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, (3) involuntary (not for cause) or good reason termination after a change-in-control, and (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.
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 fiscal year 2022:2023:
We 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.There were no changes in our employee population or employee compensation arrangements that the Company believed would result in a significant change to the pay ratio disclosure.
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. These2022.These employees will bewere 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 believes would result in a significant change to the pay ratio disclosure. The employees whom we omitted this year joined the Company in connection with the following acquisitions completed during fiscal year 2022:2023: Lemtapes Oy; certain assets of Tissue Seal,Aspen Research Corporation; Beardow Adams Holdings Ltd.; XChem International LLC; the stock of Fourny Group; Apollo Chemicals Limited, Apollo Roofing Solutions Limited and Apollo Construction Solutions Limited; the stock of ZKLT Polymer Materials Co., Ltd.;Adhezion Biomedical, LLC; and certain assets of GSSI Sealants, Inc.Sanglier Ltd.
For purposes of the calculation, we added together all the elements of the median employee’s compensation for fiscal year 20222023 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.
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.
In deciding how to vote on this proposal, the Board urges you to consider the following factors:
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 consider 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’sCompany’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. |
H. B. FULLER | 2024 Proxy Statement 62
H. B. FULLER | 2023 Proxy Statement 58
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PROPOSAL 4—NON-BINDING ADVISORY VOTE ON FREQUENCY OF AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
As required pursuant to Section 14A of the Exchange Act, the Company is providing shareholders with an advisory (non-binding) vote on the frequency with which our shareholders shall have an advisory vote on executive compensation as provided in Proposal 3 above. By voting on this proposal, shareholders may indicate whether they would prefer an advisory vote on executive compensation once every one, two or three years. In addition, shareholders may abstain from voting. The Company is required to hold an advisory vote on frequency at least once every six years.
Starting with our annual meeting held in 2011, we have held annual advisory votes on executive compensation. The Board has determined that an advisory vote on executive compensation every year is the appropriate alternative for the Company and its shareholders. In reaching this recommendation, the Board considered that holding an annual advisory vote to approve executive compensation allows shareholders to provide direct input on the Company’s compensation philosophy, policies and practices as disclosed in the proxy statement each year. An annual advisory vote also provides the Compensation Committee with the opportunity to evaluate its compensation decisions taking into account the timely feedback provided by shareholders. In addition, the Board recognizes that an annual advisory vote to approve executive compensation is consistent with facilitating communications of shareholders with the Board and its various committees, including the Compensation Committee.
You may cast your vote on your preferred voting frequency by choosing the option of one year, two years, three years or abstain when you vote in response to the resolution set forth below:
“RESOLVED, that if no option receives the affirmative vote of a majority of the shares of common stock represented and entitled to vote, the option of once every one year, two years or three years that receives the highest number of votes cast for this resolution will be determined to be the preferred frequency with which the Company is to hold a shareholder vote to approve the compensation of the named executive officers.”
If no option receives the affirmative vote of a majority of the shares of common stock represented and entitled to vote, the option of one year, two years or three years that receives the highest number of votes cast by shareholders will be the frequency for the advisory vote on executive compensation that has been selected by the shareholders.
Although the vote is non-binding, our Board of Directors will take into account the outcome of the vote when making future decisions about the frequency of the Company’s advisory votes on executive compensation.QUESTIONS AND ANSWERS ABOUT THE MEETING
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| The Board of Directors recommends that you vote for the option of every “ONE YEAR” as the frequency with which shareholders are provided an advisory vote on the compensation of the named executive officers.
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H. B. FULLER | 2023 Proxy Statement 59
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PROPOSAL 5—APPROVAL OF THE SECOND AMENDMENT AND RESTATEMENT OF THE H.B. FULLER COMPANY 2020 MASTER INCENTIVE PLAN TO INCREASE SHARES AND ADOPT CERTAIN OTHER AMENDMENTS
PROPOSAL
We are asking our shareholders to approve the second amendment and restatement of the H.B. Fuller Company 2020 Master Incentive Plan (the “Second Amended and Restated 2020 Incentive Plan”) for two reasons:
To increase the total number of shares of common stock authorized for issuance under the 2020 Incentive Plan, from 2,500,000 shares, of which a maximum of 1,000,000 shares may be issued in the form of Full Value Awards, to 5,000,000 shares, of which a maximum of 2,000,000 shares may be issued in the form of Full Value Awards; and
•
| To extend the term of the 2020 Incentive Plan from January 21, 2031 to January 24, 2033.
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On January 24, 2023, our Board of Directors adopted, upon recommendation of our Compensation Committee and subject to shareholder approval, the Second Amended and Restated 2020 Incentive Plan. All capitalized terms not otherwise defined in this proposal have the meanings assigned to them in the Second 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.
The purpose of the Second Amended and Restated 2020 Incentive Plan is to promote the interests 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 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. The Second Amended and Restated 2020 Incentive Plan will allow us to provide such persons an opportunity to acquire a proprietary interest in the Company, and align the interests of such persons with our shareholders.
The Second Amended and Restated 2020 Incentive Plan is an omnibus equity incentive plan that allows 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 number of shares of common stock that may be issued under all stock-based awards under the Second Amended and Restated 2020 Incentive Plan will be 5,000,000 shares. Of these authorized shares, an aggregate of 2,000,000 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 6, 2023, 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 Second Amended and Restated 2020 Incentive Plan.
Reasons for Amending the 2020 Incentive Plan
The Second 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 2,500,000 shares, of which a maximum of 1,000,000 shares may be issued in the form of Full Value Awards, to 5,000,000 shares, of which a maximum of 2,000,000 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 2020 Incentive Plan. As of February 6, 2023, we have 866,520 shares available under the 2020 Incentive Plan, of which a maximum of 197,798 shares may be issued in the form of Full Value Awards. We are asking our shareholders to approve the Second 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 2023 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 2024 Annual Meeting of
H. B. FULLER | 2023 Proxy Statement 60
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PROPOSAL 5—APPROVAL OF THE SECOND AMENDMENT AND RESTATEMENT OF THE H.B. FULLER COMPANY 2020 MASTER INCENTIVE PLAN TO INCREASE SHARES AND ADOPT CERTAIN OTHER AMENDMENTS
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 Second Amended and Restated 2020 Incentive Plan, equity awards will be made both to executive officers and other employees and to non-employee directors.
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 2022 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 Second 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 Second Amended and Restated 2020 Incentive Plan in order to allow the Company to have the ability to continue to grant equity awards at competitive levels.
Since the first amendment and restatement of the 2020 Incentive Plan was approved by our shareholders on April 8, 2021, 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 Second Amended and Restated 2020 Incentive Plan.
If the Second Amended and Restated 2020 Incentive Plan is not approved by shareholders, we will continue to use the 2020 Incentive Plan in its current 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 Second Amended and Restated 2020 Incentive Plan
Consistent with the 2020 Incentive Plan, the following features of the Second Amended and Restated 2020 Incentive Plan reflect additional equity incentive plan “best practices” intended to protect the interests of our shareholders:
•
| Limit on Shares Authorized. Under the Second Amended and Restated 2020 Incentive Plan, the aggregate number of shares that may be issued is 5,000,000 shares, of which, no more than 2,000,000 shares may be issued pursuant to Full Value Awards.
| |
•
| No Evergreen Provision. The Second Amended and Restated 2020 Incentive Plan does not contain an “evergreen” provision that will automatically increase the number of shares authorized for issuance under the Second Amended and Restated 2020 Incentive Plan.
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•
| No Liberal Share “Recycling.” Any shares surrendered to pay the exercise price of an option or shares withheld by the Company or tendered to satisfy tax withholding obligations with respect to any award will not be added back (“recycled”) to the Second Amended and Restated 2020 Incentive Plan.
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•
| No Discounted Stock Options or Stock Appreciation Rights. Stock options and stock appreciation rights must have an exercise price equal to or greater than the fair market value of our common stock on the date of grant.
