Exhibit 10.1

LSC COMMUNICATIONS, INC.

2016 PERFORMANCE INCENTIVE PLAN

(as adopted by the Board of Directors on April 6, 2017 and approved by the
stockholders on May 18, 2017)

 

I. General

1. Plan. To provide incentives to officers, other employees and other persons
providing services to LSC Communications, Inc. (the “Company”) through rewards
based upon the ownership or performance of the common stock, par value $0.01 per
share, of the Company (“common stock”) or other performance measures, the
Committee hereinafter designated may grant cash or bonus awards, stock options,
stock appreciation rights (“SARs”), restricted stock, stock units or
combinations thereof, to eligible participants, on the terms and subject to the
conditions stated in this Amended and Restated 2016 Performance Incentive Plan
(the “Plan”). This Amended and Restated 2016 Performance Incentive Plan
(i) replaces the Existing Company Plans for awards granted on or after the
Effective Date and (ii) amends and restates the Company’s 2016 Performance
Incentive Plan in its entirety effective as of the Effective Date. In addition,
to provide incentives to members of the Board of Directors (the “Board”) who are
not employees of the Company (“non-employee directors”), such non-employee
directors are eligible to receive awards as set forth in Article V of the Plan.
For purposes of the Plan, references to employment by or service to the Company
also means employment by or service to a direct or indirect majority-owned
subsidiary of the Company and employment by or service to any other entity
designated by the Board or the Committee in which the Company has a direct or
indirect equity interest. Capitalized terms not defined herein shall have the
meanings specified in the applicable award agreement.

2. Eligibility. Officers and other employees of, and other persons providing
services to the Company (“participants”) shall be eligible, upon selection by
the Committee, to receive cash or bonus awards, stock options, SARs, restricted
stock and stock units, either singly or in combination, as the Committee, in its
discretion, shall determine. In addition, non-employee directors shall receive
awards on the terms and subject to the conditions stated in the Plan.

3. Limitation on Shares to be Issued. Subject to adjustment as provided in
Section 5 of this Article I, 3,500,000 shares of common stock shall be available
under the Plan, reduced by the aggregate number of shares of common stock which
become subject to outstanding bonus awards, stock options, SARs which are not
granted in tandem with or by reference to a stock option (“free-standing SARs”),
restricted stock awards and stock unit awards. Shares subject to a grant or
award under the Plan (including shares awarded under the Plan prior to the date
of this amendment and restatement) which are not issued or delivered, by reason
of the expiration, termination, cancellation or forfeiture of all or a portion
of the grant or award or the settlement of the grant or award in cash shall
again be available for future grants and awards under the Plan; provided,
however, that for purposes of this sentence, stock options and SARs granted in
tandem with or by reference to a stock option granted prior to the grant of such
SARs (“tandem SARs”) shall be treated as one grant. Shares tendered or withheld
upon exercise of an option, vesting of restricted stock or stock units,
settlement of an SAR or upon any other event to pay exercise price or tax
withholding, or shares purchased by the Company using the proceeds of the
exercise

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a stock option, shall not be available for future issuance under the Plan. In
addition, upon exercise of an SAR, the total number of shares remaining
available for issuance under the Plan shall be reduced by the gross number of
shares for which the SAR is exercised.

For the purpose of complying with Section 162(m) of the Internal Revenue Code of
1986, as amended (the “Code”), and the rules and regulations thereunder, the
maximum number of shares of common stock with respect to which options or SARs
or a combination thereof may be granted during any calendar year to any person
shall be 1,500,000, subject to adjustment as provided in Section 5 of this
Article I; provided, however, that for purposes of this sentence, stock options
and tandem SARs shall be treated as one grant. If the Plan becomes effective, no
new grants shall be made under any equity plan of the Company that is in effect
as of the date immediately prior to the date of stockholder approval of the Plan
(the “Existing Company Plans”) and all such Existing Company Plans shall be
terminated, provided, however, that such termination shall have no effect on any
outstanding awards granted under any Existing Company Plan.

Shares of common stock to be issued may be treasury shares reacquired by the
Company or authorized and unissued shares, or a combination of both.

4. Administration of the Plan. The Plan shall be administered by a Committee
designated by the Board (the “Committee”), provided that the Board may designate
a separate committee, also meeting the requirements set forth in the following
sentence, to administer Article V hereof. Each member of the Committee shall be
a director that the Board has determined to be (i) an “outside director” within
the meaning of Section 162(m) of the Code, (ii) a “Non-Employee Director” within
the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) and (iii) “independent” within the meaning of the rules of
the principal stock exchange on which the common stock is traded. The Committee
shall, subject to the terms of the Plan, select eligible participants for grants
and awards; determine the form of each grant and award, either as cash, bonus
awards, stock options, SARs, restricted stock awards, stock unit awards or a
combination thereof; and determine the number of shares or units subject to the
grant or award, the fair market value of the common stock or units when
necessary, the timing and conditions of vesting, exercise or settlement, whether
dividends or dividend equivalents accrue under any award, and all other terms
and conditions of each grant and award, including, without limitation, the form
of instrument evidencing the grant or award. Notwithstanding the foregoing and
subject to Article V, all stock option awards, SARs, restricted stock awards and
stock unit awards, other than awards that are subject to performance-based
vesting conditions over a performance period of at least one year, shall have a
minimum vesting period of at least three years from the date of grant (such
vesting may, in the discretion of the Committee, occur in full at the end of
such period or may occur in specified installments over such period, provided
that no more than 40% of any particular award may vest by the end of the first
year following the date of grant and no more than 80% of any particular award
may vest by the end of the second year following the date of grant); provided,
however, that the Committee may provide for early vesting upon the death,
permanent and total disability, retirement or involuntary termination of service
of the award recipient. Notwithstanding the foregoing, up to 5% of the shares
available for grant under the Plan may be granted with a minimum vesting
schedule that is shorter than that mandated in this Section 4 of Article I. The
Committee may establish rules and regulations for the administration of the
Plan, interpret the Plan, and impose,

 

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incidental to a grant or award, conditions with respect to competitive
employment or other activities not inconsistent with the Plan. All such rules,
regulations, interpretations and conditions shall be conclusive and binding on
all parties. Notwithstanding anything in this Plan to the contrary and subject
to Section 5 of this Article I, to the extent required by the New York Stock
Exchange, or any other stock exchange on which shares of Common Stock are
traded, the Committee will not amend, replace, cancel or surrender in exchange
for cash or other consideration (in each case that has the effect of reducing
the exercise price) any previously granted option or SAR in a transaction that
constitutes a repricing, without the approval of the stockholders of the
Company.

