U.S.-based named executive officers participate in the same health and welfare programs as all other U.S.-based H.B. Fuller employees.
WeIn addition to our broad-based retirement plan (in which participation was frozen as of 1/1/2007*), we provide the following benefits, retirement programsperquisites and perquisitesbenefits to our named executive officers:officers who are based in the United States or who are U.S. expatriates:
Perquisites and Benefits | Description | |
• Defined
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Ø 3% non-elective (retirement) contribution restoration for compensation in excess of IRS
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Key Employee Deferred Compensation Plan | • Allows deferral of a portion of annual base salary | |
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Auto Allowance | • Monthly allowance. | |
Financial Counseling | • Up to $7,500 annually in financial planning and tax preparation. | |
Executive Health Exams | • | |
Excess Liability Insurance | • Group personal excess liability insurance policy provides individual coverage up to
|
Perquisites and Benefits | Description | |
Relocation Expense | • Assistance with relocation, sale and purchase of home, temporary living assistance, and movement of property, including a tax gross up for |
* | Eligible employees (including Michele Volpi and Ann B. Parriott) hired prior to January 1, 2007 are eligible for a qualified defined benefit pension plan described in the narrative accompanying “Pension Benefits” table in this Proxy Statement. |
** | The 3% non-elective (retirement contribution) benefit is available through the H.B. Fuller Company 401(k) & Retirement Plan only to eligible employees (including James J. Owens, James R. Giertz and Barry S. Snyder) who were hired after December 31, 2006 as such employees are not eligible for the defined benefit retirement offered to employees hired prior to January 1, 2007. |
*** | The 7% defined contribution supplemental executive retirement plan credit is available to eligible plan participants (including James J. Owens, Michele Volpi, James R. Giertz, Ann B. Parriott and Barry S. Snyder) who were either hired after December 31, 2006 or who made a transition election to participate in the defined contribution supplemental executive retirement plan in lieu of participation in the defined benefit supplemental executive retirement plan. |
Of the perquisites and benefits set forth above, only the financial counseling, executive health exam and the excess liability insurance are extended to Mr. Kenny, who is not based in the United States and is not an expatriate. Other benefits provided to Mr. Kenny include:
Perquisites and Benefits | Description | |
Retirement Plan | • See descriptions of retirement plan in the “Pension Benefits” table in this Proxy Statement. | |
Auto Allowance | • Monthly allowance. |
Analysis of Fiscal 20072010 Executive Benefits Retirement Programs, Perquisites and Other Programs.Perquisites. We provide perquisites to our executive officers aligned to the overall compensation objective to generally reflect competitiveness at the market median/50th percentile. However, the defined contribution restoration plan is designed to be above market to differentiate the Company in the competition for key executive talent. The Company provides supplemental executive retirement benefits under the defined contribution restoration plan for executive officers to complement the benefits provided through H.B. Fuller’s broad-based retirement plans.
In conjunction with the annual review of executive officer total compensation, which is typically done in July of each year, the Compensation Committee reviews data regarding executive officer benefits and perquisites from a high level comparison against prevalance inperquisites. In fiscal 2010, the market. In 2007, thisCompensation Committee reviewed market data was provided byon the prevalence of the following benefits and perquisites: the Key Employee Deferred Compensation Plan, auto allowance, executive health exam program and financial counseling. The data used to review the market prevalence of all of these benefits was:
2009 Hewitt TCM Executive Compensation Policies and Program survey.Programs U.S. Edition (439 participating companies)
Watson Wyatt 2009/2011 Survey Report on Perquisite Policies & Practices (prevalence for top management excluding CEO) (300 participating companies)
Towers Perrin 2009 Employee Benefit Information Center Executive Database (most recent proxy filing date with no data being more than two years old) (373 participating companies)
• | Peer Group noted in “Peer Group Data” section above |
3M Company, Best Buy Co., Inc., Donaldson Co. Inc., General Mills, Inc., Graco Inc., Imation Corp., Medtronic Inc., Polaris Industries, Inc., Supervalu Inc., Target Corp., and U.S. Bancorp. We reviewed the benefits and perquisites at these companies because they are competitors for talent in the regional marketplace in which we operate.
The annual review of executive officer total compensation with the Compensation Committee did not cover the prevalence of personal excess liability insurance coverage or relocation programs because the survey data on these types of programs is very limited. The Compensation Committee did not review the prevalence of the defined contribution restoration plan due to the philosophy that this plan is designed to be above market as discussed above. There were no changes made as a result of that review.the Compensation Committee’s review of the perquisite and other benefit programs because of the market prevalence of these programs. All perquisites paid to our named executive officers are disclosed in the “Summary Compensation TableTable” under the “Other Compensation”Other Compensation column and the footnotes thereto.
Severance, Change-in-Control and other Employment-Related Agreements
In General. H.B. Fuller provides supplemental executive retirement benefits for executive officers (includingdoes not have employment agreements with any of the named executive officers)officers that provide for a specified term of employment. The Company does have an employment agreement with Mr. Kenny as discussed below. The Company also has change-in-control agreements discussed under the heading“Change-in-Control Agreements”, executive severance agreements discussed under the heading“Severance”, and agreements regarding certain payments to complementMr. Owens and Mr. Snyder discussed under the heading“Other” below.
Severance. The executive severance agreements provide for payment of the following severance benefits provided through H.B. Fuller’s broad-based retirement plans. Beginning in 2007,if the broad-basedeligible executive officer’s employment is terminated involuntarily by the Company without cause (as defined benefit pension plan and the associated defined benefit supplemental executive retirement plan were frozen to new participants. Participation in the qualified pension plan was frozen as a result of a review ofagreement) or voluntarily by the competitive market practicesexecutive officer for good reason (as defined in the agreement):
Severance pay equal to one times (two times for the CEO) base salary plus target bonus, payable over the 12 months (24 months for the CEO) following termination;
Continued group medical and high cost ofdental insurance over 12 months (18 months for the plan. Management worked with Mercer Human Resource Consulting in 2006 on this review. In an effort to align with the marketCEO); and business objectives, management asked Mercer Human Resource Consulting to provide a review of current U.S. retirement plans including a detailed market analysis and development of potential future options
Outplacement services with a cost/benefit analysis. The market analysis compared benefitsvalue of up to $20,000.
Except as a percentageindicated above with respect to the CEO, the same form of pay at retirement with 15 other chemical companies and 14 other companies in the Minneapolis-St. Paul area.
In 2007, a further reviewagreement was done of the defined benefit supplemental executive retirement plan. This review was done by Towers Perrin. In an effortprovided to align with the market and business objectives, H.B. Fuller had Towers Perrin analyze high growth companies and certain chemical companies. For this purpose, high growth companies were defined as companies with greater than 20% total shareholder return in the prior year and sustained upward trend in stock price over the 5-year horizon. Only companies that disclosed under the new executive compensation disclosures rules were included in the analysis due to information limitations in the previous reporting format. The high growth companies included: Allergan, Inc., Ametek, Inc., Cameron International Corporation, Cephalon, Inc., Equifax, Inc., Hess Corporation, Martin Marietta Materials Processing, Inc., Millipor Corporation, Terex Corporation and Thomas & Betts Corporation. Towers Perrin also analyzed the following chemical companies: Wellman Inc., Albermarle Corporation, Arch Chemicals Inc., Cytec Industries, Inc., Ferro Corporation, FMC Corporation, International Flavors & Fragrances, Inc., Georgia Gulf Corporation, Olin Corporation, PolyOne Distribution Company, Sigma-Aldrich Corporation, Westlake Chemical Corporation, Terra Industries, Ltd., Hercules Incorporated, Chemtura Corporation, Kronos Worldwide, Inc. and OM Group, Inc.
We also solicited input from executives in the plan. This input indicated that a significant percentage of the active executives preferred an alternative arrangement. The new defined contribution supplemental executive retirement plan is designed to be above market to differentiate H.B. Fuller in the competition for key executive talent.
As a result of a review of the data discussed above regarding both the pension plan and the accompanying defined benefit supplemental executive retirement plan, it was determined that the defined benefit supplemental executive retirement plan was difficult to understand, lacked portability and delivered inconsistent benefits to executive officers. The Compensation Committee approved the freezing of participation in the pension plan and the defined benefit supplemental executive retirement plan and the creation of a defined contribution retirement plan and a defined contribution supplemental executive retirement plan for new hires. Participants in the defined benefit supplemental executive
retirement plan were given the opportunity to choose between continuing their participation in the defined contribution supplemental executive retirement plan or the new defined contribution supplemental executive retirement plan. The new defined contribution supplemental executive retirement plan went into effect on January 1, 2008.
Other Benefits.
Health & Welfare Benefits. Ourall named executive officers participateexcept for Mr. Kenny. The severance agreement with Mr. Kenny provides for a reduction in the same health and welfare programs as all other H.B. Fuller employees.
Severance.Our named executive officers participate in the same H.B. Fullerany severance pay policy as all U.S. based employees, which is intendeddue to help with the expenses of temporary unemployment if a named executive officer is involuntarily terminated from H.B. Fuller. An employee must sign an employment release to receive severance pay. An employee is not eligiblehim for any severance pay inrequired by local law. Mr. Owens’ agreement was amended effective December 2, 2010 to provide for the event of certain conditions. For example, if an executive officer was terminated for a gross violation of working rules or gross misconduct, or if an executive officer dies, voluntarily resigns or retires, then he/she is not eligible for severance. The “Executive Benefit and Payments Upon Separation” table in this Proxy Statement sets forth payments that may be made under this program.
enhanced CEO benefits.
Change-in-Control Agreements. All named executive officers except Mr. McCreary, have entered into change-in-control agreements with H.B. Fuller. These agreements provide for payments under certain circumstances following a change-in-control of H.B. Fuller.the Company. The purposeCompensation Committee believes that one of the purposes of providing change-in-control agreements is to provide financial security to the executive officer in the event theirthe executive officer’s employment is terminated in connection with a change–in-control.change-in-control. The agreement is intended to ensure the executive officer remains focused on activities related to a change-in-control that could be in the best interest of the companyCompany and its shareholders, and that the executive officer is not distracted by compensation implications as a result of a change-in-control. The Compensation Committee also believes that change-in-control payments under these agreements are triggered by certain circumstances, such as involuntaryassist in the retention of executive officers at a time when their departure might be detrimental to the Company and shareholders.
The change-in-control agreements contain a “double trigger” for receipt of change-in-control payments. This means that there must be a change in control of the Company and a termination of employment (or a material change to employment) for the provisions to apply and benefits to be paid. The Compensation Committee believes that a “double trigger” is more appropriate than a “single trigger” because it prevents the unnecessary payment of benefits to an executive officer in the event that the change in control does not result in the executive officer’s termination of employment or termination for good reasona material change in the terms of the executive officer’s employment (such as demotion, pay cut or relocation) that occurs following.
An explanation of any payments to be made under the change-in-control agreements is found under the heading “Involuntary (Not for Cause) Termination or Good Reason Termination after a change-in-controlChange-in-Control” in the section of this Proxy Statement titled “Potential Payments Made Upon Termination or Change-In-Control”.
Other. The Company has an agreement with Mr. Owens regarding the payment of a relocation bonus. This bonus was offered to Mr. Owens to encourage him to join the Company and to compensate him for the loss of benefits and compensation he would have received from his prior long-term employer. The Compensation Committee approved an amendment to this agreement with Mr. Owens regarding his relocation bonus during early fiscal year 2010. Under the original agreement, Mr. Owens was eligible to receive $500,000 if he relocated to Minnesota within 24 months of the Company. The cash severance payment is not triggered simply by a change-in-controldate he was hired. Under the amendment, Mr. Owens was eligible to receive $250,000 of the Company.
The Company’s change-in-control program$500,000 bonus if he remained employed by the Company until August 1, 2010. This payment was reviewed in 2007. Towers Perrin conducted the market review. Research was includedmade to Mr. Owens and is reflected in the review regarding providing change-in-control agreements to executive officers working outside the U.S. (excluding expatriates from the U.S.). Pursuant to the overall review, the Compensation Committee decided to approve the current program, with some modifications. The most important modifications to the current program were to provide change-in-control agreements to non-U.S.-based executive officers and changes relating to Section 409A“Bonus” column of the Internal Revenue Code. Summary Compensation Table. If he remains employed by the Company and relocates to Minnesota by August 1, 2012, he is eligible to receive the remaining $250,000 payment.
The Committee also determined to continue to review this programCompany does have an employment agreement with Mr. Kenny because employment agreements are customary in 2008.the region in England where Mr. Kenny is based. The “Executive Benefitagreement with Mr. Kenny sets forth his salary, job functions, benefits, ownership of intellectual property, and termination, non-competition and confidentiality provisions. The agreement does not provide for any minimum term of employment. See the section titled “Potential Payments Upon Separation” tablemade upon Termination or Change-in-Control” later in this Proxy Statement sets forthfor contractual payments that the Company may be madeowe Mr. Kenny under this program.
Employment Contracts. Presently, H.B. Fuller does not havehis employment contracts with anyagreement. In addition, as part of the named executive officers,offer of employment to Mr. Kenny, he was granted equity awards: (1) he received a grant of nonqualified stock options with 50% of the expected value provided on or near his hire date, and the other than50% of the change-in-control agreements discussed underexpected value provided on October 1, 2010 as long as he remained employed by the heading “Change-in-Control Agreements”Company; and non-competition and/or confidentiality agreements that are signed by all employees who have certain job responsibilities.(2) a pro-rated long-term incentive plan award granted on his date of hire in October 2009. The grant of nonqualified stock options was made in recognition of the loss of benefits from his prior employer.
The Company also has an agreement with Mr. Snyder regarding the payment of a bonus. This bonus was offered to Mr. Snyder to encourage him to join the Company and in recognition of the loss of stock he would incur in leaving his prior employer. It was structured, in part, as a retention bonus over a period of three years after his hire in lieu of paying a large hiring bonus at the time of hire with no retention criteria specified. Mr. Snyder was eligible to receive $320,000 in four equal payments of $80,000 each. The first payment of $80,000 was paid to Mr. Snyder within 30 days of his hire date. The second and third installments were paid on or about the first and second anniversaries of his hire date. The final payment will be paid on or about the third anniversary of his hire date provided that he remains employed by the Company.
Stock Ownership.Ownership
We believe that ownership of H.B. Fuller Common Stock by executive officers encourages long-term, strategic decision making that helps to reduce undue short-term risk-taking and is aligned with the balanced best interestinterests of H.B. Fuller’s constituents. Goals for recommended levels of executive stock
ownership were established in 2003.2003 and are reviewed annually. An executive officer’s stock ownership goal (which includes directly held H.B. Fuller stock, H.B. Fuller stock held in the H.B. Fuller ThriftCompany 401(k) & Retirement Plan, (a 401(k) plan), restricted stock, restricted stock units and stock units held in the Key Employee Deferred Compensation Plan) ranges in dollar amount from one to five times theirthe executive officer’s annual salary, depending on job grade.
The guideline for the CEO is ownership of at least five times his base salary in H.B. Fuller stockCommon Stock and the guideline for other named executive officers is ownership of at least two to three times their base salaries, depending on job grade. The Compensation Committee reviews the stock holdings of our named executive officers annually. Mr. McCreary has met his stock ownership goal. All other named executive officers are making progress toward meeting their stock ownership goals. No named executive officer, except for Mr. McCreary, has been in his or her present position for more than three years (excluding Mr. Feenan, who resigned as of February 15, 2007). The guideline provides that an executive should strive to reach the applicable stock ownership goal within five years of appointment to their position.
The guideline for Mr. Giertz and Mr. Kenny is ownership of at least three times their base salary in H.B. Fuller Common Stock. The guideline for Ms. Parriott and Mr. Snyder is ownership of at least two times their base salary in H.B. Fuller Common Stock. The Compensation Committee reviews the stock holdings of our named executive officers annually. This year’s review was based on job grades and stock values in effect as of June 30, 2010. At that point in time, no named executive officer had been in his or her present position for more than five years and no named executive officer had met his or her stock ownership goal. All of the named executive officers are continuing to make progress on meeting their stock ownership goals.
