UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended October 31, 2014
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission file number
0-7977
NORDSON CORPORATION
(Exact name of Registrant as specified in its charter)
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Ohio
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34-0590250
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(State of incorporation)
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(I.R.S. Employer Identification No.)
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28601 Clemens Road
Westlake, Ohio
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44145
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(Address of principal executive offices)
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(Zip Code)
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(440) 892-1580
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(Registrant’s Telephone Number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
Common Shares, without par value
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
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No
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes
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No
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90
days. Yes
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No
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such
files). Yes
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No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K.
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Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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(Do not check if smaller reporting company)
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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes
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No
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The aggregate market value of Common Shares, no par value per share, held by nonaffiliates (based on the closing sale price on the Nasdaq Stock Market) as
of April 30, 2014 was approximately $4,713,344,000.
There were 62,211,946 Common Shares outstanding as of November 28, 2014.
Documents incorporated by reference:
Portions of the Proxy Statement for the 2015 Annual Meeting — Part III
Table
of Contents
Table of Contents
PART I
NOTE REGARDING AMOUNTS AND FISCAL YEAR REFERENCES
In this annual report, all amounts related to United States dollars and foreign currency and to the number of Nordson Corporation’s common shares, except for per share earnings and dividend amounts,
are expressed in thousands. Unless the context otherwise indicates, all references to “we” or the “Company” mean Nordson Corporation.
Unless otherwise noted, all references to years relate to our fiscal year ending October 31.
Gen
eral
Description of Business
Nordson engineers, manufactures and markets differentiated products and systems used to dispense, apply and
control adhesives, coatings, polymers, sealants, biomaterials, and other fluids, to test and inspect for quality, and to treat and cure surfaces. These products are supported with extensive application expertise and direct global sales and service.
We serve a wide variety of consumer non-durable, consumer durable and technology end markets including packaging, nonwovens, electronics, medical, appliances, energy, transportation, building and construction, and general product assembly and
finishing.
Our strategy for long-term growth is based on solving customers’ needs globally. We are headquartered in Westlake, Ohio, and
our products are marketed through a network of direct operations in more than 30 countries. Consistent with this global strategy, approximately 70 percent of our revenues were generated outside the United States in 2014.
We have 5,966 employees worldwide. Principal manufacturing facilities are located in the United States, Belgium, the People’s Republic of China,
Germany, India, the Netherlands, Thailand and the United Kingdom.
Corporate P
urpose and Goals
We strive to be a vital, self-renewing, worldwide organization that, within the framework of ethical behavior and enlightened citizenship, grows and
produces wealth for our customers, employees, shareholders and communities.
We operate for the purpose of creating balanced, long-term
benefits for all of our constituencies.
Although every quarter may not produce increased sales, net income and earnings per share, or exceed
the comparative prior year’s quarter, we do expect to produce long-term gains. When short-term swings occur, we do not intend to alter our basic objectives in efforts to mitigate the impact of these natural occurrences.
We drive organic growth by continually introducing new products and technology, providing high levels of customer service and support, capturing rapidly
expanding opportunities in emerging geographies, and by leveraging existing technology into new applications. Additional growth comes through the acquisition of companies that serve international growth markets, share our business model
characteristics and can leverage our global infrastructure.
We create benefits for our customers through a Package of
Values
®
, which includes carefully engineered, durable products; strong service support; the backing of a
well-established, worldwide company with financial and technical strengths; and a corporate commitment to deliver what was promised.
We strive
to provide genuine customer satisfaction; it is the foundation upon which we continue to build our business.
Complementing our business
strategy is the objective to provide opportunities for employee self-fulfillment, growth, security, recognition and equitable compensation. This goal is met through the Human Resources department’s facilitation of employee training and
leadership training and the creation of on-the-job growth opportunities. The result is a highly qualified and professional global team capable of meeting corporate objectives.
We recognize the value of employee participation in the planning process. Strategic and operating plans are developed by all business units, resulting in a sense of ownership and commitment on the part of
employees in accomplishing our objectives. In addition, employees participate in Lean and Six Sigma initiatives to continuously improve our processes.
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We are an equal opportunity employer.
We are committed to contributing approximately five percent of domestic pretax earnings to human welfare services, education and other charitable activities, particularly in communities where we have
significant operations.
Fina
ncial Information About Operating Segments, Foreign and Domestic Operations and
Export Sales
In accordance with generally accepted accounting standards, we have reported information about our three operating segments,
including information about our foreign and domestic operations. This information is contained in Note 15 of Notes to Consolidated Financial Statements, which can be found in Part II, Item 8 of this Annual Report.
P
rincipal Products and Uses
We engineer, manufacture and market differentiated products and systems used to dispense, apply and control adhesives, coatings, polymers, sealants, biomaterials, and other fluids, to test and inspect for
quality, and to treat and cure surfaces. Our technology-based systems can be found in manufacturing facilities around the world producing a wide range of goods for consumer durable, consumer non-durable and technology end markets. Equipment ranges
from single-use components to manual, stand-alone units for low-volume operations to microprocessor-based automated systems for high-speed, high-volume production lines.
We market our products globally, primarily through a direct sales force, and also through qualified distributors and sales representatives. We have built a worldwide reputation for creativity and
expertise in the design and engineering of high-technology application equipment that meets the specific needs of our customers. We create value for our customers by developing solutions that increase uptime, enable faster line speeds and reduce
consumption of materials.
The following is a summary of the products and markets served by our operating segments:
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Adhesive Dispensing Systems
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This segment delivers our proprietary precision dispensing and processing technology to diverse markets for applications that commonly reduce material consumption, increase line efficiency and enhance
product strength, durability, brand and appearance.
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Nonwovens —
Dispensing, coating and laminating systems for applying adhesives, lotions, liquids and fibers to disposable products
and continuous roll goods. Key strategic markets include adult incontinence products, baby diapers and child-training pants, feminine hygiene products and surgical drapes, gowns, shoe covers and face masks.
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Packaging —
Automated adhesive dispensing systems used in the rigid packaged goods industries. Key strategic markets include food
and beverage packaging, pharmaceutical packaging, and other consumer goods packaging.
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Polymer Processing
— Components and systems used in the thermoplastic melt stream in plastic extrusion, injection molding,
compounding, polymerization and recycling processes. Key strategic markets include flexible packaging, electronics, medical, building and construction, transportation and aerospace, and general consumer goods.
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Product Assembly —
Dispensing, coating and laminating systems for the assembly of plastic, metal and wood products, for paper and
paperboard converting applications and for the manufacturing of continuous roll goods. Key strategic markets include appliances, automotive components, building and construction materials, electronics, furniture, solar energy, and the manufacturing
of bags, sacks, books, envelopes and folding cartons.
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Advanced Technology Systems
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This segment integrates our proprietary product technologies found in progressive stages of a customer’s production process, such as surface treatment, precisely controlled automated, semi-automated
or manual dispensing of material, and post-dispense bond testing and X-ray inspection to ensure quality. Related single-use plastic molded syringes, cartridges, tips, tubing and fluid connection components are used to dispense or control fluids in
production processes or within customers’ end products. This segment primarily serves the specific needs of electronics, medical and related high-tech industries.
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Electronic Systems
— Automated dispensing systems for high-speed, accurate application of a broad range of attachment, protection
and coating fluids, and related gas plasma treatment systems for cleaning and conditioning surfaces prior to dispense. Key strategic markets include mobile phones, tablets, personal computers, wearable technology, liquid crystal displays, micro hard
drives, microprocessors, printed circuit boards, micro-electronic mechanical systems (MEMS), and semiconductor packaging.
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Fluid Management —
Precision manual and semi-automated dispensers, highly engineered single-use plastic molded syringes, cartridges
and tips, and fluid connection components, tubing and catheters. Products are used for applying and controlling the flow of adhesives, sealants, lubricants, and biomaterials in critical industrial production processes and within medical equipment
and related surgical procedures. Key strategic markets include consumer goods, electronics, industrial assembly, solar, and medical.
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Test and Inspection —
Bond testing and automated optical and x-ray inspection systems used in the semiconductor and printed circuit
board industries. Key strategic markets include mobile phones, tablets, personal computers, wearable technology, liquid crystal displays, micro hard drives, microprocessors, printed circuit boards, MEMS, and semiconductor packaging.
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Industrial Coating Systems
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This segment provides both standard and highly-customized equipment used primarily for applying coatings, paint, finishes, sealants and
other materials, and for curing and drying of dispensed material. This segment primarily serves the consumer durables market.
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Cold Materials
— Automated and manual dispensing products and systems used to apply multiple component adhesive and sealant
materials in the general industrial and transportation manufacturing industries. Key strategic markets include aerospace, alternative energy, appliances, automotive, building and construction, composites, electronics and medical.
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Container Coating —
Automated and manual dispensing and curing systems used to coat and cure containers. Key strategic markets
include beverage containers and food cans.
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Curing and Drying Systems —
Ultraviolet equipment used primarily in curing and drying operations for specialty coatings,
semiconductor materials and paints. Key strategic markets include electronics, containers, and durable goods products.
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Liquid Finishing —
Automated and manual dispensing systems used to apply liquid paints and coatings to consumer and industrial
products. Key strategic markets include automotive components, agriculture, construction, metal shelving and drums.
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Powder Coating —
Automated and manual dispensing systems used to apply powder paints and coatings to a variety of metal, plastic and
wood products. Key strategic markets include agriculture and construction equipment, appliances, automotive components, home and office furniture, lawn and garden equipment, pipe coating, and wood and metal shelving.
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Manufacturing and Raw Materials
Our production operations include machining, molding and assembly. We manufacture specially designed parts and assemble components into finished
equipment. Many components are made in standard modules that can be used in more than one product or in combination with other components for a variety of models. We have principal manufacturing operations and sources of supply in the United States
in Ohio, Georgia, California, Colorado, Michigan, Minnesota, New Jersey, North Carolina, Pennsylvania, Rhode Island, Virginia and Wisconsin; as well as in Belgium, the People’s Republic of China, Germany, India, Mexico, the Netherlands,
Thailand and the United Kingdom.
Principal materials used to make our products are metals and plastics, typically in sheets, bar stock,
castings, forgings, tubing and pellets. We also purchase many electrical and electronic components, fabricated metal parts, high-pressure fluid hoses, packings, seals and other items integral to our products. Suppliers are competitively selected
based on cost, quality and service. All significant raw materials that we use are available through multiple sources.
Senior operating
executives supervise an extensive quality control program for our equipment, machinery and systems.
Natural gas and other fuels are our
primary energy sources. However, standby capacity for alternative sources is available if needed.
Intellectual
Property
We maintain procedures to protect our intellectual property (including patents, trademarks and copyrights) both domestically and
internationally. Risk factors associated with our intellectual property are discussed in Item 1A. Risk Factors.
Our intellectual property
portfolios include valuable patents, trade secrets, know-how, domain names, trademarks and trade names. As of October 31, 2014, we held 534 United States patents and 1,181 foreign patents and had 241 United States
patent applications pending and 990 foreign patent applications pending, but there is no assurance that any patent application will be issued. We continue to apply for and obtain patent protection for new products on an
ongoing basis.
Patents covering individual products extend for varying periods according to the date of filing or grant and legal
term of patents in various countries where a patent is obtained. Our current patent portfolio has expiration dates ranging from November 2014 to July 2039. The actual protection a patent provides, which can vary from country to country, depends
upon the type of patent, the scope of its coverage, and the availability of legal remedies in each country. We believe, however, that the duration of our patents generally exceeds the life cycles of the technologies disclosed and claimed in the
patents.
We believe our trademarks are important assets and we aggressively manage our brands. We also own a number of trademarks in the
United States and foreign countries, including registered trademarks for Nordson, Asymtek, Dage, EFD, Micromedics, Value Plastics, and Xaloy and various common law trademarks which are important to our business, inasmuch as they identify
Nordson and our products to our customers. As of October 31, 2014, we had a total of 1,633 trademark registrations in the United States and in various foreign countries.
We rely upon a combination of nondisclosure and other contractual arrangements and trade secret laws to protect our proprietary rights and also enter into confidentiality and intellectual property
agreements with our employees that require them to disclose any inventions created during employment, convey all rights to inventions to us, and restrict the distribution of proprietary information.
We protect and promote our intellectual property portfolio and take those actions we deem appropriate to enforce our intellectual property rights and to
defend our right to sell our products. Although in aggregate our intellectual property is important to our operations, we do not believe that the loss of any one patent, trademark, or group of related patents or trademarks would have a material
adverse effect on our results of operations or financial position of our overall business.
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Seasonal Variation in Business
Generally, the highest volume of sales occurs in our fourth quarter due in large part to the timing of customers’ capital spending programs.
Accordingly, first quarter sales volume is typically the lowest of the year due to timing of customers’ capital spending programs and customer holiday shutdowns.
Working Capital Practices
No special or unusual practices affect
our working capital. We generally require advance payments as deposits on customized equipment and systems and, in certain cases, require progress payments during the manufacturing of these products. We continue to initiate new processes focused on
reduction of manufacturing lead times, resulting in lower investment in inventory while maintaining the capability to respond promptly to customer needs.
Custo
mers
We serve a broad customer base, both in terms of
industries and geographic regions. In 2014, no single customer accounted for ten percent or more of sales.
Back
log
Our
backlog of open orders increased to approximately $223,000 at October 31, 2014 from approximately $211,000 at October 31, 2013. The amounts for both years were calculated based upon exchange rates in effect at October 31, 2014. The
increase is primarily due to orders within the Advanced Technology segment, as well as from 2014 acquisitions. All orders in the 2014 year-end backlog are expected to be shipped to customers in 2015.
Gov
ernment Contracts
Our business neither includes nor depends upon a significant amount of governmental contracts or subcontracts. Therefore, no material part of our business is subject to renegotiation or termination at the
option of the government.
Compe
titive Conditions
Our equipment is sold in competition with a wide variety of alternative bonding, sealing, finishing, coating, processing, testing, inspecting, and fluid control techniques
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Potential uses for our
equipment include any production processes that require preparation, modification or curing of surfaces; dispensing, application, processing or control of fluids and materials; or testing and inspecting for quality.
Many factors influence our competitive position, including pricing, product quality and service. We maintain a leadership position in our business
segments by delivering high-quality, innovative products and technologies, as well as service and technical support. Working with customers to understand their processes and developing the application solutions that help them meet their production
requirements also contributes to our leadership position. Our worldwide network of direct sales and technical resources also is a competitive advantage.
Rese
arch and Development
Investments in research and development
are important to our long-term growth, enabling us to keep pace with changing customer and marketplace needs through the development of new products and new applications for existing products. We place strong emphasis on technology developments and
improvements through internal engineering and research teams. Research and development expenses were approximately $47,536 in 2014, compared with approximately $47,973 in 2013 and $36,535 in 2012. As a percentage of sales, research and development
expenses were approximately 2.8, 3.1 and 2.6 percent in 2014, 2013 and 2012, respectively.
Environmental
Compliance
We are subject to extensive federal, state, local and foreign environmental, safety and health laws and regulations concerning,
among other things, emissions to the air, discharges to land and water and the generation, handling, treatment and disposal of hazardous waste and other materials. Under certain of these laws, we can be held strictly liable for hazardous substance
contamination of any real property we have ever owned, operated or used as a disposal site or for natural resource damages associated with such contamination. We are also required to maintain various related permits and licenses, many of which
require periodic modification and renewal. The operation of manufacturing plants unavoidably entails environmental, safety and health risks, and we could incur material unanticipated costs or liabilities in the future if any of these risks were
realized in ways or to an extent that we did not anticipate.
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We believe that we operate in compliance, in all material respects, with applicable environmental laws and
regulations. Compliance with environmental laws and regulations requires continuing management effort and expenditures. We have incurred, and will continue to incur, costs and capital expenditures to comply with these laws and regulations and to
obtain and maintain the necessary permits and licenses. We believe that the cost of complying with environmental laws and regulations will not have a material effect on our earnings, liquidity or competitive position but cannot assure that material
compliance-related costs and expenses may not arise in the future. For example, future adoption of new or amended environmental laws, regulations or requirements or newly discovered contamination or other circumstances that could require us to incur
costs and expenses that may have a material effect, but cannot be presently anticipated.
We believe that policies, practices and procedures
have been properly designed to prevent unreasonable risk of material environmental damage arising from our operations. We accrue for estimated environmental liabilities with charges to expense and believe our environmental accrual is adequate to
provide for our portion of the costs of all such known environmental liabilities. Compliance with federal, state and local environmental protection laws during 2014 had no material effect on our capital expenditures, earnings or competitive
position. Based upon consideration of currently available information, we believe liabilities for environmental matters will not have a material adverse affect on our financial position, operating results or liquidity, but we cannot assure that
material environmental liabilities may not arise in the future.
Employees
As of October 31, 2014, we had 5,966 full-time and part-time employees, including 146 at our Amherst, Ohio, facility who are represented by a
collective bargaining agreement that expires on October 30, 2016 and 64 at our New Castle, Pennsylvania facility who are represented by collective bargaining agreements that expire on August 31, 2017 and September 30, 2017. No work
stoppages have been experienced at any of our facilities during any of the periods covered by this report.
Available Information
Our proxy statement, annual report to the Securities and Exchange Commission (Form 10-K), quarterly reports (Form 10-Q) and current reports (Form 8-K) and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge at http://www.nordson.com/investors as soon as reasonably practical after such material is electronically filed with, or furnished to, the
SEC. Copies of these reports may also be obtained free of charge by sending written requests to Corporate Communications, Nordson Corporation, 28601 Clemens Road, Westlake, Ohio 44145.
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In an enterprise as diverse as ours,
a wide range of factors could affect future performance. We discuss in this section some of the risk factors that, if they actually occurred, could materially and adversely affect our business, financial condition, value and results of operations.
You should consider these risk factors in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K because these factors could cause our actual results and financial condition to differ materially from
those projected in forward-looking statements.
The significant risk factors affecting our operations include the following:
Changes in United States or international economic conditions could adversely affect the profitability of any of our operations.
In 2014, approximately 30 percent of our revenue was derived from domestic customers, while approximately 70 percent was derived from international
customers. Our largest markets include appliance, automotive, construction, container, electronics assembly, food and beverage, furniture, life sciences and medical, metal finishing, nonwovens, packaging, paper and paperboard converting, plastics
processing and semiconductor. A slowdown in any of these specific end markets could directly affect our revenue stream and profitability.
A
portion of our product sales is attributable to industries and markets, such as the semiconductor, mobile electronics and metal finishing industries, which historically have been cyclical and sensitive to relative changes in supply and demand and
general economic conditions. The demand for our products depends, in part, on the general economic conditions of the industries or national economies of our customers. Downward economic cycles in our customers’ industries or countries may
reduce sales of some of our products. It is not possible to predict accurately the factors that will affect demand for our products in the future.
Any significant downturn in the health of the general economy, globally, regionally or in the markets in which we sell products, could have an adverse effect on our revenues and financial performance,
resulting in impairment of assets.
Our growth strategy includes acquisitions, and we may not be able to execute on our acquisition
strategy or integrate acquisitions successfully.
Our recent historical growth has depended, and our future growth is likely to continue to
depend, in part on our acquisition strategy and the successful integration of acquired businesses into our existing operations. We intend to continue to seek additional acquisition opportunities both to expand into new markets and to enhance our
position in existing markets throughout the world. We cannot assure, however, that we will be able to successfully identify suitable acquisition opportunities, prevail against competing potential acquirers, negotiate appropriate acquisition terms,
obtain financing that may be needed to consummate such acquisitions, complete proposed acquisitions, successfully integrate acquired businesses into our existing operations or expand into new markets. In addition, we cannot assure that any
acquisition, once successfully integrated, will perform as planned, be accretive to earnings, or prove to be beneficial to our operations and cash flow.
The success of our acquisition strategy is subject to other risks and uncertainties, including:
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our ability to realize operating efficiencies, synergies or other benefits expected from an acquisition, and possible delays in realizing the benefits
of the acquired company or products;
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diversion of management’s time and attention from other business concerns;
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difficulties in retaining key employees, customers or suppliers of the acquired business;
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difficulties in maintaining uniform standards, controls, procedures and policies throughout acquired companies;
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adverse effects on existing business relationships with suppliers or customers;
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the risks associated with the assumption of contingent or undisclosed liabilities of acquisition targets; and
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the ability to generate future cash flows or the availability of financing.
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In addition, an acquisition could adversely impact our operating performance as a result of the incurrence
of acquisition-related debt, pre-acquisition potential tax liabilities, acquisition expenses, the amortization of acquisition-acquired assets, or possible future impairments of goodwill or intangible assets associated with the acquisition.
We may also face liability with respect to acquired businesses for violations of environmental laws occurring prior to the date of our
acquisition, and some or all of these liabilities may not be covered by environmental insurance secured to mitigate the risk or by indemnification from the sellers from which we acquired these businesses. We could also incur significant costs,
including, but not limited to, remediation costs, natural resources damages, civil or criminal fines and sanctions and third-party claims, as a result of past or future violations of, or liabilities associated with environmental laws.
If we fail to develop new products, or our customers do not accept the new products we develop, our revenue and profitability could be adversely
impacted.
Innovation is critical to our success. We believe that we must continue to enhance our existing products and to develop and
manufacture new products with improved capabilities in order to continue to be a leading provider of precision technology solutions for the industrial equipment market. We also believe that we must continue to make improvements in our productivity
in order to maintain our competitive position. Difficulties or delays in research, development or production of new products or failure to gain market acceptance of new products and technologies may reduce future sales and adversely affect our
competitive position. We continue to invest in the development and marketing of new products. There can be no assurance that we will have sufficient resources to make such investments, that we will be able to make the technological advances
necessary to maintain competitive advantages or that we can recover major research and development expenses. If we fail to make innovations, launch products with quality problems or the market does not accept our new products, our financial
condition, results of operations, cash flows and liquidity could be adversely affected. In addition, as new or enhanced products are introduced, we must successfully manage the transition from older products to minimize disruption in customers’
ordering patterns, avoid excessive levels of older product inventories and ensure that we can deliver sufficient supplies of new products to meet customers’ demands.
Increased IT security threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, products, solutions and services.
Increased global IT security threats and more sophisticated and targeted computer crime pose a risk to the security of our systems and networks and the
confidentiality, availability and integrity of our data. While we attempt to mitigate these risks by employing a number of measures, including employee training, comprehensive monitoring of our networks and systems, and maintenance of backup and
protective systems, our systems, networks, products, solutions and services remain potentially vulnerable to advanced persistent threats. Depending on their nature and scope, such threats could potentially lead to the compromising of confidential
information, improper use of our systems and networks, manipulation and destruction of data, defective products, production downtimes and operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of
operations.
If our intellectual property protection is inadequate, others may be able to use our technologies and tradenames and thereby
reduce our ability to compete, which could have a material adverse effect on us, our financial condition and results of operations.
We
regard much of the technology underlying our products and the trademarks under which we market our products as proprietary. The steps we take to protect our proprietary technology may be inadequate to prevent misappropriation of our technology, or
third parties may independently develop similar technology. We rely on a combination of patents, trademark, copyright and trade secret laws, employee and third-party non-disclosure agreements and other contracts to establish and protect our
technology and other intellectual property rights. The agreements may be breached or terminated, and we may not have adequate remedies for any breach, and existing trade secrets, patent and copyright law afford us limited protection. Policing
unauthorized use of our intellectual property is difficult. A third party could copy or otherwise obtain and use our products or technology without authorization. Litigation may be necessary for us to defend against claims of infringement or to
protect our intellectual property rights and could result in substantial cost to us and diversion of our efforts. Further, we might not prevail in such litigation, which could harm our business.
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Our products could infringe on the intellectual property of others, which may cause us to engage in
costly litigation and, if we are not successful, could cause us to pay substantial damages and prohibit us from selling our products.
Third parties may assert infringement or other intellectual property claims against us based on their patents or other intellectual property claims, and
we may have to pay substantial damages, possibly including treble damages, if it is ultimately determined that our products infringe. We may have to obtain a license to sell our products if it is determined that our products infringe upon another
party’s intellectual property. We might be prohibited from selling our products before we obtain a license, which, if available at all, may require us to pay substantial royalties. Even if infringement claims against us are without merit,
defending these types of lawsuits takes significant time, may be expensive and may divert management attention from other business concerns.
Any impairment in the value of our intangible assets, including goodwill, would negatively affect our operating results and total capitalization.
Our total assets reflect substantial intangible assets, primarily goodwill. The goodwill results from our acquisitions and represents the
excess of cost over the fair value of the identifiable net assets we acquired. We assess at least annually whether there has been any impairment in the value of our intangible assets. If future operating performance at one or more of our business
units were to fall significantly below current levels, if competing or alternative technologies emerge, if market conditions for acquired businesses decline, if significant and prolonged negative industry or economic trends exist, if our stock price
and market capitalization declines, or if future cash flow estimates decline, we could incur under current applicable accounting rules, a non-cash charge to operating earnings for goodwill impairment. Any determination requiring the write-off of a
significant portion of unamortized intangible assets would negatively affect our results of operations and equity book value, the effect of which could be material.
Significant movements in foreign currency exchange rates or change in monetary policy may harm our financial results.
We are exposed to fluctuations in foreign currency exchange rates, particularly with respect to the euro, the yen, the pound sterling and the Chinese yuan. Any significant change in the value of the
currencies of the countries in which we do business against the United States dollar could affect our ability to sell products competitively and control our cost structure, which could have a material adverse effect on our business, financial
condition and results of operations. For additional detail related to this risk, see Item 7A, Quantitative and Qualitative Disclosure About Market Risk.
The majority of our consolidated revenues in 2014 were generated in currencies other than the United States dollar, which is our reporting currency. We recognize foreign currency transaction gains and
losses arising from our operations in the period incurred. As a result, currency fluctuations between the United States dollar and the currencies in which we do business have caused and will continue to cause foreign currency transaction and
translation gains and losses, which historically have been material and could continue to be material. We cannot predict the effects of exchange rate fluctuations upon our future operating results because of the number of currencies involved, the
variability of currency exposures and the potential volatility of currency exchange rates. We take actions to manage our foreign currency exposure, such as entering into hedging transactions, where available, but we cannot assure that our strategies
will adequately protect our consolidated operating results from the effects of exchange rate fluctuations.
We also face risks arising from the
imposition of exchange controls and currency devaluations. Exchange controls may limit our ability to convert foreign currencies into United States dollars or to remit dividends and other payments by our foreign subsidiaries or customers located in
or conducting business in a country imposing controls. Currency devaluations diminish the United States dollar value of the currency of the country instituting the devaluation and, if they occur or continue for significant periods, could adversely
affect our earnings or cash flow.
9
We may be exposed to liabilities under the Foreign Corrupt Practices Act (FCPA), which could have a
material adverse effect on our business.
We are subject to compliance with various laws and regulations, including the FCPA and similar
worldwide
anti-bribery
laws, which generally prohibit companies and their intermediaries from engaging in bribery or making other improper payments to foreign officials for the purpose of obtaining or
retaining business or gaining an unfair business advantage. The FCPA also requires proper record keeping and characterization of such payments in our reports filed with the SEC. Our employees are trained and required to comply with these laws, and
we are committed to legal compliance and corporate ethics. Violations of these laws could result in severe criminal or civil sanctions and financial penalties and other consequences that may have a material adverse effect on our business,
reputation, financial condition or results of operations.
Inability to access capital could impede growth or the repayment or refinancing
of existing indebtedness.
The limits imposed on us by the restrictive covenants contained in our credit facilities could prevent us from
making acquisitions or cause us to lose access to these facilities.
Our existing credit facilities contain restrictive covenants that limit
our ability to, among other things:
|
|
•
|
|
borrow money or guarantee the debts of others;
|
|
|
•
|
|
use assets as security in other transactions;
|
|
|
•
|
|
make restricted payments or distributions; and
|
|
|
•
|
|
sell or acquire assets or merge with or into other companies.
|
In addition, our credit facilities require us to meet financial ratios, including a “Leverage Ratio” and an “Interest Coverage Ratio”, both as defined in the credit facilities.
These restrictions could limit our ability to plan for or react to market conditions or meet extraordinary capital needs and could otherwise
restrict our financing activities.
Our ability to comply with the covenants and other terms of our credit facilities will depend on our future
operating performance. If we fail to comply with such covenants and terms, we may be in default and the maturity of the related debt could be accelerated and become immediately due and payable. We may be required to obtain waivers from our lenders
in order to maintain compliance under our credit facilities, including waivers with respect to our compliance with certain financial covenants. If we are unable to obtain necessary waivers and the debt under our credit facilities is accelerated, we
would be required to obtain replacement financing at prevailing market rates.
We may need new or additional financing in the future to expand
our business or refinance existing indebtedness. If we are unable to access capital on satisfactory terms and conditions, we may not be able to expand our business or meet our payment requirements under our existing credit facilities. Our ability to
obtain new or additional financing will depend on a variety of factors, many of which are beyond our control. We may not be able to obtain new or additional financing because we have substantial debt or because we may not have sufficient cash flow
to service or repay our existing or future debt. In addition, depending on market conditions and our financial performance, neither debt nor equity financing may be available on satisfactory terms or at all. Finally, as a consequence of worsening
financial market conditions, our credit facility providers may not provide the agreed credit if they become undercapitalized.
Changes in
interest rates could adversely affect us.
Any period of interest rate increases may also adversely affect our profitability. At
October 31, 2014, we had $799,800 of total debt and notes payable outstanding, of which 68 percent was priced at interest rates that float with the market. A one percent increase in the interest rate on the floating rate debt in 2014 would have
resulted in approximately $4,201 of additional interest expense. A higher level of floating rate debt would increase the exposure to changes in interest rates. For additional detail related to this risk, see Item 7A, Quantitative and
Qualitative Disclosure About Market Risk.
10
Failure to retain our existing senior management team or the inability to attract and retain qualified
personnel could hurt our business and inhibit our ability to operate and grow successfully.
Our success will continue to depend to a
significant extent on the continued service of our executive management team and the ability to recruit, hire and retain other key management personnel to support our growth and operational initiatives and replace executives who retire or resign.
Failure to retain our leadership team and attract and retain other important management and technical personnel could place a constraint on our global growth and operational initiatives, possibly resulting in inefficient and ineffective management
and operations, which would likely harm our revenues, operations and product development efforts and eventually result in a decrease in profitability.
The level of returns on pension plan assets and changes in the actuarial assumptions used could adversely affect us.
Our operating results may be positively or negatively impacted by the amount of expense we record for our defined benefit pension plans. U.S. GAAP requires that we calculate pension expense using
actuarial valuations, which are dependent upon our various assumptions including estimates of expected long-term rate of return on plan assets, discount rates for future payment obligations, and the expected rate of increase in future compensation
levels. Our pension expense and funding requirements may also be affected by our actual return on plan assets and by legislation and other government regulatory actions. Changes in assumptions, laws or regulations could lead to variability in
operating results and could have a material adverse impact on liquidity.
New regulations related to conflict-free minerals may result in
additional expenses that could affect our financial condition and business operations.
Pursuant to the Dodd-Frank Wall Street Reform and
Consumer Protection Act, the SEC promulgated final rules regarding disclosure of the use of certain minerals, known as conflict minerals, which are mined from the Democratic Republic of the Congo and adjoining countries, as well as procedures
regarding a manufacturer’s efforts to prevent the sourcing of such minerals and metals produced from those minerals. These new disclosure obligations will require continuing due diligence efforts to support our future disclosure requirements.
We incurred and will continue to incur costs associated with complying with such disclosure requirements, including costs associated with canvassing our supply chain to determine the source country of any conflict minerals incorporated in our
products, in addition to the cost of remediation and other changes to products, processes, or sources of supply as a consequence of such verification activities. In addition, the implementation of these rules could adversely affect the sourcing,
supply, and pricing of materials used in our products.
Political conditions in foreign countries in which we operate could adversely
affect us.
We conduct our manufacturing, sales and distribution operations on a worldwide basis and are subject to risks associated with
doing business outside the United States. In 2014, approximately 70 percent of our total sales were to customers outside the United States. We expect that international operations and United States export sales will continue to be important to our
business for the foreseeable future. Both sales from international operations and export sales are subject in varying degrees to risks inherent in doing business outside the United States. Such risks include, but are not limited to, the following:
|
|
•
|
|
risks of economic instability;
|
|
|
•
|
|
unanticipated or unfavorable circumstances arising from host country laws or regulations;
|
|
|
•
|
|
threats of war, terrorism or governmental instability;
|
|
|
•
|
|
significant foreign and U.S. taxes on repatriated cash;
|
|
|
•
|
|
restrictions on the transfer of funds into or out of a country;
|
|
|
•
|
|
currency exchange rate fluctuations;
|
|
|
•
|
|
potential negative consequences from changes to taxation policies;
|
|
|
•
|
|
the disruption of operations from labor and political disturbances;
|
|
|
•
|
|
the imposition of tariffs, import or export licensing requirements; and
|
|
|
•
|
|
exchange controls or other trade restrictions including transfer pricing restrictions when products produced in one country are sold to an affiliated
entity in another country.
|
11
Any of these events could reduce the demand for our products, limit the prices at which we can sell our
products, or otherwise have an adverse effect on our operating performance.
Our international operations also depend upon favorable trade
relations between the U.S. and those foreign countries in which our customers, subcontractors and materials suppliers have operations. A protectionist trade environment in either the U.S. or those foreign countries in which we do business, such as a
change in the current tariff structures, export compliance or other trade policies, may materially and adversely affect our ability to sell our products in foreign markets.
Our business and operating results may be adversely affected by natural disasters or other catastrophic events beyond our control.
While we have taken precautions to prevent production and service interruptions at our global facilities, severe weather conditions such as hurricanes or tornadoes, as well major earthquakes and
other natural disasters, in areas in which we have manufacturing facilities or from which we obtain products may cause physical damage to our properties, closure of one or more of our manufacturing or distribution facilities, lack of an
adequate work force in a market, temporary disruption in the supply of inventory, disruption in the transport of products and utilities, and delays in the delivery of products to our customers. Any of these factors may disrupt our operations and
adversely affect our financial condition and results of operations.
The insurance that we maintain may not fully cover all potential
exposures.
We maintain property, business interruption and casualty insurance but such insurance may not cover all risks associated with
the hazards of our business and is subject to limitations, including deductibles and maximum liabilities covered. We are potentially at risk if one or more of our insurance carriers fail. Additionally, severe disruptions in the domestic and global
financial markets could adversely impact the ratings and survival of some insurers. In the future, we may not be able to obtain coverage at current levels, and our premiums may increase significantly on coverage that we maintain.
|
Item 1B.
|
Unresolved Staff Comments
|
None.
12
The following
table summarizes our principal properties as of October 31, 2014:
|
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|
|
|
|
|
|
|
Location
|
|
Description of Property
|
|
Approximate
Square Feet
|
|
|
Amherst, Ohio
2, 3
|
|
A manufacturing, laboratory and office complex
|
|
|
521,000
|
|
|
Duluth, Georgia
1
|
|
A manufacturing, laboratory and office building
|
|
|
176,000
|
|
|
Swainsboro, Georgia
1
|
|
A manufacturing building (leased)
|
|
|
136,000
|
|
|
East Providence, Rhode Island
2
|
|
A manufacturing, warehouse and office building
|
|
|
116,000
|
|
|
Pulaski, Virginia
1
|
|
A manufacturing, warehouse and office building
|
|
|
101,000
|
|
|
Carlsbad, California
2
|
|
Two manufacturing and office buildings (leased)
|
|
|
88,000
|
|
|
Robbinsville, New Jersey
2
|
|
A manufacturing, warehouse and office building (leased)
|
|
|
88,000
|
|
|
Chippewa Falls, Wisconsin
1
|
|
A manufacturing, warehouse and office building (leased)
|
|
|
86,000
|
|
|
New Castle, Pennsylvania
1
|
|
A manufacturing, warehouse and office building
|
|
|
76,000
|
|
|
Youngstown, Ohio
1
|
|
A manufacturing, warehouse and office building (leased)
|
|
|
58,000
|
|
|
Chippewa Falls, Wisconsin
1
|
|
A manufacturing, warehouse and office building (leased)
|
|
|
45,000
|
|
|
Ft. Collins, Colorado
2
|
|
A manufacturing, warehouse and office building (leased)
|
|
|
42,000
|
|
|
Vista, California
2
|
|
A manufacturing building (leased)
|
|
|
41,000
|
|
|
Hickory, North Carolina
1
|
|
A manufacturing, warehouse and office building (leased)
|
|
|
41,000
|
|
|
Eagan, Minnesota
2
|
|
A manufacturing, warehouse and office building (leased)
|
|
|
35,000
|
|
|
Plymouth, Michigan
3
|
|
Two manufacturing, warehouse and office buildings (leased)
|
|
|
35,000
|
|
|
Westlake, Ohio
|
|
Corporate headquarters
|
|
|
28,000
|
|
|
Chippewa Falls, Wisconsin
1
|
|
An engineering and laboratory building (leased)
|
|
|
20,000
|
|
|
Shanghai, China
1, 3
|
|
A manufacturing, warehouse and office building (leased)
|
|
|
134,000
|
|
|
Lüneburg, Germany
1
|
|
A manufacturing and laboratory building
|
|
|
129,000
|
|
|
Shanghai, China
1, 2, 3
|
|
An office and laboratory building
|
|
|
86,000
|
|
|
Bangalore, India
1, 2, 3
|
|
A manufacturing, warehouse and office building
|
|
|
56,000
|
|
|
Maastricht, Netherlands
1, 2, 3
|
|
A manufacturing, warehouse and office building
|
|
|
54,000
|
|
|
Shanghai, China
1
|
|
A manufacturing, warehouse and office building (leased)
|
|
|
53,000
|
|
|
Chonburi, Thailand
1
|
|
A manufacturing, warehouse and office building
|
|
|
52,000
|
|
|
Münster, Germany
1
|
|
A manufacturing, warehouse and office building (leased)
|
|
|
51,000
|
|
|
Erkrath, Germany
1, 2, 3
|
|
An office, laboratory and warehouse building (leased)
|
|
|
48,000
|
|
|
Deurne, Netherlands
2
|
|
A manufacturing, warehouse and office building (leased)
|
|
|
46,000
|
|
|
Temse, Belgium
1
|
|
A manufacturing, warehouse and office building (leased)
|
|
|
43,000
|
|
|
Münster, Germany
1
|
|
A manufacturing, warehouse and office building (leased)
|
|
|
43,000
|
|
|
Suzhou, China
2
|
|
A manufacturing, warehouse and office building (leased)
|
|
|
42,000
|
|
|
Tokyo, Japan
1, 2, 3
|
|
An office, laboratory and warehouse building (leased)
|
|
|
42,000
|
|
|
Aylesbury, U.K.
1, 2
|
|
A manufacturing, warehouse and office building (leased)
|
|
|
36,000
|
|
|
Shanghai, China
1
|
|
An engineering and laboratory building
|
|
|
24,000
|
|
|
El Marques, Mexico
1, 2, 3
|
|
A warehouse and office building (leased)
|
|
|
22,000
|
|
|
Singapore
1, 2, 3
|
|
A warehouse and office building (leased)
|
|
|
16,000
|
|
|
Lagny Sur Marne, France
1, 3
|
|
An office building (leased)
|
|
|
6,000
|
|
|
Segrate, Italy
1, 3
|
|
An office, laboratory and warehouse building (leased)
|
|
|
5,000
|
|
Business Segment — Property Identification Legend
1 — Adhesive Dispensing Systems
2 — Advanced Technology Systems
3 — Industrial Coating Systems
13
The facilities listed have adequate, suitable and sufficient capacity (production and nonproduction) to meet
present and foreseeable demand for our products.
Other properties at international subsidiary locations and at branch locations within the
United States are leased. Lease terms do not exceed 25 years and generally contain a provision for cancellation with some penalty at an earlier date. Information about leases is reported in Note 10 of Notes to Consolidated Financial Statements that
can be found in Part II, Item 8 of this document.
|
Item 3.
|
Legal Proceedings
|
We are
involved in pending or potential litigation regarding environmental, product liability, patent, contract, employee and other matters arising from the normal course of business. Including the environmental matter discussed below, it is our opinion,
after consultation with legal counsel, that resolutions of these matters are not expected to result in a material effect on our financial condition, quarterly or annual operating results or cash flows.
Environmental
— We have voluntarily agreed with the City of New Richmond, Wisconsin and other Potentially Responsible Parties to share costs
associated with the remediation of the City of New Richmond municipal landfill (the “Site”) and constructing a potable water delivery system serving the impacted area down gradient of the Site. At October 31, 2014 and 2013, our
accrual for the ongoing operation, maintenance and monitoring obligation at the Site was $615 and $668, respectively.
The liability for
environmental remediation represents management’s best estimate of the probable and reasonably estimable undiscounted costs related to known remediation obligations. The accuracy of our estimate of environmental liability is affected by several
uncertainties such as additional requirements that may be identified in connection with remedial activities, the complexity and evolution of environmental laws and regulations, and the identification of presently unknown remediation requirements.
Consequently, our liability could be different than our current estimate. However, we do not expect that the costs associated with remediation will have a material adverse effect on our financial condition or results of operations.
|
Item 4.
|
Mine Safety Disclosures
|
None.
14
Executive Officers of the Company
Our executive officers as of October 31, 2014, were as follows:
|
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|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Officer Since
|
|
|
Position or Office with The Company and
Business
Experience During the Past Five (5) Year Period
|
|
Michael F. Hilton
|
|
|
60
|
|
|
|
2010
|
|
|
President and Chief Executive Officer, 2010
Senior Vice President and General Manager-Electronics and Performance Materials Segment of Air Products and Chemicals, Inc., 2007
|
|
John J. Keane
|
|
|
53
|
|
|
|
2003
|
|
|
Senior Vice President, 2005
|
|
Gregory P. Merk
|
|
|
43
|
|
|
|
2006
|
|
|
Senior Vice President, 2013
Vice President, 2006
|
|
Gregory A. Thaxton
|
|
|
53
|
|
|
|
2007
|
|
|
Senior Vice President, Chief Financial Officer, 2012
|
|
|
|
|
|
|
|
|
|
|
|
Vice President, Chief Financial Officer, 2008
|
|
Douglas C. Bloomfield
|
|
|
55
|
|
|
|
2005
|
|
|
Vice President, 2005
|
|
James E. DeVries
|
|
|
55
|
|
|
|
2012
|
|
|
Vice President, 2012
Vice
President, Global Continuous Improvement, 2011
Vice President, North America and China, Engineering
(Adhesive Dispensing Systems), 2010
|
|
|
|
|
|
|
|
|
|
|
|
Vice President, Adhesive Dispensing Systems, North America, 2009
|
|
Shelly M. Peet
|
|
|
49
|
|
|
|
2007
|
|
|
Vice President, 2009
|
|
Robert E. Veillette
|
|
|
62
|
|
|
|
2007
|
|
|
Vice President, General Counsel and Secretary, 2007
|
15
PART II
|
Item 5.
|
Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
Market Information and Dividends
(a) Our common shares are listed on the Nasdaq Global Select Market under the symbol NDSN. As of November 28, 2014, there were 1,577 registered shareholders. The table below is a summary of dividends
paid per common share and the range of closing market prices during each quarter of 2014 and 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
Paid
|
|
|
Common Share
Price
|
|
|
Quarters
|
|
|
High
|
|
|
Low
|
|
|
2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
$
|
.18
|
|
|
$
|
75.02
|
|
|
$
|
69.14
|
|
|
Second
|
|
|
.18
|
|
|
|
74.54
|
|
|
|
67.98
|
|
|
Third
|
|
|
.18
|
|
|
|
84.30
|
|
|
|
74.08
|
|
|
Fourth
|
|
|
.22
|
|
|
|
81.50
|
|
|
|
67.75
|
|
|
2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
$
|
.15
|
|
|
$
|
67.62
|
|
|
$
|
58.89
|
|
|
Second
|
|
|
.15
|
|
|
|
70.60
|
|
|
|
61.33
|
|
|
Third
|
|
|
.15
|
|
|
|
75.00
|
|
|
|
67.26
|
|
|
Fourth
|
|
|
.18
|
|
|
|
74.90
|
|
|
|
66.65
|
|
Source: NASDAQ OMX
While we have historically paid dividends to shareholders of our common stock on a quarterly basis, the declaration and payment of future dividends will depend on many factors, including but not limited
to, our earnings, financial condition, business development needs and regulatory considerations, and are at the discretion of our board of directors.
16
Performance Graph
The following is a graph that compares the five-year cumulative return, calculated on a dividend-reinvested basis, from investing $100 on November 1, 2009 in Nordson common shares, the S&P 500
Index, the S&P MidCap 400 Index, the S&P 500 Industrial Machinery Index, the S&P MidCap 400 Industrial Machinery Index and our Proxy Peer Group. Our Proxy Peer Group includes: AIN, AME, ATU, B, CLC, DCI, ENTG, ESL, FLIR, GGG, GTI, GTLS,
IEX, LECO, ROP, VECO, WTS, and WWD.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company/Market/Peer Group
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
Nordson Corporation
|
|
$
|
100.00
|
|
|
$
|
151.62
|
|
|
$
|
183.67
|
|
|
$
|
238.70
|
|
|
$
|
294.28
|
|
|
$
|
315.68
|
|
|
S&P 500 Index
|
|
$
|
100.00
|
|
|
$
|
116.52
|
|
|
$
|
125.94
|
|
|
$
|
145.09
|
|
|
$
|
186.11
|
|
|
$
|
218.25
|
|
|
S&P MidCap 400
|
|
$
|
100.00
|
|
|
$
|
127.64
|
|
|
$
|
138.55
|
|
|
$
|
155.32
|
|
|
$
|
209.02
|
|
|
$
|
233.38
|
|
|
S&P 500 Ind. Machinery
|
|
$
|
100.00
|
|
|
$
|
127.95
|
|
|
$
|
132.38
|
|
|
$
|
158.43
|
|
|
$
|
226.75
|
|
|
$
|
255.70
|
|
|
S&P MidCap 400 Ind. Machinery
|
|
$
|
100.00
|
|
|
$
|
129.98
|
|
|
$
|
147.82
|
|
|
$
|
161.44
|
|
|
$
|
223.07
|
|
|
$
|
236.39
|
|
|
Peer Group
|
|
$
|
100.00
|
|
|
$
|
132.42
|
|
|
$
|
148.68
|
|
|
$
|
167.11
|
|
|
$
|
226.13
|
|
|
$
|
247.78
|
|
Source: Zack’s Investment Research
17
|
(b)
|
Use of Proceeds. Not applicable.
|
|
(c)
|
Issuer Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number
of Shares
Repurchased
(1)
|
|
|
Average
Price Paid
per Share
|
|
|
Total Number of
Shares Repurchased
as Part of Publicly
Announced Plans
or
Programs
(2)
|
|
|
Maximum Value of
Shares That May Yet
Be Purchased
Under
the Plans or Programs
(2)
|
|
|
August 1, 2014 to August 31, 2014
|
|
|
238
|
|
|
$
|
76.87
|
|
|
|
238
|
|
|
$
|
86,147
|
|
|
September 1, 2014 to September 30, 2014
|
|
|
143
|
|
|
$
|
78.38
|
|
|
|
142
|
|
|
$
|
75,008
|
|
|
October 1, 2014 to October 31, 2014
|
|
|
595
|
|
|
$
|
71.49
|
|
|
|
595
|
|
|
$
|
32,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
976
|
|
|
|
|
|
|
|
975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes shares purchased as part of a publicly announced program, as well as shares tendered for taxes related to stock option exercises and vesting of restricted
shares.
|
|
(2)
|
In August 2013, the board of directors approved a repurchase program of up to $200,000. Uses for repurchased shares include the funding of benefit programs, including
stock options, restricted stock and 401(k) matching. Shares purchased are treated as treasury shares until used for such purposes. The repurchase program is being funded using cash from operations and proceeds from borrowings under our credit
facilities.
|
Subsequent to October 31, 2014, the board of directors authorized a new $300,000 share
repurchase program, effective December 16, 2014. This new program replaced the $200,000 program approved by the board in August 2013.
18
|
Item 6.
|
Selected Financial Data
|
Five-Year Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
(In thousands except for per-share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Data
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
1,704,021
|
|
|
$
|
1,542,921
|
|
|
$
|
1,409,578
|
|
|
$
|
1,233,159
|
|
|
$
|
1,041,551
|
|
|
Cost of sales
|
|
|
758,923
|
|
|
|
676,777
|
|
|
|
586,289
|
|
|
|
484,727
|
|
|
|
419,937
|
|
|
% of sales
|
|
|
45
|
|
|
|
44
|
|
|
|
42
|
|
|
|
39
|
|
|
|
40
|
|
|
Selling and administrative expenses
|
|
|
577,993
|
|
|
|
542,295
|
|
|
|
487,809
|
|
|
|
431,078
|
|
|
|
386,781
|
|
|
% of sales
|
|
|
34
|
|
|
|
35
|
|
|
|
35
|
|
|
|
35
|
|
|
|
37
|
|
|
Long-lived asset impairments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,811
|
|
|
|
—
|
|
|
Operating profit
|
|
|
367,105
|
|
|
|
323,849
|
|
|
|
335,480
|
|
|
|
315,543
|
|
|
|
234,833
|
|
|
% of sales
|
|
|
22
|
|
|
|
21
|
|
|
|
24
|
|
|
|
26
|
|
|
|
23
|
|
|
Net income
|
|
|
246,773
|
|
|
|
221,817
|
|
|
|
224,829
|
|
|
|
222,364
|
|
|
|
168,048
|
|
|
% of sales
|
|
|
14
|
|
|
|
14
|
|
|
|
16
|
|
|
|
18
|
|
|
|
16
|
|
|
Financial Data
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
301,815
|
|
|
$
|
365,269
|
|
|
$
|
242,939
|
|
|
$
|
294,796
|
|
|
$
|
259,117
|
|
|
Net property, plant and equipment and other non-current assets
|
|
|
1,607,447
|
|
|
|
1,451,113
|
|
|
|
1,242,892
|
|
|
|
827,493
|
|
|
|
535,323
|
|
|
Total capital
(b)
|
|
|
1,662,283
|
|
|
|
1,498,082
|
|
|
|
1,261,962
|
|
|
|
853,071
|
|
|
|
567,323
|
|
|
Total assets
|
|
|
2,280,130
|
|
|
|
2,053,179
|
|
|
|
1,829,515
|
|
|
|
1,304,450
|
|
|
|
986,354
|
|
|
Long-term liabilities
|
|
|
1,004,465
|
|
|
|
928,519
|
|
|
|
816,061
|
|
|
|
550,966
|
|
|
|
289,368
|
|
|
Shareholders’ equity
|
|
|
904,797
|
|
|
|
887,863
|
|
|
|
669,770
|
|
|
|
571,323
|
|
|
|
505,072
|
|
|
Return on average total capital — %
(c)
|
|
|
17
|
|
|
|
18
|
|
|
|
23
|
|
|
|
35
|
|
|
|
32
|
|
|
Return on average shareholders’ equity — %
(d)
|
|
|
27
|
|
|
|
29
|
|
|
|
38
|
|
|
|
39
|
|
|
|
40
|
|
|
Per-Share Data
(a)(e)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of common shares
|
|
|
63,656
|
|
|
|
64,214
|
|
|
|
64,407
|
|
|
|
67,616
|
|
|
|
67,610
|
|
|
Average number of common shares and common share equivalents
|
|
|
64,281
|
|
|
|
64,908
|
|
|
|
65,103
|
|
|
|
68,425
|
|
|
|
68,442
|
|
|
Basic earnings per share
|
|
$
|
3.88
|
|
|
$
|
3.45
|
|
|
$
|
3.49
|
|
|
$
|
3.29
|
|
|
$
|
2.49
|
|
|
Diluted earnings per share
|
|
|
3.84
|
|
|
|
3.42
|
|
|
|
3.45
|
|
|
|
3.25
|
|
|
|
2.46
|
|
|
Dividends per common share
|
|
|
0.76
|
|
|
|
0.63
|
|
|
|
0.525
|
|
|
|
0.44
|
|
|
|
0.39
|
|
|
Book value per common share
|
|
|
14.49
|
|
|
|
13.83
|
|
|
|
10.42
|
|
|
|
8.71
|
|
|
|
7.44
|
|
|
(a)
|
See accompanying Notes to Consolidated Financial Statements.
|
|
(b)
|
Notes payable, plus current portion of long-term debt, plus long-term debt, minus cash and marketable securities, plus shareholders’ equity.
|
|
(c)
|
Net income plus after-tax interest expense on borrowings as a percentage of the average of quarterly borrowings (net of cash) plus shareholders’ equity over five
accounting periods.
|
|
(d)
|
Net income as a percentage of average quarterly shareholders’ equity over five accounting periods.
|
|
(e)
|
Amounts adjusted for 2-for-1 stock split effective April 12, 2011.
|
19
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
NOTE REGARDING AMOUNTS AND FISCAL YEAR REFERENCES
In this annual report, all amounts related to United States dollars and foreign currency and to the number of Nordson Corporation’s common shares, except for per share earnings and dividend amounts,
are expressed in thousands. Unless the context otherwise indicates, all references to “we” or the “Company” mean Nordson Corporation.
Unless otherwise noted, all references to years relate to our fiscal year ending October 31.
Critical Accounting Policies and Estimates
Our consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial
statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate the accounting policies and estimates that are used to prepare
financial statements. We base our estimates on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates used by management.
Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are
discussed below. On a regular basis, critical accounting policies are reviewed with the Audit Committee of the board of directors.
Revenue
Recognition
— Most of our revenues are recognized upon shipment, provided that persuasive evidence of an arrangement exists, the sales price is fixed or determinable, collectibility is reasonably assured, and title and risk of loss have
passed to the customer. The FASB has issued guidance on multiple deliverable arrangements that establishes a relative selling price hierarchy for determining the selling price of a deliverable based on vendor specific objective evidence (VSOE) if
available, third-party evidence (TPE) if vendor-specific objective evidence is not available, or best estimated selling price (BESP) if neither vendor-specific objective evidence nor
third-party
evidence is
available. Our multiple deliverable arrangements include installation, installation supervision, training, and spare parts, which tend to be completed in a short period of time, at an insignificant cost, and utilizing skills not unique to us, and,
therefore, are typically regarded as inconsequential or perfunctory. Revenue for undelivered items is deferred and included within accrued liabilities in the accompanying balance sheet. Revenues deferred in 2014, 2013 and 2012 were not material.
Translation of Foreign Currency Financial Statements and Foreign Currency Transactions —
Our reporting currency is the U.S.
dollar. However, the functional currency for each of our foreign subsidiaries is its principal operating currency. We translate the amounts included in our Consolidated Statements of Income from our foreign subsidiaries into U.S. dollars at
weighted-average exchange rates, which we believe are representative of the actual exchange rates on the dates of the transactions. Our foreign subsidiaries’ assets and liabilities are translated into U.S. dollars from local currency at the
actual exchange rates as of the end of each reporting date, and we record the resulting foreign exchange translation adjustments in our Consolidated Balance Sheets as a component of accumulated other comprehensive income (loss). If the U.S. dollar
strengthens, we reflect the resulting losses as a component of accumulated other comprehensive income (loss). Conversely, if the U.S. dollar weakens, foreign exchange translation gains result, which favorably impact accumulated other comprehensive
income (loss). Translation adjustments may be included in net earnings in the event of a sale or liquidation of certain of our underlying foreign investments. If we determine that the functional currency of any of our foreign subsidiaries should be
the U.S. dollar, our financial statements will be affected. Should this occur, we will adjust our reporting to appropriately account for any such changes.
As appropriate, we use permanently invested intercompany loans as a source of capital to reduce exposure to foreign currency fluctuations at our foreign subsidiaries. These loans, on a consolidated basis,
are treated as being analogous to equity for accounting purposes. Therefore, foreign exchange gains or losses on these intercompany loans are recorded in accumulated other comprehensive income (loss).
20
Goodwill
— Goodwill is the excess of purchase price over the fair value of tangible and
identifiable intangible net assets acquired in various business combinations. Goodwill is not amortized but is tested for impairment annually at the reporting unit level, or more often if indications of impairment exist. Our reporting
units are the Adhesive Dispensing Systems segment, the Industrial Coating Systems segment and one level below the Advanced Technology Systems segment.
We test goodwill in accordance with Accounting Standards Codification (ASC) 350. The goodwill impairment test is a two-step process. In the first step, performed in the fourth quarter of each year,
we estimate a reporting unit’s fair value using a combination of the discounted cash flow method of the Income Approach and the guideline public company method of the Market Approach and compare the result against the reporting unit’s
carrying value of net assets. If the carrying value of a reporting unit exceeds its fair value, then a second step is performed to determine if goodwill is impaired. We use an independent valuation specialist to assist with refining our
assumptions and methods used to determine fair values using these methods. In step one, the discounted cash flow method uses assumptions for revenue growth, operating margin, and working capital turnover that are based on general
management’s strategic plans tempered by performance trends and reasonable expectations about those trends. Terminal value calculations employ a published formula known as the Gordon Growth Model Method that essentially captures the
present value of perpetual cash flows beyond the last projected period assuming a constant Weighted Average Cost of Capital (WACC) methodology and growth rate. For each reporting unit, a sensitivity analysis is performed to vary the discount
and terminal growth rates in order to provide a range of reasonableness for detecting impairment.
Discount rates are developed using a WACC
methodology. The WACC represents the blended average required rate of return for equity and debt capital based on observed market return data and company specific risk factors. For 2014, the discount rates used ranged from 10 percent to 17 percent
depending upon the reporting unit’s size, end market volatility, and projection risk. The calculated internal rate of return for the discounted cash flow method was 11 percent, the same as the calculated WACC for total Nordson. In the
application of the guideline public company method, fair value is determined using transactional evidence for similar publicly traded equity. The comparable company guideline group is determined based on relative similarities to each reporting unit
since exact correlations are not available. An indication of fair value for each reporting unit is based on the placement of each reporting unit within a range of multiples determined for its comparable guideline company group. Valuation multiples
are derived by dividing latest twelve month performance for revenues and EBITDA into total invested capital, which is the sum of traded equity plus interest bearing debt less cash. These multiples are applied against the revenue and EBITDA of each
reporting unit. While the implied indications of fair value using the guideline public company method yield meaningful results, the discounted cash flow method of the income approach includes management’s thoughtful projections and insights as
to what the reporting units will accomplish in the near future. Accordingly, the reasonable, implied fair value of each reporting unit is a blend based on the relative strength of the approaches employed.
To test the reasonableness of the aggregate fair value, we performed the control premium test, which compares the sum of the implied fair values
calculated for our reporting units (net of debt) to the market value of equity. The control premium was 7 percent as of the test date of August 1, 2014 and 5 percent as of October 31, 2014. The control premium indicated that the
discounted cash flow valuation was reasonable.
In 2014 and 2013, the results of our step one testing indicated no impairment; therefore, the
second step of impairment testing was not necessary.
21
The excess of fair value (FV) over carrying value (CV) was compared to the carrying value for each reporting
unit. Based on the results shown in the table below and based on our measurement date of August 1, 2014, our conclusion is that no indicators of impairment exist in 2014. Potential events or circumstances, such as a sustained downturn
in global economies, could have a negative effect on estimated fair values.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WACC
|
|
|
Excess of
FV over CV
|
|
|
Goodwill
|
|
|
Adhesive Dispensing Systems Segment
|
|
|
10
|
%
|
|
|
365
|
%
|
|
$
|
405,328
|
|
|
Industrial Coating Systems Segment
|
|
|
16
|
%
|
|
|
136
|
%
|
|
$
|
24,058
|
|
|
Advanced Technology Systems Segment — Electronics Systems
|
|
|
13
|
%
|
|
|
562
|
%
|
|
$
|
15,138
|
|
|
Advanced Technology Systems Segment — Fluid Management
|
|
|
12
|
%
|
|
|
113
|
%
|
|
$
|
478,218
|
|
|
Advanced Technology Systems Segment — Test & Inspection
|
|
|
17
|
%
|
|
|
157
|
%
|
|
$
|
14,397
|
|
The table above does not include two acquisitions that occurred after the August 1 measurement date but before our
fiscal year-end. We acquired Avalon Laboratories Holding Corp. (“Avalon”) on August 8, 2014 and Dima Group B.V. (“Dima”) on August 29, 2014. Determination of the preliminary goodwill associated with these
acquisitions was completed with the assistance of an independent valuation specialist in October 2014. Since the dates of the valuations, no events or changes in circumstances have occurred that would more likely than not reduce the fair value
of these acquisitions below their carrying values. For future valuation purposes, Avalon will be included in the Advanced Technology Systems — Fluid Management reporting unit, and Dima will be included in the Advanced Technology Systems —
Electronics Systems reporting unit.
Other Long-Lived Assets
— We test other depreciable and amortizable long-lived assets for
recoverability in accordance with ASC 360 using undiscounted cash flows. The total carrying value of long-lived assets for each reporting unit has been compared to the forecasted cash flows of each reporting unit’s long-lived assets being
tested. Cash flows have been defined as earnings before interest, taxes, depreciation, and amortization, less annual maintenance capital spending.
Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) are based on the remaining useful life of the asset. We believe that the relative value of long-lived
assets within each reporting unit is a reasonable proxy for the relative importance of the assets in the production of cash flow. To get to a reasonable forecast period, the aggregate net book value of long-lived assets was divided by the current
depreciation and amortization value to arrive at a blended remaining useful life. Our calculations for 2014 showed the undiscounted aggregate value of cash flows over the remaining useful life for each reporting unit was greater than the respective
carrying value of the long-lived assets within each reporting unit, so no impairment charges were recognized.
Inventories
—
Inventories are valued at the lower of cost or market. Cost was determined using the last-in,
first-out
(LIFO) method for 21 percent of consolidated inventories at October 31, 2014 and October 31,
2013, with the first-in, first-out (FIFO) method used for the remaining inventory. On an ongoing basis, inventory is tested for technical obsolescence, as well as for future demand and changes in market conditions. We have historically maintained
inventory reserves to reflect those conditions when the cost of inventory is not expected to be recovered. Reserves are also maintained for inventory used for demonstration purposes. The inventory reserve balance was $26,744, $26,579 and $20,505 at
October 31, 2014, 2013 and 2012, respectively.
Pension Plans and Postretirement Medical Plans —
The measurement of
liabilities related to our pension plans and postretirement medical plans is based on management’s assumptions related to future factors, including interest rates, return on pension plan assets, compensation increases, mortality and turnover
assumptions, and health care cost trend rates.
The weighted-average discount rate used to determine the present value of our domestic
pension plan obligations was 4.29 percent at October 31, 2014 and 4.75 percent at October 31, 2013. The weighted-average discount rate used to determine the present value of our various international pension plan obligations was 2.94
percent at October 31, 2014, compared to 3.72 percent at October 31, 2013. The discount rates used for all plans were determined by using quality fixed income investments with a duration period approximately equal to the period over which
pension obligations are expected to be settled.
22
In determining the expected return on plan assets, we consider both historical performance and an estimate
of future long-term rates of return on assets similar to those in our plans. We consult with and consider the opinions of financial and actuarial experts in developing appropriate return assumptions. The expected rate of return
(long-term
investment rate) on domestic pension assets used to determine net benefit costs was 7.24 percent in 2014 and 2013. The average expected rate of return on international pension assets used to determine net
benefit costs was 4.60 percent in 2014 and 4.43 percent in 2013.
The assumed rate of compensation increases used to determine the present
value of our domestic pension plan obligations was 3.49 percent at October 31, 2014, compared to 3.30 percent at October 31, 2013. The assumed rate of compensation increases used to determine the present value of our international pension
plan obligations was 3.19 percent at October 31, 2014, compared to 3.18 percent at October 31, 2013.
The measurement of domestic
pension and other post employment benefit (OPEB) plans’ projected benefit obligations included the effects of adopting the Society of Actuaries’ release of final RP2014 / MP2014 mortality tables. The adoption of these new tables resulted
in an increase to our domestic pension and OPEB plans’ projected benefit obligations of $28,554 and $4,878, respectively.
Annual expense
amounts are determined based on the discount rate used at the end of the prior year. Differences between actual and assumed investment returns on pension plan assets result in actuarial gains or losses that are amortized into expense over a period
of years.
With respect to the domestic postretirement medical plan, the discount rate used to value the benefit plan was 4.40 percent at
October 31, 2014 and 4.80 percent at October 31, 2013. The annual rate of increase in the per capita cost of covered benefits (the health care cost trend rate) is assumed to be 3.93 percent in 2015, decreasing gradually to 3.41 percent in
2024.
For the international postretirement plan, the discount rate used to value the benefit obligation was 4.25 percent at October 31,
2014 and 4.95 percent at October 31, 2013. The annual rate of increase in the per capita cost of covered benefits (the health care cost trend rate) is assumed to be 6.48 percent in 2015, decreasing gradually to 3.50 percent in 2031.
Employees hired after January 1, 2002, are not eligible to participate in the domestic postretirement medical plan.
Pension and postretirement expenses in 2015 are expected to be approximately $4,000 higher than 2014, primarily due to changes in discount rates and the
new mortality tables used for domestic plans.
Income Taxes —
Income taxes are estimated based on income for financial reporting
purposes. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and certain changes in valuation
allowances. We provide valuation allowances against deferred tax assets if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Management believes the valuation allowances are adequate after considering future taxable income, allowable carryforward periods and ongoing prudent and
feasible tax planning strategies. In the event we were to determine that we would be able to realize the deferred tax assets in the future in excess of the net recorded amount (including the valuation allowance), an adjustment to the valuation
allowance would increase income in the period such determination was made. Conversely, should we determine that we would not be able to realize all or part of the net deferred tax asset in the future, an adjustment to the valuation allowance would
be expensed in the period such determination was made.
Further, at each interim reporting period, we estimate an effective income tax rate
that is expected to be applicable for the full year. Significant judgment is involved regarding the application of global income tax laws and regulations and when projecting the jurisdictional mix of income. Additionally, interpretation of tax laws,
court decisions or other guidance provided by taxing authorities influences our estimate of the effective income tax rates. As a result, our actual effective income tax rates and related income tax liabilities may differ materially from our
estimated effective tax rates and related income tax liabilities. Any resulting differences are recorded in the period they become known.
23
Financial Instruments —
Assets, liabilities and commitments that are to be settled in cash and
are denominated in foreign currencies are sensitive to changes in currency exchange rates. We enter into foreign currency forward contracts, which are derivative financial instruments, to reduce the risk of foreign currency exposures resulting from
the collection of receivables, payables and loans denominated in foreign currencies. The maturities of these contracts are usually less than 90 days. Forward contracts are not designated as hedging instruments and therefore are marked to market each
accounting period, and the resulting gains or losses are included in “other–net” within other income (expense) in the Consolidated Statement of Income.
Warranties —
We provide customers with a product warranty that requires us to repair or replace defective products within a specified period of time (generally one year) from the date of
delivery or first use. An accrual is recorded for expected warranty costs for products shipped through the end of each accounting period. In determining the amount of the accrual, we rely primarily on historical warranty claims. Amounts charged to
the warranty reserve were $10,813, $7,891 and $5,430 in 2014, 2013 and 2012, respectively. The reserve balance was $9,918, $9,409 and $8,929 at October 31, 2014, 2013 and 2012, respectively.
Performance Share Incentive Awards —
Executive officers and selected other key employees are eligible to receive share awards with
payouts based on corporate performance over three-year periods. Award payouts vary based on the degree to which corporate performance equals or exceeds predetermined threshold, target and maximum performance levels at the end of a performance
period. No award payout will occur unless certain threshold performance levels are equaled or exceeded. The amount of compensation expense is based upon current performance projections for each three-year performance period and the
percentage of the requisite service that has been rendered. The calculations are also based upon the grant date fair value determined using the closing market price of Nordson Common Stock at the grant date, reduced by the implied value of
dividends not to be paid. Awards are recorded as capital in excess of stated value in shareholders’ equity. The cumulative amount recorded at October 31, 2014 for the plans originating in 2012, 2013 and 2014 was $7,570.
Compensation expense attributable to all performance share incentive award periods for executive officers and selected other key employees for 2014, 2013 and 2012 was $4,304, $3,588 and $4,235, respectively.
2014 compared to 2013
Sales —
Worldwide sales for 2014 were $1,704,021, an increase of 10.4 percent from 2013 sales of $1,542,921. Sales volume increased 10.9 percent, and unfavorable currency effects caused by the stronger U.S. dollar primarily against the Japanese Yen
reduced sales by 0.5 percent. The volume increase consisted of 6.2 percent from organic growth and 4.7 percent from acquisitions. Two acquisitions were made during 2014: Avalon Laboratories and Dima Group B.V., both of which are included within the
Advanced Technology Systems segment. Three acquisitions were made during 2013: the Kreyenborg Group and certain assets of Kodama Chemical Industry Co., Ltd., both of which were included within the Adhesives Dispensing Systems segment and certain
assets of Nellcor Puritan Bennett Mexico, S.A. de C.V., a subsidiary of Covidien LP (“Nellcor”), which was included within the Advanced Technology Systems segment.
As used throughout this Form 10-K, geographic regions include the Americas (Canada, Mexico and Central and South America), Asia Pacific (excluding Japan), Europe, Japan, and the United States.
Sales of the Adhesive Dispensing Systems segment were $899,696 in 2014, an increase of $106,208, or 13.4 percent, from 2013 sales of $793,488. The
increase was the result of a sales volume increase of 14.3 percent offset by unfavorable currency effects that reduced sales by 0.9 percent. The sales volume increase consisted of 8.1 percent from acquisitions and 6.2 percent from organic
volume. Sales volume, inclusive of acquisitions, increased in all geographic regions and was particularly strong in the Europe and Asia Pacific regions. Organic growth in all product lines was driven by our disposable hygiene, rigid packaging,
polymer processing and general product assembly end markets.
Sales of the Advanced Technology Systems segment were $561,784 in 2014, an
increase of $45,518, or 8.8 percent, from 2013 sales of $516,266. The increase was the result of a sales volume increase of 8.4 percent and favorable currency effects that increased sales by 0.4 percent. The sales volume increase consisted of
6.8% from organic volume and 1.6% from the first-year effect of acquisitions. Within the segment, sales volume, inclusive of acquisitions, increased in all geographic regions, except the Americas, and were most pronounced in
24
Japan and Asia Pacific. Strong organic growth in all product lines was led by demand for our automated dispensing equipment related to electronic mobile device assembly end markets, along with
higher demand for our electronic test and inspection equipment, semi-automated dispensing systems and single-use fluid management components related to medical and industrial end markets.
Sales of the Industrial Coating Systems segment were $242,541 in 2014, an increase of $9,374, or 4.0 percent, from 2013 sales of $233,167. The increase was the result of a sales volume increase of 4.7
percent offset by unfavorable currency effects that reduced sales by 0.7 percent. The sales volume increase was entirely due to organic growth. Sales volume increased in the United States and Europe regions. Growth was driven by demand for our cold
material dispensing equipment in automotive and industrial end markets, coating equipment for food and beverage end markets and select consumer durable goods end markets, partially offset by softness in UV curing equipment for electronic
applications.
Sales outside the United States accounted for 70.4 percent of our sales in 2014, as compared to 69.8 percent in 2013. On a
geographic basis, sales in the United States were $503,776, an increase of 8.2 percent from 2013. The increase consisted of 6.1 percent organic volume and 2.1 percent from acquisitions. In the Americas region, sales were $120,993, down 2.2 percent
from the prior year, with volume increasing 0.8 percent offset by unfavorable currency effects of 3.0 percent. The increase in sales volume consisted of 0.5 percent from organic volume and 0.3 percent from acquisitions. Sales in Europe were
$494,538 in 2014, up 18.7 percent from 2013, with volume increasing 16.8 and favorable currency effects of 1.9 percent. The increase in sales volume consisted of 5.3 percent from organic growth and 11.5 percent from acquisitions. Sales in Japan for
2014 were $127,057, a decrease of 0.7 percent from the prior year. The decrease consisted of volume growth of 7.4 percent offset by unfavorable currency effects of 8.1 percent. The increase in sales volume consisted of 5.5 percent organic
volume and 1.9 percent from acquisitions. Sales in the Asia Pacific region were $457,657, up 11.9 percent from the prior year, with volume increasing 12.1 percent, offset by unfavorable currency effects of 0.2 percent. The increase in sales
volume consisted of 9.0 percent from organic growth and 3.1 percent from acquisitions.
It is estimated that the effect of pricing on total
revenue was neutral relative to 2013.
Operating profit —
Cost of sales were $758,923 in 2014, up 12.1 percent from 2013. The
increase compared to 2013 is primarily due to increased sales volume. Gross profit, expressed as a percentage of sales, decreased to 55.5 percent in 2014 from 56.1 percent in 2013. The reduction in gross margin was primarily a result of product
line mix, as well as a higher mix of systems revenue in our legacy business and currency effects.
Selling and administrative expenses,
including severance and restructuring costs, were $577,993 in 2014, an increase of $35,698, or 6.6 percent, from 2013. The increase was primarily due to the addition of acquired businesses and higher compensation expenses related to increased
employment levels, partially offset by currency effects that reduced expenses.
Selling and administrative expenses as a percentage of sales
decreased to 33.9 percent in 2014 from 35.1 percent in 2013, due primarily to the higher level of sales and the favorable effects of continuous improvement activities.
Severance and restructuring costs of $2,551 were recorded during 2014. Within the Adhesives Dispensing Systems segment, certain restructuring programs within our U.S. and European operations resulted in
costs of $1,731. Within the Advanced Technology Systems segment, restructuring initiatives in the U.S. resulted in severance costs of $579. Within the Industrial Coatings Systems segment, restructuring activities in China resulted in severance costs
of $241.
Operating profit as a percentage of sales was 21.5 percent in 2014 compared to 21.0 percent in 2013. The increase was primarily due
to higher sales volume supported by a more efficient cost structure.
Operating capacity for each of our segments can support fluctuations in
order activity without significant changes in operating costs. Also, currency translation affects reported operating margins. Operating margins for each segment were unfavorably impacted by a stronger dollar during 2014 as compared to 2013.
Operating profit as a percentage of sales for the Adhesive Dispensing Systems segment decreased to 25.5 percent in 2014 from 25.7 percent in
2013. The slight decline in 2014 was due to the dilution effect of acquired product lines in 2013.
25
Operating profit as a percentage of sales for the Advanced Technology Systems segment increased to
25.0 percent in 2014 from 23.9 percent in 2013. The increase was due primarily to higher sales volume supported by a more efficient cost structure.
Operating profit as a percentage of sales for the Industrial Coating Systems segment increased to 15.7 percent in 2014 from 14.5 percent in 2013. The increase was due primarily to higher sales volume
supported by a more efficient cost structure.
Interest and other income (expense)
— Interest expense in 2014 was $15,035, an
increase of $194, or 1.3 percent, from 2013. The increase was due to higher borrowing levels resulting primarily from acquisitions in the second half of 2013 and 2014.
Other expense in 2014 was $138 compared to other income in 2013 of $1,694. Included in 2014 were a gain on property insurance settlement of $1,005 and foreign currency losses of $478. Included in 2013
were a gain on sale of real estate in China of $2,106 and foreign currency losses of $2,214.
Income taxes —
Income tax expense in
2014 was $105,740, or 30.0 percent of pre-tax income, as compared to $89,306, or 28.7 percent of pre-tax income in 2013.
The 2013 rate was
impacted by a favorable adjustment to unrecognized tax benefits of $900 primarily related to expiration of certain foreign statutes of limitations. On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted which retroactively
reinstated and extended the Federal Research and Development Tax Credit (Federal R&D Tax Credit) from January 1, 2012 to December 31, 2013 and extended certain other tax provisions. As a result, the Company’s income tax expense
for 2013 includes a discrete tax benefit of $1,700 related to 2012.
Net income —
Net income was $246,773, or $3.84 per diluted
share, in 2014, compared to net income of $221,817, or $3.42 per diluted share in 2013. This represents an 11.3 percent increase in net income and a 12.3 percent increase in diluted earnings per share.