Each grant and award shall be evidenced by a written instrument and no grant or
award shall be valid until an agreement is executed by the Company and such
grant or award shall be effective as of the effective date set forth in the
agreement. The Committee may delegate some or all of its power and authority
hereunder to the chief executive officer or other executive officer of the
Company as the Committee deems appropriate; provided, however, that the
Committee may not delegate its power and authority with regard to (i) the
selection for participation in the Plan of (A) a person who is a “covered
employee” within the meaning of Section 162(m) of the Code or who, in the
Committee’s judgment, is likely to be a covered employee at any time during the
period a grant or award hereunder to such participant would be outstanding,
(B) an officer or other person subject to Section 16 of the Exchange Act or
(C) a person who is not an employee of the Company or (ii) decisions concerning
the time, pricing or amount of a grant or award to a participant, officer or
other person described in clause (i) above. A majority of the Committee shall
constitute a quorum. The acts of the Committee shall be either (i) acts of a
majority of the members of the Committee present at any meeting at which a
quorum is present or (ii) acts approved in writing by all of the members of the
Committee without a meeting.

Notwithstanding anything to the contrary contained herein, the Board may, in its
sole discretion, at any time and from time to time, grant Awards or administer
the Plan. In any such case, the Board will have all of the authority and
responsibility granted to the Committee herein.

5. Adjustments. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event affecting the Company or its common stock, or any distribution to holders
of the Company’s common stock other than a regular cash dividend, the number,
class and kind of securities (including, for this purpose, securities of any
other entity that is a party to such transaction) available under the Plan, the
specific share limitations otherwise set forth in the Plan, the number, class
and kind of securities (including, for this purpose, securities of any other
entity that is a party to such transaction) subject to each outstanding bonus
award, the number, class and kind of securities (including, for this purpose,
securities of any other entity that is a party to such transaction) subject to
each outstanding stock option and the purchase price per security and the terms
of each outstanding SAR shall be appropriately adjusted by the Committee, such
adjustments to be made in the case of outstanding stock options and SARs without
an increase in the aggregate purchase price or base price. For purposes of the
Plan, the fair market value of the common stock on a specified date shall be the
closing market price of the common stock on such date, or, if no such trading in
the common stock occurred on such date, then on the next preceding date when
such trading occurred, or as otherwise determined by the Committee.

 

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6. Effective Date and Term of Plan. The Plan shall be submitted to the
stockholders of the Company for approval at the next meeting of stockholders
held following the Board’s adoption of the Plan and, if approved, shall become
effective on the date of such stockholder approval (the “Effective Date”). The
Plan shall terminate on the date on which shares are no longer available for
grants or awards under the Plan, unless terminated prior thereto by action of
the Board; provided, however that if the Plan itself has not previously
terminated, Section 1 of Article V shall terminate on the date that is ten years
from the date of stockholder approval of the Plan. No further grants or awards
shall be made under the Plan after termination, but termination shall not affect
the rights of any participant under any grants or awards made prior to
termination.

7. Amendments. The Plan may be amended or terminated by the Board in any respect
except that no amendment may be made without stockholder approval if stockholder
approval is required by applicable law, rule or regulation, including
Section 162(m) of the Code, or such amendment would increase (subject to
Section 5 of this Article I) the number of shares available under the Plan or
would amend the prohibition on repricing of awards set forth in Section 4 of
this Article I or otherwise permit the repricing of awards granted hereunder. No
amendment may impair the rights of a holder of an outstanding grant or award
without the consent of such holder.

8. Indemnification. No member of the Board, Committee or any person to whom the
Committee delegates its powers, responsibilities or duties in writing, including
by resolution (each such person, a “Covered Person”), will have any liability to
any person (including any grantee) for any action taken or omitted to be taken
or any determination made with respect to the Plan or any award, except as
expressly provided by statute. Each Covered Person will be indemnified and held
harmless by the Company against and from:

(a) any loss, cost, liability or expense (including attorneys’ fees) that may be
imposed upon or incurred by such Covered Person in connection with or resulting
from any action, suit or proceeding to which such Covered Person may be a party
or in which such Covered Person may be involved by reason of any action taken or
omitted to be taken under the Plan or any award agreement, in each case, in good
faith and

(b) any and all amounts paid by such Covered Person, with the Company’s
approval, in settlement thereof, or paid by such Covered Person in satisfaction
of any judgment in any such action, suit or proceeding against such Covered
Person, provided that the Company will have the right, at its own expense, to
assume and defend any such action, suit or proceeding and, once the Company
gives notice of its intent to assume the defense, the Company will have sole
control over such defense with counsel of the Company’s choice.

The foregoing right of indemnification will not be available to a Covered Person
to the extent that a court of competent jurisdiction in a final judgment or
other final adjudication, in either case, not subject to further appeal,
determines that the acts or omissions of such Covered Person giving rise to the
indemnification claim resulted from such Covered Person’s bad faith, fraud or
willful misconduct. The foregoing right of indemnification will not be exclusive
of any other

 

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rights of indemnification to which Covered Persons may be entitled under the
Company’s articles of incorporation or bylaws, pursuant to any individual
indemnification agreements between such Covered Person and the Company, as a
matter of law, or otherwise, or any other power that the Company may have to
indemnify such persons or hold them harmless.

