Document:

Exhibit 10.1

  

  

    TRANSITION SERVICES AGREEMENT

     

    THIS TRANSITION SERVICES AGREEMENT (the “Agreement”) is made effective as of January 6, 2020, (the “Effective Date”), by and between Gannett Co., Inc.
        (formerly known as New Media Investment Group Inc.), a Delaware corporation (the “Company” and together with its affiliates within the meaning of Rule 12b-2 promulgated under Section 12 of
        the Securities Exchange Act of 1934, as amended, the “Company Group”), and Alison Engel (“Executive” and, together with the
        Company, the “Parties”).  Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Gannett Co., Inc. 2015 Change in Control Severance Plan, as amended
        as of July 20, 2017 (the “Change in Control Severance Plan”).

     

    RECITALS

     

    WHEREAS, on August 5, 2019,
        Gannett Media Corp. (formerly known as Gannett Co., Inc.), a Delaware corporation (“Gannett Media Corp.”), entered into an Agreement and Plan of Merger (as it may be amended from time to
        time, the “Merger Agreement”) by and among the Company, Gannett Media Corp., Gannett Holdings LLC (formerly known as Arctic Holdings LLC), a Delaware limited liability company and wholly
        owned subsidiary of the Company (“Intermediate Holdco”), and Arctic Acquisition Corp., a Delaware corporation and a direct, wholly owned subsidiary of Intermediate Holdco (“Merger Sub”), pursuant to which, effective as of the closing of the transactions contemplated by the Merger Agreement on November 19, 2019 (the “Effective

            Time”), Merger Sub merged with and into Gannett Media Corp. and Gannett Media Corp. continued as the surviving corporation (the “Merger”);

     

    WHEREAS, Executive is a
        participant in the Change in Control Severance Plan; and

     

    WHEREAS, the Company deems the
        knowledge, skill and experience of Executive critical to the integration of Gannett Media Corp. as a subsidiary of the Company and also the ongoing success of Gannett Media Corp. in the period following the Effective Time.

     

    NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Parties agree as follows:

     

    1.          Qualifying Termination Date; Departure Date; Notice of Termination.  Executive’s employment with the Company Group shall cease effective as of April 3, 2020 (the “Transition Date”), (provided, that, following February 28, 2020, Executive shall not be required to report to the office unless specifically requested and otherwise may provide requested services remotely) or,
          if earlier, upon (x) Executive’s termination of employment by the Company Group without Cause, (y) Executive’s termination of employment for Good Reason, or (z) Executive’s termination of employment as a result of Executive’s death or disability
          (as determined under the Company’s Long Term Disability Plan in effect immediately prior to the Effective Time) (each a “Qualifying Termination” and such date, the “Qualifying Termination Date”).  Notwithstanding the foregoing, nothing contained in this Agreement shall prohibit either Party from terminating the employment of Executive for any reason
          prior to the Transition Date (the date of termination of employment, whether on or before the Transition Date, the “Departure Date”).  Effective as of the Departure Date, Executive shall
          be deemed to have resigned from all positions Executive holds as an officer or employee with respect to the Company Group and agrees to execute all further documents reasonably necessary or appropriate to further memorialize any or all such
          resignations.

     

    
      
        

    

    
    2.           Transition Services; Retention Bonuses.

     

    (a)         If

        Executive continues in the employment of Gannett Media Corp. and performs for the Company Group services related to transition and integration matters arising out of the transactions contemplated by the Merger Agreement as reasonably requested by
        the Company (the “Transition Services”) during the period commencing on the Effective Time and through and including the Qualifying Termination Date (such period, the “Transition Period”), then, as consideration for the Transition Services, the Company Group shall provide Executive with the payments and benefits provided under Sections 7(b)(ii)-(v) of the
        Change in Control Severance Plan (the “CIC Retention Bonus”). The CIC Retention Bonus shall be provided to Executive in accordance with Section 7(c) (“Timing of Payments and Release Condition”) of the Change in Control Severance Plan, and including, without limitation, conditioned upon the execution and the delivery of the release (in the form of Exhibit A of the Change
        in Control Severance Plan) as required therein.  For the avoidance of doubt, the CIC Retention Bonus shall be paid to Executive following a Qualifying Termination.

     

    (b)        If

        Executive continues in the employment of Gannett Media Corp. and performs for the Company Group the Transition Services during the period commencing on the Effective Time and ending on the Transition Date, then, as additional consideration for the
        Transition Services, the Company Group shall pay Executive a cash retention bonus of $500,000 (the “Transition Date Retention Bonus”);
            provided, that the Transition Date Retention Bonus shall vest and become payable if, prior to the Transition Date, Executive’s employment is terminated as a result of a Qualifying Termination. To the extent earned or otherwise
        becomes vested and payable, the Transition Date Retention Bonus shall be paid to Executive no later than fifteen (15) business days following the Transition Date or, if earlier, the Qualifying Termination Date.

