SUP Superior Industries International

ITEM 11 - EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Introduction

This Compensation Discussion and Analysis provides insight into Superior’s executive compensation structure, philosophy, decisions and results primarily for 2019 (and other relevant periods) and is organized into the following sections:

Our senior management team has been assembled to drive our performance and accomplish the performance results discussed below. This discussion focuses on the compensation structure in effect for the named executive officers (who will be referred to as the “NEOs”) in 2019. The tenure of each NEO with Superior is noted in the following table:

Executive Summary

Superior is one of the largest suppliers of cast aluminum wheels to the world’s leading automobile and light truck manufacturers, with employees supporting our wheel manufacturing operations in the United States, Germany, Mexico, and Poland. Our products are sold to global automotive manufacturers’ assembly operations, and to the aftermarket, in North America and Europe.

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The Value-Added Sales and Adjusted EBITDA measures used in this section are key measures that are not calculated in accordance with GAAP. Management believes the non-GAAP financial measures used in this Amendment No. 1 are useful to management and may be useful to investors in their analysis of the Company’s financial position and results of operations. Further, management uses these non-GAAP financial measures for planning and forecasting future periods. This non-GAAP financial information is provided as additional information for investors and is not in accordance with or an alternative to GAAP. These non-GAAP measures may be different from similar measures used by other companies.

Adjusted EBITDA is defined as earnings before interest income and expense, income taxes, depreciation, amortization, restructuring charges and other closure costs and impairments of long-lived assets and investments, changes in fair value of redeemable preferred stock embedded derivative liability, acquisition and integration costs, certain hiring and separation related costs, gains associated with early extinguishment of debt and Accounts Receivable factoring fees. The following table reconciles our net income, the most directly comparable GAAP financial measure, to our Adjusted EBITDA:

Value-Added Sales represents net sales less the value of aluminum and services provided by outside service providers that are included in net sales. The following table reconciles our net sales, the most directly comparable GAAP financial measure, to our Value-Added Sales:

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Executive Compensation Highlights

Highlights of our 2019 executive compensation program are summarized as follows:

As discussed in the “2019 Executive Compensation Components – Long-Term Equity Incentive Compensation” section on page 21 of this Amendment No. 1, these performance targets were developed after a rigorous bottom-up financial analysis of our business.

2019 Total Direct Compensation Allocation

(assuming performance-based components earned at target)

Employment Agreement with Timothy C. McQuay, Former Interim Executive Chairman of the Board

As previously disclosed, we entered into an employment agreement with Mr. McQuay with respect to his employment as interim Executive Chairman of the Board, which began on December 12, 2018. As interim Executive Chairman of the Board, Mr. McQuay performed services for the Company and had the duties that are customarily associated with the role of principal executive officer. In such position, Mr. McQuay received a base salary of $50,000 per month, and the Company reimbursed Mr. McQuay for all reasonable expenses incurred by him in connection with the performance of his duties under the Agreement. Mr. McQuay’s employment as

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interim Executive Chairman of the Board terminated on May 15, 2019 in connection with the appointment of Mr. Abulaban as the President and Chief Executive Officer of the Company. Upon the termination of his employment, Mr. McQuay received accrued compensation and benefits through his termination date and reimbursement of outstanding but unreimbursed expenses and his employment agreement was terminated.

Employment Agreement with Majdi B. Abulaban, President and Chief Executive Officer

On April 1, 2019, the Company announced the appointment of Majdi B. Abulaban, as its President and Chief Executive Officer. The Company entered into an employment agreement with Mr. Abulaban, effective May 15, 2019, and Mr. Abulaban was appointed to the Board of Directors of the Company, effective that same date.

The employment agreement is subject to an initial two-year term, with one-year automatic renewals thereafter. The employment agreement provides Mr. Abulaban with an initial annual base salary of $800,000 and eligibility to receive annual cash performance bonuses with target and maximum opportunities of 125% and 250% of his annual base salary, respectively, subject to a minimum amount for the 2019 fiscal year of $625,000. In addition, Mr. Abulaban is eligible to receive severance payments and benefits upon certain terminations of his employment with the Company pursuant to the terms of the employment agreement as discussed in the “2019 Executive Compensation Components—Severance / Termination / Change in Control Benefits” section of this Amendment No. 1.

In connection with the commencement of Mr. Abulaban’s employment with the Company, Mr. Abulaban received the following equity awards pursuant to the Company’s 2019 Inducement Grant Plan (the “2019 Inducement Plan”): (i) the Inducement Award consisting of (A) 666,667 PRSUs at target, vesting in three approximately equal installments to the extent that the performance metrics are satisfied during each of three performance periods and (B) 333,333 time-based RSUs, vesting in approximately equal installments on February 28, 2020, 2021 and 2022; (ii) a regular 2019-2021 PRSU grant, with the target number of PRSUs to be equal to 316,832 which will vest to the extent that the performance metrics are satisfied; and (iii) a regular 2019 time-based RSU grant, with the number of RSUs to be equal to 158,416 vesting in approximately equal installments on February 28, 2020, 2021 and 2022. The Inducement Award is intended to replace certain equity awards that were forfeited by Mr. Abulaban upon his resignation from his former employer. The PRSU awards may be earned at up to 200% of target depending on the level of achievement of the performance metrics.

Retention Agreements

As a result of changes in leadership and the desire to retain key executives, the Company entered into a Retention Bonus Agreement with each of Mr. Masanovich and Ms. Finnorn on August 8, 2019 and with Mr. Kakar on December 13, 2019 (the “Retention Bonus Agreements”). Pursuant to the terms of their respective Retention Bonus Agreement, Mr. Masanovich received a retention award consisting of a cash award of $583,495 payable August 8, 2021 and a grant of 35,000 time-based RSUs with a vesting date of August 8, 2021, Ms. Finnorn received a retention award consisting of a cash award of $118,650 payable August 8, 2021 and a grant of 20,000 time-based RSUs with a vesting date of August 8, 2021, and Mr. Kakar received a retention award consisting of a cash award of $216,300 payable October 1, 2021 and a grant of 20,000 time-based RSUs with a vesting date of October 1, 2021. Messrs. Masanovich and Kakar, and Ms. Finnorn are required to be employed at the time of vesting to receive the retention awards, except that the Company is required to pay the full amount of the cash award and the time-based RSUs become fully vested if the Company terminates the employment of Mr. Masanovich, Mr. Kakar, or Ms. Finnorn, as applicable, other than for cause.

Compensation Governance

Philosophy

The Compensation and Benefits Committee believes that Superior’s NEOs should be paid in a manner that attracts, motivates and retains the best-available talent and rewards them for driving successful results. This philosophy is achieved through the base salary, AIPP and LTIP being targeted at the 50th percentile of the benchmark for each position, with adjustments made to reflect the relative skills, experience and past performance of the NEOs and their respective roles and responsibilities within the organization, and judgments about the extent to which the NEOs can impact the company-wide performance and creation of stockholder value. Within this overall philosophy, the Compensation and Benefits Committee’s ongoing objectives are:

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Superior’s executive officers are compensated in a manner consistent with Superior’s strategy, competitive practice, sound compensation governance principles and stockholder interests and concerns. In 2015, the Company implemented its current AIPP and LTIP compensation program, which emphasizes performance-based compensation and which was developed after obtaining guidance from our independent compensation consultant and seeking and receiving feedback from some of our stockholders regarding desired plan design features.

Best Practices

The core of Superior’s executive compensation philosophy enables the company to continue to attract and retain talent while driving performance. The Compensation and Benefits Committee has made significant overhauls to our executive compensation program since 2014. The Compensation and Benefits Committee continues to monitor and review the compensation program against our financial performance and continues to monitor the market to ensure competitive and performance driven plans.

Our programs continue to have many features that our stockholders widely consider best practices and that we view as consistent with our compensation and governance philosophy, including:

BEST PRACTICES

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Compensation Risk Oversight

The Compensation and Benefits Committee’s annual review and approval of Superior’s compensation philosophy and strategy includes the review of compensation-related risk management. The Compensation and Benefits Committee believes that the following risk oversight and compensation design features described in greater detail elsewhere herein safeguard against excessive risk taking:

Methodology for Establishing Compensation

In designing and administering the NEO compensation programs, the Compensation and Benefits Committee attempts to strike a balance among the above elements, which are discussed in more detail below. The Compensation and Benefits Committee considers the pay practices of comparable companies to determine the appropriate pay mix and compensation levels, as well as Superior’s own specific short and long-term strategic objectives. The following section describes the various methods the Compensation and Benefits Committee uses in its design, administration and oversight of the compensation programs for the NEOs.

The Compensation and Benefits Committee has direct responsibility for making recommendations to the independent members of the Board regarding the approval, amendment or termination of Superior’s executive compensation plans and programs, the annual compensation of Superior’s President and Chief Executive Officer, and the compensation for other executive officers.

Consistent with its charter, the Compensation and Benefits Committee is composed of four directors. Each member of the Committee is independent, as determined by the Board and based on the New York Stock Exchange listing standards. Their independence from management allows the Compensation and Benefits Committee members to apply independent judgment when designing and overseeing our compensation program and in making pay decisions.

The Compensation and Benefits Committee from time to time engages independent compensation consultants to provide advice and ongoing recommendations regarding executive compensation programs and principles that are consistent with Superior’s business goals and pay philosophy. The Compensation and Benefits Committee has the final authority to hire and terminate any consultant, as well as the responsibility to consider the independence of the consultant. The Compensation and Benefits Committee continued to retain Willis Towers Watson in 2019 to assist with specific assignments. The Compensation and Benefits Committee has assessed the independence of Willis Towers Watson, and concluded that Willis Towers Watson’s work does not raise any conflict of interest under applicable SEC and New York Stock Exchange rules.

Setting Executive Pay (Benchmarking)

The Compensation and Benefits Committee is responsible for recommending to the Board the annual compensation of Superior’s CEO. For the remaining NEOs and other executives, Superior’s CEO recommends compensation levels and specific components of compensation. The Compensation and Benefits Committee reviews these recommendations and adjusts them as it deems appropriate before approving or recommending any changes to either the CEO or Board.

The Compensation and Benefits Committee typically reviews broad-based third-party compensation surveys covering a wide array of public companies, some larger and some smaller than we are, to obtain a general understanding of current compensation practices. These compensation surveys provide valuable data for subjective review and confirmation of the equanimity of the salaries paid to the NEOs. The data also gives the Compensation and Benefits Committee information concerning market pay practices regarding the pay mix among base salary, annual bonus and long-term incentives of companies in the industry that compete with us for executive talent. The Compensation and Benefits Committee targets the compensation components at the 50th percentile range of the market data while taking into consideration the experience level and performance of each named executive officer.

Since 2016, Willis Towers Watson has been engaged to assist the Compensation and Benefits Committee in evaluating the competitiveness of Superior’s executive compensation program. In February 2019, the Compensation and Benefits Committee relied upon the studies performed by Willis Towers Watson, utilizing competitive pay assessment on survey data of a company with $1.5 billion in revenue and proxy data from the previously approved peer group consisting of sixteen automotive part and equipment

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manufacturers to evaluate the compensation positioning of the NEOs. In April 2019 and based on recommendations from Willis Towers Watson, two companies were removed from the previously approved peer group (Meritor, Inc and Dorman Products, Inc) and two companies were added (Horizon Global Corporation and Cooper-Standard Holdings Inc.) as replacements.

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In addition, Superior’s NEOs were provided with retirement benefits and certain other benefits. Narrative descriptions of the individual elements of compensation are set forth below.

The Compensation and Benefits Committee does not use a specific formula for allocating compensation among the various components. Instead, the Compensation and Benefits Committee considers market pay practices and whether the total compensation package is fair, reasonable and in accordance with the interests of our stockholders.

Base Salary

Base salary provides a fixed element of compensation that competitively rewards the executive’s skills, experience and contributions to Superior. In 2019, Mr. McQuay served as our principal executive officer, as the interim Executive Chairman of the Board until May 15, 2019. During that time, Mr. McQuay received a base salary equal to $50,000 per month ($600,000 on an annualized basis). The base salary of Mr. Abulaban, our current CEO, was established when he was appointed in May of 2019 and remained the same through fiscal year 2019.

For NEOs other than the CEO, base salary adjustments are based on recommendations of the CEO to the Compensation and Benefits Committee, taking into account the executive’s performance, scope of work, competitive benchmarks and Company performance. In setting 2019 salaries, the former CEO and the Compensation and Benefits Committee reviewed the analysis and findings of our independent compensation consultant. Base salaries for NEOs other than the CEO are generally adjusted when deemed necessary to meet market competition or when appropriate to recognize increased responsibilities. In 2019, certain of our NEOs received merit increases, as shown in the following table:

2020 Update. In response to the COVID-19 pandemic, our CEO voluntarily agreed to forego 100% of his base salary from April 1, 2020 until May 31, 2020 and all of our other NEOs agreed to a 20% reduction in their base salary from April 1, 2020 to May 31, 2020. Although on March 3, 2020 the Board approved increases in the salaries of Messrs. Abulaban and Masanovich and Ms. Finnorn in the amounts of 3.0%, 2.9% and 4.1%, respectively, in response to the COVID-19 pandemic, the executives have decided to defer these merit increases.

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Annual Incentive Compensation and Bonuses

We use annual incentive awards to motivate our CEO and other NEOs to achieve annual business results and create value for our stockholders. Annual incentive awards granted pursuant to the AIPP are expressed as a percentage of base salary and are designed to recognize and reward targeted financial performance. Attainment of the financial target may be adjusted based on an individual performance modifier that considers the individual’s performance rating under the Annual Performance Management Program, annual objectives and accomplishments. The Compensation and Benefits Committee believes that this design, combining an objective measurable financial goal with adjustments for individual performance, reinforces a Company culture that recognizes both team achievement and individual contributions.

The Compensation and Benefits Committee selected AIPP Adjusted EBITDA for 2019 as the financial performance component because it is an objective measure of core Company performance, without considering matters such as interest income or expense, taxes, depreciation amortization and M&A activity costs, which generally do not impact operational efficiencies. The AIPP Adjusted EBITDA target for the AIPP was adopted after we conducted a rigorous bottom-up full range comprehensive business and financial planning analysis in several layers of the Company from middle management up through our Board. As a result of this comprehensive process, the Compensation and Benefits Committee approved a performance goal level that is designed to be achieved if we meet our business plan.

Under the AIPP for 2019, the target bonus percentages for the NEOs, with the exception of our CEO, ranged from 50% to 70% of base salary. The target bonus percentage for our CEO was 125% of base salary. For the NEOs, with the exception of our CEO, the Compensation and Benefits Committee can exercise its business judgment to increase or decrease the fixed portion of the non-equity incentive bonus a NEO otherwise earned within a range of 0% to 200% depending on the annual performance rating and pre-specified individual performance goals. Rather than an individual performance multiplier, our CEO has increased leverage for achievement of financial performance in excess of the financial performance target. For 2019, our CEO has a minimum guaranteed payment under the AIPP of $625,000 pursuant to the terms of his employment agreement.

The following table illustrates the payout opportunities under the AIPP Adjusted EBITDA and individual performance components of the AIPP for 2019.

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In 2019, the Company achieved Adjusted EBITDA of $168.8 million, which was below the AIPP Adjusted EBITDA target of $182 million. As a result, the 2019 AIPP bonus pool was funded at 85.5% of the target bonus pool amount. The following table shows the target award, AIPP Adjusted EBITDA performance multiplier, individual performance multiplier (if applicable), and amounts paid to the NEOs under the AIPP for 2019 (other than Mr. McQuay, who was not eligible to participate in the 2019 AIPP):

These decisions and the 2019 AIPP payments were made before the full global extent of COVID-19 became apparent. The Compensation and Benefits Committee will consider the business and financial impact to Superior, our stockholders and our employees, in evaluating 2020 performance early in 2021.

2020 Update. The Compensation and Benefits Committee has approved the following target values for the 2020 AIPP awards for our NEOs, as a percentage of base salary, which are unchanged from 2019: Mr. Abulaban – 125%; Mr. Masanovich – 70%; Mr. Kakar – 55%, Ms. Finnorn – 55% and Mr. Burke – 50%.

Long-Term Equity Incentive Compensation

2019 Long-Term Equity Incentive Awards. Since 2015, the Compensation and Benefits Committee has approved the grants of regular long-term equity incentive awards to all of our NEOs, that place a strong emphasis on pay for performance. In 2019, the annual LTIP awards were granted on February 28, 2019, with 2/3 of value allocated to PRSU awards and 1/3 to time-based RSU awards.

Performance criteria for the 2019 PRSU awards to all of our NEOs include the following (weighting in parentheses): (i) Cumulative EPS (40%), (ii) ROIC (40%) and (iii) Relative TSR (20%). The PRSU awards provide all the NEOs the opportunity to earn up to 200% of the target award value in Company stock.

Each of these three performance criteria are calculated as follows:

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The Compensation and Benefits Committee choose each criterion for the following reasons:

The target levels of these performance criteria were designed after a rigorous bottom up full range comprehensive business and financial planning analysis in several layers of the Company from middle management up through our Board. Because of this process, the Compensation and Benefits Committee approved performance goal levels that are designed to be met if we meet our business plan.

The annual RSU awards for all NEOs, vest in equal annual installments over a three-year period. Mr. McQuay did not receive any LTIP awards in connection with his appointment to the role of interim Executive Chairman of the Board.

For 2019, the total target award opportunities for our NEOs, expressed as a percentage of each NEO’s annual base salary (at date of grant), is as follows: Mr. Abulaban – 300%, Mr. Masanovich – 150%, Mr. Kakar – 110%, Ms. Finnorn – 90%, Mr. Burke – 75%, and Mr. Tykal – 110%. In 2019, Mr. Masanovich received an increase in the target award from 125% to 150% based on his continued support during the CEO transition.

Inducement Awards. In connection with the commencement of Mr. Abulaban’s employment with the Company, Mr. Abulaban received the following equity awards pursuant to the 2019 Inducement Plan: (i) an inducement award (the “Inducement Award”) consisting of (A) 666,667 PRSUs at target, vesting in three approximately equal installments to the extent that the performance metrics are satisfied during each of three performance periods and (B) 333,333 time-based RSUs, vesting in approximately equal installments on February 28, 2020, 2021 and 2022; (ii) a regular 2019-2021 PRSU grant, with the target number of PRSUs to be equal to 316,832, which will vest to the extent that the performance metrics are satisfied; and (iii) a regular 2019 time-based RSU grant, with the number of time-based RSUs equal to 158,416, vesting in approximately equal installments on February 28, 2020, 2021 and 2022. The Inducement Award was intended to replace certain equity awards that were forfeited by Mr. Abulaban upon his resignation from his former employer. The PRSU awards may be earned at up to 200% of target depending on the level of achievement of the performance metrics.

Retention Agreements. As a result of changes in leadership and the desire to retain key executives, a retention award was granted to each of Messrs. Masanovich, and Kakar and Ms. Finnorn in 2019. The retention awards included a cash component and a time-based RSU component. The number of time-based RSUs granted to Messrs. Masanovich, and Kakar and Ms. Finnorn were 35,000 RSUs, 20,000 RSUs and 20,000 RSUs, respectively. The time-based RSUs granted to Mr. Masanovich and Ms. Finnorn vest on August 8, 2021 and the time-based RSUs granted to Mr. Kakar vest on October 1, 2021.

The numbers of time-based RSUs and PRSUs awarded to our NEOs in 2019 are set forth in the following chart:

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Vesting of 2019 PRSUs. PRSUs could be earned based on the Company’s achievement over the three-year performance period with respect to certain performance metrics (Cumulative EPS, ROIC and Relative TSR). For the grants issued to Ms. Finnorn and Messrs. Kakar and Masanovich for the 2017-2019 performance period, the Company did not achieve metrics that met the required targets, yielding a 0% attainment level. Mr. Abulaban received a 2019-2021 PRSU award in connection with the commencement of his employment in May 2019 that vests in three tranches. The first tranche vested on December 31, 2019 at an attainment level of 111%. The resulting shares earned by Mr. Abulaban are set forth in the table below.

2020 Update. The Compensation and Benefits Committee, in connection with the aforementioned study by Willis Towers Watson, has approved the use of the same performance criteria (and weighting) that was used for the 2019 LTIP awards for the 2020 LTIP awards (Cumulative EPS, ROIC and Relative TSR). The target value for the 2020 LTIP awards for our NEOs as a percentage of base salary are as follows: Mr. Abulaban – 300%; Mr. Masanovich – 150%; Mr. Kakar – 110%, Ms. Finnorn – 90% and Mr. Burke – 75%

Retirement and Similar Benefits

Mr. Kakar is a participant in Superior’s Salary Continuation Plan, which provides a retirement benefit for participants who terminate employment after having reached specified vesting dates and after reaching the age of 65 (or in the event of death while in our employ prior to separation from service). Upon a qualifying termination, Superior will pay to the participant a benefit equal to 30% of his or her final average compensation over the preceding 36 months. For employee participants, final average compensation includes only base salary. The benefit is paid twice per month and continues for the longer of 10 years or until death, provided death occurs more than 10 years after the employee’s retirement date. Mr. Kakar’s rights have vested under the Salary Continuation Plan. The Salary Continuation Plan was closed to new participants in 2011 and, as a result, none of our NEOs other than Mr. Kakar are participants.

All employees may participate in Superior’s tax-qualified Savings and Retirement Plan which is a 401(k) plan. For fiscal year 2019, Superior matched 100% of the first 1% of before-tax contributions made to the plan and 50% of such contributions over 1% and up to 6%. However, Superior did not match employee contributions in excess of the legal limit of $19,000 ($25,000 for individuals older than 50 years of age) in 2019. All Company contributions are vested 100% after two years of service.

Other Benefits

Superior provides NEOs with incidental benefits that the Compensation and Benefits Committee believes are reasonable and consistent with the competitive market. For example, the NEOs, other than our former interim Executive Chairman of the Board, receive an automobile allowance (which is a similar benefit provided to some of our other employees). In addition, the NEOs may participate in Superior’s health and welfare benefit plans that are available to other executives and employees.

Severance / Termination / Change in Control Benefits

If Mr. Abulaban’s employment is terminated because of his death or “disability,” Mr. Abulaban’s Employment Agreement, provides him with severance compensation of a prorated amount of his current year annual bonus based on actual performance and the Inducement Award becomes vested in full, with the payout level under the performance-based portion of the Inducement Award

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determined and deemed to have been earned based upon an assumed achievement of all relevant performance goals at the “target” level. If Mr. Abulaban’s employment is terminated without “cause” or Mr. Abulaban resigns for “good reason,” other than within two years of a change of control of Superior, Mr. Abulaban’s Employment Agreement provides him with severance compensation of eighteen months’ base salary, a prorated amount of his current year annual bonus based on actual performance, and health care continuation ending on the earlier of (i) the eighteen (18) month anniversary of the termination date and (ii) the date as of which Mr. Abulaban becomes eligible to receive comparable benefits from a subsequent employer. If Mr. Abulaban’s employment is terminated by the Company other than for “cause” or “disability” or Mr. Abulaban resigns for “good reason,” in each case, within two years of a change of control of Superior, Mr. Abulaban’s Employment Agreement provides him with severance compensation of a lump-sum payment of two times his base salary, health care continuation ending on the earlier of (i) the eighteen (18) month anniversary of the termination date and (ii) the date as of which Mr. Abulaban becomes eligible to receive comparable benefits from a subsequent employer, and all time-based equity awards become vested in full, and the performance-based equity awards are deemed earned based upon an assumed achievement of all relevant performance goals at the “target” level.

Mr. McQuay’s Employment Agreement did not provide for severance upon a termination of his employment, and Mr. McQuay is not eligible to participate in the Executive Change in Control Severance Plan. Mr. Tykal resigned from his position as Senior Vice President Operations, North America, effective July 2019 and was not entitled any severance.

Pursuant to the terms of the Retention Bonus Agreements, the Company is required to pay the full amount of the cash award and the time-based RSUs become fully vested if the Company terminates the employment of Mr. Masanovich, Mr. Kakar, or Ms. Finnorn, as applicable, other than for cause.

Messrs. Masanovich, Kakar and Burke and Ms. Finnorn currently participate in the Executive Change in Control Severance Plan. The plan is intended to encourage executive officers to remain employed with the Company during a time when prospects for continued employment are often uncertain and to provide some measure of financial security prior to and after a change of control. The amounts to be paid under the plan help ensure that the interests of Superior’s executives will be materially consistent with the interests of Superior’s stockholders when considering corporate transactions. Under the plan, if the employment of a participant is terminated by the Company without “cause” (other than by reason of the Participant’s death or “disability”) or the participant resigns for “good reason,” in either case within two years following a change in control, the participant will receive a two-times multiple of the sum of both the participant’s annual base salary and the participant’s target annual bonus, paid in a lump sum within 60 days after termination. The Compensation and Benefits Committee considers these protections to be an important part of the NEOs’ compensation and consistent with competitive market practices.

Other Termination or Change in Control Benefits

Upon a change of control of Superior, participants will fully vest in the benefits provided under the Salary Continuation Plan (Mr. Kakar is the only NEO who participates in this plan and is already fully vested in his benefits thereunder). Moreover, the 2018 Equity Plan and the 2019 Inducement Plan provide that all outstanding equity awards will become fully vested upon the occurrence of a change in control unless the award agreement provides otherwise or the award is assumed by the successor entity. If the awards are assumed by the successor entity, a “double-trigger” vesting generally applies, so that a participant’s awards vest if he or she incurs a qualifying termination within two years after the change of control.

Risk Mitigation, Regulatory, and Other Considerations

Executive Stock Ownership Guidelines

The Board has approved Stock Ownership Guidelines under the Company’s Stock Ownership Policy for its executive officers, including the NEOs. The CEO is required to own shares equal to 5 times his annual base salary and all other executive officers are required to own shares equal to 2 times his or her annual base salary. The applicable level of stock ownership must be attained within 5 years of becoming subject to the Stock Ownership Policy. In addition, participants must retain 100% of the net shares received upon exercise or vesting until in compliance with the required ownership level.

Messrs. Abulaban, Masanovich and Burke and Ms. Finnorn are subject to the Stock Ownership Policy but are not required to meet the Stock Ownership Guidelines set forth in the Stock Ownership Policy because they have been employed by Superior for less than 5 years. Mr. McQuay, is not subject to the executive officer Stock Ownership Guidelines given his service as Executive Chairman of the Board was on an interim basis only. Mr. Tykal, whose employment terminated in July 2019, is not subject to the Stock Ownership Policy. Mr. Kakar is subject to the Stock Ownership Policy and has satisfied the applicable Stock Ownership Guidelines.

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Clawback Policy

The Company has adopted a formal clawback policy (the “Clawback Policy”) that applies to all incentive-based cash and equity compensation awards granted on or after the effective date (“Incentive Compensation”) to any current or former executive officer of the Company (collectively, the “Covered Recipients”). In the event that the Company is required by applicable U.S. federal securities laws to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under such securities laws where such accounting restatement was caused or substantially caused by the intentional misconduct of the Covered Recipient, the Company will recover from such Covered Recipient who received Incentive Compensation during the three-year period preceding the date on which the Company is required to prepare an accounting restatement, based on the erroneous data, the amount, if any, in excess of what would have been paid to the Covered Recipient under the accounting restatement.

Tax Deductibility of Executive Compensation

One of the factors that the Compensation and Benefits Committee considers when determining compensation is the anticipated tax treatment to Superior and to the executives of the various payments and benefits. Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”) generally places a limit of $1 million on the amount of compensation that Superior may deduct in any one year with respect to its certain covered executive officers. While the Compensation and Benefits Committee generally considers this limit when determining compensation, the Compensation and Benefits Committee reserves the right to use its business judgment to authorize compensation payments that may exceed the limitation on deductibility under Section 162(m) when the Compensation and Benefits Committee believes that such payments are appropriate. Furthermore, interpretations of and changes in the tax laws, and other factors beyond the Compensation and Benefit Committee’s control, also affect the deductibility of compensation.

Our compensation program, including the AIPP and the 2018 Equity Plan, was designed to allow the Compensation and Benefits Committee to grant certain incentive awards that were intended to be fully deductible for federal income tax purposes pursuant to the performance-based compensation exemption to the limit on deductibility under Section 162(m). However, the Section 162(m) exemption from the deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our covered executive officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.

Because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, including the uncertain scope of the transition relief under the legislation repealing Section 162(m)’s exception to the deduction limit for performance-based compensation, no assurance can be given that compensation intended to satisfy the requirements for exception from the Section 162(m) deduction limit will in fact satisfy the exception. Further, the Compensation and Benefits Committee reserves the right to modify compensation that was initially intended to be exempt from Section 162(m) if it determines that such modifications are consistent with Superior’s business needs.

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Compensation Committee Report

The following Compensation Committee Report is not considered proxy solicitation material and is not deemed filed with the SEC. Notwithstanding anything to the contrary set forth in any of our previous filings made under the Securities Act of 1933, as amended, or under the Exchange Act that might incorporate future filings made by Superior under those statutes, the Compensation Committee Report will not be incorporated by reference into any such prior filings or into any future filings made by Superior under those statutes.

The Compensation and Benefits Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation and Benefits Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Amendment No. 1 and the proxy statement for the 2020 Annual Meeting of stockholders.

Submitted by the Compensation and Benefits Committee of the Board of Directors

Paul J. Humphries, Chairperson

Richard J. Giromini

James S. McElya

Francisco S. Uranga

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2019 Summary Compensation Table

The following table provides summary information concerning the compensation earned for services rendered in all capacities to Superior by (i) all individuals serving as principal executive officer or acting in a similar capacity in 2019, (ii) all individuals serving as principal financial officer or acting in a similar capacity in 2019, (iii) each of its other three most highly compensated executive officers whose total compensation for 2019 was in excess of $100,000 and who were serving as executive officers at the end of 2019 and (iv) persons serving as executive officers at any time in 2019, who were not serving as executive officers as of December 31, 2019, but would have been one of the three most highly compensated executive officers at the end of 2019 had they been serving as executive officers at such time.

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Nonqualified Deferred Compensation

Superior does not have any nonqualified deferred compensation plans other than the Salary Continuation Plan.

Potential Payments upon Termination of Employment or Change in Control

Other than Mr. McQuay, our former interim Executive Chairman of the Board, and Mr. Abulaban, our current President and Chief Executive Officer, none of Superior’s NEOs have an employment agreement specifying a term of employment, and their employment may be terminated at any time. However, Superior does provide severance benefits upon the termination of an NEO’s employment under certain prescribed circumstances.

For a description of benefits upon termination of employment or change of control, see the “2019 Executive Compensation Components – Severance / Termination / Change in Control Benefits” portion of the “Compensation Discussion and Analysis” section of this Amendment No. 1.

Other Arrangements. Mr. Kakar is a participant in Superior’s Salary Continuation Plan, which provides a retirement benefit for participants who terminate their employment after having reached specified vesting dates and after reaching the age of 65. For a description of the benefits payable under the Salary Continuation Plan, see the “2019 Executive Compensation Components – Retirement and Similar Benefits” portion of the “Compensation Discussion and Analysis” section of this Amendment No. 1.

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Summary of Potential Termination Payments and Benefits. The following table summarizes the value of the termination payments and benefits that each of our NEOs (other than Mr. McQuay, who was not entitled to any special benefits upon a termination of his employment, and Mr. Tykal, who voluntarily resigned effective July 12, 2019 and did not receive any termination payments or benefits in connection with his resignation) would have received if he or she had terminated employment on December 31, 2019 under the circumstances shown. The amounts shown in this table do not include accrued but unpaid salary, earned annual bonus for 2019, or payments and benefits to the extent they are provided on a non-discriminatory basis to salaried employees generally upon termination of employment, such as distributions of plan balances under our tax-qualified 401(k) plan and death or disability benefits under our generally available welfare programs.