Recently issued accounting standards —
In July 2013, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update
(ASU) which requires the netting of unrecognized tax benefits against a deferred tax asset for a loss or other carry forward that would apply in settlement of uncertain tax positions. Under the new standard, unrecognized tax benefits will be netted
against all available same-jurisdiction loss or other tax carry forwards that would be utilized, rather than only against carry forwards that are created by the unrecognized tax benefits. The new guidance is effective prospectively to all existing
unrecognized tax benefits, but entities can choose to apply it retrospectively. The guidance will be effective for us in our first quarter of 2015, with early adoption permitted. We do not believe the adoption of this ASU will have a material effect
on our consolidated financial statements.
In May 2014, the FASB issued a new standard regarding revenue recognition. Under this standard, a
company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard implements a
five-step process for customer contract revenue recognition that focuses on transfer of control. It will be effective for us beginning in 2018, with early adoption not permitted. Entities can transition to the standard either retrospectively or as a
cumulative-effect adjustment as of the date of adoption. We are currently assessing the impact this standard will have on our consolidated financial statements as well as the method by which we will adopt the new standard.
2013 compared to 2012
Sales —
Worldwide sales for 2013 were $1,542,921, an increase of 9.5 percent from 2012 sales of $1,409,578. Sales volume increased 10.6 percent, and unfavorable currency effects caused by the stronger U.S. dollar primarily against the Japanese Yen
reduced sales by 1.1 percent. The volume increase consisted of 10.2 percent from acquisitions and 0.4 percent from organic growth. Three acquisitions were made during 2013: the Kreyenborg Group and certain assets of Kodama Chemical Industry Co.,
Ltd., which were both included within the Adhesive Dispensing Systems segment, and certain assets of Nellcor Puritan Bennett Mexico, S.A. de C.V., a subsidiary of
Covidien LP (Nellcor) which was included within the Advanced Technology Systems
segment. Three
26
acquisitions were made during 2012: EDI Holdings, Inc. (EDI) and Xaloy Superior Holdings, Inc. (Xaloy), which were included within the Adhesive Dispensing Systems segment, and Sealant
Equipment & Engineering, Inc. (SEE), which was included within the Industrial Coating Systems segment.
As used throughout this
Form 10-K, geographic regions include the Americas (Canada, Mexico and Central and South America), Asia Pacific (excluding Japan), Europe, Japan, and the United States.
Sales of the Adhesive Dispensing Systems segment were $793,488 in 2013, an increase of $109,392, or 16.0 percent, from 2012 sales of $684,096. The increase was the result of a sales volume increase
of 17.6 percent offset by unfavorable currency effects that reduced sales by 1.6 percent. The sales volume increase consisted of 18.8 percent from acquisitions offset by a 1.2 percent reduction in organic volume. Sales volume, inclusive of
acquisitions, increased in all geographic regions and was particularly strong in the United States and Asia Pacific regions. Growth in our solar applications, paper board packaging and certain durable goods markets was partially offset by softness
in our plastics processing markets and disposable hygiene product markets.
Sales of the Advanced Technology Systems segment were $516,266 in
2013, an increase of $274, or 0.1 percent, from 2012 sales of $515,992. The increase was the result of a sales volume increase of 0.3 percent offset by unfavorable currency effects that reduced sales by 0.2 percent. The sales volume increase was
solely due to organic growth. Within the segment, volume increases occurred in all geographic regions, except Asia Pacific, and were most pronounced in Japan. Growth in our automotive electronics, display assembly, printed circuit board assembly and
medical equipment markets was offset by softness in our semiconductor packaging and industrial assembly end markets.
Sales of the Industrial
Coating Systems segment were $233,167 in 2013, an increase of $23,677, or 11.3 percent, from 2012 sales of $209,490. The increase was the result of a sales volume increase of 12.7 percent offset by unfavorable currency effects that reduced sales by
1.4 percent. The sales volume increase consisted of 5.6 percent organic growth and 7.1 percent from an acquisition. Sales volume, inclusive of acquisitions, increased in the United States, Americas, and Japan regions. Growth in some of our consumer
and industrial durable goods markets was offset by softness in our large dollar systems supporting automotive OEMs and container coating markets.
Sales outside the United States accounted for 69.8 percent of our sales in 2013, versus 72.4 percent in 2012. On a geographic basis, sales in the United States were $465,789, an increase of 19.8 percent
from 2012. The increase consisted of 1.5 percent organic volume and 18.3 percent from acquisitions. In the Americas region, sales were $123,654, up 13.4 percent from the prior year, with volume increasing 14.8 percent offset by unfavorable currency
effects of 1.4 percent. The increase in sales volume consisted of 5.8 percent organic volume and 9.0 percent from acquisitions. Sales in Europe were $416,725 in 2013, up 9.4 percent from 2012, with volume increasing 8.1 and favorable currency
effects of 1.3 percent. The increase in sales volume consisted primarily of 8.0 percent from acquisitions. Sales in Japan for 2013 were $127,945, an increase of 0.3 percent from the prior year. The increase consisted of volume of 16.1 percent offset
by unfavorable currency effects of 15.8 percent. The increase in sales volume consisted of 8.5 percent organic volume and 7.6 percent from acquisitions. Sales in the Asia Pacific region were $408,808, up 1.4 percent from the prior year, with volume
increasing 0.9 percent, and favorable currency effects of 0.5 percent. The increase in sales volume consisted of 5.4 percent from acquisitions offset by a decline in organic volume of 4.5 percent.
It is estimated that the effect of pricing on total revenue was neutral relative to 2012.
Operating profit —
Cost of sales, including those costs classified as restructuring, were $676,777 in 2013, up 15.4 percent from 2012. The increase compared to 2012 is primarily due to
increased sales volume. Gross profit, expressed as a percentage of sales, decreased to 56.1 percent in 2013 from 58.4 percent in 2012. The reduction in gross margin was primarily a result of lower product line margins relating to 2013 and 2012
acquisitions, as well as a higher mix of systems revenue in our legacy business and currency effects.
Selling and administrative expenses,
including severance and restructuring costs, were $542,295 in 2013, an increase of $54,486, or 11.2 percent, from 2012. The increase was primarily due to the addition of acquired businesses, acquisition transaction costs and higher compensation
expenses related to increased employment levels, partially offset by currency effects that reduced expenses.
27
Selling and administrative expenses as a percentage of sales increased to 35.1 percent in 2013 from 34.6
percent in 2012, due primarily to the acquired businesses and modest organic sales volume growth.
Severance and restructuring costs of $1,126
were recorded during 2013. Within the Adhesives Dispensing Systems segment, a restructuring program to optimize certain European operations resulted in costs of $315. Within the Advanced Technology Systems segment, restructuring initiatives that
involved plant and facility consolidations and other programs resulted in severance costs of $811 in 2013.
Operating profit as a percentage of
sales was 21.0 percent in 2013 compared to 23.8 percent in 2012. The decrease was primarily due to the dilutive effect of 2013 and 2012 acquisitions, as well as modest organic sales growth and higher selling and administrative expenses.
Operating capacity for each of our segments can support fluctuations in order activity without significant changes in operating costs. Also, currency
translation affects reported operating margins. Operating margins for each segment were unfavorably impacted by a stronger dollar during 2013 as compared to 2012.
Operating profit as a percentage of sales for the Adhesive Dispensing Systems segment decreased to 25.7 percent in 2013 from 30.9 percent in 2012. The decrease was primarily due to the dilutive effect of
2013 and 2012 acquisitions.
Operating profit as a percentage of sales for the Advanced Technology Systems segment decreased to
23.9 percent in 2013 from 26.0 percent in 2012. The decline was partially due to a higher mix of engineered systems serving mobile electronic device customers and incremental spending on initiatives that are intended to drive growth in future
periods.
Operating profit as a percentage of sales for the Industrial Coating Systems segment increased to 14.5 percent in 2013 from 12.4
percent in 2012. The increase was primarily due to better absorption of fixed expenses, as well as the accretive effect of a 2012 acquisition.
Interest and other income (expense)
— Interest expense in 2013 was $14,841, an increase of $3,688, or 33.1 percent, from 2012. The
increase was due to higher borrowing levels resulting primarily from acquisitions in the second half of 2012 and 2013.
Other income in 2013
was $1,694 compared to $1,463 in 2012. Included in 2013 were the gain on sale of real estate in China of $2,106 and foreign currency losses of $2,214. The 2012 amount included a net gain of $713 on the sale of three facilities within the Adhesive
Dispensing Systems segment and foreign currency losses of $1,016.
Income taxes —
Income tax expense in 2013 was $89,306, or 28.7
percent of pre-tax income, as compared to $101,424, or 31.1 percent of pre-tax income in 2012.
The 2013 rate was impacted by a favorable
adjustment to unrecognized tax benefits of $900 primarily related to expiration of certain foreign statutes of limitations. On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted which retroactively reinstated and extended the
Federal Research and Development Tax Credit (Federal R&D Tax Credit) from January 1, 2012 to December 31, 2013 and extended certain other tax provisions. As a result, the Company’s income tax expense for 2013 includes a discrete
tax benefit of $1,700 related to 2012.
The 2012 tax rate was impacted by a favorable adjustment related to our 2011 tax provision that reduced
income taxes by $400, a favorable adjustment to deferred taxes related to a tax rate reduction in the United Kingdom that reduced income taxes by $175, and additional tax expense of $325 related to an adjustment of deferred taxes resulting from a
tax rate reduction in Japan.
Net income —
Net income was $221,817, or $3.42 per diluted share, in 2013, compared to net income of
$224,829, or $3.45 per diluted share in 2012. This represented a 1.3 percent decrease in net income and a 0.9 percent decrease in diluted earnings per share.
Liquidity and Capital Resources
Cash and cash equivalents decreased $61 in 2014. Cash
provided by operating activities was $288,155 in 2014, compared to $268,376 in 2013. The primary sources were net income adjusted for non-cash income and expenses
28
and the tax benefit from the exercise of stock options, the sum of which was $322,529 in 2014, compared to $287,378 in 2013. Operating assets and liabilities used $34,374 of cash in 2014,
compared to $19,002 in 2013. The primary reasons for this increase were higher receivables due to higher year-end shipments, higher inventory investments to meet anticipated demand, partially offset by higher accrued liabilities.
Cash used by investing activities was $230,525 in 2014, compared to $220,545 in 2013. The 2014 acquisitions of Avalon Laboratories and Dima Group B.V.
used $186,420 of cash. The 2013 acquisitions of the Kreyenborg Group, certain assets from Kodama Chemical Industry Co., Ltd and certain assets from Nellcor Puritan Bennett Mexico, S.A. de C.V., a subsidiary of Covidien LP used $176,333 of cash.
Capital expenditures were $43,574 in 2014, down from $47,219 in the prior year. Current year capital expenditures were focused on production machinery, continued investments in our information systems platform and on a new facility in Colorado
supporting our fluid management product lines. Cash proceeds of $3,847 in 2013 related primarily to sale of real estate in China.
Cash of
$53,458 was used by financing activities in 2014, compared to $52,426 in 2013. Included in 2014 were net short and long-term borrowings of $153,823, compared to $15,747 in the prior year. The change was primarily due to increased borrowing for
acquisitions and purchase of treasury shares in 2014. Issuance of common shares related to employee benefit plans generated $7,013 of cash in 2014, up from $6,018 in 2013, and the tax benefit from stock option exercises was $6,385 in the current
year, up from $5,531 in the prior year. These increases were the result of higher stock option exercises. In 2014, cash of $166,434 was used for the purchase of treasury shares, up from $33,402 in 2013. Dividend payments were $48,391 in 2014, up
from $40,478 in 2013 due to an increase in the annual dividend to $0.76 per share from $0.63 per share.
The following is a summary of
significant changes by balance sheet caption from October 31, 2013 to October 31, 2014. Receivables increased $57,137 primarily due to higher sales in the fourth quarter of 2014 compared to the fourth quarter of 2013. The increase of
$12,470 in inventories was primarily due to inventory held by Avalon Laboratories and Dima Group B.V, which were both acquired in 2014. Net property, plant and equipment increased $23,460 primarily due to capital expenditures and acquisitions,
partially offset by depreciation expense. Goodwill increased $113,326, due to acquisitions completed in 2014 that added $124,391 of goodwill, offset by $11,065 from the effects of currency translation. The increase in net other intangibles of
$22,237 was due to $53,281 of intangibles added as a result of the 2014 acquisitions, partially offset by $25,308 of amortization and $5,736 from the effects of currency translation.
The increase in notes payable of $102,577 was related to the borrowing of a $100,000 short-term credit facility with PNC Bank. Accounts payable increased $6,377, primarily due to the higher level of
business activity in the fourth quarter of 2014 compared to the fourth quarter of 2013. The increase in income taxes payable of $2,064 was due to the timing of required tax payments. The increase of $26,473 in accrued liabilities was due to higher
compensation-related accruals and higher value of foreign exchange contracts. The long-term debt increase of $44,710 primarily reflects $121,242 of net borrowings under our revolving credit agreement offset by repayments of $65,815 under our
€100,000 agreement with The Bank of Tokyo-Mitsubishi UFJ, Ltd, and repayments of $10,556 under our New York Life credit facility. The $20,328 increase in long-term pension obligations was primarily the result of a decrease in discount rates and
new mortality tables used for domestic plans. Postretirement obligations increased $8,506 primarily due to a decrease in discount rates and new mortality tables used for domestic plans. The increase of $3,945 in other long-term liabilities is due
primarily to the Avalon and Dima Group acquisitions and Corporate deferred compensation liabilities.
In August 2013 the board of directors
approved a repurchase program of up to $200,000. Uses for repurchased shares include the funding of benefit programs including stock options, restricted stock and 401(k) matching. Shares purchased are treated as treasury shares until used for such
purposes. The repurchase program is being funded using cash from operations and proceeds from borrowings under our credit facilities. During 2014, we repurchased 2,224 shares within these programs for a total of $163,584, excluding shares
repurchased for taxes associated with stock-based compensation.
As of October 31, 2014, approximately 87 percent of our consolidated cash
and cash equivalents were held at various foreign subsidiaries. Deferred income taxes are not provided on undistributed earnings of international
29
subsidiaries that are intended to be permanently invested in those operations. These undistributed earnings aggregated approximately $622,914 and $510,842 at October 31, 2014 and 2013,
respectively. Should these earnings be distributed, applicable foreign tax credits would substantially offset United States taxes due upon the distribution.
Subsequent to October 31, 2014, the board of directors authorized a new $300,000 share repurchase program, effective December 16, 2014. This new program replaced the $200,000 program approved by
the board in August 2013.
Contractual Obligations
The following table summarizes contractual obligations as of October 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
|
|
Payments Due by Period
|
|
|
|
|
Total
|
|
|
Less than
1 Year
|
|
|
1-3 Years
|
|
|
4-5 Years
|
|
|
After 5
Years
|
|
|
Long-term debt
(1)
|
|
$
|
693,619
|
|
|
$
|
10,751
|
|
|
$
|
487,384
|
|
|
$
|
48,178
|
|
|
$
|
147,306
|
|
|
Interest payments on long-term debt
(1)
|
|
|
43,297
|
|
|
|
7,464
|
|
|
|
13,220
|
|
|
|
10,462
|
|
|
|
12,151
|
|
|
Capital lease obligations
(2)
|
|
|
22,267
|
|
|
|
6,866
|
|
|
|
7,297
|
|
|
|
1,628
|
|
|
|
6,476
|
|
|
Operating leases
(2)
|
|
|
43,551
|
|
|
|
12,189
|
|
|
|
13,000
|
|
|
|
7,952
|
|
|
|
10,410
|
|
|
Notes payable
(3)
|
|
|
106,181
|
|
|
|
106,181
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Contributions related to pension and postretirement benefits
(4)
|
|
|
28,100
|
|
|
|
28,100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Purchase obligations
(5)
|
|
|
52,616
|
|
|
|
52,314
|
|
|
|
302
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total obligations
|
|
$
|
989,631
|
|
|
$
|
223,865
|
|
|
$
|
521,203
|
|
|
$
|
68,220
|
|
|
$
|
176,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) We have a $500,000 unsecured, multicurrency credit facility with a group of banks that expires in December 2016 and
may be increased to $750,000 under certain conditions. At October 31, 2014, $375,242 was outstanding under this facility, compared to $254,000 outstanding at October 31, 2013. The weighted average interest rate for borrowings under this
agreement was 1.08 percent at October 31, 2014. There are two primary financial covenants that must be met under this facility. The first covenant limits the amount of total indebtedness that can be incurred to 3.50 times consolidated trailing
four-quarter EBITDA (both indebtedness and EBITDA as defined in the credit agreement). The second covenant requires consolidated trailing
four-quarter
EBITDA to be at least 2.75 times consolidated trailing
four-quarter interest expense (both as defined in the credit agreement). At October 31, 2014, we were in compliance with all debt covenants, and the amount we could borrow under the credit facility would not have been limited by any debt
covenants.
In 2011, we entered into a $150,000 three-year Private Shelf Note agreement with New York Life Investment Management
LLC. Effective in 2013, the amount of the facility was increased from $150,000 to $175,000. Borrowings under the agreement may be up to 12 years, with an average life of up to 10 years and are unsecured. The interest rate on each borrowing can
be fixed or floating and is based upon the market rate at the borrowing date. This agreement contains customary events of default and covenants related to limitations on indebtedness and the maintenance of certain financial ratios. At
October 31, 2014, there was $53,333 outstanding under this facility, compared to $63,889 at October 31, 2013. The fixed rate was 2.21 percent at October 31, 2014. We were in compliance with all covenants at October 31, 2014, and
the amount we could borrow would not have been limited by any debt covenants.
In 2012, we entered into a Note Purchase Agreement with a group
of insurance companies under which we sold $200,000 of Senior Notes. The notes mature between July 2017 and July 2025 and bear interest at fixed rates between 2.27 percent and 3.13 percent. We were in compliance with all covenants at
October 31, 2014.
In 2013, we entered into a €100,000 agreement with The Bank of Tokyo-Mitsubishi UFJ, Ltd. The term of the
agreement is three years and can be extended by one year at the end of the third and fourth anniversaries. The
30
interest rate is variable based upon the EUR LIBOR rate and was 0.95 percent at October 31, 2014. At October 31, 2014, there was €50,500 $(63,244) outstanding under this agreement,
compared to €95,000 $(129,058) at October 31, 2013. We were in compliance with all covenants at October 31, 2014.
See Note 9
for additional information.
(2) See Note 10 for additional information.
(3) In 2014, we entered into a 364-day $100,000 unsecured credit facility with PNC Bank. We borrowed $100,000 under this facility to partially fund the Avalon acquisition. No additional borrowings can be
made under this agreement, and any future repayments will reduce the maximum amount by the amount of the repayment. The interest rate for borrowings under this facility was 0.95 percent at October 31, 2014. We were in compliance with all
covenants at October 31, 2014.
See Note 8 for additional information.
(4) Pension and postretirement plan funding amounts after 2015 will be determined based on the future funded status of the plans and therefore cannot be estimated at this time. See Note 6 for additional
information.
(5) Purchase obligations primarily represent commitments for materials used in our manufacturing processes that are not recorded
in our Consolidated Balance Sheet.
We believe that the combination of present capital resources, internally generated funds and unused
financing sources are more than adequate to meet cash requirements for 2015. There are no significant restrictions limiting the transfer of funds from international subsidiaries to the parent company.
Outlook
Our operating performance,
balance sheet position, and financial ratios for 2014 remained strong relative to 2013 and recent years, although uncertainties persisted in global financial markets and the general economic environment. Going forward, we are well-positioned to
manage our liquidity needs that arise from working capital requirements, capital expenditures, contributions related to pension and postretirement obligations, and principal and interest payments on indebtedness. Primary sources of capital to meet
these needs as well as other opportunistic investments are cash provided by operations and borrowings under our loan agreements. In 2014, cash from operations was 17 percent of revenue. With respect to borrowing under existing loan agreements, as of
October 31, 2014, we had $124,758 available capacity under our five-year term, $500,000 unsecured, multicurrency credit facility. In addition, we had $121,666 borrowing capacity remaining on our $175,000
three-year
Private Shelf agreement with New York Life Investment Management LLC. While these facilities provide the contractual terms for any borrowing, we cannot be assured that these facilities would be
available in the event that these financial institutions failed to remain sufficiently capitalized.
Other loan agreements exist with no
remaining borrowing capacity, but factor into debt covenant calculations that affect future borrowing capacity. On July 26, 2012, we entered into a note purchase agreement with a group of insurance companies under which we sold $200,000 of
senior notes. The notes mature between July 2017 and July 2025 and bear interest at fixed rates between 2.27 percent and 3.13 percent. As of October 31, 2014, we owe €50,500 on a €100,000 three-year term loan facility entered into on
August 30, 2013, with the Bank of Tokyo Mitsubishi UFJ, Ltd. This loan facility bears interest at variable margin rates of 0.75 percent to 1.625 percent above EUR LIBOR. As of August 6, 2014, we entered into a $100,000 364-day term loan
facility with PNC Bank, National Association. Rate on this loan is 75 basis points over LIBOR.
Respective to all of these loans are two
primary covenants, the leverage ratio that restricts indebtedness (net of cash) to a maximum 3.50 times consolidated four-quarter trailing EBITDA and the interest coverage ratio that requires four-quarter trailing EBITDA to be at minimum 2.75 times
consolidated trailing four-quarter interest expense. (Debt, EBITDA, and interest expense are as defined in respective credit agreements.) With respect to these two primary covenants as of October 31, 2014, we were approximately 47 percent of
the most restrictive leverage ratio and approximately nine times the most restrictive interest coverage ratio. Unused borrowing capacity under existing loan agreements would amount to an additional 15 percent of the most restrictive leverage ratio.
31
Regarding expectations for 2015, we are optimistic about the growth opportunities in the diverse consumer
durable, non-durable, medical, electronics and industrial end markets we serve. However, we move forward with caution given slower growth in emerging markets, economists’ expectations for global GDP indicating a
low-growth
macroeconomic environment and marketplace effects of political instability in certain areas of the world. Though the pace of improvement in the global economy remains somewhat unclear, our growth
potential has been demonstrated over time from our capacity to build and enhance our core by entering emerging markets and pursuing market adjacencies. We drive value for our customers through our application expertise, differentiated technology,
and direct sales and service support. Our priorities also focus on operational improvements by employing continuous improvement methodologies to our business processes. We expect these efforts will continue to provide more than sufficient cash from
operations for meeting our liquidity needs and paying dividends to common shareholders, as well as enabling us to invest in the development of new applications and markets for our technologies and pursue strategic acquisition opportunities. For 2009
— 2014, excluding voluntary contributions to US defined benefit plans in 2010, cash from operations have been 17 to 21 percent of revenues, resulting in more than sufficient cash for our ordinary business requirements. Our available borrowing
capacity will enable us to make opportunistic investments in our own common shares and strategic business combinations.
With respect to
contractual spending, the table above presents our financial obligations as $989,631 of which $223,865 is payable in 2015. Effective December 16, 2014, we have in place a share repurchase program approved by the board of directors, authorizing
management at its discretion to repurchase shares up to $300,000.
This new authorization continues a succession of share repurchase programs
authorized since 2011. The repurchase program is funded using cash from operations and proceeds from borrowings under our credit facilities. Timing and actual number of shares subject to repurchase are contingent on a number of factors including
levels of cash generation from operations, cash requirements for acquisitions, repayment of debt and our share price. Capital expenditures for 2015 will be focused on continued investments in our information systems, completing a new facility in
Colorado supporting our fluid management product lines and projects that improve both capacity and efficiency of manufacturing and distribution operations.
Effects of Foreign Currency
The impact of changes in foreign currency exchange rates on
sales and operating results cannot be precisely measured due to fluctuating selling prices, sales volume, product mix and cost structures in each country where we operate. As a general rule, a weakening of the United States dollar relative to
foreign currencies has a favorable effect on sales and net income, while a strengthening of the dollar has a detrimental effect.
In 2014, as
compared with 2013, the United States dollar was generally stronger against foreign currencies. If 2013 exchange rates had been in effect during 2014, sales would have been approximately $7,002 higher and third-party costs would have been
approximately $1,845 higher. In 2013, as compared with 2012, the United States dollar was generally stronger against foreign currencies. If 2012 exchange rates had been in effect during 2013, sales would have been approximately $15,052 higher and
third-party costs would have been approximately $7,035 higher. These effects on reported sales do not include the impact of local price adjustments made in response to changes in currency exchange rates.
Inflation
Inflation affects profit
margins as the ability to pass cost increases on to customers is restricted by the need for competitive pricing. Although inflation has been modest in recent years and has had no material effect on the years covered by these financial statements, we
continue to seek ways to minimize the impact of inflation through focused efforts to increase productivity.
Trends
The Five-Year Summary in Item 6 documents our historical financial trends. Over this period, the world’s economic conditions fluctuated
significantly. Our solid performance is attributed to our participation in diverse geographic and industrial markets and our long-term commitment to develop and provide quality products and worldwide service to meet our customers’ changing
needs.
32
Safe Harbor Statements Under the Private Securities Litigation Reform Act of 1995
This Form 10-K, particularly “Management’s Discussion and Analysis,” contains forward-looking statements within the meaning of the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, income, earnings, cash flows, changes in operations,
operating improvements, businesses in which we operate and the United States and global economies. Statements in this 10-K that are not historical are hereby identified as “forward-looking statements” and may be indicated by words or
phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,” “could,” “hope,” “forecast,”
“management is of the opinion,” use of the future tense and similar words or phrases.
In light of these risks and uncertainties,
actual events and results may vary significantly from those included in or contemplated or implied by such statements. Readers are cautioned not to place undue reliance on such
forward-looking
statements.
These forward-looking statements speak only as of the date made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Factors that could cause our actual results to differ materially from the expected results are discussed in Item 1A, Risk Factors.
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
We operate internationally and enter into intercompany transactions denominated in foreign currencies. Consequently, we are subject to market risk arising from exchange rate movements between the dates
foreign currencies are recorded and the dates they are settled. We regularly use foreign exchange contracts to reduce our risks related to most of these transactions. These contracts, primarily associated with the euro, yen and pound sterling,
typically have maturities of 90 days or less, and generally require the exchange of foreign currencies for United States dollars at rates stated in the contracts. Gains and losses from changes in the market value of these contracts offset foreign
exchange losses and gains, respectively, on the underlying transactions. Other transactions denominated in foreign currencies are designated as hedges of our net investments in foreign subsidiaries or are intercompany transactions of a long-term
investment nature. As a result of the use of foreign exchange contracts on a routine basis to reduce the risks related to most of our transactions denominated in foreign currencies, as of October 31, 2014, we did not have material foreign
currency exposure.
Note 12 to the financial statements contains additional information about our foreign currency transactions and the methods
and assumptions used to record these transactions.
A portion of our operations is financed with short-term and long-term borrowings and is
subject to market risk arising from changes in interest rates.
33
The tables that follow present principal repayments and weighted-average interest rates on outstanding
borrowings of fixed-rate debt.
At October 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
Thereafter
|
|
|
Total
Value
|
|
|
Fair
Value
|
|
|
Annual repayments of long-term debt
|
|
$
|
10,751
|
|
|
$
|
10,798
|
|
|
$
|
38,101
|
|
|
$
|
26,586
|
|
|
$
|
21,591
|
|
|
$
|
147,306
|
|
|
$
|
255,133
|
|
|
$
|
257,654
|
|
|
Average interest rate on total borrowings outstanding during the year
|
|
|
2.8
|
%
|
|
|
2.8
|
%
|
|
|
2.8
|
%
|
|
|
2.9
|
%
|
|
|
3.0
|
%
|
|
|
3.0
|
%
|
|
|
2.8
|
%
|
|
|
|
|
At October 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
Thereafter
|
|
|
Total
Value
|
|
|
Fair
Value
|
|
|
Annual repayments of long-term debt
|
|
$
|
10,832
|
|
|
$
|
10,757
|
|
|
$
|
10,763
|
|
|
$
|
38,095
|
|
|
$
|
26,587
|
|
|
$
|
168,897
|
|
|
$
|
265,931
|
|
|
$
|
253,845
|
|
|
Average interest rate on total borrowings outstanding during the year
|
|
|
2.8
|
%
|
|
|
2.8
|
%
|
|
|
2.8
|
%
|
|
|
2.8
|
%
|
|
|
2.9
|
%
|
|
|
3.0
|
%
|
|
|
2.8
|
%
|
|
|
|
|
We also have variable-rate notes payable and long-term debt. The weighted average interest rate of this debt was 1.1
percent at October 31, 2014 and 1.0 percent at October 31, 2013. A one percent increase in interest rates would have resulted in additional interest expense of approximately $4,201 on the variable rate notes payable and long-term debt in
2014.
34
|
Item 8.
|
Financial Statements and Supplementary Data
|
Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended October 31, 2014, 2013 and 2012
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
(In thousands except for per-share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
1,704,021
|
|
|
$
|
1,542,921
|
|
|
$
|
1,409,578
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
758,923
|
|
|
|
676,777
|
|
|
|
586,289
|
|
|
Selling and administrative expenses
|
|
|
577,993
|
|
|
|
542,295
|
|
|
|
487,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,336,916
|
|
|
|
1,219,072
|
|
|
|
1,074,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
367,105
|
|
|
|
323,849
|
|
|
|
335,480
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(15,035
|
)
|
|
|
(14,841
|
)
|
|
|
(11,153
|
)
|
|
Interest and investment income
|
|
|
581
|
|
|
|
421
|
|
|
|
463
|
|
|
Other — net
|
|
|
(138
|
)
|
|
|
1,694
|
|
|
|
1,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,592
|
)
|
|
|
(12,726
|
)
|
|
|
(9,227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
352,513
|
|
|
|
311,123
|
|
|
|
326,253
|
|
|
Income tax provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
102,251
|
|
|
|
84,184
|
|
|
|
91,596
|
|
|
Deferred
|
|
|
3,489
|
|
|
|
5,122
|
|
|
|
9,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,740
|
|
|
|
89,306
|
|
|
|
101,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
246,773
|
|
|
$
|
221,817
|
|
|
$
|
224,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares
|
|
|
63,656
|
|
|
|
64,214
|
|
|
|
64,407
|
|
|
Incremental common shares attributable to outstanding stock options, restricted stock and deferred stock-based
compensation
|
|
|
625
|
|
|
|
694
|
|
|
|
696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares and common share equivalents
|
|
|
64,281
|
|
|
|
64,908
|
|
|
|
65,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
3.88
|
|
|
$
|
3.45
|
|
|
$
|
3.49
|
|
|
Diluted earnings per share
|
|
$
|
3.84
|
|
|
$
|
3.42
|
|
|
$
|
3.45
|
|
|
Dividends declared per common share
|
|
$
|
0.76
|
|
|
$
|
0.63
|
|
|
$
|
0.525
|
|
The accompanying notes are an integral part of the consolidated financial statements.
35
Consolidated Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended October 31, 2014, 2013 and 2012
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
246,773
|
|
|
$
|
221,817
|
|
|
$
|
224,829
|
|
|
Components of other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustments
|
|
|
(23,972
|
)
|
|
|
465
|
|
|
|
(10,806
|
)
|
|
Pension and postretirement benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service (cost) credit arising during the year
|
|
|
175
|
|
|
|
(1,050
|
)
|
|
|
2,142
|
|
|
Net actuarial gain (loss) arising during the year
|
|
|
(29,158
|
)
|
|
|
38,149
|
|
|
|
(23,829
|
)
|
|
Amortization of prior service cost
|
|
|
(251
|
)
|
|
|
(375
|
)
|
|
|
(183
|
)
|
|
Amortization of actuarial loss
|
|
|
6,989
|
|
|
|
9,657
|
|
|
|
7,899
|
|
|
Settlement loss recognized
|
|
|
398
|
|
|
|
—
|
|
|
|
563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pension and postretirement benefit plans
|
|
|
(21,847
|
)
|
|
|
46,381
|
|
|
|
(13,408
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss)
|
|
|
(45,819
|
)
|
|
|
46,846
|
|
|
|
(24,214
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
200,954
|
|
|
$
|
268,663
|
|
|
$
|
200,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
36
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
October 31, 2014 and 2013
|
|
2014
|
|
|
2013
|
|
|
(In thousands)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
42,314
|
|
|
$
|
42,375
|
|
|
Receivables — net
|
|
|
365,844
|
|
|
|
308,707
|
|
|
Inventories — net
|
|
|
210,871
|
|
|
|
198,401
|
|
|
Deferred income taxes
|
|
|
29,926
|
|
|
|
30,850
|
|
|
Prepaid expenses
|
|
|
23,728
|
|
|
|
21,733
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
672,683
|
|
|
|
602,066
|
|
|
Property, plant and equipment — net
|
|
|
224,439
|
|
|
|
200,979
|
|
|
Goodwill
|
|
|
1,052,537
|
|
|
|
939,211
|
|
|
Intangible assets — net
|
|
|
291,310
|
|
|
|
269,073
|
|
|
Deferred income taxes
|
|
|
6,559
|
|
|
|
9,394
|
|
|
Other assets
|
|
|
32,602
|
|
|
|
32,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,280,130
|
|
|
$
|
2,053,179
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Notes payable
|
|
$
|
106,181
|
|
|
$
|
3,604
|
|
|
Accounts payable
|
|
|
68,500
|
|
|
|
62,123
|
|
|
Income taxes payable
|
|
|
16,586
|
|
|
|
14,522
|
|
|
Accrued liabilities
|
|
|
137,001
|
|
|
|
110,528
|
|
|
Customer advance payments
|
|
|
25,578
|
|
|
|
28,341
|
|
|
Current maturities of long-term debt
|
|
|
10,751
|
|
|
|
10,832
|
|
|
Deferred income taxes
|
|
|
1,163
|
|
|
|
1,326
|
|
|
Current obligations under capital leases
|
|
|
5,108
|
|
|
|
5,521
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
370,868
|
|
|
|
236,797
|
|
|
Long-term debt
|
|
|
682,868
|
|
|
|
638,158
|
|
|
Obligations under capital leases
|
|
|
11,018
|
|
|
|
10,112
|
|
|
Pension obligations
|
|
|
124,082
|
|
|
|
103,754
|
|
|
Postretirement obligations
|
|
|
68,300
|
|
|
|
59,794
|
|
|
Deferred income taxes
|
|
|
87,092
|
|
|
|
89,541
|
|
|
Other liabilities
|
|
|
31,105
|
|
|
|
27,160
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
Preferred shares, no par value; 10,000 shares authorized; none issued
|
|
|
—
|
|
|
|
—
|
|
|
Common shares, no par value; 160,000 shares authorized; 98,023 shares issued at October 31, 2014 and 2013
|
|
|
12,253
|
|
|
|
12,253
|
|
|
Capital in excess of stated value
|
|
|
328,605
|
|
|
|
304,549
|
|
|
Retained earnings
|
|
|
1,560,966
|
|
|
|
1,362,584
|
|
|
Accumulated other comprehensive loss
|
|
|
(103,199
|
)
|
|
|
(57,380
|
)
|
|
Common shares in treasury, at cost
|
|
|
(893,828
|
)
|
|
|
(734,143
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity
|
|
|
904,797
|
|
|
|
887,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,280,130
|
|
|
$
|
2,053,179
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
37
Consolidated Statements of Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended October 31, 2014, 2013 and 2012
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Number of common shares in treasury
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
33,805
|
|
|
|
33,766
|
|
|
|
32,422
|
|
|
Shares issued under company stock and employee benefit plans
|
|
|
(480
|
)
|
|
|
(468
|
)
|
|
|
(571
|
)
|
|
Purchase of treasury shares
|
|
|
2,263
|
|
|
|
507
|
|
|
|
1,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
35,588
|
|
|
|
33,805
|
|
|
|
33,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning and ending of year
|
|
$
|
12,253
|
|
|
$
|
12,253
|
|
|
$
|
12,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital in excess of stated value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
304,549
|
|
|
$
|
287,581
|
|
|
$
|
272,928
|
|
|
Shares issued under company stock and employee benefit plans
|
|
|
264
|
|
|
|
(325
|
)
|
|
|
(504
|
)
|
|
Tax benefit from stock option and restricted stock transactions
|
|
|
6,385
|
|
|
|
5,531
|
|
|
|
4,792
|
|
|
Stock-based compensation
|
|
|
17,407
|
|
|
|
11,762
|
|
|
|
10,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
328,605
|
|
|
$
|
304,549
|
|
|
$
|
287,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
1,362,584
|
|
|
$
|
1,181,245
|
|
|
$
|
990,221
|
|
|
Net income
|
|
|
246,773
|
|
|
|
221,817
|
|
|
|
224,829
|
|
|
Dividends paid ($.76 per share in 2014, $.63 per share in 2013, and $.525 per share in 2012)
|
|
|
(48,391
|
)
|
|
|
(40,478
|
)
|
|
|
(33,805
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
1,560,966
|
|
|
$
|
1,362,584
|
|
|
$
|
1,181,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
(57,380
|
)
|
|
$
|
(104,226
|
)
|
|
$
|
(80,012
|
)
|
|
Translation adjustments
|
|
|
(23,972
|
)
|
|
|
465
|
|
|
|
(10,806
|
)
|
|
Settlement loss recognized, net of tax of $(234) in 2014 and $(331) in 2012
|
|
|
398
|
|
|
|
—
|
|
|
|
563
|
|
|
Net prior service cost arising during the year, net of tax of $125 in 2014, $840 in 2013 and $(1,078) in 2012
|
|
|
(76
|
)
|
|
|
(1,425
|
)
|
|
|
1,959
|
|
|
Net actuarial gain (loss) arising during the year, net of tax of $11,457 in 2014, $(28,644) in 2013 and $7,791 in
2012
|
|
|
(22,169
|
)
|
|
|
47,806
|
|
|
|
(15,930
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
(103,199
|
)
|
|
$
|
(57,380
|
)
|
|
$
|
(104,226
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares in treasury, at cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
(734,143
|
)
|
|
$
|
(707,083
|
)
|
|
$
|
(624,067
|
)
|
|
Shares issued under company stock and employee benefit plans
|
|
|
6,749
|
|
|
|
6,490
|
|
|
|
7,762
|
|
|
Purchase of treasury shares
|
|
|
(166,434
|
)
|
|
|
(33,550
|
)
|
|
|
(90,778
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
(893,828
|
)
|
|
$
|
(734,143
|
)
|
|
$
|
(707,083
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity
|
|
$
|
904,797
|
|
|
$
|
887,863
|
|
|
$
|
669,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
38
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended October 31, 2014, 2013 and 2012
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
246,773
|
|
|
$
|
221,817
|
|
|
$
|
224,829
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
34,446
|
|
|
|
31,766
|
|
|
|
24,469
|
|
|
Amortization
|
|
|
25,308
|
|
|
|
22,672
|
|
|
|
14,521
|
|
|
Provision for losses on receivables
|
|
|
867
|
|
|
|
889
|
|
|
|
710
|
|
|
Deferred income taxes
|
|
|
3,489
|
|
|
|
5,122
|
|
|
|
9,828
|
|
|
Tax benefit from the exercise of stock options
|
|
|
(6,385
|
)
|
|
|
(5,531
|
)
|
|
|
(4,792
|
)
|
|
Non-cash stock compensation
|
|
|
17,407
|
|
|
|
11,762
|
|
|
|
10,365
|
|
|
(Gain)/loss on sale of property, plant and equipment
|
|
|
218
|
|
|
|
(1,879
|
)
|
|
|
(638
|
)
|
|
Other non-cash
|
|
|
406
|
|
|
|
760
|
|
|
|
(401
|
)
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(65,692
|
)
|
|
|
19,971
|
|
|
|
(49,595
|
)
|
|
Inventories
|
|
|
(8,699
|
)
|
|
|
(10,741
|
)
|
|
|
171
|
|
|
Prepaid expenses
|
|
|
(1,852
|
)
|
|
|
(75
|
)
|
|
|
(1,201
|
)
|
|
Other noncurrent assets
|
|
|
(232
|
)
|
|
|
(5,898
|
)
|
|
|
(1,290
|
)
|
|
Accounts payable
|
|
|
6,906
|
|
|
|
(2,549
|
)
|
|
|
4,882
|
|
|
Income taxes payable
|
|
|
9,524
|
|
|
|
(8,552
|
)
|
|
|
18,855
|
|
|
Accrued liabilities
|
|
|
27,932
|
|
|
|
(19,130
|
)
|
|
|
12,923
|
|
|
Customer advance payments
|
|
|
(2,103
|
)
|
|
|
(839
|
)
|
|
|
2,124
|
|
|
Other noncurrent liabilities
|
|
|
59
|
|
|
|
7,195
|
|
|
|
12,156
|
|
|
Other
|
|
|
(217
|
)
|
|
|
1,616
|
|
|
|
(3,518
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
288,155
|
|
|
|
268,376
|
|
|
|
274,398
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
(43,574
|
)
|
|
|
(47,219
|
)
|
|
|
(30,959
|
)
|
|
Proceeds from sale of property, plant and equipment
|
|
|
323
|
|
|
|
3,847
|
|
|
|
6,120
|
|
|
Proceeds from sale of product lines
|
|
|
—
|
|
|
|
—
|
|
|
|
2,213
|
|
|
Acquisition of businesses, net of cash acquired
|
|
|
(186,420
|
)
|
|
|
(176,333
|
)
|
|
|
(443,864
|
)
|
|
Investment in equity affiliate
|
|
|
(854
|
)
|
|
|
(1,116
|
)
|
|
|
—
|
|
|
Proceeds from sale of (purchases of) marketable securities
|
|
|
—
|
|
|
|
276
|
|
|
|
(279
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(230,525
|
)
|
|
|
(220,545
|
)
|
|
|
(466,769
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from short-term borrowings
|
|
|
108,679
|
|
|
|
5,036
|
|
|
|
250,001
|
|
|
Repayment of short-term borrowings
|
|
|
(6,093
|
)
|
|
|
(51,505
|
)
|
|
|
(200,033
|
)
|
|
Proceeds from long-term debt
|
|
|
158,828
|
|
|
|
270,283
|
|
|
|
401,175
|
|
|
Repayment of long-term debt
|
|
|
(107,591
|
)
|
|
|
(208,067
|
)
|
|
|
(136,589
|
)
|
|
Repayment of capital lease obligations
|
|
|
(5,854
|
)
|
|
|
(5,842
|
)
|
|
|
(5,203
|
)
|
|
Issuance of common shares
|
|
|
7,013
|
|
|
|
6,018
|
|
|
|
4,934
|
|
|
Purchase of treasury shares
|
|
|
(166,434
|
)
|
|
|
(33,402
|
)
|
|
|
(88,455
|
)
|
|
Tax benefit from the exercise of stock options
|
|
|
6,385
|
|
|
|
5,531
|
|
|
|
4,792
|
|
|
Dividends paid
|
|
|
(48,391
|
)
|
|
|
(40,478
|
)
|
|
|
(33,805
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(53,458
|
)
|
|
|
(52,426
|
)
|
|
|
196,817
|
|
|
Effect of exchange rate changes on cash
|
|
|
(4,233
|
)
|
|
|
5,731
|
|
|
|
(615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(61
|
)
|
|
|
1,136
|
|
|
|
3,831
|
|
|
Cash and cash equivalents at beginning of year
|
|
|
42,375
|
|
|
|
41,239
|
|
|
|
37,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
42,314
|
|
|
$
|
42,375
|
|
|
$
|
41,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
39
Notes to Consolidated Financial Statements
NOTE REGARDING AMOUNTS AND FISCAL YEAR REFERENCES
In this annual report, all amounts related to United States dollars and foreign currency and to the number of Nordson Corporation’s common shares, except for per share earnings and dividend amounts,
are expressed in thousands. Unless the context otherwise indicates, all references to “we” or the “Company” mean Nordson Corporation.
Unless otherwise noted, all references to years relate to our fiscal year.
Note 1
—
Significant accounting policies
Consolidation
— The consolidated financial statements include the accounts of Nordson Corporation and its majority-owned
and controlled subsidiaries. Investments in affiliates and joint ventures in which our ownership is 50 percent or less or in which we do not have control but have the ability to exercise significant influence, are accounted for under the equity
method. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of estimates
— The
preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and
notes. Actual amounts could differ from these estimates.
Presentation
— Certain amounts for 2013 were reclassified to correct
immaterial misclassifications of deferred tax assets and deferred tax liabilities. Specifically, non-current deferred tax liabilities increased $9,564, current deferred tax liabilities increased $1,326, non-current deferred tax assets increased
$9,394 and current deferred tax assets increased $1,496.
Fiscal year
— Our fiscal year is November 1 through October 31.
Revenue recognition —
Most of our revenues are recognized upon shipment, provided that persuasive evidence of an arrangement
exists, the sales price is fixed or determinable, collectibility is reasonably assured, and title and risk of loss have passed to the customer.
A relative selling price hierarchy exists for determining the selling price of deliverables in multiple deliverable arrangements. Vendor specific
objective evidence (VSOE) is used, if available. Third-party evidence (TPE) is used if VSOE is not available, and best estimated selling price (BESP) is used if neither VSOE nor TPE is available. Our multiple deliverable arrangements include
installation, installation supervision, training, and spare parts, which tend to be completed in a short period of time, at an insignificant cost, and utilizing skills not unique to us, therefore, are typically regarded as inconsequential or
perfunctory. Revenue for undelivered items is deferred and included within accrued liabilities in the accompanying balance sheet. Revenues deferred in 2014, 2013 and 2012 were not material.
Shipping and handling costs
— Amounts billed to customers for shipping and handling are recorded as revenue. Shipping and handling expenses are included in cost of sales.
Advertising costs
— Advertising costs are expensed as incurred and were $10,823, $12,480 and $10,935 in 2014, 2013 and 2012, respectively.
Research and development
— Research and development costs are expensed as incurred and were $47,536, $47,973 and $36,535 in 2014,
2013 and 2012, respectively.
Earnings per share
— Basic earnings per share are computed based on the weighted-average number of
common shares outstanding during each year, while diluted earnings per share are based on the weighted-average number of common shares and common share equivalents outstanding. Common share equivalents consist of shares issuable upon exercise of
stock options computed using the treasury stock method, as well as restricted stock and deferred stock-based compensation. Options whose exercise price is higher than the average market price are excluded from the calculation of diluted earnings per
share because the effect would be anti-dilutive. Options for 69 common shares were excluded from the diluted earnings per share calculation in 2014 because their effect would have been anti-dilutive. No options for common shares were excluded from
the 2013 diluted earnings per
40
Notes to Consolidated Financial
Statements
— (Continued)
share calculation, and options for 75 common shares were excluded from the diluted earnings per share calculation in 2012. Under the 2012 Stock Incentive and Award Plan, executive officers
and selected other key employees receive common share awards based on corporate performance measures over three-year performance periods. Awards for which performance measures have not been met were excluded from the calculation of diluted earnings
per share.
Cash and cash equivalents
— Highly liquid instruments with maturities of 90 days or less at date of purchase
are considered to be cash equivalents. Cash and cash equivalents are carried at cost, which approximates fair value.
Allowance for doubtful
accounts
— An allowance for doubtful accounts is maintained for estimated losses resulting from the inability of customers to make required payments. The amount of the allowance is determined principally on the basis of past collection
experience and known factors regarding specific customers. Accounts are written off against the allowance when it becomes evident that collection will not occur.
Inventories
— Inventories are valued at the lower of cost or market. Cost was determined using the last-in,
first-out
(LIFO) method for 21 percent of
consolidated inventories at October 31, 2014, and October 31, 2013. The first-in, first-out (FIFO) method is used for all other inventories. Consolidated inventories would have been $7,496 and $6,797 higher than reported at October 31,
2014 and October 31, 2013, respectively, had the FIFO method, which approximates current cost, been used for valuation of all inventories.
Property, plant and equipment and depreciation
— Property, plant and equipment are carried at cost. Additions and improvements that extend the
lives of assets are capitalized, while expenditures for repairs and maintenance are expensed as incurred. Plant and equipment are depreciated for financial reporting purposes using the straight-line method over the estimated useful lives of the
assets or, in the case of property under capital leases, over the terms of the leases. Leasehold improvements are depreciated over the shorter of the lease term or their useful lives. Useful lives are as follows:
|
|
|
|
|
|
|
Land improvements
|
|
|
15-25 years
|
|
|
Buildings
|
|
|
20-40 years
|
|
|
Machinery and equipment
|
|
|
3-18 years
|
|
|
Enterprise management systems
|
|
|
5-13 years
|
|
Depreciation expense is included in cost of sales and selling and administrative expenses.
Internal use software costs are expensed or capitalized depending on whether they are incurred in the preliminary project stage, application development
stage or the post-implementation stage. Amounts capitalized are amortized over the estimated useful lives of the software beginning with the project’s completion. All reengineering costs are expensed as incurred. Interest costs on significant
capital projects are capitalized. No interest was capitalized in 2014, 2013 or 2012.
Goodwill and intangible assets
— Goodwill is
the excess of cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill relates to and is assigned directly to specific reporting units. Goodwill is not amortized but is
subject to annual impairment testing. Our annual impairment testing is performed as of August 1. Testing is done more frequently if an event occurs or circumstances change that would indicate the fair value of a reporting unit is less than the
carrying amount of those assets.
Other amortizable intangible assets, which consist primarily of patent/technology costs, customer
relationships, noncompete agreements, and trade names, are amortized over their useful lives on a straight-line basis. At October 31, 2014, the weighted-average useful lives for each major category of amortizable intangible assets were:
|
|
|
|
|
|
|
Patent/technology costs
|
|
|
14 years
|
|
|
Customer relationships
|
|
|
14 years
|
|
|
Noncompete agreements
|
|
|
3 years
|
|
|
Trade names
|
|
|
16 years
|
|
41
Notes to Consolidated Financial
Statements
— (Continued)
Foreign currency translation
— The financial statements of subsidiaries outside the United
States are generally measured using the local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at the rates of exchange at the balance sheet dates. Income and expense items are translated at average
monthly rates of exchange. The resulting translation adjustments are included in accumulated other comprehensive income (loss), a separate component of shareholders’ equity. Generally, gains and losses from foreign currency transactions,
including forward contracts, of these subsidiaries and the United States parent are included in net income. Gains and losses from intercompany foreign currency transactions of a long-term investment nature are included in accumulated other
comprehensive income (loss).
Accumulated other comprehensive loss
— Accumulated other comprehensive loss at October 31, 2014
and 2013 consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
Pension and
|
|
|
Accumulated
|
|
|
|
|
translation
|
|
|
postretirement benefit
|
|
|
other comprehensive
|
|
|
|
|
adjustments
|
|
|
plan adjustments
|
|
|
loss
|
|
|
Balance at October 31, 2013
|
|
$
|
26,699
|
|
|
$
|
(84,079
|
)
|
|
$
|
(57,380
|
)
|
|
Pension and postretirement plan changes, net of tax of $(11,348)
|
|
|
—
|
|
|
|
(21,847
|
)
|
|
|
(21,847
|
)
|
|
Current period charge
|
|
|
(23,972
|
)
|
|
|
—
|
|
|
|
(23,972
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 31, 2014
|
|
$
|
2,727
|
|
|
$
|
(105,926
|
)
|
|
$
|
(103,199
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warranties
— We offer warranties to our customers depending on the specific product and terms of the customer
purchase agreement. A typical warranty program requires that we repair or replace defective products within a specified time period (generally one year) measured from the date of delivery or first use. We record an estimate for future
warranty-related costs based on actual historical return rates. Based on analysis of return rates and other factors, the adequacy of our warranty provisions are adjusted as necessary. The liability for warranty costs is included in accrued
liabilities in the Consolidated Balance Sheet.
Following is a reconciliation of the product warranty liability for 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
Balance at beginning of year
|
|
$
|
9,409
|
|
|
$
|
8,929
|
|
|
Accruals for warranties
|
|
|
10,813
|
|
|
|
7,891
|
|
|
Warranty assumed from acquisitions
|
|
|
—
|
|
|
|
947
|
|
|
Warranty payments
|
|
|
(10,012
|
)
|
|
|
(8,356
|
)
|
|
Currency adjustments
|
|
|
(292
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
9,918
|
|
|
$
|
9,409
|
|
|
|
|
|
|
|
|
|
|
|
Note 2
—
Recently issued accounting standards
In July 2013, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) which requires the netting of
unrecognized tax benefits against a deferred tax asset for a loss or other carry forward that would apply in settlement of uncertain tax positions. Under the new standard, unrecognized tax benefits will be netted against all available
same-jurisdiction loss or other tax carry forwards that would be utilized, rather than only against carry forwards that are created by the unrecognized tax benefits. The new guidance is effective prospectively to all existing unrecognized tax
benefits, but entities can choose to apply it retrospectively. The guidance will be effective for us in our first quarter of 2015, with early adoption permitted. We do not believe the adoption of this ASU will have a material effect on our
consolidated financial statements.
In May 2014, the FASB issued a new standard regarding revenue recognition. Under this standard, a company
recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the
42
Notes to Consolidated Financial
Statements
— (Continued)
consideration to which the company expects to be entitled in exchange for those goods or services. The standard implements a five-step process for customer contract revenue recognition that
focuses on transfer of control. It will be effective for us beginning in 2018, with early adoption not permitted. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. We are
currently assessing the impact this standard will have on our consolidated financial statements as well as the method by which we will adopt the new standard.
Note 3
—
Acquisitions
Business acquisitions have been accounted for as purchases, with the acquired assets and liabilities recorded at estimated fair value
on the dates of acquisition. The cost in excess of the net assets of the business acquired is included in goodwill. Operating results since the respective dates of acquisitions are included in the Consolidated Statement of Income.
2014 acquisitions
On August 8,
2014, we purchased 100 percent of the outstanding shares of Avalon Laboratories Holding Corp. (Avalon). Avalon, a leading designer and manufacturer of highly specialized catheters and medical tubing products for cardiology, pulmonology and related
applications, complements our existing lines of highly engineered, single-use plastic components for fluid management in medical applications. We acquired Avalon for an aggregate purchase price of $179,966, net of cash acquired of $1,324. Based on
the fair value of the assets acquired and the liabilities assumed, goodwill of $122,011 and identifiable intangible assets of $52,000 were recorded. The identifiable intangible assets consist primarily of $32,200 of customer relationships (amortized
over 10 years), $9,800 of technology (amortized over 10 years) and $10,000 of tradenames (amortized over 15 years). Goodwill associated with this acquisition is not tax deductible; however there is $15,800 from a previous acquisition that is tax
deductible.
On August 29, 2014, we purchased 100 percent of the outstanding shares of Dima Group B.V. (Dima), a Netherlands based
manufacturer of conformal coating, dispensing and surface mount technology equipment for the global electronics assembly market. We acquired Dima for an aggregate purchase price of $6,454, net of cash acquired of $149. Based on the fair value of the
assets acquired and the liabilities assumed, goodwill of $2,380 and identifiable intangible assets of $1,281 were recorded. The identifiable intangible assets consist primarily of $1,017 of customer relationships (amortized over 7 years), and $264
of tradenames (amortized over 15 years). Goodwill associated with this acquisition is not tax deductible.
Both of these acquisitions are being
reported in our Advanced Technology Systems segment.
As of October 31, 2014, the purchase price allocations remain preliminary as we
complete our assessments of deferred taxes and certain reserves.
2013 acquisitions
On November 8, 2012, we purchased certain assets of Kodama Chemical Industry Co., Ltd., a Japanese licensed distributor of EDI Holdings, Inc, (EDI),
that we had previously acquired in 2012. This operation provides die sales to extrusion processors, web converters, and OEMs in Japan and Taiwan and carries out final manufacturing steps on new equipment to enhance die performance and accommodate
local requirements. The acquisition date fair value was $1,335, which consisted of cash transferred of $1,231 and a holdback liability of $104. Based on the fair value of the assets acquired and the liabilities assumed, identifiable intangible
assets of $912 were recorded. The identifiable intangible assets consist primarily of $847 of customer relationships that are being amortized over nine years and $65 of technology being amortized over nine years. This operation is being reported in
our Adhesive Dispensing Systems segment.
On August 30, 2013, we purchased 100 percent of the outstanding shares of Münster, Germany
based Kreyenborg Group’s Kreyenborg GmbH and BKG Bruckmann & Kreyenborg Granuliertechnik GmbH (the Kreyenborg Group). The Kreyenborg Group broadens our existing offering of screen changers, pumps and valves,
43
Notes to Consolidated Financial
Statements
— (Continued)
critical components in the polymer processing melt stream for extrusion processes, and expands the product portfolio to include pelletizers, the key component in polymer compounding, recycling
and related processes. The acquired companies employ approximately 270 people, have additional operations in Shanghai, China, Kuala Lumpur and Malaysia, and are reported in our Adhesive Dispensing Systems segment. We acquired the
Kreyenborg Group for an aggregate purchase price of $169,994, net of cash acquired of $22,913 and debt assumed of $391. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $115,103 and identifiable intangible
assets of $60,021 were recorded. The identifiable intangible assets consist primarily of $42,306 of customer relationships (amortized over 15 years), $15,336 of technology (amortized over 15 years) and $1,851 of tradenames related to BKG (amortized
over 10 years). Goodwill associated with this acquisition is not tax deductible.
On September 27, 2013 we purchased certain assets of
Nellcor Puritan Bennett Mexico, S.A. de C.V., a subsidiary of Covidien LP (Nellcor) to be used by our Value Plastics operation. The fair value on the date of acquisition was $5,500, consisting solely of cash. Based on the fair value of the assets
acquired and the liabilities assumed, goodwill of $2,301, property, plant and equipment of $1,149, technology of $740 (amortized over 10 years) and customer relationships of $1,310 (amortized over 25 years) were recorded. Goodwill associated
with this acquisition is not tax deductible. Value Plastics is reported in our Advanced Technology Systems segment.
2012 acquisitions
On June 14, 2012, we acquired 100 percent of the outstanding shares of EDI Holdings, Inc. (EDI), a provider of slot coating and flat
polymer extrusion dies for plastic processors and web converters headquartered in Chippewa Falls, Wisconsin. EDI is being reported in our Adhesive Dispensing Systems segment.
On June 21, 2012, we acquired 100 percent of the outstanding shares of Xaloy Superior Holdings, Inc. (Xaloy), a manufacturer of melt delivery components for injection and extrusion machinery in the
global plastic processing industry headquartered in New Castle, Pennsylvania. Xaloy is being reported in our Adhesive Dispensing Systems segment.
On August 1, 2012 we acquired 100 percent of the outstanding shares of Sealant Equipment & Engineering, Inc. (SEE), a manufacturer of precision dispense systems and fluid dispense valves
headquartered in Plymouth, Michigan. SEE is being reported in our Industrial Coating Systems segment.
These acquisitions were not individually
material, but in the aggregate they must be disclosed pursuant to the business combinations guidance. The total purchase price of these acquisitions was allocated to the underlying assets acquired and liabilities assumed based upon management’s
estimated fair values at the dates of acquisition. To the extent the purchase price exceeded the estimated fair value of the net identifiable tangible and intangible assets acquired, such excess was allocated to goodwill.
Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $271,501 and identifiable intangible assets of $122,216 were
recorded. The intangible assets acquired consist of customer lists of $48,350, which are being amortized over a weighted average life of nine years; technology assets of $25,740 which are being amortized over a weighted average life of 15 years;
trade names of $43,710 which are being amortized over a weighted average life of 15 years; and non-compete agreements of $4,416, which are being amortized over a weighted average life of two years. Goodwill of $24,058 associated with the SEE
acquisition is tax deductible, and none of the goodwill associated with the EDI and Xaloy acquisitions is tax deductible. However, there is $11,000 of goodwill related to their previous acquisitions that is tax deductible.
44
Notes to Consolidated Financial
Statements
— (Continued)
The following unaudited pro forma financial information for 2012 assumes the acquisitions above occurred
as of the beginning of 2011, after giving effect to certain adjustments, including amortization of intangible assets, interest expense on acquisition debt and income tax effects. The pro forma results have been prepared for comparative purposes only
and are not necessarily indicative of the results of operations which may occur in the future or that would have occurred had the acquisitions been affected on the date indicated, nor are they necessarily indicative of our future results of
operations.
|
|
|
|
|
|
|
Sales
|
|
$
|
1,537,251
|
|
|
Net income
|
|
$
|
234,092
|
|
|
Basic earnings per share
|
|
$
|
3.63
|
|
|
Diluted earnings per share
|
|
$
|
3.60
|
|
Proforma results were adjusted to exclude $2,109 of acquisition-related expenses and $4,589 of nonrecurring expense
related to the fair value adjustment to acquisition-date inventory. Proforma results included $11,713 of pretax amortization expense related to intangible assets.
45
Notes to Consolidated Financial
Statements
— (Continued)
Note 4
—
Details of balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
Receivables:
|
|
|
|
|
|
|
|
|
|
Accounts
|
|
$
|
347,259
|
|
|
$
|
292,469
|
|
|
Notes
|
|
|
6,339
|
|
|
|
9,467
|
|
|
Other
|
|
|
16,733
|
|
|
|
11,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
370,331
|
|
|
|
312,972
|
|
|
Allowance for doubtful accounts
|
|
|
(4,487
|
)
|
|
|
(4,265
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
365,844
|
|
|
$
|
308,707
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories:
|
|
|
|
|
|
|
|
|
|
Raw materials and component parts
|
|
$
|
86,573
|
|
|
$
|
81,943
|
|
|
Work-in-process
|
|
|
27,994
|
|
|
|
34,756
|
|
|
Finished goods
|
|
|
130,544
|
|
|
|
115,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
245,111
|
|
|
|
231,777
|
|
|
Obsolescence and other reserves
|
|
|
(26,744
|
)
|
|
|
(26,579
|
)
|
|
LIFO reserve
|
|
|
(7,496
|
)
|
|
|
(6,797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
210,871
|
|
|
$
|
198,401
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment:
|
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
10,216
|
|
|
$
|
10,383
|
|
|
Land improvements
|
|
|
3,827
|
|
|
|
3,849
|
|
|
Buildings
|
|
|
141,880
|
|
|
|
127,178
|
|
|
Machinery and equipment
|
|
|
319,110
|
|
|
|
294,374
|
|
|
Enterprise management system
|
|
|
44,682
|
|
|
|
43,983
|
|
|
Construction-in-progress
|
|
|
27,419
|
|
|
|
21,251
|
|
|
Leased property under capitalized leases
|
|
|
27,715
|
|
|
|
26,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
574,849
|
|
|
|
527,856
|
|
|
Accumulated depreciation and amortization
|
|
|
(350,410
|
)
|
|
|
(326,877
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
224,439
|
|
|
$
|
200,979
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities:
|
|
|
|
|
|
|
|
|
|
Salaries and other compensation
|
|
$
|
57,722
|
|
|
$
|
44,561
|
|
|
Pension and retirement
|
|
|
1,738
|
|
|
|
720
|
|
|
Taxes other than income taxes
|
|
|
6,367
|
|
|
|
5,570
|
|
|
Other
|
|
|
71,174
|
|
|
|
59,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
137,001
|
|
|
$
|
110,528
|
|
|
|
|
|
|
|
|
|
|
|
46
Notes to Consolidated Financial
Statements
— (Continued)
Note 5
—
Goodwill and intangible assets
We account for goodwill and other intangible assets in accordance with the provisions of ASC 350 and account for business combinations
using the acquisition method of accounting and accordingly, the assets and liabilities of the entities acquired are recorded at their estimated fair values at the acquisition date. Goodwill is the excess of purchase price over the fair value of
tangible and identifiable intangible net assets acquired in various business combinations. Goodwill is not amortized but is tested for impairment annually at the reporting unit level, or more often if indications of impairment exist. We assess the
fair value of reporting units on a non-recurring basis using a combination of two valuation methods, a market approach and an income approach, to estimate the fair value of our reporting units. The implied fair value of our reporting units is
determined based on significant unobservable inputs; accordingly, these inputs fall within Level 3 of the fair value hierarchy.
Our reporting
units are the Adhesive Dispensing Systems segment, the Industrial Coating Systems segment and one level below the Advanced Technology Systems segment.
The goodwill impairment test is a two-step process. In the first step, performed in the fourth quarter of each year, we estimate a reporting unit’s fair value using a combination of the discounted
cash flow method of the Income Approach and the guideline public company method of the Market Approach and compare the result against the reporting unit’s carrying value of net assets. If the carrying value of a reporting unit exceeds its
fair value, then a second step is performed to determine if goodwill is impaired. In the second step, a hypothetical purchase price allocation of the reporting unit’s assets and liabilities is performed using the fair value calculated in step
one. The difference between the fair value of the reporting unit and the hypothetical fair value of assets and liabilities is the implied goodwill amount. Impairment is recorded if the carrying value of the reporting unit’s goodwill is higher
than its implied goodwill. Based upon results of step one in 2014, 2013 and 2012, the second step of the goodwill impairment test was not necessary.
We acquired Avalon on August 8, 2014 and Dima on August 29, 2014. Determination of the preliminary goodwill associated with these acquisitions was completed with the assistance of an
independent valuation specialist in October 2014. Since the dates of the valuations, no events or changes in circumstances have occurred that would more likely than not reduce the fair value of these acquisitions below their carrying values.
Changes in the carrying amount of goodwill during 2014 by operating segment follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adhesive
Dispensing
Systems
|
|
|
Advanced
Technology
Systems
|
|
|
Industrial
Coating
Systems
|
|
|
Total
|
|
|
Balance at October 31, 2013
|
|
$
|
407,269
|
|
|
$
|
507,884
|
|
|
$
|
24,058
|
|
|
$
|
939,211
|
|
|
Acquisitions
|
|
|
—
|
|
|
|
124,391
|
|
|
|
—
|
|
|
|
124,391
|
|
|
Currency effect
|
|
|
(10,223
|
)
|
|
|
(842
|
)
|
|
|
—
|
|
|
|
(11,065
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 31, 2014
|
|
$
|
397,046
|
|
|
$
|
631,433
|
|
|
$
|
24,058
|
|
|
$
|
1,052,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated impairment losses, which were recorded in 2009, were $232,789 at October 31, 2014 and October 31,
2013. Of these losses, $229,173 related to the Advanced Technology Systems segment and $3,616 related to the Industrial Coating Systems segment.
47
Notes to Consolidated Financial Statements — (Continued)
Information regarding intangible assets subject to amortization follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2014
|
|
|
|
|
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net Book Value
|
|
|
Customer relationships
|
|
$
|
200,028
|
|
|
$
|
41,910
|
|
|
$
|
158,118
|
|
|
Patent/technology costs
|
|
|
93,799
|
|
|
|
27,030
|
|
|
|
66,769
|
|
|
Trade name
|
|
|
77,846
|
|
|
|
12,173
|
|
|
|
65,673
|
|
|
Noncompete agreements
|
|
|
8,220
|
|
|
|
7,600
|
|
|
|
620
|
|
|
Other
|
|
|
1,369
|
|
|
|
1,239
|
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
381,262
|
|
|
$
|
89,952
|
|
|
$
|
291,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2013
|
|
|
|
|
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net Book Value
|
|
|
Customer relationships
|
|
$
|
171,489
|
|
|
$
|
28,872
|
|
|
$
|
142,617
|
|
|
Patent/technology costs
|
|
|
85,414
|
|
|
|
21,145
|
|
|
|
64,269
|
|
|
Trade name
|
|
|
67,865
|
|
|
|
7,856
|
|
|
|
60,009
|
|
|
Noncompete agreements
|
|
|
9,965
|
|
|
|
8,091
|
|
|
|
1,874
|
|
|
Other
|
|
|
1,400
|
|
|
|
1,096
|
|
|
|
304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
336,133
|
|
|
$
|
67,060
|
|
|
$
|
269,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for 2014 and 2013 was $25,308 and $22,672, respectively.
Estimated amortization expense for each of the five succeeding years follows:
|
|
|
|
|
|
|
Year
|
|
Amounts
|
|
|
2015
|
|
$
|
27,754
|
|
|
2016
|
|
$
|
27,075
|
|
|
2017
|
|
$
|
26,653
|
|
|
2018
|
|
$
|
26,366
|
|
|
2019
|
|
$
|
26,359
|
|
Note 6
—
Retirement, pension and other postretirement plans
Retirement plans
— We have funded contributory retirement plans covering certain employees. Our contributions are primarily
determined by the terms of the plans, subject to the limitation that they shall not exceed the amounts deductible for income tax purposes. We also sponsor unfunded contributory supplemental retirement plans for certain employees. Generally, benefits
under these plans vest gradually over a period of approximately three years from date of employment, and are based on the employee’s contribution. The expense applicable to retirement plans for 2014, 2013 and 2012 was approximately $14,423,
$12,955 and $10,827, respectively.
Pension plans
— We have various pension plans covering a portion of our United States
and international employees. Pension plan benefits are generally based on years of employment and, for salaried employees, the level of compensation. Actuarially determined amounts are contributed to United States plans to provide sufficient assets
to meet future benefit payment requirements. We also sponsor an unfunded supplemental pension plan for certain employees. International subsidiaries fund their pension plans according to local requirements.
48
Notes to Consolidated Financial
Statements
— (Continued)
A reconciliation of the benefit obligations, plan assets, accrued benefit cost and the amount recognized
in financial statements for pension plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
International
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
299,716
|
|
|
$
|
326,792
|
|
|
$
|
85,543
|
|
|
$
|
83,433
|
|
|
Service cost
|
|
|
8,071
|
|
|
|
8,896
|
|
|
|
2,597
|
|
|
|
2,098
|
|
|
Interest cost
|
|
|
13,921
|
|
|
|
12,314
|
|
|
|
3,185
|
|
|
|
2,872
|
|
|
Participant contributions
|
|
|
—
|
|
|
|
—
|
|
|
|
137
|
|
|
|
132
|
|
|
Plan amendments
|
|
|
186
|
|
|
|
1,667
|
|
|
|
(419
|
)
|
|
|
—
|
|
|
Foreign currency exchange rate change
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,343
|
)
|
|
|
(279
|
)
|
|
Actuarial (gain) loss
|
|
|
34,610
|
|
|
|
(40,996
|
)
|
|
|
13,293
|
|
|
|
(54
|
)
|
|
Benefits paid
|
|
|
(11,025
|
)
|
|
|
(8,957
|
)
|
|
|
(2,162
|
)
|
|
|
(2,659
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
$
|
345,479
|
|
|
$
|
299,716
|
|
|
$
|
96,831
|
|
|
$
|
85,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning fair value of plan assets
|
|
$
|
243,506
|
|
|
$
|
214,128
|
|
|
$
|
37,078
|
|
|
$
|
34,217
|
|
|
Actual return on plan assets
|
|
|
25,535
|
|
|
|
20,951
|
|
|
|
1,627
|
|
|
|
2,102
|
|
|
Company contributions
|
|
|
19,896
|
|
|
|
17,384
|
|
|
|
4,009
|
|
|
|
3,501
|
|
|
Participant contributions
|
|
|
—
|
|
|
|
—
|
|
|
|
137
|
|
|
|
132
|
|
|
Foreign currency exchange rate change
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,071
|
)
|
|
|
(215
|
)
|
|
Benefits paid
|
|
|
(11,025
|
)
|
|
|
(8,957
|
)
|
|
|
(2,162
|
)
|
|
|
(2,659
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending fair value of plan assets
|
|
$
|
277,912
|
|
|
$
|
243,506
|
|
|
$
|
39,618
|
|
|
$
|
37,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of year
|
|
$
|
(67,567
|
)
|
|
$
|
(56,210
|
)
|
|
$
|
(57,213
|
)
|
|
$
|
(48,465
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent asset
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
22
|
|
|
Accrued benefit liability
|
|
|
(709
|
)
|
|
|
(938
|
)
|
|
|
(6
|
)
|
|
|
(5
|
)
|
|
Long-term pension and retirement obligations
|
|
|
(66,858
|
)
|
|
|
(55,272
|
)
|
|
|
(57,224
|
)
|
|
|
(48,482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amount recognized in financial statements
|
|
$
|
(67,567
|
)
|
|
$
|
(56,210
|
)
|
|
$
|
(57,213
|
)
|
|
$
|
(48,465
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49
Notes to Consolidated Financial
Statements
— (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
International
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
Amounts recognized in accumulated other comprehensive (gain) loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
111,337
|
|
|
$
|
93,537
|
|
|
$
|
34,683
|
|
|
$
|
24,392
|
|
|
Prior service cost (credit)
|
|
|
(47
|
)
|
|
|
4
|
|
|
|
(995
|
)
|
|
|
(798
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
$
|
111,290
|
|
|
$
|
93,541
|
|
|
$
|
33,688
|
|
|
$
|
23,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts expected to be recognized during next fiscal year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net actuarial loss
|
|
$
|
8,694
|
|
|
$
|
8,260
|
|
|
$
|
2,459
|
|
|
$
|
1,531
|
|
|
Amortization of prior service cost (credit)
|
|
|
121
|
|
|
|
237
|
|
|
|
(97
|
)
|
|
|
(82
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,815
|
|
|
$
|
8,497
|
|
|
$
|
2,362
|
|
|
$
|
1,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the changes in accumulated other comprehensive (gain) loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
International
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
Balance at beginning of year
|
|
$
|
93,541
|
|
|
$
|
152,732
|
|
|
$
|
23,594
|
|
|
$
|
25,230
|
|
|
Net (gain) loss arising during the year
|
|
|
26,372
|
|
|
|
(46,707
|
)
|
|
|
13,438
|
|
|
|
(642
|
)
|
|
Prior service cost (credit) arising during the year
|
|
|
186
|
|
|
|
1,668
|
|
|
|
(419
|
)
|
|
|
—
|
|
|
Net gain (loss) recognized during the year
|
|
|
(7,940
|
)
|
|
|
(13,995
|
)
|
|
|
(1,233
|
)
|
|
|
(1,406
|
)
|
|
Prior service (cost) credit recognized during the year
|
|
|
(237
|
)
|
|
|
(157
|
)
|
|
|
101
|
|
|
|
81
|
|
|
Settlement loss
|
|
|
(632
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Exchange rate effect during the year
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,793
|
)
|
|
|
331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
111,290
|
|
|
$
|
93,541
|
|
|
$
|
33,688
|
|
|
$
|
23,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Information regarding the accumulated benefit obligation is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
International
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
For all plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
336,464
|
|
|
$
|
291,310
|
|
|
$
|
75,305
|
|
|
$
|
67,647
|
|
|
|
|
|
|
|
|
For plans with benefit obligations in excess of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
|
345,479
|
|
|
|
299,716
|
|
|
|
87,128
|
|
|
|
71,788
|
|
|
Accumulated benefit obligation
|
|
|
336,464
|
|
|
|
291,310
|
|
|
|
73,135
|
|
|
|
59,589
|
|
|
Fair value of plan assets
|
|
|
277,912
|
|
|
|
243,506
|
|
|
|
37,415
|
|
|
|
29,000
|
|
50
Notes to Consolidated Financial
Statements
— (Continued)
Net pension benefit costs include the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
International
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
Service cost
|
|
$
|
8,071
|
|
|
$
|
8,896
|
|
|
$
|
7,488
|
|
|
$
|
2,597
|
|
|
$
|
2,098
|
|
|
$
|
1,504
|
|
|
Interest cost
|
|
|
13,921
|
|
|
|
12,314
|
|
|
|
12,137
|
|
|
|
3,185
|
|
|
|
2,872
|
|
|
|
3,002
|
|
|
Expected return on plan assets
|
|
|
(17,297
|
)
|
|
|
(15,241
|
)
|
|
|
(14,901
|
)
|
|
|
(1,772
|
)
|
|
|
(1,512
|
)
|
|
|
(1,547
|
)
|
|
Amortization of prior service cost (credit)
|
|
|
237
|
|
|
|
157
|
|
|
|
342
|
|
|
|
(101
|
)
|
|
|
(81
|
)
|
|
|
(97
|
)
|
|
Amortization of net actuarial (gain) loss
|
|
|
7,940
|
|
|
|
13,995
|
|
|
|
11,672
|
|
|
|
1,233
|
|
|
|
1,406
|
|
|
|
564
|
|
|
Settlement loss
|
|
|
632
|
|
|
|
—
|
|
|
|
682
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total benefit cost
|
|
$
|
13,504
|
|
|
$
|
20,121
|
|
|
$
|
17,420
|
|
|
$
|
5,142
|
|
|
$
|
4,783
|
|
|
$
|
3,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost for 2014 included a settlement loss of $632 due to a lump sum retirement payment. Net periodic
pension cost for 2012 included a settlement loss of $682, due to a plan termination.
