8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): June 22, 2020

LSC COMMUNICATIONS, INC.

(Exact Name of Registrant as Specified in Its Charter)

	Delaware (State or Other Jurisdiction of Incorporation)
001-37729 (Commission File Number)		36-4829580 (IRS Employer Identification No.)
191 North Wacker Drive, Suite 1400 Chicago, Illinois (Address of Principal Executive Offices)		60606 (Zip Code)

(773) 272-9200

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:  None

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e) On June 22, 2020, the Human Resources Committee (the “Committee”) of the Board of Directors of LSC Communications, Inc. (the “Company”) approved the adoption of the LSC Communications, Inc. Key Employee Incentive Plan (the “KEIP”).   The Company was authorized to adopt the KEIP by the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) on June 2, 2020.  The KEIP is designed to incentivize seven senior executives of LSC (including the Company’s Chief Executive and other named executive officers) as the Company and its debtor subsidiaries (the “Debtors”) seek successful emergence from chapter 11.  The KEIP provides a total target award opportunity of approximately $6 million, payable as described below.

Under the KEIP, each individual who executes a KEIP award letter is eligible to earn cash incentives based on achievement of operational and asset sale performance targets.  The Company’s named executive officers have the potential to receive target awards under the KEIP, as approved by the Committee, as follows: (i) $1,558,571 for each of Thomas J. Quinlan III, the Company’s Chairman, Chief Executive Officer and President, Andrew B. Coxhead, the Company’s Chief Financial Officer and Treasurer, and Suzanne S. Bettman, the Company’s Chief Administrative Officer and General Counsel; and (ii) $102,857 for Sarah L. Hoxie, the Company’s Controller.  Operational incentives will vest on June 30, 2020, September 30, 2020, December 31, 2020 and on the date of the Debtors’ Successful Reorganization (as defined in the KEIP), subject to the level of achievement of operational incentive goals based on EBITDA, cost savings and plant consolidation and timing of chapter 11 plan approval date.  Operational incentive performance will be measured for each vesting period as well as on a cumulative basis and a “catch-up” payment will be payable to the extent operational achievement meets or exceeds the cumulative performance goals.  Asset sale incentives will be payable upon the closing of an applicable asset sale and will be offset by the amount of any operational incentives already paid prior to the applicable asset sale closing date.  

If a KEIP participant voluntarily terminates his or her employment or is terminated by the Company for Cause (as defined in the KEIP), then any remaining unpaid portion of the KEIP award will be forfeited.  If a KEIP participant’s employment is terminated without Cause, for Good Reason (as defined in the KEIP) or upon his or her death or disability during an operational incentive vesting period, such participant is eligible to earn a prorated KEIP operational incentive award for the portion of such vesting period prior to and including his or her termination date.

The foregoing description of the KEIP is a summary and is qualified in its entirety by reference to the full text of the KEIP and the form of KEIP award letter, which are filed as Exhibits 10.1 and 10.2 hereto, respectively.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit Number	Description
10.1	LSC Communications, Inc. Key Employee Incentive Plan
10.2	Form of KEIP Award Letter
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	LSC Communications, Inc.
Date: June 26, 2020	By:	/s/ Suzanne S. Bettman
	Name:	Suzanne S. Bettman
	Title:	Secretary; Chief Compliance Officer; General Counsel

EX-10.1

Exhibit 10.1

LSC Communications, Inc.

Key Employee Incentive Plan

1. Establishment and Purpose

1.1. Establishment. LSC Communications, Inc. (“LSC”) hereby adopts the LSC Communications, Inc. Key Employee Incentive Plan (this “Plan”), effective as of June 2, 2020 (the “Effective Date”).

1.2. Purpose. The purpose of this Plan is to directly tie key management employees to the success of the Debtors’ restructuring efforts by providing them with the opportunity to earn incentive payments upon achievement of Operational Incentive Goals and Asset Sale Incentive Goals, in each case, as determined in accordance with this Plan and applicable Award Letter.  This Plan is designed to incentivize the key management employees of LSC to maximize recovery for the Debtors’ unsecured creditors.

2. Definitions

2.1. “Asset Sale Incentive Goals” means the asset sale-related incentive goals set forth on Exhibit B hereto.

2.2. “Asset Sale Incentive Payout Percentage” means level of achievement of the  Asset Sale Incentive Goals, as set forth on Appendix A hereto and determined by the Committee, based on straight-line interpolation of achievement between levels of achievement.

2.3. “Asset Sale Incentive Vesting Date” means the closing date of the sale of the assets of an applicable business or the closing date of the sale of the assets of the Company on a consolidated basis as set forth on Exhibit B.

2.4. “Award” means an incentive award granted under this Plan, which Award may be earned based on the achievement of Asset Sale Incentive Goals, Operational Incentive Goals or a combination thereof.

2.5. “Award Letter” means a written document evidencing an Award that sets forth the applicable terms and provisions (including the Target Incentive Award), incorporates the terms and conditions of this Plan and includes any other applicable terms and conditions of the Award.  Any reference herein or therein to an agreement in writing will be deemed to include an electronic writing to the extent permitted by applicable law.

2.6. “Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of New York.

2.7. “Bankruptcy Code” means title 11 of the United States Code, 11 U.S.C. §§ 101 et seq., as amended from time to time.

2.8. “Cause” shall have the same meaning as the term “Cause” that is applicable to a Participant under the Amended and Restated LSC Separation Pay Plan.

2.9. “Committee” means the Human Resources Committee of the Board of Directors of LSC and any successor committee.

2.10. “Company” means LSC and its subsidiaries.

2.11. “Creditors’ Committee” means the Official Committee of Unsecured Creditors.

2.12. “Debtors” means LSC and its subsidiaries who have filed voluntary petitions for relief under the Bankruptcy Code and whose cases are jointly administered with that of LSC.

2.13. “Disability” has the meaning ascribed to such term under the Company’s long-term disability policy as in effect at the time of the Participant’s disability.

2.14. “Divestiture” means a sale or other disposition of a business unit or a portion of a business unit to a corporation or other business entity in which the Debtors have no material ownership interest, as determined by the Committee in its sole discretion.

2.15. “Earned Amount” has the meaning provided in Section 3.3.3.

2.16. “Effective Date” has the meaning provided in Section 1.1.

2.17. “Emergence Date” means the date of a Successful Reorganization.

2.18. “Good Reason” shall have the same meaning as the term “Good Reason” that is applicable to a Participant under the Amended and Restated LSC Separation Pay Plan, if any, and as may be further refined in the Participant’s participation agreement thereunder.

2.19. “Operational Incentive Goals” means the operational-related incentive goals set forth on Exhibit A hereto.

2.20. “Operational Incentive Payout Percentage” means level of achievement of Operational Incentive Goals as set forth on Appendix A hereto and determined by the Committee, based on straight-line interpolation of achievement between levels of achievement.

2.21. “Operational Incentive Vesting Date” means each of June 30, 2020, September 30, 2020, December 31, 2020 and the Emergence Date.

2.22. “Participant” means a key management employee of a Debtor designated by the Committee, in its sole discretion, to participate in this Plan.

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2.23. “Plan” has the meaning provided in Section 1.1.

2.24. “Plan of Reorganization” means a plan under chapter 11 of the Bankruptcy Code specifying the treatment of claims and interests and providing for the reorganization or liquidation of each Debtor.

2.25. “Section 409A” means Section 409A of the Tax Code and the Treasury Regulations promulgated and other official guidance issued thereunder.

2.26. “Successful Reorganization” means the earlier of (a) the effective date of a confirmed Plan of Reorganization and (b) the sale of all or substantially all of the Debtors’ assets, in each of cases (a) and (b) immediately after which a substantial portion of the Debtors’ businesses operate as a going concern outside of the Bankruptcy Code, whether as a stand-alone entity, as part of a post-emergence entity or as a result of the completion of an alternative transaction or series of transactions by which these businesses continue to operate under different ownership outside of chapter 11.

2.27. “Target Incentive Award” means the dollar amount, as determined by the Committee in its sole discretion, that a Participant would be paid pursuant to this Plan upon the achievement of Operational Incentive Goals and Asset Sale Incentive Goals at target.  

2.28. “Tax Code” means the Internal Revenue Code of 1986, as amended.

2.29. “Vesting Date” means an applicable Operational Incentive Vesting Date or Asset Sale Incentive Vesting Date.

3. Awards

3.1. Incentive Awards.  The Committee shall determine the Target Incentive Award for, and issue an Award to, each Participant, subject to the terms and conditions set forth in each applicable Award Letter; provided that the aggregate Target Incentive Awards for all Participants under the Plan shall not exceed $6,000,000.  Each Award Letter shall set forth the maximum amount payable to a Participant under the Participant’s Award.  In no event shall the cumulative amount paid with respect to a Participant’s Award on the achievement of Asset Sale Incentive Goals, Operational Incentive Goals or a combination thereof exceed the maximum amount of such Participant’s Award.  

3.2. Vesting.  Subject to the terms and conditions of this Plan and the applicable Award Letter, the applicable portion of each Award will vest, subject to the applicable Participant’s continued employment through each applicable Operational Incentive Vesting Date and each applicable Asset Sale Incentive Vesting Date, based on achievement of the applicable Operational Incentive Goals and Asset Sale Incentive Goals.

3.3. Amounts Earned.  

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3.3.1. As soon as practicable following each applicable Operational Incentive Vesting Date (but in no event later than 30 days thereafter), the Committee shall determine for each Participant as follows:

3.3.1.1. The level of achievement of the applicable Operational Incentive Goal for the applicable calendar quarter through such Operational Incentive Vesting Date and shall determine the applicable portion of the Participant’s Target Award that is payable for such calendar quarter (the “Operational Incentive Payout Percentage”).

3.3.1.2. The cumulative level of achievement for all preceding quarterly Operational Incentive Goals through the applicable Operational Incentive Vesting Date and shall determine the applicable portion of the Participant’s Target Award, if any, as a “catch-up” payment to be made to the extent the cumulative Company performance through the applicable Operational Incentive Vesting Date meets or exceeds the Operational Incentive Goals through such Vesting Date, less any amount of the Award already paid for the period through the applicable Operational Incentive Vesting Date, including any amount paid pursuant to Section 3.3.1.1 above for the applicable Operational Incentive Vesting Date.  For the avoidance of doubt, a Participant’s maximum Award shall not be increased due to the payment of any “catch-up” payment described in this Section 3.3.1.2.

3.3.2. As soon as practicable following each applicable Asset Sale Incentive Vesting Date (but in no event later than 30 days thereafter), the Committee shall determine for each Participant, the level of achievement of the applicable Asset Sale Incentive Goal and shall determine the applicable portion of the Participant’s Target Award that is payable for such Asset Sale Incentive Vesting Date (the “Asset Sale Incentive Payout Percentage”).  Any applicable portion of the Participant’s Target Award payable under this Section 3.3. 2 shall be offset by the portion of such Participant’s Target Award attributable to achievement of the applicable Operational Incentive Goals (as described in Section 3.3.1 above) through the applicable Asset Sale Incentive Vesting Date.    

3.3.3. The portion of a Participant’s Award earned under Sections 3.3.1 and 3.3.2 above from time to time shall be determined in the sole discretion of the Committee in good faith (each, an “Earned Amount”).

3.4. Payment, Generally.  Except as provided in Sections 3.5 and 3.6, on or promptly following an applicable Vesting Date, but in no event later than 45 days thereafter, LSC will deliver to each Participant the Participant’s applicable Earned Amount in a lump sum in cash.  

3.5. Termination of Employment, Generally.  Except as provided in Section 3.6, if a Participant is terminated for any reason on or prior to an applicable Vesting Date,

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any unpaid portion of theParticipant’s Award will be immediately forfeited and no additional amounts in respect of such Award will be paid, other than any earned but unpaid Earned Amount attributable to a Vesting Date preceding the date of such Participant’s termination, which Earned Amount shall be paid in accordance with Section 3.4.

3.6. Termination without Cause, for Good Reason or due to Disability or Death.  Notwithstanding any other provision of this Plan, if a Participant’s employment is terminated by the Company without Cause (including in connection with a Divestiture) or by the Participant for Good Reason, by reason of Disability or due to the Participant’s death, in each case prior to the Operational Incentive Vesting Date immediately following such termination date, a prorata portion of the Participant’s Award attributable to such Operational Incentive Vesting Date (including any “catch-up” amount described in Section 3.3.1.3 above) will vest as of such Vesting Date in an amount equal to (x) the Earned Amount for such Vesting Date calculated in accordance with Section 3.3.1, multiplied by (y) the number of calendar days elapsed from the immediately preceding Operational Incentive Vesting Date (or, if none, the Effective Date) through such Participant’s termination date and divided by (z) the number of calendar days elapsed from the immediately preceding Operational Incentive Vesting Date (or, if none, the Effective Date) to the applicable Operational Incentive Vesting Date and will be paid in accordance with Section 3.4.

4. No Right to Continued Employment.

Nothing contained in this Plan or in any Award Letter will confer upon any Participant any right to continued employment with the Debtors.

5. Non-Transferability of Award

No Award (or any rights or obligations thereunder) granted to any Participant may be sold, exchanged, transferred, assigned, pledged, hypothecated or otherwise disposed of or hedged, in any manner (including through the use of any cash-settled instrument), whether voluntarily or involuntarily and whether by operation of law or otherwise, other than by will or by the laws of descent and distribution.  Any sale, exchange, transfer, assignment, pledge, hypothecation, or other disposition in violation of the provisions of this Section 5 will be null and void and any Award which is hedged in any manner will immediately be forfeited.  All of the terms and conditions of this Plan and any Award Letter will be binding upon any permitted successors and assigns.

6. Tax Withholding

As a condition to the payment of any amount under this Plan, or in connection with any other event related to this Plan that gives rise to a federal, state or other governmental tax withholding obligation, the Debtors may deduct or withhold any cash payments made to the Participant whether or not pursuant to this Plan or require the Participant to remit cash to the

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Debtors (through payroll deduction or otherwise), in each case, in an amount sufficient in the opinion of the Debtors to satisfy such withholding obligation.

7. No Rights to other Payments

The provisions of this Plan provide no right or eligibility to a Participant to any other payouts from the Company under any other alternative plans, schemes, arrangements or contracts the Company may have with any employee or group of employees of the Company.

8. Section 409A

Awards under this Plan are intended to be exempt from Section 409A to the maximum permissible under Section 409A.  To the extent any Award under this Plan constitutes “deferred compensation” subject to Section 409A, this Plan will be interpreted, administered and construed to, comply with Section 409A with respect to such Award.  Each payment or delivery with respect to any Award will be treated as a separate payment for purposes of Section 409A.  If any payment or delivery to be made under any Award (or any other payment under this Plan) would be subject to the limitations in Section 409A(a)(2)(b) of the Tax Code, the payment or delivery will be delayed until six months after the Participant’s termination of employment (or earlier death) in accordance with the requirements of Section 409A.  The Committee will have full authority to give effect to the intent of this Section 8.

9. Other Provisions

9.1. Administration.  This Plan will be administered by the Committee.  The Committee will have the power to construe, interpret and implement this Plan, to make regulations for carrying out its purposes and to make all other determinations in connection with its administration, all of which will, unless otherwise determined by the Committee, be final, binding and conclusive.

9.2. Non-Uniform Determinations.  Subject to applicable law, the Committee’s determinations under this Plan and Award Letters need not be uniform and may be made by it selectively with respect to persons who receive, or are eligible to receive, Awards (whether or not such persons are similarly situated).  Without limiting the generality of the foregoing, the Committee will be entitled, among other things, to make non-uniform and selective determinations as to the terms and provisions of an Award and whether a Participant has been terminated for purposes of Section 3.

9.3. No Funding.  The Debtors will be under no obligation to fund or set aside amounts to pay obligations under this Plan.  Participants will have no rights to any amounts under this Plan other than as a general unsecured creditor of the Company.

9.4. No Third Party Beneficiaries.  Except as expressly provided herein, this Plan will not confer on any person other than the Company and the Participant any rights or remedies hereunder. Awards Not Taken into Account for Benefit Plans.  Awards will not be taken into account, or considered for any reason, for purpose of determining any Company provided benefits or compensation to which the

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Participant becomes eligible, including, by way of illustration and not by way of limitation, any pension or retirement benefits.

9.5. Successor and Assigns. The terms of this Plan will be binding upon and inure to the benefit of the Debtors and any successor entity.

9.6. Entire Agreement.  This Plan and the applicable Award Letter contain the entire agreement of the Company and each Participant with respect to the subject matter hereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter hereof.  Any reference herein or therein to an agreement in writing will be deemed to include an electronic writing to the extent permitted by applicable law.

9.7. Severability.  If any of the provisions of this Plan is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provision will be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions will not be affected thereby; provided that if any of such provision is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such provision will be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder.

9.8. Amendment; Termination.  The Committee may amend or revise the terms of this Plan or terminate this Plan, as permitted by applicable law and the United States Bankruptcy Court’s order authorizing the Plan; providedthat, notwithstanding the foregoing, no such amendment, revision or termination will materially adversely affect a Participant’s rights and obligations under an Award without such Participant’s consent (or the consent of his or her estate, if such consent is obtained after such Participant’s death).

9.9. Headings.  The headings in this Plan are for the purpose of convenience only and are not intended to define or limit the constructions of the provisions herein.

10. Confidentiality

Except to the extent required to be publicly disclosed by the Company, each Participant must keep confidential any information concerning any Award and any dispute, controversy or claim relating to this Plan; provided that (i) a Participant may disclose information concerning a dispute or claim to the court that is considering such dispute or to such Participant’s legal counsel (provided that such counsel agrees not to disclose any such information other than as necessary to the prosecution or defense of the dispute) or (ii) a Participant may disclose information regarding an Award to the Participant’s family members, personal lawyer or tax accountant, provided that such individuals agree to keep the information confidential.

11. Governing Law.

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This Plan and any Award Letter will be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflict of laws.

12. Termination

Unless earlier terminated by the Committee, this Plan will terminate upon the Emergence Date.  After the Emergence Date, no additional Awards may be granted hereunder, but previously granted Awards will remain outstanding in accordance with the applicable terms and conditions of the Award Letter and this Plan.

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EX-10.2

Exhibit 10.2

[Date]

[Name]

[Address]

Re:  LSC Communications, Inc. Key Employee Incentive Plan Award

Dear [Name]:

We recognize that everyone at LSC Communications, Inc. (“LSC”, and together with its subsidiaries, the “Company”) is working hard to drive towards a successful emergence from Chapter 11.  The Company felt it important to seek approval to implement the LSC Communications, Inc. Key Employee Incentive Plan (the “Plan”) designed to incentivize the performance of certain of its key employees as we make that drive towards successful emergence.  LSC has received approval from the Bankruptcy Court to implement the Plan and the Human Resources Committee of the Board of Directors of LSC adopted the Plan, effective as of June 2, 2020 (the “Effective Date”).  Capitalized terms that are used but not defined in this Award Letter have the meaning as set forth in the Plan, which was distributed to you with this Award Letter.

You have been selected to receive an Award under the Plan because of your critical role in the Company’s restructuring efforts.  Your Target Incentive Award is $[amount] and your maximum Award is $[amount].  The actual amount earned in respect of your Award will range from 0% to 200% of your Target Incentive Award, depending on the achievement of the Operational Incentive Goals, the Asset Sale Incentive Goals or a combination thereof (as described in the Plan, the applicable portions of Exhibit A and Exhibit B to the Plan and your individual Plan metrics set forth on Annex A to this Award Letter and incorporated herein by reference).  Any Earned Amount(s) under your Award will be paid to you in cash in accordance with the Plan.  Your Award and this Award Letter are subject to the terms and conditions of the Plan, including that you must remain continuously employed through each Payment Date to receive the amount due on each such date.  In the event of your termination of employment, your Award shall be treated in accordance with the terms of Section 3 of the Plan.

In consideration for the Award, you hereby acknowledge and agree that you do not currently have Good Reason (as such term is defined with respect to you under the Amended and Restated LSC Separation Pay Plan) to terminate your employment with the Company as of the Effective Date and that any claim for Good Reason prior to the Emergence Date shall be based solely on an event or events triggering Good Reason that occur on or after the Effective Date.      

Except to the extent the Company is required to publicly disclose the terms of your Award, it is confidential and should not be discussed with anyone (including co-workers) other than your immediate family members and your financial and legal advisors.  These individuals must also keep the terms of the Award confidential.  You are one of a limited number of employees who has been selected to participate in the Plan.  As you know, many other employees have not.  Out

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of consideration for them, you are expected to maintain the confidentiality of this Award.  We are relying on your sensitivity and professionalism in observing this request.

On behalf of the Company, I want to thank you for your continued hard work and dedication.  To acknowledge your agreement to, and acceptance of, the terms of the Award, this Award Letter and the Plan, please sign where indicated below and return the original signed version of this Award Letter to Thomas Konieczka at [address] by [date], 2020, and retain a copy for your files.

LSC Communications, Inc.

____________________________

Thomas J. Quinlan, III

Chairman, President and Chief Executive Officer

Accepted and Agreed:

______________________________________
[Name of Participant]Date

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Document and Entity Information	Jun. 22, 2020
Cover [Abstract]
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Entity Central Index Key	0001669812
Document Type	8-K
Document Period End Date	Jun. 22, 2020
Entity Registrant Name	LSC COMMUNICATIONS, INC.
Entity Incorporation, State or Country Code	DE
Entity File Number	001-37729
Entity Tax Identification Number	36-4829580
Entity Address, Address Line One	191 North Wacker Drive
Entity Address, Address Line Two	Suite 1400
Entity Address, City or Town	Chicago
Entity Address, State or Province	IL
Entity Address, Postal Zip Code	60606
City Area Code	(773)
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Pre-commencement Issuer Tender Offer	false
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