UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ☒
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)) ☒ Definitive Proxy Statement ☐ Definitive Additional Materials ☐ Soliciting Material Pursuant to §240.14a-12 |
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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):
☒ No fee required.
☐ Fee paid previously with preliminary materials. ☐ Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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2024 | Notice of Annual Meeting and Proxy Statement |
ANNUAL MEETING TO BE HELD APRIL 11, 2024
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 20212024 Annual Meeting of Shareholders will be held on Thursday, April 8, 2021.11, 2024. This year’s Annual Meeting will once again be a completely virtual meeting, which will be conducted via live webcast. A virtual meeting provides expanded access from any location around the world, improved communication and cost savings for our shareholders and the Company, and helps to safeguard public health during the COVID-19 pandemic.Company.
You can attend the meeting via the Internet at www.virtualshareholdermeeting.com/FUL2021FUL2024, where you will be able to vote and submit questions electronically prior to and during the meeting. Specific instructions for accessing the meeting are provided in the attached Notice of Annual Meeting of Shareholders. The virtual meeting will begin promptly at 10:00 a.m. Central Time. The Notice of Annual Meeting of Shareholders and the Proxy Statement describe the business to be conducted at the meeting.
We have elected to take advantage of the “notice and access” rules of the Securities and Exchange Commission to furnish most of our shareholders with proxy materials over the Internet. This method of delivery allows us to provide you with the information you need, while reducing printing and delivery expenses.
Your vote on the proposals is important. Whether or not you plan on attending the virtual meeting, we encourage you to vote your shares to make certain that you are represented at the meeting. You may vote via the Internet or by telephone or, if you received a printed copy of the proxy materials, by Internet, telephone or by mailing a proxy or voting instruction card.
Sincerely, | |
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Celeste B. Mastin | |
President and Chief Executive Officer |
February 24, 202128, 2024
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 |
Items of Business: | 1. The election of three directors named in the attached Proxy Statement. Three directors will serve for a three-year term until the |
2. The ratification of the appointment of Ernst & Young LLP as H.B. Fuller’s independent registered public accounting firm for the fiscal year ending November 30, 2024. | |
3. A non-binding advisory vote to approve the compensation of our named executive officers as disclosed in the attached Proxy Statement. | |
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Record Date: | You are entitled to vote on the above items of business 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, we encourage you to submit your proxy as soon as possible. For specific instructions on how to vote your shares, please refer to the instructions in the materials you received, the section entitled “ |
By Order of the Board of Directors | |
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Senior Vice President, General Counsel and Corporate Secretary |
February 24, 202128, 2024
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H. B. FULLER | 2024 Proxy Statement
GLOSSARY OF FREQUENTLY USED TERMS
2020 Incentive Plan | the H.B. Fuller Company 2020 Master Incentive Plan, which was amended and restated on April 8, 2021 and on April 6, 2023 and which is our currently effective stock plan |
401(k) Plan | the H.B. Fuller Company 401(k) and Retirement Plan |
Adjusted EBITDA | Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization as defined on page 38 |
Adjusted EPS | Adjusted earnings per share |
Adjusted Net Revenue | Defined on page 38 |
Board | Board of Directors of H.B. Fuller Company |
CAO | Chief Administrative Officer |
CAP | Compensation Actually Paid |
CEO | Chief Executive Officer |
CFO | Chief Financial Officer |
Company, H.B. Fuller, we, our | H.B. Fuller Company |
COO | Chief Operating Officer |
DC Restoration Plan | the H.B. Fuller Defined Contribution Restoration Plan |
DDCP | the H.B. Fuller Directors’ Deferred Compensation Plan |
EPS | Earnings per share |
ESG | Environmental, Social and Governance |
Exchange Act | Securities Exchange Act of 1934, as amended |
EY | Ernst & Young LLP |
GAAP | Generally Accepted Accounting Principles in the United States |
KEDCP | Key Employee Deferred Compensation Plan |
LTIP | Long-term incentive plan |
NEOs | Named executive officers of H.B. Fuller Company |
Non-GAAP | Financial measures reconciled to, but not in accordance with, Generally Accepted Accounting Principles |
NQSO | Non-qualified stock option |
NYSE | New York Stock Exchange |
PSU | Performance-based stock unit |
ROIC | Return on invested capital as defined on page 39 |
RSU | Restricted stock unit |
SEC | the Securities and Exchange Commission |
TSR | Total shareholder return |
H. B. FULLER | 2024 Proxy Statement2 |
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 8, 202111, 2024
The Board of Directors (the "Board") of H.B. Fuller Company ("H.B. Fuller", the "Company" or "we") is soliciting proxies to be used at the Annual Meeting of Shareholders to be held on April 8, 2021,11, 2024, and at any adjournment and reconvening of the meeting. We first made this Proxy Statement and the 2023 Annual Report for the fiscal year ended November 28, 2020to Shareholders available to our shareholders on or about February 24, 2021.28, 2024.
Provided below are highlights of some of the information contained in this Proxy Statement. These highlights are only a summary. Please review the complete Proxy Statement and 20202023 Annual Report to Shareholders before you vote.
ANNUAL MEETING OF SHAREHOLDERSAnnual Meeting of Shareholders
DATE AND TIME: | PLACE: | VOTING: | ||
Thursday, April RECORD DATE: Wednesday, February 14, 2024 | ||||
| Via the Internet. You may attend the virtual meeting by visiting | |||
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| You may vote by proxy or at the |
PROPOSALH. B. FULLER | 2024 Proxy StatementS REQUIRING YOUR VOTE3
PROXY SUMMARY
Proposals Requiring Your Vote
Your vote is important. Whether or not you plan to attend the virtual meeting, we encourage you to vote your shares to make certain that you are represented at the meeting.
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Recommendation | Page | |
PROPOSAL 1 – Election of Directors |
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In selecting director nominees, our Board carefully considers the qualifications of each candidate and the overall composition of the Board. The following table provides summary information about each of the director nominees: |
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| SRILATA A. ZAHEER | |||||||||||
(Class I) | |||||||||||||
(Class I) | (Class I) | ||||||||||||
Director Since: 2010 | Director Since: 2017 | Director Since: 2022 | |||||||||||
Roles on the Board: Audit Committee (Chair) and Corporate Governance and Nominating Committee | |||||||||||||
| Roles on the Board: Audit Committee and Compensation Committee | Roles on the Board: Audit Committee and Compensation Committee | |||||||||||
Independent? | Independent? | Independent? | |||||||||||
Yes | Yes | Yes | |||||||||||
Other Public Company Boards: | Other Public Company Boards: | Other Public Company Boards: | |||||||||||
Republic Services, Inc. | No | No | |||||||||||
If elected, Mr. Handley, Ms. |
H. B. FULLER | 2024 Proxy Statement 4
PROXY SUMMARY
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Recommendation | Page | ||||||||
PROPOSAL 2 – Ratification of Appointment of Independent Registered Public Accounting Firm | FOR | 28 | ||||||||
The Audit Committee has approved the appointment of Ernst & Young LLP as the Company’s independent auditor for fiscal year 2024. Shareholders are asked to ratify this appointment. | ||||||||||
PROPOSAL3 – Non-Binding Advisory Vote on Executive Compensation | FOR | 62 | ||||||||
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H. B. FULLER | 2024 Proxy Statement 5
Proposal 4 – Approve Amendment and Restatement of the H.B. Fuller Company 2020 Master Incentive Plan to Increase Shares and Adopt Certain Other Amendments
The purpose of the 2020 Master Incentive Plan is to promote the interests of the Company and our shareholders by aiding the Company in attracting and retaining employees, officers, consultants, independent contractors and non-employee directors capable of assuring the future success of the Company, to provide such persons with opportunities for stock ownership in the Company and to offer such persons other incentives to put forth maximum efforts for the success of the Company’s business. Shareholders are asked to approve an amendment and restatement of the 2020 Master Incentive Plan to increase the number of shares of common stock of the Company authorized for issuance under the Plan by 900,000 shares and to adopt certain other amendments to the Plan.
FOR
72
2020 PERFORMANCE HIGHLIGHTSPROXY SUMMARY
Fiscal 2020 Business Results.2023 Performance Highlights During
We demonstrated resilience and determination in executing our winning strategy in the face of significant headwinds, including continued raw material cost inflation, a challenging macroeconomic climate, and higher interest rates. Throughout the year, we experienced unprecedented customer inventory de-stocking actions, increasing interest rates, and headwinds from foreign currency translation.
We are proud of the financial results we delivered in fiscal 2023, compared to fiscal 2022:
● | Net revenue of $3.51 billion, down 6.4%; |
● | Net income of $145 million, down 19.6%; |
● | EPS of $2.59, with Adjusted EPS of $3.87; |
● | Adjusted EBITDA of $581 million, up 10%; |
● | Operating cash flow of $378 million, up 48%; and |
● | For the 54th consecutive year, we implemented an increase in the amount of quarterly cash dividends paid to shareholders, with an 8% increase this year. |
Despite the challenges described above, we delivered double-digit growth in adjusted EBITDA and operating cash flow in fiscal year 2020, the COVID-19 pandemic had2023, driven by management of changing price and raw material dynamics, decisive restructuring measures, and strong execution. We achieved a significant disruptive impact on global economies, supply chains and industrial production, which resulted in reduced demand in some markets, while at the same time driving elevated demand for adhesive solutions for paper products, food and e-commerce packaging, and hygiene and medical goods. We effectively managed our global operations throughout the pandemic, implementing rigorous protocols focused on the health and safety of our employees and ensuring business continuity across our supplier, manufacturing and distribution networks. These actions enabled us to meet our customers’ increased demands for adhesive solutions for essential goods, effectively allocate our resources and manage expenses, and deliver strong financial results, while maintaining a safe workplace for employees. Recognizing the success of the Company and our ability to meet the unexpected challenges of fiscal year 2020, we compensated our NEOs according to the designrecord high adjusted EBITDA margin of our executive compensation programs as adopted at the beginning of the fiscal year. Overall, the compensation provided to our NEOs is aligned with our fiscal year 2020 business results. No adjustments were made for our NEOs and we maintained the metrics and targets that were originally established for our fiscal year 2020 annual and long-term incentive plans.
At the beginning of fiscal year 2020, the Company moved from five to three reporting segments: Hygiene, Health and Consumable Adhesives, Engineering Adhesives and Construction Adhesives, in order to enhance its strategic alignment across end markets, and position the Company to better develop and deliver adhesive solutions around the world.
Net income for the 2020 fiscal year was $124 million, or $2.36 diluted earnings per share (“EPS”), versus net income of $131 million, or $2.52 EPS, in the 2019 fiscal year. Adjusted diluted earnings per share (“AEPS”) in the 2020 fiscal year were $2.84, down 4.1% versus the prior year.
Net revenue for the 2020 fiscal year was $2,790 million, down 3.7% versus the 2019 fiscal year.16.5%.
Adjusted Earnings Before Interest, Taxes, Debt and Amortization (“Adjusted EBITDA”) for fiscal year 2020 was $407 million, down 5.9% compared with $432 million in the 2019 fiscal year. The Company’s cash flow from operations of $322 million increased 23% year-over-year, and enabled us to pay down a total of $205 million of debt for the year, above our $200 million target.
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For the 51st consecutive year, we implemented an increase in the amount of quarterly cash dividends paid to shareholders, with a 2% increase this year.
More information on our 2020 performance can be found on pages 34 -37. AEPS, Adjusted Net Revenue,EPS and Adjusted EBITDA are non-GAAP financial metrics that are reconciled with the most directly comparable GAAP financial metrics in Annex A.
EXECUTIVE COMPENSATION PROGRAM (for more information,Executive Compensation Program(For More Information, see pages 34 -54)29- 43)
Our executive compensation program is designed to provide a competitive compensation package that rewards executive officers for sustained financial and operating performance that creates long-term value for our shareholders. Our program emphasizes pay for performance through the use ofusing short- and long-term incentive awards as a significant percentage of total direct compensation.
The graphs below show each element of total direct compensation (base salary, short-term incentive, and long-term incentive) as a percentage of total direct compensation for fiscal 2020year 2023 for the Chief Executive Officer (“CEO”)CEO and on average for the other named executive officersNEOs listed in the “Summary Compensation Table.” the “NEOs”). Long-term
Short-term incentive awards are composedperformance-based cash awards granted pursuant to the STIP. Actual results on all STIP metrics are set forth in a table on page 37 of non-qualified stock options (“NQSOs”), time-based restricted stock units (“RSUs”)this Proxy Statement. STIP payments can range from 0% to 200% of target. In fiscal year 2023, the achievement of our financial metrics resulted in short-term cash incentive payouts for our CEO, CFO, and performance-based restricted stock units (“PSUs”).CAO of 50% of target and ranged from 49% to 87% of target for our other NEOs, based in part on the performance of the operating segments that they lead.
Short-Term Incentive AwardsH. B. FULLER | 2024 Proxy Statement 6
The short-term incentive plan (“STIP”) aligns executive performance with achievement of annual company strategic goals and objectives and provides cash rewards for meeting or exceeding specific targets.
For fiscal year 2020, the Compensation Committee approved the following changes to the design of the STIP for the NEOs:
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The Company’s fiscal year 2020 performance against STIP metrics is summarized below:
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AEPS, Adjusted Net Revenue and Adjusted EBITDA are non-GAAP financial metrics that are reconciled with the most directly comparable GAAP financial metrics in Annex A. See “STIP Peformance Metrics” for information on the use of non-GAAP numbers in our STIP program.PROXY SUMMARY
All short-term incentive awards earned for fiscal year 2023 are also shown in the “Long-TermNon-Equity Incentive AwardsPlan Compensation” column of the “Summary Compensation Table” later in this Proxy Statement.
Our long-termLong-term incentive plan (“LTIP”) is equity-basedawards are equity awards granted pursuant to the LTIP. The awards are composed of NQSOs, RSUs and used to attract, retain and reward high caliber executive talent and to encourage long-term strategic decision making that is aligned with shareholder interests. We grantPSUs. All equity awards granted in fiscal year 2023 are shown in the following awards, which are periodically benchmarked against market data. These awards tie a significant portion“Grants of NEO total direct compensation to shareholder value creation, which is measured by share price performance.
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See further discussion and detail in the “Compensation Discussion and Analysis” section of this Proxy Statement. ROIC is a non-GAAP financial metric that is reconciled with the most directly comparable GAAP financial metric in Annex A. Discussion of the use of ROIC as a metric can be found in the “LTIP Performance Metrics” section of this Proxy Statement.
Other Highlights of Our Executive Compensation Program
OTHER HIGHLIGHTS OF OUR EXECUTIVE COMPENSATION PROGRAM
● | 25% of NEO equity awards are PSUs that cliff vest at the end of a three-year performance period; |
● | A policy regarding |
● | A prohibition on hedging, pledging and certain other transactions in the Company's securities by directors and executive officers; |
● | Policies for responsible share usage and governance of our equity compensation plans, including a prohibition on re-pricing of stock options; |
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● | Removal of tax gross-up provisions from change-in-control agreements entered into beginning in mid-fiscal year 2018; and |
● | Stock ownership goals of five times base salary for our CEO, three times base salary for our CFO, and |
Fiscal 2021 2024 Changes to our Executive Compensation Program
Effective for LTIPSTIP awards granted in January 2021, PSUs that vest based on ROIC performancerelated to the Company’s 2024 fiscal year and thereafter, Adjusted EBITDA margin will move from three-year ratable vesting to three-year cliff vesting. The ROICbe included as a fourth metric for these PSUs will not change. However, the metric target is a three-year average of annual ROIC, versus individual annual ROIC targets. This change better aligns the PSU grant vestingalong with the focus of ROIC performance over the three-year performance period of the award, incentivizes long-term strategic thinkingAdjusted EBITDA, Adjusted EPS, and behavior, and enhances the focus on retention. In addition, the PSU grant for the CEO that vests over three years only if the Company achieves at least a threshold level of AEPS, Adjusted Net Revenue orfor purposes of calculating STIP awards. Each of the metrics will be weighted at 25% for our executive officers with the exception of our SVP, International Growth Markets, whose STIP metrics will be weighted at 35% for Adjusted EPS, 25% for International Growth Markets Adjusted EBITDA in the first year of the grant, has been revised to be time-based RSUs. This change wasmargin, 20% for International Growth Markets Adjusted EBITDA, and 20% for International Growth Markets Adjusted Net Revenue. These changes were made to increasebetter align the long-term orientation of the CEO’s compensation and to be consistentSTIP metrics with the time-based RSU grants received by the other NEOs.Company’s portfolio management approach.
Board Composition and Diversity
The Board believes that its membership should reflect a diversity of experience, skills, geography, gender, and ethnicity that can enrich its deliberations. The following tablespie charts provide information about certain aspects of our Board’s diversity as of January 31, 2021.2024.
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44% Women | 11% Diverse (Ethnic or Racial) | |
11% Other | 56% Men | 89% Other |
H. B. FULLER | 2024 Proxy Statement 7
PROXY SUMMARY
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7.2 YEARS | ||
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Additional information on our policies with regard toregarding Board composition and Board diversity may be found inunder “Proposal 1 – Election of Directors – How can a shareholder suggest a candidate for election to the “Corporate GovernanceBoard?” section of this Proxy Statement.
Shareholder Engagement
We have periodically proactively reached out to many ofregularly engage with our long-term shareholdersinvestor base to obtain their input on our governance, sustainability, and compensation programs. We have generally received positive feedback and have made adjustments inplanned our programs based in part on such feedback when appropriate.
H. B. FULLER | 2024 Proxy Statement 8
PROXY SUMMARY
H.B. FULLERH.B. FULLER COMPANY’S SUSTAINABILITY
EFFORTS, HUMAN RIGHTS POLICY,
CORPORATE GIVING AND EMPLOYEE
VOLUNTEERISM
At H.B. Fuller, we are committed to creating positive change for all of our stakeholders, –including customers, employees, shareholders, and communities. We know that our company is best positioned for success when we win the right way, by creating sustainable solutions, taking care of our communities, and planning for the future. Social responsibility is fundamental to who we are as a company and also is also a source of competitive advantage. We continually strive to minimize the environmental impact of our operations, while holding safety as a top priorityCompany value and providing a dynamic and supportive workplace for our employees. We are also committed to basic human rights in our business and across our supply chain, as satedstated in the H.B. Fuller Human Rights Policy, which can be found in the “Corporate ResponsibilitySustainability” section of our corporate website (hbfuller.comwww.hbfuller.com). We are committed to minimize our ecological footprint and set performance targets for Sustainability, Volunteerismfour key sustainability metrics: energy intensity, greenhouse gas emissions intensity, waste intensity and Philanthropy, and wewater withdrawal intensity. We report annually on our progress annually,sustainability targets, volunteerism and philanthropy in our Annual Sustainability Report, which may be downloaded from theour “Corporate ResponsibilitySustainability” section of our corporate website (hbfuller.comwww.hbfuller.com). This report, our Human Rights Policy and our website are not incorporated by reference in, and are not part of, this Proxy Statement.
H. B. FULLER | 2024 Proxy Statement 9
QUESTIONS AND ANSWERS ABOUT THE MEETINGPROPOSAL 1—ELECTION OF DIRECTORS
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 accompanies this Proxy Statement. These matters 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”), the ratification of the appointment of our independent registered public accounting firm and the approval of amendments contained in an amendment and restatement of the H.B. Fuller Company 2020 Master Incentive Plan.
How can I attend the virtual meeting and vote my shares during the meeting?
If you are a shareholder of record, you may attend the meeting and vote your shares electronically during the virtual meeting by visiting www.virtualshareholdermeeting.com/FUL2021. You will need the 16-digit control number that is printed in the box marked by the arrow on your Notice Regarding the Availability of Proxy Materials to enter the Annual Meeting. We recommend that you log in at least 15 minutes before the meeting to ensure that you are logged in when the meeting starts. However, even if you currently plan to attend the virtual 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 virtual meeting.
If you have difficulty logging into the Annual Meeting, please contact technical support at 844-986-0822 (in the U.S.) and at 303-562-9302 (International calls). The virtual meeting website will also present an option for you to attend the Annual Meeting as a guest without logging in, but guests will not be able to vote during the Annual Meeting.
If you hold your shares of Common Stock in street name, you may vote your shares electronically during the virtual meeting only if you obtain a signed proxy from your broker, bank, trustee or other nominee giving you the right to vote such shares during the meeting.
If you are a participant in the H.B. Fuller Company 401(k) and Retirement Plan (the “401(k) Plan”) or the H.B. Fuller Canada Retirement & Savings Plan (“CRS Plan”), you may submit a proxy vote as described above, but you may not vote your 401(k) Plan shares in those plans during the virtual meeting.
How will management respond to questions during the virtual meeting?
The Company has held its Annual Meeting of Shareholders as a virtual meeting webcast via the Internet since 2016. While our Annual Meeting is just one of the forums where we engage with shareholders, it is an important one. The Board believes that holding the Annual Meeting in a virtual format provides the opportunity for participation by a broader group of shareholders, while reducing the costs and environmental impact associated with planning, holding and arranging logistics for an in-person meeting and helps to safeguard public health during the COVID-19 pandemic. We welcome your suggestions on how we can improve our virtual meeting and make it more effective and efficient.
Management will respond to questions from shareholders in the same way as it would if the Company held an in-person meeting. Shareholders who wish to submit a question to the Company for the meeting may do so in advance at www.proxyvote.com and live during the meeting at www.virtualshareholdermeeting.com/FUL2021. You will need the 16-digit control number that is printed in the box marked by the arrow on your Notice Regarding the Availability of Proxy Materials to enter the Annual Meeting. We recommend that you log in at least 15 minutes before the meeting to ensure that you are logged in when the meeting starts.
We intend that the virtual meeting format provide shareholders a level of participation and transparency as close as possible to the traditional in-person meeting format, and we take the following steps to ensure such an experience:
● providing shareholders with the ability to submit appropriate questions in advance of the meeting to ensure thoughtful responses from management and the Board;
● providing shareholders with the ability to submit appropriate questions real-time, limiting questions to one per shareholder unless time otherwise permits;
● answering as many questions as possible in the time allotted for the meeting (the question and answer session will be limited to 15 minutes), without discrimination, as long as the questions are submitted in accordance with the meeting rules of conduct (for example, the Company does not intend to answer questions that are irrelevant to the business of the Company or to the business of the Annual Meeting);
● if there are appropriate questions that we cannot answer during the meeting, we will post the questions and answers thereto on hbfuller.com in the Investor Relations area of our website; and
● offering separate engagement opportunities with shareholders on appropriate matters of governance or other relevant topics as outlined under the “Communications with Directors” section on page 24 in this Proxy Statement.
How does the Board recommend that I vote?
The Board of Directors recommends a vote “FOR” each of the nominees for director, “FOR” the Say on Pay Proposal, “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending November 27, 2021 and “FOR” the approval of the amendment and restatement of the H.B. Fuller Company 2020 Master Incentive Plan to increase shares and adopt certain other amendments.
Who is entitled to vote at the meeting?
If you were a shareholder of record at the close of business on February 10, 2021, you are entitled to vote at the meeting.
As of the record date, 52,091,995 shares of common stock of the Company ("Common Stock") were outstanding and eligible to vote.
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, you are considered the beneficial owner of those shares, and your shares are held in street name. If you are a “street name holder” you will receive a voting instruction 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 52,091,995 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 at the virtual meeting and votes at the meeting or the shareholder has properly submitted a proxy by mail, telephone or Internet.
How do I vote my shares?
You may give a proxy to be voted at the meeting either:
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If you hold shares beneficially in street name, you may also vote by proxy over the Internet or by telephone 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 Internet, mail or telephone by following the instructions provided in the voting instruction card provided to you by your broker, bank, trustee or nominee.
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. You may also vote at the virtual meeting as described in “Can I vote my shares during the virtual meeting?” below.
If you hold any shares of Common Stock in the 401(k) Plan or the CRS Plan, you are being provided access to the same proxy materials as any other shareholder of record. However, your proxy vote will serve as voting instructions to the plan trustee. The shares held in the 401(k) Plan and the CRS Plan will be voted by the applicable plan trustee.
What does it mean if I receive more than one Notice of Internet Availability of Proxy Materials, proxy card or voting instruction card?
It means you hold shares of Common 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.
What vote is required for the proposals to be approved?
Each director is elected by a plurality of the votes cast, meaning that the three nominees receiving the most votes will be elected. However, in an uncontested election, if a nominee for director receives a greater number of votes “WITHHELD’ from his or her election than votes “FOR” such election, the director shall submit to the Board a letter of resignation for consideration. See the heading “Director Elections” in the “Corporate Governance” section of this Proxy Statement for more information. With respect to the Say On Pay Proposal, the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm, and the approval of the amendment and restatement of the H.B. Fuller Company 2020 Master Incentive Plan, the affirmative vote of a majority of the shares of Common Stock represented and entitled to vote on each proposal is required, provided that the total number of shares of Common Stock that vote in favor of the proposal represents more than 25% of the shares outstanding on the record date.
How are votes counted?
Shareholders may either vote “FOR” or “WITHHOLD” authority to vote for each nominee for election to the Board. Shareholders may vote “FOR,” “AGAINST” or “ABSTAIN” on the Say on Pay Proposal, the ratification of the appointment of Ernst & Young LLP and the approval of the amendment and restatement of the H.B. Fuller Company 2020 Master Incentive Plan.
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 any 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 withholding of authority to vote 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 will be considered to be “broker non-votes” and will not be 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 (“NYSE”). Shares that constitute broker non-votes will be present at the meeting for the purpose of determining a quorum, but are not considered entitled to vote on the proposal in question. Your broker or nominee has discretionary authority to vote your shares on the ratification of Ernst & Young as our independent registered public accounting firm even if your broker or nominee does not receive voting instructions from you. Your broker or nominee may not vote your shares on the election of directors, the Say on Pay Proposal or the approval of the amendment and restatement of the H.B. Fuller Company 2020 Master Incentive Plan unless it receives voting instructions from you. Broker non-votes will generally have no effect in determining whether any proposals to be voted on at the meeting are approved.
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:
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Can I change my vote?
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 virtual meeting in any of the following ways:
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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 engaged The Proxy Advisory Group, LLC to assist in the solicitation of proxies and provide related advice and informational support, for a services fee and the reimbursement of customary disbursements which are not expected to exceed $16,000 in total.
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. 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 or by telephone. 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. Our Proxy Statement and 2020 Annual Report, including our Annual Report on Form 10-K, are available at www.proxyvote.com.
Will any other 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. No shareholder has given the timely notice required by our Bylaws in order to present a proposal at the Annual Meeting. The Board does not intend to present any other matters for a vote at the Annual Meeting. If you wish to present a proposal at the 2022 Annual Meeting, please see “How can a shareholder present a proposal at the 2022 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.
How can a shareholder present a proposal at the 2022 Annual Meeting?
In order for a shareholder proposal to be considered for inclusion in our Proxy Statement for the 2022 Annual Meeting, the written proposal must be received at our principal executive offices by the close of business on October 27, 2021. The proposal must comply with SEC rules regarding the inclusion of shareholder proposals in company-sponsored proxy materials and with the requirements set forth in our Bylaws. Please contact our Corporate Secretary for a copy of such rules 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 or to nominate a director at the 2022 Annual Meeting that would not be included in our Proxy Statement for such meeting, the shareholder must provide notice to us no later than the close of business on January 10, 2022 and no earlier than the close of business on December 9, 2021. The proposal must comply with the requirements set forth in our Bylaws. Please contact the Corporate Secretary for a description of the steps to be taken to present such a proposal or to nominate a director.
How can a shareholder get a copy of the Company’s 2020 Annual Report on Form 10-K?
If you receive a printed copy of the proxy materials in the mail, our 2020 Annual Report, including our Annual Report on Form 10-K for the year ended November 28, 2020, accompanies this Proxy Statement. The 2020 Annual Report, including our Annual Report on Form 10-K, is also available via the internet in the “Financial” section of our Investor Relations page of our website (www.hbfuller.com). If requested, we will provide you a paper copy of the 2020 Annual Report, including our Annual Report on Form 10-K without charge. We will also provide you with copies of any exhibits to the Form 10-K, upon written request and upon payment of a fee covering our reasonable expenses in furnishing the exhibits. You can request a paper copy of the 2020 Annual Report, or paper copies of 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.
How do I contact 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 many shares of Common Stock each director and NEO beneficially owned as of January 27, 2021. The table also shows the beneficial ownership of Common Stock by all directors and executive officers of H.B. Fuller as a group. In general, “beneficial ownership” includes those shares of 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 Common Stock underlying phantom stock units, RSUs and PSUs 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 the outstanding shares of Common Stock.
Unless otherwise noted, the shareholders listed in the table have sole voting and investment power with respect to the shares of Common Stock owned by them, and the shares beneficially owned by our directors and executive officers are not subject to any pledge.
Amount and | Percent of | |||||
Nature of | Common Stock | |||||
Name of Beneficial Owner | Beneficial Ownership | Outstanding | ||||
BlackRock, Inc. | 8,431,517 | 1 | 16.20 | % | ||
The Vanguard Group, Inc. | 5,661,432 | 2 | 10.88 | % | ||
State Street Corporation | 3,311,693 | 3 | 6.36 | % | ||
Mairs and Power, Inc. | 2,956,228 | 4 | 5.68 | % | ||
Daniel L. Florness | 10,718 | 5 |
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Thomas W. Handley | 21,106 | 5 |
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Michael J. Happe | 0 |
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Maria Teresa Hilado | 29,274 | 5 |
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Ruth S. Kimmelshue | 3,470 | 5 |
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Lee R. Mitau | 101,418 | 5, 6 |
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Dante C. Parrini | 20,228 | 5 |
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Teresa J. Rasmussen | 0 |
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John C. van Roden, Jr. | 56,604 | 5 |
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R. William Van Sant | 20,390 | 5 |
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James J. Owens | 1,244,773 | 7 | 2.35 | % | ||
John J. Corkrean | 137,872 | 8 |
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Theodore M. Clark | 111,156 | 9 |
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Andrew E. Tometich | 79,003 | 10 |
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Zhiwei Cai | 86,261 | 11 |
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All directors and executive officers as a group (19 people) | 2,255,961 | 12 | 4.19 | % |
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Daniel L. Florness | 10,718 | Lee R. Mitau | 58,747 |
Thomas W. Handley | 19,759 | Dante C. Parrini | 18,887 |
Maria Teresa Hilado | 27,928 | John C. van Roden, Jr. | 41,643 |
Ruth S. Kimmelshue | 2,119 | R. William Van Sant | 20,390 |
Excludes shares of Common Stock subject to phantom stock units credited to the accounts of directors who participate in the Directors’ Deferred Compensation Plan, described under the heading “Director Compensation” that may not 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:
Thomas W. Handley | 32,893 | Lee R. Mitau | 120,640 |
Ruth S. Kimmelshue | 9,471 | R. William Van Sant | 94,930 |
None of the phantom stock units are entitled to vote at the meeting.
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DELINQUENT SECTION 16(a) REPORTS
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 2020, except that, due to administrative error, James Owens was one day late in filing a Form 4 reporting an open-market sale on June 26, 2020.
PROPOSAL 1—ELECTION OF DIRECTORS
The Board of Directors is currently composed of elevennine directors and is divided into three classes. Generally, each year one class of directors stands for election for a three-year term. The term of office for Class I directors, consisting of Thomas W. Handley, Maria Teresa Hilado, Ruth S. Kimmelshue, and R. William Van SantSrilata A. Zaheer will expire at the Annual Meeting. Thomas W.Mr. Handley, Maria Teresa HiladoMs. Kimmelshue, and Ruth S. KimmelshueMs. Zaheer are being nominated to serve an additional three-year term of office until the 20242027 Annual Meeting and until their successors are duly elected and qualified or uponuntil their earlier resignation or removal. Mr. Van Sant will retire following the Annual Meeting. Thomas W. Handley, Maria Teresa Hiladoremoval and Ruth S. Kimmelshue each havehas agreed to serve as a director if elected. Following the Annual Meeting,Mr. Handley and Ms. Kimmelshue were elected to the Board of Directors will be comprisedby the shareholders. Ms. Zaheer was recommended by both Mr. Mitau and Mr. Owens (the Company’s former CEO) and appointed by the Board of ten directors.Directors in November 2021, effective April 2022. 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?”
Unless earlier terminated due to retirement or resignation, the term of office for Class II directors, consisting of Michael J. Happe, James J. Owens, Dante C. ParriniCharles T. Lauber, and John C. van Roden, Jr.,Celeste B. Mastin will expire at the Annual Meeting in 2022,2025, and the term of office for Class III directors, consisting of Daniel L. Florness, Lee R. Mitau, and Teresa J. Rasmussen will expire at the Annual Meeting in 2026.
Two new members joined the Board during fiscal year 2023. Effective December 4, 2022, Ms. Mastin was appointed as CEO and a member of the Board, succeeding James Owens. Mr. Lauber was appointed to the Board effective January 23, 2023.
