SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

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

Exchange Act of 1934

 

Filed by the Registrant  x

 

Filed by a Party other than the Registrant  o

 

 

NORDSON CORPORATION

(Name of Registrant as Specified in Its Charter)

 

                                                               

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

 

Payment of Filing Fee (Check the appropriate box):

 

               Not Applicable

 

               Not Applicable

 

               Not Applicable

 

               Not Applicable

 

(5) Total fee paid:

               Not Applicable

 

o  Fee paid previously with preliminary materials.

 

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

 

               Not Applicable

 

               Not Applicable

 

               Not Applicable

 

(4) Date Filed:

               Not Applicable

 

NORDSON CORPORATION

 

Notice of 2008

Annual Meeting

and Proxy Statement

 

(NORDSON LOGO)

 

[NORDSON LOGO]

 

Edward P. Campbell

Chairman, President and

Chief Executive Officer

 

January 18, 2008

 

Dear Shareholder:

 

You are cordially invited to attend the Annual Meeting of Shareholders to be held at the Spitzer Conference Center, 1005 North Abbe Road, Elyria, Ohio, at 9:30 a.m. on Tuesday, February 19, 2008. We hope that you will be able to attend.

 

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

 

I look forward to seeing you at the meeting.

 

Sincerely,

 

EDWARD P. CAMPBELL

Chairman, President and

Chief Executive Officer

NORDSON CORPORATION

 

NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS

 

The Annual Meeting of Shareholders of Nordson Corporation will be held at the Spitzer Conference Center, 1005 North Abbe Road, Elyria, Ohio, at 9:30 a.m. on Tuesday, February 19, 2008. The purposes of the meeting are:

 

 

Shareholders of record at the close of business on December 28, 2007 are entitled to notice of and to vote at the meeting.

 

For the Board of Directors

 

ROBERT E. VEILLETTE
Vice President, General Counsel
and Secretary

 

January 18, 2008

NORDSON CORPORATION

 

PROXY STATEMENT

 

The Board of Directors of Nordson Corporation requests your proxy for use at the Annual Meeting of Shareholders to be held on February 19, 2008, and at any adjournments of that meeting. This proxy statement is to inform you about the matters to be acted upon at the meeting.

 

If you are a shareholder of record, please vote in one of the following three ways whether or not you plan to attend the Annual Meeting: (1) by completing, signing and dating the accompanying proxy card and returning it in the enclosed postage-prepaid envelope, (2) by completing your proxy using the toll-free telephone number listed on the proxy card, or (3) by completing your proxy on the Internet at the address listed on the proxy card. It is important that your shares be voted whether or not you attend the meeting in person. If you attend the Annual Meeting, you may vote in person even if you have previously returned your proxy card or completed your proxy by phone or on the Internet. Your prompt cooperation will be greatly appreciated. Shares represented by proxy will be voted in accordance with the instructions you provide to the individuals named on the proxy. If no instructions are provided, the shares will be voted to elect the nominees listed below whose term expires in 2011 and for Proposals 2 and 3 described in this proxy statement. The proxies cannot be voted for a greater number of persons than the number of nominees. You may revoke your proxy before it is voted by giving notice to Nordson in writing or orally at the meeting. However, your presence at the Annual Meeting, without any further action on your part, will not revoke your previously granted proxy.

 

This proxy statement and the enclosed proxy card are being mailed to shareholders on or about January 18, 2008. Nordson’s executive offices are located at 28601 Clemens Road, Westlake, Ohio 44145, telephone number (440) 892-1580.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual
Meeting of Shareholders to be held on February 19, 2008:

 

The proxy statement, proxy card and annual report to shareholders for the fiscal year ended October 31, 2007 are available at our website: www.nordson.com.

 

INFORMATION ABOUT THE ANNUAL MEETING

 

Voting at the Meeting

 

Shareholders of record at the close of business on December 28, 2007 are entitled to vote at the meeting. On that date, a total of 33,701,041 Nordson Common Shares were outstanding. Each share is entitled to one vote.

 

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

 

Under Ohio law, directors are elected by a plurality of the votes of shareholders of the corporation present at a meeting at which a quorum is present, unless otherwise specified in an Ohio corporation’s Articles of Incorporation, and proposals are adopted or approved by the vote of a specified percentage of the voting power of the corporation. Abstentions and broker non-votes are tabulated in determining the votes present at a meeting. Consequently, an abstention or a broker non-vote may have the same effect as a vote against a director nominee or a proposal, as each abstention or broker non-vote would be one less vote in favor of a director nominee or a proposal.

 

If any of the nominees for terms expiring in 2011 becomes unable or declines to serve as a director, each properly submitted proxy will be voted for another person recommended by the Board of Directors. However, the Board has no reason to believe that any nominee will be unable or will decline to serve as a director. A favorable vote of the holders of a majority of Common Shares present in person or by proxy at the Annual Meeting is required to approve the amendments to the Nordson Corporation 2004 Long-Term Performance Plan and to approve the amendments to the Nordson Corporation 2004 Management Incentive Compensation Plan, respectively.

 

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

 

Shareholder Director Nominations and Proposals

 

Any shareholder who wishes to submit a candidate for election as director or a proposal to be considered for inclusion in next year’s proxy statement should send the nomination or proposal c/o Secretary, Nordson Corporation, 28601 Clemens Road, Westlake, Ohio 44145 for receipt on or before September 20, 2008. A shareholder may nominate a candidate for election as a director at the 2009 Annual Meeting of the Shareholders provided the shareholder (i) is a shareholder of the Company of record at the time of giving of the notice for the meeting, (ii) is entitled to vote at the meeting in the election of directors, and (iii) has given timely written notice of the nomination to the Secretary. The Governance and Nominating Committee will assess the qualifications of the candidate according to criteria set out in Nordson Corporation’s Governance Guidelines and Director Recruitment and Performance Guidelines, which are included in this proxy statement as Appendices A and B, respectively. Additionally, under our Regulations, a shareholder must submit a candidate for election as director or a proposal for consideration at next year’s Annual Meeting of Shareholders, no earlier than November 20, 2008 and no later than December 20, 2008. For a candidate to be considered for election as a director or for business to be properly requested by a shareholder to be brought before an annual meeting of shareholders, the shareholder must comply with all of the requirements of our Regulations, not just the timeliness requirements described above.

We will bear the expense of preparing, printing and mailing this notice and proxy statement. Our officers and regular employees may request proxies by contacting us by mail, telephone or in person. We will ask custodians, nominees and fiduciaries to send proxy material to beneficial owners in order to obtain voting instructions. Upon request, we will reimburse them for their reasonable expenses for mailing the proxy material.

 

Our Annual Report to Shareholders, including financial statements for the fiscal year ended October 31, 2007, is being mailed to shareholders of record with this proxy statement.

 

CORPORATE PHILOSOPHY

 

Corporate Purpose

 

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

 

Corporate Goals

 

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

 

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

 

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

 

Customers

 

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

 

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

 

Employees

 

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

 

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

 

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

 

We are an equal opportunity employer.

 

Communities

 

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

 

Since our founding, we have held the belief that business, as a corporate citizen, has a social responsibility to share its success with the communities in which it operates and its employees live. With this operating philosophy, in 2007, we contributed $1.75 million to nonprofit organizations operating in the areas of education, civic affairs, human welfare and arts and culture.

 

In addition, our employees also showed their community commitment by volunteering through our Time ’n Talent program. In 2007, employees spent nearly 6,000 hours strengthening their communities and supporting individuals and families in need.

 

CORPORATE GOVERNANCE

 

Director Independence

 

The Board of Directors has affirmatively determined that each director nominee is an “independent director” within the meaning of the independence standards of the NASDAQ Global Select Market (“NASDAQ”). Our Governance Guidelines provide that the Board of Directors will be comprised of a majority of independent directors and that only those directors or nominees who meet the listing standards of NASDAQ will be considered independent.

 

Governance Guidelines

 

The Board of Directors has adopted the Nordson Corporation Governance Guidelines. The Governance Guidelines incorporate best governance practices in the area of other board memberships, executive sessions of the independent directors and the adoption of director recruitment and performance guidelines. Our Governance Guidelines are attached to this proxy statement as Appendix A. Our Governance Guidelines and the charters of the standing committees referenced therein can also be reviewed at: www.nordson.com/corporate/governance.

 

Code of Business and Ethical Conduct

 

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

 

Director Nominating Process

 

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

 

Our Board of Directors has established a process for the identification and selection of candidates for director. The Governance and Nominating Committee, in consultation with the Chairman of the Board, periodically examines the composition of the Board and determines whether the Board would better serve its purposes with the addition of one or more directors. If the Governance and Nominating Committee determines that adding a new director is advisable, the Committee initiates the search, working with other directors, management and, if it deems appropriate or necessary, a search firm retained to assist in the search.

