| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
2021 STIP
Upon the recommendation of its human resources and compensation/nominating and governance committee, the independent members of the board of directors of the Company adopted on February 3, 2021, the material terms of the 2021 Resolute Forest Products Inc. Short-Term Incentive Plan (the “2021 STIP”). The 2021 STIP provides that participating employees, including each of the Company’s named executive officers, are eligible to receive cash incentive awards expressed as a percentage of their base salaries, based on certain quantitative Company performance goals and individual performance over the 2021 annual period. In respect of the Company’s named executive officers, the threshold, target and maximum incentive awards are 42.5%, 100% and 172.5% of base salary, with no applicable minimum.
To determine the full STIP payout, two amounts are determined—one amount is attributable to achievement of Company performance goals and a second amount is attributable to individual performance. The two amounts are added together for a final STIP payout amount. With regards to the Company performance goals, the performance metrics applicable to the Company’s named executive officers are based on budget targets relating to: income from operations; productivity; fixed costs; usage of variable components; selling, general and administrative expenses; frequency rate and severity rate of safety incidents; and environmental incidents.
To determine the amount attributable to achievement of the Company performance goals, each Company’s named executive officer’s base salary is multiplied by the actual percentage payout for the Company performance metrics, further multiplied by 85%.
To determine the amount, if any, attributable to individual performance, the named executive officer’s base salary is multiplied by the actual percentage payout for the Company performance metrics, further multiplied by a percentage up to 30% reflecting the executive’s individual payout factor. The individual payout factor is qualitative and will be based on the executive’s achievement of goals, exceptional personal or team contribution or results, level of demonstrated effectiveness in the role and remarkable initiatives, subject to the individual performance STIP pool. For the Company’s named executive officers and other senior vice presidents, the individual performance STIP pool is the sum of all eligible executives’ base salary, multiplied by the actual achievement of the Company performance metrics, further multiplied by 15%.
Moreover, under the 2021 STIP, the amount payable to the Company’s named executive officers, the other senior vice presidents, as well as certain other eligible employees for the portion of their incentive attributable to the achievement of business objectives, is limited to 5% of the Company’s 2021 free cash flow (defined as net cash from operating activities less asset maintenance capital expenditures, adjusted for special items). Awards, if granted, are expected to be paid in the first quarter of 2022.
Employees remain eligible for prorated awards if they retire during the year or are terminated other than for cause after July 1, 2021. Employees who voluntarily resign or are terminated for cause before payment is made will not be eligible. The Company may adjust financial and cost metrics, and may adjust any and all awards in its discretion. Awards are discretionary and subject to modification until they are made, including increases, decreases, cancellations, deferrals and other conditions, even if performance levels have been met.