 

II. Bonus Awards

1. Form of Award. Bonus awards, whether performance awards or fixed awards, may
be made to eligible participants in the form of (i) cash, whether in an absolute
amount or as a percentage of compensation, (ii) stock units, each of which is
substantially the equivalent of a share of common stock but for the power to
vote and, if the Committee so determines, in its sole discretion, the
entitlement to an amount equal to dividends or other distributions otherwise
payable on a like number of shares of common stock, (iii) shares of common stock
issued to the participant but forfeitable and with restrictions on transfer in
any form as hereinafter provided or (iv) any combination of the foregoing.

2. Performance Awards. (a) Awards may be made in terms of a stated potential
maximum dollar amount, percentage of compensation or number of units or shares,
with such actual amount, percentage or number to be determined by reference to
the level of achievement of corporate, sector, business unit, division,
individual or other specific performance goals over a performance period of not
less than one nor more than ten years, as determined by the Committee.

(b) Performance awards will be determined based on the attainment of written
objective performance goals approved by the Committee for a performance period
established by the Committee (i) while the outcome for that performance period
is substantially uncertain and (ii) no more than 90 days after the commencement
of the performance period to which the performance goal relates or, if the
performance period is less than one year, the number of days which is equal to
25% of the relevant performance period. At the same time as the performance
goals are established, the Committee will prescribe a formula to determine the
amount of the performance award that may be payable based upon the level of
attainment of the performance goals during the performance period.

(c) Following the completion of each performance period, the Committee will have
the sole discretion to determine whether the applicable performance goals,
including the corporate financial target under the Company’s Annual Incentive
Plan, have been met with respect to a given grantee and, if they have, will so
certify in writing and ascertain the amount of the applicable performance award.
No performance award will be paid for such performance period until such
certification is made by the Committee. The amount of the performance award
actually paid to a given grantee may be less (but not more) than the amount
determined by the applicable performance goal formula, at the discretion of the
Committee. The amount of the performance award determined by the Committee for a
performance period will be paid to the grantee at such time as determined by the
Committee in its sole discretion after the end of such performance period.

(d) In no event shall any participant receive a payment with respect to any
performance award if the minimum threshold performance goals requirement
applicable to the payment is not achieved during the performance period.

 

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(e) If the Committee desires that compensation payable pursuant to performance
awards be “qualified performance-based compensation” within the meaning of
Section 162(m) of the Code, then with respect to such performance awards, for
any calendar year (i) the maximum compensation payable pursuant to any such
performance awards granted during such year, to the extent payment thereunder is
determined by reference to shares of common stock (or the fair market value
thereof), shall not exceed 900,000 shares of common stock (or the fair market
value thereof), subject to adjustment as set forth in Section 5 of Article I,
and (ii) the maximum compensation payable pursuant to any such performance
awards granted during such year, to the extent payment is not determined by
reference to shares of common stock, shall not exceed $9,000,000. The limits set
forth in this Section (e) of Article II shall be proportionately increased for
performance periods that are longer than 12 months.

(f) The Committee may provide in any agreement evidencing a performance award
under the Plan that the Committee shall retain sole discretion to reduce the
amount of or eliminate any payment otherwise payable to a participant with
respect to any performance award. If so provided in any agreement evidencing a
performance award, the Committee may exercise such discretion by establishing
conditions for payments in addition to the performance goals, including the
achievement of financial, strategic or individual goals, which may be objective
or subjective, as it deems appropriate.

(g) For purposes of the Plan, “performance goals” means the objectives
established by the Committee which shall be satisfied or met during the
applicable performance period as a condition to a participant’s receipt of all
or a part of a performance-based award under the Plan. The performance goals
shall be tied to one or more of the following business criteria, determined with
respect to the Company or the applicable sector, business unit or division: net
sales; cost of sales; gross profit; earnings from operations; earnings before
interest, taxes, depreciation and amortization; earnings before income taxes;
earnings before interest and taxes; cash flow measures; return on equity; return
on assets; return on net assets employed; return on capital; working capital;
leverage ratio; stock price measures; enterprise value; safety measures; net
income per common share (basic or diluted); EVA™ (Economic Value Added, which
represents the cash operating earnings of the Company after deducting a charge
for capital employed); cost reduction objectives or, in the case of awards not
intended to be “qualified performance-based compensation” within the meaning of
Section 162(m) of the Internal Revenue Code, any other similar criteria
established by the Plan Committee for the applicable performance period. The
Committee may provide in any agreement evidencing a performance award under the
Plan that the Committee shall amend or adjust the performance goals or other
terms or conditions of an outstanding award in recognition of unusual or
nonrecurring events. If the Committee desires that compensation payable pursuant
to any award subject to performance goals be “qualified performance-based
compensation” within the meaning of Section 162(m) of the Code, the performance
goals (i) shall be established by the Committee no later than 90 days after the
beginning of the applicable performance period (or such other time designated by
the Internal Revenue

 

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Service) and (ii) shall satisfy all other applicable requirements imposed under
Treasury Regulations promulgated under Section 162(m) of the Code, including the
requirement that such performance goals be stated in terms of an objective
formula or standard.

3. Fixed Awards. Awards may be made which are not contingent on the achievement
of specific objectives, but are contingent on the participant’s continuing in
the Company’s employ for a period specified in the award.

4. Rights with Respect to Restricted Shares. If shares of restricted common
stock are subject to an award, the participant shall have the right, unless and
until such award is forfeited or unless otherwise determined by the Committee at
the time of grant, to vote the shares and to receive dividends thereon from the
date of grant and the right to participate in any capital adjustment applicable
to all holders of common stock; provided, however, that (i)distributions with
respect to shares of common stock and (ii) regular cash dividends with respect
to shares of restricted common stock, in each case, whether subject to
time-based or performance-based vesting conditions, shall be deposited with the
Company and shall be subject to the same restrictions as the shares of
restricted common stock with respect to which any such distribution or dividend
was made.