The Governance and Nominating Committee considers all appropriate candidates proposed by management, directors and shareholders. Information regarding potential candidates is presented to the Governance and Nominating Committee, and the Committee evaluates the candidates based on the needs of the Board at that time and issues of experience, reputation, judgment, diversity and skills, as set forth in our Governance Guidelines and Director Recruitment and Performance Guidelines. Potential candidates are evaluated according to the same criteria, regardless of whether the candidate was recommended by shareholders, the Governance and Nominating Committee, another director, management, a search firm or another third party. The Governance and Nominating Committee submits any recommended candidate(s) to the full Board of Directors for approval and recommendation to our shareholders.

 

In evaluating the suitability of individuals for Board membership, the Governance and Nominating Committee evaluates each individual in the context of our Director Recruitment and Performance Guidelines, with the objective of recommending a group of directors that can best perpetuate the success of our business and represent shareholder interests through the exercise of sound judgment, using its diversity of experience. The Director Recruitment and Performance Guidelines were adopted by the Board of Directors on December 6, 2006 upon recommendation of the Governance and Nominating Committee. In determining whether to recommend a director for re-election, the Committee also considers the director’s past attendance at meetings and participation in and contributions to the activities of the Board. The Committee does not distinguish between nominees recommended by shareholders and other nominees.

 

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

 

Shareholder Communications with the Board of Directors

 

Our Governance Guidelines provide for a process by which shareholders may communicate with the Board, a Board committee, the presiding independent director, the non-employee directors as a group, or individual directors. Shareholders who wish to communicate with the Board, a Board committee or any such other individual director or directors may do so by sending written communications addressed to the Board of Directors, a Board committee or such individual director or directors, c/o Secretary, Nordson Corporation, 28601 Clemens Road, Westlake, Ohio 44145. We have established procedures to permit confidential communications by shareholders to the Board of Directors regarding the Company. Shareholders may communicate directly with the Board of Directors by mail through the Chairperson, Governance and Nominating Committee, c/o Secretary, Nordson Corporation, 28601 Clemens Road, Westlake, Ohio 44145.

 

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

 

Presiding Director

 

The Presiding Director presides over all meetings of the non-employee directors held in executive session. The Presiding Director also has other authority and responsibilities that are described in the Governance Guidelines. Stephen R. Hardis currently serves as our Presiding Director.

 

Executive Sessions

 

Pursuant to our Governance Guidelines, non-employee directors of the Board meet in regularly scheduled executive sessions without management. The Presiding Director chairs all regularly scheduled executive sessions, and also has authority to convene meetings of the non-employee directors at any time with appropriate notice. In fiscal year 2007, our Presiding Director conducted an executive session at each of the meetings of the Board.

 

Attendance at the Annual Meeting of Shareholders

 

Directors are expected to attend the Annual Meeting of Shareholders and all Board of Directors meetings and meetings of committees on which a director serves. During the last fiscal year, each director attended at least seventy-five percent of the meetings of the Board of Directors and of the committees on which he or she served. All directors attended the 2007 Annual Meeting of the Shareholders.

 

Annual Self-Assessments

 

Under our Governance Guidelines, the Board of Directors conducts an annual self-assessment to determine, among other matters, whether the Board and the Committees are functioning effectively. The independent directors also undertake an assessment of other independent directors as part of this self-assessment process. The standing committees — Audit, Compensation, Governance and Nominating, and Pension and Finance — are also required to each conduct an annual self-assessment. The Governance and Nominating Committee is responsible for overseeing this self-assessment process. The Board and the four standing Committees each conducted the self-assessments described above during 2007.

 

Governance Documents

 

All of our current corporate governance documents and policies, including our Governance Guidelines, committee charters, and Code of Business and Ethical Conduct are available at www.nordson.com/corporate/governance and in print to any shareholder who requests them. The annual report and proxy statement are available at www.nordson.com. Upon request, copies of the annual report will be mailed to you (at no charge) by contacting the Investor Relations Department, 28601 Clemens Road, Westlake, Ohio 44145.

 

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

 

There were no transactions between us and our officers, directors or any person related to our officers or directors, or with any holder of more than 5% of our common shares, either during fiscal year 2007 or up to the date of this proxy statement. We review all transactions between us and any of our officers and directors. Our Code of Business and Ethical Conduct, which applies to all employees, emphasizes the importance of avoiding situations or transactions in which personal interests interfere with our best interests or those of our shareholders. In addition, our Related Persons Transactions Policy includes procedures for discussing and assessing relationships, including business, financial, familial and nonprofit, among us and our officers and directors, to the extent that they may arise. The Board reviews any transaction with a director to determine, on a case-by-case basis, whether a conflict of interest exists. The Board ensures that all directors voting on such a matter have no interest in the matter and discusses the transaction with counsel as deemed necessary. The Board will generally delegate the task of discussing, reviewing and approving transactions between us and any of our officers or directors to the Audit Committee. We define “related persons transactions” generally as transactions in which the self-interest of the employee, officer or director may be at odds or conflict with our interests, such as doing business with entities that are or may be controlled or significantly influenced by such persons or their immediate family members. Any related persons transactions concerning the company and any of our directors or officers including those that are reportable under Item 404(a) of Regulation S-K of the Securities Exchange Act of 1934, are to be disclosed to and approved by the Audit Committee. It is our policy to avoid related person transactions and related person transactions involving our officers are generally prohibited. Our Related Persons Transaction Policy is available at www.nordson.com/corporate/governance.

Mr. Campbell, Chairman of the Board of Directors, President and Chief Executive Officer, is also a director of KeyCorp. We and KeyCorp have had a banking relationship since 1954. KeyCorp currently acts as agent for our $400 million revolving credit facility. KeyCorp also serves as our cash manager and acts as trustee for several trusts managed by us.

 

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

 

Board of Directors.  Our Board of Directors has five regularly scheduled meetings each year. Special meetings are held as necessary. In addition, management and the directors communicate informally on a variety of topics, including suggestions for Board or Committee agenda items, recent developments and other matters of interest to the directors. The Board monitors overall corporate performance and the integrity of our financial controls and legal compliance procedures. In fiscal year 2007, our Board of Directors met five times in regular session and conducted one special meeting. An executive session of independent directors occurred at each meeting.

 

The Board has four standing committees: an Audit Committee, a Compensation Committee, a Governance and Nominating Committee, and a Pension and Finance Committee. The table below provides current committee membership and fiscal year 2007 committee meeting information:

 

 

 

* Committee Chairperson

 

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

 

 

A more detailed discussion of the purposes, duties, and responsibilities of the Audit Committee is found in the Committee’s charter, which is available at www.nordson.com/corporate/governance. The Committee has discussed with the independent auditors the auditors’ independence from management and the company, including the matters in written disclosures required by the Independence Standards Board, and considered

the compatibility of non-audit services with the auditors’ independence. The Audit Committee Report to the Board of Directors is at Appendix C of this proxy statement.

 

Compensation Committee.  All members of the Compensation Committee (for the purposes of this section, the “Committee”) meet NASDAQ independence standards. The Committee is responsible for setting and approving compensation for our executive officers and for administering the incentive and equity participation plans that make up the variable compensation paid to executive officers. The Committee also administers employee equity and qualified and non-qualified retirement benefit plans. A more detailed discussion of the purposes, duties, and responsibilities of the Committee is found in the Committee’s charter which is available at www.nordson.com/corporate/governance.

 

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

 

 

For each fiscal year, the Committee determines:

 

 

The Committee seeks to set base salaries at the median for comparable positions at companies in our peer group and adjusts individual executive officer base salaries based on performance and seniority. Furthermore, total compensation, including base salary, annual cash incentive compensation, and long-term equity-based incentive compensation is intended to vary with our performance in comparison to absolute financial measures and to the performance of our peers. Performance measures and target award levels are adjusted periodically based on peer compensation and financial performance data with the intent to cause percentile compensation to correlate generally to percentile performance relative to our peer group across a multi-year business cycle.

 

In years with outstanding performance at the maximum levels established for our annual cash incentive and long-term equity-based incentive plan, we would expect the total direct compensation (base salary, annual cash incentive compensation and long-term incentive awards) to exceed the 75th percentile of our peer group. Correspondingly, in years with weak performance below the established threshold levels, we would expect the total direct compensation to be as low as the 10th percentile of our peer group.

