AZZ INC

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FY2022 Performance Shares Earned in FY2024

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(1)

The total number of shares earned include dividend equivalents accrued during the FY2022 PSU performance cycle (March 1, 2021 – February 29, 2024), which consisted of 950 for Mr. Ferguson; 165 for Mr. Schlom; 168 for Ms. Mackey; and 133 for Mr. Stovall.

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(2)

This amount represents the market value of the FY2022 PSUs at the conclusion of their performance cycle, on February 29, 2024, which was based upon the closing price of AZZ common stock of $72.80.

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(3)

Mr. Russell did not receive FY2022 PSUs as he was not an employee of the Company at the time of grant.

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Compensation Program Overview

The Compensation Committee of the Board of Directors has the responsibility for establishing, implementing and monitoring adherence to the Company’s compensation philosophy. The Compensation Committee ensures that the total compensation paid to the Company’s executive management team is fair, reasonable, competitive and proportionately performance and responsibility based. Generally, the types of compensation and benefits provided to the NEOs are similar to those provided to other members of the management team.

Compensation Philosophy and Objectives

The Compensation Committee believes that the most effective executive compensation program is one that is designed to reward the achievement of specific annual, long-term and strategic goals by the Company, and which aligns executives’ interests with those of our shareholders by rewarding performance specifically tied to the achievement of goals set by the Company, with the ultimate overall objective of increasing shareholder value. The Compensation Committee evaluates both performance and compensation to ensure that the Company maintains its ability to retain and attract superior talent in key positions and that compensation provided to such executives remains competitive relative to the compensation paid to similarly situated executives of publicly held companies in the same industry. To that end, the Compensation Committee believes executive compensation packages provided by the Company to its executives, including the NEOs, should include both cash and equity-based compensation that rewards achieving performance of pre-established goals.

The tables below highlight our current compensation practices for our NEOs, including practices that we believe drive future strategic growth and foster strong corporate governance principles, and the practices that we have not implemented because we do not believe they would serve our shareholders’ long-term interests.

Role of Compensation Committee, its Compensation Consultant and the Chief Executive Officer in Setting Executive Compensation

The Compensation Committee makes all compensation decisions, including annual base salaries, short-term cash incentive metrics and annual equity award grants, for the executive management team. The Chief Executive Officer provides the Compensation Committee with an annual performance evaluation for each executive management team member (other than his own) and makes preliminary recommendations for base salary, short-term incentive bonus targets, and equity awards for each officer. The Compensation Committee may exercise its discretion to modify any recommended salary adjustments or target incentive awards to executives made by the Chief Executive Officer. The Compensation Committee, in executive session and without executive officers present, performs the Chief Executive Officer’s annual performance review and total compensation targets and the total compensation target levels of the executive team. The Chief Executive Officer does not make recommendations to the Compensation Committee on his own pay. The Compensation Committee structures the Company’s annual and long-term executive compensation components to motivate executives to achieve the Company’s short- and long-term business goals and reward executives who achieve their performance goals.

The Compensation Committee has the sole authority to retain and terminate compensation advisors, including the authority to approve the terms and fees of any such arrangement. The Compensation Committee has engaged the services of Meridian Compensation Partners, LLC (“Meridian”) on an ongoing basis to review and provide recommendations with relevant market data and alternative compensation components to consider when making pay decisions for the Chief Executive Officer and the recommendations being made by the Company’s Chief Executive Officer for the other executives, including for fiscal year 2024. On an annual basis, the Compensation Committee assesses the independence of Meridian pursuant to standards promulgated by the SEC and the NYSE and has concluded that no conflict of interest exists that would prevent Meridian from independently advising the Compensation Committee. In fiscal year 2024, Meridian performed services solely on behalf of the Compensation Committee and did not perform any services for the Company. In accordance with Rule 10C-1(b)(4) under the Exchange Act, the Compensation Committee has determined that Meridian is independent and that no conflict of interest exists that would be required to be disclosed in the Company’s Proxy Statement pursuant to Item 407 of Regulation S-K.

Executive Compensation Industry Peer Group

In making compensation decisions, the Compensation Committee compares each element of the total compensation program against a group of comparable publicly held companies for benchmarking executive compensation. This executive compensation industry peer group of companies, is annually reviewed and updated, if applicable, by the Compensation Committee, in consultation with Meridian, consists of companies against which the Compensation Committee believes the Company competes for business, executive talent and for shareholder investment.