During the restriction period, the shares subject to a restricted stock award
shall be held in book entry form, with the restrictions, terms and conditions
duly noted, or alternatively a certificate or certificates representing
restricted shares shall be registered in the holder’s name or the name of a
nominee of the Company and may bear a legend, in addition to any legend which
may be required under applicable laws, rules or regulations, indicating that the
ownership of the shares of common stock represented by such certificate is
subject to the restrictions, terms and conditions of the Plan and the agreement
relating to the shares of restricted common stock. All such certificates shall
be deposited with the Company, together with stock powers or other instruments
of assignment (including a power of attorney), each endorsed in blank with a
guarantee of signature if deemed necessary or appropriate, which would permit
transfer to the Company of all or a portion of the shares of common stock
subject to the award in the event such award is forfeited in whole or in part.
Upon termination of any applicable restriction period, including, if applicable,
the satisfaction or achievement of applicable objectives, and subject to the
Company’s right to require payment of any taxes, the requisite number of shares
of common stock shall be delivered to the holder of such award.

5. Rights with Respect to Stock Units. If stock units are credited to a
participant pursuant to an award, then, except as otherwise provided by the
Committee in its sole discretion, amounts equal to dividends and other
distributions otherwise payable on a like number of shares of common stock after
the crediting of the units (unless the record date for such dividends or other
distributions precedes the date of grant of such award) shall be credited to a
notional account for the participant and shall be subject to the same vesting
conditions as the related stock unit award and interest may be credited on the
account at a rate determined by the Committee. The Committee may grant awards of
stock units in such amounts and subject to such terms and conditions as the
Committee may determine. A grantee of a stock unit will have only the rights of
a general unsecured creditor of the Company, until delivery of shares, cash or
other securities or property is made as specified in the applicable award
agreement. On the delivery date specified in the award agreement, the grantee of
each stock unit not previously forfeited or terminated will receive one share of
common stock, cash or other securities or property equal in value to a share of
common stock or a combination thereof, as specified by the Committee.

 

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6. Events Upon Vesting. At the time of vesting of an award made pursuant to this
Article II, (i) the award (and any dividend equivalents, other distributions and
interest which have been credited), if in units, shall be paid to the
participant either in shares of common stock equal to the number of units, in
cash equal to the fair market value of such shares, or in such combination
thereof as the Committee shall determine, (ii) the award, if a cash bonus award,
shall be paid to the participant either in cash, or in shares of common stock
with a then fair market value equal to the amount of such award, or in such
combination thereof as the Committee shall determine and (iii) shares of
restricted common stock issued pursuant to an award shall be released from the
restrictions.

 

III. Stock Options

1. Options for Eligible Participants. Options to purchase shares of common stock
may be granted to such eligible participants as may be selected by the
Committee. These options may, but need not, constitute “incentive stock options”
under Section 422 of the Code. To the extent that the aggregate fair market
value (determined as of the date of grant) of shares of common stock with
respect to which options designated as incentive stock options are exercisable
for the first time by an optionee during any calendar year (under the Plan or
any other plan of the Company, or any parent or subsidiary) exceeds the amount
(currently $100,000) established by the Code, such options shall not constitute
incentive stock options. No incentive stock options may be granted under the
Plan after the earlier of the tenth anniversary of (a) the date the Plan is
approved by the Board or (b) the effective date of the Plan.

2. Number of Shares and Purchase Price. The number of shares of common stock
subject to an option and the purchase price per share of common stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of common stock shall not
be less than 100% of the fair market value of a share of common stock on the
date of grant of the option; provided, further, that if an incentive stock
option shall be granted to any person who, on the date of grant of such option,
owns capital stock possessing more than ten percent of the total combined voting
power of all classes of capital stock of the Company (or of any parent or
subsidiary) (a “Ten Percent Holder”), the purchase price per share of common
stock shall be the price (currently 110% of fair market value) required by the
Code in order to constitute an incentive stock option.

3. Exercise of Options. The period during which options granted hereunder may be
exercised shall be determined by the Committee; provided, however, that no stock
option shall be exercised later than ten years after its date of grant; provided
further, that if an incentive stock option shall be granted to a Ten Percent
Holder, such option shall not be exercisable more than five years after its date
of grant. The Committee may, in its discretion, establish performance measures
which shall be satisfied or met as a condition to the grant of an option or to
the exercisability of all or a portion of an option. The Committee shall
determine whether an option shall become exercisable in cumulative or
non-cumulative installments and in part or in full at any time. An exercisable
option, or portion thereof, may be exercised only with respect to whole shares
of common stock.

 

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An option may be exercised (i) by giving written notice to the Company (or
following other procedures designated by the Company) specifying the number of
whole shares of common stock to be purchased and accompanied by payment therefor
in full (or arrangement made for such payment to the Company’s satisfaction)
either (A) in cash, (B) in previously owned whole shares of common stock (for
which the optionee has good title free and clear of all liens and encumbrances)
having a fair market value, determined as of the date of exercise, equal to the
aggregate purchase price payable by reason of such exercise, (C) by authorizing
the Company to withhold whole shares of Common Stock that would otherwise be
delivered having a fair market value, determined as of the date of exercise,
equal to the aggregate purchase price payable by reason of such exercise, (D) in
cash by a broker-dealer acceptable to the Company to whom the optionee has
submitted an irrevocable notice of exercise, (E) to the extent expressly
authorized by the Committee, via a cashless exercise arrangement with the
Company or (F) a combination of (A) and (B), (ii) if applicable, by surrendering
to the Company any SARs which are canceled by reason of the exercise of the
option and (iii) by executing such documents as the Company may reasonably
request. The Committee shall have the sole discretion to disapprove of an
election pursuant to clause (D). Any fraction of a share of common stock which
would be required to pay such purchase price shall be disregarded and the
remaining amount due shall be paid in cash by the optionee. No shares of common
stock shall be delivered until the full purchase price therefor has been paid.

