Document:

ex10-1.htm

 

		
Exhibit 10.1

Rewards - Compensation 

Management Short-Term Incentive –

Executive Officers

(STI) Plan 

	 	  

 

	
Purpose
	
The STI plan provides an annual performance-based cash bonus opportunity for eligible employees. This is intended to achieve a number of goals including: 

	 	 
	
 
	
●
	
Emphasizing the Company’s commitment to competitive compensation practices;

	
 
	
 
	 
	
 
	
●
	Driving a high performance culture;
	
 
	
 
	 
	
 
	
●
	Assuring accountability;
	
 
	
 
	 
	
 
	
●
	Focusing on results, not activity; and
	
 
	
 
	 
	
 
	
●
	Reinforcing the importance of measurable and aligned goals and objectives.
	 	 	 
	Eligibility	These guidelines apply to Executive Officers.
	 	 	 
	 	To receive payment under the STI Plan, the participant must be actively employed as of fiscal year-end.

 

 

	Plan Design	The plan design is based on the following financial metrics.
	 	 	 
	 	●	Operating Income/EBITDA
	 	●	Organic Revenue
	 	●	Earnings Per Share
	 	●	Gross Margin
	 	●	Contribution Margin

 

 

 

 

	 	Each participant’s plan design will be based on the participant’s position. Details of the design are as follows:
	 	 	 
	 	●	Corporate/Global

 

	
Weighting Per Metric

	
EPS
	
HBF Organic 

Revenue
	
HBF Operating 

Income

	
30%
	
30%
	
40%

 

 

	 	●	VP, Asia Pacific

 

	
Weighting Per Metric

	
EPS
	
AP Organic

Revenue
	
AP Operating 

Income
	
Hygiene 

Revenue
	
Hygiene Gross 

Margin

	
30%
	
20%
	
25%
	
15%
	
10%

 

 

Page 1 of 7

 

 

		
Exhibit 10.1

Rewards - Compensation 

Management Short-Term Incentive –

Executive Officers 

(STI) Plan 

	  	  

 

	 	●	VP Sr, Emerging Markets

 

 

	
Weighting Per Metric

	
EPS
	
Emerging 

Markets Organic

Revenue
	
Emerging Markets 

Contribution Margin
	
Durable

Assembly 

Revenue
	
Durable 

Assembly 

Gross Margin

	
30%
	
20%
	
25%
	
15%
	
10%

 

	 	●	VP Sr, EIMEA

 

 

	
Weighting Per Metric

	
EPS
	
EIMEA Organic 

Revenue
	
EIMEA Operating 

Income
	
Packaging 

Revenue
	
Packaging 

Gross Margin

	
30%
	
20%
	
25%
	
15%
	
10%

 

	 	●	VP Sr, Americas Adhesives

 

 

	
Weighting Per Metric

	
EPS
	
Americas Adhesives + 

Construction Products 

Organic Revenue
	
Americas Adhesives + 

Construction Products 

Operating Income

	
30%
	
30%
	
40%

 

	 	●	
VP Sr, Market Development

 

 

	
Weighting Per Metric

	
EPS
	
Engineering Adhesives 

Organic Revenue
	
Engineering Adhesives 

Operating Income

	
30%
	
30%
	
40%

 

 

 

	 	
Target

	
 
	
●
	
Each metric will have a target level of performance. Payout will be determined for each metric based on performance relative to target. The target levels of performance will be established at the beginning of each fiscal year. 

 

	 	Threshold
	 	●	Threshold performance levels will be established for each metric as follows:
	 	 	o	Sales, Organic Revenue: 90% of target
	 	 	o	Operating Income/EBITDA: 80% of target
	 	 	o	EPS: 80% of target
	 	 	o	Gross Margin, Contribution Margin: 80% of target

 

 

Page 2 of 7

 

 

	

	
Exhibit 10.1

Rewards - Compensation

Management Short-Term Incentive –

Executive Officers

(STI) Plan

	  	  

 

	
 
	
●
	
Payout at the threshold level of performance will be 50% of the target allocated to that metric.

 

 

	 	Superior
	
 
	
●
	
Superior performance levels will be established for each metric as follows:

	 	 	o	Sales, Organic Revenue: 110% of target
	 	 	o	Operating Income/EBITDA: 115% of target
	 	 	o	EPS: 115% of target
	 	 	o	Gross Margin, Contribution Margin: 115% of target
	 	 	 	 
	 	●	Payout at the superior level of performance will be 150% of the target allocated to that metric.

 

 

	 	Superior Stretch Goal – Executive Committee
	 	●	Additional superior goals will be established for metrics for the EC members as follows:
	 	 	o	Organic Revenue: 115% of target
	 	 	o	Operating Income/EBITDA: 125% of target
	 	 	o	EPS: 125% of target
	 	 	o	Gross Margin, Contribution Margin: 125% of target
	 	 	 	 
	 	●	
Payout at the superior stretch goal will be 200% of the target allocated to that metric

 

	  	
See Appendix for payout schedule.

