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## 1 .  Annual Cash Compensation 

## Base Salaries 

The base salaries of our NEOs are designed to be commensurate with the position’s overall responsibility, complexity and difficulty, and scope and impact within the organization, as well as the executive’s performance in the role and ability to assume increasing levels of responsibility within Hexion. The annual base salaries of our NEOs are also intended to be internally equitable and externally competitive with the market. 

The Committee reviews our NEOs' base salary levels (i) annually, in conjunction with annual performance reviews, or (ii) in connection with promotions or significant changes in job responsibilities. When evaluating base salary increases, the Committee considers various factors, such as job performance, total target compensation, internal equity, impact on value-creation and the external competitive marketplace. 

The base salary change for each NEO is shown in the table below. No base salary increase was granted to Mr. Rogerson based on market considerations. The effective date of the salary increases for Messrs. Knight, Johns and Alness was June 29, 2020, and Ms. Frederix’s salary increase was effective July 1, 2020, both consistent with our past practice in delivering annual merit increases. 

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(1) Ms. Frederix’s local currency salary was converted from Euros to US Dollars based on a 2020 average exchange rate of 1.1389 Euros per US Dollar. 

## Annual Incentive Awards 

Our annual incentive compensation plan (“ICP”) is a short-term performance-based plan designed to reward participants for delivering increased value to the organization relative to specific financial and other critical business objectives that have been approved by the Committee at the beginning of each performance year . Annual incentive compensation awards are targeted at a level that, when combined with base salaries and other components of our total rewards program, is intended to yield total annual cash compensation that is competitive in the external marketplace, while awards for performance that exceeds the established targets are intended to result in total annual cash compensation above the market median. 

The performance targets under the ICP are identical for our top executives and other ICP eligible, salaried associates. We strive to set annual incentive award measures and goals that are achievable only through strong performance, believing that this motivates our executives and other participants to deliver ongoing value-creation, while allowing the Company to attract and retain highly talented senior executives. Annual ICP measures and goals are determined in connection with the development of an overall budget for Hexion Holdings Corporation and its subsidiaries. Performance goals may be based on a number of factors, such as our prior-year performance, current market trends, anticipated synergies, integration efforts around acquired assets or businesses, potential pricing actions, raw material projections, the realization of planned productivity initiatives, expansion plans, new product development, environmental, health and safety, and other financial and/or strategic factors that could potentially impact operations. 

## The 2020 Annual Incentive Compensation Plan 

In early 2020, the Committee approved the 2020 ICP for the Company and its subsidiaries, which we refer to as the “2020 ICP.” Under the 2020 ICP, our NEOs and other eligible participants had the opportunity to earn annual cash incentive compensation based upon the achievement of certain financial and environmental health & safety (“EH&S”) goals. 