4. No Dividend Equivalent Rights. No dividend equivalents shall be paid or shall
accrue with respect to any shares of common stock subject to an option.

 

IV. Stock Appreciation Rights

1. Grants. Free-standing SARs entitling the grantee to receive cash or shares of
common stock having a fair market value equal to the appreciation in market
value of a stated number of shares of common stock from the date of grant to the
date of exercise of such SARs, or in the case of tandem SARs, from the date of
grant of the related stock option to the date of exercise of such tandem SARs,
may be granted to such participants as may be selected by the Committee. The
holder of a tandem SAR may elect to exercise either the option or the SAR, but
not both. Tandem SARs shall be automatically canceled upon exercise of the
related stock option.

2. Number of SARs and Base Price. The number of SARs subject to a grant shall be
determined by the Committee. Any tandem SAR related to an incentive stock option
shall be granted at the same time that such incentive stock option is granted.
The base price of a tandem SAR shall be the purchase price per share of common
stock of the related option. The base price of a free-standing SAR shall be
determined by the Committee; provided, however, that such base price shall not
be less than 100% of the fair market value of a share of common stock on the
date of grant of such SAR.

3. Exercise of SARs. The agreement relating to a grant of SARs may specify
whether such grant shall be settled in shares of common stock (including
restricted shares of common stock) or cash or a combination thereof. Upon
exercise of an SAR, the grantee shall be paid the excess of the then fair market
value of the number of shares of common stock to which the SAR relates over the
base price of the SAR. Such excess shall be paid in cash or in shares of common

 

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stock having a fair market value equal to such excess or in such combination
thereof as the Committee shall determine. The period during which SARs granted
hereunder may be exercised shall be determined by the Committee; provided,
however, no SAR shall be exercised later than ten years after the date of its
grant; and provided, further, that no tandem SAR shall be exercised if the
related option has expired or has been canceled or forfeited or has otherwise
terminated. The Committee may, in its discretion, establish performance measures
which shall be satisfied or met as a condition to the grant of an SAR or to the
exercisability of all or a portion of an SAR. The Committee shall determine
whether an SAR may be exercised in cumulative or non-cumulative installments and
in part or in full at any time. An exercisable SAR, or portion thereof, may be
exercised, in the case of a tandem SAR, only with respect to whole shares of
common stock and, in the case of a free-standing SAR, only with respect to a
whole number of SARs. If an SAR is exercised for restricted shares of common
stock, the restricted shares shall be issued in accordance with Section 4 of
Article II and the holder of such restricted shares shall have such rights of a
stockholder of the Company as determined pursuant to such Section. Prior to the
exercise of an SAR for shares of common stock, including restricted shares, the
holder of such SAR shall have no rights as a stockholder of the Company with
respect to the shares of common stock subject to such SAR.

A tandem SAR may be exercised (i) by giving written notice to the Company (or
following other procedures designated by the Company) specifying the number of
whole SARs which are being exercised, (ii) by surrendering to the Company any
options which are canceled by reason of the exercise of such SAR and (iii) by
executing such documents as the Company may reasonably request. A free-standing
SAR may be exercised (i) by giving written notice to the Company specifying the
whole number of SARs which are being exercised and (ii) by executing such
documents as the Company may reasonably request.

4. No Dividend Equivalent Rights. No dividend equivalents shall be paid or shall
accrue with respect to any shares of common stock subject to a SAR.

 

V. Awards to Non-Employee Directors

1. Annual Grants to Non-Employee Directors. On the date of the Company’s 2017
annual meeting of stockholders, and on the date of each subsequent annual
meeting prior to the termination of this Section 1, the Company shall make an
award under the Plan to each individual who is, immediately following such
annual meeting, a non-employee director. Awards granted pursuant to this
Section 1 of Article V shall be in the form of stock options, restricted stock,
stock units or SARs. The form of such awards, and the number of shares subject
to each such award, shall be determined by a committee meeting the requirements
for the Committee described above in Section 4 of Article I in the exercise of
its sole discretion. Notwithstanding anything to the contrary set forth
elsewhere in the Plan, an award granted to a non-employee director pursuant to
this Section 1 of Article V shall have a minimum vesting period of one year from
the date of grant and is subject to the limits on compensation in Section 3 of
this Article V.

2. Elective Options for Non-Employee Directors. Each non-employee director may
from time to time elect, in accordance with procedures to be specified by the
Committee, to receive in lieu of all or part of any annual base cash retainer
fee for services as a director of the Company, any fees for attendance at
meetings of the Board or any committee of the Board and

 

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any fees for serving as a member or chairman of any committee of the Board that
would otherwise be payable to such non-employee director (“Fees”), an option to
purchase shares of common stock, which option shall have a value (as determined
in accordance with the Black-Scholes stock option valuation method) as of the
date of grant of such option equal to the amount of such Fees and which shall be
subject to all of the terms and conditions set forth in Article III of the Plan.
Notwithstanding anything to the contrary set forth elsewhere in the Plan, an
option granted to a non-employee director pursuant to this Section 2 of Article
V shall become exercisable in full on the first anniversary of the date of
grant.

3. Limits on Compensation to Non-Employee Directors. No non-employee director of
the Company may be granted (in any calendar year) compensation with a value in
excess of $900,000, with the value of any equity-based awards based on the
accounting grant date value of such award.

 

VI. Other

1. Non-Transferability of Options and Stock Appreciation Rights. No option or
SAR shall be transferable other than (i) by will, the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company or (ii) as otherwise set forth in the agreement relating to such option
or SAR. Each option or SAR may be exercised during the participant’s lifetime
only by the participant or the participant’s guardian, legal representative or
similar person or the permitted transferee of the participant. Except as
permitted by the second preceding sentence, no option or SAR may be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed
of (whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so sell, transfer, assign,
pledge, hypothecate, encumber or otherwise dispose of any option or SAR, such
award and all rights thereunder shall immediately become null and void.

