UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-12
Commission File No. 1-09225
H.B. Fuller Company
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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[LOGO] H.B. Fuller/R/
Office: 1200 Willow Lake Boulevard
St. Paul, Minnesota 55110-5101
Mail: P.O. Box 64683
St. Paul, Minnesota 55164-0683
Phone: (651) 236-5150
Dear Shareholder:
Our 2004 Annual Meeting of Shareholders will be held on Thursday, April 15,
2004, at the Science Museum of Minnesota, 120 West Kellogg Boulevard, Saint
Paul, Minnesota. The meeting will begin promptly at 2:00 p.m. Please join us.
As in past years, admission and parking at the Science Museum on the date of
the meeting are complimentary for shareholders. Vouchers will be available in
the lobby of the museum.
The Notice of Annual Meeting of Shareholders and the Proxy Statement that
follow describe the business to be conducted at the meeting. Also enclosed is a
copy of our 2003 Report, including our Annual Report on Form 10-K. We hope you
find these materials informative and useful. You can also view these materials
on the Internet at www.hbfuller.com.
Your vote is important, so please sign and return the enclosed proxy card in
the postage-paid envelope or instruct us by telephone or via the Internet as to
how you would like to vote your shares.
Sincerely,
/s/ ALBERT P.L. STROUCKEN
ALBERT P.L. STROUCKEN
Chairman of the Board, President and
Chief Executive Officer
March 11, 2004
PROXY STATEMENT
TABLE OF CONTENTS
Directions to the Science Museum of Minnesota
Notice of Annual Meeting of Shareholders
Proxy Statement............................................................................. 1
Questions and Answers About the Meeting and Voting....................................... 1
What is the purpose of the meeting?.................................................. 1
How does the Board recommend that I vote?............................................ 1
Who is entitled to vote at the meeting?.............................................. 1
What is the difference between a shareholder of record and a street name holder?..... 1
What are the voting rights of the shareholders?...................................... 1
How many shares must be present to hold the meeting?................................. 2
How do I vote my shares?............................................................. 2
What does it mean if I receive more than one proxy or voting instructions card?...... 2
Can I vote my shares in person at the meeting?....................................... 2
What vote is required for the proposals to be approved?.............................. 2
How are votes counted?............................................................... 2
What if I do not specify how I want my shares voted?................................. 3
Can I change my vote?................................................................ 3
Who pays for the cost of proxy preparation and solicitation?......................... 3
Security Ownership of Certain Beneficial Owners and Management........................... 4
Section 16(a) Beneficial Ownership Reporting Compliance.................................. 5
Proposal 1--Election of Directors........................................................ 6
Proposal............................................................................. 6
Who are the nominees?................................................................ 7
How can a shareholder suggest a candidate for election to the Board?................. 8
Who are the remaining directors?..................................................... 8
Does the Board have written corporate governance guidelines?......................... 10
Is a majority of the Board independent of management?................................ 10
What is the Board's policy with respect to attendance?............................... 10
What are the roles of the Board's Committees?........................................ 10
How are directors compensated?....................................................... 12
How can a shareholder contact the Board of Directors?................................ 14
Who is the Corporate Secretary?...................................................... 14
Proposal 2--Ratification of Appointment of Auditors...................................... 14
Audit Committee Report............................................................... 14
Fees to the Independent Auditors..................................................... 15
Proposal............................................................................. 16
Other Matters............................................................................ 17
Will the meeting consider any other business?........................................ 17
How can a shareholder present a proposal at the 2005 Annual Meeting?................. 17
Executive Compensation................................................................... 18
Total Shareholder Return Graph........................................................... 27
Directions to the Science Museum of Minnesota
120 West Kellogg Boulevard
St. Paul, Minnesota
[MAP]
East on I-94: If you are going east on I-94, take the Kellogg Blvd. exit. Go
right and follow Kellogg Blvd., staying in the right lane. Continue east on
Kellogg Blvd. to the upper ramp entrance (just past the museum, on your right).
North on I-35E: If you are going northbound on I-35E, take the Kellogg Blvd.
exit. Go right and follow Kellogg Blvd., staying in the right lane. Continue
east on Kellogg Blvd. to the upper ramp entrance (just past the museum, on your
right).
West on I-94: If you are going west on I-94, take the 12th Street exit and
follow to Jackson Street. Turn left and go south to Kellogg Blvd. Turn right
onto Kellogg Blvd., and continue six blocks to the parking ramp entrance (just
before the museum, on your left).
South on I-35E: If you are going southbound on I-35E, take the 10th Street exit
to Jackson Street, turn left and go south to Kellogg Blvd. Turn right onto
Kellogg Blvd., and continue six blocks to the parking ramp entrance (just
before the museum, on your left).
[LOGO] H.B. Fuller/R/
Office: 1200 Willow Lake Boulevard
St. Paul, Minnesota 55110-5101
Mail: P.O. Box 64683
St. Paul, Minnesota 55164-0683
Phone: (651) 236-5150
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date and Time: Thursday, April 15, 2004, at 2:00 p.m. Central Time
Place: Science Museum of Minnesota
120 West Kellogg Boulevard
St. Paul, Minnesota
Items of Business: The election of three directors for a three-year term.
The ratification of the appointment of KPMG, LLP as H.B. Fuller's
independent auditors for the fiscal year ending November 27, 2004.
Any other business that may properly be considered at the meeting
or any adjournment thereof.
Record Date: You may vote at the meeting if you were a shareholder of record at
the close of business on February 20, 2004.
Voting by Proxy: Whether or not you plan to attend the meeting in person, please
mark, date and sign the enclosed proxy card and mail it in the
enclosed envelope. No postage is required if the proxy card is
mailed in the United States. Instead of mailing the proxy card, you
may enter voting instructions by telephone at 1-800-560-1965 or via
the Internet at www.eproxy.com/ful/.
Annual Report: H.B. Fuller's 2003 Report including our Form 10-K, which is not part
of the proxy soliciting material, is enclosed.
By Order of the Board of Directors
/s/ Patricia L. Jones
Patricia L. Jones
Senior Vice President, Chief
Administrative Officer, General
Counsel and Corporate Secretary
March 11, 2004
[LOGO] H.B. Fuller/R/
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 15, 2004
The Board of Directors of H.B. Fuller Company is soliciting proxies to be
used at the Annual Meeting of Shareholders to be held on April 15, 2004, and at
any adjournment and reconvening of the meeting. We began mailing this Proxy
Statement and the enclosed form of proxy on March 11, 2004.
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING
What is the purpose of the meeting?
At our annual meeting, shareholders will act upon the matters disclosed in
the Notice of Annual Meeting that preceded this Proxy Statement. These include
the election of three directors and ratification of the appointment of our
independent auditors.
We will also consider any other business that may properly be presented at
the meeting, and management will report on H.B. Fuller's performance during the
last fiscal year and respond to questions from shareholders.
How does the Board recommend that I vote?
The Board of Directors recommends a vote for all of the nominees for
director and for the ratification of the appointment of KPMG LLP as the
Company's independent auditors for the fiscal year ending November 27, 2004.
Who is entitled to vote at the meeting?
If you were a shareholder of record at the close of business on February 20,
2004, you are entitled to vote at the meeting.
As of the record date, 28,497,324 shares of Common Stock were outstanding
and eligible to vote.
What is the difference between a shareholder of record and a street name holder?
If your shares are registered directly in your name, you are considered the
shareholder of record with respect to those shares.
If your shares are held in a stock brokerage account or by a bank or other
nominee, such as the H.B. Fuller 401(k) Thrift Plan, you are considered the
beneficial owner of those shares, and your shares are held in street name. If
you are a street name holder, you will receive a "voting instructions" card
which appears very similar to a proxy card. Please complete that card as
directed in order to ensure your shares are voted at the meeting.
What are the voting rights of the shareholders?
Holders of Common Stock are entitled to one vote per share. Therefore, a
total of 28,497,324 votes are entitled to be cast at the meeting. There is no
cumulative voting for the election of directors.
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How many shares must be present to hold the meeting?
A quorum is necessary to hold the meeting and conduct business. The presence
of shareholders who can direct the voting of at least a majority of the
outstanding shares of Common Stock as of the record date is considered a
quorum. A shareholder is counted as present at the meeting if the shareholder
is present and votes in person at the meeting or the shareholder has properly
submitted a proxy by mail, telephone or via the Internet.
How do I vote my shares?
If you are a shareholder of record, you can give a proxy to be voted at the
meeting either:
. over the telephone by calling 1-800-560-1965;
. electronically, using the Internet at www.eproxy.com/ful/; or
. by mailing in the enclosed proxy card.
The telephone and Internet voting procedures have been set up for your
convenience. The procedures have been designed to authenticate your identity,
to allow you to give voting instructions, and to confirm that those
instructions have been recorded properly. If you are a shareholder of record
and you would like to vote by telephone or by using the Internet, please refer
to the specific instructions on the enclosed proxy card. If you wish to vote
using the paper proxy card, please return your signed proxy card to us before
the meeting. You may also vote in person at the meeting.
If you hold your shares in street name, you must vote your shares following
the procedures indicated to you by your broker or nominee on the enclosed
voting instructions card.
What does it mean if I receive more than one proxy card or voting instructions
card?
It means you hold shares of H.B. Fuller stock in more than one account. To
ensure that all of your shares are voted, sign and return each proxy card or,
if you vote by telephone or via the Internet, vote once for each proxy card you
receive. If you would like to consolidate your accounts please contact our
stock transfer agent, Wells Fargo Bank, at 1-800-468-9716.
Can I vote my shares in person at the meeting?
Yes. If you are a shareholder of record, you may vote your shares at the
meeting by completing a ballot at the meeting. However, even if you currently
plan to attend the meeting, we recommend that you submit your proxy ahead of
time so that your vote will be counted if, for whatever reason, you later
decide to not attend the meeting.
If you hold your shares in street name, you may vote your shares in person
at the meeting only if you obtain a signed proxy from your broker, bank or
other nominee giving you the right to vote such shares at the meeting.
What vote is required for the proposals to be approved?
The affirmative vote of a majority of the shares of Common Stock represented
and entitled to vote on each matter is required for the election of each
director and the ratification of the appointment of KPMG LLP.
How are votes counted?
Shareholders may either vote "FOR" or "WITHHOLD" authority to vote for each
nominee for the Board of Directors. Shareholders may vote "FOR," "AGAINST" or
"ABSTAIN" on the ratification of the appointment of KPMG LLP.
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If you vote ABSTAIN or WITHHOLD, your shares will be counted as present at
the meeting for the purposes of determining a quorum.
If you ABSTAIN from voting on a proposal, your abstention has the same
effect as a vote against that proposal. If you WITHHOLD authority to vote for
one or more of the nominees for director, this has the same effect as a vote
against the nominee.
If you hold your shares in street name and do not provide voting
instructions to your broker or nominee, your shares may not be voted. In this
situation, a "broker non-vote" may occur. Shares that constitute broker
non-votes will be present at the meeting for the purpose of determining a
quorum, but are not considered as entitled to vote on the proposal in question.
This effectively reduces the number of shares needed to elect a director or
ratify the appointment of KPMG LLP.
What if I do not specify how I want my shares voted?