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•
| No Repricing of Stock Options or Stock Appreciation Rights. The Second Amended and Restated 2020 Incentive Plan prohibits the repricing of stock options and stock appreciation rights (including a prohibition on the repurchase of “underwater” stock options or stock appreciation rights for cash or other securities).
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•
| No Liberal Change in Control Definition. The Second Amended and Restated 2020 Incentive Plan prohibits any award agreement from having a change in control provision that has the effect of accelerating the exercisability of any award or the lapse of restrictions relating to any award upon only the announcement or shareholder approval (rather than the consummation of) a change in control transaction.
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•
| Awards Subject to Forfeiture or Clawback. Awards under the Second Amended and Restated 2020 Incentive Plan will be subject to the Company’s clawback policy, as it may be amended from time to time, and any forfeiture and penalty conditions determined by the Compensation Committee.
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•
| No Dividend Equivalents Paid on Unvested Awards. Under the Second Amended and Restated 2020 Incentive Plan, dividend and dividend equivalent amounts with respect to any share underlying an award may be accrued but shall not be paid until all conditions or restrictions relating to such share have been satisfied, waived or lapsed. In addition, the Second Amended and Restated 2020 Plan prohibits the granting of dividend equivalents on stock options and stock appreciation rights.
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H. B. FULLER | 2023 Proxy Statement 61
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PROPOSAL 5—APPROVAL OF THE SECOND AMENDMENT AND RESTATEMENT OF THE H.B. FULLER COMPANY 2020 MASTER INCENTIVE PLAN TO INCREASE SHARES AND ADOPT CERTAIN OTHER AMENDMENTS
Minimum Vesting Requirements. Under the Second Amended and Restated 2020 Incentive Plan, no option, stock appreciation right, restricted stock, RSU or other stock-based award shall be granted with terms providing for a vesting schedule over a period of less than one year from the date of grant, except that Company may issue the following awards that do not comply with the one year minimum exercise and vesting requirements: (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 Second Amended and Restated 2020 Incentive Plan.
Annual Limit on Awards to Directors. Under the Second Amended and Restated 2020 Incentive Plan, 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.
Independent Committee Administration. The Second Amended and Restated 2020 Incentive Plan will be administered by a committee of the Board of Directors comprised entirely of independent directors.
Determination of Increase in the Number of Shares for the Second Amended and Restated 2020 Incentive 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 Second 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 Second 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 6, 2023, there were 5,082,492 outstanding stock options, which had a weighted average exercise price of $52.02 and a weighted average remaining contractual life of 6.2893 years, and there were 519,097 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. In setting and recommending to our shareholders the increase in the number of shares to be authorized under the Second Amended and Restated 2020 Incentive Plan, the Compensation Committee and the Board of Directors considered H.B. Fuller’s net burn rate for each of the past three fiscal years. The calculation of our net burn rate is shown in the table below:
Fiscal Year | | | | | | Total | | |
2022 | | Weighted Average Shares of Common Stock Outstanding | | | | 53,580,000 | | | | | | | | | | | | | | |
| | Stock Options Granted | | | | 549,458 | | | | | | | | | | | | | | |
| | Stock Options Forfeited | | | | (40,991 | ) | | | | | | | | | | | | | |
| | Full Value Awards Granted (RSUs and PSUs) | | | | 179,603 | | | | | | | | | | | | | | |
| | Full Value Awards Forfeited | | | | (68,374 | ) | | | | | 619,696 | | | | | 1.16% | | |
| | | | | | | | | | | | | | | | | | | | |
2021 | | Weighted Average Shares of Common Stock Outstanding | | | | 52,887,000 | | | | | | | | | | | | | | |
| | Stock Options Granted | | | | 1,237,094 | | | | | | | | | | | | | | |
| | Stock Options Forfeited | | | | (1,069,886 | ) | | | | | | | | | | | | | |
| | Full Value Awards Granted (RSUs and PSUs) | | | | 356,779 | | | | | | | | | | | | | | |
| | Full Value Awards Forfeited | | | | (78,818 | ) | | | | | 445,169 | | | | | 0.84% | | |
| | | | | | | | | | | | | | | | | | | | |
2020 | | Weighted Average Shares of Common Stock Outstanding | | | | 52,039,000 | | | | | | | | | | | | | | |
| | Stock Options Granted | | | | 1,052,968 | | | | | | | | | | | | | | |
| | Stock Options Forfeited | | | | (169,907 | ) | | | | | | | | | | | | | |
| | Full Value Awards Granted (RSUs and PSUs) | | | | 216,293 | | | | | | | | | | | | | | |
| | Full Value Awards Forfeited | | | | (50,666 | ) | | | | | 1,048,688 | | | | | 2.02% | | |
| | TOTAL THREE YEAR GRANTS | | | | | | | | | | | | | | | 4.02% | | |
| | | | | | | | | | | | | | | | | | | | |
| | Three Year Average | | | | | | | | | 4.02%/3 | | | | | 1.34% | | |
| (1)
| The net burn rate is calculated by adding options and full value awards granted, less any options and full-value awards forfeited, cancelled, or expired, divided by the weighted average shares outstanding.
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H. B. FULLER | 2023 Proxy Statement 62
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PROPOSAL 5—APPROVAL OF THE SECOND AMENDMENT AND RESTATEMENT OF THE H.B. FULLER COMPANY 2020 MASTER INCENTIVE PLAN TO INCREASE SHARES AND ADOPT CERTAIN OTHER AMENDMENTS
Based on the burn rates in fiscal years 2022, 2021 and 2020, our three-year average burn rate was 1.34%.
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 Second Amended and Restated 2020 Incentive Plan, is shown in the table below:
| | Total Potential Dilution
|
Remaining Reserve under 2020 Incentive Plan (“Remaining Reserve”)1
| | | 866,520
| |
Shares Subject To Outstanding Awards under 2020 Incentive Plan and Predecessor Plans (“Granted Shares Outstanding”)1,
| | | 5,746,096
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Common Stock Outstanding (“CSO”)1
| | | 53,798,746
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Total Current Dilution2
| | | 10.9%
| |
Share Increase under Second Amended and Restated 2020 Incentive Plan (“2023 Plan Shares”)
| | | 2,500,000
| |
Total Potential Dilution3
| | | 14.5%
| |
| (1)
| As of February 6, 2023.
| |
| (2)
| Calculated as (Remaining Reserve + Granted Shares Outstanding), divided by (Remaining Reserve + Granted Shares Outstanding + CSO).
| |
| (3)
| Calculated as (Remaining Reserve + Granted Shares Outstanding + requested Share increase in 2023), divided by (Remaining Reserve + Granted Shares Outstanding + requested Share increase in 2023 + CSO).
| |
Summary of Material Terms of the Second Amended and Restated 2020 Incentive Plan
The following summary of the material terms of the Second Amended and Restated 2020 Incentive Plan is qualified in its entirety by reference to the full text of the Second Amended and Restated 2020 Incentive Plan, which is attached as Annex B to this Proxy Statement.
Administration
The Compensation Committee will administer the Second 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 Second Amended and Restated 2020 Incentive Plan. In addition, the Compensation Committee can specify whether, and under what circumstances, awards to be received under the Second 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 Second Amended and Restated 2020 Incentive Plan. Subject to the provisions of the Second 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 Second Amended and Restated 2020 Incentive Plan and establish rules and regulations for the administration of the Second 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 Second 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 Second Amended and Restated 2020 Incentive Plan will be liable for any action or determination taken and made in good faith with respect to the Second Amended and Restated 2020 Incentive Plan or any award granted under the Second 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 Second 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 Second Amended and Restated 2020 Incentive Plan will be 5,000,000. Of that number, a maximum of 2,000,000 shares are available for “Full
H. B. FULLER | 2023 Proxy Statement 63
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PROPOSAL 5—APPROVAL OF THE SECOND AMENDMENT AND RESTATEMENT OF THE H.B. FULLER COMPANY 2020 MASTER INCENTIVE PLAN TO INCREASE SHARES AND ADOPT CERTAIN OTHER AMENDMENTS
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 Second 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 Second 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 Second Amended and Restated 2020 Incentive Plan. Subject to the Second 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 8, 2023, the record date for our 2023 Annual Meeting of Shareholders, approximately 7,141 executive officers and other employees and all eight non-employee directors would have been eligible to be selected by the Compensation Committee to receive awards under the Second Amended and Restated 2020 Incentive Plan. In fiscal year 2022, we granted awards to approximately 240 executive officers and other employees and all of our non-employee directors who were directors during fiscal year 2022.