2. Tax Withholding. The Company shall have the right to require, prior to the
issuance or delivery of any shares of common stock or the payment of any cash
pursuant to a grant or award hereunder, payment by the holder thereof of any
federal, state, local or other taxes which may be required to be withheld or
paid in connection therewith. An agreement may provide that (i) the Company
shall withhold whole shares of common stock which would otherwise be delivered
to a holder, having an aggregate fair market value determined as of the date the
obligation to withhold or pay taxes arises in connection therewith (the “Tax
Date”), or withhold an amount of cash which would otherwise be payable to a
holder, in the amount necessary to satisfy any such obligation or (ii) the
holder may satisfy any such obligation by any of the following means: (A) a cash
payment to the Company, (B) delivery to the Company of previously owned whole
shares of common stock (which the holder has held for at least six months prior
to the delivery of such shares or which the holder purchased on the open market
and for which the holder has good title, free and clear of all liens and
encumbrances) having an aggregate fair market value determined as of the Tax
Date, equal to the amount necessary to satisfy any such obligation,
(C) authorizing the Company to withhold whole shares of common stock which would
otherwise be delivered having an aggregate fair market value determined as of
the Tax Date or withhold an amount of cash which would otherwise be payable to a
holder, equal to the amount necessary to satisfy any such liability, (D) in the
case of the exercise of an

 

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option, a cash payment by a broker-dealer acceptable to the Company to whom the
optionee has submitted an irrevocable notice of exercise or (E) any combination
of (A), (B) and (C); provided, however, that the Committee shall have sole
discretion to disapprove of an election involving clause (D). An agreement
relating to a grant or award hereunder may not provide for shares of common
stock to be withheld having an aggregate fair market value in excess of the
minimum amount of taxes required to be withheld. Any fraction of a share of
common stock which would be required to satisfy such an obligation shall be
disregarded and the remaining amount due shall be paid in cash by the holder.

3. Acceleration Upon Change in Control. If while (i) any performance award or
fixed award granted under Article II is outstanding, (ii) any stock option
granted under Article III of the Plan or SAR granted under Article IV of the
Plan is outstanding or (iii) any award made to non-employee directors pursuant
to Article V (“nonemployee director awards”) is outstanding:

(a) any “person,” as such term is defined in Section 3(a)(9) of the Exchange
Act, as modified and used in Section 13(d) and 14(d) thereof (but not including
(i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company) (hereinafter a “Person”)
is or becomes the beneficial owner, as defined in Rule 13d-3 of the Exchange
Act, directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired directly
from the Company or its affiliates, excluding an acquisition resulting from the
exercise of a conversion or exchange privilege in respect of outstanding
convertible or exchangeable securities) representing 50% or more of the combined
voting power of the Company’s then outstanding securities; or

(b) during any period of two (2) consecutive years beginning on the date that
stockholders approve the Plan, individuals who at the beginning of such period
constitute the Board and any new director (other than a director designated by a
Person who has entered into any agreement with the Company to effect a
transaction described in Clause (a), (c) or (d) of this Section) whose election
by the Board or nomination for election by the Company’s stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or

(c) a merger or consolidation of the Company with any other corporation
(hereinafter, a “Corporate Transaction”) is consummated, other than (i) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving or acquiring entity), in combination with the ownership of any trustee
or other fiduciary holding securities under an employee benefit plan of the
Company, at least 50% of the combined voting power of the voting securities of
the Company or such surviving or acquiring entity outstanding

 

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immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person acquires more than 50% of the combined
voting power of the Company’s then outstanding securities; or

(d) the stockholders of the Company approve a plan of complete liquidation of
the Company or for the consummation of the sale or disposition by the Company of
all or substantially all of the Company’s assets,

(any of such events being hereinafter referred to as a “Change in Control”),
then unless the Committee determines otherwise or as otherwise provided in the
applicable award agreement, if a grantee’s Employment is terminated by the
Company or any successor entity thereto without Cause, or the grantee resigns
his or her Employment for Good Reason, in either case, on or within two
(2) years after a Change in Control, (i) each award granted to such grantee
prior to such Change in Control will become fully vested (including the lapsing
of all restrictions and conditions) and, as applicable, exercisable, and
(ii) any shares deliverable pursuant to restricted stock units will be delivered
promptly (but no later than 15 days) following such grantee’s termination of
Employment. As of the Change in Control date, any outstanding performance awards
shall be deemed earned at the greater of the target level and, to the extent
determinable, the actual performance level at the date of the Change in Control
with respect to all open performance periods and will cease to be subject to any
further performance conditions but will continue to be subject to time-based
vesting following the Change in Control in accordance with the original
performance period. In connection with such Change in Control, the Board (as
constituted prior to the Change in Control) may, in its discretion:

(i) require that shares of capital stock of the corporation resulting from or
succeeding to the business of the Company pursuant to such Change in Control, or
a parent corporation thereof, be substituted for some or all of the shares of
common stock subject to an outstanding award, with an appropriate and equitable
adjustment to such award as determined by the Committee in accordance with
Section 5 of Article I; and/or

(ii) require outstanding awards, in whole or in part, to be surrendered to the
Company by the holder, and to be immediately cancelled by the Company, and to
provide for the holder to receive (a) a cash payment in an amount equal to
(1) in the case of an option or an SAR, the number of shares of common stock
then subject to the portion of such option or SAR surrendered multiplied by the
excess, if any, of the fair market value of a share of common stock as of the
date of the Change in Control, over the exercise price or base price per share
of common stock subject to such option or SAR, (2) in the case of a restricted
stock award, stock unit award or bonus award denominated in shares of common
stock, the number of shares of common stock then subject to the portion of such
award surrendered, multiplied by the fair market value of a share of common
stock as of the date of the Change in Control, and (3) in the case of a bonus
award denominated in cash, the value of the bonus award then subject to the
portion of such award surrendered; (b) shares of capital stock of the
corporation resulting from or succeeding to the business of the Company pursuant
to such Change in

 

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Control, or a parent corporation thereof, having a fair market value not less
than the amount determined under clause (a) above; or (c) a combination of the
payment of cash pursuant to clause (a) above and the issuance of shares pursuant
to clause (b) above.