If you do not specify on your returned proxy card (or when giving your proxy
by telephone or via the Internet) how you want to vote your shares, we will
vote them:
. FOR all of the nominees for director, and;
. FOR the ratification of the appointment of KPMG LLP as the Company's
independent auditors for the 2004 fiscal year.
Can I change my vote?
Yes. If you are a shareholder of record, you may change your vote and revoke
your proxy at any time before it is voted at the meeting in any of the
following ways:
. by sending a written notice of revocation to the Corporate Secretary of
the Company;
. by submitting another properly signed proxy card at a later date to the
Corporate Secretary;
. by submitting another proxy by telephone or via the Internet at a later
date; or
. by voting in person at the meeting.
If you are a street name holder, please consult your broker, trustee or
nominee for instructions on how to change your vote.
Who pays for the cost of proxy preparation and solicitation?
The Company pays for the cost of proxy preparation and solicitation,
including the charges and expenses of brokerage firms or other nominees for
forwarding proxy materials to beneficial owners of shares held in street name.
We have retained Morrow & Co., Inc. to assist in the solicitation of proxies
for a fee of approximately $5,000 plus associated costs and expenses.
We are soliciting proxies primarily by mail. In addition, proxies may be
solicited by telephone or facsimile, or personally by directors, officers and
regular employees of the Company. These individuals will receive no
compensation (other than their regular salaries) for these services.
3
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows how much H.B. Fuller Common Stock each director
and executive officer listed in the Summary Compensation Table in this Proxy
Statement beneficially owned as of January 30, 2004 (unless otherwise noted).
The table also shows the beneficial ownership of H.B. Fuller Common Stock by
all directors and executive officers of H.B. Fuller as a group.
In addition to the shares listed in this table, certain directors hold
phantom stock units that will be paid out in shares of H.B. Fuller Common
Stock. These units are subject to the same economic risk as a direct investment
in H.B. Fuller Common Stock. As of January 30, 2004, in addition to the amounts
shown below, the directors, as a group, held phantom stock units representing
98,446 shares of H.B. Fuller Common Stock.
To the best of the Company's knowledge, except for Barclays Global
Investors, NA and Fund Advisors, no shareholder, director or officer
beneficially owned more than 5% of H.B. Fuller's Common Stock as of January 30,
2004.
Unless otherwise noted, the shareholders listed in the table have sole
voting and investment powers with respect to the shares of Common Stock owned
by them.
Amount and Percent of
Nature of Common Stock
Name of Beneficial Owner Beneficial Ownership Outstanding
------------------------ -------------------- ------------
Barclays Global Investors, NA and Fund Advisors 1,544,786/(1)/ 5.4%
Norbert R. Berg................................ 6,051/(2)(3)/ *
Freeman A. Ford................................ 10,999/(2)(3)/ *
Knut Kleedehn.................................. 8,713/(2)(3)/ *
J. Michael Losh................................ 6,247/(2)(3)/ *
John J. Mauriel, Jr............................ 22,999/(2)(3)/ *
Lee R. Mitau................................... 14,535/(2)(3)/ *
Alfredo L. Rovira.............................. 1,325/(2)(3)/ *
John C. van Roden, Jr.......................... 1,300/(2)/ *
R. William Van Sant............................ 6,256/(2)(3)/ *
Albert P.L. Stroucken.......................... 524,732/(4)/ 1.8%
Alan R. Longstreet............................. 81,677/(5)/ *
Patricia L. Jones.............................. 4,239/(6)/ *
James R. Conaty................................ 80,157/(7)/ *
Walter Nussbaumer.............................. 59,791/(8)/ *
All directors and executive officers as a group
(21 people).................................. 1,045,170/(9)/ 3.7%
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* Indicates less than 1%.
(1) As of December 31, 2003. This information is in accordance with Schedule
13G filed by the holder. The holder has sole voting and dispositive powers
as to 1,415,971 shares. The shares are held by the holder in trust accounts
for the economic benefit of the beneficiaries of those accounts. The
holder's address is 45 Fremont Street, San Francisco, California 94105.
(2) Includes the following shares of Common Stock that were awarded under the
1998 Directors' Stock Incentive Plan, including shares acquired upon
reinvestment of dividends:
Norbert R. Berg..... 4,282 Lee R. Mitau......... 11,818
Freeman A. Ford..... 4,282 Alfredo L. Rovira.... 1,325
Knut Kleedehn....... 4,247 John C. van Roden. Jr 1,300
J. Michael Losh..... 4,247 R. William Van Sant.. 4,256
John J. Mauriel, Jr. 4,282
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(3) Excludes Common Stock units credited to the accounts of directors who
participate in the Directors' Deferred Compensation Plan, described under
the heading "How are directors compensated?" These Common Stock units are
not entitled to vote at the meeting. The number of units credited to each
director participating in this plan is as follows:
Norbert R. Berg 31,886 John J. Mauriel, Jr. 32,344
Freeman A. Ford 4,578 Lee R. Mitau........ 15,482
Knut Kleedehn.. 2,243 Alfredo L. Rovira... 1,715
J. Michael Losh 6,401 R. William Van Sant. 3,796
(4) Includes 1,331 shares held in trust under H.B. Fuller's 401(k) Thrift Plan
and 252,989 shares that could be issued pursuant to stock options which are
currently exercisable. Excludes 31,684 Common Stock units credited to Mr.
Stroucken's H.B. Fuller Common Stock account under the Key Employee
Deferred Compensation Plan described in the "Executive Compensation"
section of this Proxy Statement. These Common Stock units are not entitled
to vote at the meeting.
(5) Includes 6,981 shares of restricted Common Stock subject to forfeiture,
7,625 shares held in trust under H.B. Fuller's 401(k) Thrift Plan, and
64,687 shares that could be issued pursuant to stock options which are
currently exercisable. Excludes 10,083 restricted stock units which are
subject to forfeiture, and 2,344 Common Stock units credited to Mr.
Longstreet's H.B. Fuller Common Stock account under the Key Employee
Deferred Compensation Plan. Neither the restricted stock units nor Common
Stock units are entitled to vote at the meeting.
(6) Includes 106 shares held in trust under H.B. Fuller's 401(k) Thrift Plan
and 4,133 shares that could be issued pursuant to stock options which are
currently exercisable. Excludes 496 Common Stock Units credited to Ms.
Jones's H.B. Fuller Common Stock account under the Key Employee Deferred
Compensation Plan. These Common Stock units are not entitled to vote at the
meeting.
(7) Includes 8,311 shares of restricted Common Stock subject to forfeiture,
5,901 shares held in trust under H.B. Fuller's 401(k) Thrift Plan, and
34,900 shares that could be issued pursuant to stock options which are
currently exercisable. Excludes 685 Common Stock units credited to Mr.
Conaty's H.B. Fuller Common Stock account under the Key Employee Deferred
Compensation Plan. These Common Stock units are not entitled to vote at the
meeting.
(8) Includes 2,655 shares of restricted Common Stock subject to forfeiture,
2,350 shares held in trust under H.B. Fuller's 401(k) Thrift Plan, and
42,374 shares that could be issued pursuant to stock options which are
currently exercisable. Excludes 8,213 restricted stock units which are
subject to forfeiture, and 1,090 Common Stock units credited to Mr.
Nussbaumer's H.B. Fuller Common Stock account under the Key Employee
Deferred Compensation Plan. Neither the restricted stock units nor Common
Stock units are entitled to vote at the meeting.
(9) Includes 31,478 shares of restricted Common Stock subject to forfeiture,
30,649 shares held in trust under H.B. Fuller's 401(k) Thrift Plan, and
537,782 shares that could be issued pursuant to stock options which are
currently exercisable. Excludes 31,503 restricted stock units which are
subject to forfeiture, and 154,147 Common Stock units credited to the
directors and executive officers as a group under their individual accounts
under the Directors' Deferred Compensation Plan and the Key Employee
Deferred Compensation Plan. Neither the restricted stock units nor Common
Stock units are entitled to vote at the meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file initial reports of ownership and
reports of changes in ownership of H.B. Fuller's securities with the Securities
and Exchange Commission (SEC). These reports are available for review
5
on the Company's website: www.hbfuller.com/Shareholder Relations/SEC Filings.
Directors and executive officers are required to furnish H.B. Fuller with
copies of these reports. Based solely on a review of these reports and written
representations from the directors and executive officers, we believe that all
directors and executive officers complied with all Section 16(a) filing
requirements for fiscal year 2003, except for Jose Miguel Fuster, Group
President, General Manager Latin America, who filed one late report.
PROPOSAL 1--ELECTION OF DIRECTORS
Proposal
The Board of Directors is currently composed of ten directors and divided
into three classes. Each year one class of directors stands for election for a
three-year term. The term of office for Class II directors, consisting of
Norbert R. Berg, Freeman A. Ford, Knut Kleedehn, John J. Mauriel, Jr. and John
C. van Roden, Jr. will expire at the meeting.
At the meeting, three persons are to be elected as Class II directors to
hold a three-year term of office from the date of their election until the 2007
Annual Meeting and until their successors are duly elected and qualified. The
three nominees for election as Class II directors are Norbert R. Berg, Knut
Kleedehn and John C. van Roden, Jr., all of whom are currently directors. All
of the nominees have agreed to serve as a director if elected. Following the
meeting, the Board will be composed of eight directors. Pursuant to the
Company's Bylaws, no more than 15 persons may serve on the Board. For
information on how a shareholder may suggest a person to be a nominee to the
Board, see "How can a shareholder suggest a candidate for election to the
Board?"
Mr. Ford and Dr. Mauriel, both after years of dedicated service, will retire
from the Board and not stand for reelection. Dr. Mauriel has been a director of
H.B. Fuller since 1968, and Mr. Ford has served the Company since 1975. Both of
these directors retired in response to the Board's corporate governance
guidelines which generally require a director to retire from the Board after
more than four terms, or upon reaching age 72. The Company is grateful and
appreciative of their contributions and counsel.
In accordance with the Company's guidelines, upon reaching the age of 72,
Mr. Berg was scheduled to retire in January 2004. However, given the
retirements of Mr. Ford and Dr. Mauriel in April 2004, the Board unanimously
waived the retirement guideline with respect to Mr. Berg for one year and
requested Mr. Berg to stand for re-election. Mr. Berg has been a director of
the Company since 1976 and most recently has served as Presiding Director at
the executive sessions of each Board meeting and as Chair of the Corporate
Governance and Nominating Committee. Notwithstanding the Board's corporate
governance policy, the Board believes that based upon his experience and
expertise Mr. Berg's continued service for a transitional period would be in
the best interest of the Company and its shareholders. Mr. Berg agreed to the
Board's request. As of the date of this Proxy Statement, it is expected that
Mr. Berg will retire in January 2005.
The term of office for Class III directors, consisting of J. Michael Losh,
Lee R. Mitau and R. William Van Sant will expire at the 2005 Annual Meeting,
and the terms of Class I directors, consisting of Alfredo L. Rovira and Albert
P.L. Stroucken will expire at the Annual Meeting in 2006.
We will vote your shares as you specify when providing your proxy. You may
either vote FOR or WITHHOLD authority to vote for each nominee for the Board of
Directors. If you submit your proxy without voting instructions, we will vote
your shares FOR the election of the three nominees. If, for any reason, any
nominee becomes unable to serve before the election, we will vote your shares
for a
6
substitute nominee selected by the Board of Directors. Alternatively, the Board
of Directors, at its option, may reduce the number of directors constituting
Class II directors.