If, for any reason, any nominee becomes unable to serve before the election, the persons designated as proxies will vote your shares for a substitute nominee selected by the Board of Directors. Alternatively, the Board, at its option, may reduce the number of directors constituting Class IIII directors. Ms Rasmussen was appointed as a Class III director effective November 20, 2020, and Mr. Happe was appointed as a Class II director effective January 20, 2021.
The Board of Directors recommends a vote FOR election of each of the nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF EACH OF THE NOMINEES. |
H. B. FULLER | 2024 Proxy Statement 10
PROPOSAL 1—ELECTION OF DIRECTORS
Who are the nominees?WHO ARE THE NOMINEES?
The following directors are standing for re-election for a three-year term until the 20242027 Annual Meeting of Shareholders and until the successors are duly elected and qualified or uponuntil their earlier resignation or removal.
Class I (Term Ending in 2021)2024)
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Independent Director since 2010
Committees: Audit Corporate Governance and Nominating Other Public Company Boards: Republic Services, Inc. | Thomas W. Handley Biography Senior Advisor and former Chief Operating Officer (August |
Qualifications | |
Mr. Handley brings to our Board a valuable operating perspective due to his broad experience in a variety of markets, businesses, and | |
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The Board of Directors has determined that Mr. Handley is an audit committee financial expert as that term is defined under the rules of the SEC. |
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Age 61 Independent Director since 2017 Committees: Audit and (Chair) |
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Ruth S. Kimmelshue | |
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Qualifications | |
Ms. Kimmelshue brings to our Board, a depth of experience in leading successful global businesses at Cargill and Continental Grain. She has extensive experience in |
H. B. FULLER | 2024 Proxy Statement 11
How can a shareholder suggest a candidate for election to the Board?PROPOSAL 1—ELECTION OF DIRECTORS
Age 69 Independent Director since 2022 Committees: Audit and Compensation | Srilata A. Zaheer Biography Former Dean of the Carlson School of Management of the University of Minnesota (2011-2023) where she holds the Elmer L. Andersen Chair in Global Corporate Social Responsibility. She has served as a director of the Federal Reserve Bank of Minneapolis since 2017 and as Chair of the Board of the Federal Reserve Bank of Minneapolis (2020-2023). Dr. Zaheer has worked in India, China, Nigeria, Poland, and Brazil. Qualifications Dr. Zaheer brings to the Board deep experience in international business strategy and strong networks in China and India, both important growth markets for our Company. She also has a deep understanding of developing robust corporate social responsibility strategies and programs that will complement our ESG efforts. Dr. Zaheer is a strong leader with deep understanding of global business strategy, including building strong partnerships to diversify and scale service offerings, implementing end-to-end digital transformation to drive performance, and developing strong, global talent pipelines. She has a background in multinational, corporate financial management, and she will bring to the Company insights that will further strengthen our strategy and growth trajectory. |
HOW CAN A SHAREHOLDER SUGGEST A CANDIDATE FOR ELECTION TO THE BOARD?
The Corporate Governance and Nominating Committee of the Board reviews and recommends candidates for election to the Board. Generally, current directors or third partythird-party search firms engaged by the Corporate Governance and Nominating Committee identify candidates for consideration by the Committee. No third partythird-party search firm was engaged during fiscal year 2020.2023. The Corporate Governance and Nominating Committee reviews candidates and reports their recommendations to the Board of Directors, including an assessment of a candidate’s judgment, experience, independence, and such other factors as the Corporate Governance and Nominating Committee concludes are pertinent in light ofconsidering the Board’s needs. The Board of Directors believes that its membership should reflect a diversity of experience, skills, geography, gender, and ethnicity that can enrich its deliberations. The Board invites each candidate to self-identify diversity characteristics, which may include but are not limited to gender, racial or ethnic background, as well as diverse work experiences, military service, or socio-economic or demographic characteristics. It considers diversity when evaluating director candidates and setting priorities for director searches.
The Committee considers candidates recommended by any shareholder using the same criteria set forth above. Recommendations may be sent to the Corporate Governance and Nominating Committee in care of the Corporate Secretary of H.B. Fuller. No shareholder recommended any candidate during fiscal year 2020.2023. For the Board to consider a candidate for nomination at the 20222025 Annual Meeting, shareholders must submit the required information to the Corporate Secretary by the close of business on October 27, 2021.31, 2024.
Who are the remaining directors?WHO ARE THE REMAINING DIRECTORS?
The following directors are not standing for re-election at the Annual Meeting and their service will continue until the end of their respective terms provided the following information about themselves as of January 31, 2021.terms.
H. B. FULLER | 2024 Proxy Statement 12
PROPOSAL 1—ELECTION OF DIRECTORS
Class II (Term Ending in 2022)2025)
Independent Director since 2021 Committees: Compensation and Corporate Governance and Nominating Other Public Company Boards: Winnebago Industries, Inc. |
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Michael J. Happe
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| Mr. Happe brings to the Board a strong business acumen in leading domestic and international businesses at Winnebago and |
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Charles T. Lauber Biography Executive Vice President and Chief Financial Officer Qualifications Mr. |
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Manufacturers. The Board of Directors has determined that Mr. |
H. B. FULLER | 2024 Proxy Statement 13
PROPOSAL 1—ELECTION OF DIRECTORS
Age 55 Director since 2022 Other Public Company Boards: Granite Construction, Inc. | Celeste B. Mastin Biography President and Chief Executive Officer (2022-present), and Executive Vice President and Chief Operating Officer (2022), H.B. Fuller Company. Previously, Ms. Mastin served as CEO of PetroChoice Lubrication Solutions (2018-2022), the largest distributor of petroleum lubrication solutions in the United States. Prior to that, she held CEO roles at Distribution International, Inc., a distributor of thermal and acoustical insulation and related supplies for maintenance and repair operations, and MMI Products, Inc. (a division of Oldcastle), a manufacturer of chain link and ornamental iron fence products and concrete reinforcing welded wire mesh and accessories. She served in executive leadership roles at Ferro Corporation and Bostik Adhesives, now owned by Arkema. Qualifications Ms. Mastin brings to the Board her 30 years’ experience in manufacturing and distribution with a successful track record of guiding companies’ growth through innovation, service improvement, global expansion, and acquisition. Ms. Mastin also brings experience as an exceptional commercial leader with a proven track record of success in highly complex, international businesses. She has a wealth of global, executive leadership experience and an understanding of the adhesives industry that will provide accelerated growth and performance for the Company. |
Class III (Term Ending in 2023)2026)
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Committees: Audit and Governance and Nominating Other Public Company Boards: Fastenal Company | Daniel L. Florness Biography President and Chief Executive Officer (2016-present) |
Qualifications | |
Mr. Florness brings to the Board a broad range of financial and management experience, CEO experience, and public company Board experience. Prior to becoming CEO at Fastenal, his responsibilities included finance, leadership of a portion of a manufacturing division, product development and procurement, and Fastenal’s national accounts business. He also brings deep knowledge and understanding of corporate strategy, and experience growing a business from a $250 million business with operations in two countries to a | |
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The Board of Directors has determined that Mr. Florness is an audit committee financial expert as that term is defined under the rules of the SEC. |
H. B. FULLER | 2024 Proxy Statement 14
PROPOSAL 1—ELECTION OF DIRECTORS
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Committees: Compensation and Corporate Governance and Nominating (Chair) Other Public Company Boards: Chairman of the Board of Graco Inc. | Lee R. Mitau Biography Chairman of the Board (2002-2006 and |
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Mr. Mitau brings to the Board extensive public company legal and governance expertise. He is widely recognized as an expert | |
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Director since Committees: Audit and Corporate Governance and Nominating |
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Teresa J. Rasmussen
| President and Chief Executive Officer (2018-present) of Thrivent Financial for Lutherans, |
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Ms. Rasmussen brings to the Board unique strengths given her extensive financial and legal experience, in addition to her executive and leadership roles at Thrivent. She |
H. B. FULLER | 2024 Proxy Statement 15
CORPORATE GOVERNANCE GUIDELINES
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 follows in governing H.B. Fuller. The guidelines are available for review on our website (www.hbfuller.com) in the “Governance” section of the Investor Relations page.
Code of Business ConductDIRECTOR INDEPENDENCE
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 (www.hbfuller.com) in the “Governance” section of the Investor Relations page.
Interested parties may contact the Board, any Board committee, the Chairman or any independent director, by communicating through the Corporate Secretary, whose contact information may be found on page 13. 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; advertisements, junk mail and surveys; and any other communication 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”), the Board has determined that all Board members, other than Mr. Owens,Ms. Mastin, 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 of a director's immediate family members and any entity with which a director is affiliated.
The Board reviewed certain transactions between H.B. Fuller and our directors 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. Mr. Florness, Mr. Happe and Ms. KimmelshueThese directors recused themselves from this review and determination as it related to the entities with which they are affiliated. The Board considered customer-supplier transactions between: (i) the Company and Fastenal Company, of which Mr. Florness is the President and Chief Executive Officer, (ii) the Company and Cargill, Incorporated, of which Ms. Kimmelshue is Corporate Senior Vice President, Business Operations & Supply Chain, and (iii) the Company and Winnebago Industries, Inc., of which Mr. Happe is the Chief Executive Officer, and (iv) the Company and A.O. Smith Corporation, of which Mr. Lauber is the Executive Vice President and Chief Financial Officer. In addition,The Board also reviewed H.B. Fuller’s charitable contributions to, and services provided by, the University of Minnesota and its Carlson School of Management, Dr. Zaheer’s employer. The dollar amounts involved in the transactions with Fastenal, Cargill and Winnebago fall below the thresholds set by the NYSE for director independence.
Meetings of the Board andMEETINGS OF THE BOARD AND THE BOARD’ the S COMMITTEESBoard’s Committees
Directors are expected to attend the Annual Meeting of Shareholders and all meetings (including teleconferencevirtual meetings) of the Board and each committee on which they serve. During the 20202023 fiscal year, the Board held five meetings. Each of the directors attended greater than 75% of the meetings of the Board and Board committees on which the directors served during the 20202023 fiscal year. In addition, all the directors (except Mr. Happe and Ms. Rasmussen, who were not directors at the time of the Annual Meeting) attended our Annual Meeting of Shareholders held on April 2, 2020.6, 2023.
What are the roles of the Board’s Committees?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)(www.hbfuller.com) in the “Governance”“Governance” section of the Investor Relations page. Information regarding the three standing committees is set forth below. When necessary, the Board may also establish ad hoc committees to address specific issues. The members of the committees as of January 31, 2024 are as follows:
Audit Committee | Compensation Committee | Corporate Governance and Nominating Committee |
Thomas W. Handley (Chair) | Ruth S. Kimmelshue (Chair) | Lee R. Mitau (Chair) |
Daniel L. Florness | Michael J. Happe | Daniel L. Florness |
Ruth S. Kimmelshue | Charles T. Lauber | Thomas W. Handley |
Charles T. Lauber | Lee R. Mitau | Michael J. Happe |
Teresa J. Rasmussen | Srilata A. Zaheer | Teresa J. Rasmussen |
Srilata A. Zaheer |
H. B. FULLER | 2024 Proxy Statement 16
CORPORATE GOVERNANCE
Audit Committee
AUDIT COMMITTEE
NumberNumber of Meetings in fiscal year 2020:2023: Nine
Functions: The Audit Committee reviews the Company's financial information and disclosures, appoints the independent registered public accounting firm to audit our consolidated financial statements, oversees the audit and the independence and performance of our independent registered public accounting firm, determines and pre-approves the type and scope of all audit, audit-related and non-audit services provided by our independent registered public accounting firm, oversees our internal audit function, reviews the performance of our retirement plans and reviews our 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, procedures, and procedurescontrols to assess their adequacy and appropriateness in the context of the Company’s business and operating environment, and review steps that management takes to monitor and mitigate risk exposures. The Committee reviews, on an annual basis, the overall enterprise risk management approach and management’s assessment and mitigation of significant risk factors impacting the Company’s business and operating environment. ThisThe Committee also monitors cybersecurity, compliance with legal and regulatory requirements, 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. The Board of Directors has also determined that John C. van Roden, Jr., Daniel L. Florness, and Thomas W. Handley, and Charles T. Lauber satisfy 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 20202023 is included in this Proxy Statement.
Compensation CommitteeCOMPENSATION COMMITTEE
Number of Meetings in fiscal year 2020:2023: Five
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 our 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. It also administers the compensation recovery policy.
The Compensation Committee annually reviews and approves compensation for our non-employee directors including retainers, fees, stock-basedequity 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.
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.NYSE and the applicable rules and regulations of the SEC. The Compensation Committee Report for fiscal year 20202023 is included in this Proxy Statement.
Corporate Governance and Nominating CommitteeCORPORATE GOVERNANCE AND NOMINATING COMMITTEE
Number of Meetings in fiscal year 20202023: Four
Functions: The Corporate Governance and Nominating Committee reviews matters of corporate governance, including 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.
The Committee is also responsible for reviewing and assessing the Company’s policies and practices relating to significant issues of corporate social and public concern including environmental, social and governance (ESG) matters and may delegate to other Board committees responsibilities related to certain ESG matters as the Committee deems appropriate. The Committee oversees the Company’s engagement with and disclosures concerning ESG matters.
H. B. FULLER | 2024 Proxy Statement 17
CORPORATE GOVERNANCE
The Corporate Governance and Nominating Committee considers shareholder recommendations for potential director nominees. 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.
Board’s Role in Oversight of RiskBOARD’S ROLE IN OVERSIGHT OF RISK
In General
The Board believes that effective enterprise risk management must be an integral part of Board and Committee deliberations and activities throughout the year. As part of the enterprise risk management, the Board engages in the following activities throughout the fiscal year:
● | The full Board of Directors annually reviews the Company’s enterprise risk management process and a comprehensive assessment of key financial, operational, strategy and compliance/regulatory risks identified by management, as well as mitigating practices. |
● | The Audit Committee also reviews the Company’s |
● | The Company’s strategy is also reviewed with the Board |
● | The Board of Directors also encourages management to promote a corporate culture that integrates risk management into the Company’s strategy and |
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● | Each committee conducts its own risk assessment and management activities throughout the year (some of which are highlighted in the section on Board committees above) |
Through these processes, the Board continuously oversees a system to identify, assess, and address material risks to the Company on a timely basis. During fiscal year 2020,2023, the Board conducted a comprehensive risk assessment process and specifically reviewed the top risks relatingidentified during that process. This review included a review of risk mitigation strategies and included the steps taken since the prior year review to enable the impact of the COVID-19 pandemic. The Board reviewed a business continuity plan that was enhanced through learnings during the COVID-19 pandemic and the Company’s efforts to ensure the safety of employees while leveraging our global business unit structure to better understand and react to our customer’s needs and to improve speed of decision-making and execution.mitigation strategies.
In addition, the Board’s leadership structure, as described below in the section titled “Board Leadership Structure” supports its role in risk oversight. The Company presently has a separate Chairman of the Board and Chief Executive Officer. When thoseOfficer and has had these roles separated since 2007. If these positions are combined, we will have an independent Presiding Director. We have strong independent directors chairing each of our Board Committees, all of which are involved in risk oversight, and there is open communication between management and the non-employee directors.
Risk Assessment of Compensation Programs
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. Management discussed the findings of the risk assessment with the Compensation Committee. Based on the assessment, 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.
Board Leadership StructureBOARD LEADERSHIP STRUCTURE
Our Corporate Governance Guidelines provide that the Board of Directors does not require 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. 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.
H. B. FULLER | 2024 Proxy Statement 18
CORPORATE GOVERNANCE
Mr. Mitau has served as our independent Chairman of the Board since December 2006 and, in this capacity, has acted as the Presiding Director at 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 Chief Executive Officer since 2006.2007, because it promotes independent Board oversight of management, capitalizes on existing Board expertise, and it is an effective allocation of duties as between the Chairman and the CEO. Mr. Mitau serves as the Chairman of the Board of Graco Inc. and has significant public company experience. The Chief Executive Officer, 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. In addition, Mr. Van Sant has served as Vice Chairman of the Board since fiscal 2011 and in this role he provides special assistance, oversight and guidance to the Chairman of the Board in performing the duties of the Chairman, and he provides counsel to the Chief Executive Officer. Since Mr. Van Sant will be retiring from the Board after the Annual Meeting, the Board will consider the future of the Vice Chair role in the course of its succession planning.
Director ElectionsDIRECTOR ELECTIONS
With respect to the election of directors, our Board has adopted a so-called “plurality-plus” standard. A plurality voting standard means that the three nominees receiving the most votes will be elected. In accordance with procedures set forth in our Corporate Governance Guidelines, at any shareholder meeting at which directors are subject to an uncontested election (i.e., an election where the only nominees are those recommended by the Board), any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” such election shallmust submit to the Board a letter of resignation for consideration by the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee shallwill promptly consider the resignation offer and recommend to the full Board whether to accept it. In considering whether to accept or reject the resignation offer, the Corporate Governance and Nominating Committee will consider all factors deemed relevant by members of the Corporate Governance and Nominating Committee, including, without limitation, (i) the perceived reasons why shareholders withheld votes “for” election from the director, (ii) the length of service and qualifications of the director, (iii) the director’s contributions to the Company, (iv) compliance with listing standards, (v) the purpose and provisions of the Corporate Governance Guidelines, and (vi) the best interests of the Company and its shareholders. To the extent that one or more directors’ resignation is accepted by the Board, the Corporate Governance and Nominating Committee will recommend to the Board whether to fill such vacancy or vacancies or to reduce the size of the Board. Any director who tenders his or her offer to resign from the Board pursuant to this provision shall not participate in the Corporate Governance and Nominating Committee or Board deliberations regarding whether to accept the offer of resignation. The Board will act on the Corporate Governance and Nominating Committee’s recommendation within 90 days following the certification of the shareholder vote by the Inspector of Elections, which action may include, without limitation, acceptance of the offer of resignation, adoption of measures intended to address the perceived issues underlying the vote, or rejection of the resignation offer. Thereafter, the Board will publicly disclose its decision whether to accept the director’s resignation offer.
In accordance with our Corporate Governance Guidelines, the Board waived the mandatory retirement restriction for Mr. Mitau in 2023 until the expiration of his current term because his continued service would be beneficial to the Company.
In 2023, Mr. Handley transitioned from Chief Operating Officer to Senior Advisor of Cascade Asset Management Company and submitted his resignation for consideration in accordance with our Corporate Governance Guidelines. The Board considered Mr. Handley’s resignation and the recommendation of the Corporate Governance and Nominating Committee and determined not to accept Mr. Handley’s resignation because his continued service would be beneficial to the Company.
Board Performance EvaluationBOARD PERFORMANCE EVALUATION
The Board of Directors has a practice of annually reviewing its performance, and the performance of its committees and individual directors. Extensive input is received from each director during these annual performance reviews, as well as during the course of the year, through written evaluation forms and other informal means of communication with the Chairman Vice Chairman and other members of the Board.
We have a Code of Business Conduct applicable to all 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 (www.hbfuller.com) in the “Governance” section of the Investor Relations page.
Interested parties may contact the Board, any Board committee, the Chairman, or any independent director, by communicating through the Corporate Secretary, whose contact information may be found on page 67. 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; advertisements, junk mail, and surveys; and any other communication that does not relate to the responsibilities of the Board.
H. B. FULLER | 2024 Proxy Statement 19
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The Board of Directors has a written policy and procedures for the review, approval, or ratification of transactions with executive officers, directors and nominees for director, 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, and immediate family members of these parties. In general, the policy provides that certain transactions with these related persons are subject to the review and prior 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 the Company’s attention. Management shall make all reasonable efforts to cancel or annul the transactions that are not pre-approved or ratified.
All executive officers and directors of H.B. Fuller are 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 a 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 including any 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 2020,2023, we had transactions, arrangements, and relationships with entities with which some of our related persons, specifically certain of our directors, are affiliated. See the description of these transactions under "Director Independence." 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.
H. B. FULLER | 2024 Proxy Statement 20
The form and amount of compensation for each non-employee director is typically determined and reviewed at least annually by the Compensation Committee. Such compensation reflects the practices of boards of similar public companiesin our peer group and is comprised of cash and Common Stock (or its equivalents). SimilarIt is our practice to our executive compensation policy, the practice of generally aligningalign to the market median/50th50th percentile also applies toamong our non-employee director compensation.peer companies.
2020 Review of Director Compensation2023 REVIEW OF DIRECTOR COMPENSATION
The Compensation Committee uses an independent compensation consultant to provide ongoing advice and information regarding design and implementation of the Company’s non-employee director compensation programs as requested by the Compensation Committee. See further discussion regarding the Compensation Committee’s independent consultant under the heading “Independent Compensation Consultant” in the “Compensation Discussion and Analysis” section in this Proxy Statement. During fiscal 2018 and fiscal 2019, the Company conductedThe Compensation Committee periodically conducts an in-depth market review, including annual board retainers, committee chair retainers, and annual stock-based awards. The findings indicated that H.B. Fuller’s non-employee director compensation program was generally aligned to
After review of market practice. Due to economic conditionsdata during fiscal 2020,2023, the Committee approved an increase in the value of the annual equity award from $135,000 to $150,000 and also approved increasing the Compensation Committee determined that no non-employee director compensation program changes would be made during fiscal 2020 and therefore, no market review was conducted.Chair retainer from $15,000 to $17,500.
The feesretainers paid to our non-employee directors are set forth in the table below. Non-employee directors may elect to defer their feesretainers into deferred phantom stock units or other deferred investments. If the director elects to defer their cash feesretainers into phantom stock units, the number of phantom stock units received equals the cash retainer divided by the closing price of a share of the Company common stock on the payment date, plus the Company’s 10% matching contribution as described below under Directors’“Directors’ Deferred Compensation Plan. Mr. Owens, ourPlan.” Our President and Chief Executive Officer does not receive separate compensation for serving as a director or for attendance at any Board meeting.
The following fees are paid to our non-employee directors:
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Audit Committee Chair | $ | 20,000 | ||
Compensation Committee Chair | $ | 17,500 | ||
Corporate Governance and Nominating Committee Chair | $ | 15,000 |
Expense ReimbursementEQUITY AWARDS
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.
In addition to the board and chair retainers described above, the Board believes it is important that each director have an economic stake in our Common Stock.common stock. As a result, the Compensation Committee typically makes an annual grant of deferred phantom stock units to each non-employee director, which pays out in shares of Common Stockcommon stock under the terms of H.B. Fuller Company Directors’ Deferred Compensation Plan (“DDCP”)the DDCP, and pursuant to elections made by each director. This plan is described below.
On July 8, 2020,5, 2023, the Compensation Committee made a discretionaryan award in the amount of $115,000$150,000 to each non-employee director. This amount was divided by the fair market value of the Common Stockcommon stock on the date of grant to determine the number of deferred phantom stock units awarded under the DDCP. These deferred phantom stock units are not subject to forfeiture.
InH. B. FULLER | 2024 Proxy Statement 21
DIRECTOR COMPENSATION
In addition, each non-employee director typically receives a one-time grant of restricted stock units upon his or her initial election to the Board. These restricted stock unitRSU awards are granted under our H.B. Fuller Company 2020 Master Incentive Plan, which is described below. In general, these awards vest three years from the date of grant subject to continued service during that period. These RSU awards vest in full upon death or disability and forfeit upon resignation prior to a vesting date.
Equity Awards | |
Discretionary Annual Award of Deferred Phantom Stock Units | Valued at $150,000 |
One-time Initial Award of Restricted Stock Units | 1,300 units |
Directors’ Deferred Compensation PlanDIRECTORS’ DEFERRED COMPENSATION PLAN
Under this plan,the DDCP, non-employee directors may elect to defer all or a percentage of their boardBoard and chair retainers into several investments. Deferred amounts are credited with gains and losses based on the performance of certain mutual funds or the Common Stockcommon stock as elected by the director prior to deferring any fees. Directorsretainers. Non-employee directors who elect to defer their retainers into phantom stock units will eventually be paid out in shares of Common Stock.common stock. Phantom stock units are credited with dividend equivalents equal to the amountnumber of dividends, if any, paid on an equal number of shares of the Common Stock.common stock. The dividend equivalents are converted into additional phantom stock units based on the fair market value of Common Stockcommon stock on the dividend payment date. If a participant elects to defer retainers into the Common Stockcommon stock account in this plan, we make a 10% matching contribution of additional phantom stock units to the amount invested in Common Stockcommon stock by the non-employee director. The phantom stock units credited to the non-employee directors’ accounts do not have voting rights. In addition, the Compensation Committee may make discretionary contributions to a participant’s H.B. Fuller Common Stockcommon stock account under this plan. As described above, during fiscal year 2020,2023, the Compensation Committee exercised this discretion and awarded each non-employee director 2,654.052,197.48 deferred phantom stock units having a grant date fair value of $115,000$150,000 under this plan.
Any amounts deferred under this plan are paid in shares of Common Stockcommon stock or cash (depending on the election made by the non-employee director) at the earliest to occur of:
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H.B. Fuller Company 2020 Master Incentive PlanINCENTIVE PLAN
Under the H.B. Fuller Company 2020 Master Incentive Plan, (the “2020 Incentive Plan”), we may issue to non-employee directors restricted stock, restricted stock units, options, stock appreciation rights, performance awards, or other stock-based awards. In addition, shares of H.B. Fuller Common Stockcommon stock are issued under this plan to satisfy any requirements under the DDCP.
Physical ExaminationsPHYSICAL EXAMINATIONS
Non-employee directors are reimbursed for a preventative/diagnostic annual physical examination and local travel expenses. These amounts are shown in the “All Other Compensation” column of the ““Director Compensation Table”Table” in this Proxy Statement.
Matching Gifts to Educational, Arts and Cultural Organizations ProgramMATCHING GIFTS TO EDUCATIONAL, ARTS AND CULTURAL ORGANIZATIONS
Under this program, we match a non-employee director’s contributionscontribution (up to $1,000) to eligible educational, arts and cultural institutions. These amounts are shown in the “All Other Compensation” column of the ““Director Compensation Table”Table” in this Proxy Statement.
Director Compensation Table – Fiscal Year H. B. FULLER | 2024 Proxy Statement2020 22
Name | Fees Earned or | Stock Awards | All Other | Total | ||||||||||||
Daniel L. Florness | 18,000 | 194,200 | 863 | 213,063 | ||||||||||||
Thomas W. Handley | - | 214,000 | 140 | 214,140 | ||||||||||||
Maria Teresa Hilado | 82,336 | 123,430 | - | 205,766 | ||||||||||||
Ruth S. Kimmelshue | - | 214,000 | 651 | 214,651 | ||||||||||||
Michael J. Losh3 | - | 49,500 | 1,000 | 50,500 | ||||||||||||
Lee R. Mitau | - | 304,200 | 3,088 | 307,288 | ||||||||||||
Dante C. Parrini | 99,966 | 115,000 | 140 | 215,106 | ||||||||||||
Teresa J. Rasmussen | 22,500 | - | - | 22,500 | ||||||||||||
John C. van Roden, Jr. | 110,000 | 115,000 | - | 225,000 | ||||||||||||
R. William Van Sant | - | 255,250 | 4,015 | 259,265 |
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION TABLE – FISCAL YEAR 2023
Fees Earned | ||||
or Paid in | Stock | All Other | ||
Cash | Awards | Compensation | Total | |
Name | ($)1 | ($)2 | ($)3 | ($) |
Daniel L. Florness | 100,000 | 158,000 | 168 | 258,168 |
Thomas W. Handley | 120,000 | 162,000 | 168 | 282,168 |
Michael J. Happe | 100,000 | 150,431 | 1,242 | 251,673 |
Ruth S. Kimmelshue | 115,625 | 161,563 | 168 | 277,356 |
Charles T. Lauber4 | 100,000 | 238,621 | 1,220 | 339,841 |
Lee R. Mitau | 215,000 | 171,500 | 168 | 386,668 |
Teresa J. Rasmussen | 100,000 | 159,570 | 1,242 | 260,812 |
Srilata Zaheer | 100,000 | 150,000 | 4,098 | 254,098 |
(1) | The amounts included in this column include retainers deferred into deferred phantom stock units at the election of the director. Elections are made on a calendar year basis. For calendar year 2023: Mr. Lauber and Ms. Zaheer elected to receive their retainers in cash; Mr. Happe elected to receive his retainer in cash with the exception of a pro-rated deferral in the first quarter into deferred phantom stock units; Mr. Florness elected to receive 20% of his retainer in cash and 80% in deferred phantom stock units; Mr. Handley, Ms. Kimmelshue, and Mr. Mitau elected to receive 100% of their retainers in deferred phantom stock units; and Ms. Rasmussen elected to defer 100% of her retainer into deferred phantom stock units with the exception of a prorated deferral in the first quarter into an investment in the DDCP. |
| The amounts in this column are calculated based on the fair market value of the |
The aggregate number of deferred phantom stock units and restricted stock units held by each non-employee director as of December 2, 2023 were as follows:
During all or a portion of their service on the Board, Mr. Florness, Mr. Handley, Ms. Hilado, Ms. Kimmelshue, Mr. Mitau, Mr. van Roden and Mr. Van Sant elected to defer some or all of their compensation into deferred phantom stock units. The aggregate number of deferred phantom stock units and restricted stock units held by each non-employee director as of November 28, 2020 were as follows:
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Restricted Stock Units | ||||
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Daniel L. Florness | 21,516 | |||
Thomas W. Handley | 66,324 | |||
| 7,431 | |||
Ruth S. Kimmelshue | 23,655 | |||
Charles T. Lauber | 2,210 | |||
Lee R. Mitau | 202,096 | |||
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No non-employee director held any stock options as of November 28, 2020. OnlyDecember 2, 2023. Mr. FlornessHappe, Mr. Lauber, and Ms. Zaheer held RSUs as of fiscal 20202023 year end. As of November 28, 2020,December 2, 2023, Mr. FlornessHappe held 1,3441,343 RSUs, Mr. Lauber held 1,315 RSUs and Ms. Zaheer held 1,326 RSUs.
| These amounts represent the following: for Mr. Florness, a gift in the amount of $106 and $62 for accident/travel insurance; for Mr. Handley, a gift in the amount of $106 and $62 for accident/travel insurance; for Mr. Happe, dividends paid on unvested restricted stock units in the amount of |
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Stock Ownership GuidelinesSTOCK OWNERSHIP GUIDELINES
We have goals for stock ownership byfor all non-employee directors. Our goal for non-employee director stock ownership is five times the annual boardBoard retainer within five years of becoming a director. A review of director stock ownership was conducted using June 30, 20202023 stock values. At the time of this review, all non-employee directors have met or exceeded this goal or are on track to meet this goal within five years of being elected as a director.
H. B. FULLER | 2024 Proxy Statement 23
BENEFICIAL OWNERS AND MANAGEMENT
The following table shows how many shares of common stock each director and NEO beneficially owned as of January 29, 2024. The table also shows the beneficial ownership of common stock by all directors and executive officers of H.B. Fuller as a group. In general, “beneficial ownership” includes those shares of common stock which a director or executive officer has the power to vote or invest, as well as stock options that are exercisable currently or within 60 days and common stock underlying phantom stock units, RSUs and PSUs 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 the outstanding shares of common stock.
Unless otherwise noted, the shareholders listed in the table have sole voting and investment power with respect to the shares of common stock owned by them, and the shares beneficially owned by our directors and executive officers are not subject to any pledge.