4. Section 409A. All awards made under the Plan that are intended to be
“deferred compensation” subject to Section 409A will be interpreted,
administered and construed to comply with Section 409A, and all awards made
under the Plan that are intended to be exempt from Section 409A will be
interpreted, administered and construed to comply with and preserve such
exemption. The Board and the Committee will have full authority to give effect
to the intent of the foregoing sentence. To the extent necessary to give effect
to this intent, in the case of any conflict or potential inconsistency between
the Plan and a provision of any award or award agreement with respect to an
award, the Plan will govern. Without limiting the generality of this Section,
with respect to any award made under the Plan that is intended to be “deferred
compensation” subject to Section 409A:

(a) any payment due upon a grantee’s termination of employment will be paid only
upon such grantee’s separation from service from the Company within the meaning
of Section 409A;

(b) Any payment due upon a Change in Control of the Company will be paid only if
such Change in Control constitutes a “change in ownership” or “change in
effective control” within the meaning of Section 409A, and in the event that
such Change in Control does not constitute a “change in the ownership” or
“change in the effective control” within the meaning of Section 409A, such award
will vest upon the Change in Control and any payment will be delayed until the
first compliant date under Section 409A;

(c) any payment to be made with respect to such award in connection with the
grantee’s separation from service from the Company within the meaning of
Section 409A (and any other payment that would be subject to the limitations in
Section 409A(a)(2)(B) of the Code) will be delayed until six months after the
grantee’s separation from service (or earlier death) in accordance with the
requirements of Section 409A;

(d) if any payment to be made with respect to such award would occur at a time
when the tax deduction with respect to such payment would be limited or
eliminated by Section 162(m) of the Code, such payment may be deferred by the
Company under the circumstances described in Section 409A until the earliest
date that the Company reasonably anticipates that the deduction or payment will
not be limited or eliminated;

(e) to the extent necessary to comply with Section 409A, any other securities,
other awards or other property that the Company may deliver in lieu of shares in
respect of an award will not have the effect of deferring delivery or payment
beyond the date on which such delivery or payment would occur with respect to
the shares that would otherwise have been deliverable (unless the Committee
elects a later date for this purpose in accordance with the requirements of
Section 409A);

 

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(f) with respect to any required consent under an applicable award agreement, if
such consent has not been effected or obtained as of the latest date provided by
such award agreement for payment in respect of such award and further delay of
payment is not permitted in accordance with the requirements of Section 409A,
such award or portion thereof, as applicable, will be forfeited and terminate
notwithstanding any prior earning or vesting;

(g) if the award includes a “series of installment payments” (within the meaning
of Section 1.409A-2(b)(2)(iii) of the Treasury Regulations), the grantee’s right
to the series of installment payments will be treated as a right to a series of
separate payments and not as a right to a single payment;

(h) if the award includes “dividend equivalents” (within the meaning of
Section 1.409A-3(e) of the Treasury Regulations), the grantee’s right to the
dividend equivalents will be treated separately from the right to other amounts
under the award; and

(i) for purposes of determining whether the grantee has experienced a separation
from service from the Company within the meaning of Section 409A, “subsidiary”
will mean a corporation or other entity in a chain of corporations or other
entities in which each corporation or other entity, starting with the Company,
has a controlling interest in another corporation or other entity in the chain,
ending with such corporation or other entity. For purposes of the preceding
sentence, the term “controlling interest” has the same meaning as provided in
Section 1.414(c)-2(b)(2)(i) of the Treasury Regulations, provided that the
language “at least 20 percent” is used instead of “at least 80 percent” each
place it appears in Section 1.414(c)-2(b)(2)(i) of the Treasury Regulations.

5. Restrictions on Shares. Each grant and award made hereunder shall be subject
to the requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of common stock subject thereto upon
any securities exchange or under any law, or the consent or approval of any
governmental body, or the taking of any other action is necessary or desirable
as a condition of, or in connection with, the delivery of shares thereunder,
such shares shall not be delivered unless such listing, registration,
qualification, consent, approval or other action shall have been effected or
obtained, free of any conditions not acceptable to the Company. The Company may
require that certificates evidencing shares of common stock delivered pursuant
to any grant or award made hereunder bear a legend indicating that the sale,
transfer or other disposition thereof by the holder is prohibited except in
compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.

6. No Right of Participation or Employment. No person (other than non-employee
directors to the extent provided in Article V) shall have any right to
participate in the Plan. Neither the Plan nor any grant or award made hereunder
shall confer upon any person any right to employment or continued employment by
the Company, any subsidiary or any affiliate of the Company or affect in any
manner the right of the Company, any subsidiary or any affiliate of the Company
to terminate the employment of any person at any time without liability
hereunder.

7. Rights as Stockholder. No person shall have any right as a stockholder of the
Company with respect to any shares of common stock or other equity security of
the Company which is subject to a grant or award hereunder unless and until such
person becomes a stockholder of record with respect to such shares of common
stock or equity security.

 

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8. Awards Subject to Clawback. The awards and any cash payment or securities
delivered pursuant to an award are subject to forfeiture, recovery by the
Company or other action pursuant to the applicable award agreement or any
clawback or recoupment policy which the Company may adopt from time to time,
including without limitation any such policy which the Company may be required
to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and
implementing rules and regulations thereunder, or as otherwise required by law.

