2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 360 Compensation Discussion & Analysis The table below outlines each of the principal elements of the Company’s executive compensation program: Pay Element Base Salary Annual Cash Incen�ve Performance Restricted Stock RSUs Stock Op�ons Who Receives All NEOs When Granted Annually Form of Delivery Equity Cash Type of Performance Short-term emphasis (fixed) Short-term emphasis (variable) Long-term emphasis (variable) Performance Period 1 year 1 year 3 years 3 years (ratable annual ves�ng) 4 years (ratable annual ves�ng) How Payout Is Determined Compensa�on Commi�ee determina�on Pre-established formula Pre-established formula and stock price at ves�ng date Stock price at each ves�ng date Stock price apprecia�on between grant date and exercise date 2017 Performance Measures Individual performance, role, responsibili�es, market/industry norms EBITDA; Net Sales; Individual Performance Cumula�ve Free Cash Flow; Cumula�ve Net Sales Stock price Stock price The targeted mix of total direct compensation we established at the beginning of 2017 for our CEO and the other NEOs is illustrated below. We believe the mix of compensation components, the allocation between cash and equity, the time horizon between short- term and long-term and the differentiation between fixed and variable compensation collectively provide appropriate incentives to motivate near-term performance, while at the same time providing significant incentives to keep our executives focused on longer- term corporate goals that drive stockholder value. CEO Targeted Pay Mix Salary Annual Cash Incentive Performance Restricted Stock RSU Stock Options Total % of Total Compensation 17% 17% 27% 27% 13% 100% Cash vs. Equity 34% 66% 100% Short-Term vs. Long-Term 34% 66% 100% Fixed vs. Variable & At Risk 17% 83% 100% Other NEOs Targeted Pay Mix (Average) Salary Annual Cash Incentive Performance Restricted Stock RSU Stock Options Total % of Total Compensation 35% 21% 18% 18% 9% 100% Cash vs. Equity 56% 44% 100% Short-Term vs. Long-Term 56% 44% 100% Fixed vs. Variable 35% 65% 100% PayElementBaseSalaryAnnualCashIncentivePerformanceRestrictedStockRSUsStockOptionsWhoReceivesAllNEOsWhenGrantedAnnuallyFormofDeliveryCashEquityTypeofPerformanceShort-termemphasis(fixed)Short-termemphasis(variable)Long-termemphasis(variable)PerformancePeriod1year1year3years3years(ratableannualvesting)4years(ratableannualvesting)HowPayoutIsDeterminedCompensationCommitteedeterminationPre-establishedformulaPre-establishedformulaandstockpriceatvestingdateStockpriceateachvestingdateStockpriceappreciationbetweengrantdateandexercisedate2017PerformanceMeasuresIndividualperformance,role,responsibilities,market/industrynormsEBITDA;NetSales;IndividualPerformanceCumulativeFreeCashFlow;CumulativeNetSalesStockpriceStockpric 18 DONNELLEY FINANCIAL SOLUTIONS