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Name of Beneficial Owner | Ownership | Outstanding | |||
BlackRock, Inc. | 8,429,2171 | 15.53% | |||
The Vanguard Group, Inc. | 6,532,5042 | 12.04% | |||
State Street Corporation | 3,002,7723 | 5.53% | |||
Daniel L. Florness | 22,5984 | * | |||
Thomas W. Handley | 22,6904 | * | |||
Michael J. Happe | 8,6814 | * | |||
Ruth S. Kimmelshue | 8,1694 | * | |||
Charles T. Lauber | 2,1834 | * | |||
Lee R. Mitau | 105,9294,5 | * | |||
Teresa J. Rasmussen | 3,2974 | * | |||
Srilata A. Zaheer | 4,4364 | * | |||
Celeste B. Mastin | 36,0816 | * | |||
John J. Corkrean | 259,1627 | * | |||
Zhiwei Cai | 175,3268 | * | |||
James J. East | 41,0089 | * | |||
Traci L. Jensen | 163,80410 | * | |||
All directors and executive officers as a group (17 people) | 1,080,64711 | 1.96% |
* | Indicates less than 1%. |
(1) | This information is based on a Schedule 13G/A filed with the SEC on January 22, 2024 reporting beneficial ownership as of December 31, 2023. BlackRock, Inc., a parent holding company, reported that it has sole voting power over 8,335,617 shares and sole dispositive power 8,429,217 shares. The holder’s address is 50 Hudson Yards, New York, New York 10001. As disclosed in the Schedule 13G/A, BlackRock’s position includes shares held on behalf of iShares Core S&P Small-Cap ETF, constituting more than five percent of our total outstanding common stock. |
(2) | This information is based on a Schedule 13G/A filed with the SEC on February 13, 2024 reporting beneficial ownership as of December 31, 2023. The Vanguard Group, Inc., an investment adviser, reported that it has shared voting power over 93,304 shares, sole dispositive power over 6,381,719 shares and shared dispositive power over 150,715 shares. The holder’s address is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. |
(3) | This information is based on a Schedule 13G/A filed with the SEC on January 24, 2024 reporting beneficial ownership as of December 31, 2023. State Street Corporation, a holding company, reported that it has shared voting power over 2,794,360 shares and shared dispositive power over 3,002,772 shares. The holder’s address is State Street Financial Center, 1 Congress Street, Suite 1, Boston, Massachusetts 02114-2016. |
H. B. FULLER | 2024 Proxy Statement 24
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(4) | Includes shares of common stock subject to phantom stock units credited to the accounts of non-employee directors who participate in the DDCP, described under the heading “Director Compensation,” that may be acquired, in certain circumstances, within 60 days. The number of units credited to each director participating in this plan that may be acquired within 60 days is as follows: |
Daniel L. Florness | 21,247 | Charles T. Lauber | 2,183 |
Thomas W. Handley | 21,343 | Lee R. Mitau | 63,258 |
Michael J. Happe | 7,338 | Teresa J. Rasmussen | 954 |
Ruth S. Kimmelshue | 6,818 | Srilata A. Zaheer | 4,436 |
Excludes shares of common stock subject to phantom stock units credited to the accounts of directors who participate in the DDCP, described under the heading “Director Compensation” that may not 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:
Daniel L. Florness | 269 | Charles T. Lauber | 27 |
Thomas W. Handley | 44,981 | Lee R. Mitau | 138,838 |
Michael J. Happe | 93 | Teresa J. Rasmussen | 8,705 |
Ruth S. Kimmelshue | 16,837 | Srilata A. Zaheer | 56 |
None of the phantom stock units are entitled to vote at the meeting. |
(5) | Includes 42,671 shares held by a grantor retained annuity trust. |
(6) | Includes 32,316 shares that could be purchased pursuant to stock options within 60 days from January 29, 2024, including, in the case of retirement-eligible officers, options vesting upon retirement from the Company. |
(7) | Includes 211,975 shares that could be purchased pursuant to stock options within 60 days from January 29, 2024, including, in the case of retirement-eligible officers, options vesting upon retirement from the Company. |
(8) | Includes 140,018 shares that could be purchased pursuant to stock options within 60 days from January 29, 2024, including, in the case of retirement-eligible officers, options vesting upon retirement from the Company. |
(9) | Includes 103 shares held in trust under the 401(k) Plan and 31,597 shares that could be purchased pursuant to stock options within 60 days from January 29, 2024, including, in the case of retirement-eligible officers, options vesting upon retirement from the Company. |
(10) | Includes 150,751 shares that could be purchased pursuant to stock options within 60 days from January 29, 2024, including, in the case of retirement-eligible officers, options vesting upon retirement from the Company. |
(11) | Includes 103 shares held in trust under the 401(k) Plan, 756,110 shares that could be purchased pursuant to stock options within 60 days from January 29, 2024, including, in the case of retirement-eligible officers, options vesting upon retirement from the Company and 127,577 phantom stock units credited to directors’ individual H.B. Fuller common stock accounts under the Directors’ Deferred Plan that may be acquired, in certain circumstances, within 60 days. |
H. B. FULLER | 2024 Proxy Statement 25
EXECUTIVE COMPENSATIONDELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and any beneficial owners of more than ten percent of our common stock 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 “Financials” section of the Investor Relations page. We review these reports on the SEC’s website. 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 on a timely basis, except that James J. East had one delinquent filing covering one transaction due to administrative oversight.
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 registered public accounting firm. In the exercise of that authority, we, the members of the Audit Committee, determined to engage Ernst & Young LLP to serve as H.B. Fuller’s independent registered public accounting firm for the year ended December 2, 2023.
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.
Ernst & Young LLP, as H.B. Fuller’s independent registered public accounting firm for fiscal year 2023, was responsible for performing an independent audit of the consolidated financial statements and the company’s internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) and issuing reports.
We have reviewed and discussed the audited consolidated financial statements with management and Ernst & Young LLP. We have also discussed with Ernst & Young LLP the matters required to be discussed pursuant to applicable requirements of the Public Company Accounting Oversight Board and the SEC, and they have discussed with us their independence and provided to us the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence.
Based upon our review and discussions 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 2, 2023 filed with the SEC.
Audit Committee of the Board of Directors of H.B. Fuller Company
Thomas W. Handley (Chair) | Charles T. Lauber |
Daniel L. Florness | Teresa J. Rasmussen |
Ruth S. Kimmelshue | Srilata A. Zaheer |
H. B. FULLER | 2024 Proxy Statement 26
FEES PAID TO INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The following table presents fees for professional services provided by Ernst & Young LLP for fiscal year 2023 and fiscal year 2022 for the audit, audit-related, and tax services rendered to us and our affiliates.
2023 | 2022 | |||||||
Audit Fees | $ | 3,913,165 | $ | 3,193,604 | ||||
Audit-Related Fees | - | - | ||||||
Tax Fees | 1,360,954 | 2,094,333 |
Audit Fees: 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, (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, and (v) consultations concerning financial accounting and reporting. Audit fees also include fees for reviews of documents filed with the SEC.
Compensation DiscussionAudit-Related Fees: Audit-related fees include fees and Analysisexpenses for services related to registration statements.
Tax Fees: Tax Fees includes fees and expenses for U.S. federal, state and international tax planning and tax compliance services.
The Audit Committee is responsible for appointing, setting compensation for, and overseeing our independent registered public accounting firm’s work. The Audit Committee has established a policy requiring its pre-approval of all audit and permissible non-audit services provided by our independent registered public accounting firm, and it pre-approved all audit, audit-related, and tax services provided to us that are described above. The policy provides for the general pre-approval of specific types of services, gives detailed guidance to management as to the specific services that are eligible for general pre-approval, and establishes requirements for annual pre-approval levels and subsequent specific pre-approval requests. The policy requires specific pre-approval of all other permitted services. For both types of pre-approval, the Audit Committee considers whether such services are consistent with the rules of the SEC on auditor independence. The Audit Committee’s charter delegates to its chair the authority to address any requests for pre-approval of services between Audit Committee meetings, and the chair must report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The policy prohibits the Audit Committee from delegating to management the Audit Committee’s responsibility to pre-approve any permitted services.
Requests for pre-approval for services that are eligible for general pre-approval must be submitted to our Vice President, Controller and Principal Accounting Officer and be detailed as to the services to be provided and the estimated total cost. The Vice President, Controller and Principal Accounting Officer then determines whether the services requested fall within the detailed guidance of the Audit Committee in the policy as to the services eligible for general pre-approval. Our independent registered public accounting firm and management must report to the Audit Committee on a timely basis regarding the services provided by the independent public accounting firm in accordance with general pre-approval.
We have a policy of avoiding the engagement of our independent registered public accounting firm except for audit, audit-related and tax planning, and compliance services. All the services provided by our independent registered public accounting firm in fiscal years 2023 and 2022 were pre-approved by the Audit Committee under its pre-approval procedures.
H. B. FULLER | 2024 Proxy Statement 27
APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending November 30, 2024. While we are not required to do so, H.B. Fuller is submitting the appointment of Ernst & Young LLP for ratification to ascertain the views of our shareholders. If shareholders do not ratify the Audit Committee’s appointment of Ernst & Young LLP as our independent registered public accounting firm, the Audit Committee intends to reconsider that appointment. However, the Audit Committee retains sole responsibility for appointing or terminating our independent registered public accounting firm.
Representatives of EY will be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so and to respond to appropriate questions from shareholders.
The Board of Directors recommends a vote FOR ratification of the appointment of Ernst & Young LLP. |
H. B. FULLER | 2024 Proxy Statement 28
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
This Compensation Discussion and Analysis describes our executive compensation program, including its underlying philosophy, policies, and practices; significant executive compensation developments during the fiscal year; and the determinations made on material elements of compensation awarded to each of our executive officers (the “NEOs”)NEOs for fiscal year 2020:2023:
| Celeste B. Mastin | John J. Corkrean | Traci L. Jensen | ||
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Executive Vice President, Engineering Adhesives
This discussion and analysis focuses on the information containedfiscal 2023 compensation actions disclosed in the following compensation tables and accompanying footnotes and narrative for fiscal year 2020.narrative. We discuss compensation actions taken during other fiscal years to the extent they enhance the understanding of our executive compensation program for fiscal year 2020.2023.
Elements of Executive Compensation. We use base salary, a short-term incentive plan with cash awards (“STIP”) and a long-term incentive plan with equity grants (“LTIP”), as well as benefits, to attract and motivate our executive officers to achieve results that increase shareholder value. We generally align with the market median for base salary, short-term incentive target values, and long-term incentive target values, which comprise total direct compensation, and we review these elements each year. The emphasis on short-term and long-term incentive compensation reflects our pay-for-performance philosophy. See "Key Elements of Executive Compensation Program" on page 42.34.
Fiscal Year 2020 2023 Business Results. During fiscal
We demonstrated resilience and determination in executing our winning strategy in the face of significant headwinds, including continued raw material cost inflation, a challenging macroeconomic climate, and higher interest rates. Throughout the year, 2020,we experienced unprecedented customer inventory de-stocking actions, increasing interest rates, and headwinds from foreign currency translation.
We are proud of the COVID-19 pandemic had a significant disruptive impact on global economies, supply chains and industrial production, which resulted in reduced demands in some markets, while at the same time driving elevated demand for adhesive solutions for paper products, food and e-commerce packaging, and hygiene and medical goods. We effectively managed our global operations throughout the pandemic, implementing rigorous protocols focused on the health and safety of our employees and ensuring business continuity across our supplier, manufacturing and distribution networks. These actions enabled us to meet our customers’ increased demands for adhesive solutions for essential goods, effectively allocate our resources and manage expenses, and deliver strong financial results while maintaining a safe workplace for employees. Recognizing the success of the Company and our abilitywe delivered in fiscal 2023, compared to meet the unexpected challenges of fiscal year 2020, we compensated our NEOs according to the design of our executive compensation programs as adopted at the beginning of the fiscal year. Overall, the compensation provided to our NEOs is aligned with our fiscal year 2020 business results. No adjustments were made for our NEOs and we maintained the metrics and targets that were originally established for our fiscal year 2020 annual and long-term incentive plans.
At the beginning of fiscal year 2020, the Company moved from five to three reporting segments: Hygiene, Health and Consumable Adhesives, Engineering Adhesives and Construction Adhesives, in order to enhance its strategic alignment across end markets, and position the Company to better develop and deliver adhesive solutions around the world.
Net income for the 2020 fiscal year was $124 million, or $2.36 diluted earnings per share (“EPS”), versus net income of $131 million, or $2.52 EPS, in the 2019 fiscal year. Adjusted diluted earnings per share (“AEPS”) in the 2020 fiscal year were $2.84, down 4.1% versus the prior year.
Net revenue for the 2020 fiscal year was $2,790 million, down 3.7% versus the 2019 fiscal year.
Adjusted Earnings Before Interest, Taxes, Debt and Amortization (“Adjusted EBITDA”) for fiscal year 2020 was $407 million, down 5.9% compared with $432 million in the 2019 fiscal year. The Company’s cash flow from operations of $322 million increased 23% year-over-year, and enabled us to pay down a total of $205 million of debt for the year, above our $200 million target.2022:
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● | Adjusted EBITDA of $581 million, |
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Forfor the 51st54th consecutive year, we implemented an increase in the amount of quarterly cash dividends paid to shareholders, with a 2%an 8% increase this year.
More information on ourDespite the challenges described above, we delivered double-digit growth in adjusted EBITDA and operating cash flow in fiscal year 20202023, driven by management of changing price and raw material dynamics, decisive restructuring measures, and strong execution. We achieved a fiscal year record high adjusted EBITDA margin of 16.5%.
Highlights of our business performance can be found on pages 34 - 37. AEPS, by segment include the following:
● | Within our Hygiene, Health and Consumable Adhesives segment, which accounted for 45% of our net revenue, segment revenue totaled $1,601 million, a decrease of 6%, and segment Adjusted EBITDA totaled $276 million, an increase of 23%. |
● | Within our Engineering Adhesives segment, which accounted for 41% of our net revenue, segment revenue totaled $1,429 million, a decrease of 7%, and segment Adjusted EBITDA totaled $256 million, an increase of 8%. |
● | Within our Construction Adhesives segment, which accounted for 14% of our net revenue, segment revenue totaled $481 million, a decrease of 8%, and segment Adjusted EBITDA totaled $56 million, a decrease of 25%. |
H. B. FULLER | 2024 Proxy Statement 29
EXECUTIVE COMPENSATION
Adjusted Net RevenueEPS and Adjusted EBITDA are defined in footnotes 4, 5 and 6 on page 47."Fiscal 2023 Short-Term Incentive Compensation." These metrics are non-GAAP financial metrics that are reconciled with the most directly comparable GAAP financial metrics in Annex A.
STIP Performance Metrics.Metrics. For our short-term incentive plan, we measure our success primarily by the Company-wide financial metrics which are aligned with our long-term strategic plan. These metrics consist of Adjusted Net Revenue, Adjusted EBITDA, and AEPS. For fiscal year 2020 we replaced Adjusted Operating Income withEPS. Adjusted EBITDA to better align how we evaluate the Company’s operating performance.Net Revenue is a measure of global sales generation, Adjusted EBITDA is a measure of operational effectiveness and profitability, and AEPSAdjusted EPS is an overall measurement of profitability and the effectiveness of the following growth strategies:
● | organic growth led by innovation and the sale of specialized adhesives solutions to |
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AEPS, Adjusted Net Revenue and Adjusted EBITDA are non-GAAP measures. A definition of these measures is found on page 47, and a full reconciliation of these items is found in Annex A of this Proxy Statement.
The annual, short-term incentive planSTIP targets for AEPS,Adjusted EPS, Adjusted Net Revenue and Adjusted EBITDA are consistent with the Company’s strategic financial targets.
STIP Performance and Compensation OutcomesOutcomes..
● | Company-wide STIP financial metrics were |
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● | Actual results on all STIP metrics are set forth in a table on page |
● | All short-term incentive awards earned for fiscal year |
AEPS,Adjusted EPS, Adjusted Net Revenue, and Adjusted EBITDA are non-GAAP financial metrics that are defined on page 47in "Fiscal 2023 Short-Term Incentive Compensation" and reconciled with the most directly comparable GAAP financial metrics in Annex A.
LTIP Performance Metrics. For our LTIP, we use ROIC as the performance metric for PSUs, which account for 25% of the equity awards granted to our NEOs, including our CEO. ROIC is a common metric for LTIPs and it is a key measure for assessing how much profit a company is generating for every dollar that is invested, providing a clear picture of how efficiently a company is using the capital that has been invested in it to generate income. Further, the CEO’s PSUs which account for 25% of his equity awards vest if at least a threshold level of AEPS, Adjusted Net Revenue or Adjusted EBITDA is met. We use these metrics in the STIP and the LTIP because they are key financial metrics for both our annual and long-term strategic plans.
LTIP Performance and Compensation Outcomes.
Long-term incentive awards are equity awards granted pursuant to the LTIP. The awards are comprised of NQSOs, RSUs, and PSUs.
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H. B. FULLER | 2024 Proxy Statement 30
EXECUTIVE COMPENSATION |
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The fiscal year 2020 ROIC target of 7.8% is lower than in previous years due to fiscal year 2019 results being negatively impacted by foreign currency and the impact of the divestiture of the surfactants and thickeners business. Therefore, the fiscal year 2020 ROIC target was established based on a lower baseline.
ROIC is a non-GAAP financial metric that is reconciled with the most directly comparable GAAP financial metric in Annex A.
Executive Compensation Best Practices.Highlights. The Company’s compensation program features best practices, such as:the following:
● | 25% of NEO equity awards are PSUs cliff vesting at the end of a three-year performance period; |
● | A policy regarding “clawbacks” of executive and key manager incentive compensation if there is a |
● | A prohibition on hedging, pledging, and certain other transactions in Company securities by directors and executive officers; |
● | Policies for responsible share usage and governance of our equity compensation plans, including a prohibition on re-pricing of stock options; |
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● | Removal of tax gross-up provisions from change-in-control agreements entered into beginning in mid-fiscal year 2018; and |
● | Stock ownership goals of five times base salary for our CEO, three times base salary for our CFO, and |
Philosophy
The philosophy of our executive compensation program is to provide a competitive compensation package that rewards executive officers for sustained financial and operating performance that creates long-term value for our shareholders. We have designed and implemented our compensation programs for our executive officers to meet three principal goals:
● | Attract and retain qualified executive officers; |
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● | Promote internally equitable treatment of our executive officers, while considering external competitiveness and differences in job responsibilities. |
To meet these goals, the Company has established the following guidelines:
● | Pay compensation that is competitive with the practices of companies in a broad number of industries, including comparable companies in the chemical industry, with revenues comparable to our revenues; |
● | Pay for performance by setting challenging performance goals for our executive officers and providing a short-term incentive plan that is based upon achievement of these goals; and |
● | Provide long-term incentives in the form of stock options, restricted stock units, and performance stock units that are designed to increase long-term shareholder value by aligning the interests of our executive officers |
We consider the market median/50th percentile as a reference point when determining appropriate target total direct compensation for each NEO, while allowing deviations from the market median/50th percentile based on role, tenure and other individual-specific considerations.
H. B. FULLER | 2024 Proxy Statement 31
To meet these goals, the Company has the following guidelines:
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We strive to keep the target value of each individual element of compensation at or near the market median/50th percentile, thereby maintaining target total compensation at or near the market median/50th percentile.EXECUTIVE COMPENSATION
Use of Competitive Market Data
The Compensation Committee uses several surveys and peer group data points when it reviews executive compensation as described below.
General Survey Data. With respect to Peer Group Data, during fiscal 2023, the Compensation Committee reviewed the peer group below and did not make any changes for fiscal 2023. This year, we reviewed surveypeer proxy data for 19 companies with a revenue range of $1-6$1.437 billion - $12.44 billion based on our fiscal year 20192022 revenue and expectations for fiscal year 20202023 revenue. The Compensation Committee used published survey data from the following sources to analyze the appropriate level of compensation for our U.S.-based NEOs:
● AON Hewitt ($2.5 – 4.99 billion revenue categories for corporate positions (excluding the CEO) and relevant revenue categories for non-corporate positions (other U.S.-based NEOs))
● Willis Towers Watson ($1-6 billion revenue category for corporate positions (CEO, COO and CFO) and relevant revenue categories for non-corporate positions (other U.S.-based NEOs))
The Company participates in both surveys. The Aon Hewitt survey includes 450 companies and is titled "AON Hewitt U.S. Total Compensation Measurement™ (TCM™) Total Compensation Industry – Executive and Senior Management – 2019”, and the Willis Towers Watson survey includes 811 companies and is titled "Willis Towers Watson 2019 CDB General Industry Executive Compensation Survey Report – U.S.”
Peer Group Data.Our peer group consists of comparable, publicly-traded companies with revenues between $1.018 - $7.070 billion (for the most recent fiscal year):
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From fiscal year 2019 to 2020, there were no changes to our peer group, except that PolyOne Corporation changed its name to Avient Corporation.
Use of Market Data in Fiscal 2020.2023. When analyzing compensation paid to our NEOs, the Compensation Committee uses specific data that matches revenue and job responsibilities from the published surveys named above,sources discussed below, based on availability, by position. For fiscal year 2020,2023, the above-referenced survey data used by the Compensation Committee to review total compensation (base salary, short-term incentive compensationSTIP, LTIP, and long-term incentive compensation)high-level review of benefits and perquisites) for our executive officers showed that our total compensation was generally in line with the market data matched according to revenue and job responsibilities.
In addition, for the NEOs, management and the Compensation Committee supplements the survey data sources below with peer group data, as a reference point for compensation design considerations. This data is derived from the most recent proxy statementProxy Statement available for each peer company.
The Compensation Committee uses survey data and peer groupthis data because these sources of data areit is considered reliable market information. When we refer to competitive 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.below.
General Survey Data. The Compensation Committee used published survey data from the following sources to analyze the appropriate level of compensation for our U.S.-based NEOs:
● | AON Radford ($1.50 - 4.99 billion revenue categories for corporate positions (excluding the CEO) and relevant revenue categories for non-corporate positions (other U.S.-based NEOs)) |
● | Willis Towers Watson ($1.00 - 6.00 billion revenue category for corporate positions (CEO, CFO, and CAO) and relevant revenue categories for non-corporate positions (other U.S.-based NEOs)) |
The Company participates in both surveys. The AON Radford database includes 4,661 companies and is titled "2023 AON Global Compensation Database.” This database is a global database and covers non-executive jobs as well. The Willis Towers Watson survey includes 797 companies and is titled "Willis Towers Watson 2022 General Industry Executive Survey Report – Compensation Data U.S.” and only includes executive jobs.
Peer Group Data. Our peer group used to inform fiscal 2023 target compensation consisted of comparable, publicly-traded companies with revenues between $1.437 - 12.44 billion (for the most recent fiscal year):
Albemarle Corporation | Graco Inc. | ||
Aptar Group Inc. | Hexcel Corporation | ||
Ashland Global Holdings Inc. | International Flavors & Fragrances Inc. | ||
Avery Dennison Corporation | Nordson Corporation | ||
Avient Corporation | Olin Corporation | ||
Axalta Coating Systems Ltd. | RPM International Inc. | ||
Cabot Corporation | Sensient Technologies Corporation | ||
Celanese Corporation | The Chemours Company | ||
Donaldson Company, Inc. | Trinseo Plc | ||
FMC Corporation |
Compensation Process
The Compensation Committee reviews and approves all elements of compensation for our CEO, taking into accountconsidering 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 the Compensation Committee’s independent compensation consultant. The Compensation Committee also reviews and approves all elements of compensation for our other executive officers using the sources noted above and taking into accountconsidering the recommendations of the CEO.
H. B. FULLER | 2024 Proxy Statement 32
EXECUTIVE COMPENSATION
In determining the particular elements of the executive compensation program, the Compensation Committee selects elementsperformance measures that will motivate executives to enhance our performance, such as our earnings and revenue growth, and business-unit-specificoperating segment specific operational and financial performance. Other considerations include furthering our business objectives, fulfilling corporate responsibilities (including equity among executive officer positions and affordability), maintaining competitive practices and trends, and observing legal 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 increases in pay and combines the compensation elements for each executive officer in a manner that optimizes the executive officer’s incentive to contribute to the Company's success.
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 histheir compensation package is discussed. In addition, the Compensation Committee also holds executive sessions not attended by any members of management, including the CEO.
Independent Compensation Consultant
The Compensation Committee may use outside compensation consultants to provide compensation advice, competitive survey data and other reference market information related to trends and competitive practices in executive compensation. The Compensation Committee engages Willis Towers Watson US LLC (“WTW”) to provide ongoing advice and information regarding design and implementation of the Company’s executive compensation programs as requested by the Compensation Committee. In addition, from time to time, management receives information from the independent compensation consultant in preparation for Compensation Committee meetings.
In fiscal year 2020,2023, the Company paid WTW for services as noted below.
Services | Fees | |||
Executive and Board Compensation Support | $ | |||
North America Benefits Consulting, Administration and Actuarial Valuations | $ | |||
EIMEA Retirement Plan Investment Advisory Services | $ |
WTW also providesprovided broker services in fiscal year 2023 for insurance in Brazil but receivesreceived no direct payment from the Company.Company for those services.
All additionalnon-executive and board related services performed by WTW, along with their affiliated companies, were approved by management and performed at the direction of management in the ordinary course of business. In assessing the independence of WTW, the Compensation Committee considered the factors contained in the applicable SEC and NYSE rules, including the amount and nature of the additional consulting work provided to the Company by WTW and concluded that no conflict of interest exists that would prevent WTW from independently advising the Committee.
A representative of the independent compensation consultant generally attends Compensation Committee meetings to serve as a resource for the Compensation Committee. To encourage independent review and discussion of executive compensation matters, the Compensation Committee and its chair may request meetings with the independent compensation consultant in executive session without management present.
The Role of Shareholder Say on Pay Votes. The Company provides its shareholders with the opportunity to cast an annual advisory vote onto approve the compensation of our named executive compensationofficers as disclosed in this Proxy Statement (a “Say on Pay Proposal”). At the Company’s Annual Meeting of Shareholders held in April 2020, over 80%2023, 94% of the votes cast on the Say on Pay Proposal were voted in favor of the proposal. While shareholders have endorsed the Company’s executive compensation program, the Compensation Committee made changescontinually evaluates the program to theensure that it is designed to provide a competitive compensation package that rewards executive officers for sustained financial and operating performance that creates long-term incentive plan moving to a three-year cliff vestingvalue for PSUs, as described under the heading “Fiscal 2021 Changes to the Executive Compensation Program.”our shareholders. The Compensation Committee will continue to take into accountconsider the outcome of the Company’s Say on Pay Proposal votes.votes in connection with its evaluation of the Company’s executive compensation program. The Compensation Committee will also continue to consider feedback received through the Company's regular engagement with investors, which has generally been positive, in connection with its evaluation of the Company's executive compensation program.
H. B. FULLER | 2024 Proxy Statement 33
EXECUTIVE COMPENSATION
Key Elements of the Executive Compensation Program
Element and Purpose | Features and Market Positioning | |
Base salary | ||
Attract and retain high caliber executive talent with competitive fixed compensation. | Each NEO’s job is positioned in a salary grade based upon market data and an analysis of the related job responsibilities. Salary ranges are established to generally reflect competitiveness at the market median/ | |
Short-term incentive (cash) | ||
Aligns executive performance with achievement of annual company-wide financial goals and objectives, as well as operating segment goals and objectives. Payouts are dependent on achievement of predetermined annual financial performance goals. | Short-term incentive awards are set for each executive officer so that the expected payout at target performance levels would result in competitive market levels of such compensation. Payments under the
The annual | |
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Other Benefits (includes supplemental retirement and deferred compensation plans, severance, change-in-control, and other perquisites) | ||
| We provide NEOs market competitive perquisite and other benefit programs. Some of these benefits assist our executive officers so that they may efficiently use their time on our business. Our U.S.-based NEOs participate in the same health and welfare programs as all other U.S.-based Company employees. | |
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Fiscal 20202023 Base Salaries
In General. In January of each year, the Compensation Committee reviews and considers the annual performance of the CEO and the other NEOs. The effective date of annual merit increases is February 1st.1st. In April,the fourth quarter of fiscal 2023, with the assistance of the compensation consultant, the Compensation Committee reviewsreviewed the overalltotal compensation (base salary, short-term incentive, long-term incentiveSTIP, LTIP, and high-level review of benefits and perquisites) of all of the executive officers (excluding the CEO) for market competitiveness.
H. B. FULLER | 2024 Proxy Statement 34
EXECUTIVE COMPENSATION
The amount of annual base salary and year-over-year increase for each of the NEOs in fiscal year 20202023 are set forth in the following table.
Named Executive Officer | Base Salary as of 12/1/2019 ($) | Base Salary as of 2/1/2020 ($) | Percent Increase from | ||||||
James J. Owens President and Chief Executive Officer | 1,177,300 | 1,236,165 | 5.00% | ||||||
John J. Corkrean Executive Vice President and Chief Financial Officer | 525,000 | 545,000 | 3.81% | ||||||
Theodore M. Clark Executive Vice President and Chief Operating Officer | 525,000 | 545,000 | 3.81% | ||||||
Andrew E. Tometich Executive Vice President, Hygiene, Health and Consumable Adhesives | 503,000 | 503,0001 | n/a1 | ||||||
Zhiwei Cai Executive Vice President, Engineering Adhesives | 500,000 | 525,000 | 5.0% |
Percent Increase | ||||||||||||
Base Salary as of | Base Salary as of | from | ||||||||||
12/3/2022 | 12/2/2023 | 12/3/2022 to 12/2/2023 | ||||||||||
Named Executive Officer | ($) | ($) | (%) | |||||||||
Celeste B. Mastin1 | 585,000 | 950,000 | 62.39 | |||||||||
President and Chief | ||||||||||||
Executive Officer | ||||||||||||
John J. Corkrean | 580,000 | 600,000 | 3.45 | |||||||||
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Zhiwei Cai | 560,000 | 576,800 | 3.0 | |||||||||
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Engineering Adhesives | ||||||||||||
James J. East2 | 450,000 | 500,000 | 11.11 | |||||||||
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Hygiene, Health and Consumable Adhesives | ||||||||||||
Traci L. Jensen3 | 390,000 | 500,000 | 28.21 | |||||||||
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(2) | Mr. East was promoted to Executive Vice President, Hygiene, Health and Consumable Adhesives effective December 4, 2022. Mr. East previously served as Senior Vice President, Hygiene, Health and Consumable Adhesives through December 3, 2022. See discussion below under “Analysis of Fiscal 2023 Base Salaries, Retention Awards, and Incentive Targets.” |
(3) | Ms. Jensen was promoted to Executive Vice President and CAO effective December 4, 2022. Ms. Jensen previously served as Vice President, Global Business Process Improvement through December 3, 2022. See discussion below under “Analysis of Fiscal 2023 Base Salaries, Retention Awards, and Incentive Targets.” |
Analysis of Fiscal 20202023 Base Salaries, Retention Awards, and Incentive TargetsTargets.. Based on the competitive market data review, the Compensation Committee approved changing Mr. Owens’
Ms. Mastin’s short-term incentive target from 110% of base salary tois 120% of base salary and theher long-term incentive target is 375% of base salary. Ms. Mastin was promoted to President and Chief Executive Officer on December 4, 2022 and received a salary of $950,000 as part of that promotion. Ms. Mastin did not receive an additional merit increase on February 1, 2023 due to her recent promotion.
Mr. Corkrean’s short-term incentive target increased from 350%75% to 80% of base salary to 400%based on a review of base salary.market data. His long-term incentive target remained at $1,000,000. Mr. OwensCorkrean received a 5.0% merit increase of 3.45% after a review of market data and his performanceoverall contributions to the Company. Mr. Corkrean’s base salary is in the third quartile of the salary range for his position.
Ms. Jensen was promoted to Executive Vice President and CAO on December 4, 2022 and received a salary of $500,000 as part of that promotion. Ms. Jensen did not receive an additional merit increase on February 1, 2023 due to her recent promotion. Ms. Jensen’s short-term incentive target is 70% of base salary and her long-term incentive target is $650,000. Ms. Jensen’s base salary is in the competitivesecond quartile of the salary range for her position.
Due to a transition in CEO leadership during fiscal 2022, our Compensation Committee determined that a cash retention award for Ms. Jensen was appropriate to ensure stability and continuity in a key executive role throughout this transition and to position the Company for continued success in fiscal 2023. Therefore, Ms. Jensen received a $500,000 cash retention award payable within 60 days of December 4, 2024 conditional on Ms. Jensen being employed by the Company on such date. The retention award is shown in "Grants of Plan-Based Awards During Fiscal Year 2023."
Mr. Cai’s short-term incentive target increased from 65% to 70% of base salary based on a review of market data. His long-term incentive target is $650,000. Mr. Owens’Cai received a merit increase of 3.0% after a review of market data and his overall contributions to the Company. Mr. Cai’s base salary is in the fourth quartile of the salary range for his position.
Effective January 24, 2023, the Compensation Committee approved a one-time grant of time-based restricted stock units with an approximate grant date fair market value of $500,000 to Mr. Cai. Due to a transition in CEO salary range.leadership during fiscal 2022, our Compensation Committee determined that a retention stock award for Mr. Cai was appropriate to ensure stability and continuity in a key executive role throughout this transition and to position the Company for continued success in fiscal 2023. The time-based restricted stock units will cliff-vest on January 24, 2025 subject to Mr. Cai remaining employed by H.B. Fuller Company until the vesting date. There are no provisions for accelerated vesting of the units upon an earlier retirement. The retention award is shown in "Grants of Plan-Based Awards During Fiscal Year 2023."
H. B. FULLER | 2024 Proxy Statement 35
EXECUTIVE COMPENSATION
Mr. Corkrean’sEast was promoted to Executive Vice President, Hygiene, Health and Consumable Adhesives on December 4, 2022 and received a salary of $500,000 as part of that promotion. Mr. East did not receive an additional merit increase on February 1, 2023 due to his recent promotion. Mr. East’s short-term incentive target remained at 75%is 70% of base salary and his long-term incentive target increased from $750,000 to $1,000,000 based on a 2019 review of market data for the CFO position.is $650,000. Mr. Corkrean received a merit increase of 3.81% after a review of his performance. Mr. Corkrean’sEast’s base salary is in the second quartile of the salary range for his position.
Mr. Clark’s short-term incentive target is 75% of base salary, and his long-term incentive target is $1,000,000. Mr. Clark received a merit increase of 3.81% after a review of his performance. Mr. Clark’s base salary is in the second quartile of the salary range for his position.
Mr. Tometich’s short-term incentive target remained at 65% of base salary and his long-term incentive target is $600,000. Due to Mr. Tometich’s start date of August 27, 2019, he was not eligible for a merit increase during fiscal year 2020. Mr. Tometich’s base salary is in the third quartile of the salary range for his position. In connection with his hiring during fiscal year 2019, Mr. Tometich also received a long-term incentive grant in January 2020 with a value of $300,000 (consisting of 50% non-qualified stock options and 50% restricted stock units), vesting 50% in 2021 and 50% in 2022 based on continued employment.