In fiscal year 2024, following an annual review, and based upon recommendations by Meridian, the Compensation Committee determined that it would be appropriate to modify the Company’s industry peer group to align with its transformed business following the acquisition

of the Precoat Metals segment and the disposition of its Infrastructure Solutions segment during fiscal year 2023. As a result of the Company transitioning from a diverse holding company to a focused metal coatings solutions company, the Committee believed it was necessary to utilize an industry peer group that was comparable in scale and to the transformed business.

The Company’s FY2024 industry peer group consisted of 15 companies in the following industries: (i) building products; (ii) steel; (iii) construction materials; (iv) aluminum; (v) industrial machinery and supplies; (vi) construction and engineering; and (vii) diversified metals and mining. These industry peer companies had a median revenue of $1.46 billion for the most recently reported fiscal year end as disclosed by Meridian to the Compensation Committee and all companies were size appropriate in terms of market capitalization, number of employees, EBIT margin and the markets in which AZZ currently competes for business and talent. The Company’s fiscal year 2024 industry peer group included the following companies:

Though the Compensation Committee considers the compensation practices of the industry peer companies noted above in determining the overall compensation of the Company’s executive officers, including the NEOs (including determining base salaries, as described below), the Compensation Committee does not set target compensation at specific market percentiles. Subject to the discretion of the Compensation Committee, the Company base salaries, short-term incentive compensation targets and long-term incentive compensation targets generally range within the market median of our industry peer group listed above on an annual basis.

In addition to industry peer market data, compensation is determined based upon:

Internal pay equity is also considered (including the executive’s responsibilities and potential impact on Company operations). In considering internal pay equity, the Compensation Committee has no formula or established ratios for setting one executive’s total compensation versus the compensation of another executive officer. Rather, the Compensation Committee subjectively evaluates the relative importance of each NEO’s role to the Company as a whole, which results in certain executives receiving more total compensation than others (e.g., the Company’s Chief Executive Officer is paid more than its Chief Financial Officer). The Compensation Committee may also consider how the Company has performed relative to its industry peer group of companies listed above.

While the Compensation Committee considers a variety of factors in making compensation decisions for the Company’s NEOs, the Compensation Committee does not use any particular weighting or formula to determine executive compensation. Rather, the Compensation Committee subjectively evaluates all of the factors noted in the discussion above in determining executive compensation.

2023 Say-On-Pay Advisory Vote

At the Company’s 2023 Annual Meeting, 97.6% of the shareholders that cast a ballot voted to approve the Company’s executive compensation program. After considering this non-binding, advisory voting result, the Compensation Committee believes the result reflects strong shareholder concurrence that the Company’s executive compensation program is consistent with sound corporate governance principles, and appropriately designed to support the Company’s short- and long-term strategic business objectives. Additionally, the Compensation Committee believes these results demonstrate shareholders’ concurrence that the executive compensation program maintains an appropriate balance between utilizing responsible, measured pay practices and effectively ensuring the interests of the NEOs are incentivized by, and aligned with, the creation of long-term value for the Company’s shareholders. Consequently, the Compensation Committee intends to continue following the executive compensation philosophy, policies and practices it has historically utilized, and update certain compensation elements from time to time as market compensation trends evolve to remain competitive and recruit and retain top talent.

Employment Agreements

Mr. Ferguson

Mr. Ferguson’s initial employment agreement with the Company commenced in November 2013 and was amended and restated in September 2016 and was subsequently amended on October 3, 2018, solely to clarify compliance with Section 409A of the Internal Revenue Code. On October 3, 2019, Mr. Ferguson entered into the Second Amended and Restated Employment Agreement (the “Second Amended CEO Agreement”) with the Company, which extended Mr. Ferguson’s employment term for an additional three years that expired on October 3, 2022, subject to automatic extensions for successive one-year periods unless either the Company or Mr. Ferguson gives written notice to the other at least one hundred twenty (120) days before such extension would otherwise occur of the Company’s or Mr. Ferguson’s election not to extend the term.

Mr. Ferguson’s employment agreement provides for certain severance payments and benefits following a termination of employment under certain circumstances. These benefits are described below in the section titled “Potential Payments upon Termination or Change in Control.”

Mr. Schlom

Mr. Schlom entered into an employment agreement with the Company on November 4, 2020, which had an initial term of three years that expired on November 4, 2023, but is subject to automatic one-year extensions for successive periods unless either the Company or Mr. Schlom provides written notice to the other at least one hundred twenty (120) days before such extension would otherwise occur

of the Company’s or Mr. Schlom’s election not to extend the term. On March 26, 2024, Mr. Schlom notified the Company that he would complete the term under his existing employment agreement and then will retire from his role as the Company’s Senior Vice President and Chief Financial Officer, effective November 4, 2024.

Mr. Russell

Mr. Russell entered into an employment agreement with the Company on March 10, 2022, which has an initial term of two years, which expired on March 10, 2024, but is subject to automatic one-year extensions for successive periods unless either the Company or Mr. Russell gives written notice to the other at least one hundred twenty (120) days before such extension would otherwise occur of the Company’s or Mr. Russell’s election not to extend the term.

All of the employment agreements above provide for: (i) a base salary, to be reviewed annually, which the Board and/or the Compensation Committee may adjust at its discretion; (ii) eligibility for an annual equity award under the Company’s 2023 Plan; and (iii) an annual cash incentive opportunity to be based upon individual and/or Company performance criteria that the Board and/or the Compensation Committee establishes for each fiscal year, with a target annual cash incentive expressed as a percentage of base salary. Messrs. Ferguson, Russel, and Schlom are each subject to covenants prohibiting: (i) during or after employment, the disclosure of confidential information; (ii) during employment and the twelve (12)-month period thereafter, competition, solicitation of customers or employees, interference with business relationships, purchase of Company shares during a blackout period except as permitted by the Board or through the Company’s employee stock purchase plan, disparagement of the Company, or entering into a transaction with the Company; and (iii) ownership of any intellectual property or property conceived or developed during his employment or the 6-month period thereafter, (the “Employment Agreement Terms and Conditions.”)

Ms. Mackey and Mr. Stovall do not have employment agreements with the Company. All of our NEOs will receive certain severance payments and benefits following a termination of employment under various circumstances pursuant to the terms set forth in the Company’s Executive Officer Severance Plan, as more fully described below in the sections titled “Executive Officer Severance Plan” and “Potential Payments upon Termination or Change in Control.”

Fiscal Year 2024 Executive Compensation Components

For the fiscal year ended February 29, 2024, the principal components of compensation for NEOs were:

Base Salary

The Company provides executive officers and other employees with a base salary to compensate them for services required by their respective level of job responsibilities. Base salaries for our NEOs are determined for each executive based on his or her position and areas of responsibility and factors in experience and external market data for their position. Base salaries are designed so that pay opportunities for a given position recommended by Meridian are within plus or minus 10% of the median market base salary of the Company’s industry peer group.

During its review of base salaries for executives, the Compensation Committee primarily considers:

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market data and advisory services periodically provided by Meridian, the Compensation Committee’s external compensation consultant;

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internal data regarding the executive’s compensation, both individually and relative to other executive officers; and

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individual performance of the executive.

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Salary levels are typically considered annually as part of the Company’s performance review process, as well as upon a promotion or upon other changes in job responsibilities. Annual salary increases are not guaranteed and do not automatically occur each year.

The following table details the NEOs’ base salaries for the fiscal year ended February 29, 2024.

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(1)

Mr. Russell was not an NEO during fiscal year 2023.

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(2)

Mr. Russell received an extra payment during fiscal year 2024 as the Precoat Metals segment is paid bi-weekly as compared to all the other NEOs whom are paid bi-monthly.

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In determining annual salary increases, if applicable, and also in determining short-term cash incentive awards under the Company’s STI Plan and long-term incentive equity awards under the Company’s 2014 Long Term Incentive Plan (the “2014 Plan”), for the NEOs for fiscal year 2024, the Compensation Committee utilized qualitative factors to evaluate their performances and recognize their contributions and leadership during fiscal year 2024. In particular, the Compensation Committee considered each officer’s contributions to achieving the following: (i) completion of AZZ’s strategic transformation plan for fiscal year 2024; (ii) the ability of the executive officers to effectively execute on their respective operating budgets and various business segment goals for the year; (iii) completing several corporate and operational excellence initiatives including paying down debt, improving net working capital, and refinancing the Company’s debt; (iv) reducing inventories; and (v) effectively integrating the Precoat Metals business segment operations and internal controls into the Company’s public company discipline and practices. The Compensation Committee also considered issues of relative amounts paid and awarded to each NEO as a matter of internal equity.

The amount of each officer’s salary and incentive awards was based on the CEO’s subjective evaluation of each officer’s performance, the relative responsibilities of the officers and the Compensation Committee’s sense of fair and equitable distributions of salaries and incentive awards. The Compensation Committee also considered comparable market compensation data from similarly situated officers of companies against which the Compensation Committee believes the Company competes for talent and from the Company’s 2024 industry peer group discussed above.

In assessing the NEO’s performance evaluation, the Compensation Committee considered and acknowledged the following individual performance achievements for fiscal year 2024:

Performance-Based Incentive Compensation

The STI Plan is an annual cash incentive program that provides the Compensation Committee the flexibility to reward high performance for the achievement of annual performance goals by NEOs, increase shareholder value and allow key employees to share in the annual growth and profitability of the Company. The STI Plan provides guidelines for the eligibility, minimum thresholds and maximum payouts, and calculation of annual cash incentive awards based upon predetermined performance metrics.

At the beginning of each fiscal year, the Compensation Committee approves the group of employees who are eligible to participate in the Company’s STI Plan for that fiscal year and the total target award pool. Each participant’s responsibilities and potential impact on the Company’s operations are factored into their respective target award opportunities that are established as a percentage of base salary. For fiscal year 2024, the Compensation Committee approved annual short-term incentive target award opportunities that ranged from 60% to 100% of base salary for the Company’s NEOs. The target annual short-term incentive opportunity for each NEO in fiscal year 2024 is set forth in the following table:

Each NEO may earn a maximum of 200% of his or her annual short-term incentive target award opportunity as a percentage of his or her base salary. Based on the table above, the maximum award payments under the STI Plan may not exceed 200% of base salary for Mr. Ferguson, 160% of base salary for Messrs. Russell and Stovall, 140% of base salary for Mr. Schlom, and 120% of base salary for Ms. Mackey. Payments made under the Company’s STI Plan could be forfeitable and must be repaid to the Company by the applicable NEO under certain circumstances more fully described in the Company’s Compensation Recovery Policy and the Executive Officer Incentive Compensation Recovery Policy. See page 63 of this Proxy Statement for a detailed explanation.

Modifications to the STI Plan Minimum Thresholds for Payout

For fiscal year 2024, the Compensation Committee consulted with Meridian (the Compensation Committee’s consultant) and Mercer (US) Inc. (the Company’s compensation consultant) to determine best practices related to short-term annual cash incentive threshold benchmarking. After review, analysis and careful consideration of the Company’s historical annual performance metrics and targets, the Compensation Committee determined that it was best practice to set a higher minimum performance achievement threshold before any bonus was paid and to reduce the maximum payout threshold.

Historically, the Company’s STI Plan began paying participants upon achieving 51% of the performance metric target with the potential to payout a maximum of 200% of each participant’s incentive opportunity by achieving at least 125% of the participant’s annual performance target. For fiscal year 2024, the Compensation Committee increased the minimum payout threshold from 51% to 81 % of the performance metric target with a maximum payout of 200% if the participant’s achieved a performance level of at least 120% of the participant’s annual performance target as illustrated in the table below.

Award payments are calculated (as a percentage of the target award opportunity) with respect to each applicable performance metric, based on the percentage of performance target achieved in accordance with the following schedule:

Beginning in FY2024, for every percentage point increase in the percentage of the performance target achieved, the percentage of target bonus opportunity earned increased by five percentage points between the minimum payment thresholds and the target bonus opportunity.

As described below, the Compensation Committee determines the percentage of the performance target that has been achieved for each performance metric assigned to each NEO and the corresponding percentage of the target bonus opportunity earned. For example, if the Compensation Committee sets a target cash award of $10,000 based upon achievement of a target level of diluted earnings per share of $1.00 and if the Company’s actual earnings per share is $1.10, the Compensation Committee would determine that the recipient of the award had achieved 110% of his target performance metric and would be entitled to a cash bonus of 150% of his STI target cash award resulting in a cash award of $150,000.

Fiscal Year 2024 STI Plan Performance Metrics

Our STI Plan performance metrics are designed to drive shareholder value creation. For fiscal year 2024, the Compensation Committee assigned quantitative and qualitative performance goals for the year that relate to the following: (i) completion of AZZ’s strategic transformation plan for fiscal year 2024; (ii) the ability of the executive officers to effectively execute on their respective operating budgets and various business segment goals for the year; (iii) completing several corporate and operational excellence initiatives including paying down debt, improving net working capital, and refinancing the Company’s debt; (iv) reducing inventories; and (v) effectively integrating the Precoat Metals business segment operations and internal controls into the Company’s public company discipline and practices. Levels for adjusted earnings per share; cash flow; business segment earnings; interest, taxes, depreciation and amortization (“EBITDA”); and business segment cash flow were set and approved in alignment with the Company’s strategic plan, and expectations set and approved by the Compensation Committee regarding the Company’s annual operating budget based upon various market conditions.

Each NEO also has an individual qualitative performance metric, which comprises the final component of the annual STI performance target. This qualitative performance metric is discretionary, and subject to the same 0% to 200% payout range as the financial performance metrics. The amounts awarded to the NEOs under the qualitative metrics are influenced by the quantitative performance assessment of each officer and the Company’s performance in an effort to ensure executives are appropriately compensated for demonstrating behaviors that are consistent with AZZ’s business objectives and core values.

The chart below shows the performance metrics, the weight of each performance metric and target performance goals assigned to each NEO, and the actual percentage of target performance achieved for fiscal year 2024:

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(1)

Adjusted EPS is a non-GAAP measure. See Appendix A for a reconciliation of Adjusted EPS to the most comparable GAAP measure.

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(2)

Consolidated Cash Flow from operations minus consolidated capital expenditures.

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(3)

Based on the CEO and the Compensation Committee’s review of the NEOs individual and collective performance, the Committee approved various discretionary individual performance payouts for the NEOs ranging between 100% to 150% of award targets. This decision took into account the Company’s performance against annual performance goals, the strong individual and collective performances across different corporate functions and all aspects of the business, and the value created for the Company’s shareholders during fiscal year 2024.

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(4)

Segment Adjusted EBITDA is calculated as earnings excluding depreciation, amortization, interest, provision for income taxes, acquisition expenses, transaction related expenses and certain non-ordinary course legal settlements and accruals.

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(5)

Segment Cash Flow is calculated as cash flow from operations for each business segment minus the respective segment’s fiscal year annual capital expenditures.

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Upon completion of each fiscal year, the Compensation Committee assesses the actual achieved performance of the Company against each performance objective to determine the percentage of target performance achieved. Actual performance achieved was based upon our audited financial results and on the percentage of target performance achieved by each NEO. Awards made to our NEOs under the STI Plan for performance in fiscal year 2024 are reported in the column titled “Non-Equity Incentive Plan Compensation” of the Summary Compensation Table of this Proxy Statement on page 65 and also detailed in the following table:

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(1)

Actual payout is based upon actual base salary earned during fiscal year 2024 multiplied by the actual payout percentage.

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Long-Term Incentive Compensation

Our long-term equity compensation is granted on an annual basis to our executive officers and is designed to align the interests of management with those of our shareholders. Awards, including those granted in fiscal year 2024, were made under the Company’s 2014 Plan which was previously approved by shareholders and allows the Company to grant stock options, stock appreciation rights (“SARs”), restricted shares, RSUs, performance awards (including PSUs) and other stock-based awards. The AZZ Inc. 2023 Long-Term Incentive Plan (the “2023 Plan”) was approved by our shareholders on July 11, 2023 at last year’s annual meeting, and succeeded the 2014 Plan. As the date of such approval of the 2023 Plan, no further grants were permited or will be made under the 2014 Plan.

The purpose of our long-term incentive compensation program is to:

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align the interests of executive officers with our shareholders;

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provide an opportunity for increased equity ownership in the Company by directors and executives as well as key management that is being trained and developed for future succession planning purposes;

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maintain competitive levels of total compensation with the Company’s industry peer group; and

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facilitate compliance with the Company’s Stock Ownership Guidelines, which requires AZZ’s executive officers and directors to hold shares of AZZ’s Common Stock.

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During fiscal year 2024, the compensation program for our executive officers included long-term equity awards with a target value based upon a percentage of each NEO’s base salary, which were awarded in the form of 50% RSUs and 50% PSUs all of which were granted under the 2014 Plan. The RSUs and PSUs accrue dividend equivalents during the restricted vesting period or performance cycle, as applicable, which will not be paid, unless and until, the underlying award vests. If the underlying award vests, the accrued dividend equivalents will be paid either in cash or shares of AZZ Common Stock at the discretion of the Compensation Committee.

On April 28, 2023, the Compensation Committee approved an aggregate award pool of 112,789 RSUs and 74,107 PSUs to certain officers and employees of the Company under the 2014 Plan. The RSUs vest ratably during a three-year period from the grant date, with one-third of the RSUs vesting on each of the first, second and third anniversaries of the grant date beginning on April 28, 2024 and are settled in shares of AZZ Common Stock. The PSUs cliff vest at the end of each three-year performance cycle based on the Company’s TSR performance relative to the Company’s industry peer group’s TSR over the performance cycle and are settled, if at all, in shares of AZZ Common Stock.

Annual RSU target award levels are determined based on market data provided by Meridian and vary among participants based on their positions and responsibilities within the Company, and are granted on the first open trading window day following the Company publicly announcing its financial results for the prior full fiscal year. To determine target awards of RSUs, the Compensation Committee first establishes a target value to be delivered to each NEO through long-term equity awards. In setting target value, the Compensation Committee considered various factors, including the following:

No particular weighting was assigned to the factors described above in the determination of the total target value for fiscal year 2024.

Once the target values of RSU and PSU awards were established for each executive officer based upon a percentage of his or her salary, the Compensation Committee determined the number of shares to be awarded to the NEOs by utilizing a 30-day average closing stock price of the Company’s Common Stock from the last trading day preceding the date of grant. Pursuant to both our 2014 Plan and the 2023 Plan, if an NEO voluntarily leaves the Company before his or her award vests, the NEO will forfeit the unvested portion of the award. The number and value of RSUs and PSUs granted to each NEO in fiscal year 2024 is reported in the “Grants of Plan Based Awards” table on page 67 of this Proxy Statement.

Fiscal Year 2024 Performance Share Units

For fiscal year 2024, the Company granted target PSUs to the NEOs that have a three-year performance cycle (March 1, 2023 to February 28, 2026) and will vest and become payable, if at all, on the third anniversary of the award date, with payments to be settled in shares of the Company’s Common Stock (the “FY2024 PSUs”). Payments under the PSUs will be based on the Company’s TSR relative to the TSR of its industry peer group companies over the three-year performance cycle. The Company’s industry peer group is described in detail beginning on page 49 of this Proxy Statement. The TSR performance metric is defined below.

The Company’s industry peer group companies and AZZ will be ranked according to their performance at the end of the three-year period. AZZ’s percentile ranking will be calculated as follows:

Award recipients will not be entitled to receive any payment under the FY2024 PSUs unless AZZ’s TSR performance ranks in the 25 th percentile or higher as compared to its industry peer group for the relative performance cycle. Within these constraints, payments under the FY2024 PSUs will be determined as follows:

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(1)

The percentage of target award payout earned under the FY2024 PSUs will be interpolated for performance percentiles that fall between the threshold and maximum percentages shown above.

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The FY2024 PSU target awards that vest at the end of the three-year performance cycle with potential payouts ranging from 0% to 200%. Upon completion of the three-year performance cycle ending on February 28, 2026, the Compensation Committee will determine the amount of TSR performance achieved by the Company based on the Company’s audited financial statements relative to its industry peer group for the same period.

RSUs and PSUs granted under the 2014 Plan (which is now frozen as to new awards) include dividend equivalents, which are intended to provide the recipient of these awards with the benefits of dividends paid on the underlying shares of AZZ Common Stock during the vesting period. Dividend equivalents are calculated based upon the dividends paid by the Company during the vesting period of the applicable award and are paid only upon the vesting of the underlying equity award, and such dividend equivalents may be paid in either cash or shares of AZZ Common Stock. Recipients of the RSUs and PSUs have no rights with respect to accrued dividend equivalents unless and until the vesting of the underlying award.

The following table sets forth the number of target award RSUs and PSUs granted to each NEO in fiscal year 2024. The Compensation Committee determined a dollar value amount of RSUs and PSUs that it desired to grant each NEO based on a percentage of each NEO’s base salary. This dollar value amount was then divided by the 30-day average closing stock price of the Company’s Common Stock from the last trading day preceding the date of grant (April 28, 2023), which was $39.27, to determine the number of shares to be granted.

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(1)

Grant values vary from the values in the Summary Compensation Table because grant values represent the dollar value of the target grant values that the Compensation Committee awarded based on a percentage of each NEOs base salary, which was then divided by the 30-day average closing stock price of the Company’s Common Stock on the last trading day preceding the date of grant to determine the number of shares awarded. The values in the Summary Compensation Table represent the fair market value of the award calculated by the different methodology as set forth in FASB ASC Topic 718.

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(2)

The Compensation Committee approved adjusting the total target value of RSUs and PSUs for Mr. Ferguson and Ms. Mackey from 200% to 225% and 85% to 100% of their base salaries, respectively, to align them with the market median as recommended by Meridian.

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Modifications to PSU Awards for Fiscal Year 2025

The Company will be modifying the performance metrics for the PSUs that will be granted to the NEOs in FY2025 by making the following change:

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Performance metrics for PSUs will be measured 50% on relative TSR as presented and defined above and 50% on Adjusted Return on Investment Capital (“Adjusted ROIC”) rather than current practice of measuring 100% on relative TSR. The Compensation Committee determined that utilizing relative TSR and adjusted ROIC is more consistent with the Company’s industry peer group companies. Adjusted ROIC is defined as:

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The components above may be adjusted with the approval of the Compensation Commitee for items such as: M&A costs; asset impairment; restructuring costs; or major changes to Federal or State tax laws.

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The same as TSR, Adjusted ROIC will be measured at the end of the three-year performance cycle.

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The percentage of Adjusted ROIC target goal achieved will be calculated as:

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Actual Adjusted ROIC

Target ROIC

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A payout percentage will be calculated for each metric (TSR and Adjusted ROIC) and then averaged to determine total PSU vesting percentage.

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Benefits and Perquisites

The Company provides benefits to its salaried employees including health care coverage, life and long-term disability insurance benefits, 401(k) matching contributions, and reimbursement for educational expenses. In addition to the aforementioned benefits provided to all employees generally, the Company provides the NEOs with nominal perquisites that the Company and the Compensation Committee believe are reasonable and consistent with the Company’s overall conservative compensation program to better enable the Company to attract and retain superior talent for key leadership positions. These perquisites include reimbursement of costs associated with club membership dues, executive physical exams, executive supplemental disability insurance and tax gross ups on relocation expenses. The Compensation Committee annually reviews the levels of benefits and perquisites provided to the Company’s NEOs.

Severance Benefits

On October 8, 2021, the Board of Directors of the Company adopted the AZZ Inc. Executive Officer Severance Plan (the “Executive Severance Plan”), effective October 11, 2021, which replaced the AZZ Inc. Severance Plan and provides severance pay and benefits under certain circumstances to eligible active, full-time executive employees of the Company and its U.S. subsidiaries, including the Company’s

executive officers, other than certain NEOs to the extent their severance benefits are set forth in their respective employment agreements, as discussed under the headings titled “Employment Agreements” ​(above) and “Potential Payments Upon Termination, Death, Disability or Change in Control” ​(below). The Executive Severance Plan provides for the payment of severance pay and benefits to eligible executive employees in the event of an involuntary termination of employment by the Company without cause or by the eligible executive employee for good reason.

Additionally, the Company has entered into a change in control agreement with Mr. Ferguson. Mr. Ferguson’s Change in Control Agreement and the change in control provisions of the Executive Severance Plan for the other NEOs, are designed to promote stability and continuity of executive management. Information regarding applicable payments under these arrangements for our NEOs is provided under the headings titled “Employment Agreements” ​(above) and “Potential Payments Upon Termination or Change of Control” ​(below) of this Proxy Statement. The Company does not have any arrangement providing for tax gross up payments of any compensation elements with any of our executive officers, including for severance and change in control benefits, except for relocation expenses, which is available to all employees.

Retirement and Other Benefits

Although we maintain a frozen qualified defined benefit retirement plan for certain grandfathered Precoat Metals employees, none of our NEOs participate in that plan, and it does not allow any additional employees to become participants. Instead, eligible Company employees, including NEOs, may participate in one of two tax-qualified 401(k) plans that we maintain.

The NEOs (other than Mr. Russell) participate in the AZZ Inc. Employee Benefit Plan and Trust (the “AZZ Plan”). The AZZ Plan is a tax-qualified savings plan pursuant to which eligible employees, including the NEOs (other than Mr. Russell), can contribute a portion of their annual salary on a pre-tax, Roth and/or after-tax basis. The Company matches pre-tax and Roth contributions at a rate of 100% of the first 1% of eligible pay contributed, and 50% of contributions between 2% and 6% of eligible pay. Company matching contributions are fully vested after two years of service. Although the AZZ Plan also permits us to make discretionary employer profit sharing contributions, we have not made those types of contributions in several years.

Mr. Russell does not participate in the AZZ Plan, and instead participates in the Precoat 401(k) Plan, a separate 401(k) plan we maintain for our legacy Precoat Metals employees. The Precoat 401(k) Plan is a tax-qualified savings plan pursuant to which eligible employees, including Mr. Russell, can contribute a portion of their annual salary on a pre-tax basis. For nonunion employees, including Mr. Russell, the Company matches employee contributions at a rate of 100% of the first 3% of eligible pay contributed, and 50% of contributions between 4% and 5% of eligible pay. Company matching contributions are fully vested immediately. Although the Precoat 401(k) Plan also permits us to make discretionary employer profit sharing contributions for nonunion employees, we have not made those types of contributions in the past.

Employee Stock Purchase Plan

On January 18, 2018, the Company’s Board of Directors approved the AZZ Inc. 2018 Employee Stock Purchase Plan (the “2018 ESPP”). The 2018 ESPP succeeded the Company’s 2008 Employee Stock Purchase Plan that expired in 2018. The 2018 ESPP allows eligible employees of the Company, including NEOs, to purchase shares of the Company’s Common Stock, two times per year, at a 15% discount through accumulated payroll deductions. Offerings under the 2018 ESPP have a duration of 24 months. Participation in the 2018 ESPP is entirely voluntary. Under the 2018 ESPP, employees are permitted to contribute 0% to 10% of their pay on an after-tax basis for a maximum contribution limit in any one year of $21,250 (85% of $25,000) and may not purchase more than 5,000 shares during any offering period. Participants may terminate or decrease their payroll deductions during an enrollment period by withdrawing the accumulated payroll deductions at any time prior to the end of the offering period.

Tax and Accounting Implications

Deductibility of Executive Compensation

As part of its role, the Compensation Committee reviews and considers limits on the deductibility of certain executives’ compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended. Generally, Section 162(m) disallows a tax deduction for a publicly held corporation for compensation exceeding $1,000,000 in any taxable year paid to a 162(m) covered employee. For this purpose, the definition of “covered employee” includes (i) the principal executive officer and the principal financial officer (or an individual acting in such a capacity); (ii) the three other most highly compensated executive officers; and (iii) anyone who previously was considered a 162(m) covered employee for any tax year beginning after 2016.

Although the Compensation Committee does consider tax deductibility of covered employees’ compensation, it believes that the tax deduction is only one of several relevant considerations in setting compensation. Accordingly, where it is deemed to be in the Company’s best interests, e.g., to attract and retain executive talent, to compete successfully and to motivate our senior executives to achieve the goals inherent in our business strategy, the Compensation Committee may approve compensation to Section 162(m) covered employees that exceeds the limits of tax deductibility.

In addition, Section 4999 and Section 280G of the Internal Revenue Code provide that executives could be subject to additional taxes if they receive payments or benefits that exceed certain limits in connection with a change in control of the Company and that the Company could lose an income tax deduction for such payments. The Company has not provided any executive with tax gross ups or other reimbursement for tax amounts that the executive might be required to pay under Section 4999.

Compensation-Related Risk Management

The Compensation Committee, and the Board of Directors, believes the Company’s compensation policies and practices for its NEOs, and those relating to all employees generally across the Company, are reasonably unlikely to create inappropriate management risk-taking that could potentially have a material adverse effect on the Company. The Compensation Committee believes that, the Company’s compensation policies and practices are well-balanced between the cash/equity mix utilized to provide incentives to achieve both short-term and long-term business objectives that benefit the Company. This practice is considered appropriate to help ensure a reasonable relationship between the annual and long-term compensation elements, and it is not considered to create incentives for excessive or imprudent risk-taking by management. To the contrary, the Compensation Committee believes that the Company’s compensation policies and practices serve to ensure a long-term value creation focus by management.