The weighted average assumptions used in the valuation of
pension benefits were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
International
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
Assumptions used to determine benefit obligations at October 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
4.29
|
%
|
|
|
4.75
|
%
|
|
|
3.85
|
%
|
|
|
2.94
|
%
|
|
|
3.72
|
%
|
|
|
3.52
|
%
|
|
Rate of compensation increase
|
|
|
3.49
|
|
|
|
3.30
|
|
|
|
3.30
|
|
|
|
3.19
|
|
|
|
3.18
|
|
|
|
3.13
|
|
|
|
|
|
|
|
|
|
|
Assumptions used to determine net benefit costs for the years ended October 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
4.75
|
|
|
|
3.85
|
|
|
|
4.46
|
|
|
|
3.72
|
|
|
|
3.52
|
|
|
|
4.43
|
|
|
Expected return on plan assets
|
|
|
7.24
|
|
|
|
7.24
|
|
|
|
7.75
|
|
|
|
4.60
|
|
|
|
4.43
|
|
|
|
4.85
|
|
|
Rate of compensation increase
|
|
|
3.30
|
|
|
|
3.30
|
|
|
|
3.20
|
|
|
|
3.18
|
|
|
|
3.13
|
|
|
|
3.16
|
|
The amortization of prior service cost is determined using a straight-line amortization of the cost over the average
remaining service period of employees expected to receive benefits under the plans.
The discount rate reflects the current rate at which
pension liabilities could be effectively settled at the end of the year. The discount rate used considers a yield derived from matching projected pension payments with maturities of a portfolio of available bonds that receive the highest rating
given from a recognized investments ratings agency. The decrease in the discount rate in 2014 and increase in 2013 are due to changes in yields for these types of investments as a result of the economic environment.
In determining the expected return on plan assets, we consider both historical performance and an estimate of future long-term rates of return on assets
similar to those in our plans. We consult with and consider the opinions of financial and other professionals in developing appropriate return assumptions. The rate of compensation increase is based on managements’ estimates using historical
experience and expected increases in rates.
The measurement of domestic pension plans’ projected benefit obligations included the effects
of adopting the Society of Actuaries’ release of final RP2014 / MP2014 mortality tables. The adoption of these new tables resulted in an increase of $28,554 to our domestic pension plans’ projected benefit obligations.
51
Notes to Consolidated Financial
Statements
— (Continued)
Economic assumptions have a significant effect on the amounts reported. The effect of a one percent
change in the discount rate, expected return on assets and compensation increase is shown in the table below. Bracketed numbers represent decreases in expense and obligation amounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
International
|
|
|
|
|
1% Point
Increase
|
|
|
1% Point
Decrease
|
|
|
1% Point
Increase
|
|
|
1% Point
Decrease
|
|
|
Discount rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on total service and interest cost components
in 2014
|
|
$
|
(4,527
|
)
|
|
$
|
5,514
|
|
|
$
|
(1,235
|
)
|
|
$
|
1,561
|
|
|
Effect on pension obligation as of October 31, 2014
|
|
$
|
(44,353
|
)
|
|
$
|
55,900
|
|
|
$
|
(15,756
|
)
|
|
$
|
19,996
|
|
|
Expected return on assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on total service and interest cost components
in 2014
|
|
$
|
(2,582
|
)
|
|
$
|
2,582
|
|
|
$
|
(375
|
)
|
|
$
|
375
|
|
|
Compensation increase:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on total service and interest cost components
in 2014
|
|
$
|
4,257
|
|
|
$
|
(2,490
|
)
|
|
$
|
934
|
|
|
$
|
(1,088
|
)
|
|
Effect on pension obligation as of October 31, 2014
|
|
$
|
21,915
|
|
|
$
|
(12,788
|
)
|
|
$
|
7,729
|
|
|
$
|
(6,999
|
)
|
The allocation of pension plan assets as of October 31, 2014 and 2013 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
International
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
Asset Category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
|
23 %
|
|
|
|
27 %
|
|
|
|
— %
|
|
|
|
— %
|
|
|
Debt securities
|
|
|
29
|
|
|
|
29
|
|
|
|
—
|
|
|
|
—
|
|
|
Insurance contracts
|
|
|
—
|
|
|
|
—
|
|
|
|
58
|
|
|
|
60
|
|
|
Pooled investment funds
|
|
|
47
|
|
|
|
43
|
|
|
|
42
|
|
|
|
39
|
|
|
Other
|
|
|
1
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100 %
|
|
|
|
100 %
|
|
|
|
100 %
|
|
|
|
100 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our investment objective for defined benefit plan assets is to meet the plans’ benefit obligations, while minimizing
the potential for future required plan contributions.
Our United States plans comprise 88 percent of the worldwide pension assets. In general,
the investment strategies focus on asset class diversification, liquidity to meet benefit payments and an appropriate balance of long-term investment return and risk. Target ranges for asset allocations are determined by dynamically matching the
actuarial projections of the plans’ future liabilities and benefit payments with expected long-term rates of return on the assets, taking into account investment return volatility and correlations across asset classes. The current target in
“return-seeking assets” is 45 percent and 55 percent in fixed income. Plan assets are diversified across several investment managers and are invested in liquid funds that are selected to track broad market indices. Investment risk is
carefully controlled with plan assets rebalanced to target allocations on a periodic basis and continual monitoring of investment managers’ performance relative to the investment guidelines established with each investment manager.
Our international plans comprise 12 percent of the worldwide pension assets. Asset allocations are developed on a country-specific basis. Our investment
strategy is to cover pension obligations with insurance contracts or to employ independent managers to invest the assets.
52
Notes to Consolidated Financial
Statements
— (Continued)
The fair values of our pension plan assets at October 31, 2014 by asset category are in the table
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
International
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Cash
|
|
$
|
1,617
|
|
|
$
|
1,617
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Money market funds
|
|
|
2,820
|
|
|
|
2,820
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic materials
|
|
|
3,224
|
|
|
|
3,224
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Consumer goods
|
|
|
5,114
|
|
|
|
5,114
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Financial
|
|
|
8,036
|
|
|
|
8,036
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Healthcare
|
|
|
4,372
|
|
|
|
4,372
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Industrial goods
|
|
|
3,527
|
|
|
|
3,527
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Technology
|
|
|
4,226
|
|
|
|
4,226
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Utilities
|
|
|
1,084
|
|
|
|
1,084
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Mutual funds
|
|
|
31,255
|
|
|
|
31,255
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government
|
|
|
26,447
|
|
|
|
7,877
|
|
|
|
18,570
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Corporate
|
|
|
50,720
|
|
|
|
—
|
|
|
|
50,720
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
2,486
|
|
|
|
—
|
|
|
|
2,486
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other types of investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance contracts
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
23,174
|
|
|
|
—
|
|
|
|
—
|
|
|
|
23,174
|
|
|
Real estate collective funds
|
|
|
16,495
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,495
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Pooled investment funds
|
|
|
115,877
|
|
|
|
—
|
|
|
|
115,877
|
|
|
|
—
|
|
|
|
16,436
|
|
|
|
—
|
|
|
|
16,436
|
|
|
|
—
|
|
|
Other
|
|
|
612
|
|
|
|
612
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
277,912
|
|
|
$
|
73,764
|
|
|
$
|
187,653
|
|
|
$
|
16,495
|
|
|
$
|
39,618
|
|
|
$
|
8
|
|
|
$
|
16,436
|
|
|
$
|
23,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53
Notes to Consolidated Financial
Statements
— (Continued)
The fair values of our pension plan assets at October 31, 2013 by asset category are in the table
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
International
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Cash
|
|
$
|
2,811
|
|
|
$
|
2,811
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
321
|
|
|
$
|
321
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Money market funds
|
|
|
2,783
|
|
|
|
2,783
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic materials
|
|
|
3,834
|
|
|
|
3,834
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Consumer goods
|
|
|
4,958
|
|
|
|
4,958
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Financial
|
|
|
7,825
|
|
|
|
7,825
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Healthcare
|
|
|
4,109
|
|
|
|
4,109
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Industrial goods
|
|
|
3,255
|
|
|
|
3,255
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Technology
|
|
|
4,159
|
|
|
|
4,159
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Utilities
|
|
|
988
|
|
|
|
988
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Mutual funds
|
|
|
32,617
|
|
|
|
32,617
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government
|
|
|
26,892
|
|
|
|
10,715
|
|
|
|
16,177
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Corporate
|
|
|
43,367
|
|
|
|
—
|
|
|
|
43,367
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
1,356
|
|
|
|
—
|
|
|
|
1,356
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other types of investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance contracts
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,093
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,093
|
|
|
Real estate collective funds
|
|
|
14,958
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14,958
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Pooled investment funds
|
|
|
88,973
|
|
|
|
—
|
|
|
|
88,973
|
|
|
|
—
|
|
|
|
14,664
|
|
|
|
—
|
|
|
|
14,664
|
|
|
|
—
|
|
|
Other
|
|
|
621
|
|
|
|
621
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
243,506
|
|
|
$
|
78,675
|
|
|
$
|
149,873
|
|
|
$
|
14,958
|
|
|
$
|
37,078
|
|
|
$
|
321
|
|
|
$
|
14,664
|
|
|
$
|
22,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These investment funds did not own a significant number of shares of Nordson Corporation common stock for any year
presented.
The inputs and methodology used to measure fair value of plan assets are consistent with those described in Note 12. Following
are the valuation methodologies used to measure these assets:
|
|
•
|
|
Money market funds
— Money market funds are public investment vehicles that are valued with a net asset value of one dollar. This is a
quoted price in an active market and is classified as Level 1.
|
|
|
•
|
|
Equity securities
— Common stocks are valued at the closing price reported on the active market on which the individual securities are
traded and are classified as Level 1. Mutual funds are valued at the net asset values of the shares at year-end, as determined by the closing price reported on the active market on which the individual securities are traded and are classified as
Level 1.
|
|
|
•
|
|
Fixed income securities
— U.S. Treasury bills reflect the closing price on the active market in which the securities are traded and are
classified as Level 1. Securities of U.S. agencies are valued using bid evaluations and a classified as Level 2. Corporate fixed income securities are valued using evaluated prices, such as dealer quotes, bids and offers and are therefore classified
as Level 2.
|
|
|
•
|
|
Insurance contracts
— Insurance contracts are investments with various insurance companies. The contract value represents the best estimate
of fair value. These contracts do not hold any specific assets. These investments are classified as Level 3.
|
54
Notes to Consolidated Financial
Statements
— (Continued)
|
|
•
|
|
Real estate collective funds
— These funds are valued at the estimated fair value of the underlying properties. Estimated fair value is
calculated using a combination of key inputs, such as revenue and expense growth rates, terminal capitalization rates and discount rates. These investments are classified as Level 3.
|
|
|
•
|
|
Pooled investment funds
— These are public investment vehicles valued using the net asset value. The net asset value is based on the value
of the assets owned by the plan, less liabilities. These investments are not quoted on an active exchange and are classified as Level 2.
|
The following tables present an analysis of changes during the years ended October 31, 2014 and 2013 in Level 3 plan assets, by plan asset class, for U.S. and International pension plans using
significant unobservable inputs to measure fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using Significant
Unobservable Inputs (Level 3)
|
|
|
|
|
Real estate
collective funds
|
|
|
Insurance
contracts
|
|
|
Total
|
|
|
Beginning balance at October 31, 2013
|
|
$
|
14,958
|
|
|
$
|
22,093
|
|
|
$
|
37,051
|
|
|
Actual return on plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets held, end of year
|
|
|
1,667
|
|
|
|
771
|
|
|
|
2,438
|
|
|
Assets sold during the period
|
|
|
25
|
|
|
|
—
|
|
|
|
25
|
|
|
Purchases
|
|
|
—
|
|
|
|
2,816
|
|
|
|
2,816
|
|
|
Sales
|
|
|
(155
|
)
|
|
|
(1,529
|
)
|
|
|
(1,684
|
)
|
|
Foreign currency translation
|
|
|
—
|
|
|
|
(977
|
)
|
|
|
(977
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance at October 31, 2014
|
|
$
|
16,495
|
|
|
$
|
23,174
|
|
|
$
|
39,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using Significant
Unobservable Inputs (Level 3)
|
|
|
|
|
Real estate
collective funds
|
|
|
Insurance
contracts
|
|
|
Total
|
|
|
Beginning balance at October 31, 2012
|
|
$
|
13,110
|
|
|
$
|
19,046
|
|
|
$
|
32,156
|
|
|
Actual return on plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets held, end of year
|
|
|
1,970
|
|
|
|
1,025
|
|
|
|
2,995
|
|
|
Assets sold during the period
|
|
|
13
|
|
|
|
—
|
|
|
|
13
|
|
|
Purchases
|
|
|
—
|
|
|
|
4,242
|
|
|
|
4,242
|
|
|
Sales
|
|
|
(135
|
)
|
|
|
(2,093
|
)
|
|
|
(2,228
|
)
|
|
Foreign currency translation
|
|
|
—
|
|
|
|
(127
|
)
|
|
|
(127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance at October 31, 2013
|
|
$
|
14,958
|
|
|
$
|
22,093
|
|
|
$
|
37,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions to pension plans in 2015 are estimated to be approximately $26,000.
Retiree pension benefit payments, which reflect expected future service, are anticipated to be paid as follows:
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
United States
|
|
|
International
|
|
|
2015
|
|
$
|
10,922
|
|
|
$
|
4,833
|
|
|
2016
|
|
|
11,637
|
|
|
|
2,300
|
|
|
2017
|
|
|
12,721
|
|
|
|
2,166
|
|
|
2018
|
|
|
13,661
|
|
|
|
2,984
|
|
|
2019
|
|
|
14,853
|
|
|
|
5,014
|
|
|
2020-2024
|
|
|
92,418
|
|
|
|
17,392
|
|
55
Notes to Consolidated Financial
Statements
— (Continued)
Other postretirement plans
— We have an unfunded postretirement benefit plan covering
certain of our United States employees. Employees hired after January 1, 2002, are not eligible to participate in this plan. The plan provides medical and life insurance benefits. The plan is contributory, with retiree contributions in the form
of premiums that are adjusted annually, and contains other cost-sharing features, such as deductibles and coinsurance. We also sponsor an unfunded, non-contributory postretirement benefit plan that provides medical and life insurance benefits for
certain international employees.
A reconciliation of the benefit obligations, accrued benefit cost and the amount recognized in financial
statements for other postretirement plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
International
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
61,004
|
|
|
$
|
71,228
|
|
|
$
|
768
|
|
|
$
|
851
|
|
|
Service cost
|
|
|
1,037
|
|
|
|
1,145
|
|
|
|
28
|
|
|
|
35
|
|
|
Interest cost
|
|
|
3,062
|
|
|
|
2,598
|
|
|
|
38
|
|
|
|
38
|
|
|
Participant contributions
|
|
|
431
|
|
|
|
600
|
|
|
|
—
|
|
|
|
—
|
|
|
Foreign currency exchange rate change
|
|
|
—
|
|
|
|
—
|
|
|
|
(63
|
)
|
|
|
(34
|
)
|
|
Actuarial (gain) loss
|
|
|
6,015
|
|
|
|
(11,619
|
)
|
|
|
130
|
|
|
|
(118
|
)
|
|
Benefits paid
|
|
|
(2,070
|
)
|
|
|
(2,948
|
)
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
$
|
69,479
|
|
|
$
|
61,004
|
|
|
$
|
897
|
|
|
$
|
768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning fair value of plan assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Company contributions
|
|
|
1,639
|
|
|
|
2,348
|
|
|
|
4
|
|
|
|
4
|
|
|
Participant contributions
|
|
|
431
|
|
|
|
600
|
|
|
|
—
|
|
|
|
—
|
|
|
Benefits paid
|
|
|
(2,070
|
)
|
|
|
(2,948
|
)
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending fair value of plan assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of year
|
|
$
|
(69,479
|
)
|
|
$
|
(61,004
|
)
|
|
$
|
(897
|
)
|
|
$
|
(768
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued benefit liability
|
|
$
|
(2,069
|
)
|
|
$
|
(1,974
|
)
|
|
$
|
(7
|
)
|
|
$
|
(4
|
)
|
|
Long-term postretirement obligations
|
|
|
(67,410
|
)
|
|
|
(59,030
|
)
|
|
|
(890
|
)
|
|
|
(764
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amount recognized in financial statements
|
|
$
|
(69,479
|
)
|
|
$
|
(61,004
|
)
|
|
$
|
(897
|
)
|
|
$
|
(768
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
International
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
Amounts recognized in accumulated other comprehensive (gain) loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial (gain) loss
|
|
$
|
22,434
|
|
|
$
|
17,854
|
|
|
$
|
(86
|
)
|
|
$
|
(243
|
)
|
|
Prior service cost (credit)
|
|
|
(1,012
|
)
|
|
|
(1,461
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive (gain) loss
|
|
$
|
21,422
|
|
|
$
|
16,393
|
|
|
$
|
(86
|
)
|
|
$
|
(243
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts expected to be recognized during next fiscal year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net actuarial (gain) loss
|
|
$
|
1,187
|
|
|
$
|
1,139
|
|
|
$
|
—
|
|
|
$
|
(14
|
)
|
|
Amortization of prior service cost (credit)
|
|
|
(438
|
)
|
|
|
(449
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
749
|
|
|
$
|
690
|
|
|
$
|
—
|
|
|
$
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
Notes to Consolidated Financial
Statements
— (Continued)
The following table summarizes the changes in accumulated other comprehensive (gain) loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
International
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
Balance at beginning of year
|
|
$
|
16,393
|
|
|
$
|
29,651
|
|
|
$
|
(243
|
)
|
|
$
|
(138
|
)
|
|
Net (gain) loss arising during the year
|
|
|
6,015
|
|
|
|
(11,619
|
)
|
|
|
130
|
|
|
|
(117
|
)
|
|
Net gain (loss) recognized during the year
|
|
|
(1,435
|
)
|
|
|
(2,112
|
)
|
|
|
13
|
|
|
|
4
|
|
|
Prior service credit (cost) recognized during the year
|
|
|
449
|
|
|
|
473
|
|
|
|
—
|
|
|
|
—
|
|
|
Exchange rate effect during the year
|
|
|
—
|
|
|
|
—
|
|
|
|
14
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
21,422
|
|
|
$
|
16,393
|
|
|
$
|
(86
|
)
|
|
$
|
(243
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net postretirement benefit costs include the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
International
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
Service cost
|
|
$
|
1,037
|
|
|
$
|
1,145
|
|
|
$
|
1,183
|
|
|
$
|
28
|
|
|
$
|
35
|
|
|
$
|
28
|
|
|
Interest cost
|
|
|
3,062
|
|
|
|
2,598
|
|
|
|
2,759
|
|
|
|
38
|
|
|
|
38
|
|
|
|
41
|
|
|
Amortization of prior service cost (credit)
|
|
|
(449
|
)
|
|
|
(473
|
)
|
|
|
(584
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Amortization of net actuarial (gain) loss
|
|
|
1,435
|
|
|
|
2,112
|
|
|
|
1,789
|
|
|
|
(13
|
)
|
|
|
(4
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total benefit cost
|
|
$
|
5,085
|
|
|
$
|
5,382
|
|
|
$
|
5,147
|
|
|
$
|
53
|
|
|
$
|
69
|
|
|
$
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average assumptions used in the valuation of postretirement benefits were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
International
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
Assumptions used to determine benefit obligations at October 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
4.40
|
%
|
|
|
4.80
|
%
|
|
|
3.85
|
%
|
|
|
4.25
|
%
|
|
|
4.95
|
%
|
|
|
4.40
|
%
|
|
Health care cost trend rate
|
|
|
3.93
|
|
|
|
4.12
|
|
|
|
4.90
|
|
|
|
6.48
|
|
|
|
6.65
|
|
|
|
6.83
|
|
|
Rate to which health care cost trend rate is assumed to decline (ultimate trend rate)
|
|
|
3.41
|
|
|
|
3.47
|
|
|
|
3.60
|
|
|
|
3.50
|
|
|
|
3.50
|
|
|
|
3.50
|
|
|
Year the rate reaches the ultimate trend rate
|
|
|
2024
|
|
|
|
2021
|
|
|
|
2017
|
|
|
|
2031
|
|
|
|
2031
|
|
|
|
2031
|
|
|
Assumption used to determine net benefit costs for the years ended October 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
4.80
|
%
|
|
|
3.85
|
%
|
|
|
4.50
|
%
|
|
|
4.95
|
%
|
|
|
4.40
|
%
|
|
|
5.85
|
%
|
The decrease in the weighted-average United States health care cost trend rate beginning in 2013 relates to a change in
the plan design of the retiree medical plan effective January 1, 2013 moving to a Health Reimbursement Arrangement for post-65 coverage.
The measurement of domestic other post employment benefit (OPEB) plan’s projected benefit obligation included the effect of adopting the Society of
Actuaries’ release of final RP2014 / MP2014 mortality tables. The adoption of these new tables resulted in an increase of $4,878 to our domestic OPEB plan’s projected benefit obligation.
57
Notes to Consolidated Financial
Statements
— (Continued)
The discount rate and the health care cost trend rate assumptions have a significant effect on the
amounts reported. For example, a one-percentage point change in the discount rate and the assumed health care cost trend rate would have the following effects. Bracketed numbers represent decreases in expense and obligation amounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
International
|
|
|
|
|
1% Point
Increase
|
|
|
1% Point
Decrease
|
|
|
1% Point
Increase
|
|
|
1% Point
Decrease
|
|
|
Discount rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on total service and interest cost components in 2014
|
|
$
|
(770
|
)
|
|
$
|
938
|
|
|
$
|
(7
|
)
|
|
$
|
6
|
|
|
Effect on postretirement obligation as of October 31, 2014
|
|
$
|
(9,992
|
)
|
|
$
|
12,790
|
|
|
$
|
(173
|
)
|
|
$
|
229
|
|
|
Health care trend rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on total service and interest cost components in 2014
|
|
$
|
589
|
|
|
$
|
(479
|
)
|
|
$
|
14
|
|
|
$
|
(14
|
)
|
|
Effect on postretirement obligation as of October 31, 2014
|
|
$
|
11,302
|
|
|
$
|
(9,001
|
)
|
|
$
|
174
|
|
|
$
|
(208
|
)
|
Contributions to postretirement plans in 2015 are estimated to be approximately $2,100.
Retiree postretirement benefit payments are anticipated to be paid as follows:
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
United States
|
|
|
International
|
|
|
2015
|
|
$
|
2,069
|
|
|
$
|
7
|
|
|
2016
|
|
|
2,242
|
|
|
|
8
|
|
|
2017
|
|
|
2,420
|
|
|
|
9
|
|
|
2018
|
|
|
2,614
|
|
|
|
12
|
|
|
2019
|
|
|
2,743
|
|
|
|
13
|
|
|
2020-2024
|
|
|
16,609
|
|
|
|
107
|
|
Note 7
—
Income taxes
Income tax expense includes the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
Current:
|
|
|
|
|
|
U.S. federal
|
|
$
|
52,985
|
|
|
$
|
45,004
|
|
|
$
|
51,458
|
|
|
State and local
|
|
|
1,900
|
|
|
|
2,351
|
|
|
|
1,378
|
|
|
Foreign
|
|
|
47,366
|
|
|
|
36,829
|
|
|
|
38,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
102,251
|
|
|
|
84,184
|
|
|
|
91,596
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
8,695
|
|
|
|
8,361
|
|
|
|
7,204
|
|
|
State and local
|
|
|
(1,635
|
)
|
|
|
(991
|
)
|
|
|
782
|
|
|
Foreign
|
|
|
(3,571
|
)
|
|
|
(2,248
|
)
|
|
|
1,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
3,489
|
|
|
|
5,122
|
|
|
|
9,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
105,740
|
|
|
$
|
89,306
|
|
|
$
|
101,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes of domestic operations, which are calculated after intercompany profit eliminations, were
$184,894, $164,702 and $177,035 in 2014, 2013 and 2012, respectively.
Income tax expense in 2013 included a benefit of $900 for the reduction
of unrecognized tax benefits primarily related to expiration of certain foreign statutes of limitations. On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted which retroactively reinstated and extended the Federal Research
and Development Tax
58
Notes to Consolidated Financial
Statements
— (Continued)
Credit (Federal R&D Tax Credit) from January 1, 2012 to December 31, 2013 and extended certain other tax provisions. As a result, our income tax provision for 2013 included a
discrete tax benefit of $1,700 related to 2012.
Income tax expense in 2012 included a benefit of $2,717 related to the utilization of loss
carryforwards and to the release of the valuation allowance related to loss carryforwards which are expected to be utilized in future years.
A
reconciliation of the U.S. statutory federal rate to the worldwide consolidated effective tax rate follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
Statutory federal income tax rate
|
|
|
35.00
|
%
|
|
|
35.00
|
%
|
|
|
35.00
|
%
|
|
Domestic Production Deduction
|
|
|
(1.74
|
)
|
|
|
(1.71
|
)
|
|
|
(1.82
|
)
|
|
Foreign tax rate variances, net of foreign tax credits
|
|
|
(3.42
|
)
|
|
|
(3.39
|
)
|
|
|
(2.31
|
)
|
|
State and local taxes, net of federal income tax benefit
|
|
|
0.05
|
|
|
|
0.28
|
|
|
|
0.43
|
|
|
Amounts related to prior years
|
|
|
(0.24
|
)
|
|
|
(1.00
|
)
|
|
|
(0.31
|
)
|
|
Other — net
|
|
|
0.35
|
|
|
|
(0.48
|
)
|
|
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
30.00
|
%
|
|
|
28.70
|
%
|
|
|
31.09
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Domestic Production Deduction, enacted by the American Jobs Creation Act of 2004, allows a deduction with respect to
income from certain United States manufacturing activities.
Earnings before income taxes of international operations, which are calculated
before intercompany profit elimination entries, were $167,619, $146,421 and $149,218 in 2014, 2013 and 2012, respectively. Deferred income taxes are not provided on undistributed earnings of international subsidiaries that are intended to be
permanently invested in their operations. These undistributed earnings aggregated approximately $622,914 and $510,842 at October 31, 2014 and 2013, respectively. Should these earnings be distributed, applicable foreign tax credits would
substantially offset taxes due upon the distribution. It is not practical to estimate the amount of additional taxes that might be payable on such undistributed earnings.
At October 31, 2014 and 2013, total unrecognized tax benefits were $5,812 and $5,717, respectively. The amounts that, if recognized, would impact the effective tax rate were $5,175 and $5,178 at
October 31, 2014 and 2013, respectively. The increase in unrecognized tax benefits in 2013 as compared to prior year relates primarily to foreign positions and, if recognized, a substantial portion of the gross unrecognized tax benefits would
be offset against assets currently recorded in the Consolidated Balance Sheet. A reconciliation of the beginning and ending amount of unrecognized tax benefits for 2014, 2013 and 2012 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
Balance at beginning of year
|
|
$
|
5,717
|
|
|
$
|
3,140
|
|
|
$
|
2,576
|
|
|
Additions based on tax positions related to the current year
|
|
|
196
|
|
|
|
703
|
|
|
|
148
|
|
|
Additions for tax positions of prior years
|
|
|
319
|
|
|
|
3,261
|
|
|
|
896
|
|
|
Reductions for tax positions of prior years
|
|
|
—
|
|
|
|
(317
|
)
|
|
|
—
|
|
|
Settlements
|
|
|
(110
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Lapse of statute of limitations
|
|
|
(310
|
)
|
|
|
(1,070
|
)
|
|
|
(480
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
5,812
|
|
|
$
|
5,717
|
|
|
$
|
3,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At October 31, 2014 and 2013, we had accrued interest and penalty expense related to unrecognized tax benefits of
$2,025 and $1,085, respectively. We include interest accrued related to unrecognized tax benefits in interest expense. Penalties, if incurred, would be recognized as other income (expense).
We are subject to United States Federal income tax as well as income taxes in numerous state and foreign jurisdictions. We are subject to examination in the U.S. by the Internal Revenue Service (IRS) for
the 2012, 2013 and 2014 tax years; tax years prior to the 2012 year are closed to further examination by the IRS. Generally, major state and foreign jurisdiction tax years remain open to examination for tax years after 2008. Within the
59
Notes to Consolidated Financial Statements — (Continued)
next twelve months, it is reasonably possible that certain statute of limitations periods would expire, which could result in a minimal decrease in our unrecognized tax benefits.
Significant components of deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Employee benefits
|
|
$
|
79,669
|
|
|
$
|
66,148
|
|
|
Other accruals not currently deductible for taxes
|
|
|
17,379
|
|
|
|
16,984
|
|
|
Tax credit and loss carryforwards
|
|
|
16,531
|
|
|
|
13,077
|
|
|
Inventory adjustments
|
|
|
5,276
|
|
|
|
4,998
|
|
|
Translation of foreign currency accounts
|
|
|
154
|
|
|
|
384
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
119,009
|
|
|
|
101,591
|
|
|
Valuation allowance
|
|
|
(7,672
|
)
|
|
|
(5,663
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
111,337
|
|
|
|
95,928
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
163,107
|
|
|
|
146,500
|
|
|
Other — net
|
|
|
—
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
163,107
|
|
|
|
146,551
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(51,770
|
)
|
|
$
|
(50,623
|
)
|
|
|
|
|
|
|
|
|
|
|
At October 31, 2014, we had $4,161 of tax credit carryforwards of which $161 will expire in 2015 through 2017, and
$4,000 of which has an indefinite carryforward period. We also had $19,535 Federal, $50,343 state and $13,213 foreign operating loss carryforwards, of which $70,084 will expire in 2015 through 2033, and $13,007 of which has an indefinite
carryforward period. The net change in the valuation allowance was an increase of $2,009 in 2014 and an increase of $617 in 2013. The valuation allowance of $7,672 at October 31, 2014, related primarily to tax credits and loss carryforwards
that may expire before being realized. We continue to assess the need for valuation allowances against deferred tax assets based on determinations of whether it is more likely than not that deferred tax benefits will be realized.
Note 8
—
Notes payable
Bank lines of credit and notes payable are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
Maximum borrowings under bank lines of credit:
|
|
|
|
|
|
|
|
|
|
Domestic banks
|
|
$
|
100,000
|
|
|
$
|
—
|
|
|
Foreign banks
|
|
|
48,619
|
|
|
|
83,191
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
148,619
|
|
|
$
|
83,191
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding notes payable:
|
|
|
|
|
|
|
|
|
|
Domestic bank debt
|
|
$
|
100,000
|
|
|
$
|
—
|
|
|
Foreign bank debt
|
|
|
6,181
|
|
|
|
3,604
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
106,181
|
|
|
$
|
3,604
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average interest rate on notes payable
|
|
|
1.0
|
%
|
|
|
2.0
|
%
|
|
Unused bank lines of credit
|
|
$
|
42,438
|
|
|
$
|
79,587
|
|
|
|
|
|
|
|
|
|
|
|
In 2014, we entered into a 364-day, $100,000 unsecured credit facility with PNC Bank. We borrowed $100,000 under this
facility to partially fund the Avalon acquisition.
60
Notes to Consolidated Financial
Statements
— (Continued)
Note 9
—
Long-term debt
A summary of long-term debt is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
Revolving credit agreement, due 2017
|
|
$
|
375,242
|
|
|
$
|
254,000
|
|
|
Senior notes, due 2017-2025
|
|
|
200,000
|
|
|
|
200,000
|
|
|
Euro loan, due 2016
|
|
|
63,244
|
|
|
|
129,058
|
|
|
Private shelf facility, due 2012-2020
|
|
|
53,333
|
|
|
|
63,889
|
|
|
Development loans, due 2011-2026
|
|
|
1,586
|
|
|
|
1,702
|
|
|
Other
|
|
|
214
|
|
|
|
341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
693,619
|
|
|
|
648,990
|
|
|
Less current maturities
|
|
|
10,751
|
|
|
|
10,832
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term maturities
|
|
$
|
682,868
|
|
|
$
|
638,158
|
|
|
|
|
|
|
|
|
|
|
|
Revolving credit agreement
— This $500,000 unsecured multi-currency revolving credit agreement is with a group
of banks and expires in December 2016. Payment of quarterly commitment fees is required. The weighted average interest rate for borrowings under this agreement was 1.08 percent at October 31, 2014.
Senior notes, due 2017-2025
—These fixed-rate notes entered into in 2012 with a group of insurance companies had an original weighted-average
life of 8.78 years at the time of issuance. The weighted-average interest rate at October 31, 2014 was 2.93 percent.
Euro loan, due
2016
— This loan was entered into in 2013 with The Bank of Tokyo-Mitsubishi UFJ, Ltd. It can be extended by one year at the end of the third and fourth anniversaries. The interest rate is variable based upon the EUR LIBOR rate. The weighted
average interest rate at October 31, 2014 was 0.95 percent.
Private shelf facility
— In 2011, we entered into a $150,000
three-year Private Shelf Note agreement with New York Life Investment Management LLC (NYLIM). The amount of the facility was increased to $175,000 in 2013. Borrowings under the agreement may be up to 12 years, with an average life of up to 10 years,
and are unsecured. The interest rate on each borrowing can be fixed or floating and is based upon the market rate at the borrowing date. At October 31, 2014, the amount outstanding under this facility was at a fixed rate of 2.21 percent.
Development loans, due 2011-2026
— These fixed-rate loans with the State of Ohio and Cuyahoga County, Ohio were issued in 2011 in
connection with the construction of our corporate headquarters building and are payable in monthly installments over 15 years beginning in 2011. The interest rate on the State of Ohio loan is 3.00 percent, and the interest rate on the Cuyahoga
County loan is 3.50 percent.
Annual maturities
— The annual maturities of long-term debt for the five years subsequent to October
31, 2014, are as follows: $10,751 in 2015; $74,041 in 2016; and $413,343 in 2017; $26,587 in 2018 and $21,591 in 2019.
61
Notes to Consolidated Financial Statements — (Continued)
Note 10
—
Leases
We have lease commitments expiring at various dates, principally for manufacturing, warehouse and office space, automobiles and office
equipment. Many leases contain renewal options and some contain purchase options and residual guarantees.
Rent expense for all operating
leases was approximately $15,135, $14,835 and $13,822 in 2014, 2013 and 2012, respectively.
Amortization of assets recorded under
capital leases is recorded in depreciation expense.
Assets held under capitalized leases and included in property, plant and equipment are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
Transportation equipment
|
|
$
|
15,524
|
|
|
$
|
16,261
|
|
|
Other
|
|
|
12,191
|
|
|
|
10,577
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalized leases
|
|
|
27,715
|
|
|
|
26,838
|
|
|
Accumulated amortization
|
|
|
(11,139
|
)
|
|
|
(10,805
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net capitalized leases
|
|
$
|
16,576
|
|
|
$
|
16,033
|
|
|
|
|
|
|
|
|
|
|
|
At October 31, 2014, future minimum lease payments under non-cancelable capitalized and operating leases are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized
Leases
|
|
|
Operating
Leases
|
|
|
Year:
|
|
|
|
|
|
|
|
|
|
2015
|
|
$
|
6,866
|
|
|
$
|
12,189
|
|
|
2016
|
|
|
4,957
|
|
|
|
7,192
|
|
|
2017
|
|
|
2,340
|
|
|
|
5,808
|
|
|
2018
|
|
|
993
|
|
|
|
4,179
|
|
|
2019
|
|
|
635
|
|
|
|
3,773
|
|
|
Later years
|
|
|
6,476
|
|
|
|
10,410
|
|
|
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
|
22,267
|
|
|
$
|
43,551
|
|
|
|
|
|
|
|
|
|
|
|
|
Less amount representing executory costs
|
|
|
1,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net minimum lease payments
|
|
|
20,274
|
|
|
|
|
|
|
Less amount representing interest
|
|
|
4,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of net minimum lease payments
|
|
|
16,126
|
|
|
|
|
|
|
Less current portion
|
|
|
5,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term obligations at October 31, 2014
|
|
$
|
11,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
Notes to Consolidated Financial Statements — (Continued)
Note 11
—
Fair value measurements
The inputs to the valuation techniques used to measure fair value are classified into the following categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The following table
presents the classification of our assets and liabilities measured at fair value on a recurring basis at October 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
(a)
|
|
$
|
9,934
|
|
|
$
|
—
|
|
|
$
|
9,934
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
9,934
|
|
|
$
|
—
|
|
|
$
|
9,934
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation plans
(b)
|
|
$
|
8,884
|
|
|
$
|
8,884
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Foreign currency forward contracts
(a)
|
|
|
8,424
|
|
|
|
—
|
|
|
|
8,424
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value
|
|
$
|
17,308
|
|
|
$
|
8,884
|
|
|
$
|
8,424
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
We enter into foreign currency forward contracts to reduce the risk of foreign currency exposures resulting from receivables, payables, intercompany receivables,
intercompany payables and loans denominated in foreign currencies. Foreign exchange contracts are valued using market exchange rates. These foreign exchange contracts are not designated as hedges.
|
|
(b)
|
Executive officers and other highly compensated employees may defer up to 100 percent of their salary and annual cash incentive compensation and for executive officers,
up to 90 percent of their long-term incentive compensation, into various non-qualified deferred compensation plans. Deferrals can be allocated to various market performance measurement funds. Changes in the value of compensation deferred under these
plans are recognized each period based on the fair value of the underlying measurement funds.
|
Fair value disclosures related to
goodwill and indefinite-lived intangible assets are disclosed in Note 5.
Note 12
—
Financial instruments
We operate internationally and enter into intercompany transactions denominated in foreign currencies. Consequently, we are subject to
market risk arising from exchange rate movements between the dates foreign currency transactions occur and the dates they are settled. We regularly use foreign currency forward contracts to reduce our risks related to most of these transactions.
These contracts usually have maturities of 90 days or less and generally require us to exchange foreign currencies for U.S. dollars at maturity, at rates stated in the contracts. These contracts are not designated as hedging instruments under U.S.
GAAP. Accordingly, the changes in the fair value of the foreign currency forward contracts are recognized in each accounting period in “other – net” on the Consolidated Statement of Income together with the transaction gain or loss
from the related balance sheet position. In 2014, we recognized net losses of $826 on foreign currency forward contracts and net gains of $348 from the change in fair value of balance sheet positions. In 2013, we recognized net gains of $1,437 on
foreign currency forward contracts and net losses of $3,651 from the change in fair value of balance sheet positions. In 2012, we recognized net gains of $294 on foreign currency forward contracts and net losses of $1,310 from the change in fair
value of balance sheet positions.
63
Notes to Consolidated Financial
Statements
— (Continued)
The following table summarizes, by currency, the contracts outstanding at October 31, 2014 and
2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sell
|
|
|
Buy
|
|
|
|
|
Notional
Amounts
|
|
|
Fair Market
Value
|
|
|
Notional
Amounts
|
|
|
Fair Market
Value
|
|
|
October 31, 2014 contract amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro
|
|
$
|
424,624
|
|
|
$
|
407,422
|
|
|
$
|
344,461
|
|
|
$
|
330,957
|
|
|
Pound sterling
|
|
|
86,654
|
|
|
|
85,632
|
|
|
|
141,638
|
|
|
|
140,065
|
|
|
Japanese yen
|
|
|
21,057
|
|
|
|
19,780
|
|
|
|
17,477
|
|
|
|
16,498
|
|
|
Australian dollar
|
|
|
216
|
|
|
|
220
|
|
|
|
9,012
|
|
|
|
8,618
|
|
|
Hong Kong dollar
|
|
|
52,278
|
|
|
|
52,247
|
|
|
|
117,040
|
|
|
|
116,978
|
|
|
Singapore dollar
|
|
|
—
|
|
|
|
—
|
|
|
|
10,984
|
|
|
|
10,693
|
|
|
Others
|
|
|
2,627
|
|
|
|
2,573
|
|
|
|
28,409
|
|
|
|
27,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
587,456
|
|
|
$
|
567,874
|
|
|
$
|
669,021
|
|
|
$
|
651,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2013 contract amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro
|
|
$
|
194,531
|
|
|
$
|
194,187
|
|
|
$
|
131,198
|
|
|
$
|
131,825
|
|
|
Pound sterling
|
|
|
17,854
|
|
|
|
17,856
|
|
|
|
29,441
|
|
|
|
29,950
|
|
|
Japanese yen
|
|
|
11,426
|
|
|
|
11,404
|
|
|
|
8,686
|
|
|
|
8,672
|
|
|
Australian dollar
|
|
|
894
|
|
|
|
899
|
|
|
|
8,653
|
|
|
|
8,986
|
|
|
Hong Kong dollar
|
|
|
1,935
|
|
|
|
1,935
|
|
|
|
42,140
|
|
|
|
42,132
|
|
|
Singapore dollar
|
|
|
201
|
|
|
|
201
|
|
|
|
9,815
|
|
|
|
10,065
|
|
|
Others
|
|
|
5,768
|
|
|
|
5,745
|
|
|
|
24,227
|
|
|
|
24,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
232,609
|
|
|
$
|
232,227
|
|
|
$
|
254,160
|
|
|
$
|
256,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We also use intercompany foreign currency transactions of a long-term investment nature to hedge the value of investment
in wholly-owned subsidiaries. For hedges of the net investment in foreign operations, realized and unrealized gains and losses are shown in the cumulative translation adjustment account included in total comprehensive income. For 2014 and 2013, net
gains of $318 and $699, respectively, were included in the cumulative translation adjustment account related to foreign denominated fixed-rate debt designated as a hedge of net investment in foreign operations.
We are exposed to credit-related losses in the event of nonperformance by counterparties to financial instruments. These financial instruments include
cash deposits and foreign currency forward contracts. We periodically monitor the credit ratings of these counterparties in order to minimize our exposure. Our customers represent a wide variety of industries and geographic regions. As of
October 31, 2014, there were no significant concentrations of credit risk.
The carrying amounts and fair values of financial instruments,
other than receivables and accounts payable, are shown in the table below. The carrying values of receivables and accounts payable approximate fair value due to the short-term nature of these instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
Cash and cash equivalents
|
|
$
|
42,314
|
|
|
$
|
42,314
|
|
|
$
|
42,375
|
|
|
$
|
42,375
|
|
|
Notes payable
|
|
|
106,181
|
|
|
|
106,181
|
|
|
|
3,604
|
|
|
|
3,604
|
|
|
Long-term debt (including current portion)
|
|
|
693,619
|
|
|
|
696,140
|
|
|
|
648,990
|
|
|
|
636,904
|
|
|
Foreign currency forward contracts (net)
|
|
|
1,510
|
|
|
|
1,510
|
|
|
|
2,313
|
|
|
|
2,313
|
|
64
Notes to Consolidated Financial
Statements
— (Continued)
We used the following methods and assumptions in estimating the fair value of financial instruments:
|
|
•
|
|
Cash, cash equivalents and notes payable are valued at their carrying amounts due to the relatively short period to maturity of the instruments.
|
|
|
•
|
|
Long-term debt is valued by discounting future cash flows at currently available rates for borrowing arrangements with similar terms and conditions,
which are considered to be Level 2 inputs under the fair value hierarchy.
|
|
|
•
|
|
Foreign currency forward contracts are estimated using quoted exchange rates, which are considered to be Level 2 inputs under the fair value hierarchy.
|
Note 13
—
Capital shares
Preferred
— We have authorized 10,000 Series A convertible preferred shares without par value. No preferred shares were
outstanding in 2014, 2013 or 2012.
Common
— We have 160,000 authorized common shares without par value. At October 31, 2014
and 2013, there were 98,023 common shares issued. At October 31, 2014 and 2013, the number of outstanding common shares, net of treasury shares, was 62,435 and 64,218, respectively.
Common shares repurchased as part of publicly announced programs during 2014, 2013 and 2012 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Number of
Shares
|
|
|
Total
Amount
|
|
|
Average
per Share
|
|
|
2014
|
|
|
2,224
|
|
|
$
|
163,584
|
|
|
$
|
73.55
|
|
|
2013
|
|
|
459
|
|
|
$
|
30,443
|
|
|
$
|
66.29
|
|
|
2012
|
|
|
1,831
|
|
|
$
|
86,022
|
|
|
$
|
46.98
|
|
Note 14
—
Stock-based compensation
During the 2013 Annual Meeting of Shareholders, our shareholders approved the 2012 Stock Incentive and Award Plan (the “2012
Plan”). The 2012 Plan provides for the granting of stock options, stock appreciation rights, restricted stock, performance shares, stock purchase rights, stock equivalent units, cash awards and other stock or performance-based incentives. A
maximum of 2,900 common shares is available for grant under the Plan.
Stock options
— Nonqualified or incentive stock options may
be granted to our employees and directors. Generally, options granted to employees may be exercised beginning one year from the date of grant at a rate not exceeding 25 percent per year and expire 10 years from the date of grant. Vesting
accelerates upon the occurrence of events that involve or may result in a change of control. For grants made prior to November 2012, vesting ceases upon retirement, death and disability, and unvested shares are forfeited. For grants made
in or after November 2012, in the event of termination of employment due to early retirement or normal retirement at age 65, options granted within 12 months prior to termination are forfeited, and vesting continues post retirement for all other
unvested options granted. In the event of disability or death, all unvested stock options fully vest. Termination for any other reason results in forfeiture of unvested options and vested options in certain circumstances. The
amortized cost of options is accelerated if the retirement eligibility date occurs before the normal vesting date. Option exercises are satisfied through the issuance of treasury shares on a first-in, first-out basis. We recognized
compensation expense related to stock options of $10,251, $4,906 and $3,789 for 2014, 2013 and 2012, respectively. The increase in the 2014 expense was primarily related to accelerated amortization of the cost of options.
65
Notes to Consolidated Financial
Statements
— (Continued)
The following table summarizes activity related to stock options during 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Options
|
|
|
Weighted-Average
Exercise Price Per
Share
|
|
|
Aggregate
Intrinsic
Value
|
|
|
Weighted-
Average
Remaining
Term
|
|
|
Outstanding at October 31, 2013
|
|
|
1,749
|
|
|
$
|
34.63
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
277
|
|
|
$
|
71.75
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(314
|
)
|
|
$
|
22.35
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(26
|
)
|
|
$
|
51.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at October 31, 2014
|
|
|
1,686
|
|
|
$
|
42.77
|
|
|
$
|
56,957
|
|
|
|
6.0 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested at October 31, 2014 or expected to vest
|
|
|
1,673
|
|
|
$
|
42.58
|
|
|
$
|
56,841
|
|
|
|
6.0 years
|
|
|
Exercisable at October 31, 2014
|
|
|
955
|
|
|
$
|
30.86
|
|
|
$
|
43,626
|
|
|
|
4.6 years
|
|
Summarized information on currently outstanding options follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of Exercise Price
|
|
|
|
|
$14 — $28
|
|
|
$29 — $44
|
|
|
$45 — $73
|
|
|
Number outstanding
|
|
|
610
|
|
|
|
543
|
|
|
|
533
|
|
|
Weighted-average remaining contractual life, in years
|
|
|
3.5
|
|
|
|
6.4
|
|
|
|
8.6
|
|
|
Weighted-average exercise price
|
|
$
|
22.54
|
|
|
$
|
41.90
|
|
|
$
|
66.78
|
|
|
Number exercisable
|
|
|
578
|
|
|
|
318
|
|
|
|
59
|
|
|
Weighted-average exercise price
|
|
$
|
22.28
|
|
|
$
|
40.71
|
|
|
$
|
61.62
|
|
As of October 31, 2014, there was $6,741 of total unrecognized compensation cost related to nonvested stock options.
That cost is expected to be amortized over a weighted average period of approximately 1.4 years.
The Black-Scholes option valuation model was
developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility.
The fair value of each option grant was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
Expected volatility
|
|
40.1%-44.7%
|
|
45.3%-46.9%
|
|
45.4%-46.9%
|
|
Expected dividend yield
|
|
0.98%-1.03%
|
|
0.97%-1.01%
|
|
1.20%
|
|
Risk-free interest rate
|
|
1.51%-1.79%
|
|
0.75%-0.90%
|
|
1.03%-1.23%
|
|
Expected life of the option (in years)
|
|
5.4-6.1
|
|
5.4-6.1
|
|
5.4-6.1
|
The weighted-average expected volatility used to value options granted in 2014, 2013 and 2012 was 44.5 percent, 46.3
percent and 46.2 percent, respectively.
66
Notes to Consolidated Financial
Statements
— (Continued)
Historical information was the primary basis for the selection of the expected volatility, expected
dividend yield and the expected lives of the options. The risk-free interest rate was selected based upon yields of United States Treasury issues with terms equal to the expected life of the option being valued.
The weighted average grant date fair value of stock options granted during 2014, 2013 and 2012 was $27.92, $24.12 and $17.03, respectively.
The total intrinsic value of options exercised during 2014, 2013 and 2012 was $17,223, $12,892 and $13,329, respectively.
Cash received from the exercise of stock options for 2014, 2013 and 2012 was $7,013, $6,018 and $4,934, respectively. The tax benefit realized from tax
deductions from exercises for 2014, 2013 and 2012 was $6,385, $5,531 and $4,792, respectively.
Restricted shares and restricted share
units
— We may grant restricted shares and/or restricted share units to our employees and directors. These shares or units may not be transferred for a designated period of time (generally one to three years) defined at the date of grant.
For employee recipients, in the event of termination of employment due to early retirement, restricted shares granted within 12 months prior
to termination are forfeited, and other restricted shares vest on a pro-rata basis. In the event of termination of employment due to retirement at normal retirement age, restricted shares granted within 12 months prior to termination are forfeited,
and, for other restricted shares, the restriction period will terminate and the shares will vest and be transferable. Restrictions lapse in the event of a recipient’s disability or death. Termination for any other reason prior to the lapse of
any restrictions results in forfeiture of the shares.
For non-employee directors, all restrictions lapse in the event of disability or death
of the non-employee director. Termination of service as a director for any other reason within one year of date of grant results in a pro-rata vesting of shares or units.
As shares or units are issued, deferred stock-based compensation equivalent to the fair market value on the date of grant is expensed over the vesting period. Tax benefits arising from the lapse of
restrictions are recognized when realized and credited to capital in excess of stated value.
The following table summarizes activity related
to restricted shares during 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted-Average
Grant Date Fair
Value Per
Share
|
|
|
Restricted at October 31, 2013
|
|
|
82
|
|
|
$
|
52.67
|
|
|
Granted
|
|
|
28
|
|
|
$
|
73.56
|
|
|
Vested
|
|
|
(39
|
)
|
|
$
|
48.13
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted at October 31, 2014
|
|
|
71
|
|
|
$
|
63.53
|
|
|
|
|
|
|
|
|
|
|
|
As of October 31, 2014, there was $2,074 of unrecognized compensation cost related to restricted shares. The cost is
expected to be amortized over a weighted average period of 1.7 years. The amount charged to expense related to restricted shares was $1,784, $2,464 and $1,724 in 2014, 2013 and 2012, respectively. These amounts included common share dividends $52,
57, and $53 in 2014, 2013 and 2012, respectively.
The following table summarizes activity related to restricted share units in 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Units
|
|
|
Weighted-Average
Grant Date Fair
Value
|
|
|
Restricted share units at October 31, 2013
|
|
|
12
|
|
|
$
|
51.79
|
|
|
Granted
|
|
|
12
|
|
|
$
|
71.82
|
|
|
Vested
|
|
|
(19
|
)
|
|
$
|
62.07
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted share units at October 31, 2014
|
|
|
5
|
|
|
$
|
61.59
|
|
|
|
|
|
|
|
|
|
|
|
67
Notes to Consolidated Financial
Statements
— (Continued)
As of October 31, 2014, there was no remaining expense to be recognized related to outstanding
restricted share units. The amount charged to expense related to restricted share units during 2014, 2013 and 2012 was $890, $598 and $370, respectively.
Deferred directors’ compensation —
Non-employee directors may defer all or part of their cash and equity-based compensation until retirement. Cash compensation may be deferred as cash or
as share equivalent units. Deferred cash amounts are recorded as liabilities, and share equivalent units are recorded as equity. Additional share equivalent units are earned when common share dividends are declared.
The following table summarizes activity related to director deferred compensation share equivalent units during 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted-Average
Grant Date Fair
Value Per
Share
|
|
|
Outstanding at October 31, 2013
|
|
|
148
|
|
|
$
|
23.22
|
|
|
Restricted stock units vested
|
|
|
13
|
|
|
$
|
57.43
|
|
|
Dividend equivalents
|
|
|
1
|
|
|
$
|
76.49
|
|
|
Distributions
|
|
|
(52
|
)
|
|
$
|
19.20
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at October 31, 2014
|
|
|
110
|
|
|
$
|
29.74
|
|
|
|
|
|
|
|
|
|
|
|
The amount charged to expense related to director deferred compensation was $101, $183 and $265 in 2014, 2013 and 2012,
respectively.
Performance share incentive awards —
Executive officers and selected other key employees are eligible to receive
common share-based incentive awards. Payouts, in the form of unrestricted common shares, vary based on the degree to which corporate financial performance exceeds predetermined threshold, target and maximum performance levels over three-year
performance periods. No payout will occur unless certain threshold performance measures are exceeded.
The amount of compensation expense is
based upon current performance projections for each three-year period and the percentage of the requisite service that has been rendered. The calculations are also based upon the grant date fair value determined using the closing market price of our
common shares at the grant date, reduced by the implied value of dividends not to be paid. This value was $69.25 per share for 2014, $59.59 per share for 2013 and $42.12 per share for 2012. The amounts charged to expense for executive officers and
selected other key employees in 2014, 2013 and 2012 were $4,304, $3,588 and $4,235, respectively. The cumulative amount recorded in shareholders’ equity at October 31, 2014, and 2013 was $7,570 and $8,083, respectively.
Deferred compensation —
Our executive officers and other highly compensated employees may elect to defer up to 100 percent of their base pay
and cash incentive compensation and, for executive officers, up to 90 percent of their performance share-based incentive payout each year. Additional share units are credited for quarterly dividends paid on our common shares. Expense related to
dividends paid under this plan was $129, $79 and $35 for 2014, 2013 and 2012, respectively.
Shares reserved for future issuance
—
At October 31, 2014, there were 2,430 of common shares reserved for future issuance through the exercise of outstanding options or rights.
68
Notes to Consolidated Financial
Statements
— (Continued)
Note 15
—
Operating segments and geographic area data
We conduct business in three primary operating segments: Adhesive Dispensing Systems, Advanced Technology Systems, and Industrial
Coating Systems. The composition of segments and measure of segment profitability is consistent with that used by our chief operating decision maker. The primary measure used by the chief operating decision maker for purposes of making decisions
about allocating resources to the segments and assessing performance is operating profit, which equals sales less cost of sales and certain operating expenses. Items below the operating profit line of the Consolidated Statement of Income (interest
and investment income, interest expense and other income/expense) are excluded from the measure of segment profitability reviewed by our chief operating decision maker and are not presented by operating segment. The accounting policies of the
segments are generally the same as those described in Note 1, Significant Accounting Policies.
No single customer accounted for 10 percent or
more of sales in 2014, 2013 or 2012.
The following table presents information about our reportable segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adhesive
Dispensing
Systems
|
|
|
Advanced
Technology
Systems
|
|
|
Industrial
Coating
Systems
|
|
|
Corporate
|
|
|
Total
|
|
|
Year ended October 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net external sales
|
|
$
|
899,696
|
|
|
$
|
561,784
|
|
|
$
|
242,541
|
|
|
$
|
—
|
|
|
$
|
1,704,021
|
|
|
Depreciation
|
|
|
15,467
|
|
|
|
10,433
|
|
|
|
3,368
|
|
|
|
5,178
|
|
|
|
34,446
|
|
|
Operating profit (loss)
|
|
|
229,556
|
(a)
|
|
|
140,240
|
(b)
|
|
|
38,117
|
(e)
|
|
|
(40,808
|
)
|
|
|
367,105
|
|
|
Identifiable assets
(c)
|
|
|
747,063
|
|
|
|
919,052
|
|
|
|
130,624
|
|
|
|
495,676
|
(d)
|
|
|
2,292,415
|
|
|
Expenditures for long-lived assets
|
|
|
15,886
|
|
|
|
15,163
|
|
|
|
4,057
|
|
|
|
8,468
|
|
|
|
43,574
|
|
|
Year ended October 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net external sales
|
|
$
|
793,488
|
|
|
$
|
516,266
|
|
|
$
|
233,167
|
|
|
$
|
—
|
|
|
$
|
1,542,921
|
|
|
Depreciation
|
|
|
15,326
|
|
|
|
9,180
|
|
|
|
3,084
|
|
|
|
4,176
|
|
|
|
31,766
|
|
|
Operating profit (loss)
|
|
|
203,757
|
(a)
|
|
|
123,403
|
(b)
|
|
|
33,786
|
|
|
|
(37,097
|
)
|
|
|
323,849
|
|
|
Identifiable assets
(c)
|
|
|
750,616
|
|
|
|
721,524
|
|
|
|
113,835
|
|
|
|
467,809
|
(d)
|
|
|
2,053,784
|
|
|
Expenditures for long-lived assets
|
|
|
20,498
|
|
|
|
10,080
|
|
|
|
6,239
|
|
|
|
10,402
|
|
|
|
47,219
|
|
|
Year ended October 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net external sales
|
|
$
|
684,096
|
|
|
$
|
515,992
|
|
|
$
|
209,490
|
|
|
$
|
—
|
|
|
$
|
1,409,578
|
|
|
Depreciation
|
|
|
9,540
|
|
|
|
8,711
|
|
|
|
2,704
|
|
|
|
3,514
|
|
|
|
24,469
|
|
|
Operating profit (loss)
|
|
|
211,072
|
(a)
|
|
|
134,074
|
|
|
|
25,933
|
(e)
|
|
|
(35,599
|
)
|
|
|
335,480
|
|
|
Identifiable assets
(c)
|
|
|
611,357
|
|
|
|
718,354
|
|
|
|
110,982
|
|
|
|
395,331
|
(d)
|
|
|
1,836,024
|
|
|
Expenditures for long-lived assets
|
|
|
14,612
|
|
|
|
6,871
|
|
|
|
4,602
|
|
|
|
4,874
|
|
|
|
30,959
|
|
|
(a)
|
Includes $1,731 and $315 of severance and restructuring costs in 2014 and 2013, respectively. Includes $3,862 of cost of goods sold — restructuring and severance
and restructuring costs in 2012.
|
|
(b)
|
Includes $579 and $811 of severance and restructuring costs 2014 and 2013, respectively.
|
|
(c)
|
Operating segment identifiable assets include notes and accounts receivable net of customer advance payments and allowance for doubtful accounts, inventories net of
reserves, property, plant and equipment net of accumulated depreciation and goodwill.
|
|
(d)
|
Corporate assets are principally cash and cash equivalents, deferred income taxes, capital leases, headquarter facilities, the major portion of our enterprise
management system, and intangible assets.
|
|
(e)
|
Includes $241 and $690 of severance and restructuring costs in 2014 and 2012, respectively.
|
69
Notes to Consolidated Financial
Statements
— (Continued)
We have significant sales and long-lived assets in the following geographic areas:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
Net external sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
503,776
|
|
|
$
|
465,789
|
|
|
$
|
388,904
|
|
|
Americas
|
|
|
120,993
|
|
|
|
123,654
|
|
|
|
109,074
|
|
|
Europe
|
|
|
494,538
|
|
|
|
416,725
|
|
|
|
381,005
|
|
|
Japan
|
|
|
127,057
|
|
|
|
127,945
|
|
|
|
127,509
|
|
|
Asia Pacific
|
|
|
457,657
|
|
|
|
408,808
|
|
|
|
403,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net external sales
|
|
$
|
1,704,021
|
|
|
$
|
1,542,921
|
|
|
$
|
1,409,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
159,946
|
|
|
$
|
136,551
|
|
|
$
|
127,486
|
|
|
Americas
|
|
|
2,451
|
|
|
|
4,154
|
|
|
|
3,180
|
|
|
Europe
|
|
|
21,039
|
|
|
|
22,576
|
|
|
|
14,896
|
|
|
Japan
|
|
|
5,967
|
|
|
|
4,384
|
|
|
|
3,431
|
|
|
Asia Pacific
|
|
|
35,036
|
|
|
|
33,314
|
|
|
|
25,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets
|
|
$
|
224,439
|
|
|
$
|
200,979
|
|
|
$
|
174,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of total segment operating income to total consolidated income before income taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
Total profit for reportable segments
|
|
$
|
367,105
|
|
|
$
|
323,849
|
|
|
$
|
335,480
|
|
|
Interest expense
|
|
|
(15,035
|
)
|
|
|
(14,841
|
)
|
|
|
(11,153
|
)
|
|
Interest and investment income
|
|
|
581
|
|
|
|
421
|
|
|
|
463
|
|
|
Other-net
|
|
|
(138
|
)
|
|
|
1,694
|
|
|
|
1,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
352,513
|
|
|
$
|
311,123
|
|
|
$
|
326,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of total assets for reportable segments to total consolidated assets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
Total assets for reportable segments
|
|
$
|
2,292,415
|
|
|
$
|
2,053,784
|
|
|
$
|
1,836,024
|
|
|
Customer advance payments
|
|
|
25,578
|
|
|
|
28,341
|
|
|
|
20,894
|
|
|
Eliminations
|
|
|
(37,863
|
)
|
|
|
(28,946
|
)
|
|
|
(27,403
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated assets
|
|
$
|
2,280,130
|
|
|
$
|
2,053,179
|
|
|
$
|
1,829,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 16
—
Supplemental information for the statement of cash flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
Cash operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
14,115
|
|
|
$
|
16,037
|
|
|
$
|
9,285
|
|
|
Income taxes paid
|
|
|
87,797
|
|
|
|
93,074
|
|
|
|
70,935
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized lease obligations incurred
|
|
$
|
8,584
|
|
|
$
|
6,441
|
|
|
$
|
12,981
|
|
|
Capitalized lease obligations terminated
|
|
|
864
|
|
|
|
468
|
|
|
|
894
|
|
|
Shares acquired and issued through exercise of stock options
|
|
|
—
|
|
|
|
148
|
|
|
|
2,323
|
|
70
Notes to Consolidated Financial
Statements
— (Continued)
Note 17
—
Quarterly financial data (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
359,420
|
|
|
$
|
417,461
|
|
|
$
|
458,550
|
|
|
$
|
468,590
|
|
|
Gross margin
|
|
|
194,782
|
|
|
|
235,552
|
|
|
|
257,511
|
|
|
|
257,253
|
|
|
Net income
|
|
|
34,880
|
|
|
|
61,934
|
|
|
|
77,879
|
|
|
|
72,080
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.54
|
|
|
|
0.97
|
|
|
|
1.23
|
|
|
|
1.14
|
|
|
Diluted
|
|
|
0.54
|
|
|
|
0.96
|
|
|
|
1.21
|
|
|
|
1.13
|
|
|
2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
347,043
|
|
|
$
|
382,100
|
|
|
$
|
402,960
|
|
|
$
|
410,818
|
|
|
Gross margin
|
|
|
197,229
|
|
|
|
216,938
|
|
|
|
225,083
|
|
|
|
226,894
|
|
|
Net income
|
|
|
42,011
|
|
|
|
54,605
|
|
|
|
65,424
|
|
|
|
59,777
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.65
|
|
|
|
0.85
|
|
|
|
1.02
|
|
|
|
0.93
|
|
|
Diluted
|
|
|
0.65
|
|
|
|
0.84
|
|
|
|
1.01
|
|
|
|
0.92
|
|
The sum of the per-share amounts for the four quarters may not always equal the annual per-share amounts due to
differences in the average number of shares outstanding during the respective periods.
During the fourth quarter of 2014, we recorded pre-tax
severance costs of $1,273. Additionally, we recorded a pre-tax gain of $1,005 related to a property insurance settlement.
During the second
quarter of 2014, we recorded pre-tax severance costs of $1,278.
During the third quarter of 2013, we recorded a pre-tax gain of $2,116 on the
sale of real estate in China.
During the first quarter of 2013, we recorded a favorable adjustment to unrecognized tax benefits of $900
primarily related to expiration of certain foreign statutes of limitations. On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted which retroactively reinstated and extended the Federal Research and Development Tax Credit
(Federal R&D Tax Credit) from January 1, 2012 to December 31, 2013 and extended certain other tax provisions. As a result, our income tax provision for the first quarter of 2013 included a discrete tax benefit of $1,700 related to
2012.
Note 18
—
Contingencies
We are involved in pending or potential litigation regarding environmental, product liability, patent, contract, employee and other
matters arising from the normal course of business. Including the environmental matter discussed below, it is our opinion, after consultation with legal counsel, that resolutions of these matters are not expected to result in a material effect on
our financial condition, quarterly or annual operating results or cash flows.
Environmental
— We have voluntarily agreed with the
City of New Richmond, Wisconsin and other Potentially Responsible Parties to share costs associated with the remediation of the City of New Richmond municipal landfill (the “Site”) and constructing a potable water delivery system serving
the impacted area down gradient of the Site. At October 31, 2014, and 2013 our accrual for the ongoing operation, maintenance and monitoring obligation at the Site was $615 and $668, respectively. The liability for environmental remediation
represents management’s best estimate of the probable and reasonably estimable undiscounted costs related to known remediation obligations. The accuracy of our estimate of environmental liability is affected by several uncertainties such as
additional requirements that may be identified in connection with remedial activities, the complexity and evolution of environmental laws and regulations, and the identification of presently unknown remediation requirements. Consequently, our
liability could be different than our current estimate. However, we do not expect that the costs associated with remediation will have a material adverse effect on our financial condition or results of operations.
71
Management’s Report on Internal Control Over Financial Reporting
The management of Nordson Corporation is responsible for establishing and maintaining adequate internal control over financial reporting.
Using criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework (1992 framework), Nordson’s management assessed the effectiveness of our internal control over financial reporting as of October 31, 2014.
We acquired Avalon Laboratories (Avalon) and Dima Group B.V. (Dima) on August 8, 2014 and August 29, 2014, respectively. They represented 9 percent of our total assets as of
October 31, 2014. As the acquisitions occurred during the last 12 months, the scope of our assessment of the effectiveness of internal control over financial reporting does not include Avalon and Dima. This exclusion is in accordance with the
SEC’s general guidance that assessments of recently acquired businesses may be omitted from our scope in the year of acquisition.
Based
on our assessment, management concluded that our internal control over financial reporting was effective as of October 31, 2014.
The
independent registered public accounting firm, Ernst & Young LLP, has also audited the effectiveness of our internal control over financial reporting as of October 31, 2014. Their report is included herein.
|
|
|
|
|
|
|
/s/ M
ICHAEL
F. H
ILTON
|
|
|
|
/s/ G
REGORY
A. T
HAXTON
|
|
President and Chief Executive Officer
|
|
|
|
Senior Vice President, Chief Financial Officer
|
|
December 15, 2014
|
|
|
|
December 15, 2014
|
72
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Nordson Corporation
We have audited Nordson Corporation’s internal control over financial reporting as of October 31, 2014, based on criteria established in Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). Nordson Corporation’s management is responsible for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying “Management’s Report on Internal Control Over Financial Reporting”. Our responsibility is to express an opinion on the
company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over
financial reporting did not include the internal controls of Avalon Laboratories and Dima Group B.V., which are included in the 2014 consolidated financial statements of Nordson Corporation and constituted 9 percent of total assets as of
October 31, 2014. Our audit of internal control over financial reporting of Nordson Corporation also did not include an evaluation of the internal control over financial reporting of the Avalon Laboratories and Dima Group B.V.
In our opinion, Nordson Corporation maintained, in all material respects, effective internal control over financial reporting as of October 31, 2014,
based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of Nordson Corporation as of October 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in
the period ended October 31, 2014 of Nordson Corporation and our report dated December 15, 2014 expressed an unqualified opinion thereon.
Cleveland, Ohio
December 15, 2014
73
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Nordson Corporation
We have audited the accompanying consolidated balance sheets of Nordson Corporation as of October 31, 2014 and 2013 and the related consolidated statements of income, comprehensive income,
shareholders’ equity, and cash flows for each of the three years in the period ended October 31, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and
schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nordson
Corporation at October 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended October 31, 2014, in conformity with US generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Nordson Corporation’s
internal control over financial reporting as of October 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our
report dated December 15, 2014 expressed an unqualified opinion thereon.
Cleveland, Ohio
December 15, 2014
74
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
None.
|
Item 9A.
|
Controls and Procedures
|
(a)
Evaluation of
disclosure controls and procedures.
Our management, with the participation of the principal executive officer (president and chief executive officer) and the principal financial officer (senior vice president and chief financial officer), has
reviewed and evaluated our disclosure controls and procedures (as defined in the Securities Exchange Act Rule 13a-15e) as of October 31, 2014. Based on that evaluation, our management, including the principal executive and financial officers,
has concluded that our disclosure controls and procedures were effective as of October 31, 2014 in ensuring that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including the principal executive officer and the principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
(b)
Management’s report on internal control over financial
reporting
. The Report of Management on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm thereon are set forth in Part II, Item 8 of this Annual Report on Form 10-K.
(c)
Changes in internal control over reporting
. There were no changes in our internal controls over financial reporting that occurred during the
fourth quarter of 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
|
Item 9B.
|
Other Information
|
None.
PART III
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
The information required by this Item is incorporated by reference to the captions “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” of our
definitive Proxy Statement for the 2015 Annual Meeting of Shareholders. Information regarding Audit Committee financial experts is incorporated by reference to the caption “Election of Directors” of our definitive Proxy Statement for the
2015 Annual Meeting of Shareholders.
Our executive officers serve for a term of one year from date of election to the next organizational
meeting of the board of directors and until their respective successors are elected and qualified, except in the case of death, resignation or removal. Information concerning executive officers is contained in Part I of this report under the caption
“Executive Officers of the Company.”
We have adopted a code of ethics for all employees and directors, including the principal
executive officer, other executive officers, principal finance officer and other finance personnel. A copy of the code of ethics is available free of charge on our Web site at http://www.nordson.com/governance. We intend to satisfy our disclosure
requirement under Item 5.05 of Form 8-K regarding any amendment to or waiver of a provision of our code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or
persons performing similar functions and that relates to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S-K by posting such information on our Web site.
75
|
Item 11.
|
Executive Compensation
|
The information required by
this Item is incorporated by reference to the captions “Directors Compensation for Fiscal Year 2014,” “Summary Compensation for Fiscal Year 2014,” “Grants of Plan-Based Awards for Fiscal Year 2014,” “Option
Exercises and Stock Vested for Fiscal Year 2014,” “Pension Benefits for Fiscal Year 2014,” “Nonqualified Deferred Compensation for Fiscal Year 2014” and “Potential Payments Upon Termination or Change of Control” in
our definitive Proxy Statement for the 2015 Annual Meeting of Shareholders.
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
The information required by this Item is incorporated by reference to the caption “Ownership of Nordson Common Shares” in our definitive Proxy Statement for the 2015 Annual Meeting of
Shareholders.
Equity Compensation Table
The following table sets forth information regarding equity compensation plans in effect as of October 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan category
|
|
Number of securities to be
issued upon exercise of
outstanding
options,
warrants and rights
|
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
|
|
Number of securities
remaining available for
future issuance
under
equity compensation plans
(excluding securities
reflected in first reporting
column)
|
|
|
Equity compensation plans approved by security holders
|
|
|
1,686
|
|
|
$
|
42.77
|
|
|
|
2,900
|
|
|
Equity compensation plans not approved by security holders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,686
|
|
|
$
|
42.77
|
|
|
|
2,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
The information required by this Item is incorporated by reference to the caption “Review of Transactions with Related Persons” in our definitive Proxy Statement for the 2015 Annual Meeting of
Shareholders.
|
Item 14.
|
Principal Accountant Fees and Services
|
The
information required by this Item is incorporated by reference to the caption “Fees Paid to Ernst and Young LLP” in our definitive Proxy Statement for the 2015 Annual Meeting of Shareholders.
76
PART IV
|
Item 15.
|
Exhibits and Financial Statement Schedule
|
The
following are filed as part of this report:
(a) 1. Financial Statements
The following financial statements are included in Part II, Item 8:
Consolidated Statements of Income for each of the three years in the period ending October 31, 2014
Consolidated Statements of Comprehensive Income for each of the three years in the period ending October 31, 2014
Consolidated Balance Sheets as of October 31, 2014 and October 31, 2013
Consolidated
Statements of Shareholders’ Equity for each of the three years in the period ending October 31, 2014
Consolidated Statements of
Cash Flows for each of the three years in the period ending October 31, 2014
Notes to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm
(a) 2. Financial Statement Schedule
Schedule II Valuation and
Qualifying Accounts and Reserves for each of the three years in the period ending October 31, 2014.
No other consolidated financial
statement schedules are presented because the schedules are not required, because the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in
the financial statements, including the notes thereto.
(a) 3. Exhibits
The exhibits listed on the accompanying index to exhibits are filed as part of this Annual Report on Form 10-K.
77
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NORDSON CORPORATION
Date: December 15, 2014
|
|
|
By: /s/ G
REGORY
A.