     

    (c)         In

        performing the Transition Services, Executive shall comply  with all applicable laws and, to the extent made available to Executive, policies of the Company Group.  Executive acknowledges and agrees that, during the Transition Period, Executive
        shall not work on a full- or part-time basis for another person, firm or entity; provided, that Executive may manage personal and family investments, participate in community and charitable activities (including not-for-profit boards of directors),
        serve on one non-competitive for-profit board of directors, participate in industry organizations and deliver lectures at educational institutions, so long as such activities do not interfere with the performance of the Transition Services or
        Executive’s responsibilities to the Company Group.  Executive acknowledges that, in consideration for the potential CIC Retention Bonus, Executive shall not be eligible to receive, and, except as provided herein, hereby irrevocably waives any right
        to, any payment or benefit under the Change in Control Severance Plan or any other severance benefit or bonus or incentive payment that may be available (other than the Transition Date Retention Bonus, outstanding equity awards and the Employment
        Retention Agreement (as defined below)).  Notwithstanding any provision of this Agreement to the contrary, Executive shall continue to receive from the Company Group payment of Executive’s annual base salary during the Transition Period through the
        Departure Date at the rate in effect on the date hereof, and shall be paid a 2019 annual incentive bonus at target, paid in the normal course on or before March 15, 2020. The Company Group shall also provide Executive with all amounts to which
        Executive is entitled under any other compensation, benefit, or other plan or policy of the Company Group, not specifically addressed herein at the time such amounts are due, including any unreimbursed business expenses and accrued but unused
        vacation.

     

    (d)         Executive’s

          Employment Retention Agreement, dated January 15, 2019 (the “Employment Retention Agreement”), shall remain in full force and effect. For the avoidance of doubt, payment under the Employment Retention Agreement shall be made following any
          Qualifying Termination.

     

    
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    3.           Miscellaneous.

     

    (a)         Governing Law.  The validity, interpretation, construction, performance and enforcement of this Agreement shall be governed by the laws of the Commonwealth of Virginia, without application
          of any conflict of laws principles that would result in the application of the laws of any other jurisdiction.

     

    (b)         Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other
          provisions hereof.

     

    (c)         Successors and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and permitted assigns and the Company shall require any successor
          or assign to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or assignment had taken place. The Company may not assign or delegate
          any rights or obligations hereunder except to a successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company.  Neither this Agreement nor any
          right or interest hereunder shall be assignable or transferable by Executive, Executive’s beneficiaries or legal representatives, except by will or by the laws of descent and distribution.  This Agreement shall inure to the benefit of and be
          enforceable by Executive’s legal personal representatives.

     

    (d)        Notice. For the purposes of this Agreement, notices and all other communications shall be in writing and shall be deemed to have been duly given when personally delivered or sent by
          certified mail, return receipt requested, postage prepaid, addressed to the respective addresses last given by one Party to another Party or, if none, in the case of the Company, to the Company’s headquarters directed to the attention of the
          Company’s General Counsel and, in the case of the Executive, to the most recent address shown in the personnel records of the Company or another member of the Company Group.  All notices and communications shall be deemed to have been received on
          the date of delivery thereof.

     

    (e)         Entire Agreement; Certain Acknowledgements.  This Agreement contains the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior agreements, if
          any, understandings and arrangements, oral or written, between or among any member of the Company Group and Executive with respect to the subject matter hereof; provided, that, except
          as otherwise amended by this Agreement, the Change in Control Severance Plan shall continue in accordance with its terms following the Effective Date, including with respect to the provision of benefits (including those provided under Sections
          7(b)(vi), 8, 9 and 10 of the Change in Control Severance Plan), as applicable, in respect of a termination of Executive’s employment following the Effective Time and prior to or on the Transition Date.  In addition,
          for the avoidance of doubt, the provisions of Sections 7(b)(vi), 8, 9 and 10  of the Change in Control Severance Plan shall apply to any disputes and/or payments under this Agreement and Executive shall not be entitled to “double payment” of any
          amounts thereunder by virtue of the provisions of this Agreement (e.g. Executive shall not be entitled to the CIC Retention Bonus and payments and benefits under sections 7(b)(vi) of the CIC Severance Plan). The Company Group and the Executive
          hereby acknowledge and agree that, subject to the continued employment of Executive through the Transition Date or upon Executive’s termination of employment resulting in a Qualifying Termination Date, Executive shall have incurred a termination
          of employment by the Company Group without “cause” as of the Transition Date (or such earlier Qualifying Termination Date) for purposes of any then-outstanding award originally granted by Gannett Media Corp. prior to the Effective Time under the
          Gannett Co., Inc. 2015 Omnibus Incentive Plan, and each other agreement by and between any member of the Company Group and Executive that contain such a term or provision. Executive acknowledges that Executive has read and understands this
          Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on Executive’s own
          judgment.  Executive acknowledges that Executive has had the opportunity to consult with legal counsel of Executive’s choice in connection with the drafting, negotiation and execution of this Agreement.

