SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934

 

Filed by the Registrant  x

 

Filed by a Party other than the Registrant  o

 

 

NORDSON CORPORATION

(Name of Registrant as Specified in Its Charter)

 

                                                               

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

               Not Applicable

 

               Not Applicable

 

               Not Applicable

 

               Not Applicable

 

(5) Total fee paid:

               Not Applicable

 

o  Fee paid previously with preliminary materials.

 

o  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

               Not Applicable

 

               Not Applicable

 

               Not Applicable

 

(4) Date Filed:

               Not Applicable

 

NORDSON CORPORATION

 

Notice of 2010

Annual Meeting

and Proxy Statement

 

 

 

 

Edward P. Campbell

Chairman of the Board

 

January 16, 2010

 

Dear Shareholder:

 

You are cordially invited to attend the Annual Meeting of Shareholders to be held at the Spitzer Conference Center, 1005 North Abbe Road, Elyria, Ohio, at 9:30 a.m. on Tuesday, February 16, 2010. We hope that you will be able to attend.

 

The Notice of Annual Meeting of Shareholders and the Proxy Statement, which are included in this booklet, describe the matters to be acted upon at the meeting. Regardless of the number of shares you own, your vote on these matters is important. Whether or not you plan to attend the meeting, I urge you to vote your shares by telephone, the Internet or by mail. Instructions regarding all three methods of voting accompany your proxy card. If you later decide to vote in person at the meeting, you will have an opportunity to revoke your proxy and vote by ballot.

 

I look forward to seeing you at the meeting.

 

Sincerely,

 

EDWARD P. CAMPBELL

Chairman of the Board

NORDSON CORPORATION

 

NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS

 

The Annual Meeting of Shareholders of Nordson Corporation will be held at the Spitzer Conference Center, 1005 North Abbe Road, Elyria, Ohio, at 9:30 a.m. on Tuesday, February 16, 2010. The purposes of the meeting are:

 

 

Shareholders of record at the close of business on December 24, 2009 are entitled to notice of and to vote at the meeting.

 

For the Board of Directors

 

ROBERT E. VEILLETTE

Vice President, General Counsel

and Secretary

 

January 16, 2010

 

NORDSON CORPORATION

 

PROXY STATEMENT

 

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors of Nordson Corporation to be used at the Annual Meeting of Shareholders to be held on February 16, 2010 and any adjournment or postponement of that meeting. The time, place and purposes of the Annual Meeting are stated in the Notice of Annual Meeting of Shareholders that accompanies this proxy statement.

 

The accompanying proxy is solicited by our Board of Directors. All validly executed proxies received by our Board of Directors pursuant to this solicitation will be voted at the Annual Meeting, and the instructions contained in such proxies will be followed. If no directions are given, the proxy will be voted (i) FOR the election of the five nominees listed on the proxy; and (ii) FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending October 31, 2010.

 

If you are a shareholder of record, you may vote in one of the following three ways whether or not you plan to attend the Annual Meeting: (1) by completing, signing and dating the accompanying proxy card and returning it in the enclosed postage-prepaid envelope, (2) by completing your proxy using the toll-free telephone number listed on the proxy card, or (3) by completing your proxy on the Internet at the address listed on the proxy card. It is important that you vote your shares whether or not you attend the meeting in person. If you attend the Annual Meeting, you may vote in person even if you have previously returned your proxy card or completed your proxy by phone or on the Internet. The proxies cannot be voted for a greater number of persons than the number of nominees. You may revoke your proxy before it is voted by giving notice to us in writing or orally at the meeting. However, your presence at the Annual Meeting, without any further action on your part, will not revoke your previously granted proxy.

 

If you hold your shares (i.e., they are registered) through a bank, broker or other nominee in “street name” but you do not provide the firm that holds your shares with specific voting instructions, it will only be allowed to vote your shares on your behalf in its discretion on “routine” matters, but it cannot vote your shares in its discretion on your behalf on any “non-routine” matters. Proposal 1 relating to the election of five directors nominated by the Board of Directors is considered a “non-routine” matter and Proposal 2 relating to the appointment of the company’s independent auditors for our fiscal year ending October 31, 2010 is considered a “routine” matter. Therefore, you must give specific instructions to your broker for your shares to be voted on the election of directors at the Annual Meeting.

 

If you participate in our 401(k) plan and/or our Employee Stock Ownership Plan (ESOP), you may vote the amount of shares credited to your account as of the record date for the Annual Meeting. You may vote by instructing New York Life Investment Management, the trustee of the 401(k) plan and the ESOP, pursuant to the instruction card being delivered with this proxy statement to plan participants. The trustee will vote your shares in accordance with your duly executed instructions if received in a timely manner. If you do not send timely instructions, the non-voted whole and fractional shares will be voted by the trustee in the same proportion that it votes the whole and fractional shares for which it did receive timely voting instructions.

 

Even after you have submitted your proxy card, you may change your vote at any time before the proxy is exercised by filing either a notice of revocation or a duly executed proxy bearing a later date with our Corporate Secretary; however, no such revocation or subsequent proxy will be effective unless and until written notice of the revocation or subsequent proxy is received by us at or prior to the Annual Meeting.

 

For 401(k) plan and the ESOP shares, you may revoke previously given voting instructions on or before February 12, 2010 by filing either a written notice of revocation or a properly completed and signed voting instruction card bearing a later date with the trustee.

 

This proxy statement and the enclosed proxy card are being mailed to shareholders on or about January 16, 2010. Nordson’s executive offices are located at 28601 Clemens Road, Westlake, Ohio 44145, telephone number (440) 892-1580.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual
Meeting of Shareholders to be held on February 16, 2010:

 

The proxy statement, proxy card and annual report to shareholders for the fiscal year ended October 31, 2009 are available by accessing the “Investor Information” menu item of our website: www.nordson.com.

 

INFORMATION ABOUT THE ANNUAL MEETING

 

Voting at the Meeting

 

Shareholders of record at the close of business on December 24, 2009 are entitled to vote at the meeting. On that date, a total of 33,733,939 of our common shares were outstanding. Each share is entitled to one vote.

 

Voting for directors will be cumulative if any shareholder gives notice in writing to the President, a Vice President or the Secretary of Nordson at least 48 hours before the time set for the meeting and an announcement of the notice is made at the beginning of the meeting by the Chairman or the Secretary, or by or on behalf of the shareholder giving the notice. If cumulative voting is in effect, our shareholders will be entitled to cast, in the election of directors, a number of votes equal to the product of the number of directors to be elected multiplied by the number of shares that each of our shareholders is voting. Our shareholders may cast all of these votes for one nominee or distribute them among several nominees, as they see fit. If cumulative voting is in effect, shares represented by each properly submitted proxy will also be voted on a cumulative basis, with the votes distributed among the nominees in accordance with the judgment of the persons named on the proxy card.

 

Under Ohio law, directors are elected by a plurality of the votes of shareholders of the corporation present at a meeting at which a quorum is present, unless otherwise specified in an Ohio corporation’s Articles of Incorporation, and proposals are adopted or approved by the vote of a specified percentage of the voting power of the corporation. Abstentions and broker non-votes are tabulated in determining the votes present at a meeting. Consequently, an abstention or a broker non-vote may have the same effect as a vote against a director nominee or a proposal, as each abstention or broker non-vote would be one less vote in favor of a director nominee or a proposal. An affirmative vote of a majority of the shares represented at the meeting will be required to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm.

 

If any of the nominees for terms expiring in 2013 becomes unable or declines to serve as a director, each properly submitted proxy will be voted for another person recommended by the Board of Directors. However, the Board has no reason to believe that any nominee will be unable or will decline to serve as a director.

 

The Board of Directors knows of no other matters that will be presented at the annual meeting other than as described in this proxy statement. However, if other matters do properly come before the annual meeting, the persons named in the proxy card will vote on these matters in accordance with their best judgment.

 

Shareholder Director Nominations and Proposals

 

Any shareholder who wishes to submit for inclusion in next year’s proxy statement a candidate for election as director or a proposal to be considered should send the nomination or proposal for consideration c/o Secretary, Nordson Corporation, 28601 Clemens Road, Westlake, Ohio 44145 for receipt on or before September 18, 2010. A shareholder may nominate a candidate for election as a director at the 2011 Annual Meeting of the Shareholders provided the shareholder (i) is a shareholder of the company of record at the time of giving of the notice for the meeting, (ii) is entitled to vote at the meeting in the election of directors, and (iii) has given timely written notice of the nomination to the Secretary. The Governance and Nominating Committee will assess the qualifications of the candidate according to criteria set out in Nordson Corporation’s Governance Guidelines, which are available by accessing the “Governance” menu item at www.nordson.com/corporate. Additionally, under our Regulations, a shareholder may submit a proposal for consideration at next year’s Annual Meeting of Shareholders, but not for inclusion in the proxy statement, if the shareholder provides written notice no earlier than November 18, 2010 and no later than December 18, 2010. For a candidate to be considered for election as a director or for business to be properly requested by a shareholder to be brought before an annual meeting of shareholders, the shareholder must comply with all of the requirements of our Regulations, not just the timeliness requirements described above.

 

We will bear the expense of preparing, printing and mailing this notice and proxy statement. Our officers and regular employees may request proxies by contacting us by mail, telephone or in person. We will ask

custodians, nominees and fiduciaries to send proxy material to beneficial owners in order to obtain voting instructions. Upon request, we will reimburse them for their reasonable expenses for mailing the proxy material. Our Annual Report to Shareholders, including financial statements for the fiscal year ended October 31, 2009, is being mailed to shareholders of record with this proxy statement.

 

Also, we have engaged a professional proxy solicitation firm, Georgeson Inc., to assist us in soliciting proxies. We will pay a fee of approximately $8,500, plus expenses, to Georgeson for its services. If you have any questions or need any assistance in voting your shares, please contact Georgeson at:

 

Georgeson Inc.
199 Water Street, 26th Floor
New York, NY 10038
(800) 509-0963 (Toll Free)
Banks and Brokerages please call:
(212) 440-9800

 

 

CORPORATE PHILOSOPHY

 

Corporate Purpose

 

We strive to be a vital, self-renewing, worldwide organization which, within the framework of ethical behavior and enlightened citizenship, grows and produces wealth for our customers, employees, long-term shareholders and communities.

 

Corporate Goals

 

We operate for the purpose of creating balanced, long-term benefits for all of our constituencies: customers, employees, long-term shareholders and communities.

 

We do not expect every quarter to produce increased sales, earnings and earnings per share, or to exceed the comparative prior year’s quarter. We do expect to produce long-term gains. When short-term swings occur, we do not intend to alter our basic objectives in efforts to mitigate the impact of these natural occurrences.