T
HAXTON
|
|
Gregory A. Thaxton
|
|
Senior Vice President, Chief Financial Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated.
|
|
|
|
|
|
|
/s/ M
ICHAEL
F. H
ILTON
|
|
|
|
December 15, 2014
|
|
Michael F. Hilton
|
|
|
|
|
|
Director, President and
|
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
/s/ G
REGORY
A. T
HAXTON
|
|
|
|
December 15, 2014
|
|
Gregory A. Thaxton
|
|
|
|
|
|
Senior Vice President, Chief Financial Officer
|
|
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
(Principal Accounting Officer)
|
|
|
|
|
|
|
|
|
|
|
|
/s/ J
OSEPH
P. K
EITHLEY
|
|
|
|
December 15, 2014
|
|
Joseph P. Keithley
|
|
|
|
|
|
Chairman of the Board
|
|
|
|
|
|
|
|
|
|
|
|
/s/ L
EE
C. B
ANKS
|
|
|
|
December 15, 2014
|
|
Lee C. Banks
|
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
/s/ R
ANDOLPH
W. C
ARSON
|
|
|
|
December 15, 2014
|
|
Randolph W. Carson
|
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
78
Signatures
— (Continued)
|
|
|
|
|
|
|
/s/ A
RTHUR
L. G
EORGE
,
J
R
.
|
|
|
|
December 15, 2014
|
|
Arthur L. George, Jr.
|
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
/s/ F
RANK
M. J
AEHNERT
|
|
|
|
December 15, 2014
|
|
Frank M. Jaehnert
|
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
/s/ M
ICHAEL
J. M
ERRIMAN
,
J
R
.
|
|
|
|
December 15, 2014
|
|
Michael J. Merriman, Jr.
|
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
/s/ M
ARY
G. P
UMA
|
|
|
|
December 15, 2014
|
|
Mary G. Puma
|
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
/s/ V
ICTOR
L. R
ICHEY
,
J
R
.
|
|
|
|
December 15, 2014
|
|
Victor L. Richey, Jr.
|
|
|
|
|
|
Director
|
|
|
|
|
79
Schedule II – Valuation and Qualifying Accounts and Reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
Beginning
of Year
|
|
|
Assumed
from
Acquisitions
|
|
|
Charged to
Expense
|
|
|
Deductions
|
|
|
Currency
Effects
|
|
|
Balance
at End
of
Year
|
|
|
Allowance for Doubtful Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
$
|
3,311
|
|
|
|
648
|
|
|
|
710
|
|
|
|
801
|
|
|
|
(92
|
)
|
|
$
|
3,776
|
|
|
2013
|
|
$
|
3,776
|
|
|
|
256
|
|
|
|
889
|
|
|
|
698
|
|
|
|
42
|
|
|
$
|
4,265
|
|
|
2014
|
|
$
|
4,265
|
|
|
|
121
|
|
|
|
867
|
|
|
|
551
|
|
|
|
(215
|
)
|
|
$
|
4,487
|
|
|
Inventory Obsolescence and Other Reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
$
|
16,050
|
|
|
|
2,071
|
|
|
|
6,033
|
|
|
|
3,237
|
|
|
|
(412
|
)
|
|
$
|
20,505
|
|
|
2013
|
|
$
|
20,505
|
|
|
|
3,969
|
|
|
|
5,075
|
|
|
|
2,961
|
|
|
|
(9
|
)
|
|
$
|
26,579
|
|
|
2014
|
|
$
|
26,579
|
|
|
|
1,045
|
|
|
|
6,706
|
|
|
|
6,361
|
|
|
|
(1,225
|
)
|
|
$
|
26,744
|
|
80
NORDSON CORPORATION
Index to Exhibits
(Item 15(a) (3))
|
|
|
|
|
Exhibit
Number
|
|
Description
|
|
(3)
|
|
Articles of Incorporation and By-Laws
|
|
3-a
|
|
1989 Amended Articles of Incorporation (incorporated herein by reference to Exhibit 3-a to Registrant’s Annual Report on Form 10-K for the year ended October 31,
2011)
|
|
3-a-1
|
|
Certificate of Amendment to 1989 Amended Articles of Incorporation (incorporated herein by reference to Exhibit 3-a-1 to Registrant’s Annual Report on Form 10-K for the year
ended October 31, 2011)
|
|
3-b
|
|
1998 Amended Regulations (incorporated herein by reference to Exhibit 3-b to Registrant’s Annual Report on Form 10-K for the year ended October 31, 2010)
|
|
(4)
|
|
Instruments Defining the Rights of Security Holders, including indentures
|
|
4-b
|
|
Note Purchase and Private Shelf Agreement for $150 million between Nordson Corporation and New York Life Investment Management LLC dated as of June 30, 2011 (incorporated herein by
reference to Exhibit 4.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2011)
|
|
4-c
|
|
$
500 million Credit Agreement dated December 9, 2011 between Nordson Corporation and various financial institutions (incorporated herein by reference to Exhibit 4.1 to
Registrant’s Form 8-K dated December 12, 2011)
|
|
4-e
|
|
Master Note Purchase Agreement dated July 26, 2012 between Nordson Corporation and the purchasers listed therein (incorporated herein by reference to Exhibit 4.2 to
Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2012)
|
|
4-f
|
|
Second Amendment to the Note Purchase and Private Shelf Agreement dated as of February 12, 2013 between Nordson Corporation and New York Life Investment Management LLC
(incorporated herein by reference to Exhibit 4.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2013)
|
|
4-g
|
|
Credit Agreement dated August 6, 2014 by and among Nordson Corporation, PNC Bank National Association and PNC Capital Markets LLC (incorporated herein by reference to Exhibit 10.3
to Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2014)
|
|
(10)
|
|
Material Contracts
|
|
10-a
|
|
Amended and Restated Nordson Corporation 2004 Management Incentive Compensation Plan (incorporated herein by reference to Exhibit 10-a to Registrant’s Annual Report on Form
10-K for the year ended October 31, 2013)*
|
|
10-b-1
|
|
Nordson Corporation 2005 Deferred Compensation Plan (incorporated herein by reference to Exhibit 10-b-1 to Registrant’s Annual Report on Form 10-K for the year ended October
31, 2010)*
|
|
10-b-2
|
|
Nordson Corporation 2005 Deferred Compensation Plan (as Amended and Restated Effective January 1, 2009) *
|
|
10-c
|
|
Resolution of Board of Directors Authorizing Execution of Indemnification Agreements (incorporated herein by reference to Exhibit 10-c to Registrant’s Annual Report on Form
10-K for the year ended October 31, 2013)*
|
|
10-d
|
|
Restated Nordson Corporation Excess Defined Contribution Retirement Plan Agreement (incorporated herein by reference to Exhibit 10-d to Registrant’s Annual Report on Form 10-K
for the year ended October 31, 2009) *
|
|
10-d-1
|
|
First Amendment to Nordson Corporation Excess Defined Contribution Retirement Plan (incorporated herein by reference to Exhibit 10-d-1 to Registrant’s Annual Report on Form
10-K for the year ended October 31, 2012)*
|
81
Index to
Exhibits
—
Continued
|
|
|
|
|
Exhibit
Number
|
|
Description
|
|
10-d-2
|
|
Nordson Corporation 2005 Excess Defined Contribution Benefit Plan (incorporated herein by reference to Exhibit 10-d-2 to Registrant’s Annual Report on Form 10-K for the year
ended October 31, 2011)*
|
|
10-d-3
|
|
Nordson Corporation 2005 Excess Defined Contribution Retirement Plan (as Amended and Restated Effective January 1, 2009)*
|
|
10-e
|
|
Nordson Corporation Excess Defined Benefit Pension Plan (incorporated herein by reference to Exhibit 10-d to Registrant’s Annual Report on Form 10-K for the year ended October
31, 2009)*
|
|
10-e-1
|
|
Second Amendment to Nordson Corporation Excess Defined Benefit Pension Plan (incorporated herein by reference to Exhibit 10-e-1 to Registrant’s Annual Report on Form 10-K for
the year ended October 31, 2012)*
|
|
10-e-2
|
|
Nordson Corporation 2005 Excess Defined Benefit Pension Plan (incorporated herein by reference to Exhibit 10-e-2 to Registrant’s Annual Report on Form 10-K for the year ended
October 31, 2010)*
|
|
10-e-3
|
|
Nordson Corporation 2005 Excess Defined Benefit Pension Plan (as Amended and Restated Effective January 1, 2009)*
|
|
10-g-1
|
|
Amended and Restated Nordson Corporation 2004 Long-Term Performance Plan (incorporated herein by reference to Exhibit 10-g-1 to Registrant’s Annual Report on Form 10-K for the
year ended October 31, 2013)*
|
|
10-g-2
|
|
Nordson Corporation 2012 Stock Incentive and Award Plan (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K dated March 4, 2013)*
|
|
10-g-3
|
|
Nordson Corporation 2012 Stock Incentive and Award Plan, Form of Notice of Award
(as amended November 24, 2014)*
|
|
10-g-4
|
|
Nordson Corporation 2012 Stock Incentive and Award Plan, Form of Notice of Award (as amended November 24, 2014)*
|
|
10-g-5
|
|
Nordson Corporation 2012 Stock Incentive and Award Plan, Directors’ Deferred Compensation Sub-Plan (incorporated herein by reference to Exhibit 10-g -5 to Registrant’s
Annual Report on Form 10-K for the year ended October 31, 2013)*
|
|
10-g-6
|
|
Nordson Corporation 2012 Stock Incentive and Award Plan, Directors’ Deferred Compensation Sub-Plan, Form of Notice of Award (incorporated herein by reference to Exhibit 10-g-6
to Registrant’s Annual Report on Form 10-K for the year ended October 31, 2013)*
|
|
10-h
|
|
Assurance Trust Agreement between Nordson Corporation and Key Trust Company of Ohio, N.A. amended and restated as of January 22, 2014 (incorporated herein by reference to Exhibit
10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2014)
|
|
10-h-1
|
|
Form of Change in Control Retention Agreement between the Registrant and Executive Officers*
|
|
10-i
|
|
Compensation Committee Rules of the Nordson Corporation 2004 Long Term Performance Plan governing directors’ deferred compensation (incorporated herein by reference to Exhibit
10-i to Registrant’s Annual Report on Form 10-K for the year ended October 31, 2010)*
|
|
10-j
|
|
Compensation Committee Rules of the Nordson Corporation Amended and Restated Nordson Corporation 2004 Long Term Performance Plan governing directors’ deferred compensation
(incorporated herein by reference to Exhibit 10-j to Registrant’s Annual Report on Form 10-K for the year ended October 31, 2010)*
|
|
10-m
|
|
Employment Agreement between Registrant and Michael F. Hilton (incorporated herein by reference to Exhibit 99.3 to Registrant’s Form 8-K dated December 21,
2009)*
|
82
Index to Exhibits
—
Continued
|
|
|
|
|
Exhibit
Number
|
|
Description
|
|
10-n
|
|
Employment Agreement (Change in Control Retention Agreement) between Registrant and Michael F. Hilton (incorporated herein by reference to Exhibit 99.4 to Registrant’s Form 8-K
dated December 21, 2009)*
|
|
10-o
|
|
Supplemental Retirement Agreement between the Registrant and Michael F. Hilton (incorporated herein by reference to Exhibit 10-o to Registrant’s Annual Report on Form 10-K for
the year ended October 31, 2010)*
|
|
10-p
|
|
Stock Purchase Agreement by and among VP Acquisition Holdings, Inc., the Stockholders of VP Acquisition Holdings, Inc., the Optionholders of VP Acquisition Holdings, Inc., American
Capital, Ltd., as Securityholder Representative, and Nordson Corporation dated as of July 15, 2011 (incorporated herein by reference to Exhibit 4.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31,
2011)
|
|
10-q
|
|
Stock Purchase Agreement Dated May 18, 2012 by and among Nordson Corporation and Bertram Growth Capital I, Bertram Growth Capital II, Bertram Growth Capital II-A, and EDI Holdings,
Inc. (incorporated herein by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form
10-Q
for the quarter ended July 31, 2012)
|
|
10-r
|
|
Agreement and Plan of Merger by and among Xaloy Superior Holdings, Inc., Nordson Corporation, Buckeye Merger Corp. and Sellers’ Representative dated as of June 2, 2012
(incorporated herein by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2012)
|
|
10-s
|
|
Sale and Purchase Agreement dated July 16, 2013 relating to Kreyenborg and BKG between Mr. Jan-Udo Kreyenborg, Kreyenborg Verwaltungen und Beteiligungen GmbH & Co. KG,
Kreyenborg Verwaltungs-GmbH and Nordson Corporation (incorporated herein by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2013)
|
|
10-t
|
|
Agreement and Primary Release of Claims dated June 24, 2014 between Registrant and Peter G. Lambert (incorporated herein by reference to Exhibit 10.1 to Registrant’s Quarterly
Report on Form 10-Q for the quarter ended July 31, 2014)
|
|
10-u
|
|
Agreement and Plan of Merger by and among Avalon Laboratories Holding Corp., Nordson Medical Corporation, Arriba Merger Corp., American Capital Equity III, LP, as
Securityholders’ Representative and for the limited purposes set forth herein, Nordson Corporation, dated as of August 1, 2014 (incorporated herein by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter
ended July 31, 2014)
|
|
(21)
|
|
Subsidiaries of the Registrant
|
|
(23)
|
|
Consent of Independent Registered Public Accounting Firm
|
|
31.1
|
|
Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 by the Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
|
Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 by the Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
32.1
|
|
Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
32.2
|
|
Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
99-a
|
|
Form S-8 Undertakings (Nos. 33-18309 and 33-33481)
|
83
Index to Exhibits
—
Continued
|
|
|
|
|
Exhibit
Number
|
|
Description
|
|
101
|
|
The following financial information from Nordson Corporation’s Annual Report on Form 10-K for the year ended October 31, 2014, formatted in Extensible Business Reporting
Language (XBRL): (i) the Consolidated Statements of Income for the years ended October 31, 2014, 2013 and 2012, (ii) the Consolidated Statements of Comprehensive Income for the years ended October 31, 2014, 2013 and 2012
(iii) the Consolidated Balance Sheets at October 31, 2014 and 2013, (iv) the Consolidated Statements of Changes in Shareholders’ Equity for the years ended October 31, 2014, 2013 and 2012, (v) the Consolidated
Statements of Cash Flows for the years ended October 31, 2014, 2013 and 2012, and (vi) Notes to Consolidated Financial Statements.
|
*Indicates management contract or compensatory plan, contract or arrangement in which one or more directors and/or
executive officers of Nordson Corporation may be participants.
84
Exhibit 10-b-2
NORDSON CORPORATION
2005 DEFERRED COMPENSATION PLAN
Effective January 1, 2005
(As Amended and Restated Effective January 1, 2009)
Purpose
The
purpose of this 2005 Deferred Compensation Plan, established effective as of January 1, 2005 and amended and restated effective January 1, 2009, is to provide specified benefits to a select group of management and highly compensated
Employees who contribute materially to the continued growth, development, and future business success of Nordson Corporation, and its subsidiaries, if any, that sponsor this Plan. This Plan shall be unfunded for tax purposes and for purposes of
Title I of ERISA. This Plan applies to compensation earned, deferred, or vested on and after January 1, 2005; the Nordson Corporation Deferred Compensation Plan, dated November 3, 2000, as amended on January 22, 2003, and as in effect
on October 3, 2004 (the “2000 Plan”), applies to compensation earned, deferred, and vested on or before December 31, 2004. No provisions of this Plan shall alter, affect, or amend any provisions of the 2000 Plan applicable to
compensation earned, deferred, and vested on or before December 31, 2004.
ARTICLE 1
Definitions
For
purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings:
|
1.1
|
“Account Balance” shall mean, with respect to a Participant, a credit on the records of the Company equal to the sum of (i) the Deferral Account balance, (ii) the LTIP Deferral Account balance,
(iii) the vested Company Contribution Account balance, and (iv) the Unilateral Committee Contribution Account balance. The Account Balance, and each other specified account balance, shall be a bookkeeping entry only and shall be utilized
solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan.
|
|
1.2
|
“Annual Company Contribution Amount” shall mean, for any one Plan Year, the amount determined in accordance with Section 3.5.
|
|
1.3
|
“Annual Installment Method” shall be an annual installment payment over the number of years selected by the Participant in accordance with
this Plan, calculated as follows: (i) for the first annual installment, the vested Account Balance of the Participant shall be calculated as of the close of business on (a) the last business day of the Plan Year in which the Participant
Retires or is deemed to have Retired in accordance with Section 8.1, or (b) the date on which the Participant experiences a Separation from Service or is deemed to
|
-1-
|
|
have experienced a Separation from Service in accordance with Section 8.1, and (ii) for remaining annual installments, the vested Account Balance of the Participant shall be calculated
on every applicable anniversary of (a) the last business day of the Plan Year in which the Participant Retires or is deemed to have Retired in accordance with Section 8.1, or (b) the date on which the Participant experiences a
Separation from Service or is deemed to have experienced a Separation from Service in accordance with Section 8.1. Each annual installment shall be calculated by multiplying this balance by a fraction, the numerator of which is one and the
denominator of which is the remaining number of annual payments due the Participant. By way of example, if the Participant elects a ten (10) year Annual Installment Method, the first payment shall be 1/10 of the vested Account Balance,
calculated as described in this definition. The following year, the payment shall be 1/9 of the vested Account Balance, calculated as described in this definition.
|
|
1.4
|
“Base Salary” shall mean the annual cash compensation relating to services performed during any calendar year, whether or not paid in such calendar year or included on the Federal Income Tax Form
W-2
for such calendar year, excluding cash or stock-based incentive payments (whether discretionary or paid pursuant to a written plan) commissions, overtime, fringe benefits, stock options, relocation expenses,
non-monetary awards, fees, automobile and other allowances paid to a Participant for employment services rendered (whether or not such allowances are included in the Employee’s gross income). Base Salary shall be calculated before reduction for
compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or
non-qualified
plans of any Employer and shall be calculated to include amounts not otherwise included in the
Participant’s gross income under Sections 125, 402(e)(3), 402(h), or 403(b) of the Code pursuant to plans established by any Employer; provided, however, that all such amounts will be included in compensation only to the extent that, had there
been no such plan, the amount would have been payable in cash to the Employee.
|
|
1.5
|
“Beneficiary” shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 9, that are entitled to receive benefits under this Plan upon the death of a
Participant.
|
|
1.6
|
“Beneficiary Designation Form” shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee or its designee to designate one or more
Beneficiaries.
|
|
1.7
|
“Board” shall mean the board of directors of the Company.
|
|
1.8
|
“Bonus” shall mean any compensation relating to services performed during any calendar year(s), whether or not paid in a calendar year or included on the Federal Income Tax Form
W-2
for a calendar year, payable to a Participant as an Employee under any Employer’s written incentive compensation plans, excluding stock options, and restricted or performance stock.
|
-2-
|
1.9
|
“Change in Control” shall mean an event described below occurring at any time after the date of the adoption of this Plan:
|
(i) a report is filed with the Securities and Exchange Commission (the “SEC”) on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form, or report), each as promulgated pursuant to the Securities Exchange Act of 1934, disclosing that any “person” (as the term “person” is used in Section 13(d) or Section 14(d)(2) of the
Securities Exchange Act of 1934) is or has become a beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding securities;
(ii) The Company files a report or proxy statement with the SEC pursuant to the Securities Exchange Act of 1934 disclosing that
a Change in Control of the Company has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction;
(iii) The Company is merged or consolidated with another corporation and, as a result thereof, securities representing less
than 50% of the combined voting power of the surviving or resulting corporation’s securities (or the securities of a parent corporation in case of a merger in which the surviving or resulting corporation becomes a wholly-owned subsidiary of the
parent corporation) are owned in the aggregate by holders of the Company’s securities immediately before such merger or consolidation;
(iv) all or substantially all of the assets of the Company are sold in a single transaction or a series of related transactions
to a single purchaser or a group of affiliated purchasers; or
(v) during any period of 24 consecutive months, individuals
who were Directors of the Company at the beginning of the period cease to constitute at least a majority of the Board unless the election, or nomination for election by the Company’s shareholders, of more than one half of any new Directors of
the Company was approved by a vote of at least two-thirds of the Directors of the Company then still in office who were Directors of the Company at the beginning of the 24 month period.
|
1.10
|
“Claimant” shall have the meaning set forth in Section 14.1.
|
|
1.11
|
“Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.
|
|
1.12
|
“Committee” shall mean the Compensation Committee of the Board of Directors of the Company or its designee.
|
|
1.13
|
“Company” shall mean Nordson Corporation, an Ohio corporation its corporate successors, the surviving corporation resulting from any merger of the Company and any other corporation or corporations and any
successor to all or substantially all of the Company’s assets or business.
|
|
1.14
|
“Company Contribution Account” shall mean (i) the sum of the Participant’s Annual Company Contribution Amounts, plus
(ii) amounts credited in accordance with all the
|
-3-
|
|
applicable crediting provisions of this Plan that relate to the Participant’s Company Contribution Account, less (iii) all distributions made to the Participant or his or her
Beneficiary pursuant to this Plan that relate to the Participant’s Company Contribution Account.
|
|
1.15
|
“Deduction Limitation” shall mean the following described limitation on a benefit that may otherwise be distributable pursuant to the provisions of this Plan. Except as otherwise provided, this limitation
shall be applied to all distributions that are “subject to the Deduction Limitation” under this Plan. If an Employer determines in good faith prior to a Change in Control that there is a reasonable likelihood that any compensation paid to
a Participant for a taxable year of the Employer would not be deductible by the Employer solely by reason of the limitation under Section 162(m) of the Code, then to the extent deemed necessary by the Employer to ensure that the entire amount
of any distribution to the Participant pursuant to this Plan prior to a Change in Control is deductible, the Employer may defer all or any portion of a distribution under this Plan. Any amounts deferred pursuant to this limitation shall continue to
be credited/debited with additional amounts in accordance with Section 3.9 below, even if such amount is being paid out in installments. The amounts so deferred and amounts credited thereon shall be distributed to the Participant or his or her
Beneficiary (in the event of the Participant’s death) during the Participant’s first taxable year in which the Employer reasonably anticipates, or should reasonably anticipate, that if payment is made during such year, the deduction of
such payment will not be barred by the application of Section 162(m) of the Code or during the period beginning with the date of the Participant’s Separation from Service and ending on the later of the last day of the taxable year of the
Employer in which the Participant has a Separation from Service or the 15th day of the 3rd month following the Participant’s Separation from Service; provided however that where any scheduled payment to a particular Participant in the
Employer’s taxable year is delayed, the delay in payment will be treated as a subsequent deferral election (in accordance with Section 4.1 or 5.4) unless all scheduled payments to that Participant that could be delayed are so delayed; and
provided further however, that where the payment is delayed to a date on or after the Participant’s Separation from Service, the payment will be considered a payment upon a Separation from Service and for purposes of a Specified Employee,
subject to a six month delay (as described in Section 5.5 or 7.3). Notwithstanding anything to the contrary in this Plan, the Deduction Limitation shall not apply to any distributions made after a Change in Control.
|
|
1.16
|
“Deferral Account” shall mean (i) the sum of all of a Participant’s Deferral Amounts, plus (ii) amounts credited in accordance with all of the applicable crediting provisions of this Plan that
relate to the Participant’s Deferral Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to his or her Deferral Account.
|
|
1.17
|
“Deferral Amount” shall mean that portion of a Participant’s Base Salary and Bonus that a Participant elects to have, and is deferred, in accordance with Article 3, for any one Plan Year. In the
event of a Participant’s Retirement, Disability, death or a Separation from Service prior to the end of a Plan Year, such year’s Deferral Amount shall be the actual amount withheld prior to such event.
|
-4-
|
1.18
|
“Disability” shall mean a period of disability during which a Participant (a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (b) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or
can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Participant’s Employer.
|
|
1.19
|
“Disability Benefit” shall mean the benefit set forth in Article 8.
|
|
1.20
|
“Election Form” shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan.
|
|
1.21
|
“Employee” shall mean a person who is an employee of any Employer.
|
|
1.22
|
“Employer(s)” shall mean the Company and any of its subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Committee to participate in the Plan and have adopted the Plan
as a sponsor.
|
|
1.23
|
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.
|
|
1.24
|
“Excess Cash Compensation” shall mean, for any Plan Year, that portion of a Participant’s cash compensation relating to services performed during any Plan Year, including, without limitation, Base Salary,
Bonus or payments from any incentive plan (whether in cash or in kind), that the Committee, in its sole discretion, determines is in excess of the amount set forth in Section 162(m)(1) of the Code. For purposes of this Section 1.24, a
Participant’s cash compensation: (i) shall be calculated after reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or
non-qualified
plans of
any Employer and any amounts not otherwise included in the Participant’s gross income under Sections 125, 402(e)(3), 402(h), or 403(b) of the Code pursuant to plans established by any Employer; and (ii) shall not include any distributions
from this Plan.
|
|
1.25
|
“Fair Market Value,” with respect to a Nordson Stock as of any given day, shall mean the last reported closing price for a common share on the National Association of Securities Dealers Automated Quotation
System (“NASDAQ”) for that day or, if there was no sale of common shares so reported for that day, on the most recently preceding day on which there was such a sale. If Nordson Stock is not listed or admitted to trading on NASDAQ on any
given day, the Fair Market Value on that day will be as determined by the Committee.
|
|
1.26
|
“LTIP Deferral Account” shall mean (i) the sum of all of a Participant’s LTIP Deferral Amounts, plus (ii) amounts credited in
accordance with all of the applicable crediting
|
-5-
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|
provisions of this Plan that relate to the Participant’s LTIP Deferral Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that
relate to his or her LTIP Deferral Account.
|
|
1.27
|
“LTIP Deferral Amount” shall mean that portion of any LTIP Payment that a Participant elects to have, and is deferred, in accordance with Article 3A for any one Plan Year.
|
|
1.28
|
“LTIP Payment” shall mean the amount that would otherwise be payable to a Participant for a Plan Year under the Nordson Corporation 2004 Long-Term Performance Plan (or any successor plan thereto).
|
|
1.29
|
“NEST” shall mean the Nordson Corporation Employees’ Savings Trust Plan.
|
|
1.30
|
“Nordson Stock” shall mean the common shares of the Company or any other equity securities of the Company designated by the Committee.
|
|
1.31
|
“Participant” shall mean any Employee (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs an Election Form and a Beneficiary Designation
Form, (iv) whose signed Election Form and Beneficiary Designation Form are accepted by the Committee, and (v) who commences participation in the Plan. A spouse or former spouse of a Participant shall not be treated as a Participant in the
Plan or have an account balance under the Plan, even if he or she has an interest in the Participant’s benefits under the Plan as a result of applicable law or property settlements resulting from legal separation or divorce.
|
|
1.32
|
“Plan” shall mean the Nordson Corporation 2005 Deferred Compensation Plan, as amended and restated effective January 1, 2009 and as further amended from time to time.
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|
1.33
|
“Plan Year” shall mean a period beginning on January 1 of each calendar year and continuing through December 31 of such calendar year.
|
|
1.34
|
“Pre-Retirement Survivor Benefit” shall mean the benefit set forth in Article 6.
|
|
1.35
|
“Retirement”, “Retire(s)” or “Retired” shall mean, with respect to an Employee, Separation from Service for any reason other than death or Disability on or after the attainment of age
fifty-five (55).
|
|
1.36
|
“Retirement Benefit” shall mean the benefit set forth in Article 5.
|
|
1.37
|
“Separation from Service” shall have the meaning set forth in Section 1.409A-1(h) of the Treasury Regulations; provided that in
applying Section 1.409A-1(h)(1)(ii) of the Treasury Regulations, a Separation from Service shall be deemed to occur if the Participant’s Employer and the Participant reasonably anticipate that the level of bona fide services the
Participant will perform for the Employers (whether as an employee or as an independent contractor) will permanently decrease to less than 50% of the average level of bona fide services performed by the Participant for the Employers (whether as an
Employee or as an independent contractor) over the immediately preceding 36-month period (or the full
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-6-
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|
period of services performed for the Employers if the Participant has been providing services to the Employers for less than 36 months). In the event of a disposition of assets by the Company to
an unrelated person, the Company reserves the discretion to specify (in accordance with Section 1.409A-1(h)(4) of the Treasury Regulations) whether a Participant who would otherwise experience a Separation from Service with the Company and the
Employers as part of the disposition of assets will be considered to experience a Separation from Service for purposes of Section 1.409A-1(h) of the Treasury Regulations.
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|
1.38
|
“Termination Benefit” shall mean the benefit set forth in Article 7.
|
|
1.39
|
“Trust” shall mean one or more rabbi trusts established by the Company or an Employer in accordance with Article 15 of this Plan as amended from time to time.
|
|
1.40
|
“Unforeseeable Financial Emergency” shall mean a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined
in Section 152(a) of the Code) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.
|
|
1.41
|
“Unilateral Committee Contribution Account” shall mean: (i) the sum of all of the Participant’s Unilateral Committee Contribution Amounts, plus (ii) amounts credited in accordance with all of
the applicable crediting provisions of this Plan that relate to the Participant’s Unilateral Committee Contribution Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate
to his or her Unilateral Committee Contribution Account.
|
|
1.42
|
“Unilateral Committee Contribution Amount” shall mean, for any one Plan Year, the amount determined in accordance with Section 3.6.
|
ARTICLE 2
Selection,
Enrollment, Eligibility
|
2.1
|
Selection by Committee
. Participation in the Plan shall be limited to those employees of an Employer who (i) are officers or key employees of an Employer, (ii) received, or would have received
but for an election to defer compensation under this Plan and any other plan of the Company, from the Employer aggregate cash compensation for the prior Plan Year (or calendar year for purposes of the initial Plan Year) of not less than $100,000, or
such higher amount as the Committee may decide from time to time, and (iii) are, upon recommendation of the President and Chief Executive Officer of the Company, approved for such participation by the Committee, in its sole discretion.
|
|
2.2
|
Enrollment Requirements
. As a condition to participation, each selected Employee shall complete, execute and return to the Committee, an Election Form and a Beneficiary Designation Form, all within 30 days
(or such shorter time as the Committee may determine) after he or she is selected to participate in the Plan. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines in its sole discretion are
necessary.
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-7-
|
2.3
|
Eligibility; Commencement of Participation
. Provided an Employee selected to participate in the Plan has met all enrollment requirements set forth in this Plan and required by the Committee, including
returning all required documents to the Committee within thirty (30) days (or such shorter time as the Committee may determine) after he or she is selected to participate in the Plan, that Employee shall commence participation in the Plan on
the first day of the month following the month in which the Employee completes all enrollment requirements. If an Employee fails to meet all such requirements within the period required, that Employee shall not be eligible to participate in the Plan
until the first day of the Plan Year following the delivery to and acceptance by the Committee of the required documents.
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|
2.4
|
Termination of Participation and/or Deferrals
. If the Committee determines in good faith that a Participant no longer qualifies as a member of a select group of management or highly compensated employees,
as membership in such group is determined in accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, the Committee shall have the right, in its sole discretion, to prevent the Participant from making future deferral elections.
|
ARTICLE 3
Deferral Commitments/Company Matching/Crediting/Taxes
|
|
(a)
|
Base Salary and Bonus
. For each Plan Year, a Participant may elect to defer, as his or her Deferral Amount, a minimum of at least Five Thousand dollars ($5,000) between his Base Salary and Bonus. If an
election is made for less than the stated minimum amounts, or if no election is made, the amount deferred shall be zero.
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|
|
(b)
|
Short Plan Year
. Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, or in the case of the first Plan Year of the Plan itself, the minimum Base
Salary and Bonus deferral shall be an amount equal to the minimum set forth above, multiplied by a fraction, the numerator of which is the number of complete months remaining in the Plan Year and the denominator of which is 12.
|
|
|
(a)
|
Base Salary and Bonus
. For each Plan Year, a Participant may elect to defer, as his or her Deferral Amount, Base Salary and/or Bonus up to the following maximum percentages for each deferral elected:
|
|
|
|
|
|
|
|
Deferral
|
|
Maximum
Percentage
|
|
|
Base Salary
|
|
|
100
|
%
|
|
Bonus
|
|
|
100
|
%
|
-8-
|
|
(b)
|
Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, or in the case of the first Plan Year of the Plan itself, the maximum Deferral Amount, with respect to Base
Salary shall be 100% of Base Salary paid for services to be performed after the date the Participant submits an Election Form to the Committee for acceptance and the maximum Deferral Amount with respect to Bonus shall be 100% of Bonus paid for
services performed after the date the Participant submits an Election Form to the Committee for acceptance.
|
|
3.3
|
Election to Defer; Effect of Election Form
.
|
|
|
(a)
|
First Plan Year
. In connection with a Participant’s commencement of participation in the Plan, the Participant shall make an irrevocable deferral election for the Plan Year in which the Participant
commences participation in the Plan, along with such other elections as the Committee deems necessary or desirable under the Plan. For these elections to be valid, the Election Form must be completed and signed by the Participant, timely delivered
to the Committee (in accordance with Section 2.2 above) and accepted by the Committee.
|
|
|
(b)
|
Subsequent Plan Years
. For each succeeding Plan Year, an irrevocable deferral election for that Plan Year, and such other elections as the Committee deems necessary or desirable under the Plan, shall be
made by timely delivering to the Committee, in accordance with its rules and procedures, before the end of the Plan Year preceding the Plan Year for which the election is made, or at such other time as the Committee may determine from time to time,
a new Election Form. If no such Election Form is timely delivered for a Plan Year, the Deferral Amount shall be zero for that Plan Year.
|
|
3.4
|
Withholding of Deferral Amounts
. For each Plan Year, the Base Salary portion of the Deferral Amount shall be withheld from each regularly scheduled Base Salary payroll in equal amounts, as adjusted from
time to time for increases and decreases in Base Salary. The Bonus portion of the Deferral Amount shall be withheld at the time the Bonus is or otherwise would be paid to the Participant, whether or not this occurs during the Plan Year itself.
|
|
3.5
|
Annual Company Contribution Amount
. For each Plan Year, the Committee, in its sole discretion, may, but is not required to, credit any
amount it desires to any Participant’s Company Contribution Account under this Plan, which amount shall equal any Annual Company Contribution Amount for that Participant for that Plan Year. The amount so credited to a Participant may be smaller
or larger than the amount credited to any other Participant, and the amount credited to any Participant for a Plan Year may be zero, even
|
-9-
|
|
though one or more other Participants receive an Annual Company Contribution Amount for that Plan Year. The Annual Company Contribution Amount described in this Section 3.5, if any, shall be
credited on a date or dates to be determined by the Committee, in its sole discretion.
|
|
3.6
|
Unilateral Committee Contribution Amount
. For each Plan Year, the Committee, in its sole discretion, may, but is not required to, credit any amount, including any Excess Cash Compensation, to a
Participant’s Unilateral Committee Contribution Account under this Plan, which amount shall be the Participant’s Unilateral Committee Contribution Amount for that Plan Year. The amount so credited to a Participant may be smaller or larger
than the amount credited to any other Participant, and the amount credited to any Participant for a Plan Year may be zero, even though one or more other Participants receive a Unilateral Committee Contribution Amount for that Plan Year. The
Unilateral Committee Contribution Amount described in this Section 3.6, if any, shall be credited on a date or dates to be determined by the Committee, in its sole discretion.
|
|
3.7
|
Investment of Trust Assets
. The Trustee of the Trust shall be authorized, upon written instructions received from the Committee or investment manager appointed by the Committee, to invest and reinvest the
assets of the Trust in accordance with the applicable Trust Agreement, including the disposition of Nordson Stock and reinvestment of the proceeds in one or more investment vehicles designated by the Committee.
|
|
|
(a)
|
A Participant shall at all times be 100% vested in his or her Deferral Account, LTIP Deferral Account and Unilateral Committee Contribution Account. A Participant shall vest in his or her Company Contribution Account in
accordance with the same vesting schedule as set forth in the NEST.
|
|
|
(b)
|
Notwithstanding anything to the contrary contained in this Section 3.8, in the event of a Change in Control, a Participant’s Company Contribution Account shall immediately become 100% vested (if it is not
already vested in accordance with the above vesting schedules).
|
|
|
(c)
|
Notwithstanding subsection (a), the vesting schedule for a Participant’s Company Contribution Account shall not be accelerated to the extent that the Committee determines that such acceleration would cause the
deduction limitations of Section 280G of the Code to become effective. In the event that all of a Participant’s Company Contribution Account is not vested pursuant to such a determination, the Participant may request independent
verification of the Committee’s calculations with respect to the application of Section 280G of the Code. In such case, the Committee must provide to the Participant within 15 business days of such a request an opinion from a nationally
recognized accounting firm selected by the Participant (the “Accounting Firm”). If the Accounting Firm’s opinion is in agreement with the Committee’s determination, the opinion shall state that any limitation in the vested
percentage hereunder is necessary to avoid the limits of Section 280G of the Code and contain supporting calculations. The cost of such opinion shall be paid for by the Company.
|
-10-
|
3.9
|
Crediting/Debiting of Account Balances
. In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole discretion, amounts shall be
credited or debited to a Participant’s Account Balance in accordance with the following rules:
|
|
|
(a)
|
Allocation of Deferrals
. A Participant, in connection with his or her deferral election made in accordance with Section 3.3(a) or 3.3(b) above, shall elect, on the Election Form, one or more
Measurement Fund(s) (as described in Section 3.9(c) below) (other than the Nordson Stock Measurement Fund) to be used to determine the additional amounts to be credited to his or her Account Balance for each business day thereof in which the
Participant commences participation in the Plan and continuing thereafter for each subsequent business day in which the Participant participates in the Plan. Thereafter, the Participant may (but is not required to) elect, either by submitting an
Election Form to the Committee that is accepted by the Committee or through any other manner approved by the Committee, to (i) add or delete one or more Measurement Fund(s) (excluding the Nordson Stock Measurement Fund) to be used to determine
the additional amounts to be credited to his or her Account Balance, or (ii) add or delete one or more Measurement Fund(s), including the Nordson Stock Measurement Funds, to be used to change the portion of his or her Account Balance allocated
to each previously elected Measurement Fund, all in a manner permitted by the Committee. Notwithstanding the foregoing, however, any election made in accordance with this Section 3.9(a) to re-allocate any portion of his Deferral Amount to the
Nordson Stock Measurement Fund shall not be effective unless such election is completed during a window period, as specified by the Committee, during which the Participant is not in possession of any non-public material information.
|
|
|
(b)
|
Proportionate Allocation
. In making any election described in Section 3.9(a) above, the Participant shall specify on the Election Form, in increments of five percentage points (5%), the percentage of
his or her Account Balance to be allocated to a Measurement Fund (as if the Participant was making an investment in that Measurement Fund with that portion of his or her Account Balance).
|
|
|
(c)
|
Measurement Funds
. For the purpose of determining amounts to be crediting or debited to the Participant’s Account Balance in accordance with this Article 3, reference shall be made to pre-determined
actual investments (each a “Measurement Fund”). The Committee may, in its sole discretion, discontinue, substitute or add a Measurement Fund(s), and shall maintain appropriate accounts with respect to each. Each such action will take
effect seven (7) days following the day on which the Committee gives Participants advance written notice of such change, provided, however, that prior to such date the prior restrictions of the Plan apply.
|
-11-
The following funds shall be Measurement Funds under the Plan:
|
|
•
|
|
International Equity Index
|
|
|
•
|
|
Investment Contract Fund
|
|
|
•
|
|
Nordson Stock Measurement Fund
|
Amounts deferred or transferred by a Participant to the
Nordson Stock Measurement Fund shall be in the form of stock equivalent units (hereinafter referred to as “Stock Equivalent Units”), the number of which shall be determined by dividing the amount so deferred or transferred by the Fair
Market Value of Nordson Stock at the time the Participant’s compensation would otherwise have been paid to the Participant or the transfer is otherwise made, as the case may be. Dividends on the Stock Equivalent Units credited to a
Participant’s Nordson Stock Measurement Fund account shall be credited to the Participant’s Nordson Stock Measurement Fund account in the form of additional Stock Equivalent Units, based on the Fair Market Value of Nordson Stock on the
date the dividend is otherwise payable.
|
|
(d)
|
Crediting or Debiting Method
. The performance of each elected Measurement Fund (either positive or negative) will be determined by the
Committee, in its reasonable discretion, based on the performance of the Measurement Funds themselves. A Participant’s Account Balance (whether or not vested, for purposes of making the adjustments described in this Section 3.9(d)) shall
be credited or debited on a schedule as determined by the Committee in its sole discretion, as though (i) a Participant’s Account Balance were invested in the Measurement Fund(s) selected by the Participant, in the percentages applicable
to such business day, as of the close of business on the business day, at the closing price on such date; (ii) the portion of the Deferral Amount that was actually deferred during any business day were invested in the Measurement Fund(s)
selected by the Participant, in the percentages applicable to such business day, no later than the close of business on that business day after the day on which such amounts are actually deferred from the Participant’s Base Salary or Bonus
through reductions in his or her payroll, at the closing price on such date; and (iii) any distribution made to a Participant that decreases such Participant’s Account Balance ceased being invested in the Measurement Fund(s), in the
percentages applicable to such business day, no earlier than one business day prior to the distribution, at the closing price on such
|
-12-
|
|
date. The Participant’s Company Contributions Amount shall be credited to his or her Company Contribution Account for purposes of this Section 3.9(d) as of the date(s) determined by the
Company, in its sole discretion. The Participant’s Unilateral Committee Contribution Amount shall be credited to his or her Unilateral Committee Contribution Account for purposes of this Section 3.9(d) as of the date(s) determined by the
Company, in its sole discretion. Notwithstanding the foregoing, in the case of the Nordson Stock Measurement Fund, adjustments shall be made each day to the portion of a Participant’s Account Balance which is expressed in Stock Equivalent Units
to reflect as of that date the number of additional Stock Equivalent Units resulting from additional deferrals allocated by the Participant to the Nordson Stock Measurement Fund, transfer allocations by the Participant to the Nordson Stock
Measurement Fund, dividend credits to the Nordson Stock Measurement Fund, and distributions to the Participant that decrease the portion of such Participant’s Account Balance reflected by Stock Equivalent Units.
|
|
|
(e)
|
No Actual Investment
. Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only, and a Participant’s
election of any such Measurement Fund, the allocation to his or her Account Balance thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant’s Account Balance shall not be considered or
construed in any manner as an actual investment of his or her Account Balance in any such Measurement Fund. In the event that the Company or the trustee of the Trust, in its own discretion, decides to invest funds in any or all of the Measurement
Funds, no Participant shall have any rights in or to such investments themselves. Without limiting the foregoing, a Participant’s Account Balance shall at all times be a bookkeeping entry only and shall not represent any investment made on his
or her behalf by the Company or the Trust; the Participant shall at all times remain an unsecured creditor of the Company.
|
|
|
(f)
|
Special Rules for Nordson Stock Measurement Fund
. Notwithstanding any provision of this Plan that may be construed to the contrary, an election to allocate deferrals to the Nordson Stock Measurement Fund
may not be revoked and any amounts allocated to the Nordson Stock Measurement Fund by a Participant can never be reallocated to any other Measurement Fund(s) in this Plan.
|
Moreover, no distribution of amounts allocated to the Nordson Stock Measurement Fund shall be made other than (i) on a fixed date more
than six months following the date of the Participant’s election with respect to Deferral Amounts originally allocated to the Nordson Stock Measurement Fund, (ii) at the time and in the form of payment specified by the Participant with
respect to any Deferral Amount previously allocated to another Measurement Fund, but in no event earlier than six months and one day after the date of the Participant’s election with respect to Deferral Amounts originally allocated to another
Measurement Fund or (iii) automatically on an earlier date pursuant to the Plan on the Participant’s death, Disability while eligible to Retire, Retirement, or Separation from Service,
-13-
provided that in the event of Separation from Service other than due to Retirement, death or Disability, such amount shall be paid in a lump sum, notwithstanding the provisions of
Section 7.2. Accordingly, the provisions of Sections 4.3 shall not be applicable to any portion of the Participant’s Account Balance allocated to the Nordson Stock Measurement Fund, nor shall the provisions of Section 8.1 of this
Plan be applicable to any portion of the Participant’s Account Balance allocated to the Nordson Stock Measurement Fund in the case of a Participant suffering a Disability prior to the date he is eligible to Retire.
Finally, when distribution is to be made of amounts allocated to the Nordson Stock Measurement Fund, Stock Equivalent Units credited to the
Participant’s Account Balance shall be converted to the same number of Shares of Nordson Stock for distribution to the Participant. Except in the case of a fractional Stock Equivalent Unit, which shall be paid in cash, all distributions from
the Nordson Stock Measurement Fund shall be made only in the form of Nordson Stock.
|
3.10
|
FICA and Other Taxes
.
|
|
|
(a)
|
Deferral Amounts
. For each Plan Year in which a Deferral Amount is being withheld from a Participant, the Participant’s Employer(s) shall withhold from that portion of the Participant’s Base
Salary and Bonus that is not being deferred, in a manner determined by the Employer(s), the Participant’s share of FICA and other employment taxes on such Deferral Amount. If necessary, the Committee may reduce the Deferral Amount in order to
comply with this Section 3.10.
|
|
|
(b)
|
Company Contribution Amounts
. When a Participant becomes vested in a portion of his or her Company Contribution Account, the Participant’s Employer(s) shall withhold from the Participant’s Base
Salary and/or Bonus that is not deferred, in a manner determined by the Employer(s), the Participant’s share of FICA and other employment taxes. If necessary, the Committee may reduce the vested portion of the Participant’s Company
Contribution Account in order to comply with this Section 3.10.
|
|
|
(c)
|
Unilateral Committee Contribution Amounts
. When the Participant’s Employer(s) credits a Unilateral Committee Contribution Amount to a Participant’s Unilateral Committee Contribution Account, the
Participant’s Employer(s) shall withhold from the Participant’s Base Salary and/or Bonus that is not deferred, in a manner determined by the Employer(s), the Participant’s share of FICA and other employment taxes. If necessary, the
Committee may reduce the Participant’s Unilateral Committee Contribution Amount in order to comply with this Section 3.10.
|
|
3.11
|
Distributions
. The Participant’s Employer, or the trustee of the Trust, shall withhold from any payments made to a Participant under this Plan all federal, state and local income, employment and other
taxes required to be withheld by the Employer, or the trustee of the Trust, in connection with such payments, in amounts and in a manner to be determined in the sole discretion of the Employer and the trustee of the Trust.
|
-14-
ARTICLE 3A
LTIP Deferral Commitments/Crediting/Taxes
|
3A.1
|
LTIP Deferrals
. For each Plan Year, a Participant may elect to defer, as his or her LTIP Deferral Amount, an amount equal to a specified dollar amount or a specified percentage of the LTIP Payment that may
be payable to the Participant during such Plan Year. Such election must be made on an Election Form no later than the earlier of (a) six months before the end of the performance period to which the LTIP Payment relates or (b) the date of
the Participant’s Separation from Service. For the election to be valid, the Election Form must be completed and signed by the Participant, timely delivered to the Committee (in accordance with Section 2.2 above) and accepted by the
Committee.
|
|
3A.2
|
Crediting/Debiting of LTIP Deferral Account Balances
. In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole discretion, a
Participant’s deferral election in accordance with Section 3A.1 shall be (a) an election to defer the LTIP Deferral Amount to the Nordson Stock Measurement Fund and (b) an election to have additional amounts credited to his or
her LTIP Deferral Account in accordance with Section 3.9 as if the Participant had elected the Nordson Stock Measurement Fund to be used to determine the additional amounts to be credited to his or her LTIP Deferral Account.
|
|
3A.3
|
FICA and Other Taxes
. On the Election Form completed in order to make an LTIP Deferral, the Participant shall elect to (i) have the amount of the LTIP Payment subject to the LTIP Deferral reduced by
the amount of FICA and other federal, state and local taxes due on the LTIP Payment thereby reducing the amount of the LTIP Deferral Amount by the sum of the FICA and other taxes due, (ii) if electing to defer less than 100% of the LTIP
Payment, have the amount of the LTIP Payment not subject to the LTIP Deferral reduced by the amount of FICA and other federal, state and local taxes due on the LTIP payment thereby authorizing deferral of the entire percentage of the LTIP Payment
elected, or (iii) pay the amount of FICA and other federal, state and local taxes due on the LTIP Payment to the Company via personal check on the date that the LTIP Payment would have otherwise been paid to the Participant thereby authorizing
deferral of the entire percentage of the LTIP Payment elected.
|
ARTICLE 4
Unforeseeable Financial Emergencies;
Withdrawal Election
|
4.1
|
Payout/Suspensions for Unforeseeable Financial Emergencies
. If the Participant experiences an Unforeseeable Financial Emergency, the
Participant may petition the Committee to receive a partial or full payout from the Plan. The payout shall not exceed the lesser of the Participant’s vested Account Balance, calculated as if such Participant were receiving a Termination
Benefit, or the amount reasonably needed to satisfy the
|
-15-
|
|
Unforeseeable Financial Emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the payout, after taking into account the extent to which such Unforeseeable Financial
Emergency is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent such liquidation would not itself cause severe financial hardship). If, subject to the
sole discretion of the Committee, the petition for a suspension and/or payout is approved, suspension shall take effect upon the date of approval and any payout shall be made within 60 days of the date of approval. The payment of any amount
under this Section 4.3 shall not be subject to the Deduction Limitation.
|
ARTICLE 5
Retirement Benefit
|
5.1
|
Retirement Benefit
. Subject to the Deduction Limitation, a Participant who Retires shall receive, as a Retirement Benefit, his or her vestd Account Balance.
|
|
5.2
|
Payment of Retirement Benefit
. A Participant, in connection with his or her commencement of participation in the Plan, shall elect on an Election Form to receive the Retirement Benefit in a lump sum or
pursuant to an Annual Installment Method of 5, 10 or 15 years. Notwithstanding the preceding sentence, if the sum of the Participant’s Account Balance under the Plan, the Participant’s benefit under the Nordson Corporation 2005 Excess
Defined Contribution Retirement Plan and the Participant’s benefit under any other nonqualified deferred Compensation arrangement that is aggregated with any portion of the Plan or the Nordson Corporation 2005 Excess Defined Contribution
Retirement Plan under Section 1.409A-1(e) of the Treasury Regulations as of the date payment would otherwise commence is less than or equal to the applicable dollar amount in effect on such date under Section 402(g)(1)(B) of the Code,
payment of his or her Retirement Benefit shall be paid in a lump sum on December 31 of the calendar year in which occurs the Participant’s Separation from Service. If a Participant does not make any election with respect to the payment of
the Retirement Benefit with respect to the Base Salary, Bonus or LTIP Payment deferred pursuant to a particular Election Form, the election with respect to payment of the Retirement Benefit on the most recent previously filed Election Form shall
govern, provided however that if a Participant fails to make any election with respect to the payment of the Retirement Benefit, then such benefit shall be payable in a lump sum. The lump sum payment shall be made, or installment payments shall
commence, no later than 60 days after the last day of the Plan Year during which the Participant Retires. Any payment made shall be subject to the Deduction Limitation.
|
|
5.3
|
Death Prior to Completion of Retirement Benefit
. If a Participant dies after Retirement but before the Retirement Benefit is paid in full, the Participant’s unpaid Retirement Benefit payments shall
continue and shall be paid to the Participant’s Beneficiary over the remaining number of years and in the same amounts as that benefit would have been paid to the Participant had the Participant survived. In the event of the death of the
Participant and all of the Participant’s Beneficiaries prior to payment in full of the Participant’s Retirement Benefit, any remaining Retirement Benefit shall be paid to the estate of the last to die of the Participant and the
Participant’s Beneficiaries.
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5.4
|
Change in Time or Form of Payment
. Notwithstanding the method of payment for the Retirement Benefit elected by a Participant pursuant to Section 5.2, the Participant may elect to change the time or
form of such payment at any time up to 12 months before the first scheduled payment; provided, however, that (a) any such election shall not be effective for at least 12 months following the date made; and (b) to the extent required by
Section 409A of the Code, as a result of any such change, payment or commencement of payment shall be delayed for 5 years from the date the first payment was scheduled to have been paid (taking into account any delay of commencement of payment
under Section 5.5 on account of a Participant’s status as a Specified Employee and any other delay in payment or commencement of payment on account of a Participant’s election to change the time and form of payment made on or after
January 1, 2009).
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The form of payment elected in a subsequent election must be a lump sum or an Annual Installment
Method of 5, 10, or 15 years.
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5.5
|
Limitation on Specified Employees
. Notwithstanding any other provision of the Plan to the contrary, the Retirement Benefit of a Specified Employee of the Company, shall not be paid or commence to be paid
until the date that is six months following the date of such Specified Employee’s Retirement. On the date that payment is made or payments commence, the Participant shall receive payment of any amounts that would have otherwise been paid during
the six month delay but for the application of this Section 5.5. For purposes of this Section 5.5 and Section 7.5, Specified Employees shall be determined as of any date in accordance with the Nordson Corporation Policy for
determining Specified Employees.
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ARTICLE 6
Pre-Retirement Survivor Benefit
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6.1
|
Pre-Retirement Survivor Benefit
. Subject to the Deduction Limitation, the Participant’s Beneficiary shall receive a Pre-Retirement Survivor Benefit equal to the Participant’s Account Balance if
the Participant dies before he or she Retires, experiences a Separation from Service or suffers a Disability.
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6.2
|
Payment of Pre-Retirement Survivor Benefit
. A Participant’s Beneficiary shall receive the Pre-Retirement Survivor Benefit in a lump sum. The lump sum payment shall be made no later than 60 days after
the last day of the Plan Year in which the Participant dies. Any payment made shall be subject to the Deduction Limitation.
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ARTICLE 7
Termination Benefit
|
7.1
|
Termination Benefit
. Subject to the Deduction Limitation, the Participant shall receive a Termination Benefit, which shall be equal to the Participant’s Account Balance if a Participant experiences a
Separation from Service prior to his or her Retirement, death or Disability.
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7.2
|
Payment of Termination Benefit
. If the sum of the Participant’s Account Balance under the Plan, the Participant’s benefit under the Nordson Corporation 2005 Excess Defined Contribution
Retirement Plan and the Participant’s benefit under any other nonqualified deferred compensation arrangement that is aggregated with any portion of the Plan or the Nordson Corporation 2005 Excess Defined Contribution Retirement Plan under
Section 1.409A-1(e) of the Treasury Regulations at the time of his or her Separation from Service is less than or equal to the applicable dollar amount in effect on such date under Section 402(g)(1)(B) of the Code, payment of his or her
Termination Benefit shall be paid in a lump sum on December 31 of the calendar year in which occurs the Participant’s Separation from Service. If his or her Account Balance at such time is equal to or greater than that amount, the
Termination Benefit shall be paid in a lump sum or pursuant to an Annual Installment Method of 5, 10 or 15 years as elected by the Participant for the payment of the Retirement Benefit with respect to such amount. The lump sum payment shall be made,
or installment payments shall commence, no later than 60 days after the Participant experiences the Separation from Service. Any payment made shall be subject to the Deduction Limitation.
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7.3
|
Death Prior to Completion of Termination Benefit
. If a Participant dies after Separation from Service but before the Termination Benefit is paid in full, the Participant’s unpaid Termination
Benefit payments shall continue and shall be paid to the Participant’s Beneficiary over the remaining number of years and in the same amounts as that benefit would have been paid to the Participant had the Participant survived. In the event of
the death of the Participant and all of the Participant’s Beneficiaries prior to payment in full of the Participant’s Termination Benefit, any remaining Termination Benefit shall be paid to the estate of the last to die of the Participant
and the Participant’s Beneficiaries.
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7.4
|
Limitation on Specified Employees
. Notwithstanding any other provision of the Plan to the contrary, the Termination Benefit of a Specified Employee of the Company, shall not be paid or commence to be paid
until the date that is six months following the date of such Specified Employee’s Separation from Service. On the date that payment is made or payments commence, the Participant shall receive payment of any amounts that would have otherwise
been paid during the six month delay but for the application of this Section 7.4.
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ARTICLE 8
Disability Benefit
|
8.1
|
Disability Benefit
. A Participant suffering a Disability shall, for benefit purposes under this Plan, be deemed to have experienced a
Separation from Service, or in the case of a
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Participant who is eligible to Retire to have Retired, as soon as practicable after such Participant is determined to be suffering a Disability, in which case the Participant shall receive a
Disability Benefit equal to his or her Account Balance provided, however, that should the Participant otherwise have been eligible to Retire, he or she shall be paid in accordance with Article 5. The Disability Benefit shall be paid in a lump sum no
later than 60 days after the date of the Participant’s Disability. Any payment made shall be subject to the Deduction Limitation.
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ARTICLE 9
Beneficiary Designation
|
9.1
|
Beneficiary
. Each Participant shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the Plan to a
Beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant participates.
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9.2
|
Beneficiary Designation; Change; Spousal Consent
. A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Committee or its
designated agent. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee’s rules and procedures, as in effect from time to
time. If the Participant names someone other than his or her spouse as a Beneficiary, a spousal consent, in the form designated by the Committee, must be signed by that Participant’s spouse and returned to the Committee. Upon the acceptance by
the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the
Committee prior to the Participant’s death.
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9.3
|
Acknowledgment
. No designation or change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Committee or its designated agent.
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9.4
|
No Beneficiary Designation
. If a Participant fails to designate a Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all designated Beneficiaries predecease the Participant or die prior
to complete distribution of the Participant’s benefits, then the Participant’s designated Beneficiary shall be deemed to be his or her surviving spouse.
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9.5
|
Doubt as to Beneficiary
. To the extent permitted by Section 409A of the Code and the Treasury Regulations issued thereunder, if the Committee has any doubt as to the proper Beneficiary to receive
payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Participant’s Employer to withhold such payments until this matter is resolved to the Committee’s satisfaction.
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9.6
|
Discharge of Obligations
. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under this Plan with
respect to the Participant.
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ARTICLE 10
Leave of Absence
|
10.1
|
Paid Leave of Absence
. If a Participant is authorized by the Participant’s Employer for any reason to take a paid leave of absence from the employment of the Employer for purposes of military leave,
sick leave or other bona fide leave of absence and such period of leave does not exceed six months or if longer, so long as the Participant retains a right to reemployment with the Employer under an applicable statue or by contract, the Participant
shall continue to be considered employed by the Employer and the Deferral Amount and LTIP Deferral Amount shall continue to be withheld during such paid leave of absence in accordance with Section 3.3 and Section 3.3A.
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10.2
|
Unpaid Leave of Absence
. If a Participant is authorized by the Participant’s Employer for any reason to take an unpaid leave of absence from the employment of the Employer for purposes of military
leave, sick leave or other bona fide leave of absence and such period of leave does not exceed six months or if longer, so long as the Participant retains a right to reemployment with the Employer under an applicable statue or by contract, the
Participant shall continue to be considered employed by the Employer and the Participant shall be excused from making deferrals until the Participant returns to a paid employment status. Upon such return, deferrals shall resume for the remaining
portion of the Plan Year in which the return occurs, based on the deferral election, if any, made for that Plan Year. If no election was made for that Plan Year, no deferral shall be withheld.
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ARTICLE 11
Termination, Amendment or Modification
|
11.1
|
Termination
. Although the Company anticipates that it will continue the Plan for an indefinite period of time, there is no guarantee that the Company will continue the Plan or will not terminate the Plan
at any time in the future. Accordingly, the Company reserves the right to terminate the Plan at any time with respect to any or all of its participating Employees as permitted by Section 1.409A-3(j)(4)(ix) of the Treasury Regulations or as
otherwise may be permitted by future Regulations or other guidance under Section 409A of the Code, by action of the Committee.
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11.2
|
Amendment
. The Company may, at any time, amend or modify the Plan in whole or in part by the action of the Committee; provided, however,
that: (i) no amendment or modification shall be effective to decrease or restrict the value of a Participant’s Account Balance in existence at the time the amendment or modification is made, calculated as if the Participant had experienced
a Separation from Service as of the effective date of the amendment or modification or, if the amendment or modification occurs after the date upon which the Participant was eligible to Retire, the Participant had Retired as of the effective date of
the amendment or modification, and (ii) no amendment or modification of
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this Section 11.2 or Section 12.2 of the Plan shall be effective. The amendment or modification of the Plan shall not affect any Participant or Beneficiary who has become entitled to
the payment of benefits under the Plan as of the date of the amendment or modification. The Company specifically reserves the right to amend the Plan to conform the provisions of the Plan to the guidance issued by the Secretary of the Treasury with
respect to Section 409A of the Code, in accordance with such guidance.
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11.3
|
Effect of Payment
. The full payment of the applicable benefit under Articles 4, 5, 6, 7 or 8 of the Plan shall completely discharge all obligations to a Participant and his or her designated
Beneficiaries under this Plan.
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ARTICLE 12
Administration
|
12.1
|
Committee Duties
. This Plan will be administered by the Committee. The Committee will, subject to the terms of this Plan, have the authority to: (i) approve for participation employees who are
recommended for participation by the president and Chief Executive Officer of the Company, (ii) adopt, alter, and repeal administrative rules and practices governing this Plan, (iii) interpret the terms and provisions of this Plan, and
(iv) otherwise supervise the administration of this Plan. All decisions by the Committee will be made with the approval of not less than a majority of its members. The Committee may delegate any of its authority to any other person or persons
that it deems appropriate, provided the delegation does not cause this Plan or any awards granted under this Plan to fail to qualify for the exemption provided by Rule 16b-3, or, if applicable, to meet the requirements of the regulations under
Section 162(m) of the Code.
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12.2
|
Administration Upon Change In Control
. For purposes of this Plan, the Company shall be the “Administrator” at all times prior
to the occurrence of a Change in Control. Upon and after the occurrence of a Change in Control, the “Administrator” shall be an independent third party selected by the trustee of the Trust and approved by the individual who, immediately
prior to such event, was the Company’s Chief Executive Officer or, if not so identified, the Company’s then highest ranking officer (the
“Ex-Chief
Executive Officer”). The Administrator
shall have the discretionary power to determine all questions arising in connection with the administration of the Plan and the interpretation of the Plan and Trust including, but not limited to benefit entitlement determinations; provided, however,
upon and after the occurrence of a Change in Control, the Administrator shall have no power to direct the investment of Plan or Trust assets or select any investment manager or custodial firm for the Plan or Trust. Upon and after the occurrence of a
Change in Control, the Company must: (1) pay all reasonable administrative expenses and fees of the Administrator; (2) indemnify the Administrator against any costs, expenses and liabilities including, without limitation, attorney’s
fees and expenses arising in connection with the performance of the Administrator hereunder, except with respect to matters resulting from the gross negligence or willful misconduct of the Administrator or its employees or agents; and
(3) supply full and timely information to the Administrator or all matters relating to the Plan, the Trust, the Participants and their Beneficiaries, the Account Balances of the Participants, the date of circumstances of the Retirement,
Disability, death
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or Separation from Service of the Participants, and such other pertinent information as the Administrator may reasonably require. Upon and after a Change in Control, the Administrator may be
terminated (and a replacement appointed) by the trustee of the Trust only with the approval of the Ex-Chief Executive Officer. Upon and after a Change in Control, the Administrator may not be terminated by the Company.
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12.3
|
Agents
. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed
representative) and may from time to time consult with counsel who may be counsel to any Employer.
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12.4
|
Binding Effect of Decisions
. All decisions by the Committee, and by any other person or persons to whom the Committee has delegated authority, shall be final and conclusive and binding upon all persons
having any interest in the Plan.
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12.5
|
Indemnity of Committee
. The Company shall indemnify and hold harmless the members of the Committee, and any Employee to whom the duties of the Committee may be delegated, and the Administrator against any
and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee, any of its members, any such Employee or the Administrator.
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12.6
|
Employer Information
. To enable the Committee and/or Administrator to perform its functions, the Company and each Employer shall supply full and timely information to the Committee and/or Administrator, as
the case may be, on all matters relating to the compensation of its Participants, the date and circumstances of the Retirement, Disability, death or Separation from Service of its Participants, and such other pertinent information as the Committee
or Administrator may reasonably require.
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ARTICLE 13
Other Benefits and Agreements
|
13.1
|
Coordination with Other Benefits
. The benefits provided for a Participant and Participant’s Beneficiary under the Plan are in addition to any other benefits available to such Participant under any
other plan or program for employees of the Participant’s Employer. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided.
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ARTICLE 14
Claims Procedures
|
14.1
|
Presentation of Claim
. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below
as a “Claimant”) may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the
claim must be made within 60 days after such notice was received by the
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Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination
desired by the Claimant.
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14.2
|
Notification of Decision
. The Committee shall consider a Claimant’s claim within a reasonable time, and shall notify the Claimant in writing:
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(a)
|
that the Claimant’s requested determination has been made, and that the claim has been allowed in full; or
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|
(b)
|
that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant:
|
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(i)
|
the specific reason(s) for the denial of the claim, or any part of it;
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(ii)
|
specific reference(s) to pertinent provisions of the Plan upon which such denial was based;
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(iii)
|
a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and
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(iv)
|
an explanation of the claim review procedure set forth in Section 14.3 below.
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14.3
|
Review of a Denied Claim
. Within 60 days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s duly authorized
representative) may file with the Committee a written request for a review of the denial of the claim. Thereafter, but not later than 30 days after the review procedure began, the Claimant (or the Claimant’s duly authorized
representative):
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(a)
|
may review pertinent documents; and/or
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(b)
|
may submit written comments or other documents.
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14.4
|
Decision on Review
. The Committee shall render its decision on review promptly, and not later than 60 days after the filing of a written request for review of the denial, unless special circumstances
require additional time, in which case the Committee’s decision must be rendered within 120 days after such date. Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain:
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(a)
|
specific reasons for the decision;
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(b)
|
specific reference(s) to the pertinent Plan provisions upon which the decision was based; and
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(c)
|
such other matters as the Committee deems relevant.
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14.5
|
Legal Action
. A Claimant’s compliance with the foregoing provisions of this Article 14 is a mandatory prerequisite to a Claimant’s right to commence any legal action with respect to any
claim for benefits under this Plan.
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ARTICLE 15
Trust
|
15.1
|
Establishment of the Trust
. The Company may establish one or more Trusts to which the Company may transfer such assets as the Company determines in its sole discretion to assist in meeting its obligations
under the Plan.
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15.2
|
Interrelationship of the Plan and the Trust
. The provisions of the Plan shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the
rights of the Company, Participants and the creditors of the Employers to the assets transferred to the Trust.
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15.3
|
Distributions From the Trust
. Each Employers obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the
Company’s obligations under this Plan.
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15.4
|
Stock Transferred to the Trust
. Notwithstanding any other provision of this Plan or the Trust, any Stock transferred to the Trust in accordance with Section 3.7 may not be otherwise distributed or
disposed of by the Trustee until at least 6 months after the date such Stock is transferred to the Trust.
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ARTICLE 16
Miscellaneous
|
16.1
|
Status of Plan
. The Plan is intended to be a plan that is not qualified within the meaning of Section 401(a) of the Code and that “is unfunded and is maintained by an employer primarily for the
purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. The Plan shall be administered and interpreted to the extent
possible in a manner consistent with that intent.
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16.2
|
Unsecured General Creditor
. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of the Company or an
Employer. For purposes of the payment of benefits under this Plan, any and all of the Company’s or an Employer’s assets shall be, and remain, the general, unpledged unrestricted assets of the Company or an Employer, respectively. The
Company’s or an Employer’s obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.
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16.3
|
Employer’s Liability
. An Employer’s liability for the payment of benefits shall be defined only by the Plan. An Employer shall have no obligation to a Participant under the Plan except as
expressly provided in the Plan.
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|
16.4
|
Nonassignability
. Except in the case of a domestic relations order within the meaning of Section 414(p)(1)(B) of the Code, neither a Participant nor any other person shall have any right to commute,
sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are
expressly declared to be, unassignable and non-transferable. Except in the case of a domestic relations order within the meaning of Section 414(p)(1)(B) of the Code, no part of the amounts payable shall, prior to actual payment, be subject to
seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant’s or any
other person’s bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise.
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16.5
|
Not a Contract of Employment
. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant, either expressed or implied. Such
employment is hereby acknowledged to be an “at will” employment relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless expressly provided in a written
employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of any Employer, or to interfere with the right of any Employer to discipline or discharge the Participant at any time.
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16.6
|
Furnishing Information
. A Participant or his or her Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be
requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary.
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16.7
|
Terms
. Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the
singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply.
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16.8
|
Captions
. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.
|
|
16.9
|
Governing Law
. Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of the State of Ohio without regard to its conflicts of laws principles.
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-25-
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16.10
|
Notice
. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address
below:
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Robert E. Veillette
Vice President, General Counsel and Secretary
Nordson Corporation
28601 Clemens
Road
Westlake, Ohio 44145
Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
Any notice or filing required or permitted to be given to a Participant under this Plan shall
be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant.
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16.11
|
Successors
. The provisions of this Plan shall bind and inure to the benefit of the Company and its successors and assigns and the Participant and the Participant’s designated Beneficiaries.
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|
16.12
|
Spouse’s Interest
. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by
such spouse in any manner, including but not limited to such spouse’s will, nor shall such interest pass under the laws of intestate succession.
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16.13
|
Validity
. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and
enforced as if such illegal or invalid provision had never been inserted herein.
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16.14
|
Incompetent
. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of
that person’s property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority,
incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant’s Beneficiary, as the case may be, and
shall be a complete discharge of any liability under the Plan for such payment amount.
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16.15
|
Court Order
. The Committee is authorized to make any payments directed by court order in any action in which the Plan or the Committee has been named as a party. In addition, if a court determines that a
spouse or former spouse of a Participant has an interest in the Participant’s benefits under the Plan in connection with a property settlement or otherwise, the Committee, in its sole discretion, shall have the right, notwithstanding any
election made by a Participant, to immediately distribute the spouse’s or former spouse’s interest in the Participant’s benefits under the Plan to that spouse or former spouse.
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16.16
|
Insurance
. The Company, on its own behalf or on behalf of the trustee of the Trust, and, in its sole discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in
such forms as the Trust may choose. The Company or the trustee of the Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance. The Participant shall have no interest whatsoever in any such policy or policies, and at
the request of the Company shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to whom the Company has applied for insurance.
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16.17
|
Legal Fees To Enforce Rights After Change in Control
. The Company is aware that upon the occurrence of a Change in Control, the Board or a shareholder of the Company, or of any successor corporation might
then cause or attempt to cause the Company, or such successor to refuse to comply with its obligations under the Plan and might cause or attempt to cause the Company to institute, or may institute, litigation seeking to deny Participants the
benefits intended under the Plan. In these circumstances, the purpose of the Plan could be frustrated. Accordingly, if, within the first five (5) years following a Change in Control, it should appear to any Participant that the Company or any
successor corporation has failed to comply with any of its obligations under the Plan or any agreement thereunder or, if the Company or any other person takes any action to declare the Plan void or unenforceable or institutes any litigation or other
legal action designed to deny, diminish or to recover from any Participant the benefits intended to be provided, then the Company hereby irrevocably authorizes such Participant to retain counsel of his or her choice at the expense of the Company to
represent such Participant in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any director, officer, shareholder or other person affiliated with the Company or any successor
thereto in any jurisdiction. The Company’s reimbursement of the Participant’s legal fees and expenses pursuant to this Section 16.17 shall be made on or before the last day of the calendar year following the calendar year in which
such legal fees are incurred. The amount of legal fees and expenses eligible for reimbursement during any calendar year shall not affect the amount of legal fees and expenses eligible for reimbursement during any other calendar year, and the right
to reimbursement shall not be subject to liquidation or exchange for another benefit.
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16.18
|
Permissible Accelerations
.
Notwithstanding any other provision of the Plan to the contrary, in accordance with
Section 1.409A-3(j)(4) of the Treasury Regulations, the Company may, in its sole discretion, cause payments to or on behalf of a Participant to be accelerated (i) to the extent necessary to fulfill a domestic relations order (as defined in
Section 414(p)(1)(B) of the Code, (ii) to the extent necessary for any Federal officer or employee in the executive branch to comply with an ethics agreement with the Federal government, (iii) to the extent reasonably necessary to
avoid the violation of an applicable Federal, state, local, or foreign ethics law or conflicts of interest law (including where such payment is reasonably necessary to permit the Participant or Beneficiary to participate in
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activities in the normal course of his or her position in which a Participant or Beneficiary would otherwise not be able to participate under an applicable rule); (iv) to pay FICA taxes on
any amounts deferred under the Plan and any state, local or foreign income tax withholding related to such FICA tax, (v) at any time the Plan fails to meet the requirements of Section 409A of the Code and the Treasury Regulations
thereunder; provided however that the amount of the accelerated payment may not exceed the amount required to be included as a result of the failure to comply with Section 409A of the Code and the Treasury Regulations thereunder;
(vi) where the acceleration of the payment is made pursuant to a termination and liquidation of the Plan in accordance with Section 1.409A-3(j)(4)(ix) of the Treasury Regulations; (vii) to reflect payment of state, local or foreign
tax obligations arising from participation in the Plan that apply to the amount deferred under the Plan before the amount is paid or made available to the Participant or Beneficiary; provided such payment may not exceed the amount of such taxes due
as a result of participation in the Plan; (viii) as satisfaction of a debt of the Participant or Beneficiary to the Company in accordance with Section 1.409A-3(j)(4)(xiii) of the Treasury Regulations and (ix) where such payment occurs
as a part of a settlement between the Participant or the Beneficiary and the Company of an arm’s length, bona fide dispute as to the Participant’s or Beneficiary’s right to the deferred amount.
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16.19
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Compliance with Section 409A of the Code
. The Plan is intended to provide for the deferral of compensation in accordance with Section 409A of the Code for compensation earned, vested, or deferred
after December 31, 2004. Notwithstanding any provisions of the Plan or any Election Form to the contrary, no otherwise permissible election under the Plan shall be given effect that would result in the taxation of any amount under
Section 409A of the Code. To the extent permitted in guidance issued by the Secretary of the Treasury and in accordance with procedures established by the Committee, Participants were permitted to terminate participation in the Plan or cancel
an election with respect deferral elections made under the Plan prior to January 1, 2005.
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16.20
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Transition Elections
. Notwithstanding any other elections made hereunder and only to the extent permitted by the Company and transition rules issued under Section 409A of the Code, through such dates
as specified by the Company pursuant to transitional guidance issued under Section 409A of the Code, Participants have been permitted to make one or more elections as to the time and form of payment of their Account Balance under the Plan to be
paid in cash and one or more elections as to the time and form of payment of their Account Balance to be paid in Nordson Stock, provided that (a) any such elections made during 2005 were only available for amounts that were payable after the
2005 calendar year and could not accelerate any payments into the 2005 calendar year, (b) any such elections made during 2006 were only available for amounts that were payable after the 2006 calendar year and could not accelerate any payments
into the 2006 calendar year, (c) any such elections made during 2007 were only available for amounts that were payable after the 2007 calendar year and could not accelerate any payments into the 2007 calendar year, and (d) any such
elections made during 2008 were only available for amounts that were payable after the 2008 calendar year and could not accelerate any payments into the 2008 calendar year.
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IN WITNESS WHEREOF, the Company has signed this Plan document on
, 2008.
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NORDSON CORPORATION
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Nordson Corporation, an Ohio corporation
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By:
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Title:
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Exhibit 10-d-3
NORDSON CORPORATION
AMENDED AND RESTATED 2005 SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
[Defined Contribution]
Nordson
Corporation hereby establishes, effective as of January 1, 2009, the Nordson Corporation Amended and Restated 2005 Supplemental Executive Retirement Plan [Defined Contribution] (“Plan”), to supplement the retirement benefits of
certain salaried employees, designated by the Compensation Committee of the Board of Directors (the “Committee”) as permitted by Section 3(36) of the Employee Retirement Income Security Act of 1974 (“ERISA”), with respect to
compensation earned for services performed by such employees for the Company or vested after December 31, 2004. The Nordson Corporation Excess Defined Contribution Plan established effective as of November 1, 1985, and amended and restated
in its entirety effective as of November 1, 1987 (the “1985 Plan”) supplements the retirement benefits of such employees with respect to compensation earned for services performed for the Company and vested prior to January 1,
2005. No provisions of this Plan shall alter, affect, or amend any provisions of the 1985 Plan applicable to compensation earned, deferred, and vested on or before December 31, 2004.
ARTICLE I
DEFINITIONS
1.1 Definitions. The following words and phrases shall have the meanings indicated, unless a different meaning is plainly required by the
context:
(a) The term “Base Compensation” shall mean the annual cash compensation relating to services performed during any
calendar year, whether or not paid in such calendar year or included on the Federal Income Tax Form
W-2
for such calendar year, excluding cash or stock-based incentive payments (whether discretionary or paid
pursuant to a written plan) commissions, overtime, fringe benefits, stock options, relocation expenses, non-monetary awards, fees, automobile and other allowances paid to an Employee for employment services rendered (whether or not such allowances
are included in the Employee’s gross income). Base Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by the Employee pursuant to all qualified or
non-qualified
plans of any Employer and shall be calculated to include amounts not otherwise included in the Employee’s gross income under Sections 125, 402(e)(3), 402(h), or 403(b) of the Code pursuant
to plans established by any Employer; provided, however, that all such amounts will be included in compensation only to the extent that, had there been no such plan, the amount would have been payable in cash to the Employee.
(b) The term “Beneficiary” shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article
VI, that are entitled to receive excess retirement benefits under this Plan upon the death of the Employee.
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(c) The term “Beneficiary Designation Form” shall mean the form established from time
to time by the Committee that an Employee completes, signs and returns to the Committee to designate one or more Beneficiaries.
(d) The
term “Bonus Compensation” shall mean any compensation relating to services performed during any calendar year(s), whether or not paid in a calendar year or included on the Federal Income Tax Form
W-2
for a calendar year, payable to an Employee under any Employer’s written incentive compensation plans, excluding stock options, and restricted or performance stock.
(e) The term “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time. Reference to a section of the Code
shall include such section and any comparable section or sections of any future legislation that amends, supplements, or supersedes such section.
(f) The term “Commissions” shall mean any commissions paid relating to sales made during any calendar year(s), whether or not paid
in a calendar year or included on the Federal Income Tax Form W-2 for a calendar year.
(g) The term “Company” shall mean
Nordson Corporation, an Ohio corporation, its corporate successors, the surviving corporation resulting from any merger of the Company with any other corporation or corporations, and any successor to all or substantially all of the Company’s
assets or business.
(h) The term “Compensation” of an Employee for any period shall mean compensation as determined under the
Employees’ Savings Trust Plan or the Non-Union ESOP, as the case may be, increased, however, by amounts deferred to any non-qualified deferred compensation plan in which the Employee participates.
(i) The term “Election Form” shall mean the form established from time to time by the Committee that an Employee completes, signs
and returns to the Committee to make an election under the Plan.
(j) The term “Employee” shall mean any person employed by the
Company on a salaried basis who is designated by the Committee to participate in the Plan and who has not waived participation in the Plan.
(k) The term “Employees’ Savings Trust Plan” shall mean the Nordson Employees’ Savings Trust Plan in effect on the date of
an Employee’s retirement, death or Separation from Service.
(l) The term “Employer(s)” shall mean the Company and any of
its subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Committee to participate in the Plan and have adopted the Plan as a sponsor.