     

    
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    (f)         Fees and Expenses. The Company will reimburse (or cause to be reimbursed) Executive’s reasonable attorney’s fees incurred in connection with the negotiation of this Agreement up to a maximum
          of $10,000.  Such costs shall be paid to Executive promptly upon presentation of expense statements or other supporting information evidencing the incurrence of such expenses.

     

    (g)         Headings. The headings and captions in this Agreement are provided for reference and convenience only, shall not be considered part of this Agreement, and shall not be employed in the
          construction of this Agreement.

     

    (h)         Construction. This Agreement shall be deemed drafted equally by both the Parties, and any presumption or principle that the language is to be construed against either Party shall not apply.

     

    (i)          Counterparts.  This Agreement may be executed in several counterparts, each of which is an original and all of which shall constitute one instrument. It shall not be necessary in making
          proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

     

    (j)          Withholding.  The Company shall be entitled to withhold (or to cause the withholding of) the amount, if any, of all taxes of any applicable jurisdiction required to be withheld by an
          employer with respect to any amount paid to Executive hereunder. The Company, in its sole and absolute discretion, shall make all determinations as to whether it is obligated to withhold any taxes hereunder and the amount thereof.

     

    (k)         Section 409A.  The Parties intend for the payments and benefits under this Agreement to be exempt from Section 409A or, if not so
            exempt, to be paid or provided in a manner which complies with the requirements of such section, and intend that this Agreement shall be construed and administered in accordance with such intention.  If any payments or benefits due to the
            Executive hereunder would cause the application of an accelerated or additional tax under Section 409A, such payments or benefits shall be restructured in a manner which does not cause such an accelerated or additional tax, while endeavoring to
            maintain the economic intent of this Agreement.  For purposes of the limitations on nonqualified deferred compensation under Section 409A, each payment of compensation under this Agreement shall be treated as a separate payment of
            compensation.  Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A amounts that would otherwise be
            payable and benefits that would otherwise be provided pursuant to this Agreement during the six-month period immediately following the Executive’s separation from service shall instead be paid on the first business day after the date that is
            six months following the Executive’s termination date (or death, if earlier).

     

    [Signature Page Follows]

     

    
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    IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date and year first above written.

     

    
      	
               

            	GANNETT CO, INC. 
	
               

            	
               

            	
               

            
	
               

            	By:	/s/ Paul Bascobert 
	
               

            	
               

            	Name: Paul Bascobert
	
               

            	
               

            	Title:   President and Chief Executive Officer, Gannett Media Corp.
	 	 	 
	 	
              EXECUTIVE

            
	 	 	/s/ Alison Engel
	 	Alison Engelschn-ex101_180.htm

Exhibit 10.1

 

SCHNITZER STEEL INDUSTRIES, INC.

LONG-TERM INCENTIVE AWARD AGREEMENT

(FY2020-FY2022 Performance Period)

On November 14, 2019, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of Schnitzer Steel Industries, Inc. (the “Company”) authorized and granted a performance-based award to _________________ (“Recipient”) pursuant to Section 10 of the Company’s 1993 Stock Incentive Plan (the “Plan”).  By accepting this award, Recipient agrees to all of the terms and conditions of this Agreement.

1.Award.  Subject to the terms and conditions of this Agreement, the Company shall issue to the Recipient the number of shares of Class A Common Stock of the Company (“Performance Shares”) determined under this Agreement based on (a) the performance of the Company during the 3-year period from September 1, 2019 to August 31, 2022 (the “Performance Period”) as described in Section 2, (b) Recipient’s continued employment during the Performance Period as described in Section 3, and (c) Recipient’s not engaging in actions prohibited by Section 4.  Recipient’s “TSR Target Share Amount” for purposes of this Agreement is _______ shares and Recipient’s “ROCE Target Share Amount” for purposes of this Agreement is _______ shares.  This award does not include a dividend equivalent cash payment.

2.Performance Conditions.

2.1Payout Formula.  Subject to adjustment under Sections 3, 4, 5, 6, 7 and 8, the number of Performance Shares to be issued to Recipient shall be equal to the sum of (a) the TSR Payout Shares (as defined below), plus (b) the ROCE Payout Factor as determined under Section 2.3 below multiplied by the ROCE Target Share Amount.  The “TSR Payout Shares” shall be equal to the TSR Payout Factor as determined under Section 2.2 below multiplied by the TSR Target Share Amount; provided, however, that the number of TSR Payout Shares shall be reduced as necessary to ensure that the total value of the TSR Payout Shares at the time of payout (calculated by multiplying the Value (as defined in Section 7 below) by the number of TSR Payout Shares) shall not be more than 400% of the value of the TSR Target Share Amount on the date of this Agreement (calculated by multiplying the closing market price for Class A Common Stock on the date of this Agreement by the TSR Target Share Amount).

2.2TSR Payout Factor.