 

We achieve growth by seizing market opportunities with existing products and markets, investing in systems to maximize productivity and pursuing growth markets. We augment this strategy through product line additions, engineering, research and development, and acquisition of companies that can serve multinational industrial markets.

 

Customers

 

We create benefits for our customers through a Package of Values^®, which includes carefully engineered, durable products; strong service support; the backing of a well-established worldwide company with financial and technical strengths; and a corporate commitment to deliver what was promised.

 

We strive to provide genuine customer satisfaction; it is the foundation upon which we continue to build our business.

 

Employees

 

Complementing our business strategy is the objective to provide opportunities for employee self-fulfillment, growth, security, recognition and equitable compensation.

 

We meet this goal through our Human Resources department’s facilitation of employee training and leadership training and the creation of on-the-job growth opportunities. The result is a highly qualified and professional management team capable of meeting corporate objectives.

We recognize the value of employee participation in the planning process. Strategic and operating plans are developed by all business units and divisions, resulting in a sense of ownership and commitment on the part of employees in accomplishing our objectives. In addition, employees participate in Lean initiatives to continuously improve our processes.

 

We are an equal opportunity employer.

 

Communities

 

We are committed to contributing approximately 5 percent of domestic pretax earnings to human services, education and other charitable activities, particularly in communities where we have major facilities.

 

Since our founding, we have held the belief that business, as a corporate citizen, has a social responsibility to share its success with the communities in which it operates and its employees live. With this operating philosophy, in 2009 we contributed $2.1 million to nonprofit organizations operating in the areas of education, civic affairs, human welfare and arts and culture. In addition, our employees also showed their community commitment by volunteering through our Time ’n Talent program. In 2009, employees spent nearly 5,600 hours strengthening their communities and supporting individuals and families in need.

 

CORPORATE GOVERNANCE

 

Director Independence

 

Our Governance Guidelines provide that the Board of Directors will be comprised of a majority of independent directors and that only those directors or nominees who meet the Nasdaq Stock Market LLC (“Nasdaq”) standards for independence will be considered independent. Our Board of Directors has affirmatively determined that Messrs. Carson, Hardis, Keithley, Madar, Merriman, Robinson, Rosen, Dr. Ignat and Ms. Puma are independent directors and nominees Messrs. Banks and Richey, if elected, will be independent directors. The independent directors constitute a majority of the Board, and the only director who will not be independent is nominee Michael F. Hilton, our President and Chief Executive Officer effective January 16, 2010.

 

Governance Guidelines

 

On December 10, 2008, our Board of Directors adopted the revised Nordson Corporation Governance Guidelines. The Governance Guidelines incorporate best governance practices in the area of other board memberships, executive sessions of the independent directors and director recruitment and performance guidelines. Our Governance Guidelines also set out in detail the roles of the chairman of the board and the presiding director, including the role of the presiding director in the event the chairman of the board is not an independent director.

 

Code of Business and Ethical Conduct

 

We have a Code of Business and Ethical Conduct that addresses our commitment to honesty and integrity and the ethical behavior of our directors, officers and employees with current and potential customers, fellow employees, competitors, government and self-regulatory agencies, investors, the public, the media and anyone else with whom we have or may have contact. Violations of any of the standards of the Code will be met with appropriate disciplinary action, up to and including termination of employment. Retaliation against any director, officer or employee who files a report concerning what he or she reasonably believes to be conduct that violates the Code is strictly prohibited. The Code of Business and Ethical Conduct is available by accessing the “Code of Business and Ethical Conduct” menu item at www.nordson.com/corporate/governance.

 

Director Nominating Process

 

The Governance and Nominating Committee reviews annually the appropriate experience, skills and characteristics required of Board members in the context of the current membership of the Board. This assessment includes experience, reputation, judgment, diversity and skills, among other relevant factors in the context of the perceived needs of the Board.

Our Board of Directors has established a process for the identification and selection of candidates for director. The Governance and Nominating Committee, in consultation with the Chairman of the Board, periodically examines the composition of the Board. If the Governance and Nominating Committee determines that adding a new director is advisable, the Committee initiates the search, working with other directors, management and, if it deems appropriate or necessary, a search firm retained to assist in the search. The Governance and Nominating Committee considers all appropriate candidates proposed by management, directors and shareholders. Information regarding potential candidates is presented to the Governance and Nominating Committee, and the Committee evaluates the candidates based on the needs of the Board at that time and issues of experience, reputation, judgment, diversity and skills, as set forth in our Governance Guidelines and Director Recruitment and Performance Guidelines. The Director Recruitment and Performance Guidelines were adopted by the Board of Directors on December 6, 2006 upon recommendation of the Governance and Nominating Committee and are a crucial element of our Governance Guidelines. Potential candidates are evaluated according to the same criteria, regardless of whether the candidate was recommended by shareholders, the Governance and Nominating Committee, another director, management, a search firm or another third party. The Governance and Nominating Committee submits any recommended candidate to the full Board of Directors for approval and recommendation to our shareholders.

 

In evaluating the suitability of individuals for Board membership, the Governance and Nominating Committee evaluates each individual in the context of our Director Recruitment and Performance Guidelines, with the objective of recommending a group of directors that can best perpetuate the success of our business and represent shareholder interests through the exercise of sound judgment, using its diversity of experience. In determining whether to recommend a director for re-election, the Committee also considers the director’s past attendance at meetings and participation in and contributions to the activities of the Board. The Governance and Nominating Committee does not distinguish between nominees recommended by shareholders and other nominees. In 2009, the Governance and Nominating Committee engaged a third-party search firm, Heidrick & Struggles, to identify possible candidates who met the minimum and desired qualifications, to interview and screen such candidates (including conducting reference checks and arranging for appropriate background checks), to act as a liaison among the Board of Directors, the Governance and Nominating Committee and each candidate during the screening and evaluation process, and thereafter to be available for consultation as needed. Nominees Richey and Banks were recommended by Heidrick & Struggles.

 

Shareholders wishing to suggest candidates to the Governance and Nominating Committee for consideration as directors must submit a written notice to the Secretary, who will present the notice to the Governance and Nominating Committee. Our Regulations set forth the procedures a shareholder must follow to nominate directors. These procedures are summarized in the “Shareholder Director Nominations and Proposals” and “Shareholder Communications with the Board of Directors” sections of this proxy statement.

 

Shareholder Communications with the Board of Directors

 

Shareholders may communicate with the Board, the Chairman of the Board, a Board committee, the non-employee directors as a group, or individual directors by sending written communications addressed to the Board of Directors, a Board committee or such individual director or directors, c/o Secretary, Nordson Corporation, 28601 Clemens Road, Westlake, Ohio 44145. Shareholders may also communicate directly with the Board of Directors by mail through the Chairperson, Governance and Nominating Committee, c/o Secretary, Nordson Corporation, 28601 Clemens Road, Westlake, Ohio 44145.

 

Each communication should specify the applicable addressee or addressees to be contacted as well as the general topic of the communication. Our Secretary will initially receive and process communications before forwarding them to members of the Board to whom the communication is directed, or if the communication is not directed to any specific member(s) of the Board, to the Chairperson of the Governance and Nominating Committee. We generally will not forward a shareholder communication that is primarily commercial in nature, relates to an improper or irrelevant topic, or requests general information about us. Concerns about accounting or auditing matters or possible violations of our Code of Business and Ethical Conduct should be reported pursuant to the procedures outlined in the Code.

 

Presiding Director

 

A Presiding Director would be elected by our independent directors and serve in the absence of an independent non-executive Chairman. A Presiding Director presides over all meetings of the non-employee directors held in executive session. A Presiding Director also has other authority and responsibilities that are described in the Governance Guidelines. Stephen R. Hardis served as our Presiding Director in 2009, but will relinquish the role upon Joseph P. Keithley assuming the position of Chairman of the Board effective with Edward P. Campbell’s retirement as Chairman and as a director at the Annual Meeting. Mr. Keithley will be an independent non-executive Chairman.

 

Executive Sessions

 

Pursuant to our Governance Guidelines, non-employee directors of the Board meet in regularly scheduled executive sessions without management. In the absence of an independent non-executive Chairman, the Presiding Director chairs all regularly scheduled executive sessions, and also has authority to convene meetings of the non-employee directors at any time with appropriate notice. In fiscal year 2009, Mr. Hardis conducted an executive session at each regular meeting of the Board.

 

Attendance at the Annual Meeting of Shareholders

 

Directors are expected to attend the Annual Meeting of Shareholders and all Board of Directors meetings and meetings of committees on which a director serves. During the last fiscal year, each incumbent director attended at least seventy-five percent of the meetings of the Board of Directors and of the committees on which he or she served. All incumbent directors attended the 2009 Annual Meeting of the Shareholders, except Mr. Carson who was not a director at the time of the 2009 Annual Meeting of the Shareholders.

 

Annual Self-Assessments

 

The Board of Directors conducts an annual self-assessment to determine, among other matters, whether the Board and the Committees are functioning effectively. The independent directors also undertake a peer assessment of other independent directors as part of this self-assessment process. The standing Committees — Audit, Compensation, and Governance and Nominating — are also required to each conduct an annual self-assessment. The Governance and Nominating Committee is responsible for overseeing this self-assessment process. The Board and the three standing Committees each conducted the self-assessments described above during fiscal year 2009.

 

Certain Relationships and Related Transactions; Review, Approval or Ratification of Related Transactions

 

There were no transactions between us and our officers, directors or any person related to our executive officers or directors, or with any holder of more than 5% of our outstanding common shares, either during fiscal year 2009 or up to the date of this proxy statement, in which any such person has a direct or indirect material interest. We review all transactions between us and any of our executive officers and directors. Our Code of Business and Ethical Conduct, which applies to directors, officers and all employees, emphasizes the importance of avoiding situations or transactions in which personal interests interfere with our best interests or those of our shareholders. In addition, our Related Persons Transactions Policy includes procedures for discussing and assessing relationships, including business, financial, familial and nonprofit, among us and our officers and directors, to the extent that they may arise. The Board reviews any transaction with a director to determine, on a case-by-case basis, whether a conflict of interest exists. The Board ensures that all directors voting on such a matter have no interest in the matter and discusses the transaction with counsel as deemed necessary. The Board will generally delegate the task of discussing, reviewing and approving transactions between us and any of our officers or directors to the Audit Committee. We define “related persons transactions” generally as transactions in which the self-interest of the employee, officer or director may be at odds or conflict with our interests, such as doing business with entities that are or may be controlled or significantly influenced by such persons or their immediate family members. Any related persons transactions concerning the Company and any of our directors or executive officers including

those that are reportable under Item 404(a) of Regulation S-K of the Securities Exchange Act of 1934, are to be disclosed to and approved by the Audit Committee. It is our policy to avoid related person transactions and related person transactions involving our executive officers are generally prohibited. We also require that each of our executive officers and directors complete a detailed annual questionnaire that requires, among other things, disclosure of any transactions with a related person meeting the minimum threshold for disclosure under the relevant Securities and Exchange Commission rules. Our legal counsel reviews and analyzes all responses to the annual questionnaires and, if necessary or appropriate, presents the information to the Governance and Nominating Committee for analysis, consideration and, if appropriate, approval.