Tax Deductibility of CompensationConsiderations
Under Section 162(m) of the U.S. Internal Revenue Code, generally limits the tax deductibilitywe must meet specified requirements related to our performance and must obtain shareholder approval of compensation paid by a public company, like H.B. Fuller, to its chief executive officer and other executive officers. We consider the deductibility ofcertain compensation arrangements in order for us to fully deduct compensation in excess of $1,000,000 paid to a named executive compensation decisions, but deductibility is notofficer other than the only factor used in determining the appropriate level of compensation. H.B. Fuller’s Annual and Long-Term Incentive Plan and the H.B. Fuller Company Amended and Restated Year 2000 Stock Incentive Plan have each been approved by our shareholders as required by Section 162(m). Therefore, cash incentive awards and compensation attributable to stock options and other stock-based awards under these plans may be tax deductible. The Compensation Committee will continue to evaluate the compensation plans and programs in view of the Section 162(m) limitations.CFO. The Annual and Long-Term Incentive Plan has been amended(“ALTIP”) was approved by shareholders in 2008 and restated andincludes specific performance criteria; therefore, annual incentive awards granted under the Company is seeking approval fromALTIP are deemed to meet the requirements of Section 162(m). The Committee believes that compensation paid pursuant to the ALTIP will be deductible.
The shareholders ofapproved the Amended and Restated Annual and Long-TermH.B. Fuller Company Year 2000 Stock Incentive Plan at itsthe 2006 Annual Meeting of shareholders. See “Proposal 3”Shareholders and the ALTIP at the 2008 Annual Meeting of Shareholders. Therefore, cash incentive awards, stock options and other performance-based compensation under these plans may be excluded from the $1,000,000 cap under Section 162(m) as well. Additionally, cash compensation voluntarily deferred by our executive officers under our Key Employee Deferred Compensation Plan is not subject to the Section 162(m) cap until the year paid. Compensation paid in this Proxy Statement.
fiscal 2010 subject to the Section 162(m) cap did not exceed $1,000,000 for anyone who was an executive officer as of fiscal 2010 year end.
The Compensation Committee may decideintends to pay amounts that are non-deductible if it determines these payments arecontinue its practice of paying competitive compensation consistent with our compensation philosophy to attract, retain and aremotivate executive officers to manage our business in the best interests of H.B. Fuller. DuringFuller and our shareholders. The Compensation Committee, therefore, may choose to provide non-deductible compensation to our executive officers if it deems such compensation to be in the best interests of H.B. Fuller and our shareholders.
Our benefit plans that provide for deferrals of compensation are subject to Section 409A of the Internal Revenue Code. We have reviewed such plans for compliance with Section 409A and believe that they are in compliance.
2011 Compensation Arrangements with James J. Owens
On November 19, 2010, the Company’s Board of Directors appointed James J. Owens President and CEO and elected him as a director. On December 2, 2010, the Compensation Committee of the Company’s Board of Directors approved the compensation and benefits to be paid to Mr. Owens as
President and CEO effective November 19, 2010. Mr. Owens will receive an annual base salary of $560,000. Also, he will be entitled to receive a target incentive opportunity of 100% of his base salary with a maximum incentive opportunity of up to 200% of his base salary under the Company’s short-term incentive plan for the fiscal 2007, allyear ending December 3, 2011. In addition, Mr. Owens will be eligible for a stock-based award in an amount equal to $840,000 under the Company’s long-term incentive plan for such fiscal year. Mr. Owens will be eligible to receive other standard benefits provided to executives and other key employees of the Company under the Company’s benefit plans and programs, which are described above.
In addition, Mr. Owens’ Severance Agreement with the Company dated August 25, 2008 was amended effective December 2, 2010 to modify certain payments and benefits to be provided to Mr. Owens in the event his employment with the Company is terminated either involuntarily without cause or voluntarily for good reason, as follows: (i) the amount of any separation pay that would be paid to Mr. Owens was increased from one time to two times his annual cash compensation and (ii) the period of time after his termination of employment during which the Company would pay a portion of the premiums or cost of any group medical and/or dental insurance coverage was deductible.increased from 12 months to 18 months.
Consistent with Company practice regarding pay of directors who are also employees of the Company, Mr. Owens will not receive any separate compensation for serving as a director of the Company.
Total Compensation for Named Executive Officers
We believe that the policies and programs described in the Compensation Discussion and Analysis maintain an appropriate balance between motivating achievement of short-term goals and strategically leading H.B. Fuller in a direction to provide long-term success and therefore serve the interests of H.B. Fuller and its shareholders.
The Compensation Committee of the Board of Directors has reviewed and discussed with H.B. Fuller management the Compensation Discussion and Analysis. Based on this review and discussion with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in the Annual Report on Form 10-K for the year ended December 1, 2007.
November 27, 2010.
Compensation Committee of the Board of Directors of H.B. Fuller Company
R. William Van Sant, Chair
Knut KleedehnJuliana L. Chugg
Thomas W. Handley
Lee R. Mitau
John C. van Roden, Jr.
FISCAL YEAR 2007
The following table shows the cash and non-cash compensation for the 2007last three fiscal yearyears awarded to or earned by Mr. Michele Volpi,individuals who served as Chief Executive Officer during fiscal 2007, Mr. John A. Feenan as Chief Financial Officer for a portion of the 2007 fiscal year, Mr. James C. McCreary, Jr. as Interimand Chief Financial Officer during a portion of the 2007 fiscal year 2010 and each of the other three most highly compensated executive officers who were serving as executive officers at the end of fiscal year 2007.2010.
Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(1)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non- Equity Incentive Plan Compen- sation(1)(5) | Change in Pension Value & Non-qualified Deferred Compen- sation Earnings ($)(6) | All Other Compen- sation ($) | Total ($) | |||||||||||||
Michele Volpi, President and Chief Executive Officer | 2007 | 502,496 | 351,191 | (7) | 296,693 | 288,533 | 501,702 | 68,038 | 80,939 | (8) | 2,089,592 | |||||||||||
James C. McCreary, Jr., Vice President, Controller and Interim Chief Financial Officer | 2007 | 262,520 | 100,000 | (9) | 67,240 | 100,645 | 169,541 | 123,197 | 54,796 | (10) | 877,939 | |||||||||||
John A. Feenan, Chief Financial Officer(11) | 2007 | 86,791 | -0- | -0- | (11) | -0- | (11) | -0- | -0- | 46,816 | (12) | 133,607 | ||||||||||
Ann B. Parriott, Vice President, | 2007 | 288,565 | -0- | 81,193 | 79,975 | 180,746 | 24,279 | 47,073 | (13) | 701,831 | ||||||||||||
Timothy J. Keenan, Vice President, | 2007 | 246,328 | -0- | 72,304 | 89,255 | 165,595 | 19,641 | 41,467 | (14) | 634,590 | ||||||||||||
Jay Scripter Vice President, North America | 2007 | 231,374 | -0- | 23,221 | 28,907 | 88,553 | 24,874 | 198,489 | (15) | 595,418 |
Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(1)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non- Equity Incentive Plan Compen- sation ($)(1)(5) | Change in Pension Value and Non- qualified Deferred Compen -sation Earnings ($)(6) | All Other Compen -sation ($)(7) | Total ($) | |||||||||||||||||||||||||||
James J. Owens | 2010 | 441,401 | 250,000 | 283,907 | 282,305 | 277,937 | — | 240,869 | 1,776,419 | |||||||||||||||||||||||||||
President and Chief Executive Officer | 2009 | 419,130 | — | 155,282 | 231,976 | 387,911 | — | 212,389 | 1,406,688 | |||||||||||||||||||||||||||
2008 | 110,384 | 521,517 | 35,186 | 46,762 | — | — | 30,949 | 744,798 | ||||||||||||||||||||||||||||
Michele Volpi(8) | 2010 | 800,269 | — | 1,083,038 | 981,938 | 918,276 | 5,681 | 3,536,537 | 7,325,739 | |||||||||||||||||||||||||||
Former President and Chief Executive Officer | 2009 | 737,854 | — | 539,610 | 806,082 | 1,031,012 | 36,905 | 168,997 | 3,320,460 | |||||||||||||||||||||||||||
2008 | 710,273 | 319,500 | 538,490 | 717,247 | — | 162 | 217,635 | 2,503,307 | ||||||||||||||||||||||||||||
James R. Giertz | 2010 | 445,753 | — | 271,565 | 270,029 | 280,919 | — | 146,479 | 1,414,745 | |||||||||||||||||||||||||||
Sr. Vice President, Chief Financial Officer | 2009 | 428,095 | — | 155,282 | 231,976 | 304,242 | — | 95,955 | 1,215,550 | |||||||||||||||||||||||||||
2008 | 307,677 | 77,490 | 125,622 | 161,013 | — | — | 63,553 | 735,355 | ||||||||||||||||||||||||||||
Steven Kenny(9) | 2010 | 379,002 | — | 246,861 | 495,655 | 196,830 | — | 59,903 | 1,378,251 | |||||||||||||||||||||||||||
Sr. Vice President, Europe India, Middle East & Africa | ||||||||||||||||||||||||||||||||||||
Ann B. Parriott(10) | 2010 | 334,376 | — | 149,359 | 148,512 | 180,602 | 31,656 | 93,298 | 937,803 | |||||||||||||||||||||||||||
Vice President, Human Resources | 2009 | 322,331 | — | 109,606 | 163,745 | 196,382 | 32,577 | 70,152 | 894,793 | |||||||||||||||||||||||||||
2008 | 306,147 | 66,122 | 94,794 | 126,281 | — | 6,724 | 76,554 | 676,622 | ||||||||||||||||||||||||||||
Barry S. Snyder(9) | 2010 | 297,027 | 80,000 | 135,783 | 135,014 | 160,371 | — | 94,783 | 902,978 | |||||||||||||||||||||||||||
Vice President, Chief Technology Officer | 2009 | 290,000 | 80,000 | 91,338 | 136,456 | 176,510 | — | 251,261 | 1,025,565 |
(1) | Includes cash compensation deferred at the election of the executive under the H.B. |
(2) | We award bonuses under our short-term incentive |
(3) |
(4) | The amounts in this column represent the grant date fair values of stock option awards. In accordance with FASB ASC Topic 718, the grant date fair value of these awards have been determined using the Black-Scholes method and based on the assumptions |
(5) | As described in the “Compensation Discussion and |
(6) | The amounts in this column represent the aggregate change in the actuarial present value of the named executive officer’s accumulated retirement benefits under the H.B. Fuller Retirement |
(7) |
All Other Compensation—Fiscal Year 2010
Name | Defined Contribution Plan Company Match & Contributions ($) | Defined Contribution Restoration Plan Contributions ($) | Dividends on Unvested Restricted Stock ($) | Perquisites (see table below) ($) | Severance ($) | Total ($) | ||||||||||||||||||
James J. Owens | 17,150 | 100,498 | 7,654 | 115,567 | — | 240,869 | ||||||||||||||||||
Michele Volpi | 9,800 | 189,531 | 30,767 | 26,999 | 3,279,440 | (a) | 3,536,537 | |||||||||||||||||
James R. Giertz | 17,150 | 88,080 | 8,727 | 32,522 | — | 146,479 | ||||||||||||||||||
Steven Kenny | 30,320 | — | 3,784 | 25,799 | — | 59,903 | ||||||||||||||||||
Ann B. Parriott | 9,800 | 48,706 | 5,381 | 29,411 | — | 93,298 | ||||||||||||||||||
Barry S. Snyder | 17,150 | 49,239 | 6,612 | 21,782 | — | 94,783 |
Perquisites—Fiscal Year 2010
Name | Auto Allowance ($) | Personal Excess Liability Insurance ($)(b) | Health Exam ($) | Financial Counseling ($) | Housing & Commuting Expenses and Related Tax Gross-Ups ($)(c) | Spousal Airfare ($)(d) | Total Perquisites ($) | |||||||||||||||||||||
James J. Owens | 14,400 | 1,499 | 2,225 | 500 | 94,025 | 2,918 | 115,567 | |||||||||||||||||||||
Michele Volpi | 18,000 | 1,499 | — | 7,500 | — | — | 26,999 | |||||||||||||||||||||
James R. Giertz | 14,400 | 1,499 | 14,123 | 2,500 | — | — | 32,522 | |||||||||||||||||||||
Steven Kenny | 17,464 | 835 | — | 7,500 | — | — | 25,799 | |||||||||||||||||||||
Ann B. Parriott | 14,400 | 1,499 | 6,512 | 7,000 | — | — | 29,411 | |||||||||||||||||||||
Barry S. Snyder | 14,400 | 1,499 | 2,929 | 2,500 | — | 454 | 21,782 |
(a) | Mr. Volpi had a severance agreement dated May 20, 2008 (the “Severance Agreement”) with the |
installments in accordance with the Company’s regular payroll practices and schedule over a twenty-four month period; (2) for a period of up to eighteen months, continued coverage under the Company’s group medical and dental insurance programs, with the Company continuing to pay |
(b) | Includes |
(c) | Amount for Mr. Owens includes a housing expense of $8,435 (with a related tax gross-up of $4,098) and commuting expenses of $45,391 (with a related tax gross-up of $36,101). |
(d) | Amounts for spousal airfare were paid in accordance with company policy requiring a valid business purpose for payment of spouse travel expenses. These amounts are treated as income to the employee and are not grossed up for tax purposes. |
(8) | The amounts in the “All Other Compensation” column for fiscal 2009 and 2008 have been reduced by $8,297 and $2,600 respectively from amounts reported in this column in prior years due to in advertent inclusion of |
(9) | Mr. |
(10) |
GRANTS OF PLAN-BASED AWARDS DURING FISCAL 20072010
The following table summarizes the grants of plan-based awards in fiscal year 2010 for each of the named executive officers in the Summary Compensation Table.