Mr. Cai’s short-term incentive target remained at 65% of base salary and his long-term incentive target increased from $500,000 to $529,000 in fiscal year 2020 based on a review of market data for his position. Due to his performance, Mr. Cai received a long-term incentive award valued at $600,000 and his base salary increased by 5%. Mr. Cai’s base salary is in the third quartile of the salary range for his position.
For fiscal year 2020,2023, all merit increases for the NEOs (except for Mr. Tometich, who was notwere eligible for a merit increase in fiscal year 2020 based on his hire date)increases fell within the Company’s general merit increase guidelines for our general employee population. The range of merit increases provided to NEOs who did not receive promotions at the beginning of fiscal 2023 was 0%3% to 5%3.45%.
Fiscal 20202023 Short-Term Incentive Compensation
In General. Each year, the Compensation Committee establishes the annual cash incentive target opportunities as a percentage of base salary. Under the short-term incentive plan,STIP, the Compensation Committee may also consider extraordinary circumstances that may positively or negatively impact the achievement of the total Company performance objectives.
For fiscal year 2020,2023, based on market data, the annual cash incentive target opportunity for our executive officers ranged from 65%70% to 120% of base salary at a target level of performance. Potential payouts range from 0% to 200% of the target award based on attainment of segment operating and/or Company-wide financial goals. The threshold level of performance for the annual cash incentive was set at 80% of each financial target, except the net revenueAdjusted Net Revenue metrics had a threshold level of 90% of target, meaning that financial performance must meet or exceed these thresholds for executive officers to earn at least 50% of the target incentive. Higher payouts are possible if performance is above target levels. For example, at the superior level of performance (110% of target for net revenueAdjusted Net Revenue and 120% of target for all other metrics), payout is 200% of target.
For fiscal year 2020, the Compensation Committee of the Company approved the following changes to the design of the STIP for the NEOs:
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The Compensation Committee, in its discretion, has the right at any time to enhance, diminish or terminate all or any portion of any compensation plan or program, on a collective or individual basis for the NEOs.
Analysis of Fiscal 20202023 Short-Term Incentive Awards. The Compensation committeeCommittee approved the STIP metrics because they were representative of our financial results and were key financial measures that are linked to our long-term strategic plan. In establishing the goals for these metrics for fiscal year 2020,2023, we considered our prior year results, economic conditions, and expected business opportunities. At the beginning of fiscal year 2020,2023, we believed the targets were challenging but achievable, and they became even more challenging with the onset of the global COVID-19 pandemic.achievable.
For fiscal year 2020,2023, the goals for threshold, target, and superior level of performance, the weighting of the metrics, and the actual performance were as set forth below. These amounts are shown on a non-GAAP basis which differs from the reported GAAP results discussed under the section entitled “Fiscal 2020 Business Results”, due to adjustments which are allowed under the short-term incentive planSTIP as set forth in a footnote in the table below. Actual amounts paid to each NEO are set forth in the “Summary Compensation Table’’ later in this Proxy Statement.
H. B. FULLER | 2024 Proxy Statement 36
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_____________________EXECUTIVE COMPENSATION
Named Executive Officer | Target Cash Incentive ($) | Target (%) | Actual Payout ($)2 | Payout as a percent of Target (%) | ||||||||
Celeste B. Mastin | 1,134,477 | 120 | 570,018 | 50.25 | ||||||||
John J. Corkrean | 477,282 | 80 | 239,810 | 50.24 | ||||||||
Traci L. Jensen | 348,726 | 70 | 175,217 | 50.25 |
Metric | Weighting (%) | Threshold (50% Payout) ($)1 | Target (100% Payout) ($)1 | Superior (200% payout) ($)1 | Actual Result ($) | % of Target | Payout Percentage | |||||||||||||
Adjusted EPS3 | 30 | 3.48 | 4.35 | 5.22 | 3.87 | 89.0 | 72.4 | |||||||||||||
Engineering Adhesives Adjusted Net Revenue4 | 35 | 1,395,677 | 1,550,752 | 1,705,827 | 1,385,835 | 89.4 | 0.0 | |||||||||||||
Engineering Adhesives Adjusted EBITDA5 | 35 | 219,043 | 273,804 | 328,565 | 248,832 | 90.9 | 77.2 |
Named Executive Officer | Target Cash Incentive ($) | Target (%) | Actual Payout ($)2 | Payout as a percent of Target (%) | ||||||||
Zhiwei Cai | 401,762 | 70 | 195,819 | 48.7 |
Metric | Weighting (%) | Threshold (50% Payout) ($)1 | Target (100% Payout) ($)1 | Superior (200% payout) ($)1 | Actual Result ($) | % of Target | Payout Percentage | |||||||||||||
Adjusted EPS3 | 30 | 3.48 | 4.35 | 5.22 | 3.87 | 89.0 | 72.4 | |||||||||||||
Hygiene, Health and Consumable Adhesives Adjusted Net Revenue4 | 35 | 1,498,856 | 1,665,395 | 1,831,935 | 1,505,774 | 90.4 | 52.1 | |||||||||||||
Hygiene, Health and Consumable Adhesives Adjusted EBITDA5 | 35 | 194,872 | 243,590 | 292,308 | 260,392 | 106.9 | 134.5 |
Named Executive Officer | Target Cash Incentive ($) | Target (%) | Actual Payout ($)2 | Payout as a percent of Target (%) | ||||||||
James J. East | 349,342 | 70 | 304,033 | 87.0 |
H. B. FULLER | 2024 Proxy Statement 37
EXECUTIVE COMPENSATION
(1) | All values in this column are in thousands except for Adjusted EPS. |
(2) | The actual cash incentive paid is also found in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation |
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(3) |
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| Adjusted Net Revenue is a non-GAAP measure which is defined as |
| Adjusted EBITDA is a non-GAAP financial measure which is defined as adjusted net income plus adjusted income tax expense plus interest expense, net, plus depreciation expense plus amortization expense. Segment EBITDA is defined as segment operating income plus depreciation expense plus amortization expense, plus non-operating pension expense or income, plus reported Sekisui-Fuller joint venture equity earnings |
The following chart shows the percentage increase in fiscal year 20202023 performance targets over fiscal year 20192022 actual results for each measuremetric used to determine the short-term incentive payouts:
FY | ||||
2022 Actual Increase/Decrease | ||||
| 8.75% | |||
Company Adjusted Net Revenue | (3.04)%(1) | |||
Company Adjusted EBITDA | ||||
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Engineering Adhesives Segment Adjusted Net Revenue | (3.53)% | |||
Engineering Adhesives Segment Adjusted EBITDA | 11.96% |
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Hygiene, Health and Consumable Adhesives Adjusted Net Revenue
(7.16)%(1) | ||
Hygiene, Health and Consumable Adhesives Adjusted EBITDA |
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Fiscal 20202023 Long-Term Incentive Compensation
In General.For all NEOs, except the CEO, the fiscal year 2020 long-term incentive plan2023 LTIP design included grants with a mix of equity grants consisting of 50% NQSOs, 25% RSUs, and 25% PSUs based onissued under the grant date fair market value of common stock. Instead of RSUs, the CEO received PSUs, in a mix of 50% NQSOs and 50% PSUs.2020 Incentive Plan.
Stock Options. The NQSOs are focused on aligning shareholder value creation with executive rewards and enhancing employee retention, with vesting typically vest in three equal installments of 33%, 33%, and 34% on each anniversary date of the grant date as long asif the optionee continues to be employed by the Company, which enhances retention.Company. 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 with the Company, or once employeethe executive officer becomes retirement eligible. Retirement eligibility is defined as 55 years of age and 10 years of service. If an NEO is retirement eligible, stock options immediately vest upon retirement. For awards granted in fiscal year 2019 and later,However, if an NEO does not remain employed for 180 days from the grant date, the award is forfeited regardless of retirement eligibility. Stock options are granted for a 10-year term. Stock options are granted with an exercise price equal to the fair market value of our common stock on the date of grant.
Restricted Stock Units.Units. Restricted stockStock units provide a benefit to an employee only if the employee remains employed until the award vests or once the employee becomes retirement eligible. Dividends are accrued on restricted stock units during the period prior to vesting and are subject to the same vesting requirements, with payment in the form of additional shares once vesting has occurred. Restricted stockStock units do not have voting rights. 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. We grant two kinds of restricted stock units.
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● | PSUs. For all NEOs, |
● | RSUs. For all NEOs, 25% of their equity awards are RSUs vesting based on continued employment over time. RSUs typically vest in three annual installments (33%, 33%, and 34%) from the grant date, which enhances retention. |
H. B. FULLER | 2024 Proxy Statement 38
EXECUTIVE COMPENSATION
If an NEO is retirement eligible, RSUs and PSUs continue to vest pursuant to the terms of the award. For awards granted in fiscal year 2019 and later,However, if an NEO does not remain employed for 180 days from the grant date, the award is forfeited regardless of retirement eligibility.
Fiscal 20202023 Long-Term IncentiveIncentive Awards. The value of an individual’s target award is established to generally correlate with consideration of the market median/50th50th percentile for the applicable position and grade level.level as well as the contributions and potential of the individual. The CEO recommends to the Compensation Committee the value of stock options, RSUs, and PSUs to be granted to each executive officer. The Compensation Committee retains full authority to accept, modify, or reject these recommendations and 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 determined based on a Black-Scholes valuation, and a 30-day share price average is applied. To determine the number of restricted stock units to be awarded, a 30-day share price average is applied.
The Compensation Committee reviews and approves long-term incentives for our CEO and the other executive officers in January of each year. This long-term incentive grant date in January aligns with the annual individual performance review process and allows the grants to occur during the open trading period (after our fiscal year-end annual earnings release) for our common stock as provided under Company policy. 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.
The targetapproximate values for each named executive officer’sNEO’s fiscal year 2023 long-term incentive award are set forth in the table below. 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.
Named Executive Officer | Target Value of | Approximate Value of | ||||||
James J. Owens | 4,944,661 | 1 | 4,944,661 | 1 | ||||
John J. Corkrean | 1,000,000 | 2 | 1,000,000 | |||||
Theodore M. Clark | 1,000,000 | 1,000,000 | ||||||
Andrew E. Tometich | 600,000 | 600,000 | ||||||
Zhiwei Cai | 529,000 | 3 | 600,000 |
Approximate | ||
Value of | ||
Long-Term | ||
Incentive | ||
for FY 2023 | ||
Named Executive Officer | ($) | |
Celeste B. Mastin | 3,562,500 | |
John J. Corkrean | 1,100,000 | |
Zhiwei Cai | 650,0001 | |
James J. East | 650,000 | |
Traci L. Jensen | 650,000 |
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(1) |
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In addition to his long-term incentive award, Mr. Tometich received a new hire grant of 50% NQSOs and 50% RSUs with a grant date fair value of approximately $300,000. The NQSOs and RSUs vested 50% on January 24, 2021 and 50% will vest on January 24, 2022, subject to continued employment. Mr. Tometich’s grant was given to both attract Mr. Tometich to the Company and to help offset the loss of awards at his previous employer.
All grants are set forth in the “Grants of Plan-Based Awards During Fiscal 2020” table later in this Proxy Statement.
Analysis of Fiscal 2018 -20202021-2023 Long-Term Incentive Awards.Award. PSUs granted in fiscal year 2021 and later have a three-year ROIC goal. Fiscal year 2020years 2021-2023 ROIC performance and related vesting of PSUs are set forth below.
Fiscal Year 2020 ROIC Performance Goals and Achievement | |||
2018 PSU | 2019 PSU | 2020 PSU | |
Superior | 12.1% | 13.0% | 11.8% |
Target | 8.1% | 9.0% | 7.8% |
Threshold | 6.1% | 7.0% | 5.8% |
< Threshold | 0% | 0% | 0% |
Actual | 6.7% | 6.7% | 6.7% |
Payout Percent | 65% | -0- | 72.5% |
Fiscal years 2021-2023 ROIC1 Performance Goals and Achievement
2021 PSU Grant | ||||
(2021-2023 Performance Period) | ||||
Superior | 12.2 | % | ||
Target | 8.2 | % | ||
Threshold | 6.2 | % | ||
Actual | 9.0 | % | ||
Payout Percent | 120.0 | % |
(1) | ROIC is defined as: |
The fiscal year 2020 ROIC target of 7.8% is lower than in previous years due to fiscal year 2019 results being negatively impacted by foreign currency and the impact of the divestiture of the surfactants and thickeners business. Therefore, the fiscal year 2020 ROIC target was established based on a lower baseline.NOPAT (Net operating profit after tax)
For all grants, if(Short-Term Debt + Long-Term Debt + Total Equity - Cash)
At time of grant, we believed the targets were challenging but achievable. We consider the related target for the ROIC metric to be confidential commercial information the disclosure of which would result in competitive harm to us.
If performance in a yearduring the three-year performance period is less than threshold (target ROIC less 2%), no shares will be earned.PSUs vest. If the threshold level is achieved, the PSUs will vest at 50%. If the target level is achieved, the PSUs will vest at 100%. If the superior level (target ROIC plus 4%) is achieved, the PSUs will vest at 200%. Performance between threshold and target and target and superior will beis calculated on a straight-line basis.
ROIC is a non-GAAP financial metric that is reconciled with the most directly comparable GAAP financial metric in Annex A.
25% of the CEO’s equity awards are PSUs vesting in three equal installments only if one or more of the performance measures in the CEO’s short-term incentive plan (AEPS, Adjusted Net Revenue or Adjusted EBITDA) are achieved at the threshold level for fiscal year 2020 as determined by the Compensation Committee. For the January 2020 grant of PSUs, the threshold level was met for each of these measures as of January 24, 2021. Therefore, these PSUs will vest according to the three-year vesting schedule. There is no higher level of payout for these PSUs if target or superior performance is achieved for any of the measures.
Fiscal year 20202023 RSU and PSU awards are set forth in the ““Grants of Plan-Based Awards During Fiscal Year 20232020” table in this Proxy Statement.
Fiscal H. B. FULLER | 2024 Proxy Statement2017 Performance-Bas 39ed NQSO Award. In October 2017, the Compensation Committee approved a one-time performance-based NQSO award to NEOs to provide incentive for the successful integration of the Royal Adhesives acquisition. These performance-based NQSOs would have vested on January 31, 2021 if the Company had achieved Adjusted EBITDA at a certain threshold level for fiscal year 2020. The threshold performance level was not achieved. Therefore, none of these NQSOs vested.
EXECUTIVE COMPENSATION
Other Executive Benefits and Perquisites
In General. We provide the following perquisites and benefits to our executive officers:
Perquisites and Benefits | Description | |||
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► | 1% non-elective (retirement) contribution restoration for compensation in excess of IRS limits for eligible U.S. employees, | |||
► | An opportunity for a discretionary contribution of 0% to 3% of eligible pay in excess of IRS limits, based on EPS , | |||
► | 4% 401(k) match restoration for compensation match in excess of IRS limits, and | |||
► | Additional credit equal to 7% of eligible earnings. | |||
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Financial Counseling | ● |
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Executive Health Exams | ● |
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Excess Liability Insurance | ● |
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Relocation Expense | ● |
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Long-Term Disability Insurance | ● |
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(1) | Information regarding calculation of the fiscal year |
H. B. FULLER | 2024 Proxy Statement 40
EXECUTIVE COMPENSATION
Analysis of Fiscal 20202023 Executive Benefits and Perquisites. We provide perquisites to our executive officers to generally reflect competitiveness at the market median/50th50th percentile.
In conjunction with the annual review of the executive officer total compensation program, the Compensation Committee typically reviews executive officer benefits and perquisites for market prevalence. However, due to the pandemic,In fiscal year 2022, the Compensation Committee determined that onlydecided to review benefits and perquisites on an “every other year” basis since the market data does not typically change materially on an annual basis. The Compensation Committee conducted a limiteddetailed review and made no changes in fiscal 2023 to the types and amounts of benefits and perquisites would be made. The Compensation Committee reviewed findings on theoffered to executive long-term disability program and reviewed prior year market data related to the other programs. The Compensation Committee determined not to make any changes to these programs due to general market competitiveness.officers.
All benefits and perquisites paid to our NEOs are disclosed in the “Summary Compensation Table”Table” under the “Other Compensation” column and the footnotes thereto.
Severance, Change-in-ControlChange-In-Control and otherOther Employment-Related Agreements
In General. H.B. Fuller does not have employment agreements with any of the NEOs that provide for a specified term of employment. The Company has executive severance agreements discussed under the heading ““Severance”Severance” and change in control agreements discussed under the heading “Change-in-Control Agreements.”
Severance.The executive severance agreements provide for payment of the following severance benefits if the eligible executive officer’s employment is terminated involuntarily by the Company without cause (as defined in the agreement) or voluntarily by the executive officer for good reason (as defined in the agreement):
● | Severance pay equal to one |
● | Continued group medical and dental insurance over |
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● | Outplacement services with a value of up to $20,000. |
Except as indicated above with respect to the CEO, the same form of agreement was provided to all NEOs.
Change-in-Control Agreements.All NEOs have entered into change-in-control agreements with H.B. Fuller. The agreements are a critical and effective tool to attract and retain executives. These agreements provide for payments under certain circumstances following a change-in-control of the Company. The Compensation 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 the executive officer’s employment is terminated in connection with a 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 Company and its shareholders, and that the executive officer is not distracted by compensation implications as a resultbecause of a change-in-control. The Compensation Committee also believes thatAdditionally, change-in-control agreements assist in the retention of executive officers at a time when their departure might be detrimental to the Company and shareholders. The agreements are a critical and effective tool to attract and retain executives and provide for payments under certain circumstances following a change-in-control of the Company. Another purpose of providing change-in-control agreements is to provide financial security to the executive officer in the event the executive officer’s employment is terminated in connection with a change-in-control.
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 the NEO's terms of employment, such as demotion, reduction in compensation or required relocation) during the covered period 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 a double trigger prevents the unnecessary payment of benefits to an executive officer in the event thatif the change in control does not result in the executive officer’s termination of employment or a material change in the terms of the executive officer’s employment.
For change-in-control agreements entered into prior to mid-fiscal year 2018 (for Mr. Owens,Corkrean, Mr. CorkreanCai, and Mr. Cai)Ms. Jensen), the arrangements were structured to ensure that executives receive the full intended benefits of these arrangements in the event thatif a transaction should take place. Our approach was to provide our executives with arrangements that include a modified tax gross-up. These arrangements eliminated de minimis or inefficient gross-up payments, only providing tax gross-up in cases of significant imbalance. For change-in-control agreements entered into starting in mid-fiscal year 2018 (for Mr. ClarkMs. Mastin and Mr. Tometich)East), the Company does not include a tax gross-up provision. The Company instead references a best of net provision whereby the individual is responsible for any excise tax, or the benefit is reduced so as to not trigger an excise tax. The Company would calculate both scenario estimates and the individual would receive the provision with the highest after-tax benefit estimate.
H. B. FULLER | 2024 Proxy Statement 41
EXECUTIVE COMPENSATION
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-Control”Change-in-Control” in the section of this Proxy Statement titled “Potential Payments Made Upon Termination or Change-In-Control.”
Stock OwnershipExecutive Compensation Policies
Stock Ownership. Goals and levels of executive stock ownership are reviewed annually by the Compensation Committee. An executive officer’s stock ownership includes common stock directly held by the executive officer and Common Stockcommon stock held in our 401(k) Plan, restricted stock, restricted stock units (time-based and performance-based),RSUs, and phantom stock units held in the Key Employee Deferred Compensation Plan. NQSOs and unvested/unearned PSUs are not counted toward stock ownership goals.
The guideline for the CEO is ownership of at least five times histheir base salary in Common Stock,common stock, and the guideline for the other NEOsCFO is ownership of at least three times their base salary. For the other NEOs, the guideline is two times their base salary. The guideline provides that an executive should strive to reach and then maintain the applicable stock ownership goal within five years of appointmentbecoming subject to a new job grade.that goal. For the 2020fiscal year 2023 review of stock ownership, all NEOs who had been in their job gradesubject to the same stock ownership goal for at least five years had met the applicable stockthat goal except for Ms. Jensen, who had met her ownership goal.goal prior to her promotion to CAO and related increase in base salary. If after five years inat a job grade,particular stock ownership target, an NEO has not met the stock ownership goal, the NEO must retain 100% of all after-tax profit shares from any exercise, vesting, or payout of equity awards until the stock ownership guideline is met, unless a hardship exception is granted.
Tax Considerations
Considerations. Section 162(m) of the U.S. Internal Revenue Code ("Section 162(m)") imposes a $1,000,000 annual deduction limit on compensation payable to certain current and former named executive officers.NEOs. The Compensation Committee intends to pay competitive compensation consistent with our philosophy to attract, retain, and motivate executive officers to manage our business in the best interests of the Company 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.
Prior to the Tax Cuts and Jobs Act (the “Act”), Section 162(m) permitted a deduction for compensation in excess of $1,000,000 paid to a covered executive if specified requirements related to our performance were met and shareholder approval was obtained. The Act eliminated the exception to the deduction limit for qualified performance-based compensation (and broadened the application of the deduction limit to certain current and former executive officers who previously were exempt from such limit). However, the Act also included a transition provision which exempts from the above changes made to performance-based compensation payable under a written binding agreement that was in effect on November 2, 2017, if such agreement is not subsequently materially amended. As a result of the transition rule, certain performance-based awards that were outstanding as of November 2, 2017 but which may vest and pay out in future tax years may be fully deductible if they qualify for transition relief.
Various programs, including 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.comply.
Fiscal 2021Prohibition on Hedging and PledgingChanges. Our insider trading policy prohibits hedging transactions in Company securities by all officers and directors. Hedging transactions include, for example, prepaid variable contracts, equity swaps, “costless collars,” and other transactions that are designed to Executive Compensation Programhedge or offset any decrease in the market value of Company securities. Additionally, our insider trading policy prohibits pledging transactions by directors and executive officers.
EffectiveClawbacks. Our compensation recovery policy generally requires the Compensation Committee to recoup incentive-based compensation from any current or former executive officer or key manager if the payment was predicated on achieving certain financial results that were subsequently the subject of a restatement of Company financial statements due to the material non-compliance with any financial reporting requirements. In such a case, the Compensation Committee will require the executive officer or key manager to reimburse the Company for LTIP awards granted in January 2021, PSUsall incentive-based compensation paid within the three-year period prior to the date that vestthe Company is required to prepare the restatement to the extent that incentive-based compensation received exceeds the amount of incentive-based compensation that otherwise would have been received had it been determined based on ROIC performance will movethe restated amounts. Under our compensation recovery policy, the Compensation Committee may also recoup incentive-based compensation from three-year ratable vesting to three-year cliff vesting. The ROIC metric for these PSUs will not change. However, the metric target is a three-year average of annual ROIC, versus individual annual ROIC targets. This change better aligns the PSU grant vesting with the focus of ROIC performance over the three-year performance period of the award, incentivizes long-term strategic thinking and behavior, and enhances the focus on retention. In addition, the PSU grant for the CEO that vests over three years onlyany current or former executive officer or key manager if the Compensation Committee determines that the executive officer or key manager engaged in intentional misconduct in performing his or her duties. In such a case, the Compensation Committee may require the executive officer or key manager to reimburse the Company achieves at leastfor all or a threshold levelportion of AEPS, Adjusted Net Revenueany incentive-based compensation paid within any fiscal year during which the executive officer's or Adjusted EBITDA in the first year of the grant, has been revised to be time-based RSUs. This change was made to increase the long-term orientation of the CEO’s compensation and to be consistent with the time-based RSU grants received by the other NEOs.key manager's intentional misconduct occurred.
Non-GAAP Financial Measures
The "Compensation Discussion and Analysis" section of this Proxy Statement contains non-GAAP financial measures, including AEPS,Adjusted EPS, Adjusted Net Revenue, Adjusted EBITDA, Adjusted EBITDA Margin, and ROIC measured on a company-wide basis and certain financial measures for individual businessoperating segments. See "Reconciliation of Non-GAAP Financial Information"Information" in Annex A to this Proxy Statement for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure.
H. B. FULLER | 2024 Proxy Statement 42
EXECUTIVE COMPENSATION
Compensation Committee ReportCOMPENSATION COMMITTEE REPORT
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 November 28, 2020.December 2, 2023.
Compensation Committee of the Board of Directors of H.B. Fuller Company
Ruth S. Kimmelshue, | ||
Lee R. Mitau | ||
Michael J. Happe | Srilata A. Zaheer | |
Charles T. Lauber |
H. B. FULLER | 2024 Proxy Statement 43
EXECUTIVE COMPENSATION
Summary Compensation TableSUMMARY COMPENSATION TABLE
The following table shows the cash and non-cash compensation for the last three fiscal years awarded to or earned by our NEOs, which include individuals who served as Chief Executive Officer and Chief Financial Officer during fiscal year 20202023 and three other most highly compensated executive officers.officers who either were serving as executive officers at the end of fiscal year 2023 or served as an executive officer during fiscal year 2023.