The election of each director requires an affirmative vote of a majority of
the shares of Common Stock represented and entitled to vote on this matter.
The Board of Directors recommends a vote FOR election of each of the nominees.
Who are the nominees?
As specified by the rules of the SEC, the nominees provided the following
information about themselves as of January 30, 2004.
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Norbert R. Berg
Age: 72
Director Since: 1976
Principal Occupation: President of Boyer Creek Ranch located in Barronett, Wisconsin.
Business Experience: Mr. Berg was Deputy Chairman of the Board of Control Data
Corporation, a computer manufacturing and data services
company headquartered in Bloomington, Minnesota, from 1980
to 1988. He was a director of First Trust National Association
from 1970 to 1996 and a director of Control Data Corporation
from 1977 to 1990.
----------------------------------------------------------------------------------------
Knut Kleedehn
Age: 66
Director Since: 2001
Principal Occupation: Private investor
Business Experience: Mr. Kleedehn was with Bayer AG from 1960 to 2001. At Bayer,
he served in a series of senior management roles as President
and Senior Country Representative of Bayer for Japan and
Korea, co-chair of Bayer do Brasil, General Manager of Bayer's
Pigments and Ceramics Division, and CEO of three Bayer
chemical divisions and several subsidiaries.
----------------------------------------------------------------------------------------
John C. van Roden, Jr.
Age: 55
Director Since: 2003
Principal Occupation: Senior Vice President and Chief Financial Officer at Glatfelter,
Inc., a specialty paper producer located in York, Pennsylvania.
Business Experience: Mr. van Roden served as Senior Vice President and Chief
Financial Officer for Conectiv, an energy company located in
Wilmington, Delaware, from 1998 to 2003 and at Lukens, Inc., a
steel producer located in Coatesville, Pennsylvania, from 1982 to
1998.
Mr. van Roden is also considered to be an audit committee
financial expert as that term is defined in the rules of the SEC.
Other Directorships: Mr. van Roden is a director of Ascendant Capital Partners.
----------------------------------------------------------------------------------------
7
How can a shareholder suggest a candidate for election to the Board?
The Corporate Governance and Nominating Committee of the Board nominates all
candidates for election to the Board. This committee is entirely comprised of
directors who are considered "independent" as that term is defined by the
Company's Corporate Governance Guidelines and the New York Stock Exchange.
Generally, current directors or management have identified candidates for
consideration by the Committee. For this meeting, non-management directors
identified all the nominees and no fees were paid to any third party with
respect to the identification of any nominee for election at the meeting. If
appropriate in the future, the Committee could engage a third person for a fee
to assist in the process of identifying potential nominees. The Committee also
will consider candidates put forward by any shareholder. No shareholder
identified any candidate during fiscal year 2003. Any shareholder interested in
suggesting a candidate for election to the Board should contact the Corporate
Governance and Nominating Committee through the Corporate Secretary.
The Committee assesses candidates to identify persons with the judgment,
experience, independence and other attributes that the Committee concludes are
pertinent in light of the Board's current needs. The Board believes that its
membership should reflect a diversity of experience, skills, geography, gender
and ethnicity.
Who are the remaining directors?
As specified by the rules of the SEC, the directors not standing for
election at the meeting and whose service will continue until the end of their
respective terms also provided the following information about themselves as of
January 30, 2004.
Class I (Term Ending in 2006)
------------------------------------------------------------------------------------------------
Alfredo L. Rovira
Age: 59
Director Since: 2003
Principal Occupation: Managing partner of the law firm of Brons & Salas, and Co-
Chairman of the Corporate Law Department of that firm, located
in Buenos Aires, Argentina.
Business Experience: Mr. Rovira has been associated with Brons & Salas since 1970.
At Brons & Salas, Mr. Rovira has had extensive experience as an
arbitrator involving both domestic and multinational companies.
He has also written and taught extensively on legal topics.
------------------------------------------------------------------------------------------------
Albert P.L. Stroucken
Age: 56
Director Since: 1998
Principal Occupation: Chairman of the Board, President and Chief Executive Officer,
H.B. Fuller Company.
Business Experience: Mr. Stroucken was elected Chairman of the Board in October,
1999. He has been President and Chief Executive Officer of H.B.
Fuller since April, 1998. He was General Manager, Inorganics
Division of Bayer AG from 1997 to 1998. Prior to that position, he
was Executive Vice President and President of Industrial
Chemicals Division, Bayer Corporation from 1992 to 1997.
------------------------------------------------------------------------------------------------
8
Class III (Term Ending in 2005)
------------------------------------------------------------------------------------------------
J. Michael Losh
Age: 57
Director Since: 2001
Principal Occupation: Private investor
Business Experience: Mr. Losh was the Chairman of Metaldyne Corporation, a global
designer and supplier of high quality, metal-formed components,
assemblies and modules for the transportation industry
headquartered in Plymouth, Michigan, from 2000 to 2002. Prior
to that position, Mr. Losh was employed by General Motors
Corporation from 1964 to 2000. At General Motors he served in a
variety of operating and financial posts in the U.S., Mexico and
Brazil, including general manager of both the Pontiac and
Oldsmobile divisions. From 1994 to 2000, Mr. Losh was Chief
Financial Officer of General Motors.
Mr. Losh is also considered to be an audit committee financial
expert as that term is defined in the rules of the SEC.
Other Directorships: AON Corporation; AMB Property Corp.; Cardinal Health, Inc.;
MASCO Corporation; Metaldyne Corporation; TRW Automotive
Holdings Corporation.
In addition to H.B. Fuller, Mr. Losh serves on the audit
committees of AMB Property, MASCO, Metaldyne and TRW. The
Board of Directors of H.B. Fuller has determined that such
simultaneous service does not impair Mr. Losh's ability to
effectively serve on the Company's Audit Committee. This
determination reflects Mr. Losh's experience and understanding
of financial statements, accounting principles and controls and
audit committee functions gained throughout his professional
career, and his availability to devote time and attention to his
service on each committee.
------------------------------------------------------------------------------------------------
Lee R. Mitau
Age: 55
Director Since: 1996
Principal Occupation: Executive Vice President and General Counsel, U.S. Bancorp, a
bank holding company headquartered in Minneapolis, Minnesota.
Business Experience: Mr. Mitau has been Executive Vice President of U.S. Bancorp
since 1995. He was a partner in the Corporate Department of the
law firm of Dorsey & Whitney LLP from 1983 to 1995.
Other Directorships: Mr. Mitau is Chairman of the Board of Graco Inc.
------------------------------------------------------------------------------------------------
9
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R. William Van Sant
Age: 65
Director Since: 2001
Principal Occupation: Operating Partner at Norwest Equity Partners, a venture capital
firm headquartered in Minneapolis, Minnesota.
Business Experience: Mr. Van Sant was Chairman and Chief Executive Officer of
Nortrax, Inc., a distributor of John Deere construction equipment
in Minneapolis, Minnesota, from 1999 to March, 2001. He was
Chairman and Chief Executive Officer of Lukens, Inc., a specialty
steel producer from 1991 to 1998.
Other Directorships: Mr. Van Sant is a director of Amcast Industrial Corporation and
Graco Inc.
---------------------------------------------------------------------------------------
Does the Board have written corporate governance guidelines?
The Board, upon recommendation of the Corporate Governance and Nominating
Committee, has adopted Corporate Governance Guidelines which summarize many of
the corporate governance principles which the Board has followed in governing
the Company. The guidelines are available for review at
www.hbfuller.com/Shareholder Relations/Board of Directors.
Is a majority of the Board independent of management?
Pursuant to the Company's Corporate Governance Guidelines and applicable
rules of the New York Stock Exchange, the Board has determined that all
members, other than Mr. Stroucken, are independent. No director is considered
independent unless the Board affirmatively determines that such director has no
material relationship with the Company. In assessing the materiality of any
person's relationship with H.B Fuller, the Board considers all relevant facts
and circumstances, including not only direct relationships between the Company
and each director but also any relationships between H.B. Fuller and any entity
with which a director is affiliated.
What is the Board's policy with respect to attendance?
Directors are expected to attend the annual meeting of shareholders and all
meetings of the Board and each committee on which they serve. The Board and
each committee, other than the Audit Committee, held five scheduled meetings
during the 2003 fiscal year. The Audit Committee held six meetings during the
2003 fiscal year. Each director attended 100% of the meetings of the Board,
Board committees on which the director served and the shareholder meeting
during the period in which the director served on the Board in fiscal year 2003.
What are the roles of the Board's committees?
The Board of Directors is responsible for the overall affairs of the
Company. The Board conducts its business through meetings of the Board and four
standing committees: Audit; Compensation; Corporate Governance and Nominating;
and Finance. The Board has adopted a written charter for each committee. These
charters are available for review at hbfuller.com/Shareholder Relations/Board
of Directors. When necessary, the Board also establishes ad hoc committees to
address specific issues.
Audit Committee
Members:
John J. Mauriel, Jr.
(Co-Chair) J. Michael Losh (Co-Chair)
Freeman A. Ford Alfredo L. Rovira
Knut Kleedehn John C. van Roden, Jr.
10
Number of Meetings in fiscal year 2003: Six
Functions: The Audit Committee appoints the independent auditors to audit the
Company's consolidated financial statements, oversees the audit and the
independence and performance of independent public auditors, and reviews the
annual audited consolidated financial statements, accounting principles and
practices and the adequacy of internal controls. This Committee also monitors
compliance with the Company's codes of conduct.
All of the Audit Committee members meet the independence and experience
requirements of the SEC and the New York Stock Exchange. Mr. J. Michael Losh
and Mr. John C. van Roden, Jr., are deemed to satisfy the requirements of an
audit committee financial expert as such term is defined under applicable
federal law and regulations. The Audit Committee Report for fiscal year 2003 is
included in this Proxy Statement.
Compensation Committee
Members:
Lee R. Mitau (Chair) Knut Kleedehn
Norbert R. Berg R. William Van Sant
Number of Meetings in fiscal year 2003: Five
Functions: The Compensation Committee establishes overall compensation
programs and practices for executives and directors, reviews and approves
compensation, including salary, incentive programs, stock-based awards,
perquisites and supplemental benefits for executives who report to the Chief
Executive Officer and the directors, and monitors the competitiveness, fairness
and equity of the Company's retirement plans. This Committee also has the
authority to administer the Company's stock-based compensation plans and
individual awards.
All of the members of the Compensation Committee are considered independent as
that term is described by the Company's Corporate Governance Guidelines and the
New York Stock Exchange. The report of the Compensation Committee on Executive
Compensation for fiscal year 2003 is included in this Proxy Statement.
Corporate Governance and Nominating Committee
Members:
Norbert R. Berg (Chair) R. William Van Sant
Lee R. Mitau
Number of Meetings in fiscal year 2003: Five
Functions: The Corporate Governance and Nominating Committee reviews matters
of corporate governance, including reviewing the Company's organizational
structure and succession planning, and policies and practices relating to
significant issues of corporate, social and public concern. This Committee
evaluates and recommends new director nominees and evaluates each current
director prior to nominating such person for reelection. The Corporate
Governance and Nominating Committee reviews a director's continued service if a
director's occupation changes during his or her term. This Committee also
evaluates the performance of the Chairman of the Board, President and Chief
Executive Officer, and directors, and makes recommendations to the Board
regarding any shareholder proposals.