 

With respect to annual and long-term incentive compensation, the Committee believes selecting the appropriate performance measures is critical to our “paying for performance” philosophy. The Committee bases its awards to our executive officers each year on a number of factors, including:

 

 

The Committee also has the authority to engage outside executive compensation consultants, to determine the scope of the consultant’s services and to terminate the consultant’s engagement. As described in the Compensation Discussion and Analysis section of this proxy statement, the Committee engaged Mercer Human Resources Consulting in fiscal year 2007. The compensation consultant reports directly to the Chairperson of the Committee and provides the Committee with information and analysis related to executive compensation including:

 

 

Each year, the Committee instructs the consultant to analyze the proxy statement data of our peer group of companies and other broad surveys and assess competitive market compensation data relating to salary, annual incentive and long-term incentive in the context of the purpose and objectives of the executive compensation program. The Committee discusses this assessment and any recommendations with the consultant. Although our total compensation program targets median pay among our peer group for median performance by comparable executives, the individual primary elements of our program (base salary, annual cash incentive and long-term equity-based incentive compensation) may vary from peer medians. We established our peer group by selecting companies with revenues ranging in size from approximately one-half to two times that of ours, a significant portion of business located or transacted internationally and a business focus on precision industrial manufacturing.

 

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

 

The Committee designs incentive compensation to achieve earnings and revenue growth rates that substantially exceed past performance. The Committee believes that if these maximum performance levels are achieved, the results will lead to increased returns for our long-term shareholders. Thus, the performance awards are designed to motivate executives to maximize our performance each year and to provide a long-term retention incentive for the entire period covered by the award.

 

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

 

Pension and Finance Committee.  All members of the Pension and Finance Committee meet NASDAQ independence standards. The purpose of the Pension and Finance Committee is to provide oversight of the named fiduciaries’ (us and our Administrative Committee for Qualified Retirement Plans) administration of the Nordson Corporation Salaried and Hourly-Rated Employees’ Savings Trust and Salaried and Hourly-Rated

Employees’ Pension Plans (collectively, the “Plans”), including oversight of the selection and evaluation of the performance of investment managers that have investment management authority over assets of the Plans. The Committee’s charter is available at www.nordson.com/corporate/governance.

 

NOMINATION AND ELECTION OF DIRECTORS

 

Nordson’s Board of Directors is composed of eleven directors, divided into two classes of four members and one class of three members with one vacancy in the class of 2010. The terms of these classes as of the 2008 Annual Meeting will expire in 2009, 2010 and 2011. Each of the directors serves for a term of three years and until a successor is elected.

 

The Governance and Nominating Committee is responsible for identifying and evaluating nominees for director and for recommending to the Board a slate of nominees for election at the Annual Meeting of Shareholders.

 

The Governance and Nominating Committee has recommended to the Board, and the Board has approved, the persons named as nominees for terms expiring in 2011 and, unless otherwise marked, a proxy will be voted for such nominees. Each of the nominees currently serves as a director. Ms. Puma and Mr. Keithley were last elected by the shareholders at the 2005 Annual Meeting.

 

Peter S. Hellman retired as a director and President and Chief Financial and Administrative Officer of the Company, effective January 2, 2008. As a result, the Governance and Nominating Committee has recommended the reassignment of Directors Stephen R. Hardis and William L. Robinson from the class whose term expires in 2010 to the class of directors whose term expires in 2011 and increasing the class of 2011 to four directors. The Board of Directors has unanimously accepted the recommendation. The Board of Directors also reduced the class of 2010 to three directors, leaving one vacancy in this class.

 

The Board of Directors has not elected a director or proposed a nominee to fill the vacancy because it has not yet identified a candidate to serve as a director. The Board of Directors anticipates electing a director to fill the vacancy prior to the 2010 Annual Meeting of Shareholders and having the director stand for election at the 2010 Annual Meeting of Shareholders.

 

The name and age of each of the four nominees for election as directors for terms expiring in 2011, as well as present directors whose terms will continue after the meeting, appear below together with his or her principal occupation for at least the past five years, the year each became a director of the company and certain other information. The information is as of January 18, 2008.

 

Nominees For Terms Expiring in 2011

 

 

Present Directors Whose Term Expires in 2009

 

 

Present Directors Whose Term Expires in 2010

 

 

No shareholder or group that beneficially owns 5% or more of our outstanding Common Shares has recommended a candidate for election as a director at the 2008 Annual Meeting of the Shareholders.

 

Board of Directors Recommendation

 

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE SLATE OF DIRECTORS NOMINATED BY THE BOARD.

 

PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR EACH NOMINEE UNLESS
SHAREHOLDERS SPECIFY A CONTRARY VOTE.

 

Director Compensation

 

Directors who are also our employees do not receive compensation for their services as directors. We structure director compensation to attract and retain qualified non-employee directors and to further align the interests of directors with the interests of our long-term shareholders by linking a substantial portion of their compensation to the performance of our common shares. Directors can elect to receive their entire Board remuneration in shares and share-related compensation. Following is a description of our compensation program for non-employee directors in fiscal year 2007.

 

Determining Director Compensation.  The Governance and Nominating Committee periodically reviews a competitive analysis of non-employee director compensation and makes recommendations to the Board of Directors on compensation for our non-employee directors, including their cash retainers and annual equity grants. Each component of director compensation is described below.

 

Board Retainer.  Our non-employee directors receive an annual cash retainer of $55,000. Directors do not receive any meeting or attendance fees.

 

Committee Retainer.  Each non-employee director who chairs a committee of the Board (other than the Audit Committee) receives an additional cash retainer of $5,000 each year. The chair of the Audit Committee receives an additional $10,000 cash retainer. The Presiding Director receives an additional cash retainer of $5,000.

 

Equity Grant.  For fiscal year 2007 and pursuant to the Long-Term Performance Plan, which was approved by the shareholders at the 2004 Annual Meeting, each non-employee director was granted 1,435 restricted common shares. The dollar value of the grant, made at the fair market value of $48.79 per share on the date of grant, is $70,000.

 

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

 

The terms of the grant are:

 

 

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

 

Group Medical and Dental Insurance Plan.  Non-employee directors also may elect to participate in the group welfare plan, which provides medical and dental insurance coverage to our employees. Non-employee

directors may obtain medical and dental coverage on the same terms as our employees. For fiscal year 2007, we paid a total of $11,218 in equivalent insurance premiums for our non-employee directors that participated in the group medical plan, Messrs. Colville and Ginn.

 

Charitable Gifts Matching Program for Non-Employee Directors.  Non-employee directors may participate in our employee matching gift program involving contributions of cash or publicly-traded stock made to cultural, educational, social, medical or health-related charitable organizations that are exempt from federal income tax. Ms. Puma and Messrs. Colville, Ginn, Hardis, Madar, Robinson and Rosen participated in this program. We made contributions totalling $37,520 during fiscal year 2007.

 

Director Compensation Table for Fiscal Year 2007

 

The following table sets forth the total compensation paid to each non-employee director for services provided as a director for fiscal year 2007.

 

 

 

 

 

 

 

Amounts also reflect the equivalent health care insurance premiums and matching gifts. All three components of the column are presented in the following table:

 

 

We did not award any stock options to directors in fiscal year 2007. We do not have a non-equity incentive compensation plan for directors nor do we sponsor a defined benefit (pension plan) for directors. Mr. Madar receives a pension benefit as a company retiree.

 

Ownership of Nordson Common Shares

 

The following table shows the number and percent of our common shares beneficially owned on December 28, 2007 by each of the directors, including nominees; each of the executive officers named in the Summary Compensation Table for Fiscal Year 2007; any persons known to us to be the beneficial owner of more than 5% of our common shares; and by all directors and executive officers as a group.

 

 

 

* Less than 0.1%.

 

 

 

As of December 28, 2007, our present and former directors, officers and employees and their families beneficially owned over 11 million Nordson Common Shares, representing 33% of the outstanding shares. We are party to an agreement that, with some exceptions, gives us a right of first refusal with respect to proposed sales of our common shares by Eric Nord, individually or as testamentary trustee, and The Nord Family Foundation.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

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

 

Based on our review of these reports, we believe that, during the fiscal year ended October 31, 2007, all reports were filed on a timely basis by reporting persons.

 

Share Ownership Guidelines for Directors

 

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

 

EXECUTIVE COMPENSATION

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Introduction

 

We have written this Compensation Discussion and Analysis to provide you with the clearest and most concise description possible of the material factors that lie beneath our compensation policies and decisions for our most senior executive officers. We have included tables and related narratives in the next major section of this proxy statement that will tell you the types and amounts of compensation and benefits we pay to our most senior executive officers. In this section, we discuss the reasons why we paid our most senior executive officers the types of compensation and benefits described in the tables and narratives. We also discuss how we determined the specific amounts of compensation and benefits to pay our most senior executive officers.