Name and Principal Position | Year | Salary ($)1 | Bonus ($)2 | Stock Awards ($)3 | Option Awards ($)4 | Non-Equity Incentive Plan Compensation ($)1,5 | Change in Pension Value and Non- qualified Deferred Compensation Earnings ($)6 | All Other Compensation ($)7 | Total ($) | |||||||||
CELESTE B. MASTIN8 | 2023 | 950,000 | 1,624,832 | 1,615,756 | 570,018 | - | 290,296 | 5,050,902 | ||||||||||
President and | 2022 | 438,750 | 1,700,000 | 502,842 | 525,814 | 364,920 | - | 444,347 | 3,976,673 | |||||||||
Chief Executive Officer | 2021 | |||||||||||||||||
JOHN J. CORKREAN | 2023 | 596,769 | 523,710 | 498,896 | 239,810 | 17,781 | 140,572 | 2,017,538 | ||||||||||
Executive Vice President & | 2022 | 587,615 | 490,494 | 460,969 | 488,044 | 4,447 | 195,156 | 2,226,725 | ||||||||||
Chief Financial Officer | 2021 | 558,404 | 527,346 | 501,728 | 575,000 | 3,407 | 171,373 | 2,337,258 | ||||||||||
ZHIWEI CAI | 2023 | 610,685 | 755,063 | 294,794 | 195,819 | 16,153 | 113,332 | 1,985,846 | ||||||||||
Executive Vice President, | 2022 | 595,437 | 329,309 | 322,680 | 368,609 | 4,247 | 131,482 | 1,751,764 | ||||||||||
Engineering Adhesives | 2021 | 533,270 | 341,517 | 334,315 | 540,000 | 3,542 | 91,740 | 1,844,384 | ||||||||||
JAMES J. EAST9 | 2023 | 500,000 | 298,166 | 294,794 | 304,033 | 6,817 | 118,992 | 1,522,802 | ||||||||||
Executive Vice President, | ||||||||||||||||||
Hygiene, Health and Consumable Adhesives | ||||||||||||||||||
TRACI L. JENSEN10 | 2023 | 500,000 | 296,471 | 294,794 | 175,217 | 31,807 | 109,620 | 1,407,909 | ||||||||||
Executive Vice President & | ||||||||||||||||||
Chief Administrative Officer |
Name and Principal Position | Year | Salary ($)1 | Bonus ($)2 | Stock Awards ($)3 | Option | Non-Equity Compensation | Change in qualified | All Other sation ($)8 | Total ($) | |||||||||||||||||||||||||
James J. Owens | 2020 | 1,225,977 | - | 2,367,071 | 2,342,618 | 1,044,717 | 45,542 | 362,306 | 7,388,231 | |||||||||||||||||||||||||
President and | 2019 | 1,167,813 | - | 2,595,195 | 2,194,071 | 956,994 | 43,430 | 350,655 | 7,308,158 | |||||||||||||||||||||||||
Chief Executive Officer | 2018 | 1,112,408 | - | 1,662,920 | 1,675,099 | 948,233 | 21,066 | 373,222 | 5,792,948 | |||||||||||||||||||||||||
John J. Corkrean8 | 2020 | 455,498 | - | 636,759 | 473,766 | 230,727 | 4,211 | 148,594 | 1,949,555 | |||||||||||||||||||||||||
Executive Vice President & | 2019 | 449,905 | - | 526,663 | 399,347 | 291,920 | 2,861 | 149,840 | 1,820,536 | |||||||||||||||||||||||||
Chief Financial Officer | 2018 | 440,872 | - | 309,158 | 248,995 | 291,900 | 573 | 152,743 | 1,444,241 | |||||||||||||||||||||||||
Theodore M. Clark | 2020 | 541,539 | - | 478,665 | 473,766 | 288,408 | - | 110,928 | 1,893,306 | |||||||||||||||||||||||||
Executive Vice President & | ||||||||||||||||||||||||||||||||||
Chief Operating Officer | ||||||||||||||||||||||||||||||||||
Andrew E. Tometich | 2020 | 503,000 | - | 430,799 | 426,379 | 329,517 | - | 112,923 | 1,802,618 | |||||||||||||||||||||||||
Executive Vice President, Hygiene, | 2019 | 133,488 | 150,000 | 517,684 | 471,598 | 64,064 | - | 116,682 | 7 | 1,453,516 | ||||||||||||||||||||||||
Health and Consumable Adhesives | ||||||||||||||||||||||||||||||||||
Zhiwei Cai | 2020 | 524,535 | - | 308,493 | 284,256 | 123,123 | 4,865 | 92,219 | 1,337,491 | |||||||||||||||||||||||||
Executive Vice President, | 2019 | 475,503 | - | 332,400 | 266,231 | 284,311 | 4,146 | 87,569 | 1,450,160 | |||||||||||||||||||||||||
Engineering Adhesives |
__________________________
(1) | Includes cash compensation deferred at the election of the executive under the 401(k) Plan and/or the |
(2) | The amount in this column for |
H. B. FULLER | 2024 Proxy Statement 44
EXECUTIVE COMPENSATION
(3) | The amounts in this column represent the grant date fair value of (a) the 10% Company match of phantom units deferred under the KEDCP, |
(4) | The amounts in this column represent the grant date fair values of stock option |
(5) | As described in the “Compensation Discussion and |
(6) | Amounts reported in this column |
(7) |
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| The table below shows the components of this column for fiscal year |
All Other Compensation -- Fiscal Year 2020 | ||||||||||||||||||||
Name | Defined | Defined | Dividends on | Perquisites (see | Total | |||||||||||||||
James J. Owens | 14,229 | 247,727 | 60,401 | 39,949 | 362,306 | |||||||||||||||
John J. Corkrean | 14,229 | 81,484 | 14,042 | 38,839 | 148,594 | |||||||||||||||
Theodore M. Clark | 15,276 | 81,931 | 6,445 | 7,276 | 110,928 | |||||||||||||||
Andrew E. Tometich | 13,469 | 50,318 | 8,549 | 40,587 | 112,923 | |||||||||||||||
Zhiwei Cai | 14,229 | 62,994 | 8,950 | 6,046 | 92,219 |
H. B. FULLER | 2024 Proxy Statement 45
EXECUTIVE COMPENSATION
All Other Compensation -- Fiscal Year 2023 | ||||||||||||||||||||
Defined | Defined | |||||||||||||||||||
Contribution Plan | Contribution | |||||||||||||||||||
Company Match | Restoration | Dividends on | ||||||||||||||||||
& | Plan | Unvested | Perquisites and | |||||||||||||||||
Contributions | Contributions | RSUs and PSUs | Other Payments | Total | ||||||||||||||||
Name | ($)a | ($)a | ($)b | ($)c | ($) | |||||||||||||||
Celeste B. Mastin | 16,396 | 137,010 | 24,578 | 112,312 | 290,296 | |||||||||||||||
John J. Corkrean | 16,396 | 100,255 | 15,702 | 8,219 | 140,572 | |||||||||||||||
Zhiwei Cai | 16,396 | 73,372 | 15,572 | 7,992 | 113,332 | |||||||||||||||
James J. East | 16,396 | 78,865 | 6,676 | 17,055 | 118,992 | |||||||||||||||
Traci L. Jensen | 16,396 | 68,790 | 6,836 | 17,598 | 109,620 |
(a) | For the contributions related to the discretionary contribution of 0% to 3% of eligible earnings in excess of IRS limits, based on Adjusted EPS performance of |
(b) | Dividends accrued on unvested RSUs and PSUs are not paid unless the RSUs or PSUs vest. |
(c) | The |
Insurance amounts include premiums for personal excess liability insurance paid on a tax-protected basis and related tax gross-ups. Insurance amounts also include reimbursement for long-term disability insurance premiums in the amount of $1,843 for Ms. Mastin, Mr. Cai, Mr. East, and Ms. Jensen. |
(8) | Ms. Mastin was hired as EVP and COO effective March 7, 2022. She became President and CEO of the Company and a director of the Company effective December 4, 2022. |
(9) | Mr. East was promoted to his current role effective December 4, 2022. |
(10) | Ms. Jensen was promoted to her current role effective December 4, 2022. |
H. B. FULLER | 2024 Proxy Statement 46
Perquisites - Fiscal Year 2020 | ||||||||||||||||||||||||
Name | Insurance ($)i | Health | Moving and | Financial | Charitable Donationsiv | Total | ||||||||||||||||||
James J. Owens | 4,753 | 7,500 | - | 7,500 | 20,196 | 39,949 | ||||||||||||||||||
John J. Corkrean | 2,145 | - | - | 7,500 | 29,194 | 38,839 | ||||||||||||||||||
Theodore M. Clark | 2,276 | - | - | - | 5,000 | 7,276 | ||||||||||||||||||
Andrew E. Tometich | 4,161 | - | 24,214 | 7,500 | 4,712 | 40,587 | ||||||||||||||||||
Zhiwei Cai | 4,274 | - | - | 1,600 | 172 | 6,046 |
EXECUTIVE COMPENSATION
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Grants of Plan-Based Awards During Fiscal GRANTS OF PLAN-BASED2020 AWARDS DURING FISCAL 2023
The following table summarizes the grants of plan-based awards in fiscal year 20202023 for each of the named executive officersNEOs in the “Summary Compensation Table.”. For more information on the terms of these awards, see “Fiscal 20202023 Short-Term Incentive Compensation” and “Fiscal 20202023 Long-Term Incentive Compensation” in the “Compensation Discussion and Analysis.”.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards1 | Estimated Future Payouts Under Equity Incentive Plan Awards2 | All Other Number of Shares of Stock or | Option Awards: Number of Securities Underlying | Exercise or Base Price of Option | Grant Date Fair Value of Stock and | |||||||||||||||||||||||||||||||||||||||
Name and Award Type | Grant Date | Approval Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Units (#) | Options (#)3 | Awards ($/Sh) | Options Awards ($)4 | ||||||||||||||||||||||||||||||||
James J. Owens | ||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive | 220,715 | 1,471,432 | 2,942,864 | |||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 24,479 | 5 | 1,183,560 | |||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 12,239 | 24,478 | 48,956 | 1,183,511 | ||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 238,872 | 48.35 | 2,342,618 | |||||||||||||||||||||||||||||||||||||||
John J. Corkrean | ||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive | 60,931 | 406,209 | 812,418 | |||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 4,950 | 6 | 239,333 | |||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 2,475 | 4,950 | 9,900 | 239,333 | ||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 48,309 | 48.35 | 473,766 | |||||||||||||||||||||||||||||||||||||||
Key Employee Deferred Compensation Plan | 3,499 | 7 | 158,093 | |||||||||||||||||||||||||||||||||||||||||
Theodore M. Clark | ||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive | 60,931 | 406,209 | 812,418 | |||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 4,950 | 6 | 239,333 | |||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 2,475 | 4,950 | 9,900 | 239,333 | ||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 48,309 | 48.35 | 473,766 | |||||||||||||||||||||||||||||||||||||||
Andrew E. Tometich | ||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive | 49,043 | 326,950 | 653,900 | |||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 2,970 | 6 | 143,600 | |||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 2,970 | 8 | 143,600 | |||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 1,485 | 2,970 | 5,940 | 143,600 | ||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 28,985 | 48.35 | 284,256 | |||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 14,492 | 8 | 48.35 | 142,123 | ||||||||||||||||||||||||||||||||||||||
Zhiwei Cai | ||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentive | 50,775 | 338,497 | 676,994 | |||||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 2,970 | 6 | 143,600 | |||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 1,485 | 2,970 | 5,940 | 143,600 | ||||||||||||||||||||||||||||||||||||||
LTI Award | 1/24/2020 | 1/15/2020 | 28,985 | 48.35 | 284,256 | |||||||||||||||||||||||||||||||||||||||
Key Employee Deferred Compensation Plan | 472 | 7 | 21,293 |
Estimated Future Payouts Under Non- Equity Incentive Plan Awards1 | Estimated Future Payouts Under Equity Incentive Plan Awards2 | All Other Stock Awards: Number of Shares of Stock | Option Awards: Number of Securities Underlying | Exercise or Base Price of Option | Grant Date Fair Value of Stock and Options | ||||||||||||||||||||||||||||||||||||||||
Name and Award Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | or Units (#) | Options (#)3 | Awards ($/Sh) | Awards ($)4 | ||||||||||||||||||||||||||||||||||
CELESTE B. MASTIN | |||||||||||||||||||||||||||||||||||||||||||||
STIP Award | 170,172 | 1,134,477 | 2,268,953 | ||||||||||||||||||||||||||||||||||||||||||
LTIP Award - PSUs | 1/24/2023 | 5,959 | 11,917 | 23,834 | 812,382 | ||||||||||||||||||||||||||||||||||||||||
LTIP Award - RSUs | 1/24/2023 | 11,918 | 5 | 812,450 | |||||||||||||||||||||||||||||||||||||||||
LTIP Award - NQSOs | 1/24/2023 | 72,261 | 68.17 | 1,615,756 | |||||||||||||||||||||||||||||||||||||||||
JOHN J. CORKREAN | |||||||||||||||||||||||||||||||||||||||||||||
STIP Award | 71,592 | 477,282 | 954,564 | ||||||||||||||||||||||||||||||||||||||||||
LTIP Award - PSUs | 1/24/2023 | 1,840 | 3,679 | 7,358 | 250,797 | ||||||||||||||||||||||||||||||||||||||||
LTIP Award - RSUs | 1/24/2023 | 3,680 | 5 | 250,866 | |||||||||||||||||||||||||||||||||||||||||
LTIP Award - NQSOs | 1/24/2023 | 22,312 | 68.17 | 498,896 | |||||||||||||||||||||||||||||||||||||||||
KEDCP | 3,410 | 6 | 243,516 | ||||||||||||||||||||||||||||||||||||||||||
ZHIWEI CAI | |||||||||||||||||||||||||||||||||||||||||||||
STIP Award | 60,264 | 401,762 | 803,525 | ||||||||||||||||||||||||||||||||||||||||||
LTIP Award - PSUs | 1/24/2023 | 1,087 | 2,174 | 4,348 | 148,202 | ||||||||||||||||||||||||||||||||||||||||
LTIP Award - RSUs | 1/24/2023 | 2,175 | 5 | 148,270 | |||||||||||||||||||||||||||||||||||||||||
Retention Award - RSUs | 1/24/2023 | 6,691 | 5 | 456,125 | |||||||||||||||||||||||||||||||||||||||||
LTIP Award - NQSOS | 1/24/2023 | 13,184 | 68.17 | 294,794 | |||||||||||||||||||||||||||||||||||||||||
KEDCP | 376 | 6 | 27,230 | ||||||||||||||||||||||||||||||||||||||||||
JAMES J. EAST | |||||||||||||||||||||||||||||||||||||||||||||
STIP Award | 52,401 | 349,342 | 698,685 | ||||||||||||||||||||||||||||||||||||||||||
LTIP Award - PSUs | 1/24/2023 | 1,087 | 2,174 | 4,348 | 148,202 | ||||||||||||||||||||||||||||||||||||||||
LTIP Award - RSUs | 1/24/2023 | 2,175 | 5 | 148,270 | |||||||||||||||||||||||||||||||||||||||||
LTIP Award - NQSOs | 1/24/2023 | 13,184 | 68.17 | 294,794 | |||||||||||||||||||||||||||||||||||||||||
KEDCP | 261 | 6 | 18,734 | ||||||||||||||||||||||||||||||||||||||||||
TRACI L. JENSEN | |||||||||||||||||||||||||||||||||||||||||||||
STIP Award | 52,309 | 348,726 | 697,452 | ||||||||||||||||||||||||||||||||||||||||||
Retention Award | 1/24/2023 | 500,000 | 7 | ||||||||||||||||||||||||||||||||||||||||||
LTIP Award - PSUs | 1/24/2023 | 1,087 | 2,174 | 4,348 | 148,202 | ||||||||||||||||||||||||||||||||||||||||
LTIP Award - RSUs | 1/24/2023 | 2,175 | 5 | 148,270 | |||||||||||||||||||||||||||||||||||||||||
LTIP Award - NQSOs | 1/24/2023 | 13,184 | 68.17 | 294,794 | |||||||||||||||||||||||||||||||||||||||||
H. B. FULLER | 2024 Proxy Statement 47
EXECUTIVE COMPENSATION
(1) | The amounts shown in these columns represent the opportunity under our |
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(4) | The grant date fair value of |
(5) |
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For Mr. Cai, the retention award is a one-time grant of RSUs that will cliff-vest on January 24, 2025 subject to Mr. Cai remaining employed by the Company until the vesting date. There are no provisions for accelerated vesting of the units upon an earlier retirement. See "Analysis of Fiscal 2023 Base Salaries, Retention Awards, and Incentive Targets." |
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H. B. FULLER | 2024 Proxy Statement 48
Outstanding Equity Awards at FiscalEXECUTIVE COMPENSATION
2020OUTSTANDING EQUITY AWARDS AT FISCAL 2023 YEAR-END Year-End
The following table summarizes the outstanding equity awards as of November 28, 2020December 2, 2023 for each of the named executive officers in the “Summary Compensation Table.”.
Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Underlying Unexercised Options (#) Exercisable1 | Number of Securities Underlying Unexercised Options (#) Unexercisable1 | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)2 | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)3, 5 | Market Value of Shares or Units of Stock That Have Not Vested ($)4 | Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#)5 | Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($)4,6 | |||||||||||||||||||||||||||
James J. Owens | 1/26/2012 | 38,941 | - | 28.40 | 1/26/2022 | ||||||||||||||||||||||||||||||||
1/24/2013 | 80,697 | - | 39.64 | 1/24/2023 | |||||||||||||||||||||||||||||||||
1/23/2014 | 79,061 | - | 48.92 | 1/23/2024 | |||||||||||||||||||||||||||||||||
1/22/2015 | 112,727 | - | 41.00 | 1/22/2025 | |||||||||||||||||||||||||||||||||
1/19/2016 | 182,039 | - | 33.38 | 1/19/2026 | |||||||||||||||||||||||||||||||||
1/26/2017 | 151,826 | - | 50.10 | 1/26/2027 | |||||||||||||||||||||||||||||||||
10/20/2017 | - | - | 133,592 | 57.70 | 10/20/2027 | ||||||||||||||||||||||||||||||||
1/25/2018 | 96,945 | 49,942 | 53.57 | 1/25/2028 | |||||||||||||||||||||||||||||||||
1/24/2019 | 74,712 | 151,691 | 45.05 | 1/24/2029 | |||||||||||||||||||||||||||||||||
1/24/2020 | - | 238,872 | 48.35 | 1/24/2030 | |||||||||||||||||||||||||||||||||
1/25/2018 | 5,475 | 294,172 | |||||||||||||||||||||||||||||||||||
1/25/2018 | 3,009 | 161,673 | |||||||||||||||||||||||||||||||||||
1/24/2019 | 16,733 | 899,064 | |||||||||||||||||||||||||||||||||||
1/24/2019 | 9,203 | 494,477 | |||||||||||||||||||||||||||||||||||
1/24/2020 | 24,836 | 1,334,438 | |||||||||||||||||||||||||||||||||||
1/24/2020 | 13,659 | 733,898 | |||||||||||||||||||||||||||||||||||
John J. Corkrean | 5/17/2016 | 16,672 | - | 43.48 | 5/17/2026 | ||||||||||||||||||||||||||||||||
1/26/2017 | 23,696 | - | 50.10 | 1/26/2027 | |||||||||||||||||||||||||||||||||
10/20/2017 | - | - | 25,020 | 57.70 | 10/20/2027 | ||||||||||||||||||||||||||||||||
1/25/2018 | 14,410 | 7,424 | 53.57 | 1/25/2028 | |||||||||||||||||||||||||||||||||
1/24/2019 | 13,598 | 27,610 | 45.05 | 1/24/2029 | |||||||||||||||||||||||||||||||||
1/24/2020 | - | 48,309 | 48.35 | 1/24/2030 | |||||||||||||||||||||||||||||||||
1/25/2018 | 814 | 43,736 | |||||||||||||||||||||||||||||||||||
1/25/2018 | 447 | 24,017 | |||||||||||||||||||||||||||||||||||
1/24/2019 | 3,046 | 163,662 | |||||||||||||||||||||||||||||||||||
1/24/2019 | 1,675 | 89,998 | |||||||||||||||||||||||||||||||||||
1/24/2020 | 5,022 | 269,832 | |||||||||||||||||||||||||||||||||||
1/24/2020 | 2,762 | 148,402 | |||||||||||||||||||||||||||||||||||
Theodore M. Clark | 10/20/2017 | 83,402 | - | 57.70 | 10/20/2027 | ||||||||||||||||||||||||||||||||
1/24/2020 | - | 48,309 | 48.35 | 1/24/2030 | |||||||||||||||||||||||||||||||||
1/24/2020 | 5,022 | 269,832 | |||||||||||||||||||||||||||||||||||
1/24/2020 | 2,762 | 148,402 | |||||||||||||||||||||||||||||||||||
Andrew E. Tometich | 10/3/2019 | 52,301 | - | 46.16 | 10/3/2029 | ||||||||||||||||||||||||||||||||
1/24/2020 | - | 28,985 | 48.35 | 1/24/2030 | |||||||||||||||||||||||||||||||||
1/24/2020 | - | 14,492 | 48.35 | 1/24/2030 | |||||||||||||||||||||||||||||||||
1/24/2020 | 3,013 | 161,888 | |||||||||||||||||||||||||||||||||||
1/24/2020 | 3,013 | 161,888 | |||||||||||||||||||||||||||||||||||
1/24/2020 | 1,657 | 89,039 | |||||||||||||||||||||||||||||||||||
Zhiwei Cai | 1/23/2014 | 2,746 | - | 48.92 | 1/23/2024 | ||||||||||||||||||||||||||||||||
1/26/2017 | 13,033 | - | 50.10 | 1/26/2027 | |||||||||||||||||||||||||||||||||
10/20/2017 | - | - | 20,850 | 57.70 | 10/20/2027 | ||||||||||||||||||||||||||||||||
1/25/2018 | 10,807 | 5,568 | 53.57 | 1/25/2028 | |||||||||||||||||||||||||||||||||
1/24/2019 | 9,065 | 18,407 | 45.05 | 1/24/2029 | |||||||||||||||||||||||||||||||||
1/24/2020 | - | 28,985 | 48.35 | 1/24/2030 | |||||||||||||||||||||||||||||||||
1/25/2018 | 605 | 32,507 | |||||||||||||||||||||||||||||||||||
1/25/2018 | 339 | 18,214 | |||||||||||||||||||||||||||||||||||
1/24/2019 | 2,031 | 109,126 | |||||||||||||||||||||||||||||||||||
1/24/2019 | 1,117 | 60,016 | |||||||||||||||||||||||||||||||||||
1/24/2020 | 3,013 | 161,888 | |||||||||||||||||||||||||||||||||||
1/24/2020 | 1,657 | 89,030 |
Option Awards | ||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable1 | Number of Securities Underlying Unexercised Options (#) Unexercisable1 | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | 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 ($)3 | Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#)4 | Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($)3 | ||||||||||
CELESTE B. MASTIN | 4/7/2022 | 8,470 | 17,197 | 67.55 | 4/7/2032 | |||||||||||||||
1/24/2023 | — | 72,261 | 68.17 | 1/24/2033 | ||||||||||||||||
4/7/2022 | 2,546 | 195,762 | ||||||||||||||||||
4/7/2022 | 7,598 | 584,210 | ||||||||||||||||||
1/24/2023 | 12,059 | 927,217 | ||||||||||||||||||
1/24/2023 | 24,116 | 1,854,279 | ||||||||||||||||||
JOHN J. CORKREAN | 5/17/2016 | 16,672 | — | 43.48 | 5/17/2026 | |||||||||||||||
1/26/2017 | 23,696 | — | 50.10 | 1/26/2027 | ||||||||||||||||
1/25/2018 | 21,834 | — | 53.57 | 1/25/2028 | ||||||||||||||||
1/24/2019 | 41,208 | — | 45.05 | 1/24/2029 | ||||||||||||||||
1/24/2020 | 48,309 | — | 48.35 | 1/24/2030 | ||||||||||||||||
1/27/2021 | 25,328 | 13,048 | 51.89 | 1/27/2031 | ||||||||||||||||
1/24/2022 | 7,259 | 14,738 | 72.94 | 1/24/2032 | ||||||||||||||||
1/24/2023 | — | 22,312 | 68.17 | 1/24/2033 | ||||||||||||||||
1/27/2021 | 1,714 | 131,789 | ||||||||||||||||||
1/27/2021 | 6,044 | 464,723 | ||||||||||||||||||
1/24/2022 | 2,188 | 168,235 | ||||||||||||||||||
1/24/2022 | 6,528 | 501,938 | ||||||||||||||||||
1/24/2023 | 3,724 | 286,338 | ||||||||||||||||||
1/24/2023 | 7,446 | 572,523 | ||||||||||||||||||
ZHIWEI CAI | 1/26/2017 | 13,033 | — | 50.10 | 1/26/2027 | |||||||||||||||
1/25/2018 | 16,375 | — | 53.57 | 1/25/2028 | ||||||||||||||||
1/24/2019 | 27,472 | — | 45.05 | 1/24/2029 | ||||||||||||||||
1/24/2020 | 28,985 | — | 48.35 | 1/24/2030 | ||||||||||||||||
1/27/2021 | 16,876 | 8,695 | 51.89 | 1/27/2031 | ||||||||||||||||
1/24/2022 | 5,081 | 10,317 | 72.94 | 1/24/2032 | ||||||||||||||||
1/24/2023 | — | 13,184 | 68.17 | 1/24/2033 | ||||||||||||||||
1/27/2021 | 1,142 | 87,808 | ||||||||||||||||||
1/27/2021 | 4,028 | 309,713 | ||||||||||||||||||
1/24/2022 | 1,532 | 117,795 | ||||||||||||||||||
1/24/2022 | 4,568 | 351,234 | ||||||||||||||||||
1/24/2023 | 6,770 | 520,545 | ||||||||||||||||||
1/24/2023 | 4,400 | 338,316 | ||||||||||||||||||
1/24/2023 | 2,201 | 169,235 | ||||||||||||||||||
JAMES J. EAST | 1/24/2020 | 7,935 | — | 48.35 | 1/24/2030 | |||||||||||||||
1/27/2021 | 4,018 | 2,070 | 51.89 | 1/27/2031 | ||||||||||||||||
1/24/2022 | 3,839 | 7,797 | 72.94 | 1/24/2032 | ||||||||||||||||
1/24/2023 | — | 13,184 | 68.17 | 1/24/2033 | ||||||||||||||||
1/27/2021 | 272 | 20,914 | ||||||||||||||||||
1/27/2021 | 958 | 73,661 | ||||||||||||||||||
1/24/2022 | 1,157 | 88,962 | ||||||||||||||||||
1/24/2022 | 3,452 | 265,424 | ||||||||||||||||||
1/24/2023 | 2,201 | 169,235 | ||||||||||||||||||
1/24/2023 | 4,400 | 338,316 | ||||||||||||||||||
TRACI L. JENSEN | 1/19/2016 | 29,832 | — | 33.38 | 1/19/2026 | |||||||||||||||
1/26/2017 | 23,696 | — | 50.10 | 1/26/2027 | ||||||||||||||||
1/25/2018 | 21,834 | — | 53.57 | 1/25/2028 | ||||||||||||||||
1/24/2019 | 27,472 | — | 45.05 | 1/24/2029 | ||||||||||||||||
1/24/2020 | 14,492 | — | 48.35 | 1/24/2030 | ||||||||||||||||
1/27/2021 | 7,914 | 4,078 | 51.89 | 1/27/2031 | ||||||||||||||||
1/24/2022 | 2,722 | 5,527 | 72.94 | 1/24/2032 | ||||||||||||||||
1/24/2023 | — | 13,184 | 68.17 | 1/24/2033 | ||||||||||||||||
1/27/2021 | 535 | 41,136 | ||||||||||||||||||
1/27/2021 | 1,888 | 145,168 | ||||||||||||||||||
1/24/2022 | 821 | 63,127 | ||||||||||||||||||
1/24/2022 | 2,448 | 188,227 | ||||||||||||||||||
1/24/2023 | 2,201 | 169,235 | ||||||||||||||||||
1/24/2023 | 4,400 | 338,316 | ||||||||||||||||||
H. B. FULLER | 2024 Proxy Statement 49
EXECUTIVE COMPENSATION
(1) |
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(2) |
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| The market value is based on the closing price |
| Awards of |
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Option Exercises and Stock Vested—Fiscal Year 2020OPTION EXERCISES AND STOCK VESTED—FISCAL YEAR 2023
The following table summarizes the number of options exercised and shares of restricted stock vested during fiscal year 20202023 for each of the named executive officersNEOs in the “Summary Compensation TableTable.”.
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||
Name | Number of Shares | Value Realized | Number of Shares |
Value Realized on Vesting ($)2 | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)1 | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)2 | ||||||||||||||||||||||||
James J. Owens | 103,019 | 2,089,341 | 42,815 | 2,070,105 | ||||||||||||||||||||||||||||
Celeste B. Mastin | — | — | 1,241 | 79,548 | ||||||||||||||||||||||||||||
John J. Corkrean | -0- | -0- | 6,707 | 324,283 | — | — | 5,541 | 378,009 | ||||||||||||||||||||||||
Theodore M. Clark | -0- | -0- | -0- | -0- | ||||||||||||||||||||||||||||
Andrew E. Tometich | -0- | -0- | 5,707 | 263,720 | ||||||||||||||||||||||||||||
Zhiwei Cai | -0- | -0- | 16,620 | 808,602 | — | — | 3,540 | 241,508 | ||||||||||||||||||||||||
James J. East | — | — | 1,289 | 87,916 | ||||||||||||||||||||||||||||
Traci L. Jensen | 22,789 | 694,347 | 1,762 | 120,203 |
(1) | The value realized on the exercise of options is the |
(2) | The value realized on the vesting of stock awards is the closing market price of a share of H.B. Fuller |
H. B. FULLER | 2024 Proxy Statement 50
EXECUTIVE COMPENSATION
Nonqualified Deferred Compensation—Fiscal Year 2020NONQUALIFIED DEFERRED COMPENSATION—FISCAL YEAR 2023
The following table summarizes information with respect to the participation of the named executive officersNEOs in our nonqualified deferred compensation plans (“NQDC plan”).– the KEDCP and DC Restoration Plan. The Company makes a 1% non-discretionary contribution to the NQDC planDC Restoration Plan and there is an opportunity for a discretionary contribution of 0% to 3% of eligible payearnings in excess of IRS limits, based on EPS performance. For fiscal year 2020, the2023, no discretionary contribution was -0-%made based on Adjusted EPS of $2.83.$3.87. The Company also makes a 4% matching contribution to the DC Restoration Plan in excess of IRS limits and a contribution of 7% of eligible earnings. Participation in the KEDCP is voluntary.
Name | Plan Name | Executive Contributions in Last FY ($)1 | Registrant Contributions in Last FY ($)2 | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals /Distributions ($) | Aggregate Balance at Last FYE ($)3 | 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- | 247,727 | 83,524 | -0- | 2,615,986 | |||||||||||||||||||||||||||||||||||||
Celeste B. Mastin | DC Restoration Plan | - | 137,010 | - | - | 137,010 | ||||||||||||||||||||||||||||||||||||
John J. Corkrean | Key Employee Deferred Compensation Plan | 85,777 | 8,578 | 42,517 | -0- | 336,215 | KEDCP | 269,673 | 26,967 | 9,279 | - | 1,360,359 | ||||||||||||||||||||||||||||||
Defined Contribution Restoration Plan | -0- | 81,484 | 7,354 | -0- | 318,742 | |||||||||||||||||||||||||||||||||||||
Theodore M. Clark | Key Employee Deferred Compensation Plan | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||||||||||||||||||||||
Defined Contribution Restoration Plan | -0- | 81,931 | -0- | -0- | 81,931 | |||||||||||||||||||||||||||||||||||||
Andrew E. Tometich | Key Employee Deferred Compensation Plan | 23,215 | -0- | 296 | -0- | 23,511 | ||||||||||||||||||||||||||||||||||||
Defined Contribution Restoration Plan | -0- | 50,318 | -0- | -0- | 50,318 | DC Restoration Plan | - | 100,255 | 42,527 | - | 691,552 | |||||||||||||||||||||||||||||||
Zhiwei Cai | Key Employee Deferred Compensation Plan | 438,057 | 3,285 | 202,502 | -0- | 2,119,711 | KEDCP | 466,919 | 3,502 | 346,248 | - | 4,049,941 | ||||||||||||||||||||||||||||||
Defined Contribution Restoration Plan | -0- | 62,994 | 8,332 | -0- | 324,433 | DC Restoration Plan | - | 73,372 | 38,365 | - | 606,379 | |||||||||||||||||||||||||||||||
James J. East | KEDCP | 141,003 | 4,230 | 29,951 | (3,499 | ) | 657,083 | |||||||||||||||||||||||||||||||||||
DC Restoration Plan | - | 78,865 | 16,800 | - | 308,766 | |||||||||||||||||||||||||||||||||||||
Traci L. Jensen | DC Restoration Plan | - | 68,790 | 77,941 | - | 1,089,750 |
(1) | Only Mr. Corkrean, Mr. |
(2) | The amount in this column related to the KEDCP is also included in the “Stock Awards” column of the “Summary Compensation Table” and includes the Company’s 10% match under the KEDCP for any amounts deferred into the Company stock account. The Company contributions under the |
(3) | Of the totals in this column, the table below sets forth amounts that were previously reported as compensation to the relevant NEOs in our “Summary Compensation Table” for previous years for the KEDCP and for the DC Restoration Plan. |
Name | Plan Name | Amount previously reported as compensation to the |
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Celeste B. Mastin |
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John J. Corkrean |
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Zhiwei Cai |
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James J. East | KEDCP | - | ||||
DC Restoration Plan | - | |||||
Traci L. Jensen | DC Restoration Plan | 575,725 |
(a) | Amounts for the DC Restoration Plan also include |
Key Employee Deferred Compensation Plan. The KEDCP is a nonqualified deferred compensation plan that allows deferral of salary or short-term incentive awards on a pre-tax basis. Executive officers may defer up to 80% of their base salary or up to 100% of their short-term incentive award. The plan is unfunded and does not protect the executive from insolvency of the Company.
H. B. FULLER | 2024 Proxy Statement 51
EXECUTIVE COMPENSATION
Amounts deferred under the KEDCP 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 executive. Executive officers are allowed tocan change their investment elections at any time.time, except for investments in the Company stock fund, which can be changed annually. The one yearone-year rates of return for such investments for fiscal 20202023 are as follows:
PIMCO VIT Total Return AC | 7.63% | Goldman VIT MidCap Value | 5.75% |
PIMCO VIT Real Return AC | 10.37% | Fidelity VIP MidCap SC | 12.89% |
Fidelity VIP Equity-Income SC | 4.30% | T. Rowe Price MidCap Growth II | 20.00% |
T. Rowe Price Equity Income II | -0.80% | Royce Micro-Cap IC | 17.83% |
Dreyfus Stock Index IS | 16.60% | Lincoln VIPT Baron Growth Opportunities SC | 26.73% |
Fidelity VIP Contrafund SC | 29.09% | Van Kampen UIF US Real Estate Portfolio | -18.24% |
Oppenheimer Capital Appreciation VA Non-SS | 35.18% | Oppenheimer Global Securities VA Non-SS | 24.65% |
Janus Henderson Forty Fund | 36.02% | Dreyfus VIF Appreciations | 22.24% |
Janus Aspen Overseas Portfolio | 13.98% | Fidelity VIP Growth | 42.66% |
H.B. Fuller Company stock | 7.7% |
BNY Mellon Stock Index | 16.12% | Janus Aspen Overseas Portfolio | 6.50% | ||||
BNY Mellon Variable Investment, Appreciation | 15.22% | Janus Forty Portfolio | 30.46% | ||||
Fidelity VIP Equity-Income | 2.16% | LVIP Baron Growth Opportunities Fund | 5.79% | ||||
Fidelity VIP Growth | 25.72% | Morgan Stanley VIF U.S. Real Estate Portfolio | 1.14% | ||||
Fidelity VIP II Contrafund | 24.16% | PIMCO VIT Real Return Portfolio | 1.77% | ||||
Fidelity VIP III Midcap SC | 3.27% | PIMCO VIT Total Return Fund | 2.48% | ||||
Goldman Sachs VIT Mic Cap Value | 0.52% | Royce Capital Fund Royce Micro-Cap | 4.47% | ||||
H.B. Fuller Company Stock | -4.76% | T Rowe Price Equity Income Portfolio II | 0.12% | ||||
Invesco V.I. Capital Appreciation Fund | 24.61% | T Rowe Price Mid-Cap Growth Portfolio II | 8.29% | ||||
Invesco V.I. Global Fund | 25.14% |
Participants who invest in the Company 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 CompensationTable” in this Proxy Statement. During fiscal year 2020,2023, only Mr. Corkrean, Mr. TometichCai, and Mr. CaiEast 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 2020,2023, no discretionary contributions were made to any of the NEOs. Balances in the plan reflect amounts that have accumulated over time.
Executive officers are always 100% vested in their KEDCP account and are entitled to receive a distribution 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 Internal Revenue 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 account will be in the form of stock and all other amounts will be distributed in cash.
Defined Contribution Restoration Plan (“DC Restoration Plan”).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 threefour component accounts in the plan:
● | 4% restoration plan match credit provides a contribution of 4% of eligible pay in excess of the IRS annual compensation limit |
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● | The potential for 0-3% of eligible pay in excess of the IRS annual compensation limit based on EPS performance. Participants become vested after 3 years of service with the Company. |
● | 7% credit on all eligible earnings. Participants become vested after 3 years of participation in the DC Restoration Plan. |
Interest on contributions is based on the daily Wall Street Journal prime rate when credited. Upon termination, the vested balance is paid in a lump sum approximately 90 days after the end of the sixth month after termination. Upon death or disability, the vested balance is paid in a lump sum approximately 90 days after date of death or after becoming totally disabled as defined by the plan.
Contributions made on behalf of named executive officersNEOs under the DC Restoration Plan are disclosed in the “Summary Compensation Table”Table” in this Proxy Statement.
Potential Payments Upon Termination or Change-in-ControlPOTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
In General.
The Company has certain arrangements, policies, and practices covering the NEOs 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 an NEO or his or hertheir 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, and retirement. The estimated amounts payable are calculated as if the termination occurred on the last business day of the fiscal year, November 27, 2020,December 2, 2023, using the closing share price from the last business day of the fiscal year.
H. B. FULLER | 2024 Proxy Statement 52
EXECUTIVE COMPENSATION
We have not included payments or benefits that are fully disclosed in the “Nonqualified Deferred Compensation Table” Tableof” in this Proxy Statement, unless such payment is enhanced or its vesting or other provisions are 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 NEOs and that are available generally to all salaried employees. We call these benefits “general benefits” and they include:
● | Accrued Vacation Pay |
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Life Insurance Proceeds |
Voluntary Termination
In the event of a voluntary 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 aan NEO unless the NEO is retirement eligible. For all long-term incentive awards, retirement eligibility is defined as 55 years of age and 10 years of service. If an NEO is retirement eligible, stock options immediately vest upon retirement and RSUs and PSUs continue to vest pursuant to the terms of the award. For awards granted in fiscal 2019 and later,However, if an NEO does not remain employed for 180 days from the grant date, the award is forfeited regardless of retirement eligibility.
Retirement
In the event of a retirement as of the last business day of the fiscal year, stock options immediately vest and RSUs and PSUs continue to vest pursuant to the terms of the award. Retirement eligibility is defined as 55 years of age and 10 years of service. For awards granted in fiscal 2019 and later, ifIf an NEO does not remain employed for 180 days from the grant date, the award is forfeited regardless of retirement eligibility.
Involuntary For Cause Termination
In the event of 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 an NEO. Under our long-term incentive award agreements, “cause” means any act by the NEO that is materially inimical to the best interests of the Company and that constitutes common law fraud, a felony, or other gross malfeasance of duty on the part of the Participant. In such a termination, all stock awards are forfeited.
Involuntary Not For Cause Termination or Good Reason Termination
In the event of an involuntary not for cause termination or a good reason termination as of the last business day of the fiscal year, an NEO’s compensation would be affected as follows.
We have a severance arrangement with each of the NEOs. If the NEO’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 toTo 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, where permitted by local law, 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 |
H. B. FULLER | 2024 Proxy Statement 53
● | The executive is entitled to medical and dental insurance over 12 months (18 months for the CEO). |
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● | Outplacement services with a value up to $20,000. |
Benefits under the DC Restoration Plan are not accelerated or automatically vested upon involuntary not for cause termination or good reason termination.
