LOGO [g5043201.jpg]   

Exhibit 10.1

2013 Short-Term Incentive Plan

 

Purpose   

As a means of rewarding employees for their contribution toward the success of
the Company, a 2013 Short-Term Incentive Plan (STIP) has been instituted. 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.

Eligibility   

The Plan applies to all non-unionized, regular, salaried, employees of the
Company. Eligibility for or receipt of incentive pay should not be considered as
automatic, retroactive or precedent based.

Performance Period   

The STIP relates to the achievement of performance goals over the period from
January 1, 2013 to December 31, 2013.

Plan Design   

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 a participant is eligible to receive is expressed as a
certain percentage of the employee’s base salary as determined by his grade
level. Base salary is the rate in effect at December 31, 2013. The Company
determines the threshold, target and maximum incentive payouts to participants,
which payout levels vary per grade level. Supervisors are responsible to inform
their employees of their respective threshold, target and maximum incentive
award payouts.

Discretionary Plan and Plan Administration   

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

 

u       The Company will approve actual achievement of performance measures 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.”

  

u       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 measures, even if such decision is made after the end of the
performance period.

  

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

  

u       Any payment made under this plan is subject to the Company’s recoupment
policy.

  

u       With respect to any employee, the Company reserves the right to reduce
or even cancel incentive awards in the event an employee has demonstrated a
lower level of performance than expected, whether or not the Company or group
performance levels have been met.

  

u       A performance appraisal must be completed for each employee to justify
an award under the STIP.

  

u       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, and similar items.

  

u       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.

  

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

  

u       Awards under the STIP are to be paid in a lump sum no later than March
15, 2014.

 

This plan text replaces and supercedes any and all prior versions and summary
fact sheet. April 2013

     1   

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LOGO [g5043201.jpg]   

Exhibit 10.1

2013 Short-Term Incentive Plan

 

Performance Metrics    Performance Metrics – Weighting    Performance Metrics

 

 

Criteria

 

  

 

Threshold

 

  

 

Target

 

  

 

Maximum

 

Income from operations (RFP)   

$ 212M

(80% of Budget)

  

$265 M

(Budget)

  

$318 M

(120% of Budget)

 

Manufacturing costs1

 

  

 

2% > Budget

 

  

 

Budget

 

  

 

2% < Budget

 

SG&A cost2

 

  

 

$144 M

 

  

 

$141 M

 

  

 

$138 M

 

 

Profit per metric ton

 

  

 

$65

 

  

 

$82

 

  

 

$98

 

 

Safety – OSHA rate3

 

  

 

1.1

 

  

 

1.0

 

  

 

£0.9

 

 

Safety – Severity rate4

 

  

 

33

 

  

 

30

 

  

 

£ 27

 

  1 

For the Hyrdo-Saguenay division, threshold is set at budget, target is set at 2%
below budget and maximum payout is set at 5% below budget. Targets based on cost
of goods sold are set for the Recycling division. US wood product divisions are
tied to the manufacturing costs of the respective paper mills they supply.

  2 

Excluding incentive and equity compensation costs.

  3 

The frequency of safety incidents is the OSHA incident rate measured by the
number of days lost due to lost time incidents and recordable incidents,
multiplied by 200,000 and divided by the total number of hours worked. The
calculation methodology for the mills/divisions varies from the calculation
methodology for corporate.

  4 

The severity of safety incidents is measured by the number of days lost due to
lost time incidents and incidents resulting in temporary assignments or
restricted work, multiplied by 200,000 and divided by the total number of hours
worked. Targets based on vehicle incident rate are set for the Recycling
division.

 

   % of STIP

 

Weighting    Pulp/paper
mills    Wood
products
division    Sales    Corporate
functions Income from operations (RFP)    40%    40%    50%    50% Manufacturing
costs (mill/division)    40%    40%           SG&A cost or profit/metric ton   
          30%    30% Safety – OSHA (mill/division) (RFP)    15% (mill)    15%
(division)    15% (RFP)    15% (RFP)

Safety – Severity

(mill/division) (RFP)

   5% (mill)    5% (division)    5% (RFP)    5% (RFP)

 

This plan text replaces and supercedes any and all prior versions and summary
fact sheet. April 2013

     2   

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LOGO [g5043201.jpg]   

Exhibit 10.1

2013 Short-Term Incentive Plan

 

Maximum and Minimum Payout   

The overall maximum incentive payout under the STIP cannot exceed 7% of the free
cash flow (FCF) generated by the Company in 2013 (maximum available envelope).
If the total payout determined based on actual achievement of performance
metrics exceeds the maximum available envelope, all incentive awards are reduced
on a prorata basis. If the total payout determined based on actual achievement
of performance metrics is lower than the maximum available envelope, the excess
envelope is not distributed to participants.

 

There is no minimum payout under the STIP.

Cash Flow Measure   

For purpose of the STIP, free cash flow is defined as net cash provided by
operating activities, less maintenance, safety and environmental capital
expenditures, adjusted for:

 

u        Cash reorganization and restructuring costs

u        Additional pension contributions towards past service

u        Other special items

Vacation   

Any payment made pursuant to the STIP is deemed to include any and all vacation
pay that may be owed pursuant to applicable minimum employment standards.

Administrative Guidelines   

New Hires

 

An employee hired into a regular position on or before September 30, 2013 is
eligible to participate on a prorated basis, effective upon his date of hire. An
employee hired into a regular position on or after October 1, 2013 is not
eligible for participation in the STIP.

   Promotion or Status Changes   

u       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, 2013.

  

u       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, 2013.

  

u       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, 2013.

   Termination   

u       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, an employee is deemed to retire if he is age 55 or above on his last day
of active work.

  

u       An employee who is involuntarily terminated and whose last day of active
work is on or before June 30, 2013 will not be entitled to receive an incentive
payout, unless he is deemed to retire pursuant to the previous paragraph.

  

u       An employee who is involuntarily terminated and whose last day of active
work is on or after July 1, 2013 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.

 

This plan text replaces and supercedes any and all prior versions and summary
fact sheet. April 2013

     3   

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LOGO [g5043201.jpg]   

Exhibit 10.1

2013 Short-Term Incentive Plan

 

  

u       An employee who hands in his resignation from the Company before payment
is made will not be eligible to receive an award.

  

u       An employee who is terminated for cause, as determined by the Company or
his specific employer, in their discretion, whether during the performance
period or after the performance period and before actual payouts, will not
receive an award.

Administrative Guidelines    Other leaves   

u       Maternity/parental/adoption leave: The length of the leave is not
included in the calculation of any incentive payout.

  

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

  

u       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.

  

u       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.

  

Approved by:

 

/s/ Richard Garneau

 

Richard Garneau

President and Chief Executive Officer

 

This plan text replaces and supercedes any and all prior versions and summary
fact sheet. April 2013

     4