 

Mr. Campbell, Chairman of the Board of Directors through this Annual Meeting, is also a director of KeyCorp. We and KeyCorp have had a banking relationship since 1954. KeyCorp currently acts as agent for our $400 million revolving credit facility. KeyCorp also serves as our cash manager and acts as trustee for several trusts managed by us. Mr. Banks, a director-nominee, serves as executive vice president and operating officer of Parker Hannifin Corporation. Parker Hannifin is a supplier of components to a number of our business units in volumes of less than .01% of Parker Hannifin’s annual revenue for fiscal year 2009. All purchases were conducted at arms-length. We have taken the appropriate steps to ensure the avoidance of any conflicts of interest resulting from our relationships with KeyCorp and Parker Hannifin.

 

Governance Documents

 

All of our current corporate governance documents and policies, including our Governance Guidelines, Director Recruitment and Performance Guidelines, committee charters, Code of Business and Ethical Conduct and Related Persons Transaction Policy are available by accessing the “Governance” menu item at www.nordson.com/corporate and in print to any shareholder who requests them. The annual report and this proxy statement are also available at www.nordson.com. Upon request, copies of the annual report will be mailed to you (at no charge) by contacting Corporate Communications, 28601 Clemens Road, Westlake, Ohio 44145.

 

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

 

Board of Directors.  Our Board of Directors has five regularly scheduled meetings each year. Special meetings are held as necessary. In addition, management and the directors communicate informally on a variety of topics, including suggestions for Board or Committee agenda items, recent developments and other matters of interest to the directors. The Board monitors overall corporate performance and the integrity of our financial controls and legal compliance procedures. In fiscal year 2009, our Board of Directors met five times in regular session and conducted two special meetings. An executive session of independent directors occurred at each regular meeting.

 

The Board has three standing committees: an Audit Committee, a Compensation Committee, and a Governance and Nominating Committee. The table below provides current committee membership and fiscal year 2009 committee meeting information:

 

 

 

* Committee Chairperson

 

Audit Committee.  All members of the Audit Committee meet the Nasdaq independence standards. The Board of Directors has designated Mr. Madar and Mr. Merriman as “audit committee financial experts” pursuant to the SEC’s final rules implementing Section 407 of the Sarbanes-Oxley Act. The Audit Committee is responsible for:

 

 

A more detailed discussion of the purposes, duties, and responsibilities of the Audit Committee is found in the Committee’s charter, which is available by accessing the “Committee of the Board of Directors — Audit Committee” menu item at www.nordson.com/corporate/governance. The Committee has discussed with the independent auditors the auditors’ independence from management and the company and considered the compatibility of non-audit services with the auditors’ independence. The Audit Committee Report to the Board of Directors is at Appendix A of this proxy statement.

 

Compensation Committee.  All members of the Compensation Committee meet the Nasdaq independence standards. The Committee is responsible for setting and approving compensation for our executive officers and for administering the incentive and equity participation plans under which we pay variable compensation to our executive officers. The Committee also administers employee equity and qualified and non-qualified retirement benefit plans. A more detailed discussion of the purposes, duties, and responsibilities of the Committee is found in the Committee’s charter which is available by accessing the “Committee of the Board of Directors — Compensation Committee” menu item at www.nordson.com/corporate/governance.

 

The Committee takes steps to enhance significantly its ability to carry out its responsibilities effectively to ensure that we maintain strong links between executive compensation and performance. Examples of these steps are:

 

 

For each fiscal year, the Committee determines:

 

 

The Committee also has the authority to engage outside executive compensation consultants, to determine the scope of the consultant’s services and to terminate the consultant’s engagement. As described in the Compensation Discussion and Analysis section of this proxy statement, the Committee engaged Mercer for fiscal year 2009. The compensation consultant reports directly to the Chairperson of the Committee and provides the Committee with information and analysis related to executive compensation. The Committee also has oversight responsibility of the investment policy with respect to tax-qualified pension and retirement plan funds held in trust and financial performance of the investment managers for those funds.

 

Governance and Nominating Committee.  All members of the Governance and Nominating Committee meet the Nasdaq independence standards. The purpose of the Governance and Nominating Committee is to ensure that the Board of Directors and its committees are appropriately constituted so that the Board and each director may effectively meet their fiduciary obligations to shareholders and to us. A more detailed discussion of the purposes, duties, and responsibilities of the Governance and Nominating Committee is found in the Committee’s charter which is available by accessing the “Committee of the Board of Directors — Governance and Nominating Committee” menu item at www.nordson.com/corporate/governance.

 

PROPOSAL NO. 1: ELECTION OF DIRECTORS WHOSE TERM EXPIRES IN 2013

 

NOMINEES AND OTHER DIRECTORS

 

Our Regulations require us to have at least nine directors with not less than three directors in each of three classes. The terms of these classes as of the 2010 Annual Meeting will expire in 2011, 2012, and 2013. Each of the directors serves for a term of three years and until a successor is elected.

 

The Governance and Nominating Committee is responsible for identifying and evaluating nominees for director and for recommending to the Board a slate of nominees for election at the Annual Meeting of Shareholders. The Governance and Nominating Committee has recommended to the Board, and the Board has approved, the persons named as nominees for terms expiring in 2013 and, unless otherwise marked, a proxy will be voted for such nominees. Messrs. Carson and Rosen currently serve as directors. Mr. Rosen was last elected by the shareholders at the 2007 Annual Meeting. Mr. Carson was elected as a director by the Board of Directors on April 28, 2009 as a member of the class of directors whose terms expire in 2010. Under our Regulations, a director who is elected by the Board of Directors is required, if nominated, to stand for election at the next regularly scheduled Annual Meeting of Shareholders.

 

The name and age of each of the five nominees for election as directors for terms expiring in 2013, as well as present directors whose terms will continue after the meeting, appear below together with his or her principal occupation for at least the past five years, the year each became a director of the company and certain other information. The information is as of January 16, 2010.

 

Nominees For Terms Expiring in 2013

 

 

Present Directors Whose Terms Expire in 2011

 

 

Present Directors Whose Terms Expire in 2012

 

 

Former director William Colville retired from the Board of Directors on December 8, 2009. Director William Ginn will retire from the Board of Directors effective February 15, 2010. Edward P. Campbell will retire as Chairman of the Board and as a director at the 2010 Annual Meeting of Shareholders. Mr. Keithley will succeed Mr. Campbell as Chairman of the Board. No shareholder or group that beneficially owns 1% or more of our outstanding common shares has recommended a candidate for election as a director at the 2010 Annual Meeting of Shareholders.

 

RECOMMENDATION REGARDING PROPOSAL 1:

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR”
THE DIRECTORS NOMINATED BY THE BOARD.

 

PROXIES RECEIVED BY THE BOARD WILL BE VOTED FOR ALL NOMINEES UNLESS SHAREHOLDERS SPECIFY A CONTRARY VOTE OR DO NOT PROVIDE VOTING INSTRUCTIONS TO THEIR BROKER.

 

Director Compensation

 

Directors who are also our employees do not receive compensation for their services as directors. We structure director compensation to attract and retain qualified non-employee directors and to further align the interests of directors with the interests of our long-term shareholders by linking a substantial portion of their compensation to the performance of our common shares. Following is a description of our compensation program for non-employee directors for fiscal years 2009 and 2010.

 

Determining Director Compensation.  As specified in its Charter, the Governance and Nominating Committee reviews compensation of our directors, as well as our compensation practices for directors, and makes recommendations to the Board regarding these matters. The Committee typically conducts its review and makes its recommendations in September of each year.

 

To assist the Committee in performing these duties, the Governance and Nominating Committee periodically reviews a competitive analysis of non-employee director compensation, including cash retainers and annual equity grants, prepared by an outside consultant. Each component of director compensation is described below.

 

Board Retainer.  For fiscal year 2009, our non-employee directors received an annual cash retainer of $55,000 paid in equal quarterly installments. Effective for fiscal year 2010, the annual cash retainer increases to $70,000. Directors do not receive any meeting or attendance fees.

 

Committee Retainer.  The chairpersons of the Compensation and Governance and Nominating Committees each receive an annual cash retainer of $5,000. The Audit Committee chairperson receives an annual cash retainer of $10,000. The Presiding Director receives an annual cash retainer of $5,000.

 

Equity Grant.  For fiscal year 2009 and pursuant to the Amended and Restated Nordson Corporation 2004 Long-Term Performance Plan, which was approved by the shareholders at the 2008 Annual Meeting, each non-employee director was granted 2,436 restricted common shares. The dollar value of the grant, made at the fair market value of $28.74 per share on the date of grant, is $70,000. For fiscal year 2010, the value of our non-employee directors’ equity grant was increased to $80,000 and the non-employee directors received a grant of 1,456 restricted common shares at the fair market value of $54.96 per share on the date of grant.

 

For retiring directors and directors elected by the Board of Directors or shareholders, the annual restricted share grant will be prorated based on the number of months served in the fiscal year prior to the date of retirement for retiring directors and number of months remaining in the fiscal year for directors elected after the commencement of a fiscal year.

 

Directors may elect to defer receipt of the restricted common shares under the terms of the Directors Deferred Compensation Plan. The election to defer must be made prior to the effective date of the grant and deferral is in the form of restricted share units.

 

The terms of the grant are:

 

 

Deferred Compensation Program.  Under the Directors Deferred Compensation Plan, non-employee directors may elect to defer all or a portion of their annual cash retainer and restricted share grant into a non-qualified, unfunded deferred compensation program. At the election of the director, amounts deferred under the Directors Deferred Compensation Plan will earn a return equivalent to the return on an investment in (i) an interest-bearing account, earning interest based on the 10-year Treasury bill constant maturity rate or (ii) a share equivalent account, earning a return based on our common share price and accruing dividend equivalents. Any restricted share grant that a non-employee director elects to defer is invested into a restricted stock unit account with dividends credited to the directors’ share equivalent unit account. The amounts deferred, dividend equivalents and any appreciation or accrued interest are paid in cash or in our common shares, as applicable, on dates selected by the director. We do not pay above market rates or preferential rates under this deferred compensation plan.