Types of Awards and Terms and Conditions
The Second Amended and Restated 2020 Incentive Plan permits the granting of:
•
| stock options (including both incentive and non-qualified stock options);
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•
| stock appreciation rights;
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restricted stock and RSUs (including performance-based RSUs (“PSUs”);
•
| dividend equivalents; and
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•
| other stock-based awards.
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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 Second 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 Second 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 Second Amended and Restated 2020 Incentive Plan.
Vesting. The Second 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 Second Amended and Restated 2020 Incentive Plan.
The closing price of a share of our common stock as reported on the NYSE on February 8, 2023, the record date for our 2023 Annual Meeting of Shareholders was $72.14.
H. B. FULLER | 2023 Proxy Statement 64
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PROPOSAL 5—APPROVAL OF THE SECOND AMENDMENT AND RESTATEMENT OF THE H.B. FULLER COMPANY 2020 MASTER INCENTIVE PLAN TO INCREASE SHARES AND ADOPT CERTAIN OTHER AMENDMENTS
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 Second 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 Second 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 Second 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 Second 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 Second Amended and Restated 2020 Incentive Plan with respect to such award, to the extent of any such
H. B. FULLER | 2023 Proxy Statement 65
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PROPOSAL 5—APPROVAL OF THE SECOND AMENDMENT AND RESTATEMENT OF THE H.B. FULLER COMPANY 2020 MASTER INCENTIVE PLAN TO INCREASE SHARES AND ADOPT CERTAIN OTHER AMENDMENTS
forfeiture, reacquisition by us, termination or cancellation, will again be available for future awards under the Second 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 Second Amended and Restated 2020 Incentive Plan.
Amendment and Termination
The Second Amended and Restated 2020 Incentive Plan will terminate on January 24, 2033, 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 Second Amended and Restated 2020 Incentive Plan prior to expiration may extend beyond the expiration of the Second Amended and Restated 2020 Incentive Plan through the award’s normal expiration date.
The Board may amend, alter, suspend, discontinue or terminate the Second Amended and Restated 2020 Incentive Plan at any time, although shareholder approval must be obtained for any amendment to the Second Amended and Restated 2020 Incentive Plan that would (1) increase the number of shares of Common Stock available for issuance under the Second Amended and Restated 2020 Incentive Plan, (2) increase the award limits under the Second 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 Second 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 Second Amended and Restated 2020 Incentive Plan), or (6) cause us to be unable to grant incentive stock options under the Second 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 Second 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 Second 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 Second Amended and Restated 2020 Incentive Plan.
Clawback or Recoupment
All awards under the Second 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 and any amendments to such clawback policy as may be adopted from time to time 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 Second Amended and Restated 2020 Incentive Plan and subject to the terms of the Second 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 Second 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.
H. B. FULLER | 2023 Proxy Statement 66
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PROPOSAL 5—APPROVAL OF THE SECOND AMENDMENT AND RESTATEMENT OF THE H.B. FULLER COMPANY 2020 MASTER INCENTIVE PLAN TO INCREASE SHARES AND ADOPT CERTAIN OTHER AMENDMENTS
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 Second 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. Therefore, compensation paid to a covered executive in any given year in excess of $1 million will not be deductible.
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.
H. B. FULLER | 2023 Proxy Statement 67
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PROPOSAL 5—APPROVAL OF THE SECOND AMENDMENT AND RESTATEMENT OF THE H.B. FULLER COMPANY 2020 MASTER INCENTIVE PLAN TO INCREASE SHARES AND ADOPT CERTAIN OTHER AMENDMENTS
Section 409A of the Internal Revenue Code. The Compensation Committee will administer and interpret the Second 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 Second 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 Second Amended and Restated 2020 Incentive Plan.
New Plan Benefits
No benefits or amounts have been granted, awarded or received under the Second 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 Second Amended and Restated 2020 Incentive Plan. Accordingly, it is not possible to determine the benefits that will be received by eligible participants if the Second Amended and Restated 2020 Incentive Plan is approved by our shareholders.
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| THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE SECOND 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.
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Equity Compensation Plan Information
The following table summarizes information regarding our equity compensation plans as of December 2, 2022, the last trading day of our most recently completed fiscal year.
Period | | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights | | (b) Weighted- average exercise price of outstanding options, warrants and rights | | (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
Equity compensation plans approved by security holders | | | 5,314,1901 | | | | $ | 51.212 | | | | 1,268,6083 | |
Equity compensation plans not approved by security holders | | | - | | | | | N/A | | | | - | |
Total | | | 5,314,190 | | | | $ | 51.21 | | | | 1,268,608 | |
(1)
| Consists of outstanding stock options to acquire 4,823,070 shares of common stock, 284,178 outstanding time-based restricted stock units and 206,942 outstanding performance-based restricted stock units granted under the Company's equity compensation plans.
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(2)
| Consists of the weighted average exercise price of stock options granted under the Company's equity compensation plans.
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(3)
| Number of shares of common stock remaining available for future issuance under the Amended and Restated H.B. Fuller Company 2020 Master Incentive Plan.
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H. B. FULLER | 2023 Proxy Statement 68
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QUESTIONS AND ANSWERS
ABOUT THE MEETING
What is the purpose of the meeting?
At our Annual Meeting, shareholders will act upon the matters disclosed in the Notice of Annual Meeting of Shareholders that accompanies this Proxy Statement. These matters include the election of three directors, the ratification of the appointment of our independent registered public accounting firm, and 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”), a non-binding advisory vote on the frequency of an advisory vote on executive compensation (the “Frequency of Say on Pay Proposal”), and the second amendment and restatement of the H.B. Fuller Company 2020 Master Incentive Plan to increase the number of shares of common stock authorized for issuance under the Plan by 2,500,000 shares, and to adopt certain other amendments to the 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/FUL2023FUL2024. 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 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 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. 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/FUL2023FUL2024. 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 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;
● | 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
H. B. FULLER | 2023 Proxy Statement 69
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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); |
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 |
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. |
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.
How does the Board recommend that I vote?
The Board of Directors recommends a vote “FOR” each of the nominees for director, “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 2, 2023,November 30, 2024, and “FOR” the Say on Pay Proposal, for the “ONE YEAR” frequency for the Frequency of Say on Pay Proposal, and “FOR” the second amendment and restatement of the H.B. Fuller Company 2020 Master Incentive Plan.Proposal.
Who is entitled to vote at the meeting?
If you were a shareholder of record at the close of business on February 8, 2023,14, 2024, you are entitled to vote at the meeting.
As of the record date, 53,799,90654,435,548 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 53,799,90654,435,548 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
● | 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.
● | 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.
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QUESTIONS AND ANSWERS ABOUT THE MEETING
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 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’“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 of the appointment of Ernst & Young LLP as our independent registered public accounting firm and the Say On Pay Proposal, and the second 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.With respect to the Frequency of Say on Pay Proposal, if no option receives the affirmative vote of a majority of the shares of common stock represented and entitled to vote, the frequency selected by shareholders will be determined based on a plurality of the votes cast. This means that the option of one year, two years or three years that receives the highest number of votes cast by shareholders will be the frequency that has been selected by shareholders.
