FULLER H B CO (Form: 8-K, Received: 01/25/2016 15:29:36)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 19, 2016

	H.B. FULLER COMPANY
	(Exact name of registrant as specified in its charter)

Minnesota

001-09225

41-0268370

(State or other jurisdiction

of incorporation)

(Commission file number)

(I.R.S. Employer Identification No.)

1200 Willow Lake Boulevard

P.O. Box 64683

	St. Paul, MN 55164-0683
	(Address of principal executive offices, including zip code)


	(651) 236-5900
	(Registrant’s telephone number, including area code)


	Not Applicable
	(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e) (i) On January 19, 2016, the Compensation Committee of the Board of Directors of H.B. Fuller Company (the “Company”) approved changes to the design of the H.B. Fuller Company Management Short-Term Incentive Plan (the “STIP”) applicable to executive officers as attached to this Current Report on Form 8-K as Exhibit 10.1. The changes made relating to executive officers were:

a. a change to the calculation of EPS to match the calculation used in reporting quarterly EPS results to the Company’s shareholders; and

b. a revision of the metrics for non-Corporate executive officers to align to their individual job responsibilities for 2016.

The changes to the STIP will be effective for any short-term incentive awards related to the Company’s 2016 fiscal year and thereafter. The STIP provides an annual performance-based cash incentive opportunity for eligible employees. In general, the STIP design is based on financial metrics. The metrics will vary based on position and will generally include (i) operating income, (ii) organic revenue and (iii) earnings per share. Each metric will have a target level of performance. Threshold, superior, and superior stretch performance levels will be set for each metric. Payout will be determined for each metric based on performance relative to target. The target, threshold, superior and superior stretch levels of performance will be established at the beginning of each fiscal year. The foregoing description is qualified in its entirety by reference to the STIP, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.

(ii) Additionally, the Compensation Committee approved the H.B. Fuller Company Management Long-Term Incentive Plan (the “LTIP”) applicable to executive officers as attached to this Current Report on Form 8-K as Exhibit 10.2. The LTIP now includes a performance metric for 50% of the restricted stock units granted under the LTIP. See (iii) for a description of the LTIP provisions applicable to the Company’s CEO. These performance shares are earned based on performance against a pre-established return on invested capital (“ROIC”) target, and will not vest unless at least a threshold level of performance is met in each year of the three years of vesting. For all executive officers, higher levels of ROIC performance will result in increased stock vesting amounts.

In addition, on January 19, 2016, the Compensation Committee of the Board of Directors of the Company approved the form Performance Share Award Agreement attached as Exhibit 10.3 for annual performance share grants to eligible Company employees under the H.B. Fuller Company 2013 Master Incentive Plan.

The Performance Share Award Agreement provides for multi-year vesting performance-based restricted stock units respectively in annual installments over a multi-year period only if an ROIC criteria is met at threshold or higher level and also includes provisions related to vesting upon retirement and to address compliance with Internal Revenue Code Section 409A. The Agreement also contains a provision referencing that the grant is subject to the Company’s Executive and Key Manager Compensation Clawback Policy which provides that the Compensation Committee may clawback incentive-based compensation in the event of certain financial statement restatements or in the event of misconduct. The foregoing description is qualified in its entirety by reference to the form of the Performance Share Award Agreement, a copy of which is filed as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated herein by reference.

The foregoing description is qualified in its entirety by reference to the STIP, LTIP and Performance Share Award Agreement, copies of which are filed as Exhibits 10.1, 10.2 and 10.3 respectively to this Current Report on Form 8-K and are incorporated herein by reference.

(iii) On January 19, 2016, the Compensation Committee of the Company approved the following increase in compensation for James J. Owens, President and Chief Executive Officer of the Company:

•

Annual Base Salary effective February 1, 2016: $1,016,996.

•

Effective January 19, 2016, the target value of Mr. Owens’ stock-based awards under the Company’s Annual and Long-Term Incentive Plan (the “LTIP”) was increased from 250% of his base salary to 300% of his base salary, resulting in a grant of 182,039 shares of non-qualified stock options and 41,646 shares of performance-based restricted stock units under the LTIP for the Company’s 2016 fiscal year, which grants have a total value of $3,050,989. The grant of stock options will vest in three equal annual installments beginning on the first anniversary date of the grant date subject to Mr. Owens remaining an employee of the Company. Half of the restricted stock units contains a requirement that the restricted stock will vest in three equal installments on January 19, 2017, January 19, 2018 and January 19, 2019 only if (1) one or more of the performance measures in the CEO’s short-term incentive program are met at the threshold level for fiscal 2016 as determined by the Compensation Committee and (2) Mr. Owens continues to be employed by the Company on the respective vesting date. The other half of the restricted stock units contains a requirement that the restricted stock units will vest in three installments on January 19, 2017, January 19, 2018 and January 19, 2019 only if (1) an ROIC metric is met at least at the threshold level for each applicable fiscal year as determined by the Compensation Committee and (2) Mr. Owens continues to be employed by the Company on the respective vesting date.