11
This Committee considers shareholder recommendations for potential director
nominees. Suggestions may be sent to the Corporate Governance and Nominating
Committee in care of the Corporate Secretary of H.B. Fuller. See "How can a
shareholder suggest a candidate for election to the Board?"
All of the members of the Corporate Governance and Nominating Committee are
considered independent as that term is described by the Company's Corporate
Governance Guidelines and the New York Stock Exchange.
The Chair of the Corporate Governance and Nominating Committee acts as the
Presiding Director of the Board. At each regularly scheduled meeting of the
Board of Directors, the Presiding Director leads a discussion at which only
independent directors are present.
Finance Committee
Members:
Freeman A. Ford (Chair) John C. van Roden, Jr.
J. Michael Losh John J. Mauriel, Jr.
Alfredo L. Rovira Albert P.L. Stroucken
Number of Meetings in 2003: Five
Functions: The Finance Committee reviews and makes recommendations to the
Board regarding the Company's financial performance, plans and organization,
including the following: long-range financial strategic plans and asset
allocations; financial aspects of acquisitions and divestitures; major
financing programs; dividend policy; capital and operating budgets and policy;
the purchase and sale of H.B. Fuller's securities; third-party guarantees; the
level of overall borrowing authority; information systems; and funding level
and performance of retirement plans.
How are directors compensated?
The form and amount of compensation for each director is determined and
reviewed at least annually by the Compensation Committee. Such compensation
reflects the philosophy and practice for boards of similar public companies and
is comprised of cash and H.B. Fuller Common Stock (or its equivalents). H.B
Fuller has and maintains goals for stock ownership by all non-employee
directors.
Effective as of July, 2003, the following fees are paid to all directors who
are not employees of the Company:
Annual Board retainer.............................. $32,000
Annual retainer for Committee Chair................ $ 4,000
Daily attendance fee for each Board meeting........ $ 1,000
Attendance fee for each Committee in person meeting $ 1,000
Attendance fee for each Committee telephone meeting $ 500
The Company also reimburses each director for any out-of-pocket expenses
related to attendance at any meeting or arising from other Company business.
Mr. Stroucken, as the Company's President and Chief Executive Officer, does
not receive separate compensation for serving as Chairman of the Board of
Directors nor for attendance at any meeting.
12
In addition to the retainer, meeting and attendance fees described above,
the Board believes it is important that each director have an economic stake in
the Company's Common Stock. As a result, the Compensation Committee typically
makes an annual grant of shares of restricted Common Stock or restricted Common
Stock units to each non-employee director. During 2003, the Compensation
Committee made a discretionary grant of 1,700 H.B. Fuller Common Stock units
under the Directors' Deferred Compensation Plan. This plan is described below.
In addition, each director typically receives a one-time grant of H.B.
Fuller Common Stock (or its equivalent) upon their initial election to the
Board. During 2003, Mr. Rovira and Mr. van Roden each received a grant of 1,300
shares of restricted Common Stock under the Directors' Stock Incentive Plan.
This plan is described below. These shares vest four years from the date of
grant subject to continued service during that period.
Directors' Deferred Compensation Plan. Under this plan, directors may elect
to defer all or a percentage of their retainer, attendance or meeting fees. In
addition, the Compensation Committee may make discretionary contributions to a
participant's Common Stock account under this plan. During fiscal year 2003,
the Committee exercised this discretion and granted each non-employee director
1,700 H.B. Fuller Common Stock units under this plan.
Deferred amounts are credited with gains and losses based on the performance
of certain mutual funds or H.B. Fuller Common Stock as elected by the director
prior to deferring any retainer or fees. Directors who elect their retainer,
attendance or meeting fees to be deferred into H.B. Fuller Common Stock units
as an investment are credited with phantom stock units that will be paid out in
shares of Common Stock. Phantom stock units are credited with dividend
equivalents equal to the amount of dividends, if any, paid on an equal number
of shares of H.B. Fuller Common Stock. The dividend equivalents are converted
into additional phantom stock units based on the fair market value of H.B.
Fuller Common Stock on the dividend payment date. If a participant elects to
defer retainer, attendance or meeting fees to the H.B. Fuller Common Stock
account in this plan, the Company makes a 10% matching contribution of
additional phantom stock units to the amount invested in H.B Fuller Common
Stock by the director. The phantom stock units credited to the directors'
accounts do not have voting rights.
Any amounts deferred under this plan are paid in shares of H.B. Fuller
Common Stock or cash at the earliest to occur of:
. the last date on which the director serves as a director (that is, the
date of resignation or removal from the Board or the end of the
director's elected term) or on the first, second, third, fourth or fifth
anniversary of such date, as may be elected by the director in advance;
. disability;
. death; or
. the date of a change in control of the Company.
Directors' Stock Incentive Plan. Under this plan, the Company may issue to
non-employee members of the Board of Directors restricted stock, restricted
stock units, options, stock appreciation rights, performance awards or other
stock-based instruments. Shares of H.B. Fuller Common Stock are also issued
under this plan to satisfy any requirements under the Directors' Deferred
Compensation Plan. The Compensation Committee determines the type, amount and
other terms and conditions of any award under this plan.
Directors' Retirement Plan. In fiscal year 1997, the Compensation Committee
terminated the Directors' Retirement Plan for any director elected to the Board
after October 16, 1997 and replaced it
13
with the Directors' Stock Incentive Plan. Messrs. Berg, Ford and Mauriel are
the only current directors eligible to receive retirement benefits under this
plan. This plan provides for payment of a retirement benefit to each director
with a minimum of ten years service. Payments begin on the later of the
director's retirement from the Board or the director's 60th birthday. The
amount of the annual retirement benefit equals the aggregate amount of the
director's last annual retainer. The retirement benefit is payable for the
lesser of 15 years or the number of years the director served on the Board. In
lieu of a series of payments, a director may receive a one-time payment of an
actuarial equivalent amount. This retirement plan is unfunded, but H.B. Fuller
has placed funds in a trust to provide benefits under this plan. These funds
are, however, subject to the claims of H.B. Fuller's creditors.
Physical Examinations. Non-employee directors are reimbursed for an annual
physical examination. During the 2003 fiscal year, H.B. Fuller paid
reimbursements of $11,592 for director physical examinations and related
expenses.
Matching Gifts to Education Program. Under this program, H.B. Fuller
matches a non-employee director's contributions (up to $1,000) to eligible
educational institutions. During the 2003 fiscal year, H.B. Fuller matched
$4,500 of eligible contributions.
How can a shareholder contact the Board of Directors?
Any shareholder may contact the Board, any committee or an individual
director, by mailing a letter addressed to the Board, committee or individual
director in care of the Corporate Secretary. The Corporate Secretary reviews
all communication, but will forward all such correspondence to the directors
for their information and consideration.
Who is the Corporate Secretary?
The Corporate Secretary is Patricia L. Jones. The mailing address is the
Office of the Corporate Secretary, P.O. Box 64683, St. Paul, Minnesota
55164-0683.
PROPOSAL 2--RATIFICATION OF APPOINTMENT OF AUDITORS
Audit Committee Report
Pursuant to its charter the Audit Committee of the Board of Directors is
responsible for the appointment, compensation and oversight of the work of H.B.
Fuller's independent auditors. In the exercise of that authority, we, the
members of the Audit Committee, determined to engage KPMG LLP to commence
service as the Company's independent auditor for the year ended November 27,
2004. A discussion of our decision is included below under the Proposal seeking
the shareholders ratification of that appointment of KPMG.
The Audit Committee of the Board is composed solely of independent directors
who satisfy all applicable requirements of federal law, the listing standards
of the New York Stock Exchange and the Company's Corporate Governance
Guidelines. Except in our capacity as directors, no member of the Committee
receives, directly or indirectly, any consulting, advisory or other
compensatory fee from the Company, and no member is otherwise "affiliated" with
the Company or any subsidiary, as such term is defined by applicable federal
law and regulations. In addition to the foregoing, Mr. J. Michael Losh,
Co-Chair of the Committee and Mr. John C. van Roden, Jr., based upon their
experience in the preparation and auditing of the financial statements of
comparable companies and their understanding of generally accepted accounting
principles, internal accounting controls and audit committee functions, are
deemed to satisfy the requirements of an audit committee financial expert as
such term is defined under applicable federal law and regulations.
14
Management is responsible for the financial reporting process, accounting
principles, and internal controls and procedures designed to assure compliance
with accounting standards and applicable law and regulations. Management
represented to us that H.B. Fuller's consolidated financial statements were
prepared in accordance with accounting principles generally accepted in the
United States of America.
PricewaterhouseCoopers LLP, as the Company's independent auditors for fiscal
years 2003, 2002 and 2001 were responsible for performing an independent audit
of the consolidated financial statements in accordance with auditing standards
generally accepted in the United States of America and to issue a report.
We have reviewed and discussed the audited consolidated financial statements
with management and PricewaterhouseCoopers LLP. We have also discussed with
PricewaterhouseCoopers LLP the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit Committees), and they have
discussed with us their independence and provided to us the written disclosure
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees). We have also considered and determined that
the provisions of non-audit services by PricewaterhouseCoopers LLP during the
2003 fiscal year were compatible with maintaining their independence.
Based upon our discussions and our review of the representations of
management and the report of the independent auditors, and in reliance upon
such information, representations, reports and opinions, we recommended to the
Board of Directors that the audited consolidated financial statements be
included in H.B. Fuller's Annual Report on Form 10-K for the fiscal year ended
November 29, 2003 filed with the SEC.
John J. Mauriel, Jr. (Co-Chair) J. Michael Losh (Co-Chair)
Freeman Alfredo
A. Ford Knut Kleedehn L. Rovira John C. van Roden, Jr.
Fees to the Independent Auditor
The following table presents fees for professional services provided by
PricewaterhouseCoopers LLP for the audit, audit-related, tax and all other
services rendered by PricewaterhouseCoopers LLP to the Company and its
affiliates for the 2003 and 2002 fiscal years.
2003 2002
---------- ----------
Audit Fees........ $1,604,000 $1,404,000
Audit Related Fees $ 109,000 $ 149,000
Tax Fees.......... $ 324,000 $1,000,000
All Other Fees.... $ 8,000 $ 22,000
Audit Fees: includes fees and expenses billed and to be billed for (i) the
audit of the consolidated financial statements included in the Company's annual
report on Form 10-K, (ii) reviews of the interim consolidated financial
information included in the Company's quarterly reports on Form 10-Q, (iii)
statutory audits of certain international subsidiaries, (iv) consultations
concerning financial accounting and reporting, and (v) reviews of documents
filed with the SEC and consents.
Audit Related Fees: includes fees and expenses for audits of employee
benefit plans.
Tax Fees: includes fees and expenses for tax compliance (including U.S.
federal and international returns) and tax planning advice. For fiscal year
2003, the Company paid PricewaterhouseCoopers LLP $295,000 for tax compliance
services and $29,000 for tax planning advice.
15
All Other Fees: includes fees and expenses associated with miscellaneous
non-audit projects.
The Audit Committee has in place procedures to pre-approve all audit, audit
related, tax and other permissible services provided to the Company by
PricewaterhouseCoopers LLP. The Company has a policy of avoiding the engagement
of its independent auditors except for audit, audit related and tax compliance
services. During 2003, PricewaterhouseCoopers did provide $8,000 of such other
services that were preapproved. The Committee has delegated to one or more of
its members pre-approval authority with respect to permitted services, and
receives a regular report from management on all such services provided to the
Company by PricewaterhouseCoopers LLP.