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”“AGAINST,” or “ABSTAIN” on the ratification of the appointment of Ernst & Young LLP the Say on Pay Proposal and the second amendment and restatement of the H.B. Fuller Company 2020 Master Incentive Plan. Shareholders may vote “ONE YEAR,” “TWO YEARS,” “THREE YEARS” or “ABSTAIN” on the Frequency of Say on Pay Proposal.
If you vote ABSTAIN"ABSTAIN" or WITHHOLD,"WITHHOLD," your shares will be counted as present at the meeting for the purposes of determining a quorum. If you ABSTAIN from voting on the Frequency of Say on Pay Proposal, and the frequency selected by shareholders is determined based on a plurality of the votes cast, this will have no effect on the frequency that is selected by shareholders. Otherwise, if you ABSTAIN"ABSTAIN" from voting on any proposal, your abstention has the same effect as a vote against that proposal. If you WITHHOLD"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 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 the Frequency of Say on Pay Proposal and the second 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.
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QUESTIONS AND ANSWERS ABOUT THE MEETING
What if I do not specify how I want my shares voted?
If you do not specify on your returned proxy card or voting instruction card (or when giving your proxy by telephone or via the Internet) how you want to vote your shares, we will vote them:
● | FOR all 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
FOR all the nominees for director;
FOR the Say on Pay Proposal;
FOR “ONE YEAR” for the Frequency of Say on Pay Proposal;
“FOR” the second amendment and restatement of the 2020 Incentive Plan; 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.
QUESTIONS 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 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 properly signed proxy card later to our Corporate Secretary; |
by submitting another proxy by telephone or via the Internet later; or
● | by submitting another proxy by telephone or via the Internet later; or |
by voting electronically at the virtual meeting.
● | 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 $13,000$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 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 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 20222023 Annual Report, including our Annual Report on Form 10-K, are available at www.proxyvote.com.
H. B. FULLER | 2023 Proxy Statement 72
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QUESTIONS AND ANSWERS ABOUT THE MEETING
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 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 20242025 Annual Meeting, please see “How can a shareholder present a proposal at the 20242025 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 20242025 Annual Meeting?
For a shareholder proposal to be considered for inclusion in our Proxy Statement for the 20242025 Annual Meeting, the written proposal must be received at our principal executive offices by the close of business on October 25, 2023.31, 2024. The proposal must comply with SEC rules regarding the inclusion of shareholder proposals in company-sponsored proxy materials.
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 20232025 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 8, 202413, 2025 and no earlier than the close of business on December 8, 2023.12, 2024. The proposal 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 Exchange Act. 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 2022Company’s 2023 Annual Report on Form 10-K?
If you receive a printed copy of the proxy materials in the mail, our 20222023 Annual Report, including our Annual Report on Form 10-K for the year ended December 3, 2022,2, 2023, accompanies this Proxy Statement. The 20222023 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 20222023 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 20222023 Annual Report, or paper copies of exhibits to the Form 10-K by writing to the Corporate Secretary, H.B. Fuller Company, P.O. Box 64683, St. Paul, Minnesota 55164-0683.
How do I contact the Corporate Secretary?
The Corporate Secretary is Timothy J. Keenan.Gregory O. Ogunsanya. The mailing address is the Office of the Corporate Secretary, P.O. Box 64683, St. Paul, Minnesota 55164-0683.
H. B. FULLER | 2024 Proxy Statement 67
H. B. FULLER | 2023 Proxy Statement 73
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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
H. B. FULLER | 2023 Proxy Statement 74
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ANNEX A
ANNEX A
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 December 3, 2022 | | For the Fiscal Year Ended November 27, 2021 | | Fiscal Year 2021 to Fiscal Year 2022 Increase (Decrease) | | 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) | | | $ | 180,313 | | | | | $ | 161,393 | | | | | 12% | | | | $ | 144,906 | | | $ | 180,313 | | | (20 | %) |
Acquisition project costs | | | | 10,830 | | | | | | 5,622 | | | | | | | | | | 16,874 | | | 10,830 | | | | |
Organizational realignment | | | | 6,386 | | | | | | 12,699 | | | | | | | | | | 29,900 | | | 6,386 | | | | |
Royal restructuring and integration | | | | 2,474 | | | | | | 4,195 | | | | | | | | | | 0 | | | 2,474 | | | | |
Project One | | | | 9,885 | | | | | | 9,426 | | | | | | | | | | 9,815 | | | 9,885 | | | | |
Other | | | | 12,791 | | | | | | (146 | ) | | | | | | | | | (611 | ) | | 12,791 | | | | |
Discrete tax items | | | | 9,308 | | | | | | 4,272 | | | | | | | | | | 26,085 | | | 9,308 | | | | |
Income tax effect on adjustments | | | | (10,699 | ) | | | | | (8,872 | ) | | | | | | | | | | (10,604 | ) | | (10,699 | ) | | | |
Adjusted net income attributable to H.B. Fuller (non-GAAP) | | | $ | 221,288 | | | | | $ | 188,589 | | | | | | | | | | $ | 216,365 | | | $ | 221,288 | | | | |
Diluted shares | | | | 55,269 | | | | | | 54,315 | | | | | | | | | | 55,958 | | | 55,269 | | | | |
Diluted earnings per share (GAAP) | | | $ | 3.26 | | | | | $ | 2.97 | | | | | 10% | | | | $ | 2.59 | | | $ | 3.26 | | | (21 | %) |
Adjusted diluted earnings per share (Adjusted EPS) non-GAAP1 | | | $ | 4.00 | | | | | $ | 3.47 | | | | | 15% | | | |
| | | | | | | | | | | | | | | | | | | |
Adjusted diluted earnings per share (Adjusted EPS) (non-GAAP)1 | | | $ | 3.87 | | | $ | 4.00 | | | (3 | %) |
| (1) | Adjusted EPS is a non-GAAP financial measure and excludes the after-tax items shown on the reconciliation table above, including costs related to accounting for acquisitions, costs associated with organizational realignment to support the Company’s strategic plan; costs associated with the integration and restructuring of the acquired Royal business; costs (benefits) associated with U.S. tax reform; Project ONE development costs; and other costs. |
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.