Name | Grant | Date of sation | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | All Other Option Awards: Number of Securities Underlying Options (#)(4) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | |||||||||||
Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||
Michele Volpi | 12/4/2006 | 11/30/2006 | 250,851 | 501,702 | 1,003,404 | 16,660 | 446,321 | |||||||||||
12/4/2006 | 11/30/2006 | 64,309 | 26.79 | 708,171 | ||||||||||||||
James C. McCreary, Jr. | 12/4/2006 | 11/30/2006 | 99,730 | 149,595 | 2,499 | 66,948 | ||||||||||||
12/4/2006 | 11/30/2006 | 9,646 | 26.79 | 106,222 | ||||||||||||||
John A. Feenan | 12/4/2006 | 11/30/2006 | 213,316 | 426,633 | 7,080 | 189,673 | ||||||||||||
12/4/2006 | 11/30/2006 | 27,331 | 26.79 | 300,969 | ||||||||||||||
Ann B. Parriott | 12/4/2006 | 11/30/2006 | 129,104 | 258,208 | 4,165 | 111,580 | ||||||||||||
12/4/2006 | 11/30/2006 | 16,077 | 26.79 | 177,040 | ||||||||||||||
Timothy J. Keenan | 12/4/2006 | 11/30/2006 | 118,282 | 236,564 | 4,165 | 111,580 | ||||||||||||
12/4/2006 | 11/30/2006 | 16,077 | 26.79 | 177,040 | ||||||||||||||
Jay Scripter | 12/4/2006 | 11/30/2006 | 88,553 | 169,420 | 1,249 | 33,461 | ||||||||||||
12/4/2006 | 11/30/2006 | 4,823 | 26.79 | 45,505 |
Name and Award | Grant Date | Date of Meeting of Compen- sation Committee at which Grant was Approved | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | All Other Option Awards: Number of Securities Underlying Options (#)(3) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(4) | ||||||||||||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||
James J. Owens | ||||||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive | 128,968 | 257,936 | 515,873 | |||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 12/3/2009 | 12/3/2009 | 13,802 | 283,907 | ||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 12/3/2009 | 12/3/2009 | 33,275 | 20.57 | 282,305 | |||||||||||||||||||||||||||||||||||||||||||
Michele Volpi | ||||||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive | 401,117 | 802,233 | 1,604,467 | |||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 12/3/2009 | 12/3/2009 | 48,007 | (5) | 1,083,038 | |||||||||||||||||||||||||||||||||||||||||||
LTI Award | 12/3/2009 | 12/3/2009 | 115,740 | 20.57 | 981,938 | |||||||||||||||||||||||||||||||||||||||||||
James R. Giertz | ||||||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive | 124,965 | 249,929 | 499,859 | |||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 12/3/2009 | 12/3/2009 | 13,202 | 271,565 | ||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 12/3/2009 | 12/3/2009 | 31,828 | 20.57 | 270,029 | |||||||||||||||||||||||||||||||||||||||||||
Steven Kenny | 75,131 | 150,263 | 300,525 | |||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive | ||||||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 12/3/2009 | 12/3/2009 | 12,001 | 246,861 | ||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 12/3/2009 | 12/3/2009 | 28,935 | 20.57 | 245,485 | |||||||||||||||||||||||||||||||||||||||||||
Employment Inducement Award(6) | 10/1/2010 | 10/1/2009 | 30,557 | 20.20 | 250,170 | |||||||||||||||||||||||||||||||||||||||||||
Ann B. Parriott | ||||||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive | 80,340 | 160,679 | 321,358 | |||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 12/3/2009 | 12/3/2009 | 7,261 | 149,359 | ||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 12/3/2009 | 12/3/2009 | 17,505 | 20.57 | 148,512 | |||||||||||||||||||||||||||||||||||||||||||
Barry S. Snyder | ||||||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive | 71,340 | 142,680 | 285,360 | |||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 12/3/2009 | 12/3/2009 | 6,601 | 135,783 | ||||||||||||||||||||||||||||||||||||||||||||
LTI Award | 12/3/2009 | 12/3/2009 | 15,914 | 20.57 | 135,014 |
(1) |
The restricted stock awards are granted under the Amended and Restated H.B. Fuller Company Year 2000 Stock Incentive Plan. The restricted stock grants vest in |
(4) | The fair value of the restricted stock awards is calculated by multiplying the number of shares of restricted stock by the closing price of our Common Stock on the date of grant. The Black-Scholes option pricing method was used to estimate the grant date fair value of the options in this column. |
(5) | The restricted stock award for Mr. Volpi was granted under the Amended and Restated H.B. Fuller Company Year 2000 Stock Incentive Plan. The restricted stock grant would have vested in three annual installments on January 31, 2011, December 3, 2011 and December 3, 2012 only if (a) one or more of the performance measures in the CEO’s short-term incentive program measures had been met (except for the net working capital metric) for fiscal 2010 as determined by the Compensation Committee and (b) Mr. Volpi continued to be employed by the Company on the respective vesting date. Under the Amended and Restated H.B. Fuller Company Year 2000 Stock Incentive Plan, dividends on restricted stock are accrued by H.B. Fuller at the same rate as payable to all H.B. Fuller shareholders and are paid if and when the restricted stock vests. The restricted stock becomes immediately vested in the event of death, disability and change-in-control. The value of accrued dividends is included in the Summary Compensation Table in the “All Other Compensation” column. Since Mr. Volpi’s employment with the Company ended on December 7, 2010, the shares of restricted stock did not vest and were forfeited. |
(6) | Mr. Kenny was awarded these stock options as part his agreement to join the Company. An initial award of stock options with a value of $250,000 was granted on his hire date. This award of stock options has a grant date of October 1, 2010 and vests in four equal annual installments beginning on October 1, 2011. |
OUTSTANDING EQUITY AWARDS AT FISCAL 2010 YEAR-END
The following table summarizes the total outstanding equity awards as of November 27, 2010 for each of the named executive officers in the Summary Compensation Table.
Option Awards | Stock Awards | |||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | |||||||||||||||||||||
James J. Owens | 10/02/2008 | 3,692 | 3,693 | 19.03 | 10/02/2018 | |||||||||||||||||||||||
12/04/2008 | 11,915 | 35,748 | 14.15 | 12/04/2018 | ||||||||||||||||||||||||
12/03/2009 | -0- | 33,275 | 20.57 | 12/03/2019 | ||||||||||||||||||||||||
10/02/2008 | 1,911 | (3) | 40,264 | |||||||||||||||||||||||||
12/04/2008 | 11,292 | (3) | 237,922 | |||||||||||||||||||||||||
12/03/2009 | 13,981 | (3) | 294,580 | |||||||||||||||||||||||||
Michele Volpi | 06/27/2002 | 5,122 | -0- | 15.31 | 06/27/2012 | |||||||||||||||||||||||
12/09/2002 | 3,364 | -0- | 13.95 | 12/09/2012 | ||||||||||||||||||||||||
12/03/2003 | 10,162 | -0- | 13.65 | 12/03/2013 | ||||||||||||||||||||||||
12/02/2004 | 24,464 | -0- | 14.49 | 12/02/2014 | ||||||||||||||||||||||||
12/01/2005 | 39,608 | -0- | 16.02 | 12/01/2015 | ||||||||||||||||||||||||
12/04/2006 | 48,231 | 16,078 | 26.79 | 12/04/2016 | ||||||||||||||||||||||||
12/06/2007 | 40,326 | 40,327 | 26.65 | 12/06/2017 | ||||||||||||||||||||||||
12/04/2008 | 41,405 | 124,217 | 14.15 | 12/04/2018 | ||||||||||||||||||||||||
12/03/2009 | -0- | 115,740 | 20.57 | 12/03/2019 | ||||||||||||||||||||||||
12/06/2007 | 21,054 | (3) | 443,607 | |||||||||||||||||||||||||
12/04/2008 | 39,241 | (3)(4) | 826,808 | |||||||||||||||||||||||||
12/03/2009 | 48,630 | (5) | 1,024,634 | |||||||||||||||||||||||||
James R. Giertz | 04/02/2008 | 11,985 | 11,986 | 20.93 | 04/02/2018 | |||||||||||||||||||||||
12/04/2008 | 11,915 | 35,748 | 14.15 | 12/04/2018 | ||||||||||||||||||||||||
12/03/2009 | -0- | 31,828 | 20.57 | 12/03/2019 | ||||||||||||||||||||||||
04/02/2008 | 6,237 | (3) | 131,414 | |||||||||||||||||||||||||
12/04/2008 | 11,292 | (3) | 237,922 | |||||||||||||||||||||||||
12/03/2009 | 13,373 | (3) | 281,769 | |||||||||||||||||||||||||
Steven Kenny | 10/01/2009 | 10,427 | 31,281 | 19.85 | 10/01/2019 | |||||||||||||||||||||||
12/03/2009 | -0- | 28,935 | 20.57 | 12/03/2019 | ||||||||||||||||||||||||
10/01/2010 | -0- | 30,557 | 20.20 | 10/01/2020 | ||||||||||||||||||||||||
10/01/2009 | 1,385 | (3) | 29,182 | |||||||||||||||||||||||||
12/03/2009 | 12,157 | (3) | 256,148 | |||||||||||||||||||||||||
Ann B. Parriott | 01/27/2006 | 19,858 | -0- | 18.74 | 01/27/2016 | |||||||||||||||||||||||
12/04/2006 | 12,057 | 4,020 | 26.79 | 12/04/2016 | ||||||||||||||||||||||||
12/06/2007 | 7,100 | 7,100 | 26.65 | 12/06/2017 | ||||||||||||||||||||||||
12/04/2008 | 8,411 | 25,233 | 14.15 | 12/04/2018 | ||||||||||||||||||||||||
12/03/2009 | -0- | 17,505 | 20.57 | 12/03/2019 | ||||||||||||||||||||||||
12/06/2007 | 3,706 | (3) | 78,085 | |||||||||||||||||||||||||
12/04/2008 | 7,971 | (3) | 167,949 | |||||||||||||||||||||||||
12/03/2009 | 7,355 | (3) | 154,970 | |||||||||||||||||||||||||
Barry S. Snyder | 10/27/2008 | 22,307 | 22,308 | 12.94 | 10/27/2018 | |||||||||||||||||||||||
12/04/2008 | 7,009 | 21,028 | 14.15 | 12/04/2018 | ||||||||||||||||||||||||
12/03/2009 | -0- | 15,914 | 20.57 | 12/03/2019 | ||||||||||||||||||||||||
10/27/2008 | 10,079 | (3) | 212,365 | |||||||||||||||||||||||||
12/04/2008 | 6,642 | (3) | 139,947 | |||||||||||||||||||||||||
12/03/2009 | 6,687 | (3) | 140,895 |
(1) | Stock options granted prior to December 3, 2009 vest in four equal annual installments beginning on the first anniversary of the grant date. Stock options granted on or after December 3, 2009 vest in three equal annual installments beginning on the first anniversary of the grant date. Options become immediately exercisable upon retirement (age 55 and 10 years of service), death, disability or change-in-control. |
The following table summarizes the total outstanding equity awards as of December 1, 2007 for each of the named executive officers in the Summary Compensation Table.
(2) | The market value is based on the closing price at November 26, 2010 (the last business day of the fiscal year) of $21.07. |
OUTSTANDING EQUITY AWARDS AT FISCAL 2007 YEAR-END
Option Awards | Stock Awards | |||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | |||||||
Michele Volpi | 06/27/2002 | 5,122 | -0- | 15.31 | 6/27/2012 | |||||||||
12/09/2002 | 9,364 | -0- | 13.95 | 12/9/2012 | ||||||||||
12/03/2003 | 7,620 | 2,542 | 13.65 | 12/3/2013 | ||||||||||
12/02/2004 | 12,232 | 12,232 | 14.49 | 12/2/2014 | ||||||||||
12/01/2005 | 19,804 | 19,804 | 16.02 | 12/1/2015 | ||||||||||
12/04/2006 | -0- | 64,309 | 26.79 | 12/4/2016 | ||||||||||
04/15/2004 | 828.720 | 20,958 | ||||||||||||
12/02/2004 | 6,190.524 | 156,558 | ||||||||||||
12/01/2005 | 14,668.053 | 370,955 | ||||||||||||
04/05/2006 | 4,939.062 | 124,909 | ||||||||||||
12/04/2006 | 16,822.858 | 425,450 | ||||||||||||
James C. McCreary, Jr. | 01/17/2002 | 15,368 | -0- | 12.98 | 1/17/2012 | |||||||||
12/09/2002 | 14,044 | -0- | 13.95 | 12/9/2012 | ||||||||||
12/03/2003 | 11,432 | 3,812 | 13.65 | 12/3/2013 | ||||||||||
12/02/2004 | 9,174 | 9,174 | 14.49 | 12/2/2014 | ||||||||||
12/01/2005 | 8,388 | 8,388 | 16.02 | 12/1/2015 | ||||||||||
12/04/2006 | -0- | 9,646 | 26.79 | 12/4/2016 | ||||||||||
04/15/2004 | 470.099 | 11,889 | ||||||||||||
12/02/2004 | 4,643.931 | 117,445 | ||||||||||||
12/01/2005 | 4,141.280 | 104,733 | ||||||||||||
12/04/2006 | 2,523.429 | 63,818 | ||||||||||||
John A. Feenan(4) | -0- | -0- | N/A | N/A | -0- | -0- | ||||||||
Ann B. Parriott | 01/27/2006 | 4,964 | 14,894 | 18.74 | 1/27/2016 | |||||||||
12/04/2006 | -0- | 16,077 | 26.79 | 12/4/2016 | ||||||||||
01/27/2006 | 7,357.510 | 186,071 | ||||||||||||
12/04/2006 | 4,205.715 | 106,363 | ||||||||||||
Timothy J. Keenan | 12/02/2004 | 6,116 | 6,116 | 14.49 | 12/2/2014 | |||||||||
12/01/2005 | 8,388 | 8,388 | 16.02 | 12/1/2015 | ||||||||||
12/04/2006 | 16,077 | 26.79 | 12/4/2016 | |||||||||||
12/02/2004 | 3,095.262 | 78,279 | ||||||||||||
12/01/2005 | 4,141.280 | 104,733 | ||||||||||||
12/04/2006 | 4,205.715 | 106,363 | ||||||||||||
Jay Scripter | 04/13/2005 | 700 | 1,400 | 14.10 | 4/13/2015 | |||||||||
12/01/2005 | 2,097 | 4,194 | 16.02 | 12/1/2015 | ||||||||||
12/04/2006 | 4,823 | 26.79 | 12/4/2016 | |||||||||||
04/15/2004 | 302.882 | 7,660 | ||||||||||||
12/01/2005 | 2,070.640 | 52,366 | ||||||||||||
12/04/2006 | 1,261.209 | 31,896 |
(4) | Since Mr. |
(5) | These performance-based restricted stock shares were granted on December 3, 2009 subject to a requirement that the restricted stock will vest in three equal annual installments on January 31, 2011, December 3, 2011 and December 3, 2012 only if (1) one or more of the performance measures in the CEO’s short-term incentive program measures are met (except for the net working capital metric) for fiscal 2010 as determined by the Compensation Committee and (2) Mr. Volpi continues to be employed by the Company on the respective vesting date. Since Mr. Volpi’s employment with the Company ended on December 7, 2010, the shares of restricted stock did not vest and were forfeited. |
OPTION EXERCISES AND STOCK VESTED—FISCAL 2007YEAR 2010
The following table summarizes the number of options exercised and shares of restricted stock vested during fiscal year 20072010 for each of the named executive officers in the Summary Compensation Table.
Option Awards | Stock Awards | |||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | ||||
Michele Volpi | -0- | -0- | 822 | 22,765 | ||||
James C. McCreary, Jr. | -0- | -0- | 466 | 12,914 | ||||
John Feenan | 95,739 | 1,068,383 | -0- | -0- | ||||
Ann B. Parriott | -0- | -0- | -0- | -0- | ||||
Timothy J. Keenan | -0- | -0- | -0- | -0- | ||||
Jay Scripter | 2,797 | 30,405 | 300 | 8,320 |
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||
James J. Owens | -0- | -0- | -0- | -0- | ||||||||||||
Michele Volpi | -0- | -0- | 17,304 | 365,808 | ||||||||||||
James R. Giertz | -0- | -0- | -0- | -0- | ||||||||||||
Steven Kenny | -0- | -0- | -0- | -0- | ||||||||||||
Ann B. Parriott | -0- | -0- | 4,326 | 91,452 | ||||||||||||
Barry S. Snyder | -0- | -0- | -0- | -0- |
(1) | The value realized on the vesting of stock awards is the closing market price of a share of H.B. Fuller Common Stock on the date of vesting multiplied by the number of vested shares. H.B. Fuller withheld shares of the H.B. Fuller Common Stock from the amounts shown having a value equal to the applicable tax withholding requirement. |
PENSION BENEFITS—FISCAL YEAR 20072010
The amounts reported in the table below sets forthequal the present accumulated value of the pension benefitsaccumulated benefit as of November 27, 2010 for the named executive officers under the H.B. Fuller Company Retirement Plan based on the assumptions described in note 1 below. Mr. Owens, Mr. Giertz, Mr. Kenny and Mr. Snyder are not eligible to participate in the Summary Compensation Table under each of the following pension plans.H.B. Fuller Company Retirement Plan.
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit(1) ($) | Payments During Last Fiscal Year ($) | ||||||||||||
Michele Volpi | H.B. Fuller Company Retirement Plan | 8.417 | 105,785 | -0- | ||||||||||||
Ann B. Parriott | H.B. Fuller Company Retirement Plan | 4.917 | 111,653 | -0- |
(1) |
|
The H. B. Fuller Company Retirement Plan is a funded and tax-qualified plan that provides pension benefits to 782 active employees as of December 31, 2010. Entry into the plan was frozen as of December 31, 2006 to new participants. Neither Mr. Volpi nor Ms. Parriott is currently eligible for early retirement benefits.