 

After you read this section, we hope that you will have a clear and complete picture of our executive compensation program and how it operates for the following executive officers, who we refer to in this proxy statement as our named executive officers for fiscal year 2007:

 

 

This Compensation Discussion and Analysis discloses future company performance targets and goals. You should read and understand these targets and goals only as they relate to our executive compensation program. We are not providing these targets and goals as guidance or as statements of management’s expectations or estimates of our current or future results.

 

Executive Summary

 

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

 

 

Philosophy and Objectives

 

Our philosophy for our executive compensation program is that we should pay our named executive officers for the work they do for our company in ways that align their personal financial interests with the investment interests of our shareholders, with a focus on “paying for performance.” To us, paying for performance means that we pay our named executive officers types and amounts of compensation based on the successful implementation of the strategic objectives of the company and the degree to which the annual operational and financial objectives are achieved, both of which provide a direct linkage between executive compensation and the long-term interests of our shareholders.

 

The objectives of our executive compensation program are to:

 

 

Compensation Process and Procedures

 

Role of the Compensation Committee

 

The Compensation Committee of our Board of Directors, which we refer to in this section of the proxy statement as the Committee, has primary responsibility for designing our executive compensation program and for making compensation decisions under the program. In fulfilling its duties and responsibilities, the Committee each year seeks input, advice and recommendations from an executive compensation consultant and other resources, including recommendations from our Chief Executive Officer, on the compensation and performance of our executive officers. The Committee is not bound by the input, advice or recommendations it receives. Instead, the Committee at all times exercises independent judgment in its executive compensation decisions. We provide more detailed information about the Committee’s processes and procedures for making compensation decisions under the Corporate Governance section of this proxy statement and in the narratives to the compensation tables in the next major section of this proxy statement.

 

The Committee meets in executive session to determine all elements of our Chief Executive Officer’s total compensation — base salary, annual incentive compensation, and long-term equity-based incentives. Our Chief Executive Officer does not offer the Committee any recommendations on his compensation.

 

Role of the Compensation Consultant

 

The Committee has engaged Mercer Human Resource Consulting, an internationally recognized human resources consulting firm (which we refer to as Mercer), as its outside executive compensation consultant. Mercer reports directly to the Chairman of the Committee.

 

The Committee asks Mercer to collect and analyze proxy data for our peer group, which is a term we use to describe a particular group of companies that meet certain specific criteria and are picked as companies comparable to us in terms of compensation practices.

 

While no single company in our peer group competes with us across all of our businesses, we believe that our peer companies as a group operate in markets and compete for executive talent in a manner sufficiently similar to us such that they are an appropriate group of companies against which the Committee can establish performance goals, evaluate performance and establish compensation.

We provide more detailed information about Mercer’s instructions, responsibilities, processes and interaction with the Committee under the discussion of how the Committee determined executive compensation for fiscal year 2007 later in this Compensation Discussion and Analysis.

 

Role of Executive Officers

 

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

 

 

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

 

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

 

Allocation of Executive Compensation

 

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

Stock options provide a return to the recipient only if our share price increases. The annual cash incentive compensation and long-term incentive compensation elements of our executive compensation program provide a return to our executive officers only if we meet certain financial and operational performance goals.

 

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

 

The Committee structures the program in this manner because executive officers have greater responsibility and influence over the performance of our business. The Committee does not have any formal policies or guidelines with respect to the allocation of executive compensation between short-term and long-term elements, cash and non-cash elements or different forms of non-cash elements. In practice, however, the Committee has taken the following approaches:

 

Allocation between short-term and long-term elements.  The Committee considered the input, advice and recommendations from Mercer for fiscal year 2007 to set each named executive officer’s compensation for fiscal year 2007. For base salary, the Committee set a target for each named executive officer at approximately the median of his or her comparable position within our peer group, or at median salaries using salary survey data for similar positions at similarly-sized companies. The amount of target annual incentive compensation for each named executive officer was set such that each named executive officer’s base salary plus target annual bonus was approximately equal to the 65^th percentile of peer group annual cash compensation for executive officers with comparable responsibilities. The Committee also reviewed peer group data in setting target long-term compensation, which includes both long-term incentive awards and stock options. Target long-term compensation was set for each named executive officer at approximately the 65^th percentile of peer group long-term compensation.

 

Allocation between cash and non-cash elements.  Base salaries and annual incentive compensation are paid in cash. Based on Mercer’s recommendation, the Committee determined that long-term incentive awards for the fiscal year 2005-2007 performance period would be denominated in performance share units and would be payable in cash, providing linkage to the performance of the price of our common shares. Effective with the long-term incentive award for the fiscal year 2006-2008 performance period, the Committee accepted Mercer’s recommendation that long-term incentive awards be paid in performance shares to:

 

 

Allocation between different forms of non-cash elements.  Taking into account Mercer’s recommendation, the Committee allocates 50% of the total target value of each named executive officer’s long-term incentive compensation to stock options and 50% to long-term incentive performance shares. The Committee takes this approach to balance the allocation between elements based on long-term financial, operational and strategic measures and those based on long-term performance of our common shares. The Committee does not allocate an unbalanced percentage to stock options to avoid any appearance that the executive compensation program is a positive or negative indicator of current common share value or anticipated common share performance.

 

SUMMARY OF ELEMENTS OF THE EXECUTIVE COMPENSATION PROGRAM

 

The table below summarizes the elements of our fiscal year 2007 executive compensation program for our named executive officers. Mr. Groos does not participate in the 401(k) defined contribution plan, which is available to U.S.-based employees only. Mr. Groos participates in the statutory pension plan and other social and welfare (health) benefit plans sponsored by his employer, Nordson Deutschland GmbH, a wholly-owned subsidiary of the company, which benefits are available to all employees of Nordson Deutschland GmbH.

 

 

DETERMINING PRIMARY ELEMENTS OF EXECUTIVE COMPENSATION
(BASE SALARY AND ANNUAL AND LONG-TERM INCENTIVE COMPENSATION)
FOR FISCAL YEAR 2007 — SPECIFICS OF THE PROCESS

 

The Committee provided Mercer with preliminary instructions regarding the objectives of the fiscal year 2007 executive compensation program and the parameters of the competitive review of executive total direct compensation programs to be conducted by Mercer. In particular, the Committee instructed Mercer to (i) test both the competitiveness of our executive officer compensation packages within the market and the reasonableness of the packages given our performance relative to our peer group, as measured by diluted earnings per share and return on average capital; (ii) benchmark all components of compensation, including base salary, total target compensation (base salary plus cash incentive compensation), total actual cash compensation and equity-based long-term incentive awards; (iii) assess the continued applicability of our peer group; (iv) assess the alignment between executive officer compensation and our financial performance and (v) analyze our internal compensation model and guidelines and compare them to our peer group and actual compensation practices. For purposes of analyzing our performance against that of our peer group, the Committee instructed Mercer to organize its analysis around our business segments and general corporate executive positions.

 

Our peer group at the time compensation for fiscal year 2007 was established for the named executive officers, included:

 

 

Once Mercer completed its preliminary analysis of executive compensation for fiscal year 2007, it discussed its report with the Committee in general session and in executive session without management present.

 

Based on the performance of each executive officer and Mercer’s report, our Chief Executive Officer provided the Committee with his initial recommendations for base salary adjustments and incentive compensation for fiscal year 2007.

 

Taking into consideration the Chief Executive Officer’s recommendation and Mercer’s report, the Committee determined base salaries (with any adjustments being retroactive to the beginning of fiscal year 2007) for our named executive officers and established the performance measures for the annual cash incentive plan and the prospective long-term incentive plan three-year performance period.

 

Base Salary

 

Each of our named executive officers received an annual base salary during fiscal year 2007. In general, we pay base salaries to our named executive officers that recognize their experience, expertise, level of responsibility, seniority, leadership qualities, advancement, individual accomplishment, and other significant contributions to the enhancement of shareholder value and our success. Having competitive base salaries ensures the attraction, retention and motivation of highly-talented and ethical individuals.

 

Using Mercer’s annual review to analyze base salaries of persons holding comparable positions within our peer group and considering our Chief Executive Officer’s annual performance review of the named executive

officers, the Committee established base salaries for each of the named executive officers. The Committee tries to target base salary amounts at approximately the median of the peer group.