Proposal
The Audit Committee has a policy of periodically reviewing the proposed
scope and fees of a number of alternative auditing firms qualified to perform
the Company's audit and considering the appropriateness of either retaining the
incumbent auditor or engaging another firm.
The reports of PricewaterhouseCoopers LLP, including those for fiscal years
2003, 2002 and 2001, did not contain an adverse opinion or disclaimer of
opinion, nor were they qualified or modified as to uncertainty, audit scope or
accounting principles.
In connection with the audits of the Company for the two most recent fiscal
years, there were no disagreements with PricewaterhouseCoopers LLP on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure which disagreement if not resolved to the
satisfaction of PricewaterhouseCoopers LLP would have caused them to make
reference to such disagreement in connection with their report on the Company's
consolidated financial statements for such years. Also, during those years and
period, there have been no "reportable events" as such term is used in Item
304(a)(1)(v) of Regulation S-K as promulgated by the SEC.
On October 1, 2003, the Audit Committee, after a comprehensive review of
proposals for audit services from several public accountants, determined to
engage KPMG LLP as principal accountant of the Company for the fiscal year
commencing November 30, 2003 and ending November 27, 2004.
If the shareholders do not ratify the Audit Committee's appointment of
independent auditors, the Audit Committee intends to reconsider that
appointment.
Representatives of PricewaterhouseCoopers LLP and KPMG LLP are expected to
be present at the meeting and will have the opportunity to make a statement if
they desire to do so and to respond to appropriate questions from shareholders.
We will vote your shares as you specify when providing your proxy. If you
submit your proxy without voting instructions, we will vote your shares FOR the
ratification of the appointment of KPMG LLP.
The affirmative vote of a majority of the outstanding shares of Common Stock
represented and entitled to vote on this matter is required to approve this
proposal.
The Board of Directors recommends a vote FOR ratification of the appointment of
KPMG LLP.
16
OTHER MATTERS
Will the meeting consider any other business?
H.B. Fuller's Bylaws provide that a shareholder may present a proposal at
the meeting that is not included in this Proxy Statement only if proper written
notice was received by the Company before the close of business on November 7,
2003. Since no shareholder provided the notice required by the Bylaws prior to
that deadline, the Company does not anticipate that any other proposals will be
presented for consideration at the meeting. If you wish to present a proposal
at the 2005 Annual Meeting, please contact the Corporate Secretary prior to
November 6, 2004 for a description of the steps to be taken to present such a
proposal. If you wish to make a proposal for inclusion in the Proxy Statement
for the 2005 Annual Meeting, please see "How can a shareholder present a
proposal at the 2005 Annual Meeting?"
As of the date of this Proxy Statement, we do not know of any other business
to be presented for consideration at the meeting. If any other business does
properly come before the meeting, the persons named as proxies on the enclosed
proxy card will vote in accordance with their best judgment as to the best
interests of H.B. Fuller and its shareholders.
How can a shareholder present a proposal at the 2005 Annual Meeting?
In order for a shareholder proposal to be considered for inclusion in H.B.
Fuller's Proxy Statement for the 2005 Annual Meeting, the written proposal must
be received at the principal executive offices of the Company by the close of
business on November 6, 2004. The proposal must comply with SEC regulations
regarding the inclusion of shareholder proposals in company-sponsored proxy
materials. Please contact the Corporate Secretary for a copy of such
regulations.
If a shareholder wishes to present a proposal at the 2005 Annual Meeting,
they must provide notice to the Company no later than November 6, 2004. Please
contact the Corporate Secretary for a description of the steps to be taken to
present such a proposal.
17
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation
Introduction. The Compensation Committee of the Board of Directors
establishes, monitors and administers compensation policies, plans and
provisions in an effort to ensure the Company's ability to attract, retain and
motivate qualified directors and executives. We, the members of the
Compensation Committee, establish targets for base salary, short-term and
long-term incentives with an emphasis on market-based competitiveness and
alignment with the Company's mission, strategies and financial objectives. Each
year, we review national and regional compensation surveys to determine and
establish competitive levels of compensation. Certain of these surveys include
comparable companies from the specialty chemical peer group referred to in the
Total Shareholder Return Graph in this Proxy Statement. From time to time, we
also hire experienced outside consultants to analyze and review the Company's
compensation programs. The purpose of these reviews is to satisfy ourselves
that H.B. Fuller's compensation programs meet our goals.
Compensation of the Chief Executive Officer. As the Company's chief
executive officer, Mr. Stroucken's total compensation package is designed to be
competitive with compensation provided to chief executive officers at chemical
manufacturing and allied products companies with total revenues comparable to
H.B. Fuller's net revenues. Since coming to the Company in 1998, Mr.
Stroucken's employment compensation has been governed by his employment
agreement. This agreement is described under the heading, "Executive
Compensation--Employment Agreements" in this Proxy Statement and is filed with
the SEC. Since the components of Mr. Stroucken's total compensation package
(base salary, short-term incentives and long-term incentives), are the same as
those for all other executives, the specifics of his fiscal year 2003
compensation are discussed under each heading.
Compensation for Fiscal Year 2003.
Base Salary. Generally, base salary reflects an executive's job grade. Job
grades are set to reflect the complexity and importance of a position as well
as the market rate paid for such positions. Executives generally receive
increases due to promotions throughout the year. Merit increases in base salary
are tied to annual performance reviews and are generally subject to salary
ranges based on market surveys of companies with total revenues comparable to
H.B. Fuller's net revenues. We review and consider the annual performance of
and proposed merit increase for each executive annually. For the most recent
fiscal year, the budget guideline for base salary merit increases was 3.8%.
Base salary merit increases for executives named in this Proxy Statement (other
than the CEO) averaged 3.8% for fiscal year 2003. In order to make Mr.
Stroucken's base salary competitive with that of CEOs at chemical manufacturing
and allied product companies with total revenues comparable to the Company's,
the Committee increased Mr. Stroucken's base salary 8.0% from fiscal 2002 to
2003.
Short-Term Incentive Awards. Consistent with our overall philosophy and
objectives, aggregate short-term incentive awards are set for each executive so
that the expected payout at target performance levels, together with the
executive's base salary, would result in base salary and short-term incentive
compensation at least equal to the compensation for similar positions at
comparable companies. Target award opportunities for executives named in this
Proxy Statement (other than the CEO) ranged from 48% to 56% of base salary for
fiscal 2003. The maximum opportunity ranged from 72% to 84%. For fiscal 2003,
Mr. Stroucken was eligible to earn an award of up to 128% of his base salary
under the Company's short-term incentive program.
Pursuant to the Company's Annual and Long Term Incentive Plan, the pool of
available funds for short-term incentive awards is based on the Company's
operating income and cash flow. However, the Committee exercises discretion to
decrease the pool if the Company fails to achieve its pre-established
18
financial targets. In fiscal 2003, the Company failed to meet these objectives.
As a result no short-term incentive compensation was paid to any executive
named in this Proxy Statement (including Mr. Stroucken) for fiscal 2003.
Long-Term Incentive Awards. The Company has also established a long-term
incentive program that includes annual grants of cash-based Performance Units
and non-qualified stock options. The aggregate amount of these long-term
incentive awards is set for each executive so that the expected payout would
result in compensation at least equal to competitive market levels of such
compensation for similar positions at comparable companies.
Performance Units. Since 1999, each annual award of Performance Units
specify a three-year measurement period for determining the amount to be
paid with respect to each award. The basis for performance measurement and
determining payout of the Performance Units compares the Company's
percentage improvement in return on invested capital (ROIC) measured across
a peer group of companies. These peer companies are identified under the
Total Shareholder Return Graph in this Proxy Statement. For example, the
Performance Units awarded during fiscal year 2003 are based upon the
Company's performance from 2003 through 2005. For detailed information
regarding the Performance Units awarded to Mr. Stroucken and the other
executives named in this Proxy Statement for fiscal year 2003, please refer
to the table under the heading "Long Term Incentive Plan--Awards in the Last
Fiscal Year" in this Proxy Statement.
Stock-Based Programs. The Committee believes that ownership of H.B.
Fuller Common Stock by executives encourages long-term, strategic
decision-making that is in the balanced best interests of H.B. Fuller's
constituents. Goals for recommended levels of executive stock ownership were
established several years ago. An executive's stock ownership goal ranges in
dollar amount from one to five times their annual salary, depending on job
grade. To foster stock ownership by executives, in addition to cash based
Performance Units, 50% of each executive's long-term incentive award is
provided through the grant of nonqualified stock options. For detailed
information regarding the options awarded to Mr. Stroucken and the other
executives named in this Proxy Statement for fiscal 2003, please refer to
the table under the heading "Option Grants in Last Fiscal Year" in this
Proxy Statement.
Independence. No member of the Compensation Committee is a current or
former employee of the Company. The membership of the Committee satisfies all
applicable requirements for a corporation listed on the New York Stock Exchange
and all members are considered "independent" as that term has been defined by
the Exchange and the Company's Corporate Governance Guidelines.
Conclusion. We believe that the policies and programs described in the
report maintain an appropriate balance between motivating achievement of
short-term goals and strategically leading the Company in a direction to
provide long-term success and therefore serve the interests of the shareholders
and the Company.
Lee R. Mitau, Chair
Norbert R. Berg Knut Kleedehn R. William Van Sant
19
Summary Compensation Table
The following table shows, in the format required by the SEC, the cash and
non-cash compensation for each of the last three fiscal years awarded to or
earned by Mr. Stroucken, as CEO of the Company, and each of the other four most
highly compensated executives at the end of fiscal year 2003.
Long-Term
Annual Compensation Compensation Awards
- ------------------------------- ---------------------
Restricted Securities
Other Annual Stock Underlying All Other
Name and Principal Fiscal Salary(1) Bonus(2) Compensation(3) Awards(4) Options Compensation(5)
Position Year ($) ($) ($) ($) (#) ($)
------------------ ------ --------- -------- --------------- ---------- ---------- ---------------
Albert P.L. Stroucken 2003 756,000 0 0 0 65,543 127,713
Chairman of the Board, 2002 704,487 669,060 12,602 0 71,721 190,118
President and Chief 2001 648,945 225,000 16,224 0 103,896 99,424
Executive Officer
Alan R. Longstreet 2003 303,613 0 730 0 14,045 44,305
Group President, 2002 295,512 173,319 0 0 15,369 153,635
General Manager 2001 283,426 83,823 625 0 25,974 39,381
North America
Patricia L. Jones 2003 288,729 0 0 0 10,534 13,787
Senior Vice President, 2002(6) 87,615 42,500 0 0 6,000 0
Chief Administrative 2001(6) -- -- -- -- -- --
Officer, General Counsel
and Corporate Secretary
James R. Conaty 2003 279,656 0 0 0 8,193 22,795
Group President, 2002 277,633 130,635 0 0 8,965 17,785
General Manager 2001 239,585 32,743 0 0 15,152 10,899
Global Adhesives
Walter K. Nussbaumer 2003 271,015 0 544,666(7) 0 10,534 17,131
Group President, 2002 263,783 131,853 439,989(7) 0 11,527 14,119
General Manager 2001 247,975 56,542 254,979(7) 0 19,480 14,505
Europe
--------
(1) Includes cash compensation deferred at the election of the executive under
H.B. Fuller's Thrift Plan and Key Employee Deferred Compensation Plan.