Employees hired or rehired after December 31, 2006 are eligible for the “3% ‘non-elective’” retirement credit under the H.B. Fuller Company 401(k) & Retirement Plan discussed below. All regular, full-time and part-time U.S. employees who were hired before January 1, 2007 are eligible to participate in the plan after six full months of employment. Normal Retirement Age is defined as age 65; however employees are generally eligible to retire with unreduced benefits at age 62 or later if they have completed 10 years of service, and are eligible to retire with reduced benefits from ages 55 to 61 if they have completed 5 years of service.
The amount of pension benefits received at retirement is based on a formula that includes final average compensation and years of service. Final average compensation is the average amount of eligible earnings for the five highest paid calendar years of the last 10 consecutive
years of credited service. Eligible earnings are defined as base salary and short-term incentive cash bonuses below the IRS-prescribed limit applicable to tax-qualified plans ($225,000245,000 for calendar year 2007)2010). The benefit will equal the sum of 1.0% of final average compensation for each year of credited service plus .45% of final average compensation in excess of the Social Security covered compensation level for each year of credited service up to a maximum of 30 years.
The pension benefit an employee earns over his or her career with H.B. Fuller is payable starting after retirement on a monthly basis for life. Employees vest in the plan after completing five years of qualifying service.
Benefits under this plan are subject to the limitations imposed under Section 415 of the Internal Revenue Code. The section 415 limit for calendar year 20072010 is $180,000$195,000 per year for a single life annuity payable at an IRS-prescribed retirement age.
Supplemental benefits provide for restoration of benefits limited in qualified retirement plans. They include:
|
During 2007 participants were given the choice to either remain in the H.B. Fuller Company DB SERP or to participate in the supplemental executive retirement plan account within the Defined Contribution Restoration Plan (DC Restoration Plan) described below.Of the named executive officers, only Mr. McCreary elected to continue to participate in the DB SERP. The remaining participants will be removed and an amount equal to their DB SERP earned benefit as of December 31, 2006 plus interest and 7% of their eligible earnings for the calendar year ending December 31, 2007 will be credited to their DC Restoration Plan account during 2008.
|
4% restoration plan match credit on H.B. Fuller’s Thrift Plan (a 401(k) plan) employer match to restore the company matching contribution that is restricted by IRS contribution limits, providing for a benefit of 4% of eligible compensation minus matching contributions under the H.B. Fuller Thrift Plan. (For Mr. McCreary, this match is also available.)
3% “restoration nonelective” credit provides a contribution of 3% of eligible pay in excess of the IRS annual limit for participants who were hired after December 31, 2006. None of the named executive officers are eligible for this retirement credit.
7% supplemental executive retirement plan credit on all eligible earnings.
One time transition election additional amount for participants who elected to convert from a DB SERP to the DC Restoration Plan.
In the past, in certain circumstances, H.B. Fuller has adjusted its standard retirement benefits in order to bring in key executive talent. In the circumstances in which these adjustments have been made, it has been to recognize valuable experience that an executive brings from a prior career and is now bringing to H.B. Fuller. We have not adjusted the standard retirement benefits for any of the named executive officers.
For Mr. Kenny, who is based in England, our stakeholder pension plan is a defined contribution plan. Eligibility for the stakeholder pension plan is immediate upon hire. The contribution consists of a 4% non-elective credit and a matching credit on a 1 to 1 basis for the first 4% of employee contributions. Benefit payout is based on the employee decision. The employee may choose between an annuity of the retirement saving or a partial lump sum and annuity pay-out at retirement at age of 55 or later. Employees who leave the company before retirement age can choose to leave their account where it is or to transfer the value of their account to another personal or stakeholder plan.
No pension benefits were paid to any named executivesexecutive officers in the last fiscal year.
NONQUALIFIED DEFERRED COMPENSATION—FISCAL YEAR 2010
The amounts reported infollowing table summarizes information with respect to the table below equal the present valueparticipation of the accumulated benefit as of December 1, 2007 for the named executives under each plan based on the assumptions describedexecutive officers in note 1.our nonqualified deferred compensation plans. Mr. Kenny is not eligible to participate in our nonqualified deferred compensation plans.
PENSION BENEFITS—FISCAL YEAR 2007
Name | Plan Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(3) | ||||||||||||||||
James J. Owens | Key Employee Deferred Compensation Plan | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||
Defined Contribution Restoration Plan | -0- | 100,498 | 1,638 | -0- | 156,473 | |||||||||||||||||
Michele Volpi | Key Employee Deferred Compensation Plan | -0- | -0- | 12,151 | -0- | 149,136 | ||||||||||||||||
Defined Contribution Restoration Plan | -0- | 189,531 | 12,015 | -0- | 578,277 | |||||||||||||||||
James R. Giertz | Key Employee Deferred Compensation Plan | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||
Defined Contribution Restoration Plan | -0- | 88,080 | 2,477 | -0- | 171,349 | |||||||||||||||||
Ann B. Parriott | Key Employee Deferred Compensation Plan | -0- | -0- | 453 | -0- | 10,335 | ||||||||||||||||
Defined Contribution Restoration Plan | -0- | 48,706 | 4,013 | -0- | 178,394 | |||||||||||||||||
Barry S. Snyder | Key Employee Deferred Compensation Plan | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||
Defined Contribution Restoration Plan | -0- | 49,239 | 820 | -0- | 77,419 |
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit(1) ($) | Payments During Last Fiscal Year ($) | ||||
Michele Volpi | H.B. Fuller Retirement Plan | 5.167 | 49,019 | -0- | ||||
Defined Benefit Supplemental Executive Retirement Plan | 5.167 | 108,533 | -0- | |||||
James C. McCreary, Jr.(2) | H.B. Fuller Retirement Plan | 6.833 | 103,249 | -0- | ||||
Defined Benefit Supplemental Executive Retirement Plan | 28.833 | 533,521 | -0- | |||||
John A. Feenan(3) | H.B. Fuller Retirement Plan | N/A | N/A | -0- | ||||
Defined Benefit Supplemental Executive Retirement Plan | N/A | N/A | -0- | |||||
Ann B. Parriott | H.B. Fuller Retirement Plan | 1.667 | 26,215 | -0- | ||||
Defined Benefit Supplemental Executive Retirement Plan | 1.667 | 6,410 | -0- | |||||
Timothy J. Keenan | H.B. Fuller Retirement Plan | 3.083 | 41,901 | -0- | ||||
Defined Benefit Supplemental Executive Retirement Plan | 3.083 | 91,376 | -0- | |||||
Jay Scripter | H.B. Fuller Retirement Plan | 4.167 | 39,773 | -0- | ||||
Defined Benefit Supplemental Executive Retirement Plan | 4.167 | 21,783 | -0- |
(1) |
(2) |
|
|
(3) |
Name | Plan Name | Amount previously reported as compensation to executive officer in Compensation Table for previous years ($) | ||||
James J. Owens | Key Employee Deferred Compensation Plan Defined Contribution Restoration Plan | -0- | ||||
111,519 | ||||||
Michele Volpi | Key Employee Deferred Compensation Plan Defined Contribution Restoration Plan | 114,781 | ||||
364,491 | ||||||
James R. Giertz | Key Employee Deferred Compensation Plan Defined Contribution Restoration Plan | -0- | ||||
116,879 | ||||||
Ann B. | Key Employee Deferred Compensation Plan Defined Contribution Restoration Plan | 12,803 | ||||
97,291 | ||||||
Barry S. Snyder | Key Employee Deferred Compensation Plan Defined Contribution Restoration Plan | -0- | ||||
50,058 |
We offerKey Employee Deferred Compensation Plan. The Key Employee Deferred Compensation Plan is a nonqualified deferred compensation plan asthat allows deferral of salary or short-term incentive awards on a tool for our key employees (including our named executive officers) to plan for their financial future. This plan is a tax deferral opportunity. The named executivepre-tax basis. Executive officers may defer amounts into this plan fromup to 80% of their base salary andor up to 100% of their short-term incentive awards. award. The plan is unfunded and does not protect the executive from insolvency of the Company.
Amounts deferred under the planKey Employee Deferred Compensation Plan are credited with earnings and investment gains and losses by assuming that deferred amounts were invested in one or more hypothetical investment options selected by the participant underexecutive. Executive officers are allowed to change their investment elections at any time. The one year rates of return for such investments for fiscal 2010 are as follows: Prime Rate Fund 3.28%; PIMCO VIT Total Return AC, 7.36%; PIMCO VIT Real Return AC, 7.52%; Fidelity VIP Equity-Income SC, 8.19%; T. Rowe Price Equity Income II, 8.62%; Dreyfus Stock Index IS, 10.55%; Fidelity VIP Contrafund SC, 13.78%; Oppenheimer Capital Appreciation VA Non-SS, 9.39%; Janus AS Forty SS, 5.4%; Goldman VIT MidCap Value, 22.28%; Fidelity VIP MidCap SC, 27.25%; T. Rowe Price MidCap Growth II, 27.22%; Royce Micro-Cap IC, 27.50%; Lincoln VIPT Baron Growth Opportunities SC, 24.29%; Van Kampen UIF US Real Estate CI I, 37.20%; Oppenheimer Global Securities VA Non-SS, 12.28%; Dreyfus VIF International Value IS, 0.03%; Janus AS Overseas SS, 26.80%; and H.B. Fuller Company stock, 5.72%. Participants who invest in the termsCompany stock fund are eligible to receive a 10% match in Company stock. The value of the matching contributions received, if any, is disclosed in the Summary Compensation Table in this Proxy Statement. During fiscal year 2010, no named executive officers made contributions to this plan. In addition, the Compensation Committee may make discretionary contributions to a participant’s Company Stock account under this plan. For fiscal year 2010, no discretionary contributions were made to any of the named executive officers listed in the Summary Compensation Table. Balances in
the deferred compensation plan reflect amounts that have accumulated over time and directly relate to participants’ length of participation in the plan, individual investment choices and individual decisions regarding the level of savings over time. Participants who invest
Executive officers are always 100% vested in the Company stock fundtheir Key Employee Deferred Compensation Plan account and are eligibleentitled to receive a 10% matchdistribution from their account under the following circumstances: separation from service, death, disability, age 65, date elected or unforeseeable emergency that results in severe financial hardship that is consistent with the meaning of that term under section 409A of the IRS Code. Distributions are made in either a lump sum or, if previously elected by the executive officer, up to 11 annual installments. Distributions from the Company stock.Stock account will be in the form of stock and all other amounts will be distributed in cash.
Defined Contribution Restoration Plan (“DC Restoration Plan”). The DC Restoration Plan is a non-qualified unfunded retirement plan that is intended to provide for retirement benefits above amounts available under H.B. Fuller’s tax-qualified retirement plans. Participants in this plan receive annual credits in a bookkeeping account that is hypothetical in nature. Following are the three component accounts in the plan:
The value4% restoration plan match credit on H.B. Fuller Company 401(k) & Retirement Plan employer match to restore the company matching contribution that is restricted by IRS contribution limits, providing for a benefit of these4% of eligible compensation minus matching contributions isunder the H.B. Fuller Company 401(k) & Retirement Plan.
3% “restoration non-elective” credit provides a contribution of 3% of eligible pay in excess of the IRS annual limit for participants who were hired after December 31, 2006. Mr. Owens, Mr. Giertz and Mr. Snyder are the only named executive officers eligible for this retirement credit for fiscal year 2010.
7% supplemental executive retirement plan credit on all eligible earnings. During 2007, Mr. Volpi and Ms. Parriott elected to convert earned benefits under the H.B. Fuller Supplemental Executive Retirement Plan to the DC Restoration Plan effective January 1, 2008. Mr. Owens, Mr. Giertz and Mr. Snyder are participants in this plan due to their hire dates.
Contributions made on behalf of named executive officers under the DC Restoration Plan are disclosed in the “Summary Compensation TableTable” in this Proxy Statement. In addition, the Compensation Committee may make discretionary contributions to a participant’s Common Stock account under this plan. For fiscal year 2007, no discretionary grants were made to any of the named executive officers listed in the Summary Compensation Table.
The following table summarizes information with respect to the participation of the named executive officers in our nonqualified deferred compensation plans.
NONQUALIFIED DEFERRED COMPENSATION—FISCAL YEAR 2007
Name | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($)(1) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | |||||||
Michele Volpi | 4,989 | 1,765 | (6,533 | ) | -0- | 163,882 | (2) | |||||
James C. McCreary, Jr. | 9,891 | 1,383 | (1,330 | ) | -0- | 202,285 | ||||||
John Feenan | 389,055 | 21,183 | 6,036 | 866,982 | 104,524 | (3) | ||||||
Ann B. Parriott | 10,641 | 1,064 | (1,394 | ) | -0- | 10,311 | ||||||
Timothy J. Keenan | 11,373 | 569 | (1,620 | ) | -0- | 19,238 | ||||||
Jay T. Scripter | -0- | -0- | -0- | -0- | -0- |
POTENTIAL PAYMENTS MADE UPON TERMINATION OR CHANGE-IN-CONTROL
In General.
In General.The Company has certain arrangements, policies and practices covering the named executive officers in this Proxy Statement that require it to provide compensation in the event of certain types of terminations, including certain terminations due to a change-in-control of the Company.
The information set forth below describes amounts that the Company would pay or provide to a named executive officer or his/her beneficiaries in each of the following situations: voluntary termination, involuntary for cause termination, involuntary not for cause termination or good reason termination, involuntary (not for cause) or good reason termination after a change-in control, death, disability, early retirement and death.retirement. The estimated amounts payable are calculated as if the termination occurred on the last business day of the fiscal year, November 30, 2007,26, 2010, using the closing stock price from the last business day of the fiscal year.
We have not included payments or benefits that are fully disclosed in the Pension Benefits Table or the Nonqualified Deferred Compensation Table of this Proxy Statement, unless such payment is enhanced or its vesting or other provisions are accelerated or enhanced.accelerated. We have also not included information or payments related to contracts, agreements, plans or arrangements to the extent that they do not discriminate in scope, term or operation in favor of the named executive officers and that are available generally to all salaried employees. We are calling these benefits “general benefits” and they include:
Accrued Vacation Pay
ThriftH.B. Fuller Company 401(k) & Retirement Plan (or similar applicable plan)
Health and Welfare Benefits
Life Insurance Proceeds
Voluntary Termination and Involuntary For Cause Termination
In the event of a voluntary termination or an involuntary for cause termination as of the last business day of the fiscal year, the Company is not obligated to provide any enhanced benefits or accelerate vesting of any existing benefits of a named executive officer.
Change-in-Control ArrangementsInvoluntary Not For Cause Termination or Good Reason Termination
In the event of an involuntary not for cause termination as of the last business day of the fiscal year, a named executive officer’s compensation would be affected as follows:
We have a change-in-controlseverance arrangement with each of the named executive officers. If the named executive officer’s employment with the Company is involuntarily terminated at the initiative of the Company for any reason other than cause or disability or at the initiative of the executive for good reason and such termination does not occur during the protected period of a change-in-control, then the executive officer is entitled to receive certain severance benefits. Good reason means a material reduction of the executive officer’s base salary, material diminution in the executive officer’s authority and duties, or a required change of the executive officer’s principal work location of 50 miles or more. Protected period means the 24-month period immediately following each and every change-in-control. In order to receive severance, the executive officer must sign a release of claims in favor of the Company and be in compliance with the terms of the executive severance agreement, including that
the executive officer must agree not to compete with the Company or solicit customers or employees of the Company for two years after termination of employment. The severance benefit consists of the following:
A severance payment equal to one times (two times for the CEO) base salary plus target bonus, payable over the 12 months (24 months for the CEO) following termination. Any amount over the lesser of $460,000 or two times the executives annualized compensation based upon the annual rate of pay for services to the Company for the calendar year prior to the calendar year in which the date of termination occurs shall be paid out in a lump sum at the earliest of the executive’s death or six months after the date of termination.
