2018 Guide to Effective Proxies

2.17.7 Alternative pay calculations | 413 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES CENTURYLINK, INC. CLEARWATER PAPER CORPORATION DEVON ENERGY CORPORATION ENDO INTERNATIONAL PLC Asthischartillustrates,ourCEO’srealizablepayhasaveraged55%overthelast3years,specifically49%, 57%and58%ofhistotaltargetcompensationforyears2015,2016and2017,respectively.Therealizablepay foreachpayelementofpaythatimpactedourCEO’srealizablepayisdiscussedfurtheraboveinthisSubsection undertheheadings“—Short-TermIncentivePerformance,”“—Long-TermIncentivePerformance”and“Stock Performance.” $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 $16,000,000 2017Realizable Pay 2017 Target Comp 2016Realizable Pay 2016 Target Comp 2015Realizable Pay 2015 Target Comp 2015-2017Realizable Pay BaseSalary STI TBRS PBRS:CoreRevenue PBRS:TSR Cash: Integra�onAward PBRS: Integra�onAward III. Our Compensation Program Objectives and Components of Pay OurCompensationPractices Toassistusinachievingourbroadcompensationgoals,weapplythefollowingpractices(manyofwhich aredescribedfurtherelsewhereinthisCD&A): WhatWeDo… • Focuson performance-basedcompensation weightedheavilytowardslong-termincentiveawards • Benchmarkagainst50 th percentile peercompensationlevels • Maintainrobust stockownershipguidelines applicabletoourexecutiveofficersandoutsidedirectors • Annuallyreviewourcompensationprograms toavoidencouragingexcessivelyriskybehavior • Conduct annual“say-on-pay”votes • Periodically seekinputfromshareholders onourexecutivecompensationprogram • Maintainacompensation “clawback”policy • Impose compensationforfeiturecovenants broaderthanthosemandatedbylaw • Reviewthecompositionofour peergroupsatleastannually • Conduct independentandintensiveperformancereviews ofourseniorofficers • CapthenumberofrelativeTSRperformance-basedsharesthatmayvestifourownTSRisnegative • Reviewrealizablepay ofourseniorofficersandtotalcompensation“tally”sheets • Require shareholderstoapproveanyfutureseveranceagreements valuedatmorethan2.99timesthe executive’stargetcashcompensation 48 2015-2017RealizablePay2015TargetComp2015RealizablePay2016TargetComp2016RealizablePay2017TargetComp2017RealizablePayBaseSalarySTITBRSPBRS:CoreRevenuePBRS:TSRCash:IntegrationAwardPBRS:IntegrationAward Clearwater Paper Corporation 2018 23 2015-2017 CEO Target Pay vs. Realized Pay During the 2015-2017 period, when our TSR was -33.2%, our CEO’s realized pay was 46% lower than aggregate target pay, demonstrating the strong link between pay outcomes and company stock price performance. Specifically, our CEO’s realized pay was directly and significantly reduced by: • below-target annual incentive pay outcomes, • below-threshold or zero performance share pay outcomes, and • underwater option awards for 2 of the past 3 grants. The chart below compares our CEO’s target pay versus realized pay for this three-year period: (1) TargetPay– consists ofbase salary, targetannual incentive cashbonus amountand the fair value atgrantof equity awards (i.e.,Black-Scholes for stockoptions and the closingpriceofour common stockon thedate of thegrant forRSUs),excluding other compensationpaid. (2) RealizedPay consists ofbase salary,annual Incentive cash bonusatactual payout levels,RSUs, stock options less exercise price, andoutstandingPSUawards atprojectedpayout (currently0%) for the2016–2017 tranche,and at0% for the rTSR component for the 2017–2019 tranche.PSU,RSU and stock option valueswere calculatedusingour closing stock price of $45.40 as ofDecember29, 2017. CEO Stock Ownership Ms. Massman holds 192,681 shares as of December 31, 2017, and has not sold any shares during her tenure with the company. These actions further support Ms. Massman’s alignment with the long-term success of the company and our stockholders. 46% TargetPay (1) RealizedPay (2) $11,600 $6,249 PSUs$0 PSUs$2,863 Options$2,863 RSUs$625 RSUs$455 Options$595 AIP $2,625 AIP $2,574 Base $2,625 Base $2,625 2015-2017 CEO Pay - Target vs Realized ($000) (AsofDecember29,2017priceof$45.40) PleaseseethebelowexampleforMr.Campanelli,whichcomparesexpectedtargetcompensationvalueswithrealizedvalues basedonactualresultsthroughtherecorddateofApril13,2018.Asdemonstratedbythisexample,equitycompensationlev- elsreflectareductionofapproximately67%,withoverallcompensationlevelsreducedbyapproximately52%.SeeSummary Compensation Table’s footnote (1) on page 53 for details regarding LTI valuations under ASC 718 for accounting and proxy reportingpurposes. TotalCashCompensation EquityCompensation TargetedValue RealizedValue $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $3.72 $2.09 $11.32 $2.77 $13.4Million $6.5Million TheinformationdisclosedintheCD&AsectiondetailstheactionsapprovedbytheCompensationCommitteeandexplainsthe steps taken to support the Company’s executive management team charged with advancing Endo’s strategic imperatives, financialperformanceandoperatingobjectives. Pay-for-performanceIncentivePlanDesign TheCompany’scompensationprogramsconsistofelementsdesignedtocomplementeachotherandrewardachievementof short-term and long-term objectives. This is achieved by tying the Company’s compensation programs to its performance through the establishment and achievement of strategic operating metrics, or as a function of the Company’s Total Share- holder Return (TSR). We have chosen the selected metrics to align employee compensation, including compensation for the NEOs as disclosedintheSummaryCompensation Tablelocatedunderthesectionentitled“Compensation ofExecutiveOffi- cers and Directors,” to the Company’s strategic operating results and business strategy in an effort to enhance shareholder value.ThesummarybelowreflectstheincentiveprogramenhancementsimplementedandmaintainedbyEndoinaneffortto optimizepay-for-performance: Pay-for-performanceIncentivePlanDesign Highconcentrationonvariableshort-andlong-termincentivecompensation Incentive-based compensationaccountsforamajorityofthecompensationprovidedtoEndo’sNEOs;over90%forMr.Campanelli, withallother NEOsaveragingover75% PSUdesignwithmeasurementbasedonrelativeTSRandfreecashflowperformanceoverathree-yearperformanceperiod LTIawardsgrantedtoemployeesaregenerallyrequiredtovest,ataminimum,overathree-yearperiod Equityplansprohibitthere-pricingofequityawardswithoutshareholderapproval “Doubletrigger”changeincontrolprovision Equityplansdonotallowforcashbuyoutsofunderwateroptions As the Company’s shareholders consider the evolution of Endo’s pay-for-performance practices, consideration should be given to the significant progress made in recentyears (see“Compensation Discussion and Analysis”). Based on the Compa- ny’sperformanceandcompetitivepositioningofpay,CEOpay-for-performancehasdemonstratedahighdegreeofalignment withEndo’sPayComparatorCompaniesacrossmultiplequantitativescreens. 19 NAMED EXECUTIVE COMPENSATION (cont’d) 5 BonustargetsfortheNEOsareasfollows:Mr.Hager-135%;Mr.Ritenour–90%;Mr.Mitchell–100%;Mr.Vaughn-100%;Mr. Taylor–90%;and,Mr.Marcum-80%. 6 Allamountscalculatedusingtheface-valuemethod(valuedividedbytheclosingpriceoftheCompanystockasofthegrant effectivedate). 7 Mr. Ritenour was appointed Executive Vice President and Chief Financial Officer in April 2017. Mr. Mitchell, the former ExecutiveVicePresidentandChiefFinancialOfficer,lefttheCompanyinApril2017. Effect of Company Performance on President and CEO Realizable Pay Changes in stock price and performance over the vesting or performance period of LTI cause the value ultimately received by the executive to differ from the target grant value. The measurement of realizable pay seeks to include such changes when comparing pay received, or trending to be received, to the target pay granted. The following chart demonstrates that the executive compensation program is meeting one of its key objectives, which is tying pay to Company TSR performance. The chart compares Mr. Dave Hager’s target pay at the time of compensation decisions for the applicable year to realizable pay as of December 31, 2017. The chart illustrates that strong relative and overall TSR performance—like that of 2016—drives realizable pay above targets while weak relative and overall TSR performance results in pay below target—such as that for 2015 and 2017. President and CEO Realizable Pay 1 -%TSRChange -29.5% 32.1% -8.8% 9th 9th 10th -25.2% 26.1% -14.4% -%Difference between Realizable andTarget Pay -DevonTSR Positionwithin 15Company PeerGroup $0 $2,000 $8,000 $14,000 $4,000 $6,000 $10,000 $12,000 $16,000 Performance ShareUnits PerformanceRestricted Stock Cash Performance Bonus Base Salary 2016 Pay 2015 Pay 2017 Pay Target $8,628 Realizable $6,449 Target $11,496 Realizable $14,498 Target $11,496 Realizable $9,841 1 Alldollaramountsshowninthousands. Explanatory notes to “President and CEO Realizable Pay” chart Amounts shown for each “Target” column reflect (1) base salary paid during the year, (2) Bonus target for the year and (3) face value (shares multiplied by grant date fair market value) of the Performance Restricted Stock and Performance Share Units granted at the beginning of the year. 49 Commitment Runs Deep