 

Group Medical and Dental Insurance Plan.  Non-employee directors also may elect to participate in the company’s group welfare plan and obtain medical and dental coverage on the same terms as our employees.

 

Charitable Gifts Matching Program for Non-Employee Directors.  Non-employee directors may participate in our employee matching gift program involving contributions of cash or publicly-traded stock made to cultural, educational, social, medical or health-related charitable organizations that are exempt from federal income tax. Ms. Puma, and Messrs. Colville, Hardis, Ignat, Madar, Merriman, Robinson, and Rosen participated in this program. We made contributions totaling $45,050 during fiscal year 2009.

 

Director Compensation Table for Fiscal Year 2009

 

The following table sets forth the total compensation paid to each non-employee director for services provided as a director for fiscal year 2009.

 

 

 

 

 

 

 

 

 

We did not award any stock options to directors in fiscal year 2009. We do not have a non-equity incentive compensation plan for directors nor do we sponsor a defined benefit (pension plan) for directors. Mr. Madar receives a pension benefit as a company retiree. For fiscal year 2009 based on our commitment to Mr. Madar at the time he retired as our president and chief executive officer in 1997, we paid $10,922 in equivalent insurance premiums for health care coverage and $2,466 for reimbursement of Medicare premiums. These payments are not made in consideration of Mr. Madar’s service as a director.

 

PROPOSAL 2: RATIFY THE APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

 

Appointment of Independent Registered Public Accounting Firm for Fiscal Year 2010

 

Ernst & Young LLP served as our independent registered public accounting firm for the fiscal year ended October 31, 2009. In addition to the engagement to audit our financial statements and internal control over financial reporting and to review the financial statements included in our quarterly reports on Form 10-Q, Ernst & Young was also engaged by us during fiscal year 2009 to perform certain audit-related services.

 

The Audit Committee has appointed Ernst & Young to serve as our auditors for the fiscal year ending October 31, 2010. Although shareholder ratification of the appointment of Ernst & Young is not required, the Board of Directors believes that submitting the appointment to our shareholders for ratification is a matter of good corporate governance. If our shareholders do not ratify the appointment of Ernst & Young, the Audit Committee will reconsider the appointment. We expect that a representative of Ernst & Young will be present at the 2010 Annual Meeting to respond to appropriate questions from shareholders and to make a statement if he or she desires to do so.

 

As provided in the Audit Committee’s Charter, the Audit Committee is responsible for directly appointing, retaining, terminating and overseeing our independent registered public accounting firm. While we have a long-standing relationship with Ernst & Young, the Audit Committee continuously evaluates the independence and effectiveness of Ernst & Young and its personnel, and the cost and quality of its audit and audit-related services.

 

Required Vote

 

The affirmative vote of a majority of the shares represented at the 2010 Annual Meeting of Shareholders and entitled to vote on this proposal will be required to ratify the Audit Committee’s appointment of our independent registered public accounting firm. Abstentions will have the effect of a vote against ratification of the appointment of the independent registered public accounting firm.

 

Pre-Approval of Audit and Non-Audit Services

 

At the start of each fiscal year, our Audit Committee pre-approves the audit services, audit-related services and tax services, if any, together with specific details regarding such services anticipated to be required for such fiscal year including, as available, estimated fees. The Audit Committee reviews and, if it deems them appropriate, pre-approves those services. The Audit Committee reviews the services provided to date and actual fees against the estimates, and such fee amounts may be updated for presentation at the regularly scheduled meetings of the Audit Committee. Additional pre-approval is required before actual fees for any service can exceed the originally pre-approved amount. The Audit Committee may also revise the list of pre-approved services and related fees from time to time. All of the services described below under the captions “Audit Fees” and “Audit-Related Fees” with respect to fiscal years 2008 and 2009 were pre-approved in accordance with this policy.

 

If we seek to engage our independent registered public accounting firm for other services that are not considered subject to general pre-approval as described above, then the Audit Committee must approve such specific engagement as well as the estimated fees. Such engagement will be presented to the Audit Committee for pre-approval at its next regularly scheduled meeting. If the timing of the project requires an expedited decision, then we may ask the chairperson of the Audit Committee to pre-approve such engagement. Any such pre-approval by the chairperson is then reported to the full Audit Committee for ratification at the next Audit Committee meeting. In any event, pre-approval of any engagement by the Audit Committee or the chairperson of the Audit Committee is required before our independent registered public accounting firm may commence any engagement. Additional pre-approval is required before any fees can exceed approved fees for any such specifically-approved services.

 

Fees Paid to Ernst & Young LLP

 

The following table shows the fees we paid or accrued for audit and other services provided by Ernst & Young LLP for the fiscal years ended October 31, 2009 and October 31, 2008:

 

 

 

 

RECOMMENDATION REGARDING PROPOSAL 2:

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
“FOR” RATIFICATION OF THE
AUDIT COMMITTEE’S APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING OCTOBER 31, 2010.

 

Security Ownership of Nordson Common Shares by Directors, Executive Officers and Large Beneficial Owners

 

The following table shows the number of Nordson common shares beneficially owned as of December 24, 2009 by each person who was a director as of October 31, 2009, each executive officer named in this proxy statement and by all officers and directors as a group. Each person has sole voting and investment power for all shares shown, unless otherwise noted. No executive officer or director owns more than 4.5% of outstanding Nordson common shares. All executive officers and directors as a group own approximately 8.3% of outstanding Nordson common shares.

 

This beneficial ownership information is based on information furnished by the directors and executive officers. Beneficial ownership is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934 for purposes of this proxy statement and is not necessarily to be construed as beneficial ownership for other purposes.

 

 

 

 

 

Five Percent Beneficial Owners

 

The following table lists each person we know to be an owner of more than 5% of our shares as of December 24, 2009.

 

 

 

 

As of December 24, 2009, our present and former directors, officers and employees and their families beneficially owned approximately 10 million Nordson common shares, representing over 29% of the outstanding shares. We are party to an agreement that, with some exceptions, gives us a right of first

refusal with respect to proposed sales of our common shares by members of the Nord family and The Nord Family Foundation.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and persons who own more than ten percent of our common shares to file reports of ownership and changes in ownership of our common shares held by them with the Securities and Exchange Commission. Copies of these reports must also be provided to us.

 

Based on our review of these reports, we believe that, during the fiscal year ended October 31, 2009, all reports were filed on a timely basis by reporting persons.

 

Share Ownership Guidelines for Non-Employee Directors

 

The Board strongly believes that our non-employee directors should have a meaningful ownership interest in the company and has implemented share ownership guidelines for our non-employee directors. The ownership guidelines require non-employee directors to own a minimum of five times their annual cash retainer in common shares (shares held in the form of stock equivalent units or restricted share units qualify as shares owned under the guidelines). Newly elected directors have five years within which to achieve the share ownership requirement. Our share ownership guidelines may be reviewed by accessing the “Share Ownership Guidelines” menu item at www.nordson.com/corporate/governance.

 

EXECUTIVE COMPENSATION

 

COMPENSATION DISCUSSION AND ANALYSIS

 

This Compensation Discussion and Analysis is presented in four parts:

 

Part I:  Introduction and Executive Summary.  In this section we highlight actions taken by the Compensation Committee during 2009, those actions pertaining to 2010 compensation and our performance results that relate to executive compensation in 2009.

 

Part II:  Components of Our Executive Compensation Program.  In this section we explain our compensation philosophy, compensation process and procedures, components of our compensation program and all elements of the compensation we provide to our named executive officers.

 

Part III:  Analysis of Compensation Decisions for Fiscal Years 2009 and 2010.  In this section we discuss and analyze the reasons why we paid our named executive officers the types of compensation and benefits described for fiscal years 2009 and 2010.

 

Part IV:  Policies Related to Executive Compensation.  In this section we review the policies we have adopted that relate to our executive compensation program — equity grant practices, shareholder ownership guidelines and tax and accounting considerations.

 

We use the terms the “Committee,” “we,” “us,” and “our” interchangeably in reference to the Compensation Committee, or in the proper context, Nordson Corporation. In this Compensation Discussion and Analysis, all references to a year is intended to mean “fiscal year” unless otherwise indicated.

 

This Compensation Discussion and Analysis discloses future company performance targets and goals. You should read and understand these targets and goals only as they relate to our executive compensation program. We are not providing these targets and goals as guidance or as statements of management’s expectations or estimates of our current or future results. We refer you to our Annual Report on Form 10-K for the year ended October 31, 2009 for additional information regarding 2009 financial results discussed in this Compensation Discussion and Analysis.

 

PART I: INTRODUCTION AND EXECUTIVE SUMMARY

 

In this Compensation Discussion and Analysis, we discuss and analyze the compensation we paid to our executive officers and in particular, our named executive officers, during 2009. Our named executive officers during 2009 were:

 

 

Mr. Campbell retired as our President and Chief Executive Officer effective January 15, 2010 and is expected to retire as Chairman of the Board at our 2010 Annual Meeting of Shareholders. Mr. Groos retired on November 30, 2009. Mr. Michael F. Hilton was appointed our President and Chief Executive Officer effective January 16, 2010. Mr. Lambert was promoted to Senior Vice President effective December 1, 2009.

 

Executive Summary — 2009/2010 Compensation Committee Actions and 2009 Financial Performance Related to Executive Compensation

 

Compensation Committee Actions

 

The following actions taken by the Committee for 2009 and 2010 relate to the compensation of our named executive officers:

 

2009 Actions:

 

 

 

2010 Actions:

 

 

2009 Financial Performance Related to Executive Compensation

 

We incurred $16.4 million in restructuring and other charges as we attempted to better align our organization and cost structure with economic conditions. The price of our common stock increased 43% in 2009, from a $36.93 closing price on October 31, 2008 to a $52.77 closing price on October 31, 2009.

 

However, our performance in 2009 was substantially impacted by the global recession, as reflected in our earnings per share and return on equity results:

 

 

PART II: COMPONENTS OF OUR EXECUTIVE COMPENSATION PROGRAM

 

The following is a brief overview of the topics that we discuss in detail in this part of the Compensation Discussion and Analysis:

 

 

Philosophy and Objectives of our Executive Compensation Program

 

Our executive compensation program philosophy is that we should pay our named executive officers for their work on our behalf in ways that align their personal financial interests with the interests of our long-term shareholders, with a specific focus on “paying for performance.” To us, paying for performance means that we pay our named executive officers different types and amounts of compensation based on their successful implementation of our strategic objectives and the degree to which our annual operational and financial objectives are achieved. By basing executive pay primarily on the achievement of these corporate objectives, we establish a direct link between executive compensation and the interests of our long-term shareholders.