 

During fiscal year 2007, the named executive officers received the base salaries included in the “Salary” column of the Summary Compensation Table for Fiscal Year 2007, which is found in the section of this proxy statement following this Compensation Discussion and Analysis. Those amounts reflect the following percentage increases in base salaries of the named executive officers at the end of fiscal year 2007 as compared to their base salaries at the end of fiscal year 2006:

 

 

With respect to Mr. Groos, the Committee determined that no salary increase was in order based upon review of survey data for European executives with responsibilities comparable to those of Mr. Groos. Mr. Keane received a larger than average base pay increase based upon a comparison of his base salary with that of peer group executives in similar positions and the objective of setting base salaries at our peer group median.

 

Annual Incentive Compensation

 

Annual incentive compensation is utilized to fulfill our principle of paying for performance where performance criteria are aligned with interests of our long-term shareholders, putting pay significantly “at risk” and subject to the achievement of strategic business objectives, and balancing short-term and long-term objectives. The annual incentive component of the compensation program also supports our principle of providing total compensation opportunities to our named executive officers that are market competitive and supportive of our strategy to attract, develop and retain outstanding talent. Target annual cash incentive compensation is expressed as a percent of base salary, and, in combination with base salary, is targeted at the 65^th percentile of our peer group.

 

The Committee establishes the performance measures applicable to each element by analyzing our annual goals and objectives for each performance measure. The Committee links directly and materially annual cash incentive compensation to growth in the performance measures.

 

Based on its review of Mercer’s analysis and assessment, the Committee established two quantitative performance measures for the annual incentive compensation plan for fiscal year 2007: (1) return on capital and (2) diluted earnings per share growth.

 

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

 

 

For the diluted earnings per share measure, corresponding diluted earnings per share are: threshold — $2.65 per share; target — $2.86 per share; and maximum — $3.07 per share.

 

The Committee considers earnings per share growth and return on capital as performance measures critical to the company’s financial performance and profitable growth. Each of these measures offers a balance between growth and profitability, and the Committee believes they align the interests of our named executive officers with those of our shareholders and over time will drive improved shareholder return and foster maximum value for our assets. Specifically,

 

The following table sets forth the potential payout at threshold, target and maximum; corporate performance against target; individual performance adjustment; payout as a percentage of target, and payouts (rounded to the nearest thousand) for fiscal year 2007 under the annual incentive compensation plan for each of our named executive officers:

 

 

 

 

In determining diluted earnings per share growth, the Committee utilized diluted earnings per share including discontinued operations for fiscal year 2006 and fiscal year 2007. Consistent with the authority granted in the annual cash incentive plan, the Committee decided to eliminate the distorting effect of acquisition purchase price accounting by excluding from the calculation of diluted earnings per share for the annual incentive payout the effect of allocating a portion of the purchase price of acquisitions to acquired inventory. During fiscal year 2007, this purchase price allocation reduced diluted earnings per share by $.16 per share, diluted earnings per share growth by 6% and return on capital by 2%.

 

After considering the named executive officers’ performance against their individual objectives, the Committee determined individual payouts under the annual incentive compensation plan. In making its determination, the Committee considered Mr. Campbell’s recommendations for the named executive officers, Mercer’s analysis and assessment and the named executive officer’s contribution to meeting our financial and operating objectives.

 

After considering Mr. Campbell’s recommendation, the Committee reduced Mr. Keane’s annual cash bonus payout from 144% to 130% of target. As a consequence, we paid Mr. Keane a cash bonus under the annual incentive compensation plan that was 10% less than the amount that we calculated for Mr. Keane based on our actual diluted earnings per share and return on capital achievement during fiscal year 2007. Mr. Keane is the senior executive in charge of our Adhesive Dispensing Systems segment. The segment performance goals for fiscal year 2007 included growing revenue for the segment by 7% and operating income by 13% compared to fiscal year 2006 amounts, in each case before the effects of currency movements. During fiscal year 2007, the segment’s revenue grew by 2% and operating income grew by 3%, falling short of the pre-established measures for Mr. Keane.

 

After considering Mr. Campbell’s recommendation, the Committee reduced Mr. Groos’ annual cash bonus payout from 144% to 130% of target. As a consequence, we also paid Mr. Groos a cash bonus under the annual incentive compensation plan that was 10% less than the amount that we calculated for Mr. Groos based on our actual diluted earnings per share and return on capital achievement during fiscal year 2007.

Mr. Groos is a senior executive of our Adhesive Dispensing Systems segment, and he has responsibility for significant portions of the global activities for the segment. Mr. Groos had individual performance goals for fiscal year 2007 including growing revenue within the portion of the segment for which he had responsibility by 6% and operating income by 11% compared to fiscal year 2006 amounts, in each case before the effects of currency movements. During fiscal year 2007, the revenue for these businesses declined by 0.4% and operating income grew by 4%, falling short of the pre-established measures for Mr. Groos.

 

After considering Mr. Campbell’s recommendation, the Committee reduced Mr. Dunn’s annual cash bonus payout from 144% to 137% of target. As a consequence, we paid Mr. Dunn a cash bonus under the annual incentive compensation plan that was 5% less than the amount that we calculated for Mr. Dunn based on our actual earnings per share and return on capital achievement during fiscal year 2007. During fiscal year 2007, Mr. Dunn was the senior vice president in charge of certain of the product lines within the Advanced Technology segment. He also led the corporate development function for the company. The performance goals for Mr. Dunn relating to these product lines included achieving revenue of $154 million and pre-tax economic value added of $9 million. He also was charged with adding $50 million of annualized revenue from the acquisition of companies targeted for investment. During fiscal year 2007, revenue and pre-tax economic value added from these product lines were $150 million and $3 million, respectively, falling short of the pre-established measures for Mr. Dunn. However, the performance measure for revenue growth through completed acquisitions was exceeded, with approximately $103 million of annualized revenue being added through the acquisition of four companies.

 

Mr. Campbell recommended that there not be any adjustment to Mr. Hellman’s cash bonus payout for fiscal year 2007. The Committee reviewed Mr. Campbell’s recommendation and determined that Mr. Hellman’s payout would be at 144% of target.

 

With regard to Mr. Campbell, the Committee considered our performance against the primary measures of diluted earnings per share growth and return on capital. It also considered the excellent progress we made in completing four acquisitions during fiscal year 2007 that brought into our fold high performing business in markets important to our future. Favorable progress against operating objectives to lower costs, introduce important new products and build our capability in important fast growing markets also contributed to the Committee’s decision to make an annual incentive payment to Mr. Campbell equal to 149% of target.

 

The amount of cash incentive compensation earned by each named executive officer in fiscal year 2007 is included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for Fiscal Year 2007 of this proxy statement.

 

Long-Term Incentive Compensation

 

Long-term incentive awards are utilized to fulfill our principles of paying for performance where performance criteria are aligned with shareholder interests, putting pay significantly “at risk” and subject to the achievement of strategic business objectives, and balancing short-term and long-term objectives. Long-term incentive awards also support our principle of providing total compensation opportunities that are market competitive and supportive of our strategy to attract, develop and retain outstanding talent. Our named executive officers received long-term incentive compensation consisting of long-term incentive awards and stock options. Long-term incentive awards and stock options work together to align the long-term financial interests of our executive officers with that of our long-term shareholders.

 

The Committee based the target amount of the long-term incentive awards and the number of stock options granted to our named executive officers on similar compensation of persons holding comparable positions within our peer group, as reflected in Mercer’s annual analysis and assessment.

Fiscal Year 2005-2007 Performance Period

 

Based upon Mercer’s annual assessment and review, the Committee established the following threshold, target, and maximum cumulative earnings per share growth and cumulative revenue growth performance measures for the fiscal year 2005-2007 performance period:

 

 

For the cumulative earnings, corresponding cumulative earnings per share are: threshold — $5.46 per share; target — $5.73 per share; and maximum — $6.01 per share. For the cumulative revenue growth measure, corresponding revenue is (000’s): threshold — $2,626,600; target — $2,755,800; and maximum — $2,889,100.

 

Each of these measures offers balance between growth and profitability, and the Committee believes they align the interests of the executive officers with those of our shareholders and over time will drive improved shareholder return and foster maximum value for our assets. Specifically,

 

 

For the fiscal year 2005-2007 performance period, performance exceeded the maximum performance level for cumulative earnings per share growth and was just below target performance level for cumulative revenue growth during the three-year period. Cumulative earnings per share for the three-year period were $7.52, which is equivalent to a constant annual growth rate of 22.4% over the three-year performance period after adjusting for the change in accounting for the expensing of stock options. Cumulative revenue for the three-year period was $2,731 million, which is equivalent to a constant annual growth rate of 7.0% over the three-year performance period. We included revenue from discontinued operations during the years in which we owned these operations. In calculating cumulative earnings per shares growth, we reduced both base year and fiscal year 2005 diluted earnings per share by $.08 to reflect on a consistent basis the effect of the accounting charge for stock options that began with fiscal year 2006.

 

The following table sets forth the potential payout at threshold, target and maximum, performance as a multiple of target and the payout (rounded to the nearest thousand) for the fiscal year 2005-2007 performance period for each of our named executive officers:

 

 

 

Fiscal Year 2006-2008 Performance Period

 

Using the same methodology as was used to establish the threshold, target, and maximum cumulative earnings per share growth and cumulative revenue growth performance measures for the fiscal year 2005-2007 performance period, the Committee has established the following threshold, target, and maximum cumulative earnings per share growth and cumulative revenue growth performance measures for the fiscal year 2006-2008 performance period:

 

 

For the cumulative earnings measure, corresponding cumulative earnings per share growth are: threshold — $6.82 per share; target — $7.15 per share; and maximum — $8.08 per share. For the cumulative revenue growth measure, corresponding revenue is (000’s): threshold — $2,778,900; target — $2,914,500; and maximum — $3,290,600.

 

Any payouts for the fiscal year 2006-2008 performance period will be in the form of unrestricted shares. The following table provides information for the fiscal year 2006-2008 performance period:

 

 

The threshold, target, and maximum amounts for Mr. Hellman represent prorated amounts based on a 26-month performance period instead of a 36-month performance period due to his January 2, 2008 retirement date.

 

Fiscal Year 2007-2009 Performance Period

 

Using the same methodology as was used to establish the threshold, target, and maximum cumulative earnings per share growth and cumulative revenue growth performance measures for the fiscal year 2006-2008 performance period, the Committee has established the following threshold, target, and maximum cumulative earnings per share growth and cumulative revenue growth performance measures for the fiscal year 2007-2009 performance period:

 

 

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

Any payouts for the fiscal year 2007-2009 performance period will be in the form of unrestricted shares. The following table provides information for the fiscal year 2007-2009 performance period:

 

 

Mr. Hellman retired as Chief Financial and Administrative Officer on January 2, 2008. The Committee anticipated his retirement by granting Mr. Hellman fewer long-term incentive plan shares at the beginning of the fiscal year 2007-2009 performance period. Consequently, no reduction in the potential payout will be required as a result of his retirement.

 

In February 2007, Mr. Dunn was promoted to Senior Vice President. At the time of his promotion, Mr. Dunn was awarded an additional 1,500 shares under the long-term incentive plan at target performance in addition to the number of shares shown in the table above. The payout on those additional shares will be determined using the 32-month portion remaining in the 36-month fiscal year 2007-2009 performance period.

 

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:

 

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.

Compensation Allocation

 

The following table summarizes the allocation, on a percentage basis, among the primary elements of compensation for our named executive officers for fiscal year 2007: actual base salary, payout for the annual cash incentive plan, cash payout for the fiscal year 2005-2007 long-term performance plan and grant date fair value of stock options granted in fiscal year 2007:

 

 

The Committee met in executive session to determine the base salary adjustment for Mr. Campbell. Mr. Campbell did not offer the Committee any recommendation on adjustment to his base salary. For base salary, the Committee looked at the average increase being paid to executive officers, and the amount being paid to Mr. Campbell relative to peer group chief executives, with an objective to move base salary toward the median base salary of our peer group. The Committee set annual incentive compensation with the objective that total short-term compensation (base salary and annual incentive compensation) be at the 65th percentile of peer group chief executive officer total short-term compensation. With this objective and based on peer group analysis, the Committee set Mr. Campbell’s fiscal year 2007 target annual incentive compensation at 100% of base salary. The Committee set the value of Mr. Campbell’s long-term incentive opportunity at target performance at approximately the 65th percentile of peer group long-term incentive compensation. These actions produce the resulting proportions of base salary, annual incentive and long-term incentive opportunity shown in the table above.

 

The Committee used the same process for Mr. Hellman with regard to setting base salary and annual incentive compensation. A further consideration in setting Mr. Hellman’s compensation was the relatively high compensation paid to Mr. Hellman in connection with his initial recruitment by us in February 2000. Mr. Hellman’s position prior to joining us was president and chief operating officer of a company substantially larger than us. This process resulted in setting Mr. Hellman’s target annual incentive compensation for fiscal year 2007 at 80% of base salary. The process for setting Mr. Hellman’s long-term incentive for fiscal year 2007 was the same as Mr. Campbell’s except that the amount of long-term incentive awards was reduced by two-thirds in anticipation of Mr. Hellman’s retirement during the first year of the three-year performance period. Also, Mr. Hellman was not granted any stock options in fiscal year 2007 because he was expected to retire before any of his options would have vested. The consequence of the smaller long-term awards to Mr. Hellman increase the proportion of the base salary and annual incentive compensation shown in the table above.

 

The proportion of the elements of compensation for Messrs. Dunn, Groos and Keane are a result of the same process of setting base salary, annual incentive compensation and long-term compensation. In setting each named executive officer’s base salary, the Committee looks at the average increase being paid to all executive officers, and the amount being paid to the named executive officer relative to peer group executives, with an objective over time to move base salary toward the median of our peer group. An additional element affecting compensation for Mr. Groos is that he operates in Europe and his cash compensation is paid in Euros. The strength of the Euro relative to the dollar has worked to increase Mr. Groos’ compensation relative to executives in our peer group who are paid in U.S. dollars. The Committee does not attempt to adjust the compensation of Mr. Groos for currency fluctuation.

 

NON-CASH BENEFIT PROGRAMS

 

In fiscal year 2007, our named executive officers participated in the non-cash benefit programs discussed below. The purpose of these programs is to provide competitive fringe benefits, to attract and retain employees and to provide an incentive for employees to save for their retirement income needs.

Medical, Disability and Life Insurance Benefits (Welfare Benefits)

 

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

 

Mr. Groos’ welfare benefits are mandated by German social law and include health insurance and participation in statutory social security and pension plans.

 

Retirement Benefits

 

401(k) Plan.  We sponsor a 401(k) tax-qualified retirement savings plan for U.S.-based employees. All of our employees who work a minimum of 1,000 hours in a calendar year are eligible to participate in the 401(k) plan immediately upon employment. Our named executive officers participate in the 401(k) plan on the same basis as other employees.

 

We match employee contributions $.50 on the dollar for the first 6% of compensation contributed. We believe the matching contribution allows us to compete effectively for management talent because many other companies offer a similar match. Employee contributions to the 401(k) plan vest immediately, while matching contributions vest in increments based on years of service, with participants being fully vested after three years of service.

 

The Internal Revenue Service places limits on amounts that “highly compensated employees,” such as our named executive officers, may contribute to 401(k) plans. Correspondingly, because of these limits, matching contributions to the 401(k) plan accounts of highly compensated employees in fiscal year 2007 were limited. In order to restore any match amount that may have been forgone by this limitation, the company provides executive officers the opportunity to capture this potential loss by restoring the match that would have been made absent the limitations. This restoration match is made to the named executive officers who defer all or a portion of their base salary under the Deferred Compensation plan discussed below.

 

For fiscal year 2007, our match for each named executive officer was:

 

 

As an employee of Nordson Deutschland GmbH, Mr. Groos does not participate in the 401(k) plan. Instead, Mr. Groos participates in a Nordson Deutschland GmbH pension plan that is described in the Pension Benefits for Fiscal Year 2007 section of this proxy statement.

 

These matching contributions to the 401(k) accounts of our named executive officers are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2007 of this proxy statement.

 

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

 

The primary benefit to participants of this plan is that most taxes are deferred until the plan account balance is distributed, so savings accumulate on a pre-tax basis. Prior to the beginning of each fiscal year, named executive officers may elect to defer up to 100% of their base salary and cash incentive compensation including long-term incentive payout. There is no maximum dollar limit on the amount that may be deferred each year. Participants can select from a number of investment alternatives, including equity and fixed income alternatives. For interest earning investments, the deferred cash amounts earn interest that is compounded

quarterly on the last day of each fiscal quarter. The applicable interest rate, which is not considered to be an “above market” interest rate, is determined as of the beginning of each fiscal year. Distributions are in either a lump sum or installments based upon the participant’s election when he or she first begins participating in the plan.

 

During fiscal year 2007, the amounts deferred by each named executive officer and our matching contribution on those amounts were:

 

 

Mr. Groos’ participates in a deferred compensation arrangement with Nordson Deutschland GmbH. Nordson Deutschland GmbH does not provide a match under this arrangement.