NET REVENUE - GAAP AMOUNT TO ADJUSTED NET REVENUE
AMOUNT USED FOR THE STIP
Fiscal Year Ended December 3, 20222, 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
Net Revenue (GAAP) | | $ | 3,749,183 | | |
Adjustments for acquisitions | | $ | (64,604 | ) | |
Foreign Exchange Adjustment to Budget Rates | | | 189,251 | | |
Adjusted Net Revenue – STIP (non-GAAP) | | $ | 3,873,830 | | |
ANNEX A
H. B. FULLER | 2023 Proxy Statement A-1
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ANNEX A
NET INCOME - GAAP AMOUNT TO ADJUSTED EBITDA USED FOR THE STIP
Fiscal Year Ended December 3, 20222, 2023
| | | 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) | | $ | 144,906 | | | $ | 180,313 | | | | | |
Adjustments | | | | | | | | | | | | |
Acquisition project costs | | | 16,874 | | | | 10,830 | | | | | |
Organizational realignment | | | 29,900 | | | | 6,386 | | | | | |
Royal restructuring and integration | | | 0 | | | | 2,474 | | | | | |
Project One | | | 9,815 | | | | 9,885 | | | | | |
Other | | | (611 | ) | | | 12,791 | | | | | |
Discrete tax items | | | 26,085 | | | | 9,308 | | | | | |
Income tax effect on adjustments | | | (10,604 | ) | | | (10,699 | ) | | | | |
Adjusted Net Income | | $ | 216,365 | | | $ | 221,288 | | | | | |
Add: | | | | | | | | | | | | |
Interest expense | | | 131,913 | | | | 91,547 | | | | | |
Interest income | | | (3,943 | ) | | | (7,790 | ) | | | | |
Income taxes | | | 78,047 | | | | 78,576 | | | | | |
Depreciation and Amortization expense | | | 158,456 | | | | 146,394 | | | | | |
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 | | | (11,630 | ) | | | 18,623 | | | | | |
Adjusted EBITDA – STIP (non-GAAP) | | $ | 555,626 | | | $ | 533,277 | | | | | |
H. B. FULLER | 2024 Proxy Statement A-2
| | For the Fiscal Year Ended December 3, 2022 | For the Fiscal Year Ended November 27, 2021 | | | Fiscal Year 2021 to Fiscal Year 2022 Increase (Decrease) | |
| | | | | | | | | | | | |
Net Income attributable to H.B. Fuller (GAAP) | | $ | 180,313 | | | $ | 161,393 | | | | | |
Adjustments | | | | | | | | | | | | |
Acquisition project costs | | | 10,830 | | | | 5,622 | | | | | |
Organizational realignment | | | 6,386 | | | | 12,699 | | | | | |
Royal restructuring and integration | | | 2,474 | | | | 4,195 | | | | | |
Project One | | | 9,885 | | | | 9,426 | | | | | |
Other | | | 12,791 | | | | (146 | ) | | | | |
Discrete tax items | | | 9,308 | | | | 4,272 | | | | | |
Income tax effect on adjustments | | | (10,699 | ) | | | (8,872 | ) | | | | |
Adjusted Net Income | | $ | 221,288 | | | | 188,589 | | | | | |
Add: | | | | | | | | | | | | |
Interest expense | | | 91,547 | | | | 78,175 | | | | | |
Interest income | | | (7,790 | ) | | | (9,476 | ) | | | | |
Income taxes | | | 78,576 | | | | 67,632 | | | | | |
Depreciation and Amortization expense | | | 146,394 | | | | 142,003 | | | | | |
Adjusted EBITDA (non-GAAP) | | | 530,015 | | | | 466,923 | | | 14% | |
Adjustments for acquisitions | | | (15,361 | ) | | - | | | | | |
Foreign Exchange Adjustment to Budget Rates | | | 18,623 | | | | (8,361 | ) | | | | |
Adjusted EBITDA – STIP (non-GAAP) | | $ | 533,277 | | | $ | 458,562 | | | | | |
| | | | | | | | | | | | |
ANNEX A
H. B. FULLER | 2023 Proxy Statement A-2
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ANNEX A
ENGINEERING ADHESIVES (“EA”(“EA”) SEGMENT NET REVENUE - GAAP AMOUNT
TO ADJUSTED NET REVENUE USED FOR THE STIP
Fiscal Year Ended December 3, 20222, 2023
| | Fiscal Year Ended December 3, 2022 | | | Fiscal Year Ended November 27, 2021 | | | Fiscal Year 2021 to Fiscal Year 2022 Increase (Decrease) | | | 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) | | $ | 1,532,639 | | | $ | 1,371,756 | | | 12% | | | $ | 1,428,744 | | | $ | 1,532,639 | | | (7 | %) |
Adjustments for acquisitions | | $ | (7,421 | ) | | | | | | | | | | $ | (5,189 | ) | | $ | (7,421 | ) | | | |
Foreign Exchange Adjustment to Budget Rates | | | 82,196 | | | | (26,998 | ) | | | | | | | (37,720 | ) | | 82,196 | | | | |
EA Segment Net Revenue - STIP (non-GAAP) | | $ | 1,607,414 | | | $ | 1,344,758 | | | 20% | | | $ | 1,385,835 | | | $ | 1,607,414 | | | (14 | %) |
EA SEGMENT ADJUSTED NET INCOME - GAAP AMOUNT
TO ADJUSTED EBITDA USED FOR THE STIP
Fiscal Year Ended December 3, 20222, 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
| | Fiscal Year Ended December 3, 2022 | | | Fiscal Year Ended November 27, 2021 | | | Fiscal Year 2021 to Fiscal Year 2022 Increase (Decrease) | |
EA Adhesives Segment Net Income (GAAP) | | $ | 168,873 | | | $ | 135,913 | | | | | |
Add: Depreciation and Amortization | | | 58,307 | | | | 61,081 | | | | | |
Add: Non-Operating Pension Expense or Income | | | 8,768 | | | | 10,137 | | | | | |
Adjusted EBITDA (non-GAAP) | | | 235,948 | | | | 207,131 | | | 14% | |
Adjustments for acquisitions | | | (1,245 | ) | | | | | | | | |
Foreign Exchange Adjustment to Budget Rates | | | 9,853 | | | | (5,781 | ) | | | | |
EA Adhesives Segment Adjusted EBITDA – STIP (non-GAAP) | | $ | 244,556 | | | $ | 201,350 | | | 21% | |
H. B. FULLER | 2023 Proxy Statement A-3
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ANNEX A
CONSTRUCTION ADHESIVES (“CA”(“CA”) SEGMENT
NET REVENUE - GAAP AMOUNT TO ADJUSTED NET REVENUE USED FOR THE STIP
Fiscal Year Ended December 3, 20222, 2023
| | Fiscal Year Ended December 3, 2022 | | | Fiscal Year Ended November 27, 2021 | | | Fiscal Year 2021 to Fiscal Year 2022 Increase (Decrease) | | | 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) | | $ | 520,610 | | | $ | 433,519 | | | 20% | | | $ | 480,703 | | | $ | 520,610 | | | (8 | %) |
Adjustments for acquisitions | | $ | (53,716 | ) | | | - | | | | | | | (15,838 | ) | | (53,716 | ) | | | |
Foreign Exchange Adjustment to Budget Rates | | | 5,685 | | | | (3,011 | ) | | | | | | | (6,022 | ) | | 5,685 | | | | |
CA Segment Adjusted Net Revenue – STIP (non-GAAP) | | $ | 472,579 | | | $ | 430,508 | | | 10% | | | $ | 458,843 | | | $ | 472,579 | | | (3 | %) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
CASEGMENT NET INCOME - GAAP AMOUNT TO ADJUSTED EBITDA USED FOR THE STIP
Fiscal Year Ended December 3, 20222, 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
| | Fiscal Year Ended December 3, 2022 | | | Fiscal Year Ended November 27, 2021 | | | Fiscal Year 2021 to Fiscal Year 2022 Increase (Decrease) | |
CA Segment Net Income (GAAP) | | $ | 22,989 | | | $ | 14,148 | | | | | |
Add: Depreciation and Amortization | | $ | 41,713 | | | $ | 35,003 | | | | | |
Add: Non-Operating Pension Expense or Income | | | 9,485 | | | | 8,739 | | | | | |
Adjusted EBITDA (non-GAAP) | | | 74,187 | | | | 57,890 | | | 28% | |
Adjustments for acquisitions | | | (12,414 | ) | | | - | | | | | |
Foreign Exchange Adjustment to Budget Rates | | | 20 | | | | (267 | ) | | | | |
CA Segment Adjusted EBITDA – STIP (non-GAAP) | | $ | 61,793 | | | $ | 57,623 | | | 7% | |
H. B. FULLER | 2023 Proxy Statement A-4
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ANNEX A
HYGIENE, HEALTH AND CONSUMABLE (“HHC”(“HHC”) ADHESIVES SEGMENT
NET REVENUE - GAAP AMOUNT TO ADJUSTED NET REVENUE USED FOR THE STIP
Fiscal Year Ended December 3, 20222, 2023
| | Fiscal Year Ended December 3, 2022 | | | Fiscal Year Ended November 27, 2021 | | | Fiscal Year 2021 to Fiscal Year 2022 Increase (Decrease) | | | 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) | | $ | 1,695,934 | | | | 1,472,756 | | | 15.0% | | | $ | 1,601,487 | | | $ | 1,695,934 | | | (6 | %) |
Adjustments for acquisitions | | $ | (3,467 | ) | | | - | | | | | | | $ | (73,250 | ) | | $ | (3,467 | ) | | | |
Foreign Exchange Adjustment to Budget Rates | | | 101,370 | | | | (18,253 | ) | | | | | | | (22,463 | ) | | 101,370 | | | | |
HHC Adhesives Segment Adjusted Net Revenue – STIP (non-GAAP) | | $ | 1,793,837 | | | $ | 1,454,503 | | | 23% | | | $ | 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 3, 20222, 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
| | Fiscal Year Ended December 3, 2022 | | | Fiscal Year Ended November 27, 2021 | | | Fiscal Year 2021 to Fiscal Year 2022 Increase (Decrease) | |
HHC Adhesives Segment Net Income (GAAP) | | $ | 168,129 | | | | 138,366 | | | | | |
