Exhibit 10.12
ABITIBIBOWATER INC. 2008 EQUITY INCENTIVE PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
     THIS OPTION AGREEMENT (the “Agreement”), dated as of [Insert Date] (the
“Date of Grant”), is made by and between AbitibiBowater Inc., a Delaware
corporation (the “Company”), and                      (“Participant”).
     WHEREAS, the Company has adopted the AbitibiBowater Inc. 2008 Equity
Incentive Plan (the “Plan”), pursuant to which options may be granted to
purchase shares of the Company’s common stock, par value $1.00 per share
(“Stock”); and
     WHEREAS, the Human Resources and Compensation Committee of the Company (the
“Committee”) has determined that it is in the best interests of the Company and
its stockholders to grant the stock option award provided for herein to
Participant subject to the terms set forth herein.
     NOW, THEREFORE, for and in consideration of the premises and the covenants
of the parties contained in this Agreement, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto,
for themselves, their successors and assigns, hereby agree as follows:
     1. Grant of Option.
          (a) Grant. The Company hereby grants to Participant an option (the
“Option”) to purchase [                    ] shares of Stock (such shares of
Stock, the “Option Shares”), on the terms and conditions set forth in this
Agreement and as otherwise provided in the Plan. The Option is not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
          (b) Incorporation by Reference, Etc. The provisions of the Plan are
hereby incorporated herein by reference. Except as otherwise expressly set forth
herein, this Agreement shall be construed in accordance with the provisions of
the Plan and any interpretations, amendments, rules and regulations promulgated
by the Committee from time to time pursuant to the Plan. Any capitalized terms
not otherwise defined in this Agreement shall have the definitions set forth in
the Plan. The Committee shall have final authority to interpret and construe the
Plan and this Agreement and to make any and all determinations under them, and
its decision shall be binding and conclusive upon Participant and his legal
representative in respect of any questions arising under the Plan or this
Agreement.
          (c) Approval of the Plan. The Option granted under this Agreement is
subject to the Plan being approved by the shareholders of the Company, as set
forth in the Plan. If the shareholders do not approve the Plan, then the Option
granted under this Agreement shall become automatically void and of no further
force or effect.
          (d) Acceptance of Agreement. Unless you notify your local human
resources in writing within 14 days after the Date of Grant that you do not wish
to accept this

 

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Agreement, you will be deemed to have accepted this Agreement and will be bound
by the terms of the Agreement and the Plan.
     2. Terms and Conditions.
          (a) Exercise Price. The Exercise Price, being the price at which
Participant shall be entitled to purchase the Option Shares upon the exercise of
all or any portion of the Option, shall be $      per Option Share.
          (b) Exercisability of the Option. Except as may otherwise be provided
herein, the Option shall become vested and exercisable in four equal
installments on each of the first four anniversaries of the Date of Grant,
subject to the Participant’s continued employment or service through the
applicable vesting date.
     3. Termination of Employment or Service with the Company.
          (a) Retirement. If the Participant’s employment or service with the
Company terminates as a result of (i) “Retirement” or (ii) involuntarily
termination by the Company when the Participant would otherwise be eligible for
Retirement as of the date of such termination (or following the expiration of
any applicable severance period), then any portion of the outstanding Option
shall continue to vest on its regular schedule for up to four years after such
termination and any vested portion of the Option will remain exercisable during
the five-year period immediately following such termination; provided that if
the Participant dies after such termination during such five-year period, then
any portion of the outstanding and vested Option shall remain exercisable for
two years following the death of the Participant. The term “Retirement” shall
mean termination of employment at a time when the Participant qualifies for the
payment of benefits immediately due to the Participant’s status as a “retired”
employee under any qualified or registered defined benefit pension plan
maintained by the Company (or would so qualify if the Participant was a
participant in such plan).
          (b) Termination by the Company without Cause. If the Participant’s
employment or service with the Company is involuntarily terminated without
Cause, other than on account of Disability, Retirement, or eligibility for
Retirement on the date of termination, then any portion of the Option which was
vested in accordance with its terms on such date shall remain exercisable for
five years after such termination of employment or service; provided that if the
Participant dies during such five-year period, then any portion of the
outstanding and vested Option shall remain exercisable for two years following
the death of the Participant.
          (c) Death. If the Participant’s employment or service with the Company
terminates due to the Participant’s death, then any portion of the Option which
was vested of the date of death shall remain exercisable for two years after
such death.
          (d) Disability. For the avoidance of doubt, the Option shall continue
vesting during any applicable short-term disability period prior to termination
of employment. If the Participant’s employment or service with the Company
terminates due to the Participant’s Disability, the Option shall continue to
vest following such termination until the expiration of the two-year period
commencing on the start of the corresponding short-term disability period, and

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any portion of the outstanding and vested Option shall remain exercisable during
such two-year period.
          (e) Termination by the Company for Cause. If the Participant’s
employment or service with the Company terminates for Cause, then the entire
Option (including any portion which was previously vested) shall immediately
terminate.
          (f) Other Termination. If the Participant’s employment or service with
the Company terminates other than as otherwise described in the foregoing
provisions of this Section 3, then any vested Option as of the date of such
termination shall remain exercisable for 90 days following such termination of
employment or service; provided that if the Participant dies during such 90-day
period, then any portion of the outstanding and vested Option as of the date of
death shall remain exercisable for one year following the death of the
Participant.
Notwithstanding anything contained to the contrary in this Section 3, in no
event shall all or any portion of the Option be exercisable after the ten-year
anniversary of the Date of Grant.
     4. Method of Exercise. Subject to applicable law, the Exercise Price shall
be payable in cash, check, cash equivalent or by tendering, by either actual
delivery of shares or by attestation, shares of Stock acceptable to the
Committee, and valued at Fair Market Value as of the day of exercise, or in any
combination thereof, as determined by the Committee; provided that, except as
otherwise provided by the Committee, payments made with shares of Stock shall be
limited to shares held by the Participant for not less than six months prior to
the payment date. Subject to applicable law, the Committee may permit a
Participant to elect to pay the Exercise Price upon (i) the exercise of an
Option by irrevocably authorizing a third party to sell shares of Stock (or a
sufficient portion of the shares) acquired upon exercise of the Option and remit
to the Company a sufficient portion of the sale proceeds to pay the entire
Exercise Price and any tax withholding resulting from such exercise, (ii) upon a
“net exercise” procedure approved by the Committee or (iii) such other method
which is approved by the Committee. Notwithstanding the foregoing, if on the
last day of the Option Period, the Fair Market Value exceeds the Exercise Price,
the Participant has not exercised the Option, and the Option has not expired,
such Option shall be deemed to have been exercised by the Participant on such
last day by means of a net exercise and the Company shall deliver to the
Participant the number of shares of Stock for which the Option was deemed
exercised less such number of shares of Stock required to be withheld to cover
the payment of the Exercise Price and all applicable required withholding taxes.
     5. Compliance with Legal Requirements. The granting and exercising of the
Option, and any other obligations of the Company under this Agreement, shall be
subject to all applicable federal, state, local and foreign laws, rules and
regulations and to such approvals by any regulatory or governmental agency as
may be required. The Committee, in its sole discretion, may postpone the
issuance or delivery of Option Shares as the Committee may consider appropriate
and may require the Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Option Shares in compliance with applicable laws, rules and
regulations.

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          (a) Transferability. Unless otherwise provided by the Committee in
writing, the Option shall not be transferable by Participant other than by will
or the laws of descent and distribution.
          (b) Rights as Stockholder. The Participant shall not be deemed for any
purpose to be the owner of any shares of Stock subject to this Option unless,
until and to the extent that (i) this Option shall have been exercised pursuant
to its terms, (ii) the Company shall have issued and delivered to the
Participant the Option Shares and (iii) the Participant’s name shall have been
entered as a stockholder of record with respect to such Option Shares on the
books of the Company.
          (c) Tax Withholding. All distributions under the Plan are subject to
withholding of all applicable federal, state, local and foreign taxes, and the
Committee may condition the delivery of any shares or other benefits under the
Plan on satisfaction of the applicable withholding obligations. If permitted by
the Committee (in its sole discretion), such withholding obligations may be
satisfied (i) through cash payment by the Participant; (ii) through the
surrender of shares of Stock which the Participant already owns (provided,
however, that to the extent shares described in this clause (ii) are used to
satisfy more than the minimum statutory withholding obligation, as described
below, then, except as otherwise provided by the Committee, payments made with
shares of Stock in accordance with this clause (ii) shall be limited to shares
held by the Participant for not less than six months prior to the payment date);
(iii) through the surrender of shares of Stock to which the Participant is
otherwise entitled under the Plan, provided, however, that such shares under
this clause (iii) may be used to satisfy not more than the Company’s minimum
statutory withholding obligation (based on minimum statutory withholding rates
for Federal and state tax purposes, including payroll taxes, that are applicable
to such supplemental taxable income) or (iv) by such other method as specified
by the Committee.
     6. Miscellaneous.
          (a) Waiver. Any right of the Company contained in this Agreement may
be waived in writing by the Committee. No waiver of any right hereunder by any
party shall operate as a waiver of any other right, or as a waiver of the same
right with respect to any subsequent occasion for its exercise, or as a waiver
of any right to damages. No waiver by any party of any breach of this Agreement
shall be held to constitute a waiver of any other breach or a waiver of the
continuation of the same breach.
          (b) Notices. Any written notices provided for in this Agreement or the
Plan shall be in writing and shall be deemed sufficiently given if either hand
delivered or if sent by fax or overnight courier, or by postage paid first class
mail. Notices sent by mail shall be deemed received three business days after
mailing but in no event later than the date of actual receipt. Notices shall be
directed, if to the Participant, at the Participant’s address indicated by the
Company’s records, or if to the Company, at the Company’s principal executive
office.
          (c) Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this

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Agreement, and each other provision of this Agreement shall be severable and
enforceable to the extent permitted by law.
          (d) No Rights to Employment. Nothing contained in this Agreement shall
be construed as giving Participant any right to be retained, in any position, as
an employee, consultant or director of the Company or its Affiliates or shall
interfere with or restrict in any way the right of the Company or its
Affiliates, which are hereby expressly reserved, to remove, terminate or
discharge Participant at any time for any reason whatsoever.
          (e) Fractional Shares. In lieu of issuing a fraction of a share of the
Stock resulting from any exercise of the Option, resulting from an adjustment of
the Option pursuant to Section 8.3 of the Plan or otherwise, the Company will be
entitled to pay to the Participant an amount equal to the fair market value of
such fractional share.
          (f) Beneficiary. The Participant may file with the Committee a written
designation of a beneficiary on such form as may be prescribed by the Committee
and may, from time to time, amend or revoke such designation. If no designated
beneficiary survives the Participant, the Participant’s estate shall be deemed
to be Participant’s beneficiary.
          (g) Successors. The terms of this Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns, and of the
Participant and the beneficiaries, executors, administrators, heirs and
successors of the Participant.
          (h) Entire Agreement. This Agreement and the Plan contain the entire
agreement and understanding of the parties hereto with respect to the subject
matter contained herein and supersede all prior communications, representations
and negotiations in respect thereto. No change, modification or waiver of any
provision of this Agreement shall be valid unless the same be in writing and
signed by the parties hereto, except for any changes permitted without consent
under Section 9 of the Plan.
          (i) Governing Law.  This Agreement shall be construed and interpreted
in accordance with the laws of the State of Delaware without regard to
principles of conflicts of law thereof, or principals of conflicts of laws of
any other jurisdiction which could cause the application of the laws of any
jurisdiction other than the State of Delaware.
          (j) Headings. The headings of the Sections hereof are provided for
convenience only and are not to serve as a basis for interpretation or
construction, and shall not constitute a part, of this Agreement.

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     IN WITNESS WHEREOF, the Company has executed this Agreement as of the day
first written above.

            ABITIBIBOWATER, INC.
      By:                                                                     
Name:           Title:        

[Signature Page to Nonqualified Stock Option Agreement]

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