 

The following objectives provide the framework supporting our philosophy:

 

 

Compensation Process and Procedures

 

Role of the Compensation Committee

 

We have primary responsibility for designing our executive compensation program and for making compensation decisions under the program. In fulfilling our duties and responsibilities, each year we seek input, advice and recommendations from an executive compensation consultant retained by us as well as recommendations from our Chief Executive Officer on the compensation and performance of our executive officers.

 

Mercer, our compensation consultant, provides us with benchmark data with respect to all elements of an executive officer’s total direct compensation: base salary, annual cash incentive compensation, and long-term equity-based incentive compensation. Included as benchmark data are longer-term reviews of our performance and compensation paid to our executive officers compared to that of our peer group. It is our practice to set performance goals that will be retained through a complete ten-year business cycle, not just for periods of one or three years. Therefore, it is expected that positioning of target performance levels relative to actual peer company performance will vary through a business cycle.

 

However, we are not bound by the input, advice or recommendations we receive from Mercer or from our Chief Executive Officer. Instead, we at all times exercise independent judgment in making executive compensation decisions. We meet in executive session to determine all elements of the Chief Executive

Officer’s total compensation — base salary, annual incentive compensation, and long-term equity-based incentives. Our Chief Executive Officer does not offer us any recommendations for his compensation.

 

Role of the Compensation Consultant

 

Under our charter, we have the authority to retain outside consultants or advisors as we deem necessary to provide desired expertise and counsel. Since 2005, the Committee has engaged Mercer as its outside executive compensation consultant to provide information, analysis, and advice regarding executive compensation, as described below. Mercer is a subsidiary of Marsh & McLennan Companies, Inc. (“Marsh & McLennan”), a global professional services firm providing advice in the areas of risk, strategy and human capital. As disclosed earlier in this proxy statement, director Stephen Hardis is a director of Marsh & McLennan.

 

The lead consultant from Mercer reports directly and exclusively to us and provides objective support based on his expertise regarding current and emerging best practices with regard to executive compensation. Specifically, we ask Mercer to collect and analyze proxy data for our peer group, which is a term we use to describe a particular group of companies having revenues ranging in size from approximately one-half to two times our revenue, manufacture value-added industrial products and have a significant portion of their business located or transacted internationally. While no single company in our peer group competes with us across all of our businesses, we believe that our peer companies as a group operate in markets and compete for executive talent in a manner sufficiently similar to us to make compensation and performance comparison relevant. As a result, our peer group is an appropriate group of companies against which we can establish performance goals, evaluate performance and establish compensation. We provide more detailed information about Mercer’s instructions, responsibilities, processes and interaction with us in 2009 under the discussion of how we determined executive compensation for 2009 later in this Compensation Discussion and Analysis.

 

During 2009, Mercer received $106,612 for its services as our executive compensation consultant. We also engage Mercer to provide compensation benchmarking advice regarding our directors’ compensation program. The Company engages Mercer to provide non-customized compensation surveys for some of our international subsidiaries. Mercer received approximately $36,190 for these services during 2009. The Company also engaged other affiliate organizations of Marsh to provide investment advisory services with respect to our U.S. pension and 401(k) retirement plans and brokerage services for the casualty insurance portion of our risk management and insurance program. Marsh and its affiliates received $418,850 for these services.

 

We have reviewed Mercer’s engagement and determined that these services do not constitute a conflict of interest or prevent Mercer from being objective in the work Mercer performs for us related to executive compensation. Other than providing the services described above and the work performed in its role as the executive compensation consultant, Mercer provided no other services to the Company in 2009.

 

Role of Executive Officers

 

Our Chief Executive Officer and Vice President, Human Resources review Mercer’s analyses and assessments, develop initial recommendations for base salary adjustments and incentive compensation for our named executive officers (other than our Chief Executive Officer) for the next fiscal year, and present management’s initial recommendations to the Committee. More specifically, our Chief Executive Officer and

Vice President, Human Resources have the following roles in preparing management’s initial recommendations for the Committee:

 

 

With respect to the assessment of executive officers’ performance, at the beginning of each fiscal year, our executive officers provide our Chief Executive Officer with a list of their individual goals and objectives for the upcoming year. For executive officers in charge of one of our operating segments, their individual goals include elements of corporate financial performance and operating measures such as segment revenue growth and operating income. Our Chief Executive Officer approves these individual objectives at the beginning of the fiscal year, and then reviews them at the end of the fiscal year in order to determine whether to recommend an adjustment to an individual executive officer’s payout under the annual cash incentive compensation program.

 

We review any recommendations of our Chief Executive Officer regarding adjustments to payouts under the annual incentive compensation program and discuss them with Mercer. We believe that this review helps ensure that our Chief Executive Officer’s compensation recommendations are in line with the executive compensation program’s stated philosophy and objectives, and are reasonable when compared to our competitive market.

 

COMPONENTS OF OUR EXECUTIVE COMPENSATION PROGRAM TABLE

 

Compensation of our named executive officers consists principally of the elements identified in the following summary table:

 

 

 

 

We eliminated the country club membership reimbursement perquisite effective with Mr. Campbell’s retirement, and car allowance perquisite effective with the 2010 compensation program.

 

Elements of Executive Compensation — Base Salary, Short- and Long-Term Incentives and Perquisites

 

Our total direct compensation program was designed to correlate pay and performance such that performance at any percentile level of peer group performance, determined over a ten-year period, would result in total direct compensation (base salary + target annual incentive compensation + long term incentive awards) at the same percentile of peer group compensation for comparable positions.

 

In line with our “paying for performance” philosophy, our executive compensation program is designed to allocate a greater proportion of our named executive officers’ total compensation (as compared to that for other employees) to elements that are based on both short-term and long-term corporate performance. Each of the performance-based elements of compensation within those categories is directly tied to appreciation of our share price and/or to significant financial and operational performance goals. More than one-half of the targeted total compensation for our executive officers is incentive-based and may significantly fluctuate from year to year based on our financial, operational and share performance.

 

Base Salary

 

We pay base salaries to our named executive officers to recognize and reward their experience, expertise, level of responsibility, seniority, leadership qualities, advancement, individual accomplishment, and other significant contributions to the enhancement of shareholder value and our success.

 

We review annually, but do not necessarily increase, the base salaries of our named executive officers and will typically consider the responsibilities, performance and experience of the executive officer; base salaries of comparable officers at peer companies; and the recommendations of our Chief Executive Officer for all named executive officers other than himself.

 

Short-Term Incentive

 

We pay annual incentive compensation in the form of a cash bonus in support of our philosophy of paying for performance. Our named executive officers earn annual cash incentive compensation only when we satisfy key performance criteria that are aligned with the investment interests of our long-term shareholders. When

we achieve our performance goals, our shareholders should benefit in terms of their investment, and our named executive officers benefit by receiving annual incentive compensation. By tying annual incentive compensation achievement to the achievement of specific performance goals, we view this portion of the named executive officers’ compensation as significantly variable and as a way to balance our short-term and long-term objectives. The annual cash incentive component of our compensation program also supports our core objective of providing total compensation opportunities to our named executive officers that are competitive within our talent market and help us attract and retain outstanding executive talent.

 

Awards are based on achievement of specific performance goals, and the responsibilities, individual performance and contribution of the recipient. In our judgment, annual performance targets are set with sufficient difficulty to produce performance above the median level with the intent of our shareholders receiving an above-average return on our investment in executive compensation.

 

Long-Term Incentives

 

We pay long-term incentive compensation to also help fulfill our philosophy of paying for performance. Long-term incentive awards are also intended to reinforce the importance of building value for our long-term shareholders. As with our annual cash incentive compensation, our named executive officers earn long-term incentive compensation only when we satisfy key performance criteria that are aligned with the investment interests of our long-term shareholders and/or our share price increases. Due to this variable form of compensation, when we achieve our long-term performance goals, our shareholders should benefit in terms of their investment, and our named executive officers will benefit by receiving their long-term incentive compensation. The long-term incentive component of our compensation program also supports our core principle of providing total compensation opportunities to our named executive officers that are competitive within our talent market and help us attract and retain outstanding executive talent.

 

Our long-term incentive compensation consists of a performance share opportunity and stock options. The three-year performance period measures we use and the goals we set for the performance share opportunity are based on our long-term strategic objectives. Performance share awards and stock options work together to align the long-term financial interests of our executive officers with those of our long-term shareholders. In general, we base the target amount of the long-term incentive awards and the number of stock options granted to our named executive officers on similar compensation for persons holding comparable positions within our peer group, as reflected in Mercer’s annual peer group analysis and assessment.

 

We allocate approximately 50% of the total target value of each named executive officer’s long-term incentive compensation to stock options and approximately 50% to the performance share opportunity. We take this approach to balance the allocation between performance shares, which are earned based on long-term financial, operational and strategic measures, and stock options, the value of which is based on long-term performance of our common shares. We do not allocate an unbalanced percentage to stock options to avoid any appearance that the executive compensation program is a positive or negative indicator of current common share value or anticipated common share performance.

 

Stock options are rights to purchase a specified number of shares of our common stock at a pre-determined price. Stock options provide a return to the recipient only if our share price increases. Because we fix the exercise price of an option (the price at which the shares may be purchased) at the fair market value on the grant date, an option becomes more valuable as the price of our common shares increases. Alternatively, an executive officer will not receive any value from a stock option if the price of our common shares decreases below the exercise price of the option. Therefore, stock option grants are intended to focus management’s attention on long-term stock price appreciation. Stock options are also a valuable retention tool because our option grants vest over a period of time and, with a few limited exceptions, unvested options are forfeited if an executive officer’s employment terminates.

 

We make equity grants on a consistent schedule and do not grant long-term incentive awards or stock options to our executive officers in anticipation of the release of significant positive earnings announcements or other material non-public information likely to result in changes to the price of our common shares. Similarly, we do not time the release of material non-public information based on stock option grant dates.

The grants are subject to (i) profit disgorgement provisions (commonly known as a “clawback”) when an executive officer acts inconsistently with the non-compete provision of his or her employee agreement following termination of employment, or (ii) forfeiture in the event an executive officer’s employment is terminated due to a criminal act, fraud or other such behavior inconsistent with our Code of Business and Ethical Conduct. The invoking of the clawback or forfeiture provision is solely at our discretion. To date, we have not had the need to exercise our discretion in seeking profit disgorgement or forfeiture from any former executive officer.