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 NEOs. 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, the executive officer separates from serviceis terminated by the Company 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 consists of the following:
● | The executive will receive a target |
● | A severance payment equal to three times the sum of: (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 |
● | A |
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| In addition, the executive is entitled to medical and dental benefits for a three-year period following the termination of employment. |
InThe Company does not include a tax gross-up provision for change-in-control agreements entered into starting in mid-fiscal year 2018 (for Ms. Mastin and Mr. East). The Company instead references a best of net provision whereby the individual is responsible for any excise tax, or the benefit is reduced to not trigger an excise tax. The Company would calculate both scenario estimates and the individual would receive the provision with the highest after-tax benefit estimate. For Mr. Corkrean, Mr. Cai, and Ms. Jensen, who entered into change-in-control agreements before fiscal year 2018, in the event severance payments are made to the NEOs due to a change-in-control and in the event thatif they are subject to an excise tax imposed by Section 280G of the Internal Revenue Code, where the 280G parachute value does not exceed 330% of the executive’s base amount, we will reduce the payments and benefits. Under these circumstances, the payments and benefits will be reduced 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 thatIf the payments and benefits are subject to an excise tax, where the 280G parachute value exceeds 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. This is typically called a “gross-up”.“gross-up.” 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. For all executive change-in-control agreements entered into after mid-fiscal 2018 (for example for Mr. Clark and Mr. Tometich), this tax gross-up provision has been eliminated.
We have other compensatory arrangements with our NEOs that will be affected by a change-in-control. For the CEO, CFO and COO, theThe DC Restoration Plan provides that if within two years after a change-in-control, we terminate a participant’san NEO’s employment without cause or the participantNEO terminates his or her employment for good reason (as defined in this plan), then three years shall be added to the participant’s years of credited service for purposes of determining benefits under the plan. For the other NEOs, 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 two years shall be added to the participant’s years of credited service for purposes of determining benefits under the plan.
In addition, in the event of a change-in-control, all restricted stock unitsRSUs and any unvested stock options outstanding under our stock incentive plans immediately vest in full. For performance-based RSUPSU grants, if termination under a change-in-control occurs during the performance period, the participant is entitled to receive a paymentvesting based on, and assuming that, performance would have been achieved at the target level. For any executive equity grant agreements beginning mid-fiscal year 2018, a double-triggerdouble trigger will be required prior to accelerated equity vesting. This means that there must be a change-in-control of the Company and a termination of employment (or a material change to the NEO’s terms of employment (such as demotion, reduction in compensation, or required relocation)) in order for vesting to accelerate.
H. B. FULLER | 2024 Proxy Statement 54
EXECUTIVE COMPENSATION
Payments upon Death or Disability
In the event of a death or disability as of the last business day of the fiscal year, an NEO’s compensation would be affected as follows:
● | Stock options and |
● | Benefits under the |
H. B. FULLER | 2024 Proxy Statement 55
EXECUTIVE COMPENSATION
Executive Benefit and Payments Upon Termination—Fiscal Year 2020EXECUTIVE BENEFIT AND PAYMENTS UPON TERMINATION—FISCAL YEAR 2023
The following table shows potential estimated payments to the NEOs in this Proxy Statement upon (1) voluntary termination or retirement, (2) involuntary (not for cause) or good reason termination, (2)(3) involuntary (not for cause) or good reason termination after a change-in-control, and (3)(4) death or disability. The table assumes that the termination was effective on the last business day of the fiscal year and contains estimates of amounts that would be paid to the NEOs upon termination in addition to the base salary and short-term incentive earned by the executives during the fiscal year. Actual amounts payable to any NEO would only be determined after an actual event of termination.
Name | Voluntary Termination or Retirement ($) | 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 ($) | Voluntary Termination or Retirement ($) | 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 | 7,655,482 | 13,140,476 | 15,890,906 | 7,655,482 | ||||||||||||||||||||||||||||
Celeste B. Mastin | - | 4,235,769 | 9,598,555 | 3,232,017 | ||||||||||||||||||||||||||||
John J. Corkrean | 994,555 | 5,996,492 | 1,453,855 | - | 1,123,846 | 7,554,467 | 2,089,872 | |||||||||||||||||||||||||
Theodore M. Clark | 799,600 | 1,787,922 | 3,303,137 | 855,013 | ||||||||||||||||||||||||||||
Zhiwei Cai | 373,092 | 1,024,406 | 6,992,547 | 1,871,444 | ||||||||||||||||||||||||||||
Andrew E. Tometich | 849,950 | 3,237,015 | 759,828 | |||||||||||||||||||||||||||||
James J. East | 197,513 | 893,846 | 3,486,449 | 839,911 | ||||||||||||||||||||||||||||
Zhiwei Cai | 907,055 | 5,259,859 | 923,204 | |||||||||||||||||||||||||||||
Traci L. Jensen | 238,746 | 883,821 | 3,356,797 | 896,526 |
H. B. FULLER | 2024 Proxy Statement 56
As required by SEC rules and regulations, we are providing the following information regarding the ratio of the median annual total compensation of our employees and the annual total compensation of our CEO. For the fiscal year ended November 28, 2020:2023:
● | The median of the annual total compensation of all employees of our company, except for the CEO, was reasonably estimated to be |
● | The annual total compensation of our CEO, |
● | Based on this information, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all other employees is estimated to be |
ThereWe are using a median employee that we identified for our analysis for fiscal year 2021. To identify our median employee, we began by considering everyone employed by us globally on September 3, 2021, which included approximately 6,522 employees. We then calculated total cash compensation for each employee including both current base salary and target cash incentive, and we annualized this amount for employees who commenced employment during the 2021 fiscal year. To calculate total cash compensation for any employee that we paid in currency other than U.S. Dollars, we converted to U.S. Dollars using the same exchange rate used for financial reporting purposes. We then analyzed the compensation amounts for all our employees to determine our median employee. As permitted by SEC rules and regulations, we excluded leased employees and independent contractors.
In our analysis for fiscal year 2022, we omitted approximately 328 employees who became employees as a result of acquisitions we completed during fiscal year 2022.These employees were included in fiscal year 2023 when determining whether or not a significant change occurred which would necessitate choosing a new median employee. In our analysis for fiscal year 2023, we omitted approximately 350 employees who became employees as a result of acquisitions we completed during fiscal year 2023. Based on our analysis for fiscal year 2023, we concluded that there were no changes in our employee population or employee compensation arrangements that the Company believedbelieves would result in a significant change to the pay ratio disclosure. The median employee utilized for last year’s calculation, however, had a non-standard decreaseemployees whom we omitted this year joined the Company in compensation. This employee experienced a reduced work week schedule for three months ofconnection with the year related to COVID-19. Approximately 10% of Company employees were impacted by reductions or furloughsfollowing acquisitions completed during fiscal 2020year 2023: Lemtapes Oy; certain assets of Aspen Research Corporation; Beardow Adams Holdings Ltd.; XChem International LLC; Adhezion Biomedical, LLC; and substantially all employees are back at work ascertain assets of fiscal year end. Therefore, we identified a similarly situated employee using the same compensation measure utilized in fiscal 2018 (total cash compensation for each employee including both current base salary and target cash incentive) as the median employee for fiscal 2020.Sanglier Ltd.
For purposes of the calculation, we added together all the elements of the median employee’s compensation for 2020fiscal year 2023 in the same way that we calculate the annual total compensation of our NEOs (including the CEO) in the “Summary Compensation Table.”. To calculate our ratio, we divided Mr. Owens’Ms. Mastin's annual total compensation, as reported in the “Summary Compensation Table,” above, by the median employee’s annual total compensation.
H. B. FULLER | 2024 Proxy Statement 57
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive "compensation actually paid" (CAP, as computed in accordance with SEC rules) and certain financial performance metrics of the Company. For further information concerning the Company’s pay for performance philosophy and how the Company aligns executive compensation with the Company’s performance, refer to “Compensation Discussion and Analysis.”
Pay Versus Performance Table
Value of Initial Fixed $100 Investment Based On: | ||||||||||||||||||||||||||||||||
Year | Summary Compensation Table Total for PEO ($)(1) | “Compensation Actually Paid” to PEO ($)(2) | Average Summary Compensation Table Total for Non-PEO NEOs ($)(3) | Average “Compensation Actually Paid” to Non-PEO NEOs ($)(4) | Total Shareholder Return ($)(5) | Peer Group Total Shareholder Return ($)(6) | Net Income (millions)($)(7) | Adjusted EBITDA (millions) ($)(8) | ||||||||||||||||||||||||
2023 | 5,050,902 | 5,348,935 | 1,733,524 | 1,541,646 | 147.95 | 105.03 | 145 | 556 | ||||||||||||||||||||||||
2022 | 9,625,758 | 12,914,989 | 2,365,901 | 2,675,267 | 152.83 | 120.59 | 180 | 533 | ||||||||||||||||||||||||
2021 | 11,799,233 | 21,770,541 | 1,837,302 | 2,381,444 | 139.05 | 121.21 | 161 | 459 | ||||||||||||||||||||||||
(1) | Our Principal Executive Officer (PEO) for fiscal 2021 and 2022 was James J. Owens and for fiscal 2023 was Celeste B. Mastin. The dollar amounts reported are the amounts of total compensation reported in our "Summary Compensation Table." |
(2) | The dollar amounts reported represent the amount of CAP. The dollar amounts do not reflect the actual amount of compensation earned or realized by or paid to an NEO during the applicable year. In accordance with SEC rules, the following adjustments were made to the PEO's total compensation, as reported in the "Summary Compensation Table," to determine the PEO's CAP: |
Year | Reported Summary Compensation Table Total for PEO ($) | Deduct: Reported Value of Equity Awards ($)(a) | Add: Equity Award Adjustments ($)(b) | Deduct: Change in Actuarial Present Value of Pension Benefits ($)(c) | Add: Pension Benefit Adjustments ($)(c) | Equals: “Compensation Actually Paid” to PEO ($) | ||||||||||||||||||
2023 | 5,050,902 | 3,240,588 | 3,538,621 | - | - | 5,348,935 | ||||||||||||||||||
2022 | 9,625,758 | 5,118,606 | 8,407,837 | - | - | 12,914,989 | ||||||||||||||||||
2021 | 11,799,233 | 7,852,124 | 17,823,432 | - | - | 21,770,541 | ||||||||||||||||||
(a) | The grant date fair value of equity awards represents the total of the amounts reported in the “Stock Awards” and “Option Awards” columns in the "Summary Compensation Table" for the applicable year. |
(b) | The amounts (deducted) or added in calculating the equity award adjustments are set forth in the following table. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. |
(c) | No NEOs participate in the H.B. Fuller Legacy Pension Plan. |
H. B. FULLER | 2024 Proxy Statement 58
Year | Add: Year End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year ($) | Add: Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years ($) | Add: Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year ($) | Add: Change in Fair Value from Prior Year End of Equity Awards Granted in Prior Years that Vested in the Year ($) | Deduct: Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year ($) | Add: Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value ($) | Equals: Total Equity Award Adjustments ($) | |||||||||||||||||||||
2023 | 3,754,816 | (99,113 | ) | - | (117,081 | ) | - | - | 3,538,621 | |||||||||||||||||||
2022 | 6,101,567 | 2,659,513 | - | (353,243 | ) | - | - | 8,407,837 | ||||||||||||||||||||
2021 | 14,246,777 | 3,854,019 | - | (277,364 | ) | - | - | 17,823,432 | ||||||||||||||||||||
(3) | The dollar amounts reported represent the average of the amounts reported for the Company’s named executive officers (NEOs) as a group (excluding our President and CEO) in the “Total” column of the "Summary Compensation Table" in each applicable year. These NEOs included for purposes of calculating the average amounts in each applicable year are as follows: (i) for fiscal 2023, Mr. Cai, Mr. Corkrean, Mr. East, and Ms. Jensen; (ii) for fiscal 2022, Mr. Cai, Heather Campe, our Senior Vice President, International Growth, Mr. Corkrean, and Ms. Mastin; and (iii) for fiscal 2021, Mr. Cai, Theodore M. Clark, our former Executive Vice President and Chief Operating Officer, Mr. Corkrean, M. Shahbaz Malik, our Senior Vice President, Construction Adhesives, and Andrew E. Tometich, our former Executive Vice President, Hygiene, Health and Consumable Adhesives. |
(4) | The dollar amounts reported represent the average amount of CAP to the NEOs as a group (excluding our President and CEO). The dollar amounts do not reflect the actual average amount of compensation earned by or paid to these NEOs as a group during the applicable year. In accordance with the SEC rules, the following adjustments were made to average total compensation, as reported in the "Summary Compensation Table," for these NEOs to determine their average CAP, using the same methodology described above in Note 2: |
Year | Average Reported Summary Compensation Table Total for Non-PEO NEOs ($) | Deduct: Average Reported Value of Equity Awards($)(a) | Add: Average Equity Award Adjustments($)(b) | Deduct: Average Change in Actuarial Present Value of Pension Benefits ($)(c) | Add: Average Pension Benefit Adjustments ($)(c) | Equals: Average “Compensation Actually Paid” to Non-PEO NEOs ($) | ||||||||||||||||||
2023 | 1,733,524 | 814,172 | 622,294 | - | - | 1,541,646 | ||||||||||||||||||
2022 | 2,365,901 | 781,698 | 1,091,064 | - | - | 2,675,267 | ||||||||||||||||||
2021 | 1,837,302 | 810,273 | 1,354,415 | - | - | 2,381,444 | ||||||||||||||||||
(a) | The grant date fair value of equity awards represents the total of the amounts reported in the “Stock Awards” and “Option Awards” columns in the "Summary Compensation Table" for the applicable year. |
(b) | The amounts deducted or added in calculating the equity award adjustments are set forth in the following table. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. |
(c) | No NEOs participate in the H.B. Fuller Legacy Pension Plan. |
Year | Add: Average Year End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year ($) | Add: Average Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years ($) | Add: Average Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year ($) | Add: Average Change in Fair Value from Prior Year End of Equity Awards Granted in Prior Years that Vested in the Year ($) | Deduct: Average Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year ($) | Add: Average Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value ($) | Equals: Average Total Equity Award Adjustments ($) | |||||||||||||||||||||
2023 | 932,268 | (87,160 | ) | 6,552 | (229,366 | ) | - | - | 622,294 | |||||||||||||||||||
2022 | 952,615 | 188,553 | 8,304 | (39,896 | ) | (18,512 | ) | - | 1,091,064 | |||||||||||||||||||
2021 | 1,115,084 | 394,490 | 5,412 | (25,366 | ) | (135,205 | ) | - | 1,354,415 | |||||||||||||||||||
(5) | Cumulative TSR is based on a fixed investment of $100 in the Company's common stock measured from the beginning of the measurement period (November 27, 2020) through and including the end of each applicable fiscal year. Return includes (a) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (b) the difference between the Company's share price at the end of each applicable year and the beginning of the measurement period. |
(6) | Represents the peer group cumulative TSR, weighted according to the respective companies’ stock market capitalization at the beginning of each measurement period for which a return is indicated. The peer group used for this purpose is the Dow Jones U.S. Specialty Chemicals Index. |
H. B. FULLER | 2024 Proxy Statement 59
(7) | The dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the applicable year. |
(8) | The Compensation Committee has selected Adjusted EBITDA as the Company-Selected Measure representing the most important financial measure used to link CAP to the NEOs in fiscal 2023 to Company performance. Adjusted EBITDA is, along with Adjusted Net Revenue, the most heavily-weighted metric of our STIP metrics, and under our pay-for-performance approach the STIP represents a significant portion of the NEOs’ compensation. Adjusted EBITDA is a non-U.S. GAAP financial measure defined in "Fiscal 2023 Short-Term Incentive Compensation." See “Annex A” for information concerning this measure including a reconciliation to the most comparable U.S. GAAP financial measure. |
Description of Certain Relationships
The graphs below compare the CAP to our President and CEO and the average of the CAP to our other NEOs, with (i) our cumulative TSR, (ii) our net income, and (iii) our Adjusted EBITDA, in each case for our 2021, 2022, and 2023 fiscal years. The graphs below also compare our cumulative TSR and our peer group cumulative TSR for our 2021, 2022, and 2023 fiscal years. TSR amounts assume $100 invested on November 27, 2020 and reinvestment of dividends.
H. B. FULLER | 2024 Proxy Statement 60
Financial Performance Measures
The most important financial performance measures used by the Company to link CAP to the Company’s NEOs in fiscal 2023 to the Company’s performance are listed below. These metrics are further described in “Key Elements of Executive Compensation Program.”
● | Adjusted EBITDA | |
● | Adjusted EPS | |
● | Adjusted Net Revenue | |
● | ROIC |
H. B. FULLER | 2024 Proxy Statement 61
PROPOSAL 2—3—NON-BINDING ADVISORY
VOTE ON EXECUTIVE COMPENSATION
Pursuant to Section 14A of the Exchange Act, the Company is providing shareholders with an advisory (non-binding) vote on the compensation of our NEOs as disclosed in the “Compensation Discussion and Analysis”, section, 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 NEOs 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:factors:
● | 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 |
● |
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Effective for LTIP awards granted in |
● | Company best practices include: |
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• | Policies for responsible share usage and governance of our equity compensation plans, including a prohibition on |
• |
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• | Stock ownership goals of five times base salary for our CEO, three times base salary for our CFO, and two times base salary for our other executive |
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” section, 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 Board. However, the Board will take into accountconsider the result of the vote when determining future executive compensation arrangements. The Company currently conducts annual advisory votes on executive compensation.
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.
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 REPORTH. B. FULLER | 2024 Proxy Statement 62
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 registered public accounting firm. In the exercise of that authority, we, the members of the Audit Committee, determined to engage Ernst & Young LLP to serve as H.B. Fuller’s independent registered public accounting firm for the year ending November 27, 2021.
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.
Ernst & Young LLP, as H.B. Fuller’s independent registered public accounting firm for fiscal year 2020, was responsible for performing an independent audit of the consolidated financial statements and the company’s internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) and issuing reports.
We have reviewed and discussed the audited consolidated financial statements with management and Ernst & Young LLP. We have also discussed with Ernst & Young LLP the matters required to be discussed pursuant to applicable requirements of the Public Company Accounting Oversight Board and the SEC, and they have discussed with us their independence and provided to us the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence.
Based upon our review and discussions 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 November 28, 2020 filed with the SEC.
Audit Committee of the Board of Directors of H.B. Fuller Company
QUESTIONS AND ANSWERS ABOUT THE MEETING
FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMQUESTIONS AND ANSWERS
ABOUT THE MEETING
What is the purpose of the meeting?
The following table presents fees for professional services provided by Ernst & Young LLP for fiscal year 2020 and KPMG LLP for fiscal year 2019 forAt our Annual Meeting, shareholders will act upon the audit, audit-related, tax and all other services rendered to us and our affiliates.
2020 | 2019 | ||||||
Audit Fees | $2,811,857 | $3,492,000 | |||||
Audit-Related Fees | -0- | -0- | |||||
Tax Fees | $885,000 | 837,000 |
Audit Fees: Audit fees includes fees and expenses billed and to be billed for (i)matters disclosed in the auditNotice of Annual Meeting of Shareholders that accompanies this Proxy Statement. These matters include the election of three directors, the ratification of the consolidated financial statements included in our annual report on Form 10-K, (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, and (v) consultations concerning financial accounting and reporting. Audit fees also include fees for reviews of documents filed with the SEC.
Audit-Related Fees: Audit-related fees include fees and expenses for services related to registration statements.
Tax Fees: 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 registered public accounting firm. We have a policy of avoiding the engagementappointment of our independent registered public accounting firm, except for audit, audit-related and tax planninga non-binding advisory vote to approve the compensation of our named executive officers as disclosed in this Proxy Statement (the “Say on Pay Proposal”).
How can I attend the virtual meeting and compliance services. The Audit Committee has delegated to one or morevote my shares during the meeting?
If you are a shareholder of its members pre-approval authority with respect to permitted services,record, you may attend the meeting and receives a regular report from management on all such services provided to usvote your shares electronically during the virtual meeting by our independent registered public accounting firm. Allvisiting www.virtualshareholdermeeting.com/FUL2024. You will need the services provided by our independent registered public accounting firm16-digit control number that is printed in fiscal years 2020 and 2019 were pre-approvedthe box marked by the Audit Committee underarrow on your Notice Regarding the Availability of Proxy Materials to enter the Annual Meeting. We recommend that you log in at least 15 minutes before the meeting to ensure that you are logged in when the meeting starts. However, even if you currently plan to attend the virtual 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 virtual meeting.
If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the Virtual Shareholder Meeting log in page. The virtual meeting website will also present an option for you to attend the Annual Meeting as a guest without logging in, but guests will not be able to vote during the Annual Meeting.
If you are a participant in the 401(k) Plan, you may submit a proxy vote as described above, but you may not vote your 401(k) Plan shares during the virtual meeting.
How will management respond to questions during the virtual meeting?
The Company has held its pre-approval procedures.Annual Meeting of Shareholders as a virtual meeting webcast via the Internet since 2016. While our Annual Meeting is just one of the forums where we engage with shareholders, it is an important one. The Board believes that holding the Annual Meeting in a virtual format provides the opportunity for participation by a broader group of shareholders, while reducing the costs and environmental impact associated with planning, holding, and arranging logistics for an in-person meeting. We welcome your suggestions on how we can improve our virtual meeting and make it more effective and efficient.
Management will respond to questions from shareholders in the same way as it would if the Company held an in-person meeting. Shareholders who wish to submit a question to the Company for the meeting may do so in advance at www.proxyvote.com and live during the meeting at www.virtualshareholdermeeting.com/FUL2024. You will need the 16-digit control number that is printed in the box marked by the arrow on your Notice Regarding the Availability of Proxy Materials to enter the Annual Meeting. We recommend that you log in at least 15 minutes before the meeting to ensure that you are logged in when the meeting starts.
We intend that the virtual meeting format provide shareholders a level of participation and transparency as close as possible to the traditional in-person meeting format, and we take the following steps to ensure such an experience:
● | providing shareholders with the ability to submit appropriate questions in advance of the meeting to ensure thoughtful responses from management and the Board; |
● | providing shareholders with the ability to submit appropriate questions real-time, limiting questions to one per shareholder unless time otherwise permits; |
H. B. FULLER | 2024 Proxy Statement 63
QUESTIONS AND ANSWERS ABOUT THE MEETING
● | answering as many questions as possible in the time allotted for the meeting (the question-and-answer session will be limited to 15 minutes), without discrimination, if the questions are submitted in accordance with the meeting rules of conduct (for example, the Company does not intend to answer questions that are irrelevant to the business of the Company or to the business of the Annual Meeting); |
● | if there are appropriate questions that we cannot answer during the meeting, we will post the questions and answers thereto on www.hbfuller.com in the Investor Relations area of our website; and |
● | offering separate engagement opportunities with shareholders on appropriate matters of governance or other relevant topics as outlined under the “Communications with Directors” section on page 19 in this Proxy Statement. |
PROPOSAL 3—RATIFICATION OF APPOINTMENT OF INDEPENDENTHow does the Board recommend that I vote?
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointedBoard of Directors recommends a vote “FOR” each of the nominees for director, “FOR” the ratification of the appointment of Ernst & Young LLP (“EY”), as our independent registered public accounting firm for the fiscal year ending November 27, 2021. While we30, 2024, and “FOR” the Say on Pay Proposal.
Who is entitled to vote at the meeting?
If you were a shareholder of record at the close of business on February 14, 2024, you are notentitled to vote at the meeting.
As of the record date, 54,435,548 shares of common stock of the Company were outstanding and eligible to vote.
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, you are considered the beneficial owner of those shares, and your shares are held in street name.
What are the voting rights of the shareholders?
Holders of common stock are entitled to one vote per share. Therefore, a total of 54,435,548 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 logs in to the virtual meeting and votes at the meeting or if the shareholder has properly submitted a proxy by mail, telephone, or Internet.
How do I vote my shares?
You may give a proxy to be voted at the meeting either:
● | by Internet or telephone, by following the 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 Internet, mail, or telephone as instructed on the proxy card, or if you hold shares beneficially in street name, the voting instruction card provided to you by your broker, bank, trustee, or nominee. |
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. You may also vote at the virtual meeting as described in “How can I attend thevirtual meeting and vote my shares during the meeting?” above.
H. B. FULLER | 2024 Proxy Statement 64
QUESTIONS AND ANSWERS ABOUT THE MEETING
If you hold any shares of common stock in the 401(k) Plan, you are being provided access to the same proxy materials as any other shareholder of record. However, your proxy vote will serve as voting instructions to the plan trustee. The shares held in the 401(k) Plan will be voted by the applicable plan trustee.
What does it mean if I receive more than one Notice of Internet Availability of Proxy Materials, proxy card or voting instruction card?
It means you hold shares of common stock in more than one account. To ensure that all 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.
What vote is required for the proposals to do so, H.B. Fullerbe approved?
Each director is submittingelected by a plurality of the appointmentvotes cast, meaning that the three nominees receiving the most votes will be elected. However, in an uncontested election, if a nominee for director receives a greater number of Ernst & Young LLPvotes “WITHHELD" from his or her election than votes “FOR” such election, the director shall submit to the Board a letter of resignation for consideration. See the heading “Director Elections” in the “Corporate Governance” section of this Proxy Statement for more information. With respect to the ratification in order to ascertainof the views of our shareholders. If shareholders do not ratify the Audit Committee’s appointment of Ernst & Young LLP as our independent registered public accounting firm and the Audit Committee intendsSay On Pay Proposal, the affirmative vote of a majority of the shares of common stock represented and entitled to reconsidervote on each proposal is required, provided that appointment. However, the Audit Committee retains sole responsibilitytotal number of shares of common stock that vote in favor of the proposal represents more than 25% of the shares outstanding on the record date.
How are votes counted?
Shareholders may either vote “FOR” or “WITHHOLD” authority to vote for appointingeach nominee for election to the Board. Shareholders may vote “FOR,” “AGAINST,” or terminating“ABSTAIN” on the ratification of the appointment of Ernst & Young LLP and the 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 any 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 withholding of authority to vote will have no effect on the election of any director from whom votes are withheld, unless the director receives a greater number of votes “WITHHELD” from his or her election than votes “FOR” such election, in which case the director shall submit to the Board a letter of resignation for consideration. See the heading “Director Elections” in the “Corporate Governance” section of this Proxy Statement for more information.
If you hold your shares in street name and do not provide voting instructions to your broker or nominee, your shares will be considered to be “broker non-votes” and will not be voted on any proposal on which your broker or nominee does not have discretionary authority to vote under the rules of the NYSE. Shares that constitute broker non-votes will be present at the meeting for the purpose of determining a quorum but are not considered entitled to vote on the proposal in question. Your broker or nominee has discretionary authority to vote your shares on the ratification of Ernst & Young as our independent registered public accounting firm.firm even if your broker or nominee does not receive voting instructions from you. Your broker or nominee may not vote your shares on the election of directors or the Say on Pay Proposal unless it receives voting instructions from you. Broker non-votes will generally have no effect in determining whether any proposals to be voted on at the meeting are approved.
The Audit Committee conducted a competitive process to determine the Company’s independent registered public accounting firm for the Company’s fiscal year ending November 28, 2020. The Company invited several independent registered public accounting firms to participate in this process.What if I do not specify how I want my shares voted?
Following review of proposals fromIf you do not specify on your returned proxy card or voting instruction card (or when giving your proxy by telephone or via the independent registered public accounting firms that participated in the process, on April 23, 2019, the Audit Committee approved the engagement of EY as the Company’s independent registered public accounting firm for the Company’s fiscal year ending November 28, 2020, subjectInternet) how you want to completion of EY’s standard client acceptance procedures and execution of an engagement letter. KPMG LLP (“KPMG”), the Company’s former independent registered public accounting firm, was dismissed upon the completion of its engagement for the fiscal year ended November 30, 2019.vote your shares, we will vote them:
● | FOR all the nominees for director; |
● | FOR the ratification of the appointment of Ernst & Young as our independent registered public accounting firm for fiscal year ending November 30, 2024; |
● | FOR the Say on Pay Proposal; 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. |
H. B. FULLER | 2024 Proxy Statement 65
KPMG’s reportsQUESTIONS AND ANSWERS ABOUT THE MEETING
Can I change my vote?
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 virtual 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 later to our Corporate Secretary; |
● | by submitting another proxy by telephone or via the Internet later; or |
● | by voting electronically at the virtual 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 engaged Alliance Advisors, LLC to assist in the solicitation of proxies and to provide related advice and informational support, for a services fee and the reimbursement of customary disbursements which are not expected to exceed $26,000 in total.
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 SEC, we may furnish proxy materials to our shareholders by providing access to these documents on the Company’s consolidated financial statementsInternet instead of mailing printed copies. In general, you will not receive printed copies of the materials unless you request them. 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 ofto how you may access and forreview all the fiscal years ended December 1, 2018 and November 30, 2019 did not contain any adverse opinion or disclaimer of opinion. KPMG’s reportproxy materials on the Company’s consolidated financial statements asInternet. The Notice of and forInternet Availability of Proxy Materials explains how to submit your proxy over the fiscal year ended December 1, 2018 containedInternet or by telephone. If you would like to receive a paragraph indicatingpaper copy or e-mail copy of the Company decided to change its methodproxy materials, please follow the instructions provided in the Notice of accounting for inventory in 2018.Internet Availability of Proxy Materials.
DuringAre the fiscal years ended December 1, 2018proxy and November 30, 2019, and the subsequent interim period through January 24, 2020, the effective date of KPMG’s dismissal, there were: (i) no disagreements within the meaning of Item 304(a)(1)(iv) of Regulation of S-K and the related instructions between the Company and KPMG on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to KPMG’s satisfaction, would have caused KPMG to make reference thereto in their reports; and (ii) no “reportable events” within the meaning of Item 304(a)(1)(v) of Regulation S-K.materials available electronically?
The Company requested KPMG furnish a letter addressed to the SEC stating whether or not it agrees with the above statements. A copy of KPMG’s letter, dated January 27, 2020, is filed as Exhibit 16.1 to theYes. Our Proxy Statement and 2023 Annual Report, including our Annual Report on Form 8-K/A dated April 23, 2019.10-K, are available at www.proxyvote.com.
Representatives of EY willWill any other business be considered at the meeting?
Our Bylaws provide that a shareholder may present a proposal at the Annual Meeting and will havethat is not included in this Proxy Statement only if proper written notice was received by us. No shareholder has given the opportunitytimely notice required by our Bylaws to makepresent a statement if they desireproposal at the Annual Meeting. The Board does not intend to present any other matters for a vote at the Annual Meeting. If you wish to present a proposal at the 2025 Annual Meeting, please see “How can a shareholder present a proposal at the 2025 Annual Meeting?” As of the date of this Proxy Statement, we do so andnot know of any other business to respond to appropriate questions from shareholders.be presented for consideration at the Annual Meeting.
The Board of Directors recommendsHow can a vote FOR ratification ofshareholder present a proposal at the appointment of Ernst & Young LLP.2025 Annual Meeting?
PROPOSAL 4—APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE H.B. FULLER
COMPANY2020 MASTER INCENTIVE PLAN TO INCREASE SHARES AND
ADOPT CERTAIN OTHER AMENDMENTSFor a shareholder proposal to be considered for inclusion in our Proxy Statement for the 2025 Annual Meeting, the written proposal must be received at our principal executive offices by the close of business on October 31, 2024. The proposal must comply with SEC rules regarding the inclusion of shareholder proposals in company-sponsored proxy materials.
We are asking our shareholders to approve the Amended and Restated H.B. Fuller Company Master Incentive Plan (the “Amended and Restated 2020 Incentive Plan”) for three reasons:
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On January 21, 2021, our Board of Directors adopted, upon recommendation of our Compensation Committee and subject to shareholder approval, the Amended and Restated 2020 Incentive Plan. All capitalized terms not otherwise defined in this proposal have the meanings assigned to them in the Amended and Restated 2020 Incentive Plan, which is attached as Annex B to this proxy statement.
Long-term equity compensation plays an important part in the Company’s pay-for-performance philosophy. Our compensation program emphasizes stock-based compensation, encouraging our executive officers and other employees and non-employee directors to think and act as long-term shareholders.H. B. FULLER | 2024 Proxy Statement 66
QUESTIONS AND ANSWERS ABOUT THE MEETING
If a shareholder wishes to present a proposal or to nominate a director at the 2025 Annual Meeting that would not be included in our Proxy Statement for such meeting, the shareholder must provide notice to us no later than the close of business on January 13, 2025 and no earlier than the close of business on December 12, 2024. The purposeproposal or nomination must comply with the requirements set forth in our Bylaws. In addition, notice of a nomination must comply with the additional requirements of Rule 14a-19(b) of the Amended and Restated 2020 Incentive Plan is to promoteExchange Act. Please contact the interestsCorporate Secretary for a description of the Company and our shareholders by aiding us in attracting and retaining employees, officers, consultants, independent contractors and non-employee directors capable of assuring the future successsteps to be taken to present such a proposal or to nominate a director.
How can a shareholder get a copy of the Company to provide such persons with opportunities for stock ownership’s 2023 Annual Report on Form 10-K?