Add: Depreciation and Amortization | | $ | 46,374 | | | | 45,919 | | | | | |
Add: Non-Operating Pension Expense or Income | | | 9,485 | | | | 13,194 | | | | | |
Adjusted EBITDA (non-GAAP) | | | 223,988 | | | | 197,479 | | | 13% | |
Adjustments for acquisitions | | | (1,701 | ) | | | - | | | | | |
Foreign Exchange Adjustment to Budget Rates | | | 12,392 | | | | (2,148 | ) | | | | |
HHC Adhesives Segment Adjusted EBITDA – STIP (non-GAAP) | | $ | 234,679 | | | $ | 195,331 | | | 20% | |
| | | | | | | | | | | | |
H. B. FULLER | 2023 Proxy Statement A-5
|
ANNEX A
OPERATING INCOME – GAAP AMOUNT TO ROIC USED FOR THE LTIP
Fiscal Year ended December 3, 20222, 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 | % | | | | | | | | |
Operating Income (GAAP)(1)
| | | 322,718
| | |
Other income (expense), net1
| | | 30,081
| | |
Adjustments for Acquisitions
| | | (7,952
| )
| |
Adjustments2
| | | 34,936
| | |
Adjusted Operating Income
| | | 379,783
| | |
| | | | | |
Tax Expense
| | | (101,402
| )
| |
Income from equity method investments
| | | 5,665
| | |
Net operating profit after taxa
| | | 284,046
| | |
| | | | | |
| | | | | |
Invested Capitalb
| | | 3,045,437
| | |
| | | | | |
ROIC (a/b) (non-GAAP)
| | | 9.3
| %
| |
| | | | | |
(1)
| All components of net periodic pension (cost) benefit and net periodic pensionretirement postretirement benefit (cost) benefit and net periodic retirement postretirement benefitother than service (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 Company’s strategic plan; costs associated with the integration and restructuring of the acquired Royal Adhesives business; transactional tax expense associated with an audit settlement,settlement; Project ONE developmentdevelopment; and other costs. |
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 | |
H. B. FULLER | 2024 Proxy Statement A-6
Acquisition project costs
| | | 10,830
| | |
Organizational realignment
| | | 7,601
| | |
Royal restructuring and integration
| | | 2,500
| | |
Project One
| | | 9,885
| | |
Other
| | | 4,120
| | |
Total Adjustments
| | | 34,936
| | |
| | | | | |
H. B. FULLER | 2023 Proxy Statement A-6
|
ANNEX B
SECOND amended and restated H.B. fuller company
2020 master INCENTIVE PLAN
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, and may only be granted an Award in connection with the provision of services not related to capital raising or promoting or maintaining a market for the Shares.
(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.
H. B. FULLER | 2023 Proxy Statement B-1
ANNEX B
(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 Second 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.
H. B. FULLER | 2023 Proxy Statement B-2
ANNEX B
(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.
| | |
| (i)
| Subject to adjustment as provided in Section 4(c) of the Plan, the aggregate number of Shares that may be issued under all Awards under the Plan shall equal 5,000,000 (the authorized net increase of Shares in connection with the adoption of the Plan), plus any Shares subject to any outstanding award under the Prior Plans that, after April 2, 2020, 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, subject to the share counting provisions of Section 4(b) below.
|
| | |
| (ii)
| Notwithstanding the foregoing and subject to adjustment as provided in Section 4(c) of the Plan, the aggregate number of Shares that may be issued under all Full Value Awards shall not exceed the sum of 2,000,000, plus any Shares subject to any outstanding full value award under the Prior Plan that, after April 2, 2020, 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, subject to the share counting provisions of Section 4(b) below.
|
| | |
| (iii)
| On and after April 2, 2020, the date shareholders originally approved the Plan, grants of new awards have been permanently discontinued under the Prior Plans, but all outstanding awards previously granted under the Prior Plans shall remain outstanding and subject to the terms of the Prior Plans.
|
(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.
| | |
| (i)
| Shares Added Back to Reserve. Subject to the limitations in Section 4(b)(ii) below, if any Shares covered by an Award or to which an Award relates are not purchased or are forfeited or are reacquired by the Company, 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 Plan with respect to such Award, to the extent of any such forfeiture, reacquisition by the Company, termination or cancellation, shall again be available for granting Awards under the Plan.
|
| | |
| (ii)
| Shares Not Added Back to Reserve. Notwithstanding anything to the contrary in Section 4(b)(i) above, the following Shares will not again become available for issuance under the Plan: (A) any Shares which would have been issued upon any exercise of an Option but for the fact that the exercise price was paid by a “net exercise” pursuant to Section 6(a)(iii)(B) or any Shares tendered in payment of the exercise price of an Option; (B) any Shares withheld by the Company or Shares tendered to satisfy any tax withholding obligation with respect to an Award; (C) Shares covered by a stock-settled Stock Appreciation Right issued under the Plan that are not issued in connection with settlement in Shares upon exercise; or (D) Shares that are repurchased by the Company using Option exercise proceeds.
|
| | |
| (iii)
| Cash-Only Awards. Awards that do not entitle the holder thereof to receive or purchase Shares shall not be counted against the aggregate number of Shares available for Awards under the Plan.
|
| | |
| (iv)
| Substitute Awards Relating to Acquired Entities. Shares issued under Awards granted in substitution for awards previously granted by an entity that is acquired by or merged with the Company or an Affiliate shall not be counted against the aggregate number of Shares available for Awards under the Plan.
|
(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
H. B. FULLER | 2023 Proxy Statement B-3
ANNEX B
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.
| | |
| (i)
| Annual Limitations for Awards Granted to Employees, Officers, Consultants, Etc. 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 (subject to adjustment as provided for in Section 4(c) of the Plan), in the aggregate in any calendar year. The foregoing limit applies solely to Awards that are denominated in Shares (whether or not paid in Shares).
|
| | |
| (ii)
| Annual Limitation for Compensation Granted to Non-Employee Directors. The maximum value of all equity and cash-based compensation granted to a Director who is not also an employee of the Company or an Affiliate 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). Furthermore, the independent members of the Board may make exceptions to this limit for a non-executive chair of the Board, provided that the non-employee director receiving such additional compensation may not participate in the decision to award such compensation.
|
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:
| | |
| (i)
| Exercise Price. The purchase price per Share purchasable under an Option shall be determined by the Committee and shall not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant of such Option; provided, however, that the Committee may designate a purchase price below Fair Market Value on the date of grant if the Option is granted in substitution for a stock option previously granted by an entity that is acquired by or merged with the Company or an Affiliate.
|
| | |
| (ii)
| Option Term. The term of each Option shall be fixed by the Committee at the date of grant but shall not be longer than 10 years from the date of grant.
|
| | |
| (iii)
| Time and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised within the Option term, either in whole or in part, and the method of exercise, except that any exercise price tendered shall be in either cash, Shares having a Fair Market Value on the exercise date equal to the applicable exercise price or a combination thereof, as determined by the Committee.
|
| | |
| (A)
| Promissory Notes. For avoidance of doubt, the Committee may not accept a promissory note as consideration.