•

No changes were made in Mr. Owens’ incentive opportunity under the STIP. Mr. Owens will continue to be eligible to receive a target incentive opportunity of 100% of his base salary with a maximum incentive opportunity of up to 200% of his base salary under the STIP for the Company’s 2016 fiscal year.

Item 9.01. Financial Statements and Exhibits.

(d)

Exhibits.

10.1

H.B. Fuller Company Management Short-Term Incentive Plan for Executive Officers

10.2

H.B. Fuller Company Management Long-Term Incentive Plan

10.3

Form of Performance Share Award Agreement under the H.B. Fuller Company 2013 Master Incentive Plan for awards made on or after January 19, 2016

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

Date: January 25, 2016

	H.B. FULLER COMPANY


	By:	/s/ Timothy J. Keenan
		Timothy J. Keenan
		Vice President, General Counsel
		and Corporate Secretary

EXHIBIT INDEX

Exhibit No.	Description

10.1	H.B. Fuller Company Management Short-Term Incentive Plan for Executive Officers

10.2	H.B. Fuller Company Management Long-Term Incentive Plan

10.3	Form of Performance Share Award Agreement under the H.B. Fuller Company 2013 Master Incentive Plan for awards made on or after January 19, 2016

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%

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%

40%

●

VP Sr, Market Development

Weighting Per Metric

EPS

Engineering Adhesives

Organic Revenue

Engineering Adhesives

Operating Income

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 – E xecutive C ommittee
●	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 15 ^th 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 f or 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 all ocated operating i ncome
	●	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 7

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 :
	NOPAT ¹
	(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 I nvestments
	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

Exhibit 10.3

FORM OF PERFORMANCE SHARE AWARD AGREEMENT

H.B. FULLER COMPANY

PERFORMANCE SHARE AWARD AGREEMENT
(Under the H.B. Fuller Company 2013 Master Incentive Plan)

THIS AGREEMENT , dated as of____________, 20__, is entered into between H.B. Fuller Company, a Minnesota corporation (the “Company”), and _____________, an employee of the Company or an affiliate of the Company (“Participant”).

WHEREAS , the Company, pursuant to the H.B. Fuller Company 2013 Master Incentive Plan (the “Plan”), wishes to award to Participant a Performance Share Award representing the right to receive shares (“Shares”) of common stock, par value $1.00 per share, of the Company (“Common Stock”), subject to certain restrictions and on the terms and conditions contained in this Performance Share Award Agreement and the Plan;

WHEREAS , Participant’s rights to receive Shares of Common Stock hereunder are sometimes referred to as “Restricted Stock Units” in this Agreement.

NOW, THEREFORE , in consideration of the premises and agreements set forth herein, the parties hereto hereby agree as follows:

1. Performance Share Award . The Company, effective as of the date of this Agreement, hereby grants to Participant a Performance Share Award representing the right to receive a specified number of Shares of Common Stock as set forth below and subject to the terms and conditions set forth in this Agreement and the Plan:

(a) ______ Target Number of Shares Subject to Award. The Target Number shall consist of three (3) tranches determined using the percentages set forth below (each, a Tranche Number). The number of Shares payable with respect to each tranche ranges from a maximum number of Shares equal to 200% of the Tranche Number to a potential for a -0- payout in the event the threshold level of performance for that tranche is not achieved (see Exhibit A ).

(b) The Performance Periods and Tranche Vesting Dates for purposes of determining whether, and the extent to which, Shares of Common Stock within each tranche become payable hereunder shall be:

	Performance P eriod	Tranche	Tranche Vesting Date

a)	__________, 20__ – ___________ , 20__	33%	____________, 20__

b)	__________, 20__ – ___________ , 20__	33%	____________, 20__

c)	__________, 20__ – ___________ , 20__	34%	____________, 20__

The performance goals for purposes of determining whether, and the extent to which, the Shares of Common Stock will be paid are set forth in Exhibit A to this Agreement, which Exhibit is made a part of this Agreement.

2. Rights of Participant with Respect to the Restricted Stock Units.

(a) No Shareholder Rights . The Restricted Stock Units granted pursuant to this Agreement do not and shall not entitle Participant to any rights of a shareholder of Common Stock. The rights of Participant with respect to the Restricted Stock Units shall remain forfeitable at all times prior to the date on which such rights become vested, and the restrictions with respect to the Restricted Stock Units lapse, in accordance with Section 3 hereof.

