EXHIBIT 10.18
EXECUTION COPY
SEPARATION AGREEMENT
     THIS SEPARATION AGREEMENT (this “Agreement”) is made and entered into this
10th day of December, 2010, by and between DAVID J. PATERSON (“Executive”) and
ABITIBIBOWATER INC., a Delaware corporation (“Company”). Executive and Company
are sometimes hereinafter referred to together as the “Parties” and individually
as a “Party.”
BACKGROUND:
     A. Executive is employed as the Chief Executive Officer and President of
Company.
     B. Executive and Company now mutually desire to end Executive’s employment
pursuant to the terms set forth herein.
     C. Company and Executive wish to avoid any disputes which could arise by
agreeing to the terms of this Agreement.
     NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
     1. Termination of Employment. The Parties agree that (a) Executive will
resign as Chief Executive Officer and President of Company, and from the Board
of Directors of the Company as well as any subsidiaries of the Company upon
which Executive is serving, effective as of December 31, 2010, (b) Executive
will remain employed by Company as Special Executive Advisor, reporting to the
Board of Directors of the Company, effective January 1, 2011 until January 31,
2011, (c) Executive’s employment with the Company, and all benefits, privileges
and authorities related to Executive’s employment with Company, will end on
January 31, 2011 (the “Separation Date”), except as otherwise specifically set
forth in this Agreement, and (d) the initial presentation of this Agreement on
December 7, 2010 constituted written notice to Executive of the separation and
delivery of the form Release (as defined below) for Executive’s consideration.
     2. No Admission. The Parties agree that their entry into this Agreement is
not and shall not be construed to be an admission of liability or wrongdoing on
the part of either Party.
     3. Future Cooperation. Executive agrees that after the termination of his
employment and the Consulting Period (as defined below), Executive upon
reasonable notice, and not interfering with Executive’s other full-time business
endeavors, will make himself available to Company or its designated
representatives for the purposes of providing information regarding any matter
which Executive was involved while employed by Company. Company shall pay for
all reasonable and documented travel expenses as may be incurred by Executive in
connection with complying with this Section 3.

 

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     4. Consideration.
          (a) In consideration for Executive’s agreement to fully release
Company from any and all claims as described below, and to perform the other
duties and obligations of Executive contained herein, and provided Executive
remains employed with Company until the Separation Date as described above, or
in the event, prior to the Separation Date, Company terminates Executive’s
employment without Cause (as defined below); Executives terminates his
employment for Good Reason (as defined below); Executive is incapacitated due to
any mental or physical impairment which makes Executive unable to perform the
essential duties and responsibilities of his position, with or without
reasonable accommodation (“Disability”); or Executive dies (any such events
occurring prior to the Separation Date collectively referred to as an “Early
Separation Date”), Company will, subject to ordinary and lawful deductions and
Sections 4(b) and 22 below:
          (i) Pay cash severance to Executive in the amount of One Million Three
Hundred Thirty-Eight Thousand Dollars ($1,338,000) in a single lump sum within
fifteen (15) days following the Separation Date or, if earlier, the Early
Separation Date.
          (ii) Continue after the Separation Date or, if earlier, the Early
Separation Date, any health care (medical, dental, prescription drug and vision)
plan coverage, other than under a flexible spending account which shall be
provided in accordance with applicable plan terms and practices, provided to
Executive and Executive’s spouse and dependents at such date, for up to eighteen
(18) months following such date, on the same basis, at no cost to Executive
(including tax cost), as available to similarly-situated active employees during
such eighteen (18) months, provided Executive and Executive’s spouse and
dependents at such date are eligible for, elect and remain eligible for such
continued coverage pursuant to the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended (“COBRA”).
          (iii) Pay to Executive the cash amount of Four Hundred Thirty Thousand
Dollars ($430,000), in lieu of any grant of awards under the Company’s LTIP (as
described below) and any continued vesting therein, in a single lump sum on
July 31, 2011.
          (b) Notwithstanding anything else contained herein to the contrary, no
payments shall be made or benefits delivered under this Agreement (other than
payments required to be made by Company pursuant to Section 5 below) unless,
within thirty (30) days after the Separation Date or, if earlier, the Early
Separation Date, (i) Executive (or his legal representative in the case of
Executive’s incapacity or death) has signed and delivered to Company a Release
in the form attached hereto as Exhibit A (the “Release”), which will release,
discharge and hold harmless Company and its subsidiaries, divisions and
affiliates and their respective officers, directors, employees, agents,
insurers, assigns and successors in interest from any and all claims Executive
has or might have at such time, and (ii) the applicable revocation period under
the Release has expired without Executive (or his legal representative in the
case of Executive’s incapacity or death) having elected to revoke the Release.
Executive agrees and acknowledges that Executive would not be entitled to the
consideration described herein absent execution of the Release. Any payments to
be made, or benefits to be delivered, under this