If you receive a printed copy of the proxy materials in the Company and to offer such persons other incentives to put forth maximum effortsmail, our 2023 Annual Report, including our Annual Report on Form 10-K for the successyear ended December 2, 2023, accompanies this Proxy Statement. The 2023 Annual Report, including our Annual Report on Form 10-K, is also available via the internet in the “Financials” section of our Investor Relations page of our website (www.hbfuller.com). If requested, we will provide you a paper copy of the Company’s business. The Amended2023 Annual Report, including our Annual Report on Form 10-K without charge. We will also provide you with copies of any exhibits to the Form 10-K, upon written request and Restated 2020 Incentive Plan will allow usupon payment of a fee covering our reasonable expenses in furnishing the exhibits. You can request a paper copy of the 2023 Annual Report, or paper copies of exhibits to provide such persons an opportunitythe Form 10-K by writing to acquire a proprietary interest in the Corporate Secretary, H.B. Fuller Company, and alignP.O. Box 64683, St. Paul, Minnesota 55164-0683.
How do I contact the interests of such persons with our shareholders.Corporate Secretary?
The Amended and Restated 2020 Incentive PlanCorporate Secretary is an omnibus equity incentive plan that allowsGregory O. Ogunsanya. The mailing address is the Company to grant stock options, stock appreciation rights, restricted stock and restricted stock units, dividend equivalents and other stock-based awards to employees, officers, consultants, independent contractors and non-employee directors. The total numberOffice of shares of common stock that may be issued under all stock-based awards under the Amended and Restated 2020 Incentive Plan will be 2,500,000 shares. Of these authorized shares, an aggregate of 1,000,000 shares may be issued pursuant to awards other than stock options or stock appreciation rights (e.g., restricted stock and restricted stock units) (“Full Value Awards”). In addition, shares subject to any outstanding award under our prior incentive plans that, after April 8, 2021, are not purchased or are forfeited or reacquired by the Company, or otherwise not delivered to the participant due to termination or cancellation of such award, will be available for reissuance under the Amended and Restated 2020 Incentive Plan. For more information on shares outstanding under our prior incentive plans, please see the table on page 76.Corporate Secretary, P.O. Box 64683, St. Paul, Minnesota 55164-0683.
Reasons for Amending the 2020 Incentive Plan
The Amended and Restated 2020 Incentive Plan would increase the total number of shares of common stock authorized for issuance under the 2020 Incentive Plan, from 1,600,000 shares, of which a maximum of 600,000 shares may be issued in the form of Full Value Awards, to 2,500,000 shares, of which a maximum of 1,000,000 shares may be issued in the form of Full Value Awards.
We currently make awards of stock options, restricted stock units and dividend equivalents to executive officers and other employees under our H.B. Fuller Company 2020 Master Incentive Plan (the “2020 Incentive Plan”). As of February 5, 2021, we have 1,294,070 shares available under the 2020 Incentive Plan, of which a maximum of 189,091 shares may be issued in the form of Full Value Awards. We are asking our shareholders to approve the Amended and Restated 2020 Incentive Plan so that the Company will have an adequate number of shares authorized to make appropriate levels of stock incentive awards to officers, other employees and non-employee directors in 2021 and beyond. The Compensation Committee does not believe a sufficient number of shares of common stock remain available for issuance under the 2020 Incentive Plan for equity awards the Compensation Committee anticipates granting prior to our 2022 Annual Meeting of Shareholders. Therefore, the Company is proposing to amend and restate the 2020 Incentive Plan to increase the total number of shares of common stock authorized for issuance. Consistent with the 2020 Incentive Plan, under the Amended and Restated 2020 Incentive Plan, equity awards will be made both to executive officers and other employees and to non-employee directors.H. B. FULLER | 2024 Proxy Statement 67
Our Board of Directors believes that the continuation of the Company’s stock-based compensation program is essential in attracting, retaining and motivating highly qualified executive officers and other employees and non-employee directors to enhance the success of the Company. As discussed above in the “Compensation Discussion and Analysis” under the caption “Fiscal 2020 Long-Term Incentive Compensation,” awards of stock options and restricted stock units (including performance-based restricted stock units) to executive officers and other employees are an essential part of this program. Unless the Amended and Restated 2020 Incentive Plan is adopted, the Board of Directors has concluded that the Company will need to curtail grants of stock incentive awards to executive officers, other employees and non-employee directors. The Board of Directors believes this result will have a significantly negative impact on the Company’s compensation program and objectives. Accordingly, the Board of Directors recommends approval of the Amended and Restated 2020 Incentive Plan in order to allow the Company to have the ability to continue to grant stock options, performance-based restricted stock units (“PSUs”) and restricted stock units (“RSUs”) to executive officers and other employees and restricted stock and RSUs to non-employee directors at competitive levels.
Since the 2020 Incentive Plan was approved by our shareholders on April 2, 2020, no additional awards have been or will be granted under the 2018 Incentive Plan or any predecessor plan (although all outstanding awards previously granted under previous stock incentive plans will remain outstanding and subject to the terms of these plans), and shares subject to any outstanding awards under these prior plans that are forfeited, cancelled or reacquired by the Company (including if an award otherwise terminates or is cancelled without delivery of any shares) have been and will become available for re-issuance under the 2020 Incentive Plan.
If the Amended and Restated 2020 Incentive Plan is not approved by shareholders, we will continue to use the 2020 Incentive Plan in its original form as the framework for our equity incentive compensation program. However, if the authorized shares are depleted prior to its expiration date, we would not be able to continue to offer a long-term incentive program that employs equity awards, which could put us at a competitive disadvantage in recruiting and retaining talent, and also make it more difficult for us to align employee interests with those of our shareholders through a program that includes stock ownership.
Key Features of the Amended and Restated 2020Incentive Plan
The Amended and Restated 2020 Incentive Plan contains a more comprehensive annual limit on both cash-based and equity compensation to non-employee directors than the existing limit on equity awards contained in the 2020 Incentive Plan.
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Consistent with the 2020 Incentive Plan, the following features of the Amended and Restated 2020 Incentive Plan reflect additional equity incentive plan “best practices” intended to protect the interests of our shareholders:
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Determination of Increase in the Number of Shares for the Amended and Restated 2020Incentive Plan
The Company has a history of conservative and disciplined share usage. In setting the proposed increase in the number of shares issuable under the Amended and Restated 2020 Incentive Plan, our Compensation Committee and Board considered the Company’s historical equity compensation practices (including the total number of shares underlying existing equity awards, the Company’s three-year average share usage and dilution). The Compensation Committee and the Board of Directors also considered these factors in assessing the number of shares likely to be needed for future grants.
The Amended and Restated 2020 Incentive Plan does not set the number of shares subject to equity awards that will be granted in future years. In setting each year’s award amounts for executive officers, the Compensation Committee considers the following: the relative market position of the awards and the total compensation for each executive, the proportion of each executive’s total compensation to be delivered as a long-term incentive award, internal pay equity, executive performance and changes in responsibility, retention concerns, and corporate performance. Similar considerations are taken into account in granting awards to participants who are not executive officers. Equity awards to non-employee directors have historically been granted at levels intended to be competitive, taking into account current market conditions.
Number of Outstanding Awards Under All Plans: As of February 5, 2021, there were 5,687,033 outstanding stock options, which had a weighted average exercise price of $46.98 and a weighted average remaining contractual life of 7.09 years, and there were 526,949 RSU (including PSU awards) awards outstanding.
Burn Rate.Burn rate is a measure of the speed at which companies use shares available for grant under their equity compensation plans. Burn rate is defined as, in a given fiscal year, the number of shares subject to time-based equity awards granted and performance-based equity awards earned and vested, divided by the weighted average number of shares outstanding. In setting and recommending to our shareholders the increase in the number of shares to be authorized under the Amended and Restated 2020 Incentive Plan, the Compensation Committee and the Board of Directors considered H.B. Fuller’s burn rate for each of the past three fiscal years. The calculation of our burn rate is shown in the table below:
2020 | 2019 | 2018 | ||||||||||
Weighted Average Shares of Common Stock Outstanding | 52,039,000 | 50,920,000 | 50,591,000 | |||||||||
Time-Based Stock Options Granted | 1,052,968 | 1,020,246 | 706,183 | |||||||||
Performance-Based Stock Options Granted | 0 | 0 | 112,354 | |||||||||
Performance-Based Stock Options Earned and Vested1 | 3,531 | 13,863 | 13,863 | |||||||||
Time-Based Full Value Awards Granted | 138,228 | 228,535 | 102,928 | |||||||||
Performance-Based Full Value Awards Granted | 102,479 | 98,434 | 83,793 | |||||||||
Performance-Based Full Value Awards Earned and Vested1 | 61,949 | 76,645 | 80,128 | |||||||||
Time-Based Awards + Performance-Based Awards Earned and Vested | 1,256,676 | 1,339,289 | 903,102 | |||||||||
Burn Rate | 2.41 | % | 2.63 | % | 1.79 | % |
(1) For purposes of calculating the burn rate, shares subject to performance-based stock options ("PSOs") and PSUs are counted only to the extent shares issuable thereunder have vested, and such PSOs and PSUs are included in the year in which such vesting occurred.
Based on the burn rates in fiscal years 2020, 2019 and 2018, our three-year average burn rate was 2.28%.
Overhang.Total potential dilution, or overhang, is a common measure to assess the dilutive impact of equity plans. Total potential dilution is equal to (i) the number of shares available to be granted as future equity awards plus the number of shares subject to outstanding equity awards, divided by (ii) such total number of shares plus the total number of shares outstanding. Total potential dilution, prior to and after shareholder approval of the increase in shares under the Amended and Restated 2020 Incentive Plan, is shown in the table below:
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(1) As of February 5, 2021.
(2) This amount does not include 266,255 deferred phantom stock units contributed by employees and non-employee directors pursuant to the Key Employee Deferred Compensation Plan ("KEDCP") and the Director Deferred Compensation Plan ("DDCP"). It does include 239,856 deferred phantom stock units comprised of matching contributions by the Company pursuant to the KEDCP and DDCP and annual grants to non-employee directors.
(3) Calculated as (Remaining Reserve + Granted Shares Outstanding), divided by (Remaining Reserve + Granted Shares Outstanding + CSO).
(4) Calculated as (Remaining Reserve + Granted Shares Outstanding + requested Share increase in 2021), divided by (Remaining Reserve + Granted Shares Outstanding + requested Share increase in 2021 + CSO).
Summary of Material Terms of the Amended and Restated 2020Incentive Plan
The following summary of the material terms of the Amended and Restated 2020 Incentive Plan is qualified in its entirety by reference to the full text of the Amended and Restated 2020 Incentive Plan, which is attached as Annex B to this Proxy Statement.
Administration
The Compensation Committee will administer the Amended and Restated 2020 Incentive Plan and will have full power and authority to determine when and to whom awards will be granted, and the type, amount, form of payment and other terms and conditions of each award, consistent with the provisions of the Amended and Restated 2020 Incentive Plan. In addition, the Compensation Committee can specify whether, and under what circumstances, awards to be received under the Amended and Restated 2020 Incentive Plan or amounts payable under such awards may be deferred automatically or at the election of either the holder of the award or the Compensation Committee. Also, the Compensation Committee can specify the manner in which the Awards are paid out under the Amended and Restated 2020 Incentive Plan. Subject to the provisions of the Amended and Restated 2020 Incentive Plan, the Compensation Committee may amend or waive the terms and conditions, or accelerate the exercisability, of an outstanding award. The Compensation Committee has authority to interpret the Amended and Restated 2020 Incentive Plan and establish rules and regulations for the administration of the Amended and Restated 2020 Incentive Plan.
The Compensation Committee may delegate to one or more officers or directors of the Company the authority to grant awards under the Amended and Restated 2020 Incentive Plan, except that the Compensation Committee may not delegate such authority with regard to grants to executive officers who are subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or in a way that would violate applicable rules of the Exchange Act or applicable corporate law.
The Board may also exercise the powers of the Compensation Committee at any time, so long as its actions would not violate Rule 16b-3. Only the Compensation Committee (or another committee of the Board comprised of independent directors) may grant awards to non-employee directors.
No member of the Board or the Compensation Committee or any person to whom the Compensation Committee delegates authority under the Amended and Restated 2020 Incentive Plan will be liable for any action or determination taken and made in good faith with respect to the Amended and Restated 2020 Incentive Plan or any award granted under the Amended and Restated 2020 Incentive Plan. Members of the Board and the Compensation Committee and each person to whom the Compensation Committee delegates authority under the Amended and Restated 2020 Incentive Plan will be entitled to indemnification with regard to such actions and determinations.
Shares Available for Awards and Limits on Awards
The aggregate number of shares of our common stock that may be issued under all stock-based awards made under the Amended and Restated 2020 Incentive Plan will be 2,500,000. Of that number, a maximum of 1,000,000 shares are available for “Full Value Awards,” or awards other than options, stock appreciation rights and other awards the value of which is based solely on an increase in the value of the shares underlying such award after the date of grant. Shares of Common Stock that are issued under awards granted in substitution for awards previously granted by an entity that is acquired by or merged with us or one of our affiliates will not be counted against the aggregate number of shares of Common Stock available for awards under the Amended and Restated 2020 Incentive Plan. The Compensation Committee will not grant incentive stock options in which the aggregate fair market value of the shares with respect to which such options are exercisable for the first time by any participant during any calendar year exceeds $100,000. In addition, the maximum value of all equity and cash-based compensation granted to a non-employee director cannot exceed $500,000 in any calendar year (and for this purpose equity value is determined using grant date value under applicable financial accounting rules). The independent, non-employee members of the Board may make exceptions to this limit for a non-executive chair of the Board, provided that he or she may not participate in the decision. Furthermore, no eligible person who is an employee, officer, consultant, independent contractor, or advisor may be granted any award or awards for more than 750,000 shares in the aggregate in any calendar year.
The Compensation Committee will adjust the number of shares and share limits described above in the case of a dividend or other distribution, stock split, reverse stock split, merger or other similar corporate transaction or event that affects shares of our common stock, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be provided under the Amended and Restated 2020 Incentive Plan.
Eligible Participants
Any employee, officer, non-employee director, consultant, independent contractor or advisor providing services to us or any of our affiliates, or any person to whom an offer of employment or engagement with us or any of our affiliates has been made, is eligible to receive an award under the Amended and Restated 2020 Incentive Plan. Subject to the Amended and Restated 2020 Incentive Plan, the Compensation Committee will have full authority to designate which eligible persons will be granted an award. As of February 10, 2021, the record date for our 2020 Annual Meeting of Shareholders, approximately 6,412 executive officers and other employees and all 10 non-employee directors would have been eligible to be selected by the Compensation Committee to receive awards under the Amended and Restated 2020 Incentive Plan. In fiscal year 2020, we granted awards to approximately 405 executive officers and other employees and all of our non-employee directors who were directors during fiscal year 2020.
Types of Awards and Terms and Conditions
The Amended and Restated 2020 Incentive Plan permits the granting of:
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Awards may be granted alone, in addition to, in combination with or in substitution for, any other award granted under the Amended and Restated 2020 Incentive Plan or any other compensation plan. Awards can be granted for no cash consideration or for any cash or other consideration as may be determined by the Compensation Committee or as required by applicable law. Awards may provide that upon the grant or exercise thereof, the holder will receive cash, shares of Common Stock, other securities (but excluding promissory notes), other awards or other property, or any combination of these in a single payment, installments or on a deferred basis.
Fair Market Value. Determinations of fair market value under the Amended and Restated 2020 Incentive Plan will be made in accordance with methods and procedures established by the Compensation Committee. Unless otherwise determined by the Compensation Committee, the value of a share of Common Stock as of a given date will be the closing price per share of the Common Stock on the New York Stock Exchange on such date. Awards will be adjusted by the Compensation Committee in the case of a dividend (other than a regular cash dividend) or other distribution, recapitalization, stock split, reverse stock split, merger or other similar corporate transaction or event that affects shares of Common Stock, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be provided under the Amended and Restated 2020 Incentive Plan.
Vesting. The Amended and Restated 2020 Incentive Plan requires at least a one-year minimum vesting period for time-based awards and a performance period of at least one year for performance-based awards, subject to the following limited exceptions: (i) substitute awards granted in connection with awards that are assumed, converted or substituted pursuant to a merger, acquisition or similar transaction; (ii) shares delivered in lieu of fully vested cash awards or any cash incentive compensation, provided that the performance period for such incentive compensation was at least one fiscal year; and (iii) additional awards up to a maximum of 5% of the aggregate number of shares available for issuance under the Amended and Restated 2020 Incentive Plan.
Acceleration. The Compensation Committee may provide for the acceleration of the exercisability of any award or the lapse of any restrictions relating to any award, except that no award agreement may contain a definition of change in control that has the effect of accelerating the exercisability of any award or the lapse of any restrictions relating to any award upon the announcement or shareholder approval (rather than consummation) of any reorganization, merger or consolidation of the Company, or sale or other disposition of all or substantially all of our assets.
Stock Options. The holder of an option will be entitled to purchase a number of shares of Common Stock at a specified exercise price during a specified time period, all as determined by the Compensation Committee. The exercise price per share under any stock option may not be less than the fair market value of the Common Stock on the date of grant of such option, except if such option is granted in substitution for an option previously granted by an entity that is acquired by or merged with us or one of our affiliates. Each stock option will expire no later than ten years from the date of grant. The option exercise price may be payable, at the discretion of the Compensation Committee, in cash, shares of Common Stock, other securities, other awards or other property having a fair market value on the exercise date equal to the exercise price. The Compensation Committee may also permit an option to be exercised by delivering to the participant a number of shares of Common Stock having an aggregate fair market value equal to the excess, if positive, of the fair market value of the shares underlying the option being exercised, on the date of exercise, over the exercise price of the option for such shares (being referred to as a “net exercise”). Stock options vest and become exercisable in accordance with a vesting schedule established by the Compensation Committee. In the case of a grant of an incentive stock option to a participant who, at the time of grant, possesses more than 10% of the combined voting power of all classes of our stock and our affiliates, the exercise price per share may not be less than 110% of the fair market value of the Common Stock on the date of grant, and each such incentive stock option will expire no later than five years from the date of grant. The Company does not currently grant any incentive stock options.
Stock Appreciation Rights. The holder of a stock appreciation right is entitled to receive the excess of the fair market value as of the exercise date of a specified number of shares of the Common Stock over the grant price of the stock appreciation right. The grant price of any stock appreciation right may not be less than the fair market value of the Common Stock on the date of grant of such stock appreciation right, except if such stock appreciation right is granted in substitution for a stock appreciation right previously granted by an entity that is acquired by or merged with us or one of our affiliates. Each stock appreciation right will expire no later than ten years from the date of grant. Stock appreciation rights vest and become exercisable in accordance with a vesting schedule established by the Compensation Committee. The Company does not currently grant any stock appreciation rights.
We would receive no consideration for options or stock appreciation rights granted under the Amended and Restated 2020 Incentive Plan, other than the services rendered by the holder in his or her capacity as employee, officer, non-employee director, consultant, independent contractor or advisor providing services to us or any of our affiliates, or the promise of services from any person to whom an offer of employment or engagement with us or any of our affiliates is made.
Restricted Stock and Restricted Stock Units. The holder of restricted stock will own shares of our common stock subject to restrictions imposed by the Compensation Committee (including, for example, restrictions on the right to transfer, the right to vote the restricted shares or to receive any dividends with respect to the shares) for a specified time period determined by the Compensation Committee. The holder of RSUs will have the right, subject to any restrictions imposed by the Compensation Committee, to receive shares of Common Stock, or a cash payment equal to the fair market value of those shares, at some future date determined by the Compensation Committee. The Company does not currently grant any restricted stock.
Dividend Equivalents. The holder of a dividend equivalent will be entitled to receive payments (in cash, shares of our common stock, other securities, other awards or other property) equivalent to the amount of cash dividends paid by us to the holders of Common Stock, with respect to the number of shares determined by the Compensation Committee. Dividend equivalents will be subject to other terms and conditions determined by the Compensation Committee, but the Compensation Committee may not grant dividend equivalents to a participant in connection with grants of options, stock appreciation rights or other awards the value of which is based is solely on an increase in the value of our common stock after the grant of such award. Dividend equivalent amounts with respect to any share underlying any other award may be accrued but shall not be paid until all conditions or restrictions relating to such share have been satisfied, waived or lapsed.
Other Stock-Based Awards. The Compensation Committee is also authorized to grant other types of awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of Common Stock, subject to terms and conditions determined by the Compensation Committee and the limitations in the Amended and Restated 2020 Incentive Plan. No such other stock-based award can contain a purchase right or an option-like feature.
Counting Shares
If an award entitles the holder to receive or purchase shares of our common stock, the shares covered by such award or to which the award relates will be counted against the aggregate number of shares available for awards under the Amended and Restated 2020 Incentive Plan. Awards that do not entitle the holder to receive or purchase shares, and shares issued under awards granted in substitution for awards previously granted by an entity that is acquired by or merged with us or one of our affiliates, will not be counted against the aggregate number of shares available for awards under the Amended and Restated 2020 Incentive Plan.
In general, if shares covered by an award are not purchased or are forfeited or are reacquired by us, or if an award otherwise terminates or is cancelled without delivery of any shares, then the number of shares counted against the aggregate number of shares available under the Amended and Restated 2020 Incentive Plan with respect to such award, to the extent of any such forfeiture, reacquisition by us, termination or cancellation, will again be available for future awards under the Amended and Restated 2020 Incentive Plan. Notwithstanding the foregoing, shares withheld as payment of the purchase or exercise price of an award or in satisfaction of tax obligations relating to an award, shares covered by a stock-settled stock appreciation right that are not issued in connection with settlement in shares upon exercise, and shares repurchased by us using option exercise proceeds, will not be available again for granting awards under the Amended and Restated 2020 Incentive Plan.
Amendment and Termination
The Amended and Restated 2020 Incentive Plan will terminate on January 21, 2031, unless earlier terminated by the Board. No awards may be made after that date. Unless otherwise expressly provided in an applicable award agreement, any award granted under the Amended and Restated 2020 Incentive Plan prior to expiration may extend beyond the expiration of the Amended and Restated 2020 Incentive Plan through the award’s normal expiration date.
The Board may amend, alter, suspend, discontinue or terminate the Amended and Restated 2020 Incentive Plan at any time, although shareholder approval must be obtained for any amendment to the Amended and Restated 2020 Incentive Plan that would (1) increase the number of shares of Common Stock available for issuance under the Amended and Restated 2020 Incentive Plan, (2) increase the award limits under the Amended and Restated 2020 Incentive Plan, (3) permit repricing of options or stock appreciation rights, (4) increase the maximum term permitted for options or stock appreciation rights under the Amended and Restated 2020 Incentive Plan, (5) permit awards of options or stock appreciation rights at a price less than fair market value (other than as permitted under the Amended and Restated 2020 Incentive Plan), or (6) cause us to be unable to grant incentive stock options under the Amended and Restated 2020 Incentive Plan. Shareholder approval is also required for any action that requires shareholder approval under the rules and regulations of the SEC, the NYSE or any other securities exchange that are applicable to us. The Compensation Committee may amend the Amended and Restated 2020 Incentive Plan, without prior approval of our shareholders, to comply with any changes in tax law impacting the tax deductibility of awards under the Amended and Restated 2020 Incentive Plan to the extent such amendments are for the purpose of maximizing the tax deductibility of awards.
Prohibition on Repricing Awards
Without the approval of our shareholders, the Compensation Committee will not reprice, adjust or amend the exercise price of any option or the grant price of any stock appreciation right previously awarded, whether through amendment, cancellation, repurchase and replacement grant or any other means, except in connection with a dividend (other than a regular cash dividend) or other distribution, stock split, reverse stock split, merger or other similar corporate transaction or event that affects shares of our common stock, in order to prevent dilution or enlargement of the benefits, or potential benefits intended to be provided under the Amended and Restated 2020 Incentive Plan.
Clawback or Recoupment
All awards under the Amended and Restated 2020 Incentive Plan will be subject to forfeiture or other penalties pursuant to the Company’s clawback policy and such forfeiture and penalty provisions as are determined by the Compensation Committee.
Certain Corporate Events
In the event of certain corporate transactions or events involving the Company, including any reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares of our common stock or other securities, or if we enter into a written agreement to undergo such a transaction or event, the Compensation Committee or our Board will have the authority, with respect to any awards under the Amended and Restated 2020 Incentive Plan and subject to the terms of the Amended and Restated 2020 Incentive Plan, to provide for any of the following to be effective upon consummation of the event (i) either terminate such awards, whether or not vested, in exchange for an amount of cash and/or other property, if any, equal to the amount that would have been attained upon the exercise of the vested portion of such award or realization of the participant’s vested rights, or replace such awards with other rights or property selected by the Compensation Committee or the Board, (ii) provide that such awards will be assumed by the successor or survivor corporation, or a parent or subsidiary of the successor or surviving corporation, or substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, (iii) accelerate such awards, or (iv) provide that such awards cannot vest, be exercised or become payable after a date certain in the future, which may be the effective date of such event.
Transferability of Awards
Generally, no award or other right or interest of a participant under the Amended and Restated 2020 Incentive Plan (other than fully vested and unrestricted shares issued pursuant to an award) shall be transferable by a participant other than by will or by the laws of descent and distribution, and no right or award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance shall be void and unenforceable against the Company or any affiliates. However, the Committee may allow transfer of an award to family members for no value, and such transfer shall comply with the General Instructions to Form S-8 under the Securities Act of 1933, as amended. The Committee may also establish procedures to allow a named beneficiary to exercise the rights of the participant and receive any property distributable with respect to any award upon the participant’s death.
Federal Income Tax Consequences
Grant of Options and Stock Appreciation Rights. The grant of a stock option (either an incentive stock option or a non-qualified stock option) or stock appreciation right is not expected to result in any taxable income for the recipient.
Exercise of Incentive Stock Options. No taxable income is realized by the optionee upon the exercise of an incentive stock option. If stock is issued to the optionee pursuant to the exercise of an incentive stock option, and if no disqualifying disposition of such shares is made by such award holder within two years after the date of grant or within one year after the transfer of such shares to such award holder, then (1) upon the sale of such shares, any amount realized in excess of the option price will be taxed to such optionee as a long-term capital gain and any loss sustained will be a long-term capital loss, and (2) we will not be entitled to a deduction for federal income tax purposes.
If the stock acquired upon the exercise of an incentive stock option is disposed of prior to the expiration of either holding period described above, generally (1) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of such shares at exercise (or, if less, the amount realized on the disposition of such shares) over the option price paid for such shares, and (2) we generally will be entitled to deduct such amount for federal income tax purposes if the amount represents an ordinary and necessary business expense. Any further gain (or loss) realized by the optionee will be taxed as short-term or long-term capital gain (or loss), as the case may be, and will not result in any deduction by us.
Exercise of Non-Qualified Stock Options and Stock Appreciation Rights. Upon exercising a non-qualified stock option, the optionee must recognize ordinary income equal to the excess of the fair market value of the shares of our common stock acquired on the date of exercise over the exercise price, and we generally will be entitled at that time to an income tax deduction for the same amount. Upon exercising a stock appreciation right, the amount of any cash received and the fair market value on the exercise date of any shares of our common stock received are taxable to the recipient as ordinary income and generally are deductible by us.
The tax consequence upon a disposition of shares acquired through the exercise of a non-qualified stock option or stock appreciation right will depend on how long the shares have been held. Generally, there will be no tax consequence to us in connection with the disposition of shares acquired under a non-qualified stock option or stock appreciation right.
Restricted Stock. Recipients of grants of restricted stock generally will be required to include as taxable ordinary income the fair market value of the restricted stock at the time it is no longer subject to a substantial risk of forfeiture. However, an award holder who makes an 83(b) election within 30 days of the date of grant of the restricted stock will incur taxable ordinary income on the date of grant equal to the fair market value of such shares of restricted stock (determined without regard to forfeiture restrictions). With respect to the sale of shares after the forfeiture restrictions have expired, the holding period to determine whether the award recipient has long-term or short-term capital gain or loss generally begins when the restrictions expire, and the tax basis for such shares will generally be based on the fair market value of the shares on that date. However, if the award holder made an 83(b) election as described above, the holding period commences on the date of such election, and the tax basis will be equal to the fair market value of the shares on the date of the election (determined without regard to the forfeiture restrictions on the shares). Dividends, if any, that are accrued while the restricted stock is subject to a substantial risk of forfeiture will also be taxed as ordinary income. We generally will be entitled to an income tax deduction equal to amounts the award holder includes in ordinary income at the time of such income inclusion.
Restricted Stock Units and Other Stock-Based Awards. Recipients of grants of restricted stock units will not incur any federal income tax liability at the time the awards are granted. Award holders will recognize ordinary income equal to (a) the amount of cash received under the terms of the award or, as applicable, (b) the fair market value of the shares received (determined as of the date of receipt) under the terms of the award. Dividend equivalents accrued with respect to any award will also be taxed as ordinary income if and when paid. Cash or shares to be received pursuant to any other deferred payment award generally become payable when applicable forfeiture restrictions lapse; provided, however, that, if the terms of the award so provide, payment may be delayed until a later date to the extent permitted under applicable tax laws. We generally will be entitled to an income tax deduction for any amounts included by the award holder as ordinary income. For awards that are payable in shares, the participant’s tax basis is equal to the fair market value of the shares at the time the shares become payable. Upon the sale of the shares, appreciation (or depreciation) after the shares are paid is treated as either short-term or long-term capital gain (or loss) depending on how long the shares have been held.
Income Tax Deduction. Subject to the usual rules concerning reasonable compensation, including our obligation to withhold or otherwise collect certain income and payroll taxes, we generally will be entitled to a corresponding income tax deduction at the time a participant recognizes ordinary income from awards made under the Amended and Restated 2020 Incentive Plan. However, Section 162(m) of the Code prohibits publicly held corporations from deducting more than $1 million per year in compensation paid to certain named executive officers. The Tax Cuts and Jobs Act (the “Act”), which was signed into law at the end of 2017, made significant changes to the deduction limit under Section 162(m). The Act eliminated the exception to the deduction limit for qualified performance-based compensation and broadened the application of the deduction limit to certain current and former executive officers who previously were exempt from such limit. However, the Act also includes a transition provision, which exempts from the above changes compensation under a written binding agreement that was in effect on November 2, 2017 and was not subsequently materially amended. Therefore, compensation paid to a covered executive in excess of $1 million will not be deductible for taxable years beginning on and after January 1, 2018 unless it qualifies for transition or other regulatory relief.
Special Rules for Executive Officers Subject to Section 16 of the Exchange Act. Special rules may apply to individuals subject to Section 16 of the Exchange Act. In particular, unless a special election is made pursuant to the Code, shares received through the exercise of a stock option or stock appreciation right may be treated as restricted as to transferability and subject to a substantial risk of forfeiture for a period of up to six months after the date of exercise. Accordingly, the amount of any ordinary income recognized and the amount of our income tax deduction will be determined as of the end of that period.
Section 409A of the Internal Revenue Code. The Compensation Committee will administer and interpret the Amended and Restated 2020 Incentive Plan and all award agreements in a manner consistent with the intent to satisfy the requirements of Section 409A of the Code to avoid any adverse tax results thereunder to a holder of an award. If any provision of the Amended and Restated 2020 Incentive Plan or any award agreement would result in such adverse consequences, the Compensation Committee may amend that provision or take other necessary action to avoid any adverse tax results, and no such action will be deemed to impair or otherwise adversely affect the rights of any holder of an award under the Amended and Restated 2020 Incentive Plan.
New Plan Benefits
No benefits or amounts have been granted, awarded or received under the Amended and Restated 2020 Incentive Plan, as the amendments to the 2020 Incentive Plan will only take effect upon shareholder approval. In addition, the Compensation Committee, in its sole discretion, will determine the number and types of awards that will be granted under the Amended and Restated 2020 Incentive Plan. Accordingly, it is not possible to determine the benefits that will be received by eligible participants if the Amended and Restated 2020 Incentive Plan is approved by our shareholders. The closing price of a share of our common stock as reported on the NYSE on February 10, 2021, the record date for our 2021 Annual Meeting of Shareholders, was $57.71.
Recommendation
The Board of Directors recommends that you vote FOR the proposal to approve the Amendment and Restatement of the H.B. Fuller Company 2020 Master Incentive Plan to increase shares and adopt certain other amendments. Proxies will be voted FOR the proposal unless otherwise specified.
Equity Compensation Plan Information
The following table summarizes information regarding our equity compensation plans as of November 28, 2020, the last day of our fiscal year:
Plan Category |
|
| Number of | |||||||||
Equity compensation plans approved by security holders | 5,978,2641 | $ | 47.262 | 1,679,5793 | ||||||||
Equity compensation plans not approved by security holders | -0- | N/A | -0- | |||||||||
Total | 5,978,264 | $ | 47.26 | 1,679,579 |
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“HOUSEHOLDING” OF PROXY MATERIALS
The SEC rules allow a single copy of the Proxy Statement, Annual Report and Notice of Internet Availability of Proxy Materials to be delivered to multiple shareholders sharing the same address and last name, or who we reasonably believe are members of the same family, and who 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 proxy statements and 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, Annual Report, or Notice of Internet Availability of Proxy Materials, or if you are receiving multiple copies of either document and you 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, Annual Report, and/or Notice of Internet Availability of Proxy Materials to a shareholder at a shared address to which a single copy of either document was delivered. For copies of either or both documents, shareholders should contact the Corporate Secretary, H.B. Fuller Company, at P.O. Box 64683, St. Paul, Minnesota 55164-0683, or call (651) 236-5825.