The executive is entitled to medical and dental insurance over 12 months (18 months for the CEO).
Outplacement services with a value up to $20,000.
In addition, for Mr. Volpi, Ms. Parriott, Mr. Keenan and Mr. Scripter.Kenny, any benefits he receives pursuant to local law are offset against the severance benefits set forth above.
Involuntary (Not for Cause) Termination or Good Reason Termination after a Change-in-Control
We have entered into a change-in-control agreement with each of the named executive officers. The initial three-year term of these agreements automatically extends for an additional year on each subsequent anniversary of the agreement, unless our Board of Directors gives notice of non-renewal prior to an anniversary date. A protected period of 24 months follows each and every change-in-control of H.B. Fuller under the terms of these agreements. If during this protected period, we terminate the executive’s employmentexecutive officer separates from service for any reason other than cause or disability, or the executive officer terminates his or her employment for good reason (including demotion, pay cut or certain relocations), the executive officer is entitled to receive a lump sum payment from us. The payment isconsists of the following:
The executive will receive a target short-term incentive plan payment prorated to the date of the termination without application of any denial provisions based on unsatisfactory personal performance or any other reason.
A severance payment equal to three times the sum ofof: (a) the executive’s highest base salary, on an annualized basis, established by us during the period commencing three months prior to the occurrence of the change-in-control and ending on the date of the executive’s termination of employment,employment; plus (b) the executive’s target annual incentive compensation established by us and in effect immediately prior to the change-in-control. In addition, the executive will receive the target short-term incentive plan
A payment proratedfor outplacement services of up to the date of the termination without application of any denial provisions based on unsatisfactory personal performance or any other reason. If any named executive officer is also entitled to severance payments which would be made in the absence of a change-in-control under any plan or program of, or contract with, H.B. Fuller, or under the laws of any federal, state, local or foreign jurisdiction, the amount payable to the named executive officer under the change-in-control severance calculation (prior to the crediting of interest) shall be reduced (but not below zero) by the present value of such other severance payments. $25,000.
In addition, the executive is entitled to medical and dental benefits and certain perquisites for a three-year period following the termination of employment. We will adjust the payments and benefits in the event that they are subject to an excise tax imposed by Section 280G of the Internal Revenue Code and do not exceed 330% of the executive’s base amount. Under these
circumstances, the payments and benefits will be adjusted so that the amount of the payments equals 299% of the base amount, which is the maximum amount that can be paid without imposition of an excise tax. In the event that theseverance payments and benefits are subject to an excise tax and exceed 330% of the executive’s base amount, we have agreed to reimburse the executive for the amount of the excise tax and for any taxes imposed upon the reimbursement.
Mr. McCreary has change-in-control benefits under an H.B. Fuller group benefit plan. A protected period of 24 months follows a change in control of H.B. Fuller. If during this protected period, we terminate Mr. McCreary’s employment for any reason other than cause or disability, or if he terminates his employment for good reason (including demotion, pay cut or certain relocations), Mr. McCreary is entitled to receive a lump sum payment from us. The payment is equal to two times the sum of his highest base salary, on an annualized basis, established by us during the period commencing three months priormade to the occurrence of the change in control and ending on the date of his termination of employment, plus his target annual incentive compensation established by us and in effect immediately priornamed executive officers due to the change in control. In addition, Mr. McCreary is entitled to medical and dental benefits and certain perquisites for a two-year period following the termination of employment. Wechange-in-control, we will adjust the payments and benefits in the event that they are subject to an excise tax imposed by Section 280G of the Internal Revenue Code and do not exceed 330% of the executive’s base amount. Under these circumstances, the payments and benefits will be adjusted so that the amount of the payments equals 299% of the base amount, which is the maximum amount that can be paid without imposition of an excise tax. In the event that the payments and benefits are subject to an excise tax and exceed 330% of the executive’s base amount, we have agreed to reimburse the executive for the amount of the excise tax and for any taxes imposed upon the reimbursement. The effects of the Internal Revenue Code are unpredictable and executive officers may have very different and unexpected effects based on their own particular compensation history. Therefore, these payments are intended to place an executive officer in the same position that they would have been in
had they received the payments for reasons other than a change-in-control. The payments are not meant to pay regular income tax payments for an executive officer. In these situations, the Company will make payments to the executive officer to reimburse them for the excise tax, in addition to any other amounts to cover the tax imposed on the reimbursement. This is typically called a “gross-up”.
We have other compensatory arrangements with our named executive officers that will be affected by a change-in-control. Our Supplemental Executive RetirementThe DC Restoration Plan provides that if within two years after a change-in-control, we terminate a participant’s employment without cause or the participant terminates his or her employment for good reason (as defined in this plan), then zero to three years (depending on the participant’s position and pay grade) shall be added to both the participant’s age and years of credited service for purposes of determining benefits under the plan.
In addition, in the event of a change-in-control, all shares of restricted stock, all restricted stock units and any unvested stock options outstanding under our stock incentive plans immediately vest in full.
Severance
H.B. Fuller employees (including the named executive officers) are eligible for severance pay if their employment with the Company is involuntarily terminated and if they sign an employment release indicating that in exchange for the severance payment, they will not bring any legal claims against the Company arising out of their employment or the cessation of that employment. Employees are not eligible for severance pay if they are discharged for gross violation of working rules or gross misconduct, if they voluntarily resign or voluntarily retire, if they die, if they are transferred to or from a subsidiary of H.B. Fuller, if they are employed in a business that is sold or transferred to a new owner and they continue to be employed by the new owner immediately after the sale or transfer; or if they are employed in a business that is sold or transferred to a new owner and they decline to be employed in a comparable position in that business or by the new owner after the sale or transfer. Severance is paid in a lump sum after termination. If an H.B. Fuller employee is entitled to regular severance pay, he/she generally receives one week’s pay for each full year he/she has worked for H.B. Fuller, with a minimum of two weeks’ pay.
Payments upon Death or Disability
In the event of a death or disability as of the last business day of the fiscal year, a named executive officer’s compensation would be affected as follows:
Stock options, restricted stock and restricted stock units would vest both at death and at disability.
Payments upon Involuntary Not For Cause TerminationBenefits under the Defined Contribution Restoration Plan would vest at death or disability.
In the event of an involuntary termination, not for cause,Mr. Kenny’s death as of the last business day of the fiscal year, a named executive officer’s compensationhis beneficiaries would be affectedeligible to receive four times his annual base salary. In the event of a disability during which Mr. Kenny would not be able to work at all, as follows:
Unvested restricted stock and restricted stock units awarded through April 2004 would vest forof the last business day of the fiscal year, Mr. Volpi, Mr. McCreary and Mr. Scripter.
Outplacement services not to exceed $25,000Kenny would be provided for all named executive officers except Mr. McCreary whose outplacement services would not exceed $12,500.
eligible to receive 75% of his base salary after a 13 week waiting period up to a maximum payment of British Pound Sterling 158,000 per year ($255,498 on November 27, 2010). During the 13 week waiting period, the Company pays his normal base salary, allowances and fringe benefits.
Early and Normal Retirement
As of the last business day of the fiscal year, no named executive officer was eligible for early retirement.
Normal Retirement
As of the last business day of the fiscal year, no named executive officer was eligible foror normal retirement.
EXECUTIVE BENEFIT AND PAYMENTS UPON TERMINATION—FISCAL YEAR 2010
The following table shows potential estimated payments to the named executive officers in this Proxy Statement upon (1) involuntary termination (not for cause), or good reason termination, (2) involuntary (not for cause) or good reason termination after a change-in-control, disability and/and (3) death or death.disability. The tables assumetable assumes that the termination was effective on the last business day of the fiscal year and arecontains estimates of amounts that would be paid to the named executive officers upon termination in addition to the base salary and short-term incentive earned by the executives during the fiscal year and any applicable pension amounts payable to the executive officers discussed under the section titled “Pension Benefits”Pension Benefits in this Proxy Statement. Actual amounts payable to any named executive officer would only be determined asafter an actual event of termination.
No information is included for For Mr. Feenan. Mr. FeenanVolpi, who resigned fromas President and CEO on November 19, 2010 and whose employment was terminated as of December 7, 2010, amounts are provided only in the Company effective February 15, 2007. No payments were madecolumn titled “Involuntary Not For Cause or Good Reason”. Amounts paid to Mr. FeenanVolpi in connection with his resignation other than accrued vacation and holiday pay, whichtermination also are includedset forth in the amount under the “Salary” column of the Summary Compensation Table in this Proxy Statement.
Executive Benefit and Payments Upon Separation—FY 2007
Name | Type of Payment | Involuntary Not For Cause or Good Reason ($) | Payments upon Involuntary (Not for Cause) or Good Reason Termination after a Change-in-Control ($) | Death or Disability ($) | ||||||||||
James. J. Owens(1) | ||||||||||||||
Short-Term Incentive Plan | 257,936 | |||||||||||||
Stock Options | 271,548 | 271,548 | ||||||||||||
Restricted Stock | 572,764 | 572,764 | ||||||||||||
Health and Welfare Benefits | 12,960 | 38,880 | ||||||||||||
Cash Severance | 883,680 | 2,651,040 | ||||||||||||
Outplacement Services | 20,000 | 25,000 | ||||||||||||
DC Restoration Plan | 47,891 | 47,891 | ||||||||||||
Excise Tax Gross-Up | 1.270,248 | |||||||||||||
Total | 916,640 | 5,135,307 | 892,203 | |||||||||||
Michele Volpi | ||||||||||||||
Short-Term Incentive Plan | ||||||||||||||
Stock Options | ||||||||||||||
Restricted Stock | ||||||||||||||
Health and Welfare Benefits | 19,439 | |||||||||||||
Cash Severance | 3,260,000 | |||||||||||||
Outplacement Services | 20,000 | |||||||||||||
DC Restoration Plan | ||||||||||||||
Excise Tax Gross-Up | ||||||||||||||
Total | 3,299,439 | |||||||||||||
James R. Giertz | ||||||||||||||
Short-Term Incentive Plan | 249,929 | |||||||||||||
Stock Options | 264,968 | 264,968 | ||||||||||||
Restricted Stock | 651,109 | 651,109 | ||||||||||||
Health and Welfare Benefits | 12,960 | 38,880 | ||||||||||||
Cash Severance | 701,802 | 2,105,406 | ||||||||||||
Outplacement Services | 20,000 | 25,000 | ||||||||||||
DC Restoration Plan | 72,541 | 72,541 | ||||||||||||
Excise Tax Gross-Up | 1,087,129 | |||||||||||||
Total | 734,762 | 4,494,962 | 988,618 | |||||||||||
Steven Kenny | ||||||||||||||
Short-Term Incentive Plan | 150,263 | |||||||||||||
Stock Options | 79,216 | 79,216 | ||||||||||||
Restricted Stock | 285,325 | 285,325 | ||||||||||||
Health and Welfare Benefits | 1,698 | 5,094 | ||||||||||||
Cash Severance | 530,603 | 1,591,810 | ||||||||||||
Outplacement Services | 20,000 | 25,000 | ||||||||||||
DC Restoration Plan | ||||||||||||||
Excise Tax Gross-Up | ||||||||||||||
Total | 552,301 | 2,136,708 | 364,541 | |||||||||||
Ann B. Parriott | ||||||||||||||
Short-Term Incentive Plan | 160,679 | |||||||||||||
Stock Options | 183,365 | 183,365 | ||||||||||||
Restricted Stock | 401,005 | 401,005 | ||||||||||||
Health and Welfare Benefits | 12,960 | 38,880 | ||||||||||||
Cash Severance | 499,009 | 1,497,026 | ||||||||||||
Outplacement Services | 20,000 | 25,000 | ||||||||||||
DC Restoration Plan | ||||||||||||||
Excise Tax Gross-Up | 682,206 | |||||||||||||
Total | 531,969 | 2,988,161 | 584,370 | |||||||||||
Barry S. Snyder | ||||||||||||||
Short-Term Incentive Plan | 142,680 | |||||||||||||
Stock Options | 334,835 | 334,835 | ||||||||||||
Restricted Stock | 493,206 | 493,206 | ||||||||||||
Health and Welfare Benefits | 12,960 | 38,880 | ||||||||||||
Cash Severance | 442,076 | 1,326,228 | ||||||||||||
Outplacement Services | 20,000 | 25,000 | ||||||||||||
DC Restoration Plan | 26,129 | 26,129 | ||||||||||||
Excise Tax Gross-Up | ||||||||||||||
Total | 475,036 | 2,386,958 | 854,170 |
NEO | Type of Payment | Involuntary Not For Cause ($) | Payments upon Involuntary or Good Reason Termination after a Change-in-Control ($) | Disability ($) | Death ($) | |||||
Michele Volpi, | ||||||||||
Short-Term Incentive Plan | 501,702 | |||||||||
Stock Options | 345,377 | 345,377 | 345,377 | |||||||
Restricted Stock | 39,857 | 1,078,113 | 1,078,113 | 1,078,113 | ||||||
Health and Welfare Benefits | 41,371 | |||||||||
Cash Severance | 3,207,306 | |||||||||
Outplacement Services | 25,000 | 25,000 | ||||||||
Excise Tax Gross-Up | 1,919,997 | |||||||||
Total | 64,857 | 7,118,866 | 1,423,490 | 1,423,490 | ||||||
James C. McCreary, Jr. | ||||||||||
Short-Term Incentive Plan | 99,730 | |||||||||
Stock Options | 221,249 | 221,249 | 221,249 | |||||||
Restricted Stock | 11,305 | 290,228 | 290,228 | 290,228 | ||||||
Health and Welfare Benefits | 18,394 | |||||||||
Cash Severance | 724,355 | |||||||||
Outplacement Services | 12,500 | 15,000 | ||||||||
Excise Tax Gross-Up | -0- | |||||||||
Total | 23,805 | 1,368,956 | 511,477 | 511,477 | ||||||
Ann B. Parriott | ||||||||||
Short-Term Incentive Plan | 129,104 | |||||||||
Stock Options | 97,630 | 97,630 | 97,630 | |||||||
Restricted Stock | 287,573 | 287,573 | 287,573 | |||||||
Health and Welfare Benefits | 39,643 | |||||||||
Cash Severance | 1,265,112 | |||||||||
Outplacement Services | 25,000 | 25,000 | ||||||||
Excise Tax Gross-Up | 634,271 | |||||||||
Total | 25,000 | 2,478,333 | 385,203 | 385,203 | ||||||
Timothy J. Keenan | ||||||||||
Short-Term Incentive Plan | 118,282 | |||||||||
Stock Options | 143,852 | 143,852 | 143,852 | |||||||
Restricted Stock | 283,324 | 283,324 | 283,324 | |||||||
Health and Welfare Benefits | 39,643 | |||||||||
Cash Severance | 1,094,110 | |||||||||
Outplacement Services | 25,000 | 25,000 | ||||||||
Excise Tax Gross-Up | 600,130 | |||||||||
Total | 25,000 | 2,304,341 | 427,176 | 427,176 | ||||||
Jay Scripter | ||||||||||
Short-Term Incentive Plan | 88,553 | |||||||||
Stock Options | 54,572 | 54,572 | 54,572 | |||||||
Restricted Stock | 7,284 | 90,159 | 90,159 | 90,159 | ||||||
Health and Welfare Benefits | 41,371 | |||||||||
Cash Severance | 989,550 | |||||||||
Outplacement Services | 25,000 | 25,000 | ||||||||
Excise Tax Gross-Up | 458,490 | |||||||||
Total | 32,284 | 1,747,695 | 144,731 | 144,731 |
(1) | For Mr. Owens, the amounts calculated in the column titled “Payments upon Involuntary (Not for Cause) or Good Reason Termination after a Change-in-Control” were calculated based on the Severance Agreement that was in effect for Mr. Owens as of the last day of the fiscal year 2010. As of December 2, 2010, Mr. Owens Severance Agreement was amended to provide for an increased benefit due to his promotion to President and CEO of the Company. See the section titled “2011 Compensation Arrangements with James J. Owens” in this Proxy Statement. |
PROPOSAL 2—RATIFICATION OF APPOINTMENT OF AUDITORSNON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION
As required pursuant to Section 14A of the Exchange Act, the Company is providing shareholders with an advisory (non-binding) vote on the compensation of our named executive officers as disclosed in the Compensation Discussion and Analysis, the tabular disclosure regarding such compensation and the accompanying narrative disclosure contained in this Proxy Statement.
