DFS Proxy Statement

Compensation Discussion and Analysis ANNUAL INCENTIVE PLAN The threshold and corporate financial targets under the AIP for 2016 were set by the RRD HR Committee at the beginning of the year following the presentation of the annual operating budget to the RRD Board of Directors. The table below sets forth a description of such targets and the individual performance goals under the AIP. Target/Goals Metric Treatment in the Spin and Payout Threshold Target • $7 billion in consolidated RRD revenue for 2016 • No pro-ration for the Spin • RRD HR Committee determined attainment as of December 31, 2016 • Target was attained Corporate Financial Target • Non-GAAP reported EBITDA of $867.6 million • Defined as net earnings attributable to RRD common stockholders adjusted for income attributable to non-controlling interests, income taxes, interest expense, investment and other income, depreciation and amortization, restructurings and impairments, acquisition- related expenses and certain other charges or credits • Pro-rated to the Spin Date based on seasonality as determined by the RRD HR Committee • RRD HR Committee determined attainment as of the Spin Date • Pre-Spin attainment of $823.0 million Non-GAAP reported EBITDA • Payout of 12% for the first three quarters of the year or 9% Individual Performance Goals • Vary by individual and vary year to year depending upon key business objectives and areas of emphasis for each individual • Awards may be modified downward by achievement levels on individual performance goals 2016 AIP target as a percentage of base salary was 150% for Mr. Leib. The 2016 pre-Spin performance payout curve (which was the same curve as used in 2015) was structured as follows: • Payout is 0% if the threshold target is not attained; • Payout starts at 90% of the corporate financial target, with an AIP payout of 10%; • Payouts scale upward from 10% to 100%, with the corporate financial target needing to be attained for Plan to fund at 100%; and • Performance at 110% of the corporate financial target would result in an AIP payout at 150%. The RRD HR Committee has the discretionary authority to increase or decrease the amount of the AIP award of employees not designated as “covered employees” under section 162(m) of the Internal Revenue Code if the RRD HR Committee determined, prior to the end of the plan year, that an adjustment was appropriate to better reflect the actual performance of RRD and/or the participant. The RRD HR Committee could not increase the amount of the award payable to a person who was a “covered employee” to an amount in excess of the amount earned under the 2012 RRD Performance Incentive Plan. The RRD HR Committee had discretionary authority to decrease the amount of any AIP award otherwise payable at any time for any person designated as an executive officer of RRD for purposes of Section 16 of the Securities Exchange Act of 1934, including after the end of the plan year. Additionally, the RRD HR Committee had discretionary authority to reduce the amount of the award otherwise payable if it determined that any participant had engaged in misconduct. RRD SPIN COST REDUCTION INCENTIVE In early 2016, to maintain focus on the work to be done for the Spin as well as a focus on effecting the Spin in the most cost- effective manner, the RRD HR Committee implemented a spin cost reduction incentive, or the Spin Cost Reduction Incentive, under the RRD AIP, which granted a cash award to each of the Pre-Spin NEOs other than the RRD CEO (who received no bonus with respect to the Spin), in an amount equal to 1x the recipient’s then-current salary to be paid in March 2017 if the total costs incurred by RRD in connection with the Spin (excluding debt and financing costs) were equal to or less than $169 million. The RRD HR Committee determined this threshold after reviewing comparable transactions and their costs. After the Spin, the RRD HR 2017 Proxy Statement 25