2018 Resolute Forest Products Inc. Short-Term Incentive Plan - U.S

As a means of rewarding employees for their contribution towards the success of the Company, a 2018 Short‑Term Incentive Plan (STIP) has been implemented. The STIP is designed to link a portion of employees’ total compensation to the attainment of specific, measurable, and bottom-line oriented key company performance indicators as well as to recognize and reward individual performance.

The Plan applies to non-unionized, regular, salaried employees of the Pulp and Paper Group and Wood Products Group working in the United States. Eligibility for or receipt of incentive pay should not be considered as automatic, retroactive or precedent based.

The STIP relates to the achievement of performance goals over the period from January 1, 2018 to December 31, 2018.

The STIP is designed to reflect the different employee accountabilities and diversity of positions. In order to tie incentive payouts to employee performance and the achievement of key performance indicators, the STIP’s design is adapted to all groups of employees: Operations, Sales and Corporate.

The amount of award that employees are eligible to receive is expressed as a certain percentage of their base salary (eligible earnings in the case of non-exempt salaried employees) as determined by their grade level. Base salary is the rate in effect at December 31, 2018. The Company determines the threshold, target and maximum incentive payouts for participants, which vary per grade level. Immediate managers are responsible to inform their employees of their respective threshold, target and maximum incentive award payouts.

4    Incentive payouts are within the complete and sole discretion of the Company.

4    The Company will approve actual achievement of performance metrics and individual awards based on actual achievement before awards are granted and paid, subject to the overall maximum incentive payout described below under “Maximum and Minimum Payout”.

4    The Company has the right to adjust any or all awards; this includes the right to eliminate any or all awards for any year despite achievement of performance metrics, even if such decision is made after the end of the performance period.

4    The Company may modify, suspend, amend or terminate the STIP at any time.

4    Any payment made under this plan is subject to the Company's recoupment policy.

4    With respect to any employee, the Company reserves the right to reduce or even cancel incentive awards in the event an employee has demonstrated an inadequate level of performance, whether or not the applicable performance metrics have been met.

4    Adjustments may be made to the financial metrics for closure costs, impairment charges and other related charges, severance costs, net loss or gain on the disposition of assets, strategic capital expenditures and similar items.

4    Adjustments may be made to the cost metrics for specific reasons such as market downtime, major variation in grade mix, major changes in input price, restructuring or reorganization costs, and similar items.

4    Any adjustment to the performance metrics has to be formally approved before implementation.

4    Awards under the STIP are to be paid in a lump sum no later than March 15, 2019.

Incentive payout depends on the Company performance as well as on employees’ individual performance. Below are performance metrics derived from corporate and divisional objectives.

The Short-Term Incentive Plan payout will be calculated at the end of the calendar year, based on Company performance to derive a potential incentive award for each plan participant.

Eighty-five percent (85%) of the calculated potential incentive payout, based on the company results, will be reserved for payment to all eligible employees with an adequate level of performance. The remaining fifteen percent (15%) of the calculated potential incentive payout will constitute an Individual Performance Pool (or reserve) dedicated for distribution to eligible employees based on their individual performance, as illustrated below.

An Individual Performance Component has been created to better align short-term incentive awards with each eligible employee’s performance. The Individual Performance Component payout can fall in the range of 0% to 30% of each employee’s short-term incentive target, based on the company results.

The individual performance payout for each employee will be determined based on each employee’s individual contribution during the performance period, as assessed by management, exercising managerial judgment and subject to the availability of funds in the pool.

Factors to be considered by management in making determination of individual performance payout include the following:

As outlined under “Discretionary Plan and Plan Administration,” the Company reserves the right to reduce awards or even to cancel the awards for all employees whose performance is inadequate, whether or not the applicable performance metrics have been met.

The creation of the Individual Performance Pool and the allocation of such pool to eligible employees cannot result in increasing the total amount of awards payable under the plan, such amount being determined based on performance metrics and subject to the maximum available envelope as set out in the following paragraph.

Employees hired into a regular position on or before September 30, 2018 are eligible to participate in the STIP on a prorated basis, effective upon their date of hire. Employees hired into a regular position on or after October 1, 2018 are not eligible for participation in the STIP.

4    If an employee is promoted or demoted to a position covered by a different incentive payout level, any incentive payout calculation will be prorated for time spent in respective positions. In either case, the base salary rate used to determine the prorated incentive payout will be the base salary rate in effect at December 31, 2018.

4    If an employee is transferred internally, any incentive payout calculation will be prorated for time spent in respective locations or groups. The base salary rate used to determine the prorated incentive payout will be the base salary rate in effect at December 31, 2018.

4    If an employee’s status changes from temporary salaried, unionized salaried or hourly to regular non-unionized salaried (and vice versa) during the performance period, the employee will be eligible to participate for time spent as a regular non-unionized salaried employee, and any incentive payout calculation will be prorated for time spent as a regular non-unionized salaried employee. The base salary rate used to determine the prorated incentive payout will be the base salary rate in effect at December 31, 2018.

4    If an employee’s status changes between non-exempt and exempt during the year, the incentive payout will be calculated based on eligible earnings for time spent as a non-exempt employee and on the base salary as of December 31, 2018 for time spent as an exempt employee.

4    An employee who retires or who dies during the performance period will be entitled to receive a prorated incentive payout, based on actual achievement for time as an active eligible employee, if and when the Board approves the incentive payouts and does not otherwise cancel payment. For the purpose of this plan, employees are deemed to retire if they are age 58 or above on their last day of active work and have completed at least 2 years of continuous service. Nevertheless, employees who hand in their resignation to start new employment within 3 months of their last day of work are considered to have resigned and not deemed to retire. Notwithstanding the above, the Company reserves the right, at its discretion, to make the final decision on award eligibility.

4    Employees who are involuntarily terminated and whose last day of active work is on or before June 30, 2018 will not be entitled to receive an incentive payout, unless they are deemed to retire pursuant to the previous paragraph.

4    An employee who is involuntarily terminated and whose last day of active work is on or after July 1, 2018 will be entitled to receive a prorata amount of an incentive payout, based on actual achievement for time as an active eligible employee, if and when the Board approves the incentive payouts and does not otherwise cancel payment.

4    Employees who hand in their resignation before payment is made will not be eligible to receive an award.

4    Notwithstanding anything to the contrary, employees who are terminated for cause, as determined at the discretion of the Company or their specific employer, whether during the performance period or after the performance period and before actual payouts, will not receive an award.

4    Leave without pay: The length of the leave is not included in the calculation of any incentive payout.

4    Short-term absence due to illness: The length of the absence is included in the calculation of the incentive payout if it is a bona fide absence pursuant to the disability medical leave procedure.

4    Long-term absence due to illness (time on long-term disability): The length of the absence is not included in the calculation of the incentive payout.