2.2.1The “TSR Payout Factor” shall be determined under the table below based on the Average TSR Percentile Rank of the Company; provided, however, that if the Three-Year TSR as determined under Section 2.2.5 below is less than 0%, the TSR Payout Factor shall not be greater than 100%.

 

	
Average

TSR Percentile Rank
	
 
	
TSR Payout Factor

	
 
	
 
	
 

	
less than 25%
	
 
	
0%

	
25%
	
 
	
50%

	
50%
	
 
	
100%

	
90% or more
	
 
	
200%

 

 

 

If the Company’s Average TSR Percentile Rank is between any two data points set forth in the first column of the above table, the TSR Payout Factor shall be determined by interpolation between the corresponding data points in the second column of the table as follows:  the difference between the Company’s Average TSR Percentile Rank and the lower data point shall be divided by the difference between the higher data point and the lower data point, the resulting fraction shall be multiplied by the difference between the two corresponding data points in the second column of the table, and the resulting product shall be added to the lower corresponding data point in the second column of the table, with the resulting sum being the TSR Payout Factor.

2.2.2The Company’s “Average TSR Percentile Rank” for the Performance Period shall be equal to the average of the TSR Percentile Ranks determined for each of the three fiscal years of the Performance Period.  To determine the Company’s “TSR Percentile Rank” for any fiscal year the TSR of the Company and each of the Peer Group Companies for that fiscal year shall be calculated, and the Peer Group Companies shall be ranked based on their respective TSR’s from lowest to highest.  If the Company’s TSR is equal to the TSR of any other Peer Group Company, the Company’s TSR Percentile Rank shall be equal to the number of Peer Group Companies with a lower TSR divided by the number that is one less than the total number of Peer Group Companies, with the resulting amount expressed as a percentage and rounded to the nearest tenth of a percentage point.  If the Company’s TSR is between the TSRs of any two Peer Group Companies, the TSR Percentile Ranks of those two Peer Group Companies shall be determined as set forth in the preceding sentence, and the Company’s TSR Percentile Rank shall be interpolated as follows.  The excess of the Company’s TSR over the TSR of the lower Peer Group Company shall be divided by the excess of the TSR of the higher Peer Group Company over the TSR of the lower Peer Group Company.  The resulting fraction shall be multiplied by the difference between the TSR Percentile Ranks of the two Peer Group Companies.  The product of that calculation shall be added to the TSR Percentile Rank of the lower Peer Group Company, and the resulting sum (rounded to the nearest tenth of a percentage point) shall be the Company’s TSR Percentile Rank.  The intent of this definition of TSR Percentile Rank is to produce the same result as calculated using the PERCENTRANK.INC function in Microsoft Excel to determine the rank of the Company’s TSR within the array consisting of the TSRs of the Peer Group Companies.

2.2.3The “Peer Group Companies” are AK Steel Holding Corporation, Allegheny Technologies Incorporated, Century Aluminum Company, Cleveland-Cliffs Inc., Coeur Mining, Inc., Commercial Metals Company, Gerdau S.A., Harsco Corporation, Hecla Mining Company, Minerals Technologies Inc., Nucor Corporation, Sims Metal Management Limited, Steel Dynamics, Inc., Suncoke Energy, Inc. and United States Steel Corporation.  If prior to the end of any fiscal year in the Performance Period, the common stock of any Peer Group Company ceases to be publicly traded for any reason, then such company shall no longer be considered a Peer Group Company for that fiscal year.

2.2.4Except as provided below for the first fiscal year of the Performance Period, the “TSR” for the Company and each Peer Group Company for any fiscal year shall be calculated by (1) assuming that $100 is invested in the common stock of the company at a price equal to the average of the closing market prices of the stock for the twenty trading day period ending on the last trading day of the prior fiscal year, (2) assuming that for each dividend paid on the stock during the fiscal year, the amount equal to the dividend paid on the assumed number of shares held is reinvested in additional shares at a price equal to the closing market price of the 

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stock on the ex-dividend date for the dividend, and (3) determining the final dollar value of the total assumed number of shares based on the average of the closing market prices of the stock for the twenty trading day period ending on the last trading day of the fiscal year.  The “TSR” shall then equal the amount determined by subtracting $100 from the foregoing final dollar value, dividing the result by 100 and expressing the resulting fraction as a percentage.  For the first fiscal year of the Performance Period, the fiscal year shall be deemed to be the period from the date of this Agreement to August 31, 2020, and the TSR calculation for each company shall be further modified by assuming that $100 is invested in the common stock of the company at a price equal to the closing market price of the stock on the date of this Agreement.  For Sims Metal Management Limited, all calculations shall be in Australian dollars.  For Gerdau S.A., all calculations shall be in Brazilian reals.

2.2.5The “Three-Year TSR” for the Company shall be calculated by (1) assuming that $100 is invested in the common stock of the Company at a price equal to the closing market price of the stock on the date of this Agreement, (2) assuming that for each dividend paid on the stock during the period from the date of this Agreement to the end of the Performance Period, the amount equal to the dividend paid on the assumed number of shares held is reinvested in additional shares at a price equal to the closing market price of the stock on the ex-dividend date for the dividend, and (3) determining the final dollar value of the total assumed number of shares based on the average of the closing market prices of the stock for the twenty trading day period ending on the last trading day of the Performance Period.  The “Three-Year TSR” shall then equal the amount determined by subtracting $100 from the foregoing final dollar value, dividing the result by 100 and expressing the resulting fraction as a percentage.

2.3ROCE Payout Factor.

2.3.1The “ROCE Payout Factor” shall be determined under the table below based on the Average ROCE of the Company for the Performance Period.

 

	
Average ROCE
	
 
	
ROCE Payout Factor

	
 
	
 
	
 

	
Less than      %
	
 
	
0%

	
       %
	
 
	
50%

	
       %
	
 
	
100%

	
       % or more
	
 
	
200%

 

If the Average ROCE is between any two data points set forth in the first column of the above table, the ROCE Payout Factor shall be determined by interpolation between the corresponding data points in the second column of the table as follows:  the difference between the Average ROCE and the lower data point shall be divided by the difference between the higher data point and the lower data point, the resulting fraction shall be multiplied by the difference between the two corresponding data points in the second column of the table, and the resulting product shall be added to the lower corresponding data point in the second column of the table, with the resulting sum being the ROCE Payout Factor.

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2.3.2The Company’s “Average ROCE” for the Performance Period shall be equal to the average of the ROCEs determined for each of the three fiscal years of the Performance Period.  The “ROCE” for any fiscal year shall be equal to Adjusted Net Income for that fiscal year divided by Average Adjusted Capital for that fiscal year, expressed as a percentage and rounded to the nearest hundredth of a percentage point.  “Adjusted Net Income” for any fiscal year shall mean the net income attributable to SSI for that fiscal year as set forth in the audited consolidated statement of operations of the Company and its subsidiaries for the fiscal year, and as adjusted in accordance with Section 2.4 below, increased by interest expense for that fiscal year, as set forth in the audited consolidated statement of operations of the Company and its subsidiaries for the fiscal year, adjusted to exclude the impact of the associated income tax determined in accordance with Section 2.4.9.  “Average Adjusted Capital” for any fiscal year shall mean the average of five (5) numbers consisting of the Adjusted Capital as of the last day of the fiscal year and as of the last day of the four preceding fiscal quarters.  “Adjusted Capital” as of any date shall mean (i) the Company’s total assets, as adjusted in accordance with Section 2.4 below, minus (ii) the Company’s total liabilities other than debt for borrowed money and finance lease liabilities, in each case as set forth in the consolidated balance sheet of the Company and its subsidiaries as of the applicable date or otherwise determined from the Company’s accounting records on a consistent basis.

2.4Adjustments.

2.4.1Change in Accounting Principle.  If the Company implements a change in accounting principle during the Performance Period either as a result of issuance of new accounting standards or otherwise, and the effect of the accounting change was not reflected in the Company’s business plan at the time of approval of this award, then the Adjusted Net Income and Adjusted Capital for each affected period shall be adjusted to eliminate the impact of the change in accounting principle.

2.4.2Restructuring Charges.  Adjusted Net Income for each fiscal year of the Performance Period and Adjusted Capital as of each quarter end used in calculating Average Adjusted Capital for any fiscal year of the Performance Period shall be adjusted to eliminate the impact of any restructuring charges and exit-related activities as set forth in the audited consolidated statement of operations of the Company and its subsidiaries for the applicable period.

2.4.3Impairments.  Adjusted Net Income for each fiscal year of the Performance Period and Adjusted Capital as of each quarter end used in calculating Average Adjusted Capital for any fiscal year of the Performance Period shall be adjusted to eliminate the impact of any charges, and reversal of charges, taken by the Company during the applicable period for impairment of goodwill or other assets as set forth in the audited consolidated statement of operations of the Company and its subsidiaries for the applicable period, as well as to add back to Adjusted Capital the amount of goodwill allocated to any business sold by the Company during the applicable period.

2.4.4Acquisition Impacts.  Adjusted Net Income for the last fiscal year of the Performance Period and Adjusted Capital as of each quarter end in the last fiscal year of the Performance Period shall be adjusted to eliminate any impact of business acquisitions or business combinations completed or reviewed (including incremental costs incurred solely as a result of the transaction, whether or not consummated) during that fiscal year.

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2.4.5Certain Environmental Accruals and Expenses.  Adjusted Capital as of each quarter end used in calculating Average Adjusted Capital for any fiscal year of the Performance Period and Adjusted Net Income for each fiscal year during the Performance Period shall be adjusted to eliminate the impact of any changes in environmental liabilities recorded for investigation and remediation costs and natural resource or other damage claims and any fines, penalties, indemnities, fees, costs and other expenses incurred in connection with or resulting from the Portland Harbor Superfund Site and the other environmental matters listed as adjustments in the Company’s Fiscal 2020 Operating Targets Environmental Adjustments document dated November 14, 2019, which document is available for review from the Company’s Legal Division (net of any insurance or other reimbursements thereof).

2.4.6Net Realizable Value Charges.  Adjusted Net Income for each fiscal year during the Performance Period shall be adjusted to eliminate any charges to reduce the recorded value of any inventory to net realizable value in connection with significant macroeconomic events.

2.4.7Accelerated Depreciation.  Adjusted Net Income for each fiscal year of the Performance Period and Adjusted Capital as of each quarter end used in calculating Average Adjusted Capital for any fiscal year of the Performance Period shall be adjusted to eliminate the impact of any incremental accelerated depreciation related to joint product equipment assets existing on September 1, 2019 which are made obsolete due to the Three Dimensional Separator (3DS) ASR Processing System technology investment during the Performance Period. 

2.4.8Utility Charges.  Adjusted Net Income for each fiscal year during the Performance Period shall be adjusted to eliminate any charges related to the settlement of any third-party claims in connection with a purported error on the part of a utility provider in the calculation and reporting of electricity consumption at one of the Company’s facilities.

2.4.9Tax Impacts.  All adjustments to Adjusted Net Income for the items listed in Sections 2.4.1 to 2.4.8 in any fiscal year shall be net of the discrete income tax impacts associated with each of the adjustments as certified by the Audit Committee based on the recommendation of the Chief Financial Officer.

3.Employment Condition.

3.1Full Payout.  In order to receive the full number of Performance Shares determined under Section 2, Recipient must be employed by the Company on the October 31 immediately following the end of the Performance Period (the “Vesting Date”).  For purposes of Sections 3 and 4, all references to the “Company” shall include the Company and its subsidiaries.

3.2Retirement; Termination Without Cause After 12 Months.  If Recipient’s employment with the Company is terminated at any time prior to the Vesting Date because of retirement (as defined in paragraph 6(a)(iv)(D) of the Plan), or if Recipient’s employment is terminated by the Company without Cause (as defined below) after the end of the 12th month of the Performance Period and prior to the Vesting Date, Recipient shall, subject to Section 4.1, be entitled to receive a pro-rated award to be paid following completion of the Performance Period.  The number of Performance Shares to be issued as a pro-rated award under this Section 3.2 shall 

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be determined by multiplying the number of Performance Shares determined under Section 2 by a fraction, the numerator of which is the number of days Recipient was employed by the Company since the beginning of the Performance Period and the denominator of which is the number of days in the period from the beginning of the Performance Period to the Vesting Date.  Any obligation of the Company to issue a pro-rated award under this Section 3.2 shall be subject to and conditioned upon the execution and delivery by Recipient no later than the Vesting Date of a Release of Claims in such form as may be requested by the Company.  For purposes of this Section 3.2, “Cause” shall mean (a) the conviction (including a plea of guilty or nolo contendere) of Recipient of a felony involving theft or moral turpitude or relating to the business of the Company, other than a felony predicated on Recipient's vicarious liability, (b) Recipient’s continued failure or refusal to perform with reasonable competence and in good faith any of the lawful duties assigned by (or any lawful directions of) the Company that are commensurate with Recipient’s position with the Company (not resulting from any illness, sickness or physical or mental incapacity), which continues after the Company has given notice thereof (and a reasonable opportunity to cure) to Recipient, (c) deception, fraud, misrepresentation or dishonesty by Recipient in connection with Recipient’s employment with the Company, (d) any incident materially compromising Recipient’s reputation or ability to represent the Company with the public, (e) any willful misconduct by Recipient that substantially impairs the Company’s business or reputation, or (f) any other willful misconduct by Recipient that is clearly inconsistent with Recipient’s position or responsibilities.

3.3Death or Disability.  If Recipient’s employment with the Company is terminated at any time prior to the Vesting Date because of death or disability, Recipient shall be entitled to receive a pro-rated award to be paid as soon as reasonably practicable following such event.  The term “disability” means a medically determinable physical or mental condition of Recipient resulting from bodily injury, disease, or mental disorder which is likely to continue for the remainder of Recipient’s life and which renders Recipient incapable of performing the job assigned to Recipient by the Company or any substantially equivalent replacement job.  For purposes of calculating the pro-rated award under this Section 3.3, the TSR Payout Factor and the ROCE Payout Factor shall both be calculated as if the Performance Period ended on the last day of the Company’s most recently completed fiscal quarter prior to the date of death or disability.  For this purpose, the TSR for the Company and each Peer Group Company for any partial fiscal year shall be determined based on the closing market prices of its stock for the twenty trading day period ending on the last day of the most recently completed fiscal quarter prior to the date of death or disability, before determining the Company’s TSR Percentile Rank for that partial fiscal year, and the Average TSR Percentile Rank shall be determined by averaging however many full and partial fiscal years for which a TSR Percentile Rank shall have been determined.  For this purpose, the Adjusted Net Income for any partial fiscal year shall be annualized (e.g., multiplied by 4/3 if the partial period is three quarters) and the Average Adjusted Capital shall be determined based on the average of Adjusted Capital as of the last day of only those quarters that have been completed, before determining the ROCE for that partial fiscal year, and the Average ROCE shall be determined by averaging however many full and partial fiscal years for which a ROCE shall have been determined.  The number of Performance Shares to be issued as a pro-rated award under this Section 3.3 shall be determined by multiplying the number of Performance Shares determined after applying the modifications described in the preceding sentences by a fraction, the numerator of which is the number of days Recipient was employed by the Company since the beginning of the Performance Period and the denominator of which is the number of days in the period from the beginning of the Performance Period to the Vesting Date.

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3.4Other Terminations.  If Recipient’s employment by the Company is terminated at any time prior to the Vesting Date and neither Section 3.2 nor Section 3.3 applies to such termination, Recipient shall not be entitled to receive any Performance Shares.

4.Non-Competition.

4.1Consequences of Violation.  If the Company determines that Recipient has engaged in an action prohibited by Section 4.2 below, then:

4.1.1Recipient shall immediately forfeit all rights under this Agreement to receive any unissued Performance Shares; and

4.1.2If Performance Shares were issued to Recipient following completion of the Performance Period, and the Company’s determination of a violation occurs on or before the first anniversary of the Vesting Date, Recipient shall repay to the Company (a) the number of shares of Common Stock issued to Recipient under this Agreement (the “Forfeited Shares”), plus (b) the amount of cash equal to the withholding taxes paid by withholding shares of Common Stock from Recipient as provided in Section 7.  If any Forfeited Shares are sold by Recipient prior to the Company’s demand for repayment, Recipient shall repay to the Company 100% of the proceeds of such sale or sales.  The Company may, in its sole discretion, reduce the amount to be repaid by Recipient to take into account the tax consequences of such repayment for Recipient.

4.2Prohibited Actions.  The consequences described in Section 4.1 shall apply if during Recipient’s employment with the Company, or at any time during the period of one year following termination of such employment, Recipient, directly or indirectly, owns, manages, controls, or participates in the ownership, management or control of, or is employed by, consults for, or is connected in any manner with:

4.2.1if Recipient is, or was at the time of termination of employment, employed by the Company’s Cascade Steel and Scrap Business (“CSS”), any business that (a) is engaged in the steel manufacturing business, (b) produces any of the same steel products as CSS, and (c) competes with CSS for sales to customers in California, Oregon, Washington, Nevada, British Columbia or Alberta;

4.2.2if Recipient is, or was at the time of termination of employment, employed by the Company’s Auto and Metals Recycling Business (“AMR”) or CSS, any business that (a) is engaged in the metals recycling business or the self-service used auto parts business, and (b) operates a metal recycling collection or processing facility or a self-service used auto parts store within 250 miles of any of AMR’s or CSS’ facilities or stores;

4.2.3if Recipient is, or was at the time of termination of employment, employed in the Company’s Corporate Shared Services Division, any business that is described in Section 4.2.1 or Section 4.2.2.

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5.Company Sale.

5.1If a Company Sale (as defined below) occurs before the Vesting Date, Recipient shall be entitled to receive an award payout no later than the earlier of fifteen (15) days following such event or the last day on which the Performance Shares could be issued so that Recipient may participate as a shareholder in receiving proceeds from the Company Sale.  The amount of the award payout under this Section 5.1 shall be the greater of (a) the sum of the TSR Target Share Amount and the ROCE Target Share Amount, or (b) the amount determined using a TSR Payout Factor and a ROCE Payout Factor each calculated as if the Performance Period ended on the last day of the Company’s most recently completed fiscal quarter prior to the date of the Company Sale.  For this purpose, the TSR for the Company and each Peer Group Company for any partial fiscal year shall be determined based on the closing market prices of its stock for the twenty trading day period ending on the last day of the most recently completed fiscal quarter prior to the date of the Company Sale, before determining the Company’s TSR Percentile Rank for that partial fiscal year, and the Average TSR Percentile Rank shall be determined by averaging however many full and partial fiscal years for which a TSR Percentile Rank shall have been determined.  For this purpose, the Adjusted Net Income for any partial fiscal year shall be annualized (e.g., multiplied by 4/3 if the partial period is three quarters) and the Average Adjusted Capital shall be determined based on the average of Adjusted Capital as of the last day of only those quarters that have been completed, before determining the ROCE for that partial fiscal year, and the Average ROCE shall be determined by averaging however many full and partial fiscal years for which a ROCE shall have been determined.

 

5.2For purposes of this Agreement, a “Company Sale” shall mean the occurrence of any of the following events:

5.2.1any consolidation, merger or plan of share exchange involving the Company (a “Merger”) in which the Company is not the continuing or surviving corporation or pursuant to which outstanding shares of Class A Common Stock would be converted into cash, other securities or other property; or

5.2.2any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company.

6.Certification and Payment.  As soon as practicable following the completion of the audit of the Company’s consolidated financial statements for the final fiscal year of the Performance Period, the Company shall calculate the TSR Payout Factor, the ROCE Payout Factor and the corresponding numbers of Performance Shares issuable to Recipient.  This calculation shall be submitted to the Committee.  No later than the Vesting Date the Committee shall certify in writing (which may consist of approved minutes of a Committee meeting) the levels of TSR and TSR Percentile Rank attained by the Company for each fiscal year of the Performance Period, the levels of ROCE attained by the Company for each fiscal year of the Performance Period, the Tax Impacts applied in calculating ROCE in each fiscal year and the number of Performance Shares issuable to Recipient based on the Company’s performance.  Subject to applicable tax withholding, the number of Performance Shares so certified shall be issued to Recipient as soon as practicable following the Vesting Date, but no Performance Shares shall be issued prior to certification.  No fractional shares shall be issued and the number of Performance Shares deliverable shall be rounded to the nearest whole share.  In the event of the death or disability of Recipient as described in Section 3.3 or a Company Sale as described in Section 5, each of which requires an award payout earlier than the Vesting Date, a similar calculation and certification process shall be followed within the time frames required by those sections.

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7.Tax Withholding.  Recipient acknowledges that, on the date the Performance Shares are issued to Recipient (the “Payment Date”), the Value (as defined below) on that date of the Performance Shares will be treated as ordinary compensation income for federal and state income and FICA tax purposes, and that the Company will be required to withhold taxes on these income amounts.  To satisfy the required minimum withholding amount, the Company shall withhold the number of Performance Shares having a Value equal to the minimum withholding amount.  For purposes of this Section 7, the “Value” of a Performance Share shall be equal to the closing market price for Class A Common Stock on the last trading day preceding the Payment Date.

8.Changes in Capital Structure.  If the outstanding Class A Common Stock of the Company is hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any stock split, combination of shares or dividend payable in shares, recapitalization or reclassification, appropriate adjustment shall be made by the Committee in the number and kind of shares subject to this Agreement so that the Recipient’s proportionate interest before and after the occurrence of the event is maintained.

9.Approvals. The obligations of the Company under this Agreement are subject to the approval of state, federal or foreign authorities or agencies with jurisdiction in the matter.  The Company will use its reasonable best efforts to take steps required by state, federal or foreign law or applicable regulations, including rules and regulations of the Securities and Exchange Commission and any stock exchange on which the Company’s shares may then be listed, in connection with the award evidenced by this Agreement.  The foregoing notwithstanding, the Company shall not be obligated to deliver Class A Common Stock under this Agreement if such delivery would violate or result in a violation of applicable state or federal securities laws.

10.No Right to Employment.  Nothing contained in this Agreement shall confer upon Recipient any right to be employed by the Company or to continue to provide services to the Company or to interfere in any way with the right of the Company to terminate Recipient’s services at any time for any reason, with or without cause.

11. Recoupment Policy.  The Recipient acknowledges and agrees that the Performance Shares shall be subject to the Company’s Executive Officer Incentive Compensation Recovery Policy, as the same may be amended from time to time or any replacement policy thereto, or as may be required by any applicable law (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder).

12.Miscellaneous.

12.1Entire Agreement.  This Agreement constitutes the entire agreement of the parties with regard to the subjects hereof.

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12.2Notices.  Any notice required or permitted under this Agreement shall be in writing and shall be deemed sufficient when delivered personally to the party to whom it is addressed or when deposited into the United States Mail as registered or certified mail, return receipt requested, postage prepaid, addressed to the Company, Attention: Corporate Secretary, at its principal executive offices or to Recipient at the address of Recipient in the Company’s records, or at such other address as such party may designate by ten (10) days’ advance written notice to the other party.

12.3Assignment; Rights and Benefits.  Recipient shall not assign this Agreement or any rights hereunder to any other party or parties without the prior written consent of the Company.  The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns and, subject to the foregoing restriction on assignment, be binding upon Recipient’s heirs, executors, administrators, successors and assigns.

12.4Further Action.  The parties agree to execute such instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.

12.5Applicable Law; Attorneys’ Fees.  The terms and conditions of this Agreement shall be governed by the laws of the State of Oregon.  In the event either party institutes litigation hereunder, the prevailing party shall be entitled to reasonable attorneys’ fees to be set by the trial court and, upon any appeal, the appellate court.

12.6Severability.  Each provision of this Agreement will be treated as a separate and independent clause and unenforceability of any one clause will in no way impact the enforceability of any other clause.  Should any of the provisions of this Agreement be found to be unreasonable or invalid by a court of competent jurisdiction, such provision will be enforceable to the maximum extent enforceable by the law of that jurisdiction.

 

	
SCHNITZER STEEL INDUSTRIES, INC.

	
 
	
 

	
By
	
 

	
Title
	
 

 

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