(2) The bonus amounts were paid pursuant to H.B. Fuller's short-term incentive
plans described in the Compensation Committee Report on Executive
Compensation. Includes cash compensation deferred at the election of the
executive under the Key Employee Deferred Compensation Plan.
Amounts for Fiscal Year 2002 also include payments for Performance Units
awarded in fiscal 2002 for achievements in Fiscal Year 2002 as follows:
Albert P.L. Stroucken $233,310
Alan R. Longstreet... $ 49,995
James R. Conaty...... $ 29,164
Walter K. Nussbaumer. $ 37,496
These amounts were determined after the date of last year's Proxy Statement.
(3) For Mr. Stroucken and Mr. Longstreet the amount reported includes the
dollar value of H.B. Fuller's 10% matching contribution relating to Common
Stock units credited to the executive's account under the Key Employee
Deferred Compensation Plan. See note 7 for a description of the amounts
paid to Mr. Nussbaumer.
(4) H.B. Fuller issued restricted Common Stock and restricted Common Stock
units under its 1992 Stock Incentive Plan. Each restricted Common Stock
unit represents the right to receive one share of H.B. Fuller Common Stock.
Dividends are paid on restricted Common Stock and then reinvested in
additional shares of restricted Common Stock. Dividend equivalents accrue
with respect to restricted Common Stock units at the same rate as dividends
are paid on Common Stock, and the dividend equivalents are then credited as
additional restricted Common Stock units. Shares of restricted Common Stock
are entitled to vote at the meeting. Restricted Common Stock units are not
entitled to vote at the meeting.
20
Listed below are the total numbers of shares of restricted Common Stock and
restricted Common Stock units held by each executive as of December 1, 2003.
Amounts shown include accrued dividend shares or dividend equivalents.
Restricted
Restricted Market Stock Market
Stock Value Units Value
---------- -------- ---------- --------
Alan R. Longstreet.. 6,981 $190,511 10,083 $275,165
James R. Conaty..... 8,311 $226,807 0 $ 0
Walter K. Nussbaumer 2,655 $ 72,455 8,213 $224,133
Each executive also holds phantom stock units in the Key Employee Deferred
Compensation Plan. These amounts are disclosed in the notes to the Security
Ownership of Certain Beneficial Owners and Management table in this Proxy
Statement.
(5) Amounts include H.B. Fuller's matching contributions for fiscal year 2003
under the terms of H.B. Fuller's Thrift Plan (a 401(k) plan):
Albert P.L. Stroucken $4,032
Alan R. Longstreet... $5,701
Patricia L. Jones.... $1,228
James R. Conaty...... $5,198
Walter K. Nussbaumer. $4,963
A participant's account in the Thrift Plan is fully vested upon the
occurrence of certain specified circumstances, including a change in control
of H.B. Fuller or after three years of credited service. The account
balances for Messrs. Stroucken, Longstreet, Conaty and Nussbaumer are fully
vested. Distribution of a participant's vested account balance is made only
upon the termination of employment.
For fiscal year 2003, the amounts also include certain matching
contributions under the Key Employee Deferred Compensation Plan as follows:
Albert P.L. Stroucken $53,994
Alan R. Longstreet... $13,413
Patricia L. Jones.... $11,126
James R. Conaty...... $10,385
Walter K. Nussbaumer. $10,735
Amounts also include premiums paid for fiscal year 2003, on a tax-protected
basis, on term life and personal excess liability insurance covering each
executive as follows:
Albert P.L. Stroucken $69,687
Alan R. Longstreet... $25,191
Patricia L. Jones.... $ 1,433
James R. Conaty...... $ 7,212
Walter K. Nussbaumer. $ 1,433
The term life insurance covers the amount of the executive's outstanding
loan under the Executive Stock Purchase Loan Program.
The amount for Mr. Stroucken also includes $28,964 of life insurance
premiums paid, on a tax-protected basis, by the Company for fiscal year
2003. The death benefit to be paid under this policy is the amount required
to provide the full amount of coverage required by Mr. Stroucken's
employment agreement. The amount of any death benefit in excess of this
required amount is payable to the Company. If terminated during his
lifetime, Mr. Stroucken may purchase the policy for the greater of the
aggregate amount of premiums paid by the Company or the policy's cash
surrender value.
(6) Ms. Jones was hired in August, 2002.
(7) This amount includes payments made to Mr. Nussbaumer or on his behalf under
H.B. Fuller's International Service Assignment Agreement.
21
Option Grants in Last Fiscal Year
As described in the Compensation Committee Report on Executive Compensation,
H.B. Fuller provides 50% of its targeted long-term incentive compensation to
its executives in the form of stock options. The following table provides
information on the stock options granted during fiscal year 2003 to the
executives listed in the Summary Compensation Table.
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation for Option
Individual Grants Term
-------------------------------- --------------------------
Number of
Securities % of Total
Underlying Options Exercise
Options Granted to or Base
Granted Employees in Price Expiration 5%(2) 10%(2)
Name (#)(1) Fiscal Year ($/Sh) Date ($) ($)
---- ---------- ------------ -------- ---------- --------- ---------
Albert P.L. Stroucken 65,543 18.50% 27.90 12-9-12 1,150,028 2,914,397
Alan R. Longstreet... 14,045 3.96% 27.90 12-9-12 246,436 624,517
Patricia L. Jones.... 10,534 2.97% 27.90 12-9-12 184,831 468,399
James R. Conaty...... 8,193 2.31% 27.90 12-9-12 143,756 364,305
Walter K. Nussbaumer. 10,534 2.97% 27.90 12-9-12 184,831 468,399
--------
(1) The options have an exercise price equal to the market price of H.B. Fuller
Common Stock on the date of grant. Beginning one year after the date of
grant, 25% of the annual grant can be exercised. An additional 25% of the
annual grant vests each year. The options vest earlier upon retirement or a
change in control of the Company. Change in control circumstances are
defined as certain changes in H.B. Fuller's Board of Directors, certain
concentrations of voting power, certain mergers, sales of corporate assets,
statutory share exchanges or similar transactions, or a liquidation or
dissolution of the Company.
(2) The assumed 5% and 10% annual rates of appreciation over the terms of the
options are shown in accordance with rules and regulations of the SEC and
do not represent H.B. Fuller's estimates of stock price appreciation.
Aggregated Option Exercises in Fiscal Year 2003 and Fiscal Year End Option
Values
The following table summarizes information with respect to stock option
exercises by the executives listed in the Summary Compensation Table during
fiscal year 2003 and the value of stock options held by such executives at the
end of fiscal year 2003.
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options at
Acquired Value Options at Fiscal Year End Fiscal Year End(1)
on Realized ------------------------- -------------------------
Name Exercise ($) Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
Albert P.L. Stroucken 0 0 178,529 185,453 $1,172,329 $627,287
Alan R. Longstreet... 0 0 47,298 42,102 $ 232,566 $127,979
Patricia L. Jones.... 0 0 1,500 15,034 $ 0 $ 0
James R. Conaty...... 0 0 25,051 24,265 $ 126,086 $ 74,656
Walter K. Nussbaumer. 0 0 29,627 31,282 $ 145,694 $ 95,983
--------
(1) The value was determined by subtracting the exercise price per share from
$27.29, the closing market price per share of H.B. Fuller Common Stock on
December 1, 2003.
Long Term Incentive Plan--Awards in Last Fiscal Year
As described in the Compensation Committee's report on Executive
Compensation, historically, the Company has made an annual award of units whose
cash payout is determined at the end of a specified three-year period. Such
awards are designed to represent 50% of each executive's targeted long-term
compensation. Such annual awards have resulted in a series of overlapping
three-year performance periods.
22
The following table shows awards under the H.B. Fuller Performance Unit Plan
made during fiscal year 2003 to the executives listed in the Summary
Compensation Table. Any payout for units awarded in 2003 will be made in 2006
and will be based upon the Company's relative percentage improvement in return
on invested capital (ROIC) in comparison to an established peer group of 19
specialty chemical companies. The average performance in fiscal years 2003
through 2005 will be compared to the average performance in fiscal years 2000
through 2002. The ROIC improvement for each company will be ranked from 1 to
20, highest to lowest. If H.B. Fuller falls within the first quartile of
ranking (positions 1-5) the Performance Units will be paid at the "Maximum"
level. If the Company falls within the second quartile of ranking (positions
6-10), the Performance Units will be paid at the "Target" level. If the Company
falls within the third or fourth quartiles (positions 11-20), no amounts will
be paid under the Performance Units.
Performance or
Other Period Estimated Future Payouts
Until Maturation Under Non-Stock
Number or Payout Price-Based Plan (2)
- of ---------------- ------------------------
Name Units(1) Fiscal Years(2) Target Maximum
---- -------- ---------------- -------- ----------
Albert P.L. Stroucken 7,000 2003-2005 $700,000 $1,050,000
Alan R. Longstreet... 1,500 2003-2005 $150,000 $ 225,000
Patricia L. Jones.... 1,125 2003-2005 $112,500 $ 168,750
James R. Conaty...... 875 2003-2005 $ 87,500 $ 131,250
Walter K. Nussbaumer. 1,125 2003-2005 $112,500 $ 168,750
--------
(1) The performance units are payable in cash. After performance for a
designated period is determined and prior to payment, the performance units
are converted to a dollar value.
No cash awards under outstanding Performance Units were paid for the
three-year performance period covering fiscal years 2001-2003 since H.B.
Fuller's financial results over the 2001-2003 performance period did not meet
the targets specified in such awards.
Before awarding the 2002 Performance Units, the Compensation Committee
decided that the Performance Units granted in years prior to fiscal year 2002
were unlikely to pay out. As a result, the next possible incentive payment
would not be until April, 2005 unless the Committee made special provisions in
2002. Therefore, as part of the Performance Units awarded in fiscal year 2002,
in addition to an award based upon the full three-year measuring period
covering fiscal years 2002-2004, there was an opportunity to receive an
incentive payment for the fiscal years 2002 and 2003 separately. The incentive
payment opportunities for fiscal year 2002 and 2003 are equal to 1/3 and 2/3 of
the potential award for the 2002-2004 measuring period. After the date of last
year's Proxy Statement, it was determined that the Company's performance
satisfied the requirements for a "target level" payment for the fiscal year
2002 measuring period. The amount paid to the executives listed in the Summary
Compensation Table for fiscal year 2002 is disclosed in that table. As of the
date of this Proxy Statement, the Company is not yet able to calculate the
amount, if any, for the fiscal year 2003 measuring period. If any amount is
paid for fiscal year 2003, it will be disclosed in next year's Proxy Statement.
Retirement Plans
H.B. Fuller's Retirement Plan is a defined benefit, tax qualified plan that
provides benefits for U.S. employees and is sometimes referred to as a pension
plan. Employees do not make contributions to this plan. The plan provides an
annual benefit equal to a percentage of the employee's average annual
compensation (including annual incentive compensation) during the highest five
years of compensation in the final ten years of an employee's service, based on
the employee's length of service with the Company.
23
H.B. Fuller has established a Supplemental Executive Retirement Plan to
provide additional benefits to executives who may be affected by limits that
are imposed by the Internal Revenue Code and the Employee Retirement Income
Security Act of 1974 on the amount of benefits that may be paid from tax
qualified pension plans. This supplemental plan provides an annual benefit
equal to a percentage of the executive's average annual compensation (including
short term incentive compensation) during the highest five years of
compensation in the final ten years of an executive's service, based on the
executive's length of service with H.B. Fuller. This supplemental amount is
offset by retirement income from certain other sources. The supplemental plan
is an unfunded plan. However, the Company has placed funds in a trust that is
intended to provide plan benefits. The funds are subject to the claims of H.B.
Fuller's creditors.
The following table shows the estimated annual benefits on a straight-line
annuity basis payable to the executives listed in the Summary Compensation
Table who have 15 or more years of credited service upon normal retirement (age
65 or later) under the pension plan and the Supplemental Executive Retirement
Plan. In accordance with the plans, the annual compensation considered in
determining the benefits payable to any executive is the salary and short term
incentive compensation disclosed in the Summary Compensation Table.
Final Final
Five-Year Five-Year
Average Average
Annual Annual Annual Annual
Compensation ($) Benefit ($) Compensation ($) Benefit ($)
---------------- ----------- ---------------- -----------
225,000 91,608 900,000 429,608
300,000 129,108 975,000 466,108
375,000 166,608 1,050,000 504,608
450,000 204,108 1,125,000 541,108
525,000 241,608 1,200,000 579,608
600,000 279,608 1,275,000 616,108
675,000 316,108 1,350,000 654,608
750,000 354,608 1,425,000 691,108
825,000 391,108
Mr. Stroucken, Mr. Longstreet, Ms. Jones, Mr. Conaty and Mr. Nussbaumer
participate in the pension plan and the Supplemental Executive Retirement Plan.
Mr. Longstreet, Mr. Conaty and Mr. Nussbaumer each had more than 15 years of
service as of December 1, 2003. At the time of his hiring, Mr. Stroucken was
credited with years of service under the Supplemental Executive Retirement Plan
for the number of years served with his prior employer.
Key Employee Deferred Compensation Plan
H.B. Fuller's Key Employee Deferred Compensation Plan permits eligible
employees to defer annually a portion of their base salary and any annual
incentive payment or payments under H.B. Fuller's Performance Unit Plan.
Deferred compensation is payable on the earlier of the participant's
termination of employment, reaching age 65, disability, death or the date(s)
for payment selected by the participant. Amounts deferred under the plan are
credited with interest based on the prime rate, or gains and losses based on
the performance of certain mutual funds or H.B. Fuller Common Stock, all as
elected by the participant. If a participant elects to defer amounts to the
H.B. Fuller Common Stock account, the Company makes a matching contribution
equal to 10% of the value of such amount. H.B. Fuller also makes matching
contributions to a participant's stock account to restore certain matching
contributions under the H.B. Fuller Thrift Plan (a 401(k) plan) that are
limited by tax regulations. The value of these matching contributions is
disclosed in the Summary Compensation Table. In addition, the Compensation
Committee may make discretionary contributions to a participant's Common Stock
account under this plan. For fiscal year 2003, no discretionary grants were
made to any executives listed in the Summary Compensation Table.
24
Employment Agreements
Albert P.L. Stroucken. Mr. Stroucken's employment as President and Chief
Executive Officer of the Company is governed by the terms of an employment
agreement dated April 16, 1998. This agreement addresses Mr. Stroucken's base
salary, annual and long-term incentive compensation, specified perquisites and
participation in the Company's employee benefit plans. The employment agreement
terminates on March 31, 2004, and as of the date of this Proxy Statement, the
Company is negotiating a new contract to retain Mr. Stroucken's employment with
the Company. It is expected that the new contract will be substantially similar
to the agreement currently in effect. Mr. Stroucken's agreement is filed with
the SEC and can be reviewed by any shareholder at www.hbfuller.com/Shareholder
Relations/SEC Filings.
Pursuant to the employment agreement in effect as of the date of this Proxy
Statement, in the event of Mr. Stroucken's death or disability during the term
of this agreement, the Company agrees to pay his spouse or estate for the
following three years an annual amount equal to the sum of his average base
salary during the two years preceding his death or disability plus his average
annual bonus during the preceding two years. The Company will pay a similar
amount for three years following his termination of employment if the Company
terminates his employment without cause, Mr. Stroucken terminates his
employment for "good reason" (as defined in the agreement), or his employment
terminates on March 31, 2004. In addition, any unvested stock options
outstanding on the death or termination immediately vest in full. The Company
will also provide him and/or his spouse with certain benefits and perquisites
during this three-year period. Pursuant to the terms of his agreement, Mr.
Stroucken is prohibited from disclosing confidential information and engaging
in certain activities competitive with H.B. Fuller for a period following his
employment with the Company.
Mr. Stroucken's employment agreement contains provisions which may trigger a
lump-sum payment in the event of a change in control of the Company. This
payment is triggered if within one year after a change in control, Mr.
Stroucken terminates his employment or the Company terminates his employment
for any reason (other than cause), or if within three years after a change in
control, the Company terminates Mr. Stroucken's employment without cause, or he
terminates his employment due to a reduction in his position, responsibilities
or compensation from what existed prior to the change of control. The payment
is equal to three times the amount of Mr. Stroucken's base salary plus his
largest annual bonus in any of the three years before the change in control. In
addition, the Company will provide Mr. Stroucken with certain benefits and
perquisites for a three-year period following the termination of employment. In
the event that these payments are subject to any excise tax, the Company will
reimburse Mr. Stroucken for the amount of the excise tax and for any taxes
imposed upon such reimbursement.
Other Executive Officers. The Company has agreements with Mr. Longstreet,
Ms. Jones and Mr. Conaty that prohibit disclosure of confidential information
and prohibit each of them from competing with the Company for a period of time
after termination of employment. In certain circumstances the agreements
require the Company to pay the executive during any noncompetition period the
difference between his monthly income and his monthly income immediately prior
to leaving the Company.
Change in Control Arrangements
H.B. Fuller has a change in control arrangement with each of the executives
listed in the Summary Compensation Table (Mr. Stroucken's arrangement is
described above). The one-year term of these agreements automatically extends
on a daily basis, so that the term continues to be one year, unless H.B. Fuller
gives notice that the term will not be extended. Upon the occurrence of a
change in control of the Company, the term of the agreement is automatically
extended to three years from the date of the change in control. If during this
three-year period, H.B. Fuller terminates the executive's
25
employment for any reason other than cause or disability, the executive
terminates his or her employment for good reason (as defined in the agreement),
or the executive terminates his or her employment for any reason during the
90-day period following the first anniversary of the change in control, the
executive is entitled to receive a lump sum payment from H.B. Fuller. The
payment is equal to three times the amount of the executive's annual base
salary plus the executive's largest annual bonus in any of the three years
before the change in control. In addition, the executive is entitled to medical
and dental benefits and certain perquisites for a three-year period following
the termination of employment. H.B. Fuller will adjust the payments and
benefits in the event that they are subject to an excise tax imposed by the
Internal Revenue Code and do not exceed 330% of the executive's base amount.
Under these circumstances, the payments and benefit will be adjusted so that
the amount of the payments equals 299% of the base amount, which is the maximum
amount that can be paid without imposition of an excise tax. In the event that
the payments and benefits are subject to an excise tax and exceed 330% of the
executive's base amount, the Company has agreed to reimburse the executive for
the amount of the excise tax and for any taxes imposed upon the reimbursement.
H.B. Fuller has other compensatory arrangements with its executives which
will result from a change in control. H.B. Fuller's Supplemental Executive
Retirement Plan provides that if within three years after a change in control,
H.B. Fuller terminates a participant's employment without cause or the
participant terminates his or her employment for good reason (as defined in
this plan), or if the participant terminates his or her employment for any
reason during the 90-day period following the first anniversary of the change
in control, then five years shall be added to both the participant's age and
years of credited service for purposes of determining benefits under this plan.
If a participant's employment terminates as described above and the participant
is not entitled to a benefit under the supplemental retirement plan, then the
participant will be paid an annual benefit equal to 25% of his or her final
average compensation, regardless of age or years of credited service.
In addition, in the event of a change in control, all shares of restricted
stock, all restricted stock units and any unvested stock options outstanding
under H.B. Fuller's stock incentive plans immediately vest in full.
Executive Stock Purchase Loan Program
In July, 2000, the Board of Directors adopted the Executive Stock Purchase
Loan Program. Under the program, H.B. Fuller arranged for U.S. Bank to provide
full-recourse, personal loans to eligible management employees to purchase
shares of H.B. Fuller Common Stock in the open market. Each eligible employee
was allowed to obtain a loan equal to the dollar amount of the participant's
stock ownership goal plus capitalization of interest for the term of the loan.
An executive's stock ownership goal ranges in dollar amount from one to five
times his or her annual salary, depending on the executive's position with the
Company. The loans bear interest at the Applicable Federal Rate and mature in
five years, with principal and interest due at that time. The loans are
guaranteed by H.B. Fuller only in the event of the participant's default. The
Company pays the premiums on a term life insurance policy for each participant
in an amount necessary to repay the outstanding loan in the event of the
participant's death. H.B. Fuller also pays the administrative fees and expenses
of the program. During fiscal year 2003, 14 management employees participated
in the program, and the aggregate amount of loans outstanding under the program
on November 29, 2003 was $8,950,000. As of November 29, 2003, executives listed
in the Summary Compensation Table participated in the Executive Stock Purchase
Loan Program as follows:
Loan
Amount
----------
Albert P.L. Stroucken $3,601,184
Alan R. Longstreet... $ 833,799
James R. Conaty...... $ 531,219
This program ended during fiscal year 2001. In accordance with applicable
law, the Company will not extend, directly or indirectly, any similar loans in
the future.
26
TOTAL SHAREHOLDER RETURN GRAPH
Shown below is the shareholder return graph required by SEC rules. The graph
compares the yearly cumulative total shareholder return on H.B. Fuller Common
Stock over the prior five years with the cumulative total return of Standard &
Poor's 500 Composite Stock Index, Standard & Poor's Small Cap 600 Index and an
index of 19 selected peer companies. The peer index is included, since these
are the companies the Company uses most to benchmark its performance, including
for determination of performance under the Company's Performance Unit Plan.
CUMULATIVE TOTAL RETURN
Based on reinvestment of $100 beginning November 28, 1998
[CHART]
H.B. FULLER CO. S&P 500 INDEX S&P 600 SMALLCAP PEER GROUP
--------------- ------------- ---------------- ----------
Nov-98 $100.00 $100.00 $100.00 $100.00
Nov-99 127.10 120.90 110.50 108.11
Nov-00 82.69 115.82 119.03 110.41
Nov-01 144.86 101.56 129.67 130.96
Nov-02 142.68 84.79 122.31 142.39
Nov-03 133.78 97.59 161.17 164.16
The following publicly traded companies are included in the peer group: 3M
Co., Air Products & Chemical Inc., Albemarle Corp., Arch Chemicals Inc., Avery
Dennison Corp., Bemis Co., Ecolab Inc., Engelhard Corp., Ferro Corp., Great
Lakes Chemical Corp., Intertape Polymer Group Inc., Lubrizol Corp, OM Group
Inc., Polyone Corp., Rohm & Haas Co., RPM International Inc., A. Schulman Inc.,
Solutia Inc. and Valspar Corp.
27
[LOGO] H.B. Fuller/R/
[MAP]
[Logo of H.B. FULLER]
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, APRIL 15, 2004
2:00 P.M.
SCIENCE MUSEUM OF MINNESOTA
120 WEST KELLOGG BOULEVARD
SAINT PAUL, MINNESOTA
IMPORTANT NOTICE
----------------
IF YOU WOULD LIKE TO ACCESS
THE PROXY MATERIALS ELECTRONICALLY
NEXT YEAR, YOU MAY DO SO BY
GIVING YOUR CONSENT AT THE
FOLLOWING WEBSITE:
WWW.ECONSENT.COM/FUL/
H.B. FULLER
[H.B. Fuller Logo] P.O. BOX 64683
ST. PAUL, MN 55164-0683 PROXY
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, revoking all prior proxies, appoints Albert P.L. Stroucken,
John A. Feenan and Patricia L. Jones, or any one or more of them, as proxies,
with full power of substitution, to represent the undersigned and to vote, as
indicated on the reverse side and otherwise in their discretion, upon such other
matters as may properly come before the meeting, all shares of the common stock
of H.B. Fuller Company which the undersigned is entitled to vote at the Annual
Meeting of Shareholders of the Company to be held at the Science Museum of
Minnesota, 120 West Kellogg Boulevard, Saint Paul, Minnesota on Thursday, April
15, 2004, at 2:00 p.m. and at any adjournment thereof. The undersigned hereby
acknowledges receipt of the Proxy Statement for the Annual Meeting.
SEE REVERSE FOR VOTING INSTRUCTIONS.
|---------------------|
| COMPANY # |
| |
|---------------------|
There are three ways to vote your Proxy
Your telephone or Internet vote authorizes the Named Proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
VOTE BY PHONE -- TOLL FREE -- 1-800-560-1965 -- QUICK *** EASY *** IMMEDIATE
o Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week,
until 12:00 p.m. (CT) on Wednesday, April 14, 2004.
o Please have your proxy card and the last four digits of your Social Security
Number available. Follow the instructions the voice provides you.
VOTE BY INTERNET -- WWW.EPROXY.COM/FUL/ -- QUICK *** EASY *** IMMEDIATE
o Use the internet to vote your proxy 24 hours a day, 7 days a week, until
12:00 p.m. (CT) on Wednesday, April 14, 2004.
o Please have your proxy card and the last four digits of your Social Security
Number available. Follow the instructions to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to H.B. Fuller Company, c/o Shareowner Services(SM),
P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
. Please detach here .
The Board of Directors Recommends a Vote FOR Items 1 and 2
1. Election of directors: 01 Norbert R. Berg 03 John C. van Roden, Jr. [ ] Vote FOR [ ] Vote WITHHELD
02 Knut Kleedehn all nominees from all
(except as specified below) nominees
|-------------------------------------|
(Instructions: To withhold authority to vote for any indicated nominee, | |
write the number of the nominee in the box provided to the right.) |-------------------------------------|
2. To ratify the appointment of KPMG LLP as the Company's independent auditors
for the fiscal year ending November 27, 2004. [ ] For [ ] Against [ ] Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR
ITEMS 1 AND 2.
The proxies are also authorized to vote upon such other business as may properly come before the meeting in accordance with the
recommendation of the Board of Directors, or in absence of a recommendation, in the proxies' discretion.
Address Change? Mark Box [ ] Indicate changes below: Date ________________________________
|--------------------------------------|
| |
| |
|--------------------------------------|
Signature(s) in Box
Please sign exactly as your name(s) appear
on this Proxy. If held in joint tenancy, all
persons must sign. Trustees, administrators,
etc., should include title and authority.
Corporations should provide full name of
corporation and title of authorized officer
signing the proxy.
[MAP] [Logo of H.B. Fuller]
Annual Meeting of Shareholders
Thursday, April 15, 2004
2:00 P.M.
Science Museum of Minnesota
120 West Kellogg Boulevard
Saint Paul, Minnesota
H.B. Fuller
[Logo] P.O. Box 64683
St. Paul, MN 55164-0683 Voting Instructions to Trustee
--------------------------------------------------------------------------------
H.B. Fuller Company Thrift Plan
and EFTEC Savings Plan
I hereby direct Wells Fargo Bank, N.A., as Trustee of the H.B. Fuller Company
Thrift Plan Trust and the EFTEC Savings Plan Trust to vote at the Annual Meeting
of Shareholders of H.B. Fuller Company (the "Company") to be held on April 15,
2004, and at any adjournment thereof, the shares of common stock of the Company
allocated to my accounts.
This voting instruction card is furnished in connection with the solicitation of
proxies by the Board of Directors of the Company. I understand this card must be
returned to the Trustee if my voting instructions are to be honored. If it is
not received by the Trustee, or if it is received but the voting instructions
are invalid, the shares of stock with respect to which I could have directed the
Trustee shall be voted by the Trustee in accordance with the terms of the plans.
The Trustee is hereby directed to vote as indicated on the following proposals
which are more fully described in the Company's Notice of Annual Meeting of
Shareholders and Proxy Statement. The undersigned hereby acknowledges receipt of
the Proxy Statement for the Annual Meeting.
See reverse for voting instructions.
------------------
|COMPANY # |
| |
------------------
There are three ways to vote your Voting Instruction Card
Your telephone or Internet vote authorizes the Trustee to vote your shares in
the same manner as if you marked, signed and returned your voting instruction
card.
VOTE BY PHONE -- TOLL FREE -- 1-800-560-1965 -- QUICK *** EASY *** IMMEDIATE
.. Use any touch-tone telephone to vote 24 hours a day, 7 days a week, until
12:00 p.m. (CT) on Monday, April 12, 2004.
.. Please have your voting instruction card and the last four digits of your
Social Security Number available. Follow the instructions the voice
provides you.
VOTE BY INTERNET -- www.eproxy.com/ful/ -- QUICK *** EASY *** IMMEDIATE
.. Use the internet to vote 24 hours a day, 7 days a week, until 12:00 p.m.
(CT) on Monday, April 12, 2004.
.. Please have your voting instruction card and the last four digits of your
Social Security Number available. Follow the instructions to obtain your
records and create an electronic ballot.
VOTE BY MAIL
Mark, sign and date your voting instruction card and return it in the
postage-paid envelope we've provided or return it to H.B. Fuller Company, c/o
Shareowner Services/SM/, P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL
YOUR VOTING INSTRUCTION CARD
. Please detach here .
______ ______
| |
| The Board of Directors Recommends a Vote FOR Items 1 and 2 |
| |
1. Election of directors: 01 Norbert R. Berg 03 John C. van Roden, Jr. [ ] Vote FOR [ [ Vote WITHHELD
02 Knut Kleedehn all nominees from all
(except as specified below) nominees
(Instructions: To withhold authority to vote for any indicated nominee, -----------------------------------------------
write the number of the nominee in the box provided to the right.) | |
-----------------------------------------------
2. To ratify the appointment of KPMG LLP as the Company's independent
auditors for the fiscal year ending November 27, 2004. [ ] For [ ] Against [ ] Abstain
THIS VOTING INSTRUCTION CARD WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED
FOR ITEMS 1 AND 2.
Address Change? Mark Box [ ] Indicate changes below: Date ______________________________________
-----------------------------------------------
| |
| |
-----------------------------------------------
Signature(s) in Box
Please sign exactly as your name(s) appear on
this voting instruction card. If held in joint
tenancy, all persons must sign. Trustees,
administrators, etc., should include title and
authority. Corporations should provide full
name of corporation and title of authorized
officer signing the voting instruction card.
| |
| |
|_____ _____|
[Map] [Logo of H.B. Fuller]
Annual Meeting of Shareholders
Thursday, April 15, 2004
2:00 P.M.
Science Museum of Minnesota
120 West Kellogg Boulevard
Saint Paul, Minnesota
H.B. Fuller
[Logo] P.O. Box 64683
St. Paul, MN 55164-0683 Voting Instructions to Trustee
--------------------------------------------------------------------------------
H.B. Fuller Company Canadian ESPP
and H.B. Fuller Company German ESPP
The undersigned hereby constitutes and appoints Wells Fargo Bank, N.A., as
trustee for the H.B. Fuller Company Canadian ESPP and/or the H.B. Fuller Company
German ESPP, the true and lawful attorney and proxy of the undersigned, with
full power of substitution, to attend the Annual Meeting of H.B. Fuller Company
to be held at 2:00 p.m. Thursday, April 15, 2004, at the Science Museum of
Minnesota, 120 West Kellogg Boulevard, Saint Paul, Minnesota, and at any
adjournment thereof, and to vote the common shares of said corporation standing
in the name of the undersigned, as designated on the reverse side.
This voting instruction card is furnished in connection with the solicitation of
proxies by the Board of Directors of the Company. I understand this card must be
returned to the Trustee if my voting instructions are to be honored. The Trustee
is hereby directed to vote as indicated on the following proposals which are
more fully described in the Company's Notice of Annual Meeting of Shareholders
and Proxy Statement. The undersigned hereby acknowledges receipt of the Proxy
Statement for the Annual Meeting.
See reverse for voting instructions.
---------------------------
| COMPANY # |
| |
---------------------------
There are two ways to vote your Voting Instruction Card
Your Internet vote authorizes the Trustee to vote your shares in the same manner
as if you marked, signed and returned your voting instruction card.
VOTE BY INTERNET -- www.eproxy.com/ful/ -- QUICK --- EASY --- IMMEDIATE
.. Use the internet to vote 24 hours a day, 7 days a week, until 12:00 p.m.
(CT) on Monday, April 12, 2004.
.. Please have your voting instruction card and the last four digits of your
Social Security Number available. Follow the instructions to obtain your
records and create an electronic ballot.
VOTE BY MAIL
Mark, sign and date your voting instruction card and return it in the
postage-paid envelope we've provided or return it to H.B. Fuller Company, c/o
Shareowner Services/SM/, P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY INTERNET, PLEASE DO NOT MAIL YOUR VOTING INSTRUCTION CARD
. Please detach here .
______ ______
| |
| The Board of Directors Recommends a Vote FOR Items 1 and 2 |
| |
1. Election of directors: 01 Norbert R. Berg 03 John C. van Roden, Jr. [ ] Vote FOR [ [ Vote WITHHELD
02 Knut Kleedehn all nominees from all
(except as specified below) nominees
(Instructions: To withhold authority to vote for any indicated nominee, -----------------------------------------------
write the number of the nominee in the box provided to the right.) | |
-----------------------------------------------
2. To ratify the appointment of KPMG LLP as the Company's independent
auditors for the fiscal year ending November 27, 2004. [ ] For [ ] Against [ ] Abstain
THIS VOTING INSTRUCTION CARD WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED
FOR ITEMS 1 AND 2.
Address Change? Mark Box [ ] Indicate changes below: Date ______________________________________
-----------------------------------------------
| |
| |
-----------------------------------------------
Signature(s) in Box
Please sign exactly as your name(s) appear on
this voting instruction card. If held in joint
tenancy, all persons must sign. Trustees,
administrators, etc., should include title and
authority. Corporations should provide full
name of corporation and title of authorized
officer signing the voting instruction card.
| |
| |
|_____ _____|