The Company is asking shareholders to indicate their support for the compensation of our named executive officers described in this Proxy Statement. The Company has designed its executive compensation program to attract, motivate, reward and retain the executive talent required to achieve our corporate growth objectives and increase shareholder value. We believe that our compensation policies and procedures are centered on a pay-for-performance philosophy and are strongly aligned with the long-term interests of our shareholders. See “Executive Compensation—Compensation Discussion and Analysis.”
In deciding how to vote on this proposal, the Board urges you to consider the following factors, many of which are more fully discussed in the “Executive Compensation—Compensation Discussion and Analysis” section of this Proxy Statement:
The Compensation Committee has designed our executive compensation program to be competitive with the compensation offered by those peers with whom we compete for management talent.
The Compensation Committee believes that there is a need to reasonably and fairly compensate and retain a senior management team that is relatively new to the Company and many of whom have left other executive positions to join H.B. Fuller to help attain its strategic goals.
The Compensation Committee believes the Company’s executive compensation programs have been effective at incenting the achievement of short-term financial performance metrics and long-term decision making that is in the best interests of our shareholders:
Ø | In fiscal 2010, we increased our revenue by 10 percent over fiscal 2009. |
Ø | In a very difficult raw material environment, we delivered an adjusted gross margin near the adjusted gross margin for fiscal 2009—a year in which we achieved a historically high adjusted gross margin. |
Ø | We made good progress in shifting our business portfolio toward future strategic growth opportunities. |
Ø | Our earnings per share were up nine percent over fiscal 2009, just short of our target range of 10 to 15 percent annual growth. |
Ø | For the 41st consecutive year in a row, we implemented an increase in the amount of our dividend that we pay to shareholders (three percent increase in fiscal 2010). |
Accordingly, the Company is asking shareholders to vote FOR the following resolution at the annual meeting:
“RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the H.B. Fuller Company named executive officers, as disclosed in the Compensation Discussion and Analysis, the tabular disclosure regarding such compensation, and the accompanying narrative disclosure, set forth in this Proxy Statement.”
This advisory vote on executive compensation is not binding on the Company’s Board of Directors. However, the Board of Directors will take into account the result of the vote when determining future executive compensation arrangements.
The Board of Directors recommends a vote FOR adoption of the resolution approving the compensation of the Company’s named executive officers, as described in the Compensation Discussion and Analysis section and the related tabular and narrative disclosure set forth in this Proxy Statement.
Audit Committee ReportPROPOSAL 3—NON-BINDING ADVISORY VOTE ON FREQUENCY OF AN ADVISORY
VOTE ON EXECUTIVE COMPENSATION
As required pursuant to Section 14A of the Exchange Act, the Company is providing shareholders with an advisory (non-binding) vote on the frequency with which our shareholders shall have the advisory vote on executive compensation as provided in the previous proposal. By voting on this proposal, shareholders may indicate whether they would prefer an advisory vote on executive compensation once every one, two or three years. In addition, shareholders may abstain from voting. The Company is required to hold an advisory vote on frequency at least once every six years.
The Board has determined that an advisory vote on executive compensation every three years is the best approach for the Company based on a number of considerations, including the following:
We believe the best way for shareholders to evaluate H.B. Fuller’s performance is over a multi-year period because our compensation program is designed to incent and reward performance over a multi-year period based upon the long-term financial performance of the Company. For example, under our long-term incentive program we currently grant restricted stock, restricted stock unit and stock option awards that vest in three equal annual installments beginning on the first anniversary of the grant date. A vote held every three years would be more consistent with, and provide better input on, our long-term compensation program, which constitutes a significant part (approximately 40%) of the total compensation of our executive officers. For these reasons, we believe that a three-year time horizon is appropriate in order to provide shareholders with a more comprehensive view of whether our executive officer compensation programs are achieving their objectives.
Because we believe that an effective compensation program should be consistent and incent performance over a multi-year horizon, we strive not to make frequent changes to our compensation programs. A three-year cycle is consistent with this approach.
We believe an annual say-on-pay vote would not allow for changes to the Company’s compensation program to be in place long enough to evaluate whether the changes were effective. For example, if the say-on-pay vote in April 2011 led to changes to the compensation program being made in December 2011, at the beginning of the next fiscal year, those changes would be in place only a few months before the next annual say-on-pay vote would take place in April 2012. Therefore, we believe that a three-year vote cycle gives the Board sufficient time to thoughtfully consider the results of the advisory vote and to implement any desired changes to our executive compensation policies and procedures.
You may cast your vote on your preferred voting frequency by choosing the option of one year, two years, three years or abstain when you vote in response to the resolution set forth below:
“RESOLVED, that the option of once every one year, two years or three years that receives the highest number of votes cast for this resolution will be determined to be the preferred frequency with which the Company is to hold a shareholder vote to approve the compensation of the named executive officers.”
The option of one year, two years or three years that receives the highest number of votes cast by shareholders will be the frequency for the advisory vote on executive compensation that has been selected by the shareholders.
Although the vote is non-binding, our Board of Directors will take into account the outcome of the vote when making future decisions about the frequency of the Company’s advisory votes on executive compensation.
The Board of Directors recommends that you vote for the option of every “THREE YEARS” as the frequency with which shareholders are provided an advisory vote on the compensation of the named executive officers.
Pursuant to its charter, the Audit Committee of the Board of Directors is responsible for the appointment, compensation and oversight of the work of our independent auditors.registered public accounting firm. In the exercise of that authority, we, the members of the Audit Committee, determined to engage KPMG LLP to serve as H.B. Fuller’s independent auditorsregistered public accounting firm for the year ending November 29, 2008.
The Audit Committee of the Board is composed solely of independent directors who satisfy all applicable requirements of federal law, the listing standards of the New York Stock Exchange and the Company’s Corporate Governance Guidelines. Except in our capacity as directors, no member of the Committee receives, directly or indirectly, any consulting, advisory or other compensatory fee from the Company, and no member is otherwise “affiliated” with the Company or any subsidiary, as such term is defined by applicable federal law and regulations. In addition to the foregoing, Mr. J. Michael Losh, Chair of the Committee, based upon his experience in the preparation and auditing of the financial statements of comparable companies and his understanding of generally accepted accounting principles, internal accounting controls and audit committee functions, is deemed to satisfy the requirements of an audit committee financial expert as such term is defined under applicable federal law and regulation.
December 3, 2011.
Management is responsible for the financial reporting process, accounting principles, and internal controls and procedures designed to assure compliance with accounting standards and applicable law and regulation. Management represented to us that H.B. Fuller’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America.
KPMG LLP, as H.B. Fuller’s independent auditorsregistered public accounting firm for fiscal year 2007,2010, was responsible for performing an independent audit of the consolidated financial statements in accordance with U.S. generally accepted auditing standards generally accepted in the United States of America and to issueissuing a report.
We have reviewed and discussed the audited consolidated financial statements with management and KPMG LLP. We have also discussed with KPMG LLP the matters required to be discussed by Statement on Auditing Standards No. 61 (Communications with Audit Committees), as amended (AICPA, Professional Standards, Vol 1. AU Section 380), and they have discussed with us their independence and provided to us the written disclosuredisclosures and the letter required by Independence Standardsapplicable requirements of the Public Company Accounting Oversight Board Standard No. 1 (Independence Discussionsregarding the independent accountant’s communications with Audit Committees).
the audit committee concerning independence.
Based upon our review and discussions and our review of the representations of management and the report of the independent auditors, and in reliance upon such information, representations, reports and opinions,referred to above, we recommended to the Board of Directors that the audited consolidated financial statements be included in H.B. Fuller’s Annual Report on Form 10-K for the fiscal year ended December 1, 2007November 27, 2010 filed with the SEC.
Audit Committee of the Board of Directors of H.B. Fuller Company
J. Michael Losh(Chair) | ||||||
Juliana L. Chugg | Alfredo L. Rovira |
Fees to the Independent AuditorsFEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table presents fees for professional services provided by KPMG LLP for the audit, audit-related, tax and all other services rendered to us and our affiliates for the 20062009 and 20072010 fiscal years.
2007 | 2006 | |||||
Audit Fees | $ | 2,498,000 | $ | 2,267,000 | ||
Audit-Related Fees | $ | 0 | $ | 250,000 | ||
Tax Fees | $ | 23,000 | $ | 4,000 | ||
All Other Fees | $ | 0 | $ | 0 |
2010 | 2009 | |||||||
Audit Fees | $ | 2,187,000 | $ | 2,394,000 | ||||
Audit-Related Fees | $ | 180,000 | $ | 128,000 | ||||
Tax Fees | $ | 0 | $ | 10,000 | ||||
All Other Fees | $ | 0 | $ | 0 |
Audit Fees: Includes fees and expenses billed and to be billed for (i) the audit of the consolidated financial statements included in our annual report on Form 10-K, as amended (ii) the audit of the effectiveness of our internal control over financial reporting, (iii) reviews of the interim consolidated financial information included in our quarterly reports on Form 10-Q, (iv) statutory audits of certain international subsidiaries, (v) consultations concerning financial accounting and reporting and (vi) reviews of documents filed with the Securities and Exchange CommissionSEC and consents.
Audit-Related Fees:Includes fees and expenses for audits of employee benefit plans and due diligence services pertaining to potential business acquisitions.
Tax Fees: Includes fees and expenses for U.S. federal, state and international tax planning and tax compliance services.
The Audit Committee has in place procedures to pre-approve all audit, audit-related, tax and other permissible services provided to us by our independent auditors.registered public accounting firm. We have a policy of avoiding the engagement of our independent auditorsregistered public accounting firm except for audit, audit-related and tax compliance services. The Audit Committee has delegated to one or more of its members pre-approval authority with respect to permitted services, and receives a regular report from management on all such services provided to us by our independent auditors.registered public accounting firm. All of the services provided by our independent auditorsregistered public accounting firm in fiscal 20072010 and 20062009 were pre-approved by the Audit Committee under its pre-approval procedures.
ProposalPROPOSAL 4—RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed KPMG LLP, certified public accountants, as our independent auditorregistered public accounting firm for the fiscal year ending November 29, 2008.December 3, 2011. KPMG LLP firsthas acted as our independent auditor during theregistered public accounting firm since our 2004 fiscal year ended November 27, 2004.year. While we are not required to do so, H.B. Fuller is submitting the selectionappointment of KPMG LLP to serve as our independent auditorregistered public accounting firm for the fiscal year ending November 29, 2008December 3, 2011 for ratification in order to ascertain the views of our shareholders on this appointment. If the shareholders by an affirmative vote of a majority of our shares of Common Stock represented and entitled to vote at the annual meeting, do not ratify the Audit Committee’s appointment of KPMG LLP as our independent auditor,registered public accounting firm, the Audit Committee intends to reconsider that appointment. However, because of the difficulty and expense of making any change in independent auditors so long after the beginning of the current fiscal year, it is likely that the appointment would stand for fiscal year 20082011 unless there were compelling reasons for making an immediate change.
Representatives of KPMG LLP will be present at the meeting and will have the opportunity to make a statement if they desire to do so and to respond to appropriate questions from shareholders.
We will vote your shares as you specify when providing your proxy. If you submit your proxy without voting instructions, we will vote your shares FOR the ratification of the appointment of KPMG LLP.
The affirmative vote of a majority of the outstanding shares of Common Stock represented and entitled to vote on this matter is required to approve this proposal.
The Board of Directors recommends a vote FOR
ratification of the appointment of KPMG LLP.
PROPOSAL 3—APPROVAL“HOUSEHOLDING” OF THE AMENDED AND RESTATED H.B. FULLER COMPANYPROXY MATERIALS
ANNUAL AND LONG-TERM INCENTIVE PLAN
Introduction
SubjectThe SEC rules allow a single copy of the proxy statement and annual report to shareholder approval, during December 2007,be delivered to multiple shareholders sharing the Boardsame address and last name, or who we reasonably believe are members of Directors adopted the Amendedsame family, and Restatedwho consent to receive a single copy of these materials in a manner provided by these rules. This practice is referred to as “householding” and can result in significant savings of paper and mailing costs. Although we do not household for our registered shareholders, some brokers household H.B. Fuller Company Annualproxy statements and Long-Term Incentive Plan.annual reports, delivering a single copy of each to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker that they will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate copy of our proxy statement or annual report, or if you are receiving multiple copies of either document and wish to receive only one, please notify your broker. The Company will deliver promptly upon written or oral request a separate copy of our proxy statement and/or our annual report to a shareholder approvalat a shared address to which a single copy of this plan is being soughteither document was delivered. For copies of either or both documents, shareholders should write to qualify compensation paid under this plan as “qualified performance-based compensation,” as defined in Section 162(m) of the Internal Revenue Code. Section 162(m) of the Code generally limits to $1,000,000 the amount that a publicly-held corporation, like H.B. Fuller, is allowed each year to deduct for the compensation paid to its principal executive officer and the three other most highly compensated executive officers (other than the principal executive officer and the principal financial officer) (sometimes referred to as “Covered Employees”). However, qualified “performance-based compensation” is not subject to the $1,000,000 deduction limit.
To qualify as “performance-based compensation,” the following requirements need to be satisfied:
payments must be based on objective, performance-based standards determined by a committee consisting solely of two or more “outside” directors,
the material terms under which the compensation is to be paid, including a limit on the maximum bonus that may be paid to any participant with respect to any performance period, must be approved by a majority of the corporation’s shareholders, and
the committee of “outside” directors must certify that the applicable performance goals were satisfied before payment is made.
The Amended and RestatedCorporate Secretary, H.B. Fuller Company, Annual and Long-Term Incentive Plan is intended to comply with the requirements of Section 162(m). If this plan is approved at the meeting, the Company’s payments under this plan should be deductible for federal income tax purposes for the next five fiscal years (at which time, shareholder approval will again be required).
The material features of this plan are summarized below. In general this plan determines the maximum amount of annual and long-term bonuses H.B. Fuller may pay to Covered Employees under this plan. In accordance with the terms of its charter, the Compensation Committee of the Board of Directors will determine the actual amount of any short or long-term bonus paid. The policies and practices that the Compensation Committee uses in determining these amounts are discussed each year in this Proxy Statement under the heading “Compensation Discussion and Analysis.” The actual amount paid by H.B. Fuller is described under the heading “Summary Compensation Table.”call (651) 236-5825.
Material Features of the Amended and Restated H.B. Fuller Company Annual and Long-Term Incentive Plan
Awards. The Amended and Restated H.B. Fuller Company Annual and Long-Term Incentive Plan permits the grant of annual cash incentive awards, called “Covered Employee Annual Incentive Awards,” and long-term cash incentive awards, called “Performance Units.” It also may be used to qualify certain stock-based awards, called “Stock Incentive Awards,” granted under the Amended and Restated H.B. Fuller Company Year 2000 Stock Incentive Plan as “performance-based compensation” under Section 162(m) of the Code.
Administration. The Annual and Long-Term Incentive Plan is administered by the Compensation Committee of the Board of Directors, which is composed solely of “outside” directors within the meaning of Section 162(m). This Committee has the authority to determine when awards will be granted, select participants, determine the amounts of the awards, and set the terms and conditions of
the awards, including allowing participants to elect to defer receipt of payments of awards. The Compensation Committee also has the authority to interpret this plan and establish rules for its administration.