 

The total compensation mix for our named executive officers is consistent with the mix of compensation elements within our peer group. Our Chief Executive Officer receives a higher proportion of his total compensation allocated to performance-based components than non-performance-based components, and more allocated to equity-based compensation than cash-based compensation compared to our other named executive officers. This compensation mix approach is consistent with that used for chief executive officers within our peer group.

 

Executive Perquisites

 

We provide various perquisites to each of our named executive officers to promote the business objectives facilitated by each perquisite described below and to reward our named executive officers for their experience, expertise, level of responsibility, seniority, leadership qualities and advancement. We also use these perquisites to help ensure that our executive compensation program remains competitive to help us attract and retain top executive talent.

 

Private Clubs.  We reimbursed Mr. Campbell for expenses associated with private country and business club memberships. We provided these memberships to encourage entertainment of business colleagues and customers, engaging in social interaction with peers from other companies, local leadership in the community and holding business meetings at offsite locations. In addition, we provide all executive officers with memberships to airline travel clubs that allow them to be more productive when traveling on commercial airlines. We decided to eliminate the country club membership expense reimbursement perquisite effective with Mr. Campbell’s retirement.

 

Financial, Estate, and Tax Planning and Tax Preparation.  We pay or reimburse our executive officers for financial, estate and tax planning and tax preparation fees and expenses. The maximum reimbursement is $5,000 per calendar year. We provide this perquisite to assist our executive officers in obtaining high-quality financial counseling enabling them to concentrate on business matters rather than on personal financial planning.

 

Executive Physicals.  We pay for annual physicals for U.S.-based executive officers. We provide this perquisite as part of the overall preventive medicine program to help promptly identify and address medical issues and to preserve our investment in our executive officers by encouraging them to maintain healthy lifestyles and be proactive in addressing actual or potential health issues.

 

Automobiles.  We do not provide company cars to executive officers, except for Mr. Groos, and do not reimburse for business mileage driven by executive officers. Instead, we provide executive officers a car allowance. We have eliminated the car allowance perquisite effective with the 2010 compensation program.

 

Attributed costs of these perquisites for our named executive officers during 2009 are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2009. We do not gross up taxes levied on executive perquisites.

 

Elements of Executive Compensation — Welfare and Retirement Benefits

 

Medical, Disability and Life Insurance Benefits

 

We sponsor a health care plan for U.S.-based employees that provides medical, vision and dental insurance and prescription drug coverage. We also offer group life insurance and short- and long-term disability plans

that cover all U.S. non-union employees. Mr. Groos’ welfare benefits were mandated by German social law and include health insurance and participation in statutory social security and pension plans.

 

Retirement Benefits

 

401(k) Plan.  We sponsor a 401(k) tax-qualified retirement savings plan for U.S.-based employees. All of our U.S.-based employees are eligible to participate in the 401(k) plan immediately upon employment. Our executive officers participate in the 401(k) plan on the same basis as other employees.

 

We match employee contributions $0.50 on the dollar for the first 6% of contributed compensation. We believe the matching contribution helps us compete effectively for management talent because many other companies offer a similar benefit. Employee contributions to the 401(k) plan vest immediately, while matching contributions vest in increments based on years of service, with participants being fully vested after three years of service. In 2009, we did not suspend this company-matching feature of the plan in response to the global economic recession.

 

As an employee of Nordson Deutschland GmbH, Mr. Groos did not participate in the 401(k) plan. Instead, Mr. Groos participated in a pension plan sponsored by Nordson Deutschland GmbH, which is described in the narrative to the “Pension Benefits for Fiscal Year 2009” table in this proxy statement. The amounts of our matching contributions to the 401(k) accounts of our named executive officers are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2009 in this proxy statement.

 

Deferred Compensation Plan.  We sponsor a non-qualified, unfunded and unsecured deferred compensation plan for U.S.-based executive officers. We believe this type of plan helps us compete effectively for executive talent because many other companies offer this type of plan.

 

A detailed description of our current and historical deferred compensation plans and information regarding contributions to those plans is provided in the “Non-Qualified Deferred Compensation for Fiscal Year 2009” table and the accompanying narrative and footnotes in this proxy statement.

 

Defined Benefit Pension Plan.  We sponsor a tax-qualified pension plan for U.S.-based salaried employees — the Nordson Corporation Salaried Employees Pension Plan. The pension plan is designed to work together with social security benefits to provide employees with 30 years of service retirement income that is approximately 55% of eligible compensation, subject to the Internal Revenue Service maximum monthly benefit.

 

For employees of our international subsidiaries, we provide pension or retirement benefits in accordance with local statutory requirements or practice. A detailed description of our pension plans for U.S.-based employees is provided in the narrative and footnotes to the “Pension Benefits for Fiscal Year 2009” table in this proxy statement.

 

Excess Defined Benefit Pension Plan.  This plan is an unfunded, non-qualified plan that provides benefits similar to the qualified defined benefit pension plan, but without the Internal Revenue Code earnings limitations. This plan is designed to provide retirement benefits to U.S.-based eligible participants as a replacement for those retirement benefits reduced by regulations under the Internal Revenue Code. Together, the pension plan and excess defined benefit pension plan are intended to provide executive officers with retirement income equivalent to that provided to all other employees under the pension plan.

 

As part of the incentive for Mr. Campbell to leave his former employer, we agreed to provide him with supplemental pension benefits in order to restore some of the benefits he would have received if he had remained with his former employer. Mr. Campbell is a participant in the pension plan, but his benefits were supplemented to recognize his prior service with his former employer. His “average annual compensation” will be determined as the average of his compensation during his 36 consecutive highest paid months (instead of 60), and he is eligible for the full pension benefit having reached age 60 on December 31, 2009. His benefit will also be reduced by the amount of any pension benefit payment he receives from the pension plan of his former employer. Mr. Campbell had eleven years of employment with his former employer. The value of this supplemental benefit is included in the “Pension Benefits for Fiscal Year 2009” table of this proxy statement.

Mr. Groos participated in a supplemental pension plan sponsored by Nordson Deutschland GmbH as part of his employment agreement with Nordson Deutschland GmbH. Under the terms of the plan, Nordson Deutschland GmbH agreed to accelerate Mr. Groos’ age 65 normal retirement date by one-half year for each year Mr. Groos remains employed beyond age 50. Therefore, upon reaching age 60 while an employee, Mr. Groos would have been be entitled to retire with an age 65 pension benefit. The Committee approved the plan in order to retain Mr. Groos’ services through age 60. Having retired effective November 30, 2009 at age 58, Mr. Groos is being provided an age 64 supplemental pension benefit.

 

Change-in-Control Retention Agreements

 

We believe that the occurrence, or potential occurrence, of a change-in-control transaction in which we are the target could create substantial uncertainty regarding the continued employment of our executive officers. In order to attract and retain top executive talent, we believe that we should agree to provide certain benefits and compensation if an executive officer’s employment or service is terminated without cause in connection with a change-in-control.

 

Upon the occurrence of a change-in-control, outstanding stock option grants to executive officers vest immediately, as do any restrictions on share grants in effect on the date of a change-in-control. We believe that the acceleration of vesting for outstanding stock options and restricted shares is appropriate because, depending on the structure of a change-in-control transaction, continuing such awards may unnecessarily complicate a potentially beneficial transaction and it may not be possible to replace such awards with comparable awards of the acquiring company’s stock. We also believe that it would not be fair to executives to lose the benefit of these outstanding awards. The accelerated vesting also provides our executive officers and employee option holders with the same opportunities as our other shareholders who are free to realize the value created at the time of the transaction by selling their shares. We believe that accelerating these equity awards upon a change-in-control is appropriate to (i) minimize the risk that executive officers might favor a transaction based on the likely impact on the executive officer’s equity awards, (ii) increase the likelihood that executive officers will remain with us after becoming aware of a pending or threatened change-in-control, and (iii) address the increased likelihood that executives may be terminated by a successor through no fault of their own.

 

We believe that a termination by the executive for good reason in connection with a change-in-control transaction may be conceptually the same as a termination by us without cause in certain circumstances. Recognizing that, in the context of a change-in-control, potential acquirers would otherwise have an incentive to constructively terminate our named executive officers’ employment to avoid paying severance, we believe it is appropriate to provide severance benefits in these circumstances as well. In the event of a change-in-control, a named executive officer is entitled to be grossed-up (reimbursed) for any excise taxes imposed on the change-in-control benefits by federal income tax laws. We believe that the mitigation of the cost of excise taxes for our executive officers is necessary to preserve the benefits they are entitled to. This approach protects the value of compensation already awarded to the executive officers, and eliminates any potential personal bias against a change-in-control transaction.

 

We believe our change-in-control policy is consistent with that of companies disclosing such provisions as reported in public filings and as periodically reported in various surveys and, accordingly allows us to be competitive in this aspect of our compensation program. We consider the benefits offered under the retention agreements to be reasonable and appropriate for executive officers who may not be in a position to obtain readily comparable employment. We do not believe that named executive officers should be entitled to receive cash severance benefits merely because a change-in-control transaction occurs. The payment of cash severance benefits is only triggered by an actual or constructive termination of employment.

 

PART III: ANALYSIS OF COMPENSATION DECISIONS FOR FISCAL YEARS 2009 AND 2010

 

2009 Compensation Actions

 

Initial Process and Considerations

 

We provided Mercer with preliminary instructions regarding the objectives of the 2009 executive compensation program and the scope of the competitive review of executive total direct compensation programs to be conducted by Mercer. In particular, we instructed Mercer to:

 

 

Benchmarking

 

Our peer group for 2009 executive compensation decisions consisted of:

 

 

We are positioned between the 25^th percentile and the median in terms of revenue size, and approximately the median in terms of market value.

 

Primary Compensation Allocation

 

Mercer provided the Committee with benchmark data with respect to all elements of an executive officer’s total direct compensation: base salary, annual cash incentive compensation, and long-term equity-based incentive compensation. Included as benchmark data are longer-term reviews of our performance and compensation paid to our executive officers compared to that of our peer group.

 

The target total direct compensation for each named executive officer was set such that if we performed at the 65th percentile of our peer group, each named executive officer’s total direct compensation would equal approximately the 65th percentile of our peer group’s total target direct compensation for executive officers with comparable responsibilities. We chose this benchmark because our performance targets were

estimated to be at the 65th percentile of the peer group performance over a business cycle, based on an analysis of 10 years of peer group performance.

 

For 2009, the allocation among the elements of compensation for both target compensation and actual compensation earned supported our principles that: (i) a significant amount of pay should be variable, (ii) realized compensation should be significantly tied to performance, and (iii) the economic interests of our executives should be aligned with our shareholders.