|
| | |
| (B)
| Net Exercises. The terms of any Option may be written to permit the Option to be exercised by delivering to the Participant a number of Shares having an aggregate Fair Market Value (determined as of the date of exercise) equal to the excess, if any, 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.
|
| | |
| (iv)
| Incentive Stock Options. Notwithstanding anything in the Plan to the contrary, the following additional provisions shall apply to the grant of stock options which are intended to qualify as Incentive Stock Options:
|
| | |
| (A)
| The Committee will not grant Incentive Stock Options in which the aggregate Fair Market Value (determined as of the time the Option is granted) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under this Plan and all other plans of the Company and its Affiliates) shall exceed $100,000.
|
H. B. FULLER | 2023 Proxy Statement B-4
ANNEX B
| | |
| (B)
| All Incentive Stock Options must be granted within ten years from the earlier of the date on which this Plan was adopted by the Board or the date this Plan was approved by the shareholders of the Company.
|
| | |
| (C)
| Unless sooner exercised, all Incentive Stock Options shall expire and no longer be exercisable no later than ten (10) years after the date of grant; provided, however, that in the case of a grant of an Incentive Stock Option to a Participant who, at the time such Option is granted, owns (within the meaning of Section 422 of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of its Affiliates, such Incentive Stock Option shall expire and no longer be exercisable no later than five (5) years from the date of grant.
|
| | |
| (D)
| The purchase price per Share for an Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant of the Incentive Stock Option; provided, however, that, in the case of the grant of an Incentive Stock Option to a Participant who, at the time such Option is granted, owns (within the meaning of Section 422 of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of its Affiliates, the purchase price per Share purchasable under an Incentive Stock Option shall be not less than one hundred ten percent (110%) of the Fair Market Value of a Share on the date of grant of the Incentive Stock Option.
|
| | |
| (E)
| Any Incentive Stock Option authorized under the Plan shall contain such other provisions as the Committee shall deem advisable, but shall in all events be consistent with and contain all provisions required in order to qualify the Option as an Incentive Stock Option.
|
(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:
| | |
| (i)
| Restrictions. Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may impose (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right or property with respect thereto), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise as the Committee may deem appropriate. For purposes of clarity and without limiting the Committee’s general authority under Section 3(a), vesting of such Awards may, at the Committee’s discretion, be conditioned upon the Participant’s completion of a specified period of service with the Company or an Affiliate, or upon the achievement of one or more performance goals established by the Committee, or upon any combination of service-based and performance-based conditions (subject to the minimum requirements in Section 6). Notwithstanding the foregoing, rights to dividend or Dividend Equivalent payments shall be subject to the limitations described in Section 6(d).
|
| | |
| (ii)
| Issuance and Delivery of Shares. Any Restricted Stock granted under the Plan shall be issued at the time such Awards are granted and may be evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of a stock certificate or certificates, which certificate or certificates shall be held by the Company or held in nominee name by the stock transfer agent or brokerage service selected by the Company to provide such services for the Plan. Shares representing Restricted Stock that are no longer subject to restrictions shall be delivered (including by updating the book-entry registration) to the Participant promptly after the applicable restrictions lapse or are waived. In the case of Restricted Stock Units, no Shares shall be issued at the time such Awards are granted. Upon the lapse or waiver of restrictions and the restricted period relating to Restricted Stock Units evidencing the right to receive Shares, such Shares shall be issued and delivered to the holder of the Restricted Stock Units.
|
H. B. FULLER | 2023 Proxy Statement B-5
ANNEX B
(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.
| | |
| (i)
| Consideration for Awards. Awards may be granted for no cash consideration or for any cash or other consideration as may be determined by the Committee or required by applicable law.
|
| | |
| (ii)
| Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any other plan of the Company or any Affiliate. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under any other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards.
|
| | |
| (iii)
| Forms of Payment under Awards. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee shall determine (including, without limitation, cash, Shares, other securities (but excluding promissory notes), other Awards or other property or any combination thereof), and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee.
|
| | |
| (iv)
| Limits on Transfer of Awards. No Award (other than fully vested and unrestricted Shares issued pursuant to any Award) and no right under any such Award shall be transferable by a Participant other than by will or by the laws of descent and distribution, and no Award (other than fully vested and unrestricted Shares issued pursuant to any Award) or right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate. Notwithstanding the foregoing, the Committee may permit the transfer of an Award to family members if such transfer is for no value and in accordance with the rules of Form S-8. The Committee may also establish procedures as it deems appropriate for a Participant to designate a person or persons, as beneficiary or beneficiaries, to exercise the rights of the Participant and receive any property distributable with respect to any Award in the event of the Participant’s death.
|
| | |
| (v)
| Restrictions; Securities Exchange Listing. All Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such restrictions as the Committee may deem advisable under the Plan, applicable federal or state securities laws and regulatory requirements, and the Committee may cause appropriate entries to be made with respect to, or legends to be placed on the certificates for, such Shares or other securities to reflect such restrictions. The Company shall not be required to deliver any Shares or other securities covered by an Award unless and until the requirements of any federal or state securities or other laws, rules or regulations (including the rules of any securities exchange) as may be determined by the Company to be applicable are satisfied.
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| | |
| (vi)
| Prohibition on Option and Stock Appreciation Right Repricing. Except as provided in Section 4(c) hereof, the Committee may not, without prior approval of the Company’s shareholders, seek to effect any re-pricing of any previously granted, “underwater” Option or Stock Appreciation Right by: (i) amending or modifying the terms of the Option or Stock Appreciation Right to lower the exercise price; (ii) canceling the underwater Option or Stock Appreciation Right and granting either (A) replacement Options or Stock Appreciation Rights having a lower exercise price; or (B) Restricted Stock, Restricted Stock Units or Other Stock-Based Award in exchange; or (iii) cancelling or repurchasing the underwater Option or Stock Appreciation Right for cash or other securities. An Option or Stock Appreciation Right will be deemed to be “underwater” at any time when the Fair Market Value of the Shares covered by such Option or Stock Appreciation Right is less than the exercise price.
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H. B. FULLER | 2023 Proxy Statement B-6
ANNEX B
| | |
| (vii)
| Minimum Vesting. Except as provided below, no Award shall be granted with terms providing for any right of exercise or lapse of any vesting obligations earlier than a date that is at least one year following the date of grant (or, in the case of vesting based upon performance based objectives, exercise and vesting restrictions cannot lapse earlier than the one year anniversary measured from the commencement of the period over which performance is evaluated). Notwithstanding the foregoing, the following Awards that do not comply with the one year minimum exercise and vesting requirements may be issued:
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| | |
| (A)
| substitute Awards granted in connection with awards that are assumed, converted or substituted pursuant to a merger, acquisition or similar transaction entered into by the Company or any of its subsidiaries;
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| | |
| (B)
| shares delivered in lieu of fully vested cash Awards or any cash incentive compensation earned by a Participant, provided that the performance period for such incentive compensation was at least one fiscal year; and
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| | |
| (C)
| any additional Awards the Committee may grant, up to a maximum of five percent (5%) of the aggregate number of Shares available for issuance under this Plan. For purposes of counting Shares against the five percent (5%) limitation, the Share counting rules under Section 4 of the Plan apply.