 

A detailed description of the deferral plans and information regarding contributions to the plans is provided in the narrative and footnotes of the Non-qualified Deferred Compensation for Fiscal Year 2007 section of this proxy statement.

 

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

 

For employees of our international subsidiaries, we provide pension or retirement benefits in accordance with local statutory requirements or practice.

 

A detailed description of the pension plans for U.S.-based employees is provided in the narrative and footnotes of the Pension Benefits for Fiscal Year 2007 section of this proxy statement.

 

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

 

As part of the incentive for Mr. Campbell to leave his former employer, we agreed to provide him with supplemental pension benefits in order to restore some of the benefits he would have received if he had remained with his former employer. Mr. Campbell is a participant in the Salaried Employees’ Pension Plan, but his benefits will be supplemented to recognize his prior service with his former employer. His “average annual compensation” will be determined as the average of his compensation during his 36 consecutive highest paid months (instead of 60), and he will be eligible for the full pension benefit at age 60. He may retire prior to age 60, commencing at age 55, but his benefit will be reduced 5% per year for retirement before age 60. His benefit will also be reduced by the amount of any pension benefit payment he receives from the pension plan of his former employer. Mr. Campbell had eleven years of employment with his former employer. The value of this benefit is included in the Pension Benefits for Fiscal Year 2007 table of this proxy statement.

 

Mr. Groos participates in a supplemental pension plan sponsored by Nordson Deutschland GmbH, our wholly-owned subsidiary, as part of his employment agreement with Nordson Deutschland GmbH. Under the terms of the plan, Nordson Deutschland GmbH has agreed to accelerate Mr. Groos’ age 65 normal retirement date by one-half year, for each year Mr. Groos remains employed beyond age 50. Therefore, at age 60,

Mr. Groos would be entitled to retire with an age 65 pension benefit. The Committee approved the plan in order to retain Mr. Groos’ services through age 60.

 

SEVERANCE AND OTHER BENEFITS UPON TERMINATION OF EMPLOYMENT

 

On October 30, 1998, the Committee approved employment agreements for executive officers that would be effective upon a change-in-control of the Company. We believe that the occurrence, or potential occurrence, of a change-in-control transaction will create uncertainty regarding the continued employment of our named executive officers. This uncertainty results from the fact that many change-in-control transactions result in significant organizational changes, particularly at the senior executive level. In order to encourage our named executive officers to remain employed with us during an important time when their prospects for continued employment following the transaction are often uncertain, we provide our named executive officers with enhanced severance benefits if their employment is terminated without cause or, in certain cases, by the executive in connection with a change-in-control. Because we believe that a termination by the executive for good reason may be conceptually the same as a termination by us without cause, and because we believe that, in the context of a change-in-control, potential acquirers would otherwise have an incentive to constructively terminate our named executive officer’s employment to avoid paying severance, we believe it is appropriate to provide severance benefits in these circumstances.

 

We believe our change-in-control policy is consistent with that of companies disclosing such provisions as reported in public filings and as periodically reported in various surveys. The Committee considers the salary and incentive compensation amounts offered by the agreements to be reasonable and appropriate for executive officers who may not be in a position to obtain readily comparable employment. We do not believe that named executive officers should be entitled to receive cash severance benefits merely because a change-in-control transaction occurs. The payment of cash severance benefits is only triggered by an actual or constructive termination of employment. Under their respective employment agreements, the named executive officers would be entitled to accelerate vesting of their outstanding equity awards upon a change-in-control.

 

Our named executive officers who voluntarily terminate their employment or who are terminated for cause do not receive severance pay. Other than our agreement with Mr. Campbell, there is no legally binding agreement requiring that severance payments or benefits be paid to a named executive officer, except in the case of a change-in-control prior to termination. If any negotiated severance arrangement were entered into between the company and a named executive officer, we would require the named executive officer to sign a general release and waiver of claims against us and would typically require compliance with confidentiality and non-compete restrictions. Payment of such severance will generally be made in equal installments over regular payroll periods subject to delay in the commencement of payments required by Section 409A of the Internal Revenue Code.

 

With respect to Mr. Campbell, at the time he was elected Chief Executive Officer, the Committee provided an assurance to Mr. Campbell that he would receive severance equal to two times his base salary and annual cash incentive in the event his employment was involuntarily terminated. These payments will be grossed-up in the event excise taxes are levied on the payments. The Committee provided this benefit based on the benefit afforded Mr. Campbell’s predecessor and for purposes of retention of Mr. Campbell’s services as Chief Executive Officer. On December 12, 2007, the Committee clarified the assurance providing that the severance payment would be made only for a termination without cause. “Cause” is defined as committing an act of fraud, embezzlement, theft or other similar criminal act constituting a felony and involving company business. In addition, the Committee clarified that the severance agreement does not apply in the event of a termination of Mr. Campbell’s employment following a change-in-control. In that case, the severance provision of Mr. Campbell’s employment agreement would be operative.

 

For a more detailed description of the severance and other benefits upon termination or a change-in-control, refer to the narrative and footnotes accompanying the Potential Payments Upon Termination or Change-in-Control tables of this proxy statement.

 

EXECUTIVE PERQUISITES

 

During fiscal year 2007, we provided various executive perquisites to each of our named executive officers. We provided these perquisites to promote the business objectives for each perquisite described below and to reward experience, expertise, level of responsibility, seniority, leadership qualities and advancement. We also use these perquisites to ensure that the executive compensation program remains competitive to attract and retain executive officers. Attributed costs of these perquisites for our named executive officers during fiscal year 2007 are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2007 in the next major section of this proxy statement.

 

Private Clubs.  We reimburse Messrs. Campbell, Hellman and Keane for the costs of initiation fees and monthly dues for private clubs. In addition, we provide all named executive officers with memberships to airline travel clubs. We provide these memberships to encourage entertainment of business colleagues and customers, engaging in social interaction with peers from other companies, local leadership and the community and holding business meetings at offsite locations.

 

Financial Planning, Tax Preparation and Estate Planning.  We pay or reimburse our executive officers for financial, estate and tax planning and tax preparation fees and expenses. Beginning fiscal year 2008, the maximum reimbursement is $5,000 per year. We provide this perquisite to assist our named executive officers in obtaining high-quality financial counselling enabling them to concentrate on business matters rather than on personal financial planning.

 

Executive Physicals.  We pay for annual physicals for U.S.-based named executive officers. Mr. Groos does not receive a corresponding benefit. We provide this perquisite as part of the overall preventive medicine program to promptly identify and address medical issues and to preserve our investment in the named executive officers by encouraging executive officers to maintain healthy lifestyles and be proactive in addressing actual or potential health issues.

 

Automobiles.  We do not provide company cars to executive officers, except for Mr. Groos, and do not reimburse for business mileage driven by executive officers. Instead, we provide executive officers a car allowance. For Mr. Campbell, the allowance was $16,000 for fiscal year 2007. For other executive officers, the allowance for fiscal year 2007 was $12,000. Mr. Groos is provided a company car, as that benefit is typically provided in Germany to senior executives at Mr. Groos’ level. The value of Mr. Groos annual use of a company car in fiscal year 2007 was $23,530.

 

EQUITY GRANT POLICY

 

Our Board of Directors has delegated to the Committee the authority to grant equity awards to executive officers. It is the Committee’s policy that neither the Committee nor members of our management shall backdate or manipulate any equity awards, or manipulate the timing of public releases of material information or equity awards with the intent of benefiting any award recipient. The Committee believes establishing fixed dates for equity grants, to the extent possible, is an important measure to ensure the integrity of the equity grant process.

 

We grant equity-based awards under the shareholder-approved 2004 Nordson Corporation Long-Term Performance Plan. Grants of equity-based awards are effective on the date that the Committee approves the award. The Committee has delegated limited authority to our Chief Executive Officer to approve equity awards, excluding grants made to executive officers. Equity grants approved by our Chief Executive Officer in any quarter will be effective the first day of the month following public disclosure of quarterly earnings for that quarter. In the event the effective date of the grant is a Saturday, Sunday or holiday, the effective date of grant will be the first subsequent day our common shares are traded. Such grants will be reported to the Committee at the Committee’s next regularly scheduled meeting. In fiscal year 2007, Mr. Campbell approved restricted share grants to two key employees, totaling 1,263 common shares.

There were 1,180,000 Nordson common shares available for grant under the plan as of October 31, 2007. All outstanding and unvested options become fully exercisable upon a change-in-control. Restrictions on any granted shares lapse upon a change-in-control. Outstanding option awards are forfeited if a named executive officer is terminated for a violation of our Code of Business and Ethical Conduct or competes with us within one year of departure.