	 	 
	
Payment
	
Payment will be made in cash, subject to taxes and deductions as applicable.

Payment will be made as close as possible to January 31 following the conclusion of the relevant Plan Year, but will be made no later than March 15th of the calendar year following the Plan Year.

	 	 
	
Participant 

Status Changes
	
If a participant begins employment with the company during the Plan Year, bonus potential will be pro-rated for the time the participant was employed during the Plan Year.

 

If a participant transfers jobs and changes plan design standards, potential bonus will be pro-rated for the time spent in each job.

	 	 
	
Administration
	
Participants may direct questions about the STI Plan to their local management or human resources representatives.

 

The Compensation Committee of the Board of Directors shall make a certification decision with respect to performance of financial metrics and consider extraordinary circumstances that may have positively or negatively impacted the achievement of the objectives. The Board or management in their discretion, reserves the right at any time to enhance, diminish or terminate all or any portion of any compensation plan or program, on a collective or individual basis; provided, however, that neither the Board nor the Compensation Committee shall take any action that would cause the Section 162(m) exemption for qualified performance-based compensation to become unavailable with respect to the STI plan.

 

 

Page 3 of 7

 

 

	
 
	
Exhibit 10.1

Rewards - Compensation

Management Short-Term Incentive –

Executive Officers

(STI) Plan

	 	 

 

	
Relevant Terms
	
Actively Employed - A full-time or part-time employee on the Company payroll. It excludes any employee who has been terminated from employment with the Company – voluntarily or involuntarily – in advance of fiscal year-end.

 

Company - H.B. Fuller Company and its wholly owned subsidiaries.

 

Eligible Earnings – To be determined by region/country.

 

Payment - The cash reward payable after conclusion of the Plan Year.

 

Plan Year – The relevant Company fiscal year.

 

Short Term Incentive (STI) Plan - The program described herein. May also be referred to as “STIP” or “STI Plan”.

 

 

Page 4 of 7

 

 

	
 
	
Exhibit 10.1

Rewards - Compensation

Management Short-Term Incentive –

Executive Officers

(STI) Plan

	
 
	
 

 

	 	
STIP Payment Schedule for 

EPS, Operating Income/EBITDA, 

Gross Margin, Contribution Margin
	 	
STIP Payment schedule for 

Organic Revenue
	 
	 	
Metric 

Performance
	
Payout (as % of

target)
	 	
Metric 

Performance
	
Payout (as % of 

target)
	 
	 	
125%
	
200.0%
	 	
115%
	
200.0%
	 
	 	
124%
	
195.0%
	 	
114%
	
190.0%
	 
	 	
123%
	
190.0%
	 	
113%
	
180.0%
	 
	 	
122%
	
185.0%
	 	
112%
	
170.0%
	 
	 	
121%
	
180.0%
	 	
111%
	
160.0%
	 
	 	
120%
	
175.0%
	 	
110%
	
150.0%*
	 
	 	
119%
	
170.0%
	 	
109%
	
145.0%
	 
	 	
118%
	
165.0%
	 	
108%
	
140.0%
	 
	 	
117%
	
160.0%
	 	
107%
	
135.0%
	 
	 	
116%
	
155.0%
	 	
106%
	
130.0%
	 
	 	
115%
	
150.0%*
	 	
105%
	
125.0%
	 
	 	
114%
	
146.7%
	 	
104%
	
120.0%
	 
	 	
113%
	
143.3%
	 	
103%
	
115.0%
	 
	 	
112%
	
140.0%
	 	
102%
	
110.0%
	 
	 	
111%
	
136.7%
	 	
101%
	
105.0%
	 
	 	
110%
	
133.3%
	 	
100%
	
100.0%
	 
	 	
109%
	
130.0%
	 	
99%
	
95.0%
	 
	 	
108%
	
126.7%
	 	
98%
	
90.0%
	 
	 	
107%
	
123.3%
	 	
97%
	
85.0%
	 
	 	
106%
	
120.0%
	 	
96%
	
80.0%
	 
	 	
105%
	
116.7%
	 	
95%
	
75.0%
	 
	 	
104%
	
113.3%
	 	
94%
	
70.0%
	 
	 	
103%
	
110.0%
	 	
93%
	
65.0%
	 
	 	
102%
	
106.7%
	 	
92%
	
60.0%
	 
	 	
101%
	
103.3%
	 	
91%
	
55.0%
	 
	 	
100%
	
100.0%
	 	
90%
	
50.0%
	 
	 	
99%
	
97.5%
	 	  	  	 
	 	
98%
	
95.0%
	 	  	  	 
	 	
97%
	
92.5%
	 	  	  	 
	 	
96%
	
90.0%
	 	  	  	 
	 	
95%
	
87.5%
	 	  	  	 
	 	
94%
	
85.0%
	 	  	  	 
	 	
93%
	
82.5%
	 	  	  	 
	 	
92%
	
80.0%
	 	  	  	 
	 	
91%
	
77.5%
	 	  	  	 
	 	
90%
	
75.0%
	 	  	  	 
	 	
89%
	
72.5%
	 	  	  	 
	 	
88%
	
70.0%
	 	  	  	 
	 	
87%
	
67.5%
	 	  	  	 
	 	
86%
	
65.0%
	 	  	  	 
	 	
85%
	
62.5%
	 	  	  	 
	 	
84%
	
60.0%
	 	  	  	 
	 	
83%
	
57.5%
	 	  	  	 
	 	
82%
	
55.0%
	 	  	  	 
	 	81%	52.5%	 	 	 	 
	 	80%	50.0%	 	 	 	 

 

	
 
	
*
	
Executive Committee members have a maximum opportunity of 200%. 

 

	 	
●
	
Payout is calculated for each incremental increase in performance (straight line interpolation).

 

 

Page 5 of 7

 

 

	
 
	
Exhibit 10.1

Rewards - Compensation

Management Short-Term Incentive –

Executive Officers

(STI) Plan

	
 
	
 

 

Calculation Guidelines

 

	
 
	
Total Company Metrics

	
 
	
Company EPS

	
 
	
The adjusted EPS as disclosed in the Company’s quarterly earnings release.

 

	 	HBF Organic Revenue 
	 	
●
	
The adjusted reported revenue as disclosed in the Company’s quarterly earnings release is adjusted for currency impact compared to budgeted exchange rates.

	 	 	 
	 	●	Unbudgeted acquisitions and divestitures are excluded from the calculation.
	 	 	 
	 	HBF Operating Income
	 	●	The adjusted gross profit minus adjusted SG&A expenses as disclosed in the Company’s quarterly earnings release adjusted for currency impact compared to budgeted exchange rates.
	 	 	 
	 	●	
Unbudgeted acquisitions and divestitures are excluded from the calculation.

 

	 	Region/Operating Segment Metrics
	 	Organic Revenue
	 	
●
	
Total company adjustments are transferred down to the region/operating segment revenue which is impacted by the adjustments, unless not approved by the CEO.

 

	 	
●
	
Basis of targets is US dollars. The budgeted exchange rates will be used to assess performance.

 

	 	
●
	
Unbudgeted acquisitions and divestitures are excluded from the calculation.

 

	 	
Fully allocated operating income

	 	
●
	
At the region/operating segment level, operating income targets include corporate governance allocation at budget. In determining performance, actual corporate governance allocations will be used at the region/operating segment level. Below the region/operating segment level, the corporate governance allocation will remain at budget for measuring performance, where applicable.

 

	 	
●
	
Total company adjustments are transferred down to the region/operating segment operating income which is impacted by the adjustments, unless not approved by the CEO.

 

 

Page 6 of 7

 

 

	
 
	
Exhibit 10.1

Rewards - Compensation

Management Short-Term Incentive –

Executive Officers

(STI) Plan

	
 
	
 

 

	 	
●
	
Basis of targets is US dollars. The budgeted exchange rates will be used to assess performance.

 

	 	
●
	
Unbudgeted acquisitions and divestitures are excluded from the calculation.

 

	
 
	
Adjustments

	 	
In calculating the results, the following adjustments will be made:

	 	a.	Individual legal settlements (payments or receipts) with a value (net of insurance) of $3 million or greater will not be included in metric calculations.
	 	b.	
Any unbudgeted reorganization or restructuring-related items which cannot be offset by related benefits in the fiscal year will not be included in metric calculations.

	 	c.	Any unbudgeted asset write-downs in excess of $2 million will not be included in metric calculations.
	 	d.	Adjustments needed to (1) correct any inadvertent errors or miscalculations made in setting a performance target for our key markets (such as Hygiene, Packaging, or Durable Assembly) or (2) account for changes resulting from new accounting definitions, requirements or pronouncements.
	 	e.	
Other items as publicly disclosed in the Company’s quarterly earnings release. However, the above adjustments (a-d) will not be made to the extent they are inconsistent with publicly disclosed earnings.

	 	 	 
	 	
Any discretion related to total company adjustments transferred to the region/operating segment exercised by the CEO requires approval by the Compensation Committee of the Board of Directors.

 

 

 

Page 7 of 7ex10-2.htm

	

 
	
Exhibit 10.2

Rewards - Compensation 

Long-Term Incentive Plan – 

(LTI) Plan

	  	  

 

	
Purpose
	
The LTI plan rewards participants for their contribution to the Company’s long-term financial results. The plan rewards participants based on shareholder value creation in two ways. First, the price at the end of the performance period would determine the value of the shares awarded. Second, performance against company goals would determine the number of shares earned for a performance-contingent portion (25%) of the award. These performance-based shares are earned based on the degree of achievement of a Return on Invested Capital goal.

	 	 
	
Eligibility
	
To participate in the LTI Plan, an employee must be a regular full-time or part-time employee of the Company in job grades 29 or higher. Consultants and temporary agency employees performing services at Company facilities are not eligible to participate.

	 	 
	
Design
	
The plan design is comprised of 50% Non-Qualified Stock Options (NQSO), 25% time-based Restricted Stock Units (RSUs), and 25% performance-based RSUs. 

	 	 
	 	
Time-Based Awards

	 	
Non-qualified stock options vest after a service requirement is met. You can exercise the vested options at any time within the remainder of the term. Time-based RSUs also vest after a service requirement is met. Once vested, they are assigned a fair market value and you will receive the shares.

	 	 
	 	
Performance-Based Awards

	 	
Performance-based RSUs are earned based on performance against a pre-established goal. The performance measure for these shares is Return on Invested Capital (“ROIC”), which is defined in the Appendix.

	 	 
	 	
The number of shares earned are based on actual performance relative to threshold, target, and superior levels of performance, as defined in the table below:

 
	 	
ROIC Performance
	
Payout (as % of Target)
	 
	 	
Target + 4% [Superior]
	
200%
	 
	 	
Target + 3%
	
175%
	 
	 	
Target + 2%
	
150%
	 
	 	
Target + 1%
	
125%
	 
	 	
Target
	
100%
	 
	 	
Target - 1%
	
75%
	 
	 	
Target - 2% [Threshold]
	
50%
	 
	 	
<Threshold
	
0%
	 

 

	 	
If performance is less than threshold, the performance-based RSU’s will vest with a value of 0, i.e., no shares will be earned. If the target level is achieved, the performance-based RSU will vest at 100%. Performance between threshold and target and target and superior will be calculated on a pro rata basis.

	 	 
	 	This payout schedule applies to each year of the 3-year award (i.e., 3 separate performance periods for each award).
	 	 
	
 
	
Details of the stock plan related to stock grants are provided in the individual agreements. 

 

 

Page 1 of 3

 

 

	

 
	
Exhibit 10.2

Rewards - Compensation 

Long-Term Incentive Plan – 

(LTI) Plan

	  	  

 

	
Administration
	
Participants may direct questions about the LTI Plan to their local management or human resources representatives.

	 	 
	 	The Compensation Committee of the Board of Directors (the “Committee”) is responsible for the administration of the plan, although they may delegate certain aspects of plan administration. The Committee shall make a certification decision with respect to performance of financial metrics and consider extraordinary circumstances that may have positively or negatively impacted the achievement of the objectives. The Board in their discretion, reserves the right at any time to enhance, diminish or terminate all or any portion of any compensation plan or program. Management will make recommendations to the Committee regarding individual participation. 
	 	 
	
Relevant Terms
	
Company - H.B. Fuller Company and its wholly owned subsidiaries.

	 	 
	 	
Performance Shares – A grant of shares of stock that are earned based on performance against objectives set at the beginning of a performance period.

	 	 
	 	
Non-Qualified Stock Options - The right to purchase stock at a stipulated price over a specified period of time. 

	 	 
	 	
Restricted Stock Units – A grant valued in terms of company stock, but company stock is not issued at the time of the grant. After the vesting requirements are satisfied, the shares are delivered. 

 

 

Page 2 of 3

 

 

	

 
	
Exhibit 10.2

Rewards - Compensation 

Long-Term Incentive Plan – 

(LTI) Plan

	  	  

 

	
Appendix
	
Definition of ROIC:

	 	
NOPAT1

	 	
(Short-Term Debt + Long-Term Debt + Total Equity - Cash)2 

	 	 
	 	
•     Acquisitions will be treated as follows:

	 	
•     Year 1: remove acquisition from measurement completely

	 	
•     Year 2: remove amortization from the calculation

	 	
•     Year 3: no adjustments

	 	 
	 	1 NOPAT = (Gross Profit – SG&A Expense) * (1-Effective Tax Rate) + Income from Equity Investments
	 	
Includes adjustments as publicly disclosed in the Company’s quarterly earnings release.

	 	
Effective tax rate defined as (Adjusted Tax Expense / Adjusted Pretax Earnings)

	 	 
	 	2 End-of-year metrics. Denominator also includes redeemable non-controlling interest. 

 

 

Page 3 of 3

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