RPM 2020 Proxy Statement

EXECUTIVE COMPENSATION (CONTINUED) The Compensation Committee uses the various equity incentive awards available to it under the 2014 Omnibus Plan to retain executives and other key employees and achieve the following additional goals: • to reward past performance; • to incentivize future performance (both short-term and long-term); • to align executives’ long-term interest with that of the stockholders; and • to enhance the longer-term performance and profitability of the Company. The Compensation Committee’s current intention is to achieve these goals by making annual awards to the Company’s executive officers and other key employees, using a combination of restricted stock and stock-settled stock appreciation rights. Performance Earned Restricted Stock (PERS) . The Compensation Committee currently awards Performance Earned Restricted Stock, or PERS, under the 2014 Omnibus Plan. The threshold and maximum number of and performance goals for the award of PERS for a given fiscal year are set early in that year. The determination of whether and to what extent the PERS have been achieved for a fiscal year is made at the July meeting of the Compensation Committee following the close of that fiscal year. Based on that determination, the actual grants, if any, with respect to a fiscal year are made at that same meeting. With respect to fiscal 2020, the maximum number and performance goals were set early in fiscal 2020 and the Compensation Committee determined whether and to what extent the PERS were achieved at its meeting in July 2020. For fiscal 2020, pursuant to the 2014 Omnibus Plan, the Compensation Committee approved a contingent target award of PERS to the named executive officers of up to 47,500 shares to be based upon the level of attainment of fiscal 2020 performance goals for EBIT growth and EBIT margin. For these PERS, 50% was based upon EBIT margin and 50% was based on a combination of EBIT growth and performance relative to peers. A maximum of 150% of target could be earned if goals were exceeded by a certain level. Based on the achievement of the criteria outlined, the Compensation Committee awarded PERS at 76% of target to the named executive officers. Stock Appreciation Rights (SARs). In July 2020, pursuant to the 2014 Omnibus Plan, the Compensation Committee awarded SARs totaling 280,000 shares to the executive officers. The SARs awards granted to the named executive officers in July 2020 are set forth below in the Grants of Plan- Based Awards for Fiscal 2020 table. The value of SARs is one component of the named executive officers’ long term incentive compensation intended to maintain such compensation competitive with the market median. Supplemental Executive Retirement Plan (SERP) Restricted Stock. SERP Restricted Stock was established to provide for supplemental retirement benefits to officers and other key employees of the Company designated by the Board of Directors whose retirement plan benefits may be limited under applicable law and the Internal Revenue Code. In July 2019, the Compensation Committee awarded 8,116 shares of restricted stock to the executive officers under the 2014 Omnibus Plan. Performance Stock Units (PSU) . In July 2019, the Compensation Committee approved contingent awards of PSU to Messrs. Frank C. Sullivan, Gordon, Moore, Michael H. Sullivan and Ms. Kastner, at a target level of 72,000 shares with a maximum possible award of up to 144,000 shares. Awarded pursuant to the 2014 Omnibus Plan, the purpose of the PSU awards is to provide an added incentive to key officers to improve the long-term performance of the Company. The PSU awards were made contingent upon the level of attainment of performance goals for the three-year performance period from June 1, 2019 ending May 31, 2022. Vesting of 50% of the PSU awards relates to increasing Adjusted EBIT Margin (“AEM”) for the period, and vesting of the remaining 50% relates to increasing Adjusted Revenue Growth (“ARG”) for the period. With respect to that portion of the PSU awards that may vest based upon achievement of improvement in AEM, the threshold increase in AEM must be achieved before any of the AEM portion of the PSU awards vest. If such threshold increase in AEM is achieved, 25% of the AEM portion of the PSU awards will vest. If the target increase in AEM is achieved, 100% of the AEM portion of the PSU awards will vest. If the maximum increase in AEM is achieved, 200% of the AEM portion of the PSU awards will vest. With respect to that portion of the PSU awards that may vest based upon achievement of improvement in ARG, the threshold increase in ARG must be achieved before any of this portion of the PSU awards vest. If such threshold increase in ARG is achieved, 25% of the ARG portion of the PSU awards will vest. If the target increase in ARG is achieved, 100% of the ARG portion of the PSU awards will vest. If the maximum increase in ARG is achieved, 200% of the ARG portion of the PSU awards will vest. 33