H. B. FULLER | 2023 Proxy Statement 68
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
Certain financial information presented in this proxy statement does not conform to generally accepted accounting principles (GAAP) and should not be construed as an alternative to the reported financial results of the Company determined in accordance with GAAP. We have included this non-GAAP information to assist in understanding the operating performance of the Company as well as the comparability of results. Such non-GAAP information provided may not be consistent with methodologies used by other companies. The non-GAAP information is reconciled with the most directly comparable GAAP results in the tables below. All information is in thousands (except per share amounts) and is unaudited.
ADJUSTED DILUTED EARNINGS PER SHARE – NON-GAAP RECONCILIATION
For the Fiscal Year Ended November 28, 2020 | For the Fiscal Year Ended November 30, 2019 | For the Fiscal Year Ended December 2, 2023 | For the Fiscal Year Ended December 3, 2022 | Fiscal Year 2022 to Fiscal Year 2023 Increase (Decrease) | |||||||||||||||
Net income attributable to H.B. Fuller | $123,719 | $130,817 | |||||||||||||||||
Net income attributable to H.B. Fuller (GAAP) | $ | 144,906 | $ | 180,313 | (20 | %) | |||||||||||||
Acquisition project costs | (162 | ) | 2,204 | 16,874 | 10,830 | ||||||||||||||
Organizational realignment | 11,449 | 7,647 | 29,900 | 6,386 | |||||||||||||||
Royal restructuring and integration | 7,396 | 787 | 0 | 2,474 | |||||||||||||||
Tax reform | (26 | ) | 132 | ||||||||||||||||
Project One | 4,265 | 4,115 | 9,815 | 9,885 | |||||||||||||||
Other | 2,268 | 7,964 | (611 | ) | 12,791 | ||||||||||||||
Adjusted net income attributable to H.B. Fuller | $148,909 | $153,666 | |||||||||||||||||
Discrete tax items | 26,085 | 9,308 | |||||||||||||||||
Income tax effect on adjustments | (10,604 | ) | (10,699 | ) | |||||||||||||||
Adjusted net income attributable to H.B. Fuller (non-GAAP) | $ | 216,365 | $ | 221,288 | |||||||||||||||
Diluted shares | 52,520 | 51,983 | 55,958 | 55,269 | |||||||||||||||
Diluted earnings per share (GAAP) | $2.36 | $2.52 | $ | 2.59 | $ | 3.26 | (21 | %) | |||||||||||
Adjusted diluted earnings per share (AEPS) non-GAAP1 | $2.84 | $2.96 | |||||||||||||||||
Adjusted diluted earnings per share (Adjusted EPS) (non-GAAP)1 | $ | 3.87 | $ | 4.00 | (3 | %) |
(1) | Adjusted |
In calculating results used for our STIP, additional adjustments are made to non-GAAP business results used for financial reporting purposes to eliminate the impact of acquisitions (for Adjusted EBITDA and Adjusted Net Revenue, but not for Adjusted EPS) and other items to ensure that actual results used for our STIP are comparable to targets. See footnote 3 on page 47 in the “Compensation Discussion and Analysis” section of this Proxy Statement for more information.
ADJUSTED DILUTED EARNINGS PER SHARE - AMOUNT TO ADJUSTED
AMOUNT USED FOR THE STIP
Fiscal Year Ended November 28, 2020
NET REVENUE - GAAP AMOUNT TO ADJUSTED NET REVENUE
AMOUNT USED FOR THE STIP
Fiscal Year Ended November 28, 2020December 2, 2023
Net Revenue (GAAP) | $ | 3,510,934 | ||
Adjustments for acquisitions | $ | (94,277 | ) | |
Foreign Exchange Adjustment to Budget Rates | (65,923 | ) | ||
Adjusted Net Revenue – STIP (non-GAAP) | $ | 3,350,734 |
H. B. FULLER | 2024 Proxy Statement A-1
ANNEX A
NET INCOME - GAAP AMOUNT TO ADJUSTED EBITDA USED FOR THE STIP
Fiscal Year Ended November 28, 2020December 2, 2023
For the Fiscal Year Ended November 28, 2020 | For the Fiscal Year Ended November 30, 2019 | For the Fiscal Year Ended December 2, 2023 | For the Fiscal Year Ended December 3, 2022 | Fiscal Year 2022 to Fiscal Year 2023 Increase (Decrease) | ||||||||||||||
Net Income attributable to H.B. Fuller (GAAP) | $123,719 | $130,817 | $ | 144,906 | $ | 180,313 | ||||||||||||
Adjustments | ||||||||||||||||||
Acquisition project costs | (162 | ) | 2,204 | 16,874 | 10,830 | |||||||||||||
Organizational realignment | 11,449 | 7,647 | 29,900 | 6,386 | ||||||||||||||
Royal restructuring and integration | 7,396 | 787 | 0 | 2,474 | ||||||||||||||
Tax reform | (26 | ) | 132 | |||||||||||||||
Project One | 4,265 | 4,115 | 9,815 | 9,885 | ||||||||||||||
Other | 2,268 | 7,964 | (611 | ) | 12,791 | |||||||||||||
Discrete tax items | 26,085 | 9,308 | ||||||||||||||||
Income tax effect on adjustments | (10,604 | ) | (10,699 | ) | ||||||||||||||
Adjusted Net Income | 148,909 | 153,666 | $ | 216,365 | $ | 221,288 | ||||||||||||
Add: | ||||||||||||||||||
Interest expense | 84,619 | 103,287 | 131,913 | 91,547 | ||||||||||||||
Interest income | (11,417 | ) | (12,178 | ) | (3,943 | ) | (7,790 | ) | ||||||||||
Income taxes | 46,456 | 47,465 | 78,047 | 78,576 | ||||||||||||||
Depreciation and Amortization expense | 138,242 | 140,105 | 158,456 | 146,394 | ||||||||||||||
Adjusted EBITDA | 406,809 | 432,345 | ||||||||||||||||
Adjusted EBITDA (non-GAAP) | 580,838 | 530,015 | 10 | % | ||||||||||||||
Net revenue | 3,510,934 | 3,749,183 | ||||||||||||||||
Adjusted EBITDA margin (non-GAAP) | 17 | % | 14 | % | ||||||||||||||
Adjustments for acquisitions | (13,582 | ) | (15,361 | ) | ||||||||||||||
Foreign Exchange Adjustment to Budget Rates | 231 | 2,207 | (11,630 | ) | 18,623 | |||||||||||||
Adjustments for acquisitions | (1,519 | ) | (216 | ) | ||||||||||||||
Adjusted EBITDA – STIP (non-GAAP) | $405,521 | $434,336 | $ | 555,626 | $ | 533,277 |
H. B. FULLER | 2024 Proxy Statement A-2
HYGIENE, HEALTH AND CONSUMABLE (“HHC”) ADHESIVES SEGMENANNEX AT
NET REVENUE - GAAP AMOUNT TO ADJUSTED NET REVENUE USED FOR THE STIP
Fiscal Year Ended November 28, 2020
HHC ADHESIVES SEGMENT NET INCOME - GAAP AMOUNT
TO ADJUSTED EBITDA USED FOR THE STIP
Fiscal Year Ended November 28, 2020
ENGINEERING ADHESIVES (“EA”(“EA”) SEGMENT NET REVENUE - GAAP AMOUNT
TO ADJUSTED NET REVENUE USED FOR THE STIP
Fiscal Year Ended November 28, 2020December 2, 2023
Fiscal Year Ended December 2, 2023 | Fiscal Year Ended December 3, 2022 | Fiscal Year 2022 to Fiscal Year 2023 Increase (Decrease) | ||||||||||
EA Segment Revenue (GAAP) | $ | 1,428,744 | $ | 1,532,639 | (7 | %) | ||||||
Adjustments for acquisitions | $ | (5,189 | ) | $ | (7,421 | ) | ||||||
Foreign Exchange Adjustment to Budget Rates | (37,720 | ) | 82,196 | |||||||||
EA Segment Net Revenue - STIP (non-GAAP) | $ | 1,385,835 | $ | 1,607,414 | (14 | %) |
EA SEGMENT ADJUSTED NET INCOME - GAAP AMOUNT
TO ADJUSTED EBITDA USED FOR THE STIP
Fiscal Year Ended November 28, 2020December 2, 2023
Fiscal Year Ended December 2, 2023 | Fiscal Year Ended December 3, 2022 | Fiscal Year 2022 to Fiscal Year 2023 Increase (Decrease) | ||||||||||
EA Adhesives Segment Net Income (GAAP) | $ | 187,346 | $ | 168,873 | ||||||||
Add: Depreciation and Amortization | 63,143 | 58,307 | ||||||||||
Add: Non-Operating Pension Expense or Income | 5,289 | 8,768 | ||||||||||
Adjusted EBITDA (non-GAAP) | 255,778 | 235,948 | 8 | % | ||||||||
Adjustments for acquisitions | 280 | (1,245 | ) | |||||||||
Foreign Exchange Adjustment to Budget Rates | (7,226 | ) | 9,853 | |||||||||
EA Adhesives Segment Adjusted EBITDA – STIP (non-GAAP) | $ | 248,832 | $ | 244,556 | 2 | % |
H. B. FULLER | 2024 Proxy Statement A-3
ANNEX A
CONSTRUCTION ADHESIVES (“CA”(“CA”) SEGMENT
NET REVENUE - GAAP AMOUNT TO ADJUSTED NET REVENUE USED FOR THE STIP
Fiscal Year Ended November 28, 2020December 2, 2023
Fiscal Year Ended December 2, 2023 | Fiscal Year Ended December 3, 2022 | Fiscal Year 2022 to Fiscal Year 2023 Increase (Decrease) | ||||||||||
CA Segment Revenue (GAAP) | $ | 480,703 | $ | 520,610 | (8 | %) | ||||||
Adjustments for acquisitions | (15,838 | ) | (53,716 | ) | ||||||||
Foreign Exchange Adjustment to Budget Rates | (6,022 | ) | 5,685 | |||||||||
CA Segment Adjusted Net Revenue – STIP (non-GAAP) | $ | 458,843 | $ | 472,579 | (3 | %) |
CASEGMENT NET INCOME
- GAAP AMOUNT TO ADJUSTED EBITDA USED FOR THE STIP
Fiscal Year Ended November 28, 2020December 2, 2023
Fiscal Year Ended December 2, 2023 | Fiscal Year Ended December 3, 2022 | Fiscal Year 2022 to Fiscal Year 2023 Increase (Decrease) | ||||||||||
CA Segment Net Income (GAAP) | $ | 5,961 | $ | 22,989 | ||||||||
Add: Depreciation and Amortization | $ | 41,915 | $ | 41,713 | ||||||||
Add: Non-Operating Pension Expense or Income | 7,641 | 9,485 | ||||||||||
Adjusted EBITDA (non-GAAP) | 55,517 | 74,187 | (25 | %) | ||||||||
Adjustments for acquisitions | (2,099 | ) | (12,414 | ) | ||||||||
Foreign Exchange Adjustment to Budget Rates | (939 | ) | 20 | |||||||||
CA Segment Adjusted EBITDA – STIP (non-GAAP) | $ | 52,479 | $ | 61,793 | (15 | %) |
H. B. FULLER | 2024 Proxy Statement A-4
OPERATING INCOME – GAAP AMOUNT TO ROIC USED FOR THE LTIP
Fiscal Year ended November 28, 2020
|
|
ANNEX A
HYGIENE, HEALTH AND CONSUMABLE (“HHC”) ADHESIVES SEGMENT
NET REVENUE - GAAP AMOUNT TO ADJUSTED NET REVENUE USED FOR THE STIP
Fiscal Year Ended December 2, 2023
Fiscal Year Ended December 2, 2023 | Fiscal Year Ended December 3, 2022 | Fiscal Year 2022 to Fiscal Year 2023 Increase (Decrease) | ||||||||||
HHC Adhesives Segment Revenue (GAAP) | $ | 1,601,487 | $ | 1,695,934 | (6 | %) | ||||||
Adjustments for acquisitions | $ | (73,250 | ) | $ | (3,467 | ) | ||||||
Foreign Exchange Adjustment to Budget Rates | (22,463 | ) | 101,370 | |||||||||
HHC Adhesives Segment Adjusted Net Revenue – STIP (non-GAAP) | $ | 1,505,774 | $ | 1,793,837 | (16 | %) |
HHC ADHESIVES SEGMENT NET INCOME - GAAP AMOUNT
TO ADJUSTED EBITDA USED FOR THE STIP
Fiscal Year Ended December 2, 2023
Fiscal Year Ended December 2, 2023 | Fiscal Year Ended December 3, 2022 | Fiscal Year 2022 to Fiscal Year 2023 Increase (Decrease) | ||||||||||
HHC Adhesives Segment Net Income (GAAP) | $ | 215,088 | $ | 165,786 | ||||||||
Add: Depreciation and Amortization | $ | 53,398 | $ | 46,374 | ||||||||
Add: Non-Operating Pension Expense or Income | 7,316 | 11,828 | ||||||||||
Adjusted EBITDA (non-GAAP) | 275,802 | 223,988 | 23 | % | ||||||||
Adjustments for acquisitions | (11,764 | ) | (1,701 | ) | ||||||||
Foreign Exchange Adjustment to Budget Rates | (3,646 | ) | 12,392 | |||||||||
HHC Adhesives Segment Adjusted EBITDA – STIP (non-GAAP) | $ | 260,392 | $ | 234,679 | 11 | % |
H. B. FULLER | 2023 Proxy Statement A-5
ANNEX A
OPERATING INCOME – GAAP AMOUNT TO ROIC USED FOR THE LTIP
Fiscal Year ended December 2, 2023
Fiscal Year Ended December 2, 2023 | Fiscal Year Ended December 3, 2022 | Fiscal Year Ended November 27, 2021 | ||||||||||
Operating Income (GAAP) | 355,137 | 322,718 | 252,622 | |||||||||
Other income (expense), net1 | 20,246 | 30,081 | 32,070 | |||||||||
Adjustments for Acquisitions | (557 | ) | (7,952 | ) | 2,848 | |||||||
Adjustments2 | 53,260 | 34,936 | 35,814 | |||||||||
Adjusted Operating Income | 428,086 | 379,783 | 323,354 | |||||||||
Tax Expense | (115,200 | ) | (101,402 | ) | (87,952 | ) | ||||||
Income from equity method investments | 4,357 | 5,665 | 7,657 | |||||||||
Net operating profit after taxa | 317,244 | 284,046 | 243,059 | |||||||||
Invested Capitalb | 3,187,199 | 3,045,437 | 3,167,972 | |||||||||
ROIC (a/b) (non-GAAP) | 10.0 | % | 9.3 | % | 7.7 | % | ||||||
ROIC Average | 9.0 | % |
(1) | All components of net periodic pension (cost) benefit and net periodic retirement postretirement benefit (cost) other than service (cost) benefit. |
(2) | Adjustments include the following pre-tax items: costs related to integrating and accounting for acquisitions; costs associated with organizational realignment to support the |
Acquisition project costs | 16,997 | 10,830 | 5,621 | |||||||||
Organizational realignment | 29,820 | 7,601 | 12,089 | |||||||||
Royal Restructuring and Integration | 2,500 | 4,278 | ||||||||||
Project One | 9,815 | 9,885 | 9,426 | |||||||||
Other | (3,352 | ) | 4,120 | 4,400 | ||||||||
Total Adjustments | 53,260 | 34,936 | 35,814 |
amended and restated H.B. fuller company2020 master INCENTIVE PLANH. B. FULLER | 2024 Proxy Statement
Section 1. Purpose
The purpose of the Plan is to promote the interests of the Company and its shareholders by aiding the Company in attracting and retaining employees, officers, consultants, independent contractors and non-employee Directors capable of assuring the future success of the Company, to provide such persons with opportunities for stock ownership in the Company and to offer such persons other incentives to put forth maximum efforts for the success of the Company’s business.
Section 2. Definitions
As used in the Plan, the following terms shall have the meanings set forth below:
(a) “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, in each case as determined by the Committee.
(b) “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Dividend Equivalent or Other Stock-Based Award granted under the Plan.
(c) “Award Agreement” shall mean any written agreement, contract or other instrument or document evidencing an Award granted under the Plan (including a document in an electronic medium) executed in accordance with the requirements of Section 9(b).
(d) “Board” shall mean the Board of Directors of the Company.
(e) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder.
(f) “Committee” shall mean the Compensation Committee of the Board or such other committee designated by the Board to administer the Plan. The Committee shall be comprised of not less than such number of Directors as shall be required to permit Awards granted under the Plan to qualify under Rule 16b-3, and each member of the Committee shall be a “non-employee director” within the meaning of Rule 16b-3.
(g) “Company” shall mean H.B. Fuller Company, a Minnesota corporation, and any successor corporation.
(h) “Director” shall mean a member of the Board.
(i) “Dividend Equivalent” shall mean any right granted under Section 6(d) of the Plan.
(j) “Eligible Person” shall mean any employee, officer, non-employee Director, consultant, independent contractor or advisor providing services to the Company or any Affiliate, or any person to whom an offer of employment or engagement with the Company or any Affiliate is extended. An Eligible Person must be a natural person.
(k) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
(l) “Fair Market Value” shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. Notwithstanding the foregoing, unless otherwise determined by the Committee, the Fair Market Value of a Share as of a given date shall be, if the Shares are then traded on the New York Stock Exchange, the closing price of one Share as reported on the New York Stock Exchange on such date or, if the New York Stock Exchange is not open for trading on such date, on the most recent preceding date when the New York Stock Exchange is open for trading.
(m) “Full Value Award” shall mean any Award other than an Option or Stock Appreciation Right or similar Award, the value of which Option, Stock Appreciation Right or similar Award is based solely on an increase in the value of the Shares after the date of grant of such Award.
(n) “Incentive Stock Option” shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provision.
(o) “Non-Qualified Stock Option” shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
(p) “Option” shall mean an Incentive Stock Option or a Non-Qualified Stock Option to purchase shares of the Company.
(q) “Other Stock-Based Award” shall mean any right granted under Section 6(e) of the Plan.
(r) “Participant” shall mean an Eligible Person designated to be granted an Award under the Plan.
(s) “Plan” shall mean the Amended and Restated H.B. Fuller Company 2020 Master Incentive Plan, as amended from time to time.
(t) “Prior Plans” shall mean the H.B. Fuller Company 2018 Master Incentive Plan, the H.B. Fuller Company 2016 Master Incentive Plan and the H.B. Fuller Company 2009 Director Stock Incentive Plan (and any predecessor plans to such plans), as amended from time to time.
(u) “Restricted Stock” shall mean any Share granted under Section 6(c) of the Plan.
(v) “Restricted Stock Unit” shall mean any unit granted under Section 6(c) of the Plan evidencing the right to receive a Share (or a cash payment equal to the Fair Market Value of a Share) at some future date.
(w) “Rule 16b-3” shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or any successor rule or regulation.
(x) “Section 409A” shall mean Section 409A of the Code, or any successor provision, and applicable Treasury Regulations and other applicable guidance thereunder.
(y) “Securities Act” shall mean the Securities Act of 1933, as amended.
(z) “Share” or Shares” shall mean share(s) of common stock, $1.00 par value per share, of the Company or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan.
(aa) “Specified Employee” shall mean a specified employee as defined in Section 409A(a)(2)(B) of the Code or applicable proposed or final regulations under Section 409A, determined in accordance with procedures established by the Company and applied uniformly with respect to all plans maintained by the Company that are subject to Section 409A.
(bb) “Stock Appreciation Right” shall mean any right granted under Section 6(b) of the Plan.
Section 3. Administration
(a) Power and Authority of the Committee. The Plan shall be administered by the Committee. Subject to the express provisions of the Plan and to applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or the method by which payments or other rights are to be calculated in connection with) each Award; (iv) determine the terms and conditions of any Award or Award Agreement, including any terms relating to the forfeiture of any Award and the forfeiture, recapture or disgorgement of any cash, Shares or other amounts payable with respect to any Award; (v) amend the terms and conditions of any Award or Award Agreement, subject to the limitations under Sections 6 and 7; (vi) accelerate the exercisability of any Award or the lapse of any restrictions relating to any Award, subject to the limitations of Sections 6 and 7; (vii) determine whether, to what extent and under what circumstances Awards may be exercised in cash, Shares, other securities, other Awards or other property (but excluding promissory notes), or canceled, forfeited or suspended; (viii) determine whether, to what extent and under what circumstances amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or the Committee, subject to the requirements of Section 409A; (ix) interpret and administer the Plan and any instrument or agreement, including an Award Agreement, relating to the Plan; (x) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan; and (xii) adopt such modifications, rules, procedures and subplans as may be necessary or desirable to comply with provisions of the laws of non-U.S. jurisdictions in which the Company or an Affiliate may operate, including, without limitation, establishing any special rules for Affiliates, Eligible Persons or Participants located in any particular country, in order to meet the objectives of the Plan and to ensure the viability of the intended benefits of Awards granted to Participants located in such non-United States jurisdictions. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award or Award Agreement shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary of any Award or Award Agreement, and any employee of the Company or any Affiliate.
(b) Delegation. The Committee may delegate to one or more officers or Directors of the Company, subject to such terms, conditions and limitations as the Committee may establish in its sole discretion, the authority to grant Awards; provided, however, that the Committee shall not delegate such authority (i) with regard to grants of Awards to be made to officers of the Company or any Affiliate who are subject to Section 16 of the Exchange Act or (ii) in such a manner as would cause the Plan not to comply with applicable exchange rules or applicable law.
(c) Power and Authority of the Board. Notwithstanding anything to the contrary contained herein, (i) the Board may, at any time and from time to time, without any further action of the Committee, exercise the powers and duties of the Committee under the Plan, unless the exercise of such powers and duties by the Board would cause the Plan not to comply with the requirements of Rule 16b-3; and (ii) only the Committee (or another committee of the Board comprised of directors who qualify as independent directors within the meaning of the independence rules of any applicable securities exchange where the Shares are then listed) may grant Awards to Directors who are not also employees of the Company or an Affiliate.
(d) Indemnification. To the full extent permitted by law, (i) no member of the Board, the Committee or any person to whom the Committee delegates authority under the Plan shall be liable for any action or determination taken or made in good faith with respect to the Plan or any Award made under the Plan, and (ii) the members of the Board, the Committee and each person to whom the Committee delegates authority under the Plan shall be entitled to indemnification by the Company with regard to such actions and determinations. The provisions of this paragraph shall be in addition to such other rights of indemnification as a member of the Board, the Committee or any other person may have by virtue of such person’s position with the Company.
Section 4. Shares Available for Awards
(a) Shares Available.
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(b) Counting Shares. Except as set forth in this Section 4(b) below, if an Award entitles the holder thereof to receive or purchase Shares, the number of Shares covered by such Award or to which such Award relates shall be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under the Plan.
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(c) Adjustments. In the event that any dividend (other than a regular cash dividend) or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is necessary in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or other property) that thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or other property) subject to outstanding Awards, (iii) the purchase price or exercise price with respect to any Award and (iv) the limitations contained in Section 4(d)(i) below; provided, however, that the number of Shares covered by any Award or to which such Award relates shall always be a whole number. Such adjustment shall be made by the Committee or the Board, whose determination in that respect shall be final, binding and conclusive.
(d) Award Limitations Under the Plan.
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Section 5. Eligibility
Any Eligible Person shall be eligible to be designated as a Participant. In determining which Eligible Persons shall receive an Award and the terms of any Award, the Committee may take into account the nature of the services rendered by the respective Eligible Persons, their present and potential contributions to the success of the Company or such other factors as the Committee, in its discretion, shall deem relevant. Notwithstanding the foregoing, an Incentive Stock Option may only be granted to full-time or part-time employees (which term as used herein includes, without limitation, officers and Directors who are also employees), and an Incentive Stock Option shall not be granted to an employee of an Affiliate unless such Affiliate is also a “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code or any successor provision.
Section 6. Awards
(a) Options. The Committee is hereby authorized to grant Options to Eligible Persons with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine:
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(b) Stock Appreciation Rights. The Committee is hereby authorized to grant Stock Appreciation Rights to Eligible Persons subject to the terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the Stock Appreciation Right as specified by the Committee, which price shall not be less than one hundred percent (100%) of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right; provided, however, that the Committee may designate a grant price below Fair Market Value on the date of grant if the Stock Appreciation Right is granted in substitution for a stock appreciation right previously granted by an entity that is acquired by or merged with the Company or an Affiliate. Subject to the terms of the Plan and any applicable Award Agreement, the grant price, term, methods of exercise, dates of exercise, methods of settlement and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee (except that the term of each Stock Appreciation Right shall be subject to the term limitation in Section 6(a)(ii) applicable to Options). The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate.
(c) Restricted Stock and Restricted Stock Units. The Committee is hereby authorized to grant an Award of Restricted Stock and Restricted Stock Units to Eligible Persons with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine:
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(d) Dividend Equivalents. The Committee is hereby authorized to grant Dividend Equivalents to Eligible Persons under which the Participant shall be entitled to receive payments (in cash, Shares, other securities, other Awards or other property as determined in the discretion of the Committee) equivalent to the amount of cash dividends paid by the Company to holders of Shares with respect to a number of Shares determined by the Committee. Subject to the terms of the Plan and any applicable Award Agreement, such Dividend Equivalents may have such terms and conditions as the Committee shall determine. Notwithstanding the foregoing, (i) the Committee may not grant Dividend Equivalents to Eligible Persons in connection with grants of Options, Stock Appreciation Rights or other Awards the value of which is based solely on an increase in the value of the Shares after the grant of such Award, and (ii) dividend and Dividend Equivalent amounts with respect to any Share underlying an Award may be accrued but not paid to a Participant until all conditions or restrictions relating to such Share have been satisfied, waived or lapsed. Notwithstanding any provision in any Award that provides for payment of dividend equivalent amounts in the form of Shares, the Committee may, in its discretion, pay such dividend equivalent amounts in cash in lieu of Shares.
(e) Other Stock-Based Awards. The Committee is hereby authorized to grant to Eligible Persons such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as are deemed by the Committee to be consistent with the purpose of the Plan. The Committee shall determine the terms and conditions of such Awards, subject to the terms of the Plan and any applicable Award Agreement. No Award issued under this Section 6(e) shall contain a purchase right or an option-like exercise feature.
(f) General.
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Section 7. Amendment and Termination; Corrections
(a) Amendments to the Plan and Awards. The Board may from time to time amend, suspend or terminate this Plan, and the Committee may amend the terms of any previously granted Award, provided that no amendment to the terms of any previously granted Award may (except as expressly provided in the Plan) adversely alter or impair the terms or conditions of the Award previously granted to a Participant under this Plan without the written consent of the Participant or holder thereof. Any amendment to this Plan, or to the terms of any Award previously granted, is subject to compliance with all applicable laws, rules, regulations and policies of any applicable governmental entity or securities exchange, including receipt of any required approval from the governmental entity or stock exchange. For greater certainty and without limiting the foregoing, the Board may amend, suspend, terminate or discontinue the Plan, and the Committee may amend or alter any previously granted Award, as applicable, without obtaining the approval of stockholders of the Company in order to:
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For greater certainty and except as provided in Section 4(c), prior approval of the stockholders of the Company shall be required for any amendment to the Plan or an Award that would:
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(b) Corporate Transactions. In the event of any reorganization, merger, consolidation, split-up, spin-off, combination, plan of arrangement, take-over bid or tender offer, repurchase or exchange of Shares or other securities of the Company or any other similar corporate transaction or event involving the Company (or the Company shall enter into a written agreement to undergo such a transaction or event), the Committee or the Board may, in its sole discretion but subject to the limitations in Section 6 (e.g., limitations on re-pricing and waiver of vesting restrictions), provide for any of the following to be effective upon the consummation of the event (or effective immediately prior to the consummation of the event, provided that the consummation of the event subsequently occurs), and no action taken under this Section 7(b) shall be deemed to impair or otherwise adversely alter or impair the rights of any holder of an Award or beneficiary thereof:
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(c) Correction of Defects, Omissions and Inconsistencies. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award or Award Agreement in the manner and to the extent it shall deem desirable to implement or maintain the effectiveness of the Plan.
Section 8. Income Tax Withholding
In order to comply with all applicable federal, state, local or foreign income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal, state, local or foreign payroll, withholding, income or other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant. Without limiting the foregoing, for avoidance of doubt, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax obligation by (a) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes (subject to any limitations required by ASC Topic 718 to avoid adverse accounting treatment); (b) delivering to the Company Shares other than Shares issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes or (c) by any other means set forth in the applicable Award Agreement.
Section 9. General Provisions
(a) No Rights to Awards. No Eligible Person, Participant or other person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to any Participant or with respect to different Participants.
(b) Award Agreements. No Participant shall have rights under an Award granted to such Participant unless and until an Award Agreement shall have been signed by the Participant (if requested by the Company), or until such Award Agreement is delivered and accepted through an electronic medium in accordance with procedures established by the Company. An Award Agreement need not be signed by a representative of the Company unless required by the Committee. 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.
(c) Plan Provisions Control. In the event that any provision of an Award Agreement conflicts with or is inconsistent in any respect with the terms of the Plan as set forth herein or subsequently amended, the terms of the Plan shall control.
(d) No Rights of Shareholders. Except with respect to Shares issued under Awards (and subject to such conditions as the Committee may impose on such Awards), neither a Participant nor the Participant’s legal representative shall be, or have any of the rights and privileges of, a shareholder of the Company with respect to any Shares issuable upon the exercise or payment of any Award, in whole or in part, unless and until such Shares have been issued.
(e) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation plans or arrangements, and such plans or arrangements may be either generally applicable or applicable only in specific cases.
(f) No Right to Employment or Directorship. The grant of an Award shall not be construed as giving a Participant the right to be retained as an employee of the Company or any Affiliate, or the right to be retained as a Director, nor will it affect in any way the right of the Company or an Affiliate to terminate a Participant’s employment at any time, with or without cause, or remove a Director in accordance with applicable law. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment, or remove a Director who is a Participant, free from any liability or any claim under the Plan or any Award, unless otherwise expressly provided in the Plan or in any Award Agreement. Nothing in this Plan shall confer on any person any legal or equitable right against the Company or any Affiliate, directly or indirectly, or give rise to any cause of action at law or in equity against the Company or an Affiliate. Under no circumstances shall any person ceasing to be an employee or Director of the Company or any Affiliate be entitled to any compensation for any loss of any right or benefit under the Plan which such employee or Director might otherwise have enjoyed but for termination of employment or directorship, whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating in the Plan, each Participant shall be deemed to have accepted all the conditions of the Plan and the terms and conditions of any rules and regulations adopted by the Committee and shall be fully bound thereby.
(g) Governing Law. The internal law, and not the law of conflicts, of the State of Minnesota shall govern all questions concerning the validity, construction and effect of the Plan or any Award, and any rules and regulations relating to the Plan or any Award.
(h) Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect.
(i) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate.
(j) Other Benefits. No compensation or benefit awarded to or realized by any Participant under the Plan shall be included for the purpose of computing such Participant’s compensation or benefits under any pension, retirement, savings, profit sharing, group insurance, disability, severance, termination pay, welfare or other benefit plan of the Company, unless required by law or otherwise provided by such other plan.
(k) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Share or whether such fractional Share or any rights thereto shall be canceled, terminated or otherwise eliminated.
(l) Headings. Headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.
Section 10. Clawback or Recoupment
All Awards under this Plan shall be subject to forfeiture or other penalties pursuant to the Company’s Executive and Key Manager Compensation Clawback Policy, as amended from time to time, and such forfeiture and/or penalty conditions or provisions as determined by the Committee.
Section 11. Effective Date of the Plan
The H.B. Fuller Company 2020 Master Incentive Plan was originally adopted by the Board on January 16, 2020 and became effective when approved by the shareholders of the Company on April 2, 2020. The amendments to the Plan made under this Amended and Restated H.B. Fuller Company 2020 Master Incentive Plan were approved by the Board on January 21, 2021 and shall be subject to approval by the shareholders of the Company at the annual meeting of shareholders of the Company to be held on April 8, 2021, and such amendments shall be effective as of the date of such shareholder approval. Since the Plan first became effective, grants of new awards under the Prior Plans have been permanently discontinued, but all outstanding awards previously granted under the Prior Plans shall remain outstanding and subject to the terms of the Prior Plans.
Section 12. Term of the Plan
No Award shall be granted under the Plan, and the Plan shall terminate, on January 21, 2031 or any earlier date of discontinuation or termination established pursuant to Section 7(a) of the Plan. Unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond such dates, and the authority of the Committee provided for hereunder with respect to the Plan and any Awards, and the authority of the Board to amend the Plan, shall extend beyond the termination of the Plan.
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