NDSN » Topics » Stock Options

This excerpt taken from the NDSN DEF 14A filed Jan 16, 2009.
Stock Options
 
Stock options represent the high-risk and potential high-return component of our total long-term incentive program, as the realizable value of each option can fall to zero if the share price is lower than the exercise price


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established on the date of grant. The size of stock option grants for our executive officers is based primarily on the target dollar value of the award translated into a number of underlying shares based on the estimated economic value on the date of grant, as determined using the Black-Scholes option pricing formula. As a result, the number of shares underlying stock option awards will typically vary from year to year, as it is dependent on the price of our common stock on the date of grant. The stock options also function as a retention incentive for executive officers as the options vest ratably over the four-year period following the date of grant.
 
The Committee uses Mercer’s annual analysis and assessment to set the target dollar values of long-term incentives at the 65th percentile of similar compensation awarded by the peer group. The Committee sets the value of stock options to be granted at approximately 50% of the value of total long-term incentives granted to each named executive officer, with the other 50% being granted in the form of performance shares.
 
The following table provides the number of stock options granted to our named executive officers in fiscal year 2008:
 
                 
    Options
    Grant Date
 
Name
  (# Shares)     Fair Value ($)  
 
Edward P. Campbell
    55,750       809,490  
Peter S. Hellman
           
Gregory A. Thaxton
    6,800       98,736  
Robert A. Dunn, Jr. 
    13,800       200,376  
Michael Groos
    11,700       169,884  
John J. Keane
    13,800       200,376  
 
The Committee did not grant Mr. Hellman stock options for fiscal year 2008, but instead, during its December 5, 2007 meeting, awarded Mr. Hellman a cash payment of $125,000, representing the lost economic value of the stock option grant Mr. Hellman would have received for fiscal year 2007 had he retired in February 2007 as he initially intended. The lost economic value was determined using the estimated fiscal year 2007 stock option grant that Mr. Hellman would have received for fiscal year 2007 (29,335 shares); the portion of that grant that would have vested on December 5, 2007 (7,334 shares) and applying a Black-Scholes value of $17.22 per share. This payment was made concurrent with the payment of Mr. Hellman’s fiscal year 2008 cash bonus on January 11, 2008. At the request of the Board of Directors, Mr. Hellman continued to serve as President and Chief Financial and Administrative Officer from February 28, 2007 through January 2, 2008.
 
The Committee does not grant long-term incentive awards or stock options to our executive officers in anticipation of the release of significant positive earnings announcements or other material non-public information likely to result in changes to the price of our common shares. Similarly, the Committee does not time the release of material non-public information based on stock option grant dates. Since the fiscal year 2006 stock option grant, the grants are subject to (1) profit disgorgement provisions (commonly known as a “clawback”) when an executive officer acts inconsistently with the non-compete provision of his employee agreement following termination of employment, or (2) forfeiture in the event an executive officer’s employment is terminated due to a criminal act, fraud or other such behavior inconsistent with our Code of Business and Ethical Conduct. The invoking of the clawback or forfeiture provision is solely at the Committee’s discretion. To date, the Committee has not had the need to exercise its discretion in seeking profit disgorgement or forfeiture from any former executive officer.
 
This excerpt taken from the NDSN DEF 14A filed Jan 18, 2008.
Stock Options
 
Equity-based long-term incentive awards fulfill our principle of paying for performance where the performance criteria are aligned with shareholder interests. The Committee believes that equity-based compensation ensures that the named executive officers have a continuing stake in our long-term success and are motivated to put forth sustained effort on behalf of our shareholders to support the continuous growth of our share price. Equity-based long-term incentive awards are also intended to be a compensation component that supports our principle of providing total compensation opportunities that are market competitive and supportive of our strategy to attract, develop and retain outstanding talent.
 
Options represent the high-risk and potential high-return component of our total long-term incentive program, as the realizable value of each option can fall to zero if the share price is lower than the exercise price established on the date of grant. The size of stock option grants for our executive officers is based primarily on the target dollar value of the award translated into a number of option shares based on the estimated economic value on the date of grant, as determined using the Black-Scholes option pricing formula. As a result, the number of shares underlying stock option awards will typically vary from year to year, as it is dependent on the price of our common stock on the date of grant. The stock options also function as a retention incentive for executive officers as the options vest ratably over the four-year period following the date of grant.
 
The Committee uses Mercer’s annual analysis and assessment to set the target dollar values of long-term incentives at the 65th percentile of similar compensation awarded by the peer group. The Committee sets the value of stock options to be granted at approximately 50% of the value of total long-term incentives granted to each named executive officer, the other 50% being granted in the form of performance shares.
 
The following table provides number of options granted to our named executive officers in fiscal year 2007:
 
                 
    Options
    Grant Date
 
Name
  (Number of Shares)     Fair Value ($)  
 
Edward P. Campbell
    63,500       1,056,640  
Peter S. Hellman
    0       0  
Robert A. Dunn, Jr. 
    16,000       279,245  
Michael Groos
    13,600       226,304  
John J. Keane
    16,000       266,240  


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The Committee did not grant Mr. Hellman an option for fiscal year 2007 under the assumption that Mr. Hellman was retiring as President and Chief Financial and Administrative Officer on February 28, 2007. Mr. Hellman, at the request of the Board of Directors, agreed to postpone his retirement date. During its December 5, 2007 meeting, the Committee awarded Mr. Hellman a cash payment of $125,000. The purpose of the payment was to provide Mr. Hellman with the equivalent of the vested portion of the stock option grant Mr. Hellman would have received for fiscal year 2007. Since the Committee’s action occurred in fiscal year 2008, the cash payment to Mr. Hellman will again be disclosed in our 2009 proxy statement. This payment was made concurrent with the payment of Mr. Hellman’s fiscal year 2007 cash bonus and is in recognition of Mr. Hellman’s continued service as President and Chief Financial and Administrative Officer from February 28, 2007 through January 2, 2008.
 
The Committee does not grant long-term incentive awards or stock options to our executive officers in anticipation of the release of significant positive earnings announcements or other material non-public information likely to result in changes to the price of our common shares. Similarly, the Committee does not time the release of material non-public information based on stock option grant dates. Since the fiscal year 2006 stock option grant, the grants are subject to (1) a clawback (profit disgorgement) when an executive officer acts inconsistently with the non-compete provision of a named executive officer’s employee agreement following termination of employment, or (2) forfeiture in the event an executive officer’s employment is terminated due to a criminal act, fraud or other such behavior inconsistent with our Code of Business and Ethical Conduct. You may review our Code of Business and Ethical Conduct at www.nordson.com/corporate/governance. The invoking of the clawback or forfeiture provision is solely at the Committee’s discretion. To date, the Committee has not had the need to exercise its discretion in seeking profit disgorgement or forfeiture from any former executive officer.


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