(m) The term “LTIP Payments” shall mean the amount payable to an Employee during a Plan Year under the Nordson Corporation 2004
Long-Term Performance Plan (or any successor plan thereto).
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(n) The term “Non-Union ESOP” shall mean the Nordson Corporation Non-Union Employees
Stock Ownership Plan and Trust, which for the period of October 1, 2000 until December 31, 2006 was maintained as part of the Employee’s Savings Trust Plan, in effect on the date of an Employee’s Separation from Service.
(o) The term “Plan” shall mean the excess defined contribution retirement plan as set forth herein, together with all amendments
hereto, which plan shall be called the “Nordson Corporation 2005 Defined Contribution Supplemental Executive Retirement Plan.”
(p) The term “Separation from Service” shall have the meaning set forth in Section 1.409A-1(h) of the Treasury Regulations,
provided that in applying Section 1.409A-1(h)(1)(ii) of the Treasury Regulations, a Separation from Service shall be deemed to occur if the Employee’s Employer and the Employee reasonably anticipate that the level of bona fide services the
Employee will perform for the Employers (whether as an Employee or as an independent contractor) will permanently decrease to less than 50% of the average level of bona fide services performed by the Employee for the Employers (whether as an
Employee or an independent contractor) over the immediately preceding 36 month period (or the full period of services performed for the Employer if the Employee has been providing services for the Employers for less than 36 months). In the event of
a disposition of assets by the Company to an unrelated person, the Company reserves the discretion to specify (in accordance with Section 1.409A-1(h)(4) of the Treasury Regulations) whether an Employee who would otherwise experience a
Separation from Service with the Company and the Employers as part of the disposition of assets will be considered to experience a Separation from Service for purposes of Section 1.409A-1(h) of the Treasury Regulations.
(q) The term “Unforeseeable Financial Emergency” shall mean a severe financial hardship to the Employee resulting from an illness or
accident of the Employee, the Employee’s spouse, or a dependent (as defined in Section 152(a) of the Code) of the Employee, loss of the Employee’s property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the Employee.
1.2 Additional Definitions. All other words and phrases
used herein shall have the meanings given them in the Employees’ Savings Trust Plan, unless a different meaning is clearly required by the context.
ARTICLE II
EXCESS RETIREMENT
BENEFIT
2.1 Eligibility. Employees designated by the Committee as eligible to participate in the Plan shall be eligible to make deferrals
with respect to Base Compensation, Bonus Compensation, LTIP Payments and Commissions. In addition, in the event that the Tax Deferred Contributions of an eligible Employee under the Employees’ Savings Trust Plan are limited by the provisions of
Section 401(a)(17), Section 415 or Section 402(g)(1) of the Code for any Plan Year, such Employee may elect to defer payment of a portion of his Compensation under this Plan to make up for that portion of his Compensation that
otherwise could have been made as Tax Deferred Contributions but for the limitations under Section 401(a)(17), Section 415 or Section 402(g)(1) of the Code. Notwithstanding the foregoing, an Employee who is a participant in the 2005
Nordson Corporation Deferred Compensation Plan with respect to any Plan Year shall not be entitled to make deferrals under this Plan with respect to such Plan Year.
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2.2 Enrollment Requirements. As a condition to participation, each selected Employee shall
complete, execute and return to the Committee, an Election Form and a Beneficiary Designation Form, all within 30 days (or such shorter time as the Committee may determine) after he or she is selected to participate in the Plan. In addition, the
Committee shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary.
2.3
Eligibility; Commencement of Participation. Provided an Employee selected to participate in the Plan has met all enrollment requirements set forth in this Plan and required by the Committee, including returning all required documents to the
Committee within thirty (30) days (or such shorter time as the Committee may determine) after he or she is selected to participate in the Plan, that Employee shall commence participation in the Plan on the first day of the month following the
month in which the Employee completes all enrollment requirements. If an Employee fails to meet all such requirements within the period required, that Employee shall not be eligible to participate in the Plan until the first day of the Plan Year
following the delivery to and acceptance by the Committee of the required documents.
2.4 Deferrals.
(a) Base Compensation, Bonus Compensation, LTIP Payments and Commission Deferrals. For each Plan Year, an Employee may elect to defer in whole
percentages or in flat dollar amounts of no less than $1,000 all or a portion of his Base Compensation, Bonus Compensation, LTIP Payments and Commissions.
(b) Notwithstanding the foregoing, (i) if an Employee first becomes an eligible Employee after the first day of a Plan Year, or in the
case of the first Plan Year of the Plan itself, the Employee’s election, with respect to Base Compensation shall apply only to Base Compensation paid for services to be performed after the date the Employee submits an Election Form to the
Committee for acceptance and the Employee’s election with respect to Bonus Compensation shall apply only to Bonus Compensation paid for Services performed after the date the Employee submits an Election Form to the Committee for acceptance.
(c) LTIP Deferrals. For each Plan Year, an Employee may elect to defer an amount equal to a specified dollar amount or a percentage (in
whole percentages) of the LTIP Payment that may be payable to the Employee during such Plan Year. Such election must be made on an Election Form no later than the earlier of six months before the end of the performance period to which the LTIP
Payment relates or the date of the Employee’s Separation from Service. For the election to be valid, the Election Form must be completed and signed by the Employee, timely delivered to the Committee (in accordance with Section 2.2 above)
and accepted by the Committee.
(d) Deferral of Commissions. For each Plan Year, an Employee may elect to defer an amount equal to a
specified dollar amount or a percentage (in whole percentages) of Commissions earned based on sales made during the Plan Year. Notwithstanding the foregoing, if an Employee first becomes an eligible Employee after the first day of a Plan Year, or in
the case of the first Plan Year of the Plan itself, the Employees’ election with respect to Commissions shall apply only to Commissions paid for sales made after the date the Employee submits an Election Form to the Committee for acceptance.
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(e) Effect of Election Forms. In connection with an Employee’s commencement of participation
in the Plan, the Employee shall make an irrevocable deferral election with respect to Base Compensation, Bonus Compensation, LTIP Payments and Commissions for the Plan Year in which the Employee commences participation in the Plan, along with such
other elections as the Committee deems necessary or desirable under the Plan. For these elections to be valid, the Election Form must be completed and signed by the Employee, timely delivered to the Committee (in accordance with Section 2.2)
and accepted by the Committee. For each succeeding Plan Year, an irrevocable deferral election for that Plan Year, and such other elections as the Committee deems necessary or desirable under the Plan, shall be made by timely delivering to the
Committee, in accordance with its rules and procedures, before the end of the Plan Year preceding the Plan Year for which the election is made, or at such other time as the Committee may determine from time to time, a new Election Form. If no such
Election Form is timely delivered for a Plan Year, an Employee shall not be permitted to make deferrals for such Plan Year. As part of any timely deferral election, the Employee may designate the date during the next Plan Year on which such deferral
election shall become effective.
2.5 Amount. The excess retirement benefit payable to an eligible Employee or his Beneficiary shall be an
amount equal to the sum of:
(a) the amount, if any, of the Employee’s deferrals made in accordance with Sections 2.1 and 2.4;
(b) the difference between the amount that would have been in the Employee’s Employer Matching Contribution Account under the
Employees’ Savings Trust Plan on the date of the Employee’s Separation from Service had the Employee made the maximum possible Tax Deferred Contributions to the Employees’ Savings Trust Plan and without regard to the limitations of
Section 401(a)(17), Section 415 and Section 402(g)(1) of the Code on the Employee’s Tax Deferred Contributions and Employer Matching Contributions to the Employees’ Savings Trust Plan less the amount that would have been in
the Employee’s Employer Matching Contribution Account under the Employee’s Savings Trust Plan on the date of the Employee’s Separation from Service had the Employee made the maximum possible Tax Deferred Contributions to the
Employee’s Savings Trust Plan; plus
(c) the difference between the vested interest the Employee would have been entitled to receive
under the Non-Union ESOP on the date of the Employee’s Separation from Service if the limitations of Section 401(a)(17) or Section 415 of the Code had not been in effect and the actual amount the Employee is entitled to receive under
the Non-Union ESOP on the date of the Employee’s Separation from Service.
In determining the value of the Employee’s deferrals with respect to
Base Compensation, Bonus Compensation, LTIP Payments and Commissions and the value that an eligible Employees’ interest under the Employees’ Savings Trust Plan would have been if the Employee had made
5
the maximum possible Tax Deferred Contributions to the Employees’ Savings Trust Plan and if the limitations of Section 401(a)(17), Section 415, and Section 402(g)(1) of the
Code had not been in effect; as described in (b) above, it shall be assumed that:
(i) his deferrals with respect to Base
Compensation, Bonus Compensation, LTIP Payments and Commissions were deposited on the dates that such amounts would otherwise have been paid to the Employee and held in the Measurement Funds designated by the Employee in accordance with
Section 2.8; and
(ii) his Maximum Tax Deferred Contributions and his Maximum Employer Matching Contributions under the
Employees’ Savings Trust Plan were deposited on the dates such contributions otherwise would have been made to the Employees’ Savings Trust Plan and held in the Measurement Funds designated by the Employee in accordance with
Section 2.8.
In determining the value that an eligible Employee’s interest under the Non-Union ESOP would have been if the
limitations of Section 401(a)(17) and Section 415 of the Code had not been in effect as described in (c) above, it shall be assumed that his Employer contributions under the Non-Union ESOP, if any, were deposited on the dates such
contributions otherwise would have been made to the Non-Union ESOP, and invested and reinvested in Company stock in the same manner and at the same time as the actual assets under the Non-Union ESOP during such period.
2.6 Payments. All payments under the Plan to an eligible Employee or his Beneficiary shall be made by the Company from its general assets. The
payment of the excess retirement benefits hereunder shall be made in a lump sum on the first day of the calendar quarter next following the Employee’s Separation from Service provided, however, that the excess retirement benefit of a Specified
Employee of the Company shall not be paid until the date that is six months following the date of such Specified Employee’s Separation from Service. For purposes of this Section 2.6, Specified Employees shall be determined in accordance
with the Nordson Corporation Policy for Determining Specified Employees. The payment of excess retirement benefits hereunder that are attributable to amounts described in Sections 2.5 (a) and (b) shall be payable in cash and payment of any
excess retirement benefits hereunder that are attributable to amounts described in Section 2.5 (c) shall be payable in shares of Company stock.
In the event of the death of the Employee prior to payment of the Employee’s excess retirement benefits hereunder, payment of the
Employees’ excess retirement benefit shall be made in a lump sum to the Employee’s Beneficiary on the first day of the calendar quarter next following the Employee’s date of death. The payment of excess retirement benefits hereunder
that are attributable to amounts described in Section 2.5(a) and (b) shall be payable in cash and payment of any excess retirement benefits hereunder that are attributable to amounts described in Section 2.5(c) shall be payable in
shares of Company stock.
2.7 Payout/Suspension for Unforeseeable Financial Emergencies. If an Employee experiences an Unforeseeable
Financial Emergency, the Employee may petition the Committee to receive a partial or full payout from the Plan. The payout shall not exceed the lesser of the Employee’s total excess retirement benefit, calculated as of the date of the
Unforeseeable Financial Emergency Distribution, or the amount reasonably needed to satisfy the Unforeseeable Financial Emergency plus amounts necessary to pay taxes reasonably anticipated
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as a result of the payout, after taking into account the extent to which such Unforeseeable Financial Emergency is or may be relieved through reimbursement or compensation by insurance or
otherwise or by liquidation of the Employee’s assets (to the extent such liquidation would not itself cause severe financial hardship). If, subject to the sole discretion of the Committee, the petition for a suspension and/or payout is
approved, suspension shall take effect upon the date of approval and any payout shall be made within 60 days of the date of approval.
2.8 Investment Elections. In accordance with, and subject to, the rules and procedures that are established from time to time by the
Committee, it is sole discretion, Employees may direct the investment of their excess retirement benefits hereunder in accordance with the following:
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(a)
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Investment Allocation. An Employee, in connection with his or her deferral election made in accordance with Section 2.4 above, shall elect, on the Election Form, to invest his deferrals with respect to Base
Compensation, Bonus Compensation, LTIP Payments and Commissions and his Maximum Tax Deferred Contributions and his Maximum Employer Matching Contributions in one or more Measurement Fund(s) (as described in Section 2.8(c) below). Thereafter,
the Employee may (but is not required to) elect, either by submitting an Election Form to the Committee that is accepted by the Committee or through any other manner approved by the Committee, to (i) invest his subsequent deferrals with respect
to Base Compensation, Bonus Compensation, LTIP Payments and Commissions and his subsequent Maximum Tax Deferred Contributions and his subsequent Maximum Employer Matching Contributions to one or more different Measurement Fund(s), or (ii) to
change the portion of his or her excess retirement benefit allocated to each previously elected Measurement Fund, all in a manner permitted by the Committee.
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(b)
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Proportionate Allocation. In making any election described in Section 2.8(a) above, the Employee shall specify on the Election Form, in increments of five percentage points (5%), the percentage of his or her Base
Compensation, Bonus Compensation, LTIP Payments, Commissions, Maximum Tax Deferred Contributions and Maximum Employer Matching Contributions to be allocated to a Measurement Fund (as if the Employee was making an investment in that Measurement Fund
with that portion of his or her excess retirement benefit).
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(c)
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Measurement Funds. For the purpose of determining the total amount of an Employee’s excess retirement benefit, reference shall be made to pre-determined actual investments (each a “Measurement Fund”). The
Committee may, in its sole discretion, discontinue, substitute or add a Measurement Fund(s), and shall maintain appropriate accounts with respect to each. Each such action will take effect seven (7) days following the day on which the Committee
gives Employees advance written notice of such change, provided, however, that prior to such date the prior restrictions of the Plan apply.
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The following funds shall be Measurement Funds under the Plan:
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International Equity Index
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Investment Contract Fund
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(d)
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Crediting or Debiting Method. The performance of each elected Measurement Fund (either positive or negative) will be determined by the Committee, in its reasonable discretion, based on the performance of the Measurement
Funds themselves. An Employee’s excess retirement benefit shall be credited or debited on a schedule as determined by the Committee in its sole discretion, as though (i) an Employee’s excess retirement benefit were invested in the
Measurement Fund(s) selected by the Employee, in the percentages applicable to such business day, as of the close of business on the business day, at the closing price on such date; (ii) the portion of the excess retirement benefit that was
actually deferred during any business day was invested in the Measurement Fund(s) selected by the Employee, in the percentages applicable to such business day, no later than the close of business on that business day after the day on which such
amounts are actually deferred, at the closing price on such date; and (iii) any distribution made to an Employee that decreases such Employee’s excess retirement benefit ceased being invested in the Measurement Fund(s), in the percentages
applicable to such business day, no earlier than one business day prior to the distribution, at the closing price on such date.
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(e)
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No Actual Investment. Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only, and an Employee’s election of any
such Measurement Fund, the allocation of his or her excess retirement benefit thereto, the calculation of additional amounts and the crediting or debiting of such amounts to an Employee’s excess retirement benefit shall not be considered or
construed in any manner as an actual investment of his or her excess retirement benefit in any such Measurement Fund. In the event that the Company or the trustee of any trust, in its own discretion, decides to invest funds in any or all of the
Measurement Funds, no Employee shall have any rights in or to such investments themselves. Without limiting the foregoing, an Employee’s excess retirement benefit shall at all times be a bookkeeping entry only and shall not represent any
investment made on his or her behalf by the Company or any trust; the Employee shall at all times remain an unsecured creditor of the Company.
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ARTICLE III
ADMINISTRATION
3.1 Committee
Duties. This Plan will be administered by the Committee. The Committee will, subject to the terms of this Plan, have the authority to: (i) approve for participation employees who are recommended for participation by the president and Chief
Executive Officer of the Company, (ii) adopt, alter, and repeal administrative rules and practices governing this Plan, (iii) interpret the terms and provisions of this Plan, and (iv) otherwise supervise the administration of this
Plan. All decisions by the Committee will be made with the approval of not less than a majority of its members. The Committee may delegate any of its authority to any other person or persons that it deems appropriate, provided the delegation does
not cause this Plan or any awards granted under this Plan to fail to qualify for the exemption provided by Rule 16b-3, or, if applicable, to meet the requirements of the regulations under Section 162(m) of the Code.
3.2 Administration Upon Change In Control. For purposes of this Plan, the Company shall be the “Administrator” at all times prior to
the occurrence of a Change in Control (as such term is defined in the Nordson Corporation 2005 Deferred Compensation Plan Effective January 1, 2005 (As Amended and Restated Effective January 1, 2009)). Upon and after the occurrence of a
Change in Control, the “Administrator” shall be an independent third party selected by the individual who, immediately prior to such event, was the Company’s Chief Executive Officer or, if not so identified, the Company’s then
highest ranking officer (the “Ex-Chief Executive Officer”). The Administrator shall have the discretionary power to determine all questions arising in connection with the administration of the Plan and the interpretation of the Plan
including, but not limited to benefit entitlement determinations. Upon and after the occurrence of a Change in Control, the Company must: (1) pay all reasonable administrative expenses and fees of the Administrator; (2) indemnify the
Administrator against any costs, expenses and liabilities including, without limitation, attorney’s fees and expenses arising in connection with the performance of the Administrator hereunder, except with respect to matters resulting from the
gross negligence or willful misconduct of the Administrator or its employees or agents; and (3) supply full and timely information to the Administrator on all matters relating to the Plan, the Employees and their Beneficiaries, the excess
retirement benefits of the Employees, the date of circumstances of the retirement, disability, death or Separation from Service of the Employees, and such other pertinent information as the Administrator may reasonably require. Upon and after a
Change in Control, the Administrator may be terminated (and a replacement appointed) by the Ex-Chief Executive Officer. Upon and after a Change in Control, the Administrator may not be terminated by the Company.
3.3 Agents. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative
duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to any Employer.
3.4 Binding Effect of Decisions. All decisions by the Committee, and by any other person or persons to whom the Committee has delegated
authority, shall be final and conclusive and binding upon all persons having any interest in the Plan.
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3.5 Indemnity of Committee. The Company shall indemnify and hold harmless the members of the
Committee, and any Employee to whom the duties of the Committee may be delegated, and the Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except
in the case of willful misconduct by the Committee, any of its members, any such Employee or the Administrator.
3.6 Employer Information.
To enable the Committee and/or Administrator to perform its functions, the Company and each Employer shall supply full and timely information to the Committee and/or Administrator, as the case may be, on all matters relating to the compensation of
its Employees, the date and circumstances of the retirement, disability, death or Separation from Service of its Employees, and such other pertinent information as the Committee or Administrator may reasonably require.
ARTICLE IV
AMENDMENT AND
TERMINATION
The Company reserves the right to amend or terminate the Plan at any time by action of its Board of Directors. Any such
termination of the Plan shall be in accordance with Section 1.409A-3(j)(4)(ix) of the Treasury Regulations or as otherwise may be permitted under future Regulations or other guidance under Section 409A of the Code. No such action shall
however adversely affect any Employee or Beneficiary who is receiving excess retirement benefits under the Plan, unless an equivalent benefit is provided under another Plan or program sponsored by the Company and such equivalent benefit is payable
at the same time and in the same form as the excess retirement benefit otherwise payable from this Plan. The Company specifically reserves the right to amend the Plan to conform the provisions of the Plan to the guidance issued by the Secretary of
the Treasury with respect to Section 409A of the Code, in accordance with such guidance.
ARTICLE V
MISCELLANEOUS
5.1 Non-Alienation
of Retirement Rights or Benefits. Except in the case of a domestic relations order within the meaning of Section 414(p)(1)(B) of the Code, an Employee or Beneficiary is not permitted to assign, transfer, alienate or otherwise encumber the right
to receive payments under the Plan. Except in the case of a domestic relations order within the meaning of Section 414(p)(1)(B) of the Code, any attempt to do so or to permit the payments to be subject to garnishment, attachment or levy of any
kind will permit the Company to make payments directly to and for the benefit of the Employee, Beneficiary or any other person. Each such payment may be made without the intervention of a guardian. The receipt of the payee shall constitute a
complete acquittance to the Company with respect to the payment. The Company shall have no responsibility for the proper application of any payment.
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5.2 Incapacity. The Company shall be permitted to make payments in the same manner as provided
for in Section 5.1 if in the judgment of the Committee, an Employee or his Beneficiary is incapable of attending to his financial affairs.
5.3 Plan Non-Contractual. This Plan shall not be construed as a commitment or agreement on the part of any person employed by the Company to
continue his employment with the Company, nor shall it be construed as a commitment on the part of the Company to continue the employment or the annual rate of compensation of any such person for any period. All Employees shall remain subject to
discharge to the same extent as if the Plan had never been established.
5.4 Interest of Employee. The obligation of the Company under the
Plan to provide an Employee or his Beneficiary with an excess retirement benefit merely constitutes the unsecured promise of the Company to make payments as provided herein. No person shall have any interest in, or a lien or prior claim upon, any
property of the Company.
5.5 Controlling Status. No Employee or Beneficiary shall be eligible for a benefit under the Plan unless such
Employee is an Employee on the date of his retirement, death, or Separation from Service.
5.6 Claims of Other Persons. The provisions of
the Plan shall in no event be construed as giving any person, firm or corporation any legal or equitable right as against the Company, its officers, employees, or directors, except any such rights as are specifically provided for in the Plan or are
hereafter created in accordance with the terms and provisions of the Plan.
5.7 No Competition. The right of any Employee or his
Beneficiary to an excess retirement benefit will be terminated, or, if payment thereof has begun, all further payments will be discontinued and forfeited in the event the Employee or his Beneficiary at any time subsequent to the effective date
hereof:
(a) wrongfully discloses any secret process or trade secret of the Company or any of its subsidiaries, or
(b) becomes involved directly or indirectly as an officer, trustee, employee, consultant, partner, or substantial shareholder, on his own
account or in any other capacity, in a business venture that within the two-year period following his Separation from Service, the Committee determines to be competitive with the Company.
5.8 Severability. The invalidity or unenforceability of any particular provision of the Plan shall not effect any other provision hereof, and
the Plan shall be construed in all respects as if such invalid or unenforceable provision were omitted therefrom.
5.9 Governing Law. The
provisions of the Plan shall be governed and construed in accordance with the laws of the State of Ohio, to the extent not preempted by ERISA.
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5.10 Permissible Accelerations. Notwithstanding any other provision of the Plan to the contrary,
in accordance with Section 1.409A-3(j)(4) of the Treasury Regulations, the Company may, in its sole discretion, cause payments to or on behalf of an Employee to be accelerated (i) to the extent necessary to fulfill a domestic relations
order (as defined in Section 414(p)(1)(B) of the Code, (ii) to the extent necessary for any Federal officer or employee in the executive branch to comply with an ethics agreement with the Federal government, (iii) to the extent
reasonably necessary to avoid the violation of an applicable Federal, state, local, or foreign ethics law or conflicts of interest law (including where such payment is reasonably necessary to permit the Employee or Beneficiary to participate in
activities in the normal course of his or her position in which an Employee or Beneficiary would otherwise not be able to participate under an applicable rule); (iv) to pay FICA taxes on any amounts deferred under the Plan and any state, local
or foreign income tax withholding related to such FICA tax, (v) at any time the Plan fails to meet the requirements of Section 409A of the Code and the Treasury Regulations thereunder; provided however that the amount of the accelerated
payment may not exceed the amount required to be included as a result of the failure to comply with Section 409A of the Code and the Treasury Regulations thereunder; (vi) where the acceleration of the payment is made pursuant to a
termination and liquidation of the Plan in accordance with Section 1.409A-3(j)(4)(ix) of the Treasury Regulations; (vii) to reflect payment of state, local or foreign tax obligations arising from participation in the Plan that apply to the
amount deferred under the Plan before the amount is paid or made available to the Employee or Beneficiary; provided such payment may not exceed the amount of such taxes due as a result of participation in the Plan; (viii) as satisfaction of a
debt of the Employee to the Company in accordance with Section 1.409A-3(j)(4)(xiii) of the Treasury Regulations and (ix) where such payment occurs as a part of a settlement between the Employee or Beneficiary and the Company of an
arm’s length, bona fide dispute as to the Employee’s or Beneficiaries right to the deferred amount.
5.11 Compliance with
Section 409A of the Code. The Plan is intended to provide for the deferral of compensation in accordance with the provisions of Section 409A of the Code, for compensation earned, vested, or deferred after December 31, 2004.
Notwithstanding any provisions of the Plan or any election form to the contrary, no otherwise permissible election under the Plan shall be given effect that would result in the taxation of any amount under Section 409A of the Code. To the
extent permitted in guidance issued by the Secretary of the Treasury and in accordance with procedures established by the Committee, Employee’s were permitted to terminate participation in the Plan or cancel an election with respect to deferral
elections made under the Plan prior to January 1, 2005.
5.12 Transition Elections. Notwithstanding any other elections made
hereunder and only to the extent permitted by the Company and transition rules issued under Section 409A of the Code, through such dates as specified by the Company pursuant to transitional guidance issued under Section 409A of the Code,
Employees have been permitted to make one or more elections as to the time and form of payment of their excess retirement benefit under the Plan, provided that (a) any such elections made during 2005 were only available for amounts that were
payable after the 2005 calendar year and could not accelerate any payments into the 2005 calendar year, (b) any such elections made during 2006 were only available for amounts that were payable after the 2006 calendar year and could not
accelerate any payments into the 2006 calendar year, (c) any such elections made during 2007 were only available for amounts that were payable after the 2007 calendar year and could not accelerate any payments into the 2007 calendar year, and
(d) any such elections made during 2008 were only available for amounts that were payable after the 2008 calendar year and could not accelerate any payments into the 2008 calendar year.
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ARTICLE VI
CLAIMS PROCEDURES
6.1
Presentation of Claim. Any Employee or Beneficiary of a deceased Employee (such Employee or Beneficiary being referred to below as a “Claimant”) may deliver to the Committee a written claim for a determination with respect to the amounts
distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. All other claims must be made
within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.
6.2 Notification of Decision. The Committee shall consider a Claimant’s claim within a reasonable time, and shall notify the Claimant in
writing:
(a) that the Claimant’s requested determination has been made, and that the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, and such notice
must set forth in a manner calculated to be understood by the Claimant:
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(i)
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the specific reason(s) for the denial of the claim, or any part of it;
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(ii)
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specific reference(s) to pertinent provisions of the Plan upon which such denial was based;
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(iii)
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a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and
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(iv)
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an explanation of the claim review procedure set forth in Section 6.3 below.
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6.3 Review
of a Denied Claim. Within 60 days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s duly authorized representative) may file with the Committee a written request
for a review of the denial of the claim. Thereafter, but not later than 30 days after the review procedure began, the Claimant (or the Claimant’s duly authorized representative):
(a) may review pertinent documents; and/or
(b) may submit written comments or other documents.
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6.4 Decision on Review. The Committee shall render its decision on review promptly, and not later
than 60 days after the filing of a written request for review of the denial, unless special circumstances require additional time, in which case the Committee’s decision must be rendered within 120 days after such date. Such decision
must be written in a manner calculated to be understood by the Claimant, and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon which the decision was based; and
(c) such other matters as the Committee deems relevant.
6.5 Legal Action. A Claimant’s compliance with the foregoing provisions of this Article VI is a mandatory prerequisite to a
Claimant’s right to commence any legal action with respect to any claim for benefits under this Plan.
ARTICLE VII
BENEFICIARY DESIGNATION
7.1
Beneficiary. Each Employee shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the Plan to a beneficiary upon the death of an Employee. The
Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Employee participates.
7.2 Beneficiary Designation; Change; Spousal Consent. An Employee shall designate his or her Beneficiary by completing and signing the
Beneficiary Designation Form, and returning it to the Committee or its designated agent. An Employee shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and
the Committee’s rules and procedures, as in effect from time to time. If an Employee names someone other than his or her spouse as a Beneficiary, a spousal consent, in the form designated by the Committee, must be signed by that Employee’s
spouse and returned to the Committee. Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary
Designation Form filed by the Employee and accepted by the Committee prior to his or her death.
7.3 Acknowledgement. No designation or
change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Committee or its designated agent.
7.4 No Beneficiary Designation. If an Employee fails to designate a Beneficiary as provided in Sections 7.1, 7.2 and 7.3 above or, if all
designated Beneficiaries predecease the Employee or die prior to complete distribution of the Employee’s benefits, then the Employee’s designated Beneficiary shall be deemed to be his or her surviving spouse. In the event of the death of
the Employee and all of the Employee’s Beneficiaries prior to payment in full of the Employee’s excess retirement benefit, any remaining excess retirement benefit shall be paid to the estate of the last to die of the Employee and the
Employee’s Beneficiaries.
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7.5 Doubt as to Beneficiary. If the Committee has any doubt as to the proper Beneficiary to
receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Employee’s Employer to withhold such payments until this matter is resolved to the Committee’s satisfaction.
7.6 Discharge of Obligations. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and
the Committee from all further obligations under this Plan with respect to the Employee.
EXECUTED this day of
, 2008.
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NORDSON CORPORATION
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By:
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Title:
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Exhibit 10-e-3
NORDSON CORPORATION
AMENDED AND RESTATED 2005 SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
[Defined Benefit]
Nordson
Corporation hereby establishes, effective as of January 1, 2009, the Nordson Corporation Amended and Restated 2005 Supplemental Executive Retirement Plan [Defined Benefit] (“Plan”) to supplement the pension benefits of certain
salaried employees designated by the Compensation Committee of the Board of Directors or its designee eligible to participate in the Plan in accordance with the terms hereof, as permitted by Section 3(36) of the Employee Retirement Income
Security Act of 1974 (“ERISA”), with respect to compensation earned for services performed by such employees for the Company or an Employer or vested after December 31, 2004. The Nordson Corporation Excess Defined Benefit Pension Plan
established effective as of November 1, 1985 (the “1985 Plan”) supplements the pension benefits of such employees with respect to compensation earned for services performed for the Company or an Employer and vested before
January 1, 2005. No provisions of this Plan shall alter, affect, or amend any provisions of the 1985 Plan applicable to compensation earned, deferred, and vested on or before December 31, 2004.
ARTICLE I
DEFINITIONS
1.1 Definitions. The following words and phrases shall have the meanings indicated, unless a different meaning is plainly required by the
context:
(a) The term “Beneficiary” shall mean one or more persons, trusts, estates or other entities designated in accordance
with Article VII, that are entitled to receive excess pension benefits under this Plan upon the death of the Employee.
(b) The term
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time. Reference to a section of the Code shall include such section and any comparable section or sections of any future legislation that amends, supplements, or
supersedes such section.
(c) The term “Committee” shall mean the Compensation Committee of the Board of Directors of the
Company, or its designee.
(d) The term “Company” shall mean Nordson Corporation, an Ohio corporation, its corporate successors,
the surviving corporation resulting from any merger of the Company with any other corporation or corporations and any successor to all or substantially all of the Company’s assets or business.
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(e) The term “Employee” shall mean any person employed by an Employer on a salaried
basis who is designated by the Committee to participate in the Plan.
(f) The term “Employer(s)” shall mean the Company and any
of its subsidiaries (now in existence of hereafter formed or acquired) that have been selected by the Committee to participate in the Plan and have adopted the Plan as a sponsor.
(g) The term “Plan” shall mean the excess defined benefit pension plan as set forth herein, together with all amendments hereto,
which Plan shall be called the “Nordson Corporation 2005 Defined Benefit Supplemental Executive Retirement Plan.”
(h) The term
“Separation from Service” shall have the meaning set forth in Section 1.409A-1(h) of the Treasury Regulations, provided that in applying Section 1.409A-1(h)(1)(ii) of the Treasury Regulations, a Separation from Service shall be
deemed to occur if the Employee’s Employer and the Employee reasonably anticipate that the level of bona fide services the Employee will perform for the Employers (whether as an Employee or as an independent contractor) will permanently
decrease to less than 50% of the average level of bona fide services performed by the Employee for the Employers (whether as an Employee or an independent contractor) over the immediately preceding 36 month period (or the full period of services
performed for the Employer if the Employee has been providing services for the Employers for less than 36 months). In the event of a disposition of assets by the Company to an unrelated person, the Company reserves the discretion to specify (in
accordance with Section 1.409A-1(h)(4) of the Treasury Regulations) whether an Employee who would otherwise experience a Separation from Service with the Company and the Employers as part of the disposition of assets will be considered to
experience a Separation from Service for purposes of Section 1.409A-1(h) of the Treasury Regulations.
(i) The term “Salaried
Pension Plan” shall mean the Nordson Corporation Salaried Employees Pension Plan in effect on the date of an employee’s retirement, death, or Separation from Service.
1.2 Additional Definitions. All other words and phrases used herein shall have the meanings given them in the Salaried Pension Plan, unless a
different meaning is clearly required by the context.
ARTICLE II
EXCESS PENSION BENEFIT
2.1
Eligibility. An Employee shall become eligible for an excess pension benefit under the Plan on the date the Employee’s benefit under the Salaried Pension Plan is first limited by Section 415 or Section 401(a)(17) of the Code.
2.2 Amount. Subject to the provisions of Article III and completion of the vesting requirement specified in Section 2.3, if applicable,
the monthly excess pension benefit
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payable to an Employee or Beneficiary shall be such an amount which, when added to the sum of the monthly pension payable (before any reduction applicable to an optional method of payment) under
the Salaried Pension Plan to such person plus the monthly benefit payable under the 1985 Plan to such person, equals the monthly pension benefit that would have been payable (before any reduction applicable to an optional method of payment) under
the Salaried Pension Plan to such person if the limitations of Section 415 and Section 401(a)(17) of the Code were not in effect and taking into consideration such other terms as agreed to between the Company and the Employee solely for
purposes of determining the amount of the excess pension benefit such as, but not limited to, additional years of service, additional final average pay, early eligibility for unreduced excess pension benefits and offset for frozen accrued benefits
from prior employers.
2.3 Vesting Requirement. Each Employee who first becomes entitled to an excess pension benefit hereunder prior to
January 1, 2009 shall at all times be 100% vested in such excess pension benefit. Each Employee who first becomes entitled to an excess pension benefit on or after January 1, 2009 shall become 100% vested in such excess pension benefit
upon the earliest of (a) the date that is 13 months after the date the Employee’s benefit under the Salaried Pension Plan is first limited by Section 415 or Section 401(a)(17) of the Code or (b) the date of the
Employee’s Death.
2.4 Form of Payment. To the extent permitted by Section 409A of the Code and Section 1.409A-2(a)(5) of
the Treasury Regulations, within 30 days following the date an Employee’s benefit under the Salaried Pension Plan is first limited by Section 415 or Section 401(a)(17) of the Code, the Employee may elect for excess pension benefits
under this Plan to be paid in the form of (a) a single lump sum or (b) a single life annuity. In the event that the vesting requirement of Section 2.3 is accelerated for an Employee on account of death, any election made by such
Employee under this Section 2.4 shall be disregarded. Further, for purposes of any Employee who elects for excess pension benefits under the Plan to be paid in the form of a single life annuity, prior to Separation from Service, such Employee
may elect to convert his excess pension benefit to any of the actuarially equivalent forms of annuity offered under the Salaried Pension Plan. If an Employee fails to make an election as to the form of payment or if an Employee’s election as to
the form of payment is invalid for any reason, the Employee shall be deemed to have elected to receive his or her excess pension benefit in the form of a single lump sum payment.
2.5 Change in Form of Payment. In addition to the initial payment election specified in Section 2.4 or any transition election specified
in Section 6.12, to the extent permitted by Section 409A of the Code, an Employee may make changes to the form of payment at any time up to 12 months before the date of the first scheduled payment; provided, however, that (a) any such
election shall not be effective for at least 12 months following the date made; and (b) to the extent required by Section 409A of the Code, as a result of any such change, payment or commencement of payment shall be delayed for 5 years
from the date the first payment was scheduled to have been paid (taking into account any delay in payment or commencement of payment under Section 2.6 on account of an Employee’s status as a Specified Employee and any other delay in
payment or commencement of payment on account of an Employee’s previous payment election change made on or after January 1, 2009).
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2.6 Payments. All payments under the Plan to an Employee or Beneficiary shall be made by the
Company from its general assets. Payment shall be made or shall commence on the first day of the month following the month in which the Employee’s Separation from Service occurs; provided, however that the excess pension benefit of a Specified
Employee of the Company shall not be paid or commence to be paid until the date that is six months following the date of such Specified Employee’s Separation from Service. On the date the payment is actually made or payments actually commence,
the Specified Employee will receive payment of all amounts that would have otherwise been paid during the six month delay but for the application of this Section 2.6 increased by interest at the 10 year Treasury rate in effect on the date of
the Specified Employee’s Separation from Service. For purposes of this Section 2.6, Specified Employees shall be determined in accordance with the Nordson Corporation Policy for Determining Specified Employees.
ARTICLE III
OPTIONAL METHODS OF
PAYMENT
3.1 Payment of the excess pension benefit to an Employee or Beneficiary shall be made in accordance with the Employee’s
election under Section 2.4 and if applicable Section 2.5. The amount of the excess pension benefit payable to an Employee or Beneficiary shall be reduced to reflect reduction for early commencement or for selection of an optional form of
payment in accordance with the applicable terms of the Salaried Pension Plan. In making the determination and reductions provided for in this Article III, the Company may rely upon calculations made by the independent actuaries for the Salaried
Pension Plan, who shall apply the assumptions then in use in connection with the Salaried Pension Plan. For purposes of calculating any Lump Sum payment under this Plan, the following actuarial assumptions shall be used: The mortality assumption
shall be the Internal Revenue Service Single Life Table under Section 1.401(a)(9)-9 of the Treasury Regulations and the interest rate assumption shall be the average 30 Year Treasury Security Rate published in the Internal Revenue Bulletin for
the month prior to the month in which the Participant’s Separation from Service occurs.
3.2 Small Benefit Cash-Out. Notwithstanding
the provisions of Section 3.1, with respect to any Employee’s excess pension benefit under the Plan that would otherwise be paid as an annuity under Section 3.1, if the aggregate actuarial value of all remaining excess pension
benefits payable to an Employee under the Plan and any other nonqualified deferred compensation arrangement that is aggregated with the Plan under Section 1.409A-1(c) of the Treasury Regulations as of the date payment is scheduled to commence
is not greater than the applicable dollar amount in effect on such date under Section 402(g)(1)(B) of the Code, the Company shall pay the excess retirement benefit under the Plan in a single lump sum; provided, however, that payment of an
excess pension benefit to any Specified Employee as defined in Section 2.6 will be made in accordance with the portions of Section 2.6 applicable to Specified Employees.
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ARTICLE III-A
SURVIVOR BENEFITS
3A.1 Death
before Separation From Service. (a) If an Employee dies before a Separation from Service and a benefit is payable to the Employee’s surviving spouse under the Salaried Pension Plan, the Employee’s surviving spouse shall be eligible
for an excess pension benefit under this Section 3A.1. The survivor benefit payable to an Employee’s surviving spouse under this Section 3A.1 shall equal the amount which, when added to the sum of the monthly pension payable (before
any reduction applicable to an optional method of payment) under the Salaried Pension Plan to the surviving spouse plus the monthly benefit payable under the 1985 Plan to the surviving spouse, equals the monthly pension benefit that would have been
payable (before any reduction applicable to an optional method of payment) under the Salaried Pension Plan to the surviving spouse if the limitations of Section 415 and Section 401(a)(17) of the Code were not in effect and taking into
consideration such other terms as agreed to between the Company and the Employee solely for purposes of determining the amount of the excess pension benefit such as, but not limited to, additional years of service, additional final average pay,
early eligibility for unreduced excess pension benefits and offset for frozen accrued benefits from prior employers.
(b) The survivor
benefit payable under this Section 3A.1 shall be paid to the Employee’s surviving spouse in the form of a joint and fifty percent survivor annuity commencing on the first day of the month following the date of the Employee’s death, or
if later, on the first day of the month following the month in which the Employee would have attained age 55 (calculated as if the Employee had a Separation from Service on the day before the date of his death and (i) if the Employee has
already attained age 55 as of the date of his death, commenced payment on the date of his death and died immediately after his receipt of such first payment or (ii) if the Employee has not already attained age 55 as of the date of his death,
commenced payment on the date of his 55th birthday and died immediately after his receipt of such firm payment); provided, however, that if the aggregate value of all remaining surviving spouse benefits payable to the Employee’s surviving
spouse under the Plan and any other nonqualified deferred compensation arrangement that is aggregated with the Plan under Section 1.409A-1(c) of the Treasury Regulations as of the date payment is scheduled to commence is not greater than the
applicable dollar amount in effect on such date under Section 402(g)(1)(B) of the Code, the Company shall pay the excess retirement benefit under the Plan in a single lump sum.
3A.2 Death After Separation from Service. If an Employee dies after Separation from Service a benefit will only be payable to the
Employee’s surviving spouse or Beneficiary if the form of payment elected by the Employee requires benefits to continue to the Employee’s surviving spouse or Beneficiary following the death of the Employee.
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ARTICLE IV
ADMINISTRATION
4.1 Committee
Duties. This Plan will be administered by the Committee. The Committee will, subject to the terms of this Plan, have the authority to: (i) approve for participation employees who are recommended for participation by the president and Chief
Executive Officer of the Company, (ii) adopt, alter, and repeal administrative rules and practices governing this Plan, (iii) interpret the terms and provisions of this Plan, and (iv) otherwise supervise the administration of this
Plan. All decisions by the Committee will be made with the approval of not less than a majority of its members. The Committee may delegate any of its authority to any other person or persons that it deems appropriate, provided the delegation does
not cause this Plan or any awards granted under this Plan to fail to qualify for the exemption provided by Rule 16b-3, or, if applicable, to meet the requirements of the regulations under Section 162(m) of the Code.
4.2 Administration Upon Change In Control. For purposes of this Plan, the Company shall be the “Administrator” at all times prior to
the occurrence of a Change in Control (as such term is defined in the Nordson Corporation 2005 Deferred Compensation Plan Effective January 1, 2005 (As Amended and Restated Effective January 1, 2009)). Upon and after the occurrence of a
Change in Control, the “Administrator” shall be an independent third party selected by the individual who, immediately prior to such event, was the Company’s Chief Executive Officer or, if not so identified, the Company’s then
highest ranking officer (the “Ex-Chief Executive Officer”). The Administrator shall have the discretionary power to determine all questions arising in connection with the administration of the Plan and the interpretation of the Plan
including, but not limited to benefit entitlement determinations. Upon and after the occurrence of a Change in Control, the Company must: (1) pay all reasonable administrative expenses and fees of the Administrator; (2) indemnify the
Administrator against any costs, expenses and liabilities including, without limitation, attorney’s fees and expenses arising in connection with the performance of the Administrator hereunder, except with respect to matters resulting from the
gross negligence or willful misconduct of the Administrator or its employees or agents; and (3) supply full and timely information to the Administrator on all matters relating to the Plan, the Participants and their Beneficiaries, the excess
pension benefits of the Participants, the date of circumstances of the retirement, disability, death or Separation from Service of the Participants, and such other pertinent information as the Administrator may reasonably require. Upon and after a
Change in Control, the Administrator may be terminated (and a replacement appointed) by the Ex-Chief Executive Officer. Upon and after a Change in Control, the Administrator may not be terminated by the Company.
4.3 Agents. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative
duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to any Employer.
4.4 Binding Effect of Decisions. All decisions by the Committee, and by any other person or persons to whom the Committee has delegated
authority, shall be final and conclusive and binding upon all persons having any interest in the Plan.
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4.5 Indemnity of Committee. The Company shall indemnify and hold harmless the members of the
Committee, and any Employee to whom the duties of the Committee may be delegated, and the Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except
in the case of willful misconduct by the Committee, any of its members, any such Employee or the Administrator.
4.6 Employer Information.
To enable the Committee and/or Administrator to perform its functions, the Company and each Employer shall supply full and timely information to the Committee and/or Administrator, as the case may be, on all matters relating to the compensation of
its Participants, the date and circumstances of the retirement, disability, death or Separation from Service of its Participants, and such other pertinent information as the Committee or Administrator may reasonably require.
ARTICLE V
AMENDMENT AND
TERMINATION
The Company reserves the right to amend or terminate the Plan at any time by action of its Board of Directors. Any such
termination of the Plan shall be in accordance with Section 1.409A-3(j)(4)(ix) of the Treasury Regulations or as otherwise may be permitted by future Regulations or other guidance under Section 409A of the Code. No such action shall
adversely affect any Employee or Beneficiary who is receiving excess pension benefits under the Plan, unless an equivalent benefit is provided under the Salaried Pension Plan or another plan sponsored by the Company and such equivalent benefit is
payable at the same time and in the same form as the excess pension benefit otherwise payable from this Plan. The Company specifically reserves the right to amend the Plan to conform the provisions of the Plan to the guidance issued by the Secretary
of the Treasury with respect to Section 409A of the Code, in accordance with such guidance.
ARTICLE VI
MISCELLANEOUS
6.1 Non-Alienation
of Retirement Rights or Benefits. Except in the case of a domestic relations order within the meaning of Section 414(p)(1)(B) of the Code, Employees or Beneficiaries are not permitted to assign, transfer, alienate or otherwise encumber the
right to receive payments under the Plan. Except in the case of a domestic relations order within the meaning of Section 414(p)(1)(B) of the Code, any attempt to do so or to permit the payments to be subject to garnishment, attachment or levy
of any kind will permit the Company to make payments directly to and for the benefit of the Employee, Beneficiary or any other person. Each such payment may be made without the intervention of a guardian. The receipt of the payee shall constitute a
complete acquittance to the Company with respect to any payments, and the Company shall have no responsibility for the proper application of any payment.
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6.2 Incapacity. The Company shall be permitted to make payments in the same manner as provided
for in Section 6.1 if in the judgment of the Company, an Employee or Beneficiary is incapable of attending to his financial affairs.
6.3 Plan Non-Contractual. This Plan shall not be construed as a commitment or agreement on the part of any person employed by the Company to
continue his employment with the Company, nor shall it be construed as a commitment on the part of the Company to continue the employment or the annual rate of compensation of any such person for any period. All Employees shall remain subject to
discharge to the same extent as if the Plan had never been established.
6.4 Interest of Employee. The obligation of the Company under the
Plan to provide an Employee or Beneficiary with an excess pension benefit merely constitutes the unsecured promise of the Company to make payments as provided herein, and no person shall have any interest in, or a lien or prior claim upon, any
property of the Company.
6.5 Controlling Status. No Employee or Beneficiary shall be eligible for a benefit under the Plan unless such
Employee is an Employee on the date of his retirement, death, or Separation from Service.
6.6 Claims of Other Persons. The provisions of
the Plan shall in no event be construed as giving any person, firm or corporation any legal or equitable right as against the Company, its officers, employees, or directors, except any such rights as are specifically provided for in the Plan or are
hereafter created in accordance with the terms and provisions of the Plan.
6.7 No Competition. The right of any Employee or Beneficiary
to an excess pension benefit will be terminated, or, if payment thereof has begun, all further payments will be discontinued and forfeited in the event the Employee or Beneficiary at any time subsequent to the effective date hereof:
(i) wrongfully discloses any secret process or trade secret of the Company or any of its subsidiaries, or
(ii) becomes involved directly or indirectly as an officer, trustee, employee, consultant, partner, or substantial shareholder, on his own
account or in any other capacity, in a business venture that within the two-year period following his Separation from Service, the Company’s Board of Directors determines to be competitive with the Company.
6.8 Severability. The invalidity or unenforceability of any particular provision of the Plan shall not effect any other provision hereof, and
the Plan shall be construed in all respects as if such invalid or unenforceable provision were omitted therefrom.
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6.9 Governing Law. The provisions of the Plan shall be governed and construed in accordance with
the laws of the State of Ohio to the extent not preempted by ERISA.
6.10 Permissible Accelerations. Notwithstanding any other provision
of the Plan to the contrary, in accordance with Section 1.409A-3(j)(4) of the Treasury Regulations, the Company may, in its sole discretion, cause payments to or on behalf of an Employee to be accelerated (i) to the extent necessary to
fulfill a domestic relations order (as defined in Section 414(p)(1)(B) of the Code, (ii) to the extent necessary for any Federal officer or employee in the executive branch to comply with an ethics agreement with the Federal government,
(iii) to the extent reasonably necessary to avoid the violation of an applicable Federal, state, local, or foreign ethics law or conflicts of interest law (including where such payment is reasonably necessary to permit the Employee or
Beneficiary to participate in activities in the normal course of his or her position in which an Employee or Beneficiary would otherwise not be able to participate under an applicable rule); (iv) to pay FICA taxes on any amounts deferred under
the Plan and any state, local or foreign income tax withholding related to such FICA tax, (v) at any time the Plan fails to meet the requirements of Section 409A of the Code and the Treasury Regulations thereunder; provided however that
the amount of the accelerated payment may not exceed the amount required to be included as a result of the failure to comply with Section 409A of the Code and the Treasury Regulations thereunder; (vi) where the acceleration of the payment
is made pursuant to a termination and liquidation of the Plan in accordance with Section 1.409A-3(j)(4)(ix) of the Treasury Regulations; (vii) to reflect payment of state, local or foreign tax obligations arising from participation in the
Plan that apply to the amount deferred under the Plan before the amount is paid or made available to the Employee or Beneficiary; provided such payment may not exceed the amount of such taxes due as a result of participation in the Plan;
(viii) as satisfaction of a debt of the Employee to the Company in accordance with Section 1.409A-3(j)(4)(xiii) of the Treasury Regulations and (ix) where such payment occurs as a part of a settlement between the Employee or
Beneficiary and the Company of an arm’s length, bona fide dispute as to the Employee’s or Beneficiaries right to the deferred amount.
6.11 Compliance with Section 409A of the Code. The Plan is intended to provide for the deferral of compensation in accordance with the
provisions of Section 409A of the Code, for compensation earned, vested, or deferred after December 31, 2004. Notwithstanding any provisions of the Plan to the contrary, no benefit shall be paid under the Plan in a manner that would result
in the taxation of any amount under Section 409A of the Code.
6.12 Transition Elections. Notwithstanding any other elections made
hereunder and only to the extent permitted by the Company and transition rules issued under Section 409A of the Code, through such dates as specified by the Company pursuant to transitional guidance issued under Section 409A of the Code,
Employees have been permitted to make one or more elections as to the time and form of payment of their excess pension benefit under the Plan, provided that (a) any such elections made during 2005 were only available for amounts that were
payable after the 2005 calendar year and could not accelerate any payments into the 2005 calendar year, (b) any such elections made during 2006 were only available for amounts that were payable after the 2006 calendar year and could not
accelerate any payments into the 2006 calendar year, (c) any such elections made during 2007 were only available for amounts that
9
were payable after the 2007 calendar year and could not accelerate any payments into the 2007 calendar year, and (d) any such elections made during 2008 were only available for amounts that
were payable after the 2008 calendar year and could not accelerate any payments into the 2008 calendar year.
ARTICLE VII
BENEFICIARY DESIGNATION
7.1
Beneficiary. Each Employee shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the Plan to a Beneficiary upon the death of an Employee. The
Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Employee participates.
7.2 Beneficiary Designation; Change; Spousal Consent. An Employee shall designate his or her Beneficiary by completing and signing a
beneficiary designation form, and returning it to the Committee or its designated agent. An Employee shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the beneficiary designation form and
the Committee’s rules and procedures, as in effect from time to time. If an Employee names someone other than his or her spouse as a Beneficiary, a spousal consent, in the form designated by the Committee, must be signed by that Employee’s
spouse and returned to the Committee. Upon the acceptance by the Committee of a new beneficiary designation form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last beneficiary
designation form filed by the Employee and accepted by the Committee prior to his or her death.
7.3 Acknowledgement. No designation or
change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Committee or its designated agent.
7.4 No Beneficiary Designation. If an Employee fails to designate a Beneficiary as provided in Sections 7.1, 7.2 and 7.3 above or, if all
designated Beneficiaries predecease the Employee or die prior to complete distribution of the Employee’s benefits, then the Employee’s designated Beneficiary shall be deemed to be his or her surviving spouse. In the event of the death of
the Employee and all of the Employee’s Beneficiaries prior to payment in full of the Employee’s excess pension benefit, any remaining excess pension benefit shall be paid to the estate of the last to die of the Employee and the
Employee’s Beneficiaries.
7.5 Doubt as to Beneficiary. If the Committee has any doubt as to the proper Beneficiary to receive
payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Employee’s Employer to withhold such payments until this matter is resolved to the Committee’s satisfaction.
7.6 Discharge of Obligations. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and
the Committee from all further obligations under this Plan with respect to the Employee.
10
ARTICLE VIII
CLAIMS PROCEDURES
8.1
Presentation of Claim. Any Employee or Beneficiary of a deceased Employee (such Employee or Beneficiary being referred to below as a “Claimant”) may deliver to the Committee a written claim for a determination with respect to the amounts
distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. All other claims must be made
within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.
8.2 Notification of Decision. The Committee shall consider a Claimant’s claim within a reasonable time, and shall notify the Claimant in
writing:
(a) that the Claimant’s requested determination has been made, and that the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, and such notice
must set forth in a manner calculated to be understood by the Claimant:
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(i)
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the specific reason(s) for the denial of the claim, or any part of it;
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(ii)
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specific reference(s) to pertinent provisions of the Plan upon which such denial was based;
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(iii)
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a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and
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(iv)
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an explanation of the claim review procedure set forth in Section 8.3 below.
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8.3 Review
of a Denied Claim. Within 60 days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s duly authorized representative) may file with the Committee a written request
for a review of the denial of the claim. Thereafter, but not later than 30 days after the review procedure began, the Claimant (or the Claimant’s duly authorized representative):
(a) may review pertinent documents; and/or
(b) may submit written comments or other documents.
11
8.4 Decision on Review. The Committee shall render its decision on review promptly, and not later
than 60 days after the filing of a written request for review of the denial, unless special circumstances require additional time, in which case the Committee’s decision must be rendered within 120 days after such date. Such decision
must be written in a manner calculated to be understood by the Claimant, and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon which the decision was based; and
(c) such other matters as the Committee deems relevant.
8.5 Legal Action. A Claimant’s compliance with the foregoing provisions of this Article VIII is a mandatory prerequisite to a
Claimant’s right to commence any legal action with respect to any claim for benefits under this Plan.
EXECUTED this
day of , 2008.
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NORDSON CORPORATION
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By:
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Title:
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12
Exhibit 10-g-3
NOTICE OF SHARE-BASED AWARDS
(KEY EMPLOYEE)
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To:
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(“Grantee”)
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Date of Notice:
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Nordson Corporation, an Ohio corporation (the “Company”), grants to you, the Grantee named above, in accordance with
the terms of Nordson Corporation 2012 Stock Incentive and Award Plan (the “Plan”) and this Notice of Share-Based Awards (“Notice”), the following Awards:
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Award Type
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Date of
Grant
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# of Options /
Shares /
Target
Opportunity
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Exercise
Price
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Vesting Date
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Non-qualified Stock Option
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[
—
]
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[
—
]
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$
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[
—
] per Share
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Equal annual installments on each of the first four anniversaries of the Date of Grant
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Restricted Shares
[if applicable]
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[
—
]
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[
—
]
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N/A
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Equal annual installments on each of the first three anniversaries of the Date of Grant
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Performance Share Units
1
(FY [
—
] Performance Share Incentive Award)
[if
applicable]
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[
—
]
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[
—
] units
(Target)
2
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N/A
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[
—
]
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1
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Actual payout amount to be determined at the conclusion of the performance period.
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2
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Fractional Shares or Units will be subject to rounding conventions adopted by the Company from time to time; provided that in no event will the total Shares or Units issued exceed the total Shares or Units granted under
the award.
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I.
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Terms of Grant
. See Appendix A to this Notice.
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II.
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Impact of Termination of Employment
. See Appendix B to this Notice
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- Notice -
1 of 34
NOTICE OF SHARE-BASED AWARDS
(KEY EMPLOYEE)
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To:
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(“Grantee”)
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Date of Notice:
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III.
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Performance Objectives:
[if applicable]
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A.
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FY
[
—
]
Performance Share Incentive Award
. Payment of any unrestricted Nordson Common Shares under the Performance Share Incentive Award is contingent
upon the Company’s achievement of specified performance levels of [
—
] over the performance period (FY [
—
] through FY [
—
]) as set out in the table below.
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[Insert measure(s) and levels established by the Compensation Committee.
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Threshold
(50%
payout)
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Target
(100%
payout)
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Maximum
(200%
payout)
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$
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[
—
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]
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$
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[
—
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]
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$
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[
—
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]
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The Compensation Committee, in its sole discretion, may modify the performance measure(s) applicable to the
Award, or the related threshold, target and maximum performance levels, or the actual payouts, in whole or in part, as the Committee deems appropriate and equitable to reflect a change in the business, operations, corporate structure or capital
structure of the Company or its affiliates, the manner in which it conducts its business, or other events or circumstances.
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IV.
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Miscellaneous Provisions
:
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A.
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Forfeiture
. The stock option award is subject to forfeiture as provided in Appendix C, “Harmful Activity.”
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B.
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No Employment Contract
. Nothing contained in this Notice shall confer upon you any right with respect to continuance of employment by the Company and its Subsidiaries, nor limit or affect in any manner the right
of the Company and its Subsidiaries to terminate your employment or adjust your compensation.
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C.
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Relation to Other Benefits
. Any economic or other benefit to you under this Notice or the Plan shall not be taken into account in determining any benefits to which you may be entitled under any profit-sharing,
retirement, life insurance or other benefit or compensation plan maintained by the Company or a Subsidiary unless expressly provided for in the respective plans.
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D.
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Compliance with Law
. The Company shall make reasonable efforts to comply with all applicable federal and state securities laws and listing requirements with respect to the awards; provided that, notwithstanding
any other provision of this Notice, and only to the extent permitted under Section 409A of the Code, the Company shall not be obligated to deliver any Shares pursuant to this Notice if the delivery thereof would result in a violation of any
such law or listing requirement.
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- Notice -
2 of 34
NOTICE OF SHARE-BASED AWARDS
(KEY EMPLOYEE)
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To:
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(“Grantee”)
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Date of Notice:
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E.
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Amendments
. Subject to the terms of the Plan, the Committee may modify this Notice upon written notice to you. Any amendment to the Plan shall be deemed to be an amendment to this Notice to the extent that the
amendment is applicable hereto. Notwithstanding the foregoing, no amendment of the Plan or this Notice shall adversely affect your rights under this Notice without your consent unless the Committee determines, in good faith, that such amendment is
required for the Notice to either be exempt from the application of, or comply with, the requirements of Section 409A of the Code, or as otherwise may be provided in the Plan.
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F.
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Severability
. In the event that one or more of the provisions of this Notice shall be invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable
from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.
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G.
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Relation to Plan
. This Notice (along with Appendices A, B and C) is subject to the terms and conditions of the Plan and, together with the Plan, contain the entire understanding of the parties with respect to the
subject matter contained in this Notice, and supersede all prior written or oral communications, representations and negotiations in respect thereto. In the event of any inconsistency between the provisions of this Notice and the Plan, the Plan
shall govern. Capitalized terms used herein (and the related Appendices A, B and C) without definition shall have the meanings assigned to them in the Plan. See Appendices D and E to this Notice for the Plan Document and Plan Summary, respectively.
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H.
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Successors and Assigns
. The provisions of this Notice shall inure to the benefit of, and be binding upon your successors, administrators, heirs, legal representatives and assigns, and the successors and assigns
of the Company.
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I.
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Governing Law
. The interpretation, performance, and enforcement of this Notice shall be governed by the laws of the State of Ohio, without giving effect to the principles of conflict of laws thereof.
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J.
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Electronic Delivery
. You hereby consent and agree to electronic delivery of any documents that the Company may elect to deliver (including, but not limited to, grant or award notifications, account statements,
annual and quarterly reports, and all other forms of communications) in connection with this and any other award made or offered under the Plan. You have the right at any time to request that the Company deliver written copies of any and all
materials referred to above at no charge. You also hereby consent to any and all procedures the Company has established or may establish for an electronic signature system for delivery and acceptance of any such documents that the Company may elect
to deliver, and agrees that your electronic response or signature is the same as, and shall have the same force and effect as your manual signature.
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- Notice -
3 of 34
NOTICE OF SHARE-BASED AWARDS
(KEY EMPLOYEE)
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To:
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(“Grantee”)
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Date of Notice:
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K.
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Tax Withholding
. To the extent the Company or any Subsidiary is required to withhold any federal, state, local, foreign or other taxes in connection with a Stock Option exercise, the vesting of Restricted Shares
or the settlement of Performance Share Units, then the Company or Subsidiary (as applicable) shall retain a number of Shares otherwise deliverable or vested with a value equal to the required withholding (based on the Fair Market Value of the Shares
on the applicable date); provided that in no event shall the value of the Shares retained exceed the minimum amount of taxes required to be withheld or such other amount that will not result in a negative accounting impact. Notwithstanding the
foregoing, you may elect, in accordance with procedures adopted by the Company from time to time, to either (i) pay or provide for payment of the required tax withholding, or (ii) have the required tax withholding deducted from any amount
of salary, bonus, incentive compensation or other amounts otherwise payable in cash to you; provided that the Company may require the use of one or both of these methods in the event that the Company or any Subsidiary is required to withhold taxes
at any time other than upon delivery or vesting of the Shares.
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- Notice -
4 of 34
APPENDIX A:
TERMS OF GRANT
KEY EMPLOYEE STOCK OPTION AWARDS
Each
Stock Option Award granted pursuant to the Compensation Committee’s
[
—
]
Resolution (“Resolution”), shall have, in addition to any terms and conditions set forth
in the Notice and the Plan, the following terms and conditions:
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FY
[
—
]
Key Employee Stock Option Award
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Form of Grant
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Non-qualified Stock Options
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Grant Period
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Fiscal Year [
—
]
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Date of Grant
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[
—
]
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Vesting Date
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Four equal annual installments on each of the first four anniversaries of the Date of Grant.
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Term
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Each Stock Option shall expire on midnight of the tenth anniversary of the Date of Grant.
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Exercise
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To the extent that the Stock Option becomes vested and exercisable, it may be exercised in whole or in part from time to time by written
notice to the Company or its designee stating the number of Shares for which the Stock Option is being exercised, the intended manner of payment to cover the exercise price, taxes or any brokerage fees or commissions, and such other provisions as
may be required by the Company or its designee. The vested Stock Option may be exercised prior to its expiration date, during the lifetime of the Grantee, only by the Grantee, or in the event of his legal incapacity, by his guardian or legal
representative acting on behalf of the Grantee in a fiduciary capacity under state law and court supervision. If the Grantee dies before the expiration of the Stock Option, all or part of this Stock Option may be exercised (prior to expiration) by
the personal representative of the Grantee or by any person who has acquired this Stock Option directly from the Grantee by will, bequest or inheritance but only to the extent that the Stock Option was vested and exercisable upon the Grantee’s
death.
The exercise price and taxes due as a consequence of the exercise are payable
(i) in cash or by certified or cashier’s check or other cash equivalent acceptable to the Company payable to the order of the Company, (ii) by surrender of vested Shares (including by attestation) owned by the Grantee having an aggregate Fair
Market Value at the time of exercise equal to the total exercise price, (iii) by a reduction in the number of Common Shares to be received upon exercise of the Stock Option (in which case shares may be reduced only to satisfy the minimum withholding
tax required by federal, state and local authorities, unless otherwise determined by the Committee, or (iv) by a combination of the foregoing methods.
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Delivery of Shares
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Subject to the terms and conditions contained herein, Shares shall be delivered to the Grantee as soon as administratively practicable following the date the Grantee (i) exercises the Stock Option in accordance with the procedures
outlined above, (ii) makes full payment to the Company or its designee of the exercise price and (iii) makes arrangements satisfactorily to the Company (or any Subsidiary, if applicable) for the payment of any required withholding taxes or brokerage
fees/commissions related to the exercise of the Stock Option. The Grantee shall not possess any incidents of ownership (including, without limitation, dividend and voting rights) in the Shares until such Shares have been delivered to the
Grantee.
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APPENDIX A:
TERMS OF GRANT
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FY
[
—
]
Key Employee Stock Option Award
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Transferability
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All Non-Qualified Stock Options shall be transferable and such options may be exercised by the transferee; provided, however, that (i)
Non-Qualified Stock Options shall only be transferable to Family Members, trusts with third party trustees and for the sole benefit of Family Member beneficiaries, partnerships whose only partners are Family Members, and organizations exempt from
income tax under §501(c)(3) of the Internal Revenue Code (provided, in this latter case, that all transferred Non-Qualified Stock Options must be vested); (ii) any such transfer must be without consideration (except when required by court
order); (iii) once transferred, Non-Qualified Stock Options may not be further transferred by the transferee, except (a) by will or the laws of descent and distribution or (b) for a transfer by a trust or a partnership to a trust beneficiary or a
partner, respectively; and (iv) the Company receives a copy of the document deemed necessary by the Committee establishing the validity of the transfer and requiring the transferee to accept and comply with the terms and conditions of the
Non-Qualified Stock Option, the applicable Plan and any related Committee rules.
“Family Members” shall include children, stepchildren, grandchildren, parents, stepparents, grandparents, spouses, siblings, mothers-in-law,
fathers-in-law, sons-in-law, daughters-in-law, brothers-in-law, sisters-in-law, nieces or nephews, including adoptive relationships.
In the event a Stock Option has been transferred, a Participant will be obligated to pay, on the date of exercise, all taxes associated with the exercise of
the Stock Option. If the Participant fails to so pay all taxes associated with the exercise, such taxes will be paid by reducing the number of Common Shares to be received upon exercise.
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Appendix A - 6
APPENDIX A:
TERMS OF GRANT
[If applicable]
KEY EMPLOYEE RESTRICTED SHARE AWARDS – Cliff Vesting
Each Restricted Share Award granted pursuant to the Resolution shall have, in addition to any terms and conditions set forth in the Notice and the Plan, the
following terms and conditions:
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FY
[
—
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Key Employee Restricted Share Award
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Form of Grant
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Restricted Shares
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Grant Period
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Fiscal Year [
—
]
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Date of Grant
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[
—
]
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Vesting Date
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[
—
]
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Transferability
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The Restricted Shares may not be sold, exchanged, assigned, transferred, pledged, encumbered or otherwise disposed of by the Grantee, except to the Company, by will or the laws of descent and distribution, or as may otherwise be
permitted by the Plan, until the Restricted Shares have vested. Any purported transfer or encumbrance in violation of this provision shall be void, and the other party to any such purported transaction shall not obtain any rights to or interest in
such Restricted Shares. Any permitted transferee (other than the Company) shall remain subject to all the terms and conditions applicable to the Restricted Shares prior to such transfer.
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Dividend, Voting and Other Rights
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Except as otherwise provided herein, from and after the Date of Grant, the Grantee shall have all of the rights of a shareholder with respect to the Restricted Shares, including the right to vote the Restricted Shares and receive
any cash dividends that may be paid thereon (which such cash dividends shall be paid to the Grantee at the same time they are paid to other shareholders); provided, however, that any additional Shares of the Company or other securities that the
Grantee may become entitled to receive pursuant to a stock dividend, stock split, combination of shares, recapitalization, merger, consolidation, separation or reorganization or any other change in the capital structure of the Company shall be
considered Restricted Shares and shall be subject to the same restrictions as the Restricted Shares covered by the Notice.
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Custody of Shares
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Until the Restricted Shares have vested, the Restricted Shares shall be issued in book-entry form only and shall not be represented by a certificate. The restrictions applicable to the Restricted Shares shall be reflected on the
stock transfer records maintained by or on behalf of the Company. The Grantee agrees that, in order to ensure compliance with the restrictions imposed on the Restricted Shares under the Notice, the Company may issue appropriate “stop
transfer” instructions to its transfer agent, if any. Effective until the Restricted Shares have become vested, the Grantee hereby irrevocably constitutes and appoints each of the Chief Financial Officer, General Counsel and the Vice President
of Human Resources of the Company as attorney-in-fact to transfer the Restricted Shares on the stock transfer records of the Company with full power of substitution.
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Appendix A - 7
APPENDIX A:
TERMS OF GRANT
[If applicable]
KEY EMPLOYEE PERFORMANCE SHARE INCENTIVE AWARDS
Each Performance Share Incentive Award granted pursuant to the Resolution, shall have, in addition to any terms and conditions set forth in any Notice and the
Plan, the following terms and conditions:
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FY
[
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]
-
[
—
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Key Employee Performance Share Incentive Award
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Form of Grant
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Performance Share Units
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Performance Period
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Fiscal Year [
—
] – Fiscal Year[
—
]
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Date of Grant
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[
—
]
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Payment:
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Payment of any Performance Share Units that become earned will be made in the form of Shares no later than 90 days after the end of the Performance Period. Notwithstanding the foregoing, payment of any Performance Share Units that
become earned pursuant to Section 20 of the Plan (relating to a Change in Control and Potential Change in Control) shall be paid within 60 days after they become earned; provided that if the Performance Share Units are considered a “deferral of
compensation” within the meaning of Section 409A of the Code, then they shall be paid within 60 days following the earlier of (i) the occurrence of a “change in the ownership,” a “change in the effective control” or a
“change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code; or (ii) the end of the Performance Period.
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Transferability
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The Performance Share Units subject to the Notice are personal to the Grantee and may not be sold, exchanged, assigned, transferred, pledged, encumbered or otherwise disposed of by the Grantee until they become earned and settled;
provided, however, that the Grantee’s rights with respect to such Performance Share Units may be transferred by will or pursuant to the laws of descent and distribution. Any purported transfer or encumbrance in violation of this provision shall
be void, and the other party to any such purported transaction shall not obtain any rights to or interest in such Performance Share Units.
|
|
|
|
|
Dividend, Voting and Other Rights
|
|
The Grantee shall have no rights of ownership in the Performance Share Units or in the Shares related thereto and shall have no right to dividends or dividend equivalents and no right to vote Performance Share Units or the Shares
related thereto until the date on which the Shares underlying the Performance Share Units are delivered to the Grantee.
|
Appendix A - 8
APPENDIX B:
IMPACT OF TERMINATION ON AWARDS
The following tables reflect the impact various termination of employment scenarios have on the Awards granted to key employees.
|
|
|
|
|
|
|
|
|
Reason for Termination
|
|
Impact of Termination
|
|
DEATH & DISABILITY
1
|
|
Stock Options
|
|
Restricted Shares
|
|
Performance Share
Incentive Award
2
|
|
Vesting
|
|
Full vesting of all unvested stock options awarded (e.g., accelerated vesting)
|
|
The restriction period will terminate and all restricted shares will become vested and transferable
|
|
Grantee shall earn a pro-rated number of Performance Share Units (rounded to the nearest whole number) equal to (i) the number of Performance Share Units to which the Grantee would have been entitled based on the performance of the
Company during the full performance period, multiplied by (ii) a fraction, the numerator of which is the number of days that the Grantee was employed during the Performance Period and the denominator of which is the number of days in the performance
period.
|
|
|
|
|
|
|
Option Expiration Date
|
|
Midnight of the 10
th
anniversary of the grant date.
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
Reason for Termination
|
|
Impact of Termination
|
|
RETIREMENT AT AGE 65
3
|
|
Stock Options
|
|
Restricted Shares
|
|
Performance Share
Incentive Award
2
|
|
Vesting
|
|
Grants made less than 12 months prior to termination date are forfeited;
Vesting continues for all other unvested stock options granted
|
|
Grants made less than 12 months prior to termination date are forfeited;
For all other unvested restricted shares at the time of retirement, the restriction period
will terminate and all restricted shares will become vested and transferable.
|
|
Grantee shall earn a pro-rated number of Performance Share Units (rounded to the nearest whole number) equal to (i) the number of Performance Share Units to which the Grantee would have been entitled based on the performance of the
Company during the full performance period, multiplied by (ii) a fraction, the numerator of which is the number of days that the Grantee was employed
|
APPENDIX B:
IMPACT OF TERMINATION ON AWARDS
|
|
|
|
|
|
|
|
|
Reason for Termination
|
|
Impact of Termination
|
|
RETIREMENT AT AGE 65
3
|
|
Stock Options
|
|
Restricted Shares
|
|
Performance Share
Incentive Award
2
|
|
|
|
|
|
|
|
during the performance period and the denominator of which is the number of days in the performance period.
|
|
|
|
|
|
|
Option Expiration Date
|
|
Midnight of the 10
th
anniversary of the grant date.
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
Reason for Termination
|
|
Impact of Termination
|
|
EARLY RETIREMENT
4
|
|
Stock Options
|
|
Restricted Shares
|
|
Performance Share
Incentive Award
2
|
|
Vesting
|
|
Grants made less than 12 months prior to termination date are forfeited;
Vesting continues for all other unvested stock options granted
|
|
Grants made less than 12 months prior to termination date are forfeited;
For all other unvested Restricted Shares at the time of retirement, the restriction period
will terminate with respect to that number of shares of Restricted Shares (rounded to the nearest whole number) equal to the product of (i) the total number of shares of Restricted Shares multiplied by (ii) a fraction the numerator of
which is the number of full months that have elapsed since the date of grant and the denominator of which is the number of full months of the full restriction period, and that number of shares of Restricted Shares will become vested and
transferable.
|
|
Grantee shall earn a pro-rated number of Performance Share Units (rounded to the nearest whole number) equal to (i) the number of Performance Share Units to which the Grantee would have been entitled based on the performance of the
Company during the full performance period, multiplied by (ii) a fraction, the numerator of which is the number of days that the Grantee was employed during the performance period and the denominator of which is the number of days in the performance
period.
|
Appendix B - 10
APPENDIX B:
IMPACT OF TERMINATION ON AWARDS
|
|
|
|
|
|
|
|
|
Reason for Termination
|
|
Impact of Termination
|
|
EARLY RETIREMENT
4
|
|
Stock Options
|
|
Restricted Shares
|
|
Performance Share
Incentive Award
2
|
|
|
|
|
|
The Committee may, in its discretion, waive the forfeiture of any or all such remaining shares.
|
|
|
|
|
|
|
|
|
Option Expiration Date
|
|
Earlier of (i) the 5
th
anniversary of the date of termination or (ii) midnight of the 10
th
anniversary of the grant date.
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
Reason for Termination
|
|
Impact of Termination
|
|
INVOLUNTARY TERMINATION
(other than a violation of the
Company’s Code of Ethics and
Business Conduct)
|
|
Stock Options
|
|
Restricted Shares
|
|
Performance Share
Incentive Award
2
|
|
Vesting
|
|
All unvested options are forfeited as of the termination date
|
|
All unvested shares of restricted stock will be forfeited as of the date of termination; except that the Committee may, in its discretion, waive the automatic forfeiture of, and the restrictions on, any or all such shares.
|
|
All unvested performance share units are forfeited; except that the Committee may, in its discretion, waive the automatic forfeiture of, and the restrictions on, any or all such shares.
|
|
|
|
|
|
|
Option Expiration Date
|
|
Earlier of (i) 90 days after the date of termination and (ii) midnight of the 10
th
anniversary of the grant date.
|
|
N/A
|
|
N/A
|
Appendix B - 11
APPENDIX B:
IMPACT OF TERMINATION ON AWARDS
|
|
|
|
|
|
|
|
|
Reason for Termination
|
|
Impact of Termination
|
|
VOLUNTARY TERMINATION or
TERMINATION DUE TO A
VIOLATION OF THE COMPANY’S
CODE OF ETHICS AND
BUSINESS
CONDUCT
|
|
Stock Options
|
|
Restricted Shares
|
|
Performance Share
Incentive Award
2
|
|
Vesting
|
|
All vested and unvested options are forfeited as of the termination date.
|
|
All unvested shares of restricted shares will be forfeited as of the date of termination.
|
|
All unvested performance share units are forfeited.
|
|
|
|
|
|
|
Option Expiration Date
|
|
On the termination date.
|
|
N/A
|
|
N/A
|
|
1.
|
Death and Disability: defined as a physical or mental impairment, due to accident or illness that renders a Grantee incapable of performing the duties of his normal occupation, as determined by management. Management
may, in its discretion, require that the existence of the Disability be verified by a physician approved by management.
|
|
2.
|
Achievement of performance levels will be verified by the Compensation Committee and payouts, if any, will be remitted following the conclusion of a performance period.
|
|
3.
|
Under the terms of the Nordson Corporation Salaried Employees Pension Plan for U.S. employees or applicable retirement plans for employees of Nordson international subsidiaries.
|
|
4.
|
Retirement no earlier than age 55 but before age 65, with no less than 5 years of service as defined under the Nordson Corporation Salaried Employees Pension Plan, for U.S. employees. For employees of Nordson
international subsidiaries, “early retirement” is defined as retirement no earlier than age 55 but before the normal retirement age under the applicable retirement plan.
|
Appendix B - 12
APPENDIX C:
HARMFUL ACTIVITY
“Harmful
Activity
.” If a grantee engages in any “harmful activity” prior to or within one year after termination of employment with the Company, then (a) any Covered Option held by the grantee that has vested, (b) any Profits
realized by the grantee or transferee of the grantee upon the exercise of any Covered Option and (c) any Profits realized upon the sale of any vested shares on or after one year prior to the date of termination of employment with the Company
shall inure to the Company. The aforementioned restriction shall not apply in the event that employment with the Company is terminated under the provisions of any employment agreement between the Company and the grantee, which agreement becomes
operative upon a change of control of the Company, or termination of employment under circumstances in which a grantee is entitled to severance benefits or salary continuation or similar benefits under a severance or separation pay plan.
