Nordson Corporation 10-K


x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes x No o

The aggregate market value of Common Stock, no par value per share, held by nonaffiliates (based on the closing sale price on the Nasdaq) as of April 30, 2004 was approximately $903,738,000.

There were 36,370,983 shares of Common Shares outstanding as of December 10, 2004.

In this annual report, all amounts related to United States and foreign currency and to number of shares of Nordson Corporation stock, except for per share earnings and dividend amounts, are expressed in thousands.

Nordson Corporation is one of the world’s leading producers of precision dispensing equipment that apply adhesives, sealants and coatings to a broad range of consumer and industrial products during manufacturing operations, helping customers meet quality, productivity and environmental targets. Nordson also produces technology-based systems for curing and surface-treatment processes, as well as life sciences applications.

Nordson products are used around the world in the appliance, automotive, bookbinding, container, converting, electronics, food and beverage, furniture, medical, metal finishing, nonwovens, packaging, semiconductor, life sciences and other diverse industries.

The company’s strategy for long-term growth is based on a customer-driven focus that is global in scope. Reaching out from corporate headquarters in Westlake, Ohio, Nordson markets its products through a network of direct operations in 30 countries. Consistent with this strategy, approximately two-thirds of the Company’s revenues are generated outside the United States.

Nordson has more than 3,500 employees worldwide. Principal manufacturing facilities are located in Alabama, California, Georgia, Ohio and Rhode Island in the United States, as well as in China, Germany, Italy, The Netherlands and the United Kingdom.

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

Our corporate goal for growth is to double the value of the Company over a moving five-year period, with the primary measure of value set by the market for Company shares.

While external factors may impact value, the achievement of this goal will rest with earnings growth, capital and human resource efficiency, and positioning for the future.

Nordson does 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.

Growth is achieved by seizing opportunities within existing markets, investing in new products and pursuing new markets. This strategy is augmented by the acquisition of companies that can serve multinational industrial markets.

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

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

Complementing our business strategy is the objective to provide opportunities for employee self-fulfillment, growth, security, recognition and equitable compensation. This goal is met through employee 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 company objectives.

Nordson is committed to contributing an average of five percent of domestic pretax earnings to human services, health, education and other charitable activities, particularly in communities where the Company has major facilities.

Financial Information About Operating Segments, Foreign and Domestic Operations, and Export Sales

In accordance with Statement of Financial Accounting Standards No. 131, “Disclosure about Segments of an Enterprise and Related Information,” Nordson has reported information about the Company’s three operating segments. This information is contained in Note 16 of Notes to Consolidated Financial Statements that can be found in Part II, Item 8 of this document.

Nordson offers a full range of equipment that moves and dispenses liquid and powder coatings, adhesives and sealants. Nordson also produces technology-based systems for curing and surface treatment processes. Equipment ranges from manual, stand-alone units for low-volume operations to microprocessor-based automated systems for high-speed, high-volume production lines.

Nordson markets its products in the United States and fifty-seven other countries, primarily through a direct sales force and also through qualified distributors and sales representatives. Nordson has built a worldwide reputation for its creativity and expertise in the design and engineering of high-technology application equipment that meets the specific needs of its customers.

The following is a summary of the products produced and markets served by the Company’s various businesses:


•	*Packaging* — Automated adhesive dispensing systems that seal corrugated cases and paperboard cartons, apply product labels and stabilize pallets.


•	*Product Assembly* — Adhesive and sealant dispensing systems for bonding or sealing plastic, metal and wood products.
•	*Web Coating* — Laminating and coating systems used to manufacture continuous-roll goods in the nonwovens, textile, paper and flexible-packaging industries.
•	*Nonwovens* — Systems for producing nonwoven fiber fabrics; equipment for applying adhesives, lotions, liquids and fibers to disposable nonwoven products.
•	*Automotive* — Adhesive and sealant dispensing systems for bonding and sealing window glass, body panels and structural components used on automobiles and trucks.


•	*Powder Coating* — Automated and manual spray systems that apply powder paints and coatings to consumer and industrial products.


•	*Liquid Finishing* — Automated and manual spray systems that apply liquid paints and coatings to consumer and industrial products.
•	*Container* — Systems used to dispense and cure coatings used in the manufacture of metal and plastic containers.


•	*Asymtek* — Automated dispensing systems for high-speed, accurate application of a broad range of attachment, protection and coating fluids to semiconductor packages, printed circuit boards and electronic assemblies.


•	*UV Curing* — Drying and curing systems for graphic arts, finishing and product assembly operations.
•	*March Plasma Systems* — Systems for cleaning and modifying surfaces during the assembly of semiconductor devices, printed circuit boards, medical instruments and electronic products.
•	*EFD, Inc.* — Manual and automated dispensing units for the controlled application of fluid materials for the electronics, medical and automotive industries.

Nordson’s production operations include machining and assembly. The Company manufactures specially designed parts and assembles components into finished equipment. Many components are made in standard modules that can be used in more than one product or in combination with other components for a variety of models. The Company has principal manufacturing operations in Amherst, Ohio; Norcross, Swainsboro and Dawsonville, Georgia; Talladega, Alabama; Carlsbad, California; East Providence, Rhode Island; Branford, Connecticut; Shanghai, China; Luneburg, Germany; Milano, Italy; Maastricht, The Netherlands; and Slough, U.K.

Principal materials used to make Nordson products are metals and plastics, typically in sheets, bar stock, castings, forgings, and tubing. Nordson also purchases many electrical and electronic components, fabricated metal parts, high-pressure fluid hoses, packings, seals and other items integral to its products. Suppliers are competitively selected based on cost and quality. All significant raw materials that Nordson uses are available through multiple sources.

Nordson’s senior operating executives supervise an extensive quality control program for Nordson equipment, machinery and systems.

Natural gas and other fuels are primary energy sources for Nordson. However, standby capacity for alternative sources is available if needed.

No special or unusual practices affect Nordson’s working capital. However, the Company generally requires advance payments as deposits on customized equipment and systems and, in certain cases, requires progress payments during the manufacturing of these products. The Company initiated a number of new business processes focused on reduction of manufacturing lead times. These initiatives have resulted in lower investment in inventory while maintaining the capability to respond promptly to customer needs.

Many factors influence the Company’s competitive position, including pricing, product quality and service. Nordson enjoys a leadership position in the competitive industrial application systems business by delivering high-quality, innovative products and technologies, as well as after-the-sale service and technical support. Working with customers to understand their processes and developing the application solutions that help them meet their production requirements also contributes to Nordson’s leadership position. Nordson’s worldwide network of direct sales and technical resources also is a competitive advantage.

Risk factors associated with Nordson’s competitive position include the development and commercial acceptance of alternative processes or materials and the growth of local competitors serving specific markets.

Investments in research and development are important to Nordson’s long-term growth because they enable the Company to keep pace with changing customer and marketplace needs, and they help to sustain sales improvements year after year. The Company places strong emphasis on technology developments and improvements through its internal engineering and research teams. Research and development expenses were approximately $22,947 in fiscal 2004, compared with approximately $22,341 in fiscal 2003 and $26,554 in fiscal 2002.

The Company’s proxy statement, annual report to the Securities and Exchange Commission (Form 10-K), quarterly reports (Form 10-Q) and current reports (Form 8-K) and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available at www.nordson.com as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC. Copies of these reports may also be obtained free of charge by sending written requests to Barbara Price, Manager of Shareholder Relations, Nordson Corporation, 28601 Clemens Road, Westlake, Ohio 44145.

The following table summarizes the principal properties of the Company as of its fiscal 2004 year-end.


(1)	Adhesive Dispensing and Nonwoven Fiber Systems

(2)	Finishing and Coating Systems

(3)	Advanced Technology Systems

The facilities listed above have adequate, suitable and sufficient capacity (production and nonproduction) to meet present and foreseeable demand for the Company’s products.

Other properties at international subsidiary locations and at branch locations within the United States are leased. Lease terms do not exceed 25 years and generally contain a provision for cancellation with some penalty at an earlier date.

In addition, the Company leases equipment under various operating and capitalized leases. Information about leases is reported in Note 7 of Notes to Consolidated Financial Statements that can be found in Part II, Item 8 of this document.

The Company has been identified as a potentially responsible party (PRP) at a Wisconsin municipal landfill and has voluntarily agreed with other PRP’s to share costs associated with (1) a feasibility study and remedial investigation (“FS/ RI”) for the site and (2) providing clean drinking water to the affected residential properties through completion of the FS/ RI phase of the project. The FS/ RI is expected to be completed in 2005. The Company is committing $829 towards completing the FS/ RI phase of the project and providing clean drinking water. This amount has been recorded in the Company’s financial statements. Against this commitment, the Company has made payments of $363 through the end of fiscal year 2004. The remaining amount of $466 is recorded in accrued liabilities in the October 31, 2004 Consolidated Balance Sheet. The total cost of the Company’s share for remediation efforts will not be ascertainable until the FS/ RI is completed and a remediation plan is approved by the Wisconsin Department of Natural Resources, which is anticipated to occur in 2006. However, based upon current information, the Company does not expect that the costs associated with remediation will have a material effect on its financial condition or results of operations.

The European Union (“EU”) has adopted two Directives to facilitate the recycling of electrical and electronic equipment sold in the EU. The first of these is the Waste Electrical and Electronic Equipment (“WEEE”) Directive which directs EU Member States to enact laws, regulations, and administrative provisions to ensure that producers of electrical and electronic equipment provide for the financing of the collection, treatment, recovery and environmentally sound disposal of WEEE from products placed on the market after August 13, 2005 and from products in use prior to that date that are being replaced. The second of these Directives is the Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (“RoHS”) Directive. The RoHS Directive addresses the restriction on use of certain hazardous substances such as mercury, lead, cadmium, and hexavalent cadmium in electrical and electronic equipment placed on the market after July 1, 2006. As of October 31, 2004, EU Member States continue to develop legislation to implement these Directives.

During the year, the Company established a project management team whose efforts are directed at assessing the impact of the Directives on the Company’s supply chain management and manufacturing processes and developing a strategy to permit the Company to react and comply with legislation enacted by Member States. The cost to the Company to comply with the Directives and Member States’ legislation will not be quantifiable until Member States have fully implemented the Directives.

In addition, the Company is involved in various other legal proceedings arising in the normal course of business. Based on current information, the Company does not expect that the ultimate resolution of pending and threatened legal proceedings will have a material adverse effect on its financial condition or results of operations. The Company is not involved in any other legal proceedings that would be required to be disclosed pursuant to Item 103 of Regulation S-K.

(a) The Company’s common shares are listed on the Nasdaq Stock Market’s National Market under the symbol NDSN. As of December 10, 2004, there were approximately 2,332 registered shareholders. The table below is a summary of dividends paid per common share, the range of market prices, and average price-earnings ratios with respect to common shares, during each quarter of fiscal 2004 and 2003. The price-earnings ratios reflect average market prices relative to trailing four-quarter earnings.


(1)	In October 2003, the Board of Directors authorized the Company to repurchase, until October 2006, up to 2,000 shares of the Company’s common stock on the open market. In October 2004, the Company repurchased 25 shares in an open market transaction at a price of $33.95 per share. There were no shares repurchased prior to October 2004.


(b)	In 2002, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” and as a result no longer amortizes goodwill. Amounts represent net income without goodwill amortization.


(c)	Net income plus interest on long-term obligations net of income taxes as a percentage of total assets less current liabilities.


(e)	2002 includes an inventory write-down of $11,388, which is included in cost of sales.

The Company’s consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company’s management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, the Company evaluates the accounting policies and estimates it uses to prepare financial statements. The Company bases its estimates on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates used by management.

Certain accounting policies that require significant management estimates and are deemed critical to the Company’s results of operations or financial position are discussed below. On a regular basis, the Company reviews critical accounting policies with the Audit Committee of the Board of Directors.

Revenue Recognition — Most of the Company’s revenues are recognized upon shipment, provided that persuasive evidence of an arrangement exists, the sales price is fixed or determinable, collectibility is reasonably assured, and title and risk of loss have passed to the customer. Revenues from contracts with multiple element arrangements, such as those including both installation and services, are recognized as each element is earned based on objective evidence of the relative fair value of each element. Amounts received in excess of revenue recognized are included as deferred revenue in the accompanying balance sheets. Revenues deferred in 2004 were not material. A limited number of the Company’s large engineered systems sales contracts are accounted for using the percentage-of-completion method. The amount of revenue recognized in any accounting period is based on the ratio of actual costs incurred through the end of the period to total estimated costs at completion. Cost estimates are updated on a quarterly basis. During 2004, 2003 and 2002, the Company recognized approximately $7,000, $5,000 and $20,000, respectively, of revenue under the percentage-of-completion method. The remaining revenues are recognized upon delivery.

Goodwill — Goodwill represents the excess of purchase price over the fair value of tangible and identifiable intangible net assets acquired. At October 31, 2004, goodwill represented approximately 40 percent of the Company’s total assets. The majority of the goodwill resulted from the acquisition of EFD, Inc. in fiscal 2001. In 2002, the Company adopted FASB Statement No. 142, “Goodwill and Other Intangible Assets,” which provides that goodwill should not be amortized but instead be tested for impairment annually at the reporting unit level. In accordance with No. 142, the Company completed a transitional goodwill impairment test that resulted in no impairment loss being recognized. Goodwill is tested for impairment on an annual basis and more often if indications of impairment exist. The estimated fair value of a reporting unit is determined by applying appropriate discount rates to estimated future cash flows and terminal value amounts for the reporting units. The results of the Company’s analyses indicated that no reduction of goodwill is required.

Inventories — Inventories are valued at the lower of cost or market. Cost has been determined using the last-in, first-out method for 38 percent of the Company’s consolidated inventories at October 31, 2004, with the first-in, first-out method used for the remaining inventory. On an ongoing basis, the Company tests its inventory for technical obsolescence, as well as for future demand and changes in market conditions. The Company has historically maintained inventory reserves to reflect those conditions when the cost of inventory is not expected to be recovered. In the face of difficult economic conditions that accelerated the technical obsolescence of certain inventory and impacted the demand outlook for other inventory, the Company recognized an inventory write-down of $11,388 in the fourth quarter of 2002 ($7,630 on an after-tax basis, or $.23 per share). The addition of $11,388 to the inventory obsolescence reserve brought the reserve balance to $23,149. During 2003, $21,281 of inventory was disposed of and charged against the reserve, and $2,243 was added to the reserve. After a currency effect of $444, the balance in the inventory obsolescence reserve was $4,555 at November 2, 2003. During 2004, $3,066 of inventory was disposed of and charged against the reserve, and $2,782 was added to the reserve. After a currency effect of $130, the balance in the inventory obsolescence reserve was $4,401 at October 31, 2004.

Pension Plans and Postretirement Medical Plan — The measurement of liabilities related to the Company’s pension plans and postretirement medical plan is based on management’s assumptions related to future factors including interest rates, return on pension plan assets, compensation increases and health care cost trend rates.

The weighted-average discount rate (based on AA quality fixed income investments) used to determine the present value of the Company’s aggregate pension plan obligation was 5.8 percent at October 31, 2004, compared to 5.9 percent at November 2, 2003. The average expected rate of return (long-term investment rate) on pension assets increased slightly from 8.1 percent in 2003 to 8.2 percent in 2004. The assumed rate of compensation increases was 3.4 percent in 2004, compared to 3.3 percent in 2003.

Annual expense amounts are determined based on the discount rate used at the end of the prior year. Differences between actual and assumed investment returns on pension plan assets result in actuarial gains or losses that are amortized into expense over a period of years.

With respect to the postretirement medical plan, the discount rate used to value the benefit obligation decreased from 6.25 percent at November 2, 2003 to 6.0 percent at October 31, 2004. The annual rate of increase in the per capita cost of covered benefits (the health care trend rate) is assumed to be 8.0 percent in 2005, decreasing gradually to 5.0 percent in 2009. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, a one-percentage point change in the assumed health care cost trend rate would have the following effects:

Employees hired after January 1, 2002 are not eligible to participate in the postretirement medical plan.

The Company expects that pension and postretirement expenses in fiscal 2005 will be approximately $1,400 higher than fiscal 2004, reflecting among other things, changes in actuarial assumptions and plan design changes.

Financial Instruments — Assets, liabilities and commitments that are to be settled in cash and are denominated in foreign currencies are sensitive to changes in currency exchange rates. The Company enters into foreign currency forward contracts, which are derivative financial instruments, to reduce the risk of foreign currency exposures resulting from the collection of receivables, payables and loans denominated in foreign currencies. The maturities of these contracts are usually less than 90 days. Forward contracts are marked to market each accounting period, and the resulting gains or losses are included in other income (expense) on the Consolidated Statement of Income.

Warranties — The Company provides customers with a product warranty that requires the Company to repair or replace defective products within a specified period of time (generally one year) from the date of delivery or first use. An accrual is recorded for expected warranty costs for products shipped through the end of each accounting period. In determining the amount of the accrual, the Company relies primarily on historical warranty claims by product sold. At October 31, 2004, the warranty accrual was $4,121, while warranty costs for 2004 were $4,165.

Long-Term Incentive Compensation Plan (LTIP) — Under this plan officers are awarded a cash payment if predetermined performance measures are met over a three-year period. The value of this payment is based upon the share price of the Company’s stock at a predetermined date subsequent to the end of the third year of each plan. Over the period of each plan, costs are accrued based on progress against performance measures, along with changes in value of the Company’s stock. At October 31, 2004, the accrued liability for the 2002, 2003 and 2004 plans amounted to $11,064. The portion of these costs recognized in the income statement was $7,004 in 2004, $2,653 for 2003 and $1,406 for 2002.

Sales — Worldwide sales for 2004 were $793,544, an increase of 19 percent from 2003 sales of $667,347. Sales volume increased 13 percent, with favorable currency effects contributing an additional 6 percent to the overall sales gain. The Company is organized into three business segments: adhesive dispensing and nonwoven fiber systems, finishing and coating systems, and advanced technology systems. Sales of the adhesive segment were $497,699 in 2004, an increase of $71,495 from 2003. Of the total 17 percent increase, 10 percent was due to volume increases and 7 percent was due to currency effects. All five businesses in the adhesive segment showed increased volume, with more than half of the increase coming from higher product assembly and fiber system sales. Finishing segment sales in 2004 were $130,944, compared with $112,722 in the prior year. The 16 percent increase can be traced to a volume increase of 11 percent and currency effects of 5 percent. The volume increase was primarily due to a strong recovery in powder system sales across all geographic regions, with the biggest growth seen in the United States and Japan. Sales of the advanced technology segment were $164,901 in 2004, an increase of $36,480 from 2003. The increase was the result of 26 percent volume gains and 2 percent from the effects of currency. Within this segment, the Asymtek business, which sells to customers in the semiconductor, printed circuit board and electronic assembly industries, was especially strong, with volume up 50 percent from 2003. The other businesses in this segment all showed sales volume growth of at least 10 percent. It is estimated that the effect of pricing on total revenue was neutral relative to the prior year.

Nordson’s sales outside the United States accounted for 66 percent of total 2004 sales, compared with 63 percent for 2003. During 2004, the Company realigned its geographic reporting. Previously, sales were reported in four regions, North America, Europe, Japan and Pacific South. The regions are now defined as United States, Americas (Canada and Latin America), Europe, Japan and Asia Pacific. Prior year amounts have been reclassified to conform to the new alignment. Sales volume in all five geographic regions increased in 2004 compared to 2003. Sales volume was up 8 percent in the United States, 19 percent in the Americas, 10 percent in Europe, 11 percent in Japan and 48 percent in Asia Pacific. The increase in Asia Pacific can be traced largely to the advanced technology segment and to higher fiber system sales.

Operating profit — Gross margins, expressed as a percent of sales, increased to 55.4 percent in 2004 from 54.8 percent in 2003. Currency changes had a ..9 percent favorable effect, with the effect of mix and absorption offsetting this gain.

Selling and administrative expenses were $328,633 in 2004, an increase of $33,476, or 11.3 percent from 2003. The increase is due to currency translation effects of 4.3 percent and to compensation increases and higher employee benefit costs. As a percent of sales these costs decreased to 41.4 percent in 2004 from 44.2 percent last year.

Operating profit margins, expressed as a percentage of sales, were 13.9 percent in 2004 compared to 10.3 percent in 2003. Beginning in 2004, the method of measuring operating profit for segment reporting was modified. A larger portion of corporate expenses is now being charged to the three primary business segments. Prior year operating profit amounts have been adjusted to conform to the 2004 methodology. Segment operating profit margins in 2004 and 2003 were as follows:

The improvement in profit margins across all three segments can be traced to absorption of fixed operating expenses and to the effects of continuing cost controls related to lean initiatives.

In light of the difficult economic environment from 2000 to 2003, the Company embarked on a number of cost reduction initiatives. Consistent with these initiatives, the Company recognized $2,028 ($1,359 on an after-tax basis, or $.04 per share) of severance and restructuring costs in 2003.

Interest and other — Interest expense in 2004 was $15,432, a decrease of 15 percent from 2003. The decrease was due to lower borrowing levels. Other expense was $2,688 in 2004, compared to other income of $1,055 last year. The change was primarily due to a loss of $3,288 on the disposition of a minority equity investment. In addition, currency losses of $201 were incurred in 2004, compared to gains of $558 in 2003.

In 2004, the Company recorded a charge of $128 in other expense. The Company has been identified as a potentially responsible party (PRP) at a Wisconsin municipal landfill and has voluntarily agreed with other PRP’s to share costs associated with (1) a feasibility study and remedial investigation (“FS/ RI”) for the site and (2) providing clean drinking water to the affected residential properties through completion of the FS/ RI phase of the project. The FS/ RI is expected to be completed in 2005. The Company has committed $829 towards completing the FS/ RI phase of the project and providing clean drinking water. This amount has been recorded in the Company’s financial statements. Against this commitment, the Company has made payments of $363 through the end of fiscal year 2004. The remaining amount of $466 is recorded in accrued liabilities in the October 31, 2004 Consolidated Balance Sheet.

Net income — The Company’s effective income tax rate was 32.5 percent in 2004, down from 33.0 percent in 2003. The decrease was due to a refund related to a prior tax year. Net income was $63,334, or $1.73 per diluted share in 2004. This compares to net income of $35,160, or $1.04 per diluted share in 2003. This represents an 80 percent increase in net income and 66 percent increase in earnings per share.

Accounting changes — In June 2002, the FASB issued Statement No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. There was no impact in 2004 on the Company’s consolidated financial position or results of operations as a result of the adoption of No. 146. During 2003, the Company recognized expense of $2,028 related to severance payments to approximately 70 employees of the finishing and coating and the advanced technology segments in North America.

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others.” This interpretation addresses the disclosures to be made by a guarantor in its interim and annual financial statements regarding its obligations under guarantees and clarifies the requirements related to the recognition of liabilities by a guarantor for obligations undertaken in issuing guarantees. The initial recognition and measurement provisions of the interpretation are applicable to guarantees issued or modified after December 31, 2002 and did not have a material effect on the Company’s financial statements. The disclosure requirements are effective for financial statements for periods ending after December 31, 2002 and are applicable for all outstanding guarantees subject to the interpretation.

The Company has issued guarantees to two banks to support the short-term borrowing facilities of a 49 percent-owned South Korean joint venture/distributor of the Company’s products. One guarantee is for Korean Won 3,000,000 (approximately $2,572) secured by land and building and expires on January 31, 2005. The other guarantee is for $2,300 and expires on October 31, 2005. As discussed below, the Company began consolidating this joint venture/distributor in the second quarter of fiscal 2004.

In 2004, the Company issued a guarantee to a U.S. bank related to a five-year trade financing agreement for a sale to a customer in Turkey. The loan is secured by collateral with a current value well in excess of the amount due. The guarantee could be called into play in the event of payment default by the customer to the bank. The amount of the guarantee at October 31, 2004 was Euro 2,000 (approximately $2,560) and will decline ratably as semi-annual principal payments are made by the customer beginning in 2005. The Company has recorded $1,161 in the allowance for doubtful accounts related to this guarantee. The recorded amount will be adjusted as the customer makes payments.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities.” This Interpretation addresses consolidation by business enterprises of variable interest entities, which possess certain characteristics. The interpretation requires that if a business enterprise has a controlling financial interest in a variable interest entity, the assets, liabilities and results of operations of the variable interest entity must be included in the consolidated financial statements with those of the business enterprise. This interpretation applies immediately to variable interest entities created after January 31, 2003 and to variable interest entities in which an enterprise obtains an interest after that date. For variable interest entities created prior to January 31, 2003, this interpretation is effective for the first year or interim period beginning after March 15, 2004. In the second quarter of 2004, the Company began consolidating a 49 percent-owned South Korean joint venture/distributor of the Company’s products. Real estate with a net book value of approximately $750 serves as collateral for one of the bank loans noted above. Other than the bank guarantees noted above, creditors of the joint venture/distributor have no recourse against the Company. The Company’s initial investment in this joint venture/distributor occurred in 1989. The effect of the consolidation on the Company’s financial statements was not material.

In December 2002, the FASB issued Statement No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure an Amendment of FASB Statement No. 123.” No. 148 amends No. 123 to provide alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. In addition, No. 148 amends the disclosure requirements of No. 123 to require more prominent disclosures in both annual and interim financial statements regarding the method of accounting for stock-based compensation and the effect of the method used on reported results. The alternative methods of transition of No. 148 are effective for fiscal years ending after December 15, 2002. The disclosure provision of No. 148 is effective for interim periods beginning after December 15, 2002. The Company accounts for its stock option plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees.” No stock option expense is reflected in net income, as all options granted under these plans had an exercise price equal to the fair market value of the underlying common stock on the date of grant.

In December 2003, the FASB revised Statement of Financial Accounting Standard No. 132, “Employers’ Disclosures about Pensions and other Postretirement Benefits.” The revision established additional annual disclosures about plan assets, investment strategy, measurement date, plan obligations and cash flows. In addition, the revised standard established interim disclosure requirements related to the net periodic benefit cost recognized and contributions paid or expected to be paid during the current fiscal year. The new annual disclosures are effective for financial statements with fiscal years ending after December 15, 2003, and the interim-period disclosures are effective for interim periods beginning after December 15, 2003. The annual disclosures were adopted for the 2004 fiscal year (see Note 3). The adoption of No. 132 had no effect on the Company’s financial condition or results of operations.

In May 2004, the FASB issued Staff Position No. FSP 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” in response to a new law that provides prescription drug benefits under Medicare (“Medicare Part D”) as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. Currently, Statement of Financial Accounting Standard No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” (“No. 106”) requires that changes in relevant law be considered in current measurement of postretirement benefit costs. The Company’s measures of the accumulated postretirement benefit obligation and the net periodic postretirement benefit cost do not reflect the effects of the subsidy, because benefits under the Company’s plan are not actuarially equivalent to Medicare Part D. The adoption of FSP No. 106-2 had no effect on the Company’s financial condition or results of operations.

In November 2004, the FASB issued Statement of Financial Accounting Standard No. 151, “Inventory Costs.” No. 151 amends Accounting Research Bulletin No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. This Statement requires that those items be recognized as current-period charges and requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The adoption of No. 151 is effective for fiscal years beginning after June 15, 2005. The Company has not yet determined the impact of adoption on its consolidated financial position or results of operations.

In December 2004, the FASB issued Statement of Financial Accounting Standard No. 123 (revised 2004), Share-Based Payment. This Statement replaces FASB Statement No. 123 and supercedes APB Opinion No. 25. No. 123(R) eliminates the ability to account for share-based compensation transactions using the intrinsic method currently used by the Company. No. 123(R) requires such transactions be accounted for using a fair-value-based method that would result in expense being recognized in the Company’s financial statements. The Company will be required to adopt No. 123(R) in the fourth quarter of fiscal 2005 and has not yet determined the impact of adoption on its consolidated financial position or results of operations.