9. Nonassignability; No Hedging. Unless otherwise provided in an award
agreement, no award (or any rights and obligations thereunder) granted to any
person under the Plan may be sold, exchanged, transferred, assigned, pledged,
hypothecated or otherwise disposed of or hedged in violation of the Company
policy on hedging, in any manner (including through the use of any cash-settled
instrument), whether voluntarily or involuntarily and whether by operation of
law or otherwise, other than by will or by the laws of descent and distribution,
and all such awards (and any rights thereunder) will be exercisable during the
life of the grantee only by the grantee or the grantee’s legal representative.
Notwithstanding the foregoing, the Committee may permit, under such terms and
conditions that it deems appropriate in its sole discretion, a grantee to
transfer any award to any person or entity that the Committee so determines. Any
sale, exchange, transfer, assignment, pledge, hypothecation, or other
disposition in violation of the provisions of this Section or Company policy
will be null and void and any award which is hedged in any manner will
immediately be forfeited. All of the terms and conditions of the Plan and the
award agreements will be binding upon any permitted successors and assigns.

10. Right of Offset. The Company will have the right to offset against its
obligation to deliver shares (or other property or cash) under the Plan or any
award agreement any outstanding amounts (including, without limitation, travel
and entertainment or advance account balances, loans, repayment obligations
under any awards, or amounts repayable to the Company pursuant to tax
equalization, housing, automobile or other employee programs) that the grantee
then owes to the Company and any amounts the Committee otherwise deems
appropriate pursuant to any tax equalization policy or agreement.
Notwithstanding the foregoing, if an award provides for the deferral of
compensation within the meaning of Section 409A of the Code, the Committee will
have no right to offset against its obligation to deliver shares (or other
property or cash) under the Plan or any award agreement if such offset could
subject the grantee to the additional tax imposed under Section 409A of the Code
in respect of an outstanding award.

11. Governing Law. The Plan, each grant and award hereunder and the related
agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Delaware and construed in
accordance therewith without giving effect to principles of conflicts of laws.

12. Foreign Participants. Notwithstanding any provision of the Plan to the
contrary the Committee may, with a view to both promoting achievement of the
purposes of the Plan and complying with (i) provisions of laws in countries
outside the United States in which the Company or its subsidiaries operate or
have employees and (ii) the rules of any foreign stock

 

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exchange upon which the common stock may be listed, determine which persons
outside the United States shall be eligible to participate in the Plan on such
terms and conditions different from those specified in the Plan as may in the
judgment of the Committee be necessary or advisable and, to that end, the
Committee may establish sub-plans, modified option exercise procedures and other
terms and procedures.

13. Insider Limits. Notwithstanding any other provision of the Plan, (i) the
maximum number of shares of common stock which may be reserved for issuance to
insiders (as defined in the Ontario Securities Act) under the Plan, together
with any other previously established or proposed incentive plan, shall not
exceed 10% of the outstanding shares of common stock, (ii) the maximum number of
shares of common stock which may be issued to insiders under the Plan, together
with any other previously established or proposed incentive plan, within any one
year period shall not exceed 10% of the outstanding shares of common stock, and
(iii) the maximum number of shares of common stock which may be issued to any
one insider and his or her associates under the Plan, together with any other
previously established or proposed incentive plan, within a one-year period,
shall not exceed 5% of the outstanding shares of common stock.

14. Waiver of Jury Trial. Each grantee waives any right it may have to trial by
jury in respect of any litigation based on, arising out of, under or in
connection with the Plan.

15. Waiver of Claims. Each grantee of an award recognizes and agrees that before
being selected by the Committee to receive an award the grantee has no right to
any benefits under the Plan. Accordingly, in consideration of the grantee’s
receipt of any award hereunder, the grantee expressly waives any right to
contest the amount of any award, the terms of any award agreement, any
determination, action or omission hereunder or under any award agreement by the
Committee, the Company or the Board, or any amendment to the Plan or any award
agreement (other than an amendment to the Plan or an award agreement to which
his or her consent is expressly required by the express terms of an award
agreement). Nothing contained in the Plan, and no action taken pursuant to its
provisions, will create or be construed to create a trust of any kind or a
fiduciary relationship between the Company and any grantee. The Plan is not
intended to be subject to the Employee Retirement Income Security Act of 1974
(ERISA), as amended.

16. Severability; Entire Agreement. If any of the provisions of the Plan or any
award agreement is finally held to be invalid, illegal or unenforceable (whether
in whole or in part), such provision will be deemed modified to the extent, but
only to the extent, of such invalidity, illegality or unenforceability and the
remaining provisions will not be affected thereby; provided that if any of such
provisions is finally held to be invalid, illegal, or unenforceable because it
exceeds the maximum scope determined to be acceptable to permit such provision
to be enforceable, such provision will be deemed to be modified to the minimum
extent necessary to modify such scope in order to make such provision
enforceable hereunder. The Plan and any award agreements contain the entire
agreement of the parties with respect to the subject matter thereof and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations and warranties between them, whether written or
oral with respect to the subject matter thereof.

 

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17. No Liability With Respect to Tax Qualification or Adverse Tax Treatment.
Notwithstanding anything to the contrary contained herein, in no event will the
Company be liable to a grantee on account of an award’s failure to (a) qualify
for favorable United States or foreign tax treatment or (b) avoid adverse tax
treatment under United States or foreign law, including, without limitation,
Section 409A.

18. No Third-Party Beneficiaries. Except as expressly provided in an award
Agreement, neither the Plan nor any award agreement will confer on any person
other than the Company and the grantee of any award any rights or remedies
thereunder. The exculpation and indemnification provisions of Section 1.8 will
inure to the benefit of a Covered Person’s estate and beneficiaries and
legatees.

19. Successors and Assigns of the Company. The terms of the Plan will be binding
upon and inure to the benefit of the Company and any successor entity, including
as contemplated by Section 6.3.

20. Approval of Plan. The Plan and all grants and awards made hereunder shall be
null and void if the adoption of the Plan is not approved by the affirmative
vote of a majority of the shares of common stock present in person or
represented by proxy at the next meeting of stockholders following the Board’s
adoption of the Plan.

 

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