 

STOCK OWNERSHIP GUIDELINES

 

Effective October 7, 2005 and after a thorough review of survey data of equity ownership practices of those companies in the peer group provided by Mercer and other national surveys, we set share ownership requirements for our executive officers to emphasize our executive compensation program’s objective of aligning the individual financial interests of our executive officers with the investment interests of our long-term shareholders. We require our executive officers to own the following amount of our common shares:

 

 

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

 

Executive officers who have not satisfied the share ownership requirements by the end of the five-year period or who have not shown progress (as subjectively determined by the Committee) toward the required ownership level prior to the end of such five-year period will be expected to retain 100% of the shares acquired through exercise of options, lapse of transfer restrictions on restricted shares or long term incentive share awards, net of shares tendered to cover the exercise price of the options or taxes due on the exercise of the options or the lapse of a restriction period until the share ownership requirement is achieved or there is progress towards the ownership requirement.

 

ACCOUNTING AND TAX CONSIDERATIONS

 

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

 

In addition, the Committee attempts to structure the program to maximize its ability to deduct compensation payments for tax purposes. The Committee takes into account whether particular elements are “performance-based” compensation under Section 162(m) of the Internal Revenue Code. Section 162(m) sets a limit of $1,000,000 on the amount we can deduct for compensation paid to each of the chief executive officer and the three other most highly compensated executive officers other than the chief financial officer. This limit does not apply to compensation that qualifies as “performance-based” compensation under Section 162(m). Base salary does not qualify as “performance-based” compensation under Section 162(m). The Committee attempts to ensure that incentive compensation qualifies as fully deductible “performance-based” compensation. The Committee has established a requirement that executive officers will defer base salary and payouts under the annual cash incentive plan and long-term incentive plan to avoid the loss of deductibility by us to the extent that non-performance-based compensation under Section 162(m) exceeds $1,000,000.

 

COMPENSATION COMMITTEE REPORT

 

The Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on such review and discussion, the Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended October 31, 2007.

 

Compensation Committee

 

Joseph P. Keithley

William L. Robinson

Benedict P. Rosen

 

January 18, 2008

 

SUMMARY COMPENSATION FOR FISCAL YEAR 2007

 

The following tables, footnotes, supplemental tables and narratives present the components of total compensation for our named executive officers for the fiscal year ended October 31, 2007. Also described below are the contracts, plans, and arrangements providing for payments to our named executive officers in connection with a termination of their employment with us, including in connection with a change-in-control of the company. The value realized by the named executive officers in fiscal year 2007 from exercised stock options and vested restricted stock is presented in the Option Exercises and Stock Vested During Fiscal Year 2007 table in this proxy statement. Target annual and long-term incentive awards for fiscal year 2007 are presented in the Grants of Plan-Based Awards During Fiscal Year 2007 table of this proxy statement.

 

The individual components of the total compensation reflected in the Summary Compensation Table for Fiscal Year 2007 are:

 

 

Summary Compensation Table For Fiscal Year 2007

 

The following table sets forth summary compensation information for our named executive officers for our fiscal year ended October 31, 2007:

 

 

 

 

		Number of Shares								Expected Life (in
Fiscal Year		Granted				Exercise Price				years)				Dividend Yield				Volatility				Risk-Free Rate
2004			163,000			$	27.71				7.0				2.19	%			0.298				3.88	%
2005			119,700			$	37.16				7.0				1.70	%			0.297				3.88	%
2006			155,000			$	38.99				7.6				1.94	%			0.279				4.58	%
2007			109,100			$	49.05				8.0				1.63	%			0.285				4.57	%

 

 

						Fiscal Year				Total Non-Equity
		Fiscal Year 2007 Annual				2005-2007 Long-Term				Incentive Plan
Name		Incentive Plan ($)				Incentive Plan ($)				Compensation ($)
Edward P. Campbell			1,100,000				623,816				1,723,816
Peter S. Hellman			594,000				312,729				906,729
Robert A. Dunn, Jr.			316,000				124,079				440,079
Michael Groos			291,550				149,599				441,149
John J. Keane			264,000				124,079				388,079

 

 

The following table provides further details to the increases by plan during fiscal year 2007:

 

						Change in Excess				Deferred
		Change in Pension				Pension Plan Value				Compensation Plan
Name		Plan Value ($)				($)				Earnings ($)				Total ($)
Edward P. Campbell			60,314				1,268,297				1,625,485				2,954,096
Peter S. Hellman			24,825				390,522				250,918				666,265
Robert A. Dunn, Jr.			28,509				714,650				247,247				990,406
Michael Groos			185,254				873,275				0				1,058,529
John J. Keane			13,671				154,389				30,271				198,331

 

We are presenting the increase in deferred compensation plan earnings in this table even though we do not provide guaranteed, above-market or preferential earnings on compensation deferred under our deferred compensation plan for U.S.-based named executive officers. We did not pay or accrue any expense for earnings on Mr. Groos’ deferred compensation since Mr. Groos’ deferred compensation arrangement does not require us to pay earnings on the balance of Mr. Groos’ deferred compensation account.

 

For more information regarding our deferred compensation plans, see the Non-qualified Deferred Compensation for Fiscal Year 2007 section of this proxy statement. For more information regarding accrued benefits under our defined benefit pension plans, see the Pension Benefits for Fiscal Year 2007 section of this proxy statement.

 

 

										Company				Dividends				Company
										Contribu-				Related to				Match of				Total Other
						Total				tions to Tax				Share-Based				Charitable				Compen-
						Perquisites (a)				Qualified Plans				Plans (b)				Contributions (c)				sation
Name		Year				$				$				$				$				$
Edward P. Campbell			2007				31,486				6,750				21,840				5,054				65,130
Peter S. Hellman			2007				32,543				6,231				10,325				6,000				55,099
Robert A. Dunn, Jr.			2007				19,143				6,750				4,550				0				30,443
Michael Groos			2007				23,530				0				5,145				0				28,675
John J. Keane			2007				21,698				6,750				4,550				2,615				35,613

 

 

						Financial								Executive				Car
						Planning				Club Dues				Physicals				Allowance				Total
Name		Year				$				$				$				$				Perquisites
Edward P. Campbell			2007				3,700				11,786				0				16,000				31,486
Peter S. Hellman			2007				6,800				13,743				0				12,000				32,543
Robert A. Dunn, Jr.			2007				5,200				275				1,668				12,000				19,143
Michael Groos			2007				0				0				0				23,530				23,530
John J. Keane			2007				3,500				6,198				0				12,000				21,698

 

 

 

GRANTS OF PLAN-BASED AWARDS DURING FISCAL YEAR 2007

 

We granted annual performance-based cash awards to the named executive officers under our shareholder-approved 2004 Management Incentive Compensation Plan (referred to in the following table as the “MICP”). We also granted multi-year equity-based incentive awards (referred to in the following table as “LTIP”) to our named executive officers under our shareholder-approved 2004 Long-Term Performance Plan.

 

Stock Options.  Our Long-Term Performance Plan allows for grants of incentive and non-qualified statutory stock options. Stock option grants must vest over a period of not less than four years, must not have a term that exceeds ten years, and must not have an exercise price lower than the closing price of our common shares on the grant date.

 

Information with respect to each of these awards on a grant-by-grant basis is set forth in the table. Stock options are granted with an exercise price equal to the fair market value of our common shares on the date of grant. Prior to the adoption of our equity grant policy on August 21, 2007, fair market value was defined under our long term performance plan as the average of the high and low price of our common shares on the date of grant. With the adoption of the equity grant policy, fair market value is now defined as the closing price of our common shares on the date of grant.

 

Annual Performance-Based Cash Awards.  The Compensation Committee establishes threshold, target, and maximum performance measures at the beginning of a fiscal year. Payouts are determined by actual fiscal year performance against the pre-established measures and individual named executive officer performance.

 

Multi-Year Equity-Based Performance Awards.  The Compensation Committee may approve long-term incentive awards for executive officers based on three-year cumulative performance measures as selected by the Compensation Committee. If the target measure is achieved, the executive officers receive a payout of

100% of the award. For the fiscal year 2006-2008 performance period and thereafter, awards will be paid in our common shares. The payout will vary based upon the actual three-year performance. However, the three-year performance threshold must be achieved before any payout is made.

 

Grants of Plan-Based Awards During Fiscal Year 2007 Table

 

The following table, footnotes, and narrative present the components of the plan-based grants made to our named executive officers during fiscal year 2007.