Sales within the adhesive segment increased 3 percent, with a 7 percent increase from currency effects offset by a 4 percent decline in volume. A drop-off in shipments of large engineered systems used in the production of nonwoven fabrics and in the assembly of durable goods accounted for virtually the entire volume decline. Advanced technology segment sales increased 7 percent, with volume up 4 percent and favorable currency effects contributing an additional 3 percent. Improved activity related to sales of plasma treatment systems and manual fluid dispensing systems to the electronics and medical industries as well as sales of UV curing systems to the graphic arts industry accounted for the higher volume within this segment. Finishing and coating segment revenue was down 1 percent in 2003. Sales volume was down 6 percent, offset by a 5 percent increase from favorable currency effects. The volume decline was influenced by lower engineered system sales in North America. It is estimated that the effect of pricing on total revenue was neutral relative to the prior year.

Nordson’s sales outside the United States accounted for 63 percent of total 2003 sales, compared with 57 percent for 2002. Sales volume decreased 12 percent in the United States, 4 percent in Europe and 1 percent in the Americas. Offsetting these decreases were increases of 17 percent in Japan and 28 percent in the Asia Pacific regions. Volume was up in all segments in Japan, while advanced technology was primarily responsible for the increase in the Asia Pacific region.

Operating profit — Gross margins, expressed as a percentage of sales, were 54.8 percent in 2003 compared to 52.1 percent in 2002. In 2002, the Company recognized a pretax inventory write-down of $11,388. Excluding the effect of this write-down, the 2003 gross margin rate improved by 1.0 percent over 2002. Favorable currency effects accounted for approximately a 1.1 percent increase in the gross margin rate with the effect of product mix offsetting a portion of this improvement.

Selling and administrative expenses increased by 4.8 percent over 2002. Currency translation effects accounted for a 4.4 percent increase, with the balance of the increase traced to compensation adjustments and higher employee benefit costs. Selling and administrative expenses, excluding severance and restructuring costs, amounted to 44.2 percent of sales in 2003 compared to 43.5 percent of sales in 2002.

In light of the difficult economic environment over the last three years, the Company embarked on a number of cost reduction initiatives. Consistent with these initiatives, the Company recognized $2,028 ($1,359 on an after-tax basis, or $.04 per share) of severance and restructuring costs in 2003. In 2002 the Company recognized $2,690 ($1,802 million on an after-tax basis, or $.05 per share) of restructuring charges, consisting of severance and other costs associated with the combination of certain businesses. Of the total amount, $191 was included in cost of sales.

Operating profit margins, expressed as a percentage of sales, were 10.3 percent in 2003 compared to 8.2 percent in 2002. Segment operating profit margins in 2003 and 2002, after restatement for the allocation of a larger portion of corporate expenses, were as follows:

The lower adhesive segment operating margin in 2003 compared to 2002 is traced primarily to absorption of fixed operating expenses related to a direct distribution organization in an environment where sales volume declined. In addition, higher initial manufacturing costs were incurred associated with the introduction of a new family of products. Operating margin increases in both the finishing and coating and the advanced technology segments are due to improved manufacturing cost absorption. The restructuring initiatives conducted over the last three years impacted all segments favorably.

Interest and other — Interest expense of $18,063 decreased $3,650 from 2002, due to lower borrowing levels and lower interest rates. Other income increased from $714 in 2002 to $1,055 in 2003, mainly due to currency gains of $558 in 2003.

In 2003, the Company recorded a charge of $375 in other expense related to the Wisconsin municipal landfill described above. Through the end of fiscal 2003 the Company had committed $700 towards completing the FS/RI phase of the project and providing clean drinking water. This amount was recorded in the Company’s financial statements. Against this commitment, the Company had made payments of $325 through the end of fiscal 2003. The remaining amount of $375 was recorded in accrued liabilities in the November 2, 2003 Consolidated Balance Sheet.

Net income — The Company’s effective tax rate was 33.0 percent for both 2003 and 2002. Net income in 2003 was $35,160, or $1.04 per share on a diluted basis compared with $22,072, or $.66 per share on a diluted basis, in 2002. As noted above, 2002 included a pretax inventory write-down of $11,388, or $.23 per share.

Cash and cash equivalents at the end of 2004 were $60,251, an increase of $53,306 from 2003. Cash generated by operations in 2004 was $109,318, up from $87,547 last year. The increase was primarily due to higher net income. Changes in operating assets and liabilities resulted in a use of $563 of cash. Increases in accounts receivable, inventory and accounts payable resulted in a use of $11,535 of cash. The increases were entirely due to increased business activity in 2004 compared to 2003. Further improvements were achieved in inventory turnover and days sales in accounts receivable in the current year. An increase in accrued liabilities accounted for $5,643 of the increase in cash. This increase was largely due to higher incentive compensation accruals. A reduction in deferred taxes in 2004 related primarily to pension payments and the amortization of goodwill.

Cash used by investing activities was $15,328 in 2004. Capital expenditures, which were concentrated on information systems and production equipment, were $11,437. Cash of $4,013 was used for the acquisition of W. Puffe Technologie, a German manufacturer of hot melt adhesive dispensing systems for the textile, aerospace, life science, automotive, construction and baby diaper industries.

Cash used in financing activities in 2004 was $41,602. The Company repaid $72,024 of notes payable and long-term debt in 2004, bringing the debt to equity ratio down from .80 at November 2, 2003 to .44 at October 31, 2004. Dividend payments to shareholders totaled $22,128 in 2004, increasing 3 percent on a per-share basis from 2003. Issuance of common stock related to the exercise of stock options generated $56,758 of cash.

On May 18, 2004 the Company entered into an interest rate swap to convert $40,000 of 6.79 percent fixed rate debt due in May 2006 to variable rate debt. The variable rate is reset semi-annually, and at October 31, 2004 the rate was 5.34 percent.

The following table summarizes the Company’s obligations as of October 31, 2004:

Nordson has various lines of credit with both domestic and foreign banks. At October 31, 2004, these lines totaled $277,958, of which $262,657 was unused. Included in the total amount of $277,958 is a $200,000 facility with a group of banks that expires in 2009. This facility was entered into on October 19, 2004 and replaced an existing facility that was scheduled to expire in 2006. The new facility may be increased from $200,000 to $400,000 under certain conditions. It was unused at the end of 2004. There are two covenants that the Company must meet under this facility. The first covenant limits the amount of additional debt the Company can incur. At the end of 2004, this covenant would not have limited the amount the Company could borrow under this facility. The other covenant requires EBIT (as defined in the credit agreement) to be at least three times interest expense. The actual interest coverage was 7.87 for 2004. The Company was in compliance with all debt covenants at October 31, 2004.

The Company believes that the combination of present capital resources, internally generated funds, and unused financing sources are more than adequate to meet cash requirements for 2005. There are no significant restrictions limiting the transfer of funds from international subsidiaries to the parent Company.

In October 2003, the Board of Directors authorized the Company to repurchase up to 2,000 shares of the Company’s common stock on the open market. Expected uses for repurchased shares include the funding of benefit programs including stock options, restricted stock and 401(k) matching. Shares purchased will be treated as treasury shares until used for such purposes. The repurchase program will be funded using the Company’s working capital. During October 2004, the Company repurchased approximately 1 percent of the shares authorized to be repurchased under this program.

The Company ended 2004 with a backlog of $78 million, up $11 million from the beginning of the year and is poised for a strong start to 2005. Looking over the course of the year, we will continue to focus on identifying new market opportunities. With a low debt level and expectations of good cash flow, the Company will have the capability to respond to opportunities as they develop.

The impact of changes in foreign currency exchange rates on sales and operating results cannot be precisely measured because of fluctuating selling prices, sales volume, product mix and cost structures in each country where Nordson operates. As a rule, a weakening of the U.S. dollar relative to foreign currencies has a favorable effect on sales and net income, while a strengthening of the U.S. dollar has a detrimental effect.

In 2004 compared with 2003, the U.S. dollar was generally weaker against foreign currencies. If 2003 exchange rates had been in effect during 2004, sales would have been approximately $37,146 lower and third-party costs would have been approximately $22,471 lower. In 2003 compared with 2002, the U.S. dollar was also generally weaker against foreign currencies. If 2002 exchange rates had been in effect during 2003, sales would have been approximately $37,685 lower and third-party costs would have been approximately $22,408 lower. These effects on reported sales do not include the impact of local price adjustments made in response to changes in currency exchange rates.

The Company operates internationally and enters into transactions denominated in foreign currencies. Consequently, the Company is subject to market risk arising from exchange rate movements between the dates foreign currencies are recorded and the dates they are settled. Nordson regularly uses foreign exchange contracts to reduce its risks related to most of these transactions. These contracts, primarily Euro and Yen, usually have maturities of 90 days or less, and generally require the Company to exchange foreign currencies for U.S. dollars at maturity, at rates stated in the contracts. Gains and losses from changes in the market value of these contracts offset foreign exchange losses and gains, respectively, on the underlying transactions. The balance of transactions denominated in foreign currencies are designated as hedges of the Company’s net investments in foreign subsidiaries or are intercompany transactions of a long-term investment nature. As a result of the Company’s use of foreign exchange contracts on a routine basis to reduce the risks related to nearly all of the Company’s transactions denominated in foreign currencies as of October 31, 2004, the Company did not have a material foreign currency risk related to its derivatives or other financial instruments.

Note 10 to the financial statements contains additional information about the Company’s foreign currency transactions and the methods and assumptions used by the Company to record these transactions.

The Company finances a portion of its operations with short-term and long-term borrowings and is subject to market risk arising from changes in interest rates for most of its long-term debt.

The tables that follow present principal cash flows and related weighted-average interest rates by expected maturity dates of fixed-rate, long-term debt.

The tables that follow present principal cash flows and related weighted-average interest rates by expected maturity dates of variable-rate, long-term debt.

Included in the variable-rate tables above is long-term debt in the amount of Japanese Yen 200,000. This debt was converted from fixed rate to variable rate through an interest rate swap agreement. Included in the October 31, 2004 table above is long-term debt in the amount of $40,000. This debt was converted from fixed rate to variable rate through an interest rate swap agreement. These swaps are discussed in Notes 9 and 10 to the Company’s financial statements. The weighted-average interest rate of the Company’s variable-rate debt was 5.08 percent at the end of fiscal 2004, compared to .97 percent at the end of 2003. A 1 percent increase in interest rates would have resulted in approximately $312 of additional interest expense in fiscal 2004.

The company also has variable-rate notes payable. The weighted average interest rate of this debt was 2.7 percent at the end of 2004, compared to 2.5 percent at the end of 2003. A 1 percent increase in interest rates would have resulted in additional interest expense of approximately $228 on the notes payable in fiscal 2004.

Inflation affects profit margins because the ability to pass cost increases on to customers is restricted by the need for competitive pricing. Although inflation has been modest in recent years and has had no material effect on the years covered by these financial statements, Nordson continues to seek ways to minimize the impact of inflation. It does so through focused efforts to raise its productivity.

The Five-Year Summary in Item 6 documents Nordson’s historical financial trends. Over this period, the world’s economic conditions fluctuated significantly. Nordson’s solid performance is attributed to the Company’s participation in diverse geographic and industrial markets and its long-term commitment to develop and provide quality products and worldwide service to meet customers’ changing needs.

Safe Harbor Statements Under the Private Securities Litigation Reform Act of 1995

Statements in this report pertaining to future periods are “forward-looking statements” intended to qualify for the protection afforded by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations and involve risks and uncertainties. Consequently, the Company’s actual results could differ materially from the expectations expressed in the forward-looking statements. Factors that could cause the Company’s actual results to differ materially from the expected results include, but are not limited to: deferral of orders, customer-requested delays in system installations, currency exchange rate fluctuations, a sales mix different from assumptions and significant changes in local business conditions in geographic regions in which the Company conducts business.

The accompanying notes are an integral part of the consolidated financial statements.

Consolidation — The consolidated financial statements include the accounts of the Company and its majority-owned and controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Ownership interests of 20 percent or more in noncontrolled affiliates are accounted for by the equity method. Other investments are recorded at cost.

Use of estimates — The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and notes. Actual amounts could differ from these estimates.

Fiscal year — The fiscal year for the Company’s domestic operations ends on the Sunday closest to October 31 and contained 52 weeks in 2004 and 2003 and 53 weeks in 2002. To facilitate reporting of consolidated accounts, the fiscal year for most of the Company’s international operations ends on September 30.

Revenue recognition — Most of the Company’s revenues are recognized upon shipment, provided that persuasive evidence of an arrangement exists, the sales price is fixed or determinable, collectibility is reasonably assured, and title and risk of loss have passed to the customer. Revenues from contracts with multiple element arrangements, such as those including both installation and services, are recognized as each element is earned based on objective evidence of the relative fair value of each element. Revenues deferred in 2004 were not material. Amounts received in excess of revenue recognized are included as deferred revenue in the accompanying balance sheets. A limited number of the Company’s large engineered systems sales contracts are accounted for using the percentage-of-completion method. The amount of revenue recognized in any accounting period is based on the ratio of actual costs incurred through the end of the period to total estimated costs at completion. Cost estimates are updated on a quarterly basis. During 2004, 2003 and 2002, the Company recognized approximately $7,000, $5,000 and $20,000, respectively, of revenue under the percentage-of-completion method. The remaining revenues are recognized upon delivery.

Shipping and handling costs — The Company records amounts billed to customers for shipping and handling as revenue. Shipping and handling expenses are included in cost of sales.

Advertising costs — Advertising costs are expensed as incurred and amounted to $4,651 in 2004 ($4,195 in 2003 and $3,780 in 2002).

Research and development — Research and development costs are expensed as incurred and amounted to $22,947 in 2004 ($22,341 in 2003 and $26,554 in 2002).

Earnings per share — Basic earnings per share are computed based on the weighted-average number of common shares outstanding during each year, while diluted earnings per share are based on the weighted-average number of common shares and common share equivalents outstanding. Common share equivalents consist of shares issuable upon exercise of the Company’s stock options, computed using the treasury stock method, as well as nonvested stock and deferred stock-based compensation. Options whose exercise price is higher than the average market price are excluded from the calculation of diluted earnings per share because the effect would be anti-dilutive.

Cash and cash equivalents — Highly liquid instruments with a maturity of 90 days or less at date of purchase are considered to be cash equivalents. Cash and cash equivalents are carried at cost.

Marketable securities — Marketable securities consist primarily of municipal and other short-term notes with maturities greater than 90 days at date of purchase. At October 31, 2004, all contractual maturities were within one year or could be callable within one year. The Company’s marketable securities are classified as available for sale and recorded at quoted market prices that approximate cost.

Allowance for doubtful accounts — The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The amount of the allowance is determined principally on the basis of past collection experience and known factors regarding specific customers. Accounts are written off against the allowance when it becomes evident that collection will not occur.

Inventories — Inventories are valued at the lower of cost or market. Cost has been determined using the last-in, first-out (LIFO) method for 38 percent of consolidated inventories at October 31, 2004 and 39 percent at November 2, 2003. The first-in, first-out (FIFO) method is used for all other inventories. Liquidations decreased cost of goods sold by $63 in 2003 and increased cost of sales by $573 in 2002. Consolidated inventories would have been $8,762 and $8,790 higher than reported at October 31, 2004 and November 2, 2003, respectively, had the Company used the FIFO method, which approximates current cost, for valuation of all inventories.

Property, plant and equipment and depreciation — Property, plant and equipment are carried at cost. Additions and improvements that extend the lives of assets are capitalized, while expenditures for repairs and maintenance are expensed as incurred. Plant and equipment are depreciated for financial reporting purposes using the straight-line method over the estimated useful lives of the assets or, in the case of property under capital leases, over the terms of the leases. Leasehold improvements are depreciated over the term of the lease or their useful lives, which is shorter. Useful lives are as follows:

The Company capitalizes costs associated with the development and installation of internal use software in accordance with Statement of Position 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” Accordingly, internal use software costs are expensed or capitalized depending on whether they are incurred in the preliminary project stage, application development stage, or the post-implementation stage. Amounts capitalized are amortized over the estimated useful lives of the software beginning with the project’s completion. All re-engineering costs are expensed as incurred. The Company capitalizes interest costs on significant capital projects. No interest was capitalized in 2004.

Goodwill and intangible assets — Goodwill assets are subject to impairment testing. Other intangible assets, which consist primarily of core/developed technology, noncompete agreements and patent costs, are amortized over their useful lives. At present, these lives range from five to 21 years. The useful life of an asset related to core/developed technology was reduced from 30 to 15 years in 2004, resulting in additional annual amortization expense of $529.

Foreign currency translation — The financial statements of the Company’s subsidiaries outside the United States, except for those subsidiaries located in highly inflationary economies, are generally measured using the local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at the rates of exchange at the balance sheet dates. Income and expense items are translated at average monthly rates of exchange. The resulting translation adjustments are included in accumulated other comprehensive income (loss), a separate component of shareholders’ equity. Generally, gains and losses from foreign currency transactions, including forward contracts, of these subsidiaries and the United States parent are included in net income. Premiums and discounts on forward contracts are amortized over the lives of the contracts. Gains and losses from foreign currency transactions which hedge a net investment in a foreign subsidiary and from intercompany foreign currency transactions of a long-term investment nature are included in accumulated other comprehensive income (loss). For subsidiaries operating in highly inflationary economies, gains and losses from foreign currency transactions and translation adjustments are included in net income.

Comprehensive income — Accumulated other comprehensive loss at October 31, 2004 and November 2, 2003 consisted of:

Warranties — The Company offers warranties to its customers depending on the specific product and terms of the customer purchase agreement. Most of the Company’s product warranties are customer specific. A typical warranty program requires that the Company repair or replace defective products within a specified time period from the date of delivery or first use. The Company records an estimate for future warranty-related costs based on actual historical return rates. Based on analysis of return rates and other factors, the adequacy of the Company’s warranty provisions are adjusted as necessary. The liability for warranty costs is included in other accrued liabilities in the Consolidated Balance Sheet.

Following is reconciliation of the product warranty liability for 2004 and 2003:

Presentation — Certain 2003 amounts have been reclassified to conform to 2004 presentation.

In June 2002, the FASB issued Statement No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. There was no impact in 2004 on the Company’s consolidated financial position or results of operations as a result of the adoption of No. 146. During 2003, the Company recognized expense of $2,028 related to severance payments to approximately 70 employees of the finishing and coating and the advanced technology segments in North America.

In December 2002, the FASB issued Statement No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure an Amendment of FASB Statement No. 123.” No. 148 amends No. 123 to provide alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based compensation. In addition, No. 148 amends the disclosure requirements of No. 123 to require more prominent disclosures in both annual and interim financial statements regarding the method of accounting for stock-based compensation and the effect of the method used on reported results. The alternative methods of transition of No. 148 are effective for fiscal years ending after December 15, 2002. The disclosure provision of No. 148 is effective for interim periods beginning after December 15, 2002. The Company accounts for its stock option plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees.” No stock option expense is reflected in net income, as all options granted under these plans had an exercise price equal to the fair market value of the underlying common stock on the date of grant.

Retirement plans — The parent company and certain subsidiaries have funded contributory retirement plans covering certain employees. The Company’s contributions are primarily determined by the terms of the plans subject to the limitation that they shall not exceed the amounts deductible for income tax purposes. The Company also sponsors unfunded contributory supplemental retirement plans for certain employees. Generally, benefits under these plans vest gradually over a period of approximately five years from date of employment, and are based on the employee’s contribution. The expense applicable to retirement plans for 2004, 2003 and 2002 was approximately $4,552, $4,084 and $3,712, respectively.

Pension and other postretirement plans — The Company has various pension plans that cover substantially all employees. Pension plan benefits are generally based on years of employment and, for salaried employees, the level of compensation. The Company contributes actuarially determined amounts to domestic plans to provide sufficient assets to meet future benefit payment requirements. The Company also sponsors an unfunded supplemental pension plan for certain employees. The Company’s international subsidiaries fund their pension plans according to local requirements.

The Company also has an unfunded postretirement benefit plan covering most of its domestic employees. Employees hired after January 1, 2002 are not eligible to participate in this plan. The plan provides medical and life insurance benefits. The plan is contributory, with retiree contributions adjusted annually, and contains other cost-sharing features such as deductibles and coinsurance.

The Company uses a measurement date of October 31 for the domestic pension and postretirement plans and September 30 for the international pension plans.

A reconciliation of the benefit obligations, plan assets, accrued benefit cost and the amount recognized in financial statements for these plans is as follows:

The accumulated benefit obligations for all pension plans was $158,921 at October 31, 2004 and $140,641 at November 2, 2003. Benefit obligations exceeded plan assets for all pension plans at October 31, 2004 and November 2, 2003.

During 2004 and 2003, the Company recorded an additional minimum pension liability so that the recorded pension liability was at least equal to the accumulated benefit obligation. Amounts recorded in other comprehensive income (loss) related to the minimum pension liability, net of tax, were ($2,650) in 2004 and ($5,633) in 2003.

Net pension and other postretirement benefit costs include the following components:

The weighted average assumptions in the following table represent the rates used to develop the actuarial present value of projected benefit obligation for the year listed and also the net periodic benefit cost for the following year.

The amortization of prior service cost is determined using a straight-line amortization of the cost over the average remaining service period of employees expected to receive benefits under the plans.

In determining the expected return on plan assets, the Company considers both historical performance and an estimate of future long-term rates of return on assets similar to those in the Company’s plans. The Company consults with and considers the opinions of financial and other professionals in developing appropriate return assumptions.

The health care cost trend rate assumption has a significant effect on the amounts reported. For example, a one-percentage point change in the assumed health care cost trend rate would have the following effects:

The allocation of pension plan assets as of October 31, 2004 and November 2, 2003 is as follows:

The Company’s investment objective for defined benefit plan assets is to meet the plans’ benefit obligations, while minimizing the potential for future required Company plan contributions. Investment policies and strategies are developed on a country-specific basis.

For the domestic plans, which comprise 87 percent of worldwide pension assets, the investment strategies focus on asset class diversification, liquidity to meet benefit payments and an appropriate balance of long-term investment return and risk. Target ranges for asset allocations are determined by matching the actuarial projections of the plans’ future liabilities and benefit payments with expected long-term rates of return on the assets, taking into account investment return volatility and correlations across asset classes. The target allocation is 50 to 70 percent equity securities and 30 to 50 percent debt securities. Plan assets are diversified across several investment managers and are generally invested in liquid funds that are selected to track broad market equity and bond indices. Investment risk is carefully controlled with plan assets rebalanced to target allocations on a periodic basis and continual monitoring of investment managers’ performance relative to the investment guidelines established with each investment manager.

International plans comprise 13 percent of worldwide pension assets. The allocation of these assets in 2004 was: 31 percent equity securities, 20 percent debt securities, 11 percent real estate and 38 percent other assets.

At October 31, 2004, the pension plans did not have any investment in the Company’s stock. During 2004, the domestic plans sold 135 shares of the Company’s stock that had been acquired in 2003. The plans received dividends on the Company’s stock of $63 in 2004 and $75 in 2003.

It is estimated that the Company’s contributions to the pension and postretirement plans in 2005 will be approximately $4,253.

Retiree benefit payments, which reflect expected future service, are anticipated to be paid as follows:

Foreign income tax expense includes a benefit related to the utilization of loss carryforwards of $395, $266 and $539 in 2004, 2003 and 2002, respectively.

The reconciliation of the United States statutory federal income tax rate to the worldwide consolidated effective tax rate follows:

The extraterritorial income exclusion allows a portion of certain income from export sales of goods manufactured in the U.S. to be excluded from taxable income.

Earnings before income taxes of international operations, which are calculated before intercompany profit elimination entries, were $40,739, $25,992 and $27,038 in 2004, 2003 and 2002, respectively. Deferred income taxes are not provided on undistributed earnings of international subsidiaries that are intended to be permanently invested in those operations. These undistributed earnings aggregated approximately $81,346 and $69,618 at October 31, 2004 and November 2, 2003, respectively. Should these earnings be distributed, applicable foreign tax credits would substantially offset U.S. taxes due upon the distribution.

In October 2004, Congress passed the American Jobs Creation Act. The new law contains numerous changes to existing tax laws. Among other things, the Act will provide a deduction with respect to income of certain U.S. manufacturing activities and allow for favorable taxing on repatriation of certain offshore earnings. The Company has not yet determined what impact, if any, the new law may have on its future results of operations and financial condition.

Significant components of the Company’s deferred tax assets and liabilities are as follows:

At October 31, 2004, the Company had $10,172 of tax credit carryforwards. Of that total, $10,056 will expire in years 2011 through 2012, and $116 has no expiration date. At October 31, 2004, the Company had $6,350 of foreign operating loss carryforwards, of which $1,663 will expire in years 2005 through 2014, and $4,687 has an indefinite carryforward period. The net change in the valuation allowance was $641 in 2004 and $876 in 2003. The valuation allowance of $10,757 at October 31, 2004 relates to tax credits and loss carryforwards that may expire before being realized.

The Company has two incentive compensation plans for executive officers. The Compensation Committee of the Board of Directors, composed of independent directors, approves participants in the plans and payments under the plans.

The annual awards under the management incentive compensation plan are based upon corporate and individual performance and are calculated as a percentage of base salary for each executive officer. In making awards under this plan for any particular year, the Committee may, however, choose to modify measures, change payment levels or otherwise exercise discretion to reflect the external economic environment and individual or Company performance. Compensation expense attributable to this plan was $3,965 in 2004, $3,684 in 2003, and $1,100 in 2002.

Under the long-term incentive compensation plan, executive officers receive cash awards based solely on corporate performance measures over three-year performance periods. Cash awards vary based on the degree to which corporate performance exceeds predetermined threshold, target and maximum performance levels at the end of a performance period. No payout will occur unless the Company achieves certain threshold performance objectives. The Committee may, however, choose to modify measures, change payment levels or otherwise exercise discretion to reflect the external economic environment and individual or Company performance. Compensation expense attributable to this plan was $7,004 in 2004, $2,653 in 2003, and $1,406 in 2002.

The Company has lease commitments expiring at various dates, principally for manufacturing, warehouse and office space, automobiles and office equipment. Many leases contain renewal options and some contain purchase options and residual guarantees.

Rent expense for all operating leases was approximately $10,462 in 2004, $10,154 in 2003, and $10,611 in 2002. Amortization of assets recorded under capital leases is recorded in depreciation expense.

Assets held under capitalized leases and included in property, plant and equipment are as follows:

At October 31, 2004, future minimum lease payments under non-cancelable capitalized and operating leases are as follows:

Included in the domestic available amount above is a $200,000 revolving credit agreement with a group of banks that began in 2004 and expires in 2009. Payment of commitment fees is required. Other lines of credit obtained by the Company can generally be withdrawn at the option of the banks and do not require material compensating balances or commitment fees.

Senior note, due 2007 — This note is payable in one installment and bears interest at a fixed rate of 6.78 percent.

Senior notes, due 2005-2011 — These notes with a group of insurance companies have a weighted-average, fixed-interest rate of 7.02 percent and had an original weighted-average life of 6.5 years at the time of issuance in 2001. During 2004 the Company entered into an interest rate swap to convert $40,000 of 6.79 percent fixed rate debt due in May 2006 to variable rate debt. The variable rate is reset semi-annually, and at October 31, 2004 the rate was 5.34 percent.

Five-year term loan — This loan is payable in five annual installments of $8,000 beginning on October 31, 2001 with interest payable quarterly. The interest rate, which can be adjusted based on the Company’s performance, was 7.52 percent at October 31, 2004.

Floating rate option notes — These notes were issued to finance real estate owned by the Company and were paid off in 2004.

Industrial revenue bonds — Gwinnett County, Georgia — These bonds were issued in connection with the acquisition and renovation of the Norcross manufacturing facility in Gwinnett County, Georgia and were paid off in 2004.

Leasehold improvements financing note, due 2006 — This note partially funded the leasehold improvements for a sales and demonstration facility in Japan built in 1996. The principal balance is Japanese Yen 200,000 and is payable in one installment in 2006. Interest, payable at a fixed rate of 3.10 percent, was converted to a variable rate through an interest rate swap. The variable rate is reset semi-annually, and at October 31, 2004 the Company’s effective borrowing rate was negative ..30 percent.

Annual maturities — The annual maturities of long-term debt for the five fiscal years subsequent to October 31, 2004 are as follows: $12,290 in 2005; $46,613 in 2006; $54,290 in 2007; $24,290 in 2008; and $4,290 in 2009.

The Company enters into foreign currency forward contracts, which are derivative financial instruments, to reduce the risk of foreign currency exposures resulting from receivables, payables, intercompany receivables, intercompany payables and loans denominated in foreign currencies. The maturities of these contracts are usually less than 90 days. Forward contracts are marked to market each accounting period, and the resulting gains or losses are included in other income (expense) in the Consolidated Statement of Income. A gain of $807 was recognized from changes in fair value of these contracts for the year ended October 31, 2004. A loss of $105 and a gain of $130 were recognized from changes in fair value of these contracts for the years ended November 2, 2003 and November 3, 2002, respectively.

At October 31, 2004, the Company had outstanding forward exchange contracts that mature at various dates through January 2005. The following table summarizes, by currency, the Company’s forward exchange contracts at October 31, 2004 and November 2, 2003:

The Company also uses foreign denominated fixed-rate debt and intercompany foreign currency transactions of a long-term investment nature to hedge the value of its investment in its wholly owned subsidiaries. For hedges of the net investment in foreign operations, realized and unrealized gains and losses are shown in the cumulative translation adjustment account included in total comprehensive income. For the years ended October 31, 2004 and November 2, 2003, net gains of $1,175 and $2,360, respectively, were included in the cumulative translation adjustment account related to foreign denominated fixed-rate debt designated as a hedge of net investment in foreign operations.

The Company has entered into two interest rate swaps that convert fixed rate debt to variable rate debt. A swap related to a Japanese Yen 200,000 leasehold improvement note was entered into in 1996, and a swap related to a $40,000 senior note was entered into in 2004. The swaps have been designated as fair-value hedges, and the derivatives qualify for the short-cut method. The swaps are recorded with a fair market value of $505 in the October 31, 2004 Consolidated Balance Sheet and $73 in the November 2, 2003 Consolidated Balance Sheet.

The Company is exposed to credit-related losses in the event of nonperformance by counterparties to financial instruments. The Company uses major banks throughout the world for cash deposits, forward exchange contracts and interest rate swaps. The Company’s customers represent a wide variety of industries and geographic regions.

As of October 31, 2004, there were no significant concentrations of credit risk. The Company does not use financial instruments for trading or speculative purposes.

The carrying amounts and fair values of the Company’s financial instruments, other than receivables and accounts payable, are as follows:

The Company used the following methods and assumptions in estimating the fair value of financial instruments:


	•	Cash, cash equivalents and notes payable are valued at their carrying amounts due to the relatively short period to maturity of the instruments.
	•	Marketable securities are valued at quoted market prices.
	•	Long-term debt is valued by discounting future cash flows at currently available rates for borrowing arrangements with similar terms and conditions.
	•	The fair value of forward exchange contracts is estimated using quoted exchange rates of comparable contracts.
	•	The fair value of interest rate swaps is estimated using valuation techniques based on discounted future cash flows.

Preferred — The Company has authorized 10,000 Series A convertible preferred shares without par value. No preferred shares were outstanding in 2004, 2003, or 2002.

Common — The Company has 80,000 authorized common shares without par value. In March 1992, the shareholders adopted an amendment to the Company’s articles of incorporation which, when filed with the State of Ohio, would increase the number of authorized common shares to 160,000. At October 31, 2004 and November 2, 2003, there were 49,011 common shares issued. At October 31, 2004 and November 2, 2003, the number of outstanding common shares, net of treasury shares, was 36,279 and 34,035, respectively. Treasury shares are reissued using the first-in, first-out method.

Long-term performance plan — The Company’s long-term performance plan, approved by the Company’s shareholders in 2004, provides for the granting of stock options, stock appreciation rights, restricted stock, stock purchase rights, stock equivalent units, cash awards, and other stock or performance-based incentives. The number of common shares available for grant of awards is 3.0 percent of the number of common shares outstanding as of the first day of each fiscal year, plus up to an additional 0.5 percent, consisting of shares available, but not granted, in prior years. At the end of fiscal 2004, there were 1,270 shares available for grant in 2005.

Stock options — Nonqualified or incentive stock options may be granted to employees and directors of the Company. Generally, the options may be exercised beginning one year from the date of grant at a rate not exceeding 25 percent per year and expire 10 years from the date of grant. Vesting accelerates upon the occurrence of events that involve or may result in a change of control of the Company.

The Company uses the intrinsic value method to account for employee stock options. No compensation expense has been recognized because the exercise price of the Company’s stock options equals the market price of the underlying common shares on the date of grant. Tax benefits arising from the exercise of nonqualified stock options are recognized when realized and credited to capital in excess of stated value.

As discussed in Note 2, the Company accounts for its stock option plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees.” No stock option expense is reflected in net income, as all options granted under these plans had an exercise price equal to the fair market value of the underlying common stock on the date of grant. The following table shows pro forma information regarding net income and earnings per share as if the Company had accounted for stock options granted since 1996 under the fair value method. Under this method, the estimated fair value of the options is amortized to expense over the options’ vesting period. The fair value for these options was estimated at the date of grant using a Black-Scholes option-pricing model.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

Stock appreciation rights — The Company may grant stock appreciation rights to employees. A stock appreciation right provides for a payment equal to the excess of the fair market value of a common share when the right is exercised, over its value when the right was granted. There were no stock appreciation rights outstanding during 2004, 2003 and 2002.

Limited stock appreciation rights that become exercisable upon the occurrence of events that involve or may result in a change of control of the Company have been granted with respect to 3,823 shares.

Restricted stock — The Company may grant restricted stock to employees and directors of the Company. These shares may not be disposed of for a designated period of time defined at the date of grant and are to be returned to the Company if the recipient’s employment terminates during the restriction period. As shares are issued, deferred stock-based compensation equivalent to the fair market value on the date of grant is charged to shareholders’ equity and subsequently amortized over the restriction period. Tax benefits arising from the lapse of restrictions on the stock are recognized when realized and credited to capital in excess of stated value. In 2004, there were 66 restricted shares granted at a weighted-average fair value of $29.00 per share (58 and $23.41 in 2003 and 4 and $24.17 in 2002). Net amortization was $946 in 2004 ($575 in 2003 and $294 in 2002).

Employee stock purchase rights — The Company may grant stock purchase rights to employees. These rights permit eligible employees to purchase a limited number of common shares at a discount from fair market value. No stock purchase rights were outstanding during 2004, 2003, and 2002.

Shareholder rights plan — In August 1988, the Board of Directors declared a dividend of one common share purchase right for each common share outstanding on September 9, 1988. Rights are also distributed with common shares issued by the Company after that date. The rights may only be exercised if a party acquires 15 percent or more of the Company’s common shares. The exercise price of each right is $175.00 per share. The rights trade with the shares until the rights become exercisable, unless the Board of Directors sets an earlier date for the distribution of separate right certificates. The rights plan was amended and restated in May 2003.

If a party acquires at least 15 percent of the Company’s common shares (a “flip-in” event), each right then becomes the right to purchase two common shares of the Company for $1.00 per share.

The rights may be redeemed by the Company at a price of $.01 per right at any time prior to a “flip-in” event, or expiration of the rights on October 31, 2007.

Shares reserved for future issuance — At October 31, 2004, there were 87,205 shares reserved for future issuance through the exercise of outstanding options or rights, including 82,322 shares under the shareholder rights plan.

During the fourth quarter of 2004, the Company disposed of a minority equity investment that resulted in a pretax loss of $3,288 ($2,257 after tax), which was recorded in other expense.

During 2003, the Company recognized severance and restructuring costs of $2,028 ($1,359 after tax, or $.04 per share), primarily related to severance payments to approximately 70 employees of the finishing and coating and the advanced technology segments in North America. The unpaid balance of $183 at November 2, 2003 was paid in 2004.

In the face of difficult economic conditions during 2002 that accelerated the technical obsolescence of certain inventory and impacted the demand for other inventory, the Company recognized an inventory write-down in the fourth quarter of 2002 of $11,388 ($7,630 on an after-tax basis, or $.23 per share). This amount was recorded in cost of sales. The addition of $11,388 to the inventory obsolescence reserve brought the reserve balance to $23,149. During 2003, $21,281 of inventory was disposed of and charged against the reserve, leaving a balance of $1,868 in this reserve at November 2, 2003. The remaining inventory was disposed of in 2004.

Also, during 2002, the Company recognized severance and restructuring costs of $2,690 ($1,802 on an after-tax basis, or $.05 per share). Of this amount, $2,499 related to workforce reduction actions involving approximately 130 employees. This amount was recorded below selling and administrative expenses in the Consolidated Statement of Income. The remaining amount of $191 related to the combination of two of the Company’s businesses and was included in cost of sales. Of the total amount, $657 was unpaid at November 3, 2002 and paid in 2003. Total severance, restructuring and inventory write-down costs in 2002 were $14,078 ($9,432 on an after-tax basis, or $.28 per share).

Business acquisitions have been accounted for as purchases, with the acquired assets and liabilities recorded at their estimated fair value at the dates of acquisition. The cost in excess of the net assets of the business acquired is included in goodwill. Operating results of acquisitions are included in the Consolidated Statement of Income from the respective dates of acquisition.

In April 2004, the Company acquired full ownership of W. Puffe Technologie, a German manufacturer of hot melt adhesive dispensing systems for the textile, aerospace, life science, automotive, construction and baby diaper industries, with annual sales of approximately $6,000. The cost of the acquisition was $4,473, which was allocated to net tangible assets of $1,498, intangible assets of $570 and tax-deductible goodwill of $2,405. The intangible assets consist of patents, which are being amortized over an average of 14 years, and a noncompete agreement, which will be amortized over two years.

In March 2003, the Company acquired full ownership interest in land and a building owned by a partnership that leased office and manufacturing space to the Company. The real estate is located in Duluth, Georgia and serves as the worldwide headquarters for the Company’s adhesives businesses. As a result, the Company assumed $10,704 of debt owed by the partnership, real estate with a net book value of $10,270, cash and other current liabilities. Previously, the Company had leased the property under an operating lease with a partnership in which the Company was a partner.

In February 2002, the Company acquired a distributor of EFD equipment for $1,223.

Assuming these acquisitions had taken place at the beginning of 2002, pro forma results would not have been materially different.

The Company conducts business across three primary business segments: adhesive dispensing and nonwoven fiber systems, finishing and coating systems and advanced technology systems. The composition of segments and measure of segment profitability is consistent with that used by the Company’s chief operating decision maker. The primary focus is operating profit, which equals sales less operating costs and expenses. Beginning in 2004, the method of measuring segment operating profit was modified. A larger portion of corporate expenses is now being allocated to the three primary business segments. Additional corporate expenses of $17,304 were allocated to the three business segments compared to the prior method of measuring segment profit. These expenses represent costs incurred to support all business segments, including human resources, legal, finance and certain employee benefit costs. Prior year segment results have been reclassified to conform to the new measurement of segment operating profit. Additional expense amounts of $14,972 and $9,629 for 2003 and 2002, respectively, were allocated to the three business segments. Operating profit excludes interest income (expense), investment income (net) and other income (expense). Items below the operating income line of the Condensed Consolidated Statement of Income are not presented by segment, since they are excluded from the measure of segment profitability reviewed by the Company’s chief operating decision maker. The accounting policies of the segments are generally the same as those described in Note 1, Significant Accounting Policies.

In 2004, the Company realigned its geographic reporting. Previously, sales were reported in four regions, North America, Europe, Japan and Pacific South. The regions are now United States, Americas (Canada and Latin America), Europe, Japan and Asia Pacific. Prior year amounts have been reclassified to conform to the new alignment.

Nordson products are used in a diverse range of industries, including appliance, automotive, bookbinding, circuit board assembly, electronics, food and beverage, furniture, medical, metal finishing, nonwoven products, packaging, semiconductor and telecommunications. Nordson sells its products primarily through a direct, geographically dispersed sales force.

No single customer accounted for more than 5 percent of the Company’s sales in 2004, 2003, or 2002.


(a)	Includes $2,028 of severance and restructuring charges in 2003 and $14,078 of severance and restructuring charges and inventory write-downs in 2002. These charges were not allocated to reportable segments for management reporting purposes.


(b)	Corporate assets are principally cash and cash equivalents, domestic deferred income taxes, investments, capital leases, headquarter facilities, the major portion of the Company’s domestic enterprise management system and intangible assets.


(c)	Includes notes and accounts receivable net of customer advance payments and allowance for doubtful accounts, inventories net of reserves and property, plant and equipment net of accumulated depreciation.


(d)	Long-lived assets consist of property, plant and equipment and capital lease assets.

The Company has significant sales and long-lived assets in the following geographic areas:

A reconciliation of total segment operating income to total consolidated income before income taxes is as follows:

A reconciliation of total assets for reportable segments to total consolidated assets is as follows:

In 2002, the Company adopted FASB Statements No. 141, “Business Combinations,” and No. 142, “Goodwill and Other Intangible Assets.” No. 141 requires that all business combinations be accounted for by the purchase method and that certain acquired intangible assets be recognized as assets apart from goodwill. No. 142 provides that goodwill should not be amortized but instead be tested for impairment annually at the reporting unit level. In accordance with No. 142, the Company completed a transitional goodwill impairment test that resulted in no impairment loss being recognized. Goodwill is tested for impairment on an annual basis and more often if indications of impairment exist. Estimates of future cash flows, discount rates and terminal value amounts are used to determine the estimated fair value of the reporting units. The results of the Company’s analyses indicated that no reduction of goodwill is required.

Changes in the carrying amount of goodwill for 2004 by operating segment are as follows:

Information regarding the Company’s intangible assets subject to amortization is as follows:

At October 31, 2004, $4,891 of intangible assets related to a minimum pension liability for the Company’s pension plans were not subject to amortization. The amount at November 2, 2003 was $2,152.

Amortization expense for 2004 and 2003 was $1,846 and $1,369, respectively. Estimated amortization expense for each of the five succeeding fiscal years is as follows:

Domestic operations report results using four 13-week quarters. International subsidiaries report results using calendar quarters.

During the fourth quarter of 2004, the Company disposed of a minority equity investment that resulted in a pre-tax loss of $3,288 ($2,257 after tax), which was recorded in other expense.

During 2003, the Company recognized severance and restructuring pretax charges of $22 in the first quarter ($15 after tax), $1,446 in the second quarter ($969 after tax), $157 in the third quarter ($105 after tax), and $403 in the fourth quarter ($270 after tax).

The Company is involved in pending or potential litigation regarding environmental, product liability, patent, contract, employee and other matters arising from the normal course of business. Including the environmental matter discussed below, it is the Company’s opinion, after consultation with legal counsel, that resolutions of these matters are not expected to result in a material effect on its financial condition, quarterly or annual operating results, and cash flows.

Environmental – The Company has been identified as a potentially responsible party (PRP) at a Wisconsin municipal landfill and has voluntarily agreed with other PRP’s to share costs associated with (1) a feasibility study and remedial investigation (“FS/ RI”) for the site and (2) providing clean drinking water to the affected residential properties through completion of the FS/ RI phase of the project. The FS/ RI is expected to be completed in 2005. The Company is committing $829 towards completing the FS/ RI phase of the project and providing clean drinking water. This amount has been recorded in the Company’s financial statements. Against this commitment, the Company has made payments of $363 through the end of fiscal year 2004. The remaining amount of $466 is recorded in accrued liabilities in the October 31, 2004 Consolidated Balance Sheet. The total cost of the Company’s share for remediation efforts will not be ascertainable until the FS/ RI is completed and a remediation plan is approved by the Wisconsin Department of Natural Resources, which is anticipated to occur in 2006. However, based upon current information, the Company does not expect that the costs associated with remediation will have a material effect on its financial condition or results of operations.

We have audited the accompanying consolidated balance sheets of Nordson Corporation as of October 31, 2004 and November 2, 2003, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended October 31, 2004. Our audits also included the financial statement schedules listed in the Index at Item 15(a)(2) and (d). These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nordson Corporation at October 31, 2004 and November 2, 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended October 31, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

An evaluation was performed under the supervision and with the participation of the Company’s management, including its Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, of the effectiveness of the Company’s disclosure controls and procedures as of October 31, 2004. Based on that evaluation, the Company’s management, including its CEO and CFO, have concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. There have been no changes in the Company’s internal controls over financial reporting or in other factors identified in connection with this evaluation that occurred during the fourth quarter of the fiscal year ended October 31, 2004 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company incorporates herein by reference the information appearing under the captions “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” of the Company’s definitive Proxy Statement for the 2005 Annual Meeting. Information regarding the Company’s audit committee financial expert is incorporated by reference to the caption “Election of Directors” of the definitive Proxy Statement for the 2005 Annual Meeting.

Executive officers of the Company serve for a term of one year from date of election to the next organizational meeting of the Board of Directors and until their respective successors are elected and qualified, except in the case of death, resignation or removal. Information concerning executive officers of the Company is contained in Part I of this report under the caption “Executive Officers of the Company.”

The Company has adopted a code of ethics for all employees and directors, including the principal executive officer, other executive officers, principal finance officer and other finance personnel. A copy of the code of ethics is available free of charge on the Company’s Web site at www.nordson.com. All material changes to the code will be posted to the Web site.

The Company incorporates herein by reference the information appearing under the caption “Compensation of Directors,” and information pertaining to compensation of executive officers appearing under the captions “Summary Compensation Table,” “Option/ SAR Grants in Last Fiscal Year,” “Long-Term Incentive Compensation,” “Aggregated Option/ SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/ SAR Values,” “Salaried Employees’ Pension Plan,” and “Excess Defined Benefit Pension Plan and Excess Defined Contribution Retirement Plan” in the Company’s definitive Proxy Statement for the 2005 Annual Meeting.

The Company incorporates herein by reference the information appearing under the caption “Ownership of Nordson Common Shares” in the Company’s definitive Proxy Statement for the 2005 Annual Meeting.

The Company incorporates herein by reference the information appearing under the caption “Agreements with Officers and Directors” in the Company’s definitive Proxy Statement for the 2005 Annual Meeting. There are no other transactions that require disclosure pursuant to Item 404 of Regulation S-K.

William D. Ginn, a director of the Company, is a retired partner with the law firm of Thompson Hine LLP. Thompson Hine LLP has in the past provided and continues to provide legal services to the Company.

The Company incorporates herein by reference the information appearing under the caption “Independent Auditors” in the Company’s definitive Proxy Statement for the 2005 Annual Meeting.

No other consolidated financial statement schedules are presented because the schedules are not required, because the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements, including the notes thereto.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	By: /s/ PETER S. HELLMAN

	Peter S. Hellman
	President, Chief Financial and Administrative Officer

	/s/ NICHOLAS D. PELLECCHIA

	Nicholas D. Pellecchia
	Vice President, Finance and Controller

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


*	Indicates management contract or compensatory plan, contract or arrangement in which one or more directors and/or executive officers of Nordson Corporation may be participants

59 EX-3.B 2 l10447aexv3wb.txt EXHIBIT 3(B) 1998 AMENDED REGULATIONS Exhibit 3-b NORDSON CORPORATION 1998 AMENDED REGULATIONS ARTICLE I --------- SHAREHOLDERS ------------ SECTION 1. ANNUAL MEETING. The annual meeting of shareholders of the Company for the election of directors, the consideration of reports, and the transaction of such other business as may properly be brought before the meeting shall be held at the principal office of the Company in Westlake, Ohio, or at such other place either within or without the State of Ohio as may be designated by the Board of Directors, by the Chairman of the Board, or by the President and specified in the notice of the meeting, at 5:15 o'clock p.m. on the fourth Tuesday in February in each year, or at such other time and on such other date (not, however, earlier than February 15 or later than March 15 in any year) as the Board of Directors may determine. SECTION 2. SPECIAL MEETING. Special meetings of the shareholders of the Company may be held on any business day when called by the President, or by a Vice President; by the Board of Directors acting at a meeting or by a majority of the directors acting without a meeting; or by persons who hold fifty percent of all the shares outstanding and entitled to vote thereat. Upon request in writing delivered either in person or by registered mail to the President or the Secretary by any person entitled to call a special meeting of the shareholders, that officer shall forthwith cause to be given to the shareholders entitled thereto notice of a meeting to be held on a date not less than seven or more than sixty days after the receipt of the request, as that officer may fix. If the notice is not given within thirty days after the delivery or mailing of the request, the persons calling the meeting may fix the time of the meeting and give notice thereof in the manner provided by law or as provided in these Regulations, or cause the notice to be given by any designated representative. Each special meeting shall be called to convene between nine o'clock a.m. and four o'clock p.m. and shall be held at the principal Office of the Company at Westlake, Ohio, unless the meeting is called by the directors, acting with or without a meeting, in which case the meeting may be held at any place either within or without the State of Ohio determined by the Board of Directors and specified in the notice of the meeting. SECTION 3. NOTICE OF MEETINGS. Not less than seven or more than sixty days before the date fixed for a meeting of the shareholders, written notice stating the time, place, and purposes of the meeting shall be given by or at the direction of the President, a Vice President, the Secretary, or an Assistant Secretary (or, if notice is not timely given, by a designated representative of the person calling the meeting under Section 2 of this Article I). The notice shall be given by personal delivery or by mail to each shareholder entitled to notice of the meeting who is not of record as of the date next preceding the day on which notice is given or, if a record date therefor is duly fixed, of record as of that date; if mailed, the notice shall be addressed to the shareholders at their respective addresses as they appear on the records of the Company. Notice of the time, place, and purposes of any meeting of shareholders may be waived in writing, either before or after the holding of the meeting, by any shareholders, which -1- writing shall be filed with or entered upon the records of the meeting. The attendance of any shareholder at any meeting without protesting, prior to or at the commencement of the meeting, the lack of proper notice shall be deemed to be a waiver by him of notice of the meeting. SECTION 4. QUORUM; ADJOURNMENT. Except as may be otherwise provided by law or by the Articles of Incorporation, at any meeting of the shareholders, holders of one-third of the outstanding voting shares of the Company present in person or by proxy shall constitute a quorum of such meeting; provided, however, that no action required by law, the Articles, or these Regulations to be authorized or taken by a designated proportion of the shares of any particular class or of each class of the Company may be authorized or taken by a lesser proportion and except that the holders of a majority of the voting shares represented at the meeting may adjourn the meeting from time to time; if any meeting is adjourned, notice of the adjournment need not be given if the time and place to which such meeting is adjourned are fixed and announced at the meeting. SECTION 5. PROXIES. Persons entitled to vote shares or act with respect to shares may vote or act in person or by proxy. The person appointed as proxy need not be a shareholder. Unless the writing appointing a proxy otherwise provides, the presence at a meeting of a person who has appointed a proxy shall not operate to revoke the appointment. Notice to the Company, in writing or in open meeting, of the revocation of the appointment of a proxy shall not affect any vote or act previously taken or authorized. SECTION 6. APPROVAL AND RATIFICATION OF ACTS OF OFFICERS AND BOARD OF DIRECTORS. Except as otherwise provided by the Articles of Incorporation or by law, any contract, act, or transaction, prospective or past, of the Company, of the Board of Directors, or of the officers may be approved or ratified by the affirmative vote at a meeting of the shareholders, or by written consent, with or without a meeting, of the holders of record of shares entitling them to exercise a majority of the voting power of the Company, and that approval or ratification shall be as valid and binding as though affirmatively voted for or consented to by every shareholder of the Company. SECTION 7. ORDER OF BUSINESS. (a) The Chairman of the Board, or such other officer of the Company as may be designated by the Board of Directors, will call meetings of the shareholders to order and will preside at the meetings. The presiding officer will determine the order of business at the meeting and have the authority to regulate the conduct of the meeting, including (i) limiting the persons (other than shareholders and their duly appointed proxies) who may attend the meeting, (ii) determining whether any shareholder or his or her proxy should be excluded from the meeting because the shareholder or proxy has disrupted or is likely to disrupt the meeting, (iii) determining the circumstances in which any person may make a statement or ask questions at the meeting, and (iv) establishing such other procedures as the presiding officer may deem appropriate for the orderly conduct of the meeting. -2- (b) At an annual meeting of the shareholders, only such business as is properly brought before the meeting will be considered. To be properly brought before an annual meeting, business must be (i) specified in the notice of the meeting (or any supplement to that notice) given by or at the direction of the President, a Vice President, the Secretary, or an Assistant Secretary in accordance with Section 3 of this Article I, (ii) brought before the meeting by the presiding officer or by or at the direction of the Board of Directors, or (iii) properly requested by a shareholder to be brought before the meeting in accordance with subsection (c) of this Section 7. (c) For business to be properly requested by a shareholder to be brought before an annual meeting of the shareholders, the shareholder must (i) be a shareholder of the Company of record at the time of the giving of the notice for the annual meeting and at the time of the annual meeting, (ii) be entitled to vote at the annual meeting, and (iii) have given timely written notice of the business to the Secretary. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Company not less than 60 nor more than 90 days prior to the annual meeting; except that, if the first public announcement of the date of the annual meeting is not made at least 70 days prior to the date of the meeting, notice by the shareholder will be timely if it is so received not later than the close of business on the tenth day following the day on which the first public announcement of the date of the meeting is made. A shareholder's notice must set forth, as to each matter the shareholder proposes to bring before the annual meeting, (A) a description in reasonable detail of the business proposed to be brought before the meeting, (B) the name and address, as they appear on the Company's books, of the shareholder proposing such business and of the beneficial owner, if any, on whose behalf the proposal is made, (C) the class and number os shares that are owned of record and beneficially by the shareholder proposing the business and by the beneficial owner, if any, on whose behalf the proposed is made, and (D) any material interest of such shareholder or beneficial owner in such business. This Section 7(c) will not affect any rights that the shareholder may have pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended, to request the inclusion of proposals in the Company's proxy statement. (d) At a special meeting of the shareholders, only such business as is properly brought before the meeting will be conducted. To be properly brought before a special meeting, business must be (i) specified in the notice of the meeting (or any supplement to that notice) given by or at the direction of the President, a Vice President, the Secretary, or an Assistant Secretary in accordance with Section 3 of this Article I (or, if notice is not timely given, by a designated representative of the person calling the meeting under Section 2 of this Article I), or (ii) brought before the meeting by the presiding officer or by or at the direction of the Board of Directors. (e) The determination of whether any business sought to be brought before any annual or special meeting of the shareholders is properly brought in accordance with this Section 7 will be made by the presiding officer of the meeting. If the presiding officer determines that any business is not properly brought before the -3- meeting, he or she will so declare to the meeting, and the business will not be considered or acted upon. ARTICLE II ---------- BOARD OF DIRECTORS ------------------ SECTION 1. NUMBER AND CLASSIFICATION. The Board of Directors will be divided into three classes consisting of not less than three directors each. The number of directors may be fixed or changed (a) by the shareholders at any meeting of shareholders called to elect directors at which a quorum is present, by the vote of the holders of shares representing 80% of the voting power in elections of directors, or (b) by the Board of Directors by the vote of a majority of the directors then in office. The terms in office of the directors in each of the classes will expire in consecutive years. At each annual election of directors, directors will be elected to the class whose term in office expires in that year and will hold office for a term of three years and until their respective successors are elected. In case of any increase in the number of directors of any class, the additional director or directors elected to that class will hold office for the remainder of the term in office of that class. SECTION 2. RESIGNATION; REMOVAL; VACANCIES. Any director may resign at any time by oral statement made at a meeting of the Board of Directors or in a writing delivered to the Secretary; the resignation will take effect immediately or at such other time as the director may specify. No director may be removed prior to the expiration of his term except for gross negligence or willful misconduct in the performance of his duties as a director. No reduction in the number of directors of any class, and no modification or elimination of the classification of the Board of Directors, will of itself have the effect of shortening the term of any incumbent director. In the event of any vacancy or vacancies in the Board of Directors, however caused, the directors then in office, though less than a majority of their number, fill each vacancy for the remainder of the term in office of the director whose resignation, removal, or death resulted in the vacancy. SECTION 3. NOMINATION OF CANDIDATES FOR ELECTION AS DIRECTORS. (a) At a meeting of the shareholders at which directors are to be elected, only persons properly nominated as candidates will be eligible for election as directors. Candidates may be properly nominated either (i) by the Board of Directors or (ii) by any shareholder in accordance with subsection (b) of this Section 3. (b) For a shareholder properly to nominate a candidate for election as a director at a meeting of the shareholders, the shareholder must (i) be a shareholder of the Company of record at the time of the giving of the notice for the meeting, (ii) be entitled to vote at the meeting in the election of directors, and (iii) have given timely written notice of the nomination to the Secretary. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Company not -4- less than 60 nor more than 90 days prior to the meeting; except that, if the first public announcement of the date of the meeting is not made at least 70 days prior to the date of the meeting, notice by the shareholder will be timely if it is so received not later than the close of business on the tenth day following the day on which the first public announcement of the date of the meeting is made. A shareholder's notice must set forth, as to each candidate, all of the information about the candidate required to be disclosed in a proxy statement complying with the rules of the Securities and Exchange Commission that is used in connection with the solicitation of proxies for the election of the candidate as a director. If the officer presiding at the meeting determines that one or more of the candidates has not been nominated in accordance with these procedures, he or she will so declare at the meeting, and the candidates will not be considered or voted upon at the meeting. SECTION 4. ORGANIZATION MEETING. Immediately after each annual meeting of the shareholders, the newly elected directors shall hold an organizational meeting for the purpose of electing officers and transacting any other business. Notice of the organizational meeting need not be given. SECTION 5. REGULAR MEETINGS. Regulation meetings of the Board of Directors may be held at such times and places within or without the State of Ohio as may be provided for in bylaws or resolutions adopted by the Board of Directors and upon such notice, if any, as may be so provided. Unless otherwise indicated in the notice of a regular meeting, any business may be transacted at that regular meeting. SECTION 6. SPECIAL MEETINGS. Special Meetings of the Board of Directors may be held at any time within or without the State of Ohio (or through use of telephone or other communications equipment if all the directors participating in the meeting can hear each other) upon call by the Chairman of the Board, by the President, by a Vice President, or by any two directors. Written notice of the time and place of each special meeting shall be given to each director either by personal delivery or by mail, telegram, or cablegram at least two days before the meeting, which notice need not specify the purposes of the meeting. Attendance of any director at a special meeting (or participation in the meeting through use of telephone or other communications equipment) without protesting, prior to or at the commencement of the meeting, the lack of proper notice shall be deemed to be a waiver by him of notice of the meeting, and notice of a special meeting may be waived in writing, either before or after the holding of the meeting, by any director, which writing shall be filed with or entered upon the records of the meeting. Unless otherwise indicated in the notice of a special meeting, any business may be transacted at that meeting. SECTION 7. QUORUM; ADJOURNMENT. A quorum of the Board of Directors shall consist of a majority of the directors then in office; provided, that a majority of the directors present at a meeting duly held, whether or not a quorum is present, may adjourn the meeting from time to time. If any meeting is adjourned, notice of the adjournment need not be given if the time and place to which the meeting is adjourned are fixed and announced at the meeting. At each meeting of the Board of Directors at which a quorum is present, all questions and business shall -5- be determined by a majority vote of those present, except as otherwise expressly provided in these Regulations. SECTION 8. ACTION WITHOUT A MEETING. Any action which may be authorized or taken at a meeting of the Board of Directors may be authorized or taken without a meeting with the affirmative vote or approval of, and in a writing or writings signed by, all of the directors, which writing or writings shall be filed with or entered upon the records of the Company. SECTION 9. COMMITTEES. The Board of Directors may at any time appoint from its members an Executive, Finance, or other committee or committees, consisting of such number of members, not less than three, as the Board of Directors may deem advisable together with such alternates as the Board of Directors may deem advisable to take the place of any absent member or members at any meeting of the committee. Each member and each alternative shall hold office during the pleasure of the Board of Directors. Any committee shall act only in the intervals between meetings of the Board of Directors and shall have such authority of the Board of Directors as may, from time to time, be delegated to it by the Board of Directors, except the authority to fill vacancies in the Board of Directors or in any committee of the Board of Directors. Subject to these exceptions, any person dealing with the Company shall be entitled to rely upon any act or authorization of an act by any committee to the same extent as an act or authorization of the Board of Directors. Each committee shall keep full and complete records of all meetings and actions, which shall be open to inspection by the directors. Unless otherwise ordered by the Board of Directors, any committee may prescribe its own rules for calling and holding meetings and for its own method of procedure and may act at a meeting by a majority of its members or without a meeting by a writing or writings signed by all of its members. ARTICLE III ----------- OFFICERS -------- SECTION 1. ELECTION AND DESIGNATION OF OFFICERS. The Board of Directors shall elect a President, a Secretary, a Treasurer, and, in its discretion, may elect a Chairman of the Board, one or more Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers as it deems necessary. The Chairman of the Board and the President shall be directors, but none of the other officers need be a director. Any two or more offices may be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in a more than one capacity if the instrument is required to be executed, acknowledged, or verified by two or more officers. SECTION 2. TERM OF OFFICE; VACANCIES. Each officer of the Company shall hold office until the next organizational meeting of the Board of Directors and until his successor is elected or until his earlier resignation, removal from office, or death. The Board of Directors may remove any officer at any time with or without cause by a majority vote of the directors then in office. Any vacancy in any office may be filled by the Board of Directors. -6- SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors, shall, unless that duty has been delegated by the Board of Directors to the President or another officer, preside at all meetings of the shareholders, and shall have such authority and shall perform such other duties as may be determined by the Board of Directors. SECTION 4. PRESIDENT. The President shall preside at all meetings of the shareholders and at all meetings of the Board of Directors, except for meetings at which the Chairman of the Board, if any, presides in accordance with the preceding Section. Subject to directions of the Board of Directors and to the delegation by the Board of Directors to the Chairman of the Board of specific or general executive supervision, the President shall have general executive supervision over the property, business, and affairs of the Company. He may execute all authorized deeds, mortgages, bonds, contracts, and other obligations in the name of the Company and shall have such other authority and shall perform such other duties as may be determined by the Board of Directors. SECTION 5. VICE PRESIDENT. Each Vice President shall have such authority and perform such duties as may be determined by the Board of Directors. SECTION 6. SECRETARY. The Secretary shall keep the minutes of meetings of the shareholders and of the Board of Directors. He shall keep such books as may be required by the Board of Directors, shall give notices of meetings of the shareholders and of the Board of Directors required by law, by these Regulations, or otherwise, and shall have such authority and shall perform such other duties as may be determined by the Board of Directors. SECTION 7. TREASURER. The Treasurer shall receive and have in charge all money, bills, notes, bonds, stocks in other corporations, and similar property belonging to the Company, and shall deal with this property as may be ordered by the Board of Directors. He shall keep accurate financial accounts and hold them open for inspection and examination by the directors and shall have such authority and shall perform such other duties as may be determined by the Board of Directors. SECTION 8. OTHER OFFICERS. The Assistant Secretaries, Assistant Treasurers, and other officers, if any, whom the Board of Directors may elect shall each have such authority and perform such duties as may be determined by the Board of Directors. SECTION 9. DELEGATION OF AUTHORITY AND DUTIES. The Board of Directors is authorized to delegate the authority and duties of any officer to any other officer and generally to control the action of the officers and to require the performance of duties in addition to those mentioned in these Regulations. -7- ARTICLE IV ---------- COMPENSATION ------------ SECTION 1. DIRECTORS AND MEMBERS OF COMMITTEES. Members of the Board of Directors and members of any committee of the Board of Directors shall, as such, receive such compensation, which may be either a fixed sum for attendance at each meeting of the Board of Directors or of the committee or may be stated compensation payable at intervals, or may otherwise be compensated as determined by or pursuant to authority conferred by the Board of Directors or any committee of the Board of Directors, which compensation may be in different amounts for various members of the Board of Directors or of any committee. No member of the Board of Directors shall be disqualified from being counted in the determination of a quorum or from acting at any meeting of the Board of Directors or of a committee by reason of the fact that matters affecting his own compensation as a director, member of a committee, officer, or employee are to be determined. SECTION 2. OFFICERS AND EMPLOYEES. The compensation of officers and employees of the Company, or the method of fixing their compensation, shall be determined by or pursuant to authority conferred by the Board of Directors or any committee of the Board of Directors. Compensation may include pension, disability, and death benefits and may be by way of fixed salary, on the basis of earnings, any combination thereof, or otherwise, as may be determined or authorized from time to time by the Board of Directors or any committee of the Board of Directors. ARTICLE V --------- INDEMNIFICATION OF DIRECTORS, ----------------------------- OFFICERS, AND EMPLOYEES ----------------------- The Company shall indemnify, to the full extent permitted or authorized by the Ohio General Corporation Law as it may from time to time be amended, any person made or threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that he is or was a director, officer, or employee of the Company, or is or was serving at the request of the Company as a director, trustee, officer, employee, or agent of another corporation, domestic or foreign, nonprofit or for profit, partnership, joint venture, trust or other enterprise. The Company shall pay, to the full extent permitted or authorized by the Ohio General Corporation Law, expenses, including attorneys' fees, as they are incurred by any director or officer in defending any such action, suit, or proceeding. The indemnification and advancement of expenses provided by this Article V shall not be deemed exclusive of any other rights to which any person seeking indemnification may be entitled under the articles of incorporation or the regulations, or any agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, or employee and shall inure to the benefit of the heirs, executors, and administrators of that person. -8- ARTICLE VI ---------- RECORD DATES ------------ For any lawful purpose, including, without limitation, the determination of the shareholders who are entitled to receive notice of or to vote at a meeting of shareholders, the Board of Directors may fix a record date in accordance with the provisions of the Ohio General Corporation Law. The record date for the purpose of the determination of the shareholders who are entitled to receive notice of or to vote at a meeting of shareholders shall continue to be the record date for all adjournments of the meeting, unless the Board of Directors or the persons who have fixed the original record date shall, subject to the limitations set forth in the Ohio General Corporation Law, fix another date and cause notice thereof and of the date to which the meeting has been adjourned to be given to shareholders of record as of the newly fixed date in accordance with the same requirements as those applying to a meeting newly called. The Board of Directors may close the share transfer books against transfers of shares during the whole or any part of the period provided for in this Article, including the date of the meeting of shareholders and the period ending with the date, if any, to which it is adjourned. If no record date is fixed therefor, the record date for determining the shareholders who are entitled to receive notice of or to vote at a meeting of shareholders shall be the date next preceding the day on which notice is given, or the date next preceding the day on which the meeting is held, as the case may be. ARTICLE VII ----------- CERTIFICATES FOR SHARES ----------------------- SECTION 1. FORM OF CERTIFICATES AND SIGNATURES. Each holder of shares shall be entitled to one or more certificates signed by the Chairman of the Board, the President, or a Vice President and by the Secretary, an Assistant Secretary, the Treasurer, or an Assistant Treasurer of the Company and certifying the number and class of shares held by him, but no certificate for shares shall be executed or delivered until the shares are fully paid. When a certificate is countersigned by an incorporated transfer agent or registrar, the signature of any officer of the Company may be facsimile, engraved, stamped, or printed. Although any officer of the Company whose manual or facsimile signature is affixed to a certificate ceases to be that officer before the certificate is delivered, the certificate nevertheless shall be effective in all respects when delivered. SECTION 2. TRANSFER OF SHARES. Shares of the Company shall be transferrable upon the books of the Company by the holders thereof, in person or by a duly authorized attorney, upon surrender and cancellation of certificates for a like number of shares of the same class or series, with duly executed assignment and power of transfer endorsed thereon or attached thereto, and with such proof of the authenticity of the signatures to the assignment and power of transfer as the Company or its agents may reasonably require. SECTION 3. LOST, STOLEN, OR DESTROYED CERTIFICATES. The Company may issue a new certificate for shares in place of any certificate theretofore issued by it and alleged to have been lost, stolen, or destroyed, and the Board of Directors may, in its discretion, require the owner, or his legal representatives, to give the Company a bond containing such terms as the -9- Board of Directors may require to protect the Company or any person injured by the execution and delivery of the new certificate. SECTION 4. TRANSFER AGENT AND REGISTRAR. The Board of Directors may appoint, or revoke the appointment of, transfer agents and registrars and may require all certificates for shares to bear the signatures of the transfer agents and registrars, or any of them. ARTICLES VIII ------------- CORPORATE SEAL -------------- The Ohio General Corporation Law provides that the absence of a corporate seal from any instrument executed on behalf of the Company does not affect the validity of the instrument. If, in spite of that provision, a seal is imprinted on or attached, applied, or affixed to an instrument by embossment, engraving, stamping, printing, typing, adhesion, or other means, the impression of the seal on the instrument shall be circular in form and shall contain the name of the Company and the words "corporate seal". ARTICLE IX ---------- AMENDMENTS ---------- These Regulations may be amended, or new Regulations may be adopted, by the shareholders at a meeting held for that purpose by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power on that proposal or without a meeting by the written consent of the holders of shares entitling them to exercise two-thirds of the voting power on that proposal; except that, unless the amendment is approved and recommended by the Board of Directors, the provisions of Sections 2, 3, and 7 of Article I, Sections 1, 2, and 3 of Article II, Article V, and this Article IX may not be amended without the affirmative vote or written consent of the holders of shares entitling them to exercise 80% of the voting power of the Company. If the Regulations are amended or new Regulations are adopted without a meeting of the shareholders, the Secretary of the Company shall mail a copy of the amendment or the new Regulations to each shareholder who would have been entitled to vote thereon and did not participate in the adoption thereof. -10- EX-10.F 3 l10447aexv10wf.txt EXHIBIT 10-F EMPLOYMENT AGREEMENT Exhibit 10-f [Nordson Corporation Letterhead] April 7, 1988 CONFIDENTIAL Mr. Edward P. Campbell 1700 Queen Anne's Gate Westlake, Ohio 44145 Dear Ed: I am pleased to confirm my offer to you for the position of Vice President, Corporate Development for Nordson Corporation. In this key position, you will report directly to me. Your initial compensation and benefit package will be as follows: COMPENSATION BASE SALARY Your initial base salary will be ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,OOO) PER YEAR. Your Base Salary will be reviewed on November 1, 1988 and yearly thereafter, coinciding with an annual performance review. BONUS - A target bonus of fifty-five percent (55%) of Base Salary has been established for your position under the Nordson Executive Incentive Bonus Plan. As we discussed should you accept this offer, you will be guaranteed the amount of the target Bonus for Fiscal Year 1988, which ends October 30, 1988, prorated for the part of Fiscal Year 1988 in which you are employed by Nordson. As with all bonuses paid under the Plan, payment will be made in cash not later than the first payroll date in January following the end of a Fiscal Year. STOCK In our discussions, I have stressed the goals for the Corporation. Achievement of these goals enhances the value of Nordson Common Stock. Your participation as a member of my team allows you to contribute to the achievement of these goals and share in the increased value of our stock as a reward for your efforts. RESTRICTED STOCK You will be granted 3,000 shares of Restricted Nordson Common Stock when you commence your employment. Upon expiration of a three-year restriction period, you will have full right, title and interest in the Stock provided you are still an active Nordson employee. Under the Restricted Stock Plan, you relinquish right, title and interest in the Stock if your employment terminates prior to the expiration of the restriction period. INCENTIVE STOCK OPTIONS - Effective on your first day of employment, you will be entitled to an Incentive Stock Option on 3,000 shares of Nordson Common Stock. The option price will be established on your first day of employment in accordance with the Incentive Stock Option Plan. The Stock Options have a ten-year exercise period and will become exercisable in cumulative installments of 25% per year beginning one year after the effective date. NON-QUALIFIED STOCK OPTIONS - Effective on your first day of employment, you will be entitled to a Non-qualified Stock Option on 4,000 shares of Nordson Common Stock. The option price will be established on your first day of employment in accordance with the terms of the Plan. The options will become exercisable in cumulative installments of 25% per year beginning one year after the effective date and will expire ten years after the effective date. CAR ALLOWANCE You will be entitled to an Executive Automobile Allowance in the amount of Eight Thousand Dollars ($8,000) per year, payable in quarterly installments. PENSION PLAN You will be a participant in the Nordson Corporation Salaried Employees' Pension Plan. Your pension benefit will be equal to the benefit you quality for under this Pension Plan described in the attached booklet, but modified by the following in view of your prior service with The Standard Oil Company/BP America. 1. Your prior service with The Standard Oil Company/BP America will be recognized in determining vesting and the amount of your pension benefit. 2. Your "Final Average Pay" will be determined as the average of your monthly compensation during your 36 consecutive highest-paid months (instead of 60). 3. You will be eligible for a full pension benefit at age 60 instead of age 65. You will be eligible for early retirement at age 55 with a reduction of 5% per year for each year that actual retirement occurs prior to age 60. 4. If your employment with Nordson terminates for any reason other than disability or death prior to retirement at age 55, your pension benefit will be equal to the benefit you would have received if you had remained employed by The Standard Oil Company/BP America calculated using your total years of service at The Standard Oil Company/BP America and Nordson. 5. The benefit you qualify for under the Nordson Pension Plan will be reduced by any pension benefit payment you receive from The Standard Oil Company/BP America. OTHER BENEFITS You will be entitled to Nordson Corporation's benefit package normally offered to executive at the Vice President level. They include the following: Medical, Dental and Life Insurance Plans Disability Income (Long-term disability coverage will commence upon your first day of employment. We are waiving the customary waiting period for this benefit.) Employee Stock Ownership Plan and Stock Purchase Plan Nordson Employees' Savings Trust Plan (401K) Four weeks annual paid vacation Officers Deferred Compensation Plan Supplemental Executive Retirement Plan This offer is contingent upon your completion of a physical examination and the signing of Nordson Corporation's Employee Agreement. We have enclosed a copy of the Employee Agreement for your review. If you have any questions concerning this Agreement, please feel free to discuss them with me. This Agreement is to be signed in the presence of a member of the Human Resource Department on the first day of your employment. It will also be necessary for you to complete the enclosed Nordson Employee Application and bring it with you on your first day of work. On behalf of Nordson Corporation, I want you to know I feel you can contribute significantly towards the growth and success of the Company. We believe that you will find the position of Vice President, Corporate Development stimulating, challenging and rewarding. Sincerely. /s/ W. P. Madar W. P. Madar WPM: Enclosures EX-10.H 4 l10447aexv10wh.txt EXHIBIT 10-H NORDSON CORPORATION ASSURANCE TRUST AGREEMENT Exhibit 10-h NORDSON CORPORATION ASSURANCE TRUST THIS TRUST AGREEMENT, made as of the 11th day of December, 1998 is between Nordson Corporation, an Ohio corporation ("Nordson"), and [ ] (the "Trustee"). WHEREAS, Nordson is obligated to provide certain supplemental pension benefits to certain of its employees and to provide benefits pursuant to certain other deferred compensation and executive compensation arrangements, including agreements with certain of its executives under which those executives may become entitled to payments and benefits after a change in control of Nordson; WHEREAS, Nordson desires to establish a trust (the "Trust") and to contribute to the Trust assets that shall be held therein and that shall be subject to the claims of the creditors of Nordson in the event that Nordson becomes Insolvent (as defined in Section 5.1 below), until distributed as provided herein or returned to Nordson; and WHEREAS, it is the intention of the parties that the Trust shall constitute an unfunded arrangement for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended; NOW, THEREFORE, Nordson and the Trustee do hereby establish the Trust and agree that the Trust shall be comprised, held, and disposed of as follows: Article 1. Establishment of Trust 1.1 Nordson hereby deposits with the Trustee in trust $100, which shall become the principal of the Trust to be held, administered, and disposed of by the Trustee as provided in this Trust Agreement. 1.2 The Trust hereby established may be revoked by Nordson at any time before the occurrence of the first to occur of (a) a Funding Event (as defined in Section 15.6) and (b) a Change of Control (as defined in Section 15.3). If any Funding Event occurs, the Trust hereby established may not be revoked by Nordson until both that particular Funding Event and any other Funding Event that may have also occurred have been "terminated" (as defined in Section 15.7) and the Trust then may be revoked by Nordson if and only if no Change of Control has then occurred. Upon the occurrence of a Change of Control, the Trust hereby established shall become irrevocable. Nordson's General Counsel shall notify the Trustee promptly upon the occurrence of any Funding Event and of any Change of Control. 1.3 The Trust is intended to be a grantor trust, of which Nordson is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code, and shall be construed accordingly. 1.4 The principal of the Trust and any earnings thereon shall be held separate and apart from other funds of Nordson and shall be used exclusively for the uses and purposes herein set forth. No employee of Nordson shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under any Covered Plan or under this Trust Agreement shall be mere unsecured contractual rights against Nordson. Any assets held by the Trust will be subject to the claims of general creditors of Nordson under federal and state law in the event Nordson becomes Insolvent. Article 2. Additional Funding 2.1 Nordson, in its sole discretion, may at any time, or from time to time, make or cause to be made, directly or indirectly, additional deposits of cash or other property in trust with the Trustee to augment the principal to be held, administered, and disposed of by the Trustee as provided in this Trust Agreement. 2.2 If a Funding Event occurs, Nordson shall, as soon as practicable and in no event later than the day before the occurrence of any Change of Control related to that Funding Event, contribute to the Trust an amount equal to the excess, if any, of the Full Funding Amount (as defined in Section 15.5) over the sum of the value of the assets in the Trust (the "Current Trust Asset Value") immediately prior to the contribution. 2.3 Immediately upon the occurrence of the first Change of Control to occur after the execution of this Trust Agreement and thereafter on each and every anniversary of that Change of Control, Nordson shall contribute to the Trust an amount equal to the excess, if any, of the Full Funding Amount over the Current Trust Asset Value immediately prior to the contribution. 2.4 Any contribution made under this Article 2 shall be subject to withdrawal by Nordson only as provided in Article 3, dealing with discretionary withdrawals. Article 3. Discretionary Withdrawals 3.1 Nordson, in its sole discretion, at any time before the occurrence of the first to occur of a Funding Event or a Change of Control, may withdraw assets from the Trust provided that no such withdrawal shall reduce the Current Trust Asset Value, immediately after the withdrawal, to an amount below $100. 3.2 Nordson shall not be entitled to make any discretionary withdrawal of assets from the Trust, after any Funding Event has occurred, until both that particular Funding Event and any other Funding Event that may have also occurred have been terminated and Nordson may then make such a discretionary withdrawal only if no Change of Control has then occurred. No discretionary withdrawal under this Section 3.2 shall reduce the Current Trust Asset Value, immediately after the withdrawal, to an amount below $100. 3.3 After a Change of Control has occurred, Nordson may not make any discretionary withdrawal from the Trust. Nothing in this Article 3 shall restrict the right of Nordson to receive a reversion of excess assets under Article 6. 2 Article 4. Payments to Participants 4.1 Not later than 120 days after the occurrence of a Funding Event and again not later than 10 days following the occurrence of a Change of Control, Nordson shall deliver to the Trustee a schedule (the "Payment Schedule") that lists the names and addresses of all Participants and indicates the amounts payable and to become payable to each Participant and/or provides a formula or other instructions acceptable to the Trustee for determining the amounts so payable and that indicates the form in which such amounts are to be paid, as provided for or available under each Covered Plan, and the time of commencement for payment of such amounts. At the same time as Nordson delivers the Payment Schedule to the Trustee, Nordson shall deliver to each Participant that portion of the Payment Schedule that pertains to amounts that may become payable to that particular Participant. After the occurrence of a Change of Control, Nordson shall update the Payment Schedule, provide revised versions thereof to the Trustee, and provide the relevant portions thereof to each Participant from time to time and at such times so that each termination of the employment of any Participant (or the occurrence of any other fact or circumstance that alters the payments due or to become due to any Participant under any of the Covered Plans) is taken into account in a current revised Payment Schedule that has been appropriately delivered to the Trustee and to each Participant (to the extent relevant to each such Participant) not later than ten days after its occurrence. Except as otherwise provided herein, the Trustee shall make payments to the Participants in accordance with the Payment Schedule as it may be revised from time to time. The Trustee shall make provision for the reporting and withholding of any federal, state, or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of each Covered Plan and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld, and paid by Nordson. 4.2 Except as otherwise specifically provided herein, the entitlement of a Participant to payments from Nordson under a particular Covered Plan shall be determined under the terms of the particular Covered Plan at issue. It is Nordson's intention that any and all amounts that may become payable to Participants under the Covered Plans will be paid to the Participants at the times and in the amounts specified in the relevant Covered Plan. 4.3 In order to provide added assurances to the Participants that the amounts to which they may be entitled under the Covered Plans will be calculated in good faith and paid promptly at the times and in the amounts specified in the respective Covered Plans, the following procedure shall be followed: (a) If, concurrently with or after the occurrence of a Change of Control, Nordson delivers to the Trustee a Payment Schedule indicating that a Participant is entitled to payments under a Covered Plan, the Trustee shall promptly thereafter deliver a copy of the relevant portion of the Payment Schedule to the Participant and shall make the payments so indicated in the Payment Schedule. (b) If, after the occurrence of a Change of Control, a Participant (either because no Payment Schedule has been delivered to the Trustee or because the Participant believes that the amounts specified in the Payment Schedule are incorrect) delivers written notice (a "Participant Payment Notice") to the Trustee that the Participant is entitled to payments under a Covered Plan 3 and requesting that the Trustee make payments to the Participant pursuant to that Covered Plan, the Trustee shall promptly deliver a copy of the Participant Payment Notice to Nordson and thereafter: (i) if Nordson has not, within ten business days of the delivery of the Participant Payment Notice to the Trustee, delivered to the Trustee a notice (a "Nordson Stop Payment Notice") in which Nordson asserts that the Participant is not entitled to the payments set forth in the Participant Payment Notice, the Trustee shall make the payments set forth in the Participant Payment Notice, or, alternatively, (ii) if Nordson has, within ten business days of the delivery of the Participant Payment Notice to the Trustee, delivered to the Trustee a Nordson Stop Payment Notice, the disparity between the Participant Payment Notice and the Nordson Stop Payment Notice shall be resolved as provided in Section 4.4 below and any payments or portions thereof that are not in dispute shall be paid by the Trustee as and when due to the Participant. 4.4 If the Trustee has received both a Participant Payment Notice and a Nordson Stop Payment Notice with regard to the same Covered Plan: (a) the Trustee shall engage the Accounting Firm (as defined in Section 15.1), at Nordson's expense, to determine what payments the Participant is entitled to under the particular Covered Plan, which determination shall be made by the Accounting Firm as promptly as practicable but in all events within 30 days of the engagement of the Accounting Firm by the Trustee, (b) Nordson shall cooperate with the Accounting Firm and provide to it all information that is available to Nordson and is required by the Accounting Firm to make the determination referred to in (a) above within the time frame set forth therein, and (c) unless and until ordered to do otherwise by an award of arbitrators following arbitration proceedings instituted pursuant to Section 4.5 below, the Trustee shall make payments to the Participant in the amount or amounts and at the time or times determined by the Accounting Firm. 4.5 In the event of any dispute between a Participant and Nordson with respect to whether the Participant is entitled to payments (or the amounts thereof) under a Covered Plan and/or to payment thereof from the assets of the Trust, either party (Nordson or the Participant) may deliver to the other a demand for binding arbitration. If either party delivers any such demand to the other, the dispute shall be determined by binding arbitration conducted in Cleveland, Ohio according to the Commercial Arbitration Rules of the American Arbitration Association. In any such arbitration the arbitrators may consider, with such weight as they may deem appropriate, any determination by the Accounting Firm that may have been made as provided in Section 4.4 above. The award of the arbitrators will be final and binding and judgment on the award may be entered in any court having jurisdiction over the subject matter and the parties. 4 4.6 In order to discourage Nordson from disputing, otherwise than in good faith, any amounts properly due to a Participant, the costs and expenses related to any arbitration proceeding referred to in Section 4.5 shall be borne as provided in this Section 4.6. Nordson shall bear the cost of its own attorneys and other representatives and all of the fees and expenses of the arbitrators and the arbitration proceedings. The reasonable fees and expenses of the Participant's attorneys relating to the subject matter of the arbitration shall be paid by Nordson unless and to the extent the arbitrators determine (which determination shall be final and binding upon the parties) that the positions advanced by the Participant in any such arbitration have no reasonable basis (which determination need not be made simply because the arbitrators decide against the Participant on any or all substantive points). If Nordson fails to pay any of the costs and expenses related to any arbitration as specified in this Section 4.6, the Trustee shall pay such amounts from the assets of the Trust. 4.7 Nordson may make payments under any Covered Plan directly to or on behalf of a Participant as they become due under the terms of the Covered Plan. If Nordson makes any such payment it shall notify the Trustee of its decision to make such payments directly prior to the time amounts are payable to or on behalf of the Participant. In addition, if the principal of the Trust and any earnings thereon are not sufficient to make any payments that are due and payable under any Covered Plan in accordance with its terms, Nordson shall make the balance of each such payment as it falls due. The Trustee shall notify Nordson whenever principal and earnings are not sufficient. 4.8 When making any payment to a Participant under a Covered Plan that is overdue, the Trustee shall increase the amount of the payment to include interest on the overdue payment from the date due to the date of the distribution calculated on a daily basis, compounded as of the end of each calendar month, and using as the interest rate for each calendar month or part thereof during the period with respect to which interest is due the prime lending rate published by KeyBank National Association or its successor and in effect on the first day of that calendar month. 4.9 Whenever a payment under a Covered Plan with respect to a participant is payable to a beneficiary of the Participant rather than to the Participant, the beneficiary shall be entitled to all of the rights of the Participant under all of the provisions of this Trust Agreement with respect to that payment. 5 Article 5. Trustee Responsibility when Nordson Is Insolvent 5.1 The Trustee shall cease payments to Participants from the Trust if Nordson is Insolvent. Nordson shall be considered "Insolvent" for purposes of this Trust Agreement if (a) it is unable to pay its debts as they become due, or (b) it is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. In determining whether Nordson is Insolvent for purposes of this Trust Agreement, the Trustee may engage the service of legal, accounting, financial and other advisors, which may be advisors to Nordson, to assist it in the determination. Nordson agrees to cooperate fully with any reasonable inquiry of the Trustee or such advisors in making the determination of Nordson's Insolvency. During the determination of Nordson's Insolvency, the Trustee may, in its discretion, suspend any transfer or distribution of assets. To the extent that the Trustee engages the services of an advisor, the Trustee may rely, without further inquiry, on the written determination of that advisor as to the solvency or Insolvency of Nordson. All costs reasonably incurred by the Trustee in making the determination of Nordson's Insolvency shall be reimbursed to the Trustee by Nordson, and if not so reimbursed, shall be chargeable against the Trust. 5.2 At all times during the continuance of the Trust, the principal and income of the Trust shall be subject to claims of general creditors of Nordson under federal and state law as set forth below. (a) The Board of Directors and the Chief Executive Officer of Nordson shall have the duty to inform the Trustee in writing of Nordson's Insolvency. If a person claiming to be a creditor of Nordson alleges in writing to the Trustee that Nordson has become Insolvent, the Trustee shall determine whether Nordson is Insolvent and, pending such determination, the Trustee shall not transfer any Trust assets to any other party. (b) Unless the Trustee has actual knowledge of Nordson's Insolvency, or has received notice from Nordson or a person claiming to be a creditor alleging that Nordson is Insolvent, the Trustee shall have no duty to inquire whether Nordson is Insolvent. The Trustee may in all events rely on such evidence concerning Nordson's solvency as may be furnished to the Trustee and that provides the Trustee with a reasonable basis for making a determination concerning Nordson's solvency. (c) If at any time the Trustee has determined that Nordson is Insolvent, the Trustee shall hold the assets of the Trust for the benefit of the general creditors of Nordson. Nothing in this Trust Agreement shall in any way diminish any rights of Participants to pursue their rights as general creditors of Nordson. (d) The Trustee shall resume the making of payments to Participants in accordance with Section 4 of this Trust Agreement only after the Trustee has determined that Nordson is not Insolvent (or is not any longer Insolvent). 5.3 Provided that there are sufficient assets, if the Trustee discontinues payments under the Covered Plans from the Trust pursuant to Section 5.2 hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate 6 amount of all payments due to Participants under the terms of the Covered Plans for the period of such discontinuance, less the aggregate amount of any payments made to the Participants by Nordson in lieu of the payments provided for hereunder during any such period of discontinuance. Article 6. Reversion of Excess Assets From time to time after the third anniversary of the first Change of Control occurring after the execution of this Trust Agreement, if and when requested by Nordson to do so, the Trustee shall engage the services of the Accounting Firm, at the expense of Nordson, to determine the Aggregate Plan Liability (as defined in Section 15.2). If the Current Trust Asset Value at the time of the calculation exceeds 150% of the dollar amount of the Aggregate Plan Liability and the Trustee is requested to do so by Nordson, the Trustee shall pay the amount of any such excess over 150% to Nordson. The Trustee shall determine, in its sole discretion, how the funds necessary to make any such payment are to be raised from Trust assets. Article 7. Payments to Nordson Except as provided in Article 3 or in Article 6, Nordson shall not have any right or power to direct the Trustee to return to Nordson or to divert to others any of the Trust assets before all payments that may become payable to any and all Participants under the Covered Plans (as defined in Section 15.4) have been made to Participants. At such point in time as no further payments are payable or may become payable in the future to or with respect to any Participant under any Covered Plan, the remaining assets of the Trust shall be paid to Nordson. 7 Article 8. Investment Authority 8.1 The Trustee shall invest and reinvest the trust property, including any income accumulated and added to principal, only in (a) annuity or life insurance contracts that either have been contributed to the trust property by Nordson or are issued by one or more insurance companies that are rated at least A++ by Best Life Insurance Reports; (b) interest-bearing deposit accounts or certificates issued or offered by any one or more Federal Deposit Insurance Corporation insured financial institutions having in each case a high credit rating and a capital and surplus of at least $1,000,000,000 in the aggregate; (c) direct obligations of the United States of America, or obligations the payment of which is guaranteed, as to both principal and interest, by the government or an agency of the government of the United States of America; (d) readily marketable debt securities listed on a United States national securities exchange (other than securities of Nordson) that are rated at least "investment grade" by one or more nationally recognized rating agencies; or (e) shares or other units of participation in any mutual fund, investment trust, or common trust fund maintained by the Trustee, which are invested exclusively or predominantly in assets described in the foregoing clauses (a) through (d) of this Section 8.1. In no event may the Trustee invest in securities (including stock or the right to acquire stock) or obligations issued by Nordson, other than a de minimis amount held in common investment vehicles in which the Trustee invests. All rights associated with assets of the Trust shall be exercised by the Trustee or the person designated by the Trustee. The Trustee shall not be liable to any Participant for any insufficiency of the Trust property to discharge all benefits due the same under the Covered Plans; rather, the liability for all such benefits shall be and remain the primary and ultimate responsibility of Nordson. 8.2 The Trustee is empowered to register securities, and to take and hold title to other property, in the name of the Trustee or in the name of a nominee without disclosing the Trust. Securities also may be held in bearer form and may be held in bulk with certificates of the same class and issuer which are assets of other fiduciary accounts. The Trustee shall be responsible for any wrongful acts of any nominee of the Trustee. 8.3 The Trustee is empowered to take all actions necessary or advisable in order to collect any life insurance, annuity, or other benefits or payments of which the Trustee is the designated beneficiary. 8.4 Nordson may maintain in force all life insurance policies held in the Trust by paying premiums and other charges due thereon. If any such premiums or other charges are not paid directly by Nordson, the Trustee shall, to the extent it has cash or its equivalent readily available for the payment of premiums due or policy loans and/or dividends are available for such purpose, pay premiums due with such cash or its equivalent or policy loans and/or dividends, as the Trustee may deem best; but if the Trustee does not have sufficient cash or its equivalent readily available and policy loans and dividends are not available, then the Trustee shall dispose of or otherwise use other assets held by it in the Trust to generate the necessary cash or, if no such other assets are available, the Trustee may surrender one or more of the life insurance policies in order to generate cash with which to pay premiums on one or more of the other life insurance policies. The Trustee shall have no liability to Nordson or any other person if, as a result of an insufficiency of cash or its equivalent, policy loans and dividends, and assets that can be disposed of or otherwise used to generate cash, the Trustee is unable to pay premiums 8 as they become due. 8.5 The Trustee shall be named sole owner and beneficiary of each life insurance policy held in the Trust and shall have full authority and power to exercise all rights of ownership relating to the policy, except that the Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. 8.6 The Trustee shall have the power to acquire additional life insurance coverage on Participants through application for new life insurance. Prior to a Change in Control, the Trustee shall acquire any additional life insurance from the agent or agents designated by Nordson. After a Change in Control, the Trustee may acquire any additional life insurance from any agent or agents that it, in its sole discretion, deems appropriate. Article 9. Accounting by Trustee The Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and other transactions required to be made, including such specific records as shall be agreed upon in writing between Nordson and the Trustee. All such accounts, books, and records shall be open to inspection and audit at all reasonable times by Nordson. Within 60 days following the close of each calendar year and within 60 days after the removal or resignation of the Trustee, the Trustee shall deliver to Nordson a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements, and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales, and showing all cash, securities, and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. Article 10. Calculations of Current Trust Asset Value and Aggregate Plan Liability 10.1 Any determination of the Current Trust Asset Value that is to be made before the occurrence of any Change of Control shall be made by Nordson. After the occurrence of a Change of Control, all determinations of the Current Trust Asset Value shall be made by the Trustee and may be based on the determination of one or more qualified independent appraisers, consultants, or other experts retained by the Trustee for that purpose. 10.2 Any determination of the Aggregate Plan Liability that is to be made before the occurrence of any Change of Control shall be made by Nordson. After the occurrence of a Change of Control, all determinations of the Aggregate Plan Liability (as defined in Section 15.2) shall be made by the Trustee and may be based on the determination of one or more qualified independent actuaries, consultants, or other experts retained by the Trustee for that purpose. All such determinations shall be based on the terms of the Covered Plans and the actuarial assumptions and methodology set forth in Exhibit B. 10.3 Nordson shall pay all costs incurred in determining from time to time the Current 9 Trust Asset Value and/or the Aggregate Plan Liability. If not so paid, these costs shall be paid from the Trust. Nordson shall reimburse the Trust within 30 days after receipt of a bill from the Trustee for any such costs paid out of the Trust. Article 11. Responsibility of Trustee 11.1 The Trustee shall act with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; provided, however, that the Trustee shall incur no liability to any person for any action taken pursuant to a direction, request, or approval that is contemplated by, and in conformity with, the terms of the Trust and is given in writing by Nordson prior to the occurrence of any Change of Control. In the event of a dispute between Nordson and any other party, the Trustee may apply to a court of competent jurisdiction to resolve the dispute. 11.2 If the Trustee undertakes or defends any litigation arising in connection with the Trust, Nordson agrees to indemnify the Trustee against the Trustee's costs, expenses, and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. If such costs, expenses, and liabilities are not paid by Nordson in a reasonably timely manner, the Trustee may obtain payment from the Trust. Nordson shall reimburse the Trust within 30 days after receipt of a bill from the Trustee for any such costs, expenses, and liabilities paid out of the Trust. 11.3 The Trustee may consult with legal counsel (who may also be counsel for the Trustee generally) with respect to any of its duties or obligations hereunder. 11.4 The Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants, or other professionals to assist it in performing any of its duties or obligations hereunder, including, without limitation, to assist it in enforcing against Nordson any of the obligations of Nordson under this Trust Agreement. 11.5 The Trustee shall have, without exclusion, all powers conferred on trustees by applicable law, unless expressly provided otherwise herein. 11.6 Notwithstanding any powers granted to the Trustee pursuant to this Trust Agreement or to applicable law, the Trustee shall not have any power that could give the Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. 10 Article 12. Compensation and Expenses of Trustee The Trustee shall be entitled to receive reasonable compensation for its services in accordance with its published fee schedule as in effect from time to time. The Trustee shall be entitled to receive its reasonable expenses incurred with respect to the administration of the Trust, including fees incurred by the Trustee pursuant to Sections 11.3 and 11.4 of this Trust Agreement. Such compensation and expenses shall be payable by Nordson. If not so paid, the fees and expenses shall be paid from the Trust. Nordson shall reimburse the Trust within 30 days after receipt of a bill from the Trustee for any such fees or expenses paid out of the Trust. Article 13. Tenure and Succession of Trustee 13.1 Nordson may remove any trustee from time to time serving under this Trust Agreement at any time upon giving 60 days written notice to such trustee, and each trustee from time to time serving under this instrument shall have the right to resign by delivering a written notice of resignation to Nordson, except that: (a) Nordson shall not have any power to remove the Trustee at any time after a Change of Control, and (b) no such removal or resignation shall become effective until the acceptance of the trust by a successor trustee designated in accordance with Section 13.2. 13.2 If [ ], or any successor to it designated in accordance with this Section 13.2, for any reason shall decline, cease, or otherwise fail to serve as trustee, the vacancy in the trusteeship shall be filled by such bank or trust company, wherever located, having a capital and surplus of at least $25,000,000 in the aggregate, as shall be designated by Nordson (if the designation is made prior to the occurrence of any Change of Control) or by the resigning Trustee (if the designation is made after the occurrence of any Change of Control). 13.3 Upon acceptance of the Trust, each successor trustee shall be vested with the title to the Trust property possessed by the trustee that it succeeds and shall have all the powers, discretion, and duties of such predecessor trustee. No successor trustee shall be required to furnish bond. 13.4 Each successor trustee may accept as complete and correct and may rely upon any accounting by any predecessor trustee and upon any statement or representation by any predecessor trustee as to the assets comprising or any other matter pertaining to the administration of the Trust. No successor trustee shall be liable for any act or omission of any predecessor trustee or have any duty to enforce or seek to enforce any claim of any kind against any predecessor trustee on account of any such act or omission. 11 Article 14. Amendment or Termination 14.1 Except as provided in the second sentence of this Section 14.1, at any time before the occurrence of the first Change of Control to occur after the execution of this Agreement, Nordson, in its sole discretion, may amend this Trust Agreement (including the exhibits hereto) in any manner and may terminate this Trust Agreement. If at any particular point in time (a) one or more Funding Events have occurred, (b) one or more of those Funding Events has not yet been terminated, and (c) no Change of Control has occurred, then Nordson may not, at that particular time, terminate this Trust Agreement and may amend this Trust Agreement only if and to the extent permitted by Section 14.2 below. 14.2 Whenever (a) one or more Funding Events have occurred, (b) one or more of those Funding Events has not yet been terminated, and (c) no Change of Control has occurred, Nordson may not terminate this Trust Agreement but may add one or more additional plans or agreements to the class of Covered Plans and may amend this Trust Agreement (including the exhibits hereto), provided that (x) Nordson determines, in the exercise of its reasonable discretion, that the amendment is in the best interests of the Participants, taken as a group, (y) no such amendment shall remove any plan or agreement from the class of Covered Plans unless the plan has been terminated and there are no further obligations due or to become due thereunder to any Participant, and (z) no such amendment shall have the effect of adding circumstances under which a Funding Event shall be deemed to have terminated, affect the determination of the Aggregate Plan Liability or the Full Funding amount so as to reduce these amounts, or in any manner permit the withdrawal or diversion of assets from the Trust. 14.3 After a Change of Control has occurred, this Trust Agreement (including the exhibits hereto) may not be amended or terminated except as provided in Section 14.5. 14.4 Unless earlier revoked pursuant to Section 1.2, the Trust shall not terminate until the date on which Participants are no longer entitled to any further payments pursuant to the terms of any Covered Plans. Upon termination of the Trust on or after that date, any assets remaining in the Trust shall be returned to Nordson. 14.5 Upon written approval of all Participants who are or may in the future be entitled to receive any payment pursuant to the terms of any of the Covered Plans, Nordson may terminate the Trust prior to the time all payments that are or may become due in the future under the Covered Plans have been made. All assets in the Trust at any such termination shall be returned to Nordson. 12 Article 15. Certain Definitions Certain capitalized terms not defined elsewhere in this Trust Agreement are defined in Article 15 below. 15.1 From and after the occurrence of the first Change of Control to occur after the execution of this Trust Agreement, the term "Accounting Firm" shall mean the independent auditors of Nordson for the fiscal year preceding the first year in which there occurred either (a) that Change of Control or (b) any Funding Event that had not terminated before the occurrence of that Change of Control and such firm's successor or successors; provided, however, if such firm is unable or unwilling to serve and perform in the capacity contemplated by this Trust Agreement, those members of the Board of Directors of Nordson (as constituted immediately before the Change of Control) who are not and have never been employees of Nordson shall select another national accounting firm of recognized standing to serve and perform in that capacity under this Trust Agreement, except that such other accounting firm shall not be the then independent auditors for Nordson or any of its affiliates (as defined in Rule 12b-2 promulgated under the 1934 Act). 15.2 The term "Aggregate Plan Liability" as at any time shall mean the maximum amount of payments that have not yet been paid but could become payable in the future under the Covered Plans, determined as provided in Section 10.2. 15.3 A "Change of Control" shall be deemed to occur if and when there occurs any of the circumstances set forth in any of clauses (a) through (d) of this Section 15.3. A. Any Person or group commences a tender offer for more than 50% of the outstanding shares that is not recommended by the Board of Directors of Nordson and one of the following occurs: (i) More than 50% of the outstanding shares are acquired. (ii) While the tender offer remains open, Nordson is sold or agrees to be sold, whether by sale of assets, sale of stock, merger, or otherwise. B. Any Person or group solicits proxies for the election of individuals who are not nominated or approved by the Board of Directors of Nordson and either: (i) the solicitation results in the election of directors that constitute a majority of any class of directors or a majority of the full Board, or (ii) the solicitation results in the election of two or more directors, but less than a majority of any class of directors or a majority of the full Board, and while at least two of those directors remain in office Nordson is sold or agrees to be sold. C. Any Person or group becomes the beneficial owner of 50% or more of the outstanding shares without prior Board approval. 13 D. Any Person or group becomes the beneficial owner of 15% or more of the outstanding shares without prior Board approval and, while the Person or group continues to own 15% or more of the outstanding shares, Nordson is sold or agrees to be sold. 15.4 The term "Covered Plan" means any one of the plans and agreements identified on Exhibit A, as the same may be amended from time to time in accordance with Sections 14.1 and 14.2 above. 15.5 The term "Full Funding Amount" as of any point in time shall mean an amount equal to 125% of the Aggregate Plan Liability as of that point in time. 15.6 A "Funding Event" shall be deemed to occur if and when there occurs any of the circumstances set forth in any of the following clauses (a) through (c): A. Any Person or group commences a tender offer for more than 50% of the outstanding shares that is not recommended by the Board of Directors of Nordson. B. Any Person or group solicits proxies for the election of two or more directors not nominated or approved by the Board of Directors of Nordson. C. Any Person or group becomes the beneficial owner of 15% or more of the outstanding shares without prior Board approval. 15.7 A Funding Event shall be deemed to have "terminated:" A. If funding of the Trust was required by reason of an unsolicited tender offer or exchange offer, either: (i) the tender offer or exchange offer is withdrawn or terminated without the acquisition of 15% or more of the outstanding shares, or (ii) if the Person or group acquires 15% or more, but less than a majority, of the outstanding shares, the Person or group subsequently disposes of enough shares so that beneficial ownership falls below 15%. B. If funding of the Trust was required by reason of a solicitation of proxies for the election of directors, either: (i) the solicitation results in the election of less than two directors, or (ii) the solicitation results in the election of more than two directors, but less than a majority of any class of directors or a majority of the full Board, and enough of those directors leave office so that fewer than two remain as directors. 14 C. If funding of the Trust was required by reason of the acquisition of beneficial ownership of 15% or more, but less than a majority, of the outstanding shares without prior Board approval, if the percentage of shares beneficially owned by the Person or group subsequently falls below 15%. 15.8 The term "Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as amended. 15.9 The term "Person" shall mean a "person" as used in Section 13(d) and Section 14(d)(2) of the 1934 Act. 15.10 The term "Participant" shall mean a person who is a participant in or party to any of the Covered Plans. 15.11 The term "1934 Act" shall mean the Securities Exchange Act of 1934, as amended. 16. Miscellaneous 16.1 Any action to be taken by Nordson hereunder shall be by action of the Chief Executive Officer or any Vice President of Nordson, except that the actions described in Sections 1.2, 13.1, 14.1, and 14.2 may be taken only by the Board of Directors of Nordson. 16.2 Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. 16.3 This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Ohio. IN WITNESS WHEREOF, Nordson and the Trustee have executed this Trust Agreement as of the date first above written. [ ] Nordson Corporation By_________________________________ By___________________________ The "Trustee" 15 EXHIBIT A Covered Plans Nordson Corporation Excess Defined Benefit Pension Plan Nordson Corporation Excess Defined Contribution Retirement Plan Nordson Corporation Officers' Deferred Compensation Plan Supplemental pension payments pursuant to employment agreements with Messrs. [ ]. Retirement payments to retired officer, [ ]. [Amounts payable under employment agreements with [ ].] EXHIBIT B Assumptions and Methodology for Determining Aggregate Plan Liability 1. The liability for benefits under each Covered Plan will be calculated using two different assumptions as to when Participants terminate service: (a) As of the date of the first Change of Control occurring after the execution of this Trust Agreement. (b) Thirty months after the first Change of Control occurring after the execution of this Trust Agreement, assuming future compensation continues at current levels, and future deferrals under deferred compensation plans continue pursuant to prior elections. The liability for accrued benefits under each Covered Plan will be the greater of the liabilities calculated in accordance with (a) and (b) above. 2. Calculations will be based upon the most valuable optional form of payment available to the Participant. 3. The liability for benefits under deferred compensation or other defined contribution Covered Plans shall be equal to the deferral or other account balances (vested and unvested) of Participants as of the applicable date, plus projected deferrals expected to be made within 30 months after the applicable date pursuant to prior elections. Account balances of Participants under a Plan shall be calculated based on crediting the highest rate of interest which may become payable to Participants under the Plan. 4. The liability for benefits under other Covered Plans shall be equal to the present value of accrued benefits (vested and unvested) of Participants as of the relevant dates under 1(a) or (b) above. 5. No mortality is assumed prior to the commencement of benefits. Future mortality is assumed to occur in accordance with the 1983 Group Annuity Table Unisex Rates after the commencement of benefits. 6. The present value of amounts shall be determined using a discount rate equal to the then current Pension Benefit Guaranty Corporation immediate annuity rate for a nonmultiemployer plan. 7. In determining the dollar cost of providing any benefit that is to be provided in stock or the value of which is dependent upon the value of common shares of Nordson, the dollar cost shall of providing those benefits shall be determined using a value for common shares of Nordson equal to 140% of the highest closing price for common shares of Nordson at any time within the six month period ending on the determination date. 8. Where left undefined above, calculations will be performed in accordance with generally accepted actuarial principles. EX-10.H.1 5 l10447aexv10whw1.txt EXHIBIT 10-H-1 EMPLOYMENT AGREEMENT Exhibit 10-h-1 EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT is entered into on this 13th day of November, 1998, by and between NORDSON CORPORATION, an Ohio corporation (the "Company"), and EDWARD P. CAMPBELL ("Employee"). W I T N E S S E T H: WHEREAS, Employee is an executive and key employee of the Company, has fully and ably discharged his responsibilities and duties in his service to the Company to date, and is now serving the Company as President and Chief Executive Officer; WHEREAS, the Company desires to assure itself of continuity of management in the event of any threatened or actual Change in Control (as hereafter defined); WHEREAS, the Company desires to provide inducements for Employee not to engage in activity competitive with the Company; WHEREAS, the Company desires to assure itself, in the event of any threatened or actual Change in Control, of the continued performance of services by Employee on an objective and impartial basis and without distraction by concern for his employment status and security; WHEREAS, Employee is willing to continue in the employ of the Company but desires assurance that his responsibilities and status as an executive of the Company will not be adversely affected by any threatened or actual Change in Control; NOW, THEREFORE, the Company and Employee agree as follows: 1. OPERATION OF AGREEMENT. This Agreement shall be effective and binding immediately upon its execution, but, anything in this Agreement to the contrary notwithstanding, this Agreement shall not be operative unless and until there has been a Change in Control while Employee is in the employ of the Company. For purposes of this Agreement, a Change in Control shall have occurred if at any time any of the following events occurs: (a) a report is filed with the Securities and Exchange Commission (the "SEC") on Schedule 13D or Schedule 14D-1 (or any successor schedule, form, or report), each as promulgated pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"), disclosing that any "person" (as the term "person" is used in Section 13(d) or Section 14(d)(2) of the Exchange Act) is or has become a beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities; (b) the Company files a report or proxy statement with the SEC pursuant to the Exchange Act disclosing in response to Item 1 of Form 8-K thereunder or Item 5(f) of Schedule 14A thereunder that a Change in Control of the Company has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; (c) the Company is merged or consolidated with another corporation and, as a result thereof, securities representing less than 50% of the combined voting power of the surviving or resulting corporation's securities (or of the securities of a parent corporation in case of a merger in which the surviving or resulting corporation becomes a wholly-owned subsidiary of the parent corporation) are owned in the aggregate by holders of the Company's securities immediately prior to such merger or consolidation; (d) all or substantially all of the assets of the Company are sold in a single transaction or a series of related transactions to a single purchaser or a group of affiliated purchasers; or (e) during any period of 24 consecutive months, individuals who were Directors of the Company at the beginning of such period cease to constitute at least a majority of the Company's Board of Directors (the "Board") unless the election, or nomination for election by the Company's shareholders, of more than one half of any new Directors of the Company was approved by a vote of at least two-thirds of the Directors of the Company then still in office who were Directors of the Company at the beginning of such 24 month period. The first date on which a Change in Control occurs is referred to herein as the "Change in Control Date." Upon the occurrence of a Change in Control while Employee is in the employ of the Company, this Agreement shall become immediately operative subject, however, to the provisions of Section 2, below. 2. POSSIBLE "UNDOING" OF A CHANGE IN CONTROL. If a report is filed with the SEC disclosing that a person (the "Acquiror") is or has become a beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the company's outstanding securities and, as a result of that filing, a Change in Control, 2 as defined in Paragraph 1(a), above, occurs, while Employee is in the employ of the Company, then, as provided in Paragraph 1, above, this Agreement will become immediately operative. However, if: (a) a Change in Control as described in Paragraph 1(a) occurs while Employee is in the employ of the Company; (b) the Acquiror subsequently transfers or otherwise disposes of sufficient securities of the Company in one or more transactions, to a person or persons other than affiliates of the Acquiror or any persons with whom the Acquiror has agreed to act together for the purpose of acquiring, holding, voting or disposing of securities of the Company, so that, after such transfer or other disposition, the Acquiror is no longer the beneficial owner, directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company's then outstanding securities; (c) at the time of the subsequent transfer or disposition that reduced the Acquiror's holdings to less than 10% as provided in (b), immediately above, no other event constituting a Change in Control had occurred; and (d) at the time of the subsequent transfer or other disposition that reduced the Acquiror's holdings to less than 10%, Employee's employment with the Company had not been terminated by the Company without cause or by Employee for good reason, then, for all purposes of this Agreement, the filing of the report constituting a Change in Control under Paragraph 1(a) shall be treated as if it had not occurred and this Agreement shall return to the status it had immediately before the filing of the report constituting a Change in Control under Paragraph 1(a). Accordingly, if and when a new Change in Control occurs, this Agreement will again become operative on the date of that new Change in Control. 3. EMPLOYMENT, CONTRACT PERIOD. (a) Subject to the terms and conditions of this Agreement, upon the occurrence of a Change in Control, the Company shall continue to employ Employee and Employee shall continue in the employ of the Company for the period specified in Paragraph 3(b) (the "Contract Period"), in the position and with the duties and responsibilities set forth in Paragraph 4. (b) The Contract Period shall commence on the 3 Change in Control Date and, subject only to the provisions of Paragraph 9 below, shall continue for a period of twenty-four months to the close of business on the day (the "Contract Expiration Date") falling twenty-four months after the Change in Control Date. 4. POSITION, DUTIES, RESPONSIBILITIES. At all times during the Contract Period, Employee shall: (a) hold the same position with substantially the same duties and responsibilities as an executive of the Company as Employee held immediately before the Change in Control Date and those duties and responsibilities may be extended, from time to time during the Contract Period, by the Board with Employee's consent; (b) adhere to and implement the policies and directives promulgated, from time to time, by the Board; (c) observe all Company policies applicable to executive personnel of the Company; and (d) devote his business time, energy, and talent to the business of and to the furtherance of the purposes and objectives of the Company to generally the same extent as he has so devoted his business time, energy, and talent before the Change in Control Date, and neither directly nor indirectly render any business, commercial, or professional services to any other person, firm, or organization for compensation without the prior approval of the Board. Nothing in this Agreement shall preclude Employee from devoting reasonable period of time to charitable and community activities or the management of his investment assets provided such activities do not materially interfere with the performance by Employee of his duties hereunder. 5. COMPENSATION. For services actually rendered by Employee on behalf of the Company during the Contract Period as contemplated by this Agreement the Company shall pay to Employee a base salary, annual bonus and stock options (together referred to as "Total Compensation") as follows: (a) base salary at a rate equal to the highest of (i) the rate in effect immediately before the Change in Control date, (ii) the rate in effect exactly two years before the Change in Control Date, or (iii) such greater rate as the Company may determine. The base salary shall be paid to Employee in the same increments and on the same schedule each month as in effect immediately before the Effective Date; 4 (b) an annual bonus under the 1995 Management Incentive Compensation Plan as amended, or any substitute therefore, ("Bonus Plan") equal to the highest of (i) the amount calculated using the Bonus Plan in effect immediately before the Change in Control Date, (ii) the amount calculated using the Bonus Plan in effect exactly two years before the Change of Control Date, or (iii) such greater amount as the Company may determine. The annual bonus shall be paid to the Employee not later than the first payroll date in January following the plan year for which the bonus was earned; (c) stock options shall be granted annually at such times, under such terms and conditions, and in such amounts, as to be no less valuable than the greater value of (i) stock options granted immediately before the Change in Control Date, (ii) stock options granted two years before the Change in Control Date, and (iii) such greater value as the Company may determine. 6. VACATION, HOLIDAYS AND SICK LEAVE. Employee will be entitled to such periods of vacation, holidays and sick leave allowance each year as are determined by the Company's policies relevant to vacation, holidays and sick pay for executive personnel as in effect immediately before the Change in Control Date or as may be increased from time to time thereafter. Neither vacation time nor sick leave allowance will be accumulated from year to year. 7. OTHER COMPANY PLANS, BENEFITS, AND PERQUISITES. During the Contract Period Employee shall continue to be entitled to participate in every employee benefit plan, incentive plan or arrangement ("Plan") that is generally available to executive personnel of the Company immediately before the Change in Control Date or that is specifically extended to Employee by the Company before the Change in Control Date, whether or not Employee is eligible to participate in such Plan on the date of this Agreement. Employee's participation in and benefits under any such Plan shall be on the terms and subject to the conditions specified in the governing document of the particular plan or arrangement as in effect immediately before the Change in Control Date, which terms and conditions shall not be amended during the Contract Period unless the benefits to Employee are at least as great under the Plan as amended (or under a substitute Plan) as were the benefits under the Plan as in effect immediately before the Change in Control Date. Specific Plans of the Company to which Employee is entitled to benefits include, but are not limited to, the Plans (or any substitute Plan) listed on Exhibit A hereto. 5 The Company will also provide Employee with such perquisites during the Contract Period as the Company customarily provided to similarly situated executive personnel in the period immediately before the Change in Control Date. 8. ADDITIONAL BENEFIT. If a Change in Control occurs and this Agreement becomes operative and thereafter Employee's employment is terminated by the Company without cause or by Employee for good reason, whether such termination occurs before, on, or after the Contract Expiration Date, the Company shall pay and provide benefits to or with respect to Employee in such amounts and at such times so that the aggregate benefits payable to or with respect to Employee under the Salaried Plan and the Excess Benefit Plans will be equal to the aggregate benefits that would have been paid to or with respect to Employee under the Salaried Plan and the Excess Benefit Plans if Employee were exactly five years older than his actual age and his credit under the Salaried Plan and the Excess Benefit Plans were equal to the greater of his actual service or the amount of service he is deemed to have under paragraph 12(a)(iv), below. If Employee's employment is terminated after a Change in Control by the Company without cause or by Employee for good reason and Employee is entitled to additional benefits by virtue of the additional five years of deemed age provided for in this Paragraph 8, then the Company shall directly provide such benefits to Employee in the same manner as additional benefits are to be provided to Employee under paragraph 12(a), below. 9. PRIORITY OF PARAGRAPHS 2 OVER 8. Paragraph 2 of this Agreement shall take precedence over Paragraph 8 of this Agreement so that if a Change in Control occurs and is subsequently undone under Paragraph 2 of this Agreement, Employee will thereafter have no rights under Paragraph 8 of this Agreement unless and until a further Change in Control occurs. 10. EFFECT OF DISABILITY. If during the Contract Period and before his employment hereunder is otherwise terminated, Employee becomes disabled to such an extent that he is prevented from performing his duties hereunder by reason of physical or mental incapacity: (a) he shall be entitled to disability and other benefits at least equal to those that would have been available to him had the Company continued, throughout the period of Employee's disability, all of its programs, benefits, and policies with respect to disabled employees that were in effect immediately before the Change in Control; and (b) if he recovers from his disability before the end of the Contract Period he shall be reinstated as an active employee for the remainder of the Contract Period under and subject to all of the terms of this Agreement including, without limitation, the Company's right to terminate Employee with or without cause under Paragraph 11(b). 6 11. TERMINATION FOLLOWING A CHANGE IN CONTROL. Following a Change in Control: (a) Employee's employment hereunder will terminate without further notice upon the death of Employee; (b) The Company may terminate Employee's employment hereunder effective immediately upon giving notice of such termination: (i) for "cause," (A) if Employee commits an act of fraud, embezzlement, theft, or other similar criminal act constituting a felony and involving the Company's business or (B) if Employee breaches his agreement with respect to the time to be devoted to the business of the Company set forth in Paragraph 3(d) hereof and fails to cure such breach within 30 days of receipt of written notice of such breach from the Board; or (ii) without cause at any time; and (c) Employee may terminate his employment hereunder effective immediately upon giving of notice of such termination or retirement: (i) without cause at any time; or (ii) for "good reason," which, for purposes of this Agreement shall mean notice by the Employee to the Company of the occurrence of any of the following: (A) any reduction in base salary or position or any material reduction in responsibilities or duties contemplated for Employee under this Agreement or any material reduction in the aggregate of employee benefits, perquisites, or fringe benefits contemplated for Employee under this Agreement, provided that any particular reduction described in this clause (A) shall constitute "good reason" only if Employee terminates his employment within six months of the date of the reduction; or (B) any good faith determination by Employee that, as a result of fundamental differences of opinion between Employee and the Board as to the goals of the Company, Employee is unable to carry out the responsibilities and duties contemplated for Employee under this Agreement, provided that any determination by Employee described in this clause (B) shall constitute "good reason" only if Employee terminates his employment within six months of the 7 Change in Control Date. 12. SEVERANCE COMPENSATION. (a) If, before the Contract Expiration Date, Employee's employment is terminated by the Company without cause or by Employee for good reason, then, except as provided in Paragraph 12(b), 12(c), or 12(d), the Company shall pay and provide to Employee the following compensation and benefits through the last to occur of (x) the expiration of twenty-four months after the effective date of the termination, and (y) the Contract Expiration Date (such last-to-occur date is hereinafter referred to as the "Severance Benefits Termination Date"): (i) Base Salary and Annual Bonus at the highest rate payable to Employee during the Contract Period, to be paid at the times provided in Paragraph 5 hereof; (ii) in lieu of the opportunity to receive stock option grants during the period from the effective date of termination through the Severance Benefits Termination Date, the Company will pay to Employee an amount in cash equal to the product of (A) the aggregate value of the stock options granted to Employee with Respect to the fiscal year ended immediately prior to the Change in Control and (B) a fraction, the numerator of which is the number of days from the effective date of termination through the Severance Benefits Termination Date and the denominator of which is 365; for this purpose, the value of the stock options will be determined using the Black-Scholes option price model; (iii) coverage under the Company's medical, dental, insurance, short-term disability, long-term disability plans, and other Plans, as listed on Exhibit A, Items 7 through 14 (provided that he became eligible to participate therein prior to the date his employment is terminated), each as in effect on the Change in Control Date (or, if subsequently amended to increase benefits to Employee or his dependents, as so amended) and each as if Employee's employment had continued through the Severance Benefits Termination Date; and (iv) coverage and service credit under the Salaried Plan and the Excess Benefit Plans maintained in connection with the Salaried Plan under which he is eligible to participate so that the aggregate benefits payable to or with respect to the Employee under the 8 Salaried Plan and the Excess Benefit Plan will be equal to the aggregate benefits that would have been paid to or with respect to Employee under the Salaried Plan and the Excess Benefit Plans if Employee's employment had continued through the Severance Benefits Termination Date. If any of the benefits to be provided under the Company's Plans cannot be provided through that Plan to Employee following termination of his employment, the Company shall directly provide the full equivalent of such benefits to Employee. For example, since it is not possible to provide additional service credit directly through the Salaried Plan, if Employee becomes entitled to an additional 18 months of service credit under the Salaried plan pursuant to (iv) above, the Company will be required to pay to Employee, from its general assets, on each date on which Employee receives a payment from the Salaried Plan, a supplemental payment equal to the amount by which that particular payment under the Salaried Plan would have been increased if Employee's total service credit under the Salaried Plan were 18 months greater than is actually the case by reason of this Agreement. In addition, if in these circumstances any payments become due under the Salaried Plan with respect to Employee following his death, the Company will be obligated to make similar supplemental payments with respect to Employee on the dates on which payments are made with respect to Employee under the Salaried Plan. Furthermore, the provisions of this Agreement shall not affect the validity or enforceability of any other agreement between the Company and Employee, and the benefits provided under this Agreement shall be additive to any other benefits promised to Employee under such other agreement. Moreover, this Agreement shall not operate to negate any other assurances provided to Employee. (b) If Employee becomes entitled to compensation and benefits pursuant to Paragraph 12(a) he shall use reasonable efforts to seek other employment, provided, however, that he shall not be required to accept a position of less importance and dignity or of substantially different character than of his position with the Company or a position that would require Employee to engage in activity in violation of Employee's agreement with respect to noncompetition set forth in Paragraph 14 hereof nor shall he be required to accept a position outside the greater Cleveland area. The Company's obligations under item (i) and (ii) of Paragraph 12(a) will be offset by payments and 9 benefits received by Employee from another employer to the following extent: (i) The Company's obligation to pay any particular installment of base salary following Employee's termination will be offset, on a dollar for dollar basis, by any cash compensation received by Employee from another employer before the date on which the installment of base salary is payable by the Company. (ii) To the extent that Employee is provided medical, dental, or short-term or long-term disability income protection benefits by another employer during any period, the Company will be relieved of its obligation to provide such benefits to Employee. For example, if a new employer provides Employee with a medical benefits plan that pays $500.00 for a specific claim made by Employee and the Company's medical insurance plan would have paid $750.00 for that claim, then the Company will be obligated to pay Employee $250.00 with respect to that claim. Other than as provided in this Paragraph 12(b) Employee shall have no duty to mitigate the amount of any payment or benefit provided for in this Agreement. (c) If during any period in which Employee is entitled to payments or benefits from the Company under Paragraph 12(a): (i) Employee materially and willfully breaches his agreement with respect to confidential information set forth in Paragraph 13 hereof and such breach directly causes the Company substantial and demonstrable damage; or (ii) Employee materially and wilfully breaches his agreement with respect to noncompetition set forth in Paragraph 14 hereof and such breach directly causes the Company substantial and demonstrable damage; then the Company will be relieved of its obligations under paragraph 12(a) hereof as of the first day of the month immediately following the date of such material breach. (d) If Employee dies on or before the Severance Benefits Termination Date and immediately before his death he is entitled to payments or benefits from the Company under Paragraph 12(a), the Company will be relieved of its 10 obligations under item (i) of Paragraph 12(a) as of the first day of the month immediately following the month in which Employee dies and thereafter the Company will provide to Employee's beneficiaries and dependents salary continuation payments, benefits under the Excess Benefits Plan (as supplemented by item (iii) of Paragraph 12(a), and continuing medical and dental benefits to the same extent (subject to reduction for payments or benefits from a new employer under paragraph 12(b) as if Employee's death had occurred while Employee was in the active employ of the Company. 13. CONFIDENTIAL INFORMATION. Employee agrees that he will not, during the term of the Agreement or at any time thereafter, either directly or indirectly, disclose or make known to any person, firm, or corporation any confidential information, trade secret, or proprietary information of the Company that Employee may acquire in the performance of Employee's duties hereunder. Upon the termination of Employee's employment with the Company, Employee agrees to deliver forthwith to the Company any and all literature, documents, correspondence, and other materials and records furnished to or acquired by Employee during the course of such employment. 14. NONCOMPETITION. During any period in which Employee is receiving Total Compensation under this Agreement (whether during the Contract Period pursuant to Paragraph 5 or following termination pursuant to Paragraph 12(a), Employee shall not act as a proprietor, investor, director, officer, employee, substantial stockholder, consultant, or partner in any business engaged to a material extent in direct competition with the Company in any market in any line of business engaged in by the Company during the Contract period. If Employee delivers to the Company a written waiver of his right to receive any further compensation or benefits pursuant to Paragraph 12(a), if agreed to by the Company in writing, he shall be released, effective as of the date of agreement by the Company, from the post-termination noncompetition covenant contained in this Paragraph 14. 15. COSTS OF ENFORCEMENT. The Company shall pay and be solely responsible for any and all costs and expenses (including attorneys' fees) incurred by Employee in seeking to enforce the Company's obligations under this Agreement unless and to the extent a court of competent jurisdiction determines that the Company was relieved of those obligations because (a) the Company terminated Employee for cause (as determined under Paragraph 11(b)(i) hereof), (b) Employee voluntarily terminated his employment other than for good reason (as determined under Paragraph 11(c)(ii) hereof), or (c) Employee materially and willfully breached his agreement not to compete with the Company 11 or his agreement with respect to confidential information and such breach directly caused substantial and demonstrable damage to the Company. The Company shall forthwith pay directly or reimburse Employee for any and all such costs and expenses upon presentation by Employee or by counsel selected from time to time by Employee of a statement or statements prepared by Employee or by such counsel of the amount of such costs and expenses. If and to the extent a court of competent jurisdiction renders a final binding judgment determining that the Company was relieved of its obligations for any of the reasons set forth in (a), (b) or (c) above, Employee shall repay the amount of such payments or reimbursements to the Company. In addition to the payment and reimbursement of expenses of enforcement provided for in this Paragraph 15, the Company shall pay to Employee in cash, as and when the Company makes any payment on behalf of, or reimbursement to, Employee, an additional amount sufficient to pay all federal, state, and local taxes (whether income taxes or other taxes) incurred by Employee as a result of (x) payment of the expense or receipt of the reimbursement, and (y) receipt of the additional cash payment. The Company shall also pay to Employee interest (calculated at the Base Rate from time to time in effect at National City Bank, Cleveland, Ohio, compounded monthly) on any payments or benefits that are paid or provided to Employee later than the date on which due under the terms of this Agreement. 16. EMPLOYEE RIGHTS. Nothing expressed or implied in this Agreement shall create any right or duty on the part of the Company or Employee to have Employee remain in the employ of the Company before any Change in Control and Employee shall have no rights under this Agreement if his employment with the Company is terminated for any reason or for no reason before any Change in Control. Nothing expressed or implied in this Agreement shall create any duty on the part of the Company to continue in effect, or continue to provide to Employee, any plan or benefit unless and until a Change in Control occurs. If, before a Change in Control, the Company ceases to provide any plan or benefit to Employee, nothing in this Agreement shall be construed to require the Company to reinstitute that plan or benefit to Employee upon the later occurrence of a Change in Control. 17. NOTICES. For purposes of this Agreement, all communications provided for herein shall be in writing and shall be deemed to have been duly given when delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the Company (Attention: President) at its principal executive office and to Employee at his principal residence, or to such other address as either party may have furnished to the other in writing and in accordance herewith, except that notices of change of address shall be effective only upon receipt. 12 18. ASSIGNMENT, BINDING EFFECT. (a) This Agreement shall be binding upon and shall inure to the benefit of the Company and the Company's successors and assigns. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and or assets of the Company, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. (b) This Agreement shall be binding upon Employee and this Agreement and all rights of Employee hereunder shall inure to the benefit of, and be enforceable by, Employee and his personal or legal representatives, executors, or administrators. No right, benefit, or interest of Employee hereunder shall be subject to assignment, anticipation, alienation, sale, encumbrance, charge, pledge, hypothecation, or to execution, attachment, levy, or similar process; except that Employee may assign any right, benefit, or interest hereunder if such assignment is permitted under the terms of any plan or policy of insurance or annuity contract governing such right, benefit, or interest. 19. INVALID PROVISIONS. (a) Any provision of this Agreement that is prohibited or unenforceable shall be ineffective to the extent, but only to the extent, of such prohibition or unenforceability without invalidating the remaining portions hereof and such remaining portions of this Agreement shall continue to be in full force and effect. (b) In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable, the parties will negotiate in good faith to replace such provision with another provision that will be valid or enforceable and that is as close as practicable to the provision held invalid or unenforceable. 20. MODIFICATION. No modification, amendment, or waiver of any of the provisions of the Agreement shall be effective unless in writing, specifically referring hereto, and signed by both parties. 21. WAIVER OF BREACH. The failure at any time to enforce any of the provisions of this Agreement or to require 13 performance by the other party of any of the provisions of this Agreement shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement or any part of this Agreement or the right of either party thereafter to enforce each and every provision of this Agreement in accordance with the terms hereof. 22. GOVERNING LAW. This Agreement has been made in and shall be governed and construed in accordance with the laws of the State of Ohio. 23. GROSS-UP OF PAYMENTS DEEMED TO BE EXCESS PARACHUTE PAYMENTS. (a) The Company and Employee acknowledge that, following a Change of Control, one or more payments or distributions to be made by the Company to or for the benefit of Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, under some other plan, agreement, or arrangement, or otherwise) (a "Payment") may be determined to be an "excess parachute payment" that is not deductible by the Company for Federal income tax purposes and with respect to which Employee will be subject to an excise tax because of Sections 280G and 4999, respectively, of the Internal Revenue Code (hereinafter referred to respectively as "Section 280G" and "Section 4999"). If Employee's employment is terminated after a Change of Control occurs, the Accounting Firm, which, subject to any inconsistent position asserted by the Internal Revenue Service, shall make all determinations required to be made under this Paragraph 23, shall determine whether any Payment would be an excess parachute payment and shall communicate its determination, together with detailed supporting calculations, to the Company and to Employee within 30 days after the date on which Employee's employment with the Company terminates or such earlier time as is requested by the Company. The Company and Employee shall cooperate with each other and the Accounting Firm and shall provide necessary information so that the Accounting Firm may make all such determinations. The Company shall pay all of the fees of the Accounting Firm for services performed by the Accounting Firm as contemplated in this Paragraph 23. (b) If the Accounting Firm determines that any Payment gives rise, directly or indirectly, to liability on the part of Employee for excise tax under Section 4999 (and/or any penalties and/or interest with respect to any 14 such excise tax), the Company shall make additional cash payments to Employee, from time to time and at the same time as any Payment constituting an excess parachute payment is paid or provided to Employee, in such amounts as are necessary to put Employee in the same position, after payment of all federal, state, and local taxes (whether income taxes, excise taxes under Section 4999 or otherwise, or other taxes) and any and all penalties and interest with respect to any such excise tax, as Employee would have been in after payment of all federal, state, and local income taxes if the Payments had not given rise to an excise tax under Section 4999 and no such penalties or interest had been imposed. (c) If the Internal Revenue Service determines that any Payment gives rise, directly or indirectly, to liability on the part of Employee for excise tax under Section 4999 (and/or any penalties and/or interest with respect to any such excise tax) in excess of the amount, if any, previously determined by the Accounting Firm, the Company shall make further additional cash payments to Employee not later than the due date of any payment indicated by the Internal Revenue Service with respect to these matters, in such amounts as are necessary to put Employee in the same position, after payment of all federal, state, and local taxes (whether income taxes, excise taxes under Section 4999 or otherwise, or other taxes) and any and all penalties and interest with respect to any such excise tax, as Employee would have been in after payment of all federal, state, and local income taxes if the Payments had not given rise to an excise tax under Section 4999 and no such penalties or interest had been imposed. (d) If the Company desires to contest any determination by the Internal Revenue Service with respect to the amount of excise tax under Section 4999, Employee shall, upon receipt from the Company of an unconditional written undertaking to indemnify and hold Employee harmless (on an after tax basis) from any and all adverse consequences that might arise from the contesting of that determination, cooperate with the Company in that contest at the Company's sole expense. Nothing in this Paragraph 23(d) shall require Employee to incur any expense other than expenses with respect to which the Company has paid to Employee sufficient sums so that after the payment of the expense by Employee and taking into account the payment by the Company with respect to that expense and any and all taxes that may be imposed upon Employee as a result of his receipt of that payment, the net effect is no cost to Employee. Nothing in this Paragraph 23(d) shall require Employee to extend the statute of limitations with respect 15 to any item or issue in his tax returns other than, exclusively, the excise tax under Section 4999. If, as the result of the contest of any assertion by the Internal Revenue Service with respect to excise tax under Section 4999, Employee receives a refund of a Section 4999 excise tax previously paid and/or any interest with respect thereto, Employee shall promptly pay to the Company such amount as will leave Employee, net of the repayment and all tax effects, in the same position, after all taxes and interest, that he would have been in if the refunded excise tax had never been paid. (e) For purposes of this Paragraph 23, the term "Accounting Firm" means the independent auditors of the Company for the fiscal year preceding the year in which the earlier of (i) the date of termination of Employee's employment with the Company, or (ii) the year, if any, in which occurred the first Change of Control occurring after the date of this Agreement, and such firm's successor or successors; provided, however, if such firm is unable or unwilling to serve and perform in the capacity contemplated by this Agreement, the Company shall select another national accounting firm of recognized standing to serve and perform in that capacity under this Agreement, except that such other accounting firm shall not be the then independent auditors for the Company or any of its affiliates (as defined in Rule 12b-2 promulgated under the Exchange Act). IN WITNESS WHEREOF, the Company and Employee have executed this Agreement on the day and year first above written. NORDSON CORPORATION By:_________________________________ Thomas L. Moorhead Title: Vice President, Law and Assistant Secretary Employee:___________________________ Edward P. Campbell 16 EXHIBIT A COMPANY PLANS 1. The Nordson Corporation 1995 Management Incentive Compensation Plan; 2. The Nordson Corporation 1993 Long-Term Performance Plan; 3. The Nordson Corporation Salaried Employees Pension Plan (the "Salaried Plan"); 4. Nordson Corporation Officers' Deferred Compensation Plan; 5. The Nordson Corporation Excess Defined Benefit Pension Plan and the Excess Defined Contribution Retirement Plan (the "Excess Benefit Plans"); 6. The Nordson Corporation Employees' Savings Trust Plan (NEST); 7. The Nordson Corporation Non-Union Employees Stock Ownership Plan; 8. The Nordson Corporation Salaried Employees' Health Plan; 9. The Nordson Corporation Prescription Drug Plan; 10. The Nordson Corporation Short Term and Long Term Disability Plans; 11. The Nordson Corporation Employees' Dental Expense Plan; 12. The Nordson Corporation Group Life Insurance Plan-Salaried; 13. The Nordson Corporation Group Travel Accident Plan; 14. The Company's car allowance Plan; 15. Nordson's policy of reimbursement for club dues, airline travel clubs, and the like. 17 EX-10.H.2 6 l10447aexv10whw2.txt EXHIBIT 10-H-2 FORM OF EMPLOYMENT AGREEMENT Exhibit 10-h-2 EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT is entered into effective ___________, 200__ by and between NORDSON CORPORATION, an Ohio corporation (the "Company"), and______________________, whose residence is at _________________________________________ ("Employee"). W I T N E S S E T H: WHEREAS, Employee is an executive and key employee of the Company, has fully and ably discharged his responsibilities and duties in his service to the Company to date, and is now serving the Company as a ____________________; WHEREAS, the Company desires to assure itself of continuity of management in the event of any threatened or actual Change in Control (as hereafter defined); WHEREAS, the Company desires to provide inducements for Employee not to engage in activity competitive with the Company; WHEREAS, the Company desires to assure itself, in the event of any threatened or actual Change in Control, of the continued performance of services by Employee on an objective and impartial basis and without distraction by concern for his employment status and security; WHEREAS, Employee is willing to continue in the employ of the Company but desires assurance that his responsibilities and status as an executive of the Company will not be adversely affected by any threatened or actual Change in Control; NOW, THEREFORE, the Company and Employee agree as follows: 1. Operation of Agreement. This Agreement shall be effective and binding immediately upon its execution, but, anything in this Agreement to the contrary notwithstanding, this Agreement shall not be operative unless and until there has been a Change in Control while Employee is in the employ of the Company. For purposes of this Agreement, a Change in Control shall have occurred if at any time any of the following events occurs: (a) a report is filed with the Securities and Exchange Commission (the "SEC") on Schedule 13D or Schedule 14D-1 (or any successor schedule, form, or report), each as promulgated pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"), disclosing that any "person" (as the term "person" is used in Section 13(d) or Section 14(d)(2) of the Exchange Act) is or has become a beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities; (b) the Company files a report or proxy statement with the SEC pursuant to the Exchange Act disclosing in response to Item 1 of Form 8-K thereunder or Item 5(f) of Schedule 14A thereunder that a Change in Control of the Company has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; (c) the Company is merged or consolidated with another corporation and, as a result thereof, securities representing less than 50% of the combined voting power of the surviving or resulting corporation's securities (or of the securities of a parent corporation in case of a merger in which the surviving or resulting corporation becomes a wholly-owned subsidiary of the parent corporation) are owned in the aggregate by holders of the Company's securities immediately prior to such merger or consolidation; (d) all or substantially all of the assets of the Company are sold in a single transaction or a series of related transactions to a single purchaser or a group of affiliated purchasers; or (e) during any period of 24 consecutive months, individuals who were Directors of the Company at the beginning of such period cease to constitute at least a majority of the Company's Board of Directors (the "Board") unless the election, or nomination for election by the Company's shareholders, of more than one half of any new Directors of the Company was approved by a vote of at least two-thirds of the Directors of the Company then still in office who were Directors of the Company at the beginning of such 24 month period. The first date on which a Change in Control occurs is referred to herein as the "Change in Control Date." Upon the occurrence of a Change in Control while Employee is in the employ of the Company, this Agreement shall become immediately operative subject, however, to the provisions of Section 2, below. 2. Possible "undoing" of a Change in Control. If a report is filed with the SEC disclosing that a person (the "Acquiror") is or has become a beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the company's outstanding securities and, as a result of that filing, a Change in Control, as defined in Paragraph 1(a), above, occurs, while Employee is in the employ of the Company, then, as provided in Paragraph 1, above, this Agreement will become immediately operative. However, if: (a) a Change in Control as described in Paragraph 1(a) occurs while Employee is in the employ of the Company; (b) the Acquiror subsequently transfers or otherwise disposes of sufficient 2 securities of the Company in one or more transactions, to a person or persons other than affiliates of the Acquiror or any persons with whom the Acquiror has agreed to act together for the purpose of acquiring, holding, voting or disposing of securities of the Company, so that, after such transfer or other disposition, the Acquiror is no longer the beneficial owner, directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company's then outstanding securities; (c) at the time of the subsequent transfer or disposition that reduced the Acquiror's holdings to less than 10% as provided in (b), immediately above, no other event constituting a Change in Control had occurred; and (d) at the time of the subsequent transfer or other disposition that reduced the Acquiror's holdings to less than 10%, Employee's employment with the Company had not been terminated by the Company without cause or by Employee for good reason, then, for all purposes of this Agreement, the filing of the report constituting a Change in Control under Paragraph 1(a) shall be treated as if it had not occurred and this Agreement shall return to the status it had immediately before the filing of the report constituting a Change in Control under Paragraph 1(a). Accordingly, if and when a new Change in Control occurs, this Agreement will again become operative on the date of that new Change in Control. 3. Employment, Contract Period. (a) Subject to the terms and conditions of this Agreement, upon the occurrence of a Change in Control, the Company shall continue to employ Employee and Employee shall continue in the employ of the Company for the period specified in Paragraph 3(b) (the "Contract Period"), in the position and with the duties and responsibilities set forth in Paragraph 4. (b) The Contract Period shall commence on the Change in Control Date and, subject only to the provisions of Paragraph 9 below, shall continue for a period of twenty-four months to the close of business on the day (the "Contract Expiration Date") falling twenty-four months after the Change in Control Date. 4. Position, Duties, Responsibilities. At all times during the Contract Period, Employee shall: (a) hold the same position with substantially the same duties and responsibilities as an executive of the Company as Employee held immediately before the Change in Control Date and those duties and responsibilities may be extended, from time to time during the Contract Period, by the Board with Employee's consent; (b) adhere to and implement the policies and directives promulgated, from 3 time to time, by the Board; (c) observe all Company policies applicable to executive personnel of the Company; and (d) devote his business time, energy, and talent to the business of and to the furtherance of the purposes and objectives of the Company to generally the same extent as he has so devoted his business time, energy, and talent before the Change in Control Date, and neither directly nor indirectly render any business, commercial, or professional services to any other person, firm, or organization for compensation without the prior approval of the Board. Nothing in this Agreement shall preclude Employee from devoting reasonable period of time to charitable and community activities or the management of his investment assets provided such activities do not materially interfere with the performance by Employee of his duties hereunder. 5. Compensation. For services actually rendered by Employee on behalf of the Company during the Contract Period as contemplated by this Agreement the Company shall pay to Employee a base salary, annual bonus and stock options (together referred to as "Total Compensation") as follows: (a) base salary at a rate equal to the highest of (i) the rate in effect immediately before the Change in Control date, (ii) the rate in effect exactly two years before the Change in Control Date, or (iii) such greater rate as the Company may determine. The base salary shall be paid to Employee in the same increments and on the same schedule each month as in effect immediately before the Effective Date; (b) an annual bonus under the 1995 Management Incentive Compensation Plan as amended, or any substitute therefore, ("Bonus Plan") equal to the highest of (i) the amount calculated using the Bonus Plan in effect immediately before the Change in Control Date, (ii) the amount calculated using the Bonus Plan in effect exactly two years before the Change of Control Date, or (iii) such greater amount as the Company may determine. The annual bonus shall be paid to the Employee not later than the first payroll date in January following the plan year for which the bonus was earned; (c) stock options shall be granted annually at such times, under such terms and conditions, and in such amounts, as to be no less valuable than the greater value of (i) stock options granted immediately before the Change in Control Date, (ii) stock options granted two years before the Change in Control Date, and (iii) such greater value as the Company may determine. 6. Vacation, Holidays and Sick Leave. Employee will be entitled to such periods of vacation, holidays and sick leave allowance each year as are determined by the 4 Company's policies relevant to vacation, holidays and sick pay for executive personnel as in effect immediately before the Change in Control Date or as may be increased from time to time thereafter. Neither vacation time nor sick leave allowance will be accumulated from year to year. 5 7. Other Company Plans, Benefits, and Perquisites. During the Contract Period Employee shall continue to be entitled to participate in every employee benefit plan, incentive plan or arrangement ("Plan") that is generally available to executive personnel of the Company immediately before the Change in Control Date or that is specifically extended to Employee by the Company before the Change in Control Date, whether or not Employee is eligible to participate in such Plan on the date of this Agreement. Employee's participation in and benefits under any such Plan shall be on the terms and subject to the conditions specified in the governing document of the particular plan or arrangement as in effect immediately before the Change in Control Date, which terms and conditions shall not be amended during the Contract Period unless the benefits to Employee are at least as great under the Plan as amended (or under a substitute Plan) as were the benefits under the Plan as in effect immediately before the Change in Control Date. Specific Plans of the Company to which Employee is entitled to benefits include, but are not limited to, the Plans (or any substitute Plan) listed on Exhibit A hereto. The Company will also provide Employee with such perquisites during the Contract Period as the Company customarily provided to similarly situated executive personnel in the period immediately before the Change in Control Date. 8. Additional Benefit. If a Change in Control occurs and this Agreement becomes operative and thereafter Employee's employment is terminated by the Company without cause or by Employee for good reason, whether such termination occurs before, on, or after the Contract Expiration Date, the Company shall pay and provide benefits to or with respect to Employee in such amounts and at such times so that the aggregate benefits payable to or with respect to Employee under the Salaried Plan and the Excess Benefit Plans will be equal to the aggregate benefits that would have been paid to or with respect to Employee under the Salaried Plan and the Excess Benefit Plans if Employee were exactly five years older than his actual age and his credit under the Salaried Plan and the Excess Benefit Plans were equal to the greater of his actual service or the amount of service he is deemed to have under paragraph 12(a)(iv), below. If Employee's employment is terminated after a Change in Control by the Company without cause or by Employee for good reason and Employee is entitled to additional benefits by virtue of the additional five years of deemed age provided for in this Paragraph 8, then the Company shall directly provide such benefits to Employee in the same manner as additional benefits are to be provided to Employee under paragraph 12(a), below. 9. Priority of Paragraphs 2 Over 8. Paragraph 2 of this Agreement shall take precedence over Paragraph 8 of this Agreement so that if a Change in Control occurs and is subsequently undone under Paragraph 2 of this Agreement, Employee will thereafter have no rights under Paragraph 8 of this Agreement unless and until a further Change in Control occurs. 10. Effect of Disability. If during the Contract Period and before his employment hereunder is otherwise terminated, Employee becomes disabled to such an extent that he is prevented from performing his duties hereunder by reason of physical or mental incapacity: (a) he shall be entitled to disability and other benefits at least equal to those that 6 would have been available to him had the Company continued, throughout the period of Employee's disability, all of its programs, benefits, and policies with respect to disabled employees that were in effect immediately before the Change in Control; and (b) if he recovers from his disability before the end of the Contract Period he shall be reinstated as an active employee for the remainder of the Contract Period under and subject to all of the terms of this Agreement including, without limitation, the Company's right to terminate Employee with or without cause under Paragraph 11(b). 11. Termination Following a Change in Control. Following a Change in Control: (a) Employee's employment hereunder will terminate without further notice upon the death of Employee; (b) The Company may terminate Employee's employment hereunder effective immediately upon giving notice of such termination: (i) for "cause," (A) if Employee commits an act of fraud, embezzlement, theft, or other similar criminal act constituting a felony and involving the Company's business or (B) if Employee breaches his agreement with respect to the time to be devoted to the business of the Company set forth in Paragraph 3(d) hereof and fails to cure such breach within 30 days of receipt of written notice of such breach from the Board; or (ii) without cause at any time; and (c) Employee may terminate his employment hereunder effective immediately upon giving of notice of such termination or retirement: (i) without cause at any time; or (ii) for "good reason," which, for purposes of this Agreement shall mean notice by the Employee to the Company of the occurrence of any of the following: (A) any reduction in base salary or position or any material reduction in responsibilities or duties contemplated for Employee under this Agreement or any material reduction in the aggregate of employee benefits, perquisites, or fringe benefits contemplated for Employee under this Agreement, provided that any particular reduction described in this clause (A) shall constitute "good reason" only if Employee terminates his employment within six months of the date of the reduction; or (B) any good faith determination by Employee that, as a result of 7 fundamental differences of opinion between Employee and the Board as to the goals of the Company, Employee is unable to carry out the responsibilities and duties contemplated for Employee under this Agreement, provided that any determination by Employee described in this clause (B) shall constitute "good reason" only if Employee terminates his employment within six months of the Change in Control Date. 12. Severance Compensation. (a) If, before the Contract Expiration Date, Employee's employment is terminated by the Company without cause or by Employee for good reason, then, except as provided in Paragraph 12(b), 12(c), or 12(d), the Company shall pay and provide to Employee the following compensation and benefits through the last to occur of (x) the expiration of twelve months after the effective date of the termination, and (y) the Contract Expiration Date (such last-to-occur date is hereinafter referred to as the "Severance Benefits Termination Date"): (i) Base Salary and Annual Bonus at the highest rate payable to Employee during the Contract Period, to be paid at the times provided in Paragraph 5 hereof; (ii) in lieu of the opportunity to receive stock option grants during the period from the effective date of termination through the Severance Benefits Termination Date, the Company will pay to Employee an amount in cash equal to the product of (A) the aggregate value of the stock options granted to Employee with Respect to the fiscal year ended immediately prior to the Change in Control and (B) a fraction, the numerator of which is the number of days from the effective date of termination through the Severance Benefits Termination Date and the denominator of which is 365; for this purpose, the value of the stock options will be determined using the Black-Scholes option price model; (iii) coverage under the Company's medical, dental, insurance, short-term disability, long-term disability plans, and other Plans, as listed on Exhibit A, Items 7 through 14 (provided that he became eligible to participate therein prior to the date his employment is terminated), each as in effect on the Change in Control Date (or, if subsequently amended to increase benefits to Employee or his dependents, as so amended) and each as if Employee's employment had continued through the Severance Benefits Termination Date; and (iv) coverage and service credit under the Salaried Plan and the Excess Benefit Plans maintained in connection with the Salaried Plan under which he is eligible to participate so that the aggregate benefits payable to or with respect to the Employee under the Salaried Plan and the Excess Benefit Plan will be equal to the aggregate benefits that would have been paid to or with respect to 8 Employee under the Salaried Plan and the Excess Benefit Plans if Employee's employment had continued through the Severance Benefits Termination Date. If any of the benefits to be provided under the Company's Plans cannot be provided through that Plan to Employee following termination of his employment, the Company shall directly provide the full equivalent of such benefits to Employee. For example, since it is not possible to provide additional service credit directly through the Salaried Plan, if Employee becomes entitled to an additional 18 months of service credit under the Salaried plan pursuant to (iv) above, the Company will be required to pay to Employee, from its general assets, on each date on which Employee receives a payment from the Salaried Plan, a supplemental payment equal to the amount by which that particular payment under the Salaried Plan would have been increased if Employee's total service credit under the Salaried Plan were 18 months greater than is actually the case by reason of this Agreement. In addition, if in these circumstances any payments become due under the Salaried Plan with respect to Employee following his death, the Company will be obligated to make similar supplemental payments with respect to Employee on the dates on which payments are made with respect to Employee under the Salaried Plan. Furthermore, the provisions of this Agreement shall not affect the validity or enforceability of any other agreement between the Company and Employee, and the benefits provided under this Agreement shall be additive to any other benefits promised to Employee under such other agreement. Moreover, this Agreement shall not operate to negate any other assurances provided to Employee. (b) If Employee becomes entitled to compensation and benefits pursuant to Paragraph 12(a) he shall use reasonable efforts to seek other employment, provided, however, that he shall not be required to accept a position of less importance and dignity or of substantially different character than of his position with the Company or a position that would require Employee to engage in activity in violation of Employee's agreement with respect to noncompetition set forth in Paragraph 14 hereof nor shall he be required to accept a position outside the greater Cleveland area. The Company's obligations under item (i) and (ii) of Paragraph 12(a) will be offset by payments and benefits received by Employee from another employer to the following extent: (i) The Company's obligation to pay any particular installment of base salary following Employee's termination will be offset, on a dollar for dollar basis, by any cash compensation received by Employee from another employer before the date on which the installment of base salary is payable by the Company. (ii) To the extent that Employee is provided medical, dental, or 9 short-term or long-term disability income protection benefits by another employer during any period, the Company will be relieved of its obligation to provide such benefits to Employee. For example, if a new employer provides Employee with a medical benefits plan that pays $500.00 for a specific claim made by Employee and the Company's medical insurance plan would have paid $750.00 for that claim, then the Company will be obligated to pay Employee $250.00 with respect to that claim. Other than as provided in this Paragraph 12(b) Employee shall have no duty to mitigate the amount of any payment or benefit provided for in this Agreement. (c) If during any period in which Employee is entitled to payments or benefits from the Company under Paragraph 12(a): (i) Employee materially and willfully breaches his agreement with respect to confidential information set forth in Paragraph 13 hereof and such breach directly causes the Company substantial and demonstrable damage; or (ii) Employee materially and willfully breaches his agreement with respect to noncompetition set forth in Paragraph 14 hereof and such breach directly causes the Company substantial and demonstrable damage; then the Company will be relieved of its obligations under paragraph 12(a) hereof as of the first day of the month immediately following the date of such material breach. (d) If Employee dies on or before the Severance Benefits Termination Date and immediately before his death he is entitled to payments or benefits from the Company under Paragraph 12(a), the Company will be relieved of its obligations under item (i) of Paragraph 12(a) as of the first day of the month immediately following the month in which Employee dies and thereafter the Company will provide to Employee's beneficiaries and dependents salary continuation payments, benefits under the Excess Benefits Plan (as supplemented by item (iii) of Paragraph 12(a), and continuing medical and dental benefits to the same extent (subject to reduction for payments or benefits from a new employer under paragraph 12(b) as if Employee's death had occurred while Employee was in the active employ of the Company. 13. Confidential Information. Employee agrees that he will not, during the term of the Agreement or at any time thereafter, either directly or indirectly, disclose or make known to any person, firm, or corporation any confidential information, trade secret, or proprietary information of the Company that Employee may acquire in the performance of Employee's duties hereunder. Upon the termination of Employee's employment with the Company, Employee agrees to deliver forthwith to the Company any and all literature, documents, correspondence, and other materials and records furnished to or acquired by 10 Employee during the course of such employment. 14. Noncompetition. During any period in which Employee is receiving Total Compensation under this Agreement (whether during the Contract Period pursuant to Paragraph 5 or following termination pursuant to Paragraph 12(a), Employee shall not act as a proprietor, investor, director, officer, employee, substantial stockholder, consultant, or partner in any business engaged to a material extent in direct competition with the Company in any market in any line of business engaged in by the Company during the Contract period. If Employee delivers to the Company a written waiver of his right to receive any further compensation or benefits pursuant to Paragraph 12(a), if agreed to by the Company in writing, he shall be released, effective as of the date of agreement by the Company, from the post-termination noncompetition covenant contained in this Paragraph 14. 15. Costs of Enforcement. The Company shall pay and be solely responsible for any and all costs and expenses (including attorneys' fees) incurred by Employee in seeking to enforce the Company's obligations under this Agreement unless and to the extent a court of competent jurisdiction determines that the Company was relieved of those obligations because (a) the Company terminated Employee for cause (as determined under Paragraph 11(b)(i) hereof), (b) Employee voluntarily terminated his employment other than for good reason (as determined under Paragraph 11(c)(ii) hereof), or (c) Employee materially and willfully breached his agreement not to compete with the Company or his agreement with respect to confidential information and such breach directly caused substantial and demonstrable damage to the Company. The Company shall forthwith pay directly or reimburse Employee for any and all such costs and expenses upon presentation by Employee or by counsel selected from time to time by Employee of a statement or statements prepared by Employee or by such counsel of the amount of such costs and expenses. If and to the extent a court of competent jurisdiction renders a final binding judgment determining that the Company was relieved of its obligations for any of the reasons set forth in (a), (b) or (c) above, Employee shall repay the amount of such payments or reimbursements to the Company. In addition to the payment and reimbursement of expenses of enforcement provided for in this Paragraph 15, the Company shall pay to Employee in cash, as and when the Company makes any payment on behalf of, or reimbursement to, Employee, an additional amount sufficient to pay all federal, state, and local taxes (whether income taxes or other taxes) incurred by Employee as a result of (x) payment of the expense or receipt of the reimbursement, and (y) receipt of the additional cash payment. The Company shall also pay to Employee interest (calculated at the Base Rate from time to time in effect at National City Bank, Cleveland, Ohio, compounded monthly) on any payments or benefits that are paid or provided to Employee later than the date on which due under the terms of this Agreement. 16. Employee Rights. Nothing expressed or implied in this Agreement shall create any right or duty on the part of the Company or Employee to have Employee remain in the employ of the Company before any Change in Control and Employee shall have no rights under this Agreement if his employment with the Company is terminated for any reason or for no reason before any Change in Control. Nothing expressed or implied in this Agreement shall 11 create any duty on the part of the Company to continue in effect, or continue to provide to Employee, any plan or benefit unless and until a Change in Control occurs. If, before a Change in Control, the Company ceases to provide any plan or benefit to Employee, nothing in this Agreement shall be construed to require the Company to reinstitute that plan or benefit to Employee upon the later occurrence of a Change in Control. 12 17. Notices. For purposes of this Agreement, all communications provided for herein shall be in writing and shall be deemed to have been duly given when delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the Company (Attention: President) at its principal executive office and to Employee at his principal residence, or to such other address as either party may have furnished to the other in writing and in accordance herewith, except that notices of change of address shall be effective only upon receipt. 18. Assignment, Binding effect. (a) This Agreement shall be binding upon and shall inure to the benefit of the Company and the Company's successors and assigns. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and or assets of the Company, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. (b) This Agreement shall be binding upon Employee and this Agreement and all rights of Employee hereunder shall inure to the benefit of, and be enforceable by, Employee and his personal or legal representatives, executors, or administrators. No right, benefit, or interest of Employee hereunder shall be subject to assignment, anticipation, alienation, sale, encumbrance, charge, pledge, hypothecation, or to execution, attachment, levy, or similar process; except that Employee may assign any right, benefit, or interest hereunder if such assignment is permitted under the terms of any plan or policy of insurance or annuity contract governing such right, benefit, or interest. 19. Invalid Provisions. (a) Any provision of this Agreement that is prohibited or unenforceable shall be ineffective to the extent, but only to the extent, of such prohibition or unenforceability without invalidating the remaining portions hereof and such remaining portions of this Agreement shall continue to be in full force and effect. (b) In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable, the parties will negotiate in good faith to replace such provision with another provision that will be valid or enforceable and that is as close as practicable to the provision held invalid or unenforceable. 20. Modification. No modification, amendment, or waiver of any of the provisions of the Agreement shall be effective unless in writing, specifically referring hereto, and signed by both parties. 13 21. Waiver of Breach. The failure at any time to enforce any of the provisions of this Agreement or to require performance by the other party of any of the provisions of this Agreement shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement or any part of this Agreement or the right of either party thereafter to enforce each and every provision of this Agreement in accordance with the terms hereof. 22. Governing Law. This Agreement has been made in and shall be governed and construed in accordance with the laws of the State of Ohio. 23. Gross-Up of Payments Deemed to be Excess Parachute Payments. (a) The Company and Employee acknowledge that, following a Change of Control, one or more payments or distributions to be made by the Company to or for the benefit of Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, under some other plan, agreement, or arrangement, or otherwise) (a "Payment") may be determined to be an "excess parachute payment" that is not deductible by the Company for Federal income tax purposes and with respect to which Employee will be subject to an excise tax because of Sections 280G and 4999, respectively, of the Internal Revenue Code (hereinafter referred to respectively as "Section 280G" and "Section 4999"). If Employee's employment is terminated after a Change of Control occurs, the Accounting Firm, which, subject to any inconsistent position asserted by the Internal Revenue Service, shall make all determinations required to be made under this Paragraph 23, shall determine whether any Payment would be an excess parachute payment and shall communicate its determination, together with detailed supporting calculations, to the Company and to Employee within 30 days after the date on which Employee's employment with the Company terminates or such earlier time as is requested by the Company. The Company and Employee shall cooperate with each other and the Accounting Firm and shall provide necessary information so that the Accounting Firm may make all such determinations. The Company shall pay all of the fees of the Accounting Firm for services performed by the Accounting Firm as contemplated in this Paragraph 23. (b) If the Accounting Firm determines that any Payment gives rise, directly or indirectly, to liability on the part of Employee for excise tax under Section 4999 (and/or any penalties and/or interest with respect to any such excise tax), the Company shall make additional cash payments to Employee, from time to time and at the same time as any Payment constituting an excess parachute payment is paid or provided to Employee, in such amounts as are necessary to put Employee in the same position, after payment of all federal, state, and local taxes (whether income taxes, excise taxes under Section 4999 or otherwise, or other taxes) and any and all penalties and interest with respect to any such excise tax, as Employee would have been in after payment of all federal, state, and local income taxes if the Payments had not given rise to an excise tax under Section 4999 and no such penalties or interest had been imposed. 14 (c) If the Internal Revenue Service determines that any Payment gives rise, directly or indirectly, to liability on the part of Employee for excise tax under Section 4999 (and/or any penalties and/or interest with respect to any such excise tax) in excess of the amount, if any, previously determined by the Accounting Firm, the Company shall make further additional cash payments to Employee not later than the due date of any payment indicated by the Internal Revenue Service with respect to these matters, in such amounts as are necessary to put Employee in the same position, after payment of all federal, state, and local taxes (whether income taxes, excise taxes under Section 4999 or otherwise, or other taxes) and any and all penalties and interest with respect to any such excise tax, as Employee would have been in after payment of all federal, state, and local income taxes if the Payments had not given rise to an excise tax under Section 4999 and no such penalties or interest had been imposed. (d) If the Company desires to contest any determination by the Internal Revenue Service with respect to the amount of excise tax under Section 4999, Employee shall, upon receipt from the Company of an unconditional written undertaking to indemnify and hold Employee harmless (on an after tax basis) from any and all adverse consequences that might arise from the contesting of that determination, cooperate with the Company in that contest at the Company's sole expense. Nothing in this Paragraph 23(d) shall require Employee to incur any expense other than expenses with respect to which the Company has paid to Employee sufficient sums so that after the payment of the expense by Employee and taking into account the payment by the Company with respect to that expense and any and all taxes that may be imposed upon Employee as a result of his receipt of that payment, the net effect is no cost to Employee. Nothing in this Paragraph 23(d) shall require Employee to extend the statute of limitations with respect to any item or issue in his tax returns other than, exclusively, the excise tax under Section 4999. If, as the result of the contest of any assertion by the Internal Revenue Service with respect to excise tax under Section 4999, Employee receives a refund of a Section 4999 excise tax previously paid and/or any interest with respect thereto, Employee shall promptly pay to the Company such amount as will leave Employee, net of the repayment and all tax effects, in the same position, after all taxes and interest, that he would have been in if the refunded excise tax had never been paid. (e) For purposes of this Paragraph 23, the term "Accounting Firm" means the independent auditors of the Company for the fiscal year preceding the year in which the earlier of (i) the date of termination of Employee's employment with the Company, or (ii) the year, if any, in which occurred the first Change of Control occurring after the date of this Agreement, and such firm's successor or successors; provided, however, if such firm is unable or unwilling to serve and perform in the capacity contemplated by this Agreement, the Company shall select another national accounting firm of recognized standing to serve and perform in that capacity under this Agreement, except that such other accounting firm shall not be the then independent auditors for the Company or any 15 of its affiliates (as defined in Rule 12b-2 promulgated under the Exchange Act). IN WITNESS WHEREOF, the Company and Employee have executed this Agreement on the day and year first above written. NORDSON CORPORATION By: ----------------------------------------- Title: Secretary Employee: ----------------------------------- 16 EXHIBIT A COMPANY PLANS 1. The Nordson Corporation 2004 Management Incentive Compensation Plan; 2. The Nordson Corporation 2004 Long-Term Performance Plan; 3. The Nordson Corporation Salaried Employees Pension Plan (the "Salaried Plan"); 4. Nordson Corporation Officers' Deferred Compensation Plan; 5. The Nordson Corporation Excess Defined Benefit Pension Plan and the Excess Defined Contribution Retirement Plan (the "Excess Benefit Plans"); 6. The Nordson Corporation Employees' Savings Trust Plan (NEST); 7. The Nordson Corporation Salaried Employees' Health Care Plan; 8. The Nordson Corporation Prescription Drug and Dental Plans; 9. The Nordson Corporation Short Term and Long Term Disability Plans; 10. The Nordson Corporation Group Life Insurance Plan-Salaried; 11. The Nordson Corporation Group Travel Accident Plan; 12. The Company's car allowance Plan; 13. Nordson's policy of reimbursement for club dues, airline travel clubs, and the like. 17 EX-21 7 l10447aexv21.htm EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Exhibit 21

The following table sets forth the subsidiaries of the Registrant (each of which is included in the Registrant’s consolidated financial statements), and the jurisdiction under the laws of which each subsidiary was organized.


(1)	Owned by Electron Fusion Devices, Inc.

(2)	Owned by Nordson Engineering GmbH and Nordson Corporation

(3)	Owned by Nordson Benelux S.A./ N.V.

(4)	Doing business as Asymtek

(5)	Owned by Electron Fusion Devices, Inc.

61 EX-23 8 l10447aexv23.htm EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS Exhibit 23

We consent to the incorporation by reference in the Registration Statements (Forms S-8) listed below and the related prospectuses of Nordson Corporation of our report dated December 8, 2004, with respect to the consolidated financial statements and schedules of Nordson Corporation included in this Annual Report (Form 10-K) for the year ended October 31, 2004:


	•	Nordson Corporation 1982 Amended and Restated Stock Appreciation Rights Plan (now entitled 1988 Amended and Restated Stock Appreciation Rights Plan) (No. 2-66776)

	•	Nordson Employees’ Savings Trust Plan (No. 33-18309)

	•	Nordson Hourly-Rated Employees’ Savings Trust Plan (No. 33-33481)

	•	Nordson Corporation 1993 Long-Term Performance Plan (No. 33-67780)

	•	Nordson Corporation — Slautterback Corporation 401(k) Profit Sharing Plan (No. 33-73522)

	•	Nordson Corporation 2004 Long-Term Performance Plan (No. 333-119399)


	1.	I have reviewed this annual report on Form 10-K of Nordson Corporation;

	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:


	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


	c)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


	5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):


	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


	/s/ EDWARD P. CAMPBELL

	Edward P. Campbell
	Chairman of the Board of Directors
	and Chief Executive Officer

Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934,


	1.	I have reviewed this annual report on Form 10-K of Nordson Corporation;

	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:


	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


	c)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


	5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):


	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


	/s/ PETER S. HELLMAN

	Peter S. Hellman
	President, Chief Financial and
	Administrative Officer

In connection with the Annual Report of Nordson Corporation (the “Company”) on Form 10-K for the year ended October 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edward P. Campbell, Chairman of the Board of Directors and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.


	/s/ EDWARD P. CAMPBELL
	_______________________________________ Edward P. Campbell
	Chairman of the Board of Directors
	and Chief Executive Officer

In connection with the Annual Report of Nordson Corporation (the “Company”) on Form 10-K for the year ended October 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Peter S. Hellman, President, Chief Financial and Administrative Officer and Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.


	/s/ PETER S. HELLMAN
	_______________________________________ Peter S. Hellman
	President, Chief Financial and
	Administrative Officer and Director

66 EX-99.A 13 l10447aexv99wa.txt EXHIBIT 99-A FORM S-8 UNDERTAKINGS Exhibit 99-a For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned Registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into Registrant's Registration Statements on Form S-8 Nos; 33-18309 (Employees Savings Trust Plan); and 33-33481 (Hourly-Rated Employees Savings Trust Plan): Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. EX-99.B 14 l10447aexv99wb.txt EXHIBIT 99-B FORM S-8 UNDERTAKINGS Exhibit 99-b For the purpose of complying with the amendments to the rules governing Form S-8 under the Securities Act of 1933, the undersigned Registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into Registrant's Registration Statement on Form S-8 No. 2-66776 (1979 Stock Option Plan and 1982 Amended and Restated Stock Appreciation Rights Plan (now entitled 1988 Amended and Restated Stock Appreciation Rights Plan)): (a) That, for purposes of determining any liability under the Securities Act of 1933 (the "Act"), each post-effective amendment to this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and that the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b) To remove from registration by means of a post-effective amendment of any of the securities being registered which remain unsold at the termination of the offering. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceedings) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 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Ohio		34-0590250
(State of Incorporation)		(I.R.S. Employer Identification No.)

28601 Clemens Road Westlake, Ohio		44145
(Address of Principal Executive Offices)		(Zip Code)


		Page

PART I
Item 1.	Business		2
	General Description of Business		2
	Corporate Purpose and Goals		2
	Financial Information About Operating Segments, Foreign and Domestic Operations, and Export Sales		3
	Principal Products and Uses		3
	Manufacturing and Raw Materials		4
	Intellectual Property		4
	Seasonal Variation in Business		4
	Working Capital Practices		4
	Customers		4
	Backlog		5
	Government Contracts		5
	Competitive Conditions		5
	Research and Development		5
	Environmental Compliance		5
	Employees		5
	Available Information		5
Item 2.	Properties		6
Item 3.	Legal Proceedings		7
Item 4.	Submission of Matters to a Vote of Security Holders		8
	Executive Officers of the Company		8
PART II
Item 5.	Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		9
	Market Information and Dividends		9
Item 6.	Selected Financial Data		10
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
	Critical Accounting Policies and Estimates		11
Item 7a.	Quantitative and Qualitative Disclosures about Market Risk		19
Item 8.	Financial Statements and Supplementary Data		22
	Consolidated Statements of Income		22
	Consolidated Balance Sheets		23
	Consolidated Statements of Shareholders’ Equity		24
	Consolidated Statements of Cash Flows		25
	Notes to Consolidated Financial Statements		26
	Report of Independent Registered Public Accounting Firm		52
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure		53
Item 9a.	Controls and Procedures		53
Item 9b.	Other Information		53


		Page

PART III
Item 10.	Directors and Executive Officers of the Company		53
Item 11.	Executive Compensation		53
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		54
	Equity Compensation Table		54
Item 13.	Certain Relationships and Related Transactions		54
Item 14.	Principal Accounting Fees and Services		54
PART IV
Item 15.	Exhibits and Financial Statement Schedules		54
	(a)(1). Financial Statements		54
	(a)(2) and(d). Financial Statement Schedules		54
	(a)(3) and(c). Exhibits		54
	Signatures		55
	Schedule II — Valuation and Qualifying Accounts and Reserves		57
	Index to Exhibits		58
	Subsidiaries of the Registrant		60
	Consent of Independent Registered Public Accounting Firm		62
	Certifications		63
Exhibit 3(B) 1998 Amended Regulations
Exhibit 10-F Employment Agreement
Exhibit 10-H Nordson Corporation Assurance Trust Agreement
Exhibit 10-H-1 Employment Agreement
Exhibit 10-H-2 Form of Employment Agreement
Exhibit 21 Subsidiaries of the Registrant
Exhibit 23 Consent of Independent Auditors
Exhibit 31.1 Certification
Exhibit 31.2 Certification
Exhibit 32.1 Certification
Exhibit 32.2 Certification
Exhibit 99-A Form S-8 Undertakings
Exhibit 99-B Form S-8 Undertakings


		Approximate
Location	Description of Property	Square Feet

Amherst, Ohio^(1)(2)(3)	A manufacturing, laboratory and office complex located on 52 acres of land		585,000
Norcross, Georgia⁽¹⁾	A manufacturing, laboratory and office building located on 10 acres of land		150,000
Dawsonville, Georgia⁽¹⁾	A manufacturing, laboratory and office building (leased)		143,000
Carlsbad, California⁽³⁾	Three manufacturing and office buildings (leased)		120,000
Duluth, Georgia⁽¹⁾	An office and laboratory building		110,000
East Providence, Rhode Island⁽³⁾	A manufacturing, warehouse, distribution and office complex		75,000
Westlake, Ohio	Corporate headquarters located on 25 acres of land		68,000
Swainsboro, Georgia⁽¹⁾	A manufacturing building		59,000
Atlanta, Georgia⁽¹⁾	A distribution center and office building (leased)		50,000
Branford, Connecticut⁽²⁾	A manufacturing and office building (leased)		46,000
Lincoln, Rhode Island⁽³⁾	A manufacturing building		44,000
Talladega, Alabama⁽¹⁾	A manufacturing and office building (leased)		27,000
St. Petersburg, Florida⁽³⁾	A manufacturing and office building (leased)		26,000
Luneburg, Germany⁽¹⁾	A manufacturing building and laboratory		130,000
Erkrath, Germany⁽¹⁾⁽²⁾	An office, laboratory and warehouse building (leased)		63,000
Maastricht, The Netherlands ^(1)(2)(3)	A manufacturing, distribution center and office building (leased)		48,000
Tokyo, Japan^(1)(2)(3)	An office, laboratory and warehouse building (leased)		42,000
Milano, Italy⁽¹⁾⁽²⁾	An office, laboratory and warehouse building (leased)		41,000
St. Thibault Des Vignes, France ⁽¹⁾⁽²⁾	An office building (leased)		29,000
Shanghai, China⁽¹⁾⁽²⁾	A manufacturing, warehouse and office building (leased)		20,000
Bangalore, India^(1)(2)(3)	An office and warehouse building		16,000
Slough, U.K.⁽³⁾	A manufacturing, warehouse and office building (leased)		10,000
Dunstable, U.K.⁽³⁾	An office building		6,000


					Position or Office with The Company and Business
Name	Age		Officer Since		Experience During the Past Five (5) Year Period

Edward P. Campbell		55		1988	Chairman of the Board of Directors and Chief Executive Officer, 2004
					President and Chief Executive Officer, 1997
Peter S. Hellman		55		2000	President, Chief Financial and Administrative Officer, 2004
					Executive Vice President, Chief Financial and Administrative Officer, 2000
					President and Chief Operating Officer, TRW, Inc. from 1995 through 1999
Donald J. McLane		61		1986	Senior Vice President, 1999
Robert A. Dunn, Jr.		57		1997	Vice President, 1997
Bruce H. Fields		53		1992	Vice President, Human Resources, 1992
Mark G. Gacka		50		1998	Vice President, 1998
Michael Groos		53		1995	Vice President, 1995
John J. Keane		44		2003	Vice President, 2003
					Vice President, Packaging and Product Assembly Systems from 2000 to 2003
					Manager, Business Operations from 1999 to 2000
Nicholas D. Pellecchia		59		1986	Vice President, Finance and Controller, 1986


Item 5.	Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities



					Common
					Stock Price
		Dividend							Price-Earnings
Fiscal Quarters		Paid			High		Low		Ratio

2004:
	First	$	.15	5	$	37.98	$	27.33		28.2
	Second		.15	5		38.41		33.50		26.1
	Third		.15	5		43.78		32.21		23.9
	Fourth		.16			42.23		32.21		21.5
2003:
	First	$	.15		$	27.86	$	21.46		39.1
	Second		.15			27.03		20.52		37.1
	Third		.15			26.05		22.28		35.0
	Fourth		.15	5		28.53		22.65		24.6


	2004		2003		2002^(e)		2001		2000
(In thousands except for per-share amounts)
Operating Data^(a)
Sales	$	793,544		667,347		647,756		731,416		740,568
Cost of sales	$	354,313		301,566		310,542		337,129		332,597
% of sales		45		45		48		46		45
Selling and administrative expenses	$	328,633		295,157		281,696		321,395		307,559
% of sales		41		44		43		44		42
Severance and restructuring costs	$	—		2,028		2,499		13,355		8,960
Operating profit	$	110,598		68,596		53,019		59,537		91,452
% of sales		14		10		8		8		12
Net income	$	63,334		35,160		22,072		24,610		54,632
% of sales		8		5		3		3		7
Net income adjusted for goodwill amortization ^(b)	$	63,334		35,160		22,072		35,853		57,979
% of sales		8		5		3		5		8
Financial Data^(a)
Working capital	$	167,362		65,708		21,926		6,524		116,230
Net property, plant and equipment and other non-current as	$	476,276		489,436		489,899		500,276		240,802
Total invested capital	$	643,638		555,144		511,825		506,800		357,032
Total assets	$	839,387		766,806		764,472		862,453		610,040
Long-term obligations	$	240,305		255,035		242,935		243,074		109,809
Shareholders’ equity	$	403,333		300,109		268,890		263,726		247,223
Return on average invested capital — %^(c)		13		7		4		6		16
Return on average shareholders’ equity — % ^(d)		18		13		8		10		25
Per-Share Data^(a)
Basic earnings per share	$	1.78		1.04		0.66		0.75		1.68
Diluted earnings per share	$	1.73		1.04		0.66		0.74		1.67
Dividends per common share	$	0.625		0.605		0.57		0.56		0.52
Book value per common share	$	11.12		8.82		8.00		7.96		7.62
Average common shares		35,489		33,703		33,383		32,727		32,455
Average common shares and common share equivalents		36,546		33,899		33,690		33,050		32,767


(a)	See accompanying Notes to Consolidated Financial Statements.


Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations


	1% Point Increase		1% Point Decrease

Effect on total service and interest cost components in 2004	$	631	$	(496	)
Effect on postretirement obligation as of October 31, 2004	$	6,506	$	(5,209	)


Segment	2004			2003

Adhesive Dispensing Systems		20	%		17	%
Finishing and Coating Systems		2	%		1	%
Advanced Technology Systems		18	%		11	%


Segment	2003			2002

Adhesive Dispensing Systems		17	%		19	%
Finishing and Coating Systems		1	%		(1	%)
Advanced Technology Systems		11	%		6	%


																There-			Total			Fair
	2004			2005			2006			2007			2008			after			Value			Value

Long-term debt, including current portion	$	8,000		$	12,290		$	44,290		$	54,290		$	24,290		$	22,840		$	166,000		$	177,574
Average interest rate		7.04	%		7.00	%		6.94	%		6.99	%		6.60	%		7.29	%		7.05	%


		2004			2003
(In thousands)
Assets
Current assets:
	Cash and cash equivalents	$	60,251		$	6,945
	Marketable securities		328			27
	Receivables — net		173,852			151,740
	Inventories — net		85,330			78,557
	Deferred income taxes		37,093			33,722
	Prepaid expenses		6,257			6,379

Total current assets			363,111			277,370
Property, plant and equipment — net			111,607			115,255
Goodwill — net			331,659			328,572
Intangible assets — net			17,331			15,363
Deferred income taxes			—			11,238
Other assets			15,679			19,008

		$	839,387		$	766,806

Liabilities and shareholders’ equity
Current liabilities:
	Notes payable	$	15,301		$	58,227
	Accounts payable		58,740			47,976
	Income taxes payable		4,873			2,666
	Accrued liabilities		91,244			83,574
	Customer advance payments		8,921			6,229
	Current maturities of long-term debt		12,290			9,097
	Current obligations under capital leases		4,380			3,893

Total current liabilities			195,749			211,662
Long-term debt			148,033			172,619
Obligations under capital leases			4,446			4,106
Pension and retirement obligations			76,874			70,661
Deferred income taxes			666			—
Other liabilities			10,286			7,649
Shareholders’ equity:
	Preferred shares, no par value; 10,000 shares authorized; none issued		—			—
	Common shares, no par value; 80,000 shares authorized; 49,011 shares issued		12,253			12,253
	Capital in excess of stated value		174,440			131,573
	Retained earnings		558,620			517,414
	Accumulated other comprehensive loss		(16,471	)		(20,296	)
	Common shares in treasury, at cost		(323,531	)		(339,815	)
	Deferred stock-based compensation		(1,978	)		(1,020	)

Total shareholders’ equity			403,333			300,109

		$	839,387		$	766,806


Land Improvements			15-25 years
Buildings			20-40 years
Machinery and Equipment			3-12 years
Enterprise Management System			10 years



			Common Shares in													Accumulated
			Treasury								Capital in					Other			Deferred
									Common		Excess of		Retained			Comprehensive			Stock-based
			Shares			Amount			Shares		Stated Value		Earnings			Loss			Compensation			Total
(In thousands)
Balance at October 28, 2001				15,874		$	(344,194	)	$	12,253	$	114,889	$	499,570		$	(18,358	)	$	(434	)	$	263,726
	Net income													22,072									22,072
	Translation adjustments																3,539						3,539
	Minimum pension liability adjustment net of taxes of $8,008																(12,499	)					(12,499	)

		Total comprehensive income																					13,112
	Shares issued under company stock and employee benefit plans			(622	)		6,918					8,289								(108	)		15,099
	Amortization of deferred stock-based compensation																			294			294
	Purchase of treasury shares			146			(4,330	)															(4,330	)
	Dividends — $.57 per share													(19,011	)								(19,011	)

Balance at November 3, 2002				15,398			(341,606	)		12,253		123,178		502,631			(27,318	)		(248	)		268,890
	Net income													35,160									35,160
	Translation adjustments																12,655						12,655
	Minimum pension liability adjustment net of taxes of $3,626																(5,633	)					(5,633	)

		Total comprehensive income																					42,182
	Shares issued under company stock and employee benefit plans			(601	)		6,658					8,395								(1,347	)		13,706
	Amortization of deferred stock-based compensation																			575			575
	Purchase of treasury shares			179			(4,867	)															(4,867	)
	Dividends — $.605 per share													(20,377	)								(20,377	)

Balance at November 2, 2003				14,976			(339,815	)		12,253		131,573		517,414			(20,296	)		(1,020	)		300,109
	Net income													63,334									63,334
	Translation adjustments																6,476						6,476
	Minimum pension liability adjustment net of taxes of $1,773																(2,651	)					(2,651	)

		Total comprehensive income																					67,159
	Shares issued under company stock and employee benefits plans			(2,625	)		30,481					39,262								(1,904	)		67,839
	Tax benefit from stock option and restricted stock transactions											3,605											3,605
	Amortization of deferred stock-based compensation																			946			946
	Purchase of treasury shares			382			(14,197	)															(14,197	)
	Dividends — $.625 per share													(22,128	)								(22,128	)

Balance at October 31, 2004				12,733		$	(323,531	)	$	12,253	$	174,440	$	558,620		$	(16,471	)	$	(1,978	)	$	403,333


	2004			2003

Net foreign currency translation adjustments	$	8,983		$	2,508
Minimum pension liability adjustments		(25,454	)		(22,804	)

	$	(16,471	)	$	(20,296	)


	2004			2003

Balance at beginning of year	$	3,030		$	2,767
Accruals for warranties		4,165			2,942
Warranty payments		(3,145	)		(2,779	)
Currency adjustments		71			120

Balance at end of year	$	4,121		$	3,030



								Other Postretirement
		Pension Benefits						Benefits

		2004			2003			2004			2003

Change in benefit obligation:
Benefit obligation at beginning of year		$	150,310		$	127,272		$	33,412		$	23,636
	Service cost		5,056			4,305			1,147			1,026
	Interest cost		8,925			8,301			2,030			1,931
	Participant contributions		141			110			—			—
	Amendments		3,354			—			(303	)		—
	Foreign currency exchange rate change		1,960			2,451			—			—
	Actuarial loss		4,399			12,851			2,382			8,168
	Benefits paid		(5,506	)		(4,980	)		(1,636	)		(1,349	)

Benefit obligation at end of year		$	168,639		$	150,310		$	37,032		$	33,412

Change in plan assets:
Beginning fair value of plan assets		$	82,041		$	65,844		$	—		$	—
	Actual return on plan assets		8,049			9,474			—			—
	Company contributions		21,533			10,662			1,636			1,349
	Participant contributions		141			110			—			—
	Foreign currency exchange rate change		911			931			—			—
	Benefits paid		(5,506	)		(4,980	)		(1,636	)		(1,349	)

Ending fair value of plan assets		$	107,169		$	82,041		$	—		$	—

Reconciliation of accrued cost:
Funded status of the plan		$	(61,470	)	$	(68,269	)	$	(37,032	)	$	(33,412	)
Unrecognized actuarial loss			50,728			45,289			20,199			18,896
Unamortized prior service cost			5,002			1,954			(4,146	)		(4,431	)
Unrecognized net transition obligation			—			1,840			—			—

Accrued benefit cost		$	(5,740	)	$	(19,186	)	$	(20,979	)	$	(18,947	)

Reconciliation of amount recognized in financial statements:
Accrued benefit liability		$	(52,505	)	$	(58,789	)	$	(20,979	)	$	(18,947	)
Intangible asset			4,891			2,152			—			—
Accumulated other comprehensive income			41,874			37,451			—			—

Total amount recognized in financial statements		$	(5,740	)	$	(19,186	)	$	(20,979	)	$	(18,947	)



	Pension Benefits									Other Postretirement Benefits

	2004			2003			2002			2004			2003			2002

Service cost	$	5,056		$	4,305		$	4,111		$	1,147		$	1,026		$	881
Interest cost		8,925			8,301			7,888			2,030			1,931			1,529
Expected return on plan assets		(8,353	)		(7,683	)		(8,203	)		—			—			—
Amortization of prior service cost		395			242			224			(589	)		(553	)		(369	)
Amortization of transition obligation		50			130			315			—			—			—
Recognized net actuarial loss		1,513			455			267			1,079			941			396
Curtailment		—			—			513			—			—			—

Total benefit cost	$	7,586		$	5,750		$	5,115		$	3,667		$	3,345		$	2,437



			Actual Asset
			Allocation

			2004			2003

Asset Category
	Equity securities			54.5	%		60.4	%
	Debt securities			31.3			27.0
	Real estate			1.4			1.5
	Other			12.8			11.1

		Total		100.0	%		100.0	%


		Pension		Other
Fiscal Year		Benefits		Benefits

2005		$	4,955	$	1,388
2006			5,319		1,439
2007			5,655		1,452
2008			5,832		1,519
2009			6,880		1,615
2010-2014			40,184		9,631

	Total	$	68,825	$	17,044


			2004			2003

Deferred tax assets:
	Sales to international subsidiaries and related consolidation adjust		$	7,148		$	7,560
	Employee benefits			20,091			24,362
	Other accruals not currently deductible for taxes			25,148			19,504
	Tax credit and loss carryforwards			11,991			13,406
	Inventory adjustments			4,573			6,060
	Translation of foreign currency accounts			—			875
	Other — net			200			589

		Total deferred tax assets		69,151			72,356
		Valuation allowance		(10,757	)		(10,116	)

		Total deferred tax assets		58,394			62,240
Deferred tax liabilities:
	Depreciation			20,626			16,108
	Translation of foreign currency accounts			282			—
	Other — net			1,059			1,172

		Total deferred tax liabilities		21,967			17,280

	Net deferred tax assets		$	36,427		$	44,960


		2004			2003

Receivables:
	Accounts	$	161,361		$	136,288
	Notes		13,004			11,686
	Other		4,817			8,018

			179,182			155,992
	Allowance for doubtful accounts		(5,330	)		(4,252	)

		$	173,852		$	151,740

Inventories:
	Finished goods	$	42,929		$	38,583
	Work-in-process		12,310			10,662
	Raw materials and finished parts		43,254			42,657

			98,493			91,902
	Obsolescence reserve		(4,401	)		(4,555	)
	LIFO reserve		(8,762	)		(8,790	)

		$	85,330		$	78,557

Property, plant and equipment:
	Land	$	6,384		$	5,865
	Land improvements		2,792			2,764
	Buildings		93,928			90,200
	Machinery and equipment		165,315			158,133
	Enterprise management system		27,809			27,664
	Construction-in-progress		2,478			1,137
	Leased property under capitalized leases		16,924			14,846

			315,630			300,609
	Accumulated depreciation and amortization		(204,023	)		(185,354	)

		$	111,607		$	115,255

Accrued liabilities:
	Salaries and other compensation	$	41,562		$	32,946
	Pension and retirement		4,092			13,981
	Taxes other than income taxes		7,724			4,597
	Other		37,866			32,050

		$	91,244		$	83,574


		2004			2003

Transportation equipment		$	16,095		$	14,203
Other			829			643

Total capitalized leases			16,924			14,846
Accumulated amortization			(8,098	)		(6,847	)

	Net capitalized leases	$	8,826		$	7,999


		Capitalized		Operating
		Leases		Leases

Fiscal year ending:
	2005	$	5,578	$	8,742
	2006		3,499		6,556
	2007		1,553		4,731
	2008		386		3,285
	2009		41		2,288
	Later years		6		3,868

Total minimum lease payments			11,063	$	29,470

Less amount representing executory costs			1,123

Net minimum lease payments			9,940
Less amount representing interest			1,114

Present value of net minimum lease payments			8,826
Less current portion			4,380

Long-term obligations at October 31, 2004		$	4,446


			2004			2003

Available bank lines of credit:
	Domestic banks		$	210,000		$	260,000
	Foreign banks			67,958			56,597

		Total	$	277,958		$	316,597

Outstanding notes payable:
	Domestic bank debt		$	—		$	41,775
	Foreign bank debt			15,301			16,452

		Total	$	15,301		$	58,227

Weighted-average interest rate on notes payable				2.7	%		2.5	%
Unused bank lines of credit			$	262,657		$	258,370


		2004		2003

Senior note, due 2007		$	50,000	$	50,000
Senior notes, due 2005-2011			100,384		100,000
Five-year term loan			8,000		16,000
Floating rate option notes			—		10,249
Industrial revenue bonds — Gwinnett County, Georgia			—		3,600
Leasehold improvements financing note, due 2006			1,939		1,867

			160,323		181,716
Less current maturities			12,290		9,097

	Total	$	148,033	$	172,619



		Sell				Buy

		Notional		Fair Market		Notional		Fair Market
		Amount		Value		Amount		Value

October 31, 2004 contract amounts:
	Euro	$	8,001	$	8,209	$	50,347	$	51,433
	British pound		1,831		1,839		8,435		8,489
	Japanese yen		3,195		3,182		14,737		14,657
	Others		3,939		4,055		11,933		11,965

	Total	$	16,966	$	17,285	$	85,452	$	86,544

November 2, 2003 contract amounts:
	Euro	$	10,782	$	10,691	$	41,398	$	42,106
	British pound		979		998		5,547		5,640
	Japanese yen		4,779		4,934		12,973		12,973
	Others		2,400		2,440		9,632		9,767

	Total	$	18,940	$	19,063	$	69,550	$	70,486



	2004

	Carrying
	Amount			Fair Value

Cash and cash equivalents	$	60,251		$	60,251
Marketable securities		328			328
Notes payable		(15,301	)		(15,301	)
Long-term debt		(160,323	)		(172,369	)
Forward exchange contracts		1,086			1,086
Interest rate swaps		505			505


					Weighted-Average
		Number of			Exercise Price
		Options			Per Share

Outstanding at October 28, 2001			5,998		$	25.82
	Granted		777		$	23.42
	Exercised		(527	)	$	24.44
	Forfeited or expired		(226	)	$	25.90

Outstanding at November 3, 2002			6,022		$	25.63
	Granted		473		$	26.78
	Exercised		(333	)	$	26.28
	Forfeited or expired		(207	)	$	26.49

Outstanding at November 2, 2003			5,955		$	25.65
	Granted		441		$	27.71
	Exercised		(2,547	)	$	26.50
	Forfeited or expired		(26	)	$	26.56

Outstanding at October 31, 2004			3,823		$	25.33

Exercisable at November 3, 2002			4,278		$	25.91

Exercisable at November 2, 2003			4,424		$	25.74

Exercisable at October 31, 2004			2,483		$	24.79



	Range of Exercise Price

	$20 - $25		$26 - $30		$31 - $35

Number outstanding		2,064		1,703		56
Weighted-average remaining contractual life, in years		5.1		7.1		2.2
Weighted-average exercise price	$	22.96	$	27.99	$	31.88
Number exercisable		1,648		800		35
Weighted-average exercise price	$	22.90	$	28.39	$	31.88


		Adhesive		Finishing
		Dispensing and		and			Advanced
		Nonwoven Fiber		Coating			Technology		Corporate			Total

Year ended October 31, 2004
	Net external sales	$	497,699	$	130,944		$	164,901	$	—		$	793,544
	Depreciation		11,508		3,871			3,851		4,853			24,083
	Operating profit		97,904		2,466			30,229		(20,001	)		110,598
	Identifiable assets^(c)		220,647		58,161			53,920		537,443	^(b)		870,171
	Expenditures for long-lived assets ^(d)		5,292		1,587			1,808		2,750			11,437
Year ended November 2, 2003
	Net external sales	$	426,204	$	112,722		$	128,421	$	—		$	667,347
	Depreciation		12,019		4,000			4,731		6,546			27,296
	Operating profit		73,302		707			14,502		(19,915	) ^(a)		68,596
	Identifiable assets^(c)		203,634		49,438			55,968		482,185	^(b)		791,225
	Expenditures for long-lived assets ^(d)		4,417		1,133			1,329		684			7,563
Year ended November 3, 2002
	Net external sales	$	413,082	$	114,196		$	120,478	$	—		$	647,756
	Depreciation		11,416		4,447			4,623		7,509			27,995
	Operating profit		79,033		(1,531	)		6,899		(31,382	) ^(a)		53,019
	Identifiable assets^(c)		205,040		56,343			61,778		459,671	^(b)		782,832
	Expenditures for long-lived assets ^(d)		5,219		1,070			4,222		886			11,397



		November 2, 2003

		Carrying		Accumulated
		Amount		Amortization		Net Book Value

Core/developed technology		$	10,400	$	1,792	$	8,608
Noncompete agreements			3,935		1,331		2,604
Patent costs			2,236		1,295		941
Other			6,189		5,131		1,058

	Total	$	22,760	$	9,549	$	13,211


Fiscal Year	Amounts

2005	$	1,772
2006	$	1,533
2007	$	1,456
2008	$	1,485
2009	$	1,212