<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MAY 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
..................to.....................
Commission File No. 0-3488
H.B. FULLER COMPANY
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0268370
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1200 WILLOW LAKE BOULEVARD, VADNAIS HEIGHTS, MINNESOTA 55110
(Address of principal executive offices) (Zip Code)
(651) 236-5900
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $1.00 per share
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the Registrant's Common Stock, par value
$1.00 per share, was 13,975,178 as of June 30, 1998.
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H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Consolidated Condensed Statements of Earnings
(Unaudited)
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
---------------------- ----------------------
May 30, May 31, % May 30, May 31, %
1998 1997 Change 1998 1997 Change
--------- --------- ----- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 341,971 $ 328,872 4.0% $ 652,626 $ 632,963 3.1%
Cost of sales (233,278) (223,400) 4.4% (446,299) (432,762) 3.1%
-------- -------- -------- --------
Gross profit 108,693 105,472 3.1% 206,327 200,201 3.1%
Selling, administrative and other expenses (83,973) (83,209) 0.9% (166,170) (162,604) 2.2%
-------- -------- -------- --------
Operating earnings 24,720 22,263 11.0% 40,157 37,597 6.8%
Interest expense (6,573) (4,919) 33.6% (11,782) (9,899) 19.0%
Other income (expense), net 38 821 -95.4% (790) 340 *
-------- -------- -------- --------
Earnings before income taxes and minority interests 18,185 18,165 0.1% 27,585 28,038 -1.6%
Income taxes (7,420) (7,411) 0.1% (11,254) (11,439) -1.6%
Net earnings of consolidated subsidiaries
applicable to minority interests (65) 102 * 14 78 -82.1%
Earnings from equity investments 561 255 * 870 255 *
-------- -------- -------- --------
Net earnings 11,261 11,111 1.4% 17,215 16,932 1.7%
Dividends on preferred stock (4) (4) (8) (8)
-------- -------- -------- --------
Net earnings applicable to common stock $ 11,257 $ 11,107 1.4% $ 17,207 $ 16,924 1.7%
========= ========= ========= =========
Average number of common and common equivalent
shares outstanding:
Basic 13,706 13,961 -1.8% 13,691 13,951 -1.9%
========= ========= ========= =========
Diluted 13,855 14,110 -1.8% 13,833 14,095 -1.9%
========= ========= ========= =========
Net earnings per common share:
Basic $ 0.82 $ 0.79 3.8% $ 1.26 $ 1.21 4.1%
========= ========= ========= =========
Diluted $ 0.81 $ 0.79 2.5% $ 1.24 $ 1.20 3.3%
========= ========= ========= =========
Cash dividend per common share $ 0.200 $ 0.185 8.1% $ 0.385 $ 0.350 10.0%
========= ========= ========= =========
</TABLE>
* Change of 100% or more.
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H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In Thousands)
(Unaudited)
May 30, November 29,
1998 1997
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 5,274 $ 2,710
Trade receivables 224,871 211,469
Allowance for doubtful accounts (7,768) (5,879)
Inventories 167,854 150,685
Other current assets 51,715 50,171
----------- -----------
Total current assets 441,946 409,156
Property, plant and equipment, net of
accumulated depreciation of $318,530
in 1998 and $289,182 in 1997 420,228 398,561
Deposits and miscellaneous assets 64,878 62,196
Other intangibles 33,746 13,830
Excess cost 71,038 33,903
----------- -----------
Total assets $ 1,031,836 $ 917,646
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 46,416 $ 39,675
Current installments of long-term debt 7,938 2,551
Accounts payable 114,125 121,883
Accrued expenses 62,647 68,952
Income taxes payable 6,097 4,488
----------- -----------
Total current liabilities 237,223 237,549
Long-term debt,
excluding current installments 328,267 229,996
Accrued pension cost 78,601 76,694
Deferred income taxes and other liabilities 21,722 18,477
Minority interest 15,953 15,816
Stockholders' equity:
Preferred stock 306 306
Common stock 13,981 13,841
Additional paid-in capital 31,214 25,009
Retained earnings 316,839 304,975
Foreign currency translation adjustment (3,262) 366
Unearned compensation (9,008) (5,383)
----------- -----------
Total stockholders' equity 350,070 339,114
----------- -----------
Total liabilities and stockholders' equity $ 1,031,836 $ 917,646
=========== ===========
See accompanying Notes to Consolidated Condensed Financial Statements.
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H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Consolidated Condensed Statement of Cash Flows
(Unaudited)
(In Thousands)
Twenty-Six Weeks Ended
----------------------
May 30, May 31,
1998 1997
--------- ---------
Cash flows from operating activities:
Net earnings 17,215 16,932
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 23,158 22,502
Pension costs 3,257 5,266
Deferred income tax 3,706 (4,249)
Other items (7,485) (497)
Change in current assets and liabilities:
Accounts receivable (7,032) (8,318)
Inventory (13,297) (4,614)
Prepaid assets 1,566 (7,127)
Accounts payable (11,689) (792)
Accrued expense (1,362) 3,492
Income taxes payable 169 (1,295)
--------- ---------
Net cash (used)provided by operating activities 8,206 21,300
Cash flows from investing activities:
Purchased property, plant and equipment (29,740) (25,682)
Purchased business, net of cash acquired (87,701) (7,618)
Proceeds from sale of assets 9,019 6,411
--------- ---------
Net cash used in investing activities (108,422) (26,889)
Cash flows from financing activities:
Increase in long-term debt 125,266 22,195
Current installments and payments of long-term debt (25,283) (7,089)
Notes payable 8,844 3,125
Dividends paid (5,351) (4,940)
Other (468) (7,781)
--------- ---------
Net cash provided by financing activities 103,008 5,510
Effect of exchange rate changes on cash (228) (165)
--------- ---------
Net change in cash and cash equivalents 2,564 (244)
Cash and cash equivalents at beginning of year 2,710 3,515
--------- ---------
Cash and cash equivalents at end of period $ 5,274 $ 3,271
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest expense (net of amount capitalized) $ 13,468 $ 10,639
Income taxes $ 4,753 $ 12,766
For purposes of this statement, the Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
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H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Amounts in Thousands)
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited Consolidated
Condensed Financial Statements include all adjustments necessary to present
fairly the financial position as of May 30, 1998 and November 29, 1997, the
results of its operations for the twenty-six weeks ended May 30, 1998 and
May 31, 1997 and its cash flows for the twenty-six weeks ended May 30, 1998
and May 31, 1997. All adjustments were of a normal recurring nature.
2. The results of operations for the thirteen week period ended May 30, 1998
are not necessarily indicative of the results to be expected for the full
year.
3. The composition of inventories is presented below:
MAY 30, 1998 NOVEMBER 29, 1997
------------ -----------------
Raw materials $ 75,436 $ 71,234
Finished goods 103,735 90,634
LIFO reserve (11,317) (11,183)
--------- ---------
$ 167,854 $ 150,685
========= =========
4. In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" (SFAS No. 128). SFAS No. 128 is effective for
financial statements for periods ending after December 15, 1997. Under SFAS
No. 128, the previous presentation of earnings per share is replaced with
dual presentation of basic earnings per share and diluted earnings per
share. Basic earnings per share includes no dilution and is computed by
dividing net earnings available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution of stock options and
restricted stock grants that could share in the earnings. The Company
adopted SFAS No. 128 for the quarter ended February 28, 1998 and has
restated last year net earnings per share data presented to conform to the
provisions of this statement. The difference between basic and diluted
earnings per share data as presented is due to the dilutive impact of stock
options and restricted stock grants whose exercise price or grant price was
below the average common stock price for the respective period presented.
5. The Company enters into foreign exchange forward contracts as a hedge
against firm commitment foreign currency intercompany accounts
receivable/payable/debt. Market value gains and losses are recognized, and
the resulting credit or debit offsets foreign exchange gains or losses on
those receivables/payables/debt. At May 30, 1998, the aggregate contract
value of instruments used to sell 4,521 pound sterling, 5,370 deutsche
marks, 1,000 French francs, and $4,331 to buy foreign currency (primarily
27,740 Dutch guilders) was $13,880. The contracts mature between June 30,
1998 and November 20, 2000.
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<PAGE>
6. The carrying amounts and estimated fair values of the Company's significant
other financial instruments at May 30, 1998, are as follows:
CARRYING FAIR
AMOUNT VALUE
-------- --------
Cash and short-term investments $ 5,274 $ 5,274
Notes payable 46,416 46,416
Long-term debt 336,205 346,401
Fair values of short-term financial instruments approximate their carrying
values due to their short maturity.
The fair value of long-term debt is based on quoted market prices for the
same or similar issues or on the current rates offered to the Company for
debt of similar maturities. The estimates presented above on long-term
financial instruments are not necessarily indicative of the amounts that
would be realized in a current market exchange.
7. During the first and second quarters, the Company acquired two adhesive
companies in the United Kingdom for $87,701 in cash. Assets acquired
include other intangibles of $21,028 and excess of cost over net assets
acquired of $43,112. The acquisitions were accounted for as purchases and
the accompanying Consolidated Financial Statements include the results of
these businesses since the purchase date. The historical results of
operations on a pro forma basis are not presented as the effects of the
acquisitions were not material.
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<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Thousands)
The following discussion includes comments and data relating to the Company's
financial condition and results of operations during the periods included in the
accompanying Consolidated Condensed Financial Statements.
RESULTS OF OPERATIONS
Net sales for the second quarter of 1998 increased $13,099, or 4.0%, when
compared to the same quarter in 1997. The 4 percentage point sales increase
resulted from a 4.1 percentage point increase from volume and changes in product
mix, a 3.1 percentage point net impact of acquisitions and divestitures, a
negative 1.3 percentage points decreased pricing and a negative 1.9 percentage
points from a strengthened U.S. dollar. Net sales for the first half of 1998
increased $19,663, or 3.1%, when compared to the first half of 1997. The 3.1
percentage point sales increase resulted from a 4.2 percentage point increase
from volume and changes in product mix, 2.5 percentage points net impact of
acquisitions and divestitures, a negative 1.2 percentage points decreased
pricing and a negative 2.4 percentage points from a strengthened U.S. dollar.
A comparison of sales increases by operating area is as follows:
THIRTEEN WEEKS ENDED 26 WEEKS ENDED
MAY 30, 1998 MAY 30, 1998
OPERATING AREA MAY 31, 1997 MAY 31, 1997
- -------------- ----------------- -------------------
North America $ 5,037 3% $14,012 4%
Latin America 2,088 5% 3,662 4%
Europe 9,078 15% 5,096 4%
Asia/Pacific (3,104) (13%) (3,107) (7%)
------- -------
Total $13,099 4% $19,663 3%
======= =======
In North America, the 3% second quarter sales increase was composed of 3
percentage points relating to increased volume and changes in product mix and 1
percentage point resulting from a second quarter 1997 joint venture and a
negative 1 percentage point from negative pricing.
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<PAGE>
The Adhesives, Sealants and Coatings Group had second quarter sales which
approximated the sales of 1997. Primary growth occurred in the woodworking,
engineered systems and window markets of the structural adhesives group. In the
industrial adhesives group, primary growth occurred in the graphic arts market
with sales of the paper/converting and nonwoven markets experiencing reduced
sales from 1997. The EFTEC (Automotive) group had an 8% increase in sales, with
5 percentage points increase resulting from the 1997 joint venture, 5 percentage
points relating to increased volume and changes in product mix and a negative 2
percentage points resulting from decreased pricing. In the Specialty Group,
sales increased 8%. The primary growth in sales occurred in TEC Incorporated and
Foster Products Incorporated. North American operating earnings grew at a rate
of 8% increasing from $15,943 to $17,295.
For the first half of 1998, North American sales increased 4% and was composed
of 4 percentage points resulting from increased volume and changes in product
mix, one percentage point resulting from the second quarter 1997 Automotive
joint venture and a negative one percentage point impact of pricing and
currency. The sales of the Adhesives, Sealants and Coatings Group approximated
the sales of 1997. Primary growth occurred in the woodworking, engineered
systems and window markets of the structural adhesives group. In the industrial
adhesives group, primary growth occurred in the graphic arts market with sales
of the paper/converting and nonwoven markets experiencing reduced sales from
1997. The EFTEC (Automotive) Group had an 18% increase in sales, with 12
percentage points increase resulting from the 1997 joint venture, 8 percentage
points relating to increased volume and changes in product mix and a negative 2
percentage points resulting from decreased pricing. Growth in the Specialty
Products Group occurred primarily in TEC Incorporated and Foster Products
Incorporated. First half North American operating income increased 15 % from
$24,128 to $27,694.
Latin American second quarter 1998 sales increased 5% from 1997. The increase in
sales is composed of 7 percentage points relating to increased volume and
changes in product mix partially offset by a 2 percentage point decrease in
pricing. Operating results were negatively impacted by pricing pressures and
slower economies in several countries mainly Brazil and Chile, two major
markets. Latin American operating earnings increased 8% when compared to 1997,
increasing from $2,916 to $3,164.
In Europe, the 15% second quarter 1998 sales increase was composed of 5
percentage points resulting from unfavorable foreign currency translations due
to the strengthening of the U.S. dollar, a negative 2 percentage points due to
pricing, a positive 7 percentage points due to increased volume and changes in
product mix and 15 percentage points resulting from two 1998 acquisitions in the
United Kingdom. Operating earnings increased from $3,374 in the second quarter
1997 to $4,362 in 1998, primarily the result of gross margins generated on
increased volumes which offset the lower gross margins, as a percent of sales,
caused by the negative impact of raw material shortages, (products sold to the
nonwoven market) and competitive pricing pressures.
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<PAGE>
Asia/Pacific sales decreased 13% from the sales of the same period last year.
The strengthening of the U.S. dollar, compared to local currencies, caused a 13
percentage point decrease. Local currency sales increased 3 percentage points
due to increased volume and changes in product mix but decreased a net 3
percentage points as a result of a fourth quarter 1997 acquisition and second
quarter 1998 divestiture. Operating results decreased from $30 in 1997 to ($101)
in 1998, primarily due to negative economic conditions in the region, caused by
the continuing currency crisis.
For the first half of 1998, Latin American sales increased 4% over the same
period in 1997 with 6 percentage points accounted for by increased volume and
changes in product mix and a negative 2 percentage points resulting from
decreased pricing. Operating earnings decreased from $8,021 in 1997 to $7,498 in
1998. European sales increased 4% from first half 1997 sales with the
strengthening of the U.S. dollar having a 7 percentage points negative impact.
The 11 percentage point increase in local currency sales was comprised of 5
percentage points resulting from increased volume and changes in product mix, a
net 8 percentage point increase resulting from two acquisitions in the U.K. and
the sale of the construction business in 1997 and 2 percentage points in
decreased pricing. Operating earnings increased from $5,549 in 1997 to $5,711 in
1998. Asia/Pacific sales decreased 7% with a 14 percentage point decrease
resulting from a strengthened U.S. dollar. A 7 percentage point increase
resulted from volume and changes in product mix. Operating earnings decreased
from ($101) in 1997 to ($746) in 1998.
Cost of sales for the second quarter increased 4.4% ($9,878) over the same
quarter in 1997. Consolidated gross margins, as a percent of sales, decreased
from 32.1% in 1997 to 31.8% in 1998. Gross margins in 1998 benefited $1,368
($350 reversal of accrual and $1,018 non-accrual) or 0.4% of sales as a result
of a projected non-payment of profit sharing. Profit sharing targets were
increased in 1998 from prior year targets to complement overall profitability
improvement goals. Overall, raw materials costs were stable when compared to
second quarter 1997. However, some of our formulas are based on Styrene,
Isoprene, Styrene or SIS block co-polymers. Currently there is a shortage of SIS
in the marketplace, which is expected to impact the Company the balance of the
year. Strong demand and tight supply of Isoprene monomer, the feedstock of SIS,
has caused the shortage. As a result, prices are increasing in all geographic
areas. Price increases to our customers are also being implemented where
appropriate. Automotive gross margins as a percent of sales decreased as a
result of the middle second quarter 1997 joint venture and due to pricing
pressures within the industry. Our management continues in the process of
rationalizing and merging the operations of the two automotive companies.
Selling, administrative, and other expenses for the quarter were up 0.9% ($764)
when compared to the prior year. This category of expense, as a percent of
sales, decreased from 25.3% in 1997 to 24.6% in 1998. This category of expense
benefited $1,367 ($350 reversal of accrual and $1,017 non-accrual) or 0.4% of
sales as a result of projected non-payment of profit sharing.
Year-to-date, cost of sales was up 3.1% ($13,537) when compared to the same
period in 1997. Consolidated gross margins, as a percent of sales, equaled the
31.6% of 1997.
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<PAGE>
Selling, administrative, and other expenses for the quarter increased 2.2%
($3,566) when compared to the prior year. This category of expense, as a percent
of sales, improved from 25.7% in 1997 to 25.5% in 1998.
Interest expense of $11,782 increased $1,883 from the expense of the first half
of 1997. This was mainly the result of higher overall debt levels to fund
acquisitions, repurchase Company stock and for funding of benefit plans.
Year-to-date other income/(expense), net, decreased from an income of $340 in
1997 to expense of $790 in 1998. The income in 1997 was primarily the result of
gains from the sale of assets in Germany and in North America. These gains were
partially offset by expenses incurred in the pursuit of a major acquisition
opportunity which was not successful. Other income in 1998 was generated by the
sale of properties in New Zealand, Honduras and Munich which was more than
offset by costs associated with the change in CEO, writedown of impaired assets,
added goodwill expense and increased currency losses, primarily in Latin
America.
Income taxes for the first half of 1998 decreased $185 (1.6%) when compared to
the first half of 1997, primarily as a result of decreased earnings. The tax
rate for the first half of 1998 reflects a 40.8% annual effective tax rate equal
to 1997.
Net earnings increased from $16,932 in the first half of 1997 to $17,215 in the
first half of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The cash flows as presented in this section have been calculated by comparison
of the Consolidated Condensed Balance Sheets at May 30, 1998 and November 29,
1997 and May 31, 1997 and November 30, 1996.
During the first half of 1998, the Company generated $8,206 of cash to finance
operations as compared to $21,300 in the first half of 1997. The decreased
generation of cash was primarily the result of $12,991 increase in cash required
to fund working capital in the first half of 1998 compared to the same period in
1997.
Working capital was $204,723 at May 30, 1998 compared to $171,607 at November
29, 1997. The current ratio at May 30, 1998 was 1.9 compared to a ratio of 1.7
at November 29, 1997. The number of days sales in trade accounts receivable was
57 days at May 30, 1998 compared to 54 days sales at May 31, 1997. The average
day sales in inventory on hand was 63 days compared to 62 days at May 31, 1997.
Trade accounts payable decreased from 46 days at year-end 1997 to 44 days at May
30, 1998.
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The Company's long-term debt to total capitalization ratio was 48.4% at May 30,
1998 compared to 40.4% at November 29, 1997. The primary reason for the increase
in this ratio is increased debt required to purchase businesses, $87,701 in
1998.
Capital expenditures for property, plant and equipment of $29,740 in the first
half of 1998 were primarily for the completion of construction of a
manufacturing facility in Georgia, the investment in Information Technology, for
general improvements in manufacturing productivity and operating efficiency and
for environmental projects. Environmental capital expenditures, less than 10% of
total expenditures, are not a material portion of overall Company expenditures.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
Certain statements in this document are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are subject to various risks and uncertainties, including but not
limited to the following: The Asian economic crisis and other political and
economic conditions; product demand and industry capacity; competitive products
and pricing; manufacturing efficiencies; new product development; product mix;
availability and price of raw materials and critical manufacturing equipment;
new plant startups; accounts receivables collection; the Company's relationships
with its major customers and suppliers; changes in tax laws and tariffs; patent
rights that could provide significant advantage to a competitor; foreign
exchange rate fluctuations (particularly with respect to the German mark and the
Japanese yen); the regulatory and trade environment; the year 2000 computer
issue; and other risks as indicated from time to time in the Company's filings
with the Securities and Exchange Commission. All forward-looking information
represents management's best judgment as of this date based on information
currently available that in the future may prove to have been inaccurate.
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<PAGE>
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on April 16, 1998. Proxies
for such meeting were solicited pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended. A total of 17,557,993 common and preferred
share votes ("Votes") were entitled to be cast at the meeting. At such meeting,
each of management's four nominees for director in Class II were elected for a
three-year term (until the Company's 2001 Annual Meeting), and until the
directors' respective successors are duly elected and qualified. The number of
Votes cast for the election of each director and the number of Votes withheld
are as follows:
COMBINED COMMON & COMBINED COMMON &
PREFERRED SHARE PREFERRED SHARE
DIRECTOR NAME VOTES IN FAVOR VOTES WITHHELD
------------- -------------- ----------------
Anthony L. Andersen 16,585,921 189,154
Norbert R. Berg 16,541,856 233,219
Freeman A. Ford 16,540,142 234,933
John J. Mauriel, Jr. 16,566,284 208,791
A proposal to approve the Company's 1998 Directors' Stock Incentive Plan was
approved by 15,195,500 Votes cast in favor, 1,246,894 Votes cast against, and
332,681 Votes abstaining. There were no broker non-votes with respect to the
approval of the 1998 Directors' Stock Incentive Plan.
A proposal to ratify the appointment of Price Waterhouse L.L.P. as independent
auditors for the Company for the fiscal year ending November 28, 1998 was
approved by 16,639,039 Votes cast in favor, 103,953 Votes cast against, and
32,083 Votes abstaining. There were no broker non-votes with respect to the
ratification of the appointment of Price Waterhouse L.L.P. as auditors.
In addition, a shareholder proposal requesting the Board of Directors adopt a
policy not to sell its adhesives to any tobacco-related company when they will
use it for the production of cigarettes or other tobacco products was defeated
by 13,454,105 Votes against the shareholder proposal, 1,332,857 Votes in favor
of the shareholder proposal and 946,624 Votes abstaining. There were 1,041,489
broker non-votes with respect to the shareholder proposal.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits to Part I
27(a) Financial Data Schedule
27(b) Restated Financial Data Schedule for May 31, 1997
Exhibits to Part II
10(a) Employment Agreement, dated as of April 16, 1998, between H.B. Fuller
Company and Albert Stroucken.
10(b) Consulting Agreement and First Amendment to International Service
Agreement and Non-Competition Agreement, effective as of April 30,
1998, between H.B. Fuller Company and Walter Kissling.
10(c) H.B. Fuller Company 1998 Directors' Stock Incentive Plan.
10(d) Restricted Stock Award Agreement, dated as of April 23, 1998, between
H.B. Fuller Company and Lee R. Mitau.
(b) Reports on Form 8-K. No reports on Form 8-K were filed for the thirteen
weeks ended May 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
H. B. FULLER COMPANY
Dated: July 13, 1998 /S/ Jorge Walter Bolanos
----------------------------
Jorge Walter Bolanos
Senior Vice President,
Treasurer and
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NUMBER
10(a) Employment Agreement, dated as of April 16, 1998, between H.B. Fuller
Company and Albert Stroucken.
10(b) Consulting Agreement and First Amendment to International Service
Agreement and Non-Competition Agreement, effective as of April 30, 1998,
between H.B. Fuller Company and Walter Kissling.
10(c) H.B. Fuller Company 1998 Directors' Stock Incentive Plan.
10(d) Restricted Stock Award Agreement, dated as of April 23, 1998, between H.B.
Fuller Company and Lee R. Mitau.
27(a) Financial Data Schedule
27(b) Restated Financial Data Schedule for May 31, 1997
<PAGE>
EXHIBIT 10(A)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of April 16,
1998, is entered into by and between H.B. FULLER COMPANY, a Minnesota
corporation (the "Company"), and ALBERT STROUCKEN (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to obtain the benefit of the Executive's
services and experience, and the Executive desires to enter the employ of the
Company, upon the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and covenants
contained herein, and intending to be legally bound, the Company agrees to
employ the Executive, and the Executive hereby agrees to be employed by the
Company, upon the following term and conditions:
ARTICLE 1
EMPLOYMENT
1.1 President and Chief Executive Officer. The Executive is hereby
employed as President and Chief Executive Officer of the Company to serve at its
headquarters office located in St. Paul, Minnesota, subject to the terms,
conditions and provisions of this Agreement. During the term of the Executive's
employment hereunder, the Executive shall report to the Company's Board of
Directors (the "Board") through the Corporate Governance Committee.
1.2 Board of Directors and Committees. The Board shall take such action
as may be necessary to cause the Executive to be elected to the Board as soon as
practicable after the date hereof and, during the term of the Executive's
employment hereunder, to be nominated for reelection to the Board by the
shareholders of the Company upon each expiration of the Executive's term of
office as a director. During the term of the Executive's employment hereunder,
the Executive shall have the right to nominate candidates to the Corporate
Governance Committee for election to the Board. During his tenure as a member of
the Board, the Executive shall be a member of its Executive and Finance
Committees, and such other committees as are deemed appropriate by the Corporate
Governance Committee, and shall have the right to provide advice and guidance to
other committees of the Board as the Executive determines to be necessary or
appropriate.
1.3 Duties and Responsibilities. During the term of the Executive's
employment hereunder, the Executive shall be responsible for the operations of
the Company and shall determine the reporting relationships of all other
officers of the Company. The Executive may
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create, and select officers and other employees of the Company to be members of,
an Operating Committee to facilitate his management of the Company. The
Executive shall devote his full-time best efforts to his employment by the
Company, provided, however, that the Executive may devote a reasonable amount of
his time to his personal investments and business affairs (including service as
a director of unaffiliated companies) and to civic and charitable activities,
but the Executive shall not accept or remain in any position with any
unaffiliated for-profit business organization without advance approval of the
Corporate Governance Committee of the Board.
1.4 Term. Subject to the terms and provisions of Article II hereof, the
Executive's employment hereunder shall commence on the date hereof and shall
continue for an initial term of three years unless terminated earlier pursuant
to the provisions hereof. On each day after the date hereof, the term of
Executive's employment shall automatically extend for an additional day, so that
the remaining term of the Executive's employment shall always be three years,
unless either party gives the other written notice of its intention to not so
extend the term of the Executive's employment, whereupon the Executive's
employment shall terminate on the date which is three years after the date of
such notice unless terminated earlier pursuant to the provisions hereof.
Notwithstanding the foregoing provisions of this Section 1.4, the term of the
Executive's employment under this Agreement shall terminate on March 31, 2004
unless such term shall be extended by agreement of the Company and the
Executive.
1.5 Salary. The Company shall pay a base salary (the "Base Salary") to
the Executive at the rate of $600,000 per annum, payable in equal installments
in accordance with the Company's normal payroll practices. The Base Salary will
be reviewed periodically by the Compensation Committee of the Board and may be
increased (but not decreased) from time to time during the term of the
Executive's employment under this Agreement as appropriate to reflect the
Executive's contributions to the Company, the Company's performance,
compensation paid to similarly situated executives and general market
conditions.
1.6 Special First Year Payment. In addition to the other payments to be
made under this Agreement, the Company hereby agrees to make a special payment
of $300,000 to the Executive of which $100,000 shall be paid simultaneously with
(and in addition to) the payment of the "Transition Allowance" as provided in
Section 1.17 hereof, and $200,000 shall be paid during January, 1999.
1.7 Annual Incentive Compensation. During each fiscal year of the
Executive's employment under this Agreement, the Executive shall be entitled to
participate in the Company's annual incentive compensation plan for senior
management employees under which the Executive shall have the opportunity to
earn up to 100% of the Executive's Base Salary paid during such year. The amount
of Annual Incentive Compensation to be awarded to the Executive under the annual
incentive compensation plan for any particular year (x) shall be based upon the
achievement of objectives to be agreed upon annually by the Executive and the
Compensation Committee of the Board, such objectives to be determined by a
combination of Company performance and the Executive's individual performance,
and (y) shall be paid not later than the date on which Annual Incentive
Compensation is paid to the Company's other
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senior management employees under such plan. Any amount of Annual Incentive
Compensation to which the Executive may become entitled in respect of fiscal
year 1998 shall be reduced by the amount paid or payable to the Executive
pursuant to Section 1.6 hereof.
1.8 Long-Term Incentive Plan. The Executive shall be entitled to
participate in the Company's long-term incentive plan for senior management
employees, such participation to be pursuant to such specific goals as shall be
determined by the Compensation Committee of the Board and agreed to by the
Executive. The Company hereby agrees to review and consider, under the
leadership of the Executive, the implementation of alternative long-term
incentive programs as may be recommended by the Executive.
1.9 Restricted Stock. Effective as of the date hereof, the Company
shall issue to the Executive 20,000 shares of its common stock (the "Restricted
Stock") under the Company's 1992 Stock Incentive Plan. Except as set forth in
this Section 1.9, the Executive shall not have the right to transfer any of the
shares of Restricted Stock and all of such shares shall be subject to forfeiture
in the event that either the Executive voluntarily terminates his employment
under this Agreement or the Company terminates the Executive's employment under
this Agreement for cause (as hereinafter defined). The restrictions on the
Executive's ability to transfer shares of Restricted Stock, and the risk of
forfeiture with respect thereto, shall lapse, as provided herein, on April 16,
2002. The period of restriction may be accelerated upon the achievement of
certain performance goals to be determined by the Compensation Committee of the
Board not later than December 1, 1998. The Company shall also assist the
Executive in obtaining the funds necessary to pay his federal, state and local
income tax liability in connection with the vesting of the Restricted Stock
pursuant to this Section 1.9.
1.10 Retirement Benefit Plans. The Executive shall be entitled to
participate in all of the Company's pension, retirement, thrift profit-sharing,
401(k), savings and similar plans, in accordance with the terms thereof, that
permit participation by the Company's U.S. executives or employee directors.
1.11 Welfare Benefit Plans. Except as provided in this Agreement, the
Executive and his eligible dependents shall be covered by, and may participate
in, such active and retired employee life, medical, health, dental and vision
insurance plans, in accordance with the terms thereof, as are available
generally to U.S. executives of the Company. The Executive shall also be
entitled to participate in the Company's executive physical program and tax and
financial planning program in accordance with current Company policy. The
Company will make available to the Executive additional tax and financial
planning benefits to the extent necessary to account for the complexities
associated with the compensation and other benefits to be provided to the
Executive during the initial year of this Agreement.
1.12 Life and Disability Insurance.
(a) The Company shall provide the Executive with, and the
Executive shall cooperate with the Company in obtaining, life insurance (to be
payable to a beneficiary as designated by the Executive) in an amount, during
each year, which, when added to the life insurance provided to the Executive
under other plans of the Company in which the Executive
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participates, is not less than two times the aggregate of his Base Salary in
respect of such year plus the Annual Incentive Compensation awarded to the
Executive in respect of the immediately preceding year.
(b) The Company shall provide the Executive with short-term
and long-term disability insurance pursuant to the Company's short-term and
long-term disability insurance programs, as from time to time in effect, with
full credit, for purposes of eligibility and benefit levels, given to the
Executive for his years of service with the company (the "Prior Employer") with
which the Executive was employed immediately prior to his employment hereunder.
(c) If the Executive becomes entitled to receive long-term
disability benefits, the Company will pay (or, in its discretion, purchase
insurance that will pay) to Executive the amount by which 50% of the Executive's
annual rate of Base Salary in respect of the year during which he becomes
disabled exceeds the sum of (i) the annual benefits the Executive is entitled to
receive from the Company's long-term disability insurance program; and (ii) any
other benefits the Executive is entitled to receive from the Company which
reduce the benefits the Executive is entitled to receive from the Company's
long-term disability insurance program. Such payments shall not be made for any
period during which the Executive is receiving payments under Section 2.2(a).
(d) The Company shall take such actions as may be necessary to
enable the Executive to purchase disability benefits of not less than sixty-six
and two-thirds (66-2/3%) percent of the annual rate of his Base Salary in
respect of the year during which he becomes disabled. Insofar as such additional
benefits are provided by the Company on a self-insured basis, the Executive
shall pay the reasonable cost of such benefits (as determined in good faith by
the Company) to the Company.
1.13 SERP. The Executive shall be entitled to participate in the
Company's Supplemental Executive Retirement Plan (the "SERP") and shall be
granted full credit for all years of service with the Prior Employer for
purposes of eligibility. The benefit (the "SERP Benefit") payable to the
Executive under the SERP shall be reduced by all other retirement benefits
received by the Executive from all other sources, including social security;
provided, however, that the SERP Benefit shall not be less than the amount that
would have been paid to the Executive under the Prior Employer's Supplemental
Executive Retirement Plan, as in effect on the date of this Agreement,
calculated as if the Executive had continued in the employ of the Prior Employer
during the term of the Executive's employment under this Agreement. In
determining the amount that would have been paid to the Executive under the
Prior Employer's Supplemental Executive Retirement Plan, the Company may assume
that the Executive's compensation from the Prior Employer, and all other factors
used to determine the amount of such benefit, would have continued during the
term of this Agreement at the rate or rates in effect at the time of the
Executive's termination of employment with the Prior Employer. Any payment made
to the Executive under Article V hereof shall not be considered to be "eligible
compensation" under or for purposes of the SERP.
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1.14 Make-up of Lost Benefits. If, as a result of the Executive's
commencement of employment hereunder, he does not receive from the Prior
Employer the bonus or other special incentive payment, earned but not yet paid
as of April 16, 1998, which he otherwise would have been entitled to receive,
the Company shall pay such amount, but not in excess of $200,000, to the
Executive. Such payment shall be made as soon as practicable after the
determination of the amount thereof.
1.15 Automobile. The Company shall furnish the Executive with an
automobile suitable to his status for business use, and shall be responsible for
expenses relating thereto, all in accordance with Company policy. The Executive
shall submit reports to the Company with respect to his use of the automobile in
sufficient detail to enable the Company to comply with all relevant Federal and
state income and employment tax laws.
1.16 Club Membership. The Company shall pay for, or shall reimburse the
Executive for the cost of, membership in a country club or a lunch or dinner
club of the Executive's choice. The costs to be paid by the Company shall
include all initiation fees (but not in excess of $10,000) and reasonable
business entertainment expenses. The Executive shall submit reports to the
Company with respect to his use of such club in sufficient detail to enable the
Company to comply with all relevant Federal and state income and employment tax
laws.
1.17 Relocation Expenses. In connection with the Executive's relocation
to the St. Paul, Minnesota area, the Executive shall be entitled to benefits
under the Company's current relocation policy and the Company shall guarantee
the purchase of the Executive's current home at fair market value.
Notwithstanding any contrary provisions of such relocation policy, the Executive
shall be paid a "Transition Allowance" thereunder of $100,000.
1.18 Out of Pocket Expenses. The Executive shall be entitled to
reimbursement for his reasonable out-of-pocket expenses incurred in performing
his duties in accordance with the general policies of Company, as the same may
change from time to time, provided that the Executive shall provide an itemized
account together with supporting receipts for such expenditures in accordance
with the Company policy, subject to the right of the Company at any time to
place reasonable limitations on such expenses thereafter to be incurred or
reimbursed.
1.19 Other Benefits. Subject to any limitations imposed by applicable
law, the Executive shall be entitled to receive such other benefits and
perquisites as may be available generally to the U.S. executives and employee
directors of the Company and as may be determined by the Board or the
Compensation Committee of the Board. The Executive shall be entitled to such
vacation time as is consistent with Company policy and with the performance of
his duties.
1.20 Withholding of Taxes. All payments made, or benefits provided, by
the Company to the Executive are subject to the withholding of income,
employment and other taxes to the extent required by law.
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ARTICLE 2
TERMINATION
2.1 Death. If the Executive dies during the term of his employment
hereunder the Executive's employment hereunder shall terminate. In the event of
the termination of the Executive's employment pursuant to the terms of this
Section 2.1, the Company shall thereupon be relieved of its obligations to pay
compensation and benefits under Article 1 hereof (except for Base Salary earned
through the date of the Executive's death; the Executive's annual incentive
compensation, if any, according to the plan as then in effect; and any other
benefits payable pursuant to the provisions of the Company's employee benefit
plans as then in effect) whereupon,
(a) For the period of 36 full calendar months next following
the date (the "Date of Death") of the Executive's death, the Company shall be
obligated to pay to the person (if any) who was the Executive's spouse on the
Date of Death, an annual benefit in an amount equal to twelve (12) times the
monthly average of (x) the Executive's Base Salary in respect of the 24 months
preceding the Date of Death, plus (y) the Annual Incentive Compensation awarded
to the Executive in respect of the two calendar years preceding the Date of
Death. In the event that the Executive's spouse either predeceases the Executive
or dies prior to the expiration of such 36-month period, the payments provided
under this subsection (a) shall continue to be made to the Executive's estate.
(b) For the lifetime of the person (if any) who was the
Executive's spouse on the Date of Death, the Company shall be obligated to pay
or provide to such spouse health insurance coverage comparable to the coverage
provided to the Executive immediately prior to the Date of Death.
(c) The restrictions on the Executive's (or his heirs')
ability to exercise stock options or transfer shares of Restricted Stock, and
the risk of forfeiture with respect thereto, shall lapse.
(d) The Executive shall be credited with an additional five
years of age and service for purposes of his participation in, and calculation
of his benefits under, the SERP.
The payments and benefits specified in paragraphs (a) through (d) will be in
full and final satisfaction of all claims by or through the Executive against
the Company and its representatives by reason of the employment of the Executive
and its termination, except as otherwise expressly provided in this Agreement or
as required by applicable law or regulation. A signed written Release to that
effect, in form approved by the Compensation Committee of the Board, will be
delivered by the Executive's representative to the Company before any such
payments or benefits are made or provided.
2.2 Disability. The term of employment of the Executive under this
Agreement may be terminated at the election of the Company upon receipt by the
Board of an opinion of one or more physicians jointly selected by the Executive
and the Board that the Executive will be unable, by reason of physical or mental
incapacity, to perform the reasonably expected duties
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assigned to him pursuant to this Agreement for a period longer than six
consecutive months or more than nine months in any consecutive twelve-month
period. The Executive shall submit to examination by any physician or physicians
so selected by the Executive and the Board of Directors, and shall otherwise
cooperate with such physician or physicians (such cooperation to include,
without limitation, consenting to the release of information by any such
physician(s) to the Board). In the event of the termination of the Executive's
employment pursuant to the terms of this Section 2.2, the Company shall
thereupon be relieved of its obligations to pay compensation and benefits under
Article 1 hereof (except for Base Salary earned through the date of the
Executive's termination; the Executive's annual incentive compensation, if any,
according to the plan as then in effect; and any other benefits payable pursuant
to the provisions of the Company's employee benefit plans as then in effect)
whereupon,
(a) For the period of 36 full calendar months next following
the date (the "Disability Termination Date") on which the Company elects to
terminate the employment of the Executive on account of disability, the Company
shall be obligated to pay to the Executive an annual benefit in an amount equal
to twelve (12) times the monthly average of (x) the Executive's Base Salary in
respect of the 24 months preceding the Disability Termination Date, plus (y) the
Annual Incentive Compensation awarded to the Executive in respect of the two
calendar years preceding the Disability Termination Date. In the event that the
Executive dies prior to the expiration of such 36-month period, the payments
provided under this subsection (a) shall continue to be made to the person (if
any) who was the Executive's spouse on the Disability Termination Date until the
earlier of the expiration of such period or her earlier death. In the event that
the Executive's spouse either predeceases the Executive or dies prior to the
expiration of such 36-month period, the payments provided under this subsection
(a) shall continue to be made to the Executive's estate.
(b) For the lifetimes of the Executive and/or his spouse, the
Company shall be obligated to pay or provide to the Executive (and/or his
spouse, as the case may be) health insurance coverage comparable to the coverage
provided to the Executive immediately prior to the Disability Termination Date.
(c) The restrictions on the Executive's (or his heirs')
ability to exercise stock options or transfer shares of Restricted Stock, and
the risk of forfeiture with respect thereto, shall lapse.
(d) The Executive shall be credited with an additional five
years of age and service for purposes of his participation in, and calculation
of his benefits under, the SERP.
The payments and benefits specified in paragraphs (a) through (d) will be in
full and final satisfaction of all claims by or through the Executive against
the Company and its representatives by reason of the employment of the Executive
and its termination, except as otherwise expressly provided in this Agreement or
as required by applicable law or regulation. A signed written Release to that
effect, in form approved by the Compensation Committee of the Board, will be
delivered by the Executive or the Executive's representative to the Company
before any such payments or benefits are made or provided.
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2.3 Company Termination for Cause. The Executive's employment hereunder
may be terminated at any time by the Company for cause. The occurrence of any of
the following events or circumstances shall constitute "cause" for termination,
at the election of the Board:
(a) The perpetration of defalcations by the Executive involving the
Company or any of its affiliates, as established by certified public
accountants employed by the Company, or willful, reckless or grossly
negligent conduct of the Executive entailing a substantial violation of any
material provision of the laws, rules, regulations or orders of any
governmental agency applicable to the Company or its subsidiaries.
(b) The repeated and deliberate failure by the Executive, after
advance written notice to him, to comply with reasonable policies or
directives of the Board.
(c) The breach by the Executive of this Agreement in any other
material respect (which shall include, without limitation, any material
inaccuracy in the representations set forth in Sections 6.8 and 6.9 hereof)
and the failure of the Executive to cure such breach within 30 calendar
days after the Executive receives written notice of such breach from the
Board.
In the event that the Company terminates the Executive's employment under this
Section 2.3, the Company shall thereupon have no further obligation to the
Executive to pay or provide for any of the compensation and benefits hereunder,
except that the Executive will be entitled to be paid and to receive all Base
Salary earned through the date of the Executive's termination; the Executive's
annual incentive compensation, if any, according to the plan as then in effect;
and any other benefits payable pursuant to the provisions of the Company's
employee benefit plans as then in effect.
2.4 Involuntary Termination/Termination for Good Reason. The
Executive's employment hereunder may be terminated at any time by the Company
without cause, or by the Executive for good reason. In the event that (a) the
term of the Executive's employment under this Agreement terminates on March 31,
2004 in accordance with the provisions of Section 1.4 hereof, (b) the Company
terminates the Executive's employment as a result of a good faith determination
by the Company's Board that the Company has suffered a sustained economic
downturn or that the Company requires a strategic redirection, (c) the Company
terminates the Executive's employment for any other reason that does not
constitute "cause" as defined in Section 2.3, (d) the Executive terminates his
employment hereunder, other than following a Change in Control, as a result of a
diminution by the Company of the Executive's position or responsibilities, as
that position and those responsibilities existed prior to such diminution, a
reduction by the Company in the Executive's Base Salary or potential maximum
incentive as in effect prior to such reduction, or an adverse (to the Executive)
change in the Executive's reporting relationship or status with the Company,
then,
(a) For a period of 36 full calendar months next following the
date of such termination, the Company shall be obligated to pay to the Executive
(or his spouse or estate, as the case may be) an annual benefit in the amount
and in the manner as set forth in subsection (a) of Section 2.2 hereof.
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(b) All benefits provided to the Executive under Sections
1.11, 1.12, 1.15, and 1.16 hereof shall continue for a period of 36 months
following the date of such termination.
(c) The restrictions on the Executive's (or his heirs')
ability to exercise stock options or transfer shares of Restricted Stock, and
the risk of forfeiture with respect thereto, shall lapse.
(d) The Executive shall continue to participate in the SERP,
according to its terms, and the Executive shall be credited with an additional
five years of age and service for purposes of his participation in, and
calculation of his benefits under, the SERP.
The payments and benefits specified in paragraphs (a) through (d) will be in
full and final satisfaction of all claims by or through the Executive against
the Company and its representatives by reason of the employment of the Executive
and its termination, except as otherwise expressly provided in this Agreement or
as required by applicable law or regulation. A signed written Release to that
effect, in form approved by the Compensation Committee of the Board, will be
delivered by the Executive to the Company before any such payments or benefits
are made or provided.
2.5 Voluntary Termination by the Executive. The Executive may
voluntarily terminate his employment hereunder at any time by giving the Company
two months prior written notice. Payment of all compensation and provision of
all benefits to the Executive hereunder shall cease effective as of the
effective date of any such termination, except that the Executive will be
entitled to his Base Salary earned through the date of the his termination; the
Executive's annual incentive compensation, if any, according to the plan as then
in effect; and any other benefits payable pursuant to the provisions of the
Company's employee benefit plans as then in effect. The provisions of this
Section 2.5 shall not apply in the case of a termination by the Executive
pursuant to Sections 2.4 or 5.1 hereof.
ARTICLE 3
THE EXECUTIVE'S ACKNOWLEDGMENTS
The Executive acknowledges that: (a) in the course of the
Executive's employment by the Company, the Executive will acquire information
concerning formulas, processes, customer lists, computer user identifiers and
passwords, and purchasing, engineering, accounting, marketing and other
information, not generally known and proprietary to the Company, and to its
existing or future subsidiaries and affiliates ("Affiliates"), relating to
research, development, manufacture or sale of the Company's and its Affiliates'
products, as well as formulas, processes and other information received by the
Company and its Affiliates from third parties under an obligation of secrecy
(collectively referred to herein as the "Confidential Information"); (b) the
Confidential Information is the property of the Company, (c) the use,
misappropriation or disclosure of the Confidential Information would constitute
a breach of trust and could cause irreparable injury to the Company; and (d) it
is essential for the protection of the Company's goodwill and to the maintenance
of the Company's competitive position that the Confidential Information be kept
secret and that the Executive not disclose the Confidential
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Information to others or use the Confidential Information to the Executive's own
advantage or the advantage of others.
The Executive further acknowledges that it is essential for
the proper protection of the business of the Company that the Executive be
restrained (a) from soliciting or inducing any employee of the Company or its
Affiliates to leave the employ of the Company or any Affiliate, (b) from
soliciting the trade of or trading with the customers of the Company or its
Affiliates for a competitive purpose and (c) from competing against the Company
or its Affiliates for a reasonable period of time following termination of the
Executive's employment by the Company.
ARTICLE 4
THE EXECUTIVES COVENANTS AND AGREEMENTS
4.1 Nondisclosure or Utilization of Confidential Information. The
Executive agrees to hold and safeguard the Confidential Information in trust for
the Company and its successors and assigns and agrees that he shall not, without
the prior written consent of the Company, misappropriate, disclose or use for
any reason or purpose, or make available to anyone for use outside the Company's
organization at any time for any reason of purpose, either during his employment
by the Company or subsequent to the termination of his employment by the Company
for any reason, any of the Confidential Information, whether or not developed by
the Executive, except as required in the performance of the Executive's duties
to the Company.
4.2 Return of Materials. Upon the termination of the Executive's
employment by the Company for any reason, the Executive shall promptly deliver
to the Company all correspondence, drawings, blueprints, manuals, letters,
notes, notebooks, reports, programs, proposals and any documents concerning the
Company's and its Affiliates' customers or concerning products or processes used
by the Company and, without limiting the foregoing, will promptly deliver to the
Company any and all other documents or materials containing or constituting
Confidential Information.
4.3 Nonsolicitation of Customers. The Executive agrees that during his
employment by the Company and for three years following termination of the
Executive's employment with the Company he shall not, directly or indirectly,
solicit the trade of, or trade with, any customer or prospective customer of the
Company or its Affiliates in competition with the Company.
4.4 Nonsolicitation of Employees. The Executive agrees that during his
employment by the Company and for three years following termination of the
Executive's employment with the Company he shall not, directly or indirectly,
hire or induce, attempt to induce, or in any way assist or act in concert with
any person or organization in hiring, inducing or attempting to induce any
employee or agent of the Company or its Affiliates to terminate such employee's
or agent's relationship with the Company or such Affiliate.
4.5 Restriction on Competition. The Executive covenants and agrees that
during the term of his employment with the Company and during the
Non-Competition Period following
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the termination thereof, the Executive shall not engage, directly or indirectly,
whether as principal or as agent, officer, director, employee, consultant,
shareholder, or otherwise, alone or in association with any other person,
corporation or other entity, in any Competing Business, except as a shareholder
of less than one percent of the outstanding capital stock of a publicly held
corporation. For purposes of this Section 4.5: (a) the term "Non-Competition
Period" shall mean the period beginning on the date the Executive's employment
terminates and ending on the later of the first anniversary of such date or the
date on which the Executive is no longer receiving payments pursuant to Sections
2.2(a) or 2.4(a) hereof; (b) the term "Competing Business" shall mean any
organization or person engaged in the development, production or sale of any
Conflicting Product ; and (c) the term "Conflicting Product" shall mean any
product, process, equipment, concept or service (in existence or under
development) of any person or organization (other than the Company), which
resembles or competes with a product, process, equipment, concept or service
upon which the Company or any of its Affiliates may have worked or which the
Company or any of its Affiliates may have sold during the last two years of the
Executive's employment by the Company, or concerning which the Executive
acquired Confidential Information at any time.
4.6 Remedies. In the event of a breach by the Executive of the terms of
this Article 4, the Company shall be entitled, if it shall so elect, to
institute legal proceedings to obtain damages for any such breach, or to enforce
the specific performance of this Article 4 by the Executive and to enjoin the
Executive from any further violation of this Article 4 and to exercise such
remedies cumulatively or in conjunction with all other rights and remedies
provided by law. The Executive acknowledges, however, that the remedies at law
for any breach by him of the provisions of this Agreement may be inadequate and
that the Company shall be entitled to injunctive relief against him in the event
of any breach.
ARTICLE 5
SEVERANCE AGREEMENT
5.1 Severance Obligations. If (x) the Executive's employment hereunder
is terminated or terminates for any reason (whether by action of the Company
(other than for cause as defined herein) or the Executive) upon the occurrence
of or within one year after the date of a "Change in Control" (as defined below)
or (y) the Executive's employment hereunder is terminated by the Company for any
reason other than for cause or by the Executive pursuant to Section 2.4 hereof
within three years after the date of a Change in Control, then
(a) The Company shall pay to the Executive within ten days
following the date of such termination a severance benefit equal to three times
the sum of (a) the Executive's Base Salary (at the highest annual rate in effect
at any time from and after the date which is three months prior to the date of
the Change in Control), plus (ii) the largest amount of Annual Incentive
Compensation awarded to the Executive in respect of any of the three years
preceding the date of the Change in Control.
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(b) The Company shall be obligated to provide to the Executive
all of the benefits provided to the Executive under Sections 1.11, 1.12, 1.15,
and 1.16 hereof for a period of three years following the date of such
termination.
(c) The Company shall be obligated to pay to or provide for
the, Executive reasonable outplacement services.
(d) The Company shall be obligated to transfer title to the
automobile then being provided to the Executive pursuant to Section 1.15 hereof.
(e) The Company shall be obligated to reimburse to the
Executive all excise taxes as may be imposed upon the Executive pursuant to
Section 4999 of the Internal Revenue Code of 1986 (or the corresponding
provisions of any future United States internal revenue law), similar excise
taxes imposed by any state, local or foreign taxing jurisdiction, and all
federal, state, local and foreign income taxes (and taxes thereon) as may be
imposed upon the reimbursement provided for by this subsection 5.1(e).
(f) The restrictions on the Executive's (or his heirs')
ability to exercise stock options or transfer shares of Restricted Stock, and
the risk of forfeiture with respect thereto, shall lapse.
(g) The Executive shall continue to participate in the SERP,
according to its terms. The Executive shall be credited with an additional five
years of age and service for purposes of his participation in, and calculation
of his benefits under, the SERP, there shall be no reduction in the Executive's
benefits under the SERP (irrespective of the Executive's age at the time of such
termination), and, if such termination occurs at or after the Executive is
deemed (after application of this subsection) to have attained the age of 55,
the Executive's benefit under the SERP shall be not less than 25% of his "final
pay" (as determined under the terms of the SERP).
(h) If the Executive institutes or defends any legal action to
enforce the Executive's rights under, or to defend the validity of, this
Agreement, the Executive shall be entitled to recover from the Company any
actual expenses for attorney's fees and disbursements incurred by the Executive.
Such fees and disbursements shall be paid or reimbursed by the Company on a
regular, periodic basis upon presentation of statements prepared by the
Executive's attorney in accordance with his or her customary practices. Any
amounts paid to the Executive pursuant to this paragraph shall be refunded to
the Company, with interest at the rate provided in section 1274(b)(2)(B) of the
Internal Revenue Code of 1986 (or the corresponding provisions of any future
United States internal revenue law), if the claim or defense asserted by the
Executive is dismissed under circumstances resulting in the imposition of
sanctions under Rule 11 of the Federal Rules of Civil Procedure or under any
similar federal, state or foreign rule or statute.
5.2 Definition of Change of Control. For purposes of this Agreement, a
"Change in Control" shall be deemed to have occurred upon any of the following
events:
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(a) a change in the control of the Company of a nature that would be
required to be reported in accordance with Regulation 14A promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"), whether or not the Company
is then subject to such reporting requirement;
(b) a public announcement (which, for purposes hereof, shall include,
without limitation, a report filed pursuant to Section 13(d) of the Exchange
Act) that any individual, corporation, partnership, association, trust or other
entity becomes the beneficial owner (as defined in Rule 13(d)(3) promulgated
under the Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding voting securities;
(c) the individuals who, as of the date of this Agreement, are members of
the Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board (provided, however, that if the election or nomination for
election by the Company's shareholders of any new director was approved by a
vote of at least a majority of the Incumbent Board, such new director shall be
considered to be a member of the Incumbent Board);
(d) the approval by the shareholders of the Company of (i) any
consolidation, merger or statutory share exchange of the Company with any person
in which the surviving entity would not have as its directors at least 60% of
the Incumbent Board and as a result of which those persons who were shareholders
of the Company immediately prior to such transaction would not hold, immediately
after such transaction, at least 60% of the combined voting power of the
Company's or the surviving entity's then outstanding voting securities; (ii) any
sale, lease, exchange or other transfer in one transaction or a series of
related transactions substantially all of the assets of the Company; or (iii)
the adoption of any plan or proposal for the complete or partial liquidation or
dissolution of the Company; or
(e) a determination by a majority of the members of the Incumbent Board, in
their sole and absolute discretion, that there has been a Change in Control of
the Company.
ARTICLE 6
MISCELLANEOUS
6.1 Authorization to Modify Restrictions. It is the intention of the
parties that the provisions of Article 4 hereof shall be enforceable to the
fullest extent permissible under applicable law, but that the unenforceability
(or modification to conform to such law) of any provision or provisions hereof
shall not render unenforceable, or impair, the remainder thereof. If any
provision or provisions hereof shall be deemed invalid or unenforceable, either
in whole or in part, this Agreement shall be deemed amended to delete or modify,
as necessary, the offending provision or provisions and to alter the bounds
thereof in order to render it valid and enforceable.
6.2 Entire Agreement. This Agreement represents the entire agreement of the
parties and may be amended only by a writing signed by each of them.
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6.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
6.4 Successors and Assigns, Agreement Binding.
(a) The Company may assign its rights and obligations under this Agreement
to any corporation, individual, group, association, partnership, firm, venture
or other entity or person that, subsequent to the date hereof, succeeds to the
actual or practical ability to control (either immediately or with the passage
of time), all or substantially all of the Company's business or assets, directly
or indirectly, by merger, consolidation, recapitalization, purchase,
liquidation, redemption, assignment, similar corporate transaction, operation of
law or otherwise. The Executive may not assign his rights or obligations under
this Agreement without the prior written consent of the Company.
(b) This Agreement shall be binding on and inure to the benefit of the
Executive and the Company and their respective heirs, executors, legal
representatives, successors and assigns.
6.5 Counterparts, Section Headings. This Agreement may be executed in any
number of counterparts, each of which shag be deemed to be an original, but all
of which together shall constitute one and the same instrument. The section
headings of this Agreement are for convenience for reference only and shall not
affect the construction or interpretation of any of the provisions hereof.
6.6 Binding Arbitration. Any dispute or controversy as to the validity,
interpretation, construction, application or enforcement of, or otherwise
arising under or in connection with this Agreement, shall be submitted at the
request of either party hereto for resolution and settlement through arbitration
in St. Paul, Minnesota in accordance with the rules then prevailing of the
American Arbitration Association. Any award rendered therein shall be final and
binding on each of the parties hereto and their heirs, executors,
administrators, successors and assigns, and judgment may be entered thereon in
any court having jurisdiction. The foregoing provisions of this Section 6.6
shall not be deemed to limit the rights and remedies reserved to the Company
under and pursuant to Article 4 hereof.
6.7 Notices. All notices required pursuant to this Agreement shall be in
writing and shall be personally delivered or mailed postage prepaid, certified
U.S. mail, to any party at its address set forth on the last page of this
Agreement. Either party may, by notice hereunder, designate a changed address.
Any notice hereunder shall be deemed effectively given and received: (a) if
personally delivered, upon delivery; or (b) if mailed, on the date stamped on
the certified mail receipt.
6.8 No Violation of Other Agreements. The Executive represents that neither
his entering into this Agreement nor his carrying out the provisions hereof
shall violate any other agreement (oral or written) to which the Executive is a
party or by which the Executive is bound.
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6.9 Legal Status. The Executive represents that he is, and will
continue to be, legally capable of being employed by the Company, and of
performing the duties required of him pursuant to this Agreement, in the United
States of America during the term of this Agreement.
6.10 Separate Representation. The Executive represents and acknowledges
that he has sought and received independent advice from legal counsel of the
Executive's own selection prior to entering into this Agreement.
6.11 Survival. The parties agree that the provisions of this Agreement
which by their express or implied terms extend beyond the termination of the
Executive's employment hereunder shall continue in full force and effect
notwithstanding the Executive's termination of employment.
6.12 Status of Agreement. This Agreement is designated as a "Change in
Control Agreement" for the purposes of Article XIII of the H.B. Fuller Company
Group Benefit Plan and for the purposes of any successor or substitute provision
requiring such a designation.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed the day and year first above
written.
WITNESS:
/s/ Joel D. Hedberg /s/ Albert Stroucken
- ----------------------------- ------------------------------
Albert Stroucken
2841 Lexington Avenue, #C
Roseville, Minnesota 55113
H.B. FULLER COMPANY
1200 Willow Lake Boulevard
St. Paul, MN 55110-5101
ATTEST:
/s/ Richard C. Baker /s/ Anthony L. Andersen
- ----------------------------- ------------------------------
Chair of Board
Representing Board of Directors
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EXHIBIT 10(B)
CONSULTING AGREEMENT AND
FIRST AMENDMENT TO INTERNATIONAL
SERVICE AGREEMENT AND
NON-COMPETITION AGREEMENT
This CONSULTING AGREEMENT AND FIRST AMENDMENT TO INTERNATIONAL SERVICE
AGREEMENT AND NON-COMPETITION AGREEMENT (the "Agreement"), effective as of April
30, 1998, is between WALTER KISSLING, an individual currently residing at Bo
Rohrmoser, San Jose, Costa Rica (the "Executive") and H.B. FULLER COMPANY, a
Minnesota corporation, with its world headquarters located at 1200 Willow Lake
Boulevard, St. Paul, Minnesota 55110-5132 (the "Company"). Any capitalized terms
used and not defined herein have the respective meanings set forth in the
International Service Agreement (as defined below) or the Non-Competition
Agreement (as defined below).
RECITALS
A. The Executive transferred to the United States in 1991 from a Company
affiliate located in Costa Rica and the Executive has been employed by the
Company since such date. The Executive is currently the retiring Chief
Executive Officer of the Company and the Executive expects to formally
retire his employment status and relocate his residence to his native Costa
Rica on or about May 5, 1998 (the "Retirement Date"). Executive has
relinquished his United States "green card" effective April 30, 1998 (the
"Conversion Date") and will convert from "resident alien" status to
"non-resident alien" status as of the end of the Conversion Date.
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B. The Executive and the Company executed an initial "international service
agreement" dated January 18, 1991 and effective from August 1, 1990 through
July 31, 1995, with a renewal and modification of such agreement pursuant
to a memorandum agreement dated June 26, 1997 and effective through August
1, 1999 (the "International Service Agreement"). Among other things, the
International Service Agreement provides for tax equalization benefits
payable by the Company to the Executive.
C. The Executive and the Company entered into an "agreement" which was
executed by the Executive on May 10, 1989 and accepted by the company on
May 16, 1989, providing, among other things, that the Executive would
maintain the confidentiality of Confidential Information, assign all rights
to Inventions to the Company and agree to refrain from competition with the
Company and its affiliates for a 24-month period beginning after
termination of Executive's employment with the Company (the
"Non-Competition Agreement").
D. The Company interprets the tax equalization provisions of the International
Service Agreement as ending upon the Conversion Date in connection with the
Executive's repatriation to Costa Rica upon completion of his expatriate
assignment and being inapplicable to (i) gains from sales of Company shares
held by the Executive directly (or indirectly through any holding
companies) prior to his U.S. expatriate assignment, and (ii) any income
recognized by the Executive due to the Executive's exercise of
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Company stock options after the Conversion Date or income recognized by the
Executive upon the lapse of restrictions on certain Company restricted
stock held by the Executive which lapse occurs after the Conversion Date.
The Company, however, recognizes that the Executive may, in good faith,
have interpreted the agreements in a different manner.
E. Because the Executive's successor as Chief Executive Officer of the Company
was hired from outside of the Company and in light of the Executive's
unique and substantial expertise and experience regarding the Company's
worldwide operations, the Company desires to enter into a consulting
arrangement with the Executive with such consulting services provided by
the Executive from his Costa Rica, post-Retirement Date, country of
residence and the Company further desires to extend the Non-Competition
Agreement for an additional 36-month period after the initial 24-month
period therein expires, in light of Executive's access to Company
Confidential Information, Inventions and other intellectual property and
trade secrets.
F. The Executive is willing to accept the provisions of this Agreement,
including the consulting arrangement, and amendments and clarifications to
the International Service Agreement and Non-Competition Agreement.
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AGREEMENT
The parties, each intending to be legally bound hereby, agree as follows:
SECTION 1.0 CONSULTING. Subject to the provisions of this Section 1.0, the
Company hereby agrees to engage the Executive as a consultant to the Company and
its affiliates for the terms set forth in Paragraph 1.2 and the Executive hereby
accepts such engagement. The Executive will serve the Company as an independent
contractor with respect to consulting provided hereunder and will not be
considered an employee of the Company or any of its affiliates.
1.1. The Executive will diligently and conscientiously perform the
consulting duties reasonably requested hereunder by other executive officers of
the Company or its affiliates.
1.2. This Section 1.0 will become effective on the Retirement Date and,
subject to earlier termination in accordance with Paragraph 1.3., will remain in
force for a term of 24 months thereafter.
1.3. The Company may terminate this Section 1.0 immediately on written
notice to the Executive for cause, including (without limitation) fraud,
misrepresentation, theft, embezzlement of assets of the Company or breach of any
provision of this Section 1.0; and this Section 1.0 will terminate (a) upon the
Executive's death, or (b) upon written notice from
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the Company in the event of the Executive's disability which disability prevents
the Executive from performing his duties under this Agreement.
1.4. The Company will reimburse the Executive in accordance with the
Company's normal reimbursement policy for reasonable travel and other expenses
incurred at the Company's or any of its affiliate's request in carrying out the
Executive's duties under this Agreement. Reimbursement for approved expenses
will be made within thirty (30) days of receipt from the Executive of an
itemized expense report.
1.5. Consideration for the Executive's services under this Section 1.0 is
included in the compensation set forth in Section 3.0 below.
1.6. For a period of 24 months after the Retirement Date, the Executive
will be provided with a "Monthly Office Allowance" in an amount as specified in
Section 3.0. Office space selected by the Executive must be conveniently located
relative to facilities of subsidiaries of Company in Costa Rica. Executive must
notify the Company when suitable office space has been obtained. The Monthly
Office Allowance will terminate earlier than 24 months after the Retirement Date
upon the Executive's death. Notwithstanding the preceding provisions, for
periods during which office space and reasonable and customary support services
are provided by the Company at the facilities of one of its subsidiaries in
Costa Rica, no Monthly Office Allowance will be payable. During the term of this
consulting relationship pursuant to Section 1.0, the Executive agrees to by
physically present (whether working on personal business of the Executive or
providing consulting services hereunder) in
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such office for an average of ten (10) hours per week subject to a maximum
physical presence requirement of five hundred (500) hours per year. The
Executive will make reasonable efforts to receive messages or other
communications (including voice mail or e-mail messages) on a periodic basis and
respond to reasonable requests for consulting services from executive officers
of the Company or any of its affiliates throughout the world. The Executive will
only be required to respond to reasonable requests for consulting services
received through the office maintained at the Company affiliate in Costa Rica,
and in no event will the Executive be required to perform actual consulting
services pursuant to any such requests in excess of an average of forty (40)
hours in any calendar month or a maximum of 300 hours in a calendar year.
SECTION 2.0. AMENDMENT TO NON-COMPETITION AGREEMENT.
2.1. Section D(1) at page 5 of the Non-Competition Agreement is amended
to increase the "Non-Competition Period" as set forth therein from 24 months to
60 months.
2.2. Consideration for Executive's agreement to extend the
Non-Competition Period to a 60-month period, is included in the compensation set
forth in Section 3.0 of this Agreement.
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SECTION 3.0. ADDITIONAL COMPENSATION TO EXECUTIVE. In consideration of the
Executive's undertakings pursuant to this Agreement, the Executive is entitled
to receive cash payments from the Company on the following dates and in the
following amounts:
DATE AMOUNT
Retirement Date $300,000
December 31, 1998 130,000
December 31, 1999 125,000
Monthly Office Allowance* 60,000
--------
Total $615,000
========
* ($2,500/mo. for up to 24 months)
3.1. Payments pursuant to this Section 3.0 will be made to the Executive by
check or wire transfer to the Executive. Any such payments will be made net of
applicable foreign, federal, state or local withholding taxes that may legally
be imposed on any such payments as determined in the reasonable discretion of
the Company.
SECTION 4.0 AMENDMENT TO INTERNATIONAL SERVICE AGREEMENT.
4.1. The International Service Agreement will no longer expire on August 1,
1999, but will end effective on the Conversion Date. Accordingly, except as
otherwise provided in Paragraph 5.4 hereof, tax equalization provisions under
the International Service Agreement will generally cease to apply to any income
recognized after the Conversion Date.
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4.2. The International Service Agreement is hereby further amended to
provide in Section IX ("Tax Equalization") thereof that the list of items not
subject to tax protection will include the following additional items:
(5) UNDER NO CIRCUMSTANCES WILL GAINS FROM SALES OF COMPANY SHARES HELD BY
THE EXECUTIVE DIRECTLY (OR INDIRECTLY THROUGH ANY HOLDING COMPANIES)
PRIOR TO HIS U.S. EXPATRIATE ASSIGNMENT BE COVERED BY TAX
EQUALIZATION. THIS INCLUDES WITHOUT LIMITATION ANY SUCH AMOUNTS OF
INCOME FROM EXECUTIVE'S WHOLLY OWNED CONTROLLED FOREIGN CORPORATION
(TALEX S.A.) THAT MAY OTHERWISE BE TREATED AS U.S. SOURCE INCOME UNDER
APPLICABLE INCOME APPORTIONMENT RULES OF THE U.S. INTERNAL REVENUE
CODE.
(6) ANY INCOME RECOGNIZED BY THE EXECUTIVE DUE TO THE EXECUTIVE'S EXERCISE
OF COMPANY STOCK OPTIONS AFTER APRIL 30, 1998 OR INCOME RECOGNIZED BY
THE EXECUTIVE UPON THE LAPSE OF RESTRICTIONS ON CERTAIN COMPANY
RESTRICTED STOCK HELD BY THE EXECUTIVE WHICH LAPSE OCCURS AFTER APRIL
30, 1998 ARE NOT COVERED BY TAX EQUALIZATION.
4.3. The terms of the "Deferred Compensation Agreement" dated December 22,
1994, as amended, which is effective for the period January 1, 1995 through the
Executive's retirement, are in no way modified or amended pursuant to the terms
of this Agreement.
4.4. In addition to the amendments to the International Service Agreement,
as amended pursuant to this Agreement, the parties hereto desire to acknowledge
that the terms and provisions of the Company's "Tax Equalization Guidelines,"
effective June 1, 1996, are generally incorporated by reference in the
International Service Agreement, as amended, between the Company and the
Executive, but only to the extent that such Tax Equalization Guidelines are
consistent with the International Service Agreement, as amended hereby. In
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any case where the Tax Equalization Guidelines are inconsistent with the
International Service Agreement as amended hereby, the International Service
Agreement, as amended, controls.
SECTION 5.0 COVENANTS OF EXECUTIVE.
5.1. Upon exercise of any stock options held by the Executive after the
Conversion Date, the Executive will utilize and agrees to engage in a "cashless
exercise" of outstanding options, whereby the Company will be entitled to
immediately convert shares otherwise to be issued to the Executive into cash and
make appropriate income and payroll tax withholdings with respect to such
exercise.
5.2. With respect to the lapse of applicable restrictions on Company
restricted stock, the Executive will pay to the Company the amount of any
applicable foreign, federal, state or local withholding amounts and payroll
taxes otherwise owing by the Executive and required to be withheld by the
Company as a result of the income generated upon the lapse of restrictions with
respect to such restricted stock. To the extent the Executive does not promptly
tender required withholding amounts to the Company to allow for appropriate
withholding, the Company will be entitled to set-off against any amounts
otherwise owing to the Executive, including amounts payable pursuant to this
Agreement, in order to fund any required withholding of income or payroll taxes
with respect to such lapse.
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5.3. This Agreement has been entered into with the expectation that
Executive will not be considered a "resident alien" of the United States under
U.S. tax law for the portion of the 1998 calendar year of Executive beginning
after the Conversion Date and ending on December 31, 1998. To avoid "resident
alien" status for such portion of 1998, Executive understands he will need to
limit the number of days he is present in the United States during the remainder
of 1998, as well as during the 1999, 2000, and 2001 calendar years (although no
tax equalization will be provided for 1999 or subsequent years under any
circumstances), in order to comply with the "nominal presence" test of Internal
Revenue Code Section 7701(b)(2)(C) during the remainder of 1998 and the
provisions, thereafter. If Executive does not avoid "resident alien" status for
the portion of his 1998 calendar year beginning after the Conversion Date for
any reason other than a medical emergency described in Section 5.4., Executive
will not be entitled to any tax equalization or other indemnification or
reimbursement hereunder for any United States federal or state or local tax
liability (or gross-up with respect thereto) that he incurs related to any
income recognized or realized directly or indirectly by the Executive after the
Conversion Date and Company will only be liable for any tax equalization
hereunder as would have been owing had Executive avoided "resident alien" status
for the post-Conversion Date portion of 1998.
5.4. Notwithstanding Section 5.3., Executive will be entitled to tax
equalization and indemnification hereunder despite his post-Conversion Date
status as a "resident alien" during 1998 if the Executive's sole and exclusive
reason for entering and remaining in the United States in excess of 10 days
after the Conversion Date is caused by a significant medical emergency during
calendar year 1998 with respect to either the Executive or the
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Executive's spouse, whereby the Executive or his spouse is required to be
hospitalized pursuant to the recommendation of the personal physician of the
Executive or Executive's spouse, and which hospitalization in calendar year 1998
results in the Executive being physically in the United States for a period of
time that causes the Executive to be treated as a "resident alien" during the
1998 calendar year or thereafter. In circumstances where a significant medical
emergency causes the Executive to be a resident alien of the United States
during the 1998 calendar year, the Company will provide applicable tax
equalization payments to the Executive with respect to any additional U.S. tax
liability incurred by the Executive as a result of such unanticipated resident
alien status. Notwithstanding this Paragraph 5.4., in no event will the
Executive be entitled to tax equalization payments with respect to (i) gains
from sales of Company shares held by the Executive directly or indirectly
(including shares held by Talex S.A.) prior to his U.S. expatriate assignment,
or (ii) any taxable income incurred by the Executive during the 1999 or any
subsequent calendar year, whether or not the Executive is treated as a resident
alien of the United States, and irrespective of any medical emergency causing
the Executive to be present in the United States for any time periods beginning
on January 1, 1999 or thereafter.
SECTION 6.0 TAX RETURN PREPARATION. The tax return preparation provisions
of the International Service Agreement shall apply to the Executive for the 1998
and 1999 calendar years, and will remain in force until applicable tax returns
for such periods have been filed by the Executive.
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SECTION 7.0 COMPANY INDEMNIFICATION. To the extent that any of the payments
of compensation to the Executive pursuant to Section 3.0 hereof are determined
to have a U.S. source, resulting in U.S. or state or local income taxation
thereof to the Executive, the Company will indemnify and hold the Executive
harmless from such additional United States or state or local income tax
liability in the same manner and under the same conditions and computations as
previously provided under the International Service Agreement, as amended,
including the Company's Tax Equalization Guidelines as made applicable thereto.
If the Executive should die during the term of this Agreement and, after giving
effect to pending liabilities of the Executive's estate, the Executive's estate
becomes subject to U.S. estate or gift taxes as a result of this Agreement, and
solely as a result of this Agreement, the Company will indemnify and hold the
Executive's estate harmless from such estate or gift tax liability arising as a
result of this Agreement. The provisions of this Section 7.0 will survive the
termination of this Agreement and will be applicable until 90 days after the
applicable statutes of limitations with respect to Executive's United States,
and state or local income, estate or gift tax returns have expired.
SECTION 8.0 MISCELLANEOUS.
8.1. NO CONFLICTS. The Executive represents and warrants to the Company
that neither the entering into of this Agreement nor the performance of any of
the Executive's obligations hereunder will conflict with or constitute a breach
under any obligation of the Executive under any agreement or contract to which
the Executive is a party or any other obligation by which the Executive is bound
that has not otherwise been described herein.
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8.2. NATURE OF RELATIONSHIP. The Executive is an independent contractor and
will not act as an agent or employee of the Company nor will the Executive be
deemed to be an employee of the Company for the purposes of any employee benefit
programs, income tax withholding, FICA taxes, foreign taxes, unemployment
benefits, or otherwise, except as otherwise expressly stated herein. The
Executive agrees that he is not entitled to any benefits provided to employees
of the Company or any of its affiliates in connection with his performance of
services pursuant to this Agreement and agrees not to make any claims for
benefits against the Company, any of its affiliates, any plan sponsored or
maintained by the Company or any affiliate or any employee, officer, director,
agent, fiduciary or other service provider of the Company, any affiliate or any
plan.
8.3. SUCCESSORS AND ASSIGNS. This Agreement is binding on and inures to the
benefit of the Company's successors and assigns, all of which are included in
the term "Company" as it is used in this Agreement.
8.4. MODIFICATION. This Agreement may be modified or amended only by a
writing signed by both the Company and the Executive.
8.5. GOVERNING LAW. The laws of the State of Minnesota will govern the
validity, construction and performance of this Agreement.
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8.6. CONSTRUCTION. Wherever possible, each provision of this Agreement will
be interpreted so that it is valid under the applicable law. If any provision of
this Agreement is to any extent invalid under the applicable law, the provision
will still be effective to the extent it remains valid. The remainder of this
Agreement will also continue to be valid and the entire Agreement will continue
to be valid in other jurisdictions.
8.7. WAIVERS. No failure or delay by either of the Company or the Executive
in exercising any right or remedy under this Agreement will waive any provision
of the Agreement.
8.8. NOTICES. All notices and other communications required or permitted
under this Agreement shall be in writing and shall be, hand-delivered or sent by
registered or certified first-class U.S. mail, postage prepaid, or commercial
overnight delivery service and shall be effective upon delivery of
hand-delivered, three days after mailing if mailed, or two days after delivery
to a commercial overnight delivery service, in each case to the address stated
at the beginning of this Agreement, or, with respect to the Executive, such
address in Costa Rica as the Executive may notify the Company promptly after the
Retirement Date. The addresses may be changed by the parties at any time by like
notice.
8.9. NO OTHER MODIFICATIONS. This Agreement represents the sole amendment
and modification to the International Service Agreement and the Non-Competition
Agreement. Such agreements shall remain in full force and effect in all respects
except as expressly amended or modified pursuant to this Agreement.
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IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement effective as of the date first above written.
COMPANY: EXECUTIVE:
- -------- ----------
H.B. FULLER COMPANY, /s/ Walter Kissling
a Minnesota corporation ------------------------------
WALTER KISSLING
By: /s/ Richard C. Baker
-------------------------------
Its: Vice President
-------------------------------
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EXHIBIT 10(C)
H.B. FULLER COMPANY
1998 DIRECTORS' STOCK INCENTIVE PLAN
1. Purpose.
The purpose of the H.B. Fuller Company 1998 Directors' Stock Incentive Plan
(the "Plan") is to aid in attracting and retaining directors capable of assuring
the future success of H.B. Fuller Company (the "Company"), to offer the
directors incentives to put forth maximum efforts for the success of the
Company's business and to afford the directors an opportunity to acquire a
proprietary interest in the Company.
2. Definitions.
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or indirectly
through one or more intermediaries, is controlled by the Company and (ii) any
entity in which the Company has a significant equity interest, as determined by
the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent or Other
Stock-Based Award granted under the Plan.
(c) "Award Agreement" shall mean the written agreement, contract or other
instrument or document evidencing an Award granted under the Plan. Each Award
Agreement shall be subject to the applicable terms and conditions of the Plan
and any other terms and conditions (not inconsistent with the Plan) determined
by the Committee.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder.
(e) "Committee" shall mean the Compensation Committee of the Board of
Directors of the Company or such other committee of directors as may be
designated by such Board to administer the Plan. The Committee shall be
comprised of not less than such number of directors as shall be required to
permit Awards granted under the Plan to qualify under Rule 16b-3, and each
member of the Committee shall be a "Non-Employee Director" within the meaning of
Rule 16b-3.
(f) "Dividend Equivalent" shall mean any right granted under Section 5(e)
of the Plan.
(g) "Eligible Person" shall mean any director of the Company who is not an
employee of the Company or any Affiliate of the Company.
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(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee. Notwithstanding the foregoing,
for purposes of the Plan, the Fair Market Value of Shares on a given date shall
be (i) the last sale price of the Shares as reported on the Nasdaq National
Market on such date, if the Shares are then quoted on the Nasdaq National
Market, or (ii) the closing price of the Shares on such date on a national
securities exchange, if the Shares are then being traded on a national
securities exchange.
(j) "Option" shall mean an option granted under Section 5(a) of the Plan
that is not intended to qualify as an incentive stock option under Section 422
of the Code or any successor provision.
(k) "Other Stock-Based Award" shall mean any right granted under Section
5(f) of the Plan.
(l) "Participant" shall mean any Eligible Person designated to be granted
an Award under the Plan.
(m) "Performance Award" shall mean any right granted under Section 5(d) of
the Plan.
(n) "Person" shall mean any individual, corporation, partnership,
association or trust.
(o) "Restricted Stock" shall mean any Share granted under Section 5(c) of
the Plan.
(p) "Restricted Stock Unit" shall mean any unit granted under Section 5(c)
of the Plan evidencing the right to receive a Share (or a cash payment equal to
the Fair Market Value of a Share) at some future date.
(q) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act or any successor rule or regulation.
(r) "Shares" shall mean shares of Common Stock, par value $1.00 per share,
of the Company or such other securities or property as may become subject to
Awards pursuant to an adjustment made under Section 4(c) of the Plan.
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(s) "Stock Appreciation Right" shall mean any right granted under
Section 5(b) of the Plan.
3. Administration.
(a) Power and Authority of the Committee. The Plan shall be administered by
the Committee. Subject to the terms of the Plan and applicable law, the
Committee shall have full power and authority to: (i) designate Participants;
(ii)determine the type or types of Awards to be granted to each Participant
under the Plan; (iii) determine the number of Shares to be covered by (or the
method by which payments or other rights are to be calculated in connection
with) each Award; (iv) determine the terms and conditions of any Award or Award
Agreement; (v) amend the terms and conditions of any Award or Award Agreement,
provided, however, that the Committee shall not adjust or amend the exercise
price of Options or Stock Appreciation Rights previously awarded to any
Participant, whether through amendment, cancellation or replacement grants, or
any other means; (vi) accelerate the exercisability of any Award or the lapse of
restrictions relating to any Award; (vii) determine whether, to what extent and
under what circumstances Awards may be exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited or suspended;
(viii) determine whether, to what extent and under what circumstances cash,
Shares, other securities, other Awards, other property and other amounts payable
with respect to an Award under the Plan shall be deferred either automatically
or at the election of the holder thereof or the Committee; (ix) interpret and
administer the Plan and any instrument or agreement relating to, or Award made
under, the Plan; (x) establish, amend, suspend or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (xi) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under or with
respect to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive and binding
upon any Participant and any holder or beneficiary of any Award.
(b) Meetings of the Committee. The Committee shall select one of its
members as its chair and shall hold its meetings at such times and places as the
Committee may determine. A majority of the Committee's members shall constitute
a quorum. All determinations of the Committee shall be made by not less than a
majority of its members. Any decision or determination reduced to writing and
signed by all of the members of the Committee shall be fully effective as if it
had been made by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary and may make such rules and regulations for
the conduct of its business as it shall deem advisable.
4. Shares Available for Awards.
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(a) Shares Available. Subject to adjustment as provided in Section 4(c),
the number of Shares available for granting Awards under the Plan shall be
200,000. Shares issued pursuant to the Plan may be either from the authorized
but unissued Shares or from Shares reacquired by the Company, including Shares
purchased in the open market. If any Shares covered by an Award or to which an
Award relates are not purchased by the Participant or are forfeited, or if an
Award otherwise terminates without delivery of any Shares, then the number of
Shares counted against the aggregate number of Shares available under the Plan
with respect to such Award, to the extent of any such forfeiture or termination,
shall again be available for granting Awards under the Plan. In addition, any
Shares that are used by a Participant as full or partial payment to the Company
of the purchase price of Shares acquired upon exercise of an Option or Other
Stock-Based Award involving a purchase right granted pursuant to the Plan shall
again be available for granting Awards.
(b) Accounting for Awards. For purposes of this Section 4, if an Award
entitles the holder thereof to receive or purchase Shares, the number of Shares
covered by such Award or to which such Award relates shall be counted on the
date of grant of such Award against the aggregate number of Shares available for
granting Awards under the Plan.
(c) Adjustments. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company
or other similar corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and type of Shares (or
other securities or other property) which thereafter may be made the subject of
Awards, (ii) the number and type of Shares (or other securities or other
property) subject to outstanding Awards and (iii) the purchase or exercise price
with respect to any Award; provided, however, that the number of Shares covered
by any Award or to which such Award relates shall always be a whole number.
5. Awards.
(a) Options. The Committee is hereby authorized to grant Options to
Eligible Persons with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the Plan
as the Committee shall determine:
(i) Exercise Price. The purchase price per Share purchasable under an
Option shall be determined by the Committee; provided, however, that such
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purchase price shall not be less than 100% of the Fair Market Value of a
Share on the date of grant of such Option.
(ii) Option Term. The term of each Option shall be fixed by the
Committee.
(iii) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part and
the method or methods by which, and the form or forms (including, without
limitation, cash, Shares, other securities, other Awards or other property,
or any combination thereof, having a Fair Market Value on the exercise date
equal to the applicable exercise price) in which, payment of the exercise
price with respect thereto may be made or deemed to have been made.
(b) Stock Appreciation Rights. The Committee is hereby authorized to grant
Stock Appreciation Rights to Eligible Persons subject to the terms of the Plan
and any applicable Award Agreement. A Stock Appreciation Right granted under the
Plan shall confer on the holder thereof a right to receive upon exercise thereof
the excess of (i) the Fair Market Value of one Share on the date of exercise
(or, if the Committee shall so determine, at any time during a specified period
before or after the date of exercise) over (ii) the grant price of the Stock
Appreciation Right as specified by the Committee, which price shall not be less
than 100% of the Fair Market Value of one Share on the date of grant of the
Stock Appreciation Right. Subject to the terms of the Plan and any applicable
Award Agreement, the grant price, term, methods of exercise, dates of exercise,
methods of settlement and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee. The Committee may
impose such conditions or restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate.
(c) Restricted Stock and Restricted Stock Units. The Committee is hereby
authorized to grant Awards of Restricted Stock and Restricted Stock Units to
Eligible Persons with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the Plan
as the Committee shall determine:
(i) Restrictions. Shares of Restricted Stock and Restricted Stock
Units shall be subject to such restrictions as the Committee may impose
(including, without limitation, any limitation on the right to vote a Share
of Restricted Stock or the right to receive any dividend or other right or
property with respect thereto), which restrictions may lapse separately or
in combination at such time or times, in such installments or otherwise as
the Committee may deem appropriate.
(ii) Stock Certificates. At the time that Restricted Stock is granted
to an Eligible Person, such Shares of Restricted Stock shall be issued and
held by the Company or held in nominee name by the stock transfer agent or
brokerage
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service selected by the Company to provide such services for the Plan. No
stock certificates evidencing such Restricted Stock shall be issued to the
Participant prior to the lapse or waiver of restrictions applicable to such
Restricted Stock. Stock certificates registered in the name of the
Participant shall be delivered to the Participant promptly after the
applicable restrictions lapse or are waived. In the case of Restricted
Stock Units, no Shares shall be issued at the time such Awards are granted.
(iii) Forfeiture; Delivery of Shares. Except as otherwise determined
by the Committee, upon a Participant's termination of service as a director
of the Company (as determined under criteria established by the Committee)
during the applicable restriction period, all Shares of Restricted Stock
and all Restricted Stock Units held by the Participant at such time shall
be forfeited and reacquired by the Company; provided, however, that the
Committee may, when it finds that a waiver would be in the best interest of
the Company, waive in whole or in part any or all remaining restrictions
with respect to Shares of Restricted Stock or Restricted Stock Units.
Shares representing Restricted Stock that is no longer subject to
restrictions shall be delivered to the holder thereof promptly after the
applicable restrictions lapse or are waived. Upon the lapse or waiver of
restrictions and the restricted period relating to Restricted Stock Units
evidencing the right to receive Shares, such Shares shall be issued and
delivered to the holder of the Restricted Stock Units.
(d) Performance Awards. The Committee is hereby authorized to grant
Performance Awards to Eligible Persons subject to the terms of the Plan and any
applicable Award Agreement. A Performance Award granted under the Plan (i)may be
denominated or payable in cash, Shares (including, without limitation,
Restricted Stock), other securities, other Awards or other property and (ii)
shall confer on the holder thereof the right to receive payments, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. Subject to the terms of the Plan and
any applicable Award Agreement, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award granted and the amount of any payment or transfer to be made
pursuant to any Performance Award shall be determined by the Committee.
(e) Dividend Equivalents. The Committee is hereby authorized to grant to
Eligible Persons Dividend Equivalents under which the Participant shall be
entitled to receive payments (in cash, Shares, other securities, other Awards or
other property as determined in the discretion of the Committee) equivalent to
the amount of cash dividends paid by the Company to holders of Shares with
respect to a number of Shares determined by the Committee. Subject to the terms
of the Plan and any applicable Award Agreement, such Dividend Equivalents may
have such terms and conditions as the Committee shall determine.
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(f) Other Stock-Based Awards. The Committee is hereby authorized to grant
to Eligible Persons such other Awards that are denominated or payable in, valued
in whole or in part by reference to, or otherwise based on or related to, Shares
(including, without limitation, securities convertible into Shares), as are
deemed by the Committee to be consistent with the purpose of the Plan. Subject
to the terms of the Plan and any applicable Award Agreement, the Committee shall
determine the terms and conditions of such Awards. Shares or other securities
delivered pursuant to a purchase right granted under this Section 5(f) shall be
purchased for such consideration, which may be paid by such method or methods
and in such form or forms (including, without limitation, cash, Shares, other
securities, other Awards or other property, or any combination thereof), as the
Committee shall determine.
(g) General.
(i) Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with or in substitution for any other Award or any award granted
under any plan of the Company or any Affiliate other than the Plan. Awards
granted in addition to or in tandem with other Awards or in addition to or
in tandem with awards granted under any such other plan of the Company or
any Affiliate may be granted either at the same time as or at a different
time from the grant of such other Awards or awards.
(ii) Forms of Payment under Awards. Subject to the terms of the Plan
and any applicable Award Agreement, payments or transfers to be made by the
Company or an Affiliate upon the grant, exercise or payment of an Award may
be made in such form or forms as the Committee shall determine (including,
without limitation, cash, Shares, other securities, other Awards or other
property, or any combination thereof) and may be made in a single payment
or transfer, in installments or on a deferred basis, in each case in
accordance with rules and procedures established by the Committee. Such
rules and procedures may include, without limitation, provisions for the
payment or crediting of reasonable interest on installment or deferred
payments or the grant or crediting of Dividend Equivalents with respect to
installment or deferred payments.
(iii) Limits on Transfer of Awards. No Award and no right under any
such Award shall be transferable by a Participant other than by will or by
the laws of descent and distribution; provided, however, that, if so
determined by the Committee, a Participant may, in the manner established
by the Committee, designate a beneficiary or beneficiaries to exercise the
rights of the Participant and receive any property distributable with
respect to any Award upon the death of the Participant. Each Award or right
under any Award shall be exercisable during the Participant's lifetime only
by the Participant or, if permissible under applicable law, by the
Participant's guardian or legal representative. No Award or right under any
such Award may be pledged,
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<PAGE>
alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.
(iv) Term of Awards. The term of each Award shall be for such period
as may be determined by the Committee.
(v) Restrictions; Securities Exchange Listing. All certificates for
Shares or other securities delivered under the Plan pursuant to any Award
or the exercise thereof shall be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the Plan or
the rules, regulations and other requirements of the Securities and
Exchange Commission and any applicable federal or state securities laws,
and the Committee may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions. If the
Shares or other securities are traded on a securities exchange, the Company
shall not be required to deliver any Shares or other securities covered by
an Award unless and until such Shares or other securities have been
admitted for trading on such securities exchange.
6. Amendment and Termination; Corrections.
(a) Amendments to the Plan. The Board of Directors of the Company may
amend, alter, suspend, discontinue or terminate the Plan; provided, however,
that, notwithstanding any other provision of the Plan or any Award Agreement, no
amendment to the Plan will be made without the prior approval of the
shareholders of the Company that: (i) requires shareholder approval under the
rules or regulations of the National Association of Securities Dealers, Inc. or
any securities exchange that are applicable to the Company; (ii) permits
repricing of Options or Stock Appreciation Rights which is prohibited by Section
3(a)(v); (iii)increases the number of shares authorized under the Plan as
specified in Section4(a); or (iv) permits the award of Options or Stock
Appreciation Rights at a price less than 100% of the Fair Market Value of a
Share on the date of grant of such Option or Stock Appreciation Right, as
prohibited by Sections 5(a)(i) and 5(b)(ii).
(b) Amendments to Awards. Subject to the provisions of the Plan, the
Committee may waive any conditions of or rights of the Company under any
outstanding Award, prospectively or retroactively. The Committee may not amend,
alter, suspend, discontinue or terminate any outstanding Award, prospectively or
retroactively, without the consent of the Participant or holder or beneficiary
thereof, except as otherwise herein provided.
(c) Correction of Defects, Omissions and Inconsistencies. The Committee may
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or any Award in the manner and to the extent it shall deem desirable to
carry the Plan into effect.
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7. General Provisions.
(a) No Rights to Awards. No Eligible Person, Participant or other Person
shall have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Eligible Persons, Participants or
holders or beneficiaries of Awards under the Plan. The terms and conditions of
Awards need not be the same with respect to different Participants.
(b) Award Agreements. No Participant shall have rights under an Award
granted to such Participant unless and until an Award Agreement shall have been
duly executed on behalf of the Company.
(c) No Rights of Shareholders. Except with respect to Restricted Stock,
neither a Participant nor the Participant's legal representative shall be, or
have any of the rights and privileges of, a shareholder of the Company in
respect of any Shares issuable upon the exercise or payment of any Award, in
whole or in part, unless and until certificates for such Shares shall have been
issued.
(d) No Limit on Other Compensation Plans or Arrangements. Nothing contained
in the Plan shall prevent the Company or any Affiliate from adopting or
continuing in effect other or additional compensation plans or arrangements, and
such plans or arrangements may be either generally applicable or applicable only
in specific cases.
(e) Governing Law. The internal law, and not the law of conflicts, of the
State of Minnesota will govern all questions concerning the validity,
construction and effect of the Plan and any rules and regulations relating to
the Plan.
(f) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction or
would disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the purpose or intent of
the Plan or the Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or any such Award shall remain in full
force and effect.
(g) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
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(h) No Fractional Shares. No stock certificate for a fractional Share shall
be issued or delivered pursuant to the Plan or any Award, and the Committee
shall determine, in connection with the issuance or delivery of any stock
certificate pursuant to an Award, whether cash shall be paid in lieu of any
fractional Share or whether such fractional Share and any rights thereto shall
be canceled, terminated or otherwise eliminated.
(i) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
8. Effective Date of the Plan.
The Plan shall be effective as of the date of its approval by the
shareholders of the Company.
9. Term of the Plan.
Awards shall only be granted under the Plan during a 10-year period
beginning on the effective date of the Plan. However, unless otherwise expressly
provided in the Plan or in an applicable Award Agreement, any Award theretofore
granted may extend beyond the end of such 10-year period, and the authority of
the Committee provided for hereunder with respect to the Plan and any Awards,
and the authority of the Board of Directors of the Company to amend the Plan,
shall extend beyond the end of such period.
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EXHIBIT 10(D)
H.B. FULLER COMPANY
RESTRICTED STOCK AWARD AGREEMENT
(UNDER THE 1998 DIRECTORS' STOCK INCENTIVE PLAN)
THIS AGREEMENT, dated as of April 23, 1998, is entered into between H.B.
Fuller Company, a Minnesota corporation (the "Company"), and Lee R. Mitau, a
non-employee director of the Company ("Participant").
WHEREAS, the Company, pursuant to the H.B. Fuller Company 1998 Directors'
Stock Incentive Plan (the "Plan"), wishes to award to Participant shares of
common stock, par value $1.00 per share, of the Company ("Common Stock"),
subject to certain restrictions and on the terms and conditions contained in
this Agreement and the Plan;
NOW, THEREFORE, in consideration of the premises and agreements set forth
herein, the parties hereto hereby agree as follows:
1. Award of Restricted Stock.
The Company, effective as of the date of this Agreement, hereby grants to
Participant, in lieu of any retirement benefit that Participant otherwise would
have been eligible to receive under the Retirement Plan for Directors of H.B.
Fuller Company, a restricted stock award of 3,417 shares of Common Stock (the
"Shares"), subject to the terms and conditions set forth in this Agreement.
2. Rights of Participant with Respect to the Shares.
(a) Shareholder Rights. With respect to the Shares, Participant shall be
entitled at all times on and after the date of issuance of the Shares to
exercise all rights of a shareholder of Common Stock of the Company, including
the right to vote the Shares and the right to receive dividends thereon as
provided in Section2(b) hereof, unless and until the Shares are forfeited
pursuant to Section 3 hereof. The rights of Participant with respect to the
Shares shall remain forfeitable at all times prior to the date on which such
rights become vested, and the restrictions with respect to the Shares lapse, in
accordance with Section 3 hereof.
(b) Reinvestment of Dividends. As a condition to receiving the Shares under
the Plan, Participant hereby elects to defer the receipt of dividends paid on
the Shares. Participant agrees that all cash dividends otherwise payable on and
with respect to the Shares shall be reinvested in additional shares of
restricted Common Stock at the Fair Market Value of such shares ("Additional
Shares"). A report showing the number of Additional Shares so purchased with
reinvested dividends shall be sent to Participant
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within 30 days following the applicable dividend payment date. The Additional
Shares so purchased shall be subject to the same terms and conditions as the
Shares granted pursuant to this Agreement and the Additional Shares shall be
forfeited in the event that the Shares with respect to which the reinvested
dividends were paid are forfeited.
(c) Stock Certificates. The Company shall cause to be issued one or more
stock certificates evidencing the Shares and any Additional Shares. The
certificates evidencing the Shares and any Additional Shares shall be issued and
held in nominee name by the stock transfer agent or brokerage service selected
by the Company to provide such services for the Plan. No such certificates shall
be issued to Participant prior to the date on which the Shares vest, and the
restrictions with respect to the Shares lapse, in accordance with Section 3
hereof. Neither this Section2(c) nor any action taken pursuant to or in
accordance with this Section 2(c) shall be construed to create a trust of any
kind. After any Shares vest pursuant to Section 3 hereof, the Company shall
promptly cause to be issued a certificate or certificates, registered in
Participant's name or in the name of Participant's legal representatives,
beneficiaries or heirs, as the case may be, evidencing such vested whole Shares
and any Additional Shares and shall cause such certificate or certificates to be
delivered to Participant or Participant's legal representatives, beneficiaries
or heirs, as the case may be. The value of any fractional Share shall be paid in
cash at the time certificates evidencing the Shares and any Additional Shares
are delivered to Participant.
3. Vesting; Forfeiture.
(a) Vesting. Subject to the terms and conditions of this Agreement, the
Shares shall vest in full in Participant, and the restrictions with respect to
the Shares shall lapse, on October 16, 2011 if Participant continuously serves
as a director of the Company until such date.
(b) Early Vesting. Notwithstanding the vesting provision contained in
Section 3(a) above, but subject to the other terms and conditions set forth
herein, upon the occurrence of a "Change in Control" (as defined below) or in
the event of Participant's death or permanent disability prior to the vesting of
the Shares pursuant to Section 3(a) hereof, Participant or Participant's legal
representatives, beneficiaries or heirs, as the case may be, shall become
immediately vested in all of the Shares, and the restrictions with respect to
the Shares shall lapse, as of the date of such Change in Control, death or
permanent disability, as the case may be.
(c) Change in Control. For the purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred upon any of the following events:
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(i) a change in the control of the Company of a nature that would be
required to be reported in accordance with Regulation 14A promulgated under
the Securities Exchange Act of 1934 (the "Exchange Act"), whether or not
the Company is then subject to such reporting requirement;
(ii) a public announcement (which, for purposes hereof, shall include,
without limitation, a report filed pursuant to Section 13(d) of the
Exchange Act) that any individual, corporation, partnership, association,
trust or other entity becomes the beneficial owner (as defined in Rule
13(d)(3) promulgated under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting
power of the Company's then outstanding voting securities;
(iii) the individuals who, as of the date of this Agreement, are
members of the Board of Directors of the Company (the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board
(provided, however, that if the election or nomination for election by the
Company's shareholders of any new director was approved by a vote of at
least a majority of the Incumbent Board, such new director shall be
considered to be a member of the Incumbent Board);
(iv) the approval of the shareholders of the Company of (A) any
consolidation, merger or statutory share exchange of the Company with any
person in which the surviving entity would not have as its directors at
least 60% of the Incumbent Board and as a result of which those persons who
were shareholders of the Company immediately prior to such transaction
would not hold, immediately after such transaction, at least 60% of the
combined voting power of the Company's or the surviving entity's then
outstanding voting securities; (B) any sale, lease, exchange or other
transfer in one transaction or series of related transactions substantially
all of the assets of the Company; or (C) the adoption of any plan or
proposal for the complete or partial liquidation or dissolution of the
Company; or
(v) a determination by a majority of the members of the Incumbent
Board, in their sole and absolute discretion, that there has been a Change
in Control of the Company.
(d) Forfeiture. If Participant ceases to serve as a director of the Company
other than by reason of death or permanent disability prior to the vesting of
the Shares pursuant to Section 3(a) or 3(b) hereof, Participant's rights to all
of the Shares shall be immediately and irrevocably forfeited, including the
right to vote the Shares and the right to receive dividends and any Additional
Shares.
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4. Restrictions on Transfer.
Until the Shares vest pursuant to Section 3 hereof, neither the Shares, nor
any right with respect to the Shares under this Agreement, may be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of by
Participant and any purported sale, assignment, transfer, pledge, hypothecation
or other disposition shall be void and unenforceable against the Company.
Notwithstanding the foregoing, Participant may, in the manner established by the
Committee, designate a beneficiary or beneficiaries to exercise the rights of
Participant and receive any property distributable with respect to the Shares
upon the death of Participant. Each right under this Agreement shall be
exercisable during Participant's lifetime only by Participant or, if permissible
under applicable law, by Participant's legal representative.
5. Income Tax Matters.
Participant understands and agrees that the Company has not advised
Participant regarding Participant's income tax liability in connection with the
grant of the Shares pursuant to this Agreement. Participant further understands
and agrees that he is responsible for consulting his own tax counsel on
questions regarding his tax liability in connection with the grant of the Shares
and upon the vesting of the Shares and any subsequent disposition of the Shares,
and that he is solely responsible for such tax liability.
6. Securities Matters.
No Shares shall be issued hereunder prior to such time as counsel to the
Company shall have determined that the issuance of the Shares will not violate
any federal or state securities or other laws, rules or regulations. The Company
shall not be required to deliver any Shares until the requirements of any
federal or state securities or other laws, rules or regulations (including the
rules of any securities exchange) as may be determined by the Company to be
applicable are satisfied.
7. Adjustments.
In the event that the Committee shall determine that any dividend or other
distribution (whether in the form of cash, shares, other securities or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase or exchange
of shares or other securities of the Company, issuance of warrants or other
rights to purchase shares or other securities of the Company or other similar
corporate transaction or event affects the Shares such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under this Agreement, then the Committee shall, in such manner as it
-4-
<PAGE>
may deem equitable, in its sole discretion, adjust any or all of the number and
type of the Shares.
8. General Provisions.
(a) Interpretations. This Agreement is subject in all respects to the terms
of the Plan. Terms used herein which are defined in the Plan shall have the
respective meanings ascribed to such terms in the Plan, unless otherwise defined
herein. In the event that any provision of this Agreement is inconsistent with
the terms of the Plan, the terms of the Plan shall govern. Any question of
administration or interpretation arising under this Agreement shall be
determined by the Committee, and such determination shall be final and
conclusive upon all parties in interest.
(b) Headings. Headings are given to the sections and subsections of this
Agreement solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of this Agreement or any provision thereof.
(c) Governing Law. The internal law, and not the law of conflicts, of the
State of Minnesota will govern all questions concerning the validity,
construction and effect of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
H.B. FULLER COMPANY
By /s/ Norbert R. Berg
--------------------------------
Norbert R. Berg
Chair, Compensation Committee
/s/ Lee R. Mitau
--------------------------------
Lee R. Mitau
-5-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET, INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-28-1998
<PERIOD-START> DEC-30-1997
<PERIOD-END> MAY-30-1998
<CASH> 5,274
<SECURITIES> 0
<RECEIVABLES> 224,871
<ALLOWANCES> 7,768
<INVENTORY> 167,854
<CURRENT-ASSETS> 441,946
<PP&E> 738,758
<DEPRECIATION> 318,530
<TOTAL-ASSETS> 1,031,836
<CURRENT-LIABILITIES> 237,223
<BONDS> 328,267
0
306
<COMMON> 13,981
<OTHER-SE> 335,783
<TOTAL-LIABILITY-AND-EQUITY> 1,031,836
<SALES> 652,626
<TOTAL-REVENUES> 652,626
<CGS> 446,299
<TOTAL-COSTS> 166,170
<OTHER-EXPENSES> 790
<LOSS-PROVISION> 908
<INTEREST-EXPENSE> 11,782
<INCOME-PRETAX> 27,585
<INCOME-TAX> 11,254
<INCOME-CONTINUING> 17,215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,215
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.24
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET, INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-29-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> MAY-31-1997
<CASH> 3,271
<SECURITIES> 0
<RECEIVABLES> 205,508
<ALLOWANCES> 6,784
<INVENTORY> 155,167
<CURRENT-ASSETS> 407,550
<PP&E> 681,278
<DEPRECIATION> 289,182
<TOTAL-ASSETS> 899,914
<CURRENT-LIABILITIES> 244,423
<BONDS> 186,649
0
306
<COMMON> 14,096
<OTHER-SE> 328,587
<TOTAL-LIABILITY-AND-EQUITY> 899,914
<SALES> 632,963
<TOTAL-REVENUES> 632,963
<CGS> 432,762
<TOTAL-COSTS> 162,604
<OTHER-EXPENSES> (340)
<LOSS-PROVISION> 493
<INTEREST-EXPENSE> 9,899
<INCOME-PRETAX> 28,038
<INCOME-TAX> 11,439
<INCOME-CONTINUING> 16,932
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,932
<EPS-PRIMARY> 1.21<F1>
<EPS-DILUTED> 1.20<F1>
<FN>
<F1>RESTATED FOR ACCOUNTING CHANGE FOR FASB NO. 128.
</FN>
</TABLE>