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Agreement (other than the payments required to be made by Company pursuant to
Section 5 below) prior to Executive’s execution of the Release and the
applicable revocation period having expired without Executive having revoked
same, shall be accumulated and, subject to Section 22, paid as soon as
administratively practicable, but in no event later than March 15, 2011, in a
lump sum after Executive (or his legal representative in the case of his
incapacity or death) delivers the signed Release and the revocation period
thereunder expires without Executive (or his legal representative in the case of
his incapacity or death) having elected to revoke same; provided, if such
payment date could occur in either of two taxable years of Executive, then such
payment shall be made in the later taxable year.
          (c) As a further condition to receipt of the payments and benefits in
Section 4(a) above, Executive also waives any and all rights to any other
amounts payable to him upon the termination of his employment relationship with
Company, other than those specifically set forth in this Agreement, including
without limitation any severance, notice rights, payments, benefits and other
amounts to which Executive may otherwise be entitled, and Executive agrees not
to pursue or claim any such payments, benefits or rights.
          (d) For purposes of this Agreement, “Cause” shall mean:
          (i) Executive’s gross negligence or willful misconduct in connection
with the performance of Executive’s duties with Company (whether as an employee
or consultant); or
          (ii) Executive’s conviction of, or entering of a guilty plea or plea
of no contest with respect to, any felony; or
          (iii) Executive’s material breach of a material term of this
Agreement.
No act or omission to act by Executive shall be “willful” if conducted in good
faith and with a reasonable belief that such act or omission was in the best
interests of the Company.
          (e) For purposes of this Agreement, “Good Reason” shall mean:
          (i) any action taken by Company which results in a substantial and
material reduction in Executive’s authority, duties or responsibilities,
including reporting responsibilities (except for any change in the foregoing as
described herein);
          (ii) the relocation of Executive to any other primary place of
employment other than Montreal, Canada, prior to January 1, 2011, and Atlanta,
Georgia, on and after January 1, 2011, which might require Executive to move
Executive’s residence which, for this purpose, means any reassignment to a place
of employment located more than fifty (50) miles from Montreal, Canada, prior to
January 1, 2011, and Atlanta, Georgia, on and after January 1, 2011, without the
Executive’s express written consent to such relocation; or
          (iii) any material failure by Company to comply with the material
terms of this Agreement.

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     Notwithstanding the above, and without limitation, “Good Reason” shall not
include any resignation by Executive where Cause for Executive’s termination by
Company exists. Executive must give Company notice of any event or condition
that would constitute “Good Reason” within thirty (30) days of Executive’s
knowledge of the event or condition which would constitute “Good Reason,” upon
which notice Company shall have thirty (30) days to remedy such event or
condition, and, if such event or condition is not remedied within such period,
Executive must terminate his employment for “Good Reason” within thirty
(30) days after the period for remedying such condition or event has expired.
          (f) Notwithstanding the foregoing, Executive will not be entitled to
receive any of the payments or benefits set forth in Section 4(a) above or
Section 6 below if, prior to the Separation Date, Executive (i) terminates his
employment voluntarily other than for Good Reason (and other than due to
Disability) or (ii) has his employment terminated involuntarily by Company for
Cause.
     5. Other Benefits. Nothing in this Agreement or the Release shall:
          (a) alter or reduce any vested, accrued benefits (if any) Executive
may be entitled to receive under any 401(k), profit sharing, pension or other
qualified retirement plan established Company;
          (b) affect Executive’s right (if any) to elect and (subject to
Section 4(a)(ii) above) pay for continuation of Executive’s health insurance
coverage under Company’s health plans pursuant to the COBRA;
          (c) affect Executive’s right (if any) to receive (i) any base salary
that accrues through the date of termination of Executive’s employment and is
unpaid, (ii) any reimbursable expenses that Executive incurs before the
termination of Executive’s employment and are unpaid and (iii) any unused
vacation or paid time off days to which Executive is entitled to payment, all of
which shall be paid as soon as administratively practicable (and in any event
within thirty (30) days) after the termination of Executive’s employment;
          (d) alter or reduce the vested benefits to which Executive is entitled
under Company’s short-term incentive plan (“STIP”) and Company’s deferred
compensation and other non-qualified retirement/savings plans, which shall be
paid in accordance with their terms and any related award agreements, except
that Executive will not receive any awards under Company’s long-term incentive
plan (“LTIP”) in return for the payment set forth in Section 4(a)(iii) above on
the terms described therein;
          (e) affect Executive’s right to receive the emergence bonus upon
confirmation of Company’s plan of reorganization; or
          (f) affect Executive’s right to continue to receive his base salary,
bonuses and STIP, perquisites and benefits (other than LTIP and any awards
thereunder) through the date of termination of Executive’s employment, as in
effect or contemplated as of the date hereof, which will continue through the
date of termination of Executive’s employment, except with respect to any
changes that are applicable generally to the other executives of Company or
otherwise specifically set forth in this Agreement.