Covered Employee Annual Incentive Awards. Persons eligible to receive Covered Employee Annual Incentive Awards are H.B. Fuller’s principal executive officer and the three other most highly compensated executive officers (other than the principal executive officer and the principal financial officer) for any fiscal year (each a “Covered Employee”). Each year an incentive pool equal to the greater of 5% of H.B. Fuller’s operating income or cash flow for a specified fiscal year will be available to the Compensation Committee to fund all Covered Employee Annual Incentive Awards. The Compensation Committee will allocate a percentage of that fiscal year’s incentive pool to each Covered Employee. No Covered Employee may be allocated a percentage in excess of 75% of the total pool. As soon as possible after determination of the total amount of the incentive pool for the applicable fiscal year, the Compensation Committee, in its sole discretion, shall then determine the actual amount of each Covered Employee’s Annual Incentive Award to be paid for that fiscal year. In no event can the amount paid exceed a Covered Employee’s allocated portion of the incentive pool.
For fiscal year 2008, the Compensation Committee determined that a Covered Employee Annual Incentive Award may not exceed 75% of the available incentive pool. The actual annual bonus, if any, paid to any covered employee for fiscal year 2008 will be determined by the Compensation Committee. At this time, it is not possible to determine the amount that will be paid for fiscal year 2008 or later years in the form of Covered Employee Annual Incentive Awards since actual amounts will depend on the performance of the Company as well as the Compensation Committee’s exercise of its discretion to adjust any such award downward. However, the fiscal year 2007 short-term incentive award paid to Mr. Volpi is disclosed in the Summary Compensation Table in this Proxy Statement.
Performance Unit. A Performance Unit is an award which the Compensation Committee can grant to any H.B. Fuller employee entitling the employee to receive a cash payment at some future date or dates. The Compensation Committee can select the employees to whom Performance Units will be granted and determines the nature and amount of each Unit. All employees of H.B. Fuller and its affiliates (currently consisting of approximately 3,200 individuals) are eligible under this plan to receive Performance Units, however, long-term incentive awards similar to Performance Units have been typically limited to a senior management level consisting of approximately 50-60 employees in the past. The Compensation Committee has not authorized Performance Unit awards related to fiscal year 2007 or fiscal year 2008. If the Compensation Committee chose to award Performance Units in the future, it would set performance goals which, depending on the extent to which they are met, would determine the value and/or size of a Performance Unit award that would be paid out. The types and amounts of such awards that may be granted in the future pursuant to this plan are not determinable as the Compensation Committee will make such determinations in its discretion.
Pursuant to the terms of this plan, the performance criteria for any Performance Unit are limited to the following performance measures: (a) earnings per share; (b) return on equity; (c) economic value added; (d) stock price; (e) return on investment; (f) return on invested capital; (g) return on assets; (h) cash flow; (i) pre-tax income; (j) net revenue; (k) return on sales; (l) total shareholder return; (m) value creation sum; (n) return on gross investment; (o) total business return; and (p) net operating income. These performance measures may be used by the Compensation Committee in defining a Performance Unit to measure the performance of the Company as a whole or any business unit of the Company or any combination, and any of the above performance measures can also be used to compare the Company’s performance to the performance of a group of comparative companies, or a published or special index that the Compensation Committee, in its sole discretion, deems appropriate. Payments under any Performance Unit could also be based upon any measured improvement (actual or relative) of any of the above performance measures as the Compensation Committee may deem
appropriate. Pursuant to this plan, no recipient may receive in excess of $5,000,000 for any one fiscal year pursuant to the terms of a Performance Unit or Units under this plan. The Compensation Committee also retains the discretion to adjust any amount due pursuant to the terms of a Performance Unit downward.
Stock Incentive Awards. Subject to the terms of the Amended and Restated H.B. Fuller Company Year 2000 Stock Incentive Plan, the Compensation Committee may grant Stock Incentive Awards to any employee in such amounts and upon such terms as it may in its discretion determine. All employees of H.B. Fuller and its affiliates (currently consisting of approximately 3,200 individuals) are eligible to receive Stock Incentive Awards. The performance measures for payment of any Stock Incentive Award are the same as those for a Performance Unit Award. It is the intention of H.B. Fuller that any Stock Incentive Awards made pursuant to the Amended and Restated H.B. Fuller Company Annual and Long-Term Incentive Plan qualify as performance-based compensation under Section 162(m) of the Code. The maximum aggregate amount payable to any one participant for any one fiscal year pursuant to the terms of a Stock Incentive Award or Awards may not exceed 300,000 shares of Company Common Stock or an amount equal to the value of 300,000 shares of Company Common Stock. No Stock Incentive Awards have been granted pursuant to this plan. The types and amounts of such awards that may be granted in the future pursuant to this plan are not determinable as the Compensation Committee will make such determinations in its discretion.
Amendment and Termination. The Compensation Committee may, at any time and from time to time, alter, amend, modify, suspend or terminate the Amended and Restated H.B. Fuller Company Annual and Long-Term Incentive Plan in whole or in part. No amendment of this plan may be made without shareholder approval if shareholder approval is required by law, regulation or stock exchange rule.
Equity Compensation Plan Information
The following table gives information about our Common Stock that may be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans as of December 1, 2007.
Plan Category | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights | (b) Weighted-average exercise price of outstanding options, warrants and rights | (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) | |||||||
Equity compensation plans approved by security holders | 2,096,294 | (1) | $ | 16.44 | (2) | 6,001,512 | (3) | |||
Equity compensation plans not approved by security holders | NONE | — | NONE | |||||||
Total | 2,096,294 | $ | 16.44 | 6,001,512 | ||||||
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Proposal
Shareholder approval of the Amended and Restated H.B. Fuller Company Annual and Long-Term Incentive Plan is being sought to qualify compensation paid under this plan as qualified “performance-based compensation,” as defined in Section 162(m) of the Internal Revenue Code.
We will vote your shares as you specify when providing your proxy. If you submit your proxy without voting instructions, we will vote your shares FOR the approval of the Amended and Restated H.B. Fuller Company Annual and Long-Term Incentive Plan.
Approval of this plan requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or by proxy and entitled to vote at the meeting.
The Board of Directors recommends a vote FOR approval of the Amended and Restated H.B. Fuller Company Annual and Long-Term Incentive Plan.
Appendix A
Amended and Restated H.B. Fuller Company Annual and Long—Term Incentive Plan
Amended and Restated H. B. Fuller Company Annual
and Long-Term Incentive Plan
H. B. Fuller Company
Effective, December 6, 2007
Contents
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Amended and Restated H. B. Fuller Company
Annual and Long-Term Incentive Plan
Article 1. Establishment, Purpose, and Duration
1.1 Establishment. H. B. Fuller Company, a Minnesota corporation (hereinafter referred to as the “Company”), establishes an incentive compensation plan to be known as the Amended and Restated H. B. Fuller Company Annual and Long-Term Incentive Plan (hereinafter referred to as the “Plan”), as set forth in this document.
The Plan permits the grant of Performance Unit Awards and Covered Employee Annual Incentive Awards, and sets forth the conditions to qualify Stock Incentive Awards granted under the H. B. Fuller Company Year 2000 Stock Incentive Plan as Performance-Based Compensation.
The Plan shall become effective as of December 6, 2007 (the “Effective Date”) and shall remain in effect as provided in Section 1.3 hereof.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the short- and long-term interests of the Company and its shareholders by strengthening the Company’s ability to attract, motivate, and retain Employees of the Company upon whose judgment, initiative, and efforts the financial success and growth of the business of the Company largely depend.
1.3 Duration of the Plan. The Plan shall commence as of the Effective Date, as described in Section 1.1 hereof, and shall remain in effect, subject to the right of the Committee to amend or terminate the Plan at any time pursuant to Article 12 hereof.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.
2.1 “Affiliate” shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company, and (ii) any entity in which the Company has a significant equity interest, as determined by the Committee.
2.2 “Award” means, individually or collectively, Performance Unit Awards and Covered Employee Annual Incentive Awards granted under the Plan, and Stock Incentive Awards granted under the H.B. Fuller Company Year 2000 Stock Incentive Plan.
2.3 “Award Agreement” shall mean any written agreement, contract, or other instrument or document evidencing an Award. Each Award Agreement shall be subject to the applicable terms and conditions of the Plan and any other terms and conditions (not inconsistent with the Plan) determined by the Committee.
2.4 “Board” or“Board of Directors” means the Board of Directors of the Company.
2.5 “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time.
2.6 “Committee” means the Compensation Committee or such other committee of Directors designated by the Board to administer the Plan.
2.7 “Company” means H. B. Fuller Company, a Minnesota corporation, and any successor thereto as provided in Article 14 herein.
2.8 “Covered Employee” means a Participant who is a “Covered Employee,” as defined in Code Section 162(m) and the regulations promulgated under Code Section 162(m), or any successor statute.
2.9 “Covered Employee Annual Incentive Award” means an award granted to a Covered Employee under the Plan evidencing the right to receive a cash payment in any Plan Year, as described in Article 8 herein.
2.10 “Director” means any individual who is a member of the Board of Directors of the Company.
2.11 “Employee” means any employee of the Company and/or its Affiliates.
2.12 “Extraordinary Items” means extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year.
2.13 “Operating Cash Flow” means net cash flow provided by operating activities computed in accordance with generally accepted accounting principles and reported in the Company’s annual report.
2.14 “Operating Income” means gross profit less selling, administration, and other expenses computed in accordance with generally accepted accounting principles and reported in the Company’s annual report. Operating Income shall be determined exclusive of the effects of Restructuring Programs.
2.15 “Participant” means an Employee of the Company who has been selected to receive an Award or whom has an outstanding Award granted under the Plan.
2.16 “Performance-Based Compensation” means an Award that is qualified as performance-based compensation under Code Section 162(m).
2.17 “Performance Measures” means measures as described in Article 7, the attainment of which may determine the degree of payout and/or vesting with respect to Stock Incentive Awards or Performance Unit Awards.
2.18 “Performance Period” means the period of time during which the performance objectives must be met in order to determine the degree of payout and/or vesting with respect to a Stock Incentive Award or a Performance Unit Award.
2.19 “Performance Unit” means a unit granted under this Plan evidencing the right to receive cash payment or payments at some future date or dates, as described in Article 6 herein
2.20 “Performance Unit Award” means an award of Performance Units granted to a Participant under this Plan, as described in Article 6 herein.
2.21 “Plan Year” means the Company’s fiscal year.
2.22 “Restructuring Programs” means unusual and/or nonrecurring items of gain or loss due to a plan of reorganization or restructuring.
2.23 “Share” means a Share of common stock of the Company, $1.00 par value per Share.
2.24 “Stock Incentive Award” means an award that is granted pursuant to the Amended and Restated H. B. Fuller Company Year 2000 Stock Incentive Plan and that is qualified as Performance-Based Compensation.
Article 3. Administration
3.1 General. The Committee shall be responsible for administering the Plan. The Committee may employ attorneys, consultants, accountants, and other persons, and the Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participants, the Company, and all other interested persons.
3.2 Authority of the Committee. Subject to the terms of this Plan and applicable law, the Committee shall have full power and authority to: (i) determine when Awards will be granted; (ii) select the Participants; (iii) determine the number of Awards to be granted to each Participant under this Plan; (iv) determine the terms and conditions of the Awards and the Award Agreements; (v) determine whether the Performance Measures and other conditions to the payment of the Awards have been met; (vi) determine whether payment of the Awards will be made at the end of the Performance Period or deferred; (vii) determine whether Awards or payment of Awards shall be reduced or eliminated; (viii) amend or waive the terms and conditions of any Award Agreement; (ix) determine whether, to what extent and under what circumstances Awards may be cancelled, forfeited, or suspended; (x) interpret and administer this Plan and any instrument or agreement relating to this Plan; (xi) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of this Plan; and (xii) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Plan.
3.3 Delegation. The Committee may delegate to one or more of its members or to one or more agents or advisors such administrative duties as it may deem advisable, and the Committee or any person to whom it has delegated duties as aforesaid may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan. The Committee may, by resolution, authorize one or more officers of the Company to do one or both of the following: (a) designate Employees of the Company and/or its Affiliates to be recipients of Awards; and (b) determine the size of the Award; provided, however, the Committee shall not delegate such responsibilities to any such officer for Awards granted to an Employee that is a Covered Employee.
Article 4. Maximum Awards
Unless and until the Committee determines that an Award to a Covered Employee shall not be designed to qualify as Performance-Based Compensation, the following limits (“Award Limits”) shall apply to grants of such Awards under the Plan:
Article 5. Eligibility and Participation
5.1 Eligibility. Individuals eligible to participate in this Plan include all Employees of the Company.
5.2 Actual Participation. Subject to the provisions of the Plan, the Committee shall select from all eligible individuals, those to whom Awards shall be granted and shall determine the nature and amount of each Award.
Article 6. Performance Unit/Stock Incentive Awards
6.1 Grant of Performance Unit/Stock Incentive Awards. Subject to the terms of the Plan or the H. B. Fuller Company Year 2000 Stock Incentive Plan, as applicable, Performance Unit Awards and/or Stock Incentive Awards may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee.
6.2 Value of Performance Unit/Stock Incentive Awards. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or size of the Performance Unit Awards and Stock Incentive Awards that will be paid out to, or vested in, the Participant.
6.3 Earning of Performance Unit/Stock Incentive Awards. After the applicable Performance Period has ended, the value and/or size of the Performance Unit Awards and Stock Incentive Awards earned by the Participant over the Performance Period, shall be determined as a function of the extent to which the corresponding performance goals have been achieved.
6.4 Form and Timing of Payment of Performance Unit/Stock Incentive Awards. Payment of earned Performance Unit Awards and Stock Incentive Awards shall be as determined by the Committee and as evidenced in the applicable Award Agreement. The Committee, in its sole discretion, may pay earned Performance Unit Awards in cash and Stock Incentive Awards according to the terms of the H. B. Fuller Company Year 2000 Stock Incentive Plan, equal to the value earned under the applicable Award Agreement at the close of the applicable Performance Period. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.
6.5 Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain the Performance Unit Awards and/or Stock Incentive Awards following termination of the Participant’s employment with the Company or its Affiliates, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Performance Unit or Stock Incentive Awards, and may reflect distinctions based on the reasons for termination.
6.6 Nontransferability. Except as otherwise provided in a Participant’s Award Agreement, Performance Unit Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement, a Participant’s rights under the Plan shall be exercisable during his or her lifetime only by such Participant.
Article 7. Performance Measures
Unless and until the Committee proposes for shareholder vote and the shareholders approve a change in the general Performance Measures set forth in this Article 7, the performance goals upon which the payment or vesting of an Award to a Covered Employee (other than an Covered Employee Annual Incentive Award awarded or credited pursuant to Article 8) that is intended to qualify as Performance-Based Compensation shall be limited to the following Performance Measures:
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Any Performance Measure(s) may be used to measure the performance of the Company as a whole or any business unit of the Company or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or any measured improvement (actual or relative) of any of the above Performance Measures, as the Committee may deem appropriate. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Article 7.
The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) Extraordinary Items, (f) acquisitions or divestitures, and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed at a time and in a form that meets the requirements of Code Section 162(m) for deductibility.
Awards that are designed to qualify as Performance-Based Compensation, and that are held by Covered Employees, may not be adjusted upward. The Committee shall retain the discretion to adjust such Awards downward.
In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m).
Article 8. Covered Employee Incentive Pool
The Committee may designate Covered Employees who are eligible to receive a monetary payment in any Plan Year based on a percentage of an incentive pool equal to the greater of: (i) five percent (5%) of the Company’s Operating Income for the Plan Year, or (ii) five percent (5%) of the Company’s Operating Cash Flow. The Committee shall allocate an incentive pool percentage to each designated Covered Employee for each Plan Year. In no event may the incentive pool percentage for any one Covered Employee exceed seventy-five percent (75%) of the total pool.