 

The following table summarizes the allocation by compensation element as a percentage of total direct compensation among the primary elements of compensation for each of our named executive officers for 2009:

 

 

Base Salary

 

For base salary, we followed Mercer’s recommendation to set base salary for each named executive officer at approximately the median of his comparable position within our peer group or salaries for similar positions at similarly-sized companies using salary survey data.

 

As previously discussed in the “Executive Summary — 2009/2010 Compensation Committee Actions and 2009 Financial Performance Related to Executive Compensation” section of this Compensation Discussion and Analysis, Mr. Campbell recommended rescinding executive officer base salary increases approved by us on December 4, 2008 and prospectively freezing base salaries at 2008 levels. We concurred with Mr. Campbell’s recommendation during our December 10, 2008 meeting and took action to implement Mr. Campbell’s recommendation. The following table illustrates the December 4, 2008 Committee-approved base salaries and actual salaries earned by our named executive officers after the base salary freeze was prospectively implemented:

 

 

 

 

Annual Incentive Compensation

 

We establish the target annual cash incentive compensation opportunity as a percentage of base salary. The target annual cash incentive compensation opportunity for our named executive officers as a percentage of their base salaries were as follows:

 

 

We established two performance measures by which to measure annual cash incentive compensation targets and payouts: diluted earnings per share growth and return on capital. We consider earnings per share

growth and return on capital to be performance measures critical to our financial performance and profitable growth because each of these measures offers the proper balance between growth and profitability. As a result, we have weighted each performance measure evenly in terms of determining annual cash incentive compensation payouts. More specifically:

 

 

We believe the choice of these performance measures aligns the interests of our named executive officers with those of our shareholders because achieving greater return on capital and earnings per share growth over time will drive improved shareholder return and foster maximum value for our assets.

 

Threshold, target and maximum quantitative performance levels for each performance measure for 2009 were:

 

 

For the diluted earnings per share performance measure, the corresponding diluted earnings per share levels were: threshold — $3.43 per share; target — $3.77 per share; and maximum — $4.12 per share.

 

Concurrent with Mr. Campbell’s recommendation to us that we freeze executive officer base salaries Mr. Campbell also confirmed to us that the executive officers would forgo any payouts under the annual cash incentive opportunity, regardless if the performance measures for payout had been achieved in 2009. We concurred with Mr. Campbell’s recommendation and approved this commitment of the executive officers. Actual performance for the diluted earnings per share performance and return on capital performance measure was negative, reflecting the effect of impairment charges for the impairment of goodwill and other long-live intangible assets.

 

The following table sets forth information for 2009 annual cash incentive compensation for each of our named executive officers: potential payout for achievement of each performance measure at threshold, target and maximum levels; corporate performance as a multiple of target level; actual payout as a percentage of target annual cash incentive compensation opportunity; and actual payout (rounded to the nearest thousand dollars):

 

 

 

 

Long-Term Incentive Compensation

 

Long-Term Incentive Plan

 

2007-2009 Performance Period.  We established the following threshold, target, and maximum cumulative earnings per share growth and cumulative revenue growth performance measures for the 2007-2009 performance period:

 

 

For the cumulative earnings per share growth measure, the corresponding cumulative earnings per share levels are: threshold — $8.77 per share; target — $9.20 per share; and maximum — $10.39 per share. For the cumulative revenue growth measure, the corresponding revenue levels are: threshold — $2,973,200,000; target — $3,119,400,000; and maximum — $3,522,000,000.

 

These measures were chosen because they offer a balance between growth in the size of the company, as measured by revenue and profitable growth. As a result, we weighted each performance measure evenly in terms of determining 2007-2009 performance period payouts. More specifically,

 

 

We believe these two measures together align the interests of our named executive officers with those of our shareholders because achieving sustained earnings per share growth and revenue growth over time will drive improved shareholder return and foster maximum value for our assets.

 

Concurrent with Mr. Campbell’s recommendation to us that we freeze executive officer base salariesy, Mr. Campbell also confirmed to us that the executive officers would forgo any payouts under the long-term incentive plan opportunity, regardless if the performance measures for payout had been achieved in 2009. We concurred with Mr. Campbell’s recommendation and approved this commitment of the executive officers.

 

The following table sets forth information for the 2007-2009 performance period for each of our named executive officers: potential payout (in number of share units) at threshold, target and maximum levels; corporate performance as a multiple of the target level; and actual payouts (rounded to the nearest whole share):

 

Stock Options

 

We relied upon Mercer’s annual analysis and assessment to set the target dollar values of long-term incentives at the 65th percentile of similar compensation awarded by the peer group. We set the value of stock options to be granted at approximately 50% of the value of total long-term incentives granted to each named executive officer, with the other 50% being granted in the form of performance shares.

 

With that principle in mind, we granted stock options for 2009 to our named executive officers at our December 4, 2008 meeting, at the same time we granted options to other key employees under our Key Employee Stock Option Program. We chose to grant stock options at our December 4, 2008 meeting because we have historically granted stock options during this meeting, which is scheduled annually at this time to deal with year-end compensation matters and to set compensation and performance goals for the next year.

 

The options granted to our named executive officers in 2009 expire in ten years; have an exercise price equal to the closing price of our common shares on the grant date; and vest in 25% increments in each of the four years following the grant date.

 

The following table provides the number of stock options granted to our named executive officers in 2009:

 

 

 

 

Mr. Campbell’s Compensation

 

On December 4, 2008, we approved a 2009 base salary increase of 3.27% for Mr. Campbell. As with other executive officers, we concurred with Mr. Campbell’s recommendation during our December 10, 2008 meeting and took action to rescind prospectively Mr. Campbell’s 2009 base salary increase.

 

Mr. Campbell’s total direct compensation for 2009 was approximately 62.2% less than his total direct compensation for the prior fiscal year. Despite the fact that Mr. Campbell’s individual performance during the year was strong, we felt that these reductions were appropriate and consistent with the principle of linking pay to performance after taking into account the company’s performance discussed above.

 

We also awarded Mr. Campbell options to purchase 92,000 shares of our common stock. This award was made as part of our usual practice of issuing long-term incentive awards in the first quarter following the end of the previous year. We made these awards after taking into consideration the responsibilities of Mr. Campbell as Chief Executive Officer, the number of unvested options and options that had exercise prices above the market price for our stock and Mr. Campbell’s individual performance.

 

2009 Realized Compensation

 

The increasing complexity of the standards of financial accounting and reporting related to equity-based executive compensation has made it difficult for investors to distinguish the compensation opportunities that we have provided to our named executive officers from the compensation that is actually realized by our named executive officers. We have provided below an additional compensation table for purposes of demonstrating the difference between compensation for 2009 as reported in the Summary Compensation Table for Fiscal Year 2009 of this proxy statement and compensation actually realized by our named executive

officers in 2009. The table below differs substantially from the Summary Compensation Table for Fiscal Year 2009, is not a substitute for that table and shows the compensation realized by each of our named executive officers for 2009, including:

 

 

For purposes of this table, “total direct compensation” means base salary, annual cash incentive and compensation provided under our Long-Term Incentive Plan and excludes the stock option grant element of our executive compensation program. The realized value of stock options exercised during 2009 is recognized and included in the calculation of total realized compensation during 2009.

 

 

 

 

Largely due to our performance in 2009, the total direct compensation realized by our named executive officers in 2009 was significantly below the target total direct compensation opportunity that we established at the beginning of the year as demonstrated in the above table — from 30% to 51% below target total direct compensation opportunity for 2009, respectively. This outcome resulted from a zero payout under the annual incentive plan and the long-term incentive plan. An example of the difference between the 2009 realized compensation in the table above and compensation reported in the Summary Compensation Table for Fiscal Year 2009 is demonstrated by the difference in Mr. Campbell’s total 2009 compensation presented in the table above – $1,236,880 - and his total 2009 compensation presented in the Summary Compensation Table for Fiscal Year 2009 - $6,208,343.

 

Unlike this 2009 Realized Compensation table, the Summary Compensation Table for Fiscal Year 2009 includes compensation amounts based on the change in the actuarial present value of accumulated pension benefits during the fiscal years shown. This 2009 Realized Compensation table excludes those amounts because we consider pension benefits in the context of our periodic assessment of the overall retirement benefit plan design and not as an element of our annual compensation decisions. Also, unlike the Summary Compensation Table for Fiscal Year 2009, this 2009 Realized Compensation table excludes the effect of expense accounting disclosure rules for equity grants that is discussed in the footnotes to the Summary Compensation Table for Fiscal Year 2009.

 

2010 Compensation Actions

 

The target total direct compensation for each named executive officer was set such that if we performed at the 50th percentile of our peer group, each named executive officer’s total direct compensation would equal approximately the 50th percentile of our peer groups’ total target direct compensation for executive officers with comparable responsibilities.

 

At our December 3, 2009 meeting, we established 2010 base salaries and incentive compensation targets. The base salary increases set for the named executive officers range from 3.3% to 18.6%.

 

We also established performance targets for the annual incentive plan. As was the case in 2009, the measures are return on capital and diluted earnings per share growth:

 

 

We revised our method for calculating return on capital for 2010 due to the impact of the $243 million impairment charge for goodwill and other long-lived intangible assets we incurred in 2009, which rendered the previously employed methodology for calculating return on capital no longer appropriate. Under this revised method, a capital charge is applied to unamortized goodwill associated with acquisitions occurring subsequent to 2009, and capital is net of cash, marketable securities and such post-2009 unamortized goodwill. For the diluted earnings per share performance measure, the corresponding diluted earnings per share levels are: threshold — $2.31 per share; target — $2.51 per share; and maximum — $2.74 per share.

 

For 2010, and in light of our historical performance, although attainment of threshold performance level is uncertain, it can reasonably be anticipated that threshold performance may be achieved for 2010, while the target and maximum levels represent increasingly challenging and aggressive levels of performance. To provide further context, we achieved the following annual cash incentive compensation results during the past three years: for return on capital, target performance in 2007, maximum performance in 2008 and below threshold for 2009; and for earnings per share growth, slightly above target performance in 2007, maximum performance in 2008 and below threshold for 2009.

We also established the following threshold, target, and maximum cumulative earnings per share growth and cumulative revenue growth performance measures for the 2010-2012 Long-Term Incentive Plan performance period:

 

 

For the cumulative earnings per share growth measure, the corresponding cumulative earnings per share levels are: threshold — $7.50 per share; target — $8.10 per share; and maximum — $9.06 per share. For the cumulative revenue growth measure, the corresponding revenue levels are: threshold — $2,712,000,000; target — $2,845,000,000; and maximum — $3,212,000,000.