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     6. Consulting Agreement.
          (a) Effective immediately after the Separation Date or, if earlier,
the Early Separation Date, and for the six (6)-month period thereafter (the
“Consulting Period”), subject to Section 4(b) above, Company will retain
Executive, as an independent contractor, to consult with and advise Company and
to provide Company advice and other management consulting services on all
aspects of Company’s operations or as otherwise assigned and directed by
Company’s Chief Executive Officer or Board of Directors. Either Executive or
Company may terminate this consulting arrangement prior to end of the Consulting
Period by giving sixty (60) days’ prior written notice of termination to the
other party.
          (b) Executive shall be reasonably available to Company during its
normal business hours to consult with and advise Company upon request during the
Consulting Period. Executive shall have no responsibilities or duties except the
rendering of advisory services to Company when solicited for such advice by the
Chief Executive Officer or Board of Directors of Company.
          (c) Subject to Section 4(b) above, Company shall pay to Executive the
amount of Executive One Hundred Fifty Thousand Dollars ($150,000) per month, on
the first day of each monthly period of the Consulting Period, for each month or
portion thereof Executive remains available to provide consulting services as
described above. Company shall reimburse Executive for all reasonable
out-of-pocket expenses actually incurred by Executive while rendering consulting
services under this Agreement upon the submission by Executive, from time to
time but no later than thirty (30) days after incurring such expenses, of an
itemized account of such expenditures in accordance with Company’s policies on
expense reimbursements. In the event, if prior to the end of the Consulting
Period, (i) Company terminates this consulting arrangement without Cause;
(ii) Executive terminates this consulting arrangement for Good Reason;
(iii) Executive is Disabled; or (iv) Executive dies, Company shall continue to
pay Executive (or Executive’s estate in the event of his death) the consulting
fees above, as set forth above, for the unexpired duration of the Consulting
Period notwithstanding Executive is no longer rendering consulting services. No
further consulting fees will be payable on and after the time this consulting
arrangement terminates because (i) Executive terminates this consulting
arrangement voluntarily other than for Good Reason or due to Disability or
(ii) Company terminates this consulting arrangement for Cause. For purposes of
this consulting arrangement, “Cause” shall mean as described in Section 4(d)
above and “Good Reason” shall mean as described above in Section 4(e)
(disregarding for this purpose Sections 4(e)(i) and (ii)).
          (d) Executive will not be required to maintain an office in Montreal,
Canada or any other place during the Consulting Period and may perform his
consulting services from a location of his selection; however, Executive agrees
to reasonable travel as may be required to render the consulting services under
this arrangement.
          (e) Both Company and Executive agree that Executive shall act as an
independent contractor with respect to Company in the performance of any and all
duties under this consulting arrangement, and that this consulting arrangement
shall not be construed to create any employment or other form of business
relationship, agency, partnership or joint venture between Company and
Executive. Executive shall not be empowered to act on behalf of or bind

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Company with third parties as a result of this consulting arrangement. Executive
acknowledges that he will not be eligible for any other compensation or benefits
other than those specifically discussed in Sections 4, 5 and 6 of this
Agreement. Executive shall be solely responsible for arranging withholding and
payment of any taxes arising out of this consulting arrangement, including,
without limitation, federal, state, and local income taxes, social security
taxes, unemployment insurance taxes, and any other taxes or business license
fees related to Executive’s activities or duties under this consulting
arrangement. Executive agrees to indemnify Company and hold it harmless from and
against all such tax obligations, as well as any penalties, assessments,
liabilities, damages, fees and attorneys’ fees incurred by Company as a result
of Executive’s failure to pay such amounts.
     7. Confidentiality of Agreement Terms. Except as otherwise expressly
provided in this Section 7, Executive agrees that the terms, conditions and
amount of consideration set forth in this Agreement (including the Exhibits
hereto) are and shall be deemed to be confidential and hereafter shall not be
disclosed by Executive or Company to any other person or entity. The only
disclosures excepted by this paragraph are (a) as may be required by law; (b) as
may be required by either party to enforce this Agreement; (c) Executive may
tell prospective employers the dates of Executive’s employment, positions held,
evaluations received, Executive’s duties and responsibilities and salary history
with Company; (d) Executive may disclose the terms and conditions of this
Agreement to Executive’s attorneys and tax and financial advisers; and (e)
Executive may disclose the terms of this Agreement to Executive’s spouse, if
any; provided, however, that any spouse, attorney or tax or financial adviser
learning about the terms of this Agreement must be informed about this
confidentiality provision, and Executive will be responsible for any breaches of
this confidentiality provision by any such person to the same extent as if
Executive had directly breached this agreement. Executive acknowledges that
Company may be required by law to disclose information about this Agreement and
its terms, and, if and only to the extent that Company does so, Executive shall
be relieved from his obligations to keep confidential under this Section 7 any
such information that Company may disclose publicly.
     8. Restrictive Covenants.
          (a) “Business of Company” means the manufacture and sale of the
following forest and wood products: newsprint, coated mechanical and uncoated
mechanical specialty papers, containerboard and packaging paper grades, and
pulp; the recovery of old paper; and the operation of sawmills, remanufacturing
and engineered wood facilities.
          (b) “Confidential Information” means all valuable and/or proprietary
information (in oral, written, electronic or other forms) belonging to or
pertaining to Company (including subsidiaries or affiliates of Company), its
customers and vendors, that would be useful to competitors of Company or
otherwise damaging to Company if disclosed. Confidential Information may
include, but is not necessarily limited to: (i) the identity of Company’s
customers or potential customers, their purchasing histories, and the terms or
proposed terms upon which Company offers or may offer its products and services
to such customers, (ii) the identity of Company’s vendors or potential vendors,
and the terms or proposed terms upon which Company may purchase products and
services from such vendors, (iii) technology and methods used in Company
products and services or planned products and services, (iv) the terms and

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conditions upon which Company employs its employees and independent contractors,
(v) marketing and/or business plans and strategies, (vi) financial reports and
analyses regarding the revenues, expenses, profitability and operations of
Company, (vii) information provided to Company by customers and other third
parties under a duty to maintain the confidentiality of such information and
(viii) information relating to the plans or terms, or proposed plans or terms,
of any actual, potential or contemplated acquisitions, dispositions, spin-offs,
reorganizations or other transactions Company may have considered or may be
considering. Confidential Information does not include any information that is
in the public domain or readily ascertainable from publicly-available
information, or disclosed to Executive outside the course and scope of the
performance of Executive’s duties on behalf of Company by a person or entity who
has the legal right to disclose such information.
          (c) “Restricted Territory” means the Countries of the United States of
America, Canada, United Kingdom, Mexico, South Korea and Italy.
          (d) “Material Contact” means contact in person, by telephone or by
electronic or paper correspondence in furtherance of the Business of Company.
          (e) “Trade Secrets” means Confidential Information that meets the
requirements of a trade secret under applicable law.
          (f) While employed by Company under this Agreement including the
period during which Executive provides consulting services to Company, and for
one (1) year thereafter, Executive shall not:
          (i) In the Restricted Territory, engage in or become financially
interested in, as a principal, agent, officer, employee, manager, advisor,
investor, or shareholder (except as a completely passive investor in a public
corporation), business activities which compete with the Business of Company; or
          (ii) Directly or indirectly solicit any customer of Company with whom
Executive had Material Contact to purchase products or services which compete
with the Business of Company, or
          (iii) Directly or indirectly solicit any vendor of Company with whom
Executive had Material Contact to provide products or services to support
business activities which compete with the Business of Company, or
          (iv) Directly or indirectly solicit any employee or contractor of
Company to terminate or lessen such employment or contract.
          (g) While employed by Company under the Agreement (including the
period during which Executive provides consulting services to Company), and for
two (2) years thereafter, Executive shall not use on his own behalf or disclose
to any other person or entity any Confidential Information. In the event of
doubt regarding the confidentiality of any information, Executive shall verify
the confidential nature of the information with the Company prior to its use or
disclosure. Nothing herein shall limit the right of Company to protect its Trade
Secrets under applicable law.

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          (h) In addition to any other remedies available at law or under this
Agreement, Company may seek injunctive relief to stop any violations by
Executive of the restrictive covenants set forth in (f) or (g) above.
          (i) Executive will forfeit the right to any payments or benefits set
forth in Sections 4(a) and 6 above, and Company shall be entitled to seek
reimbursement of, and Executive will be required to repay Company for, the gross
amount of all payments made, and value of any benefits provided, to Executive
under Sections 4(a) and 6 above, in the event of any breach by Executive of the
covenants contained in (f) and (g) of this Section 8; except that Executive
shall be entitled to retain in any event the amount of Three Hundred Thousand
Dollars ($300,000) as consideration for the Release and Executive’s other
obligations under the Agreement.
     9. Return of all Property and Information of Company. Executive agrees to
return all of Company’s property within fourteen (14) days following the
Separation Date or, if earlier, the day Company terminates Executive’s
employment without Cause or Executives terminates his employment for Good
Reason, except as may be required for Executive to discharge his duties as a
consultant (in which case such property shall be returned within fourteen
(14) days after the termination of the consulting arrangement. Such property
includes, but is not limited to, all Company-issued equipment, supplies,
accessories, vehicles, access cards and/or keys, instruments, tools, devices,
computers, cell phones, pagers, materials, documents, plans, records, notebooks,
drawings, or papers. Upon request by Company, Executive shall certify in writing
that Executive has complied with this provision, and has deleted all Company
information from any computers or other electronic storage devices owned by
Executive. Except as provided above, Executive may only retain information
relating to Executive’s benefit plans and compensation to the extent needed to
prepare Executive’s tax returns.
     10. No Harassing or Disparaging Conduct. Executive and Company mutually
further agree and promise that neither such party will engage in, or induce
other persons or entities to engage in, any harassing or disparaging conduct or
negative or derogatory statements directed at the other such party or, in the
case of Company its subsidiaries or affiliates, the activities of the other such
party (and Company’s subsidiaries or affiliates), or the Releasees (as defined
in the Release) at any time in the future. For such purpose, “Company” shall
refer to its officers, members of the Board of Directors of Company and
Company’s human resources managers. Notwithstanding the foregoing, this
Section 10 may not be used to penalize either party for providing truthful
testimony under oath in a judicial or administrative proceeding or complying
with an order of a court or government agency of competent jurisdiction.
     11. Construction of Agreement and Venue for Disputes. This Agreement shall
be deemed to have been jointly drafted by the Parties and shall not be construed
against either Party. Each of the Parties (a) consents to submit itself to the
personal jurisdiction of the Court of Chancery of the State of Delaware or any
court of the United States located in the State of Delaware, in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
(c) agrees that it will not bring any action relating to this Agreement or any
of the transactions contemplated by this Agreement in any court other than the
Court of Chancery of the State of Delaware or, if

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under applicable law exclusive jurisdiction is vested in the federal courts, any
court of the United States located in the State of Delaware. Without limiting
other means of service of process permissible under applicable law, the Parties
agree that service of any process summons, notice or document by U.S. registered
mail to their respective last known addresses shall be effective service of
process for any suit or proceeding in connection with this Agreement or the
transactions contemplated hereby.
     12. Waiver of Jury Trial. EACH OF THE PARTIES IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THE PARTIES ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
     13. Severability. If any provision of this Agreement shall be held void,
voidable, invalid or inoperative, no other provision of this Agreement shall be
affected as a result thereof, and accordingly, the remaining provisions of this
Agreement shall remain in full force and effect as though such void, voidable,
invalid or inoperative provision had not been contained herein.
     14. No Reliance Upon Other Statements. This Agreement is entered into
without reliance upon any statement or representation of any Party hereto or any
Party hereby released other than the statements and representations contained in
writing in this Agreement (including all Exhibits hereto).
     15. Entire Agreement. This Agreement, including all Exhibits hereto (which
are incorporated herein by this reference), contains the entire agreement and
understanding concerning the subject matter hereof between the Parties hereto.
No waiver, termination or discharge of this Agreement, or any of the terms or
provisions hereof, shall be binding upon either Party hereto unless confirmed in
writing. This Agreement may not be modified or amended, except by a writing
executed by both Parties hereto. No waiver by either Party hereto of any term or
provision of this Agreement or of any default hereunder shall affect such
Party’s rights thereafter to enforce such term or provision or to exercise any
right or remedy in the event of any other default, whether or not similar.
     16. Further Assurance. Upon the reasonable request of the other Party, each
Party hereto agrees to take any and all actions, including, without limitation,
the execution of certificates, documents or instruments, necessary or
appropriate to give effect to the terms and conditions set forth in this
Agreement.
     17. No Assignment. Neither Party may assign this Agreement, in whole or in
part, without the prior written consent of the other Party, and any attempted
assignment not in accordance herewith shall be null and void and of no force or
effect. The foregoing to the contrary notwithstanding, Company shall assign this
Agreement and delegate all of its obligations hereunder to any successor to all
or substantially all of its business.
     18. Binding Effect. This Agreement shall be binding on and inure to the
benefit of the Parties and their respective heirs, representatives, successors
and permitted assigns. In the event of the death of Executive prior to payment
of all amounts due under this Agreement, such amounts shall be paid to the legal
representative of his estate.

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     19. Indemnification. Company understands and agrees that any
indemnification obligations under its governing documents or the indemnification
agreement between Company and Executive, a copy of which is attached hereto as
Exhibit B, with respect to Executive’s service as an officer of Company and/or
director of Company or any of its subsidiaries shall remain in effect and
survive the termination of Executive’s employment under this Agreement as set
forth in such governing documents or indemnification agreement. Notwithstanding
Section 6(e) of this Agreement, in the event that Executive is authorized in
writing to act as an agent of Company during the Consulting Period, such
indemnification, and coverage as an insured under any applicable officers’ and
directors’ liability insurance, shall apply to Executive’s consulting services
to the same scope and effect as applies to Executive’s acts and omissions to act
while employed by Company.
     20. Disclosure. Company and Executive agree to cooperate and collaborate on
all communications, including (i) press releases, (ii) internal communications
and (iii) public disclosures (including but not limited to any Form 8-K or
comparable Canadian filings), as may apply to this Agreement, the transition of
Executive from Chief Executive Officer and President to Special Executive
Advisor and the termination of Executive’s employment with Company.
     21. Reimbursement of Attorneys’ Fees. Company agrees to reimburse Executive
for any reasonable attorneys’ fees and expenses Executive incurs in connection
with the negotiation and documentation of this Agreement and any related
agreements, up to a maximum of Thirty-Five Thousand Dollars ($35,000). Company
will pay Executive such reimbursement as soon as administratively practicable
after execution of this Agreement and upon the submission by Executive, no later
than sixty (60) days after the execution of this Agreement, of an itemized
account of such expenditures.
     22. Nonqualified Deferred Compensation.
          (a) It is intended that any payment or benefit which is provided
pursuant to or in connection with this Agreement which is considered to be
deferred compensation subject to Section 409A of the Code shall be paid and
provided in a manner, and at such time and form, as complies with the applicable
requirements of Section 409A of the Code to avoid the unfavorable tax
consequences provided therein for non-compliance.
          (b) Neither Company nor Executive shall take any action to accelerate
or delay the payment of any monies and/or provision of any benefits in any
manner which would not be in compliance with Section 409A of the Code (including
any transition or grandfather rules thereunder).
          (c) If Executive is a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Code at such time, any payments to be made or
benefits to be delivered in connection with Executive’s “Separation from
Service” (as determined for purposes of Section 409A of the Code) that
constitute deferred compensation subject to Section 409A of the Code shall not
be made until the earlier of (i) Executive’s death or (ii) six months after
Executive’s Separation from Service (the “409A Deferral Period”) as required by
Section 409A of the Code. Payments otherwise due to be made in installments or
periodically during the 409A Deferral Period shall be accumulated and paid in a
lump sum as soon as the 409A Deferral Period ends,

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and the balance of the payment shall be made as otherwise scheduled. Any such
benefits subject to the rule may be provided under the 409A Deferral Period at
Executive’s expense, with Executive having a right to reimbursement from Company
once the 409A Deferral Period ends, and the balance of the benefits shall be
provided as otherwise scheduled.
          (d) For purposes of this Agreement, all rights to payments and
benefits hereunder shall be treated as rights to receive a series of separate
payments and benefits to the fullest extent allowed by Section 409A of the Code.
          (e) For purposes of this Agreement, with respect to any amounts that
that constitute deferred compensation subject to Section 409A of the Code,
termination of employment shall mean a “separation from service” within the
meaning of Section 409A of the Code where it is reasonably anticipated that no
further services would be performed after such date or that the level of bona
fide services Executive would perform after that date (whether as an employee or
independent contractor) would permanently decrease to less than fifty percent
(50%) of the average level of bona fide services Executive performed over the
immediately preceding thirty-six (36) month period. The Parties agree that a
“separation from service” will occur no later than the Separation Date and
Executive will not be expected to perform any consulting or other services
thereafter that would negate a separation from service on the Separation Date.
          (f) Notwithstanding any other provision of this Agreement, neither
Company nor its subsidiaries or affiliates shall be liable to Executive if any
payment or benefit which is to be provided pursuant to this Agreement and which
is considered deferred compensation subject to Section 409A of the Code
otherwise fails to comply with, or be exempt from, the requirements of
Section 409A of the Code.
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     IN WITNESS WHEREOF, the Parties have executed, or caused their duly
authorized representatives to execute, this Agreement as of the day and year
first above written.

                  “Executive”    
 
                /s/ David J. Paterson                   David J. Paterson    
 
                “Company”    
 
                AbitibiBowater Inc.    
 
           
 
  By:   /s/ Richard B. Evans    
 
     
 
   
 
  Title:        
 
     
 
   

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EXHIBIT A
FORM OF RELEASE
ABITIBIBOWATER INC.
WAIVER AND RELEASE AGREEMENT
     (1) General Release. In consideration of the benefits (the “Benefits”) to
be provided to me under the terms of that certain Separation Agreement, dated
December __, 2010, between me and AbitibiBowater Inc. (the “Separation
Agreement”), I, on behalf of myself and my family and heirs, executors,
administrators, attorneys, agents and assigns, hereby waive, release and forever
discharge AbitibiBowater Inc. (the “Company”) and its subsidiaries, divisions
and affiliates, whether direct or indirect, its and their joint ventures and
joint venturers (including its and their respective directors, officers,
associates, employees, shareholders, partners and agents, past, present and
future), and each of its and their respective predecessors, successors and
assigns (collectively referred to as “Releasees”), from any and all known or
unknown actions, causes of action, claims or liabilities of any kind which have
been or could be asserted against the Releasees arising out of or related to my
employment with and/or separation from employment with the Company and/or any of
the other Releasees and/or any other occurrence up to and including the date of
this Waiver and Release Agreement (this “Agreement”), including but not limited
to:

  (a)   claims, actions, causes of action or liabilities arising under Title VII
of the Civil Rights Act of 1964, as amended, the Age Discrimination in
Employment Act, as amended (the “ADEA”), Sections 1981 through 1988 of Title 42
of the United States Code, as amended, and the Civil Rights Act of 1991, as
amended, the Fair Labor Standards Act, as amended, the Federal Occupational
Safety and Health Act, as amended, the Employee Retirement Income Security Act,
as amended, the Rehabilitation Act of 1973, as amended, the Americans with
Disabilities Act, as amended, the Family and Medical Leave Act, as amended,
and/or any other federal, state, municipal or local employment discrimination
statutes, laws, regulations, ordinances or executive orders (including, but not
limited to, claims based on age, sex, attainment of benefit plan rights or
entitlement to plan benefits, race, color, religion, national origin, source of
income, union activities, marital status, sexual orientation, ancestry,
harassment, parental status, handicap, disability, retaliation and veteran
status); and/or     (b)   claims, actions, causes of action or liabilities
arising under any other federal, state, municipal or local statute, law,
ordinance, regulation, constitution or executive order; and/or     (c)   any
other claim whatsoever including, but not limited to, claims for severance pay,
claims for salary/wages/commissions/bonus, claims for expense reimbursement,
claims based upon breach of contract, wrongful termination, defamation,
intentional infliction of emotional distress, tort, personal injury, invasion of
privacy, violation of public policy, negligence and/or any other

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      common law, statutory or other claim whatsoever arising out of or relating
to my employment with and/or separation from employment with the Company and/or
any of the other Releasees.

     (2) Exclusions from General Release. Excluded from the general release
above (i) are any claims or rights which cannot be waived by law, including my
right, if any, to accrued vacation. In addition, nothing in this Waiver and
Release Agreement limits my rights (or the rights of any government agency) of
access to, or to cooperate or participate with, any government agency, or to
file a charge with any administrative agency or participate in any agency
investigation, including without limitation, the United States Equal Employment
Opportunity Commission or (ii) claims for enforcement of the Separation
Agreement. I am, however, freely waiving my right to any recovery of money or
other relief in connection with such a charge or investigation for a claim under
clause (i). I am also waiving my right to recover money or other relief in
connection with a charge filed by any other individual or by the Equal
Employment Opportunity Commission or any other federal, state or local agency.
     (3) Covenant Not to Sue. I understand that a “covenant not to sue” is a
legal term which means I am promising not to file a lawsuit in court. It is
different from the General Release of claims contained in paragraph (1) above
because, in addition to waiving and releasing the claims covered by paragraph
(1) above, I further agree never to sue any of the Releasees or become party to
a lawsuit in any forum for any reason, including but not limited to claims of
any type or based on any laws or theories whatsoever covered by the General
Release language in paragraph (1) above or arising out of or relating to my
employment with and/or separation from employment with the Company and/or any of
the other Releasees. Notwithstanding this covenant not to sue, I may bring a
claim or lawsuit to challenge the validity of this Agreement under the ADEA or
to enforce my rights under the Separation Agreement and this Agreement.
     (4) Company’s Remedies. I further acknowledge and agree in the event that I
breach the provisions of paragraph (3) above and I fail to cure such breach
within thirty (30) days after I have been given notice of such breach, (a) the
Company shall be entitled to apply for and receive an injunction to restrain any
violation of paragraph (3) above, (b) the Company shall not be obligated to
provide the Benefits, (c) the Benefits shall be deemed canceled if already
granted, (d) I shall be obligated to pay to the Company its costs and expenses
in enforcing this Agreement and defending against such lawsuit (including court
costs, expenses, reasonable legal fees and any other litigation costs), and
(e) I shall be obligated upon demand to pay to the Company all but $300,000 of
the cost of the Benefits (as further set forth in the Separation Agreement) and
the foregoing shall not affect the validity of this Agreement.
     (5) Exclusion. As stated in paragraph (3), I would not violate any part of
this Agreement by bringing a lawsuit against the Company to enforce my rights
under the Separation Agreement or this Agreement or to challenge the validity of
this Agreement under the ADEA. However, as stated in paragraph (2), I further
waive my right to any monetary recovery or other relief that may become payable
to me pursuant to any claim that is pursued by any federal, state, or local
administrative agency for my benefit arising out of or related to my employment
with and/or separation from employment with the Company and/or any of the other
Releasees.

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     (6) Employee Acknowledgements. I further agree that I have been paid for
all hours worked, including overtime. I also acknowledge that I have not
suffered any on-the-job injury for which I have not already filed a claim.
     (7) Future Employment. To the extent permitted by law, I further waive,
release and discharge the Company and/or any of the other Releasees from any
reinstatement rights which I have or could have. I further promise not to seek
future employment with the Company and/or any of the other Releasees in any
position or capacity.
     (8) Non-Admissions. The facts and terms of this Agreement are not an
admission by the Company and/or any of the other Releasees of liability or other
wrongdoing under any law.
     (9) Additional Employee Acknowledgements. I further agree that:

  •   I am entering into this Agreement knowingly and voluntarily;     •   I
have been advised to consult with an attorney before signing this Agreement;    
•   I understand I may take at least forty-five (45) days to consider this
Agreement before signing it;     •   I have carefully read and fully understand
all the provisions of this Agreement and that I voluntarily enter into this
Agreement by signing below;     •   I am not otherwise entitled to the Benefits;
and     •   the Separation Agreement, including the exhibits attached thereto,
is the entire agreement between me and the Releasees regarding the termination
of my employment with the Releasees.

     (10) Revocation/Payment. I further understand I may revoke this Agreement
within seven (7) days after its signing and that any revocation shall be made in
writing and submitted within this seven (7) day period to the Company’s Chief
Legal Officer at the address listed on the following page. If I do not revoke
this Agreement within the seven (7) day period, the Agreement shall become
irrevocable. I further understand that if I revoke this Agreement, I shall not
receive the Benefits.
     (11) Known and Unknown Claims. I FURTHER UNDERSTAND THAT THIS AGREEMENT
INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.
     (12) Severability. I further acknowledge and agree that if any provision of
this Agreement is found, held or deemed by a court of competent jurisdiction to
be void, unlawful or unenforceable under any applicable statute or controlling
law, the remainder of this Agreement shall continue in full force and effect.
     (13) Venue for Disputes. Each of the parties (a) consents to submit itself
to the personal jurisdiction of the Court of Chancery of the State of Delaware
or any court of the United States located in the State of Delaware, in the event
any dispute arises out of this

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Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, (c) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than the Court of Chancery of
the State of Delaware or, if under applicable law exclusive jurisdiction is
vested in the federal courts, any court of the United States located in the
State of Delaware. Without limiting other means of service of process
permissible under applicable law, the parties agree that service of any process
summons, notice or document by U.S. registered mail to their respective last
known addresses shall be effective service of process for any suit or proceeding
in connection with this Agreement or the transactions contemplated hereby.
     (14) Waiver of Jury Trial. EACH OF THE PARTIES IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THE PARTIES ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

         
 
  /s/ David J. Paterson    
 
 
 
   
 
  (Signature)    
 
       
 
 
 
(Date)    

PLEASE RETURN THE SIGNED AND DATED WAIVER AND RELEASE AGREEMENT TO THE COMPANY’S
CHIEF LEGAL OFFICER AT THE FOLLOWING ADDRESS:
AbitibiBowater Inc.
1155 Metcalfe Street
Suite 800
Montreal, Quebec
H3B 5H2

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EXHIBIT B
INDEMNIFICATION AGREEMENT