<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K405
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 28, 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 of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 Willow Lake Boulevard, St. Paul, Minnesota 55110-5101
(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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K405 or any amendment to
this Form 10-K405. [X]
The aggregate market value of the Common Stock, par value $1.00 per share, held
by non-affiliates of the Registrant as of January 29, 1999 was approximately
$560,199,000 (based on the closing price of such stock as quoted on the Nasdaq
National Market ($43.00) on such date).
The number of shares outstanding of the Registrant's Common Stock, par value
$1.00 per share, was 13,982,649 as of January 29, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and IV incorporate information by reference to portions of the H.B.
Fuller Company 1998 Annual Report to Shareholders.
Part III incorporates information by reference to portions of the Registrant's
Proxy Statement dated March 5, 1999.
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H.B. FULLER COMPANY
1998 Form 10-K405 Annual Report
Table of Contents
PART I
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Page
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Item 1. Business 3
Item 2. Properties 6
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Executive Officers of the Registrant 8
PART II
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Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters 9
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 9
Item 8. Financial Statements and Supplementary Data 9
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure 9
PART III
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Item 10. Directors and Executive Officers of the Registrant 10
Item 11. Executive Compensation 10
Item 12. Security Ownership of Certain Beneficial Owners and Management 10
Item 13. Certain Relationships and Related Transactions 10
PART IV
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Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 11
Signatures 15
Schedule II - Valuation and Qualifying Accounts 17
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PART I
Item 1.
Business
Founded in 1887 and incorporated as a Minnesota corporation in 1915, H.B. Fuller
Company (the "Company") today is a worldwide manufacturer and marketer of
adhesives, sealants, coatings, paints and other specialty chemical products. The
Company currently employs approximately 6,000 people and has sales operations in
42 countries in North America, Europe, Latin America and the Asia/Pacific
region.
The Company's largest worldwide business category is adhesives, sealants and
coatings, which generated more than 90 percent of 1998 sales. These products, in
thousands of formulations, are sold to customers in a wide range of industries,
including packaging, woodworking, automotive, aerospace, graphic arts
(books/magazines), appliances, filtration, windows, sporting goods, nonwovens,
shoes and ceramic tile.
The Company also is a quality producer and supplier of powder coatings to metal
finishing industries; commercial and industrial paints in Latin American
markets; as well as mastics and coatings for thermal insulation, indoor air
quality and asbestos abatement applications in the United States.
Segment Information
For financial information relating to major geographic areas of the Company, see
Note 15, "Business Segment Information", on pages 47 and 48 of the Company's
1998 Annual Report to Shareholders, incorporated herein by reference.
Line of Business and Classes of Similar Products
The Company is engaged in one line of business, the manufacturing of specialty
chemical products which includes formulating, compounding and marketing
adhesives, sealants and coatings, paints, specialty waxes and related chemicals.
The following tabulation sets forth information concerning the approximate
contribution to consolidated sales of the Company's classes of products:
Class of Product Sales
----------------------------------
1998 1997 1996
---- ---- ----
Adhesives, sealants and coatings 91% 90% 88%
Paints 8 7 7
Other 1 3 5
--- --- ---
100% 100% 100%
=== === ===
Non-U.S. Operations
Wherever feasible, the Company's practice has been to establish manufacturing
units outside of the United States to service the local markets. The principal
markets, products and methods of distribution in the non-U.S. business vary with
the country or business practices of the country. The products sold include not
only those developed by the local manufacturing plants but also those developed
within the United States and elsewhere in the world.
The Company's operations overseas face varying degrees of economic and political
risk. At the end of fiscal year 1998, the Company had plants in 29 countries
outside the United States and satellite sales offices in another 13 countries.
The Company also uses license agreements to maintain a worldwide manufacturing
network. In the opinion of management of the Company, there are several
countries where the Company has operating facilities which have political risks
higher than in the United States. Where possible, the Company insures its
physical assets against damage from civil unrest.
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Competition
The Company encounters a high degree of competition in the marketing of its
products. Because of the large number and variety of its products, the Company
does not compete directly with any one competitor in all of its markets. The
Company competes with several large firms as well as many smaller local,
independent firms. In North America there are a large number of competitors.
Since adhesives of all types are widely used, it is not possible to identify a
few competitors who would represent the major competition.
In Latin America, the Company experiences substantial competition in marketing
its printing inks and industrial adhesives. In Central America, it is a major
factor in the industrial adhesives market and, along with several other large
paint manufacturing firms, in the residential paint market. In Europe, the
Company is a large manufacturer of adhesives and competes in certain areas of
this market with several large companies.
The principal competitive factors in the sale of adhesives, paints, coatings and
sealants are product performance, customer and technical service, quality and
price.
Customers
Of the Company's $1,347,241,000 total sales to unaffiliated customers in 1998,
$779,499,000 was sold through North American operations. The Company's largest
customer accounts for less than 5% of consolidated sales.
Backlog
Orders for the Company's products are generally processed within one week.
Therefore, the Company had no significant backlog of unfilled orders at November
28, 1998, November 29, 1997 or November 30, 1996.
Raw Materials
The Company purchases from large chemical suppliers raw materials including
solvents, plasticizers, waxes, resins, polymers and vinyl acetate monomer which
the Company uses to manufacture its principal products. Natural raw materials
are also purchased from outside suppliers and include starch, dextrines, natural
latex and resins. The Company attempts to find multiple sources for all of its
raw materials and alternate sources of supply are generally available. An
adequate supply of the raw materials used by the Company is presently available
in the open market. The Company's Latin American and Asia/Pacific operations
import many of their raw materials. Extended delivery schedules of these
materials are common, thereby requiring maintenance of higher inventory levels
than those maintained in North America and Europe.
A significant portion of the Company's raw materials are derived from
petroleum-based products and this is common to all adhesive manufacturers.
The Company is not a large consumer of energy and, therefore, has not
experienced any difficulties in obtaining energy for its manufacturing
operations. The Company anticipates it will be able to obtain needed energy
supplies in the future.
Patents, Trademarks and Licenses
Much of the technology used in the manufacturing of adhesives, coatings and
other specialty chemicals is in the public domain. To the extent that it is not,
the Company relies on trade secrets and patents to protect its know-how. The
Company has agreements with many of its employees for the purpose of protecting
the Company's rights to technology and intellectual property. The Company also
routinely obtains confidentiality commitments from customers, suppliers and
others to safeguard its proprietary information. Company trademarks such as HB
Fuller(R), Kativo(R), Protecto(R) and Rakoll(R) are of continuing importance in
marketing its products.
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Research and Development
The Company conducts research and development activities in an effort to improve
existing products and to design new products and processes. The Company's
research and development expenses during 1998, 1997 and 1996 aggregated
$22,255,000, $24,830,000 and $25,823,000, respectively.
Environmental Protection
The Company regularly reviews and upgrades its environmental policies, practices
and procedures and seeks improved production methods that reduce waste,
particularly toxic waste, coming out of its facilities, based upon evolving
societal standards and increased environmental understanding.
The Company's high standards of environmental consciousness are supported by an
organizational program supervised by environmental professionals and the
Worldwide Environment, Health and Safety Committee, a committee with management
membership from around the world which proactively monitors practices at all
facilities. Company practices are often more stringent than local government
standards. The Company integrates environmental programs into operating
objectives, thereby translating philosophy into every day practice.
The Company believes that as a general matter its current policies, practices
and procedures in the areas of environmental regulations and the handling of
hazardous waste are designed to substantially reduce risks of environmental and
other damage that would result in litigation and financial liability. Some risk
of environmental and other damage is, however, inherent in particular operations
and products of the Company, as it is with other companies engaged in similar
businesses.
The Company is and has been engaged in the handling, manufacture, use, sale
and/or disposal of substances, some of which are considered by federal or state
environmental agencies to be hazardous. The Company believes that its
manufacture, handling, use, sale and disposal of such substances are generally
in accord with current applicable environmental regulations. Increasingly strict
environmental laws, standards and enforcement policies may increase the risk of
liability and compliance costs associated with such substances.
Environmental expenditures, reasonably known to management, to comply with
environmental regulations over the Company's next two fiscal years are estimated
to be approximately $8.0 million. See additional disclosure under Item 3, Legal
Proceedings.
Employees
The Company and its consolidated subsidiaries employed approximately 6,000
persons on November 28, 1998, of which approximately 2,300 persons were employed
in the United States.
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Item 2.
Properties
The principal manufacturing plants and other properties are located in 30
countries:
U.S. Locations
--------------
California Michigan
Chatsworth Grand Rapids
Los Angeles (1 owned, 1 leased) Madison Heights*
Roseville Taylor
Florida Warren
Gainesville Minnesota
Pompano Beach Minneapolis and St. Paul
Georgia (7 owned, 1 leased)
Covington (2 owned) New Jersey - Edison
Forest Park (1 owned, 1 leased)
Tucker North Carolina - Greensboro
Illinois Ohio
Palatine Cincinnati
Tinley Park Dayton
Indiana - Elkhart Tennessee - Memphis*
Kentucky Texas
Paducah Dallas
Houston
Washington - Vancouver
Other Locations
---------------
Argentina - Buenos Aires Honduras
Australia - Melbourne San Pedro Sula (2 owned)
Austria - Wels Italy - Borgolavezzaro
Brazil - Sao Paulo Japan - Hamamatsu
Canada Mexico - Mexico City*
St. Andre est Netherlands - Amerongen
Montreal New Zealand - Auckland
Toronto Nicaragua - Managua
Chile - Santiago People's Republic of
Colombia - Itagui* China - Guangzhou*
Costa Rica - San Jose (5 owned) Peru - Lima
Dominican Republic - Santo Domingo Philippines - Manila*
Ecuador - Guayaquil (2 owned) Puerto Rico - Bayamon
El Salvador - San Salvador Republic of Panama - Panama City
Federal Republic of Germany Spain - Alicante
Luneburg United Kingdom
Nienburg* Birmingham*
France - Le Trait Chesham
Guatemala - Guatemala City Dukinfield
Leabrooks*
Venezuela - Caracas
*Leased properties
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The Company's principal executive offices and central research facilities are
Company owned and located in the St. Paul, Minnesota metropolitan area. The
Company has facilities for the manufacture of various products with total floor
space of approximately 1,656,000 square feet, including 325,000 square feet of
leased space. In addition, the Company has approximately 1,992,000 square feet
of warehouse space, including 504,000 square feet of leased space. Offices and
other facilities total 1,842,000 square feet, including 453,000 square feet of
leased space. The Company believes that the properties owned or leased are
suitable and adequate for its business.
Item 3.
Legal Proceedings
Environmental Remediation
The Company is subject to the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and similar state laws that impose
liability for costs relating to the clean-up of contamination resulting from
past spills, disposal or other release of hazardous substances. The Company is
currently involved in administrative proceedings or lawsuits under CERCLA or
such state laws relating to clean-up of 15 sites. The future costs in connection
with all of these matters have not been determined due to such factors as the
unknown timing and extent of the remedial actions which may be required, the
full extent of clean-up costs and the amount of the Company's liability in
consideration of the liability and financial resources of the other potentially
responsible parties. However, based on currently available information, the
Company does not believe that any liabilities allocated to it in these
administrative proceedings or lawsuits, individually or in the aggregate, will
have a material adverse affect on the Company's business or financial condition.
The Company has received requests for information from federal, state or local
government entities regarding 8 other contaminated sites. The Company has not
been named a party to any administrative proceedings or lawsuits relating to the
clean-up of these sites.
From time to time the Company becomes aware of compliance matters relating to,
or receives notices from federal, state or local entities regarding possible or
alleged violations of environmental, health or safety laws and regulations. In
some instances, these matters may become the subject of administrative
proceedings or lawsuits and may involve monetary sanctions of $100,000 or more
(exclusive of interest and costs). Based on currently available information, the
Company does not believe that such compliance matters or alleged violations of
laws and regulations, individually or in the aggregate, will have a material
adverse affect on the Company's business or financial condition.
Other Legal Proceedings
The Company is subject to legal proceedings incidental to its business. Based on
currently available information, the Company does not believe that an adverse
outcome in any pending legal proceedings individually or in the aggregate would
have a material adverse affect on the Company's business or financial condition.
Item 4.
Submission of Matters to a Vote of Security Holders
Not applicable.
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<PAGE>
Executive Officers of the Registrant
The following sets forth the name, age and business experience for at least the
past five years of each of the executive officers of the Company as of January
1, 1999. Unless otherwise noted, the positions described are positions with the
Company or its subsidiaries.
<TABLE>
<CAPTION>
Name Age Position Period Served
- ---- --- -------- -------------
<S> <C> <C>
Albert P.L. Stroucken 51 President and Chief Executive Officer April, 1998-Present
General Manager, Inorganics Division, Bayer AG 1997-1998
Executive Vice President, 1992-1997
President of Industrial Chemicals Division, Bayer Corporation
Jorge Walter Bolanos 55 Senior Vice President 1995-Present
Chief Financial Officer and Treasurer 1992-Present
Lars T. Carlson 60 Senior Vice President-Administration 1996-Present
Vice President 1986-1996
Alan R. Longstreet 52 Senior Vice President, Global Strategic Business Units 1998-Present
Vice President-Asia/Pacific Group Manager 1996-1998
Vice President-ASC Structural 1992-1996
John T. Ray, Jr. 61 General Manager, North American ASC 1998-Present
Senior Vice President 1984-Present
Richard C. Baker 46 Corporate Secretary 1995-Present
Vice President 1993-Present
General Counsel 1990-Present
Matthew Critchley 49 Group President, Group Manager, Asia/Pacific ASC October, 1998-Present
Managing Director, Australia/New Zealand 1994-1998
Peter Koxholt 54 Group President, General Manager, Europe ASC January, 1999-Present
Head of Business Unit Textile Chemicals & Specialties, Bayer AG 1995-1998
Vice President, Enamels and Ceramics Business, 1991-1995
Bayer Corporation
Antonio Lobo 56 General Manager, Latin America ASC 1996-Present
Vice President 1989-Present
Asia Pacific Group Manager 1989-1996
David J. Maki 57 Vice President 1990-Present
Controller 1987-Present
Walter Nussbaumer 41 Chief Technology Officer January, 1999-Present
Director of Research & Development 1997-1998
Corporate Research & Development, Group Leader 1992-1997
Linda J. Welty 43 Group President, General Manager, Specialty September, 1998-Present
Vice President, General Manager, Clariant International 1997-1998
Global Business Director, 1994-1996
Superabsorbent Materials, Clariant International
</TABLE>
The executive officers of the Company are elected annually by the Board of
Directors with the exception of the Group Presidents, Group Managers and the
Chief Technology Officer, who hold appointed offices.
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PART II
Information for Items 5 through 8 of this report appear in the 1998 H.B. Fuller
Company Annual Report to Shareholders as indicated in the following table and is
incorporated herein by reference to the applicable portions of such Annual
Report:
Annual Report to
Shareholders
Page
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Item 5.
Market for Registrant's Common Stock
and Related Stockholder Matters
Trading Market 52
High and Low Market Value 52
Dividend Payments 52
Dividend Restrictions (Note 14) 45
Holders of Common Stock 52
Item 6.
Selected Financial Data
1988 - 1998 in Review and
Selected Financial Data 50-51
Item 7.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management's Analysis of Results of
Operations and Financial Condition 23-30
Item 7A.
Quantitative and Qualitative Disclosures
About Market Risk
Financial Instruments 36-37
Item 8.
Financial Statements and Supplementary Data
Consolidated Financial Statements 31-48
Quarterly Data (Unaudited)(Note 16) 48
Report of the Independent Accountants 49
Item 9.
Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure
None
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<PAGE>
PART III
Item 10.
Directors and Executive Officers of the Registrant
The information under the heading "Election of Directors" (but not including the
sections entitled "Directors' Compensation" and "Board Meetings and Committees")
and the section entitled "Section 16(a) Beneficial Ownership Reporting
Compliance" contained in the Company's Proxy Statement dated March 5, 1999 (the
"1999 Proxy Statement") are incorporated herein by reference.
The information contained at the end of Part I hereof under the heading
"Executive Officers of the Registrant" is incorporated herein by reference.
Item 11.
Executive Compensation
The section under the heading "Election of Directors" entitled "Directors'
Compensation" and the sections under the heading "Executive Compensation"
entitled "Summary Compensation Table," "Aggregated Option Exercises in Fiscal
Year 1998 and Fiscal Year End Option Values," "Retirement Plans," "Employment
and Consulting Agreements", "Separation Agreements" and "Change in Control
Arrangements" contained in the 1999 Proxy Statement are incorporated herein by
reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management
The information under the heading "Security Ownership of Certain Beneficial
Owners and Management" contained in the 1999 Proxy Statement is incorporated
herein by reference.
Item 13.
Certain Relationships and Related Transactions
The section entitled "Exchange Agreement" contained in the 1999 Proxy Statement
is incorporated herein by reference.
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PART IV
Item 14.
Exhibits, Financial Statement Schedules and Reports on Form 8-K
<TABLE>
<CAPTION>
Reference
-----------------------------------
Form 10-K405 Annual Report
Annual Report to Shareholders
Page Page
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<S> <C> <C>
(a)(1.) Index to Consolidated Financial Statements
Incorporated by Reference to the applicable portions of
the 1998 Annual Report to Shareholders of H.B. Fuller
Company:
Consolidated Statements of Earnings for the
Three Years Ended November 28, 1998,
November 29, 1997 and November 30, 1996 31
Consolidated Balance Sheets as of
November 28, 1998 and November 29, 1997 32
Consolidated Statements of Stockholders' Equity
for the Three Years Ended November 28, 1998,
November 29, 1997 and November 30, 1996 33
Consolidated Statements of Cash Flows
for the Three Years Ended November 28, 1998,
November 29, 1997 and November 30, 1996 34
Notes to Consolidated Financial Statements 35-48
Report of Independent Accountants 49
(a)(2.) Index to Consolidated Financial Statement
Schedules for the Three Years Ended November 28, 1998,
November 29, 1997 and November 30, 1996:
Report of Independent Accountants on Financial
Statement Schedules 16
Schedule II Valuation and Qualifying Accounts 17
</TABLE>
All other financial statement schedules are omitted as the required information
is inapplicable or the information is given in the financial statements or
related notes.
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(a)(3.) Exhibits
Exhibit Number
3(a) Restated Articles of Incorporation of H.B. Fuller Company, October 30,
1998.
3(b) By-Laws of H.B. Fuller Company as amended and restated as of October
15, 1998.
4(a) Rights Agreement, dated as of July 18, 1996, between H.B. Fuller
Company and Norwest Bank Minnesota, National Association, as Rights
Agent, which includes as an exhibit the form of Right Certificate -
incorporated by reference to Exhibit 4 to the Registrant's Form 8-K,
dated July 24, 1996.
4(b) Specimen Stock Certificate.
4(c) Stock Exchange Agreement, dated July 18, 1996, between H.B. Fuller
Company and Elmer L. Andersen, including Designations for Series B
Preferred Stock - incorporated by reference to Exhibit 10 to the
Registrant's Form 8-K, dated July 24, 1996.
4(d) Agreement dated as of June 2, 1998 between H.B. Fuller Company and a
group of investors, primarily insurance companies, including the form
of Notes - incorporated by reference to Exhibit 4(a) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended August
29, 1998.
*10(a) H.B. Fuller Company 1992 Stock Incentive Plan - incorporated by
reference to Exhibit 10(a) to the Registrant's Annual Report on Form
10-K for the year ended November 30, 1992.
*10(b) H.B. Fuller Company Restricted Stock Plan - incorporated by reference
to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the
year ended November 30, 1993.
*10(c) H.B. Fuller Company Restricted Stock Unit Plan - incorporated by
reference to Exhibit 10(d) to the Registrant's Annual Report on Form
10-K for the year ended November 30, 1993.
*10(d) Directors' Stock Plan as Amended and Restated July 16, 1998 -
incorporated by reference to Exhibit 10(a) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended August 29, 1998.
*10(e) H.B. Fuller Company 1987 Stock Incentive Plan - incorporated by
reference to Exhibit 4(a) to the Registrant's Registration Statement on
Form S-8 (Commission File No. 33-16082).
*10(f) H.B. Fuller Company Executive Benefit Trust, dated October 25, 1993
between H.B. Fuller Company and First Trust National Association, as
Trustee, relating to the H.B. Fuller Company Supplemental Executive
Retirement Plan - incorporated by reference to Exhibit 10(k) to the
Registrant's Annual Report on Form 10-K for the year ended November 29,
1997.
*10(g) Form of Employment Agreement signed by executive officers -
incorporated by reference to Exhibit 10(e) to the Registrant's Annual
Report on Form 10-K for the year ended November 30, 1990 (Commission
File No. 0-3488).
*10(h) Pension Plan Agreement with Dr. Hermann Lagally signed February 5, 1980
(English translation) incorporated by reference to Exhibit 10(h) to the
Registrant's Annual Report on Form 10-K for the year ended November 30,
1996.
*10(i) Managing Director Agreement with Dr. Hermann Lagally signed December 1,
1995 - incorporated by reference to Exhibit 10(i) to the Registrant's
Annual Report on Form 10-K for the year ended November 30, 1996.
*10(j) H.B. Fuller Company Supplemental Executive Retirement Plan - 1998
Revision.
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<PAGE>
(a)(3.) Exhibits (continued)
*10(k) Amendments to H.B. Fuller Company Executive Benefit Trust, dated
October 1, 1997 and March 2, 1998, between H.B. Fuller Company and
First Trust National Association, as Trustee, relating to the H.B.
Fuller Company Supplemental Executive Retirement Plan.
*10(l) Deferred Compensation Agreement dated December 22, 1994, between H.B.
Fuller Company and Walter Kissling - incorporated by reference to
Exhibit 10(m) to the Registrant's Annual Report on Form 10-K405 for the
year ended November 30, 1994.
*10(m) First Amendment to Deferred Compensation Agreement dated December 22,
1994, between H.B. Fuller Company and Walter Kissling - incorporated by
reference to Exhibit 10(m) to the Registrant's Annual Report on Form
10-K for the year ended November 29, 1997.
*10(n) Deferred Compensation Agreement dated May 5, 1997, between H.B. Fuller
Company and Walter Kissling - incorporated by reference to Exhibit
10(n) to the Registrant's Annual Report on Form 10-K for the year ended
November 29, 1997.
*10(o) Split-Dollar Insurance Agreement, dated May 5, 1997, between H.B.
Fuller Company and Jorge Walter Bolanos, as Trustee of the Walter
Kissling Irrevocable Trust Agreement dated May 5, 1997 - incorporated
by reference to Exhibit 10(o) to the Registrant's Annual Report on Form
10-K for the year ended November 29, 1997.
*10(p) Retirement Plan for Directors of H.B. Fuller Company - incorporated by
reference to Exhibit 10(n) to the Registrant's Annual Report on Form
10-K405 for the year ended November 30, 1994.
*10(q) 1996 Performance Unit Plan - incorporated by reference to Exhibit 10(n)
to the Registrant's Annual Report on Form 10-K for the year ended
November 30, 1996.
*10(r) Employment Agreement, dated as of April 16, 1998, between H.B. Fuller
Company and Albert Stroucken - incorporated by reference to Exhibit
10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended May 30, 1998.
*10(s) 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 - incorporated by
reference to Exhibit 10(b) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended May 30, 1998.
*10(t) H.B. Fuller Company 1998 Directors' Stock Incentive Plan- incorporated
by reference to Exhibit 10(c) to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended May 30, 1998.
*10(u) Restricted Stock Award Agreement, dated as of April 23, 1998, between
H.B. Fuller Company and Lee R. Mitau - incorporated by reference to
Exhibit 10(d) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended May 30, 1998.
*10(v) Separation Agreement dated August 28, 1998 between H.B. Fuller Company
and Jerald L. Scott - incorporated by reference to Exhibit 10(b) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended August
29, 1998.
*10(w) Separation Agreement dated August 28, 1998 between H.B. Fuller Company
and Rolf Schubert - incorporated by reference to Exhibit 10(c) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended August
29, 1998.
*10(x) First Amendment to H.B. Fuller Company Supplemental Executive
Retirement Plan dated November 4, 1998.
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<PAGE>
(a)(3.) Exhibits (continued)
*10(y) Form of Change in Control Agreement dated as of April 8, 1998 between
H.B. Fuller Company and each of its executive officers, other than
Albert Stroucken.
*10(z) English translation of Separation Agreement dated December 14, 1998
between H.B. Fuller Company and Dr. Hermann Lagally.
*Asterisked items are management contracts or compensatory plans or arrangements
required to be filed as an exhibit to this Form 10-K405 pursuant to Item 14(c)
of this Form 10-K405.
11 Statement re: Computation of Net Earnings Per Common Share
13 Pages 23-52 of the 1998 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23 Consent of PricewaterhouseCoopers LLP
24 Powers of Attorney
27(a) Financial Data Schedule
27(b) Restated Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the
fiscal year ended November 28, 1998.
(c) See Exhibit Index and Exhibits attached to this Form 10-K405.
(d) See Financial Statement Schedule included at the end of this Form
10-K405.
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<PAGE>
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
H.B. FULLER COMPANY
Dated: February 25, 1999 By /s/ Albert P.L. Stroucken
---------------------------------
ALBERT P.L. STROUCKEN
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
Signature Title
--------- -----
/s/ Albert P.L. Stroucken President and
- --------------------------------- Chief Executive Officer and Director
ALBERT P.L. STROUCKEN (Principal Executive Officer)
/s/ Jorge Walter Bolanos Senior Vice President,
- --------------------------------- Chief Financial Officer and Treasurer
JORGE WALTER BOLANOS (Principal Financial Officer)
/s/ David J. Maki Vice President and Controller
- --------------------------------- (Principal Accounting Officer)
DAVID J. MAKI
*Anthony L. Andersen *Norbert R. Berg
- --------------------------------- ---------------------------------
ANTHONY L. ANDERSEN NORBERT R. BERG, Director
Chair, Board of Directors and
Director
*Edward L. Bronstien, Jr. *Freeman Ford
- --------------------------------- ---------------------------------
EDWARD L. BRONSTIEN, JR., Director FREEMAN FORD, Director
- --------------------------------- ---------------------------------
GAIL D. FOSLER, Director REATHA CLARK KING, Director
*John J. Mauriel, Jr.
- --------------------------------- ---------------------------------
WALTER KISSLING, Director JOHN J. MAURIEL, JR., Director
*Lee R. Mitau *Rolf Schubert
- --------------------------------- ---------------------------------
LEE R. MITAU, Director ROLF SCHUBERT, Vice President and
Director
*Lorne C. Webster
- ---------------------------------
LORNE C. WEBSTER, Director
*By: /s/ Richard C. Baker Dated: February 25, 1999
----------------------------
RICHARD C. BAKER
Attorney in Fact
-15-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of H.B. Fuller Company
Our audits of the consolidated financial statements referred to in our report
dated January 8, 1999 appearing in the 1998 Annual Report to Stockholders of
H.B. Fuller Company (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K405) also included
an audit of the Financial Statement Schedule listed in Item 14(a) of this Form
10-K405. In our opinion, this Financial Statement Schedule presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
January 8, 1999
-16-
<PAGE>
Schedule II
H.B. Fuller Company and Consolidated Subsidiaries
Valuation and Qualifying Accounts
(Dollars in thousands)
Allowance for doubtful receivables
--------------------------------------------
November 28, November 29, November 30,
Years Ended 1998 1997 1996
- ----------- ------------ ------------ ------------
Balance at beginning of period $5,879 $7,043 $6,256
Additions(deductions):
Charged to costs and expenses 2,232 1,183 2,745
Accounts charged off during year (2,836) (1,991) (1,897)
Accounts of business sold (154) (88) -
Effect of currency exchange rate
changes on beginning of year
balance (48) (268) (61)
------ ------ ------
Balance at end of period $5,073 $5,879 $7,043
====== ====== ======
-17-
<PAGE>
EXHIBIT INDEX
Exhibit Number
*3(a) Restated Articles of Incorporation of H.B. Fuller Company, October 30,
1998.
*3(b) By-Laws of H.B. Fuller Company as amended and restated as of October
15, 1998.
4(a) Rights Agreement, dated as of July 18, 1996, between H.B. Fuller
Company and Norwest Bank Minnesota, National Association, as Rights
Agent, which includes as an exhibit the form of Right Certificate -
incorporated by reference to Exhibit 4 to the Registrant's Form 8-K,
dated July 24, 1996.
*4(b) Specimen Stock Certificate.
4(c) Stock Exchange Agreement, dated July 18, 1996, between H.B. Fuller
Company and Elmer L. Andersen, including Designations for Series B
Preferred Stock - incorporated by reference to Exhibit 10 to the
Registrant's Form 8-K, dated July 24, 1996.
4(d) Agreement dated as of June 2, 1998 between H.B. Fuller Company and a
group of investors, primarily insurance companies, including the form
of Notes - incorporated by reference to Exhibit 4(a) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended August
29, 1998.
10(a) H.B. Fuller Company 1992 Stock Incentive Plan - incorporated by
reference to Exhibit 10(a) to the Registrant's Annual Report on Form
10-K for the year ended November 30, 1992.
10(b) H.B. Fuller Company Restricted Stock Plan - incorporated by reference
to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the
year ended November 30, 1993.
10(c) H.B. Fuller Company Restricted Stock Unit Plan - incorporated by
reference to Exhibit 10(d) to the Registrant's Annual Report on Form
10-K for the year ended November 30, 1993.
10(d) Directors' Stock Plan as Amended and Restated July 16, 1998 -
incorporated by reference to Exhibit 10(a) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended August 29, 1998.
10(e) H.B. Fuller Company 1987 Stock Incentive Plan - incorporated by
reference to Exhibit 4(a) to the Registrant's Registration Statement on
Form S-8 (Commission File No. 33-16082).
10(f) H.B. Fuller Company Executive Benefit Trust, dated October 25, 1993
between H.B. Fuller Company and First Trust National Association, as
Trustee, relating to the H.B. Fuller Company Supplemental Executive
Retirement Plan - incorporated by reference to Exhibit 10(k) to the
Registrant's Annual Report on Form 10-K for the year ended November 29,
1997.
10(g) Form of Employment Agreement signed by executive officers -
incorporated by reference to Exhibit 10(e) to the Registrant's Annual
Report on Form 10-K for the year ended November 30, 1990 (Commission
File No. 0-3488).
10(h) Pension Plan Agreement with Dr. Hermann Lagally signed February 5, 1980
(English translation) - incorporated by reference to Exhibit 10(h) to
the Registrant's Annual Report on Form 10-K for the year ended November
30, 1996.
10(i) Managing Director Agreement with Dr. Hermann Lagally signed December 1,
1995 - incorporated by reference to Exhibit 10(i) to the Registrant's
Annual Report on Form 10-K for the year ended November 30, 1996.
*10(j) H.B. Fuller Company Supplemental Executive Retirement Plan - 1998
Revision.
<PAGE>
*10(k) Amendments to H.B. Fuller Company Executive Benefit Trust, dated
October 1, 1997 and March 2, 1998, between H.B. Fuller Company and
First Trust National Association, as Trustee, relating to the H.B.
Fuller Company Supplemental Executive Retirement Plan.
10(l) Deferred Compensation Agreement dated December 22, 1994, between H.B.
Fuller Company and Walter Kissling - incorporated by reference to
Exhibit 10(m) to the Registrant's Annual Report on Form 10-K405 for the
year ended November 30, 1994.
10(m) First Amendment to Deferred Compensation Agreement dated December 22,
1994, between H.B. Fuller Company and Walter Kissling - incorporated by
reference to Exhibit 10(m) to the Registrant's Annual Report on Form
10-K for the year ended November 29, 1997.
10(n) Deferred Compensation Agreement dated May 5, 1997, between H.B. Fuller
Company and Walter Kissling - incorporated by reference to Exhibit
10(n) to the Registrant's Annual Report on Form 10-K for the year ended
November 29, 1997.
10(o) Split-Dollar Insurance Agreement, dated May 5, 1997, between H.B.
Fuller Company and Jorge Walter Bolanos, as Trustee of the Walter
Kissling Irrevocable Trust Agreement dated May 5, 1997 - incorporated
by reference to Exhibit 10(o) to the Registrant's Annual Report on Form
10-K for the year ended November 29, 1997.
10(p) Retirement Plan for Directors of H.B. Fuller Company - incorporated by
reference to Exhibit 10(n) to the Registrant's Annual Report on Form
10-K405 for the year ended November 30, 1994.
10(q) 1996 Performance Unit Plan - incorporated by reference to Exhibit 10(n)
to the Registrant's Annual Report on Form 10-K for the year ended
November 30, 1996.
10(r) Employment Agreement, dated as of April 16, 1998, between H.B. Fuller
Company and Albert Stroucken - incorporated by reference to Exhibit
10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended May 30, 1998.
10(s) 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 - incorporated by
reference to Exhibit 10(b) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended May 30, 1998.
10(t) H.B. Fuller Company 1998 Directors' Stock Incentive Plan- incorporated
by reference to Exhibit 10(c) to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended May 30, 1998.
10(u) Restricted Stock Award Agreement, dated as of April 23, 1998, between
H.B. Fuller Company and Lee R. Mitau - incorporated by reference to
Exhibit 10(d) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended May 30, 1998.
10(v) Separation Agreement dated August 28, 1998 between H.B. Fuller Company
and Jerald L. Scott - incorporated by reference to Exhibit 10(b) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended August
29, 1998.
10(w) Separation Agreement dated August 28, 1998 between H.B. Fuller Company
and Rolf Schubert - incorporated by reference to Exhibit 10(c) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended August
29, 1998.
*10(x) First Amendment to H.B. Fuller Company Supplemental Executive
Retirement Plan dated November 4, 1998.
*10(y) Form of Change in Control Agreement dated as of April 8, 1998 between
H.B. Fuller Company and each of its executive officers, other than
Albert Stroucken.
<PAGE>
*10(z) English translation of Separation Agreement dated December 14, 1998
between H.B. Fuller Company and Dr. Hermann Lagally.
*11 Statement re: Computation of Net Earnings Per Common Share
*13 Pages 23-52 of the 1998 Annual Report to Shareholders
*21 Subsidiaries of the Registrant
*23 Consent of PricewaterhouseCoopers LLP
*24 Powers of Attorney
*27(a) Financial Data Schedule
*27(b) Restated Financial Data Schedule
* Asterisked exhibits are filed with this 10-K.
<PAGE>
Exhibit 3(a)
10/30/98
RESTATED ARTICLES OF INCORPORATION
OF
H.B. FULLER COMPANY
ARTICLE I
The name of the corporation shall be H.B. FULLER COMPANY.
ARTICLE II
The address of the registered office of the Corporation in the
state is 1200 Willow Lake Boulevard, St. Paul, Minnesota 55110-5101 (mailing
address: P.O. Box 64683, St. Paul, MN 55164-0683).
ARTICLE III
The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is fifty million forty-five thousand
nine hundred (50,045,900) shares, consisting of forty million (40,000,000)
shares of common stock, par value $1.00 per share (the "Common Stock"), and ten
million forty-five thousand nine hundred (10,045,900) shares of preferred stock
("Preferred Stock"). A description of the Preferred Stock and the Common Stock
and a statement of the relative rights, voting power, preferences and
restrictions granted to or imposed upon the shares of each class thereof are as
follows:
1. No Cumulative Voting. The shareholders of the Corporation shall have
no right to cumulate votes in the election of directors.
2. Common Stock. The holders of the Common Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of funds legally
available therefor, dividends payable either in cash, in property or in shares
of the capital stock of the Corporation. Each holder of record of the Common
Stock shall have one vote for each share of Common Stock registered in the
holder's name on the books of the Corporation and entitled to vote. No holders
of Common Stock shall have any preemptive or preferential right of subscription
to any shares of capital stock of the Corporation or to any obligations
convertible into such shares. The Common Stock shall have no special powers,
preferences or rights, or qualifications, limitations or restrictions thereof.
3. Preferred Stock
(a) Forty-five thousand nine hundred (45,900) of the shares of
Preferred Stock, par value $6.6667, are hereby designated as "Series A Preferred
Stock." The holders of Series A Preferred Stock shall have the following rights
and preferences:
(i) The holders of Series A Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, from funds
legally available therefor, cumulative cash dividends at the rate of
$0.50 per share per annum from March 1, 1992 to and including April 30,
1992, and $0.3333 per share per annum thereafter, payable
quarter-annually on dates to be determined by the Board of Directors.
(ii) So long as any of the Series A Preferred Stock remains
outstanding, no dividend shall be paid or declared, or any distribution
be made on the Common Stock of the Corporation, unless the amount of the
dividends on the then outstanding Series A Preferred Stock equal to
$0.3333 per share per annum from the date of issuance of said Series A
Preferred Stock to the end of the current dividend period shall be
declared and paid or declared and set apart for payment on such Series A
Preferred Stock.
<PAGE>
(iii) Subject to the foregoing, such dividends as may be
determined by the Board of Directors may be declared and paid on the
Common Stock from funds legally available for the payment of dividends,
and the Series A Preferred Stock shall not be entitled to participate in
any such dividends, whether payable in cash, stock or otherwise.
(iv) At the option of the Board of Directors, the Corporation
may, effective at the end of any quarter-annual dividend period,
purchase the whole or any part of the Series A Preferred Stock then
outstanding, or may, when authorized by affirmative vote of a majority
of all the votes then represented by the outstanding shares of the
Corporation, redeem all, but not less than all, of the outstanding
Series A Preferred Stock upon thirty (30) days' notice duly given by
registered or certified mail to the holders of record of the shares of
Series A Preferred Stock. The redemption price per share shall be the
par value of each share together with all accrued and unpaid dividends,
such dividends to be accrued to the redemption date.
(v) Upon the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, or upon any distribution
of its capital other than by redemption or purchase of Series A
Preferred Stock, the holders of Series A Preferred Stock shall first be
paid $6.6667 per share together with all unpaid cumulated dividends,
whether or not earned or declared, and no more, before any distribution
or payment shall be made to the holders of the Common Stock. The words
"liquidation, dissolution or winding up" as used herein shall not apply
to or include transactions incident to a consolidation, merger or sale
of all or substantially all of the Corporation's assets.
(vi) Except as otherwise required by law or other provisions of
these Amended and Restated Articles of Incorporation, all Series A
Preferred Stock shall vote with the Common Stock as a single class and
for voting purposes shall be of equal rank, except that each share of
Common Stock shall have one (1) vote and each share of Series A
Preferred Stock shall have eighty (80) votes. Notwithstanding the
foregoing, the voting rights of any share of Series A Preferred Stock
shall be reduced to one (1) vote if and when said share shall not be
owned beneficially by one or more members of the class described below,
and the voting rights of all of the Series A Preferred Stock shall be
reduced to one (1) vote per share if and when a majority of the Series A
Preferred Stock outstanding shall not be owned beneficially by one or
more members of the class consisting of:
(A) the original beneficial owners of the Series A
Preferred Stock;
(B) the spouses of the original beneficial owners of the
Series A Preferred Stock;
(C) the children and more remote issue of the original
beneficial owners of the Series A Preferred Stock (including
those sustaining that relationship by reason of adoption) and
their respective spouses,
and said voting rights, if so reduced, shall not again be increased.
Series A Preferred Stock held directly or indirectly by or for a person,
including stock held in an estate or trust (to the extent of such
person's interest as beneficiary of such estate or trust) shall be
deemed to be owned beneficially by such person.
(vii) No holder of Series A Preferred Stock shall have any
preemptive or preferential right of subscription to any shares of the
Corporation, or to any obligations convertible into such shares.
(b) The balance of ten million (10,000,000) shares of Preferred
Stock may be issued from time to time in one or more series as the Board of
Directors may determine, as hereinafter provided. The Board of Directors is
hereby authorized, by resolution or resolutions, to provide from time to time
for series of Preferred Stock out of the unissued series of Preferred Stock not
then allocated to any series of Preferred Stock. Before any shares of any such
series of Preferred Stock are issued, the Board of Directors shall fix and
determine, and is hereby expressly empowered to fix and determine, by resolution
or resolutions, the designations, powers, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereof, of the shares of such series, including
without limiting the generality of the foregoing, any of the following
provisions with respect to which the Board of Directors shall determine to make
affirmative provision:
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<PAGE>
(i) the designation and name of such series and the number of
shares that shall constitute such series;
(ii) the annual dividend rate or rates payable on shares of such
series, the date or dates from which such dividends shall commence to
accrue and the dividend payment dates for such dividends;
(iii) whether dividends on such series are to be cumulative or
noncumulative, and the participating or other special rights, if any,
with respect to the payment of dividends;
(iv) whether such series shall be subject to redemption and, if
so, the manner of redemption, the redemption price or prices and the
terms and conditions on which shares of such series may be redeemed;
(v) whether such series shall have a sinking fund or other
retirement provisions for the redemption or purchase of shares of such
series and, if so, the terms and amount of such sinking fund or other
retirement provisions and the extent to which the charges therefor are
to have priority over the payment of dividends on, or the making of
sinking fund payments or other like retirement provisions for, shares of
any other series or over dividends on the Common Stock;
(vi) the amounts payable on shares of such series on voluntary
or involuntary dissolution, liquidation or winding up of the affairs of
the Corporation and the extent to which such payment shall have priority
over the payment of any amount on voluntary or involuntary dissolution,
liquidation or winding up of affairs of the Corporation, on shares of
any other series or on the Common Stock;
(vii) the terms and conditions, if any, on which shares of such
series may be converted into, or exchanged for, shares of any other
series or of the Common Stock;
(viii) the extent of the voting powers, if any, of the shares of
such series;
(ix) the stated value, if any, for the shares of such series,
the consideration for which shares of such series may be issued and the
amount of such consideration that shall be credited to the capital
account; and
(x) any other preferences and relative, participating, optional
or other special rights, and qualifications, limitations or restrictions
thereof, of the shares of such series.
The Board of Directors is expressly authorized to vary the
provisions relating to the foregoing matters among the various series of
Preferred Stock.
All shares of Preferred Stock of any one series shall be
identical in all respects with all other shares of such series, except that
shares of any one series issued at different times may differ as to the dates
from which dividends thereon shall be payable and, if cumulative, shall
cumulate.
Shares of any series of Preferred Stock that shall be issued and
thereafter acquired by the Corporation through purchase, redemption (whether
through the operation of a sinking fund or otherwise), conversion, exchange or
otherwise, shall, upon appropriate filing and recording to the extent required
by law, have the status of authorized and unissued shares of Preferred Stock and
may be reissued as part of such series or as part of any other series of
Preferred Stock. Unless otherwise provided in the resolution or resolutions of
the Board of Directors providing for the issue thereof, the number of authorized
shares of stock of any series of Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by resolution or
resolutions of the Board of Directors and appropriate filing and recording to
the extent required by law. In case the number of shares of any such series of
Preferred Stock shall be decreased, the shares representing such decrease shall,
unless otherwise provided in the resolution or resolutions of the Board of
Directors providing for the issuance thereof, resume the status of authorized
but unissued shares of Preferred Stock, undesignated as to series.
-3-
<PAGE>
ARTICLE IV
1. Number of Directors. In addition to any directors who may be elected
by the holders of any one or more series of Preferred Stock voting separately as
such (the "Series Directors"), the holders of the shares of Common Stock and of
any other shares of capital stock entitled to vote as a single class with the
shares of Common Stock shall elect that number of directors, not to exceed
fifteen (15), fixed from time to time exclusively by the affirmative vote of a
majority of the directors (other than Series Directors) then in office.
2. Classified Board. The directors to be elected by the holders of the
shares of Common Stock and of any other shares of capital stock entitled to vote
as a single class with the shares of Common Stock shall be divided into three
classes designated Class I, Class II and Class III. The term of one class of
directors shall expire each year. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors fixed pursuant to
Section 1 of this Article IV. At each Annual Meeting of Shareholders, the
directors elected to succeed those directors whose terms expire shall be elected
for a term expiring three years after the date of their election and until their
successors are duly elected and qualified. If the number of directors fixed
pursuant to Section 1 of this Article IV is changed, any increase or decrease
shall be apportioned among the three classes so as to maintain the number of
directors in each class as nearly equal as possible, and any additional director
of any class elected to fill a vacancy resulting from an increase in such class
shall hold office for a term that shall coincide with the remaining term of that
class but in no case will a decrease in the number of directors shorten the term
of any incumbent director. Subject to the rights of the holders of any class or
series of the then outstanding capital stock of the Corporation entitled to vote
generally in the election of directors (other than Series Directors), newly
created directorships resulting from any increase in the number of directors
fixed pursuant to Section 1 of this Article IV or any vacancies in any class
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
(other than Series Directors) then in office, although less than a quorum.
Directors so elected shall hold office for a term expiring at the time at which
the term of office of the class to which they have been elected expires and
until their successors are duly elected and qualified.
3. Removal. Any directors, or the entire Board of Directors, may be
removed from office at any time for good cause by the affirmative vote of the
holders of two-thirds of the combined voting power of the shares of the classes
or series of capital stock of the Corporation present and voting together as a
single class. A director named by the Board of Directors to fill a vacancy may
be removed from office at any time, with or without cause, by the affirmative
vote of a majority of the remaining directors if the shareholders have not
elected directors in the interim between the time of the appointment to fill
such vacancy and the time of removal. In the event that any one or more
directors or the entire Board is removed at a shareholders' meeting, a new
director or new directors shall be elected at the same meeting.
4. Amendment of Article IV. Notwithstanding anything contained in these
Amended and Restated Articles of Incorporation to the contrary, any amendment,
alteration, change or repeal of this Article IV shall require the affirmative
vote of the holders of two-thirds of the combined voting power of the shares of
the capital stock of the Corporation present and voting together as a single
class.
ARTICLE V
1. (a) In addition to any affirmative vote required by law or under
any other provision of these Amended and Restated Articles of Incorporation, and
except as otherwise expressly provided in Section 2 of this Article V:
(i) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (A) any 20% Shareholder
(as hereinafter defined) or (B) any other corporation or other person or
entity (whether or not itself a 20% Shareholder) which, after such
merger or consolidation, would be an Affiliate (as hereinafter defined)
of a 20% Shareholder;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any 20% Shareholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market value of
$5,000,000 or more;
-4-
<PAGE>
(iii) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related transactions) of
any securities of the Corporation or any Subsidiary to any 20%
Shareholder in exchange for cash, securities or other property (or a
combination thereof) having an aggregate fair market value of $5,000,000
or more;
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation; or
(v) any reclassification of securities (including any reverse
stock split), recapitalization, reorganization, merger or consolidation
of the Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise involving a 20%
Shareholder) which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class of equity
or convertible securities of the Corporation or any Subsidiary which is
directly or indirectly owned by any 20% Shareholder, shall require the
affirmative vote of the holders of at least 95% of the outstanding
voting power of the Corporation voting as a single class. Such
affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that some lesser percentage may be specified, by law
or in any agreement with any national securities exchange or otherwise.
(b) The term "Business Combination" as used in this Article V
shall mean any transaction which is referred to in any one or more of clauses
(i) through (v) of subsection (a) of this Section 1.
2. The provisions of Section 1 of this Article V shall not be applicable
to any particular Business Combination, and such Business Combination shall
require only such affirmative vote as is required by law and any other provision
of these Amended and Restated Articles of Incorporation, if either such Business
Combination shall have been authorized and approved by the Board of Directors of
the Corporation at a time when such Board of Directors shall consist only of
Continuing Directors (as hereinafter defined) or all of the following conditions
shall have been satisfied:
(a) The ratio of:
(i) the aggregate amount of the cash and the fair market
value of other consideration to be received per share by holders
of Common Stock of the Corporation in such Business Combination,
to
(ii) the market price of the Common Stock immediately
prior to the announcement of such Business Combination is at
least as great as the ratio of:
(A) the highest per share price (including
brokerage commissions, transfer taxes and soliciting
dealers' fees) which such 20% Shareholder or any of its
Affiliates has paid for any shares of Common Stock
acquired by it within the three-year period prior to the
Business Combination, to
(B) the market price of the Common Stock
immediately prior to the initial acquisition by such 20%
Shareholder or any of its Affiliates of any Common
Stock.
(b) The aggregate amount of the cash and fair market value of
other consideration to be received per share by holders of Common Stock
in such Business Combination:
(i) is not less than the highest per share price
(including brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by such 20% Shareholder or any of its
Affiliates in acquiring any of its holdings of Common Stock; and
(ii) is not less than the earnings per share of Common
Stock for the four full consecutive fiscal quarters immediately
preceding the record date for solicitation of votes on such
Business Combination multiplied by the then price/earnings
multiple (if any) of such 20% Shareholder as customarily
computed and reported in the financial community (provided that
this
-5-
<PAGE>
subparagraph (ii) shall not be applicable if such 20%
Shareholder does not then have outstanding Common Stock which is
publicly traded in the United States).
(c) The consideration to be received by holders of Common Stock
in such Business Combination shall be in the same form and of the same
kind as the consideration paid by the 20% Shareholder in acquiring the
shares of Common Stock already owned by it.
(d) After such 20% Shareholder has acquired ownership of not
less than 20% of the voting power of the Corporation (a "20% Interest")
and prior to the consummation of such Business Combination:
(i) the 20% Shareholder shall have taken steps to ensure
that the Corporation's Board of Directors included at all times
representation by Continuing Director(s) approximately
proportionate to the ratio that the voting power which from time
to time is held by persons who are not 20% Shareholders ("Public
Holders") bears to the entire voting power of all outstanding
shares of capital stock of the Corporation at such respective
times;
(ii) there shall have been no reduction in the rate of
dividends payable on the Common Stock except as necessary to
ensure that a quarterly dividend payment does not exceed 15% of
the net income of the Corporation for the four full consecutive
fiscal quarters immediately preceding the declaration date of
such dividend, or except as may have been approved by a
unanimous vote of all directors which the Corporation would have
if there were no vacancies (the "Whole Board");
(iii) such 20% Shareholder shall not have acquired any
newly issued shares of stock, directly or indirectly, from the
Corporation (except upon conversion of convertible securities
acquired by it prior to obtaining a 20% Interest or as a result
of a pro rata stock dividend or stock split); and
(iv) such 20% Shareholder shall not have acquired any
additional shares of the Corporation's outstanding Common Stock
or securities convertible into or exchangeable for Common Stock,
except as part of the transaction which resulted in such 20%
Shareholder acquiring its 20% Interest.
(e) Prior to the consummation of such Business Combination, such
20% Shareholder shall not have:
(i) received the benefit directly or indirectly (except
proportionately as a shareholder) of any loans, advances,
guarantees, pledges or other financial assistance or tax credits
provided by the Corporation; or
(ii) made any major change in the Corporation's business
or equity capital structure without the unanimous approval of
the Whole Board.
(f) A proxy statement responsive to the requirements of the
Securities Exchange Act of 1934 shall have been mailed to all holders of
Common Stock and all series of Preferred Stock then outstanding for the
purpose of soliciting shareholder approval of such Business Combination.
Such proxy statement shall contain at the front thereof, in a prominent
place, any recommendations as to the advisability (or inadvisability) of
the Business Combination which the Continuing Directors, or any of them,
may have furnished in writing and, if deemed advisable by a majority of
the Continuing Directors, an opinion of a reputable investment banking
firm as to the fairness (or lack of fairness) of the terms of such
Business Combination, from the point of view of the Shareholders other
than any 20% Shareholder (such investment banking firm to be selected by
a majority of the Continuing Directors, to be furnished with all
information it reasonably requests, and to be paid a reasonable fee for
its services upon receipt by the Corporation of such opinion).
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3. For the purposes of this Article V:
(a) A "person" shall mean any individual, firm, corporation or
other entity.
(b) "20% Shareholder" shall mean, in respect of any Business
Combination, any person (other than the Corporation or any Subsidiary)
who or which, as of the record date for the determination of
shareholders entitled to notice of and to vote on such Business
Combination, or immediately prior to the consummation of any such
transaction:
(i) is the beneficial owner, directly or indirectly, of
not less than 20% of the voting power of the Corporation;
(ii) is an Affiliate of the Corporation and at any time
within three (3) years prior thereto was the beneficial owner,
directly or indirectly, of not less than 20% of the voting power
of the Corporation; or
(iii) is an assignee of or has otherwise succeeded to
any shares of the capital stock of the Corporation which were at
any time within three (3) years prior thereto beneficially owned
by any 20% Shareholder, and such assignment or succession shall
have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act of 1933.
(c) A person shall be the "beneficial owner" of any shares of
Common Stock or any series of Preferred Stock:
(i) which such person or any of its Affiliates and
Associates (as hereinafter defined) beneficially own, directly
or indirectly;
(ii) which such person or any of its Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants or
options, or otherwise, or (B) the right to vote pursuant to any
agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or
indirectly, by any other person with which such first mentioned
person or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock of
the Corporation.
(d) The outstanding voting power of the Corporation shall
include shares deemed owned through application of subsection (c) above
but shall not include any other shares which may be issuable pursuant to
any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise.
(e) "Continuing Director" shall mean a person who was a member
of the Board of Directors of the Corporation and who was elected by the
Public Holders prior to the date as of which any 20% Shareholder
acquired in excess of 7.5% of the then outstanding voting power of the
Corporation, or a person designated (before his initial election as a
director) as a continuing director by a majority of the then outstanding
directors.
(f) "Other consideration to be received" shall include, but not
be limited to, Common Stock of the Corporation retained by its Public
Holders in the event of a Business Combination in which the Corporation
is the surviving corporation.
(g) "Affiliate" and "Associate" shall have the respective
meanings given those terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
January 1, 1979.
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(h) "Subsidiary" means any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as in
effect on January 1, 1979) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition
of 20% Shareholder set forth in subsection (b) of this Section 3, the
term "Subsidiary" shall mean only a corporation of which a majority of
each class of equity security is owned, directly or indirectly, by the
Corporation.
4. A majority of the Continuing Directors shall have the power and duty
to determine for the purposes of this Article V, on the basis of information
known to them, (a) the number of shares of Common Stock and all series of
Preferred Stock beneficially owned by any person, (b) whether a person is an
Affiliate or Associate of another, (c) whether a person has an agreement,
arrangement or understanding with another as to the matters referred to in
subsection (c) of Section 3, or (d) whether the assets subject to any Business
Combination have an aggregate fair market value of $5,000,000 or more.
5. Notwithstanding the provisions of Article V of these Amended and
Restated Articles of Incorporation, any amendment, alteration, change or repeal
of this Article V shall require the affirmative vote of the holders of at least
95% of the then outstanding voting power of the Corporation voting as a single
class, provided that this Section 5 shall not apply to, and such 95% vote shall
not be required for, any amendment, alteration, change or repeal recommended to
the stockholders by a majority of the Whole Board, but only if all members of
the Whole Board are Continuing Directors.
6. Nothing contained in this Article V shall be construed to relieve any
20% Shareholder from any fiduciary obligation imposed by law.
7. Notwithstanding anything contained in this Article V, the following
persons shall not, either individually or in the aggregate, be considered to be
a 20% Shareholder:
(a) the original beneficial owners of the Series A Preferred
Stock;
(b) the spouses of the original beneficial owners of the Series
A Preferred Stock; and
(c) the children and more remote issue of the original
beneficial owners of the Series A Preferred Stock (including those
sustaining that relationship by reason of adoption) and their respective
spouses.
ARTICLE VI
A director of the Corporation shall not be personally liable to
the Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for (a) liability based upon a breach of the duty of
loyalty to the Corporation or the shareholders; (b) liability for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law; (c) liability based upon the payment of an improper dividend
or an improper repurchase of the Corporation's stock under Section 559 of the
Minnesota Business Corporation Act (Minnesota Statutes, Chap. 302A) or upon
violations of federal or state securities laws; (d) liability for any
transaction from which the director derived an improper personal benefit; or (e)
liability for any act or omission occurring prior to the date this Article VI
becomes effective. If the Minnesota Business Corporation Act hereafter is
amended to authorize the further elimination or limitation of the liability of
directors, then the liability of a director of the Corporation, in addition to
the limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the Minnesota Business Corporation Act. Any repeal
or modification of this Article by the shareholders of the Corporation shall be
prospective only, shall not adversely affect any limitation on the personal
liability of a director of the Corporation existing at the time of such repeal
or modification, and shall be made only upon the affirmative vote of 95.5% of
votes represented by shares of the Common Stock and all series of Preferred
Stock then outstanding voting as a single class of the Corporation present, in
person or by proxy, at a meeting of shareholders duly called for such purpose.
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ARTICLE VII
1. Notwithstanding any other provision of these Amended and Restated
Articles of Incorporation to the contrary, all shares of capital stock acquired
by an Acquiring Person (as defined in Section 7 of this Article VII) in a
Control Share Acquisition (as defined in Section 7 of this Article VII) that
exceed the threshold of voting power of any of the ranges specified in clause
(d) of Section 2 of this Article VII, shall have only the voting rights as shall
be accorded to them pursuant to Section 5 of this Article VII.
2. An Acquiring Person shall deliver to the Corporation at its principal
executive office a statement (the "Information Statement") containing all of the
following: (a) the identity and background of the Acquiring Person, including
the identity and background of each member of any partnership, limited
partnership, syndicate or other group constituting the Acquiring Person, and the
identity and background of each Affiliate and Associate (as defined in Section 7
of this Article VII) of the Acquiring Person, including the identity and
background of each Affiliate and Associate of each member of such partnership,
syndicate or other group; provided, however, that with respect to a limited
partnership, the information need only be given with respect to a partner who is
denominated or functions as a general partner and each Affiliate and Associate
of the general partner; (b) a reference that the Information Statement is made
under Minnesota Statutes, Section 302A.671; (c) the number and class or series
of shares of the Corporation beneficially owned, directly or indirectly, before
the Control Share Acquisition by each of the persons identified pursuant to
clause (a) of Section 2 of this Article VII; (d) the number and class or series
of shares of the Corporation acquired pursuant to the Control Share Acquisition
or proposed to be acquired pursuant to the proposed Control Share Acquisition by
each of the persons identified pursuant to clause (a) of Section 2 of this
Article VII and specification of which of the following ranges of voting power
in the election of directors that, except for the provisions of this Article
VII, resulted or would result from consummation of the Control Share
Acquisition: (i) at least 20% but less than 33 1/3%, (ii) at least 33 1/3% but
less than a majority, or (iii) at least a majority; and (e) the terms of the
Control Share Acquisition or proposed Control Share Acquisition, including, but
not limited to, the source of funds or other consideration and the material
terms of the financial arrangements for the Control Share Acquisition or
proposed Control Share Acquisition, any plans or proposals of the Acquiring
Person (including plans or proposals under consideration) to liquidate or
dissolve the Corporation, to sell all or a substantial part of its assets, or
merge it or exchange its shares with any other person, to change the location of
its principal place of business or its principal executive office or of a
material portion of its business activities, to change materially its management
or policies of employment, to change materially its charitable or community
contributions or its policies, programs or practices relating thereto, to change
materially its relationship with suppliers or customers or the communities in
which it operates, or make any other material change in its business, corporate
structure, management or personnel, and other objective facts as would be
substantially likely to affect the decision of a shareholder with respect to
voting on the Control Share Acquisition or proposed Control Share Acquisition.
If any material change occurs in the facts set forth in the Information
Statement, including but not limited to any material increase or decrease in the
number of shares of the Corporation acquired or proposed to be acquired by the
persons identified pursuant to clause (a) of Section 2 of this Article VII, the
Acquiring Person shall promptly deliver to the Corporation at its principal
executive office an amendment to the Information Statement containing
information relating to the material change. An increase or decrease or proposed
increase or decrease equal, in the aggregate for all persons identified pursuant
to clause (a) of Section 2 of this Article VII, to 1% or more of the total
number of outstanding shares of any class or series of the Corporation shall be
deemed "material" for purposes of this Section; an increase or decrease or
proposed increase or decrease of less than this amount may be material,
depending upon the facts and circumstances.
3. If the Acquiring Person so requests in writing at the time of
delivery of an Information Statement pursuant to Section 2 of this Article VII
and has made, or has made a bona fide written offer to make, a Control Share
Acquisition and gives a written undertaking to pay or reimburse the
Corporation's expenses of a special meeting, except the expenses of the
Corporation in opposing according voting rights with respect to shares acquired
in the Control Share Acquisition or to be acquired in the proposed Control Share
Acquisition, within ten days after receipt by the Corporation of the Information
Statement, a special meeting of the shareholders of the Corporation shall be
called for the sole purpose of considering the voting rights to be accorded to
shares referred to in Section 1 of this Article VII acquired or to be acquired
pursuant to the proposed Control Share Acquisition. The special meeting shall be
held no later than 55 days after receipt of the Information Statement and
written undertaking to pay or reimburse the Corporation's expenses of the
special meeting, unless the Acquiring Person agrees to a later date. If the
Acquiring Person so requests in writing at the time of delivery of the
Information Statement, the special meeting shall not be held
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sooner than 30 days after receipt by the Corporation of the Information
Statement. The record date for the meeting must be at least 30 days prior to the
date of the special meeting. If no request for a special meeting is made,
consideration of the voting rights to be accorded to shares referred to in
Section 1 of this Article VII acquired pursuant to the Control Share Acquisition
or to be acquired pursuant to the proposed Control Share Acquisition shall be
presented at the next special or annual meeting of the shareholders, unless
prior thereto the matter of the voting rights becomes moot. The notice of the
special meeting shall at a minimum be accompanied by a copy of the Information
Statement (and a copy of any amendment to the Information Statement previously
delivered to the Corporation) and a statement disclosing that the Board of
Directors of the Corporation recommends approval of, expresses no opinion and is
remaining neutral toward, recommends rejection of, or is unable to take a
position with respect to according voting rights to shares referred to in
Section 1 of this Article VII acquired in the Control Share Acquisition or to be
acquired in the proposed Control Share Acquisition. The notice of meeting shall
be given at least ten days prior to the meeting. Any amendments to the
Information Statement received after mailing of the notice of the special
meeting must be mailed promptly to the shareholders by the Corporation. A proxy
relating to a meeting of shareholders required under this Section 3 must be
solicited separately from any offer to purchase or solicitation of an offer to
sell shares of the Corporation.
4. Notwithstanding anything to the contrary contained in this Article
VII, no call of a special meeting of the shareholders of the Corporation shall
be made pursuant to Section 3 of this Article VII and no consideration of the
voting rights to be accorded to shares referred to in Section 1 of this Article
VII acquired pursuant to the Control Share Acquisition or to be acquired
pursuant to the proposed Control Share Acquisition shall be presented at any
special or annual meeting of the shareholders of the Corporation unless at the
time of delivery of the Information Statement pursuant to Section 2 of this
Article VII, the Acquiring Person shall have entered into, and shall deliver to
the Corporation a copy or copies of, a definitive financing agreement or
definitive financing agreements, with one or more responsible financial
institutions or other entities having the necessary financial capacity, for any
financing of the Control Share Acquisition or proposed Control Share Acquisition
not to be provided by funds of the Acquiring Person. A financing agreement is
not deemed not definitive for purposes of this Section 4 of this Article VII
solely because it contains conditions or contingencies customarily contained in
term loan agreements with financial institutions.
5. (a) Shares referred to in Section 1 of this Article VII acquired
in a Control Share Acquisition shall have the same voting rights as other shares
of the same class or series only if approved by resolution of shareholders of
the Corporation at a special or annual meeting of shareholders pursuant to
Section 3 of this Article VII.
(b) The resolution of shareholders must be approved by (i) the
affirmative vote of the holders of a majority of the voting power of all shares
entitled to vote, including all shares held by the Acquiring Person and (ii) the
affirmative vote of the holders of a majority of the voting power of all shares
entitled to vote, excluding all interested shares (as defined in Section 7 of
this Article VII). A class or series of shares of the Corporation is entitled to
vote separately as a class or series if any provision of the Control Share
Acquisition would, if contained in a proposed amendment to these Amended and
Restated Articles of Incorporation, entitle the class or series to vote
separately as a class or series.
(c) To have the voting rights accorded by approval of a
resolution of shareholders, any proposed Control Share Acquisition not
consummated prior to the time of the shareholder approval must be consummated
within 180 days after the shareholder approval.
(d) Any shares referred to in Section 1 of this Article VII
acquired in a Control Share Acquisition that do not have voting rights accorded
to them by approval of a resolution of shareholders shall regain their voting
rights upon transfer to a person other than the Acquiring Person or any
Affiliate or Associate of the Acquiring Person, unless the acquisition of the
shares by the other person constitutes a Control Share Acquisition, in which
case the voting rights of the shares are subject to the provisions of this
Article VII.
6. The Corporation shall have the option to call for redemption all but
not less than all shares referred to in Section 1 of this Article VII acquired
in a Control Share Acquisition at a redemption price equal to the market value
of the shares at the time the call for redemption is given, in the event (a) an
Information Statement has not been delivered to the Corporation by the Acquiring
Person by the tenth day after the Control Share Acquisition or (b) an
Information Statement has been delivered but the shareholders have voted not to
accord voting rights to such shares pursuant to Section 5 of this Article VII.
The call for redemption shall be given by the Corporation within 30 days after
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the event giving the Corporation the option to call the shares for redemption
and the shares shall be redeemed within 60 days after the call is given.
7. For purposes of this Article VII:
(a) "Acquiring Person" shall mean a person that makes or
proposes to make a Control Share Acquisition. When two or more persons
act as a partnership, limited partnership, syndicate or other group
pursuant to any written or oral agreement, arrangement, relationship,
understanding or otherwise for the purposes of acquiring, owning or
voting shares of the Corporation, all members of the partnership,
syndicate or other group constitute a "person."
"Acquiring Person" does not include (i) a licensed broker-dealer
or licensed underwriter who (A) purchases shares of the Corporation
solely for purposes of resale to the public and (B) is not acting in
concert with an Acquiring Person, or (ii) a person who becomes entitled
to exercise or direct the exercise of a new range of voting power within
any of the ranges specified in clause (d) of Section 2 of this Article
VII solely as a result of a purchase of shares by, or recapitalization
of, the Corporation or similar action unless (1) the repurchase,
recapitalization or similar action was proposed by or on behalf of, or
pursuant to any written action or oral agreement, arrangement,
relationship, understanding or otherwise with, the person or any
Affiliate or Associate of the person or (2) the person thereafter
acquires beneficial ownership, directly or indirectly, of outstanding
shares entitled to vote of the Corporation and, immediately after the
acquisition, is entitled to exercise or direct the exercise of the same
or a higher range of voting power under clause (d) of Section 2 of this
Article VII as the person became entitled to exercise as a result of the
repurchase, recapitalization or similar action.
(b) "Affiliate" shall mean a person that directly or indirectly
controls, is controlled by, or is under common control with, a specified
person.
(c) "Associate," when used to indicate a relationship with any
person, shall mean any of the following:
(i) any corporation or organization of which the person
is an officer or partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class or series of shares
entitled to vote or other equity interest;
(ii) any trust or estate in which the person has a
substantial beneficial interest or as to which the person serves
as trustee or executor or in a similar fiduciary capacity; and
(iii) any relative or spouse of the person, or any
relative of the spouse, residing in the home of the person.
(d) (i) "Beneficial owner," with respect to shares or other
securities, shall include, but shall not be limited to, any person who,
directly or indirectly through any written or oral agreement,
arrangement, relationship, understanding or otherwise, has or shares the
power to vote, or direct the voting of, the shares or securities or has
or shares the power to dispose of, or direct the disposition of, the
shares or securities, except that:
(A) a person shall not be deemed the beneficial
owner of shares or securities tendered pursuant to a
tender or exchange offer made by the person or any of
the person's Affiliates or Associates until the tendered
shares or securities are accepted for purchase or
exchange; and
(B) a person shall not be deemed the beneficial
owner of shares or securities with respect to which the
person has the power to vote or direct the voting
arising solely from a revocable proxy given in response
to a proxy solicitation required to be made and made in
accordance with the applicable rules and regulations
under the Securities Exchange Act of 1934 and is not
then reportable under that Act on a Schedule 13D or
comparable
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report, or, if the Corporation is not then subject to
the rules and regulations under the Securities Exchange
Act of 1934, would have been required to be made and
would not have been reportable if the Corporation had
been subject to the rules and regulations.
(ii) "Beneficial ownership" shall include, but shall not
be limited to, the right to acquire shares or securities through
the exercise of options, warrants or rights, or the conversion
of convertible securities, or otherwise. The shares or
securities subject to the options, warrants, rights or
conversion privileges held by a person shall be deemed to be
outstanding for the purpose of computing the percentage of
outstanding shares or securities of the class or series owned by
the person, but shall not be deemed to be outstanding for the
purpose of computing the percentage of the class or series owned
by any other person. A person shall be deemed the beneficial
owner of shares and securities beneficially owned by any
relative or spouse of the person, or any relative of the spouse,
residing in the home of the person, any trust or estate in which
the person owns 10% or more of the total beneficial interest or
serves as trustee or executor or in a similar capacity, any
corporation or entity in which the person owns 10% or more of
the equity, and any Affiliate of the person.
(iii) When two or more persons act or agree to act as a
partnership, limited partnership, syndicate or other group for
the purposes of acquiring, owning or voting shares or other
securities of the Corporation, all members of the partnership,
syndicate or other group are deemed to constitute a "person" and
to have acquired beneficial ownership, as of the date they first
so act or agree to act together, of all shares or securities of
the Corporation beneficially owned by the person.
(e) "Control Share Acquisition" shall mean an acquisition,
directly or indirectly, by an Acquiring Person of beneficial ownership
of shares of the Corporation that, except for this Article VII, would,
when added to all other shares of the Corporation beneficially owned by
the Acquiring Person, entitle the Acquiring Person, immediately after
the acquisition, to exercise or direct the exercise of a new range of
voting power within any of the ranges specified in clause (d) of Section
2 of this Article VII, but does not include any of the following:
(i) an acquisition by a donee pursuant to an inter vivos
gift not made to avoid this Article VII or by a distributee as
defined in Section 524.1-201, clause (10), of the Minnesota
Statutes, as in effect on the date this Article VII is approved
by shareholders of the Corporation;
(ii) an acquisition pursuant to a security agreement not
created to avoid this Article VII;
(iii) an acquisition under Sections 302A.601 to 302A.661
of the Minnesota Statutes, as in effect on the date this Article
VII is approved by shareholders, if the Corporation is a party
to the transaction;
(iv) an acquisition from the Corporation;
(v) an acquisition for the benefit of others by a person
acting in good faith and not made to avoid this Article VII, to
the extent that the person may not exercise or direct the
exercise of the voting power or disposition of the shares except
upon the instruction of others; or
(vi) an acquisition pursuant to a savings, employee
stock ownership or other employee benefit plan of the
Corporation or any of its subsidiaries, or by a fiduciary of the
plan acting in a fiduciary capacity pursuant to the plan.
For purposes of this clause (e) of Section 7 of this Article
VII, shares beneficially owned by a plan described in clause (e)(vi) of
Section 7 of this Article VII, or by a fiduciary of a plan described in
such clause (e)(vi) pursuant to the plan, are not deemed to be
beneficially owned by a person who is a fiduciary of the plan. All
shares the beneficial ownership of which is acquired within a 120-day
period, and all shares the beneficial ownership of which is acquired
pursuant to a plan to make a Control Share Acquisition, shall be deemed
to have been acquired in the same acquisition.
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(f) "Interested shares" shall mean the shares of the Corporation
beneficially owned by any of the following persons: (i) the Acquiring
Person, (ii) any officer of the Corporation, or (iii) any employee of
the Corporation who is also a director of the Corporation.
8. If any term, provision or restriction contained in this Article VII
is held by a court or agency of competent jurisdiction to be invalid, void or
unenforceable, then such term, provision or restriction shall be modified or
stricken to the minimum degree necessary to avoid being invalid, void or
unenforceable and the remainder of this Article VII shall remain in full force
and effect and shall in no way be affected, impaired or invalidated.
9. Any amendment to, or modification or repeal of, this Article VII
shall require the affirmative vote of 78.7% of votes represented by shares of
the Common Stock and all series of Preferred Stock then outstanding voting as a
single class of the Corporation present, in person or by proxy, at a meeting of
the shareholders duly called and held for that purpose.
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Exhibit 3(b)
BYLAWS
OF
H.B. FULLER COMPANY
(As amended and restated through October 15, 1998)
ARTICLE I - SHARES
SECTION 1. CERTIFICATES. The forms of certificates for shares shall
conform to Section 302A.417 of the Minnesota Business Corporation Act, as
amended from time to time (the "MBCA"), and shall be approved by the Board of
Directors. Each certificate shall be manually signed by the Chief Executive
Officer, the President or an Executive Vice President, a Senior Vice President
or a Vice President and by the Secretary or an Assistant Secretary (except that
where any such certificate is manually signed by a transfer agent or a registrar
(or by both), the signatures of any such officers may be facsimile, engraved or
printed). All certificates of each class and each series shall be consecutively
numbered. No certificate shall be issued for any share until such share is fully
paid.
SECTION 2. TRANSFER AGENT AND REGISTRAR. The Board of Directors may
appoint one or more transfer agents and registrars to countersign and register
certificates for shares.
SECTION 3. TRANSFERS OF STOCK. Subject to Section 302A.429 of the MBCA,
upon surrender to the Corporation or the transfer agent of a certificate for
shares duly endorsed or accompanied by proper evidence of succession, assignment
or authority to transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
SECTION 4. LOSS OF CERTIFICATES. Except as otherwise provided by Section
302A.419 of the MBCA, any shareholder claiming a certificate for shares to be
lost, stolen, or destroyed shall make an affidavit of that fact in such form as
the appropriate officers of the Corporation shall require and shall give the
Corporation a bond of indemnity in form, in an amount, and with one or more
sureties satisfactory to the appropriate officers of the Corporation, to
indemnify the Corporation against any claim which may be made against it on
account of the reissue of such certificate, whereupon a new certificate may be
issued in the same tenor and for the same number of shares as the one alleged to
have been lost, stolen or destroyed.
SECTION 5. RECORD DATE.
(a) For the purpose of determining the shareholders entitled to notice
of and to vote at any meeting of shareholders or to receive payment of any
dividend, or for any other proper purpose, the Board of Directors shall fix a
record date which shall not be more than sixty days preceding the date on which
the particular action requiring such determination of shareholders is to be
taken.
(b) The record date fixed for the determination of the shareholders
entitled to notice of and to vote at a shareholders' meeting shall continue to
be the record date for all adjournments thereof.
ARTICLE II - SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the shareholders shall be
held at the principal executive office of the Corporation or at any other place
within or without the State of Minnesota designated by the Board of Directors.
SECTION 2. ANNUAL MEETINGS. An annual meeting of shareholders shall be
held each year on such date and at such time of the day as the Board of
Directors shall determine. At such meeting, directors shall be elected to
succeed those whose terms are expiring and to fill any other vacancies, reports
of the affairs of the Corporation shall be considered, and other business may be
transacted. Only proposals to be brought before an annual meeting of
shareholders by a shareholder in accordance with the following procedures shall
be considered at such annual meeting. For a proposal to be properly brought by a
shareholder at an annual meeting, the shareholder
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must give written notice to the Chief Executive Officer or Chief Financial
Officer of the Company so as to be received at the principal executive offices
of the Corporation not later than the date determined in accordance with the
proxy rules promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, that proposals of shareholders
intended to be presented at such annual meeting must be received in order to be
included in the Corporation's proxy statement and proxy for such annual meeting.
Each such notice shall set forth (a) the name and address of the shareholder who
intends to make the proposal specified in such notice, (b) a representation that
the shareholder is a holder of record of stock of the Corporation entitled to
vote at the annual meeting and intends to appear in person or by proxy at such
annual meeting to make such proposal, (c) a brief description of such proposal
and the reasons for making the proposal at the annual meeting, (d) a description
of any material interest of the shareholder in the matter proposed and (e) such
other information that would be required to be included in a Corporation proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission with respect to the proposal and the proponent thereof.
SECTION 3. SPECIAL MEETINGS. A special meeting of the shareholders may
be called for any purpose or purposes at any time in accordance with the
provisions of Section 302A.433 of the MBCA. The business transacted at a special
meeting shall be limited to the purposes stated in the notice of the meeting.
For a special meeting to be properly called by a shareholder, the shareholder
must give written notice of such shareholder's demand for a special meeting to
the Chief Executive Officer or Chief Financial Officer of the Company. Each such
notice shall set forth (a) the name and address of the shareholder demanding the
special meeting, (b) a representation that the shareholder is a holder of record
of stock of the Corporation entitled to vote at the special meeting and intends
to appear in person or by proxy at such special meeting to propose the business
to be considered at the special meeting, (c) a brief description of the business
to be considered at the special meeting and the reasons for conducting such
business at the special meeting, (d) a description of any material interest of
the shareholder in such business and (e) such other information that would be
required to be included in a Corporation proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission with respect to the
matters to be considered at the special meeting and the shareholder making the
demand for such meeting.
SECTION 4. NOTICE OF MEETINGS. Written notice given in the manner
provided in Section 302A.011, Subd. 17, of the MBCA stating the place, date, and
time of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given not less than ten nor more than
sixty days before the date of the meeting, either personally or by mail, by or
at the direction of the President, the Secretary, or the other officer calling
the meeting, to each shareholder of record entitled to vote at such meeting.
SECTION 5. QUORUM; ADJOURNED MEETINGS. The presence in person or by
proxy of the holders of a majority of the voting power of the shares entitled to
vote at any meeting shall constitute a quorum for the transaction of business. A
meeting may be adjourned from time to time, whether or not a quorum is present.
If any meeting is adjourned, no further notice as to such adjourned meeting need
be given other than by announcement at the time of adjournment of the date, time
and place of the adjourned meeting. At adjourned meetings at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally noticed. If a quorum is present when a meeting is
convened, the shareholders present may continue to transact business until
adjournment notwithstanding the withdrawal of enough shareholders originally
present to leave less than a quorum.
SECTION 6. VOTING. Every shareholder entitled to vote at a meeting of
shareholders shall be entitled at such meeting to one vote for each share of
capital stock of the Corporation which is entitled to be voted unless the terms
of the shares provide for no votes or a different number of votes per share.
SECTION 7. PROXIES. Every shareholder entitled to vote at a meeting of
shareholders shall be entitled to be represented at such meeting and to vote
thereat by proxy or proxies appointed by a writing signed by such shareholder.
No appointment of a proxy shall be valid after the expiration of eleven months
after it is made, unless the writing specifies the length of time it is to
continue in force. To be valid, all proxies must meet the requirements of, and
shall be governed by Section 302A.449 of the MBCA.
SECTION 8. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders the Board of Directors may appoint inspectors of election to act at
such meeting or any adjournment thereof. If inspectors of
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election are not so appointed, the chair of any such meeting may, and on the
request of any shareholder or shareholder's proxy shall, make such appointment
at the meeting.
SECTION 9. CONDUCT OF MEETINGS. The chair for each meeting of
shareholders shall be the first of the following persons who is able to attend
and chair the meeting: (i) the Chair of the Board, (ii) the Vice Chair of the
Board, (iii) the Chief Executive Officer, (iv) the President or (v) any director
or elected officer of the Corporation selected by the Chair.
ARTICLE III - DIRECTORS
SECTION 1. NUMBER. In addition to any director who may be elected by the
holders of any one or more series of Preferred Stock voting separately as such
(the "Series Directors"), the Board of Directors shall consist of a number of
directors, which number shall be fixed from time to time exclusively by the
Board of Directors pursuant to a resolution adopted by the affirmative vote of a
majority of the entire Board of Directors, but the number of directors shall in
no event be more than fifteen (excluding any Series Directors).
SECTION 2. TERM OF OFFICE VACANCIES AND REMOVAL.
(a) The directors to be elected by the holders of the shares of
Common Stock and of any other shares of capital stock entitled to vote as a
single class with the shares of Common Stock shall be divided into three classes
designated Class I, Class II and Class III. The term of one class of directors
shall expire each year. Each class shall consist, as nearly as may be possible,
of one-third of the total number of directors fixed pursuant to Section 1 of
this Article III. At each Annual Meeting of Shareholders, the directors elected
to succeed those directors whose terms expire shall be elected for a term
expiring three years after the date of their election and until their successors
are duly elected and qualified.
(b) If the number of directors is changed, any increase or
decrease shall be apportioned among the three classes so as to maintain the
number of directors in each class as nearly equal as possible, and any
additional director of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with the
remaining term of that class but in no case shall a decrease in the number of
directors shorten the term of any incumbent director. Subject to the rights of
the holders of any class or series of the then outstanding capital stock of the
Corporation entitled to vote generally in the election of directors (other than
Series Directors), newly created directorships resulting from any increase in
the authorized number of directors or any vacancies in any class resulting from
death, resignation, retirement, disqualification, removal from office or other
cause may be filled only by a majority vote of the directors (other than Series
Directors) then in office, although less than a quorum. Directors so elected
shall hold office for a term expiring at the time at which the term of office of
the class to which they have been elected expires and until their successors are
duly elected and qualified.
(c) Any directors, or the entire Board of Directors, may be
removed from office at any time for good cause by the affirmative vote of the
holders of at least two-thirds of the combined voting power of the shares of the
classes or series of capital stock of the Corporation present and voting as a
single class. A director named by the Board of Directors to fill a vacancy may
be removed from office at any time, with or without cause, by the affirmative
vote of a majority of the remaining directors if the shareholders have not
elected directors in the interim between the time of the appointment to fill
such vacancy and the time of removal. In the event that any one or more
directors or the entire Board is removed at a shareholder's meeting, a new
director or new directors shall be elected at the same meeting.
(d) Notwithstanding the provisions of Article VI of these
Bylaws, any amendment, alteration, change or repeal of Sections 1 and/or 2 of
Article III of these Bylaws shall require the affirmative vote of the holders of
two-thirds of the shares present and voting as a single class.
SECTION 3. NOMINATION OF DIRECTORS. Only persons nominated in accordance
with the following procedures shall be eligible for election by shareholders as
directors. Nominations of persons for election as directors at a meeting of
shareholders called for the purpose of electing directors may be made (a) by or
at the
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direction of the Board of Directors or (b) by any shareholder in the manner
herein provided. For a nomination to be properly made by a shareholder, the
shareholder must give written notice to the Corporate Governance Committee of
the Board of Directors so as to be received at the principal executive offices
of the Corporation not later than (i) with respect to an annual meeting of
shareholders, not later than the date determined in accordance with the proxy
rules promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, that proposals of shareholders intended to be
presented at such meeting must be received in order to be included in the
Corporation's proxy statement and proxy for such meeting and (ii) with respect
to a special meeting of shareholders for the election of directors, the close of
business on the seventh day following the date on which the notice of such
meeting is first given to shareholders. Each such notice shall set forth (A) the
name and address of the shareholder who intends to make the nomination and of
the person or persons to be nominated, (B) a representation that the shareholder
is a holder of record of stock of the Corporation entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice, (C) a description of all
arrangements or understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder, (D) such other
information regarding each nominee proposed to such shareholder as would have
been required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had each nominee been nominated,
or intended to be nominated, by the Board, and (E) the consent of each nominee
to serve as a director of the Corporation if so elected.
SECTION 4. MEETINGS. The Board of Directors may provide by resolution
the date, time and place, either within or without the State of Minnesota, for
the holding of meetings of the Board of Directors without other notice than such
resolution.
Other meetings of the Board of Directors may be called by the Chair of
the Board, the Vice Chair of the Board, the Chief Executive Officer (if a
director) or any two other directors. The person or persons authorized to call
meetings of the Board of Directors may fix any place, either within or without
the State of Minnesota, as the place for holding any meeting of the Board of
Directors called by them. In the absence of such designation, all called
meetings of the Board of Directors shall be held at the principal executive
office of the Corporation.
The Board of Directors shall choose from among the directors a Chair of
the Board and may from time to time choose a Vice Chair of the Board.
The chair for each meeting of the Board of Directors shall be the first
of the following persons who is able to attend and chair such meeting: (i) the
Chair of the Board, (ii) the Vice Chair of the Board, if any, (iii) the Chief
Executive Officer (if a director), (iv) the President (if a director), or (v)
any director selected by the Chair.
Notice of any called meeting of the Board of Directors shall be given by
the person or persons calling the meeting (or by the Secretary or an Assistant
Secretary at the request of such person or persons) either by mail to each
director at the director's business address at least two days prior to such
meeting or by telegram, telecopy, facsimile, telephone, or in person at least 24
hours prior to such meeting to the business address of each director, or in the
event such notice is given on a Saturday, Sunday or holiday to the residence
address of each director. If the day or date, time and place of a meeting of the
Board of Directors has been announced at a previous meeting of the Board of
Directors, no notice is required. Notice of an adjourned meeting of the Board of
Directors need not be given other than by announcement at the meeting at which
adjournment is taken.
Neither the business to be transacted at, nor the purpose of, any
regular or called meeting of the Board of Directors needs to be specified in the
notice of such meeting.
Notice of any meeting of the Board of Directors may be waived by any
director either before, at, or after such meeting orally or in a writing signed
by such director. A director, by his or her attendance at any meeting of the
Board of Directors, shall be deemed to have waived notice of such meeting,
except where the director objects at the beginning of the meeting to the
transaction of business because the meeting is not lawfully called or convened
and does not participate thereafter in the meeting.
The members of the Board of Directors, the Executive Committee or any
other committee created by the Board of Directors may participate in a meeting
of the Board of Directors or such Committee by any means of
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<PAGE>
communication through which the directors may simultaneously hear each other
during the meeting and such participation in a meeting shall constitute presence
in person at such meeting.
Any action which may be taken at a meeting of the Board of Directors,
the Executive Committee or any other committee of the Board of Directors may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the directors or committee members then holding
office.
SECTION 5. QUORUM; REQUIRED VOTE. A majority of the directors then
holding office shall constitute a quorum for the transaction of business by the
Board of Directors. The Board of Directors shall take action by the affirmative
vote of the greater of (a) majority of the directors present at a duly held
meeting at the time the action is taken, or (b) a majority of the minimum number
of directors that would constitute a quorum for the transaction of business at
the meeting. A majority of the members of any committee appointed by the Board
of Directors and then holding office shall constitute a quorum for the
transaction of business by such committee. Any committee shall take action by
the affirmative vote of the greater of (a) majority of the members present at a
duly held meeting at the time the action is taken, (b) a majority of the minimum
number of members that would constitute a quorum for the transaction of business
at the meeting, or (c) such higher requirement as may be established by the
Board of Directors. Notwithstanding the foregoing, where other sections of these
Bylaws or the Articles of Incorporation of the Corporation require a larger
proportion or number than is set forth in this Section 5 of Article III, the
affirmative vote of such larger proportion or number shall be required for the
Board of Directors or a committee of the Board of Directors to take action.
SECTION 6. EXECUTIVE COMMITTEE. By the affirmative action of at least
three fourths of the directors then holding office, the Board of Directors by
resolution may create an Executive Committee of three or more directors and may
delegate to such committee such of its powers and authority in the management of
the business and affairs of the Corporation as it may by resolution provide,
except the power to declare dividends and to adopt, amend or repeal the Bylaws.
SECTION 7. OTHER COMMITTEES. The Board of Directors by resolution may
create, in addition to an Executive Committee, ad hoc and standing committees,
and may delegate to such Committees such of its powers as it may choose,
including without limitation the power to perform such inquiries, investigations
or analyses as may be required from time to time, and to report the results of
any of their findings and their recommendations to the Board of Directors for
such action as the Board of Directors deems to be appropriate.
SECTION 8. COMPENSATION. The directors, by resolution of the Board of
Directors, may be paid fees and provided benefits and may be reimbursed for
expenses incurred by them on behalf of the Corporation, which fees, benefits and
expenses shall be paid at such times and upon such conditions as may be
determined by the Board of Directors; provided, however, that the shareholders
at any meeting called for the purpose may revoke or rescind any such action by
the Board of Directors, but may not revoke or rescind any action of the Board of
Directors (i) authorizing reimbursement to directors for expenses incurred by
them on behalf of the Corporation or (ii) establishing vested or contractual
compensation or benefit arrangements for directors. Nothing herein contained
shall be construed to preclude any director from serving the Corporation in any
other capacity as an officer, agent, employee, or otherwise, and receiving
compensation therefor.
SECTION 9. EMERITUS DIRECTORS. The Board of Directors may from time to
time appoint a former director to the honorary position of "Director Emeritus"
or, in the case of a former Chair of the Board (whether or not then also a
director), "Chair Emeritus." A former director holding an honorary position may
be invited to attend meetings or portions of meetings of the Board of Directors,
but shall have no voting or other rights of a director and shall not be entitled
to the compensation payable to directors.
ARTICLE IV - OFFICERS
SECTION 1. ELECTED OFFICERS. The officers of the Corporation to be
elected by the Board of Directors shall be a Chief Executive Officer, a
President, a Chief Financial Officer, one or more Executive or Senior Vice
Presidents, one or more Vice Presidents, a Treasurer, a General Counsel, a
Controller, a Secretary and one or more assistant officers. Any combination of
such offices may be held by the same person. Elected officers shall
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<PAGE>
hold office at the pleasure of the Board and shall perform the duties referred
to in the Bylaws, those determined by the Board of Directors and those assigned
by the Chief Executive Officer. The Chair of the Board and the Vice Chair of the
Board are not and shall not be deemed to be officers of the Corporation solely
by virtue of having such titles.
SECTION 2. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall
have general planning, administrative and oversight responsibility for the
Corporation and shall have general charge of and control over the Corporation,
subject to the orders and directions of the Board of Directors. The Chief
Executive Officer shall also perform such other duties as the Board of Directors
may from time to time prescribe or as are required by Section 302A.305, Subd. 2,
of the MBCA.
SECTION 3. PRESIDENT. The President shall be the chief operating officer
of the corporation and shall perform all responsibilities related to the ongoing
management of the Corporation.
SECTION 4. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be
responsible for all financial operations of the Corporation, including without
limitation raising funds, safeguarding assets, accounting and reporting,
financial planning, financial organizational administration and maintenance of
internal controls as are prudent and required by law. The Chief Financial
Officer shall also perform such other duties as are required by Section
302A.305, Subd. 3, of the MBCA.
SECTION 5. EXECUTIVE AND SENIOR VICE PRESIDENTS; VICE PRESIDENTS. Each
Executive and Senior Vice President and each Vice President shall perform such
duties as shall be determined by the Board of Directors or assigned by the Chief
Executive Officer.
SECTION 6. TREASURER. The Treasurer shall have the care and custody of
the funds and valuable documents of the Corporation and shall have oversight and
administrative responsibility for raising and borrowing funds and establishing
banking and similar relationships.
SECTION 7. GENERAL COUNSEL. The General Counsel shall be the chief legal
officer of the Corporation and shall be responsible for the administration and
general direction of all matters that may involve or require legal review or
analysis, including threatened and actual legal proceedings.
SECTION 8. CONTROLLER. The Controller shall be responsible for keeping
complete and accurate records of the business, assets, liabilities and
transactions of the Corporation and for the preparation of such financial
statements as may be required by law or are needed for internal management
purposes.
SECTION 9. SECRETARY. The Secretary shall keep a record of the
proceedings of the meetings of the shareholders and the Board of Directors. The
Secretary shall give notice as required of meetings of the shareholders and the
Board of Directors; provided, however, notice given by another shall not be
ineffective merely because it was not given by the Secretary. The Secretary
shall also perform such duties as are determined by the Board of Directors or by
the Chief Executive Officer.
SECTION 10. ASSISTANT OFFICERS. Each Assistant Officer shall perform
such duties as are determined by the Board of Directors and by the officer to
whom the Assistant Officer reports.
SECTION 11. APPOINTED OFFICERS. The Chief Executive Officer may from
time to time appoint vice presidents and any other officers deemed appropriate.
These officers shall hold office at the pleasure of the Chief Executive Officer
and shall perform such duties as are determined by the Chief Executive Officer.
SECTION 12. COMPENSATION. Compensation of all elected officers referred
to in Section 1 and all appointed officers referred to in Section 11 shall be
fixed by the Board of Directors or a Committee of the Board of Directors and may
be changed from time to time (subject to contract rights) by the Board or such
Committee.
SECTION 13. EXECUTION OF CORPORATE CONTRACTS. Except as otherwise
provided by the Board of Directors or the Executive Committee, all contracts of
the Corporation shall be executed on its behalf by the Chief Executive Officer,
the President, the Chief Financial Officer, the Controller, an Executive or
Senior Vice
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<PAGE>
President, a Vice President or such other person or persons as one of these
officers may from time to time authorize so to do. Notes given and drafts
accepted by the Corporation shall be valid only when signed by the Chief
Executive Officer, the President, the Chief Financial Officer, the Controller,
an Executive or Senior Vice President, a Vice President, the Treasurer or such
other person as one of these officers may from time to time authorize so to do.
Checks, drafts, and other evidences of indebtedness to the Corporation shall,
for the purpose of deposit, discount and collection, be endorsed by these same
officers or their delegees. Funds of the Corporation deposited in banks and
other depositories to the credit of the Corporation shall be drawn from such
bank and depositories by checks, drafts or orders for payment of money signed by
any one or more of the Chief Executive Officer, the President, the Chief
Financial Officer, the Controller, an Executive or Senior Vice President, a Vice
President, the Treasurer or such other person or persons as any two of these
officers may authorize. Whenever the Board of Directors or the Executive
Committee shall provide that any contract be executed or any other act be done
in any other manner and by any other officer than as specified in these Bylaws,
such method of execution or action shall be as equally effective to bind the
Corporation as if specified herein.
ARTICLE V - INDEMNIFICATION OF DIRECTORS,
OFFICERS AND EMPLOYEES
The Corporation shall indemnify such persons (and shall advance expenses
of such persons), for such expenses and liabilities, in such manner, under such
circumstances, and to such extent as required or permitted by the Minnesota
Business Corporation Act, section 302A.521, as now enacted or hereafter amended.
ARTICLE VI - AMENDMENTS
These Bylaws may be amended or repealed as provided in Section 302A.181
of the MBCA; provided, however, that Sections 1 and 2 of Article III shall only
be amended or repealed as provided in Section 2(d) of Article III.
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<PAGE>
COMMON STOCK COMMON STOCK
NUMBER SHARES
HB 9913 [LOGO]
INCORPORATED UNDER THE LAWS OF THE STATE OF MINNESOTA
H.B. FULLER COMPANY CUSIP 359694 10 6
See reverse for certain definitions
This certifies that
SPECIMEN
is the owner of Shares of
COMMON STOCK OF THE PAR VALUE OF $1.00 EACH OF
H.B. Fuller Company
transferable only on the books of the Company by the holder hereof, in person or
by duly authorized attorney, upon surrender of this certificate properly
endorsed. The shares of the Company of all classes are subject to certain
rights, preferences and restrictions, and the Company will furnish, without
charge to each stockholder who so requests, a full statement of the
designations, relative rights, voting power, preferences and restrictions
granted to, or imposed upon, said shares. This certificate is not valid unless
countersigned by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, H. B. FULLER COMPANY has caused this certificate to be
signed by its duly authorized officers and its corporate seal to be hereunto
affixed.
Dated:
H.B. FULLER COMPANY
[SIGNATURE] [SEAL] [SIGNATURE]
SECRETARY CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED
NORWEST BANK MINNESOTA, N.A.
(MINNEAPOLIS, MINNESOTA) TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
H.B. FULLER COMPANY
THE COMPANY WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND WITHOUT
CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS AND
RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED BY
THE COMPANY, SO FAR AS THEY HAVE BEEN DETERMINED, AND THE AUTHORITY OF THE BOARD
OF DIRECTORS OF THE COMPANY TO DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF
SUBSEQUENT CLASSES OR SERIES.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM--as tenants in common
TEN ENT--as tenants by the entireties
JT TEN--as joint tenants with right of survivorship
and not as tenants in common
UNIF TRANSFERS MIN ACT--....................... Custodian ....................
(Cust) (Minor)
under Uniform Transfers to Minors
Act................................
(State)
Additional abbreviations may also be used though not in the above list.
For value received __________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_________________________________________
_________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
______________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated
____________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF
THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF, TO CERTAIN
RIGHTS, AS SET FORTH IN THE RIGHTS AGREEMENT BETWEEN H.B. FULLER COMPANY AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION DATED AS OF JULY 18, 1996 (THE
"RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY
REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF
H.B. FULLER COMPANY. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS
AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO
LONGER BE EVIDENCED BY THIS CERTIFICATE. H.B. FULLER COMPANY WILL MAIL TO THE
HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT, WITHOUT CHARGE,
PROMPTLY AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN
CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY,
ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR
ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS, WHETHER CURRENTLY HELD BY, OR ON BEHALF OF,
SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.
<PAGE>
Exhibit 10(j)
H.B. FULLER COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1998 REVISION
Article 1
Description and Purpose
1.1 Name. The name of this Plan is the "H.B. Fuller Company Supplemental
Executive Retirement Plan."
1.2 Purpose. The purpose of the Plan is to promote the recruitment and retention
of high quality management personnel by providing an additional source of
retirement income to supplement that available to participants from other
sources.
1.3 Description. The Plan is a defined benefit plan for a select group of
management and highly compensated employees, which is unfunded within the
meaning of ERISA and the Internal Revenue Code. It provides a specified level of
retirement income based on the Participant's length of service with the Company,
Final Average Compensation and retirement income from certain other sources. The
Company has established a trust, separate from its operating capital, and, if
business considerations permit, will fund the trust with assets that will be
sufficient to provide the benefits under the Plan as they become due. While the
trust assets must remain subject to claims of the Company's creditors, it is the
Company's intent to preclude the use of trust assets for other corporate
purposes for so long as the assets are required to provide benefits under the
Plan.
Article 2
Eligibility
2.1 Selection of Participants. An Eligible Employee shall become a Participant
in the Plan upon his or her selection by the Administrator or, if later, on the
effective date of a non-competition and confidentiality agreement between the
Eligible Employee and the Company or an Affiliated Organization. The
Administrator shall give each Participant written notice of the commencement of
his or her participation in the Plan.
2.2 Entitlement to Benefits. A Participant shall become entitled to receive a
benefit under the Plan if his or her employment with the Company and other
Affiliated Organizations terminates for reasons other than gross misconduct
after he or she has completed at least ten years of Credited Service and has
attained age 55.
Article 3
Standard Benefits
3.1 Basic Benefit. Subject to the succeeding provisions of this article and
Article 4, a Participant shall be entitled to an annual benefit equal to 50% of
his or her Final Average Compensation.
3.2 Service Reduction. A Participant's annual benefit shall be reduced by 10%
for each year of Credited Service by which 15 exceeds the number of full years
of Credited Service that he or she has completed at the time his or her
employment terminates. A Participant who has completed less than 10 years of
Credited Service shall not be entitled to any benefit.
3.3 Other Retirement Income Reduction.
A. A Participant's annual benefit determined under the preceding
provisions of this article shall be reduced by the sum of the following amounts:
(1) The amount of the Participant's annual Social Security
Benefit;
<PAGE>
(2) The amount to which the Participant is entitled under any
old age, pension, disability or similar program of any foreign
jurisdiction;
(3) The aggregate amount of the Participant's annual benefits
under the H.B. Fuller Company Retirement Plan and each other funded or
unfunded defined benefit pension plan maintained by the Company or an
Affiliated Organization; and
(4) The aggregate value of the Participant's annual benefits
under any funded or unfunded pension, profit sharing, stock bonus or
deferred compensation plan of another employer as determined by the
Administrator in its discretion.
B. If any benefit described in Subsection A. is not payable as a single
life annuity or does not commence at the same time as the Participant's benefit
under this Plan, the Administrator shall, for purposes of this section, convert
the value of such benefit into an actuarially equivalent single life annuity
benefit commencing at the same time as the benefit under this Plan.
C. If the Participant would be entitled to a benefit described in
Subsection A. but for his or her failure to apply for such benefit, Subsection
A. will be applied as if the Participant had applied for and received the
benefit.
D. Changes in a benefit described in Subsection A. that occur after
commencement of the Participant's benefit under this Plan because of changes in
the plan or program under which the benefit is provided or because of cost of
living adjustments will not change the amount of the reduction under Subsection
A. Scheduled variations in such benefits, other than cost of living adjustments,
will be taken into account in determining the reduction under Subsection A.
3.4 Early Retirement Reduction Factor. If a Participant's benefit commences
prior to the date the Participant attains age 62, the benefit determined under
the preceding sections shall be reduced by the same factor as a benefit for the
Participant under the H.B. Fuller Company Retirement Plan would be reduced if
such benefit commenced at the same time, whether or not the Participant is
actually entitled to a benefit under such plan.
3.5 Form of Benefit.
A. A Participant who is not married at the time his or her benefit
commences shall receive a single life annuity in an annual amount equal to the
amount determined under the preceding sections of this article.
B. A Participant who is married at the time his or her benefit commences
shall receive a joint and 50% survivor annuity benefit that is the actuarial
equivalent of the benefit to which he or she would be entitled if not then
married. The Participant's spouse shall be the contingent joint annuitant and,
if such spouse survives the Participant, he or she shall receive an annuity for
the balance of his or her life equal to one-half of the annuity that the
Participant was receiving immediately prior to his or her death. If the
Administrator determines that the Participant's spouse is disabled at the time
the Participant's benefit commences, the Administrator may, in its discretion,
determine the actuarial equivalent joint and survivor annuity benefit with the
application of a mortality table for disabled individuals.
C. A Participant shall be deemed to be not married at the time his or
her benefit commences if the Administrator determines that the Participant and
his or her spouse are legally separated.
3.6 Death Benefit.
A. If a Participant dies after attaining age 55 and completing at least
10 years of Credited Service but prior to terminating his or her employment,
there shall be paid to such Participant's designated beneficiary the sum of
$50,000 per year for 10 years.
B. Each Participant may, in form prescribed by and filed with the
Administrator, designate a beneficiary to receive any death benefit payable
under this section. If no effective beneficiary designation is on file at the
time of the Participant's death, the death benefit under this section shall be
paid as follows:
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(1) To the Participant's surviving spouse, or
(2) If no spouse survives, to the Participant's surviving
children in equal shares, with the descendants of a child who has
predeceased the Participant taking such child's share by representation;
or
(3) If none of the Participant's spouse and descendants is
living, to the representative of the Participant's estate.
C. The automatic beneficiaries set forth in Subsection B. and, except as
otherwise provided in the Participant's duly filed beneficiary designation, the
beneficiaries named in such designation, shall become fixed at the Participant's
death so that if a beneficiary survives the Participant but dies before final
payment of the death benefit, any remaining death benefits shall be paid to the
representative of such beneficiary's estate.
D. No benefit, other than the survivor's annuity payable to the
surviving spouse of a Participant whose benefit commenced in the form of a joint
and survivor annuity, shall be payable following the death of a Participant
whose employment terminated prior to death.
3.7 Time of Payment.
A. Except as provided in Subsection B., benefit payments to the
Participant shall commence as of the first day of the month following the
termination of the Participant's employment.
B. A Participant may elect, by written instrument delivered to the
Administrator not more than 30 days following the date that such Participant is
notified that he or she has become a Participant, to defer any benefit that
becomes payable to him or her under the Plan to the later of the date specified
in Subsection A. or the first day of the month following the date on which the
Participant attains age 62.
C. Any benefits payable to the beneficiary of a Participant who dies
prior to termination of employment shall commence not later than the later of:
(1) the first day of the seventh month following the month in
which the Participant's death occurs; and
(2) the first day of the second month following the date on
which the Administrator has finally determined the identity of the
beneficiary.
D. The benefit payable to any Participant or beneficiary may, in the
Administrator's discretion, be paid in annual, semi-annual, quarterly or monthly
payments.
3.8 Payment in the Event of Incapacity or Minority. If the Administrator, in its
discretion, determines that any person entitled to receive any payment under
this Plan is physically, mentally or legally incapable of receiving or
acknowledging receipt, and no legal representative has been appointed for such
person, the Administrator in its discretion may (but shall not be required to)
cause any sum otherwise payable to such person to be paid to such one or more as
may be chosen by the Administrator from among the following: the institution
maintaining such person, such person's spouse, children, parents or other
relatives by blood or marriage, a custodian under any applicable Uniform
Transfers to Minors Act or any other person determined by the Administrator to
have incurred expense for such person. The Administrator's payment based upon
its good faith determination of the incapacity of the person otherwise entitled
to payments under this Plan and the existence of any other person specified
above shall be conclusive and binding on all persons. Any such payment shall be
a complete discharge of the liabilities of the Company under this Plan to the
extent of such payment.
3.9 Termination of Benefits for Breach of Contract. Notwithstanding the
provisions of this article and Article 4, a Participant's or beneficiary's right
to further benefits shall terminate upon, and no benefit shall be paid with
respect to a Participant following, the entry of a final judgment by a court of
competent jurisdiction that the Participant with respect to whom such benefit
would otherwise be payable has committed a material breach of any
non-competition or confidentiality agreement between such Participant and the
Company or an Affiliated
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Organization. A Participant's benefit payments shall be suspended upon the entry
of a preliminary injunction against the Participant in a suit brought by the
Company or an Affiliated Organization based upon the Participant's alleged
breach of any such non-competition or confidentiality agreement, and the
suspended benefits shall be forfeited upon the entry of a final judgment in
favor of the Company or such Affiliated Organization. However, if a final
judgment is entered in favor of the Participant, the suspended payments,
together with interest thereon at the rate of 8% per annum, compounded daily,
shall be restored to the Participant.
Article 4
Customized Benefits
4.1 Special Benefit. Notwithstanding the provisions of Sections 3.1, 3.2, 3.3,
3.4 and 3.6, the Administrator may, in its discretion, specify that, in lieu of
the benefit otherwise provided with respect to any Participant, such Participant
shall be entitled to a greater benefit. Such specified benefit may, by way of
example and not limitation, determine the amount of the Participant's benefit by
taking into account service with a previous employer, reduce or eliminate the
offset for benefits payable from another employer's plan, or lessen the benefit
reduction for commencement of benefits prior to age 62. However, the
Administrator shall have no authority under this Section 4.1 to reduce or delay
the benefit otherwise payable to a Participant hereunder, or to impose any
additional condition upon the receipt of such benefit, without the Participant's
written consent.
4.2 Documentation. Any special provision with respect to a Participant's benefit
shall be set forth in a written instrument permanently maintained in the
Administrator's records. A copy of the instrument shall be delivered to the
Participant within 30 days following the date on which the special provisions
are adopted.
4.3 Common Provisions. The provisions of Sections 3.5, 3.7, 3.8 and 3.9 shall
apply to any specified benefit under this article.
Article 5
Source of Benefits
5.1 Employer Funds. This Plan is unfunded, and all benefits payable to
Participants and beneficiaries shall be payable solely from the general assets
of the Company. No Participant shall be required or permitted to make any
contribution to the Plan.
5.2 Trust Fund. The Company has established a trust from which part or all of
the benefits under the Plan are to be paid. All of the principal and income of
such trust shall remain subject to the claims of the Company's creditors until
applied to the payment of benefits.
5.3 Participant's Right to Funds. This Plan constitutes a mere promise by the
Company to make benefit payments in the future. Beneficial ownership of any
assets, whether cash or investments, that the Company may earmark or place in
trust to pay the Participants' benefits under this Plan shall at all times
remain in the Company, and no Participant or beneficiary shall have any property
interest in any specific assets of the Company. To the extent a Participant or
any other person acquires a right to receive payments from the Company under
this Plan, such right shall be no greater than the right of any unsecured
general creditor of the Company.
Article 6
Administration
6.1 Administrator. The Compensation Committee of the Board of Directors of the
Company (or such other committee of such board that is, at any relevant time,
performing the functions of the Compensation Committee) shall be the
Administrator of the Plan. The Committee may delegate any of its administrative
functions to another person, subject to revocation of such delegation at any
time.
6.2 Discretion. The Administrator shall have the discretionary power and
authority to determine the individuals who shall become Participants in the
Plan. The Administrator shall also have the discretionary power and authority,
which it shall exercise in good faith, to determine whether a Participant is
entitled to a benefit under the Plan, the identity of a Participant's
beneficiary, and the amount and form of the benefit payable to any
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Participant or beneficiary. The Administrator shall have the discretion and
authority to interpret the Plan and to make such rules and regulations as it
deems necessary for the administration of the Plan and to carry out its
purposes. The determinations of the Administrator shall be conclusive and
binding on all persons. Notwithstanding the foregoing, the Administrator shall
have no power or authority to add to, subtract from, or modify any of the terms
of the Plan, nor to change or add to any benefits provided by the Plan, except
to the extent permitted by Section 4.1.
6.3 Determination of Benefit. The Administrator's good faith determination of
the benefits to which a Participant, surviving spouse, or beneficiary is
entitled under this Plan shall be conclusive and binding on all persons;
provided that this provision shall not preclude the Administrator's correcting
any error the Administrator determines to have been made in the computation of
any benefit. The Administrator shall be entitled to recover from any Participant
or beneficiary, or from his or her estate, the amount of any overpayment of
benefits and may reduce the amount of future benefits payable to any Participant
or beneficiary by the amount of any overpayment made with respect to the
Participant.
6.4 Benefit Claim Procedure. Within a reasonable period of time following a
Participant's termination of employment, the Administrator will inform the
Participant or the beneficiary of a deceased Participant of the amount of
benefits, if any, payable from the Plan. Not later than 30 days after receipt of
such notification, the Participant or beneficiary may file with the
Administrator a written claim objecting to the amount of benefits payable under
the Plan. The Administrator, not later than 90 days after receipt of such claim,
will render a written decision to the claimant on the claim. If the claim is
denied, in whole or in part, such decision will include the reason or reasons
for the denial, a reference to the Plan provision that is the basis for the
denial, a description of any additional material or information, if any,
necessary for the claimant to perfect the claim, an explanation as to why such
information or material is necessary and an explanation of the Plan's claim
procedure. The claimant may file with the Administrator, not later than 60 days
after receiving the Administrator's written decision, a written notice of
request for review of the decision, and the claimant or the claimant's
representative may review Plan documents which relate to the claim and may
submit written comments to the Administrator. Not later than 60 days after
receipt of such review request, the Administrator will render a written decision
on the claim, which decision will include the specific reasons for the decision,
including a reference to the Plan's specific provisions where appropriate. The
foregoing 90 and 60-day periods during which the Administrator must respond to
the claimant may be extended by up to an additional 90 or 60 days, respectively,
if special circumstances beyond the Administrator's control so require.
6.5 Indemnification. The Company shall indemnify the Administrator and each
other person to whom administrative functions are delegated against any and all
liabilities that may arise out of their administration of the Plan, except those
that are imposed on account of such person's willful misconduct.
6.6 Limitation of Authority. No person performing any administrative functions
with respect to the Plan shall exercise, or participate in the exercise of, any
discretion with respect to his or her own benefit under the Plan. This provision
shall not preclude such person from exercising discretionary authority with
respect to the generally applicable provisions of the Plan, even though such
person's benefit may be affected by such exercise.
Article 7
Miscellaneous
7.1 Definitions.
A. The terms "Final Average Compensation" and "Credited Service" shall
have the meanings given them in the H.B. Fuller Company Retirement Plan at the
time a Participant's eligibility for benefits under this Plan or the amount of
such benefits is being determined; provided, however, that Final Average
Compensation shall be determined without regard to any limitation on the maximum
dollar amount of compensation taken into account under the pension plan pursuant
to Internal Revenue Code ss. 401(a)(17) or any similar provision of law and that
service with the Company or an Affiliated Organization shall be taken into
account as Credited Service notwithstanding an otherwise applicable limitation
based on the Participant's nationality or place of residence.
B. The "Company" is the H.B. Fuller Company.
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C. An "Affiliated Organization" is the Company and any corporation,
trade or business that, together with the Company, would be treated as a single
employer under the provisions of Internal Revenue Code section 414(b) or (c), if
the phrase "at least 70%" were substituted for the phrase "at least 80%" each
place it appears in section 1563(a)(1) of the Code and in regulations under
section 414(c) of the Code.
D. An "Eligible Employee" is one of a select group of management and
highly compensated employees of the Company or an Affiliated Organization who,
under rules established by the Administrator, is eligible to become a
Participant in the Plan.
E. A Participant's "Social Security Benefit" is the amount, as
determined by the Administrator in its discretion and based upon the
Participant's estimated earnings history to the date of his or her termination
of employment with the Company, to which a Participant will be entitled under
the old age provisions of the Social Security Act upon attainment of age 65.
F. A Participant's "Accrued Benefit" is an amount, determined as of any
date, which is equal to 5% of the benefit the Participant would be entitled to
receive at age 62 (assuming his or her continued employment until such time) for
each of the Participant's first ten years of Credited Service as of the date the
Accrued Benefit is determined, plus 10% of the benefit the Participant would be
entitled to receive at age 62 (assuming his or her continued employment until
such date) for each of the Participant's next five years of Credited Service as
of the date the Accrued Benefit is determined. For the purposes of this
Subsection F., a Participant's Final Average Compensation shall be determined by
projecting the Participant's current rate of compensation to age 65, and a
Participant's Social Security Benefit and all other relevant factors used to
compute benefits shall be treated as remaining constant as of the beginning of
the current year for all subsequent years.
G. "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
7.2 Actuarial Equivalency. Except as otherwise provided in Section 3.5B.,
whenever an actuarial equivalent must be determined under this Plan, it shall be
determined in the same manner, and with the same interest and mortality factors,
as such equivalent would be determined under the provisions of the H.B. Fuller
Company Retirement Plan in effect at the time such determination is made.
7.3 Termination of Employment. A Participant shall be deemed to have terminated
employment for purposes of this Plan only when he or she has ceased to provide
service for the Company and other Affiliated Organizations as an employee and is
not entitled to receive severance pay or disability benefits under any plan
sponsored by the Company or any Affiliated Organization.
7.4 Reemployment. All benefits otherwise payable under this Plan shall be
suspended upon a Participant's reemployment with the Company or another
Affiliated Organization. Any benefit otherwise payable after a reemployed
Participant again terminates employment shall be reduced by the value of any
benefits previously paid, as determined by the Administrator in its discretion.
The Administrator may, in its discretion, provide that a Participant's benefit
shall not be increased by reason of service or compensation during a period of
reemployment.
7.5 Effective Date. This Plan was originally effective as of September 1, 1992.
7.6 No Employment Rights. Nothing contained in this Plan shall be construed as
conferring upon any employee the right to continue in the employ of the Company
or any Affiliated Organization.
7.7 No Compensation Guarantees. Nothing contained in this Plan shall be
construed as conferring upon any employee the right to receive any specific
level of compensation; nor shall the Company be prevented in any way from
modifying the manner or form in which the employee is to be compensated.
7.8 Effect on Benefit Plans. Neither benefits accrued by a Participant under
this Plan nor amounts paid pursuant to the Plan following the Participant's
termination of employment shall be deemed to be salary or other compensation to
the Participant for the purpose of computing benefits to which he or she may be
entitled under any pension plan or other employee benefit plan or arrangement
sponsored by the Company or an Affiliated Organization, except to the extent
such other plan expressly provides otherwise.
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7.9 Rights and Benefits Not Assignable. The rights and benefits of a Participant
and any other person or persons to whom payments may be made pursuant to this
Plan are personal and, except for payments made to the representative of a
person's estate which may be assigned to the persons entitled to such estate,
shall not be subject to any voluntary or involuntary anticipation, alienation,
sale, assignment, pledge, transfer, encumbrance, attachment, garnishment by
creditors of the Participant or such person or other disposition.
7.10 Amendment and Termination.
A. The Company may amend this Plan in such manner as it deems advisable,
provided that no amendment shall reduce the Accrued Benefit of any Participant,
determined as of the date of the adoption of such amendment.
B. The Company may terminate this Plan at any time. No person shall
accrue any additional benefits under the Plan following the date of its
termination. However, the termination of the Plan shall not affect a
Participant's right to receive payment of his or her Accrued Benefit (determined
as of the date of the Plan's termination) upon termination of employment;
provided the Participant would have been entitled to a benefit upon termination
of employment if the Plan had not been terminated.
C. Any amendment or termination of the Plan shall be effected by the
delivery to the Administrator of a written instrument, signed by the President
or Chief Executive Officer of the Company and by the Secretary or an Assistant
Secretary of the Company, setting forth the amendment or providing for the
termination of the Plan. The amendment or termination shall be effective as of
the date specified in such instrument or, if no date is specified, upon the date
such instrument is delivered to the Administrator.
7.11 Titles. The titles to sections in this instrument are for convenience of
reference only, and the Plan is not to be construed by reference to them.
7.12 Governing Law. Except to the extent preempted by the ERISA, this Plan shall
be construed in accordance with, and governed by, the laws of the State of
Minnesota without regard to rules relating to choice of law.
Article 8
Change in Control
8.1 Special Provisions. Notwithstanding anything in this Plan to the contrary,
the following provisions shall apply upon and after the occurrence of a Change
in Control:
A. Five years shall be added to the age, and five years shall be added
to the Credited Service, of a CIC Participant for the purposes of Section 2.2
("Entitlement to Benefits"), Section 3.2 ("Service Reduction"), and Section 3.7B
("Time of Payment").
B. A CIC Participant who is not otherwise entitled to a benefit under
the Plan shall be entitled to an annual benefit equal to 25% of his or her Final
Average Compensation, regardless of the Participant's age or years of Credited
Service at termination of employment. Payment of such benefit (which shall be
subject to reduction as provided in Section 3.3 -- "Other Retirement Income
Reduction") shall be made as provided in Section 3.5 ("Form of Benefit"),
commencing on the first day of the month following the later of:
(1) the date on which the Participant attains age 50; or
(2) the termination of the Participant's employment.
C. The reduction described in Section 3.3.A.(3) (relating to the
reduction of benefits for benefits payable under other plans of the Company and
its Affiliated Organizations) shall only apply to the extent such other plans
are qualified under Section 401(a) of the U.S. Internal Revenue Code, and
Section 3.3.A.(4) (relating to the reduction of benefits for benefits payable
under plans of other employers) shall not apply
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D. The reduction described in Section 3.4 ("Early Retirement Reduction
Factor") shall not apply to the benefits payable to a CIC Participant.
E. An election made by a CIC Participant pursuant to Section 3.7B to
defer the commencement of his or her benefit shall be void and of no force or
effect, and a CIC Participant's benefits shall commence on the date they would
have commenced in the absence of such an election.
F. Section 3.9 ("Termination of Benefits for Breach of Contract") shall
not apply to a CIC Participant.
G. Section 7.3 ("Termination of Employment") shall be applied to a CIC
Participant without regard to whether the Participant is entitled to receive
severance pay under any plan sponsored by the Company or an Affiliated
Organization.
H. The Plan may not be amended in a manner that would reduce, impair, or
otherwise adversely affect a Participant's right to receive any benefit under
the Plan, and the Plan may not be terminated with respect to any Participant,
without the Participant's written consent. In addition, any amendment or
termination of the Plan that reduces, impairs, or otherwise adversely affects a
Participant's right to receive any benefit which is adopted or effected, without
the Participant's written consent, during the 12 consecutive month period
immediately preceding the occurrence of a Change in Control shall be null and
void from the date of its adoption.
8.2 Definitions. For the purposes of this article:
A. "Change in Control" means:
(1) a change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act, whether or not the
Company is then subject to such reporting requirement;
(2) the public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed pursuant
to Section 13(d) of the Exchange Act) by the Company or any "person" (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act) that
such person has become the "beneficial owner" (as defined in Rule 13d-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 securities;
(3) the Continuing Directors cease to constitute a majority of
the Company's Board of Directors;
(4) the shareholders of the Company approve (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 Continuing Directors and would not have at least 60%
of the combined voting power of its outstanding securities held by
persons who were shareholders of the Company immediately prior to such
consolidation, merger, or statutory share exchange; (b) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company;
or (c) any plan of liquidation or dissolution of the Company; or
(5) the majority of the Continuing Directors determine in their
sole and absolute discretion that there has been a change in control of
the Company.
The Company shall notify each Participant promptly of the occurrence of a Change
in Control.
B. "Continuing Director" means any person who is a member of the Board
of Directors of the Company, while such person is a member of the Board of
Directors, who is not an Acquiring Person (as defined below) or an Affiliate or
Associate (as defined below) of an Acquiring Person, or a representative of an
Acquiring Person or any such Affiliate or Associate, and who (1) was a member of
the Board of Directors on August 1, 1997
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or (2) subsequently becomes a member of the Board of Directors, if such person's
initial nomination for election or initial election to the Board of Directors is
recommended or approved by a majority of the Continuing Directors. For purposes
of this Subsection B., "Acquiring Person" shall mean any "person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) who or which, together
with all Affiliates and Associates of such person, is the "beneficial owner" (as
defined in Rule 13d-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 securities, but shall
not include the Company, any subsidiary of the Company, any employee benefit
plan of the Company or of any subsidiary of the Company or any entity holding
shares of the Company's common stock organized, appointed or established for, or
pursuant to the terms of, any such plan; and "Affiliate" and "Associate" shall
have the respective meanings ascribed to such terms in Rule 12b-2 promulgated
under the Exchange Act.
C. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
D. "CIC Participant" means a Participant whose employment is terminated
upon or within three years after the occurrence of a Change in Control, if such
termination is initiated:
(1) by the Company or an Affiliated Organization without Cause;
or
(2) by the Participant for Good Reason; or
(3) by the Participant for any reason during a period of 90 days
following the first anniversary of the occurrence of the Change in
Control.
E. "Cause" means any act by a Participant that is materially inimical to
the best interests of the Company and that constitutes common law fraud, a
felony or other gross malfeasance of duty on the part of the Participant, the
Participant's death, or the Participant's inability, by reason of any physical
or mental impairment, to perform the duties of the position the Participant then
occupies for a period of not less than 90 consecutive days. Except in the case
of death or disability, termination for Cause shall be taken only upon 90 days
prior written notice to the Participant, which notice shall specify the nature
of the Cause for termination, and only if it is subsequently determined by the
Board of Directors of the Company that the Participant has failed to cure the
stated Cause prior to or during such 90-day period.
F. "Good Reason" means:
(1) any change adverse to a Participant in the Participant's
position, reporting responsibilities, duties, compensation, benefits or
other terms or conditions of employment; or
(2) any change in a Participant's principal place of employment,
if the new principal place of employment is more than 50 miles from the
previous principal place of employment;
provided, that a Participant shall not be deemed to have terminated his or her
employment for Good Reason unless the termination occurs within 180 days after
the Participant is notified by the Company of the event constituting Good Reason
or, if later, within 180 days after the occurrence of such event.
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Exhibit 10(k)
AMENDMENT TO THE
H.B. FULLER COMPANY
EXECUTIVE BENEFIT TRUST
THIS AGREEMENT is made this 1st day of October, 1997 by and between H.B.
FULLER COMPANY, a Minnesota corporation (the "Company"), and FIRST TRUST
NATIONAL ASSOCIATION, a national banking association (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company and the Trustee have heretofore entered into a trust
agreement, dated October 25, 1993 (the "Agreement"), creating the H.B. Fuller
Company Executive Benefit Trust, which Agreement is now in full force and
effect;
WHEREAS, the Company has reserved the power to amend the Agreement pursuant
to Section 9.1 thereof, subject to the Trustee's consent in certain cases; and
WHEREAS, the Company and the Trustee wish to amend the Agreement in certain
respects;
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants hereinafter set forth, the parties agree that the Agreement is hereby
amended as follows:
1. Section 1.3 of the Agreement is amended in its entirety, to read as
follows:
"1.3 'Change in Control' shall mean:
(a) a change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Exchange Act, whether or
not the Company is then subject to such reporting requirement;
(b) the public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed
pursuant to Section 13(d) of the Exchange Act) by the Company or
any 'person' (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) that such person has become the 'beneficial
owner' (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Company
representing 15% or more of the combined voting power of the
Company's then outstanding securities;
(c) the Continuing Directors cease to constitute a majority of
the Company's Board of Directors;
(d) the shareholders of the Company approve (i) any consolidation
or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares
of Company stock would be converted into cash, securities or
other property, other than a merger of the Company in which
shareholders immediately prior to the merger have the same
proportionate ownership of stock of the surviving corporation
immediately after the merger; (ii) any sale, lease, exchange or
other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the
Company; or (iii) any plan of liquidation or dissolution of the
Company; or
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<PAGE>
(e) the majority of the Continuing Directors determine in their
sole and absolute discretion that there has been a change in
control of the Company; provided, however, that within ten
business days following the date of such a determination, a
majority of the Continuing Directors, if any, may further
determine that any provision of this Trust Agreement which takes
effect upon the happening of a Change in Control shall not take
effect with respect to that Change in Control."
2. The second Section 1.4 of the Agreement is redesignated as
Section 1.5, and a new Section 1.6 is added to the Agreement, to
read as follows:
"1.6 'Continuing Director' means any person who is a member of the
Board of Directors of the Company, while such person is a member
of the Board of Directors, who is not an Acquiring Person (as
defined below) or an Affiliate or Associate (as defined below) of
an Acquiring Person, or a representative of an Acquiring Person
or any such Affiliate or Associate, and who (i) was a member of
the Board of Directors on August 1, 1997 or (ii) subsequently
becomes a member of the Board of Directors, if such person's
initial nomination for election or initial election to the Board
of Directors is recommended or approved by a majority of the
Continuing Directors. For purposes of this Section 1.6,
'Acquiring Person' shall mean any 'person' (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act) who or which,
together with all Affiliates and Associates of such person, is
the 'beneficial owner' (as defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of securities of
the Company representing 15 % or more of the combined voting
power of the Company's then outstanding securities, but shall not
include the Company, any subsidiary of the Company, any employee
benefit plan of the Company or of any subsidiary of the Company
or any entity holding shares of the Company's common stock
organized, appointed or established for, or pursuant to the terms
of, any such plan; and 'Affiliate' and 'Associate' shall have the
respective meanings ascribed to such terms in Rule 12b-2
promulgated under the Exchange Act."
3. A new Section 4.3 is added at the end of Article IV of the
Agreement, to read as follows:
"4.3 Investments. Upon and after the occurrence of a Change in
Control, the Trustee shall not be subject to the direction of the
Company in the acquisition, investment and disposition of the Trust's
assets, and the Trustee shall thereafter acquire, invest and dispose
of Trust assets in such manner as it deems prudent and in the best
interests of the Plans' participants and their beneficiaries."
4. Section 9.1 of the Agreement is amended in its entirety, to read
as follows:
"9.1 Trust Amendment. Except as limited below, the Chief Executive
Officer of the Company shall have the right to amend this Trust
Agreement at any time. Such amendment shall be stated in an instrument
in writing, executed by such Chief Executive Officer and attested by
the Secretary or an Assistant Secretary of the Company. Upon delivery
of an executed counterpart of such instrument to the Trustee, the
Trust shall be deemed to have been amended in the manner set forth in
such instrument, and all participants and the Company shall be bound
by the amendment; provided, however, that:
(a) no amendment shall increase the duties or liabilities of the
Trustee without its written consent;
(b) no amendment shall reduce, impair or otherwise adversely
affect any Plan participant's rights or protections under a
Plan or this Agreement unless the participant
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<PAGE>
consents in writing to such amendment;
(c) no amendment shall cause the Trust to be terminated prior to
the time set forth in Section 10.3; and
(d) no amendment shall cause or permit any assets of the Trust
to revert to the Company, except as permitted in Sections
2.3, 5.2, and 10.3.
* * * * *
IN WITNESS WHEREOF, the Company and the Trustee have executed this
instrument as of the date first written above.
H.B. FULLER COMPANY
By /s/ Walter Kissling
--------------------------------
Chief Executive Officer
Attest: /s/ Richard C. Baker
-----------------------------
As its: Corporate Secretary
-----------------------------
FIRST TRUST NATIONAL ASSOCIATION, TRUSTEE
By /s/ Robert H. Kaufer
--------------------------------
As Its Assistant Vice President
--------------------------------
By /s/ Joan M. Hinnenkamp
--------------------------------
As Its Vice President
--------------------------------
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<PAGE>
AMENDMENT TO THE
H.B. FULLER COMPANY
EXECUTIVE BENEFIT TRUST
THIS AGREEMENT is made this 2nd day of March, 1998 by and between H.B.
FULLER COMPANY, a Minnesota corporation (the "Company"), and FIRST TRUST
NATIONAL ASSOCIATION, a national banking association (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company and the Trustee have heretofore entered into a trust
agreement, dated October 25, 1993 (the "Agreement"), creating the H.B. Fuller
Company Executive Benefit Trust, which Agreement, as amended, is now in full
force and effect;
WHEREAS, the Company has reserved the power to amend the Agreement pursuant
to Section 9.1 thereof, subject to the Trustee's and beneficiaries' consent in
certain cases; and
WHEREAS, the Company and the Trustee wish to amend the Agreement in certain
respects;
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants hereinafter set forth, the parties agree that the Agreement is hereby
amended as follows:
1. Section 1.3(b) of the Agreement is amended in its entirety, to
read as follows:
"(b) the public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed
pursuant to Section 13(d) of the Exchange Act) by the Company or
any `person' (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) that such person has become the `beneficial
owner' (as defined in Rule 13d-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 securities;"
2. Paragraphs (d) and (e) of Section 1.3 of the Agreement are
amended in their entirety, to read as follows:
"(d) the shareholders of the Company approve (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 Continuing Directors and would
not have at least 60% of the combined voting power of its
outstanding securities held by persons who were shareholders of
the Company immediately prior to such consolidation, merger, or
statutory share exchange; (B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions)
of all or substantially all of the assets of the Company; or (C)
any plan of liquidation or dissolution of the Company; or
"(e) the majority of the Continuing Directors determine in their
sole and absolute discretion that there has been a change in
control of the Company."
3. The last sentence of Section 1.6 of the Agreement is amended
to read as follows:
"For purposes of this Section 1.6, `Acquiring Person' shall mean
any `person' (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) who or which, together with all Affiliates and
Associates of such person, is the `beneficial owner' (as defined
in Rule 13d-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
securities, but shall not include the Company, any subsidiary of
the Company, any employee benefit plan of the Company or of any
subsidiary of the Company or any entity holding shares of the
Company's common stock organized, appointed or established for,
or pursuant to the terms of, any such plan; and `Affiliate' and
`Associate' shall have the respective meanings ascribed to such
terms in Rule 12b-2 promulgated under the Exchange Act."
-4-
<PAGE>
4. Section 2.2 of the Agreement is amended in its entirety, to
read as follows:
"2.2 Payment of Benefits. Subject to the provisions of Sections
2.3, 3.1, and 4.1, the trustee shall distribute trust funds to
the Plan participants and their beneficiaries as directed by the
Administrator. If the assets of the Trust are not sufficient to
make payments of benefits pursuant to the Plan to participants
and their beneficiaries, the Company shall make the balance of
each such payment as it becomes due."
5. Section 2.3 of the Agreement is amended in its entirety, to
read as follows:
"2.3 Reversion of Excess Assets. If, prior to a Change in
Control, the Company determines, on the basis of reasonable
actuarial assumptions selected by an independent actuary
appointed by the Company, that a portion of the Trust's assets or
future earnings allocated to an account for a Plan will not be
required to pay benefits to participants and their beneficiaries
under the terms of the Plan in effect at the time of the
determination, all or any part of such portion of assets or
future Trust earnings shall be returned to the Company upon the
direction of the Company; provided that no part of any assets or
future Trust earnings shall be paid to the Company after the
occurrence of a Change in Control except as provided in Section
5.2 or 10.3."
6. A new paragraph (c) is added at the end of Section 4.1 of the
Agreement, to read as follows:
"(c) The provisions of Section 2.2 (`Payment of Benefits') shall
cease to apply, and the Trustee shall distribute the trust fund
to Plan participants and their beneficiaries in accordance with
the provisions of the Plan. If the Administrator fails to provide
the Trustee with information sufficient for it to determine the
amount or timing of any distribution within thirty days after the
Trustee's receipt of notice of the occurrence of the event
entitling the participant or beneficiary to receive such
distribution, the Trustee shall be entitled to conclusively rely
upon information provided by the participant or beneficiary. If
the assets of the Trust are not sufficient to make payments of
benefits pursuant to the Plan to participants and their
beneficiaries, the Company shall make the balance of each such
payment as it becomes due."
7. A new Section 4.4 is added at the end of Article IV of the
Agreement, to read as follows:
"4.4 Contributions. Within ten business days following the
occurrence of a Change in Control, the Company shall make an
irrevocable cash contribution to the Trust in an amount which,
when added to the then fair market value of the Trust's assets
(excluding any assets credited to an Expense Account established
pursuant to Section 6.3), is not less than the present value of
the payments which are then due or which may thereafter become
due to participants or beneficiaries pursuant to the terms of
each Plan. The amount of such contribution shall be determined by
assuming that each Plan participant who is employed by the
Company at the time of the Change in Control will become entitled
to receive benefit payments on the earliest date as of which the
participant could receive his benefits without reductions based
on the participant's age or length of employment. Present value
shall be determined using the following actuarial assumptions:
Interest: The interest rate on 30-year U.S. Treasury
obligations as of the December 31 coinciding with
or immediately preceding the date of the Change
in Control.
Salary Scale: 6%
Mortality: Postretirement: 1993 Group Annuity Mortality Table.
Preretirement: None.
As of each yearly anniversary of the occurrence of a Change in
Control (`Valuation Date'), the Company shall determine the
amount of the contribution which would have been required
pursuant to this Section 4.4 if the Change in Control had
occurred on such Valuation Date. If the amount so determined
exceeds the fair market value of the Trust assets on such
Valuation Date, the Company shall, within ten business days
following such Valuation Date, make an irrevocable cash
contribution to the Trust in an amount which is
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<PAGE>
not less than such excess."
8. Article V of the Agreement is retitled "Early Termination,"
and Section 5.1 of the Agreement is amended in its entirety, to read
as follows:
"5.1 Early Termination. Notwithstanding anything herein to the
contrary, if there is a final determination that the existence of
this Trust would cause the Plan participants to be taxed on their
benefits before they actually receive them, the Trust shall
terminate and the Trustee shall distribute to each participant
the present value of his benefits under each Plan. For the
purposes of this Section 5.1:
(a) a `final determination' means a determination by the
Internal Revenue Service or a court of competent
jurisdiction from which no further appeal may be taken,
either because there is no further appeal available or
because the time to take such appeal has expired; and
(b) `present value' shall be determined in the same manner,
and with the same interest and mortality factors, as would
be used for such purpose under the provisions of the H.B.
Fuller Company Retirement Plan in effect at the time such
determination is made."
9. A new Section 6.3 is added at the end of Article VI of the
Agreement, to read as follows:
"6.3 Expense Account. The Company, in its discretion, may direct
the Trustee to establish a separate account (the `Expense
Account') for the payment of expenses incurred by the Trustee in
administering the Trust, and it may contribute to the Expense
Account such amounts as it shall determine from time to time, in
its sole and absolute discretion. Notwithstanding anything herein
to the contrary:
(a) Prior to the occurrence of a Change in Control, amounts
credited to the Expense Account shall be used solely for the
payment of expenses incurred by the Trustee in administering
the Trust, to the extent the same have not been paid by the
Company, including, without limitation, the Trustee's
compensation and expenses incurred by the Trustee in
connection with litigation undertaken pursuant to Section
7.3(f).
(b) After the occurrence of a Change in Control, amounts
credited to the Expense Account shall be used primarily for
the payment of expenses described in paragraph (a);
provided, that if the Trustee determines that the amounts
from time to time credited to the Expense Account exceed the
amount of its reasonably anticipated expenses, it may use
the excess amounts to pay any benefits due under the Plans.
(c) Prior to the occurrence of a Change in Control, all or
any part of the amounts credited to the Expense Account
shall be paid to the Company upon the direction of the
Company.
(d) No part of the amounts credited to the Expense Account
shall be paid to the Company after the occurrence of a
Change in Control, except as provided in Section 5.2 or
10.3."
10. The first sentence of Section 7.3(d) of the Agreement is
amended in its entirety, to read as follows:
"(d) The Trustee shall receive for its services compensation in
accordance with its separate agreement with the Company;
provided, that upon and after the occurrence of a Change in
Control, the Trustee shall be compensated in accordance with the
fee schedule attached hereto as Schedule B."
11. Section 7.3(f) of the Agreement is amended in its entirety,
to read as follows:
"(f) Following prior written notice to the Company, the Trustee
may accept, compromise, settle, enforce or contest any obligation
or liability due to or from it as Trustee, including any claim
that may be asserted for taxes under any present or future law
and any claim the Trust may have for contributions due from the
Company under Section 4.4; but it shall not be required to
institute or continue litigation unless it
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<PAGE>
is in possession of funds suitable for that purpose or unless it
has been indemnified to its satisfaction against its counsel fees
and all other expenses and liabilities to which it may in its
judgment be subjected in such action. The Trustee shall be
entitled, out of the recoveries of any litigation, to
reimbursement for its expenses in connection with such
litigation."
12. A new paragraph (j) is added at the end of Section 7.3 of the
Agreement, to read as follows:
"(j) The Trustee may segregate any part or portion of the assets
of the Trust for the purpose of administration or distribution
thereof and may hold such part or portion uninvested whenever and
for so long as is required for the payment in cash of Plan
benefits normally expected to become payable in the near future.
The Trustee may hold uninvested reasonable amounts of cash
whenever the Trustee deems it desirable to do so to facilitate
disbursements, pending investments, or for other operational
reasons and may deposit the same, without any liability for
interest earned thereon, for reasonable periods in the banking
department of the Trustee or of any other bank, trust company or
other financial institution, including those affiliated in
ownership with the Trustee, notwithstanding the banking
department's or other entity's receipt of `float' from such
uninvested cash."
13. New Sections 7.4 and 7.5 are added at the end of Article VII
of the Agreement, to read as follows:
"7.4 Employment of Agents. The Trustee may employ agents,
experts, and counsel to the extent necessary to the performance
of its duties and responsibilities hereunder, and it may
reasonably compensate such agents, experts, and counsel out of
the assets of the Trust.
"7.5 Indemnification. Prior to a Change in Control, the Company
shall indemnify the Trustee and hold it harmless against any
liabilities, losses, or expenses (including reasonable attorneys'
fees) incurred by it as a result of any action taken by it
pursuant to the instructions of the Company or the Administrator,
or by reason of its failure to act upon any matter as to which it
has no power to act when no such instructions have been received,
except to the extent any such action or failure to act was
negligent or in bad faith. Upon or after the occurrence of a
Change in Control, the Company shall indemnify the Trustee and
hold it harmless against any liabilities, losses, or expenses
(including reasonable attorneys' fees) incurred by it as a result
of any action taken or omitted by it pursuant to this Agreement,
except to the extent any such action or omission was grossly
negligent or in bad faith."
14. The provisions of this Amendment shall be effective as of the
date first set forth above, except that the provisions of paragraphs
1, 2, 3, and 7 hereof shall not take effect with respect to a Plan
participant until this Amendment has been approved in writing by such
participant.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have executed this
instrument as of the date first written above.
H.B. FULLER COMPANY
By /s/ Walter Kissling
-----------------------------------
Chief Executive Officer
Attest: /s/ Richard C. Baker
---------------------------
As its: Vice President
---------------------------
FIRST TRUST NATIONAL ASSOCIATION, TRUSTEE
By /s/ Robert H. Kaufer
-----------------------------------
As its Vice President
By /s/ Joan M. Hinnenkamp
------------------------------------
As its Vice President
-8-
<PAGE>
SCHEDULE B
Upon and after the occurrence of a Change in Control, the Trustee shall be
compensated in accordance with the following fee schedule:
TRUSTEE FEES
Domestic Market Value
---------------------
First $1,000,000 .30%
Next $4,000,000 .20%
Next $5,000,000 .15%
Next $15,000,000 .10%
Excess over $15,000,000 .05%
PARTICIPANT SERVICES
Recurring Distributions $2.50 per transaction
Lump Sum Distributions $10.00 per transaction
(Automated)
Lump Sum Distributions $15.00 per transaction
(Non-automated)
ACH Distributions $1.50 per transaction
ACH Distributions w/advice $2.00 per transaction
OUT OF POCKET EXPENSES
Pass Through of Cost
-9-
<PAGE>
Exhibit 10(x)
H.B. FULLER COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1998 REVISION
First Declaration of Amendment
------------------------------
Pursuant to Section 7.10 of the H.B. Fuller Company Supplemental Executive
Retirement Plan--1998 Revision, the Company hereby amends the Plan as follows:
1. Subsections A. and B. of Section 3.3 are amended in their entirety,
to read as follows:
"A. A Participant's annual benefit shall be reduced by the sum
of the following amounts:
(1) The amount of the Participant's annual Social
Security Benefit;
(2) The annual amount to which the Participant is
entitled under any old age, pension, disability or similar
program of any foreign jurisdiction as determined by the
Administrator in its discretion;
(3) The aggregate amount of the Participant's annual
benefits under the H.B. Fuller Company Retirement Plan and each
other funded or unfunded defined benefit pension plan maintained
by the Company or an Affiliated Organization; and
(4) The aggregate value of the Participant's annual
benefits under any funded or unfunded pension, profit sharing,
stock bonus or deferred compensation plan of another employer as
determined by the Administrator in its discretion.
"B. If any benefit described in paragraphs (3) or (4) of
Subsection A. is payable in a form that differs from the form in which a
Participant's benefit is payable under this Plan, or does not commence
at the same time as the Participant's benefit under this Plan, the
Administrator shall, for purposes of this section, convert the value of
such benefit into an actuarially equivalent benefit that is payable in
the same form, and that commences at the same time, as the benefit under
this Plan. Notwithstanding the foregoing, if the benefit payable to the
Participant under another plan is limited by Section 415(b) of the U.S.
Internal Revenue Code and such benefit is being converted into the form
of benefit described in Section 3.5B, the amount of the reduction under
paragraphs (3) or (4) of Subsection A. shall not be less than the amount
that could have been paid to the Participant under the other plan in the
form of a joint and 50% survivor annuity with the Participant's spouse
as the contingent joint annuitant."
2. Section 3.4 is amended in its entirety, to read as follows:
"3.4 Early Retirement Reduction Factor. If a Participant's
benefit commences prior to the date the Participant attains age 62, the
benefit shall be reduced by the same factor as a benefit for the
Participant under the H.B. Fuller Company Retirement Plan would be
reduced if such benefit commenced at the same time, whether or not the
Participant is actually entitled to a benefit under such plan."
3. Subsection A. of Section 3.5 is amended in its entirety, to read as
follows:
"A. A Participant who is not married at the time his or her
benefit commences shall receive his or her benefit in the form of a
single life annuity."
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<PAGE>
4. A new Section 3.10 is added to the Plan, to read as follows:
"3.10 Sequence of Adjustments. The benefit to which a
Participant is entitled under this article shall be calculated as
follows:
A. First, the Participant's basic benefit will be
calculated as provided in Section 3.1.
B. Next, the Participant's basic benefit will be reduced
pursuant to Section 3.2 if the Participant has fewer than 15
full years of Credited Service.
C. Next, the early retirement reduction factor described
in Section 3.4 (if any) shall be applied to the basic benefit as
adjusted pursuant to Subsection B.
D. Next, if the Participant's benefit is payable in the
form of a joint and 50% survivor annuity, the actuarial
adjustment described in Section 3.5B. shall be applied to the
benefit determined pursuant to Subsections A through C.
E. Next, the benefit determined pursuant to Subsections
A. through D. shall be reduced by the amounts (if any)
determined pursuant to Section 3.3A.(3) (relating to benefits
payable under other plans maintained by the Company and its
Affiliated Organizations) and Section 3.3A.(4) (relating to
benefits payable under plans maintained by other employers).
F. Next, the benefit determined pursuant to Subsections
A. through E. shall be reduced by the amounts (if any)
determined pursuant to Section 3.3A.(1) (relating to the
Participant's Social Security Benefit) and Section 3.3A.(2)
(relating to benefits payable under old age, pension, disability
or similar programs of foreign jurisdictions)."
5. Subsection E. of Section 7.1 is amended in its entirety, to read as
follows:
"E. A Participant's `Social Security Benefit' is the amount, as
determined by the Administrator in its discretion and based upon the
Participant's estimated earnings history to the date of his or her
termination of employment with the Company. If the Participant is
eligible for immediate commencement of old age benefits under the Social
Security Act on the date as of which his or her benefit payments under
this Plan begin, the Participant's Social Security Benefit shall be
determined as of that date. If the Participant is not eligible for
immediate commencement of old age benefits under the Social Security Act
on the date as of which his or her benefit payments under this Plan
begin, the Participant's Social Security Benefit shall be determined as
of the earliest age at which the Participant could commence receiving
old age benefits under the Social Security Act."
This Amendment shall be effective as of the date of this instrument; provided,
that nothing in this amendment shall reduce the amount of any benefit being paid
to a Participant, or the Accrued Benefit of any Participant, on the effective
date of this Amendment.
* * * * *
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officers this 4th day of November, 1998.
H.B. FULLER COMPANY
/s/ Albert P.L. Stroucken
-----------------------------
Chief Executive Officer
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<PAGE>
Exhibit 10(y)
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT (the "Agreement") is made this 8th day of April, 1998, by
and between H.B. Fuller Company, a Minnesota corporation (the "Company") and
_________ (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company recognizes the valuable services that Executive has
rendered to the Company and/or its Affiliated Organizations and desires to be
assured that the Executive will continue to actively participate in the business
of the Company; and
WHEREAS, the Executive is willing to continue to serve the Company but
desires assurance that in the event of any change in control of the Company, the
Executive will continue to have the responsibility and status that the Executive
has earned; and
WHEREAS, the Company's Board of Directors has determined that it is
appropriate to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in potentially disturbing circumstances arising from
the possibility of a change in control of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Company and the Executive hereby agree as
follows:
1. Term. The Term of this Agreement shall commence on the date hereof
and shall terminate upon the earliest to occur of:
(a) The "Expiration Date;"
(b) the termination of the Executive's employment under
circumstances that do not entitle the Executive to benefits under
paragraph 3;
(c) the Executive's death;
(d) the date, prior to a Change in Control, on which the
Executive ceases to be in pay grade 35 through 49; or
(e) the third anniversary of the occurrence of a Change in
Control, if the Executive is still employed by the Company on such date;
provided, that the expiration of the Term shall not relieve the Company of its
obligations to make any payments or provide any benefits which are or become due
to the Executive subsequent to the expiration of the Term. For purposes of this
paragraph, the "Expiration Date" of this Agreement is the first anniversary of
the date on which the Term begins; provided, that on each day after the date on
which the Term begins the Expiration Date shall automatically extend for an
additional day, so that the remaining Term shall always be one year, unless the
Company gives written notice to the Executive that the Term shall not be so
extended, whereupon the Expiration Date shall be the date which is one year
after the date of such notice. Notwithstanding the foregoing, upon the
occurrence of a Change in Control during the Term of this Agreement, the
Expiration Date shall automatically be extended to the third anniversary of the
date on which the Change in Control occurs.
2. Employment. In the absence of a Change in Control, the Executive
agrees to remain in the employ of the Company in a pay grade which is not less
than the Executive's existing pay grade, during the Term of this Agreement,
unless the Executive's employment is earlier terminated by the Company. It is
understood and agreed that this paragraph 2 does not impose any additional
obligations on the Company prior to the occurrence of a Change in Control, nor
does it impair the Company's rights (if any) to terminate the Executive's
employment prior to a Change in Control with or without Cause.
<PAGE>
3. Benefits. If, during the Term of this Agreement and upon or after the
occurrence of a Change in Control, the Executive's employment is terminated by
the Company other than for Cause or Disability or by the Executive for Good
Reason, or if the Executive's employment is terminated by the Executive for any
reason during a period of 90 days following the first anniversary of the
occurrence of the Change in Control, the Executive shall be entitled to the
following payments and benefits:
(a) Severance Pay. The Executive shall be entitled to a lump sum
payment in an amount equal to three times the Executive's Annual
Compensation, which payment shall be made to the Executive within ten
days after the Executive's termination of employment. If the Executive
is also entitled to severance payments which would be made in the
absence of a change in control under any plan or program of the Company,
or under the laws of any federal, state, local or foreign jurisdiction,
the amount payable to the Executive pursuant to this paragraph (a) shall
be reduced (but not below zero) by the Present Value of such other
severance payments. Payments under this paragraph (a) shall not be
considered in determining the amount of the Executive's benefits under
any pension, profit sharing, stock bonus or other employee benefit plan
of the Company or any Affiliated Organization.
(b) Medical and Dental Coverage. The Executive shall be entitled
to continued coverage under any medical or dental plan maintained by the
Company in which the Executive was participating at the time of the
Executive's termination of employment, for a period of three years
following the Executive's termination of employment. Rules comparable to
those governing the provision of continuation coverage under Section 602
of ERISA shall apply to the coverage provided under this paragraph,
except that:
(i) the coverage may not be discontinued prior to the
expiration of the period specified in this paragraph (a), except
for the Executive's failure to make a required contribution;
(ii) the contributions required of the Executive for
such coverage may not exceed the contributions required for the
same coverage from a similarly situated active employee; and
(iii) if the Company discontinues the plan or plans in
which the Executive was participating prior to the expiration of
such three year period, the Company shall substitute equivalent
coverage under one or more other plans or, if there are no other
plans, under one or more individual insurance policies.
It is the intent of the Company that neither the coverage provided
pursuant to this paragraph (b), nor the benefits received as a result of
such coverage, shall be subject to U.S. income taxation to the
Executive. Accordingly, if the Company determines that the coverage to
be provided under this paragraph (b) would cause a self-insured plan
maintained by the Company or an Affiliated Organization to be in
violation of the nondiscrimination requirements of section 105(h) of the
Code, it shall substitute insured coverage providing equivalent
benefits, at no greater cost to the Executive, to the extent necessary
to avoid such discrimination.
(c) Outplacement Services. The Company shall pay for any
outplacement services provided to the Executive; provided, that the
total amount paid for such services shall not exceed $25,000. The
Employer shall pay (or, at its option, reimburse the Executive) for such
services within ten days after its receipt of a statement from the
service provider.
(d) Company Car. The Company shall transfer to the Executive
title to his or her Company car, if any, at no cost to the Executive.
4. Limitation; Make Whole Payment.
(a) If any payments or other benefits due to the Executive under
this Agreement and/or under any other plan or program of the Company or
an Affiliated Organization would be subject to the tax (the "Excise
Tax") imposed by section 4999 of the Code, and if the amount of the
Executive's "parachute
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<PAGE>
payments" (as defined in section 280G(b)(2) of the Code) with respect to
such Change in Control does not exceed 330% of the Executive's "base
amount" (as defined in section 280G(b)(3) of the Code), then such
payments or other benefits shall be adjusted until the amount of the
parachute payments equals 299% of such base amount. The adjustments
shall be made in such manner, and to such payments or other benefits, as
the Executive and the Company shall mutually agree.
(b) If any payments or other benefits due to the Executive under
this Agreement and/or under any other plan or program of the Company or
an Affiliated Organization would be subject to the Excise Tax, and if
the amount of the Executive's parachute payments (as defined in
paragraph (a)) exceeds 330% of the Executive's base amount (as defined
in paragraph (a)), the Company shall pay to the Executive an additional
amount (the "Make Whole Payment") so that the net amounts retained by
the Executive, after the deduction of the Excise Tax and any federal,
state, local, and foreign income taxes and Excise Taxes imposed upon the
Make Whole Payment, shall be equal to the payments and other benefits
the Executive would have received in the absence of the Excise Tax. The
Make Whole Payment shall be paid to the Executive within 30 days after
the Executive's termination of employment.
(c) For purposes of determining the amount of the Make Whole
Payment, the Executive shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation in the calendar year(s)
in which the Make Whole Payment is to be made and state, local and
foreign income taxes at the highest marginal rates of taxation in the
state and locality or foreign jurisdiction of the Executive's residence,
net of the reduction in federal income taxes which could be obtained
from any deduction or credit attributable to the state, local or foreign
taxes. If, after a Make Whole Payment has been made, the Excise Tax is
determined to be less than the Make Whole Payment, the Executive shall
repay to the Company at the time that the amount of such reduction in
Excise Tax is finally determined the portion of the Make Whole Payment
attributable to such reduction, plus interest on the amount of such
repayment at the rate provided in section 1274(b)(2)(B) of the Code. If,
after a Make Whole Payment has been made, the Excise Tax is determined
to exceed the amount of the Make Whole Payment (including by reason of
any payment the existence or amount of which cannot be determined at the
time of the Make Whole Payment), the Company shall make an additional
Make Whole Payment in respect of such excess, plus interest on the
amount of such payment at the rate provided in section 1274(b)(2)(B) of
the Code, at the time that the amount of such excess is finally
determined.
5. Definitions. For the purposes of this Agreement:
(a) "Affiliated Organization" means any corporation that would
be a member of a controlled group of corporations (within the meaning of
section 414(b) of the Code) that includes the Company, and any trade or
business (whether or not incorporated) that would be controlled (within
the meaning of section 414(c) of the Code) by the Company, if the phrase
"at least 70%" were substituted for the phrase "at least 80%" each place
it appears in section 1563(a)(1) of the Code and in regulations under
section 414(c) of the Code.
(b) "Annual Compensation" means the sum of:
(i) the Executive's annual base salary at the highest
rate in effect during the period commencing three months prior
to the occurrence of the Change in Control and ending on the
date of the Executive's termination of employment; plus
(ii) the largest bonus and/or incentive payments payable
to the Executive for any fiscal year of the Company during the
period commencing 36 months prior to the occurrence of the
Change in Control and ending on the date of the Executive's
termination of employment.
(c) "Cause" means any act by the Executive that is materially
inimical to the best interests of the Company and that constitutes
common law fraud, a felony or other gross malfeasance of duty on the
part of the Executive. The Executive may only be terminated for Cause
upon 90 days prior written notice to the Executive, which notice shall
specify the nature of the Cause for termination, and then only if it is
-3-
<PAGE>
subsequently determined by the Board of Directors of the Company that
the Executive has failed to cure the stated Cause prior to or during
such 90-day period.
(d) "Disability" or "Disabled" means the Executive's inability,
by reason of any physical or mental impairment, to perform the duties of
the position the Executive then occupies for a period of not less than
180 consecutive days. The Executive may only be terminated for
Disability upon receipt by the Company of an opinion of one or more
physicians jointly selected by the Executive and the Company that the
Executive has been Disabled for such period, and then only if the
Executive is eligible for immediate benefits under the Company's
long-term disability plan.
(e) "Change in Control" means:
(i) a change in control of the Company of a nature that
would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Exchange
Act, whether or not the Company is then subject to such
reporting requirement;
(ii) the public announcement (which, for purposes of
this definition, shall include, without limitation, a report
filed pursuant to Section 13(d) of the Exchange Act) by the
Company or any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) that such person has become the
"beneficial owner" (as defined in Rule 13d-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 securities;
(iii) the Continuing Directors cease to constitute a
majority of the Company's Board of Directors;
(iv) the shareholders of the Company approve (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 Continuing Directors
and would not have at least 60% of the combined voting power of
its outstanding securities held by persons who were shareholders
of the Company immediately prior to such consolidation, merger,
or statutory share exchange; (B) any sale, lease, exchange or
other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the
Company; or (C) any plan of liquidation or dissolution of the
Company; or
(v) the majority of the Continuing Directors determine
in their sole and absolute discretion that there has been a
change in control of the Company.
The Company shall notify the Executive promptly of the occurrence of a
Change in Control.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
Any reference to a specific provision of the Code will include a
reference to such provision as it may be amended from time to time and
to any successor provision.
(g) "Company" means the Company as hereinbefore defined and any
successor or assign to its business and/or assets which executes and
delivers the agreement provided for in paragraph 9 or which otherwise
becomes bound by all the terms and provisions of this Agreement by
operation of law. If at any time during the term of this Agreement the
Executive is employed by an Affiliated Organization, the term "Company"
as used in this Agreement (other than in paragraphs 5(e) and 9(a)
hereof) shall in addition include such Affiliated Organization. In such
event, the Company agrees that it shall pay or provide, or shall cause
such Affiliated Organization to pay or provide, any amounts or benefits
due the Executive pursuant to this Agreement.
(h) "Continuing Director" means any person who is a member of
the Board of Directors of the Company, while such person is a member of
the Board of Directors, who is not an Acquiring Person (as
-4-
<PAGE>
defined below) or an Affiliate or Associate (as defined below) of an
Acquiring Person, or a representative of an Acquiring Person or any such
Affiliate or Associate, and who (i) was a member of the Board of
Directors on August 1, 1997 or (ii) subsequently becomes a member of the
Board of Directors, if such person's initial nomination for election or
initial election to the Board of Directors is recommended or approved by
a majority of the Continuing Directors. For purposes of this paragraph,
"Acquiring Person" shall mean any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) who or which, together
with all Affiliates and Associates of such person, is the "beneficial
owner" (as defined in Rule 13d-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
securities, but shall not include the Company, any subsidiary of the
Company, any employee benefit plan of the Company or of any subsidiary
of the Company or any entity holding shares of the Company's common
stock organized, appointed or established for, or pursuant to the terms
of, any such plan; and "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 promulgated
under the Exchange Act.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Good Reason" means:
(i) any change adverse to the Executive in the
Executive's position, reporting responsibilities, duties,
compensation, benefits or other terms or conditions of
employment; or
(ii) any change in the Executive's principal place of
employment, if the new principal place of employment is more
than 50 miles from the previous principal place of employment.
The Executive shall not be deemed to have terminated employment for Good
Reason unless the termination occurs within 180 days after the Executive
is notified by the Company of the event constituting Good Reason or, if
later, within 180 days after the occurrence of such event.
(k) "Present Value" shall be determined based on the following
actuarial assumptions:
(i) Interest: The interest rate on 30-year U.S. Treasury
obligations as of the December 31 coinciding with or immediately
preceding the date as of which Present Value is determined.
(ii) Mortality: 1993 Group Annuity Mortality Table.
6. Legal Expenses. 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 6 shall be refunded to
the Company, with interest at the rate provided in section 1274(b)(2)(B) of the
Code, 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.
7. No Mitigation. The Executive's benefits hereunder shall be in
consideration of the Executive's past service and the Executive's continued
service from the date of this Agreement, and the Executive's entitlement thereto
shall not be governed by any duty to mitigate damages by seeking further
employment nor offset by any compensation which the Executive may receive from
future employment.
-5-
<PAGE>
8. Other Benefits. The specific arrangements referred to in this
Agreement are not intended to exclude Executive's participation in other
benefits available to executive personnel generally or to preclude other
compensation or benefits as may be authorized by the Company from time to time.
9. Successors.
(a) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good Reason, whereupon the
Executive shall be entitled to receive the payments and other benefits described
in this Agreement as though such termination had occurred upon or after the
occurrence of a Change in Control.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts are still payable to the Executive
hereunder, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's devisee, legatee,
or other designee or, if there be no such designee, to the Executive's estate.
10. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail (or its equivalent for overseas delivery), return receipt
requested, postage prepaid, and addressed as follows:
If to the Company:
H.B. Fuller Company
P.O. Box 64683
St. Paul, MN 55164-0683
Attention: General Counsel
If to the Executive:
----------------
----------------
----------------
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
11. Severability. If any provision of this Agreement is held by a court
of competent jurisdiction to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
13. Modifications; Waiver. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No
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<PAGE>
waiver by either party hereto at any time of any breach by the other party of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
14. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
15. 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 have executed this Agreement as of the
date first above written.
H.B. FULLER COMPANY
By: /s/ Walter Kissling
-----------------------------------------
As its: President and Chief Executive Officer
-------------------------------------
---------------------------------------------
Executive
-7-
<PAGE>
Exhibit 10(z)
-------------
AGREEMENT
---------
between
H.B. Fuller GmbH
Luneburg
- hereinafter referred to as "the Company"
and Mr.
Dr. Hermann Lagally
- hereinafter referred to as "Managing Director" -
1. Upon the Company's initiative, the Managing Director Agreement
between the Company and the Managing Director is hereby
terminated by mutual consent effective as at December 15, 1998
(hereinafter referred to as "Termination Date").
2. Until the Termination Date, the Managing Director shall be
entitled to his gross monthly salary according to Section 2.1
of the Managing Director Agreement.
It is agreed between the parties that due
<PAGE>
to the Managing Director's leaving of the Company he shall not
be entitled to any bonus under any incentive/bonus system as
mentioned in 2.2 or 2.3 of the Managing Director Agreement.
3. As compensation for the loss of his job the Managing Director
shall receive a settlement payment in the amount of DM 806.308
gross in accordance with Sections 3 para. 9, 24, 34 Income Tax
Act. The net amount resulting herefrom is due and payable on
December 31, 1998.
4. Vested pension entitlements which the Managing Director has
acquired until the Termination Date in accordance with Section
2.6 of the Managing Director Agreement shall remain unaffected
by this settlement agreement.
5. At the Termination Date, in case of a prior relief from work,
at the date of such relief, the Managing Director shall return
to the Company all credit cards made available to him by the
Company, office keys and all other assets including documents
belonging to the Company.
The Managing Director shall return to the Company the company
car including the documents and keys pertaining thereto on
December 15, 1998.
6. Until the Termination Date Section 5 of the Managing Director
Agreement shall remain in full force and effect.
7. Section 6 of the Managing Director
<PAGE>
Agreement shall remain unaffected by this settlement
agreement.
8. Despite the Company having waived the post-termination
non-compete covenant as contained in Section 8 of the Managing
Director Agreement both parties hereby explicitly agree that
this post-termination non-compete covenant as contained in
Section 8 of the Managing Director Agreement shall be
reinstated with effect of December 16, 1998, however, with the
following provisos:
- The duration as initially contained in Section 8.1
shall be reduced to the period from December 16, 1998
through October 31, 1999.
- Regarding Section 8.2 it is explicitly agreed that
considering the scope and the prior activities of the
Managing Director the non-competition restraints
shall explicitly include Austria.
- Regarding Section 8.3 the compensation shall not be,
as initially agreed, a monthly compensation in the
amount of the last monthly gross base salary but a
lump sum payment of DM 244.621 gross. This amount is
to be paid by the Company in a one time payment prior
to October 31, 1999. The provisions of Section 8.4
shall remain unaffected therefrom.
Otherwise, all other provisions as contained in Section 8 of
the Managing Di-
<PAGE>
rector Contract shall remain in full force and effect for the
duration of the post-termination non-compete obligation.
9. Both parties agree that, apart from the claims mentioned
above, they do not have any additional rights or claims
against each other based on the Managing Director Service
Agreement. The Managing Director further confirms that he has
also no additional claims against any other company of the H.
B. Fuller Group including the H. B. Fuller Company.
10. If provisions of this Contract should be void, invalid or
unfeasible this will not have an impact on the validity of the
other provisions. The void, invalid or unfeasible provision
then shall be replaced by another valid and feasible provision
leading as close as possible to the same economic result.
11. This Contract shall be subject to German law.
Luneburg, December 14, 1998
Albert P.L. Stroucken
-----------------------------------
The Company/die Gesellschaft
<PAGE>
H.B. Fuller Company and Consolidated Subsidiaries Exhibit 11
----------
Computation of Net Earnings Per Common Share
Years Ended November 28, 1998, November 29, 1997, and November 30, 1996
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Basic
- -----
Earnings:
Earnings before accounting change $ 15,990 $ 40,308 $ 45,430
Dividends on preferred stock (15) (15) (15)
----------- ----------- -----------
Earnings before acctg. chg. applicable to common stock 15,975 40,293 45,415
Cumulative effect of accounting change - (3,368) -
----------- ----------- -----------
Earnings applicable to common stock $ 15,975 $36,925 $ 45,415
=========== =========== ===========
Shares:
Weighted average shares outstanding 13,721,451 13,842,500 13,909,500
=========== =========== ===========
Basic earnings per common share:
Earnings before accounting change per share $ 1.16 $ 2.91 $ 3.26
Cumulative effect of accounting change per share - (0.24) -
=========== =========== ===========
Net earnings per common share $ 1.16 $ 2.67 $ 3.26
=========== =========== ===========
Diluted
- -------
Earnings:
Earnings are exactly the same as presented above under basic.
Shares:
Weighted average number of common shares outstanding 13,721,451 13,842,500 13,909,500
Common share equivalents of stock options outstanding
(determined by the treasury stock method using
average quarterly prices) 122,368 145,841 98,961
----------- ----------- -----------
Weighted average shares outstanding and common
stock equivalent shares 13,843,819 13,988,341 14,008,461
=========== =========== ===========
Diluted earnings per common share:
Earnings before accounting change per share $ 1.15 $ 2.88 $ 3.24
Cumulative effect of accounting change per share - (0.24) -
=========== =========== ===========
Net earnings per common share $ 1.15 $ 2.64 $ 3.24
=========== =========== ===========
</TABLE>
<PAGE>
Management's Analysis of Results of Operations
and Financial Condition
(Dollars in thousands, except per share amounts)
The following discussion includes comments and data relating to the Company's
financial condition and results of operations for the three fiscal years
ended November 28, 1998. This section should be read in conjunction with the
Consolidated Financial Statements and related Notes as they contain important
information for evaluation of the Company's comparative financial condition
and operating results.
Results of Operations:
1998 Compared to 1997
Worldwide sales for 1998 were a record $1,347,241, an increase of $40,452 or
3.1 percent over 1997 sales of $1,306,789. The sales increase was the result
of 2.5 percentage points from increased volume and product mix, a net increase
of 3.3 percentage points from acquisitions and divestitures, a negative 1.0
percentage point from reduced pricing and a negative 1.7 percentage points due
to the strengthening of the U.S. dollar.
Sales changes by geographic area were as follows:
Area Increase/(Decrease)
- ---------------------------------------------------------
North America $ 7,395 1%
Latin America 5,047 3%
Europe 38,454 16%
Asia/Pacific (10,444) (11%)
--------
Total $ 40,452 3%
--------
Net earnings for the year decreased from $36,940 in 1997 to $15,990 in 1998.
The earnings in 1998 were impacted by $26,747 ($21,284 after tax) of
non-recurring charges. 1997 net earnings included a ($3,368) accounting
change.
During 1998, the Company incurred non-recurring charges of $26,747 related to
a restructuring plan (See Note 3 to Consolidated Financial Statements). The
restructuring charges for the year included $16,453 of net severance related
costs (609 employees), $17,108 for the write-down of assets due to the
restructuring plan, $845 for contract and lease charges impacted by the
restructuring and $1,322 in other restructuring expenses. These charges were
offset by $8,981 of gains on the sale of two businesses divested as a part of
the plan. The restructuring plan actually generated $2,511 in cash in 1998,
with the proceeds of the businesses sold exceeding the cash expended. At the
end of 1998, the balance of the restructuring reserve was as follows:
Trade Sales by Class of Product
91% Adhesives, Sealants and Coatings
8% Paints
1% Other
Sales to Unaffiliated Customers
58% North America
21% Europe
15% Latin America
6% Asia/Pacific
Operating Earnings
71% North America
19% Latin America
11% Europe
-1% Asia/Pacific
23
<PAGE>
<TABLE>
<CAPTION>
North Latin Asia/
America Europe America Pacific Total
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance
November 29, 1997 $ - $ - $ - $ - $ -
Accruals in 1998:
Severance 4,749 8,726 3,765 278 17,518
Contracts/leases 526 266 - 53 845
Consulting 121 764 12 2 899
Other 193 - 126 104 423
Payments in 1998:
Severance (2,757) (998) (624) (190) (4,569)
Contracts/leases (526) - - (53) (579)
Consulting (121) (764) (12) (2) (899)
Other (193) - (126) (104) (423)
- --------------------------------------------------------------------------------------------
Balance
November 28, 1998 $ 1,992 $ 7,994 $ 3,141 $ 88 $13,215
- --------------------------------------------------------------------------------------------
</TABLE>
The restructuring plan anticipated a non-recurring charge of $40,000 to $45,000
(before tax) over six quarters, a reduction of employee census of more than 600
and a reduction of costs in excess of $30,000 (before tax) annually, when
completed. Cash requirements of this plan were estimated to be $29,000 to
$30,000 and will primarily by expended in fiscal 1999. As a result of selling
two business units in the fourth quarter of 1998, the total amount of the charge
is now estimated to be from $35,000 to $40,000 (before tax) with approximately
$8,000 to $13,000 to be incurred in fiscal 1999. The cash requirements are now
estimated to be $24,000 to $25,000. The Company has adequate lines of credit to
fund these payments.
In North America, the one percent sales increase was composed of 2 percentage
points related to increased volume and changes in product mix and a negative
one percentage point impact from pricing and currency. The Adhesives,
Sealants and Coatings Group had a 2 percent decrease in sales compared to
1997 primarily due to a reduction in paper converting sales. The Automotive
Group (EFTEC) had a 7 percent increase in sales compared to the prior year
with 5 percentage points of the increase the result of the 1997 Automotive
acquisitions for the full year. The General Motors strike during the third
quarter of 1998 had an approximate 5 percentage point negative impact on 1998
EFTEC annual sales. In the Specialty Group, sales increased 5 percent. Strong
increases in TEC Specialty Products, Inc. and Foster Products Corporation
sales were offset by reduced Linear Products Inc. sales. North American
operating earnings decreased from $59,940 to $56,507, before the $12,879
non-recurring charge. The primary reasons for this decrease were the impact
of the General Motors strike and the impact of reduced paper converting
sales.
Return on Net Sales
1998(d) 1.2%
1997(b) 3.1%
1996 3.6%
1995(b)(c) 2.3%
1994 2.8%
1993(b) 2.2%
1992 3.8%
1991 3.2%
1990 2.7%
1989 2.1%
1988 3.1%
(b) Excludes cumulative effect of change in accounting principles.
(c) 1995 is pro forma 1995.
(d) Excluding non-recurring charges in 1998, this return would be 2.8%.
Return on Average Assets
1998(e) 1.6%
1997(b) 4.5%
1996 5.4%
1995(b)(c) 3.6%
1994 4.7%
1993(b) 3.9%
1992 6.7%
1991 5.5%
1990 4.5%
1989 3.5%
1988 5.5%
(b) Excludes cumulative effect of change in accounting principles.
(c) 1995 is pro forma 1995.
(e) Excluding non-recurring charges in 1998, this return would be 3.8%.
In Latin America, 1998 sales increased 3 percent from 1997. The increase in
sales was composed of 5 percentage points relating to increased volume and
changes in product mix partially offset by a 2 percentage point decrease in
pricing. Latin American operating earnings decreased 10 percent when compared
to 1997, decreasing from $15,659 to $14,111, before the $7,406 non-recurring
charge. Low volumes, economic pressure within the region and the impact of
Hurricane Mitch were the primary reasons for the reduction in operating
earnings.
In Europe, the 16 percent 1998 sales increase was composed of 4 percentage
points due to increased volume and changes in
24
<PAGE>
product mix, a net 16 percentage point increase related to two 1998 United
Kingdom (U.K.) acquisitions and the divestiture of the construction business in
1997 and the wax business in 1998, and a negative 4 percentage points from
pricing and strengthening of the U.S. dollar. Operating earnings increased from
$11,112 in 1997 to $17,627 in 1998, before the $6,025 non-recurring charge, with
operating earnings from the U.K. acquisitions and control of operating expenses
being the primary reasons for the increase.
Asia/Pacific sales decreased 11 percent from sales in 1997. The strengthening
of the U.S. dollar, compared to local currencies, caused a 15 percentage
point decrease. The remaining changes were a positive 6 percentage point
increase due to increased volume and changes in product mix, offset by a net
negative 2 percentage points resulting from a divestiture and an acquisition
in New Zealand in 1998 and an acquisition in Australia late in 1997.
Operating earnings decreased from $541 in 1997 to operating losses of $286 in
1998, before the non-recurring charge of $437, with all of the change
resulting from the New Zealand divestiture.
The Company continues to develop its organization and implement strategies to
effectively serve large global customers, recognizing that, along with
significant opportunities for sales growth, such an approach also carries the
usual risks of increasing dependence on fewer large customers. In 1998, no
single customer accounted for over 5 percent of Companywide sales. Increasing
globalization of corporate functions such as information technology,
purchasing, research and development, manufacturing, engineering and quality
programs should result in improved productivity and customer service.
Consolidated gross margin for the Company, as a percent of sales, decreased
from 31.6 percent in 1997 to 31.3 percent in 1998. During 1998, the Company
overall experienced stable raw material costs. Gross margins for Europe
improved from 1997 levels. The primary cause for the overall decrease in
gross margins were economic pressures in Latin America and Asia/Pacific.
Consolidated selling, administrative and other expenses for the Company,
excluding non-recurring charges (See Note 3 to Consolidated Financial
Statements), increased $8,210 or 2.5 percent from 1997, and as a percent of
sales, decreased from 24.9 percent in 1997 to 24.8 percent in 1998. This
decrease was primarily the result of employee census control, cost control
efforts and continued globalization of the Company. The year-end 1998
employee census decreased one percent to 6,000 in spite of the fact that 1998
acquisitions and divestitures added approximately 200 employees.
Return on Invested Capital(a)
1998(d) 4.1%
1997(b) 8.6%
1996 10.3%
1995(b)(c) 7.8%
1994 9.4%
1993(b) 8.0%
1992 13.3%
1991 11.6%
1990 9.6%
1989 7.7%
1988 10.4%
(a) Average invested capital is a two-point average of long-term and short-term
debt, minority interest and stockholders' equity. After tax interest expense
and minority interest are added back to net earnings.
(b) Excludes cumulative effect of change in accounting principles.
(c) 1995 is pro forma 1995.
(d) Excluding non-recurring charges in 1998, this return would be 7.9%.
Return on Average Equity
1998(e) 4.7%
1997(b) 12.0%
1996 14.3%
1995(b)(c) 9.8%
1994 11.5%
1993(b) 8.4%
1992 15.0%
1991 13.3%
1990 11.0%
1989 8.6%
1988 12.4%
(b) Excludes cumulative effect of change in accounting principles.
(c) 1995 is pro forma 1995.
(e) Excluding non-recurring charges in 1998, this return would be 11%.
Interest expense was $26,989 in 1998, up $7,153 or 36.1 percent from the
prior year. Total Company borrowings at year-end 1998 were above that at
year-end 1997, primarily as a result of borrowings to fund acquisitions.
Capitalized interest costs associated with major property and equipment
projects decreased from $1,245 in 1997 to $822 in 1998.
Other income/expense, net, changed from $7,295 expense in 1997 to $4,674
expense in 1998, primarily as a result of 1997 consulting costs and the 1997
costs associated with pursuing a large acquisition. (See Notes 1 and 2 to the
Consolidated Financial Statements).
25
<PAGE>
Gains on the sale of assets decreased from $5,199 or $0.22 per share (basic)
in 1997 to $3,237 or $0.14 per share (basic) in 1998, excluding the sale of
businesses as part of the restructuring plan.
Income taxes totaled $18,826 in 1998, a 29.4 percent decrease from $26,651 in
1997. The effective tax rate in 1998 equaled the 40.8 percent in 1997, after
the consideration of the low tax benefit provided for a portion of the
non-recurring charges incurred in countries where no tax benefit is
available.
Results of Operations:
1997 Compared to 1996
Worldwide sales for 1997 were $1,306,789, an increase of $31,073 or 2.4 percent
over 1996 sales of $1,275,716.
Sales changes by geographic area were as follows:
Area Increase/(Decrease)
- ----------------------------------------------------------------
North America $ 38,421 5%
Latin America 8,322 5%
Europe (24,165) (9%)
Asia/Pacific 8,495 10%
--------
Total $ 31,073 2%
--------
In North America, the 5 percent increase in sales is composed of a 6 percentage
point increase due to volume and change in product mix and a negative one
percentage point related to pricing and strengthening of the U.S. dollar. North
American operating earnings increased 4.3 percent compared to 1996. Some bonuses
were not paid in 1996. On a comparable basis, adjusting for these bonuses,
operating earnings increased 12.5 percent year over year.
Within North America, the Adhesives, Sealants and Coatings (ASC) Group
produced a 7 percent sales increase over 1996 with 5 percentage points of the
increase a result of expanded sales within core industrial markets and
moderate sales growth by the ASC structural group, especially in the
engineered systems and window markets. ASC Group operating earnings had a
strong increase over 1996, supported by relatively stable raw material costs
and lower operating expenses resulting from continuing cost containment
programs.
North American automotive sales experienced a 9 percent increase over 1996
automotive sales and was composed of 13 percentage points resulting from
EFTEC and a 1996 acquisition, offset by 4 percentage points of negative
pricing. Operating earnings decreased substantially as a result of low unit
growth in the base business, negative pricing, competitive pressures in the
automotive market, and costs of merging and integrating the automotive
business.
Working Capital (In millions)
1998 $172.7
1997 $171.6
1996 $141.6
1995 $142.1
1994 $129.7
1993 $119.9
1992 $130.8
1991 $108.8
1990 $ 96.1
1989 $ 95.6
1988 $104.1
Capitalization Ratio
1998 46.8%
1997 40.4%
1996 34.0%
1995 35.7%
1994 32.1%
1993 19.5%
1992 17.3%
1991 24.7%
1990 30.9%
1989 35.1%
1988 35.5%
The North American Specialty Group, adjusted for the sale of the Monarch
Division in the third quarter of 1996, experienced an 11 percent sales
increase and a substantial operating earnings increase in 1997 compared to
1996. Global Coatings Division had a significant increase in sales, TEC
Specialty Products Inc. had a strong sales increase and Foster Products
Corporation and Linear Products Inc. had moderate increases in sales.
Sales by the Company's Latin American operations increased 5 percent compared
to the sales of the prior year, with a 6 percentage point increase resulting
from volume and product mix
26
<PAGE>
and a negative one percentage point resulting from decreased pricing. Operating
earnings for Latin America increased 19.2 percent compared to 1996. On a
comparative basis, adjusting for bonuses not paid in 1996, operating earnings
increased 29.3 percent. The increase in operating earnings resulted from
improved unit volume growth and increased gross margins.
Sales in Europe decreased 9 percent in 1997 compared to 1996, with the
strengthening of the U.S. dollar negatively affecting the sales by 10
percentage points. The one percentage point increase in local currency sales
was primarily from an 8 percentage point improvement in volume and change in
product mix, which was partially offset by 7 percentage points from negative
pricing and the impact of the sale of the construction business. Operating
earnings decreased 6.3 percent in 1997 compared to the prior year. On a
comparable basis, excluding the benefit of not paying bonuses in 1996,
operating income increased 25.5 percent.
Sales in Asia/Pacific increased 10 percent in 1997 from 1996. The
strengthening of the U.S. dollar accounted for a decrease of 8 percentage
points. The 18 percentage point increase in local currency sales included 19
percentage points from increased volume and change in product mix which was
partially offset by one percentage point of negative pricing. Operating
losses in the region in 1996 were replaced with a slight operating gain in
1997.
Consolidated gross margin for the Company, as a percent of sales, decreased
from 31.7 percent in 1996 to 31.6 percent in 1997. On a comparable basis,
excluding the favorable impact of not paying bonuses in 1996, gross margins,
as a percent of sales, improved from 31.3 percent in 1996 to 31.6 percent in
1997. During 1997, the Company overall experienced relatively stable raw
material costs. Gross margins for North American ASC and Specialty Group,
Latin America and Asia/Pacific improved from 1996 levels.
Consolidated selling, administrative and other expenses for the Company
increased $2,241 or 0.7 percent from 1996, and as a percent of sales,
decreased from 25.4 percent in 1996 to 24.9 percent in 1997. This was
primarily the result of employee census control, cost control efforts and
continued globalization of the Company. The year-end 1997 number of employees
increased 2 percent, to 6,000, with virtually all of the added census
resulting from the 1997 acquisitions. Excluding the favorable bonus nonpayment
in 1996, operating expenses decreased $1,749 or 0.5 percent and the 1996
percent to sales increased to 25.7 percent.
Interest expense was $19,836 in 1997, up $955 or 5.1 percent from the prior
year. Total Company borrowing at year-end 1997 was above that at year-end
1996, primarily as a result of borrowing to fund benefit plans and the
repurchase of 300,000 shares of Company stock. Capitalized interest costs
associated with major property and equipment projects decreased from $2,518
in 1996 to $1,245 in 1997.
Capital Expenditures, Gross (In millions)
1998 $62.3
1997 $69.2
1996 $89.8
1995 $90.7
1994 $65.0
1993 $41.8
1992 $34.5
1991 $30.0
1990 $31.5
1989 $40.9
1988 $40.2
Research and Development Expenses (In millions)
1998 $22.3
1997 $24.8
1996 $25.8
1995 $26.5
1994 $23.6
1993 $21.8
1992 $20.4
1991 $17.2
1990 $16.1
1989 $15.5
1988 $14.4
Other income/expense, net, changed from $1,995 expense in 1996 to $7,295
expense in 1997, primarily as a result of increased currency losses in Asia/
Pacific, 1997 consulting costs and the costs associated with pursuing a large
acquisition which was not consummated. (See Notes 1 and 2 to the Consolidated
Financial Statements.)
Gain on sale of assets decreased from $16,673 or $0.71 per share (basic) in
1996 to $5,199 or $0.22 per share (basic) in 1997. The gain in 1996 was
primarily the result of the sale of Monarch sanitation chemicals.
27
<PAGE>
Income taxes totaled $26,651 in 1997, a 14.7 percent decrease from $31,233 in
1996. The effective tax rate was 40.8 percent in both 1997 and 1996.
Net earnings for 1997 were $36,940, a decrease of $8,490 or 18.7 percent from
1996 earnings of $45,430. 1997 net earnings were adversely affected by an
accounting change charge of $3,368. As discussed in Note 1 to the
Consolidated Financial Statements, the Company changed its accounting for
certain information technology transformation costs to conform with issue No.
97-13 of the Emerging Issues Task Force.
Liquidity and Capital Resources
The Company generated $51,972 in cash from operations in 1998 compared to
$68,581 in 1997 and $81,261 in 1996. The decrease in 1998 resulted primarily
from increased cash required to fund working capital, excluding the
non-recurring charges. The Company also generated cash from divestitures and
the sale of assets. (See Note 5 to the Consolidated Financial Statements.)
Major other uses of cash during 1998 were capital expenditures, purchase of
businesses and payment of dividends. Cash was $4,605 at November 28, 1998,
compared to $2,710 at November 29,1997. The $4,605 cash balance and unused
lines of credit at November 28, 1998 are considered adequate to meet Company
obligations over the next year.
Working capital was $172,740 at November 28, 1998, compared to $171,607 at
November 29, 1997. A primary reason for the increase in working capital is
increased working capital required to support businesses purchased in 1998.
The current ratio at year-end 1998 was 1.6. The number of days sales in trade
accounts receivable was 60 at November 28,1998, an increase of seven days
sales from 53 at November 29, 1997. The average days sales in inventory on
hand was 63 in 1998 compared to 62 in 1997.
Management believes that the Company will continue to have access to
short-term and long-term credit markets to fund its working capital
requirements, capital expenditure programs and future acquisitions. The
Company's ratio of long-term debt to total capitalization was 46.8 percent at
November 28, 1998, compared to 40.4 percent at November 29,1997. At year-end
1998, the Company had short-term and long-term lines of credit of $372,636 of
which $260,000 was committed. The unused portion of these lines of credit was
$266,307.
Capital expenditures for property, plant and equipment of $62,327 in 1998
were primarily for completion of construction of a manufacturing plant in
Georgia, an information systems project, general improvements in
manufacturing productivity and operating efficiency and various environmental
projects. Environmental capital expenditures are less than 10 percent of
total expenditures and are not a material portion of overall Company
expenditures. Future commitments related to 1998 capital projects are estimated
to be approximately $25,000.
Over the recent past, approximately 50 percent of the Company's sales have
come from its foreign subsidiaries. Swings in exchange rates, particularly
the deutsche mark and Japanese yen, can have an impact on the Company's
results. (See Note 1 to Consolidated Financial Statements.) The Company will
continue to monitor changing economic conditions in the South American
countries, specifically Brazil where the Company has an investment of $4,100.
The Company's operations in Europe use forward foreign exchange contracts to
hedge foreign currency denominated accounts receivable/ payable and
inter-company loans.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. As a result of
this issue, computer programs that have date-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. The Year 2000
Issue could result in system failures or miscalculations causing disruption
of operations, including, among other things, a temporary inability to
process transactions involving the recording of sales, manufacture of
products, management of inventory and distribution, preparation of invoices
and collection of accounts receivable.
The Company's Year 2000 Project Office (consisting of information technology
("IT") personnel) has established a three-phase program to address the Year
2000 Issue. The three phases consist of (a) an assessment phase, (b) an
analysis and resolution strategy phase and (c) a remediation and testing
phase. The compliance program focuses on the Company's IT as well as non-IT
systems (which systems contain embedded technology in manufacturing or
process control equipment containing microprocessors or similar circuitry).
The assessment phase, during which the Year 2000 Project Office attempted to
identify all hardware and software that affect the Company's operations, has
been completed with respect to
28
<PAGE>
most of the Company's operations. Based on the results of the assessment phase,
the Company has determined that its primary hardware and operating system
software used in North American operations is Year 2000 compliant. In addition,
the Company's internal laboratory and regulatory systems, as well as the
Company's financial and enterprise resource planning systems for most division
locations in North America, England, Australia, Brazil, Argentina, and Chile are
compliant. The Company's Year 2000 Project Office has determined that the
Company will need to update or replace certain other hardware and software so
that its computer systems will properly utilize dates after December 31, 1999.
The Company is currently in the remediation and testing phase of the program
with respect to most non-compliant systems used in its North American
operations. Outside the United States, the Company is addressing compliance
issues on a region-by-region basis. The Company is in the analysis and
resolution strategy phase in certain locations, and in the remediation and
testing phase in other locations. The Company has a timeline for completing
all internal Year 2000 remediation projects. The Company currently
anticipates these projects will be completed prior to June 30, 1999.
The Company has also begun assessing Year 2000 compliance issues relating to
companies with which it has third-party outsourcing relationships on a global
basis, such as a financial institution administering employee benefit plans,
telecommunications providers and health care providers. The Company has
requested assurances from its significant suppliers that they are addressing
the Year 2000 Issue and that products purchased by the Company from such
suppliers will function properly in the Year 2000. The Company will continue
to assess supplier compliance issues. In addition, the Company is
communicating with its major customers regarding the Company's Year 2000
compliance efforts. However, it is impossible to fully assess the potential
consequences in the event service interruptions from suppliers occur or in
the event that there are disruptions in such infrastructure areas as
utilities, communications, transportation, banking and government.
In October 1998, the Company formed a Year 2000 Task Force (consisting of
representatives from its financial, IT, legal and risk management departments
and from its key business units) to further address internal and external
Year 2000 Issues.
The Company incurred Year 2000 compliance costs of approximately $2,000 over
a two-year period ending November 28, 1998. The current total estimated cost
to complete Year 2000 compliance efforts over the next year is $1,200 to
$1,500. In recent years, the Company has replaced certain of its financial
and operating systems. These systems have not required modification to
address the Year 2000 Issue, and, as a result, the Company's Year 2000 costs
have been relatively low. Estimates of Year 2000 costs are based on numerous
assumptions, and there can be no assurance that the estimates are correct or
that the actual costs will not be greater than anticipated.
The Company's most reasonably likely worst case Year 2000 Issue scenario is a
potential inability to obtain raw materials from suppliers in a timely
manner, due either to a supplier's inability to manufacture the product or
ship it. In such event, the Company may experience a delay in its ability to
manufacture and deliver products when ordered by customers. The Company is
currently evaluating its alternatives to mitigate the effect of such
scenario, if it occurs.
The Company has developed preliminary contingency plans addressing the
potential failure of its manufacturing equipment and order entry telephone
system due to Year 2000 problems. The Company is developing contingency plans
to address other potential failures or delays due to the Year 2000 Issue.
Based on its assessments and current knowledge, the Company believes it will
not, as a result of the Year 2000 Issue, experience any material disruptions
in internal manufacturing processes, information processing or interfaces
with major customers, or with processing orders and billing. However, if
certain third-party providers, such as providers of electricity, water or
telephone service, experience difficulties resulting in disruption of service
to the Company, a shutdown of the Company's operations at individual
facilities could occur for the duration of the disruption. Assuming no major
disruption in service from utility companies or other critical third-party
providers, the Company believes that it will be able to manage its total Year
2000 transition without any material effect on the Company's results of
operations or financial condition.
Safe Harbor Statement Under the Private Securities Litigation Act of 1995
Certain statements in this Annual Report 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:
29
<PAGE>
the Asian economic crises and other political 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
receivable 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; the conversion
to the euro currency by European Community member states; 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.
30
<PAGE>
Consolidated
Statements of Earnings
H.B. Fuller Company and Subsidiaries
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------
November 28, November 29, November 30,
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,347,241 $1,306,789 $1,275,716
Cost of sales 925,370 893,835 871,501
- ---------------------------------------------------------------------------------------------------------
Gross profit 421,871 412,954 404,215
Selling, administrative and other expenses 333,912 325,702 323,461
Non-recurring charges 26,747 - -
- ---------------------------------------------------------------------------------------------------------
Operating earnings 61,212 87,252 80,754
Interest expense (26,989) (19,836) (18,881)
Gains from sales of assets 3,237 5,199 16,673
Other income (expense), net (4,674) (7,295) (1,995)
- ---------------------------------------------------------------------------------------------------------
Earnings before income taxes, minority
interests and accounting change 32,786 65,320 76,551
Income taxes (18,826) (26,651) (31,233)
Net earnings or losses of consolidated
subsidiaries applicable to minority interests (117) 644 112
Earnings from equity investments 2,147 995 -
- ---------------------------------------------------------------------------------------------------------
Earnings before cumulative effect
of accounting change 15,990 40,308 45,430
Cumulative effect of accounting change - (3,368) -
- ---------------------------------------------------------------------------------------------------------
Net earnings $ 15,990 $ 36,940 $ 45,430
- ---------------------------------------------------------------------------------------------------------
Basic earnings (loss) per common share:
Earnings before accounting change $ 1.16 $2.91 $ 3.26
Accounting change - (0.24) -
- ---------------------------------------------------------------------------------------------------------
Net earnings $ 1.16 $2.67 $ 3.26
- ---------------------------------------------------------------------------------------------------------
Diluted earnings (loss) per common share:
Earnings before accounting change $ 1.15 $2.88 $ 3.24
Accounting change - (0.24) -
- ---------------------------------------------------------------------------------------------------------
Net earnings $ 1.15 $2.64 $ 3.24
- ---------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding:
Basic 13,721 13,843 13,910
Diluted 13,844 13,988 14,008
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
31
<PAGE>
Consolidated
Balance Sheets
H.B. Fuller Company and Subsidiaries
(In thousands)
<TABLE>
<CAPTION>
November 28, November 29,
1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 4,605 $ 2,710
Trade receivables, less allowance for doubtful accounts
of $5,073 in 1998 and $5,879 in 1997 242,879 205,590
Inventories 158,606 150,685
Other current assets 51,810 50,171
- -----------------------------------------------------------------------------------------------------
Total current assets 457,900 409,156
Net property, plant and equipment 414,467 398,561
Deposits and miscellaneous assets 70,673 62,196
Other intangibles, less accumulated amortization
of $16,405 in 1998 and $14,066 in 1997 34,717 13,830
Excess of cost over net assets acquired, less accumulated
amortization of $15,892 in 1998 and $15,599 in 1997 68,412 33,903
- -----------------------------------------------------------------------------------------------------
Total assets $1,046,169 $917,646
- -----------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable $ 59,282 $ 39,675
Current installments of long-term debt 4,428 2,551
Accounts payable - trade 129,694 121,883
Accrued payroll and employee benefits 34,780 36,151
Other accrued expenses 36,945 32,802
Accrued non-recurring charges 13,215 -
Income taxes 6,816 4,487
- -----------------------------------------------------------------------------------------------------
Total current liabilities 285,160 237,549
Long-term debt, excluding current installments 300,074 229,996
Accrued pensions 83,500 76,694
Other liabilities 19,833 18,477
Minority interests in consolidated subsidiaries 16,198 15,816
Stockholders' Equity:
Series A preferred stock 306 306
Common stock 13,983 13,841
Additional paid-in capital 31,140 25,035
Retained earnings 309,275 304,974
Foreign currency translation adjustment (5,306) 341
Unearned compensation - restricted stock (7,994) (5,383)
- -----------------------------------------------------------------------------------------------------
Total stockholders' equity 341,404 339,114
- -----------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 1,046,169 $917,646
- -----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
32
<PAGE>
Consolidated
Statements of Stockholders' Equity
H.B. Fuller Company and Subsidiaries
(In thousands)
FISCAL YEARS 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Unearned
Foreign Compen-
Additional Currency sation
Preferred Common Paid-in Retained Translation Restricted
Stock Stock Capital Earnings Adjustment Stock
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at November 30, 1995 $306 $14,007 $20,771 $256,489 $11,319 $(3,478)
Stock compensation plans, net - 59 1,722 - - (572)
Net earnings - change in non-
U.S. year-end* - - - 118 - -
Net earnings - 1996 - - - 45,430 - -
Dividends paid - - - (9,209) - -
Changes in foreign currency translation:
Translation gain adjustment included in
net earnings due to substantial
liquidation of non-U.S. assets - - - - 208 -
Other - - - - (2,430) -
- ----------------------------------------------------------------------------------------------------------------------------
Balances at November 30, 1996 306 14,066 22,493 292,828 9,097 (4,050)
Stock compensation plans, net - 76 3,039 - - (1,333)
Retirement of common stock - (301) (497) (14,726) - -
Net earnings - 1997 - - - 36,940 - -
Dividends paid - - - (10,068) - -
Changes in foreign currency translation:
Translation gain adjustment included in
net earnings due to substantial
liquidation of non-U.S. assets - - - - 97 -
Other - - - - (8,853) -
- ----------------------------------------------------------------------------------------------------------------------------
Balances at November 29, 1997 306 13,841 25,035 304,974 341 (5,383)
Stock compensation plans, net - 143 6,108 - - (2,611)
Excess of additional pension liability
over unrecognized prior service cost - - - (691) - -
Retirement of common stock - (1) (3) (51) - -
Net earnings - 1998 - - - 15,990 - -
Dividends paid - - - (10,947) - -
Changes in foreign currency translation:
Translation gain adjustment included in
net earnings due to substantial
liquidation of non-U.S. assets - - - - 123 -
Other - - - - (5,770) -
- ----------------------------------------------------------------------------------------------------------------------------
Balances at November 28, 1998 $306 $13,983 $31,140 $309,275 $(5,306) $(7,994)
- ----------------------------------------------------------------------------------------------------------------------------
* See Consolidated Financial Statements Note 1, Change in Year-end.
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
33
<PAGE>
Consolidated
Statements of Cash Flows
H.B. Fuller Company and Subsidiaries
(In thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------
November 28, November 29, November 30,
1998 1997 1996*
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 15,990 $ 36,940 $ 45,430
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 49,541 46,773 46,992
Pension costs 6,900 9,854 13,132
Non-recurring charges 16,043 - -
Gain on sale of businesses in the restructuring plan (8,981) - -
Gain on sale of assets (3,237) (5,199) (16,673)
Other items (6,483) (6,001) 4,324
Change in current assets and liabilities
(net of effect of acquisitions/divestitures):
Accounts receivable (27,120) (24,105) (28,781)
Inventory (4,473) (2,485) 7,727
Other current assets (79) (6,507) (929)
Accounts payable 646 8,224 5,138
Accrued non-recurring charges 13,215 - -
Accrued expense (2,780) 13,711 3,466
Income taxes payable 2,790 (2,624) 1,435
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 51,972 68,581 81,261
Cash flows from investing activities:
Purchased property, plant and equipment (62,327) (69,224) (89,847)
Proceeds from sale of assets 9,019 14,382 29,194
Purchased businesses, net of cash acquired (92,439) (9,618) (8,120)
- -----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (145,747) (64,460) (68,773)
Cash flows from financing activities:
New long-term debt 255,138 68,255 62,643
Long-term debt paid (161,636) (10,348) (58,504)
Notes payable 18,461 (4,035) (5,237)
Dividends paid (10,947) (10,068) (9,209)
Repurchase common stock (56) (15,524) -
Fund pension and other employee benefit plans (3,720) (25,741) (8,227)
Other (1,759) (6,999) 662
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 95,481 (4,460) (17,872)
Effect of exchange rate changes 189 (466) (162)
- -----------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 1,895 (805) (5,546)
Cash at beginning of year and cash equivalents 2,710 3,515 9,061
- -----------------------------------------------------------------------------------------------------------------------
Cash at end of year and cash equivalents $ 4,605 $ 2,710 $ 3,515
- -----------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid for interest $ 24,277 $ 20,358 $ 21,901
Cash paid for income taxes $ 15,224 $ 33,996 $ 36,599
</TABLE>
* Includes the fifty-two weeks ended November 30, 1996 for all entities
and the two-month stub period for non-U.S. entities. See Consolidated
Financial Statements Note 1, Change in Year-end.
See accompanying Notes to Consolidated Financial Statements.
34
<PAGE>
Notes to Consolidated
Financial Statements
H.B. Fuller Company and Subsidiaries
(In thousands, except share amounts)
1/Summary of Significant Accounting Policies
The following information is presented to explain the accounting policies
used to prepare H.B. Fuller Company's Consolidated Financial Statements.
Nature of Operations: H.B. Fuller Company ("The Company") operates as one of
the world's leading manufacturers and marketers of adhesives, sealants,
coatings, paints and other specialty chemical products. The Company has
operations in 42 countries in North America, Europe, Latin America and the
Asia/Pacific region. The Company's largest business category is specialty
chemicals and related products (adhesives, sealants and coatings). These
products, in thousands of formulations, are sold to customers in a wide range
of industries, including packaging, woodworking, automotive, aerospace,
graphic arts (books/ magazines), appliances, filtration, windows, sporting
goods, nonwovens, shoes and ceramic tile. The Company generally markets its
products through a direct sales force and independent distributors in some
markets.
Principles of Consolidation: The Consolidated Financial Statements include
the accounts of the Company and all subsidiaries. Beginning with 1996, the
Company's fiscal year ends on the Saturday closest to November 30th. All
significant intercompany items have been eliminated in consolidation.
Change in Year-end: Effective December 1, 1995, in the first quarter of the
Company's 1996 fiscal year, the Company's non-U.S. subsidiaries that
previously reported on a fiscal year ending September 30, changed their
reporting period to a Companywide 52-week fiscal year ending on the Saturday
closest to November 30. This change was made to reflect the results of
operations and financial position of these subsidiaries on a more timely
basis and to increase operating and planning efficiency. The results of
operations of these subsidiaries for the period October 1 through November
30, 1995, income of $118 or $0.01 per share (basic), have been reflected as
an adjustment to retained earnings. Sales for the period were $104,811 and
cost of sales was $73,341. The Company also changed to thirteen-week
quarters. The three fiscal years ended November 28, 1998 represent 52-week
years, respectively.
Use of Estimates: Generally accepted accounting principles require management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
Foreign Currency Translation: The financial statements of non-U.S. operations
are translated into U.S. dollars for inclusion in the Consolidated Financial
Statements.
Translation gains or losses resulting from the process of translating foreign
currency financial statements are reported as a separate component of
stockholders' equity for businesses not considered to be operating in highly
inflationary economies. Translation effect of subsidiaries operating in
highly inflationary economies and subsidiaries using the dollar as the
functional currency are included in determining net earnings.
Transaction losses included in determining earnings before income taxes and
minority interests were as follows:
1998 1997 1996
- ---------------------------------------------------------------
Currency translation
gains, net $ 837 $ 216 $ 2,182
Flow-through
effect of inventory
valuation, net (2,370) (1,479) (246)
- ---------------------------------------------------------------
(1,533) (1,263) 1,936
Currency exchange
losses, net (2,961) (2,739) (3,090)
- ---------------------------------------------------------------
Total $(4,494) $(4,002) $(1,154)
- ---------------------------------------------------------------
The net loss from the flow-through effects of inventory valuation results from
differences between translation of cost of sales at historic rates versus
average exchange rates. H.B. Fuller Company's Latin American operations,
whenever possible, raise local selling prices on their products to offset this
loss. The result of these efforts to keep pace with inflation appears in the
sales revenue of each operation.
Cash: The Company considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents.
Inventories: Inventories in the United States, representing approximately 39%
of consolidated inventories, are recorded at cost (not in excess of market
value) as determined primarily by the last-in, first-out method (LIFO).
Inventories of non-U.S. operations are valued at the lower of cost (mainly
average cost) or market. Inventories at year-end are summarized as follows:
1998 1997
- ------------------------------------------------------------------
Raw materials $ 73,126 $ 71,234
Finished goods 95,862 90,634
LIFO reserve (10,382) (11,183)
- ------------------------------------------------------------------
Total $ 158,606 $ 150,685
- ------------------------------------------------------------------
35
<PAGE>
Property, Plant and Equipment: The major classes are:
Depreciable
Lives
(in years) 1998 1997
- --------------------------------------------------------------
Land $ 56,737 $ 49,400
Buildings and
improvements 20-40 226,174 204,782
Machinery and
equipment 5-15 433,407 374,747
Construction in
progress 41,663 68,988
- --------------------------------------------------------------
Total, at cost 757,981 697,917
Accumulated
depreciation (343,514) (299,356)
- --------------------------------------------------------------
Net property, plant
and equipment $ 414,467 $ 398,561
- --------------------------------------------------------------
Depreciation is generally computed on a straight-line basis over the useful
lives, noted above, of the assets, including assets acquired by capital
leases. Accelerated depreciation is used for income tax purposes where
permitted.
Amortization: Other intangible assets, primarily technology, are amortized
over the estimated lives of 3 to 15 years. The excess of cost over net assets
of businesses acquired is charged against earnings over periods of 15 to 25
years. The recoverability of unamortized intangible assets is assessed on an
ongoing basis by comparing anticipated undiscounted future cash flows from
operations to net book value.
Capitalized Interest Costs: Interest costs associated with major construction
of property and equipment are capitalized. Interest expense for each year
includes the following components:
1998 1997 1996
- --------------------------------------------------------------
Interest costs
incurred $ 27,811 $ 21,081 $ 21,399
Capitalized
interest costs (822) (1,245) (2,518)
- --------------------------------------------------------------
Interest expense $ 26,989 $ 19,836 $ 18,881
- --------------------------------------------------------------
Non-U.S. Operations: Net earnings and equity of non-U.S. operations for each
year are:
1998 1997 1996
- --------------------------------------------------------------
Net earnings $ (5,854) $ 8,571 $ 1,984
Equity $190,880 $174,220 $147,439
- --------------------------------------------------------------
Financial Instruments: The Company generally enters into forward foreign
currency exchange contracts to hedge certain foreign
currency denominated intercompany receivables, payables and debt. Gains and
losses on forward foreign currency exchange contracts qualifying for hedges
of firm commitment foreign currency intercompany receivables, payables or
debt are recognized as the contract is adjusted to fair market value while
the resulting credit or debit offsets foreign exchange gains or losses on the
hedged receivable, payable or debt amount.
Changes in the fair value of contracts not qualifying for hedge accounting
are recognized in other income (expense).
At November 28, 1998 and November 29, 1997, the Company had outstanding
forward foreign currency exchange contracts accounted for as hedges
aggregating $17,097 and $12,075, respectively. Forward foreign currency
exchange contacts mature between December 31, 1998 and November 20, 2000 and
relate primarily to major Western European currencies. Counterparties to the
forward foreign currency exchange contracts are major financial institutions.
Credit loss from counterparty nonperformance is not anticipated.
The carrying amounts and estimated fair values of the Company's significant
other financial instruments at year-end are as follows:
Carrying Fair
Amount Value
- --------------------------------------------------------------
1998:
Cash and cash equivalents $ 4,605 $ 4,605
Notes payable $ 59,282 $ 59,282
Long-term debt $304,502 $314,613
1997:
Cash and cash equivalents $ 2,710 $ 2,710
Notes payable $ 39,675 $ 39,675
Long-term debt $232,547 $242,741
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.
36
<PAGE>
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of entities comprising the Company's customer
base and their dispersion across many different industries and countries. As
of November 28, 1998 and November 29, 1997, the Company had no significant
concentrations of credit risk.
Environmental Costs: Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate. Expenditures that
relate to an existing condition caused by past operations, and which do not
contribute to current or future revenue generation, are expensed. Liabilities
are recorded when environmental assessments are made or remedial efforts are
probable and the costs can be reasonably estimated. The timing of these
accruals is generally no later than the completion of feasibility studies.
The liabilities for environmental costs at November 28, 1998 and November 29,
1997 were $4,312 and $4,288, respectively. For further information on
environmental matters, see Item 3 of the Company's 1998 Annual Report on Form
10-K.
Income Taxes: The Company uses the asset and liability method of accounting
for income taxes. Under the asset and liability method, deferred income taxes
are recognized for the tax consequences of temporary differences by applying
enacted statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax basis of existing assets
and liabilities. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.
Other Postretirement Benefits: The Company provides medical benefits for
eligible retired employees, employee's beneficiaries and covered dependents.
These costs are accrued during the years the employee renders the necessary
service.
Postemployment Benefits: The Company provides postemployment benefits to
inactive and former employees, employee's beneficiaries and covered
dependents after employment, but prior to retirement. The cost of providing
these benefits is accrued during the years the employee renders the necessary
service.
Accounting Change: In 1997, an accounting change impacted fourth quarter
earnings by $3,368, or $0.24 per share (basic), net of $2,321 income taxes.
The Financial Accounting Standards Board (FASB) Emerging Issues Task Force
(EITF)on Issue No. 97-13, "Accounting for Costs Incurred in Connection with a
Consulting Contract or an Internal Project That Combines Business Process
Reengineering and Information Technology Transformation," issued November 20,
1997, required the Company to expense some costs that were previously
capitalizable before this pronouncement.
Earnings Per Common Share: In February 1997, the FASB issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share". 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 in fiscal
year 1998 and has restated prior years 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.
Earnings used in the calculation are reduced by the dividends paid to the
preferred stockholder.
Purchase of Company Common Stock: Under the Minnesota Business Corporation
Act, repurchased stock is included in the authorized shares of the Company,
but is not included in shares outstanding. The excess of cost over par value
is charged proportionally to the Additional Paid-In Capital and to the
Retained Earnings. During 1996 the Board of Directors authorized a stock
repurchase program under which up to 300,000 shares of H.B. Fuller Company
common stock could be repurchased by the Company. The shares of common stock
repurchased would be available for compensation plans of the Company. During
1997 the Company repurchased 300,000 shares of common stock.
New Accounting Standards: In June 1997, the FASB issued SFAS No. 130
"Reporting Comprehensive Income." This statement, which is required to be
adopted for financial statements issued for annual periods beginning after
December 15, 1997, establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. At that time, the Company will be required to report
total comprehensive income, an amount
37
<PAGE>
that will include net income as well as other comprehensive income. Other
comprehensive income refers to revenues, expenses, gains and losses that under
generally accepted accounting principles have previously been reported as
separate components of equity in the Company's consolidated financial
statements. The Company will implement this statement in fiscal year 1999 as
required.
In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information." This statement, which is required to be
adopted for financial statements issued for annual periods beginning after
December 15, 1997, establishes standards for the way that public business
enterprises report information about operating segments in financial reports
issued to shareholders. The Company will implement this statement in fiscal
year 1999 as required.
In February 1998, FASB issued SFAS No. 132 "Employers Disclosures about
Pensions and Other Postretirement Benefits." This statement, which is
required for years beginning after December 15, 1997 revises employer's
disclosures about pensions and other postretirement benefit plans. The
Company will implement this statement in fiscal year 1999.
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." This statement, which is required to be
adopted for annual periods beginning after June 15, 1999, establishes
standards for recognition and measurement of derivatives and hedging
activities. The Company will implement this statement in fiscal year 2000 as
required.
The impact of adopting the aforementioned accounting standards is not
expected to have a material effect on the Company's financial position or
results of operations.
Reclassification: Certain prior years' amounts have been reclassified to
conform to the 1998 presentation.
2/Other Income (Expense), Net
Other income (expense), net in 1998 included $2,490 in consulting costs and
costs associated with the change of the Company's Chief Executive Officer
which was partially offset by a $1,221 increase in investment income. Other
income (expense), net in 1997 included $4,349 in costs associated with an
acquisition pursued but not consummated and consulting costs. Other income
(expense), net in 1996 included a $1,496 gain on the sale of equity
investments. All years include foreign currency losses. (See Note 1 to the
Consolidated Financial Statements.)
3/Non-recurring Charges
In the third quarter of 1998, the Company's Board of Directors approved and
the Company announced a restructuring plan that will streamline the
organizational structure worldwide. Over the last two quarters of 1998 and
continuing into 1999, twelve adhesive manufacturing facilities will be
closed, primarily in Europe, Latin America and Asia/Pacific, sales offices
and warehouses will be consolidated and layers of management reduced. This
plan anticipated a non-recurring charge of $40,000 to $45,000 (before tax)
over six quarters, a reduction of employee census of more than 600 (including
142 of actual employee reductions in 1998) and a reduction of costs in excess
of $30,000 (before tax) annually, when completed. Cash requirements of this
plan are estimated to be $29,000 to $30,000 and will primarily be expended in
fiscal year 1999. As a result of selling two business units in the fourth
quarter of 1998, the total amount of the charge is now estimated to be from
$35,000 to $40,000 (before tax) with approximately $8,000 to $13,000 to be
incurred in 1999. The cash requirements are now estimated to be $24,000 to
$25,000. The Company has adequate lines of credit to fund these payments.
Reorganization and restructuring costs include costs directly related to the
Company's plan of reorganization. EITF No. 94-3 provides specific
requirements as to the appropriate recognition of costs associated with
employee termination benefits and other exit costs.
Employee termination costs are recognized when benefit arrangements are
communicated to affected employees in sufficient detail to enable the
employees to determine the amount of benefits to be received upon
termination.
Other exit costs resulting from an exit plan that are not associated with or
that do not benefit activities that will be continued are recognized at the
date of commitment to an exit plan subject to certain conditions. For the
cost to be accrued, the cost must not be associated with or incurred to
generate revenues after the commitment date, and it must be either i)
incremental to other costs incurred prior to the commitment date, or ii)
represent amounts under a contractual obligation that existed prior to the
commitment date that will either continue after the exit plan is completed
with no economic benefit or which will result in a penalty to cancel the
obligation.
Other costs directly related to the reorganization of the Company which are
not eligible for recognition at the commitment date, such as relocation and
other integration
38
<PAGE>
costs, are expensed as incurred.
The Company, as a result of the restructuring/reorganization plan, identified
certain property, plant and equipment, primarily consisting of land,
machinery and equipment and capitalized software costs, to be impaired. An
impairment was recognized when the future undiscounted cash flows of each
asset was estimated to be insufficient to recover its related carrying value.
As such, the carrying values of these assets were written down to the
Company's estimates of fair value. Fair value was based on sales of similar
assets, or other estimates of fair value such as discounting estimated future
cash flows. Most of the assets impaired as a result of the restructuring
continue to be held and used until the facilities are closed in 1999. Net
losses from operations affected by the restructuring, which will be closed in
1999, totaled $800, excluding non-recurring charges, for the year ended
November 28, 1998.
During 1998, the Company recorded the following amounts in the income
statement in connection with the restructuring plan:
North Latin Asia/
America Europe America Pacific Total
- ------------------------------------------------------------------------------
Severance
(net of pension
curtailment) $ 3,945 $ 8,526 $ 3,704 $ 278 $ 16,453
Impairment of
property, plant
and equipment 9,481 4,063 3,564 - 17,108
Contracts/leases 526 266 - 53 845
Consulting 121 764 12 2 899
Other 193 - 126 104 423
- ------------------------------------------------------------------------------
Subtotal 14,266 13,619 7,406 437 35,728
Less: Gain on the
sale of businesses (1,387) (7,594) - - (8,981)
- ------------------------------------------------------------------------------
Total $ 12,879 $ 6,025 $ 7,406 $ 437 $ 26,747
- ------------------------------------------------------------------------------
Included in the $35,700 restructuring charge are $19,700 of cash costs and
$16,000 in non-cash related costs.
North American charges relate to an announced manufacturing plant closing in
the first quarter of 1999, reduced layers of management and the impairment
recognized on property, plant and equipment, including machinery and
previously capitalized software costs, due to the reassessment of system
benefits as a result of the restructuring. These costs were partially offset
by a gain on the sale of the glue gun and stick business in the fourth
quarter of 1998. Latin American charges relate to announced closing of five
manufacturing plants (three in the first quarter and the remaining two during
the balance of 1999), including the impairment of property, plant and
equipment and severance associated with the reduction in layers of
management. The Europe charges relate to announced plant closings in two
countries (one in the first quarter and one in the second quarter of 1999),
including the impairment of property, plant and equipment and severance
associated with the reduction in layers of management. These costs were
partially offset by a gain on the sale of the wax business in the fourth
quarter of 1998. In Asia/Pacific, one manufacturing plant was closed in the
fourth quarter of 1998, sales offices and warehouses were closed, the area
office will be relocated and layers of management are being reduced.
Revenues and net operating earnings related to the businesses sold during the
fourth quarter of 1998 were approximately $11,000 and $600, respectively, for
the year ended November 28, 1998.
The following table is a detailed reconciliation of the restructuring reserve
balance from November 29, 1997 to November 28, 1998. The reconciliation
reflects the accruals recorded and payments applied during the year.
Non-recurring charge reserve:
North Latin Asia/
America Europe America Pacific Total
- ------------------------------------------------------------------------------
Balance
November 29,
1997 $ - $ - $ - $ - $ -
Accruals in 1998:
Severance 4,749 8,726 3,765 278 17,518
Contracts/leases 526 266 - 53 845
Consulting 121 764 12 2 899
Other 193 - 126 104 423
Payments in 1998:
Severance (2,757) (998) (624) (190) (4,569)
Contracts/leases (526) - - (53) (579)
Consulting (121) (764) (12) (2) (899)
Other (193) - (126) (104) (423)
- ------------------------------------------------------------------------------
Balance
November 28, 1998 $ 1,992 $ 7,994 $ 3,141 $ 88 $13,215
- ------------------------------------------------------------------------------
4/Acquisitions
In 1998 the Company purchased a business and certain assets of two businesses
for $92,439 cash. In 1997 the Company and EMS-Chemie Holding AG formed an
automotive adhesives, sealants and
39
<PAGE>
coatings joint venture called EFTEC. In connection with the formation of the
joint venture, the Company purchased 30% of the European and 38% of the
Asia/Pacific EMS-Chemie automotive business. EMS-Chemie holds a 30% and 38%
minority interest in the North American and Latin American automotive business,
respectively. In 1997 the Company also purchased the assets of another business,
with a total cash outlay in 1997 of $9,618. In 1996 the Company purchased
certain assets of a business for $8,120 cash.
The fair values of assets and liabilities acquired at the dates of their
respective acquisition are shown below as supplemental disclosure for cash flow
purposes.
1998 1997 1996
- ---------------------------------------------------------------
Cash $ 412 $ - $ -
Receivables 15,848 - -
Inventories 6,971 605 3,849
Other current assets 829 - -
Property, plant and
equipment 20,249 327 6
Miscellaneous assets - 9,610 -
Other intangibles 21,728 - 4,194
Excess cost 43,754 1,068 71
Current liabilities (17,352) (1,992) -
- ---------------------------------------------------------------
Net assets acquired $ 92,439 $ 9,618 $ 8,120
- ---------------------------------------------------------------
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.
5/Divestitures
The Company sold its glue gun and stick product line in North America, wax
product line in Europe, and powder coatings in New Zealand for $18,000 cash
in 1998. The Company sold its construction product line in Europe for $1,117
cash in 1997. It sold two product lines, including epoxy tooling slabs and
Monarch sanitation chemicals, for $27,468 in 1996. The 1998 sales of the glue
gun and stick product line and the wax product line, with gains of $8,981,
are part of the restructuring charges described in Note 3. The sales, along
with gains on the sale of assets, resulted in before tax gains of $3,237,
$5,199 and $16,673, in 1998, 1997 and 1996, respectively.
6/Research and Development Expenses
Research and development expenses charged against earnings were $22,255,
$24,830 and $25,823 in 1998, 1997 and 1996, respectively.
7/Income Taxes
Earnings before income taxes, minority interests and cumulative effect of
accounting changes for each year is as follows:
1998 1997 1996
- ---------------------------------------------------------------
United States (U.S.) $ 29,549 $49,081 $66,403
Outside U.S. 3,237 16,239 10,148
- ---------------------------------------------------------------
Total $ 32,786 $65,320 $76,551
- ---------------------------------------------------------------
The components of the provision for income taxes excluding cumulative effect
of accounting changes are:
1998 1997 1996
- ---------------------------------------------------------------
Current:
U.S. federal $ 5,971 $16,769 $23,225
State 1,198 1,706 3,555
Outside U.S. 10,201 5,705 6,487
- ---------------------------------------------------------------
17,370 24,180 33,267
- ---------------------------------------------------------------
Deferred:
U.S. federal 1,179 498 (2,453)
State (74) 195 (82)
Outside U.S. 351 1,778 501
- ---------------------------------------------------------------
1,456 2,471 (2,034)
- ---------------------------------------------------------------
Total $ 18,826 $26,651 $31,233
- ---------------------------------------------------------------
40
<PAGE>
The difference between the statutory U.S. federal income tax rate and the
Company's effective income tax rate is explained below:
1998 1997 1996
- -------------------------------------------------------------------
Statutory U.S. federal
income tax rate 35.0% 35.0% 35.0%
State income taxes 2.4 1.7 3.0
U.S. federal income taxes on
dividends received from
non-U.S. subsidiaries, before
foreign tax credits 6.8 5.2 3.6
Foreign tax credits (1.9) (1.7) (3.3)
Non-U.S. taxes 23.9 1.3 3.1
Life insurance (2.2) (0.8) -
Other credits (6.8) (2.7) (1.6)
Other 0.2 2.8 1.0
- -------------------------------------------------------------------
Total 57.4% 40.8% 40.8%
- -------------------------------------------------------------------
The effective tax rate in 1998 was impacted by costs related to the Company's
restructuring plan. Some of these restructuring costs do not provide a foreign
tax benefit in certain foreign countries resulting in an increase in the
effective tax rate associated with non-U.S. taxes.
Deferred income tax balances at each year-end were:
1998 1997
- -----------------------------------------------------
Deferred tax assets $ 70,845 $ 65,205
Valuation allowance (5,097) (4,330)
- -----------------------------------------------------
Deferred tax assets net of
valuation allowance 65,748 60,875
Deferred tax liabilities (53,637) (49,964)
- -----------------------------------------------------
Net deferred tax assets $ 12,111 $ 10,911
- -----------------------------------------------------
Deferred income tax balances at each year-end were related to:
1998 1997
- ------------------------------------------------------
Depreciation $(23,577) $(21,463)
Pension 17,957 17,613
Deferred compensation 5,168 4,895
Postretirement medical benefits 6,653 7,088
Tax loss carryforwards 11,377 11,049
Non-recurring charges 2,067 -
Inventory 711 644
Provisions for expenses (7,287) (6,405)
Difference between assigned
value and tax basis of
acquisition (1,488) (1,484)
Currency gains/losses 1,326 1,186
Other 4,301 2,118
- ------------------------------------------------------
17,208 15,241
Valuation allowance (5,097) (4,330)
- ------------------------------------------------------
Net deferred tax assets $ 12,111 $ 10,911
- ------------------------------------------------------
U.S. income taxes have not been provided on approximately $48,813 of
undistributed earnings of non-U.S. subsidiaries. The Company
plans to reinvest these undistributed earnings. If any portion were to be
distributed, the related U.S. tax liability may be reduced by foreign income
taxes paid on those earnings plus any available foreign tax credit
carryforwards. Determination of the unrecognized deferred tax liability
related to these undistributed earnings is not practicable.
While non-U.S. operations of the Company, excluding the non-recurring charge
in 1998, have been profitable overall, cumulative losses of $32,154 are
carried as net operating losses in 21 different countries. These losses can
be carried forward to offset income tax liability on future income in those
countries. Cumulative losses of $15,607 can be carried forward indefinitely,
while the remaining $16,547 must be used during the 1999-2004 period.
8/Notes Payable
The primary component of notes payable relates to the Company's short-term
lines of credit with banks. This component totals $48,162. The amount of
unused available borrowings under these lines at November 28, 1998 was
$50,863.
The weighted average interest rates on short-term borrowings were 9.0%, 9.4%
and 7.7% in 1998, 1997 and 1996, respectively.
41
<PAGE>
9/Long-Term Debt
Long-term debt, including obligations under capital leases, is summarized as
follows:
<TABLE>
<CAPTION>
Interest
Rate Range Maturity 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. dollar obligations:
Notes (a) $ 21,921 $ 98,740
Senior notes - A, B, C, D 8.49-8.73% 2001-2010 65,000 65,000
Senior note - B 10.32 1998 25,000 25,000
Senior notes 6.60 2008-2012 125,000 -
Industrial and commercial development bonds 4.00-7.75 2004-2016 7,100 7,100
Various other obligations 5.00-7.61 1999-2005 6,500 8,212
- -------------------------------------------------------------------------------------------------------
250,521 204,052
- -------------------------------------------------------------------------------------------------------
Foreign currency obligations:
Deutche mark note (a) 3,503 3,230
Pound sterling notes (a) 31,488 -
Japanese yen note (a) 1,788 -
New Zealand dollar - 2,902
Australian dollar 6.73 2000 4,433 8,159
Italian lira 10.81 2000 4,078 3,599
Honduran lempira 28.00 1999-2001 439 664
Costa Rican colones 21.30-24.50 1999-2000 308 689
Japanese yen 2.00-4.20 2003-2005 5,204 6,176
Various other obligations 18.00-42.20 1999-2001 995 1,169
- -------------------------------------------------------------------------------------------------------
52,236 26,588
Capital leases 2002 1,745 1,907
- -------------------------------------------------------------------------------------------------------
Total long-term debt 304,502 232,547
Less: current installments (4,428) (2,551)
- -------------------------------------------------------------------------------------------------------
Total $300,074 $229,996
- -------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Company has revolving credit agreements with a group of major
banks which provide committed long-term lines of credit of $158,000
through December 20, 2004. At the Company's option, interest is payable
at the London Interbank Offered Rate plus 0.175%-0.375%, adjusted
quarterly based on the Company's capitalization ratio, or a bid rate. A
facility fee of 0.075%-0.175% is payable quarterly.
The most restrictive debt agreements place limitations on secured and
unsecured borrowings, operating leases, and contain minimum interest
coverage, current assets and net worth requirements. In addition, the Company
cannot be a member of any "consolidated group" for income tax purposes other
than with its subsidiaries. At November 28, 1998 the Company exceeded minimum
requirements for all financial covenants.
Aggregate maturities of long-term debt, including obligations under capital
leases, amount to $4,428, $15,177, $1,730, $34,360 and $776 during the five
fiscal years 1999 through 2003.
42
<PAGE>
10/Lease Commitments
Assets under capital leases are summarized as follows:
1998 1997
- ------------------------------------------------------
Land $ 2,194 $ 2,824
Buildings and improvements 4,776 5,365
- ------------------------------------------------------
6,970 8,189
Accumulated depreciation (3,817) (2,512)
- ------------------------------------------------------
Net assets under capital leases $ 3,153 $ 5,677
- ------------------------------------------------------
The following are the minimum lease payments that will have to be made in
each of the years indicated based on capital and operating leases in effect
as of November 28, 1998:
Capital Operating
- ------------------------------------------------------
Fiscal year:
1999 $ 833 $ 8,157
2000 489 5,412
2001 431 4,216
2002 187 2,203
2003 - 2,111
Later years - 3,158
- ------------------------------------------------------
Total minimum
lease payments $ 1,940 $ 25,257
--------
Amount representing interest (195)
- -----------------------------------------
Present value of minimum
lease payments $ 1,745
- -----------------------------------------
Rental expense for all operating leases charged against earnings amounted to
$14,818, $14,166, and $13,385 in 1998, 1997 and 1996, respectively.
11/Contingencies
Legal: The Company and its subsidiaries are parties to various lawsuits and
governmental proceedings. For further information on certain legal
proceedings, see Item 3 of the Company's 1998 Annual Report on Form 10-K. In
particular, the Company is currently deemed a potentially responsible party
(PRP) or defendant, generally in conjunction with numerous other parties, in
a number of government enforcement and private actions associated with
hazardous waste sites. As a PRP or defendant, the Company may be required to
pay a share of the costs of investigation and cleanup of these sites. In some
cases the Company may have rights of indemnification from other parties. The
Company's liability in the future for such claims is difficult to predict
because of the uncertainty as to the cost of the investigation and cleanup of
the sites, the Company's responsibility for such hazardous waste and the
number or financial condition of other PRPs or defendants. As is the case
with other types of litigation and proceedings to which the Company is a
party, based upon currently available information, it is the Company's
opinion that none of these matters will result in material liability to the
Company.
12/Retirement Plans
The Company has noncontributory defined benefit plans covering all U.S.
employees. Benefits for the plans are based primarily on years of service and
employees' average compensation during their five highest out of the last ten
years of service. The Company's funding policy is consistent with the funding
requirements of federal law and regulations. Plan assets consist principally
of listed equity securities and an Immediate Participation Guarantee contract
with an insurance company.
Certain non-U.S. consolidated subsidiaries provide pension benefits for their
employees consistent with local practices and regulations. Most of these plans
are noncontributory, unfunded, defined benefit plans covering substantially all
employees upon completion of a specified period of service. Benefits for the
plans are generally based on years of service and annual compensation. The plans
historically have been unfunded book reserved plans, but in 1997 the Company
partially funded the German plan. Related pension obligations are provided
through accrued pension costs.
43
<PAGE>
<TABLE>
<CAPTION>
Pension cost consists of the following:
U.S. Plans Non-U.S. Plans
-----------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost-benefits earned during the period $ 5,629 $ 4,633 $ 5,440 $ 1,692 $ 1,849 $ 2,586
Interest cost on projected benefit obligation 11,795 11,048 10,026 3,559 3,482 5,087
Return on plan assets - actual (3,044) (50,212) (11,607) (4,457) (788) (690)
- deferred (11,792) 38,707 1,096 2,836 275 373
Amortization of transition (asset) liability (27) (27) (27) 70 72 107
All other cost (benefit) components (710) 339 772 70 69 104
- -------------------------------------------------------------------------------------------------------------------------------
Net pension cost $ 1,851 $ 4,488 $ 5,700 $ 3,770 $ 4,959 $ 7,567
- -------------------------------------------------------------------------------------------------------------------------------
The funded status of the plans and the amount recognized on the balance sheet at each year-end are:
Non-U.S. Plans
-------------------------------------------------
U.S. Plans Assets Exceed ABO ABO Exceeds Assets
-----------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
- vested benefits $ (132,800) $ (111,644) $ (3,984) $ (4,155) $ (43,977) $ (40,251)
- non-vested benefits (5,054) (3,576) (313) (3) (218) (760)
- -------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation (ABO) (137,854) (115,220) (4,297) (4,158) (44,195) (41,011)
Effect of projected future compensation increases (36,377) (38,911) (692) (678) (5,580) (5,639)
- -------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation (174,231) (154,131) (4,989) (4,836) (49,775) (46,650)
Plan assets at fair value 184,407 186,911 6,173 6,111 18,859 14,270
- -------------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of (less than)
projected benefit obligation 10,176 32,780 1,184 1,275 (30,916) (32,380)
Unrecognized prior service cost 5,712 5,239 58 62 (22) (41)
Unrecognized transition (asset) liability (151) (178) (82) (85) 1,145 1,202
Unrecognized net (gain) loss (56,620) (74,299) 5 (65) (5,773) (1,418)
- -------------------------------------------------------------------------------------------------------------------------------
(Accrued) prepaid pension costs $ (40,883) $ (36,458) $ 1,165 $ 1,187 $ (35,566) $ (32,637)
- -------------------------------------------------------------------------------------------------------------------------------
Assumptions used:
U.S. Plans Non-U.S. Plans
-----------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
Weighted average discount rate 6.75%(1) 7.5%(1) 8.0%(1) 6.25-8.0% 6.5-8.0% 7.0-8.0%
7.5%(2) 8.0%(2) 7.25%(2)
Rate of increase in compensation levels 3.75-4.0%(1) 4.5%(1) 4.5%(1) 2.5-4.5% 2.5-4.5% 3.0-5.0%
4.5%(2) 4.5%(2) 4.5%(2)
Expected long-term rate of return on plan assets 10.0% 10.0% 10.0% 8.0% 8.0% 8.0%
</TABLE>
(1) August 31, 1998, 1997 and 1996 assumptions used for funded status of U.S.
plans.
(2) December 1, 1997, 1996 and 1995 assumptions used for U.S. plans pension
cost. The impact of a one percent increase in the discount rate is an
approximate $1,400 decrease in annual pension cost.
The charge to earnings relating to all plans was $8,062, $11,774 and $15,934 in
1998, 1997 and 1996, respectively.
44
<PAGE>
13/Other Postretirement Benefits
The Company and certain of its consolidated subsidiaries provide health care
and life insurance benefits for eligible retired employees and their eligible
dependents. These benefits are provided through various insurance companies
and health care providers.
The obligation for these benefits was determined by application of the terms
of health and life insurance plans, together with relevant actuarial
assumptions and health-care cost trend rates, as of December 1, 1997,
projected at annual rates ranging from 7.4 percent in 1998 graded down to 4.9
percent for the year 2002 and after. The benefit obligation discount rate at
that time was 7.5 percent.
The funded status of the plan was determined based on actuarial assumptions
and health-care trend rates, as of August 31, 1998, projected at annual rates
ranging from 6.6 percent in 1998 graded down to 4.3 percent for the year 2002
and after. The benefit obligation discount rate at that time was 6.75
percent.
The effect of a one percent annual increase in the assumed health-care cost
trend rates would increase the accumulated postretirement benefits obligation
at August 31, 1998, by $5,604 and the aggregate of service and interest cost
components of net periodic postretirement benefit costs by $797.
The Company funds U.S. postretirement benefits through a Voluntary Employees'
Beneficiaries Association Trust which was established in 1991. The funds are
invested primarily in common stocks with an expected long-term rate of return
of 8.5 percent.
The funded status of the plan at each year-end is as follows:
1998 1997
- --------------------------------------------------------------------
Actuarial present value of postretirement
benefit obligation:
Retirees $ (17,168) $ (15,474)
Active employees fully
eligible for benefits (11,117) (10,306)
Other active employees (9,526) (8,419)
- --------------------------------------------------------------------
Accumulated postretirement
benefit obligation (37,811) (34,199)
Fair value of plan assets 49,233 45,891
Unrecognized prior service cost (1,899) (7,062)
Unrecognized net (gain) (5,170) (2,466)
- --------------------------------------------------------------------
Prepaid (accrued) unfunded
postretirement benefit obligation $ 4,353 $ 2,164
- --------------------------------------------------------------------
Benefit obligation discount rate 6.75% 7.5%
The components of net periodic postretirement benefit cost are as follows:
1998 1997 1996
- -----------------------------------------------------------------------
Service cost-benefits
earned during the period $ 1,833 $ 1,740 $ 2,128
Interest cost on
accumulated benefit obligation 2,641 2,447 2,437
Return on assets - actual (3,478) (11,084) (1,643)
- deferred (433) 8,531 (421)
All other components (1,040) (878) (425)
- -----------------------------------------------------------------------
Net periodic postretirement
benefit (income) cost $ (477) $ 756 $ 2,076
- -----------------------------------------------------------------------
14/Stockholders' Equity
Preferred Stock: The Board of Directors is authorized to issue up to
10,000,000 additional shares of preferred stock that may be issued in one or
more series and with such stated value and terms as may be determined by the
Board of Directors.
Series A Preferred Stock: There were 45,900 Series A preferred shares with a
par value of $6.67 authorized and issued at November 28, 1998 and November
29, 1997. The holder of Series A preferred stock is entitled to cumulative
dividends at the rate of $0.33 per share per annum. Common stock dividends
may not be paid unless provision has been made for payment of Series A
preferred dividends. The Series A preferred stock has multiple voting rights
entitling the Series A preferred stockholder to 80 votes per share. The terms
of the Series A preferred stock include the right of the Company to purchase
the shares at specified times and the right of the Company to redeem all
shares at par value if authorized by the shareholders.
Series B Preferred Stock: In connection with the adoption of the shareholder
rights plan (see below), the Board of Directors authorized a new series of
preferred stock ("Series B preferred shares") that would be exchanged for the
Company's existing Series A preferred shares, if and at such time as the
rights issued pursuant to the shareholder rights plan become exercisable. The
Series B preferred shares have the same terms as the Series A preferred
shares, except that the voting rights of the Series B preferred shares are
increased proportionately according to the number of shares issued upon the
exercise or exchange of rights. The Company entered into a Stock Exchange
Agreement dated July 18, 1996, with the holder of the Series A preferred
shares by which the Series B preferred shares would be exchanged for all
Series A preferred shares on the date the rights
45
<PAGE>
under the shareholder rights plan become exercisable. The exchange of the Series
A preferred shares for the new Series B preferred shares is intended to preserve
the holder's voting power, in the event any rights are exercised. No event has
occurred which would cause the exchange to be effected.
Common Stock: There were 40,000,000 par value $1.00 common shares authorized
and 13,982,649 and 13,840,773 shares issued at November 28, 1998 and November
29, 1997, respectively.
Shareholder Rights Plan: The Company has a shareholder rights plan under
which each holder of a share of common stock also has one right to purchase
one share of common stock for $180. The rights are not presently exercisable.
Upon the occurrence of certain "flip-in" events, each right becomes
exercisable and then entitles its holder to purchase $180 worth of common
stock at one-half of its then market value. Upon certain "flip-over" events,
each right entitles its holder to purchase $180 worth of stock of another
party at one-half of its then market value. One flip-in event is when a
person or group (an "acquiring person") acquires 15 percent or more of the
Company's outstanding common stock. Rights held by an acquiring person or an
adverse person are void. The Company may redeem the rights for one cent per
share, but the redemption right expires upon the occurrence of a flip-in
event. In addition, at any time after a person or group acquires 15 percent
or more of the Company's outstanding common stock, but less than 50 percent,
the Board of Directors may, at its option, exchange all or part of the rights
(other than rights held by the acquiring person) for shares of the Company's
common stock at a rate of one share of common stock for every right. The
rights expire on July 30, 2006.
Directors' Stock Plan: The Directors' Stock Plan reserves 75,000 shares of
common stock for allocation as payment of retainer fees. Directors, who are
not employees, can choose to receive all or a portion of the payment of their
retainer and meeting fees in shares of Company common stock when they leave
the Board rather than cash payments each year. At November 28, 1998, 33,334
shares remained available for future allocation.
1998 Directors' Stock Incentive Plan: The 1998 Directors' Stock Incentive
Plan reserves 200,000 shares of common stock to offer nonemployee directors
incentives to put forth maximum efforts for the success of the Company's
business and to afford nonemployee directors an opportunity to acquire a
proprietary interest in the Company. In 1998, 7,017 restricted shares were
awarded with a market value of $441 being charged to expense over the vesting
periods. At November 28, 1998, 192,983 shares remained available for future
award.
1992 Stock Incentive Plan: Under the 1992 Stock Incentive Plan a total of
900,000 shares of the Company's common stock are available for the granting
of awards during a period of up to ten years from April 16, 1992. The Stock
Incentive Plan permits the granting of (a) stock options; (b) stock
appreciation rights; (c) restricted stock and restricted stock units; (d)
performance awards; (e) dividend equivalents; and (f) other awards valued in
whole or in part by reference to or otherwise based upon the Company's stock.
A total of 64,755, 38,736 and 38,900 restricted shares of the Company's
common stock were granted to certain employees in 1998, 1997 and 1996,
respectively. The market value of shares awarded $3,734, $2,108 and $1,352
has been recorded as unearned compensation - restricted stock in 1998, 1997
and 1996, respectively and is shown as a separate component of stockholders'
equity. Unearned compensation is being amortized to expense over the vesting
periods and amounted to $993, $548 and $473 in 1998, 1997 and 1996,
respectively.
A total of 19,900, 21,850 and 25,500 restricted share units of the Company's
common stock were allocated to certain employees in 1998, 1997 and 1996,
respectively. The market value of units allocated of $1,104, $1,191 and $886
in 1998, 1997 and 1996, respectively, is generally being charged to expense
over the ten-year vesting period.
At November 28, 1998, 509,870 shares remained available for future grants or
allocations.
Stock-Based Compensation: In October 1995, the FASB issued SFAS No. 123,
"Accounting for Stock-Based Compensation." As permitted by this Standard, the
Company will continue to measure compensation cost using the intrinsic
value-based method of accounting prescribed by the Accounting Principles
Board Opinion No. 25. Since the Company has not granted stock options after
the effective date of SFAS No. 123, there is no pro forma impact to disclose.
1987 Stock Option Plan: 110,991 options were outstanding at November 28,
1998, under the Company's 1987 non-qualified plan. Options are exercisable
until April 27, 2000. At November 28, 1998, no shares remained available for
grants under this plan.
46
<PAGE>
Information on stock options is shown in the following table:
Option Shares
Outstanding/
Exercisable Price Range
- --------------------------------------------------------------------
Balance at
November 30, 1995 230,162 $14.33-16.33
Exercised (17,918) 14.33-15.50
Cancelled (375) 14.33
- --------------------------------------------------------------------
Balance at
November 30, 1996 211,869 14.33-16.33
Exercised (29,079) 14.33
- --------------------------------------------------------------------
Balance at
November 29, 1997 182,790 14.33-16.33
Exercised (71,799) 14.33-16.33
- --------------------------------------------------------------------
Balance at
November 28, 1998 110,991 $14.33
- --------------------------------------------------------------------
15/Business Segment Information
The Company is a manufacturer of specialty chemical products, which includes
the formulation, compounding and marketing of adhesives, sealants, coatings,
paints and other specialty chemical products. The Company considers its
manufacturing of specialty chemical and related products to be its dominant
industry segment. This segment is served commonly by corporate/regional
service departments including manufacturing, administration, research and
development and marketing services.
The segment uses many common raw materials which are either petroleum-based
or of a nonsynthetic nature. The segment is not capital intensive and the
manufacturing facilities and raw materials are relatively interchangeable and
are not, in general, highly specialized.
Operating earnings are net sales less operating costs and expenses pertaining
to specific geographic areas.
A summary of Company operations by geographic areas for each year is as
follows:
Sales to
unaffiliated
customers: 1998 1997 1996
- -----------------------------------------------------------------------
North America $ 779,499 $ 772,104 $ 733,683
Europe 286,374 247,920 272,085
Latin America 197,577 192,530 184,208
Asia/Pacific 83,791 94,235 85,740
- -----------------------------------------------------------------------
Total trade sales $ 1,347,241 $ 1,306,789 $ 1,275,716
- -----------------------------------------------------------------------
Inter-company
sales: 1998 1997 1996
- -----------------------------------------------------------------------
North America $ 12,558 $ 17,257 $ 14,379
Europe 3,673 4,098 2,432
Latin America 15,221 14,398 9,897
Asia/Pacific 33 111 51
Eliminations (31,485) (35,864) (26,759)
- -----------------------------------------------------------------------
Total intercompany sales - - -
- -----------------------------------------------------------------------
Net sales: 1998 1997 1996
- -----------------------------------------------------------------------
North America $ 792,057 $ 789,361 $ 748,062
Europe 290,047 252,018 274,517
Latin America 212,798 206,928 194,105
Asia/Pacific 83,824 94,346 85,791
Eliminations (31,485) (35,864) (26,759)
- -----------------------------------------------------------------------
Total net sales $ 1,347,241 $ 1,306,789 $ 1,275,716
- -----------------------------------------------------------------------
Earnings: 1998 1997 1996
- -----------------------------------------------------------------------
North America $ 43,628 $ 59,940 $ 57,485
Europe 11,602 11,112 11,864
Latin America 6,705 15,659 13,140
Asia/Pacific (723) 541 (1,735)
- -----------------------------------------------------------------------
Operating earnings 61,212 87,252 80,754
Interest expense (26,989) (19,836) (18,881)
Gain on sale of assets 3,237 5,199 16,673
Other (expense) (4,674) (7,295) (1,995)
- -----------------------------------------------------------------------
Earnings before income
taxes, minority interest
and accounting change $ 32,786 $ 65,320 $ 76,551
- -----------------------------------------------------------------------
47
<PAGE>
Identifiable assets: 1998 1997 1996
- -----------------------------------------------------------------------
North America $ 592,579 $ 554,569 $ 503,976
Europe 272,302 176,745 183,993
Latin America 150,867 150,138 135,031
Asia/Pacific 74,948 75,625 74,439
Eliminations (47,283) (41,247) (30,408)
General corporate assets 2,314 1,816 2,244
- -----------------------------------------------------------------------
Total assets $ 1,045,727 $ 917,646 $ 869,275
- -----------------------------------------------------------------------
16/Quarterly Data (unaudited)
Net sales: 1998 1997
- -------------------------------------------------------
First quarter $ 310,656 $ 304,091
Second quarter 341,970 328,872
Third quarter 333,518 323,460
Fourth quarter 361,097 350,366
- -------------------------------------------------------
Total year $ 1,347,241 $ 1,306,789
- -------------------------------------------------------
Gross profit: 1998 1997
- -------------------------------------------------------
First quarter $ 97,633 $ 94,728
Second quarter 108,693 105,473
Third quarter 103,095 102,760
Fourth quarter 112,450 109,993
- -------------------------------------------------------
Total year $ 421,871 $ 412,954
- -------------------------------------------------------
Operating earnings: 1998 1997
- -------------------------------------------------------
First quarter $ 15,437 $ 15,333
Second quarter 24,720 22,263
Third quarter (2,119)** 21,946
Fourth quarter 23,174 ** 27,710
- -------------------------------------------------------
Total year $ 61,212 $ 87,252
- -------------------------------------------------------
Net earnings: 1998 1997
- -------------------------------------------------------
First quarter $ 5,954 $ 5,821
Second quarter 11,261 11,111
Third quarter (10,263) 10,763
Fourth quarter 9,038 9,245*
- -------------------------------------------------------
Total year $ 15,990 $ 36,940*
- -------------------------------------------------------
Basic net earnings
per share: 1998 1997
- -------------------------------------------------------
First quarter $ 0.44 $ 0.42
Second quarter 0.82 0.79
Third quarter (0.75)** 0.78
Fourth quarter 0.65 ** 0.68*
Total year $ 1.16 $ 2.67*
- -------------------------------------------------------
Diluted net earnings
per share 1998 1997
- -------------------------------------------------------
First quarter $ 0.43 $ 0.41
Second quarter 0.81 0.79
Third quarter (0.75)** 0.77
Fourth quarter 0.65 ** 0.67*
Total year $ 1.15 $ 2.64*
- -------------------------------------------------------
*Fourth quarter earnings were $12,613 before an accounting change charge of
$(3,368) or $(0.24) per share. Year-to-date earnings were $40,308 or $2.91 per
share (basic) or $2.88 per share (diluted) before an accounting change charge
of $(3,368) or $(0.24) per share.
**Non-recurring charges reduced third quarter operating income $24,003, net
earnings $18,689 or $1.36 per share and reduced fourth quarter operating
income $2,744, net earnings $2,595 or $0.19 per share. (See Note 3 to
Consolidated Financial Statements.)
48
<PAGE>
Management's Report
The management of H.B. Fuller Company is responsible for the integrity,
objectivity and accuracy of the financial statements of the Company and its
subsidiaries. The accompanying financial statements, including the notes,
were prepared in conformity with generally accepted accounting principles
appropriate in the circumstances and include amounts based on the best
judgment of management.
Management is also responsible for maintaining a system of internal
accounting control to provide reasonable assurance that established policies
and procedures are followed, that the records properly reflect all
transactions of the Company and that assets are safeguarded against material
loss from unauthorized use or disposition. Management believes that the
Company's accounting controls provide reasonable assurance that errors or
irregularities that could be material to the financial statements are prevented
or would be detected within a timely period by employees in the normal
course of performing their assigned duties.
/s/ Jorge Walter Bolanos
Jorge Walter Bolanos
Senior Vice President,
Chief Financial Officer and
Treasurer
/s/ Albert P.L. Stroucken
Albert P.L. Stroucken
President and
Chief Executive Officer
Report of
Independent Accountants
To the Board of Directors and
Stockholders of H.B. Fuller Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of H.B.
Fuller Company and its subsidiaries at November 28, 1998 and November 29,
1997, and the results of their operations and their cash flows for each of
the three years in the period ended November 28, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1, in 1997 the Company changed its accounting for
certain information technology transformation costs to conform with issue
97-13 of the Emerging Issues Task Force.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
January 8, 1999
49
<PAGE>
1988-1998 In Review
and Selected Financial Data
H.B. Fuller Company and Subsidiaries
<TABLE>
<CAPTION>
Annual Growth Rate
------------------
1-yr 5-yr 10-yr
1997- 1993- 1988- (Dollars in thousands, Pro Forma
1998 1998 1998 except per share amounts) 1998 1997 1996* 1995** 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
% % % Income Statement Data:
3.1 6.7 7.0 Net sales $ 1,347,241 1,306,789 1,275,716 1,248,812 1,243,818
(29.8) 2.7 2.8 Operating earnings $ 61,212 87,252 80,754 65,709 69,765
Earnings from
(60.3) (5.9) (2.7) continuing operations $ 15,990 40,308 45,430 28,195 31,195
Percent of net sales 1.2 3.1 3.6 2.3 2.5
(56.7) 9.9 (2.7) Net earnings $ 15,990 36,940 45,430 25,663 28,663
Percent of net sales 1.2 2.8 3.6 2.1 2.3
4.7 11.2 11.3 Depreciation $ 42,317 40,412 40,878 35,134
36.1 20.9 12.3 Interest expense $ 26,989 19,836 18,881 18,132
(29.4) (0.4) 2.7 Income taxes $ 18,826 26,651 31,233 18,094 19,148
Balance Sheet Data:
14.0 13.1 9.2 Total assets $ 1,046,169 917,646 869,275 828,929
0.7 7.6 5.2 Working capital $ 172,740 171,607 141,617 142,056
Current ratio 1.6 1.7 1.6 1.6
Net property,
4.0 12.3 9.9 plant and equipment $ 414,467 398,561 391,201 355,123
Long-term debt, excluding
30.5 37.9 11.8 current installments $ 300,074 229,996 172,779 166,459
0.7 6.5 6.7 Stockholders' equity $ 341,404 339,114 334,740 299,532 299,414
Stockholder Data:
Earnings from continuing
operations per common share:
(60.1) (5.8) (2.4) Basic $ 1.16 2.91 3.26 2.03 2.24
(60.1) (5.8) (2.4) Diluted $ 1.15 2.88 3.24 2.02 2.23
Net earnings per common share:
(56.6) 10.0 (2.4) Basic $ 1.16 2.67 3.26 1.85 2.06
(56.6) 10.1 (2.4) Diluted $ 1.15 2.64 3.24 1.84 2.05
Dividends paid:
9.0 7.8 8.4 Per common share $ 0.785 0.72 0.655 0.625
Stockholders' equity:
(0.4) 6.4 6.9 Per common share $ 24.39 24.48 23.78 21.36 21.35
Return on average
stockholders' equity 4.7 12.0 14.3 9.8 10.0
Common stock price:
7.6 8.7 9.6 High $ 64.81 60.25 47.75 39.75
(23.6) 1.7 7.8 Low $ 34.00 44.50 29.50 27.75
Weighted average common shares
outstanding (in thousands):
(0.9) (0.2) (0.3) Basic 13,721 13,843 13,910 13,884
(1.0) (0.2) (0.4) Diluted 13,844 13,988 14,008 13,977
- - 1.4 Number of employees 6,000 6,000 5,900 6,400
</TABLE>
*All years after 1995 are 52-week years. All other years are twelve-months
ended November 30.
**See Consolidated Financial Statements Note 1, Change in Year-end.
50
<PAGE>
1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------
1,097,367 975,287 942,438 861,024 792,230 753,374 685,034
65,953 53,470 71,406 59,846 51,911 46,009 46,430
30,863 21,701 35,622 27,687 21,145 15,671 21,081
2.8 2.2 3.8 3.2 2.7 2.1 3.1
30,863 9,984 35,622 27,687 21,145 15,671 21,081
2.8 1.0 3.8 3.2 2.7 2.1 3.1
28,177 24,934 24,865 21,787 20,376 16,571 14,469
11,747 10,459 12,537 14,788 14,028 13,237 8,477
19,782 19,191 24,716 19,173 15,234 13,936 14,361
742,617 564,521 561,204 508,911 489,634 455,172 434,293
129,665 119,905 130,817 108,779 96,097 95,645 104,071
1.6 1.7 1.8 1.7 1.7 1.8 1.9
295,090 232,547 223,153 207,378 202,341 186,631 161,605
130,009 60,261 53,457 71,814 88,240 100,974 98,473
274,805 249,396 255,040 219,050 197,191 186,515 178,871
2.22 1.56 2.58 2.03 1.55 1.10 1.48
2.21 1.55 2.55 2.00 1.53 1.09 1.46
2.22 0.72 2.58 2.03 1.55 1.10 1.48
2.21 0.71 2.55 2.00 1.53 1.09 1.46
0.575 0.54 0.46 0.41 0.40 0.38 0.35
19.70 17.92 18.43 15.96 14.56 13.27 12.56
11.5 4.0 15.0 13.3 11.0 8.6 12.4
42.25 42.75 53.25 38.33 19.17 22.83 25.83
29.00 31.25 32.58 18.83 13.75 13.83 16.00
13,877 13,872 13,778 13,613 13,650 14,216 14,207
13,988 14,006 13,989 13,854 13,811 14,358 14,386
6,400 6,000 5,800 5,600 5,600 5,500 5,200
51
<PAGE>
Investor
Information
Stock Price
Common Stock* (Intraday Price High/Low)
Highs Lows
Q1F97 $51.25 $44.50
Q1F98 $58.00 $46.50
Q2F97 $56.13 $46.50
Q2F98 $64.81 $54.50
Q3F97 $60.25 $46.88
Q3F98 $63.06 $47.38
Q4F97 $59.50 $45.38
Q4F98 $50.63 $34.00
Dividends
(Per Share)
Q1F97 $0.165
Q1F98 $0.185
Q2F97 $0.185
Q2F98 $0.200
Q3F97 $0.185
Q3F98 $0.200
Q4F97 $0.185
Q4F98 $0.200
Shareholder Composition
62% Institutions
18% Individuals
13% Employees
7% Directors & Officers
Annual Meeting
The annual meeting of shareholders will be held on Thursday, April 15, 1999,
at 3 p.m. at the RiverCentre, 175 West Kellogg Boulevard, St. Paul,
Minnesota. All shareholders are cordially invited to attend.
Form 10-K
H.B. Fuller Company's Form 10-K annual report for the year ended November 28,
1998, filed with the Securities and Exchange Commission, Washington, D.C., is
available upon request at no charge. Exhibits to the Form 10-K are available
at a charge sufficient to cover postage and handling. This material may be
obtained by writing to: Corporate Secretary, H.B. Fuller Company, P.O. Box
64683, St. Paul, MN 55164-0683.
Independent Accountants
PricewaterhouseCoopers LLP, Minneapolis, Minnesota.
Investor Contact
Richard Edwards
Director of Investor Relations
To receive shareholder material through the mail, or if you'd like to be
added to our mailing list, call our Shareholder Services Line at
1-800-214-2523.
Number of Common Shareholders
As of November 28, 1998, there were approximately 4,522 common shareholders
of record.
Transfer Agent and Registrar
Norwest Bank Minnesota, N.A., P.O. Box 64856, St. Paul, MN 55164-0856,
1-800-468-9716 or 651-450-4064 (in Minnesota).
Web Site
http://www.hbfuller.com
52
<PAGE>
Exhibit 21
----------
H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
AS OF NOVEMBER 28, 1998
<TABLE>
<CAPTION>
PERCENTAGE
JURISDICTION OF OF VOTING
SUBSIDIARY ORGANIZATION SECURITIES
- -------------------------------------------------------------------- --------------- -----------
<S> <C> <C>
H.B. Fuller Company United States
Branches: Indonesia
H.B. Fuller Company Puerto Rico, Inc. United States 100.0
H.B. Fuller International Inc. United States 100.0
Branches: Hong Kong, Singapore
F.A.I. Trading Company United States 100.0
Fiber-Resin Corporation United States 100.0
H.B. Fuller Automotive Company United States 100.0
EFTEC North America, LLC United States 70.0
EFTEC Latin America Panama 88.5
EFTEC Brasil Ltda. Brazil 99.9
Grupo Placosa EFTEC, S.A. de C.V. Mexico 33.3 note a
EFTEC Europe Holding AG Switzerland 30.0
EFTEC AG Switzerland 100.0
EFTEC Sarl France 100.0
EFTEC AB Sweden 100.0
EFTEC Ltd. U.K. 100.0
EFTEC NV Belgium 100.0
EFTEC Systems S.A. Spain 100.0
EFTEC Asia Pte. Ltd. Singapore 60.0
(also owned 20% directly by H.B. Fuller Automotive Co., Ety #022 )
EFTEC (Thailand) Co., Ltd. Thailand 80.0
Changchun EFTEC Chemical Products Ltd. China 25.0
Shanghai EFTEC Chemical Products Ltd. China 60.0
Foster Products Corporation United States 100.0
TEC Specialty Products, Inc. United States 100.0
Linear Products, Inc. United States 100.0
Branches: Netherlands
H.B. Fuller Licensing & Financing Inc. United States 100.0
Aireline, Inc. United States 100.0 note b
Kativo Chemical Industries, S.A. Panama 99.7
Branches: Costa Rica (Surcusal)
(See listing of subsidiaries on the following pages.)
Pinturas Ecuatorianas, S.A. Ecuador 100.0
Distribuidora Americana, S.A. Ecuador 100.0 note b
Glidden Avenida Nacional, S.A. Panama 100.0
Fabrica Pinturas Glidden, S.A. Panama 100.0
H.B. Fuller Holding Panama Co. Panama 100.0
Glidden Panama S.A. Panama 100.0
H.B. Fuller Commercial, S.A. Panama 100.0 *
ProColor, S.A. Panama 100.0
Adhesivos Industriales, S.A. Panama 100.0
H.B. Fuller Austria Gesellschaft m.b.H. Austria 100.0
H.B. Fuller Belgium N.V./S.A. Belgium 99.8 note c
Harved Oy Finland 100.0 note b
H.B. Fuller GmbH, Luneburg Germany 99.9
Branches: Poland
Isar-Rakoll Chemie, GmbH Germany 100.0 note b
H.B. Fuller France S.A. France 99.9 note d
H.B. Fuller Schweiz AG Switzerland 100.0
Industrial Adhesives GmbH, Denzlingen Germany 100.0
Datac Klebstoffe GmbH, Hildesheim Germany 100.0
</TABLE>
Page 1 of 5
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
JURISDICTION OF OF VOTING
SUBSIDIARY ORGANIZATION SECURITIES
- -------------------------------------------------------------------- --------------- -----------
<S> <C> <C>
H.B. Fuller Italia s.r.l. Italy 97.0 note e
H.B. Fuller (Jersey) Limited Jersey 100.0
H.B. Fuller Nederland B.V. Netherlands 100.0
Prakoll, S.A. Spain 100.0
H.B. Fuller Sverige AB Sweden 100.0
H.B. Fuller Holdings Limited U.K. 100.0
H.B. Fuller U.K. Operations Ltd. U.K. 100.0
H.B. Fuller U.K. Limited U.K. 100.0
Industrial Adhesives Limited U.K. 100.0 note b
H.B. Fuller Coatings Limited U.K. 100.0
Branches: Dubai, UAE
H.B. Fuller Linear Products Limited U.K. 100.0
Datac Adhesives Ltd. U.K. 100.0 *
Branches: Ireland, Netherlands
H.B. Fuller Canada, Inc. Canada 100.0
H.B. Fuller Mexico, S.A. Mexico 100.0
H.B. Fuller Company Australia Pty. Ltd. Australia 100.0
H.B. Fuller (China) Adhesives Ltd. China 97.0
H.B. Fuller India Private Limited India 99.9 note b
H.B. Fuller Japan Company, Ltd. Japan 100.0
H.B. Fuller Korea Co., Ltd. Korea 100.0
H.B. Fuller (Malaysia) Sdn. Bhd. Malaysia 100.0
H.B. Fuller Company (N.Z.) Ltd. New Zealand 99.9
H.B. Fuller (Philippines), Inc. Philippines 80.0
HBF Realty Corporation Philippines 40.0
H.B. Fuller Taiwan Co., Ltd. Taiwan 100.0
H.B. Fuller (Thailand) Co., Ltd. Thailand 99.9
Multi-Clean Products Pty. Ltd. Australia 100.0 note b
Multi-Clean (Lebanon) S.A.R.L. Lebanon 100.0 note b
H.B. Fuller Lebanon S.A.R.L. Lebanon 100.0 note b
Nippon Tilement Company, Ltd. Japan 9.1
</TABLE>
- ----------
Notes:
* inactive (to be liquidated)
a An additional 66.67% of the outstanding voting securities is owned by 6
minority shareholders.
b Shell corporation
c An additional 0.2% of the outstanding voting securities is owned by H.B.
Fuller GmbH, Luneburg
d H.B. Fuller GmbH, Luneburg 99.94% 73,940 shares
H.B. Fuller Company 0.01% 10 shares
H.B. Fuller Licensing & Financing, Inc. 0.01% 10 shares
H.B. Fuller International, Inv. 0.01% 10 shares
H.B. Fuller U.K. Limited 0.01% 10 shares
Prakoll S.A. 0.01% 10 shares
Gerard Campard 0.01% 10 shares
------- -------------
100.00% 74,000 shares
e An additional 3.0% of the outstanding voting securities is owned by H.B.
Fuller Nederland B.V.
Page 2 of 5
<PAGE>
KATIVO CHEMICAL INDUSTRIES, S.A. AND CONSOLIDATED SUBSIDIARIES
AS OF NOVEMBER 28, 1998
<TABLE>
<CAPTION>
PERCENTAGE
JURISDICTION OF OF VOTING
SUBSIDIARY OWNER OF VOTING SECURITIES ORGANIZATION SECURITIES
- -------------------------------------------- ---------------------------------- ----------------- -----------
<S> <C> <C> <C>
Chemical Supply, S.A. Chemical Supply Corporation Argentina 100.00 * note b
H.B. Fuller Argentina, S.A. Kativo Chemical Industries, S.A. Argentina 99.99
H.B. Fuller Company 0.01
- ---------------------------------------------------------------------------------------------------------------------
H.B. Fuller Latin America Kativo Chemical Industries, S.A. Bahamas 100.00 * note b
- ---------------------------------------------------------------------------------------------------------------------
H.B. Fuller Bolivia, Ltda. Kativo Chemical Industries, S.A. Bolivia 50.00
Chemical Supply Corporation 50.00
- ---------------------------------------------------------------------------------------------------------------------
H.B. Fuller Brazil, Ltda. Chemical Supply Corporation Brazil 99.85
Kativo Chemical Industries, S.A. 0.14
Kativo de Panama, S.A. 0.01
Adhesivos H.B. Fuller (Sul) Ltda. Chemical Supply Corporation Brazil 99.81 * note b
Kativo Chemical Industries, S.A. 0.15
H.B. Fuller Brazil, Ltda. 0.04
Chemical Supply de Brazil Solventes, Ltda. Adhesivos H.B. Fuller (Sul) Ltda. Brazil 99.93 * note a
H.B. Fuller Brazil, Ltda. 0.07
- ---------------------------------------------------------------------------------------------------------------------
H.B. Fuller Chile, S.A. Kativo Chemical Industries, S.A. Chile 99.99
Minority 0.01
- ---------------------------------------------------------------------------------------------------------------------
H.B. Fuller Colombia, Ltda. Kativo Chemical Industries, S.A. Colombia 98.00
Minority 2.00
- ---------------------------------------------------------------------------------------------------------------------
Kativo Costa Rica, S.A. Kativo Chemical Industries, S.A. Costa Rica 100.00
Reca Quimica, S.A. Kativo Chemical Industries, S.A. Costa Rica 100.00
Pinturas Centroamericanas Costa Rica S.A. Kativo Chemical Industries, S.A. Costa Rica 100.00
H.B. Fuller Costa Rica, S.A. Kativo Chemical Industries, S.A. Costa Rica 100.00
Analko, S.A. Kativo Chemical Industries, S.A. Costa Rica 100.00 * note b
Deco Tintas, S.A. Kativo Chemical Industries, S.A. Costa Rica 100.00
Resistol, S.A. Kativo Chemical Industries, S.A. Costa Rica 100.00 * note b
- ---------------------------------------------------------------------------------------------------------------------
H.B. Fuller Dominicana, S.A. Kativo Chemical Industries, S.A. Dominican Republic 90.60
Chemical Supply Corporation 8.82
Kativo Panama, S.A. 0.01
Kativo Honduras, S.A. 0.01
Decotintas (Costa Rica), S.A. 0.01
Olga Ferrer 0.54
Juan Bancalari 0.01
- ---------------------------------------------------------------------------------------------------------------------
H.B. Fuller Ecuador, S.A. Kativo Chemical Industries, S.A. Ecuador 50.00
Chemical Supply Corporation 50.00
- ---------------------------------------------------------------------------------------------------------------------
Kativo de El Salvador, S.A. Kativo Chemical Industries, S.A. El Salvador 100.00 *
Kativo Industrial de El Salvador, S.A. Kativo Chemical Industries, S.A. El Salvador 80.00 note b
Chemical Supply Corporation 20.00
H.B. Fuller El Salvador, S.A. Kativo Chemical Industries, S.A. El Salvador 80.00
Chemical Supply Corporation 20.00
Deco Tintas de El Salvador, S.A. Kativo Chemical Industries, S.A. El Salvador 80.00 * note b
Chemical Supply Corporation 20.00
- ---------------------------------------------------------------------------------------------------------------------
Norchem, Ltda. Kativo Chemical Industries, S.A. Grand Cayman 100.00 * note b
- ---------------------------------------------------------------------------------------------------------------------
Kativo Comercial de Guatemala, S.A. Kativo Chemical Industries, S.A. Guatemala 80.00
Chemical Supply Corporation 20.00
Compania Mercantil de Pinturas Kativo Chemical Industries, S.A. Guatemala 100.00 * note a
Kiosko de Pinturas, S.A. Kativo de Guatemala, S.A. Guatemala 100.00 * note a
H.B. Fuller Guatemala, S.A. Chemical Supply Corporation Guatemala 100.00
Resistol, S.A. H.B. Fuller Guatemala, S.A. Guatemala 100.00 *
Sinteticos de Guatemala, S.A. Kativo Chemical Industries, S.A. Guatemala 80.00 * note a
Chemical Supply Corporation 20.00
Punto de Viniles, S.A. Sinteticos de Guatemala, S.A. Guatemala 100.00 * note a
Alfombras Canon de Guatemala, S.A. Sinteticos de Guatemala, S.A. Guatemala 100.00 * note a
</TABLE>
- ----------
* -- Inactive Entities
a -- Liquidation process has begun.
b -- To be liquidated.
Page 3 of 5
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
JURISDICTION OF OF VOTING
SUBSIDIARY OWNER OF VOTING SECURITIES ORGANIZATION SECURITIES
- -------------------------------------------- ---------------------------------- ----------------- -----------
<S> <C> <C> <C>
Kativo de Honduras, S.A. Kativo Chemical Industries, S.A. Honduras 69.31 note c
Fuller Istmena, S.A. 30.65
H.B. Fuller Panama, S.A. 0.02
Kativo de Panama, S.A. 0.02
Aerosoles de Centroamerica, S.A. Kativo Chemical Industries, S.A. Honduras 99.88 note c
H.B. Fuller Panama, S.A. 0.09
Minority 0.03
Alfombras Canon, S.A. Kativo Chemical Industries, S.A. Honduras 80.00 * notes b&c
H.B. Fuller Panama, S.A. 5.00
Kativo de Panama, S.A. 10.00
Fuller Istmena, S.A. 5.00
Comercial Punto de Viniles, S.A. Kativo Chemical Industries, S.A. Honduras 76.00 * notes b&c
Fuller Istmena, S.A. 8.00
H.B. Fuller Panama, S.A. 8.00
Kativo de Panama, S.A. 8.00
Kiosko Comercial, S.A. Kativo Chemical Industries, S.A. Honduras 68.00 * notes b&c
Kativo de Panama, S.A. 16.00
Fuller Istmena, S.A. 8.00
H.B. Fuller Panama, S.A. 8.00
Kativo Comercial, S.A. Kativo Chemical Industries, S.A. Honduras 35.00 note c
Fuller Istmena, S.A. 25.00
Kativo de Panama, S.A. 25.00
H.B. Fuller Panama, S.A. 15.00
Punto de Viniles, S.A. Kativo Chemical Industries, S.A. Honduras 74.00 * notes b&c
Fuller Istmena, S.A. 8.00
Kativo de Panama, S.A. 10.00
H.B. Fuller Panama, S.A. 8.00
Kiosko de Pinturas, S.A. Kativo Chemical Industries, S.A. Honduras 64.00 * notes b&c
Fuller Istmena, S.A. 8.00
Kativo de Panama, S.A. 20.00
H.B. Fuller Panama, S.A. 8.00
Fabrica de Pinturas Surekote Kativo Chemical Industries, S.A. Honduras 0.19 * notes b&c
de Honduras, S.A. Fuller Istmena, S.A. 0.10
Kativo de Panama, S.A. 0.10
H.B. Fuller Panama, S.A. 99.52
Minority 0.10
Servicios e Inversiones Kiosko de Pinturas, S.A. Honduras 0.40 * notes b&c
de Honduras, S.A. Kiosko Comercial, S.A. 0.40
Kativo Comercial, S.A. 0.40
Aerosoles de Centroamerica, S.A. 0.40
Kativo de Honduras, S.A. 98.40
Deco Tintas De Honduras, S.A. Kativo Chemical Industries, S.A. Honduras 80.00 * notes b&c
Chemical Supply Corporation 19.95
Kativo de Panama, S.A. 0.02
H.B. Fuller Panama, S.A. 0.02
Decotintas de Panama, S.A. 0.02
H.B. Fuller Honduras, S.A. Kativo Chemical Industries, S.A. Honduras 20.00 note c
Fuller Istmena, S.A. 20.00
Kativo de Panama, S.A. 20.00
H.B. Fuller Panama, S.A. 20.00
Chemical Supply Corporation 20.00
Comercial Fuller, S.A. Kativo Chemical Industries, S.A. Honduras 61.00 * notes a&c
Kativo Comercial, S.A. (Panama) 10.00
Kativo de Panama, S.A. 10.00
H.B. Fuller Panama, S.A. 4.00
Chemical Supply Corporation 15.00
</TABLE>
- ----------
* -- Inactive Entities
a -- Liquidation process has begun.
b -- To be liquidated.
c -- For company purposes it is owned 100% by KCI
Page 4 of 5
<PAGE>
KATIVO CHEMICAL INDUSTRIES, S.A. AND CONSOLIDATED SUBSIDIARIES
AS OF NOVEMBER 28, 1998
<TABLE>
<CAPTION>
PERCENTAGE
JURISDICTION OF OF VOTING
SUBSIDIARY OWNER OF VOTING SECURITIES ORGANIZATION SECURITIES
- -------------------------------------------- ---------------------------------- ----------------- -----------
<S> <C> <C> <C>
Industrias Kativo de Nicaragua, S.A. Kativo Chemical Industries, S.A. Nicaragua 99.99
Minority 0.01
Distribuidora Industrial y Comercial, S.A. Reca Quimica, S.A. Nicaragua 86.00 * note a
Minority 14.00
H.B. Fuller Nicaragua, S.A. Kativo Chemical Industries, S.A. Nicaragua 99.80 *
Minority 0.20
- ---------------------------------------------------------------------------------------------------------------------
Chemical Supply Corporation Kativo Chemical Industries, S.A. Panama 100.00
Kativo de Panama, S.A. Kativo Chemical Industries, S.A. Panama 100.00 * note b
Fuller Istmena, S.A. Kativo de Panama, S.A. Panama 100.00 * note a
Deco Tintas Comerciales, S.A. Kativo Chemical Industries, S.A. Panama 100.00 * note a
H.B. Fuller Panama, S.A. Kativo Chemical Industries, S.A. Panama 100.00 * note a
Deco Tintas de Panama, S.A. Kativo Chemical Industries, S.A. Panama 100.00 * note a
Sistemas Integrados, S.A. H.B. Fuller Panama, S.A. Panama 100.00 * note a
- ---------------------------------------------------------------------------------------------------------------------
Chemical Supply Peruana, S.A. Chemical Supply Corporation Peru 99.99 * note b
Minority 0.00
H.B. Fuller Peru, S.A. Chemical Supply Peruana, S.A. Peru 23.34
Kativo Chemical Industries, S.A. 53.32
H.B. Fuller Company Canada 22.42
Fuller Adhesives International 0.92
- ---------------------------------------------------------------------------------------------------------------------
H.B. Fuller Uruguay, S.A. H.B. Fuller Argentina, S.A. Uruguay 100.00
- ---------------------------------------------------------------------------------------------------------------------
H.B. Fuller Venezuela, C.A. Kativo Chemical Industries, S.A. Venezuela 100.00
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* -- Inactive Entities
a -- Liquidation process has begun.
b -- To be liquidated.
c -- For company purposes it is owned 100% by KCI
Page 5 of 5
<PAGE>
Exhibit 23
----------
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-3 (Registration No.
33-53387) and to the incorporation by reference in the Registration Statements
on Form S-8 (Registration Nos. 33-50786, 33-16082, 2-73650, 333-24703, 333-50005
and 333-50827) of H.B. Fuller Company of our report dated January 8, 1999
appearing in the 1998 Annual Report to Stockholders of H.B. Fuller Company which
is incorporated in this Annual Report on Form 10-K405. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears in this Annual Report on Form 10-K405.
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 25, 1999
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors of H.B.
FULLER COMPANY, a Minnesota corporation, which proposes to file with the
Securities and Exchange Commission, Washington D.C. 20549, under the provisions
of the Securities Exchange Act of 1934, as amended, a Form 10-K Annual Report
for the Company's fiscal year ended November 28, 1998, hereby constitute and
appoint ALBERT P.L. STROUCKEN, JORGE WALTER BOLANOS AND RICHARD C. BAKER his/her
true and lawful attorneys-in-fact and agents, and each of them, with full power
to act without the other, for him/her and in his/her name, place and stead to
sign such annual report with power, where appropriate, to affix the corporate
seal of said Company thereto, and to attest said seal, and to file such annual
report so signed, with all exhibits thereto, and any and all other documents in
connection therewith, with the Securities and Exchange Commission and with the
appropriate office of any state, hereby granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform any and all
acts and things requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he/she might do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or either of them,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the 2nd day of December, 1998.
/s/ Anthony L. Andersen
- ------------------------------------- -----------------------------------
ANTHONY L. ANDERSEN WALTER KISSLING
Chairman of the Board Director
/s/ Norbert R. Berg /s/ John J. Mauriel, Jr.
- ------------------------------------- -----------------------------------
NORBERT R. BERG JOHN J. MAURIEL, JR.
Director Director
/s/ Edward L. Bronstien, Jr. /s/ Lee R. Mitau
- ------------------------------------- -----------------------------------
EDWARD L. BRONSTIEN, JR. LEE R. MITAU
Director Director
/s/ Robert J. Carlson /s/ Rolf Schubert
- ------------------------------------- -----------------------------------
ROBERT J. CARLSON ROLF SCHUBERT
Director Vice President, Chief Technology
Officer and Director
/s/ Freeman A. Ford /s/ Albert P.L. Stroucken
- ------------------------------------- -----------------------------------
FREEMAN A. FORD ALBERT P.L. STROUCKEN
Director President, Chief Executive Officer
and Director
/s/ Lorne C. Webster
- ------------------------------------- -----------------------------------
GAIL D. FOSLER LORNE C. WEBSTER
Director Director
- -------------------------------------
REATHA CLARK KING
Director
<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> YEAR
<FISCAL-YEAR-END> NOV-28-1998
<PERIOD-START> NOV-30-1997
<PERIOD-END> NOV-28-1998
<CASH> 4,605
<SECURITIES> 0
<RECEIVABLES> 247,952
<ALLOWANCES> 5,073
<INVENTORY> 158,606
<CURRENT-ASSETS> 457,900
<PP&E> 757,981
<DEPRECIATION> 343,514
<TOTAL-ASSETS> 1,046,169
<CURRENT-LIABILITIES> 285,160
<BONDS> 300,074
0
306
<COMMON> 13,983
<OTHER-SE> 327,115
<TOTAL-LIABILITY-AND-EQUITY> 1,046,169
<SALES> 1,347,241
<TOTAL-REVENUES> 1,347,241
<CGS> 925,370
<TOTAL-COSTS> 360,659
<OTHER-EXPENSES> (1,437)
<LOSS-PROVISION> 1,406
<INTEREST-EXPENSE> 26,989
<INCOME-PRETAX> 32,786
<INCOME-TAX> 18,826
<INCOME-CONTINUING> 15,990
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,990
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.15
</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> YEAR
<FISCAL-YEAR-END> NOV-29-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-29-1997
<CASH> 2,710
<SECURITIES> 0
<RECEIVABLES> 211,469
<ALLOWANCES> 5,879
<INVENTORY> 150,685
<CURRENT-ASSETS> 409,156
<PP&E> 697,917
<DEPRECIATION> 299,356
<TOTAL-ASSETS> 917,646
<CURRENT-LIABILITIES> 237,549
<BONDS> 229,996
0
306
<COMMON> 13,841
<OTHER-SE> 324,967
<TOTAL-LIABILITY-AND-EQUITY> 917,646
<SALES> 1,306,789
<TOTAL-REVENUES> 1,306,789
<CGS> 893,835
<TOTAL-COSTS> 325,702
<OTHER-EXPENSES> (2,096)
<LOSS-PROVISION> 1,183
<INTEREST-EXPENSE> 19,836
<INCOME-PRETAX> 65,320
<INCOME-TAX> 26,651
<INCOME-CONTINUING> 40,308
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 3,368
<NET-INCOME> 36,940
<EPS-PRIMARY> 2.67
<EPS-DILUTED> 2.64
</TABLE>