 

Employment Agreement with Mr. Hilton

 

Upon our recommendation, which was approved by the Board of Directors, we entered into an employment agreement with Mr. Michael F. Hilton wherein Mr. Hilton became our President and Chief Executive Officer effective January 16, 2010. Set forth below is a description of the material terms of the agreement:

 

Base Salary.  An annual base salary of not less than $675,000.

 

Annual Cash Bonus.  An opportunity to earn an annual cash bonus based upon participation in our senior management annual cash incentive plan as it may or may not exist from time to time with Mr. Hilton’s target bonus opportunity being equal to 90% of his base salary. For fiscal year 2010, Mr. Hilton is guaranteed an incentive payment of not less than ninety percent (90%) of the base salary he earns in fiscal year 2010.

 

Initial Equity Grant.  Contemporaneous with the effective date of the agreement, we granted Mr. Hilton a restricted share award equal to $210,000 determined by dividing $210,000 by the closing price of our common shares on January 16, 2010 in accordance with our rules governing restricted share awards. Shares may not be transferred or pledged until three years after the grant date, and are subject to forfeiture in the event of a voluntary termination of employment or termination of employment for cause prior to such date.

 

Long-Term Incentives.  On January 16, 2010, Mr. Hilton received an award of (i) nonqualified options equal to $750,000 (the number of shares in the grant to be determined under the Black-Scholes valuation methodology), and (ii) for Mr. Hilton’s participation in our 2010-2012 Long-Term Incentive Plan, performance share units equal to $750,000 (as determined using the closing share price of our common shares on the effective date). Payout under the plan is based upon the achievement of performance objectives established previously by us for the 2010-2012 performance period.

 

Relocation Benefits.  In addition to relocation benefits afforded in accordance with our standard relocation assistance program, we will reimburse Mr. Hilton for any cash loss on the sale of his primary residence (determined as of the time of sale) up to a maximum of $500,000. Any cash loss shall be determined based upon the purchase price of Mr. Hilton’s primary residence plus the cost of any capital improvements to the residence that qualify for addition to the tax basis of the residence.

 

Other Benefits.  Other benefits include paid-time off, participation in our health and welfare plans, life insurance, 401(k) retirement investment plan, disability benefit plans and, to the extent we provide them to other executive officers generally, financial, tax and estate planning services and annual physical exams as discussed previously under “Executive Perquisites” and “Elements of Executive Compensation — Welfare and Retirement Benefits.”

 

Legal Expenses.  We will reimburse Mr. Hilton for reasonable legal expenses and attorneys’ fees incurred by him in connection with the review of the agreement, up to a maximum of $15,000.

 

Supplemental Pension Benefit.  We established and provided to Mr. Hilton an individual nonqualified pension benefit that treats Mr. Hilton as if he were fully vested in the Nordson Corporation Salaried Employees Pension Plan, solely in the event that Mr. Hilton experiences a termination due to death, disability, or without cause, or resignation with good reason (whether or not in connection with a change-in-control), as those

terms are defined in the agreement, prior to becoming one hundred percent (100%) vested in the Nordson Corporation Salaried Employees Pension Plan. Once Mr. Hilton has accrued sufficient service to be fully vested in the Nordson Corporation Salaried Employees Pension Plan, we will have no obligation to provide this supplemental individual pension benefit.

 

Post-Termination Payments.  Upon a termination by us without substantial cause or by Mr. Hilton for good reason, then in addition to payment of any accrued and unpaid compensation and benefits, Mr. Hilton is entitled to post-termination payments and benefits as follows:

 

(a) an amount equal to (i) two times his annual base salary at the rate in effect on the date of termination, plus (ii) an amount equal to two times the greater of: (x) 90% of his annual base salary, or (y) his target bonus payable in fiscal year 2010;

 

(b) a prorated amount of his annual bonus for such fiscal year based upon actual performance in such fiscal year, as determined at the end of the applicable performance period;

 

(c) a prorata payout of awards granted Mr. Hilton under the Long-Term Performance Plan for any performance period(s) not completed on the date of termination, based upon actual performance in each such applicable performance period, as determined at the end of the applicable performance period;

 

(d) full vesting in his benefit under the supplemental individual pension benefit and expiration of any restrictions on transfer of the initial equity grant or subsequent restricted common share grants; and

 

(e) continuation of health care and welfare benefits for a period of 24 months following the date of termination.

 

Tax Gross-Ups.  The agreement does not provide for tax gross-ups of any payment received by Mr. Hilton under the agreement.

 

Change-in-Control Retention Agreement.  Mr. Hilton signed a Change-in-Control Retention Agreement as described earlier in this Compensation Discussion and Analysis, effective January 16, 2010.

 

PART IV: POLICIES RELATED TO EXECUTIVE COMPENSATION

 

Equity Grant Policy

 

It is our policy that neither we nor members of our management team will backdate or manipulate any equity awards, or manipulate the timing of public releases of material information or equity awards with the intent of benefiting any award recipient. We believe establishing fixed dates for equity grants is an important measure to ensure the integrity of the equity grant process.

 

We grant equity-based awards under the shareholder-approved Amended and Restated 2004 Nordson Corporation Long-Term Performance Plan. Awards are effective on the date that we approve the award. We have delegated limited authority to our Chief Executive Officer to approve equity awards, excluding grants made to executive officers. Equity grants approved by our Chief Executive Officer in any quarter will be effective the first day of the month following public disclosure of quarterly earnings for that quarter. In the event the effective date of the grant is a Saturday, Sunday or holiday, the effective date of grant will be the first subsequent day our common shares are traded. Such grants will be reported to us at our next regularly scheduled meeting. In 2009, Mr. Campbell did not approve any stock option or restricted share grants.

 

Share Ownership Guidelines

 

We require share ownership by our executive officers to emphasize our executive compensation program’s objective of aligning the individual financial interests of our executive officers with the investment interests of

our long-term shareholders. We require our executive officers to own the following amount of our common shares:

 

 

Newly elected or promoted executive officers will have up to five years to meet the ownership requirements after their election or promotion, or in the case of executive officers in office at the time we adopted the ownership requirements, within five years of the date of adoption. The share ownership requirements are available for review at www.nordson.com/corporate/governance.

 

Executive officers who have not satisfied the share ownership requirements by the end of the five-year period or who have not shown progress (as subjectively determined by us) toward the required ownership level prior to the end of such five-year period will be expected to retain 100% of the shares acquired through exercise of options, lapse of transfer restrictions on restricted shares or long-term incentive share awards, net of shares tendered to cover the exercise price of the options or taxes due on the exercise of the options or the lapse of a restriction period until the share ownership requirement is achieved or there is progress towards the ownership requirement. We review annually the actual stock ownership of each executive officer compared to the applicable stock ownership guideline, including the number of vested stock options, share equivalent units in deferred compensation plans and stock ownership in the Nordson Corporation Employee Stock Ownership and 401(k) Plans, each of which count as valid forms of stock ownership under the ownership guidelines.

 

We expect the executive officers in office at the time the Share Ownership Guidelines were established to achieve their respective share ownership requirements by the end of 2010. We have concluded that executive officers that have been elected since the adoption of the Share Ownership Guidelines in December 2007 are making progress toward fulfillment of their respective ownership requirements by taking actions such as deferring long-term performance plan share grants, exercising and holding net stock option grants and increasing account balances in the 401(k) Nordson Stock Fund.

 

Accounting and Tax Considerations

 

We continuously review and evaluate the impact of tax laws, accounting changes and similar factors affecting our executive compensation program. For example, our recent adoption of Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment,” which results in recognition of compensation expense for stock incentives, and the recent enactment of Section 409A of the Internal Revenue Code, which impacts deferred compensation arrangements, are considered as we contemplate future changes to the program.

 

In addition, we attempt to structure the program to maximize its ability to deduct compensation payments for tax purposes. We take into account whether particular elements are “performance-based” compensation under Section 162(m) of the Internal Revenue Code. Section 162(m) sets a limit of $1,000,000 on the amount we can deduct for compensation paid to each of the chief executive officer and the three other most highly compensated executive officers other than the chief financial officer. This limit does not apply to compensation that qualifies as “performance-based” compensation under Section 162(m). Base salary does not qualify as “performance-based” compensation under Section 162(m). We attempt to ensure that incentive compensation qualifies as fully deductible “performance-based” compensation. We have established a requirement that executive officers will defer base salary and payouts under the annual cash incentive plan and long-term incentive plan to avoid the loss of deductibility by us to the extent that non-performance-based compensation under Section 162(m) exceeds $1,000,000. However, in certain extraordinary situations, we may approve compensation that will not meet these requirements. Based on our practice of requiring mandatory deferral of compensation that would not be deductible under Section 162(m), we have not paid any named executive officer compensation that, under Section 162(m), was not deductible by us.

 

COMPENSATION COMMITTEE REPORT

 

We have reviewed and discussed with management the Compensation Discussion and Analysis that appears in this proxy statement. Based on such review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the company’s definitive proxy statement on Schedule 14A and incorporated by reference into the company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2009, each as filed with the Securities and Exchange Commission.

 

Compensation Committee

 

Stephen R. Hardis, Chairman

Joseph P. Keithley

William L. Robinson

Mary G. Puma

Benedict P. Rosen

 

January 16, 2010

 

The above Report of the Compensation Committee does not constitute soliciting material and should not be deemed filed with the Commission or subject to Regulation 14A or 14C (other than as provided in Item 407 of Regulation S-K) or to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically requests that the information in this Report be treated as soliciting material or specifically incorporates it by reference into a document filed under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act. If this Report is incorporated by reference into the Company’s Annual Report on Form 10-K, such disclosure will be furnished in such Annual Report on Form 10-K and will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act as a result of furnishing the disclosure in this manner.

 

SUMMARY COMPENSATION FOR FISCAL YEAR 2009

 

The following narratives, tables, footnotes and supplemental tables present the components of total compensation for our named executive officers for the fiscal years ended October 31, 2009, October 31, 2008 and October 31, 2007. The individual components of the total compensation reflected in the Summary Compensation Table for Fiscal Year 2009 are:

 

 

Summary Compensation Table For Fiscal Year 2009

 

In this section we provide certain tabular and narrative information regarding the compensation of our principal executive and financial officers and our three other most highly compensated executive officers for the fiscal years ended October 31, 2009, October 31, 2008 and October 31, 2007, as applicable. For additional information regarding compensation of the named executive officers, see the “Compensation Discussion and Analysis” section of this proxy statement. Mr. Thaxton was not a named executive officer in fiscal year 2007, and therefore information on his fiscal year 2007 compensation is not included. Mr. Lambert was not a named executive officer in fiscal years 2007 and 2008, and therefore information on his fiscal years 2007 and 2008 compensation is not included in the following table: