SCHN 2017 Proxy Statement

Compensation of Executive Officers • the consummation of a sale of all or substantially all of the Company’s assets or an acquisition of the Company through a merger or share exchange. “Cause” generally includes willful and continued failure to substantially perform assigned duties or willfully engaging in illegal conduct injurious to the Company, and “good reason” generally includes a change in position or responsibilities that does not represent a promotion, a decrease in compensation, or a base office relocation. The Company has also entered into change-in-control agreements with the other NEOs which provide certain benefits if the officer’s employment is terminated by the Company without “cause” or by the officer for “good reason” within 18 months after a “change in control” of the Company. These agreements contain definitions of “change in control,” “cause,” and “good reason” which are substantially identical to those contained in the change-in-control agreement for the CEO. The Company granted LTIP performance shares to the NEOs in fiscal 2015, 2016, and 2017 pursuant to which shares of Class A common stock will be issued based on the Company’s performance during the applicable performance periods relating to the awards. The award agreements relating to the LTIP performance shares provide for an accelerated payout of the performance shares upon a “Company sale,” which generally means a sale of the Company by means of a merger, share exchange, or sale of substantially all of the assets of the Company. In addition, award agreements relating to all outstanding RSUs provide for accelerated vesting on a change in control of the Company (which has the same meaning as under the change-in-control agreements). An accelerated payout of LTIP performance shares and accelerated vesting of RSUs would occur even if the NEO’s employment was not terminated in connection with the Company sale or change in control. The following table sets forth the estimated change-in-control benefits that would have been payable to each NEO if a change in control (including a Company sale) had occurred on August 31, 2017 and, except as noted, each officer’s employment had been terminated on that date either by the Company without “cause” or by the officer with “good reason.” Name Cash Severance Benefit ($) (1) Insurance Continuation ($) (2) Restricted Stock Unit Acceleration ($) (3) LTIP Performance Shares Acceleration ($) (4) Tax Gross-up Payment ($) (5) 280G Cut-Back ($) (5) Total ($) Tamara L. Lundgren 9,572,379 233,916 6,776,192 6,904,962 8,715,786 — 32,203,235 Richard D. Peach 1,714,500 34,366 1,680,928 1,893,733 — (217,989) 5,105,538 Michael R. Henderson 1,458,000 27,376 1,291,201 1,479,394 — (753,068) 3,502,903 Steven G. Heiskell 1,176,188 22,651 1,049,666 1,479,394 — — 3,727,899 Peter B. Saba 1,131,142 32,584 491,005 893,994 — (443,221) 2,105,504 (1) Cash Severance Benefit. The change-in-control agreements provide for cash severance equal to a multiple (three for Ms. Lundgren, and one and one-half for Messrs. Peach, Henderson, Heiskell, and Saba) times the sum of (a) the officer’s base salary plus (b) the greater of (1) the average of the officer’s last three annual bonuses, except that for Ms. Lundgren the amount taken into account for any such bonus shall not exceed three times the target bonus for such year, or (2) the most recently established target bonus. The change-in-control agreements also provide for a payment of all or a portion of the annual bonus for the year in which termination occurs. The table above does not include a bonus payment for fiscal 2017 because bonuses earned for fiscal 2017 are included in the Summary Compensation Table and no additional amount would have been earned in fiscal 2017 if the officer had terminated employment as of August 31, 2017. (2) Insurance Continuation. If cash severance benefits are triggered, the change-in-control agreements also provide for continuation of Company paid life, accident and medical insurance benefits for up to 36 months following termination of employment for Ms. Lundgren, and up to 18 months for Messrs. Peach, Henderson, Heiskell, and Saba, except to the extent similar benefits are provided by a subsequent employer. The amounts in the table above represent 36 or 18 months, as applicable, of life, accident and medical insurance benefit payments at the rates paid by the Company for each of these officers as of August 31, 2017. (3) RSU Acceleration. All RSUs for all NEOs will immediately vest on a change in control of the Company, whether or not the officer’s employment is terminated in connection with the change in control. Information regarding unvested RSUs held by the NEOs is set forth in the “Outstanding Equity Awards” table. The amounts in the table above represent the number of shares subject to unvested RSUs multiplied by a stock price of $26.90 per share, which was the closing price of the Company’s Class A common stock on August 31, 2017, the last trading day of fiscal 2017. (4) LTIP Performance Share Acceleration. Under the terms of the standard LTIP performance share award agreements, upon a Company sale, each NEO would receive a payout in an amount equal to the greater of (a) 100% of the target share amount or (b) the payout calculated as if the performance period had ended on the last day of the Company’s most recently completed fiscal quarter prior to the date of the Company sale, taking into account provisions in the award agreements for calculating performance for a shorter performance period and a partial year. The accelerated payouts would occur whether or not the officer’s employment was terminated in connection with the Company sale. The amounts in the table above represent the value of outstanding LTIP performance share awards that would vest and be paid out pursuant to the terms of the award agreements on a Company sale based on a stock price of $26.90 per share, which was the closing price of the Company’s Class A common stock on August 31, 2017, the last trading day of fiscal 2017. (5) 280G Tax Gross-up Payment and Cut-Back. If any payments to Ms. Lundgren and Mr. Peach in connection with a change in control are subject to the 20% excise tax on “excess parachute payments” as defined in Section 280G of the Code, the Company is required under the change-in-control agreements to make a tax gross-up payment to the NEO sufficient so that the NEO will receive benefits as if no excise tax were payable. However, for Mr. Peach there is a cut-back provision that provides that if the “parachute value” is less than 110% of the Safe Harbor amount (as such terms are defined in the change-of-control agreement), no additional payment is required and the amounts payable to the NEO will be reduced to 2.99 times the NEO’s “base amount.” The change-in-control agreements for each of Messrs. Henderson, Heiskell and Saba do not provide for any tax gross-up payment, but do provide that if any payments to the NEO would be “excess parachute payments” the NEO’s benefits would be cut-back to 2.99 times the NEO’s “base amount” if it would result in a greater net after-tax benefit for the NEO. The cut-back amounts shown above for Messrs. Peach, Henderson and Saba represent the estimated amount of the reduction to avoid a penalty tax under Section 280G of the Code. 58 | Notice of Annual Meeting of Shareholders and 2017 Proxy Statement