(b) Dividend Equivalents . As long as Participant holds Restricted Stock Units granted pursuant to this Agreement, the Company shall credit to Participant, on each date that the Company pays a cash dividend to holders of Common Stock generally, an additional number of Restricted Stock Units (“Additional Restricted Stock Units”) equal to the total number of whole Restricted Stock Units and Additional Restricted Stock Units previously credited to Participant under this Agreement multiplied by the dollar amount of the cash dividend paid per share of Common Stock by the Company on such date, divided by the Fair Market Value of a share of Common Stock on such date. Any fractional Restricted Stock Unit resulting from such calculation shall be included in the Additional Restricted Stock Units. A report showing the number of Additional Restricted Stock Units so credited shall be sent to Participant periodically, as determined by the Company. The Additional Restricted Stock Units so credited shall be subject to the same terms and conditions as the Restricted Stock Units granted pursuant to this Agreement and the Additional Restricted Stock Units shall be forfeited in the event that the Restricted Stock Units with respect to which the dividend equivalents were credited are forfeited.

(c) Issuance of Shares; Conversion of Restricted Stock Units . No Shares of Common Stock shall be issued to Participant prior to the date on which the Restricted Stock Units vest, and the restrictions with respect to the Restricted Stock Units lapse, in accordance with Section 1 or Section 3 hereof. Neither this Section 2(c) nor any action taken pursuant to or in accordance with this Section 2(c) shall be construed to create a trust of any kind. After any Restricted Stock Units vest pursuant to Section 1 or Section 3 hereof, the Company shall promptly cause to be issued, in either certificated or uncertificated form, Shares of Common Stock registered in Participant’s name or in the name of Participant’s legal representatives, beneficiaries or heirs, as the case may be, in payment of such vested whole Restricted Stock Units and any Additional Restricted Stock Units and shall cause such certificated or uncertificated shares to be delivered to Participant or Participant’s legal representatives, beneficiaries or heirs, as the case may be. In no event shall issuance of Shares occur more than ninety (90) days after the applicable vesting date. The value of any fractional Restricted Stock Unit shall be cancelled at the time certificated or uncertificated shares are delivered to Participant in payment of the Restricted Stock Units and any Additional Restricted Stock Units.

3. Vesting; Forfeiture .

(a) Termination of Employment . In the event that Participant’s employment with the Company and all Affiliates is terminated prior to a Tranche Vesting Date, the Participant’s right to receive any Shares (including the right to receive any Shares relating to Additional Restricted Stock Units) corresponding to that Tranche Vesting Date shall be immediately and irrevocably forfeited, unless such termination is by reason of:

(1)

Participant’s permanent disability (within the meaning of Section 409A(a)(2)(C)(i) of the Code;

(2)

Participant’s death; or

(3)

Participant’s retirement (as defined below in Section 3(c) below).

For avoidance of doubt, if Participant is employed by an Affiliate that is sold or otherwise ceases to be an Affiliate of the Company, Participant shall incur a termination of employment by the Company and all Affiliates of the Company under this Agreement.

(b) Death; Disability . In the event Participant dies or becomes permanently disabled during a Performance Period, then Participant or Participant’s estate shall be entitled to receive a payment of the Shares of Common Stock corresponding to that Performance Period based on, and assuming that, performance would be achieved at the target level, as set forth in Exhibit A to this Agreement. In the event Participant dies or becomes permanently disabled after a Performance Period but prior to a Tranche Vesting Date, then Participant or Participant’s estate shall be entitled to receive a payment of the Shares of Common Stock corresponding to that Performance Period based on actual performance achieved. Such payment shall be made as soon as administratively feasible (but in no event more than ninety (90) days) following Participant’s death or permanent disability, as applicable. If a payment is made pursuant to this Section 3(b), no payment shall be made pursuant to Section 1 of this Agreement.

(c) Retirement . In the event Participant retires during the Performance Period or prior to a Tranche Vesting Date, then Participant’s rights under the Performance Award shall remain outstanding as if Participant had remained employed for the duration of the Performance Period and through the Tranche Vesting Date. Participant shall be entitled to receive payment of the Performance Award, if any, that becomes payable under Section 1 based on actual performance achieved. For purposes of this Section 3, “retirement” shall mean the voluntary or involuntary termination of Participant’s employment for any reason other than gross and willful misconduct, disability or death, after Participant has completed at least ten years of service as an employee of the Company and/or an Affiliate of the Company, and has attained age 55, so long as the Participant has at all times that Restricted Stock Units are outstanding under this Agreement complied with the terms of any applicable confidentiality, non-disclosure and/or non-competition agreement between the Company and the Participant.

(d) Change in Control . Notwithstanding the foregoing provisions of this Agreement, in the event of a Change in Control (as defined below) during the Performance Period that occurs prior to Participant’s termination of employment, Participant shall be entitled to receive a payment of the Performance Award based on, and assuming that, performance would have been achieved at the target level, as set forth in Exhibit A to this Agreement. Such payment shall be made promptly following the date of the Change in Control. For the purposes of this Agreement, a “Change in Control” shall be deemed to have occurred upon any of the following events:

(1)

a public announcement (which, for purposes hereof, shall include, without limitation, a report filed pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that any individual, corporation, partnership, association, trust or other entity becomes the beneficial owner (as defined in Rule 13(d)(3) promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the voting power of the Company then outstanding;

(2)

the individuals who, as of the date of this Agreement, are members of the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board (provided, however, that if the election or nomination for election by the Company’s shareholders of any new director was approved by a vote of at least a majority of the Incumbent Board, such new director shall be considered to be a member of the Incumbent Board);

(3)

the approval of the shareholders of the Company, and consummation, of (i) any consolidation, merger or statutory share exchange of the Company with any person in which the surviving entity would not have as its directors at least 60% of the Incumbent Board and as a result of which those persons who were shareholders of the Company immediately prior to such transaction would not hold, immediately after such transaction, at least 60% of the voting power of the Company then outstanding or the combined voting power of the surviving entity’s then outstanding voting securities; (ii) any sale, lease, exchange or other transfer in one transaction or series of related transactions substantially all of the assets of the Company; or (iii) the adoption of any plan or proposal for the complete or partial liquidation or dissolution of the Company; or

(4)

a determination by a majority of the members of the Incumbent Board, in their sole and absolute discretion, that there has been a Change in Control of the Company.

For purposes of this Section 3(d), “voting power” when used with reference to the Company shall mean the voting power of all classes and series of capital stock of the Company now or hereafter authorized.

If a payment is made pursuant to this Section 3(d), no payment shall be made pursuant to Section 1 of this Agreement. Notwithstanding the foregoing, if any payment due under this Section 3(d) is deferred compensation subject to Section 409A of the Code, and if the Change in Control is not a “change in control event” that serves as a permissible payment event under Treasury Regulation § 1.409A-3(i)(5) or such other regulation or guidance issued under Section 409A of the Code, then the Performance Award shall vest upon the Change in Control as provided above but payment under this Section 3(d) shall be delayed until the earlier of (i) the last day of the Performance Period or (ii) Participant’s separation from service (subject to any additional required delay under Section 9(a)).

4. Restrictions on Transfer. The Restricted Stock Units shall not be transferable other than by will or by the laws of descent and distribution. Notwithstanding the foregoing, Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise the rights of Participant and receive any property distributable with respect to the Restricted Stock Units upon the death of Participant. Each right under this Agreement shall be exercisable during Participant’s lifetime only by Participant or, if permissible under applicable law, by Participant’s legal representative. The Restricted Stock Units and any rights under this Agreement may not be sold, assigned, transferred, pledged, alienated, attached or otherwise encumbered and any purported sale, assignment, transfer, pledge, alienation, attachment or encumbrance shall be void and unenforceable against the Company or any Affiliate.

5. Income Tax Matters . In order to comply with all applicable federal, foreign, state or local income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal, foreign, state or local payroll, withholding, income or other taxes, which are the sole and absolute responsibility of Participant, are withheld or collected from Participant. Upon vesting of the Restricted Stock Units and the lapse of the restrictions with respect to the Restricted Stock Units under the terms of this Award Agreement, Participant shall be obligated to pay any applicable withholding taxes arising from such vesting and lapse of restrictions. Unless the Company receives an irrevocable written instruction, addressed to the attention of the Secretary of the Company, from Participant prior to the date that the Restricted Stock Units vest and the restrictions lapse, the Company shall automatically withhold as payment the number of Shares of Common Stock, determined by the Fair Market Value on the applicable vesting date as set forth in Section 3 and lapse of restrictions, required to pay the applicable withholding taxes (but only to the extent necessary to satisfy minimum statutory withholding requirements if required under ASC Topic 718).

6. Securities Matters . No Shares of Common Stock shall be issued pursuant to this Agreement prior to such time as counsel to the Company shall have determined that the issuance of such shares will not violate any securities or other laws, rules or regulations. The Company shall not be required to deliver any Shares of Common Stock until the requirements of any applicable securities or other laws, rules or regulations (including the rules of any securities exchange) as may be determined by the Company to be applicable are satisfied. In addition, the grant of these Restricted Stock Units and/or the delivery of any Shares of Common Stock under this Agreement are subject to the Company’s Executive and Key Manager Compensation Clawback Policy and any other clawback policies the Company may adopt in the future to conform to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (or any other applicable law) and any applicable rules and regulations of the Securities and Exchange Commission or applicable stock exchange.

7. Tax Consequences . Participant agrees that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimize the Participant’s tax liabilities. Participant will not make any claim against the Company, or any of its officers, directors, employees or Affiliates related to tax liabilities arising from the Restricted Stock Units or the Participant’s other compensation.

8. Adjustments . In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares or other securities of the Company, issuance of warrants or other rights to purchase shares or other securities of the Company or other similar corporate transaction or event affects the Common Stock such that an adjustment is necessary in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Agreement, then the Committee shall, in such manner as it may deem equitable, in its sole discretion, adjust any or all of the number and type of shares subject to the Restricted Stock Units.

9. General Provisions.

(a) Section 409A . Notwithstanding the foregoing, to the extent that any payment due hereunder is (i) deferred compensation subject to Section 409A of the Code (“Section 409A”), and (ii) is payable to a specified employee (as that term is defined in Section 409A), and (iii) is payable on account of the specified employee’s separation from service (as that term is defined in Section 409A), payment of any part of such amount that would have been made during the six (6) months following the separation from service shall not then be paid but shall rather be paid on the first day of the seventh (7th) month following the separation from service.

(1)

For this purpose, specified employees shall be identified by the Company on a basis consistent with regulations issued under Section 409A, and consistently applied to all plans, programs, contracts, etc . maintained by the Company that are subject to Section 409A.

(2)

For this purpose, “termination of employment” shall be defined as “separation from service” as that term is defined under Section 409A.

(3)

To the extent that Section 409A is applicable to this Agreement, this Agreement shall be construed and administered to comply with the rules of Section 409A. Neither the Company nor any of its officers, directors, agents or affiliates shall be obligated, directly or indirectly, to any participant or any other person for any taxes, penalties, interest or like amounts that may be imposed on the participant or other person on account of any amounts under this Plan or on account of any failure to comply with any Code section.

(4)

The rules of section 409A of the Code shall apply to this Agreement, and this Agreement shall be construed and administered accordingly. Notwithstanding the foregoing, neither the Company nor any of its officers, directors, agents or affiliates shall be obligated, directly or indirectly, to any Participant or any other person for any taxes, penalties, interest or like amounts that may be imposed on the Participant or other person on account of any amounts under this Agreement or on account of any failure to comply with any section of the Code.

(b) Interpretations . This Agreement is subject in all respects to the terms of the Plan. Terms used herein which are defined in the Plan shall have the respective meanings ascribed to such terms in the Plan, unless otherwise defined herein. In the event that any provision of this Agreement is inconsistent with the terms of the Plan, the terms of the Plan shall govern. Any question of administration or interpretation arising under this Agreement shall be determined by the Committee, and such determination shall be final and conclusive upon all parties in interest.

(c) No Right to Employment . The grant of the Restricted Stock Units shall not be construed as giving Participant the right to be retained as an employee of the Company or any Affiliate. In addition, the Company or an Affiliate may at any time dismiss Participant from employment, free from any liability or any claim under this Agreement, unless otherwise expressly provided in this Agreement or the Plan.

(d) Headings . Headings are given to the sections and subsections of this Agreement solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Agreement or any provision hereof.

(e) Severability . If any provision of this Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction under any law deemed to be applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable law, or if it cannot be so construed or amended without, in the determination of the Committee, materially altering the purpose or intent of this Agreement, such provision shall be stricken as to such jurisdiction or this Agreement, and the remainder of this Agreement shall remain in full force and effect.

(f) Governing Law . The internal law, and not the law of conflicts, of the State of Minnesota will govern all questions concerning the validity, construction and effect of this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first set forth above.

	H.B. FULLER COMPANY
	By:

	Participant

	Date:

Exhibit A

Performance Goals for Consecutive One-Year Performance Periods
____________, 20__ – _____________, 20__: ____%
____________, 20__ – _____________, 20__: ____%
____________, 20__ – _____________, 20__: ____%

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%
Less than threshold	0%

Performance between threshold and target and target and superior will be calculated on a pro rata basis. The level of achievement of each performance goal shall be determined by the Compensation Committee of the Board of Directors of the Company .

Definition of ROIC :

NOPAT ¹

(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