As soon as possible after the determination of the incentive pool for a Plan Year, the Committee shall calculate the Covered Employee’s allocated portion of the incentive pool based upon the percentage established at the beginning of the Plan Year. The Covered Employee’s incentive award then shall be determined by the Committee based on the Covered Employee’s allocated portion of the incentive pool subject to adjustment in the sole discretion of the Committee. In no event may the portion of the incentive pool allocated to a Covered Employee be increased in any way, including as a result of the reduction of any other Covered Employee’s allocated portion.
Article 9. Beneficiary Designation
Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.
Article 10. Deferrals
The Committee may permit or require a Participant to defer such Participant’s receipt of an Award that would otherwise be due to such Participant by virtue of the satisfaction of any requirements or performance goals with respect to Stock Incentive Awards, Performance Unit Awards, and Covered Employee Annual Incentive Awards. If any such deferral election is required or permitted, the terms of the deferral shall comply with the requirements of Section 409A of the Code (to the extent applicable), and shall be set forth in the Award Agreement pertaining to the grant of the Award.
Article 11. Rights of Participants
11.1 Employment. Nothing in the Plan or an Award Agreement shall interfere with or limit in any way the right of the Company and/or its Affiliates to terminate any Participant’s employment at any time or for any reason not prohibited by law, nor confer upon any Participant any right to continue his or her employment for any specified period of time.
Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company and/or its Affiliates and, accordingly, subject to Article 3 and Article 12, this Plan and
the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company and/or its Affiliates.
11.2 Participation. No individual shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.
Article 12. Amendment, Modification, Suspension, and Termination
12.1 Amendment, Modification, Suspension, and Termination. The Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate the Plan in whole or in part. No amendment of the Plan shall be made without shareholder approval if shareholder approval is required by law, regulation, or stock exchange rule.
12.2 Awards Previously Granted. Notwithstanding any other provision of the Plan to the contrary, no termination, amendment, suspension, or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award.
Article 13. Withholding
13.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, the minimum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.
13.2 Share Withholding. With respect to withholding required upon the achievement of performance goals related to Stock Incentive Awards, the Committee may permit the Participant subject to any restrictions or limitations that the Committee, in its sole discretion deems appropriate, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a fair market value on the date the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction.
Article 14. Successors
All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
Article 15. General Provisions
15.1 Forfeiture Events. The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events shall include, but shall not be limited to, termination of employment for cause, violation of material Company and/or Affiliate policies, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company and/or its Affiliates.
15.2 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.
15.3 Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
15.4 Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
15.5 Securities Law Compliance. Transactions under this Plan are intended to comply with all applicable securities laws. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee.
15.6 Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other person. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan. The Plan is not subject to ERISA.
15.7 Retirement and Welfare Plans. The value of compensation paid under this Plan will not be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s retirement plans (both qualified and nonqualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a participant’s benefit.
15.8 Governing Law. The Plan and each Award Agreement shall be governed by the laws of the State of Minnesota, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Award Agreement, recipients of an Award under the Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Minnesota, to resolve any and all issues that may arise out of or relate to the Plan or any related Award Agreement.
DIRECTIONS TO H.B. FULLER COMPANY
1200 Willow Lake Boulevard
St. Paul, Minnesota
651-236-5900
Directions:
From the North: Take I-35E south to County Road E. Take the County E exit (Exit 115) and turn left onto County Road E. Take County Road E east to Labore Road (second stoplight) and turn right. Follow Labore Road to Willow Lake Blvd and turn left. Turn right into H.B. Fuller’s corporate headquarters entrance at 1200 Willow Lake Blvd and continue to stop sign. Turn left at stop sign and proceed to parking lot.
From the South: Take I-35E north to County Road E (approx. 10 miles from downtown St. Paul). Take the County E exit (Exit 115) and turn right on County Road E. Take County Road E east to Labore Road (second stoplight) and turn right. Follow Labore Road to Willow Lake Blvd and turn left. Turn right into H.B. Fuller’s corporate headquarters entrance at 1200 Willow Lake Blvd and continue to stop sign. Turn left at stop sign and proceed to parking lot.
From the West: Take I-494 or I-94 east to I-35E north. Follow I-35E north to County Road E. Take the County E exit (Exit 115) and turn right on County Road E. Take County Road E east to Labore Road (second stoplight) and turn right. Follow Labore Road to Willow Lake Blvd and turn left. Turn right into H.B. Fuller’s corporate headquarters entrance at 1200 Willow Lake Blvd and continue to stop sign. Turn left at stop sign and proceed to parking lot.
From the East: Take I-694 west to I-35E north. Follow I-35E north to County Road E. Take the County E exit (Exit 115) and turn right on County Road E. Take County Road E east to Labore Road (second stoplight) and turn right. Follow Labore Road to Willow Lake Blvd and turn left. Turn right into H.B. Fuller’s corporate headquarters entrance at 1200 Willow Lake Blvd and continue to stop sign. Turn left at stop sign and proceed to parking lot.
PARKING: Parking is available in the parking lot of the H.B. Fuller Company headquarters.
*** Exercise YourRight to Vote ***
Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to Be Held on April 14, 2011.
H.B. FULLER COMPANY H.B. FULLER COMPANY P.O. BOX 64683 ST. PAUL, MN 55164-0683 | Meeting Information | |||||||||||||||
Meeting Type: | Annual Meeting | |||||||||||||||
For holders as of: | February 16, 2011 | |||||||||||||||
Date: April 14, 2011 Time:2:00 PM CDT | ||||||||||||||||
Location: H.B. Fuller Company Headquarters | ||||||||||||||||
1200 Willow Lake Boulevard | ||||||||||||||||
Saint Paul, Minnesota 55110 | ||||||||||||||||
You are receiving this communication because you hold shares in the above named company. This is not a ballot. You cannot use this notice to vote these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online atwww.proxyvote.com or easily request a paper copy (see reverse side). We encourage you to access and review all of the important information contained in the proxy materials before voting. | ||||||||||||||||
See the reverse side of this notice to obtain proxy materials and voting instructions. |
— Before You Vote — How to Access the Proxy Materials | ||||||||||
Proxy Materials Available to VIEW or RECEIVE: | ||||||||||
NOTICE AND PROXY STATEMENT ANNUAL REPORT How to View Online: Have the information that is printed in the box marked by the arrow(located on the following page) and visit:www.proxyvote.com. How to Request and Receive a PAPER or E-MAIL Copy: If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: | ||||||||||
1) BY INTERNET: | www.proxyvote.com | |||||||||
2) BY TELEPHONE: | 1-800-579-1639 | |||||||||
3) BY E-MAIL*: | sendmaterial@proxyvote.com | |||||||||
* If requesting materials by e-mail, please send a blank e-mail with the information that is printed in the box marked by the arrow(located on the following page) in the subject line. Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before April 7, 2011 to facilitate timely delivery. | ||||||||||
| — How To Vote — Please Choose One of the Following Voting Methods | |||||||||
Vote In Person: Many shareholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the meeting, you will need to request a ballot to vote these shares. | ||||||||||
Vote By Internet: To vote now by Internet, go towww.proxyvote.com. Have the information that is printed in the box marked by the arrowavailable and follow the instructions. Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. | ||||||||||
Voting Items | ||||||||
The Board of Directors recommends you vote FOR the following: | ||||||||
1. Election of Directors Nominees 01) J. Michael Losh 02) Lee R. Mitau 03) R. William Van Sant The Board of Directors recommends you vote FOR the following proposal: 2. A non-binding advisory vote to approve the compensation of our named executive officers disclosed in the attached proxy statement. The Board of Directors recommends you vote 3 YEARS on the following proposal: 3. A non-binding advisory vote on the frequency of an advisory vote on executive compensation. The Board of Directors recommends you vote FOR the following proposal: 4. The ratification of the appointment of KPMG LLP as H.B. Fuller’s independent registered public accounting firm for the fiscal year ending December 3, 2011. NOTE: The shares represented by this proxy when properly executed will be voted in the manner directed herein by the undersigned shareholder(s).If no direction is made, this proxy will be voted FOR items 1, 2 and 4 and for THREE YEARS for item 3. If any other matters properly come before the meeting, the persons named in the proxy statement will vote in their discretion. | ||||||||
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available atwww.proxyvote.com.
M30600-P05012-Z54553
H.B. FULLER COMPANY Annual Meeting of Shareholders April 14, 2011 This proxy is solicited by the Board of Directors For Registered Shareholders: The undersigned, revoking all prior proxies, appoints James J. Owens, James. R. Giertz and Timothy J. Keenan, or any one or more of them, as proxies, with full power of substitution, to represent the undersigned and to vote, as indicated on the reverse side and otherwise in their discretion upon such other matters as may properly come before the meeting, all shares of the common stock of H.B. Fuller Company which the undersigned is entitled to vote at the Annual Meeting of Shareholders of the Company to be held at the H.B. Fuller Company headquarters, 1200 Willow Lake Boulevard, Saint Paul, Minnesota on Thursday, April 14, 2011 at 2:00 p.m., local time, and at any adjournment thereof. The undersigned hereby acknowledges receipt of the Proxy Statement for the Annual Meeting. For Participants in 401(k) Plan: This voting instruction form is sent to you on behalf of JPMorgan Chase Bank, N.A. as Trustee of the H.B. Fuller Company 401(k) & Retirement Plan (the “Plan”). Please complete this form on the reverse side, sign your name exactly as it appears on the reverse side, and return it in the enclosed envelope. Your instruction must be received no later than 11:59 p.m. Central Time on Monday, April 11, 2011, to be counted. As participant in the Plan, the undersigned hereby directs JPMorgan Chase Bank as Trustee, to vote all shares of Common Stock of H.B. Fuller Company represented by the undersigned’s proportionate interest in the Plan at the Annual Meeting of Shareholders to be held on Thursday, April 14, 2011 at 2:00 p.m., local time, and at any adjournment thereof, upon the matters set forth on the reverse side and upon such other matters as may properly come before the meeting. Only the Trustee can vote these shares. You cannot vote these shares in person at the Annual Meeting. Continued and to be signed on reverse side |
H.B. FULLER COMPANY P.O. BOX 64683 ST. PAUL, MN 55164-0683 |
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Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | ||
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS | ||
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. | ||
VOTE BY PHONE - 1-800-690-6903 | ||
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. | ||
VOTE BY MAIL | ||
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||
M30599-P05012-Z54553 KEEP THIS PORTION FOR YOUR RECORDS | ||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
H.B. FULLER COMPANY The Board of Directors recommends you vote FOR the following: | For All | Withhold All | For All Except | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | ||||||||||||||||||||||
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1. | Election of Directors | ¨ | ¨ | ¨ |
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, revoking all prior proxies, appoints Michele Volpi, James C. McCreary, Jr. and Timothy J. Keenan, or any one or more of them, as proxies, with full power of substitution, to represent the undersigned and to vote, as indicated on the reverse side and otherwise in their discretion upon such other matters as may properly come before the meeting, all shares of the common stock of H.B. Fuller Company which the undersigned is entitled to vote at the Annual Meeting of Shareholders of the Company to be held at the H.B. Fuller Company headquarters, 1200 Willow Lake Boulevard, Saint Paul, Minnesota on Thursday, April 3, 2008 at 2:00 p.m. and at any adjournment thereof. The undersigned hereby acknowledges receipt of the Proxy Statement for the Annual Meeting.
See reverse for voting instructions.
There are three ways to vote your Proxy
Your telephone or Internet vote authorizes the Named Proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.
VOTE BY PHONE — TOLL FREE — 1-800-560-1965 — QUICK * * * EASY * * * IMMEDIATE
Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week, until 12:00 p.m. (CT) on Wednesday, April 2, 2008.
Please have your proxy card and the last four digits of your Social Security Number or Tax Identification Number available. Follow the simple instructions the voice provides you.
VOTE BY INTERNET — www.eproxy.com/ful — QUICK * * * EASY * * * IMMEDIATE
Use the internet to vote your proxy 24 hours a day, 7 days a week, until 12:00 p.m. (CT) on Wednesday, April 2, 2008.
Please have your proxy card and the last four digits of your Social Security Number or Tax Identification Number available. Follow the simple instructions to obtain your records and create an electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we’ve provided or return it toH.B.FullerCompany, c/o Shareowner ServicesSM,P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
òPlease detach hereò
The Board of Directors Recommends a Vote FOR Items 1, 2 and 3
01) J. Michael Losh | |||||||||||||||||||||||||||
02) Lee R. Mitau | |||||||||||||||||||||||||||
03) R. William Van Sant | |||||||||||||||||||||||||||
For | Against | Abstain | |||||||||||||||||||||||||
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The Board of Directors recommends you vote 3 YEARS on the following proposal: | 3 Years | 2 Years | 1 Year | Abstain | |||||||||||||||||||||||
3. | A non-binding advisory vote on the frequency of an advisory vote on executive compensation. | ¨ | ¨ | ¨ | ¨ | ||||||||||||||||||||||
| For | Against | Abstain | ||||||||||||||||||||||||
4. | The ratification of the appointment of KPMG LLP as
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THIS VOTING INSTRUCTION CARD WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTEDFOR ITEMS 1, 2 AND 3.
Address Change? Mark Box ¨ Indicate changes below: Date
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H.B. Fuller Company Thrift Plan
and EFTEC Savings Plan
I hereby direct Wells Fargo Bank, N.A., as Trustee of the H.B. Fuller Company Thrift Plan Trust and the EFTEC Savings Plan Trust to vote at the Annual Meeting of Shareholders of H.B. Fuller Company (the “Company”) to be held at the H.B. Fuller Company headquarters, 1200 Willow Lake Boulevard, Saint Paul, Minnesota on Thursday, April 3, 2008 at 2:00 p.m. and at any adjournment thereof, the shares of common stock of the Company allocated to my accounts.
This voting instruction card is furnished in connection with the solicitation of proxies by the Board of Directors of the Company. I understand this card must be returned to the Trustee if my voting instructions are to be honored. If it is not received by the Trustee, or if it is received but the voting instructions are invalid, the shares of stock with respect to which I could have directed the Trustee shall be voted by the Trustee in accordance with the terms of the plans. The Trustee is hereby directed to vote as indicated on the following proposals which are more fully described in the Company’s Notice of Annual Meeting of Shareholders and Proxy Statement. The undersigned hereby acknowledges receipt of the Proxy Statement for the Annual Meeting.
See reverse for voting instructions.
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There are three ways to vote your Voting Instruction Card
Your telephone or Internet vote authorizes the Named Proxies to vote your shares in the same manner as if you marked, signed and returned your voting instruction card.
VOTE BY PHONE — TOLL FREE — 1-800-560-1965 — QUICK * * * EASY * * * IMMEDIATE
Use any touch-tone telephone to vote your voting instruction 24 hours a day, 7 days a week, until 12:00 p.m. (CT) on Monday, March 31, 2008.
Please have your voting instruction card and the last four digits of your Social Security Number or Tax Identification Number available. Follow the simple instructions the voice provides you.
VOTE BY INTERNET — www.eproxy.com/ful — QUICK * * * EASY * * * IMMEDIATE
Use the Internet to vote your voting instruction 24 hours a day, 7 days a week, until 12:00 p.m. (CT) on Monday, March 31, 2008.
Please have your voting instruction card and the last four digits of your Social Security Number or Tax Identification Number available. Follow the simple instructions to obtain your records and create an electronic ballot.
VOTE BY MAIL
Mark, sign and date your voting instruction card and return it in the postage-paid envelope we’ve provided or return it toH.B. Fuller Company, c/o Shareowner ServicesSM, P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR VOTING INSTRUCTION CARD
òPlease detach hereò
The Board of Directors Recommends a Vote FOR Items 1, 2 and 3
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THIS VOTING INSTRUCTION CARD WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTEDFOR ITEMS 1, 2 AND 3.
Address Change? Mark Box ¨ Indicate changes below: Date
Please sign your name exactly as it appears hereon. When signing as attorney, executor, administrator, trustee or guardian, please add your | ||||||||||||||||||||||||||
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |