Donal J. Sullivan

About Donal J. Sullivan

Executive Vice President and Chief Strategy Officer of CSW Industrials (since April 2024; EVP since May 2020). Age 62; joined CSWI in 2015 via RectorSeal, holding successive operating leadership roles including SVP & GM, Industrial Products (2016–2020) and GM, Contractor Solutions (2020–2024) . Education not disclosed in the proxy. Under CSWI’s leadership during his tenure, the company delivered FY25 records (revenue $878.3m, adjusted EBITDA $227.9m) and long‑term performance of total revenue CAGR 14.1% and adjusted EBITDA CAGR 16.5% from FY16–FY25; CSWI’s FY23 PSU cycle achieved a 151.5% three‑year TSR (95th percentile vs Russell 2000) with max (200%) payout, and management highlighted >1,000% TSR since 2015 spin‑off on the Q4 FY25 call .

Past Roles

External Roles

Fixed Compensation

Notes:

• No executive perquisites beyond broad‑based employee benefits; no SERP; legacy pensions do not apply to Sullivan .

Performance Compensation

Annual Incentive Plan (AIP) – Structure, Targets and FY25 Payout

• FY25 Target Bonus: $356,250 (75% of base salary) .
• Metrics and weights for corporate NEOs: Consolidated EBITDA (60%), Consolidated Operating Cash Flow (15%), Individual Performance (25%) .
• FY25 Company results measured for AIP: EBITDA payout 107% (measured EBITDA $219.8m; +10.8% YoY, with acquisition effects excluded), OCF payout 85% (measured OCF $167.3m; +0.9% YoY, with defined adjustments) .

Program features and recent changes:

• Payout range 0–200%; annual target setting reinstated in FY25; payout matrix narrowed to reflect scale; FY26 introducing a new lower‑threshold tier (30% payout) while keeping 200% max; metrics remain EBITDA and OCF, with individual qualitative assessment .

Long‑Term Incentive Plan (LTIP) – Awards, Vesting, and Performance

• FY25 LTIP Target: 175% of base salary ($831,250), split 50% performance shares (PSUs) and 50% restricted stock (RS) .
• FY25 Grants:
  • Performance Shares (grant date 5/28/2024): target 1,790 shares (threshold 895; max 3,580); grant‑date fair value $593,492 (Monte Carlo, $331.56 per share) .
  • Restricted Stock (grant date 10/1/2024): 1,333 shares; grant‑date fair value $485,958 (at $364.56/share); vests ratably over three years .
• Outstanding/unvested equity at 3/31/2025 (for Sullivan):
  • Unvested RS: 4,355 shares; vesting schedule: 2,714 (10/1/2025), 1,197 (10/1/2026), 444 (10/1/2027) .
  • PSUs (unearned): 3,418 (FY23 cycle incl. accrued dividend equiv., vested at 200% effective 4/1/2025), 3,064 (FY24 cycle, performance period to 3/31/2026, assumed at 200% for table value), 1,798 (FY25 cycle, performance period to 3/31/2027, assumed at 200%) .
• Performance design:
  • PSUs cliff‑vest at 0–200% based on 3‑year relative TSR vs Russell 2000; for FY25 grants, target payout now requires >median (51st percentile) performance; if absolute TSR is negative, vesting capped at 100% .
  • RS has voting and dividend rights from grant and vests ratably over 3 years; PSUs do not receive dividends until vest and then only as dividend equivalents pro‑rated by vesting outcome .

Program governance:

• Company targets unadjusted equity burn rate ≤1.0%; no option repricing without shareholder approval; no dividends on unvested PSUs; robust stock ownership guidelines; clawback policy compliant with NYSE Dodd‑Frank rules .

Equity Ownership & Alignment

Potential vesting‑related supply:

• RS scheduled to vest: 2,714 (10/1/2025), 1,197 (10/1/2026), 444 (10/1/2027); PSU cycles complete 3/31/2026 and 3/31/2027 (subject to performance), which can create tax‑withholding transactions but hedging/pledging is prohibited .

Employment Terms

Standard NEO participation in CSWI Executive Change‑in‑Control and Severance Benefit Plan (Level Two). Key economics and FY25 quantified estimates for Sullivan:

• Termination without cause / Good Reason (no CIC): cash severance = 1x base salary; pro‑rata bonus (greater of prior‑year actual or current‑year target); 12 months health benefits; immediate vesting of unvested equity scheduled to vest within 12 months; FY25 illustrative total value: $2,743,662 (incl. equity vesting) .
• Change‑in‑Control (CIC): single‑trigger full vesting of all unvested equity upon CIC; if terminated without cause/for Good Reason within 2 years, cash severance = 2x (12 months base + target AIP), pro‑rata bonus; 24 months health benefits; “best‑of‑net” approach to 280G (no tax gross‑up). FY25 illustrative totals: CIC employment continues (equity vesting): $3,683,355; CIC + qualifying termination: $5,841,467 .
• Death/Disability: pro‑rata bonus; 12 months medical/dental; full vesting of unvested equity; FY25 illustrative death total $4,214,416; disability total $4,164,416 .

Clawback and other governance:

• Dodd‑Frank compliant recoupment policy for incentive compensation upon restatement; no fault required .
• No change‑in‑control excise tax gross‑ups; double trigger applies to cash severance; equity vests on CIC (single trigger per plan) .

Compensation Structure Analysis

• Pay‑mix and leverage: NEOs have a majority “at risk” pay; for FY25, non‑CEO NEOs averaged 67.4% at‑risk; CEO 83.5% .
• Incentive rigor: FY25 AIP metrics tightened; annual target‑setting reinstated; PSU target raised to require >median TSR for 100% payout (51st percentile) .
• FY25 outcomes for Sullivan: AIP paid at 105% of target despite EBITDA beat (107%) offset by OCF at 85%; total cash comp slightly down YoY given lower AIP vs FY24; stock awards modestly up YoY, maintaining heavy equity weighting .
• Say‑on‑Pay and peer benchmarking: 97.6% approval in 2024; target pay benchmarked around 50th percentile of a defined peer group (AAON, AWI, B, CMCO, NPO, ESE, FELE, ROCK, HLIO, IOSP, KAI, MWA, PGTI, SPXC, SXI) .

Related Party Transactions and Risk Indicators

• Related party transactions: None requiring disclosure in FY25 .
• Risk controls: No perquisites beyond broad‑based benefits; no option repricing; no hedging/pledging; robust ownership guidelines; clawback in place .
• Potential red flag: Equity awards fully vest upon a CIC regardless of termination (single‑trigger for equity), though cash severance is double‑trigger; investors often scrutinize single‑trigger equity on CIC .

SAY‑ON‑PAY & SHAREHOLDER FEEDBACK

Expertise & Qualifications

• Deep HVAC/R and industrial products leadership (Goodman/Daikin; Carrier) aligned with CSWI’s Contractor Solutions strategy .
• Strategy and operating leadership across CSWI segments culminating in Chief Strategy Officer role .

Work History & Career Trajectory

Investment Implications

• Alignment: Sullivan exceeds ownership guidelines (18.9x vs 3x) and is subject to anti‑pledging/hedging and clawback, indicating strong alignment and risk controls; no options outstanding further reduces leverage risk .
• Incentive design: AIP emphasizes EBITDA and OCF with clear adjustments and guardrails; LTIP relies on relative TSR with higher rigor (>median for target) and 0–200% payout structure, consistent with shareholder value creation; FY23 PSU max vest underscores strong historical TSR delivery .
• Retention and selling pressure: Upcoming RS vesting tranches and PSU maturities (2026/2027) may create periodic Form 4 activity for tax withholding but anti‑pledging rules mitigate leverage risk; Section 16 filings were timely in FY25 .
• Change‑in‑control economics: Double‑trigger cash but single‑trigger equity vesting can be viewed as moderately shareholder‑unfriendly; however, no 280G gross‑ups and standardized severance support governance quality .
• Execution: Sullivan’s HVAC/R pedigree and operating track record align with CSWI’s acquisitive growth in Contractor Solutions and recent Aspen acquisition integration focus cited by management, supporting continued value creation if EBITDA targets and integration synergies are realized .