If any vested shares of a Covered Option, or any Profits realized upon the exercise of any Covered Option inure to the benefit of the Company in accordance
with the first sentence of the previous paragraph, a grantee shall provide all such forfeited shares and pay all such Profits to the Company within 30 days after first engaging in any Harmful Activity and all Awards that have not yet vested and all
unexercised Covered Options shall immediately be forfeited and canceled. Determination as to whether a Grantee engaged in “harmful activity” prior to or within one year after termination of employment with the Company shall be at the
Committee’s discretion and such determination shall be final and conclusive.
A “harmful activity” shall have occurred if a grantee shall
engage in one or more of the following:
|
|
(a)
|
Use, publish, sell, trade or otherwise disclose Non-Public Information of the Company unless such prohibited activity was inadvertent, done in good faith and did not cause significant harm to the Company;
|
|
|
(b)
|
After written notice from the Company, fail to return to the Company any document, data, or thing in a grantee’s possession or to which a grantee has access that may involve Non-Public Information of the Company;
|
|
|
(c)
|
After notice from the Company, fail to assign to the Company all right, title, and interest in and to any confidential or non-confidential Intellectual Property which a grantee created, in whole or in part, during
employment with the Company, including, without limitation, copyrights, trademarks, service marks, and patents in or to (or associated with) such Intellectual Property;
|
|
|
(d)
|
After notice from the Company, fail to agree to do any acts and sign any document reasonably requested by the Company to assign and convey all right, title, and interest in and to any confidential or non-confidential
Intellectual Property which a grantee created, in whole or in part, during employment with the Company, including, without limitation, the signing of patent applications and assignments thereof;
|
|
|
(e)
|
Upon a grantee’s own behalf or upon behalf of any other person or entity that competes or plans to compete with the Company, solicit or entice for employment or hire any employee of the Company;
|
|
|
(f)
|
Upon a grantee’s own behalf or upon behalf of any other person or entity that competes or plans to compete with the Company, call upon, solicit,
or do business with (other than business which does not compete with any business conducted by the Company) any customer of the Company a grantee called upon, solicited, interacted with, or became acquainted with, or learned of through access to
information (whether or not such information is or was non-public) while employed at
|
Appendix C - 13
APPENDIX C:
HARMFUL ACTIVITY
|
|
the Company unless such prohibited activity was inadvertent, done in good faith, and did not involve a customer whom a grantee should have reasonably known was a customer of the Company;
|
|
|
(g)
|
Upon a grantee’s own behalf or upon behalf of any other person or entity that competes or plans to compete with the Company, engage in any business activity in competition with the Company in the same or a closely
related activity that a grantee was engaged in for the Company during the one year period prior to the termination of employment; or
|
|
|
(h)
|
Engage in behavior that violates the non-competition provision of the Employee Agreement or any non-compete provision of any employment contract between the grantee and the Company.
|
For purposes of this Attachment:
“Covered Option”
means any option for the purchase of Nordson Common Shares awarded by the Compensation Committee or Chief Executive Officer pursuant to the authority granted under the 2012 SIAP or, in the case of the Chief Executive Officer, under delegation from
the Compensation Committee.
“Intellectual Property” means any invention, idea, product, method of doing business, market or business plan,
process, program, software, formula, method, work of authorship, or other information, or thing.
“Non-Public Information” means, but is not
limited to, trade secrets, confidential processes, programs, software, formulas, methods, business information or plans, financial information, and listings of names (e.g., grantees, customers, and suppliers) that are developed, owned, utilized, or
maintained by an employer such as the Company, and that of its customers or suppliers, and that are not generally known by the public.
“Profit”
means, with respect to any Covered Option, the spread between the Fair Market Value of a share of Nordson Common Stock on the date of exercise and the exercise price, as the case may be, multiplied by the number of shares exercised under the Covered
Option.
Appendix C - 14
APPENDIX D:
NORDSON CORPORATION
2012
STOCK INCENTIVE AND AWARD PLAN
1. Establishment, Purpose, Duration.
a.
Establishment
. Nordson Corporation (the “Company”), hereby establishes an equity compensation plan to be known as the
Nordson Corporation 2012 Stock Incentive and Award Plan (the “Plan”). The Plan is effective as of December 28, 2012 (the “Effective Date”), subject to the approval of the Plan by the shareholders of the Company (the date of
such shareholder approval being the “Approval Date”). Definitions of capitalized terms used in the Plan are contained in Section 0 of the Plan.
b.
Purpose
. The purpose of the Plan is to attract and retain Directors, officers and other key employees of the Company and its
Subsidiaries and to provide to such persons incentives and rewards for superior performance.
c.
Duration
. No Award may be
granted under the Plan after the day immediately preceding the tenth (10th) anniversary of the Effective Date, or such earlier date as the Board shall determine. The Plan will remain in effect with respect to outstanding Awards until no Awards
remain outstanding.
d.
Prior Plan
. If the Company’s shareholders approve the Plan, the Nordson Corporation Amended and
Restated 2004 Long-Term Performance Plan (the “Prior Plan”) will terminate in its entirety effective on the Approval Date;
provided
that all outstanding awards under the Prior Plan as of the Approval Date shall remain outstanding
and shall be administered and settled in accordance with the provisions of the Prior Plan.
2. Definitions.
As used in the Plan,
the following definitions shall apply.
“Applicable Laws” means the applicable requirements relating to the administration of
equity-based compensation plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, the rules of any stock exchange or quotation system on which the Shares are listed or quoted and the applicable laws of any other
country or jurisdiction where Awards are granted under the Plan.
“Approval Date” has the meaning given such term in
Section 0(a).
“Award” means a Nonqualified Stock Option, Incentive Stock Option, Stock Appreciation Right, Restricted
Shares Award, Restricted Share Unit, Other Share-Based Award or Cash-Based Award granted pursuant to the terms and conditions of the Plan.
“Award Agreement” means either: (a) an agreement, either in written or electronic format, entered into by the Company and a
Participant setting forth the terms and provisions applicable to an Award granted under the Plan; or (b) a statement, either in written or electronic format, issued by the Company to a Participant describing the terms and provisions of such
Award, which need not be signed by the Participant.
“Board” means the Board of Directors of the Company.
“Cash-Based Award” shall mean a cash Award granted pursuant to Section 11 of the Plan.
“Cause” as a reason for a Participant’s termination of employment shall have the meaning assigned such term in the employment
agreement (or, if operative, the Change-in-Control Retention Agreement), if any, between the Participant and the Company or Subsidiary. If the Participant is not a party to an employment agreement (or Change-in-Control Retention Agreement) with the
Company or a Subsidiary in which such term is defined, then unless otherwise defined in the applicable Award Agreement, “Cause” shall mean (i) the commission of an act of fraud, embezzlement, theft, or other similar criminal act
constituting a felony and involving the business of the Company or its Subsidiaries, or (ii) the continued failure of the Participant to perform substantially the Participant’s duties with the Company or any of its Subsidiaries (other than
any such failure resulting from any medically determined physical or mental impairment) that is not cured by the Participant within 30 days after a written demand for substantial performance is delivered to the Participant by the Company which
specifically identifies the manner in which the Company believes that the Participant has not substantially performed the Participant’s duties.
“Change in Control” means the occurrence of one of the following events: (a) a report is filed with the SEC on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form, or report), each as promulgated pursuant to the Exchange Act, disclosing that any “person” (as the term “person” is used in
APPENDIX D:
NORDSON CORPORATION
2012
STOCK INCENTIVE AND AWARD PLAN
Section 13(d) or Section 14(d)(2) of the Exchange Act) is or has become a beneficial owner, directly or indirectly, of securities of the Company representing 35% or more of the combined
voting power of the Company’s then outstanding securities; (b) the Company is merged or consolidated with another corporation and, as a result thereof, securities representing less than 50% of the combined voting power of the surviving or
resulting corporation’s securities (or of the securities of a parent corporation in case of a merger in which the surviving or resulting corporation becomes a wholly-owned subsidiary of the parent corporation) are owned in the aggregate by
holders of the Company’s securities immediately before such merger or consolidation; (c) all or substantially all of the assets of the Company are sold in a single transaction or a series of related transactions to a single purchaser or a
group of affiliated purchasers; or (d) during any period of 24 consecutive months, individuals who were Directors at the beginning of the period cease to constitute at least a majority of the Board unless the election, or nomination for
election by the Company’s shareholders, of more than one half of any new Directors was approved by a vote of at least two-thirds of the Directors then still in office who were Directors at the beginning of the 24 month period.
“Code” means the Internal Revenue Code of 1986, as amended.
“Committee” means the Compensation Committee of the Board or such other committee or subcommittee of the Board as may be duly
appointed to administer the Plan and having such powers in each instance as shall be specified by the Board. To the extent required by Applicable Laws, the Committee shall consist of two or more members of the Board, each of whom is a
“non-employee director” within the meaning of Rule 16b-3 promulgated under the Exchange Act, an “outside director” within the meaning of regulations promulgated under Section 162(m) of the Code, and an “independent
director” within the meaning of applicable rules of any securities exchange upon which Shares are listed.
“Company” has
the meaning given such term in Section 1(a) and any successor thereto.
“Date of Grant” means the date as of which an
Award is determined to be effective and designated in a resolution by the Committee and is granted pursuant to the Plan. The Date of Grant shall not be earlier than the date of the resolution and action therein by the Committee. In no event shall
the Date of Grant be earlier than the Effective Date.
“Director” means any individual who is a member of the Board who is not
an Employee.
“Effective Date” has the meaning given such term in Section 0(a).
“Employee” means any employee of the Company or a Subsidiary;
provided
,
however
, that for purposes of determining
whether any person may be a Participant for purposes of any grant of Incentive Stock Options, the term “Employee” has the meaning given to such term in Section 3401(c) of the Code, as interpreted by the regulations thereunder and
Applicable Law.
“Exchange Act” means the Securities Exchange Act of 1934 and the rules and regulations thereunder, as such
law, rules and regulations may be amended from time to time.
“Fair Market Value” means the value of one Share on any relevant
date, determined under the following rules: (a) the closing sale price per Share on that date as reported on the principal exchange on which Shares are then trading, if any, or if applicable the NASDAQ Global Select Market, or if there are no
sales on that date, on the next preceding trading day during which a sale occurred; (b) if the Shares are not reported on a principal exchange or national market system, the average of the closing bid and asked prices last quoted on that date
by an established quotation service for over-the-counter securities; or (c) if neither (a) nor (b) applies, (i) with respect to Stock Options, Stock Appreciation Rights and any Award of stock rights that is subject to
Section 409A of the Code, the value as determined by the Committee through the reasonable application of a reasonable valuation method, taking into account all information material to the value of the Company, within the meaning of
Section 409A of the Code, and (ii) with respect to all other Awards, the fair market value as determined by the Committee in good faith.
“Full Value Award” means an Award that is settled by the issuance of Shares, other than a Stock Option or a Stock Appreciation
Right.
“Good Reason” as a reason for a Participant’s termination of employment shall have the meaning assigned such term
in the Change-in-Control Retention Agreement, if any, between the Participant and the Company or Subsidiary.
16 of 34
APPENDIX D:
NORDSON CORPORATION
2012
STOCK INCENTIVE AND AWARD PLAN
“Incentive Stock Option” or “ISO” means a Stock Option that is
designated as an Incentive Stock Option and that is intended to meet the requirements of Section 422 of the Code.
“Nonqualified Stock Option” means a Stock Option that is not intended to meet the requirements of Section 422 of the Code or
otherwise does not meet such requirements.
“Other Share-Based Award” means an equity-based or equity-related Award not
otherwise described by the terms of the Plan, granted in accordance with the terms and conditions set forth in Section 10.
“Participant” means any eligible individual as set forth in Section 5 who holds one or more outstanding Awards.
“Performance-Based Exception” means the performance-based exception from the tax deductibility limitations of Section 162(m)
of the Code.
“Performance Objectives” means the performance objective or objectives established by the Committee pursuant to
the Plan. Any Performance Objectives may relate to the performance of the Company or one or more of its Subsidiaries, divisions, departments, units, functions, partnerships, joint ventures or minority investments, product lines or products, or the
performance of the individual Participant, and may include, without limitation, the Performance Objectives set forth in Section 13(b). The Performance Objectives may be made relative to the performance of a group of comparable companies, or
published or special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance Objectives as compared to various stock market indices. Performance Objectives may be stated as a combination of the
listed factors.
“Plan” means this Nordson Corporation 2012 Stock and Incentive Award Plan, as amended from time to time.
“Potential Change in Control” means a report is filed with the SEC on Schedule 13D or Schedule 14D-1 (or any successor schedule,
form, or report), each as promulgated pursuant to the Exchange Act, disclosing that any “person” (as the term “person” is used in Section 13(d) or Section 14(d)(2) of the Exchange Act) is or has become a beneficial
owner, directly or indirectly, of securities of the Company representing at least 25% but less than 35% of the combined voting power of the Company’s then outstanding securities.
“Potential Change in Control Protection Period” means the period commencing on a Potential Change in Control and ending on the
earlier of (i) a Change in Control, or (ii) the second anniversary of the Potential Change in Control.
“Prior Plan”
has the meaning given such term in Section 0(d).
“Qualified Termination” means any termination of a Participant’s
employment during the Potential Change in Control Protection Period: (i) by the Company, any of its Subsidiaries or the resulting entity without Cause, or (ii) solely with respect to a Participant who is a party to a Change-in-Control
Retention Agreement with the Company or a Subsidiary immediately prior to a Potential Change in Control, by the Participant for Good Reason.
“Restricted Shares” means Shares granted or sold pursuant to Section 0 as to which neither the substantial risk of forfeiture
nor the prohibition on transfers referred to in such Section 0 has expired.
“Restricted Share Unit” means a grant or sale
of the right to receive Shares or cash at the end of a specified restricted period made pursuant to Section 0.
“SEC”
means the United States Securities and Exchange Commission.
“Share” means a share of common stock of the Company, without par
value, or any security into which such Share may be changed by reason of any transaction or event of the type referred to in Section 15.
“Stock Appreciation Right” means a right granted pursuant to Section 0.
“Stock Option” means a right to purchase a Share granted to a Participant under the Plan in accordance with the terms and
conditions set forth in Section 0. Stock Options may be either Incentive Stock Options or Nonqualified Stock Options.
17 of 34
APPENDIX D:
NORDSON CORPORATION
2012
STOCK INCENTIVE AND AWARD PLAN
“Subsidiary” means: (a) with respect to an Incentive Stock Option, a
“subsidiary corporation” as defined under Section 424(f) of the Code; and (b) for all other purposes under the Plan, any corporation or other entity in which the Company owns, directly or indirectly, a proprietary interest of
more than fifty (50%) by reason of stock ownership or otherwise.
“Ten Percent Shareholder” shall mean any Participant who
owns more than 10% of the combined voting power of all classes of stock of the Company, within the meaning of Section 422 of the Code.
3. Shares
Available Under the Plan
.
a.
Shares Available for Awards
. The maximum number of Shares that may be issued or
delivered pursuant to Awards under the Plan shall be 2,900,000, including the number of Shares that, on the Approval Date, are available to be granted under the Prior Plan but which are not then subject to outstanding awards under the Prior Plan,
all of which may be granted with respect to Incentive Stock Options. Shares issued or delivered pursuant to an Award may be authorized but unissued Shares, treasury Shares, including Shares purchased in the open market, or a combination of the
foregoing. The aggregate number of Shares available for issuance or delivery under the Plan shall be subject to adjustment as provided in Section 15.
b.
Share Counting
. The following Shares shall not count against the Share limit in Section 3(a): (i) Shares covered by
an Award that expires or is forfeited, canceled, surrendered, or otherwise terminated without the issuance of such Shares; (ii) Shares covered by an Award that is settled only in cash; (iii) Shares tendered in payment of the exercise price
of a Stock Option; (iv) Shares withheld by the Company or any Subsidiary to satisfy a tax withholding obligation; and (v) Shares granted through the assumption of, or in substitution for, outstanding awards granted by a company to
individuals who become Employees or Directors as the result of a merger, consolidation, acquisition or other corporate transaction involving such company and the Company or any of its Affiliates (except as may be required by reason of the rules and
regulations of any stock exchange or other trading market on which the Shares are listed). With respect to any Stock Appreciation Right that is settled in Shares, only the Shares used to settle the Stock Appreciation Right upon exercise shall count
against the number of Shares available for Awards under the Plan. In addition, Shares subject to outstanding awards under the Prior Plan as of the Approval Date that on or after the Approval Date are forfeited, canceled, surrendered or otherwise
terminated without the issuance of such Shares shall be available for issuance or delivery under this Plan. Notwithstanding anything contained herein to the contrary, Shares that are repurchased by the Company with Stock Option proceeds shall not be
added back to the number of Shares reserved in Section 3(a). This Section 3(b) shall apply to the number of Shares reserved and available for Incentive Stock Options only to the extent consistent with applicable Treasury regulations
relating to Incentive Stock Options under the Code.
c.
Per Participant Share Limits
. Subject to adjustment as provided in
Section 15 of the Plan, the following limits shall apply with respect to Awards that are intended to qualify for the Performance-Based Exception: (i) the maximum aggregate number of Shares that may be subject to Stock Options or Stock
Appreciation Rights granted in any calendar year to any one Participant shall be 750,000 Shares; (ii) the maximum aggregate number of Restricted Shares granted in any calendar year to any one Participant shall be 250,000 Shares; (iii) the
maximum aggregate number of shares that may be issued or delivered pursuant to Restricted Share Units or Other Share-Based Awards granted in any calendar year to any one Participant shall be 250,000 Shares, provided that if the Restricted Share
Units or Other Share-Based Awards are subject to a performance period of more than one year, the maximum shall equal the product of 250,000 Shares and the full number of years in the performance period; and (iv) the maximum aggregate
compensation that may be paid under a Cash-Based Award granted in any calendar year to any one Participant shall be $5,000,000 or a number of Shares having an aggregate Fair Market Value not in excess of such amount, provided that if the Cash-Based
Award is subject to a performance period of more than one year, the maximum shall equal the product of $5,000,000 and the full number of years in the performance period.
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4. Administration of the Plan.
a.
In General
. The Plan shall be administered by the Committee. Except as otherwise provided by the Board, the Committee shall
have full and final authority in its discretion to take all actions determined by the Committee to be necessary in the administration of the Plan, including, without limitation, discretion to: select Award recipients; determine the sizes and types
of Awards; determine the terms and conditions of Awards in a manner consistent with the Plan; grant waivers of terms, conditions, restrictions and limitations applicable to any Award, or accelerate the vesting or exercisability of any Award, in a
manner consistent with the Plan; construe and interpret the Plan and any Award Agreement or other agreement or instrument entered into under the Plan; establish, amend, or waive rules and regulations for the Plan’s administration; and take such
other action, not inconsistent with the terms of the Plan, as the Committee deems appropriate. To the extent permitted by Applicable Laws, the Committee may, in its discretion, delegate to one or more Directors or Employees any of the
Committee’s authority under the Plan. The acts of any such delegates shall be treated hereunder as acts of the Committee with respect to any matters so delegated.
b.
Determinations
. The Committee shall have no obligation to treat Participants or eligible Participants uniformly, and the
Committee may make determinations under the Plan selectively among Participants who receive, or Employees or Directors who are eligible to receive, Awards (whether or not such Participants or eligible Employees or Directors are similarly situated).
All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders and resolutions of the Committee shall be final, conclusive and binding on all persons, including the Company, its Subsidiaries, its
shareholders, Directors, Employees, Participants and their estates and beneficiaries.
c.
Authority of the Board
. The Board
may reserve to itself any or all of the authority or responsibility of the Committee under the Plan or may act as the administrator of the Plan for any and all purposes. To the extent the Board has reserved any such authority or responsibility or
during any time that the Board is acting as administrator of the Plan, it shall have all the powers of the Committee hereunder, and any reference herein to the Committee (other than in this Section 4(c)) shall include the Board. To the extent
that any action of the Board under the Plan conflicts with any action taken by the Committee, the action of the Board shall control.
5. Eligibility
and Participation.
Each Employee and Director is eligible to participate in the Plan. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees and Directors those to whom Awards shall
be granted and shall determine, in its sole discretion, the nature of any and all terms permissible by Applicable Law and the amount of each Award.
6.
Stock Options.
Subject to the terms and conditions of the Plan, Stock Options may be granted to Participants in such number, and upon such terms and conditions, as shall be determined by the Committee in its sole discretion.
a.
Award Agreement
. Each Stock Option shall be evidenced by an Award Agreement that shall specify the exercise price, the term of
the Stock Option, the number of Shares covered by the Stock Option, the conditions upon which the Stock Option shall become vested and exercisable and such other terms and conditions as the Committee shall determine and which are not inconsistent
with the terms and conditions of the Plan. The Award Agreement also shall specify whether the Stock Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option.
b.
Exercise Price
. The exercise price per Share of a Stock Option shall be determined by the Committee at the time the Stock
Option is granted and shall be specified in the related Award Agreement;
provided, however
, that in no event shall the exercise price per Share of any Stock Option be less than one hundred percent (100%) of the Fair Market Value of a
Share on the Date of Grant.
c.
Term
. The term of a Stock Option shall be determined by the Committee and set forth in the
related Award Agreement;
provided, however
, that in no event shall the term of any Stock Option exceed ten (10) years from its Date of Grant.
d.
Exercisability
. Stock Options shall become vested and exercisable at such times and upon such terms and conditions as shall be
determined by the Committee and set forth in the related Award Agreement. Such terms and conditions may include, without limitation, the satisfaction of (a) performance goals based on one or more Performance Objectives, and/or
(b) time-based vesting requirements.
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e.
Exercise of Stock Options
. Except as otherwise provided in the Plan or in a
related Award Agreement, a Stock Option may be exercised for all or any portion of the Shares for which it is then exercisable. A Stock Option shall be exercised by the delivery of a notice of exercise to the Company or its designee in a form
specified by the Company which sets forth the number of Shares with respect to which the Stock Option is to be exercised and full payment of the exercise price for such Shares. The exercise price of a Stock Option may be paid, in the discretion of
the Committee and as set forth in the applicable Award Agreement: (i) in cash or its equivalent; (ii) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the aggregate exercise price; (iii) by a cashless exercise (including by withholding Shares deliverable upon exercise and through a broker-assisted arrangement to the extent permitted by Applicable Laws); (iv) by a
combination of the methods described in clauses (i), (ii) and/or (iii); or (v) through any other method approved by the Committee in its sole discretion. As soon as practicable after receipt of the notification of exercise and full payment
of the exercise price, the Company shall cause the appropriate number of Shares to be issued to the Participant.
f.
Special Rules
Applicable to Incentive Stock Options
. Notwithstanding any other provision in the Plan to the contrary:
(i) Incentive Stock
Options may be granted only to Employees of the Company and its Subsidiaries. The terms and conditions of Incentive Stock Options shall be subject to and comply with the requirements of Section 422 of the Code.
(ii) To the extent that the aggregate Fair Market Value of the Shares (determined as of the Date of Grant) with respect to which an Incentive
Stock Option is exercisable for the first time by any Participant during any calendar year (under all plans of the Company and its Subsidiaries) is greater than $100,000 (or such other amount specified in Section 422 of the Code), as calculated
under Section 422 of the Code, then the Stock Option shall be treated as a Nonqualified Stock Option.
(iii) No Incentive Stock
Option shall be granted to any Participant who, on the Date of Grant, is a Ten Percent Shareholder, unless (x) the exercise price per Share of such Incentive Stock Option is at least one hundred and ten percent (110%) of the Fair Market
Value of a Share on the Date of Grant, and (y) the term of such Incentive Stock Option shall not exceed five (5) years from the Date of Grant.
7. Stock Appreciation Rights.
Subject to the terms and conditions of the Plan, Stock Appreciation Rights may be granted to Participants in such
number, and upon such terms and conditions, as shall be determined by the Committee in its sole discretion.
a.
Award
Agreement
. Each Stock Appreciation Right shall be evidenced by an Award Agreement that shall specify the exercise price, the term of the Stock Appreciation Right, the number of Shares covered by the Stock Appreciation Right, the conditions
upon which the Stock Appreciation Right shall become vested and exercisable and such other terms and conditions as the Committee shall determine and which are not inconsistent with the terms and conditions of the Plan.
b.
Exercise Price
. The exercise price per Share of a Stock Appreciation Right shall be determined by the Committee at the time the
Stock Appreciation Right is granted and shall be specified in the related Award Agreement;
provided, however
, that in no event shall the exercise price per Share of any Stock Appreciation Right be less than one hundred percent (100%) of
the Fair Market Value of a Share on the Date of Grant.
c.
Term
. The term of a Stock Appreciation Right shall be determined by
the Committee and set forth in the related Award Agreement;
provided, however
, that in no event shall the term of any Stock Appreciation Right exceed ten (10) years from its Date of Grant.
d.
Exercisability of Stock Appreciation Rights
. A Stock Appreciation Right shall become vested and exercisable at such times and
upon such terms and conditions as may be determined by the Committee and set forth in the related Award Agreement. Such terms and conditions may include, without limitation, the satisfaction of (i) performance goals based on one or more
Performance Objectives, and/or (ii) time-based vesting requirements.
e.
Exercise of Stock Appreciation Rights
. Except as
otherwise provided in the Plan or in a related Award Agreement, a Stock Appreciation Right may be exercised for all or any portion of the Shares for
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which it is then exercisable. A Stock Appreciation Right shall be exercised by the delivery of a notice of exercise to the Company or its designee in a form specified by the Company which sets
forth the number of Shares with respect to which the Stock Appreciation Right is to be exercised. Upon exercise, a Stock Appreciation Right shall entitle a Participant to an amount equal to (a) the excess of (i) the Fair Market Value of a
Share on the exercise date over (ii) the exercise price per Share, multiplied by (b) the number of Shares with respect to which the Stock Appreciation Right is exercised. A Stock Appreciation Right may be settled in whole Shares, cash or a
combination thereof, as specified by the Committee in the related Award Agreement.
8. Restricted Shares.
Subject to the terms and conditions
of the Plan, Restricted Shares may be granted or sold to Participants in such number, and upon such terms and conditions, as shall be determined by the Committee in its sole discretion.
a.
Award Agreement
. Each Restricted Shares Award shall be evidenced by an Award Agreement that shall specify the number of
Restricted Shares, the restricted period(s) applicable to the Restricted Shares, the conditions upon which the restrictions on the Restricted Shares will lapse and such other terms and conditions as the Committee shall determine and which are not
inconsistent with the terms and conditions of the Plan.
b.
Terms, Conditions and Restrictions
. The Committee shall impose
such other terms, conditions and/or restrictions on any Restricted Shares as it may deem advisable, including, without limitation, a requirement that the Participant pay a purchase price for each Restricted Share, restrictions based on the
achievement of specific Performance Objectives, time-based restrictions or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Shares. Unless otherwise provided in the related Award Agreement
or required by applicable law, the restrictions imposed on Restricted Shares shall lapse upon the expiration or termination of the applicable restricted period and the satisfaction of any other applicable terms and conditions. Subject to Sections 18
and 20 of the Plan, or as otherwise provided in the related Award Agreement in connection with a Change in Control or a Participant’s death, disability, retirement, involuntary termination of employment or service without Cause or termination
of employment or service for good reason, (i) no condition on vesting of Restricted Shares that is based upon the achievement of Performance Objectives shall be based on performance over a period of less than one year, and (ii) no
condition on vesting of Restricted Shares that is based solely upon continued employment or service shall provide for vesting in full of the Restricted Shares more quickly than three (3) years from the Date of Grant of the Award (which vesting
period may lapse on a pro-rated, graded, or cliff basis as specified in the Award Agreement);
provided
,
however
, that up to five percent (5%) of the Shares available for grant as Restricted Shares (together with all other Shares
available for grant as Full Value Awards) may be granted with a vesting period of at least one (1) year, regardless of whether vesting is conditioned upon the achievement of Performance Objectives;
provided further
that these minimum
vesting provisions shall not apply to any grant of Restricted Shares to Directors.
c.
Custody of Certificates
. To the extent
deemed appropriate by the Committee, the Company may retain the certificates, if any, representing Restricted Shares in the Company’s possession until such time as all terms, conditions and/or restrictions applicable to such Shares have been
satisfied or lapse.
d.
Rights Associated with Restricted Shares during Restricted Period
. During any restricted period
applicable to Restricted Shares: (i) the Restricted Shares may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated; (ii) unless otherwise provided in the related Award Agreement, the Participant shall be
entitled to exercise full voting rights associated with such Restricted Shares; and (iii) the Participant shall be entitled to all dividends and other distributions paid with respect to such Restricted Shares during the restricted period. The
Award Agreement may require that receipt of any dividends or other distributions with respect to the Restricted Shares shall be subject to the same terms and conditions as the Restricted Shares with respect to which they are paid. Notwithstanding
the preceding sentence, dividends or other distributions with respect to Restricted Shares that vest based on the achievement of Performance Objectives shall be accumulated until such Award is earned, and the dividends or other distributions shall
not be paid if the Performance Objectives are not satisfied.
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9. Restricted Share Units
. Subject to the terms and conditions of the Plan, Restricted Share
Units may be granted or sold to Participants in such number, and upon such terms and conditions, as shall be determined by the Committee in its sole discretion.
a.
Award Agreement
. Each Restricted Share Unit Award shall be evidenced by an Award Agreement that shall specify the number of
units, the restricted period(s) applicable to the Restricted Share Units, the conditions upon which the restrictions on the Restricted Share Units will lapse, the time and method of payment of the Restricted Share Units, and such other terms and
conditions as the Committee shall determine and which are not inconsistent with the terms and conditions of the Plan.
b.
Terms,
Conditions and Restrictions
. The Committee shall impose such other terms, conditions and/or restrictions on any Restricted Share Units as it may deem advisable, including, without limitation, a requirement that the Participant pay a
purchase price for each Restricted Share Unit, restrictions based on the achievement of specific Performance Objectives and/or time-based restrictions or holding requirements. Subject to Sections 18 and 20 of the Plan, or as otherwise provided in
the related Award Agreement in connection with a Change in Control or a Participant’s death, disability, retirement, involuntary termination of employment or service without Cause or termination of employment or service for good reason,
(i) no condition on vesting of Restricted Share Units that is based upon the achievement of Performance Objectives shall be based on performance over a period of less than one year, and (ii) no condition on vesting of Restricted Share
Units that is based solely upon continued employment or service shall provide for vesting in full of the Restricted Share Units more quickly than three (3) years from the Date of Grant of the Award (which vesting period may lapse on a
pro-rated, graded, or cliff basis as specified in the Award Agreement);
provided
,
however
, that up to five percent (5%) of the Shares available for grant as Restricted Share Units (together with all other Shares available for
grant as Full Value Awards) may be granted with a vesting period of at least one (1) year, regardless of whether vesting is conditioned upon the achievement of Performance Objectives;
provided further
that these minimum vesting
provisions shall not apply to any grant of Restricted Share Units to Directors.
c.
Form of Settlement
. Restricted Share Units
may be settled in whole Shares, cash or a combination thereof, as specified by the Committee in the related Award Agreement.
d.
Dividend Equivalents
. Restricted Share Units may provide the Participant with dividend equivalents, on either a current or deferred or contingent basis, and either in cash or in additional Shares, as determined by the Committee in its
sole discretion and set forth in the related Award Agreement;
provided
that dividend equivalents with respect to Restricted Share Units that vest based on the achievement of Performance Objectives shall be accumulated until such Award is
earned, and the dividend equivalents shall not be paid if the Performance Objectives are not satisfied.
10. Other Share-Based Awards.
Subject
to the terms and conditions of the Plan, Other Share-Based Awards may be granted to Participants in such number, and upon such terms and conditions, as shall be determined by the Committee in its sole discretion. Other Share-Based Awards are Awards
that are valued in whole or in part by reference to, or otherwise based on the Fair Market Value of, Shares, and shall be in such form as the Committee shall determine, including without limitation, time-based or performance-based units that are
settled in Shares and/or cash and stock equivalent units.
a.
Award Agreement
. Each Other Share-Based Award shall be evidenced
by an Award Agreement that shall specify the terms and conditions upon which the Other Share-Based Award shall become vested, if applicable, the time and method of settlement, the form of settlement and such other terms and conditions as the
Committee shall determine and which are not inconsistent with the terms and conditions of the Plan. Subject to Sections 18 and 20 of the Plan, or as otherwise provided in the related Award Agreement in connection with a Change in Control or a
Participant’s death, disability, retirement, involuntary termination of employment or service without Cause or termination of employment or service for good reason, (i) no condition on vesting of an Other Share-Based Award that is based
solely upon the achievement of Performance Objectives shall be based on performance over a period of less than one year, and (ii) no condition on vesting of an Other Share-Based Award that is based upon continued employment or service shall
provide for vesting in full of the Other Share-Based Award more quickly than three (3) years from the Date of Grant of the Award (which vesting period may lapse on a pro-rated, graded, or cliff basis as specified in the Award Agreement);
provided
,
however
, that up to five percent
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(5%) of the Shares available for grant as Other Share-Based Awards (together with all other Shares available for grant as Full Value Awards) may be granted with a vesting period of at least
one (1) year, regardless of whether vesting is conditioned upon the achievement of Performance Objectives;
provided further
that these minimum vesting provisions shall not apply to any grant of Other Share-Based Awards to Directors.
b.
Form of Settlement
. An Other Share-Based Award may be settled in whole Shares, cash or a combination thereof, as specified by
the Committee in the related Award Agreement.
c.
Dividend Equivalents
. Other Share-Based Awards may provide the Participant
with dividend equivalents, on either a current or deferred or contingent basis, and either in cash or in additional Shares, as determined by the Committee in its sole discretion and set forth in the related Award Agreement;
provided
that
dividend equivalents with respect to Other Share-Based Awards that vest based on the achievement of Performance Objectives shall be accumulated until such Award is earned, and the dividend equivalents shall not be paid if the Performance Objectives
are not satisfied.
11. Cash-Based Awards.
Subject to the terms and conditions of the Plan, Cash-Based Awards may be granted to Participants
in such amounts and upon such other terms and conditions as shall be determined by the Committee in its sole discretion. Each Cash-Based Award shall be evidenced by an Award Agreement that shall specify the payment amount or payment range, the time
and method of settlement and the other terms and conditions, as applicable, of such Award which may include, without limitation, restrictions based on the achievement of specific Performance Objectives.
12. Compliance with Section 409A.
Awards granted under the Plan shall be designed and administered in such a manner that they are either
exempt from the application of, or comply with, the requirements of Section 409A of the Code. To the extent that the Committee determines that any award granted under the Plan is subject to Section 409A of the Code, the Award Agreement
shall incorporate the terms and conditions necessary to avoid the imposition of an additional tax under Section 409A of the Code upon a Participant. Notwithstanding any other provision of the Plan or any Award Agreement (unless the Award
Agreement provides otherwise with specific reference to this Section): (i) an Award shall not be granted, deferred, accelerated, extended, paid out, settled, substituted or modified under the Plan in a manner that would result in the imposition
of an additional tax under Section 409A of the Code upon a Participant; and (ii) if an Award is subject to Section 409A of the Code, and if the Participant holding the award is a “specified employee” (as defined in
Section 409A of the Code, with such classification to be determined in accordance with the methodology established by the Company), then, to the extent required to avoid the imposition of an additional tax under Section 409A of the Code
upon a Participant, no distribution or payment of any amount shall be made before the date that is six (6) months following the date of such Participant’s “separation from service” (as defined in Section 409A of the Code)
or, if earlier, the date of the Participant’s death. Although the Company intends to administer the Plan so that Awards will be exempt from, or will comply with, the requirements of Section 409A of the Code, the Company does not warrant
that any Award under the Plan will qualify for favorable tax treatment under Section 409A of the Code or any other provision of federal, state, local, or non-United States law. The Company shall not be liable to any Participant for any tax,
interest, or penalties the Participant might owe as a result of the grant, holding, vesting, exercise, or payment of any Award under the Plan.
13.
Compliance with Section 162(m).
a.
In General
. Notwithstanding anything in the Plan to the contrary, Awards may be
granted in a manner that is intended to qualify for the Performance-Based Exception. As determined by the Committee in its sole discretion, the grant, vesting, exercisability and/or settlement of any Restricted Shares, Restricted Share Units Other
Share-Based Awards and Cash-Based Awards intended to qualify for the Performance-Based Exception shall be conditioned on the attainment of one or more Performance Objectives during a performance period established by the Committee and must satisfy
the requirements of this Section 13.
b.
Performance Objectives
. If an Award is intended to qualify for the
Performance-Based Exception, then the Performance Objectives shall be based on specified levels of or growth in one or more of the following criteria: return on net assets, return on capital employed, economic value added, sales, revenue, earnings
per share, operating income, net income, earnings before interest and taxes,
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return on equity, total shareholder return, market valuation, cash flow, completion of acquisitions, product and market development, inventory management, working capital management and customer
satisfaction. The foregoing business criteria may be clarified by reasonable definitions adopted from time to time by the Committee, which may include or exclude any items as the Committee may specify, including but not limited to: extraordinary,
unusual or non-recurring items; effects of accounting changes; effects of currency fluctuations; effects of financing activities; effects relating to the impairment of goodwill or other intangible assets; expenses for restructuring or productivity
initiatives; non-operating items; acquisition expenses; and effects of acquisitions, divestitures or reorganizations.
c.
Establishment
of Performance Goals
. With respect to Awards intended to qualify for the Performance-Based Exception, the Committee shall establish: (i) the applicable Performance Objectives and performance period, and (ii) the formula for
computing the payout. Such terms and conditions shall be established in writing while the outcome of the applicable performance period is substantially uncertain, but in no event later than the earlier of: (x) ninety days after the beginning of
the applicable performance period; or (y) the expiration of twenty-five percent (25%) of the applicable performance period.
d.
Certification of Performance
. With respect to any Award intended to qualify for the Performance-Based Exception, the Committee shall certify in writing whether the applicable Performance Objectives and other material terms imposed on
such Award have been satisfied, and, if they have, ascertain the amount of the payout or vesting of the Award. Notwithstanding any other provision of the Plan, payment or vesting of any such Award shall not be made until the Committee certifies in
writing that the applicable Performance Objectives and any other material terms of such Award were in fact satisfied in a manner conforming to applicable regulations under Section 162(m) of the Code.
e.
Negative Discretion
. With respect to any Award intended to qualify for the Performance-Based Exception, after the date that the
Performance Objectives are required to be established in writing pursuant to Section 13(c), the Committee shall not have discretion to increase the amount of compensation that is payable upon achievement of the designated Performance
Objectives. However, the Committee may, in its sole discretion, reduce the amount of compensation that is payable upon achievement of the designated Performance Objectives.
14. Transferability.
Except as otherwise determined by the Committee, no Award or dividend equivalents paid with respect to any Award shall be
transferable by the Participant except by will or the laws of descent and distribution;
provided
, that if so determined by the Committee, each Participant may, in a manner established by the Board or the Committee, designate a beneficiary to
exercise the rights of the Participant with respect to any Award upon the death of the Participant and to receive Shares or other property issued or delivered under such Award. Except as otherwise determined by the Committee, Stock Options and Stock
Appreciation Rights will be exercisable during a Participant’s lifetime only by the Participant or, in the event of the Participant’s legal incapacity to do so, by the Participant’s guardian or legal representative acting on behalf of
the Participant in a fiduciary capacity under state law and/or court supervision.
15. Adjustments.
In the event of any equity restructuring
(within the meaning of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation – Stock Compensation), such as a stock dividend, stock split, reverse stock split, spinoff, rights offering, or
recapitalization through a large, nonrecurring cash dividend, the Committee shall cause there to be an equitable adjustment in the numbers of Shares specified in Section 3 of the Plan and, with respect to outstanding Awards, in the number and
kind of Shares subject to outstanding Awards and the exercise price or other price of Shares subject to outstanding Awards, in each case to prevent dilution or enlargement of the rights of Participants. In the event of any other change in corporate
capitalization, or in the event of a merger, consolidation, liquidation, or similar transaction, the Committee may, in its sole discretion, cause there to be an equitable adjustment as described in the foregoing sentence, to prevent dilution or
enlargement of rights;
provided
,
however
, that, unless otherwise determined by the Committee, the number of Shares subject to any Award shall always be rounded down to a whole number. Notwithstanding the foregoing, the Committee shall
not make any adjustment pursuant to this Section 15 that would (i) cause any Stock Option intended to qualify as an ISO to fail to so qualify, (ii) cause an Award that is otherwise exempt from Section 409A of the Code to become
subject to Section 409A, or (iii) cause an Award that is subject
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to Section 409A of the Code to fail to satisfy the requirements of Section 409A. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and
binding on all Participants and any other persons claiming under or through any Participant.
16. Fractional Shares.
The Company shall not be
required to issue or deliver any fractional Shares pursuant to the Plan and, unless otherwise provided by the Committee, fractional shares shall be settled in cash.
17. Withholding Taxes.
To the extent required by Applicable Law, a Participant shall be required to satisfy, in a manner satisfactory to the
Company or Subsidiary, as applicable, any withholding tax obligations that arise by reason of a Stock Option or Stock Appreciation Right exercise, the vesting of or settlement of Shares under an Award, an election pursuant to Section 83(b) of
the Code or otherwise with respect to an Award. The Company and its Subsidiaries shall not be required to issue or deliver Shares, make any payment or to recognize the transfer or disposition of Shares until such obligations are satisfied. The
Committee may permit or require these obligations to be satisfied by having the Company withhold a portion of the Shares that otherwise would be issued or delivered to a Participant upon exercise of a Stock Option or Stock Appreciation Right or upon
the vesting or settlement of an Award, or by tendering Shares previously acquired, in each case having a Fair Market Value equal to the minimum amount required to be withheld or paid. Any such elections are subject to such conditions or procedures
as may be established by the Committee and may be subject to disapproval by the Committee.
18. Foreign Employees.
Without amending the Plan,
the Committee may grant Awards to Participants who are foreign nationals, or who are subject to Applicable Laws of one or more non-United States jurisdictions, on such terms and conditions different from those specified in the Plan as may in the
judgment of the Committee be necessary or desirable to foster and promote achievement of the purposes of the Plan, and, in furtherance of such purposes, the Committee may make such modifications, amendments, procedures, and the like as may be
necessary or advisable to comply with provisions of Applicable Laws of other countries in which the Company or its Subsidiaries operate or have employees.
19
.
Termination for Cause; Forfeiture of Awards
. If a Participant’s employment or service is terminated by the Company or a Subsidiary
for Cause, as determined by the Committee in its sole discretion, then the Participant shall forfeit all Awards granted under the Plan to the extent then held by the Participant. In addition, any Award granted to a Participant shall be subject to
forfeiture or repayment pursuant to the terms of any applicable compensation recovery policy adopted by the Company, including any such policy that may be adopted to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act or any
rules or regulations issued by the Securities and Exchange Commission or applicable securities exchange.
20. Change in Control and Potential Change in
Control
.
a.
Change in Control
. In the event of a Change in Control: (x) all outstanding Awards held by the
Participant that may be exercised shall become fully exercisable and shall remain exercisable for the full duration of their term effective immediately prior to the Change in Control, (y) all restrictions with respect to outstanding Awards
shall lapse effective immediately prior to the Change in Control, with any specified Performance Objectives with respect to outstanding Awards deemed to be satisfied at the “target” level, and (z) all outstanding Awards shall become
fully vested effective immediately prior to the Change in Control.
b.
Potential Change in Control
. In the event of a
Potential Change in Control, all Awards shall continue to vest during the applicable vesting period, if any. Notwithstanding the preceding sentence, if a Participant incurs a Qualified Termination during the Potential Change in Control Protection
Period, then upon such termination: (x) all outstanding Awards held by the Participant that may be exercised shall become fully exercisable and shall remain exercisable for the full duration of their term, (y) all restrictions with respect
to outstanding Awards shall lapse, with any specified Performance Objectives with respect to outstanding Awards deemed to be satisfied at the “target” level, and (z) all outstanding Awards shall become fully vested.
c.
Cancellation Right
. The Committee may, in its sole discretion and without the consent of Participants, either by the terms of
the Award Agreement applicable to any Award or by resolution adopted prior to the occurrence of a Change in Control or Potential Change in Control, provide that any
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outstanding Award (or a portion thereof) shall, upon the occurrence of such Change in Control or Potential Change in Control, be cancelled in exchange for a payment in cash or other property
(including shares of the resulting entity in connection with a Change in Control) in an amount equal to the excess, if any, of the Fair Market Value of the Shares subject to the Award, over any exercise price related to the Award, which amount may
be zero if the Fair Market Value of a Share on the date of the Change in Control or Potential Change in Control does not exceed the exercise price per Share of the applicable Awards.
21. Amendment, Modification and Termination
.
a.
In General
. The Board may at any time and from time to time, alter, amend, suspend or terminate the Plan in whole or in part;
provided
,
however
, that no alteration or amendment that requires shareholder approval in order for the Plan to comply with any rule promulgated by the SEC or any securities exchange on which Shares are listed or any other Applicable
Laws shall be effective unless such amendment shall be approved by the requisite vote of shareholders of the Company entitled to vote thereon within the time period required under such applicable listing standard or rule.
b.
Adjustments to Outstanding Awards
. The Committee may in its sole discretion at any time (i) provide that all or a portion
of a Participant’s Stock Options, Stock Appreciation Rights and other Awards in the nature of rights that may be exercised shall become fully or partially exercisable; (ii) provide that all or a part of the time-based vesting restrictions
on all or a portion of the outstanding Awards shall lapse, and/or that any Performance Objectives or other performance-based criteria with respect to any Awards shall be deemed to be wholly or partially satisfied; or (iii) waive any other
limitation or requirement under any such Award, in each case, as of such date as the Committee may, in its sole discretion, declare. Unless otherwise determined by the Committee, any such adjustment that is made with respect to an Award that is
intended to qualify for the Performance-Based Exception shall be made at such times and in such manner as will not cause such Awards to fail to qualify under the Performance-Based Exception. Additionally, the Committee shall not make any adjustment
pursuant to this Section 21(b) that would cause an Award that is otherwise exempt from Section 409A of the Code to become subject to Section 409A, or that would cause an Award that is subject to Section 409A of the Code to fail
to satisfy the requirements of Section 409A.
c.
Prohibition on Repricing
. Except for adjustments made pursuant to
Sections 15 or 20, the Board or the Committee will not, without the further approval of the shareholders of the Company, authorize the amendment of any outstanding Stock Option or Stock Appreciation Right to reduce the exercise price. No Stock
Option or Stock Appreciation Right will be cancelled and replaced with an Award having a lower exercise price, or for another Award, or for cash without further approval of the shareholders of the Company, except as provided in Sections 15 or 20.
Furthermore, no Stock Option or Stock Appreciation Right will provide for the payment, at the time of exercise, of a cash bonus or grant or sale of another Award without further approval of the shareholders of the Company. This Section 21(c) is
intended to prohibit the repricing of “underwater” Stock Options or Stock Appreciation Rights without shareholder approval and will not be construed to prohibit the adjustments provided for in Sections 15 or 20.
d.
Effect on Outstanding Awards
. Notwithstanding any other provision of the Plan to the contrary (other than Sections 15, 20,
21(b) and 23(d)), no termination, amendment, suspension, or modification of the Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding
such Award;
provided
that the Committee may modify an ISO held by a Participant to disqualify such Stock Option from treatment as an “incentive stock option” under Section 422 of the Code without the Participant’s consent.
22. Applicable Laws.
The obligations of the Company with respect to Awards under the Plan shall be subject to all Applicable Laws and such
approvals by any governmental agencies as the Committee determines may be required. The Plan and each Award Agreement shall be governed by the laws of the State of Ohio, excluding any conflicts or choice of law rule or principle that might otherwise
refer construction or interpretation of the Plan to the substantive law of another jurisdiction.
23. Miscellaneous.
a.
Deferral of Awards
. Except with respect to Stock Options, Stock Appreciation Rights and Restricted Shares, the Committee may
permit Participants to elect to defer the issuance or delivery of
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APPENDIX D:
NORDSON CORPORATION
2012
STOCK INCENTIVE AND AWARD PLAN
Shares or the settlement of Awards in cash under the Plan pursuant to such rules, procedures or programs as it may establish for purposes of the Plan. The Committee also may provide that deferred
issuances and settlements include the payment or crediting of dividend equivalents or interest on the deferral amounts. All elections and deferrals permitted under this provision shall comply with Section 409A of the Code, including setting
forth the time and manner of the election (including a compliant time and form of payment), the date on which the election is irrevocable, and whether the election can be changed until the date it is irrevocable.
b.
No Right of Continued Employment
. The Plan shall not confer upon any Participant any right with respect to continuance of
employment or other service with the Company or any Subsidiary, nor shall it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate such Participant’s employment or other service at any time. No
Employee or Director shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to be selected to receive future Awards.
c.
Unfunded, Unsecured Plan
. Neither a Participant nor any other person shall, by reason of participation in the Plan, acquire any
right or title to any assets, funds or property of the Company or any Subsidiary, including without limitation, any specific funds, assets or other property which the Company or any Subsidiary may set aside in anticipation of any liability under the
Plan. A Participant shall have only a contractual right to an Award or the amounts, if any, payable under the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing contained in the Plan shall constitute a guarantee that the
assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.
d.
Severability
. If any
provision of the Plan is or becomes 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 or limited in
scope to conform to Applicable Laws or, in the discretion of the Committee, it shall be stricken and the remainder of the Plan shall remain in full force and effect.
e.
Acceptance of Plan
. By accepting any benefit under the Plan, each Participant and each person claiming under or through any
such Participant shall be conclusively deemed to have indicated their acceptance and ratification of, and consent to, all of the terms and conditions of the Plan and any action taken under the Plan by the Committee, the Board or the Company, in any
case in accordance with the terms and conditions of the Plan.
f.
Successors
. All obligations of the Company under the Plan
and with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or other event, or a sale or disposition of all or
substantially all of the business and/or assets of the Company and references to the “Company” herein and in any Award agreements shall be deemed to refer to such successors.
[END OF DOCUMENT]
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APPENDIX E:
NORDSON CORPORATION
2012
STOCK INCENTIVE AND AWARD PLAN SUMMARY
The 2012 Stock Incentive and Award Plan (“2012 Plan”) authorizes the Company to grant equity-based
and cash-based incentive compensation in the form of stock options, stock appreciation rights (or “SARs”), restricted shares, restricted share units, other share-based awards and cash-based awards. The principal features of the 2012 Plan
are summarized below.
General Provisions of the 2012 Plan
Plan Limits
. The 2012 Plan authorizes the issuance of up to a total of 2,900,000 common shares, inclusive of shares available to be granted under
the prior plan immediately prior to shareholder approval of the 2012 Plan. As of October 31, 1,606,000 common shares were available for awards under the prior plan. Upon adoption of the 2012 Plan, no further awards will be made under the prior
plan. All of the shares authorized under the 2012 Plan may be granted with respect to incentive stock options.
The following shares will not count
against the number of shares available for awards under the 2012 Plan: (i) shares covered by awards under the 2012 Plan and the prior plan that expire or are forfeited, canceled, surrendered or otherwise terminated without the issuance of
shares; (ii) shares covered by awards settled only in cash; (iii) shares tendered in payment of the exercise price of stock options; (iv) shares withheld to satisfy a tax withholding obligation; and (v) shares granted in
assumption of, or substitution for, awards granted to individuals who become employees or directors as a result of a merger or similar transaction. With respect to SARs that are settled in shares, only the shares used to settle the SAR upon exercise
will be counted against the number of shares available for awards under the 2012 Plan. Notwithstanding the foregoing, shares that are repurchased by the Company with stock option proceeds will not be added back to the number of shares available for
awards under the 2012 Plan.
The 2012 Plan also imposes various sub-limits on the number of common shares that may be issued to any individual during any
calendar year under awards that are intended to qualify for the performance-based compensation exception to Section 162(m) of the Internal Revenue Code. In particular, for any calendar year, the following limits shall apply with respect to
awards intended to qualify as performance-based compensation:
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•
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The maximum number of shares subject to stock options or SARs granted in any calendar year to any one participant shall be 750,000 shares.
|
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•
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The maximum number of restricted shares granted in any calendar year to any one participant shall be 250,000 shares.
|
|
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•
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The maximum number of shares that may be issued pursuant to restricted share units or other share-based awards granted in any calendar year to any one participant shall be 250,000 shares (or, if the applicable
performance period is more than one year, 250,000 times the full number of years in the performance period).
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•
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The maximum amount of compensation that may be paid under a cash-based award granted in any calendar year to any one participant shall be $5,000,000, or a number of shares having a fair market value not exceeding that
amount (or, if the applicable performance period is more than one year, $5,000,000 times the full number of years in the performance period).
|
Administration of the 2012 Plan.
The 2012 Plan will be administered by the Compensation Committee of the Board of Directors of the Company (or
such other committee as may be appointed by the Board of Directors in accordance with applicable laws). The Board of Directors may reserve to itself any or all of the authority of the Compensation Committee, and the Board of Directors or the
Compensation Committee may delegate any or all of its authority to one or more directors or employees to the extent permitted by applicable laws.
Eligibility for Awards.
The 2012 Plan authorizes the Compensation Committee to make awards to any of our employees or non-employee directors. The
selection of participants and the nature and size of awards are within the discretion of the Compensation Committee.
Term and Amendment
. The
2012 Plan became effective on February 26, 2013 and will remain in effect until February 25, 2022.
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APPENDIX E:
NORDSON CORPORATION
2012
STOCK INCENTIVE AND AWARD PLAN SUMMARY
The Board of Directors may amend or terminate the 2012 Plan at any time, provided that the 2012 Plan may not
be amended without shareholder approval where required by applicable laws. Generally, the amendment or termination of the 2012 Plan or of any award agreement may not adversely affect in a material way any outstanding award without the consent of the
participant holding the award.
Awards Under the 2012 Plan
General.
When an award is granted under the 2012 Plan, the Compensation Committee will establish the terms and conditions of that award. These
terms and conditions will be contained in an award agreement and may, for example, require that the participant continue to provide services to the Company or a related entity for a certain period of time or that the participant meet certain
performance objectives during a specified period of time. By accepting an award, a participant will agree to be bound by the terms of the 2012 Plan and the associated award agreement. If there is a conflict between the terms of the 2012 Plan and the
terms of an award agreement, the terms of the 2012 Plan will control. The types of awards that may be granted under the 2012 Plan are described below.
Stock Options
.
A stock option gives a participant the right to purchase a specified number of common shares and may be an incentive stock option
or nonqualified stock option. The price at which a common share may be purchased upon exercise of a stock option, called the “exercise price,” will be determined by the Compensation Committee, but may not be less than the fair market value
of a common share on the date the stock option is granted. Generally, “fair market value” will be the closing price of the Company’s common shares on the date in question. An option’s exercise price may be paid in any way
determined by the Compensation Committee, including payment in cash (or a cash equivalent), a cashless exercise, tendering common shares the participant already owns or a combination thereof. In no event may an option be exercised more than
10 years after the date of grant. A participant who has been granted a stock option will not have any dividend or voting rights in connection with the shares underlying the stock option.
Special provisions apply to any incentive stock options granted under the 2012 Plan. All of the shares available for issuance under the 2012 Plan may be
issued pursuant to incentive stock options. Incentive stock options may be granted only to employees. Incentive stock options that become exercisable for the first time in any year cannot relate to common shares having a fair market value
(determined on the date of grant) of more than $100,000 per participant. The exercise price of an incentive stock option granted to an employee who owns shares possessing more than 10 percent of the Company’s voting power (a “10%
shareholder”) may not be less than 110 percent of the fair market value of a common share on the date of grant, and an incentive stock option granted to a 10% shareholder will expire no later than 5 years after the date of grant.
Stock Appreciation Rights.
A stock appreciation right gives a participant the right to receive the difference between the SAR’s exercise
price and the fair market value of a common share on the date the SAR is exercised. SARs will be settled in (i) cash, (ii) common shares with a value on the settlement date equal to the difference between the fair market value of the
common shares and the exercise price, or (iii) a combination of cash and common shares, as determined by the Compensation Committee at the time of grant. The exercise price of a stock appreciation right will be determined by the Compensation
Committee, but may not be less than the fair market value of a common share on the date the SAR is granted. A stock appreciation right will be forfeited if the applicable terms and conditions are not met or if it is not exercised before it expires
(which may never be later than 10 years after the date of grant). A participant who has been granted a stock appreciation right will not have any dividend or voting rights in connection with the shares underlying the SAR.
Restricted Shares.
Restricted shares consist of common shares that are granted to a participant, but which are subject to certain restrictions on
transferability and a risk of forfeiture if certain terms and conditions specified by the Compensation Committee are not met by the end of the restriction period. The restrictions may include time-based and/or performance-based restrictions.
Generally, time-based restricted shares will have a vesting period of at least three years (and may vest on a pro-rated, graded or cliff basis), and performance-based restricted shares will have a performance period of at least one year. However, up
to five percent of the shares available for grant under the 2012 Plan as restricted shares and other “full value awards” (awards settled in shares other than stock options and stock appreciation rights)
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APPENDIX E:
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STOCK INCENTIVE AND AWARD PLAN SUMMARY
may be granted with a vesting period of at least one year, regardless of whether vesting is based on the achievement of performance objectives. Unless otherwise determined by the Compensation
Committee, a participant who has been granted restricted shares will have the right to receive dividends on the restricted shares and may vote those shares during the restriction period. However, dividends with respect to performance-based
restricted shares will be accumulated until the restricted shares are earned and will not be paid unless applicable performance objectives are satisfied.
Restricted Share Units
. Restricted share units constitute an agreement to deliver common shares to a participant if certain conditions specified
by the Compensation Committee are met by the end of the restriction period. The conditions may include time-based and/or performance-based restrictions. Generally, time-based restricted share units will have a vesting period of at least three years
(and may vest on a pro-rated, graded or cliff basis), and performance-based restricted share units will have a performance period of at least one year. However, up to five percent of the shares available for grant under the 2012 Plan as restricted
share units and other “full value awards” may be granted with a vesting period of at least one year, regardless of whether vesting is based on the achievement of performance objectives. A participant who has been granted restricted share
units will not have any dividend or voting rights in connection with the notional shares underlying the restricted share units, but the Compensation Committee may authorize the payment of dividend equivalents. However, dividend equivalents with
respect to performance-based restricted share units will be accumulated until the restricted share units are earned and will not be paid unless applicable performance objectives are satisfied. At the end of the restriction period, the restricted
share units either will be forfeited or settled, depending on whether or not the applicable terms and conditions have been satisfied. Restricted share units may be settled by (i) issuing one common share for each restricted share unit,
(ii) paying the participant cash equal to the fair market value of a common share for each restricted share unit, or (iii) a combination of common shares and cash, as determined by the Compensation Committee at the time of grant.
Other Share-Based Awards
. The Compensation Committee may grant other awards that are valued in whole or in part by reference to, or otherwise
based on the fair market value of, common shares. Such other share-based awards shall be subject to terms and conditions specified by the Compensation Committee, which may include time-based and/or performance-based restrictions. Generally, other
share-based awards subject to time-based vesting conditions will have a vesting period of at least three years (and may vest on a pro-rated, graded or cliff basis), and other share-based awards subject to performance-based vesting restrictions will
have a performance period of at least one year. However, up to five percent of the shares available for grant under the 2012 Plan as other share-based awards and other “full value awards” may be granted with a vesting period of at least
one year, regardless of whether vesting is based on the achievement of performance objectives. The Compensation Committee may authorize the payment of dividend equivalents with respect to other share-based awards. However, such dividend equivalents
subject to performance-based restrictions will be accumulated until the other share-based awards are earned and will not be paid unless applicable performance objectives are satisfied.
Cash-Based Awards.
A cash-based award gives a participant the right to receive a specified amount of cash, subject to terms and conditions as
determined by the Compensation Committee, which may include time-based and/or performance-based restrictions.
Performance Objectives
. The
2012 Plan provides that performance objectives may be established by the Compensation Committee in connection with any award. Performance objectives may relate to performance of the Company or one or more of its subsidiaries, divisions, departments,
units, functions, partnerships, joint ventures or minority investments, product lines or products, or the performance of an individual participant, and performance objectives may be made relative to the performance of a group or companies or a
special index of companies.
The Compensation Committee may, in its discretion, grant awards under the 2012 Plan that are intended to qualify for the
“performance-based compensation” exemption from Section 162(m) of the Internal Revenue Code. In the case of an award intended to qualify for that exemption, any applicable performance objectives shall be based on the attainment of
specified levels of one or more of the following measures: return on net assets, return on capital employed, economic value added, sales, revenue, earnings per share, operating income, net income, earnings before interest and taxes, return on
equity, total shareholder return, market valuation, cash flow, completion of acquisitions, product and
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APPENDIX E:
NORDSON CORPORATION
2012
STOCK INCENTIVE AND AWARD PLAN SUMMARY
market development, inventory management, working capital management and customer satisfaction. Those measures may be clarified by reasonable definitions adopted from time to time by the
Compensation Committee, which may include or exclude any items as the Compensation Committee may specify, including but not limited to: extraordinary, unusual or non-recurring items; effects of accounting changes; effects of currency fluctuations;
effects of financing activities; effects relating to the impairment of goodwill or other intangible assets; expenses for restructuring or productivity initiatives; non-operating items; acquisition expenses; and effects of acquisitions, divestitures
or reorganizations. Performance objectives related to an award intended to qualify as performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code will be established by the Compensation Committee within the time
period prescribed by, and subject to the other requirements of, Section 162(m) of the Internal Revenue Code.
Forfeiture of Awards
. If
the Company terminates a participant’s employment or service for cause, then the participant shall forfeit all outstanding awards granted under the 2012 Plan. For this purpose, “cause” will have the meaning provided in any applicable
employment agreement or Change-in-Control Retention Agreement with the participant, or if there is no such applicable definition, “cause” shall mean (i) the commission of an act of fraud, embezzlement, theft, or other similar criminal
act constituting a felony and involving the business of the Company or its subsidiaries, or (ii) the participant’s continued failure to perform substantially the participant’s duties (other than a failure resulting from a medically
determined physical or mental impairment) that is not cured by the participant within 30 days after a written demand from the Company which specifically identifies the manner in which the Company believes that the participant has not substantially
performed the participant’s duties. Awards granted under the 2012 Plan may also be subject to forfeiture or repayment to the Company pursuant to any compensation recovery (or “clawback”) policy that may be adopted by the Company,
including a policy that may be adopted to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 or any rules or regulations issued by the SEC or NASDAQ.
Adjustments to Authorized Shares and Outstanding Awards.
In the event of any equity restructuring, such as a stock dividend, stock split, reverse
stock split, spinoff, rights offering or recapitalization through a large, nonrecurring cash dividend, the Compensation Committee will adjust the number and kind of shares that may be delivered under the 2012 Plan, the individual award limits, and,
with respect to outstanding awards, the number and kind of shares subject to outstanding awards, the exercise price, and the grant price or other price of shares subject to outstanding awards, to prevent dilution or enlargement of rights. In the
event of any other change in corporate capitalization, such as a merger, consolidation or liquidation, the Compensation Committee may, in its discretion, cause there to be such equitable adjustment as described in the foregoing sentence, to prevent
dilution or enlargement of rights. However, unless otherwise determined by the Compensation Committee, the Company will always round down to a whole number of shares subject to any award. Any such adjustment will be made by the Compensation
Committee, whose determination will be conclusive.
Prohibition on Repricing.
Except in connection with certain corporate transactions or
events or with the approval of shareholders, the 2012 Plan prohibits the amendment of outstanding stock options or SARs to reduce the exercise price of the award, and no stock option or SAR will be cancelled and replaced with another award
(including an award having a lower exercise price) or for cash. These provisions of the 2012 Plan are intended to prohibit the repricing of “underwater” stock options or SARs without approval of the Company’s shareholders.
Effect of a Potential Change in Control or Change in Control.
In the event of a “potential change in control” of the Company, all
unvested awards shall continue to vest during the applicable vesting period. However, if, within two years after a potential change in control, a participant’s employment is involuntarily terminated without cause or, if the participant is a
party to a Change-in-Control Retention Agreement, the participant terminates his or her employment for “good reason” (as defined in the applicable Change-in-Control Retention Agreement), then upon such termination of employment:
(i) all of the participant’s outstanding stock options and SARs shall become fully exercisable and shall remain exercisable for the full duration of their term, (ii) all restrictions with respect to outstanding awards shall lapse,
with any specified performance objectives deemed to be satisfied at the “target” level, and (iii) all outstanding awards shall become fully vested. For purposes of the 2012 Plan, a potential change of control generally means the
acquisition of at least 25% but less than 35% of the voting power of the Company’s outstanding voting securities.
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APPENDIX E:
NORDSON CORPORATION
2012
STOCK INCENTIVE AND AWARD PLAN SUMMARY
In the event of a “change in control” of the Company: (i) all outstanding stock options and
SARs shall become fully exercisable and shall remain exercisable for the full duration of their term effective immediately prior to the change in control, (ii) all restrictions with respect to outstanding awards shall lapse effective
immediately prior to the change in control, with any specified performance objectives deemed to be satisfied at the “target” level, and (iii) all outstanding awards shall become fully vested effective immediately prior to the change
in control. For purposes of the 2012 Plan, a change in control generally means (i) the acquisition of 35% or more of the voting power of the Company’s outstanding voting securities; (ii) the replacement of a majority of the members of
the incumbent Board of Directors during a 24-month period with new directors who were not approved by at least two-thirds of the directors then in office; (iii) consummation of a merger or consolidation resulting in less than 50% of the
combined voting power of the surviving or resulting corporation’s securities being owned by persons who were shareholders of the Company immediately before such transaction; or (iv) the sale of all or substantially all of the assets of the
Company in a single transaction or series of related transactions to a single purchaser or group of affiliated purchasers.
The Compensation Committee
also has discretion to cancel any award in exchange for a cash payment upon the occurrence of a change in control, or cancel a stock option or SAR without payment if the fair market value of a share on the date of the change in control does not
exceed the exercise price per share of the stock option or SAR.
U.S. Federal Income Tax Consequences
The following is a brief summary of the general U.S. federal income tax consequences relating to the 2012 Plan. This summary is based on U.S. federal
tax laws and regulations in effect on the date of this proxy statement and does not purport to be a complete description of the U.S. federal income tax laws.
Incentive Stock Options.
Incentive stock options are intended to qualify for special treatment available under Section 422 of the Internal
Revenue Code. A participant who is granted an incentive stock option will not recognize ordinary income at the time of grant, and the Company will not be entitled to a deduction at that time. A participant will not recognize ordinary income upon the
exercise of an incentive stock option provided that the participant was, without a break in service, an employee of the Company or a subsidiary during the period beginning on the date of grant of the option and ending on the date three months prior
to the date of exercise (one year prior to the date of exercise if the participant’s employment is terminated due to permanent and total disability).
If the participant does not sell or otherwise dispose of the common shares acquired upon the exercise of an incentive stock option within two years from the
date of grant of the incentive stock option or within one year after he or she receives the common shares, then, upon disposition of such common shares, any amount recognized in excess of the exercise price will be taxed to the participant as a
capital gain, and the Company will not be entitled to a corresponding deduction. The participant will generally recognize a capital loss to the extent that the amount recognized is less than the exercise price.
If the foregoing holding period requirements are not met, the participant will generally recognize ordinary income at the time of the disposition of the
common shares in an amount equal to the lesser of (i) the excess of the fair market value of the common shares on the date of exercise over the exercise price, or (ii) the excess, if any, of the amount recognized upon disposition of the
common shares over the exercise price, and the Company will be entitled to a corresponding deduction. Any amount recognized in excess of the value of the common shares on the date of exercise will be capital gain. If the amount recognized is less
than the exercise price, the participant generally will recognize a capital loss equal to the excess of the exercise price over the amount recognized upon the disposition of the common shares.
The rules described above that generally apply to incentive stock options do not apply when calculating any alternative minimum tax liability. The rules
affecting the application of the alternative minimum tax are complex, and their effect depends on individual circumstances, including whether a participant has items of adjustment other than those derived from incentive stock options.
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APPENDIX E:
NORDSON CORPORATION
2012
STOCK INCENTIVE AND AWARD PLAN SUMMARY
Nonqualified Stock Options.
A participant will not recognize ordinary income when a nonqualified
stock option is granted, and the Company will not receive a deduction at that time. When a nonqualified stock option is exercised, a participant will recognize ordinary income in an amount equal to the excess, if any, of the fair market value of the
common shares that the participant purchased over the exercise price he or she paid, and the Company generally will be entitled to a corresponding deduction.
Stock Appreciation Rights.
A participant will not recognize ordinary income when a stock appreciation right is granted, and the Company will not
receive a deduction at that time. When a stock appreciation right is exercised, the participant will recognize ordinary income equal to the cash and/or the fair market value of common shares the participant receives, and the Company generally will
be entitled to a corresponding deduction.
Restricted Shares.
A participant who has been granted restricted shares will not recognize ordinary
income at the time of grant, and the Company will not be entitled to a deduction at that time, assuming that the underlying common shares are not transferable and that the restrictions create a “substantial risk of forfeiture” for federal
income tax purposes and that the participant does not make an election under Section 83(b) of the Internal Revenue Code. Generally, upon the vesting of restricted shares, the participant will recognize ordinary income in an amount equal to the
then fair market value of the common shares, less any consideration paid for such common shares, and the Company will be entitled to a corresponding deduction. Any gains or losses recognized by the participant upon disposition of the common shares
will be treated as capital gains or losses. However, a participant may elect pursuant to Section 83(b) of the Internal Revenue Code to have income recognized at the date of grant of a restricted share award equal to the fair market value of the
common shares on the date of grant (less any amount paid for the restricted shares) and to have the applicable capital gain holding period commence as of that date. If a participant makes this election, the Company generally will be entitled to a
corresponding deduction in the year of grant.
Restricted Share Units.
A participant generally will not recognize ordinary income when
restricted share units are granted, and the Company generally will not receive a deduction at that time. Instead, a participant will recognize ordinary income when the restricted share units are settled in an amount equal to the fair market value of
the common shares and the cash he or she receives, less any consideration paid, and the Company generally will be entitled to a corresponding deduction.
Other Share-Based Awards.
Generally, participants will recognize ordinary income equal to the fair market value of the common shares subject to
other share-based awards when they receive the common shares, and the Company generally will be entitled to a corresponding deduction at that time.
Cash-Based Awards.
Generally, a participant will recognize ordinary income when a cash-based award is settled in an amount equal to the cash he or
she receives, and the Company generally will be entitled to a corresponding deduction at that time.
Miscellaneous.
When a participant sells
common shares that he or she has received under an award, the participant will generally recognize long-term capital gain or loss if, at the time of the sale, the participant has held the common shares for more than one year (or, in the case of a
restricted share award, more than one year from the date the restricted shares vested unless the participant made an election pursuant to Section 83(b) of the Internal Revenue Code, described above). If the participant has held the common
shares for one year or less, the gain or loss will be a short-term capital gain or loss.
Section 162(m) of the Tax Code.
Section 162(m)
of the Internal Revenue Code disallows the deduction of certain compensation in excess of $1 million per year payable to certain covered employees of a public company (generally, the chief executive officer and the next three most highly compensated
named executive officers, other than the chief financial officer). Compensation paid to such an officer during a year in excess of $1 million that is not performance-based (or does not comply with other exceptions) generally would not be deductible
on the Company’s federal income tax return for that year. It is intended that compensation attributable to any stock options or SARs granted under the 2012 Plan will qualify as performance-based compensation exempt from Section 162(m) of
the Internal Revenue Code. The Compensation Committee may, in its discretion, decide to structure other awards granted under the 2012 Plan to qualify for deductibility under Section 162(m).
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APPENDIX E:
NORDSON CORPORATION
2012
STOCK INCENTIVE AND AWARD PLAN SUMMARY
Section 409A of the Tax Code.
In 2004, the Internal Revenue Code was amended to add
Section 409A, which created new rules for amounts deferred under nonqualified deferred compensation plans. Section 409A includes a broad definition of nonqualified deferred compensation plans which may extend to various types of awards
granted under the 2012 Plan. If an award is subject to, but fails to comply with, Section 409A, the participant would generally be subject to accelerated income taxation, plus a 20% penalty tax and an interest charge. The Company intends that
awards granted under the 2012 Plan will either be exempt from, or will comply with, Section 409A.
Benefits Proposed to be Awarded Under the 2012
Plan.
No benefits or amounts have been granted, awarded or received under the 2012 Plan. The issuance of any awards under the 2012 Plan will be at the discretion of the Compensation Committee. Therefore, it is not possible to determine the
amount or form of any award that will be granted to any individual in the future as there are many variables the Committee considers in granting equity awards, including compensation of our executive officers compared to peer group compensation,
share price at the time the Committee sets executive compensation, and, for payouts under the Long-Term Incentive Plan, performance against predetermined metrics at the time of settlement.
34 of 34
Exhibit 10-g-4
NOTICE OF PERFORMANCE SHARE INCENTIVE AND CASH INCENTIVE AWARDS
(Executive Officer)
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To:
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(“Grantee”)
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Date of Notice:
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Nordson Corporation, an Ohio corporation (the “Company”), grants to you, the Grantee named above, in accordance with the terms of the Nordson
Corporation 2012 Stock Incentive and Award Plan (the “Plan”) and this Notice of Performance Share Incentive and Cash Incentive Awards (“Notice”), the following awards:
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Award Type
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Date of
Grant
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# of Options /
Shares /
Target
Opportunity
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Exercise
Price
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Vesting Date
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Non-qualified Stock Option
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[
—
]
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[
—
]
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$
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[
—
] per Share
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Equal annual installments on each of the first four anniversaries of the Date of Grant
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Restricted Shares
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[
—
]
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[
—
]
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N/A
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Equal annual installments on each of the first three anniversaries of the Date of Grant
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Performance Share Units
1
(FY
[
—
] Performance Share Incentive Award)
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[
—
]
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[
—
] units
(Target)
2
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N/A
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[
—
]
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Cash Incentive Award
(FY [
—
] Annual Cash Incentive)
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[
—
]
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$[
—
] (Target)
2
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N/A
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[
—
]
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1
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Fractional Shares or Units will be subject to rounding conventions adopted by the Company from time to time.
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2
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Actual payout amount to be determined at the conclusion of the performance period.
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I.
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Terms of Grant
. See Appendix A to this Notice.
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II.
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Impact of Termination of Employment
. See Appendix B to this Notice
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- Notice -
1 of 42
NOTICE OF PERFORMANCE SHARE INCENTIVE AND CASH INCENTIVE AWARDS
(Executive Officer)
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To:
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(“Grantee”)
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Date of Notice:
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III.
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Performance Levels:
Unless you are a “Covered Employee” (as defined in Appendix C to this Notice), the performance levels related to your Performance Share Incentive Award and Cash Incentive Award are
set out below. Performance Measures for Covered Employees are set out on Appendix C to this Notice.
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A.
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FY
[
—
]
Performance Share Incentive Award
. Payment of any unrestricted Nordson Common Shares under the Performance Share Incentive Award is contingent
upon the Company’s achievement of specified performance levels of [
—
] over the performance period (FY [
—
] through FY [
—
]) as set out in the table below.
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[Insert measure(s) and levels established by the Compensation Committee.
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Threshold
(50%
payout)
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Target
(100%
payout)
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Maximum
(200%
payout)
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$
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[
—
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]
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$
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[
—
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]
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$
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[
—
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]
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*
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Straight line interpolation applies for performance between designated performance levels.
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The Compensation Committee, in its sole discretion, may modify the performance measure(s) applicable to the Award, or the related threshold,
target and maximum performance levels, or the actual payouts, in whole or in part, as the Committee deems appropriate and equitable to reflect a change in the business, operations, corporate structure or capital structure of the Company or its
affiliates, the manner in which it conducts its business, or other events or circumstances.
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B.
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FY
[
—
]. Payment of a Cash Incentive Award is contingent upon the Company’s achievement of specified performance levels for FY [
—
] corporate financial measure(s) and business unit measures outlined in the table below. Corporate financial measure(s) - [
—
] - will account for [
—
]% of the cash incentive award for each executive officer. For operating unit executive officers, the remaining [
—
]% of the cash incentive award will
be determined based on individual business unit measures as set forth in Appendix D to this Notice. For the functional executive officers, including the CEO, the remaining [
—
]% of the cash
incentive award will be determined based on a weighted average of all collective business unit measures as set forth in Appendix D. The weighting of the business unit measures will be determined based on each business unit ’s actual FY [
—
] revenue as a percentage of Nordson revenue.
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- Notice -
2 of 42
NOTICE OF PERFORMANCE SHARE INCENTIVE AND CASH INCENTIVE AWARDS
(Executive Officer)
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To:
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(“Grantee”)
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Date of Notice:
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FY [
—
] Cash Incentive Award Measures
and Performance Levels
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[Insert measure(s) and levels established by the
Compensation Committee.
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Threshold (50% payout)
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[
|
—
]
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[
|
—
]
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[
—
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]
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Target (100% payout)
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[
|
—
]
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[
|
—
]
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[
—
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]
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Maximum (200% payout)
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[
|
—
]
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[
|
—
]
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[
—
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]
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*
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Straight line interpolation applies for performance between designated levels.
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The
Compensation Committee, in its sole discretion, may modify the performance measures applicable to the Award, or the related threshold, target and maximum performance levels, or the actual payout, in whole or in part, as the Committee deems
appropriate and equitable to reflect a change in the business, operations, corporate structure or capital structure of the Company or its affiliates, the manner in which it conducts its business, or other events or circumstances.
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IV.
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Miscellaneous Provisions
:
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A.
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Forfeiture
. All Awards are subject to the Company’s Clawback Policy (see Appendix E to this Notice).
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B.
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No Employment Contract
. Nothing contained in this Notice shall confer upon you any right with respect to continuance of employment by the Company and its Subsidiaries, nor limit or affect in any manner the right
of the Company and its Subsidiaries to terminate your employment or adjust your compensation.
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- Notice -
3 of 42
NOTICE OF PERFORMANCE SHARE INCENTIVE AND CASH INCENTIVE AWARDS
(Executive Officer)
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To:
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(“Grantee”)
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Date of Notice:
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C.
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Relation to Other Benefits
. Any economic or other benefit to you under this Notice or the Plan shall not be taken into account in determining any benefits to which you may be entitled under any profit-sharing,
retirement, life insurance or other benefit or compensation plan maintained by the Company or a Subsidiary unless expressly provided for in the respective plans.
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D.
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Compliance with Law
. The Company shall make reasonable efforts to comply with all applicable federal and state securities laws and listing requirements with respect to the awards; provided that, notwithstanding
any other provision of this Notice, and only to the extent permitted under Section 409A of the Code, the Company shall not be obligated to deliver any Shares pursuant to this Notice if the delivery thereof would result in a violation of any
such law or listing requirement.
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E.
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Amendments
. Subject to the terms of the Plan, the Committee may modify this Notice upon written notice to you. Any amendment to the Plan shall be deemed to be an amendment to this Notice to the extent that the
amendment is applicable hereto. Notwithstanding the foregoing, no amendment of the Plan or this Notice shall adversely affect your rights under this Notice without your consent unless the Committee determines, in good faith, that such amendment is
required for the Notice to either be exempt from the application of, or comply with, the requirements of Section 409A of the Code, or as otherwise may be provided in the Plan.
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F.
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Severability
. In the event that one or more of the provisions of this Notice shall be invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable
from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.
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G.
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Relation to Plan
. This Notice (along with Appendices A through E is subject to the terms and conditions of the Plan and, together with the Plan, contain the entire understanding of the parties with respect to the
subject matter contained in this Notice, and supersede all prior written or oral communications, representations and negotiations in respect thereto. In the event of any inconsistency between the provisions of this Notice and the Plan, the Plan
shall govern. Capitalized terms used herein (and the related Appendices A through E) without definition shall have the meanings assigned to them in the Plan. See Appendices F and G to this Notice for the Plan Document and Plan Summary, respectively.
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H.
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Successors and Assigns
. The provisions of this Notice shall inure to the benefit of, and be binding upon your successors, administrators, heirs, legal representatives and assigns, and the successors and assigns
of the Company.
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- Notice -
4 of 42
NOTICE OF PERFORMANCE SHARE INCENTIVE AND CASH INCENTIVE AWARDS
(Executive Officer)
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To:
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(“Grantee”)
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Date of Notice:
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I.
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Governing Law
. The interpretation, performance, and enforcement of this Notice shall be governed by the laws of the State of Ohio, without giving effect to the principles of conflict of laws thereof.
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J.
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Electronic Delivery
.
You hereby consent and agree to electronic delivery of any documents that the Company may elect to deliver (including, but not limited to, grant or award notifications, account
statements, annual and quarterly reports, and all other forms of communications) in connection with this and any other award made or offered under the Plan. You have the right at any time to request that the Company deliver written copies of any and
all materials referred to above at no charge. You also hereby consent to any and all procedures the Company has established or may establish for an electronic signature system for delivery and acceptance of any such documents that the Company may
elect to deliver, and agrees that your electronic response or signature is the same as, and shall have the same force and effect as your manual signature.
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K.
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Tax Withholding
.
To the extent the Company or any Subsidiary is required to withhold any federal, state, local, foreign or other taxes in connection with a Stock Option exercise, the vesting of Restricted
Shares or the settlement of Performance Share Units, then the Company or Subsidiary (as applicable) shall retain a number of Shares otherwise deliverable or vested with a value equal to the required withholding (based on the Fair Market Value of the
Shares on the applicable date); provided that in no event shall the value of the Shares retained exceed the minimum amount of taxes required to be withheld or such other amount that will not result in a negative accounting impact. Notwithstanding
the foregoing, you may elect, in accordance with procedures adopted by the Company from time to time, to either (i) pay or provide for payment of the required tax withholding, or (ii) have the required tax withholding deducted from any
amount of salary, bonus, incentive compensation or other amounts otherwise payable in cash to you (other than deferred compensation subject to Section 409A of the Code); provided that the Company may require the use of one or both of these
methods in the event that the Company or any Subsidiary is required to withhold taxes at any time other than upon delivery or vesting of the Shares, e.g., if you defer the Shares under a Company deferred compensation plan. Any payment of a Cash
Incentive Award shall be subject to withholding of applicable federal, state, local, foreign or other taxes.
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- Notice -
5 of 42
NOTICE OF PERFORMANCE SHARE INCENTIVE AND CASH INCENTIVE AWARDS
(Executive Officer)
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To:
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(“Grantee”)
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Date of Notice:
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Acceptance:
You must accept the Awards set forth in this Notice
no later than
[
—
] or this Notice may be
cancelled by the Company, in its sole discretion. You may accept the Awards by e-mailing [
—
] with a copy to [
—
] and inserting the following
legend in the body of the
e-mail:
I have reviewed this Notice of Performance Share Incentive and Cash
Incentive Awards dated [
—
] and confirm my acceptance of the Awards in accordance with the terms of the Nordson Corporation 2012 Stock Incentive and Award Plan and this Notice of Performance
Share Incentive and Cash Incentive Awards.
- Notice -
6 of 42
APPENDIX A:
TERMS OF GRANT
(EXECUTIVE OFFICER)
STOCK OPTION AWARDS
Each Stock Option
Award granted pursuant to the Compensation Committee’s
[
—
]
Resolution (“Resolution”), shall have, in addition to any terms and conditions set forth in the Notice
and the Plan, the following terms and conditions:
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FY [
—
] Executive
Officer Stock Option Award
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Form of Grant
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Non-qualified Stock Options
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Grant Period
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Fiscal Year [
—
]
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Date of Grant
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[
—
]
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Vesting Date
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Four equal annual installments on each of the first four anniversaries of the Date of Grant.
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Term
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Each Stock Option shall expire on midnight of the tenth anniversary of the Date of Grant.
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Exercise
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To the extent that the Stock Option becomes vested and exercisable, it may be exercised in whole or in part from time to time by written
notice to the Company or its designee stating the number of Shares for which the Stock Option is being exercised, the intended manner of payment to cover the exercise price, taxes or any brokerage fees or commissions, and such other provisions as
may be required by the Company or its designee. The vested Stock Option may be exercised prior to its expiration date, during the lifetime of the Grantee, only by the Grantee, or in the event of his legal incapacity, by his guardian or legal
representative acting on behalf of the Grantee in a fiduciary capacity under state law and court supervision. If the Grantee dies before the expiration of the Stock Option, all or part of this Stock Option may be exercised (prior to expiration) by
the personal representative of the Grantee or by any person who has acquired this Stock Option directly from the Grantee by will, bequest or inheritance but only to the extent that the Stock Option was vested and exercisable upon the Grantee’s
death.
The exercise price and taxes due as a consequence of the exercise are payable
(i) in cash or by certified or cashier’s check or other cash equivalent acceptable to the Company payable to the order of the Company, (ii) by surrender of vested Shares (including by attestation) owned by the Grantee having an aggregate Fair
Market Value at the time of exercise equal to the total exercise price and taxes, (iii) by a reduction in the number of Common Shares to be received upon exercise of the Stock Option (in which case shares may be reduced only to satisfy the minimum
withholding tax required by federal, state and local authorities, unless otherwise determined by the Committee, or (iv) by a combination of the foregoing methods.
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Delivery of Shares
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Subject to the terms and conditions contained herein, Shares shall be delivered to the Grantee as soon as administratively practicable following the date the Grantee (i) exercises the Stock Option in accordance with the procedures
outlined above, (ii) makes full payment to the Company or its designee of the exercise price and (iii) makes arrangements satisfactorily to the Company (or any Subsidiary, if applicable) for the payment of any required withholding taxes or brokerage
fees/commissions related to the exercise of the Stock Option. The Grantee shall not possess any incidents of ownership (including, without limitation, dividend and voting rights) in the Shares until such Shares have been delivered to the
Grantee.
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7 of 42
APPENDIX A:
TERMS OF GRANT
(EXECUTIVE OFFICER)
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FY [
—
] Executive
Officer Stock Option Award
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Transferability
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All Non-Qualified Stock Options shall be transferable and such options may be exercised by the transferee; provided, however, that (i)
Non-Qualified Stock Options shall only be transferable to Family Members, trusts with third party trustees and for the sole benefit of Family Member beneficiaries, partnerships whose only partners are Family Members, and organizations exempt from
income tax under §501(c)(3) of the Internal Revenue Code (provided, in this latter case, that all transferred Non-Qualified Stock Options must be vested); (ii) any such transfer must be without consideration (except when required by court
order); (iii) once transferred, Non-Qualified Stock Options may not be further transferred by the transferee, except (a) by will or the laws of descent and distribution or (b) for a transfer by a trust or a partnership to a trust beneficiary or a
partner, respectively; and (iv) the Company receives a copy of the document deemed necessary by the Committee establishing the validity of the transfer and requiring the transferee to accept and comply with the terms and conditions of the
Non-Qualified Stock Option, the applicable Plan and any related Committee rules.
“Family Members” shall include children, stepchildren, grandchildren, parents, stepparents, grandparents, spouses, siblings, mothers-in-law,
fathers-in-law, sons-in-law, daughters-in-law, brothers-in-law, sisters-in-law, nieces or nephews, including adoptive relationships.
In the event a Stock Option has been transferred, a Participant will be obligated to pay, on the date of exercise, all taxes associated with the exercise of
the Stock Option. If the Participant fails to so pay all taxes associated with the exercise, such taxes will be paid by reducing the number of Common Shares to be received upon exercise.
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8 of 42
APPENDIX A:
TERMS OF GRANT
(EXECUTIVE OFFICER)
RESTRICTED SHARE AWARDS
Each Restricted Share Award granted pursuant to the Resolution shall have, in addition to any terms and conditions set forth in the Notice and the Plan, the
following terms and conditions:
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FY [
—
] Executive
Officer Restricted Share Award
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Form of Grant
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Restricted Shares
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Grant Period
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Fiscal Year [
—
]
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Date of Grant
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[
—
]
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Vesting Date
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Three equal annual installments on each of the first three anniversaries of the Date of Grant.
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Transferability
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The Restricted Shares may not be sold, exchanged, assigned, transferred, pledged, encumbered or otherwise disposed of by the Grantee, except to the Company, by will or the laws of descent and distribution, or as may otherwise be
permitted by the Plan, until the Restricted Shares have vested. Any purported transfer or encumbrance in violation of this provision shall be void, and the other party to any such purported transaction shall not obtain any rights to or interest in
such Restricted Shares. Any permitted transferee (other than the Company) shall remain subject to all the terms and conditions applicable to the Restricted Shares prior to such transfer.
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Dividend, Voting and Other Rights
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Except as otherwise provided herein, from and after the Date of Grant, the Grantee shall have all of the rights of a shareholder with respect to the Restricted Shares, including the right to vote the Restricted Shares and receive
any cash dividends that may be paid thereon (which such cash dividends shall be paid to the Grantee at the same time they are paid to other shareholders); provided, however, that any additional Shares of the Company or other securities that the
Grantee may become entitled to receive pursuant to a stock dividend, stock split, combination of shares, recapitalization, merger, consolidation, separation or reorganization or any other change in the capital structure of the Company shall be
considered Restricted Shares and shall be subject to the same restrictions as the Restricted Shares covered by the Notice.
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Custody of Shares
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Until the Restricted Shares have vested, the Restricted Shares shall be issued in book-entry form only and shall not be represented by a certificate. The restrictions applicable to the Restricted Shares shall be reflected on the
stock transfer records maintained by or on behalf of the Company. The Grantee agrees that, in order to ensure compliance with the restrictions imposed on the Restricted Shares under the Notice, the Company may issue appropriate “stop
transfer” instructions to its transfer agent, if any. Effective until the Restricted Shares have become vested, the Grantee hereby irrevocably constitutes and appoints each of the Chief Financial Officer, General Counsel and the Vice President
of Human Resources of the Company as attorney-in-fact to transfer the Restricted Shares on the stock transfer records of the Company with full power of substitution.
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9 of 42
APPENDIX A:
TERMS OF GRANT
(EXECUTIVE OFFICER)
PERFORMANCE SHARE INCENTIVE AWARDS
Each Performance Share Incentive Award granted pursuant to the Resolution, shall have, in addition to any terms and conditions set forth in any Notice and the
Plan, the following terms and conditions:
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FY [
—
] Executive Officer
Performance Share Incentive Award
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Form of Grant
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Performance Share Units
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Performance Period
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Fiscal Year [
—
] – Fiscal Year [
—
]
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Date of Grant
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[
—
]
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Payment:
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Payment of any Performance Share Units that become earned will be made in the form of Shares no later than 90 days after the end of the
Performance Period.
Notwithstanding the foregoing, payment of any Performance Share
Units that become earned pursuant to Section 20 of the Plan (relating to a Change in Control and Potential Change in Control) shall be paid within 60 days after they become earned; provided that if the Performance Share Units are considered a
“deferral of compensation” within the meaning of Section 409A of the Code, then Performance Share Units earned pursuant to Section 20 of the Plan shall be paid within 60 days following the earlier of (i) the occurrence of a “change in
the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code; (ii) the Grantee’s
“separation from service” within the meaning of Section 409A of the Code; or (iii) the end of the Performance Period; provided that payment to a “specified employee” within the meaning of Section 409A of the Code shall be made,
to the extent required by Section 409A of the Code, at least six months after the Grantee’s separation from service.
See Appendix B to the Notice relating to treatment of the Performance Share Units in the event of a Grantee’s termination of employment (other than in
connection with a Potential Change in Control as provided in Section 20 of the Plan).
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Transferability
|
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The Performance Share Units subject to the Notice are personal to the Grantee and may not be sold, exchanged, assigned, transferred, pledged, encumbered or otherwise disposed of by the Grantee until they become earned and settled;
provided, however, that the Grantee’s rights with respect to such Performance Share Units may be transferred by will or pursuant to the laws of descent and distribution. Any purported transfer or encumbrance in violation of this provision shall
be void, and the other party to any such purported transaction shall not obtain any rights to or interest in such Performance Share Units.
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Dividend, Voting and Other Rights
|
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The Grantee shall have no rights of ownership in the Performance Share Units or in the Shares related thereto and shall have no right to dividends or dividend equivalents and no right to vote Performance Share Units or the Shares
related thereto until the date on which the Shares underlying the Performance Share Units are delivered to the Grantee.
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10 of 42
APPENDIX A:
TERMS OF GRANT
(EXECUTIVE OFFICER)
CASH INCENTIVE AWARDS
Each Cash Incentive Award granted pursuant to the Resolution, shall have, in addition to any terms and conditions set forth in any Notice and the Plan, the
following terms and conditions:
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FY [
—
] Executive
Officer Cash Incentive Award
|
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Form of Grant
|
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Cash
|
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Performance Period
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Fiscal Year [
—
]
|
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Date of Grant
|
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[
—
]
|
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Payment
|
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Payment of any Award that becomes earned will be made in cash after the end of fiscal year
[
—
] but no later than [
—
].
Notwithstanding the foregoing, payment of any Award that becomes earned pursuant to Section 20 of the Plan (relating to a Change in Control and Potential
Change in Control) shall be paid within 60 days after it becomes earned.
See Appendix
B to the Notice relating to disposition (payout) of the Award in the event of a Grantee’s termination of employment (other than in connection with a Potential Change in Control as provided in Section 20 of the Plan).
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11 of 42
APPENDIX B
IMPACT OF TERMINATION OF EMPLOYMENT ON AWARDS
(EXECUTIVE OFFICER)
The following tables
reflect the impact various termination of employment scenarios have on the Awards granted to Executive Officers, other than termination of employment in connection with a Potential Change in Control as provided in Section 20 of the Plan. See
Appendix A to the Notice relating to treatment of Awards in connection with a Change in Control or Potential Change in Control.
|
|
|
|
|
|
|
|
|
|
|
Reason for Termination
|
|
Impact of Termination of Employment
|
|
DEATH & DISABILITY
1
|
|
Stock Options
|
|
Restricted Shares
|
|
Performance Share
Incentive Award
2
|
|
Cash Incentive
Award
3
|
|
Vesting
|
|
Full vesting of all unvested stock options awarded (e.g., accelerated vesting)
|
|
The restriction period will terminate and all restricted shares will become vested and transferable
|
|
Subject to the Committee’s exercise of negative discretion as provided in the resolution establishing the [
—
] Performance Share Incentive Award, Grantee shall earn a pro-rated
number of Performance Share Units (rounded to the nearest whole number) equal to (i) the number of Performance Share Units to which the Grantee would have been entitled based on the performance of the Company during the full performance, multiplied
by (ii) a fraction, the numerator of which is the number of days that the Grantee was employed during the performance period and the denominator of which is the number of days in the performance period.
|
|
Subject to the Committee’s exercise of negative discretion as provided in the resolution establishing the FY[
—
] Cash Incentive Award, Grantee is not eligible for a payout,
except that the Committee may, in its discretion, provide that the Grantee shall earn a pro-rated payout equal to (i) the payout to which the Grantee would have been entitled based on the performance of the Company during the full fiscal year,
multiplied by (ii) a fraction, the numerator of which is the number of days that the Grantee was employed during the fiscal year and the denominator of which is 365.
|
|
|
|
|
|
|
|
Option Expiration Date
|
|
Midnight of the 10
th
anniversary of the grant date
|
|
N/A
|
|
N/A
|
|
N/A
|
12 of 42
APPENDIX B
IMPACT OF TERMINATION OF EMPLOYMENT ON AWARDS
(EXECUTIVE OFFICER)
|
|
|
|
|
|
|
|
|
|
|
Reason for Termination
|
|
Impact of Termination of Employment
|
|
RETIREMENT AT AGE 65
4
|
|
Stock Options
|
|
Restricted Shares
|
|
Performance Share
Incentive Award
2
|
|
Cash Incentive
Award
4
|
|
Vesting
|
|
Grants made less than 12 months prior to termination date are forfeited;
Vesting continues for all other unvested stock options granted
|
|
Grants made less than 12 months prior to termination date are forfeited;
For all other unvested restricted shares at the time of retirement, the restriction period
will terminate and all restricted shares will become vested and transferable.
|
|
Subject to the Committee’s exercise of negative discretion as provided in the resolution establishing the FY [
—
] Performance Share Incentive Award, Grantee shall earn a
pro-rated number of Performance Share Units (rounded to the nearest whole number) equal to (i) the number of Performance Share Units to which the Grantee would have been entitled based on the performance of the Company during the full performance
period, multiplied by (ii) a fraction, the numerator of which is the number of days that the Grantee was employed during the performance period and the denominator of which is the number of days in the performance period.
|
|
Subject to the Committee’s exercise of negative discretion as provided in the resolution establishing the FY[
—
] Cash Incentive Award, Grantee is not eligible for a payout,
except that the Committee may, in its discretion, provide that the Grantee shall earn a pro-rated payout equal to (i) the payout to which the Grantee would have been entitled based on the performance of the Company during the full fiscal year,
multiplied by (ii) a fraction, the numerator of which is the number of days that the Grantee was employed during the fiscal year and the denominator of which is 365.
|
|
|
|
|
|
|
|
Option Expiration Date
|
|
Midnight of the 10
th
anniversary of the grant date.
|
|
N/A
|
|
N/A
|
|
N/A
|
13 of 42
APPENDIX B
IMPACT OF TERMINATION OF EMPLOYMENT ON AWARDS
(EXECUTIVE OFFICER)
|
|
|
|
|
|
|
|
|
|
|
Reason for Termination
|
|
Impact of Termination of Employment
|
|
EARLY RETIREMENT
5
|
|
Stock Options
|
|
Restricted Shares
|
|
Performance Share
Incentive Award
2
|
|
Cash Incentive
Award
4
|
|
Vesting
|
|
Grants made less than 12 months prior to termination date are forfeited;
Vesting continues for all other unvested stock options granted
|
|
Grants made less than 12 months prior to termination date are forfeited;
For all other unvested Restricted Shares at the time of retirement, the restriction period
will terminate with respect to that number of shares of Restricted Shares (rounded to the nearest whole number) equal to the product of (i) the total number of shares of Restricted Shares multiplied by (ii) a fraction the numerator of
which is the number of full months that have elapsed since the date of grant and the denominator of which is the number of full months of the full restriction period, and that number of shares of Restricted Shares will become vested and
transferable.
The Committee may, in its discretion, waive the forfeiture of any or all
such remaining shares.
|
|
Subject to the Committee’s exercise of negative discretion as provided in the resolution establishing the FY [
—
] Performance Share Incentive Award, Grantee shall earn a
pro-rated number of Performance Share Units (rounded to the nearest whole number) equal to (i) the number of Performance Share Units to which the Grantee would have been entitled based on the performance of the Company during the full performance
period, multiplied by (ii) a fraction, the numerator of which is the number of days that the Grantee was employed during the performance period and the denominator of which is the number of days in the performance period.
|
|
Subject to the Committee’s exercise of negative discretion as provided in the resolution establishing the FY [
—
] Cash Incentive Award, Grantee is not eligible for a payout,
except that the Committee may, in its discretion, provide that the Grantee shall earn a pro-rated payout equal to (i) the payout to which the Grantee would have been entitled based on the performance of the Company during the full fiscal year,
multiplied by (ii) a fraction, the numerator of which is the number of days that the Grantee was employed during the fiscal year and the denominator of which is 365.
|
|
|
|
|
|
|
|
Option Expiration Date
|
|
Earlier of (i) the 5
th
anniversary of the date of termination or (ii) midnight of the 10
th
anniversary of the grant date.
|
|
N/A
|
|
N/A
|
|
N/A
|
14 of 42
APPENDIX B
IMPACT OF TERMINATION OF EMPLOYMENT ON AWARDS
(EXECUTIVE OFFICER)
|
|
|
|
|
|
|
|
|
|
|
Reason for Termination
|
|
Impact of Termination of Employment
|
|
INVOLUNTARY
TERMINATION (other than a
violation of the Company’s
Code of Ethics and
Business
Conduct)
|
|
Stock Options
|
|
Restricted Shares
|
|
Performance Share
Incentive Award
2
|
|
Cash Incentive
Award
4
|
|
Vesting
|
|
All unvested options are forfeited as of the termination date
|
|
All unvested shares of restricted stock will be forfeited as of the date of termination; except that the Committee may, in its discretion, waive the automatic forfeiture of, and the restrictions on, any or all such shares.
|
|
Subject to the Committee’s exercise of negative discretion as provided in the resolution establishing the FY [
—
] Performance Share Incentive Award, all unvested performance
share units are forfeited; except that the Committee may, in its discretion, provide that the Grantee shall earn a pro-rated number of Performance Share Units (rounded to the nearest whole number) equal to (i) the number of Performance Share Units
to which the Grantee would have been entitled based on the performance of the Company during the full performance period, multiplied by (ii) a fraction, the numerator of which is the number of days that the Grantee was employed during the
performance period and the denominator of which is the number of days in the performance period.
|
|
Subject to the Committee’s exercise of negative discretion as provided in the resolution establishing the FY [
—
] Cash Incentive Award, Grantee is not eligible for a payout,
except that the Committee may, in its discretion, provide that the Grantee shall earn a pro-rated payout equal to (i) the payout to which the Grantee would have been entitled based on the performance of the Company during the full fiscal year,
multiplied by (ii) a fraction, the numerator of which is the number of days that the Grantee was employed during the fiscal year and the denominator of which is 365.
|
|
|
|
|
|
|
|
Option Expiration Date
|
|
Earlier of (i) 90 days after the date of termination and (ii) midnight of the 10
th
anniversary of the grant date.
|
|
N/A
|
|
N/A
|
|
N/A
|
15 of 42
APPENDIX B
IMPACT OF TERMINATION OF EMPLOYMENT ON AWARDS
(EXECUTIVE OFFICER)
|
|
|
|
|
|
|
|
|
|
|
Reason for Termination
|
|
Impact of Termination of Employment
|
|
VOLUNTARY
TERMINATION or
TERMINATION DUE TO A
VIOLATION OF THE
COMPANY’S CODE OF
ETHICS AND
BUSINESS
CONDUCT
|
|
Stock Options
|
|
Restricted Shares
|
|
Performance Share
Incentive Award
2
|
|
Cash Incentive
Award
4
|
|
Vesting
|
|
All vested and unvested options are forfeited as of the termination date.
|
|
All unvested shares of restricted shares will be forfeited as of the date of termination.
|
|
Subject to the Committee’s exercise of negative discretion as provided in the resolution establishing the FY [
—
] Performance Share Incentive Award, all unvested performance
share units are forfeited.
|
|
Subject to the Committee’s exercise of negative discretion as provided in the resolution establishing the FY2015 Cash Incentive Award, Grantee is not eligible for a payout.
|
|
|
|
|
|
|
|
Option Expiration Date
|
|
On the termination date.
|
|
N/A
|
|
N/A
|
|
N/A
|
|
1.
|
Death and Disability: defined as a physical or mental impairment, due to accident or illness that renders a Grantee incapable of performing the duties of his normal occupation, as determined by the Committee. The
Committee may, in its discretion, require that the existence of the Disability be verified by a physician approved by the Committee.
|
|
2.
|
Achievement of performance levels and amounts payable will be certified by the Compensation Committee and payouts, if any, will be remitted following the conclusion of a performance period.
|
|
3.
|
Achievement of performance levels and amounts payable will be certified by the Compensation Committee and payouts, if any, will be remitted following the conclusion of a performance period (fiscal year).
|
|
4.
|
Under the terms of the Nordson Corporation Salaried Employees Pension Plan.
|
|
5.
|
Retirement no earlier than age 55 but before age 65, with no less than 5 years of service as defined under the Nordson Corporation Salaried Employees Pension Plan.
|
16 of 42
APPENDIX C:
PERFORMANCE MEASURES FOR PERFORMANCE SHARE INCENTIVE AWARD
AND CASH INCENTIVE AWARD TO COVERED EMPLOYEES
[this Appendix is applicable to Covered Employees only]
This Appendix C sets out performance measures for Performance Share Incentive Awards and Cash Incentive Awards to Covered Employees. Covered Employees are
those individuals serving on the last day of the applicable performance period (e.g., the last day of FY [
—
] in the case of Cash Incentive Awards and the last day of FY [
—
] in the case of Performance Share Incentive Awards) as the Company’s President and Chief Executive Officer (“CEO”), the first highest paid Named Executive Officer other than the CEO or
Chief Financial Officer (“CFO”), the second highest paid Named Executive Officer other than the CEO and CFO, and the third highest paid Named Executive Officer other than the CEO and CFO. Awards to Covered Employees subject to this
Appendix C are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code and shall be administered and interpreted in a manner consistent with that intent.
FY
[
—
]
-
[
—
]
Performance
Share Incentive (PSI) Awards
No payouts for PSI Awards shall be made to any Covered Employee unless a share pool is funded based on [
—
], as disclosed in the Company’s Form 10-K Report, if any, for the FY [
—
] Performance Period (Performance Period). The aggregate share pool, if
any, will equal [
—
]. If funded, [
—
]% of the share pool will be allocated to the CEO and [
—
]%
of the share pool will be allocated to each of the other Covered Employees; provided, however, that in no event may the portion of the share pool allocated to any Covered Employee exceed 750,000 Shares.
If the Company does not achieve positive cumulative operating cash flow for the Performance Period, then no payout for the PSI Awards will be made to any
Covered Employee for the Performance Period.
If the share pool is funded as described above, the Compensation Committee, in its sole discretion, may
decrease the payout of each Covered Employee’s PSI Award (without increasing any other Covered Employee’s payout) based on its assessment of the Company’s performance, the Covered Employee’s individual performance, or any other
factors it considers relevant, including, without limitation, the Company’s achievement of specified levels of cumulative Earnings Per Share and cumulative Revenue over the Performance Period as set out in the table below, with one-half of each
Covered Employee’s PSI Award allocated to each of those two performance measures.
Further, the Compensation Committee, in its sole discretion, may
modify the performance measures set out in the table below, or the related threshold, target and maximum performance levels, or the actual payout amounts, in whole or in part, as the Committee deems appropriate and equitable to reflect a change in
the business, operations, corporate structure or capital structure of the Company or its affiliates, the manner in which it conducts its business, or other events or circumstances.
17 of 42
APPENDIX C:
PERFORMANCE MEASURES FOR PERFORMANCE SHARE INCENTIVE AWARD
AND CASH INCENTIVE AWARD TO COVERED EMPLOYEES
[this Appendix is applicable to Covered Employees only]
|
|
|
|
|
|
|
|
|
|
|
|
|
[Insert measures and levels established by the Compensation Committee]
|
|
Threshold
([
—
]%
payout)
|
|
|
Target
([
—
]%
payout)
|
|
|
Maximum
([
—
]%
payout)
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
*
|
Straight line interpolation applies for performance between designated levels.
|
FY [
—
] Cash Incentive (CI) Awards
No payouts for CI Awards shall be made to any Covered Employee
for FY [
—
] unless a bonus pool is funded based on the Company’s achievement of positive cash flow from operating activities (“Cash Flow”), as disclosed in the Company’s Form
10-K Report, if any for FY [
—
]. The aggregate bonus pool, if any, will equal [
—
]. If funded,
[
—
]% of the bonus pool will be allocated to the CEO and [
—
]% of the bonus pool will be allocated to each of the other Covered Employees;
provided, however, that in no event may the portion of the bonus pool allocated to any Covered Employee exceed $5,000,000. The lesser of $5,000,000 or the portion of the bonus pool allocated to a Covered Employee shall be the Covered Employee’s
“Maximum Bonus.” If the Company does not achieve positive Cash Flow for FY [
—
], then no Cash-Based Award shall be payable to any Covered Employee for FY [
—
].
If the bonus pool is funded, the Compensation Committee, in its sole discretion, may decrease the
payout of each Covered Employee’s Award (without increasing any other Covered Employee’s payout) based on its assessment of the Company’s performance, the Covered Employee’s individual performance, or any other factors it
considers relevant, including, without limitation, the Company’s achievement of specified levels of [
—
]. Payment of a CI Award to Covered Employees is contingent upon the Company’s
achievement of specified performance levels for FY [
—
] outlined in the table below. [
—
] measures -
[
—
] - will account for [
—
]% of the cash incentive award for each executive officer in FY [
—
].
For operating unit executive officers, the remaining [
—
]% of the cash incentive award will be determined based on individual business unit measures as set forth in Appendix D to this Notice. For
the functional executive officers, including the CEO, the remaining [
—
]% of the cash incentive award will be determined based on a weighted average of all collective business unit measures as set
forth in Appendix D. The weighting of the business unit measures will be determined based on each business unit’s actual FY [
—
] revenue as a percentage of Nordson revenue.
18 of 42
APPENDIX C:
PERFORMANCE MEASURES FOR PERFORMANCE SHARE INCENTIVE AWARD
AND CASH INCENTIVE AWARD TO COVERED EMPLOYEES
[this Appendix is applicable to Covered Employees only]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY [
—
] Cash Incentive Award Measures and
Performance Levels
|
|
|
|
|
[Insert measures and levels established by
the Compensation Committee]
|
|
|
Threshold (50% payout)
|
|
|
[
|
—
]
|
|
|
[
|
—
]
|
|
|
[
—
|
]
|
|
Target (100% payout)
|
|
|
[
|
—
]
|
|
|
[
|
—
]
|
|
|
[
—
|
]
|
|
Maximum (200% payout)
|
|
|
[
|
—
]
|
|
|
[
|
—
]
|
|
|
[
—
|
]
|
|
|
•
|
|
Straight line interpolation applies for performance between designated levels.
|
The Compensation Committee, in
its sole discretion, may modify the performance objectives set out in the table above, or the related threshold, target and maximum performance levels, or the actual payout levels, in whole or in part, as the Committee deems appropriate and
equitable to reflect a change in the business, operations, corporate structure or capital structure of the Company or its affiliates, the manner in which it conducts its business, or other events or circumstances.
19 of 42
APPENDIX D
BUSINESS UNIT PERFORMANCE MEASURES AND LEVELS
(Executive Officers)
[tbd by Compensation Committee action annually)
20 of 42
APPENDIX E
NORDSON CORPORATION CLAWBACK POLICY
[Effective November 25, 2013]
This Clawback Policy is applicable to Nordson
Corporation (the “Company”) executive officers who are subject to Section 16 of the Securities Exchange Act of 1934 (“Executive Officers”). The Company’s Board of Directors, upon the Compensation Committee’s
recommendation, may, to the extent permitted by law and to the extent it determines that it is in the Company’s best interests to do so, take action in accordance with the following:
A. Material Restatement
:
In the
event of a material restatement of the consolidated financial statements of the Company, other than any restatement required pursuant to a change in applicable accounting rules, the Company may recover from culpable and non-culpable Executive
Officers any compensation (whether in cash or property) paid to, or realized by, an Executive Officer that would not have been paid or realized had the consolidated financial statements that are the subject of such restatement been correctly stated.
Determination of culpability and materiality will be at the discretion of the Compensation Committee. Recovery hereunder is limited to amounts paid or realized by an Executive Officer during the three-year period preceding the date that the Company
is required to prepare a restatement.
B. Other Conduct
:
In the event the Compensation Committee determines that an Executive Officer has engaged in (i) conduct that violates the Company’s Code of Ethics
and Business Conduct, or (ii) willful misconduct or fraud that causes harm to the Company, the Company’s Board of Directors, upon the Compensation Committee’s recommendation, may, to the extent permitted by law and to the extent it
determines that it is in the Company’s best interests to do so, require reimbursement or payment by the Executive Officer to the Company of an amount determined by the Board of Directors to be attributable to such conduct described in
(i) and (ii) above.
Collectively, conduct described in A and B above shall be considered “Detrimental Conduct.” Compensation subject
to this Policy includes equity-based compensation and performance-based compensation.
In determining whether to recover compensation paid or realized,
the Board in its discretion may take into account such considerations as it deems appropriate, including whether the assertion of a claim may violate applicable law or prejudice the interest of the Company in any related proceeding or investigation
and whether penalties or punishments have been imposed by third parties, such as law enforcement agencies, regulators or other authorities.
The Board may
take action only after recommendation to do so by the Compensation Committee. However, the Board has sole and absolute discretion not to take action
21 of 42
APPENDIX E
NORDSON CORPORATION CLAWBACK POLICY
[Effective November 25, 2013]
and its determination not to take action in any particular instance shall not in any way limit the Company’s ability to terminate participation of an Executive Officer in a compensation plan
or program, or terminate an Executive Officer’s employment.
If any provision of this Clawback Policy is determined to be unenforceable or invalid
under any applicable law, such provision will be applied to the maximum extent permitted by applicable law, and shall automatically be deemed amended in a manner consistent with its objectives to the extent necessary to conform to any limitations
required under applicable law.
Any action taken by the Company under this Clawback Policy is without prejudice to any other action the Company may choose
to take upon determination that an Executive Officer has engaged in Detrimental Conduct or to all other remedies available to the Company.
The Company
reserves the right to amend this policy in the future at any time including after final clawback rules are adopted by the Securities and Exchange Commission pursuant to the Dodd-Frank Act.
22 of 42
APPENDIX F:
NORDSON CORPORATION
2012
STOCK INCENTIVE AND AWARD PLAN
1. Establishment, Purpose, Duration.
a.
Establishment
. Nordson Corporation (the “Company”), hereby establishes an equity compensation plan to be known as the
Nordson Corporation 2012 Stock Incentive and Award Plan (the “Plan”). The Plan is effective as of December 28, 2012 (the “Effective Date”), subject to the approval of the Plan by the shareholders of the Company (the date of
such shareholder approval being the “Approval Date”). Definitions of capitalized terms used in the Plan are contained in Section 0 of the Plan.
b.
Purpose
. The purpose of the Plan is to attract and retain Directors, officers and other key employees of the Company and its
Subsidiaries and to provide to such persons incentives and rewards for superior performance.
c.
Duration
. No Award may be
granted under the Plan after the day immediately preceding the tenth (10th) anniversary of the Effective Date, or such earlier date as the Board shall determine. The Plan will remain in effect with respect to outstanding Awards until no Awards
remain outstanding.
d.
Prior Plan
. If the Company’s shareholders approve the Plan, the Nordson Corporation Amended and
Restated 2004 Long-Term Performance Plan (the “Prior Plan”) will terminate in its entirety effective on the Approval Date;
provided
that all outstanding awards under the Prior Plan as of the Approval Date shall remain outstanding
and shall be administered and settled in accordance with the provisions of the Prior Plan.
2. Definitions.
As used in the Plan,
the following definitions shall apply.
“Applicable Laws” means the applicable requirements relating to the administration of
equity-based compensation plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, the rules of any stock exchange or quotation system on which the Shares are listed or quoted and the applicable laws of any other
country or jurisdiction where Awards are granted under the Plan.
“Approval Date” has the meaning given such term in
Section 0(a).
“Award” means a Nonqualified Stock Option, Incentive Stock Option, Stock Appreciation Right, Restricted
Shares Award, Restricted Share Unit, Other Share-Based Award or Cash-Based Award granted pursuant to the terms and conditions of the Plan.
“Award Agreement” means either: (a) an agreement, either in written or electronic format, entered into by the Company and a
Participant setting forth the terms and provisions applicable to an Award granted under the Plan; or (b) a statement, either in written or electronic format, issued by the Company to a Participant describing the terms and provisions of such
Award, which need not be signed by the Participant.
“Board” means the Board of Directors of the Company.
“Cash-Based Award” shall mean a cash Award granted pursuant to Section 11 of the Plan.
“Cause” as a reason for a Participant’s termination of employment shall have the meaning assigned such term in the employment
agreement (or, if operative, the Change-in-Control Retention Agreement), if any, between the Participant and the Company or Subsidiary. If the Participant is not a party to an employment agreement (or Change-in-Control Retention Agreement) with the
Company or a Subsidiary in which such term is defined, then unless otherwise defined in the applicable Award Agreement, “Cause” shall mean (i) the commission of an act of fraud, embezzlement, theft, or other similar criminal act
constituting a felony and involving the business of the Company or its Subsidiaries, or (ii) the continued failure of the Participant to perform substantially the Participant’s duties with the Company or any of its Subsidiaries (other than
any such failure resulting from any medically determined physical or mental impairment) that is not cured by the Participant within 30 days after a written demand for substantial performance is delivered to the Participant by the Company which
specifically identifies the manner in which the Company believes that the Participant has not substantially performed the Participant’s duties.
“Change in Control” means the occurrence of one of the following events: (a) a report is filed with the SEC on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form, or report), each as promulgated pursuant to the Exchange Act, disclosing that any “person” (as the term “person” is used in
APPENDIX F:
NORDSON CORPORATION
2012
STOCK INCENTIVE AND AWARD PLAN
Section 13(d) or Section 14(d)(2) of the Exchange Act) is or has become a beneficial owner, directly or indirectly, of securities of the Company representing 35% or more of the combined
voting power of the Company’s then outstanding securities; (b) the Company is merged or consolidated with another corporation and, as a result thereof, securities representing less than 50% of the combined voting power of the surviving or
resulting corporation’s securities (or of the securities of a parent corporation in case of a merger in which the surviving or resulting corporation becomes a wholly-owned subsidiary of the parent corporation) are owned in the aggregate by
holders of the Company’s securities immediately before such merger or consolidation; (c) all or substantially all of the assets of the Company are sold in a single transaction or a series of related transactions to a single purchaser or a
group of affiliated purchasers; or (d) during any period of 24 consecutive months, individuals who were Directors at the beginning of the period cease to constitute at least a majority of the Board unless the election, or nomination for
election by the Company’s shareholders, of more than one half of any new Directors was approved by a vote of at least two-thirds of the Directors then still in office who were Directors at the beginning of the 24 month period.
“Code” means the Internal Revenue Code of 1986, as amended.
“Committee” means the Compensation Committee of the Board or such other committee or subcommittee of the Board as may be duly
appointed to administer the Plan and having such powers in each instance as shall be specified by the Board. To the extent required by Applicable Laws, the Committee shall consist of two or more members of the Board, each of whom is a
“non-employee director” within the meaning of Rule 16b-3 promulgated under the Exchange Act, an “outside director” within the meaning of regulations promulgated under Section 162(m) of the Code, and an “independent
director” within the meaning of applicable rules of any securities exchange upon which Shares are listed.
“Company” has
the meaning given such term in Section 1(a) and any successor thereto.
“Date of Grant” means the date as of which an
Award is determined to be effective and designated in a resolution by the Committee and is granted pursuant to the Plan. The Date of Grant shall not be earlier than the date of the resolution and action therein by the Committee. In no event shall
the Date of Grant be earlier than the Effective Date.
“Director” means any individual who is a member of the Board who is not
an Employee.
“Effective Date” has the meaning given such term in Section 0(a).
“Employee” means any employee of the Company or a Subsidiary;
provided
,
however
, that for purposes of determining
whether any person may be a Participant for purposes of any grant of Incentive Stock Options, the term “Employee” has the meaning given to such term in Section 3401(c) of the Code, as interpreted by the regulations thereunder and
Applicable Law.
“Exchange Act” means the Securities Exchange Act of 1934 and the rules and regulations thereunder, as such
law, rules and regulations may be amended from time to time.
“Fair Market Value” means the value of one Share on any relevant
date, determined under the following rules: (a) the closing sale price per Share on that date as reported on the principal exchange on which Shares are then trading, if any, or if applicable the NASDAQ Global Select Market, or if there are no
sales on that date, on the next preceding trading day during which a sale occurred; (b) if the Shares are not reported on a principal exchange or national market system, the average of the closing bid and asked prices last quoted on that date
by an established quotation service for over-the-counter securities; or (c) if neither (a) nor (b) applies, (i) with respect to Stock Options, Stock Appreciation Rights and any Award of stock rights that is subject to
Section 409A of the Code, the value as determined by the Committee through the reasonable application of a reasonable valuation method, taking into account all information material to the value of the Company, within the meaning of
Section 409A of the Code, and (ii) with respect to all other Awards, the fair market value as determined by the Committee in good faith.
“Full Value Award” means an Award that is settled by the issuance of Shares, other than a Stock Option or a Stock Appreciation
Right.
“Good Reason” as a reason for a Participant’s termination of employment shall have the meaning assigned such term
in the Change-in-Control Retention Agreement, if any, between the Participant and the Company or Subsidiary.
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“Incentive Stock Option” or “ISO” means a Stock Option that is
designated as an Incentive Stock Option and that is intended to meet the requirements of Section 422 of the Code.
“Nonqualified Stock Option” means a Stock Option that is not intended to meet the requirements of Section 422 of the Code or
otherwise does not meet such requirements.
“Other Share-Based Award” means an equity-based or equity-related Award not
otherwise described by the terms of the Plan, granted in accordance with the terms and conditions set forth in Section 10.
“Participant” means any eligible individual as set forth in Section 5 who holds one or more outstanding Awards.
“Performance-Based Exception” means the performance-based exception from the tax deductibility limitations of Section 162(m)
of the Code.
“Performance Objectives” means the performance objective or objectives established by the Committee pursuant to
the Plan. Any Performance Objectives may relate to the performance of the Company or one or more of its Subsidiaries, divisions, departments, units, functions, partnerships, joint ventures or minority investments, product lines or products, or the
performance of the individual Participant, and may include, without limitation, the Performance Objectives set forth in Section 13(b). The Performance Objectives may be made relative to the performance of a group of comparable companies, or
published or special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance Objectives as compared to various stock market indices. Performance Objectives may be stated as a combination of the
listed factors.
“Plan” means this Nordson Corporation 2012 Stock and Incentive Award Plan, as amended from time to time.
“Potential Change in Control” means a report is filed with the SEC on Schedule 13D or Schedule 14D-1 (or any successor schedule,
form, or report), each as promulgated pursuant to the Exchange Act, disclosing that any “person” (as the term “person” is used in Section 13(d) or Section 14(d)(2) of the Exchange Act) is or has become a beneficial
owner, directly or indirectly, of securities of the Company representing at least 25% but less than 35% of the combined voting power of the Company’s then outstanding securities.
“Potential Change in Control Protection Period” means the period commencing on a Potential Change in Control and ending on the
earlier of (i) a Change in Control, or (ii) the second anniversary of the Potential Change in Control.
“Prior Plan”
has the meaning given such term in Section 0(d).
“Qualified Termination” means any termination of a Participant’s
employment during the Potential Change in Control Protection Period: (i) by the Company, any of its Subsidiaries or the resulting entity without Cause, or (ii) solely with respect to a Participant who is a party to a Change-in-Control
Retention Agreement with the Company or a Subsidiary immediately prior to a Potential Change in Control, by the Participant for Good Reason.
“Restricted Shares” means Shares granted or sold pursuant to Section 0 as to which neither the substantial risk of forfeiture
nor the prohibition on transfers referred to in such Section 0 has expired.
“Restricted Share Unit” means a grant or sale
of the right to receive Shares or cash at the end of a specified restricted period made pursuant to Section 0.
“SEC”
means the United States Securities and Exchange Commission.
“Share” means a share of common stock of the Company, without par
value, or any security into which such Share may be changed by reason of any transaction or event of the type referred to in Section 15.
“Stock Appreciation Right” means a right granted pursuant to Section 0.
“Stock Option” means a right to purchase a Share granted to a Participant under the Plan in accordance with the terms and
conditions set forth in Section 0. Stock Options may be either Incentive Stock Options or Nonqualified Stock Options.
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“Subsidiary” means: (a) with respect to an Incentive Stock Option, a
“subsidiary corporation” as defined under Section 424(f) of the Code; and (b) for all other purposes under the Plan, any corporation or other entity in which the Company owns, directly or indirectly, a proprietary interest of
more than fifty (50%) by reason of stock ownership or otherwise.
“Ten Percent Shareholder” shall mean any Participant who
owns more than 10% of the combined voting power of all classes of stock of the Company, within the meaning of Section 422 of the Code.
3. Shares
Available Under the Plan
.
a.
Shares Available for Awards
. The maximum number of Shares that may be issued or
delivered pursuant to Awards under the Plan shall be 2,900,000, including the number of Shares that, on the Approval Date, are available to be granted under the Prior Plan but which are not then subject to outstanding awards under the Prior Plan,
all of which may be granted with respect to Incentive Stock Options. Shares issued or delivered pursuant to an Award may be authorized but unissued Shares, treasury Shares, including Shares purchased in the open market, or a combination of the
foregoing. The aggregate number of Shares available for issuance or delivery under the Plan shall be subject to adjustment as provided in Section 15.
b.
Share Counting
. The following Shares shall not count against the Share limit in Section 3(a): (i) Shares covered by
an Award that expires or is forfeited, canceled, surrendered, or otherwise terminated without the issuance of such Shares; (ii) Shares covered by an Award that is settled only in cash; (iii) Shares tendered in payment of the exercise price
of a Stock Option; (iv) Shares withheld by the Company or any Subsidiary to satisfy a tax withholding obligation; and (v) Shares granted through the assumption of, or in substitution for, outstanding awards granted by a company to
individuals who become Employees or Directors as the result of a merger, consolidation, acquisition or other corporate transaction involving such company and the Company or any of its Affiliates (except as may be required by reason of the rules and
regulations of any stock exchange or other trading market on which the Shares are listed). With respect to any Stock Appreciation Right that is settled in Shares, only the Shares used to settle the Stock Appreciation Right upon exercise shall count
against the number of Shares available for Awards under the Plan. In addition, Shares subject to outstanding awards under the Prior Plan as of the Approval Date that on or after the Approval Date are forfeited, canceled, surrendered or otherwise
terminated without the issuance of such Shares shall be available for issuance or delivery under this Plan. Notwithstanding anything contained herein to the contrary, Shares that are repurchased by the Company with Stock Option proceeds shall not be
added back to the number of Shares reserved in Section 3(a). This Section 3(b) shall apply to the number of Shares reserved and available for Incentive Stock Options only to the extent consistent with applicable Treasury regulations
relating to Incentive Stock Options under the Code.
c.
Per Participant Share Limits
. Subject to adjustment as provided in
Section 15 of the Plan, the following limits shall apply with respect to Awards that are intended to qualify for the Performance-Based Exception: (i) the maximum aggregate number of Shares that may be subject to Stock Options or Stock
Appreciation Rights granted in any calendar year to any one Participant shall be 750,000 Shares; (ii) the maximum aggregate number of Restricted Shares granted in any calendar year to any one Participant shall be 250,000 Shares; (iii) the
maximum aggregate number of shares that may be issued or delivered pursuant to Restricted Share Units or Other Share-Based Awards granted in any calendar year to any one Participant shall be 250,000 Shares, provided that if the Restricted Share
Units or Other Share-Based Awards are subject to a performance period of more than one year, the maximum shall equal the product of 250,000 Shares and the full number of years in the performance period; and (iv) the maximum aggregate
compensation that may be paid under a Cash-Based Award granted in any calendar year to any one Participant shall be $5,000,000 or a number of Shares having an aggregate Fair Market Value not in excess of such amount, provided that if the Cash-Based
Award is subject to a performance period of more than one year, the maximum shall equal the product of $5,000,000 and the full number of years in the performance period.
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4. Administration of the Plan.
a.
In General
. The Plan shall be administered by the Committee. Except as otherwise provided by the Board, the Committee shall
have full and final authority in its discretion to take all actions determined by the Committee to be necessary in the administration of the Plan, including, without limitation, discretion to: select Award recipients; determine the sizes and types
of Awards; determine the terms and conditions of Awards in a manner consistent with the Plan; grant waivers of terms, conditions, restrictions and limitations applicable to any Award, or accelerate the vesting or exercisability of any Award, in a
manner consistent with the Plan; construe and interpret the Plan and any Award Agreement or other agreement or instrument entered into under the Plan; establish, amend, or waive rules and regulations for the Plan’s administration; and take such
other action, not inconsistent with the terms of the Plan, as the Committee deems appropriate. To the extent permitted by Applicable Laws, the Committee may, in its discretion, delegate to one or more Directors or Employees any of the
Committee’s authority under the Plan. The acts of any such delegates shall be treated hereunder as acts of the Committee with respect to any matters so delegated.
b.
Determinations
. The Committee shall have no obligation to treat Participants or eligible Participants uniformly, and the
Committee may make determinations under the Plan selectively among Participants who receive, or Employees or Directors who are eligible to receive, Awards (whether or not such Participants or eligible Employees or Directors are similarly situated).
All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders and resolutions of the Committee shall be final, conclusive and binding on all persons, including the Company, its Subsidiaries, its
shareholders, Directors, Employees, Participants and their estates and beneficiaries.
c.
Authority of the Board
. The Board
may reserve to itself any or all of the authority or responsibility of the Committee under the Plan or may act as the administrator of the Plan for any and all purposes. To the extent the Board has reserved any such authority or responsibility or
during any time that the Board is acting as administrator of the Plan, it shall have all the powers of the Committee hereunder, and any reference herein to the Committee (other than in this Section 4(c)) shall include the Board. To the extent
that any action of the Board under the Plan conflicts with any action taken by the Committee, the action of the Board shall control.
5. Eligibility
and Participation.
Each Employee and Director is eligible to participate in the Plan. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees and Directors those to whom Awards shall
be granted and shall determine, in its sole discretion, the nature of any and all terms permissible by Applicable Law and the amount of each Award.
6.
Stock Options.
Subject to the terms and conditions of the Plan, Stock Options may be granted to Participants in such number, and upon such terms and conditions, as shall be determined by the Committee in its sole discretion.
a.
Award Agreement
. Each Stock Option shall be evidenced by an Award Agreement that shall specify the exercise price, the term of
the Stock Option, the number of Shares covered by the Stock Option, the conditions upon which the Stock Option shall become vested and exercisable and such other terms and conditions as the Committee shall determine and which are not inconsistent
with the terms and conditions of the Plan. The Award Agreement also shall specify whether the Stock Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option.
b.
Exercise Price
. The exercise price per Share of a Stock Option shall be determined by the Committee at the time the Stock
Option is granted and shall be specified in the related Award Agreement;
provided, however
, that in no event shall the exercise price per Share of any Stock Option be less than one hundred percent (100%) of the Fair Market Value of a
Share on the Date of Grant.
c.
Term
. The term of a Stock Option shall be determined by the Committee and set forth in the
related Award Agreement;
provided, however
, that in no event shall the term of any Stock Option exceed ten (10) years from its Date of Grant.
d.
Exercisability
. Stock Options shall become vested and exercisable at such times and upon such terms and conditions as shall be
determined by the Committee and set forth in the related Award Agreement. Such terms and conditions may include, without limitation, the satisfaction of (a) performance goals based on one or more Performance Objectives, and/or
(b) time-based vesting requirements.
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e.
Exercise of Stock Options
. Except as otherwise provided in the Plan or in a
related Award Agreement, a Stock Option may be exercised for all or any portion of the Shares for which it is then exercisable. A Stock Option shall be exercised by the delivery of a notice of exercise to the Company or its designee in a form
specified by the Company which sets forth the number of Shares with respect to which the Stock Option is to be exercised and full payment of the exercise price for such Shares. The exercise price of a Stock Option may be paid, in the discretion of
the Committee and as set forth in the applicable Award Agreement: (i) in cash or its equivalent; (ii) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the aggregate exercise price; (iii) by a cashless exercise (including by withholding Shares deliverable upon exercise and through a broker-assisted arrangement to the extent permitted by Applicable Laws); (iv) by a
combination of the methods described in clauses (i), (ii) and/or (iii); or (v) through any other method approved by the Committee in its sole discretion. As soon as practicable after receipt of the notification of exercise and full payment
of the exercise price, the Company shall cause the appropriate number of Shares to be issued to the Participant.
f.
Special Rules
Applicable to Incentive Stock Options
. Notwithstanding any other provision in the Plan to the contrary:
(i) Incentive Stock
Options may be granted only to Employees of the Company and its Subsidiaries. The terms and conditions of Incentive Stock Options shall be subject to and comply with the requirements of Section 422 of the Code.
(ii) To the extent that the aggregate Fair Market Value of the Shares (determined as of the Date of Grant) with respect to which an Incentive
Stock Option is exercisable for the first time by any Participant during any calendar year (under all plans of the Company and its Subsidiaries) is greater than $100,000 (or such other amount specified in Section 422 of the Code), as calculated
under Section 422 of the Code, then the Stock Option shall be treated as a Nonqualified Stock Option.
(iii) No Incentive Stock
Option shall be granted to any Participant who, on the Date of Grant, is a Ten Percent Shareholder, unless (x) the exercise price per Share of such Incentive Stock Option is at least one hundred and ten percent (110%) of the Fair Market
Value of a Share on the Date of Grant, and (y) the term of such Incentive Stock Option shall not exceed five (5) years from the Date of Grant.
7. Stock Appreciation Rights.
Subject to the terms and conditions of the Plan, Stock Appreciation Rights may be granted to Participants in such
number, and upon such terms and conditions, as shall be determined by the Committee in its sole discretion.
a.
Award
Agreement
. Each Stock Appreciation Right shall be evidenced by an Award Agreement that shall specify the exercise price, the term of the Stock Appreciation Right, the number of Shares covered by the Stock Appreciation Right, the conditions
upon which the Stock Appreciation Right shall become vested and exercisable and such other terms and conditions as the Committee shall determine and which are not inconsistent with the terms and conditions of the Plan.
b.
Exercise Price
. The exercise price per Share of a Stock Appreciation Right shall be determined by the Committee at the time the
Stock Appreciation Right is granted and shall be specified in the related Award Agreement;
provided, however
, that in no event shall the exercise price per Share of any Stock Appreciation Right be less than one hundred percent (100%) of
the Fair Market Value of a Share on the Date of Grant.
c.
Term
. The term of a Stock Appreciation Right shall be determined by
the Committee and set forth in the related Award Agreement;
provided, however
, that in no event shall the term of any Stock Appreciation Right exceed ten (10) years from its Date of Grant.
d.
Exercisability of Stock Appreciation Rights
. A Stock Appreciation Right shall become vested and exercisable at such times and
upon such terms and conditions as may be determined by the Committee and set forth in the related Award Agreement. Such terms and conditions may include, without limitation, the satisfaction of (i) performance goals based on one or more
Performance Objectives, and/or (ii) time-based vesting requirements.
e.
Exercise of Stock Appreciation Rights
. Except as
otherwise provided in the Plan or in a related Award Agreement, a Stock Appreciation Right may be exercised for all or any portion of the Shares for
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which it is then exercisable. A Stock Appreciation Right shall be exercised by the delivery of a notice of exercise to the Company or its designee in a form specified by the Company which sets
forth the number of Shares with respect to which the Stock Appreciation Right is to be exercised. Upon exercise, a Stock Appreciation Right shall entitle a Participant to an amount equal to (a) the excess of (i) the Fair Market Value of a
Share on the exercise date over (ii) the exercise price per Share, multiplied by (b) the number of Shares with respect to which the Stock Appreciation Right is exercised. A Stock Appreciation Right may be settled in whole Shares, cash or a
combination thereof, as specified by the Committee in the related Award Agreement.
8. Restricted Shares.
Subject to the terms and conditions
of the Plan, Restricted Shares may be granted or sold to Participants in such number, and upon such terms and conditions, as shall be determined by the Committee in its sole discretion.
a.
Award Agreement
. Each Restricted Shares Award shall be evidenced by an Award Agreement that shall specify the number of
Restricted Shares, the restricted period(s) applicable to the Restricted Shares, the conditions upon which the restrictions on the Restricted Shares will lapse and such other terms and conditions as the Committee shall determine and which are not
inconsistent with the terms and conditions of the Plan.
b.
Terms, Conditions and Restrictions
. The Committee shall impose
such other terms, conditions and/or restrictions on any Restricted Shares as it may deem advisable, including, without limitation, a requirement that the Participant pay a purchase price for each Restricted Share, restrictions based on the
achievement of specific Performance Objectives, time-based restrictions or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Shares. Unless otherwise provided in the related Award Agreement
or required by applicable law, the restrictions imposed on Restricted Shares shall lapse upon the expiration or termination of the applicable restricted period and the satisfaction of any other applicable terms and conditions. Subject to Sections 18
and 20 of the Plan, or as otherwise provided in the related Award Agreement in connection with a Change in Control or a Participant’s death, disability, retirement, involuntary termination of employment or service without Cause or termination
of employment or service for good reason, (i) no condition on vesting of Restricted Shares that is based upon the achievement of Performance Objectives shall be based on performance over a period of less than one year, and (ii) no
condition on vesting of Restricted Shares that is based solely upon continued employment or service shall provide for vesting in full of the Restricted Shares more quickly than three (3) years from the Date of Grant of the Award (which vesting
period may lapse on a pro-rated, graded, or cliff basis as specified in the Award Agreement);
provided
,
however
, that up to five percent (5%) of the Shares available for grant as Restricted Shares (together with all other Shares
available for grant as Full Value Awards) may be granted with a vesting period of at least one (1) year, regardless of whether vesting is conditioned upon the achievement of Performance Objectives;
provided further
that these minimum
vesting provisions shall not apply to any grant of Restricted Shares to Directors.
c.
Custody of Certificates
. To the extent
deemed appropriate by the Committee, the Company may retain the certificates, if any, representing Restricted Shares in the Company’s possession until such time as all terms, conditions and/or restrictions applicable to such Shares have been
satisfied or lapse.
d.
Rights Associated with Restricted Shares during Restricted Period
. During any restricted period
applicable to Restricted Shares: (i) the Restricted Shares may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated; (ii) unless otherwise provided in the related Award Agreement, the Participant shall be
entitled to exercise full voting rights associated with such Restricted Shares; and (iii) the Participant shall be entitled to all dividends and other distributions paid with respect to such Restricted Shares during the restricted period. The
Award Agreement may require that receipt of any dividends or other distributions with respect to the Restricted Shares shall be subject to the same terms and conditions as the Restricted Shares with respect to which they are paid. Notwithstanding
the preceding sentence, dividends or other distributions with respect to Restricted Shares that vest based on the achievement of Performance Objectives shall be accumulated until such Award is earned, and the dividends or other distributions shall
not be paid if the Performance Objectives are not satisfied.
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9. Restricted Share Units
. Subject to the terms and conditions of the Plan, Restricted Share
Units may be granted or sold to Participants in such number, and upon such terms and conditions, as shall be determined by the Committee in its sole discretion.
a.
Award Agreement
. Each Restricted Share Unit Award shall be evidenced by an Award Agreement that shall specify the number of
units, the restricted period(s) applicable to the Restricted Share Units, the conditions upon which the restrictions on the Restricted Share Units will lapse, the time and method of payment of the Restricted Share Units, and such other terms and
conditions as the Committee shall determine and which are not inconsistent with the terms and conditions of the Plan.
b.
Terms,
Conditions and Restrictions
. The Committee shall impose such other terms, conditions and/or restrictions on any Restricted Share Units as it may deem advisable, including, without limitation, a requirement that the Participant pay a
purchase price for each Restricted Share Unit, restrictions based on the achievement of specific Performance Objectives and/or time-based restrictions or holding requirements. Subject to Sections 18 and 20 of the Plan, or as otherwise provided in
the related Award Agreement in connection with a Change in Control or a Participant’s death, disability, retirement, involuntary termination of employment or service without Cause or termination of employment or service for good reason,
(i) no condition on vesting of Restricted Share Units that is based upon the achievement of Performance Objectives shall be based on performance over a period of less than one year, and (ii) no condition on vesting of Restricted Share
Units that is based solely upon continued employment or service shall provide for vesting in full of the Restricted Share Units more quickly than three (3) years from the Date of Grant of the Award (which vesting period may lapse on a
pro-rated, graded, or cliff basis as specified in the Award Agreement);
provided
,
however
, that up to five percent (5%) of the Shares available for grant as Restricted Share Units (together with all other Shares available for
grant as Full Value Awards) may be granted with a vesting period of at least one (1) year, regardless of whether vesting is conditioned upon the achievement of Performance Objectives;
provided further
that these minimum vesting
provisions shall not apply to any grant of Restricted Share Units to Directors.
c.
Form of Settlement
. Restricted Share Units
may be settled in whole Shares, cash or a combination thereof, as specified by the Committee in the related Award Agreement.
d.
Dividend Equivalents
. Restricted Share Units may provide the Participant with dividend equivalents, on either a current or deferred or contingent basis, and either in cash or in additional Shares, as determined by the Committee in its
sole discretion and set forth in the related Award Agreement;
provided
that dividend equivalents with respect to Restricted Share Units that vest based on the achievement of Performance Objectives shall be accumulated until such Award is
earned, and the dividend equivalents shall not be paid if the Performance Objectives are not satisfied.
10. Other Share-Based Awards.
Subject
to the terms and conditions of the Plan, Other Share-Based Awards may be granted to Participants in such number, and upon such terms and conditions, as shall be determined by the Committee in its sole discretion. Other Share-Based Awards are Awards
that are valued in whole or in part by reference to, or otherwise based on the Fair Market Value of, Shares, and shall be in such form as the Committee shall determine, including without limitation, time-based or performance-based units that are
settled in Shares and/or cash and stock equivalent units.
a.
Award Agreement
. Each Other Share-Based Award shall be evidenced
by an Award Agreement that shall specify the terms and conditions upon which the Other Share-Based Award shall become vested, if applicable, the time and method of settlement, the form of settlement and such other terms and conditions as the
Committee shall determine and which are not inconsistent with the terms and conditions of the Plan. Subject to Sections 18 and 20 of the Plan, or as otherwise provided in the related Award Agreement in connection with a Change in Control or a
Participant’s death, disability, retirement, involuntary termination of employment or service without Cause or termination of employment or service for good reason, (i) no condition on vesting of an Other Share-Based Award that is based
solely upon the achievement of Performance Objectives shall be based on performance over a period of less than one year, and (ii) no condition on vesting of an Other Share-Based Award that is based upon continued employment or service shall
provide for vesting in full of the Other Share-Based Award more quickly than three (3) years from the Date of Grant of the Award (which vesting period may lapse on a pro-rated, graded, or cliff basis as specified in the Award Agreement);
provided
,
however
, that up to five percent
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(5%) of the Shares available for grant as Other Share-Based Awards (together with all other Shares available for grant as Full Value Awards) may be granted with a vesting period of at least
one (1) year, regardless of whether vesting is conditioned upon the achievement of Performance Objectives;
provided further
that these minimum vesting provisions shall not apply to any grant of Other Share-Based Awards to Directors.
b.
Form of Settlement
. An Other Share-Based Award may be settled in whole Shares, cash or a combination thereof, as specified by
the Committee in the related Award Agreement.
c.
Dividend Equivalents
. Other Share-Based Awards may provide the Participant
with dividend equivalents, on either a current or deferred or contingent basis, and either in cash or in additional Shares, as determined by the Committee in its sole discretion and set forth in the related Award Agreement;
provided
that
dividend equivalents with respect to Other Share-Based Awards that vest based on the achievement of Performance Objectives shall be accumulated until such Award is earned, and the dividend equivalents shall not be paid if the Performance Objectives
are not satisfied.
11. Cash-Based Awards.
Subject to the terms and conditions of the Plan, Cash-Based Awards may be granted to Participants
in such amounts and upon such other terms and conditions as shall be determined by the Committee in its sole discretion. Each Cash-Based Award shall be evidenced by an Award Agreement that shall specify the payment amount or payment range, the time
and method of settlement and the other terms and conditions, as applicable, of such Award which may include, without limitation, restrictions based on the achievement of specific Performance Objectives.
12. Compliance with Section 409A.
Awards granted under the Plan shall be designed and administered in such a manner that they are either
exempt from the application of, or comply with, the requirements of Section 409A of the Code. To the extent that the Committee determines that any award granted under the Plan is subject to Section 409A of the Code, the Award Agreement
shall incorporate the terms and conditions necessary to avoid the imposition of an additional tax under Section 409A of the Code upon a Participant. Notwithstanding any other provision of the Plan or any Award Agreement (unless the Award
Agreement provides otherwise with specific reference to this Section): (i) an Award shall not be granted, deferred, accelerated, extended, paid out, settled, substituted or modified under the Plan in a manner that would result in the imposition
of an additional tax under Section 409A of the Code upon a Participant; and (ii) if an Award is subject to Section 409A of the Code, and if the Participant holding the award is a “specified employee” (as defined in
Section 409A of the Code, with such classification to be determined in accordance with the methodology established by the Company), then, to the extent required to avoid the imposition of an additional tax under Section 409A of the Code
upon a Participant, no distribution or payment of any amount shall be made before the date that is six (6) months following the date of such Participant’s “separation from service” (as defined in Section 409A of the Code)
or, if earlier, the date of the Participant’s death. Although the Company intends to administer the Plan so that Awards will be exempt from, or will comply with, the requirements of Section 409A of the Code, the Company does not warrant
that any Award under the Plan will qualify for favorable tax treatment under Section 409A of the Code or any other provision of federal, state, local, or non-United States law. The Company shall not be liable to any Participant for any tax,
interest, or penalties the Participant might owe as a result of the grant, holding, vesting, exercise, or payment of any Award under the Plan.
13.
Compliance with Section 162(m).
a.
In General
. Notwithstanding anything in the Plan to the contrary, Awards may be
granted in a manner that is intended to qualify for the Performance-Based Exception. As determined by the Committee in its sole discretion, the grant, vesting, exercisability and/or settlement of any Restricted Shares, Restricted Share Units Other
Share-Based Awards and Cash-Based Awards intended to qualify for the Performance-Based Exception shall be conditioned on the attainment of one or more Performance Objectives during a performance period established by the Committee and must satisfy
the requirements of this Section 13.
b.
Performance Objectives
. If an Award is intended to qualify for the
Performance-Based Exception, then the Performance Objectives shall be based on specified levels of or growth in one or more of the following criteria: return on net assets, return on capital employed, economic value added, sales, revenue, earnings
per share, operating income, net income, earnings before interest and taxes,
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return on equity, total shareholder return, market valuation, cash flow, completion of acquisitions, product and market development, inventory management, working capital management and customer
satisfaction. The foregoing business criteria may be clarified by reasonable definitions adopted from time to time by the Committee, which may include or exclude any items as the Committee may specify, including but not limited to: extraordinary,
unusual or non-recurring items; effects of accounting changes; effects of currency fluctuations; effects of financing activities; effects relating to the impairment of goodwill or other intangible assets; expenses for restructuring or productivity
initiatives; non-operating items; acquisition expenses; and effects of acquisitions, divestitures or reorganizations.
c.
Establishment
of Performance Goals
. With respect to Awards intended to qualify for the Performance-Based Exception, the Committee shall establish: (i) the applicable Performance Objectives and performance period, and (ii) the formula for
computing the payout. Such terms and conditions shall be established in writing while the outcome of the applicable performance period is substantially uncertain, but in no event later than the earlier of: (x) ninety days after the beginning of
the applicable performance period; or (y) the expiration of twenty-five percent (25%) of the applicable performance period.
d.
Certification of Performance
. With respect to any Award intended to qualify for the Performance-Based Exception, the Committee shall certify in writing whether the applicable Performance Objectives and other material terms imposed on
such Award have been satisfied, and, if they have, ascertain the amount of the payout or vesting of the Award. Notwithstanding any other provision of the Plan, payment or vesting of any such Award shall not be made until the Committee certifies in
writing that the applicable Performance Objectives and any other material terms of such Award were in fact satisfied in a manner conforming to applicable regulations under Section 162(m) of the Code.
e.
Negative Discretion
. With respect to any Award intended to qualify for the Performance-Based Exception, after the date that the
Performance Objectives are required to be established in writing pursuant to Section 13(c), the Committee shall not have discretion to increase the amount of compensation that is payable upon achievement of the designated Performance
Objectives. However, the Committee may, in its sole discretion, reduce the amount of compensation that is payable upon achievement of the designated Performance Objectives.
14. Transferability.
Except as otherwise determined by the Committee, no Award or dividend equivalents paid with respect to any Award shall be
transferable by the Participant except by will or the laws of descent and distribution;
provided
, that if so determined by the Committee, each Participant may, in a manner established by the Board or the Committee, designate a beneficiary to
exercise the rights of the Participant with respect to any Award upon the death of the Participant and to receive Shares or other property issued or delivered under such Award. Except as otherwise determined by the Committee, Stock Options and Stock
Appreciation Rights will be exercisable during a Participant’s lifetime only by the Participant or, in the event of the Participant’s legal incapacity to do so, by the Participant’s guardian or legal representative acting on behalf of
the Participant in a fiduciary capacity under state law and/or court supervision.
15. Adjustments.
In the event of any equity restructuring
(within the meaning of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation – Stock Compensation), such as a stock dividend, stock split, reverse stock split, spinoff, rights offering, or
recapitalization through a large, nonrecurring cash dividend, the Committee shall cause there to be an equitable adjustment in the numbers of Shares specified in Section 3 of the Plan and, with respect to outstanding Awards, in the number and
kind of Shares subject to outstanding Awards and the exercise price or other price of Shares subject to outstanding Awards, in each case to prevent dilution or enlargement of the rights of Participants. In the event of any other change in corporate
capitalization, or in the event of a merger, consolidation, liquidation, or similar transaction, the Committee may, in its sole discretion, cause there to be an equitable adjustment as described in the foregoing sentence, to prevent dilution or
enlargement of rights;
provided
,
however
, that, unless otherwise determined by the Committee, the number of Shares subject to any Award shall always be rounded down to a whole number. Notwithstanding the foregoing, the Committee shall
not make any adjustment pursuant to this Section 15 that would (i) cause any Stock Option intended to qualify as an ISO to fail to so qualify, (ii) cause an Award that is otherwise exempt from Section 409A of the Code to become
subject to Section 409A, or (iii) cause an Award that is subject
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to Section 409A of the Code to fail to satisfy the requirements of Section 409A. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and
binding on all Participants and any other persons claiming under or through any Participant.
16. Fractional Shares.
The Company shall not be
required to issue or deliver any fractional Shares pursuant to the Plan and, unless otherwise provided by the Committee, fractional shares shall be settled in cash.
17. Withholding Taxes.
To the extent required by Applicable Law, a Participant shall be required to satisfy, in a manner satisfactory to the
Company or Subsidiary, as applicable, any withholding tax obligations that arise by reason of a Stock Option or Stock Appreciation Right exercise, the vesting of or settlement of Shares under an Award, an election pursuant to Section 83(b) of
the Code or otherwise with respect to an Award. The Company and its Subsidiaries shall not be required to issue or deliver Shares, make any payment or to recognize the transfer or disposition of Shares until such obligations are satisfied. The
Committee may permit or require these obligations to be satisfied by having the Company withhold a portion of the Shares that otherwise would be issued or delivered to a Participant upon exercise of a Stock Option or Stock Appreciation Right or upon
the vesting or settlement of an Award, or by tendering Shares previously acquired, in each case having a Fair Market Value equal to the minimum amount required to be withheld or paid. Any such elections are subject to such conditions or procedures
as may be established by the Committee and may be subject to disapproval by the Committee.
18. Foreign Employees.
Without amending the Plan,
the Committee may grant Awards to Participants who are foreign nationals, or who are subject to Applicable Laws of one or more non-United States jurisdictions, on such terms and conditions different from those specified in the Plan as may in the
judgment of the Committee be necessary or desirable to foster and promote achievement of the purposes of the Plan, and, in furtherance of such purposes, the Committee may make such modifications, amendments, procedures, and the like as may be
necessary or advisable to comply with provisions of Applicable Laws of other countries in which the Company or its Subsidiaries operate or have employees.
19
.