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| Nothing in this Section 6 shall limit the authority of the Committee to provide for the acceleration of the exercisability of any Award or the lapse of any restrictions relating to any Award except where expressly limited in Section 6(f)(viii).
|
| | |
| (viii)
| Limits on Acceleration or Waiver of Restrictions Upon Change in Control. No Award Agreement shall contain a definition of change in control that has the effect of accelerating the exercisability of any Award or the lapse of restrictions relating to any Award upon only the announcement or shareholder approval of (rather than consummation of) any reorganization, merger or consolidation of, or sale or other disposition of all or substantially all of the assets of, the Company.
|
| | |
| (ix)
| Section 409A Provisions. Notwithstanding anything in the Plan or any Award Agreement to the contrary, to the extent that any amount or benefit that constitutes “deferred compensation” to a Participant under Section 409A and applicable guidance thereunder is otherwise payable or distributable to a Participant under the Plan or any Award Agreement solely by reason of the occurrence of a change in control or due to the Participant’s disability or “separation from service” (as such term is defined under Section 409A), such amount or benefit will not be payable or distributable to the Participant by reason of such circumstance unless the Committee determines in good faith that (i) the circumstances giving rise to such change in control event, disability or separation from service meet the definition of a change in control event, disability, or separation from service, as the case may be, in Section 409A(a)(2)(A) of the Code and applicable proposed or final regulations, or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A by reason of the short-term deferral exemption or otherwise. Any payment or distribution that otherwise would be made to a Participant who is a Specified Employee (as determined by the Committee in good faith) on account of separation from service may not be made before the date which is six months after the date of the Specified Employee’s separation from service (or if earlier, upon the Specified Employee’s death) unless the payment or distribution is exempt from the application of Section 409A by reason of the short-term deferral exemption or otherwise.
|
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:
| | |
| (i)
| amend the eligibility for, and limitations or conditions imposed upon, participation in the Plan;
|
| | |
| (ii)
| subject to the limitations in Section 6, amend any terms relating to the granting or exercise of Awards, including but not limited to terms relating to the amount and payment of the exercise price, or the vesting, expiry, assignment or adjustment of Awards, or otherwise waive any conditions of or rights of the Company under any outstanding Award, prospectively or retroactively;
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| | |
| (iii)
| make changes that are necessary or desirable to comply with applicable laws, rules, regulations and policies of any applicable governmental entity or stock exchange (including amendments to Awards necessary or desirable to maximize any available tax deduction or to avoid any adverse tax results, and no action taken to comply with such laws, rules, regulations and policies shall be deemed to impair or otherwise adversely alter or impair the rights of any holder of an Award or beneficiary thereof); or
|
H. B. FULLER | 2023 Proxy Statement B-7
ANNEX B
| | |
| (iv)
| amend any terms relating to the administration of the Plan, including the terms of any administrative guidelines or other rules related to the Plan.
|
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:
| | |
| (I)
| require shareholder approval under the rules or regulations of the Securities and Exchange Commission, the New York Stock Exchange or any other securities exchange that are applicable to the Company;
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| | |
| (II)
| increase the number of shares authorized under the Plan as specified in Section 4(a) of the Plan;
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| | |
| (III)
| permit repricing of Options or Stock Appreciation Rights, which is currently prohibited by Section 6 of the Plan;
|
| | |
| (IV)
| permit the award of Options or Stock Appreciation Rights at a price less than one-hundred percent (100%) of the Fair Market Value of a Share on the date of grant of such Option or Stock Appreciation Right, contrary to the provisions of Section 6(a)(i) and Section 6(b) of the Plan;
|
| | |
| (V)
| increase the maximum term permitted for Options and Stock Appreciation Rights as specified in Section 6(a) and Section 6(b); or
|
| | |
| (VI)
| increase the annual limitations subject to the annual limitations contained in Section 4(d) of the Plan.
|
(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:
| | |
| (i)
| either (A) termination of any Award, 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 the Award or realization of the Participant’s vested rights (and, for the avoidance of doubt, if, as of the date of the occurrence of the transaction or event described in this Section 7(b)(i)(A), the Committee or the Board determines in good faith that no amount would have been attained upon the exercise of the Award or realization of the Participant’s rights, then the Award may be terminated by the Company without any payment) or (B) the replacement of the Award with other rights or property selected by the Committee or the Board, in its sole discretion;
|
| | |
| (ii)
| that the Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be 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)
| that the Award shall be exercisable or payable or fully vested with respect to all Shares covered thereby, notwithstanding anything to the contrary in the applicable Award Agreement; or
|
| | |
| (iv)
| that the Award cannot vest, be exercised or become payable after a date certain in the future, which may be the effective date of the event.
|
(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
H. B. FULLER | 2023 Proxy Statement B-8
ANNEX B
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.
H. B. FULLER | 2023 Proxy Statement B-9
ANNEX B
(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 the Amended and Restated H.B. Fuller Company 2020 Master Incentive Plan were approved by the Board on January 21, 2021 and became effective when approved by the shareholders of the Company on April 8, 2021. The amendments to the plan under the Second Amended and Restated H.B. Fuller Company 2020 Master Incentive Plan were approved by the Board on January 24, 2023 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 6, 2023, 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 24, 2033 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.
H. B. FULLER | 2023 Proxy Statement B-10
. Mitau (Class III) 03) Teresa J. Rasmussen (Class III) For All Withhold All For All Except To withhold authority to vote for any individual nominee(s), mark "For All Except" and write the number(s) of the nominee(s) on the line below. The Board of Directors recommends you vote FOR the following proposals: 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 December 2, 2023. 3. A non-binding advisory vote to approve the compensation of our named executive officers as disclosed in the Proxy Statement. For Against Abstain The Board of Directors recommends you vote "1 Year" on the following proposal: 4. A non-binding advisory vote on the frequency of an advisory vote on executive compensation of our named executive officers as disclosed in the Proxy Statement. 1 Year 2 Years 3 Years Abstain The Board of Directors recommends you vote FOR the following proposal: 5. Approval of the Second Amendment and Restatement of the H.B. Fuller Company 2020 Master Incentive Plan to increase shares and adopt certain other amendments. For Against Abstain NOTE: The shares represented by this proxy when properly executed will be voted in the manner directed herein by the undersigned shareholder(s). If no direction is made, this proxy will be voted FOR items 1, 2, 3 and 5 and for "1 Year" for item 4. If any other matters properly come before the meeting, the persons named in the proxy statement will vote in their discretion. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, trustee or guardian, please add your title as such. When signing as joint tenants, all parties in the joint tenancy must sign. If a signer is a corporation, please sign in full corporate name by duly authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. D95844-P82836 H.B. FULLER COMPANY Annual Meeting of Shareholders April 6, 2023 This proxy is solicited by the Board of Directors For Registered Shareholders: The undersigned, revoking all prior proxies, appoints Celeste B. Mastin, John J. Corkrean and Timothy J. Keenan, or any one or more of them, as proxies, with full power of substitution, to represent the undersigned and to vote, as indicated on the reverse side and otherwise in their discretion upon such other matters as may properly come before the meeting, all shares of the common stock of H.B. Fuller Company which the undersigned is entitled to vote at the Annual Meeting of Shareholders of the Company to be held over the Internet at www.virtualshareholdermeeting.com/FUL2023 on Thursday, April 6, 2023 at 10:00 a.m. Central Time, and at any adjournment thereof. The undersigned hereby acknowledges receipt of the Proxy Statement for the Annual Meeting. For participants in the H. B. Fuller Company 401(k) & Retirement Plan (the "401(k) Plan"): This voting instruction form is sent to you on behalf of Great-West Trust Company, LLC as Trustee of the 401(k) Plan. Please complete this form on the reverse side, sign your name exactly as it appears on the reverse side, and return it in the enclosed envelope. For the 401(k) Plan, your instructions must be received no later than 11:59 p.m. Eastern Time on Monday, April 3, 2023, to be counted. As a participant in the 401(k) Plan, the undersigned hereby directs the appropriate above-named Trustee, to vote all shares of common stock of H.B. Fuller Company represented by the undersigned's proportionate interest in the 401(k) Plan at the Annual Meeting of Shareholders to be held on Thursday, April 6, 2023 at 10:00 a.m. Central Time, and at any adjournment thereof, upon the matters set forth on the reverse side and upon such other matters as may properly come before the meeting. Only the Trustee can vote these shares. You cannot vote these shares at the Annual Meeting. Continued and to be signed on reverse side