Termination for Cause; Forfeiture of Awards
. If a Participant’s employment or service is terminated by the Company or a Subsidiary
for Cause, as determined by the Committee in its sole discretion, then the Participant shall forfeit all Awards granted under the Plan to the extent then held by the Participant. In addition, any Award granted to a Participant shall be subject to
forfeiture or repayment pursuant to the terms of any applicable compensation recovery policy adopted by the Company, including any such policy that may be adopted to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act or any
rules or regulations issued by the Securities and Exchange Commission or applicable securities exchange.
20. Change in Control and Potential Change in
Control
.
a.
Change in Control
. In the event of a Change in Control: (x) all outstanding Awards held by the
Participant that may be exercised shall become fully exercisable and shall remain exercisable for the full duration of their term effective immediately prior to the Change in Control, (y) all restrictions with respect to outstanding Awards
shall lapse effective immediately prior to the Change in Control, with any specified Performance Objectives with respect to outstanding Awards deemed to be satisfied at the “target” level, and (z) all outstanding Awards shall become
fully vested effective immediately prior to the Change in Control.
b.
Potential Change in Control
. In the event of a
Potential Change in Control, all Awards shall continue to vest during the applicable vesting period, if any. Notwithstanding the preceding sentence, if a Participant incurs a Qualified Termination during the Potential Change in Control Protection
Period, then upon such termination: (x) all outstanding Awards held by the Participant that may be exercised shall become fully exercisable and shall remain exercisable for the full duration of their term, (y) all restrictions with respect
to outstanding Awards shall lapse, with any specified Performance Objectives with respect to outstanding Awards deemed to be satisfied at the “target” level, and (z) all outstanding Awards shall become fully vested.
c.
Cancellation Right
. The Committee may, in its sole discretion and without the consent of Participants, either by the terms of
the Award Agreement applicable to any Award or by resolution adopted prior to the occurrence of a Change in Control or Potential Change in Control, provide that any
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outstanding Award (or a portion thereof) shall, upon the occurrence of such Change in Control or Potential Change in Control, be cancelled in exchange for a payment in cash or other property
(including shares of the resulting entity in connection with a Change in Control) in an amount equal to the excess, if any, of the Fair Market Value of the Shares subject to the Award, over any exercise price related to the Award, which amount may
be zero if the Fair Market Value of a Share on the date of the Change in Control or Potential Change in Control does not exceed the exercise price per Share of the applicable Awards.
21. Amendment, Modification and Termination
.
a.
In General
. The Board may at any time and from time to time, alter, amend, suspend or terminate the Plan in whole or in part;
provided
,
however
, that no alteration or amendment that requires shareholder approval in order for the Plan to comply with any rule promulgated by the SEC or any securities exchange on which Shares are listed or any other Applicable
Laws shall be effective unless such amendment shall be approved by the requisite vote of shareholders of the Company entitled to vote thereon within the time period required under such applicable listing standard or rule.
b.
Adjustments to Outstanding Awards
. The Committee may in its sole discretion at any time (i) provide that all or a portion
of a Participant’s Stock Options, Stock Appreciation Rights and other Awards in the nature of rights that may be exercised shall become fully or partially exercisable; (ii) provide that all or a part of the time-based vesting restrictions
on all or a portion of the outstanding Awards shall lapse, and/or that any Performance Objectives or other performance-based criteria with respect to any Awards shall be deemed to be wholly or partially satisfied; or (iii) waive any other
limitation or requirement under any such Award, in each case, as of such date as the Committee may, in its sole discretion, declare. Unless otherwise determined by the Committee, any such adjustment that is made with respect to an Award that is
intended to qualify for the Performance-Based Exception shall be made at such times and in such manner as will not cause such Awards to fail to qualify under the Performance-Based Exception. Additionally, the Committee shall not make any adjustment
pursuant to this Section 21(b) that would cause an Award that is otherwise exempt from Section 409A of the Code to become subject to Section 409A, or that would cause an Award that is subject to Section 409A of the Code to fail
to satisfy the requirements of Section 409A.
c.
Prohibition on Repricing
. Except for adjustments made pursuant to
Sections 15 or 20, the Board or the Committee will not, without the further approval of the shareholders of the Company, authorize the amendment of any outstanding Stock Option or Stock Appreciation Right to reduce the exercise price. No Stock
Option or Stock Appreciation Right will be cancelled and replaced with an Award having a lower exercise price, or for another Award, or for cash without further approval of the shareholders of the Company, except as provided in Sections 15 or 20.
Furthermore, no Stock Option or Stock Appreciation Right will provide for the payment, at the time of exercise, of a cash bonus or grant or sale of another Award without further approval of the shareholders of the Company. This Section 21(c) is
intended to prohibit the repricing of “underwater” Stock Options or Stock Appreciation Rights without shareholder approval and will not be construed to prohibit the adjustments provided for in Sections 15 or 20.
d.
Effect on Outstanding Awards
. Notwithstanding any other provision of the Plan to the contrary (other than Sections 15, 20,
21(b) and 23(d)), no termination, amendment, suspension, or modification of the Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding
such Award;
provided
that the Committee may modify an ISO held by a Participant to disqualify such Stock Option from treatment as an “incentive stock option” under Section 422 of the Code without the Participant’s consent.
22. Applicable Laws.
The obligations of the Company with respect to Awards under the Plan shall be subject to all Applicable Laws and such
approvals by any governmental agencies as the Committee determines may be required. The Plan and each Award Agreement shall be governed by the laws of the State of Ohio, excluding any conflicts or choice of law rule or principle that might otherwise
refer construction or interpretation of the Plan to the substantive law of another jurisdiction.
23. Miscellaneous.
a.
Deferral of Awards
. Except with respect to Stock Options, Stock Appreciation Rights and Restricted Shares, the Committee may
permit Participants to elect to defer the issuance or delivery of
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Shares or the settlement of Awards in cash under the Plan pursuant to such rules, procedures or programs as it may establish for purposes of the Plan. The Committee also may provide that deferred
issuances and settlements include the payment or crediting of dividend equivalents or interest on the deferral amounts. All elections and deferrals permitted under this provision shall comply with Section 409A of the Code, including setting
forth the time and manner of the election (including a compliant time and form of payment), the date on which the election is irrevocable, and whether the election can be changed until the date it is irrevocable.
b.
No Right of Continued Employment
. The Plan shall not confer upon any Participant any right with respect to continuance of
employment or other service with the Company or any Subsidiary, nor shall it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate such Participant’s employment or other service at any time. No
Employee or Director shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to be selected to receive future Awards.
c.
Unfunded, Unsecured Plan
. Neither a Participant nor any other person shall, by reason of participation in the Plan, acquire any
right or title to any assets, funds or property of the Company or any Subsidiary, including without limitation, any specific funds, assets or other property which the Company or any Subsidiary may set aside in anticipation of any liability under the
Plan. A Participant shall have only a contractual right to an Award or the amounts, if any, payable under the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing contained in the Plan shall constitute a guarantee that the
assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.
d.
Severability
. If any
provision of the Plan is or becomes 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 or limited in
scope to conform to Applicable Laws or, in the discretion of the Committee, it shall be stricken and the remainder of the Plan shall remain in full force and effect.
e.
Acceptance of Plan
. By accepting any benefit under the Plan, each Participant and each person claiming under or through any
such Participant shall be conclusively deemed to have indicated their acceptance and ratification of, and consent to, all of the terms and conditions of the Plan and any action taken under the Plan by the Committee, the Board or the Company, in any
case in accordance with the terms and conditions of the Plan.
f.
Successors
. All obligations of the Company under the Plan
and with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or other event, or a sale or disposition of all or
substantially all of the business and/or assets of the Company and references to the “Company” herein and in any Award agreements shall be deemed to refer to such successors.
[END OF DOCUMENT]
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APPENDIX G:
2012 STOCK INCENTIVE AND AWARD PLAN SUMMARY
The 2012 Stock Incentive and Award Plan (“2012 Plan”) authorizes the Company to grant equity-based and cash-based incentive compensation in the form
of stock options, stock appreciation rights (or “SARs”), restricted shares, restricted share units, other share-based awards and cash-based awards. The principal features of the 2012 Plan are summarized below.
General Provisions of the 2012 Plan
Plan
Limits
. The 2012 Plan authorizes the issuance of up to a total of 2,900,000 common shares, inclusive of shares available to be granted under the prior plan immediately prior to shareholder approval of the 2012 Plan. As of October 31,
1,606,000 common shares were available for awards under the prior plan. Upon adoption of the 2012 Plan, no further awards will be made under the prior plan. All of the shares authorized under the 2012 Plan may be granted with respect to incentive
stock options.
The following shares will not count against the number of shares available for awards under the 2012 Plan: (i) shares covered by
awards under the 2012 Plan and the prior plan that expire or are forfeited, canceled, surrendered or otherwise terminated without the issuance of shares; (ii) shares covered by awards settled only in cash; (iii) shares tendered in payment
of the exercise price of stock options; (iv) shares withheld to satisfy a tax withholding obligation; and (v) shares granted in assumption of, or substitution for, awards granted to individuals who become employees or directors as a result
of a merger or similar transaction. With respect to SARs that are settled in shares, only the shares used to settle the SAR upon exercise will be counted against the number of shares available for awards under the 2012 Plan. Notwithstanding the
foregoing, shares that are repurchased by the Company with stock option proceeds will not be added back to the number of shares available for awards under the 2012 Plan.
The 2012 Plan also imposes various sub-limits on the number of common shares that may be issued to any individual during any calendar year under awards that
are intended to qualify for the performance-based compensation exception to Section 162(m) of the Internal Revenue Code. In particular, for any calendar year, the following limits shall apply with respect to awards intended to qualify as
performance-based compensation:
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|
•
|
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The maximum number of shares subject to stock options or SARs granted in any calendar year to any one participant shall be 750,000 shares.
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|
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•
|
|
The maximum number of restricted shares granted in any calendar year to any one participant shall be 250,000 shares.
|
|
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•
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The maximum number of shares that may be issued pursuant to restricted share units or other share-based awards granted in any calendar year to any one participant shall be 250,000 shares (or, if the applicable
performance period is more than one year, 250,000 times the full number of years in the performance period).
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•
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The maximum amount of compensation that may be paid under a cash-based award granted in any calendar year to any one participant shall be $5,000,000, or a number of shares having a fair market value not exceeding that
amount (or, if the applicable performance period is more than one year, $5,000,000 times the full number of years in the performance period).
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Administration of the 2012 Plan.
The 2012 Plan will be administered by the Compensation Committee of the Board of Directors of the Company (or
such other committee as may be appointed by the Board of Directors in accordance with applicable laws). The Board of Directors may reserve to itself any or all of the authority of the Compensation Committee, and the Board of Directors or the
Compensation Committee may delegate any or all of its authority to one or more directors or employees to the extent permitted by applicable laws.
Eligibility for Awards.
The 2012 Plan authorizes the Compensation Committee to make awards to any of our employees or non-employee directors. The
selection of participants and the nature and size of awards are within the discretion of the Compensation Committee.
Term and Amendment
. The
2012 Plan became effective on February 26, 2013 and will remain in effect until February 25, 2022.
The Board of Directors may amend or
terminate the 2012 Plan at any time, provided that the 2012 Plan may not be amended without shareholder approval where required by applicable laws. Generally, the amendment or termination of the 2012 Plan or of any award agreement may not adversely
affect in a material way any outstanding award without the consent of the participant holding the award.
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Awards Under the 2012 Plan
General.
When an award is granted under the 2012 Plan, the Compensation Committee will establish the terms and conditions of that award. These
terms and conditions will be contained in an award agreement and may, for example, require that the participant continue to provide services to the Company or a related entity for a certain period of time or that the participant meet certain
performance objectives during a specified period of time. By accepting an award, a participant will agree to be bound by the terms of the 2012 Plan and the associated award agreement. If there is a conflict between the terms of the 2012 Plan and the
terms of an award agreement, the terms of the 2012 Plan will control. The types of awards that may be granted under the 2012 Plan are described below.
Stock Options.
A stock option gives a participant the right to purchase a specified number of common shares and may be an incentive stock option
or nonqualified stock option. The price at which a common share may be purchased upon exercise of a stock option, called the “exercise price,” will be determined by the Compensation Committee, but may not be less than the fair market value
of a common share on the date the stock option is granted. Generally, “fair market value” will be the closing price of the Company’s common shares on the date in question. An option’s exercise price may be paid in any way
determined by the Compensation Committee, including payment in cash (or a cash equivalent), a cashless exercise, tendering common shares the participant already owns or a combination thereof. In no event may an option be exercised more than
10 years after the date of grant. A participant who has been granted a stock option will not have any dividend or voting rights in connection with the shares underlying the stock option.
Special provisions apply to any incentive stock options granted under the 2012 Plan. All of the shares available for issuance under the 2012 Plan may be
issued pursuant to incentive stock options. Incentive stock options may be granted only to employees. Incentive stock options that become exercisable for the first time in any year cannot relate to common shares having a fair market value
(determined on the date of grant) of more than $100,000 per participant. The exercise price of an incentive stock option granted to an employee who owns shares possessing more than 10 percent of the Company’s voting power (a “10%
shareholder”) may not be less than 110 percent of the fair market value of a common share on the date of grant, and an incentive stock option granted to a 10% shareholder will expire no later than 5 years after the date of grant.
Stock Appreciation Rights.
A stock appreciation right gives a participant the right to receive the difference between the SAR’s exercise
price and the fair market value of a common share on the date the SAR is exercised. SARs will be settled in (i) cash, (ii) common shares with a value on the settlement date equal to the difference between the fair market value of the
common shares and the exercise price, or (iii) a combination of cash and common shares, as determined by the Compensation Committee at the time of grant. The exercise price of a stock appreciation right will be determined by the Compensation
Committee, but may not be less than the fair market value of a common share on the date the SAR is granted. A stock appreciation right will be forfeited if the applicable terms and conditions are not met or if it is not exercised before it expires
(which may never be later than 10 years after the date of grant). A participant who has been granted a stock appreciation right will not have any dividend or voting rights in connection with the shares underlying the SAR.
Restricted Shares.
Restricted shares consist of common shares that are granted to a participant, but which are subject to certain restrictions on
transferability and a risk of forfeiture if certain terms and conditions specified by the Compensation Committee are not met by the end of the restriction period. The restrictions may include time-based and/or performance-based restrictions.
Generally, time-based restricted shares will have a vesting period of at least three years (and may vest on a pro-rated, graded or cliff basis), and performance-based restricted shares will have a performance period of at least one year. However, up
to five percent of the shares available for grant under the 2012 Plan as restricted shares and other “full value awards” (awards settled in shares other than stock options and stock appreciation rights) may be granted with a vesting period
of at least one year, regardless of whether vesting is based on the achievement of performance objectives. Unless otherwise determined by the Compensation Committee, a participant who has been granted restricted shares will have the right to receive
dividends on the
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APPENDIX G:
2012 STOCK INCENTIVE AND AWARD PLAN SUMMARY
restricted shares and may vote those shares during the restriction period. However, dividends with respect to performance-based restricted shares will be accumulated until the restricted shares
are earned and will not be paid unless applicable performance objectives are satisfied.
Restricted Share Units
. Restricted share units
constitute an agreement to deliver common shares to a participant if certain conditions specified by the Compensation Committee are met by the end of the restriction period. The conditions may include time-based and/or performance-based
restrictions. Generally, time-based restricted share units will have a vesting period of at least three years (and may vest on a pro-rated, graded or cliff basis), and performance-based restricted share units will have a performance period of at
least one year. However, up to five percent of the shares available for grant under the 2012 Plan as restricted share units and other “full value awards” may be granted with a vesting period of at least one year, regardless of whether
vesting is based on the achievement of performance objectives. A participant who has been granted restricted share units will not have any dividend or voting rights in connection with the notional shares underlying the restricted share units, but
the Compensation Committee may authorize the payment of dividend equivalents. However, dividend equivalents with respect to performance-based restricted share units will be accumulated until the restricted share units are earned and will not be paid
unless applicable performance objectives are satisfied. At the end of the restriction period, the restricted share units either will be forfeited or settled, depending on whether or not the applicable terms and conditions have been satisfied.
Restricted share units may be settled by (i) issuing one common share for each restricted share unit, (ii) paying the participant cash equal to the fair market value of a common share for each restricted share unit, or (iii) a
combination of common shares and cash, as determined by the Compensation Committee at the time of grant.
Other Share-Based Awards
. The
Compensation Committee may grant other awards that are valued in whole or in part by reference to, or otherwise based on the fair market value of, common shares. Such other share-based awards shall be subject to terms and conditions specified by the
Compensation Committee, which may include time-based and/or performance-based restrictions. Generally, other share-based awards subject to time-based vesting conditions will have a vesting period of at least three years (and may vest on a pro-rated,
graded or cliff basis), and other share-based awards subject to performance-based vesting restrictions will have a performance period of at least one year. However, up to five percent of the shares available for grant under the 2012 Plan as other
share-based awards and other “full value awards” may be granted with a vesting period of at least one year, regardless of whether vesting is based on the achievement of performance objectives. The Compensation Committee may authorize the
payment of dividend equivalents with respect to other share-based awards. However, such dividend equivalents subject to performance-based restrictions will be accumulated until the other share-based awards are earned and will not be paid unless
applicable performance objectives are satisfied.
Cash-Based Awards.
A cash-based award gives a participant the right to receive a specified
amount of cash, subject to terms and conditions as determined by the Compensation Committee, which may include time-based and/or performance-based restrictions.
Performance Objectives
. The 2012 Plan provides that performance objectives may be established by the Compensation Committee in connection with any
award. Performance objectives may relate to performance of the Company or one or more of its subsidiaries, divisions, departments, units, functions, partnerships, joint ventures or minority investments, product lines or products, or the performance
of an individual participant, and performance objectives may be made relative to the performance of a group or companies or a special index of companies.
The Compensation Committee may, in its discretion, grant awards under the 2012 Plan that are intended to qualify for the “performance-based
compensation” exemption from Section 162(m) of the Internal Revenue Code. In the case of an award intended to qualify for that exemption, any applicable performance objectives shall be based on the attainment of specified levels of one or
more of the following measures: return on net assets, return on capital employed, economic value added, sales, revenue, earnings per share, operating income, net income, earnings before interest and taxes, return on equity, total shareholder return,
market valuation, cash flow, completion of acquisitions, product and market development, inventory management, working capital management and customer satisfaction. Those measures may be clarified by reasonable definitions adopted from time to time
by the Compensation Committee, which may include or exclude any items as the Compensation Committee may specify, including but not limited to: extraordinary, unusual or non-recurring items; effects of accounting
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APPENDIX G:
2012 STOCK INCENTIVE AND AWARD PLAN SUMMARY
changes; effects of currency fluctuations; effects of financing activities; effects relating to the impairment of goodwill or other intangible assets; expenses for restructuring or productivity
initiatives; non-operating items; acquisition expenses; and effects of acquisitions, divestitures or reorganizations. Performance objectives related to an award intended to qualify as performance-based compensation for purposes of
Section 162(m) of the Internal Revenue Code will be established by the Compensation Committee within the time period prescribed by, and subject to the other requirements of, Section 162(m) of the Internal Revenue Code.
Forfeiture of Awards
. If the Company terminates a participant’s employment or service for cause, then the participant shall forfeit all
outstanding awards granted under the 2012 Plan. For this purpose, “cause” will have the meaning provided in any applicable employment agreement or Change-in-Control Retention Agreement with the participant, or if there is no such
applicable definition, “cause” shall mean (i) the commission of an act of fraud, embezzlement, theft, or other similar criminal act constituting a felony and involving the business of the Company or its subsidiaries, or (ii) the
participant’s continued failure to perform substantially the participant’s duties (other than a failure resulting from a medically determined physical or mental impairment) that is not cured by the participant within 30 days after a
written demand from the Company which specifically identifies the manner in which the Company believes that the participant has not substantially performed the participant’s duties. Awards granted under the 2012 Plan may also be subject to
forfeiture or repayment to the Company pursuant to any compensation recovery (or “clawback”) policy that may be adopted by the Company, including a policy that may be adopted to comply with the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 or any rules or regulations issued by the SEC or NASDAQ.
Adjustments to Authorized Shares and Outstanding Awards.
In
the event of any equity restructuring, such as a stock dividend, stock split, reverse stock split, spinoff, rights offering or recapitalization through a large, nonrecurring cash dividend, the Compensation Committee will adjust the number and kind
of shares that may be delivered under the 2012 Plan, the individual award limits, and, with respect to outstanding awards, the number and kind of shares subject to outstanding awards, the exercise price, and the grant price or other price of shares
subject to outstanding awards, to prevent dilution or enlargement of rights. In the event of any other change in corporate capitalization, such as a merger, consolidation or liquidation, the Compensation Committee may, in its discretion, cause there
to be such equitable adjustment as described in the foregoing sentence, to prevent dilution or enlargement of rights. However, unless otherwise determined by the Compensation Committee, the Company will always round down to a whole number of shares
subject to any award. Any such adjustment will be made by the Compensation Committee, whose determination will be conclusive.
Prohibition on
Repricing.
Except in connection with certain corporate transactions or events or with the approval of shareholders, the 2012 Plan prohibits the amendment of outstanding stock options or SARs to reduce the exercise price of the award, and no
stock option or SAR will be cancelled and replaced with another award (including an award having a lower exercise price) or for cash. These provisions of the 2012 Plan are intended to prohibit the repricing of “underwater” stock options or
SARs without approval of the Company’s shareholders.
Effect of a Potential Change in Control or Change in Control.
In the event of a
“potential change in control” of the Company, all unvested awards shall continue to vest during the applicable vesting period. However, if, within two years after a potential change in control, a participant’s employment is
involuntarily terminated without cause or, if the participant is a party to a Change-in-Control Retention Agreement, the participant terminates his or her employment for “good reason” (as defined in the applicable Change-in-Control
Retention Agreement), then upon such termination of employment: (i) all of the participant’s outstanding stock options and SARs shall become fully exercisable and shall remain exercisable for the full duration of their term, (ii) all
restrictions with respect to outstanding awards shall lapse, with any specified performance objectives deemed to be satisfied at the “target” level, and (iii) all outstanding awards shall become fully vested. For purposes of the 2012
Plan, a potential change of control generally means the acquisition of at least 25% but less than 35% of the voting power of the Company’s outstanding voting securities.
In the event of a “change in control” of the Company: (i) all outstanding stock options and SARs shall become fully exercisable and shall
remain exercisable for the full duration of their term effective immediately prior to the change in control, (ii) all restrictions with respect to outstanding awards shall
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APPENDIX G:
2012 STOCK INCENTIVE AND AWARD PLAN SUMMARY
lapse effective immediately prior to the change in control, with any specified performance objectives deemed to be satisfied at the “target” level, and (iii) all outstanding awards
shall become fully vested effective immediately prior to the change in control. For purposes of the 2012 Plan, a change in control generally means (i) the acquisition of 35% or more of the voting power of the Company’s outstanding voting
securities; (ii) the replacement of a majority of the members of the incumbent Board of Directors during a 24-month period with new directors who were not approved by at least two-thirds of the directors then in office; (iii) consummation
of a merger or consolidation resulting in less than 50% of the combined voting power of the surviving or resulting corporation’s securities being owned by persons who were shareholders of the Company immediately before such transaction; or
(iv) the sale of all or substantially all of the assets of the Company in a single transaction or series of related transactions to a single purchaser or group of affiliated purchasers.
The Compensation Committee also has discretion to cancel any award in exchange for a cash payment upon the occurrence of a change in control, or cancel a
stock option or SAR without payment if the fair market value of a share on the date of the change in control does not exceed the exercise price per share of the stock option or SAR.
U.S. Federal Income Tax Consequences
The following
is a brief summary of the general U.S. federal income tax consequences relating to the 2012 Plan. This summary is based on U.S. federal tax laws and regulations in effect on the date of this proxy statement and does not purport to be a
complete description of the U.S. federal income tax laws.
Incentive Stock Options.
Incentive stock options are intended to qualify for
special treatment available under Section 422 of the Internal Revenue Code. A participant who is granted an incentive stock option will not recognize ordinary income at the time of grant, and the Company will not be entitled to a deduction at
that time. A participant will not recognize ordinary income upon the exercise of an incentive stock option provided that the participant was, without a break in service, an employee of the Company or a subsidiary during the period beginning on the
date of grant of the option and ending on the date three months prior to the date of exercise (one year prior to the date of exercise if the participant’s employment is terminated due to permanent and total disability).
If the participant does not sell or otherwise dispose of the common shares acquired upon the exercise of an incentive stock option within two years from the
date of grant of the incentive stock option or within one year after he or she receives the common shares, then, upon disposition of such common shares, any amount recognized in excess of the exercise price will be taxed to the participant as a
capital gain, and the Company will not be entitled to a corresponding deduction. The participant will generally recognize a capital loss to the extent that the amount recognized is less than the exercise price.
If the foregoing holding period requirements are not met, the participant will generally recognize ordinary income at the time of the disposition of the
common shares in an amount equal to the lesser of (i) the excess of the fair market value of the common shares on the date of exercise over the exercise price, or (ii) the excess, if any, of the amount recognized upon disposition of the
common shares over the exercise price, and the Company will be entitled to a corresponding deduction. Any amount recognized in excess of the value of the common shares on the date of exercise will be capital gain. If the amount recognized is less
than the exercise price, the participant generally will recognize a capital loss equal to the excess of the exercise price over the amount recognized upon the disposition of the common shares.
The rules described above that generally apply to incentive stock options do not apply when calculating any alternative minimum tax liability. The rules
affecting the application of the alternative minimum tax are complex, and their effect depends on individual circumstances, including whether a participant has items of adjustment other than those derived from incentive stock options.
Nonqualified Stock Options.
A participant will not recognize ordinary income when a nonqualified stock option is granted, and the Company will not
receive a deduction at that time. When a nonqualified stock option is exercised, a participant will recognize ordinary income in an amount equal to the excess, if any, of the fair market value of the common shares that the participant purchased over
the exercise price he or she paid, and the Company generally will be entitled to a corresponding deduction.
Stock Appreciation Rights.
A
participant will not recognize ordinary income when a stock appreciation right is granted, and the Company will not receive a deduction at that time. When a stock appreciation
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APPENDIX G:
2012 STOCK INCENTIVE AND AWARD PLAN SUMMARY
right is exercised, the participant will recognize ordinary income equal to the cash and/or the fair market value of common shares the participant receives, and the Company generally will be
entitled to a corresponding deduction.
Restricted Shares.
A participant who has been granted restricted shares will not recognize ordinary
income at the time of grant, and the Company will not be entitled to a deduction at that time, assuming that the underlying common shares are not transferable and that the restrictions create a “substantial risk of forfeiture” for federal
income tax purposes and that the participant does not make an election under Section 83(b) of the Internal Revenue Code. Generally, upon the vesting of restricted shares, the participant will recognize ordinary income in an amount equal to the
then fair market value of the common shares, less any consideration paid for such common shares, and the Company will be entitled to a corresponding deduction. Any gains or losses recognized by the participant upon disposition of the common shares
will be treated as capital gains or losses. However, a participant may elect pursuant to Section 83(b) of the Internal Revenue Code to have income recognized at the date of grant of a restricted share award equal to the fair market value of the
common shares on the date of grant (less any amount paid for the restricted shares) and to have the applicable capital gain holding period commence as of that date. If a participant makes this election, the Company generally will be entitled to a
corresponding deduction in the year of grant.
Restricted Share Units.
A participant generally will not recognize ordinary income when
restricted share units are granted, and the Company generally will not receive a deduction at that time. Instead, a participant will recognize ordinary income when the restricted share units are settled in an amount equal to the fair market value of
the common shares and the cash he or she receives, less any consideration paid, and the Company generally will be entitled to a corresponding deduction.
Other Share-Based Awards.
Generally, participants will recognize ordinary income equal to the fair market value of the common shares subject to
other share-based awards when they receive the common shares, and the Company generally will be entitled to a corresponding deduction at that time.
Cash-Based Awards.
Generally, a participant will recognize ordinary income when a cash-based award is settled in an amount equal to the cash he or
she receives, and the Company generally will be entitled to a corresponding deduction at that time.
Miscellaneous.
When a participant sells
common shares that he or she has received under an award, the participant will generally recognize long-term capital gain or loss if, at the time of the sale, the participant has held the common shares for more than one year (or, in the case of a
restricted share award, more than one year from the date the restricted shares vested unless the participant made an election pursuant to Section 83(b) of the Internal Revenue Code, described above). If the participant has held the common
shares for one year or less, the gain or loss will be a short-term capital gain or loss.
Section 162(m) of the Tax Code.
Section 162(m)
of the Internal Revenue Code disallows the deduction of certain compensation in excess of $1 million per year payable to certain covered employees of a public company (generally, the chief executive officer and the next three most highly compensated
named executive officers, other than the chief financial officer). Compensation paid to such an officer during a year in excess of $1 million that is not performance-based (or does not comply with other exceptions) generally would not be deductible
on the Company’s federal income tax return for that year. It is intended that compensation attributable to any stock options or SARs granted under the 2012 Plan will qualify as performance-based compensation exempt from Section 162(m) of
the Internal Revenue Code. The Compensation Committee may, in its discretion, decide to structure other awards granted under the 2012 Plan to qualify for deductibility under Section 162(m).
Section 409A of the Tax Code.
In 2004, the Internal Revenue Code was amended to add Section 409A, which created new rules for amounts
deferred under nonqualified deferred compensation plans. Section 409A includes a broad definition of nonqualified deferred compensation plans which may extend to various types of awards granted under the 2012 Plan. If an award is subject to,
but fails to comply with, Section 409A, the participant would generally be subject to accelerated income taxation, plus a 20% penalty tax and an interest charge. The Company intends that awards granted under the 2012 Plan will either be exempt
from, or will comply with, Section 409A.
Benefits Proposed to be Awarded Under the 2012 Plan.
No benefits or amounts have been granted,
awarded or received under the 2012 Plan. The issuance of any awards under the 2012 Plan will be at the
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APPENDIX G:
2012 STOCK INCENTIVE AND AWARD PLAN SUMMARY
discretion of the Compensation Committee. Therefore, it is not possible to determine the amount or form of any award that will be granted to any individual in the future as there are many
variables the Committee considers in granting equity awards, including compensation of our executive officers compared to peer group compensation, share price at the time the Committee sets executive compensation, and, for payouts under the
Long-Term Incentive Plan, performance against predetermined metrics at the time of settlement.
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Exhibit 10-h-1
CHANGE-IN-CONTROL RETENTION AGREEMENT
This Agreement is entered into as of
[December , 2008]
by and between The Nordson Corporation, an Ohio corporation
(“Nordson”), and
[Name of Executive]
, an individual (“Employee”).
Employee is an executive and key employee of
Nordson and is now serving Nordson as its
[Executive’s Title]
. Nordson desires to assure itself of continuity of management in the event of any threatened or actual Change in Control, to provide inducements for Employee not to compete
with Nordson, and to assure itself, in the event of any threatened or actual Change in Control, of the continued performance of services by Employee on an objective and impartial basis and without distraction by concern for [his/her] employment
status and security. In order to induce Employee to remain in its employ, Nordson agrees that if Employee’s employment with Nordson is terminated after a Change in Control under certain circumstances as described below, Nordson will pay the
severance benefits set forth in this Agreement.
Nordson and Employee agree as follows:
1.
Operation of Agreement
. This Agreement will be effective and binding immediately upon the date first set forth above (the “Effective
Date”) but will not be operative unless and until there has been a Change in Control while Employee is in the employ of Nordson. If a Change in Control occurs while Employee is in the employ of Nordson, this Agreement will become immediately
operative and (subject only to the possible undoing of the particular Change in Control, as provided in Section 14 below) will continue in effect in accordance with its terms.
2.
Retention Period
. If and when a Change in Control occurs, Nordson will continue to employ Employee and Employee will continue in the employ of
Nordson during the period (the “Retention Period”) that begins on the first date on which a Change in Control occurs (the “Change in Control Date”) and ends at the close of business on the second anniversary of the Change in
Control Date, except that Employee’s employment may be terminated during the Retention Period as provided in Section 5 below.
3.
Position,
Duties, Responsibilities
. At all times during the Retention Period, Employee will:
(a) hold the same position with substantially the
same duties and responsibilities as an executive of Nordson as Employee held immediately before the Change in Control, as those duties and responsibilities may be extended from time to time during the Retention Period by Nordson’s Board of
Directors (the “Board”);
(b) observe all Nordson policies applicable to Nordson executive personnel; and
(c) devote [his/her] business time, energy, and talent to the business of and to the furtherance of the purposes and objectives of Nordson to
generally the same extent as Employee so devoted [his/her] business time, energy, and talent before the Change in Control.
Nothing in this Agreement will preclude Employee from devoting reasonable periods of time to charitable and
community activities or the management of Employee’s investment assets provided those activities do not materially interfere with the performance of Employee’s duties under this Agreement.
4.
Compensation and Benefits During the Retention Period
. During the Retention Period, Employee will be entitled to the same base salary and to the
same or equivalent other elements of total direct compensation opportunity (consisting of, short and long term incentive compensation, equity grants, and executive perquisites) and employee pension and welfare benefits as that afforded to Employee
by Nordson immediately before the Change in Control Date.
5.
Termination Following a Change in Control
. During the Retention Period,
Employee’s employment with Nordson (and the Retention Period) may be terminated only in accordance with one of the subsections of this Section 5. For all purposes of this Agreement, the term “Employment Termination Date” means
the last date on which Employee is employed by Nordson.
(a)
By Nordson for Cause
. Nordson may terminate Employee’s employment
under this Agreement for “Cause,” effective immediately upon giving notice of termination, if:
(i) Employee commits an act of
fraud, embezzlement, theft, or other similar criminal act constituting a felony and involving Nordson’s business, or
(ii) Employee
(except by reason of incurring a disability) breaches [his/her] agreement with respect to the time to be devoted to the business of Nordson set forth in Section 3(c) above and fails to cure that breach within 30 days of receipt of written
notice of that breach from the Board.
(b)
By Nordson without Cause
. Nordson may terminate Employee’s employment under this
Agreement without Cause at any time, effective immediately upon giving notice of that termination.
(c)
By Employee for Good Reason
.
Subject to compliance with the notice and opportunity for cure requirements set forth at the end of this Section 5(c), Employee may terminate [his/her] employment under this Agreement for “Good Reason” if any of the following
circumstances occurs during the Retention Period without Employee’s express written consent:
(i) a reduction in Employee’s base
annual salary from that provided immediately before the Change in Control Date;
(ii) a failure by Nordson to make available to Employee
compensation plans, employee pension plans, and employee welfare benefit plans (collectively, “Plans”) and other benefits and perquisites that provide opportunities to receive overall compensation and benefits and perquisites at least
equal to the opportunities for overall compensation and benefits and perquisites that were available to Employee immediately before the Change in Control Date;
2
(iii) a change in the location of Employee’s principal place of employment by more than 50
miles from the location where Employee was principally employed immediately before the Change in Control Date;
(iv) a significant increase
in the frequency or duration of Employee’s business travel; or
(v) a material and adverse change in the authorities, powers,
functions, or duties attached to Employee’s position from those authorities, powers, functions, and duties as they existed immediately before the Change in Control Date (but a change in the office or officer to whom Employee reports will not,
in itself, be deemed to be a material adverse change in Employee’s authorities, powers, functions, or duties for these purposes).
Employee may give notice of termination for Good Reason based on any particular circumstance described in any of (i) through (v) of
this Section 5(c) only if Employee gives notice of that intention (and of the particular circumstance on which the notice is based) not later than 90 days after Employee becomes aware of the existence of that particular circumstance. Any notice
by Employee of termination for Good Reason must specify a date, not earlier than 30 days after the date on which the notice is given, that Employee proposes as [his/her] Employment Termination Date. If Nordson cures the circumstance identified by
Employee in [his/her] notice before the proposed Employment Termination Date, Employee will not be entitled to terminate for Good Reason based upon the cured circumstance and Employee’s notice will be deemed rescinded. If Nordson fails to so
cure before the proposed Employment Termination Date, Employee’s employment will terminate for Good Reason effective on that date.
(d)
By Employee without Good Reason
. Employee may terminate [his/her] employment under this Agreement without Good Reason at any time,
effective immediately upon giving of notice of that termination.
(e)
Upon Death or Retirement
. Upon the death or Retirement of
Employee, Employee’s employment under this Agreement will terminate automatically and without further notice, effective as of the date of death or Retirement. For all purposes of this Agreement, “Retirement” means Employee’s
termination of employment under the terms of the applicable Nordson retirement plan as in effect immediately before the Change in Control Date.
(f)
Upon Total Disability
. Nordson may terminate Employee’s employment under this Agreement, effective thirty days after the giving
of notice by Nordson, if Employee suffers a Total Disability. For all purposes of this Agreement, “Total Disability” means a physical or mental impairment, due to accident or illness, that renders Employee permanently incapable of
performing the duties attached to Employee’s position as those duties existed immediately before the Change in Control Date.
3
6.
Payments upon Termination
.
(a)
Termination for Cause or without Good Reason
. If during the Retention Period Nordson terminates Employee’s employment for Cause
or Employee terminates [his/her] employment without Good Reason, Employee will not be entitled to any termination, separation, severance, or similar benefits under this Agreement.
(b)
Termination Upon Employee’s Total Disability, Retirement, or Death.
If during the Retention Period Employee’s employment
is terminated as a result of Employee’s Total Disability, Retirement, or death, Employee will be entitled to benefits under and in accordance with Nordson’s disability, retirement, and death benefit (including life insurance policies)
plans and policies as in effect immediately before the Change in Control Date, or benefits equivalent thereto. In addition, Nordson will pay to Employee (or to Employee’s estate in the event of Employee’s death) any Unpaid Prior Year Bonus
and a Current Year Pro Rata Bonus. For all purposes of this Agreement, the term “Unpaid Prior Year Bonus” means any bonus for the fiscal year ended immediately before the fiscal year in which the Employment Termination Date occurs that
remains unpaid as of the Employment Termination Date (whether or not, under normal practice, that bonus would not be paid until a date later than the Employment Termination Date).
For all purposes of this Agreement, the term “Current Year Pro Rata Bonus” means (x) an amount calculated on the same date and
in the same manner as Employee’s annual incentive bonus under the bonus plan in effect for the fiscal year in which the Employment Termination Date occurs would have been calculated if Employee’s employment had not been terminated and, to
the extent relevant to that calculation, Employee’s performance through the entire fiscal year had been equal to [his/her] performance during the part of the fiscal year ending on the Employment Termination Date, multiplied by (y) a
fraction, the numerator of which is the number of days in the partial fiscal year ending on the Employment Termination Date and the denominator of which is 365. Unless any payment under this Section 6(b) must be postponed by reason of
Section 409A of the Internal Revenue Code (as provided in Exhibit A to this Agreement): Nordson will pay any Unpaid Prior Year Bonus at the same time that amount would have been paid if Employee’s employment had continued indefinitely
but not later than March 15 of the year in which the Employment Termination Date occurs; Nordson will pay any Current Year Pro Rata Bonus at the same time that amount would have been paid if Employee’s employment had continued indefinitely
but not later than March 15 of the year immediately after the year in which the Employment Termination Date occurs; and Nordson will pay any other benefits or amounts payable pursuant to this Section 6(b) at the time specified in the
applicable plan.
(c)
Termination without Cause or for Good Reason
. If during the Retention Period Employee’s employment is
terminated by Nordson without Cause or by Employee for Good Reason, Nordson will pay and provide to Employee the following compensation and benefits:
(i)
Accrued Obligations
. Nordson will pay to Employee base salary through the Employment Termination Date (at the rate in effect
immediately before the
4
Employment Termination Date), any Unpaid Prior Year Bonus, a Pro Rata Current Year Bonus, and all other amounts to which Employee is entitled under any Nordson compensation plan applicable to
Employee that is listed on Exhibit B to this Agreement. Unless any payment under this Section 6(c)(i) must be postponed by reason of Section 409A of the Internal Revenue Code (as provided in Exhibit A to this Agreement), Nordson will
pay any base salary within five business days of the Employment Termination Date; Nordson will pay any Unpaid Prior Year Bonus at the same time that amount would have been paid if Employee’s employment had continued indefinitely but not later
than March 15 of the year in which the Employment Termination Date occurs; Nordson will pay any Current Year Pro Rata Bonus at the same time that amount would have been paid if Employee’s employment had continued indefinitely but not later
than March 15 of the year immediately after the year in which the Employment Termination Date occurs; and Nordson will pay any other amounts payable pursuant to this Section 6(c)(i) at the time specified in the applicable compensation
plan.
(ii)
Severance Payment
. Nordson will pay to Employee a severance payment equal to two times the sum of
(x) Employee’s annual base salary (at the rate in effect immediately before the Employment Termination Date) plus (y) Employee’s annual target incentive bonus in effect on the Employment Termination Date. Unless this payment must
be postponed by reason of Section 409A of the Internal Revenue Code (as provided in Exhibit A to this Agreement), Nordson will pay this amount to Employee within five business days of the Termination Date.
(iii)
Continuing Plan Coverage
. For a period of two years following the Employment Termination Date, Nordson will maintain in full force
and continue to provide full benefits to Employee under all life insurance, health (medical and dental), accidental death and dismemberment, pension, and disability plans and programs in which Employee was entitled to participate immediately before
the Employment Termination Date, except that (x) if Employee’s continued participation is not possible under the general terms and provisions of any such plan or program, Nordson will provide Employee with benefits equivalent to those
provided by each such plan and program, and (y) Nordson will not be required to maintain any of these plans and programs, or the equivalent thereof, after Employee has either reached the normal retirement date under the retirement or pension
plan in effect immediately before the Change in Control Date or secured full time employment with another employer that provides benefits to Employee under a comparable plan or program that are at least substantially equal to the benefits provided
by Nordson. To assure compliance with Section 409A of the Internal Revenue Code, the timing of the provision of any benefits under this Section 6(c)(iii) will be subject to Section B of Exhibit A to this Agreement if and to the extent any
part of that section is applicable according to its terms.
(iv)
Lump Sum Payment Based on Additional Two Years of Age and Service under
Pension and Excess Defined Benefit Plans
. Nordson will pay to Employee a lump sum amount equal to the amount by which the aggregate actuarial present value, calculated as of the Employment Termination Date, of all amounts payable with respect to
Employee under the Nordson Corporation Salaried Employees Pension Plan, the
5
Nordson Corporation Excess Defined Benefit Pension Plan, and the Nordson Corporation 2005 Excess Defined Benefit Pension Plan (or equivalent plans) would be increased if Employee had an
additional two years of age and an additional two years of service credit under each of these plans. Unless this payment must be postponed by reason of Section 409A of the Internal Revenue Code (as provided in Exhibit A to this Agreement),
Nordson will pay this amount to Employee within five business days of the Employment Termination Date.
(v)
Career Counseling
.
Nordson will make available to Employee, at Nordson’s expense, outplacement counseling services. Employee may select the organization that will provide Employee with such services, provided that Nordson will not be required to pay more than
$50,000 for any such services. To assure compliance with Section 409A of the Internal Revenue Code, the timing of the provision of any benefits under this Section 6(c)(v) will be subject to Section B of Exhibit A to this Agreement if and
to the extent any part of that section is applicable according to its terms.
7.
No
Set-Off;
No Obligation to
Seek Other Employment or to Otherwise Mitigate Damages; No Effect Upon Other Agreements
. Nordson’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations under this Agreement will not be
affected by any
set-off,
counterclaim, recoupment, defense, or other claim whatsoever that Nordson may have against Employee. Employee will not be required to mitigate damages or the amount of any payment
provided for under this Agreement by seeking other employment or otherwise. Except as expressly provided in Section 6(c)(iii) as to continuing coverage of benefit plans, the amount of any payment or benefits provided for under this Agreement
will not be reduced by any compensation or benefits earned by Employee as the result of employment by another employer or otherwise after the Employee’s termination date. Except as provided in Section 15(b), the provisions of this
Agreement will not affect the validity or enforceability of any other agreement between Nordson and Employee, and the benefits provided under this Agreement will be additive to any other benefits promised to Employee under any such other agreement.
Moreover, this Agreement will not operate to negate any other assurances provided to Employee.
8.
Effect of Disability
. If Employee becomes
disabled and [his/her] disability does not rise to the level of a Total Disability during the Retention Period to such an extent that [he/she] is permanently prevented from performing [his/her] duties under this Agreement by reason of physical or
mental incapacity:
(a) Employee will be entitled to disability and other benefits at least equal to those that would have been available
to [him/her] had Nordson continued, throughout the period of Employee’s disability, all of its programs, benefits, and policies with respect to disabled employees that were in effect immediately before the Change in Control Date, and
(b) if Employee recovers from [his/her] disability before the expiration of the Retention Period, [he/she] will be reinstated as an active
employee for the remainder of the Retention Period under and subject to all of the terms of this Agreement including, without limitation, Nordson’s right to terminate Employee with or without Cause under Sections 5(a) and 5(b),
respectively.
6
9.
Confidential Information
. Employee will not, at any time after the Effective Date, either directly or
indirectly, disclose or make known to any person, firm, or corporation any confidential information, trade secret, or proprietary information of Nordson that Employee may have acquired before the Effective Date or may acquire after the Effective
Date in the performance of Employee’s duties as an employee of Nordson. Upon the termination of Employee’s employment with Nordson, Employee will deliver forthwith to Nordson any and all literature, documents, correspondence, and other
materials and records furnished to or acquired by Employee during the course of [his/her] employment.
10.
Noncompetition
. During the Retention
Period Employee will not act as a proprietor, investor, director, officer, employee, substantial stockholder, consultant, or partner in any business engaged to a material extent in direct competition with Nordson in any market in any line of
business engaged in by Nordson during the Retention Period.
11.
Costs of Enforcement
. Nordson will pay and be solely responsible for any and all
costs and expenses (including attorneys’ fees) incurred by Employee in seeking to enforce Nordson’s obligations under this Agreement unless and to the extent a court of competent jurisdiction determines that Nordson was relieved of those
obligations because:
(a) Nordson terminated Employee’s employment for Cause,
(b) Employee voluntarily terminated [his/her] employment other than for Good Reason, or
(c) Employee materially and willfully breached [his/her] agreement not to compete with Nordson or [his/her] agreement with respect to
confidential information and that breach directly caused substantial and demonstrable damage to Nordson.
Nordson will forthwith pay directly or reimburse
Employee for any and all such costs and expenses upon presentation from time to time by Employee or by counsel selected by Employee of a statement or statements prepared by Employee or by that counsel of the amount of such costs and expenses. If and
to the extent a court of competent jurisdiction renders a final binding judgment determining that Nordson was relieved of its obligations for any of the reasons set forth in (a), (b) or (c) above, Employee will repay the amount of those
payments or reimbursements to Nordson. In addition to the payment and reimbursement of expenses of enforcement provided for in this Section 11, Nordson will pay to Employee in cash, as and when Nordson makes any payment on behalf of, or
reimbursement to, Employee, an additional amount sufficient to pay all federal, state, and local taxes (whether income taxes or other taxes) incurred by Employee as a result of (x) payment of the expense or receipt of the reimbursement, and
(y) receipt of the additional cash payment. Nordson will also pay to Employee interest (calculated at the Wall Street Journal Prime Rate from time to time in effect, compounded monthly) on any payments or benefits that are paid or provided to
Employee later than the date on which due under the terms of this Agreement. To assure compliance with Section 409A, Nordson will make any payments to or on behalf of Employee that are required under this Section 11 subject to and as
provided in Section B of Exhibit A to this Agreement.
12.
Tax Provisions Regarding Gross-Ups and Compliance with Section 409A a Part of this
Agreement
. All of the provisions of Exhibit A to this Agreement, captioned “Tax Provision Exhibit – 280G Gross-Up, Compliance with Section 409A, and 409A Gross-Up” will apply as between Nordson and Employee as fully if those
provisions had been written directly into the body of this Agreement.
7
13.
“Change in Control” Defined
. For purposes of this Agreement, a Change in Control will have
occurred if at any time any of the following events occurs:
(a) a report is filed with the Securities and Exchange Commission (the
“SEC”) on Schedule 13D or Schedule 14D-1 (or any successor schedule, form, or report), each as promulgated pursuant to the Securities Exchange Act of 1934, disclosing that any “person” (as the term “person” is used in
Section 13(d) or Section 14(d)(2) of the Securities Exchange Act of 1934) is or has become a beneficial owner, directly or indirectly, of securities of Nordson representing 25% or more of the combined voting power of Nordson’s then
outstanding securities;
(b) Nordson files a report or proxy statement with the SEC pursuant to the Securities Exchange Act of 1934
disclosing that a Change in Control of Nordson has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction;
(c) Nordson is merged or consolidated with another corporation and, as a result thereof, securities representing less than 50% of the combined
voting power of the surviving or resulting corporation’s securities (or of the securities of a parent corporation in case of a merger in which the surviving or resulting corporation becomes a wholly-owned subsidiary of the parent corporation)
are owned in the aggregate by holders of Nordson’s securities immediately before such merger or consolidation;
(d) all or
substantially all of the assets of Nordson are sold in a single transaction or a series of related transactions to a single purchaser or a group of affiliated purchasers; or
(e) during any period of 24 consecutive months, individuals who were Directors of Nordson at the beginning of the period cease to constitute at
least a majority of the Board unless the election, or nomination for election by Nordson’s shareholders, of more than one half of any new Directors of Nordson was approved by a vote of at least two-thirds of the Directors of Nordson then still
in office who were Directors of Nordson at the beginning of the 24 month period.
14.
Possible Undoing of a Change in Control and Its Effect on this
Agreement
. If a Change in Control as defined in Section 13(a) occurs while Employee is in the employ of Nordson with the result (as provided in Section 1) that this Agreement becomes operative and, thereafter, on any later date, all
three of the following conditions are satisfied:
(a) the acquiring person has transferred or otherwise disposed of sufficient securities
of Nordson in one or more transactions, to a person or persons other than affiliates of the acquiring person or any persons with whom the acquiring person has agreed to act together for the purpose of acquiring, holding, voting, or disposing of
securities of Nordson, so that, after the transfer or other disposition, the acquiring person is no longer the beneficial owner, directly or indirectly, of securities of Nordson representing 10% or more of the combined voting power of Nordson’s
then outstanding securities;
8
(b) no other event constituting a Change in Control had occurred; and
(c) Employee’s employment with Nordson has not been terminated by Nordson without Cause or by Employee for Good Reason;
then, for all purposes of this Agreement, the filing of the report constituting a Change in Control under Section 13(a) will be treated as if it had not
occurred and this Agreement will return to the status it had immediately before the filing of the report constituting a Change in Control under Section 13(a). Accordingly, if and when a subsequent Change in Control occurs, this Agreement will
again become operative on the date of that subsequent Change in Control.
15.
Miscellaneous
.
(a)
Employee Rights
. Nothing expressed or implied in this Agreement creates any right or duty on the part of Nordson or Employee to have
Employee remain in the employ of Nordson before any Change in Control and Employee will have no rights under this Agreement if [his/her] employment with Nordson is terminated for any reason or for no reason before any Change in Control. Nothing
expressed or implied in this Agreement creates any duty on the part of Nordson to continue in effect, or continue to provide to Employee, any plan or benefit unless and until a Change in Control occurs. If, before a Change in Control, Nordson ceases
to provide any plan or benefit to Employee, nothing in this Agreement will be construed to require Nordson to reinstitute that plan or benefit to Employee upon the later occurrence of a Change in Control.
(b)
Prior Employment Agreement Superseded
. Nordson and Employee intend that this Agreement will supersede and replace the Employment
Agreement between Nordson and Employee dated (the “Prior Employment Agreement”). As of the Effective Date, the Prior
Employment Agreement will cease to be of any force or effect.
(c)
Notices
. All communications provided for in this Agreement are to
be in writing and will be deemed to have been duly given when delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to Nordson (Attention: Vice President, General Counsel and
Secretary) at its principal executive office and to Employee at [his/her] principal residence, or to such other address as either party may have furnished to the other in writing and in accordance with this Section 15(c), except that notices of
change of address will be effective only upon receipt.
(d)
Assignment, Binding Effect
.
(i) This Agreement will be binding upon and will inure to the benefit of Nordson and Nordson’s successors and assigns. Nordson will
require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and or assets of Nordson, by agreement in form and substance satisfactory to Employee, to expressly
assume and agree to perform this Agreement in the same manner and to the same extent that Nordson would be required to perform it if no such succession had taken place.
9
(ii) This Agreement will be binding upon Employee and this Agreement and all rights of Employee
under this Agreement will inure to the benefit of, and be enforceable by, Employee and [his/her] personal or legal representatives, executors, or administrators. No right, benefit, or interest of Employee under this Agreement will be subject to
assignment, anticipation, alienation, sale, encumbrance, charge, pledge, hypothecation, or to execution, attachment, levy, or similar process; except that Employee may assign any right, benefit, or interest under this Agreement if that assignment is
permitted under the terms of any plan or policy of insurance or annuity contract governing the right, benefit, or interest.
(e)
Invalid
Provisions
. Any provision of this Agreement that is prohibited or unenforceable will be ineffective to the extent, but only to the extent, of the prohibition or unenforceability without invalidating the remaining portions of this Agreement and
all remaining portions of this Agreement will continue to be in full force and effect. If any provision of this Agreement is determined to be invalid or unenforceable, the parties will negotiate in good faith to replace that provision with another
provision that will be valid and enforceable and that is as close as practicable to the provision held invalid or unenforceable.
(f)
Modification
. No modification, amendment, or waiver of any of the provisions of this Agreement will be effective unless in writing, specifically referring to this agreement, and signed by both parties.
(g)
Waiver of Breach
. The failure at any time of a party to enforce any of the provisions of this Agreement or to require performance by
the other party of any of the provisions of this Agreement will not be construed to be a waiver of those provisions or to affect either the validity of this Agreement or any part of this Agreement or the right of either party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
(h)
Governing Law
. This Agreement has been made in and is
to be governed and construed in accordance with the laws of the State of Ohio applicable to contracts made in and to be performed entirely within that state.
(i)
Employment by Subsidiary
. If the recitals to this Agreement indicate that as of the Effective Date Employee is employed by a
subsidiary of Nordson, all references to continued employment of Employee by Nordson are to be construed as references to continued employment of Employee by the subsidiary and any termination of Employee’s employment with the subsidiary are to
be construed as termination of Employee’s employment with Nordson. For the avoidance of doubt, all references to a Change in Control are to changes in control of Nordson, not of the subsidiary and all references to the Board are to the Board of
Directors of Nordson, not of the subsidiary.
10
In witness whereof, Nordson and Employee have executed this Agreement as of the day and year first above written.
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Nordson Corporation
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Employee
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By:
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Title:
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[EMPLOYEE’S NAME]
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11
EXHIBIT A:
Tax Provision Exhibit – 280G Gross-Up, Compliance
with Section 409A, and 409A Gross-Up
A.
Gross-Up of Payments Deemed to be Excess Parachute Payments
.
A.1
Acknowledgement; Determination by Accounting Firm
. Nordson and Employee acknowledge that, following a change in ownership or control (as that term
is defined in the Treasury Regulations published under Section 280G of the Internal Revenue Code), one or more payments or distributions to be made by Nordson or an affiliated entity to or for the benefit of Employee (whether paid or payable or
distributed or distributable pursuant to the terms of the Agreement to which this Exhibit A is attached, under some other plan, agreement, or arrangement, or otherwise) (a “Payment”) may be determined to be an “excess parachute
payment” that is not deductible by Nordson or any affiliated entity for Federal income tax purposes and with respect to which Employee will be subject to an excise tax because of Sections 280G and 4999, respectively, of the Internal Revenue
Code. If a change in ownership or control occurs, either Employee or Nordson may direct the Accounting Firm, which, subject to any inconsistent position asserted by the Internal Revenue Service, will make all determinations required to be made under
this Section A, to determine whether any Payment will be an excess parachute payment and to communicate its determination, together with detailed supporting calculations, to Nordson and to Employee within 30 days after its receipt of the
direction from Employee or Nordson, as the case may be. Nordson and Employee will cooperate with each other and the Accounting Firm and will provide necessary information so that the Accounting Firm may make all such determinations.
A.2
Gross-Up Payments
. If the Accounting Firm determines that any Payment gives rise, directly or indirectly, to liability on the part of Employee for
excise tax under Section 4999 (and/or any penalties and/or interest with respect to any such excise tax), Nordson will make additional cash payments (each, a “Gross-Up Payment”) to Employee, from time to time in such amounts as are
necessary to put Employee in the same position, after payment of all federal, state, and local taxes (whether income taxes, excise taxes under Section 4999 or otherwise, or other taxes) and any and all penalties and interest with respect to any
such excise tax, as Employee would have been in after payment of all federal, state, and local income taxes if the Payments had not given rise to an excise tax under Section 4999 and no such penalties or interest had been imposed.
Nordson’s obligation to make Gross-Up Payments under this Section A is not contingent on termination of Employee’s employment with Nordson. Nordson will make each Gross-Up Payment to Employee within 30 days of the time that the related
Payment constituting an excess parachute payment is paid or provided to Employee.
A.3
Further Gross-Up Payments as Determined by the IRS
. If the
Internal Revenue Service determines that any Payment gives rise, directly or indirectly, to liability on the part of Employee for excise tax under Section 4999 (and/or any penalties and/or interest with respect to any such excise tax) in excess
of the amount, if any, previously determined by the Accounting Firm, Nordson will make further Goss-Up Payments to Employee in cash and in such amounts as are necessary to put Employee in the same position, after payment of all federal, state, and
local taxes (whether income taxes, excise taxes under Section 4999 or otherwise, or other taxes) and
12
any and all penalties and interest with respect to any such excise tax, as Employee would have been in after payment of all federal, state, and local income taxes if the Payments had not given
rise to an excise tax under Section 4999 and no such penalties or interest had been imposed. Nordson will make any additional Gross-Up Payments required by this Section A.3 not later than the due date of any payment indicated by the Internal
Revenue Service with respect to the underlying matters to which the additional Gross-Up Payment relates.
A.4
Contest of IRS Determination by
Nordson
. If Nordson desires to contest any determination by the Internal Revenue Service with respect to the amount of excise tax under Section 4999, Employee will, upon receipt from Nordson of an unconditional written undertaking to
indemnify and hold Employee harmless (on an after tax basis) from any and all adverse consequences that might arise from the contesting of that determination, cooperate with Nordson in that contest at Nordson’s sole expense. Nothing in this
Section A will require Employee to incur any expense other than expenses with respect to which Nordson has paid to Employee sufficient sums so that after the payment of the expense by Employee and taking into account the payment by Nordson with
respect to that expense and any and all taxes that may be imposed upon Employee as a result of [his/her] receipt of that payment, the net effect is no cost to Employee. Nothing in this Section A will require Employee to extend the statute of
limitations with respect to any item or issue in [his/her] tax returns other than, exclusively, the excise tax under Section 4999. If, as the result of the contest of any assertion by the Internal Revenue Service with respect to excise tax
under Section 4999, Employee receives a refund of a Section 4999 excise tax previously paid and/or any interest with respect thereto, Employee will promptly pay to Nordson such amount as will leave Employee, net of the repayment and all
tax effects, in the same position, after all taxes and interest, that [he/she] would have been in if the refunded excise tax had never been paid. To assure compliance with Section 409A, Nordson will make payments to Employee with respect to
expenses as contemplated in this Section A.4 subject to and as provided in Sections B.1 and B.2.
A.5
Accounting Firm Fees and Expenses
. Nordson
will bear and pay all fees and expenses of the Accounting Firm for services performed pursuant to this Section A that are incurred at any time from the Effective Date through the tenth anniversary of Employee’s death (“Applicable Fees and
Expenses”). To assure compliance with Section 409A, Nordson will pay any Applicable Fees and Expenses subject to and as provided in Sections B.1 and B.2.
B.
Compliance with Section 409A and 409A Gross Up
.
B.1
Six Month Delay on Certain Payments, Benefits, and Reimbursements
. If Employee is a “specified employee” for purposes of
Section 409A, as determined under Nordson’s policy for determining specified employees on the Employment Termination Date, each payment, benefit, or reimbursement paid or provided under this Agreement that constitutes a “deferral of
compensation” within the meaning of Section 409A, that is to be paid or provided as a result of a “separation from service” within the meaning of Section 409A, and that would otherwise be paid or provided at any time (a
“Scheduled Time”) that is on or before the date that is exactly six months after the Employment Termination Date (other than payments, benefits, or reimbursements that are treated as separation pay under Section 1.409A-1(b)(9)(v) of
the Treasury Regulations) will not be paid or provided at the Scheduled Time but will be accumulated (together with interest at the applicable federal rate under Section 7872(f)(2)(A) of the Code in effect on the Termination Date) through the
date that is exactly six months after the
13
Employment Termination Date and will be paid or provided to Employee during the period of 30 consecutive days that starts exactly six months and one day after the Employment Termination Date,
except that if Employee dies before the end of six months after the Employment Termination Date, the payments, benefits, or reimbursements will be accumulated only through the date of [his/her] death and will be paid or provided not later than 30
days after the date of death.
B.2
Additional Limitations on Reimbursements and In-Kind Benefits
. The reimbursement of expenses or in-kind benefits
provided under any section of this Agreement that are taxable benefits (and that are not disability pay or death benefit plans within the meaning of Section 409A of the Code) are intended to comply, to the maximum extent possible, with the
exception to Section 409A set forth in Section 1.409A-1(b)(9)(v) of the Treasury Regulations. To the extent that any reimbursement of expenses or in-kind benefits provided under any section of this Agreement either do not qualify for that
exception, or are provided beyond the applicable time periods set forth in Section 1.409A-1(b)(9)(v) of the Treasury Regulations, then they will be subject to the following additional rules: (a) any reimbursement of eligible expenses will
be paid within 30 days following Employee’s written request for reimbursement; provided that Employee provides written notice no later than 60 days before the last day of the calendar year following the calendar year in which the expense was
incurred so that Nordson can make the reimbursement within the time periods required by Section 409A; (b) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during any calendar year will not affect the amount
of expenses eligible for reimbursement, or in-kind benefits to be provided, during any other calendar year; and (c) the right to reimbursement or in-kind benefits will not be subject to liquidation or exchange for any other benefit.
B.3
Compliance Generally
. Nordson and Employee intend that the payments and benefits provided under the Agreement to which this Exhibit A is attached
will either be exempt from the application of, or comply with, the requirements of Section 409A. The Agreement is to be construed, administered, and governed in a manner that effects that intent and Nordson will not take any action that is
inconsistent with that intent. Without limiting the foregoing, the payments and benefits provided under this Agreement may not be deferred, accelerated, extended, paid out, or modified in a manner that would result in the imposition of an additional
tax under Section 409A upon Employee.
B.4
Section 409A Gross-Up
. If, notwithstanding the efforts of the parties to comply with
Section 409A, Employee is subject to any excise tax under Section 409A, Nordson will make additional payments (“409A Gross-Up Payments”) to Employee so that after taking into account any such additional tax and any related
interest and/or penalties and the 409A Gross-Up Payments, Employee will be in the same position as if no excise tax under Section 409A and no related interest or penalties had been imposed upon [him/her] pursuant to Section 409A. The
Accounting Firm will have the same general duties with respect to the determination of the amount of any Section 409A Gross-Up Payments as it has with respect to the determination of Gross-Up Payments with respect to Section 4999 under
Section A above and the parties will follow procedures in connection with the determination and payment of any Section 409A Gross-Up Payments that are similar to those specified in Section A above in connection with the determination
and payment of any Gross-Up Payments with respect to Section 4999.
14
B.4
Termination of Employment to Constitute a Separation from Service
. The parties intend that the phrase
“termination of employment” and words and phrases of similar import mean a “separation from service” with Nordson within the meaning of Section 409A. Employee and Nordson will take all steps necessary (including taking into
account this Section B.4 when considering any further agreement regarding provision of services by Employee to Nordson after the Employment Termination Date) to ensure that (a) any termination of employment under this Agreement constitutes a
“separation from service” within the meaning of Section 409A, and (b) the Employment Termination Date is the date on which Employee experiences a “separation from service” within the meaning of Section 409A.
C.
Definitions
.
C.1
Accounting Firm
. The
term “Accounting Firm” means the independent auditors of Nordson for the fiscal year immediately preceding the earlier of (a) the year in which the Termination Date occurred, or (b) the year, if any, in which occurred the first
Change of Control occurring after the Effective Date, and that firm’s successor or successors; unless that firm is unable or unwilling to serve and perform in the capacity contemplated by this Agreement, in which case Nordson must select
another accounting firm that (i) is of recognized regional or national standing and (ii) is not then the independent auditors for Nordson or any affiliated corporation.
C.2
Sections 280G, 409A, and 4999
. Each of the terms “Section 280G,” “Section 409A,” and “Section 4999,” respectively,
means that numbered section of the Internal Revenue Code. References in the Agreement to any of these sections are intended to include any proposed, temporary, or final regulations, or any other guidance, promulgated with respect to that specific
section by the U.S. Department of Treasury or the Internal Revenue Service.
15
EXHIBIT B:
Compensation and Employment Benefit Plans
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1.
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The Amended and Restated Nordson Corporation 2004 Management Incentive Compensation Plan
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2.
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The Amended and Restated Nordson Corporation 2004 Long-Term Performance Plan
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3.
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The Nordson Corporation Salaried Employees Pension Plan
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4.
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The Nordson Corporation Deferred Compensation Plan
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5.
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The 2005 Nordson Corporation Deferred Compensation Plan
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6.
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The Amended and Restated Nordson Corporation 2005 Deferred Compensation Plan
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7.
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The Nordson Corporation Excess Defined Contribution Benefit Plan
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8.
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The 2005 Nordson Corporation Excess Defined Contribution Benefit Plan
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9.
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The Amended and Restated 2005 Supplemental Executive Retirement Plan (Defined Contribution)
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10.
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The Nordson Corporation Excess Defined Benefit Pension Plan
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11.
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The 2005 Nordson Corporation Excess Defined Benefit Pension Plan
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12.
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The Amended and Restated 2005 Supplemental Executive Retirement Plan (Defined Benefit)
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11.
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The Nordson Corporation Employees’ Savings Trust Plan (NEST)
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12.
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The Nordson Corporation Salaried Employees’ Health Care Plan
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13.
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The Nordson Corporation Prescription Drug and Dental Plans
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14.
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The Nordson Corporation Short Term and Long Term Disability Plans
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15.
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The Nordson Corporation Group Life Insurance Plan-Salaried
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16.
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The Nordson Corporation Group Travel Accident Plan
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17.
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Nordson Corporation’s Car Allowance Plan
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18.
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Nordson Corporation’s policy of reimbursement for club dues, airline travel clubs, and the like
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19.
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Nordson Corporation’s policies regarding vacation, holidays, and paid time off.
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EXHIBIT 21
NORDSON CORPORATION
Subsidiaries of the Registrant
The following table sets forth the subsidiaries of the Registrant (each of which is included in the Registrant’s consolidated financial statements),
and the jurisdiction under the laws of which each subsidiary was organized:
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Name
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Jurisdiction
of Incorporation
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UNITED STATES:
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Nordson ASYMTEK, Inc. fka Asymptotic Technologies, Inc.
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California
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Nordson MARCH, Inc., fka March Plasma Systems, Inc.
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California
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Nordson DAGE, Inc. fka Dage Precision Industries, Inc.
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California
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Nordson YESTECH, Inc. fka YESTech, Inc
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California
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Value Plastics, Inc.
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Colorado
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Realty Land Conservancy 3
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Colorado
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VP Acquisition Holding, Inc.
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Delaware
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Xaloy Holdings, Inc.
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Delaware
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Nordson Xaloy Incorporated
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Delaware
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Xaloy Extrusion LLC dba Nordson Xaloy Incorporated
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Delaware
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Nordson Extrusion Dies Industries. LLC
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Delaware
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Flametech Corporation
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Delaware
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New Castle Screws, Inc.
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Delaware
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Xaloy Superior Holdings, Inc.
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Delaware
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Avalon Laboratories Holding Corp.
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Delaware
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Avalon Laboratories, LLC
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Delaware
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J and M Laboratories, Inc.
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Georgia
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Nordson Sealant Equipment, Inc.
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Michigan
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Micromedics, Inc.
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Minnesota
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Nordson U.S. Trading Company
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Ohio
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Nordson England L.L.C.
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Ohio
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Nordson Medical Corporation
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Ohio
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Spirex Corporation dba Nordson Xaloy Incorporated
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Ohio
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Nordson Pacific, Inc.
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Ohio
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Nordson Advanced Technology LLC
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Ohio
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Nordson Atlantic LLC
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Ohio
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New Castle Industries, Inc. dba Nordson Xaloy Incorporated
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Pennsylvania
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Atlantic Grinding & Welding, Inc.
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Pennsylvania
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F.R. Gross Co., Inc.
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Pennsylvania
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Nordson EFD LLC
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Rhode Island
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EFD International, Inc.
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Rhode Island
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New Castle Rolls, Inc.
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Virginia
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EDI Holdings, Inc.
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Wisconsin
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Premier Dies Corporation dba Nordson EDI Premier Coating Division
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Wisconsin
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85
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Name
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Jurisdiction
of Incorporation
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INTERNATIONAL:
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Nordson Australia Pty. Limited
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Australia
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Nordson Osterreich GmbH
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Austria
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Nordson Benelux S.A./N.V.
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Belgium
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Nordson EDI Europe NV
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Belgium
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Nordson do Brasil Industria e Comercio Ltda.
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Brazil
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Nordson Canada Limited
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Canada
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Nordson (China) Co., Ltd.
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China
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Dage Test Systems (Suzhou) Co. Ltd.
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China
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Dage Trading (Suzhou) Co. Ltd.
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China
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Nordson PPS (Shanghai) Co. Ltd. fka Nordson Extrusion Dies Industries (Shanghai) Co. Ltd.
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China
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Nordson China Business Trust
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China
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Nordson Andina Limitada
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Colombia
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Nordson CS, spol.s.r.o.
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Czech Republic
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Nordson Danmark A/S
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Denmark
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Nordson Finland Oy
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Finland
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Nordson France S.A.S.
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France
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Dosage 2000 S.A.R.L
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France
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Nordson Deutschland GmbH
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Germany
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Nordson Engineering GmbH
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Germany
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Dage Deutschland GmbH
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Germany
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Nordson Holdings S.a.r.l. & Co. KG
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Germany
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Nordson Xaloy Europe GmbH
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Germany
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EDI GmbH
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Germany
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Nordson EDI GmbH & Co. KG
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Germany
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Extrusion Dies Management GmbH
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Germany
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Nordson PPS GmbH fka Nordson Kreyenborg GmbH
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Germany
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Nordson BKG GmbH
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Germany
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Nordson Germania Ltd. & Co. KG
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Germany
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Nordson Investment (Gibraltar) Limited
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Gibraltar
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Nordson Asia Pacific, Ltd.
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Hong Kong
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Value Plastics (Asia Pacific)
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Hong Kong
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Ligonia Limited
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Hong Kong
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Macaria Limited
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Hong Kong
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Nordson Advanced Technology (Hong Kong) Ltd.
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Hong Kong
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Nordson India Private Limited
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India
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Nordson Ireland Capital Company
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Ireland
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Nordson Italia S.p.A.
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Italy
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Nordson Xaloy Italia S.r.l.
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Italy
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Nordson K.K.
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Japan
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Dage Japan Co., Ltd.
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Japan
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Nordson Xaloy K.K.
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Japan
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Nordson European Holdings Luxembourg S.a.r.l.
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Luxembourg
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Nordson S.a.r.l.
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Luxembourg
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Nordson Luxembourg S.a.r.l.
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Luxembourg
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Nordson (Malaysia) Sdn. Bhd.
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Malaysia
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Nordson de Mexico, S.A. de C.V.
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Mexico
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Nordson Benelux B.V.
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The Netherlands
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Nordson B.V.
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The Netherlands
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Dima Group B.V.
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The Netherlands
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C-Tech Systems B.V.
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The Netherlands
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Nordson New Zealand
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New Zealand
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Nordson Norge A/S
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Norway
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86
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Name
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Jurisdiction
of Incorporation
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INTERNATIONAL:
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Nordson Polska Sp.z.o.o.
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Poland
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Nordson Portugal Equipamento Industrial, Lda.
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Portugal
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Nordson Russia Limited Liability Company
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Russia
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Nordson S.E. Asia (Pte.) Ltd.
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Singapore
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Nordson Advanced Technology (Singapore) Pte Ltd. fka Dage (SEASIA) Pte. Ltd
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Singapore
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Nordson Advanced Technology International Pte. Ltd.
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Singapore
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Nordson SA
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South Africa
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Nordson Korea
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South Korea
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Nordson Iberica, S.A.
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Spain
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Nordson AB
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Sweden
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Nordson (Schweiz) A.G.
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Switzerland
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Nordson Xaloy Asia (Thailand) Ltd.
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Thailand
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Nordson (U.K.) Limited
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United Kingdom
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Dage Holdings Limited
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United Kingdom
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Dage Pension Trustees Limited
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United Kingdom
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Dage Precision Industries Limited
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United Kingdom
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YDX Limited 2010 fka Nordson London Limited
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United Kingdom
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Primount LLP
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United Kingdom
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Majority Kingdom Investment Limited
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United Kingdom
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Minority Kingdom Investment Limited
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United Kingdom
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Nordson International de Venezuela, CA
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Venezuela
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87
EXHIBIT 23
NORDSON CORPORATION
Consent of Independent Registered Public
Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
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1.
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Registration Statement (Form S-8 No. 333-167406) pertaining to the Nordson Employees’ Savings Trust Plan and Nordson Hourly-Rated Employees’ Savings
Trust Plan;
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2.
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Registration Statement (Form S-8 No. 33-18309) pertaining to the Nordson Employees’ Savings Trust Plan;
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3.
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Registration Statement (Form S-8 No. 33-33481) pertaining to the Nordson Hourly-Rated Employees’ Savings Trust Plan;
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4.
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Registration Statement (Form S-8 No. 33-67780) pertaining to the Nordson Corporation 1993 Long-Term Performance Plan;
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5.
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Registration Statement (Form S-8 No. 333-119399) pertaining to the Nordson Corporation 2004 Long-Term Performance Plan; and
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6.
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Registration Statement (Form S-8 No. 333-188980) pertaining to the Nordson Corporation 2012 Stock Incentive and Award Plan
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of our reports dated December 15, 2014, with respect to the consolidated financial statements and schedule of Nordson Corporation and the
effectiveness of internal control over financial reporting of Nordson Corporation included in this Annual Report (Form 10-K) of Nordson Corporation for the year ended October 31, 2014.
Cleveland, Ohio
December 15, 2014
88
Certifications
EXHIBIT 31.1
CERTIFICATION
PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael F. Hilton, certify that:
1. I have reviewed this Annual
Report on Form 10-K of Nordson Corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting that are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: December 15, 2014
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/s/ M
ICHAEL
F.
H
ILTON
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Michael F. Hilton
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President and Chief Executive Officer
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89
EXHIBIT 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gregory A. Thaxton, certify that:
1. I have reviewed this Annual Report on Form 10-K of Nordson Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting that are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: December 15, 2014
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/s/ G
REGORY
A.
T
HAXTON
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Gregory A. Thaxton
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Senior Vice President, Chief Financial Officer
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90
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Nordson Corporation (the “Company”) on Form 10-K for the year ended October 31, 2014, as filed with the Securities and Exchange Commission on the
date hereof (the “Report”), I, Michael F. Hilton, president and chief executive officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
December 15, 2014
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/s/ M
ICHAEL
F. H
ILTON
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Michael F. Hilton
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President and Chief Executive Officer
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91
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Nordson Corporation (the “Company”) on Form 10-K for the year ended October 31, 2014, as filed with the Securities and Exchange Commission on the
date hereof (the “Report”), I, Gregory A. Thaxton, senior vice president, chief financial officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
December 15, 2014
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/s/ G
REGORY
A. T
HAXTON
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Gregory A. Thaxton
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Senior Vice President, Chief Financial Officer
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92
Exhibit 99-a
For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned Registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into Registrant’s Registration Statements on Form S-8 Nos; 33-18309 (Employees Savings Trust Plan); and 33-33481 (Hourly-Rated Employees
Savings Trust Plan):
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.