Exhibit 10.18



 

 



EXHIBIT
10.18




SEVERANCE COMPENSATION AGREEMENT



THIS AGREEMENT made the 1st day of September, 2006.




BETWEEN:



ABITIBI-CONSOLIDATED INC., a company amalgamated under the laws of

Canada



(the “Corporation”)



—and—



YVES LAFLAMME, an individual residing in the City of

Boucherville, in the province of Québec



(the “Executive”)




RECITALS:





	A.	 	The Executive is a senior officer of the Corporation and is considered by the Board of
Directors of the Corporation to be a valued employee of the Corporation and has acquired
outstanding and special skills and abilities and an extensive background in and knowledge
of the Corporation’s business and the industry in which it is engaged.
	 
	B.	 	The Board of Directors recognizes that it is essential and in the best interests of the
Corporation and its shareholders that the Corporation retain the continuing dedication of
the Executive to his office and employment.
	 
	C.	 	The Board of Directors further believes that the past service of the Executive to the
Corporation requires that the Executive receive fair treatment, in the event of a change in
control of the Corporation.
	 
	D.	 	It is desirable to clarify the scope of the arrangements under this Agreement.





          NOW THEREFORE in consideration of these premises and the mutual covenants herein contained
and in consideration of the Executive continuing in office and in the employment of the
Corporation, the Corporation and the Executive hereby covenant and agree as follows:




					
	 
	 	 	 	Dec 08, 2006












 



 


-2-





	1.	 	Definitions






     In this Agreement,




	 	(a)	 	“Agreement” means this agreement and all schedules attached to this agreement,
in each case as they may be restated, amended or supplemented from time to time, and
the expressions “hereof, “herein”, “hereto”, “hereunder”, “hereby”, and similar
expressions refer to this agreement and, unless otherwise indicated, references to
sections are to sections in this agreement;
	 
	 	(b)	 	“Annual Compensation” means the aggregate of (i) the annual base salary of the
Executive, payable by the Corporation as at the end of the month immediately preceding
the month in which the termination of employment hereunder takes effect; and (ii) the
greater of (A) the last bonus payment earned by the Executive pursuant to the Key
Executive Incentive Plan in the fiscal year immediately preceding the termination of
the Executive’s employment hereunder; or (B) an amount equal to the average of the
bonus payments earned by the Executive pursuant to the Key Executive Incentive Plan in
the two fiscal years immediately preceding the termination of the Executive’s
employment hereunder;
	 
	 	(c)	 	“Change of Control” means any of:






	 	(i)	 	The acquisition, directly or indirectly and by any means
whatsoever, by any person, or by a group of persons acting jointly or in
concert, of that number of Voting Shares which is equal to or greater than 35%
of the total issued and outstanding Voting Shares immediately after such
acquisition unless another person or group of persons has previously acquired
and continues to hold a number of Voting Shares which represents a greater
percentage than the first-mentioned person or group of persons;
	 
	 	(ii)	 	The election or appointment by any holder of Voting Shares, or
by any group of holders of Voting Shares acting jointly or in concert, of a
number of members of the Board of Directors of the Corporation equal to or
greater than one third of the members of the Board of Directors unless another
holder or group of holders has previously elected or appointed a greater number
of members of the Board of Directors and re-elects such greater number of
members at the same time as the first-mentioned holder or group of holders;
	 
	 	(iii)	 	Any transaction or series of transactions, whether by way of
reconstruction, reorganization, consolidation, amalgamation, arrangement,
merger, transfer, sale or otherwise, whereby assets of the Corporation become
the property of any other person (other than a subsidiary of the Corporation)
if such assets which become the property of any other person have a fair market
value (net of the fair market value of any then existing liabilities of the
Corporation assumed by such other person as part of the same transaction) equal
to 50%





					
	 	 	 	 	 
	Canadian SCA — Yves Laflamme
	 	 	 	Dec 08, 2006












 



 


-3-





or more of the Market Capitalization of the Corporation immediately before
such transaction; or




	 	(iv)	 	The completion of any transaction or the first of a series of
transactions which would have the same or similar effect as any transaction or
series of transactions referred to in paragraphs (i), (ii) and (iii) above;






	 	(d)	 	“Disability” means the mental or physical state of the Executive such that:






	 	(i)	 	The directors of the Corporation, other than the Executive if
he is a director, unanimously determine that the Executive has been unable, due
to illness, disease, mental or physical disability or similar cause, to fulfil
his obligations as an employee or officer of the Corporation either for any
consecutive 6 month period or for any period of 12 months (whether or not
consecutive) in any consecutive 24 month period; or
	 
	 	(ii)	 	A court of competent jurisdiction has declared the Executive to
be mentally incompetent or incapable of managing his affairs;






	 	(e)	 	“Good Reason” means:






	 	(i)	 	Without the express written consent of the Executive, the
assignment to the Executive of any duties materially inconsistent with his
positions, duties and responsibilities with the Corporation immediately prior
to the date hereof or any removal of the Executive from, or any failure to
re-elect the Executive to, material positions, duties and responsibilities with
the Corporation, except in connection with the termination of the Executive’s
employment for Just Cause, Disability or Retirement or as a result of the
Executive’s death or by the Executive other than for Good Reason;
	 
	 	(ii)	 	A reduction by the Corporation in the Executive’s salary as in
effect on the date hereof or as the same may be increased from time to time;
	 
	 	(iii)	 	The failure by the Corporation to continue in effect any
incentive or compensation plan, or any pension, life insurance, health and
accident or disability plan in which the Executive is participating at the date
hereof, (or plans providing the Executive with substantially similar benefits)
unless such plans have been replaced by new plans providing the Executive with
benefits that are as good as or better than the benefits provided in such
plans, or the taking of any action by the Company which would adversely affect
the Executive’s participation in or materially reduce the Executive’s benefits
under any of such plans or deprive the Executive of any material fringe benefit
enjoyed by him at the date hereof;
	 
	 	(iv)	 	The requirement that the Executive be based anywhere other than
the Corporation’s principal executive offices except for required travel on the
Corporation’s business to an extent substantially consistent with the





					
	 	 	 	 	 
	Canadian SCA — Yves Laflamme
	 	 	 	Dec 08, 2006












 



 


-4-





Executive’s present employment or travel obligations, or in the event the
Executive consents to any such relocation, the failure by the Corporation to
pay (or reimburse the Executive for) all reasonable moving expenses incurred
by the Executive or to indemnify the Executive against any excess in (A) the
cost of a principal residence in the new location which is comparable to the
Executive’s principal residence at the time of the relocation, over (B) the
amount realized by the Executive upon the sale of his principal residence at
the time of the relocation; or




	 	(v)	 	Any reason which would be considered to amount to
constructive dismissal by a court of competent jurisdiction;






	 	(f)	 	“Just Cause” means wilful failure of the Executive to properly carry out his
duties after written notice by the Corporation of the failure to do so and an
opportunity for the Executive to correct the same within a reasonable time from the
date of receipt of such written notice from the Corporation, or theft, fraud or
dishonesty or material misconduct by the Executive involving the property or affairs
of the Corporation or the carrying out of the Executive’s duties;
	 
	 	(g)	 	“Key Executive Incentive Plan” means any program adopted by the Corporation
from time to time with the intention of providing bonus or similar compensation to the
executives of the Corporation;
	 
	 	(h)	 	“Market Capitalization of the Corporation” at any time means the product of (i)
the number of outstanding common shares of the Corporation at that time, and (ii) the
average of the closing prices for the common shares of the Corporation on the principal
securities exchange (in terms of volume of trading) on which the common shares of the
Corporation are listed at that time for each of the last 10 days prior to such time on
which the common shares of the Corporation traded on such securities exchange;
	 
	 	(i)	 	“Person” means includes an individual, partnership, association, body
corporate, trustee, executor, administrator, legal representative and any national,
provincial, state or municipal government;
	 
	 	(j)	 	“Retirement” means the retirement or early retirement of the Executive in
accordance with the terms of the Retirement Agreement;
	 
	 	(k)	 	“Retirement Agreement” means any agreement between the Corporation and the
Executive, under which the Corporation agreed to pay the Executive a retirement
allowance following his retirement or early retirement from employment with the
Corporation, in accordance with the terms of that agreement and including any
amendments made from time to time to such agreement;
	 
	 	(l)	 	“Stock Option Plans” means the Abitibi-Consolidated Inc. Stock Option Plan and
any similar plan of the Corporation under which the Corporation from time to time





					
	 	 	 	 	 
	Canadian SCA — Yves Laflamme
	 	 	 	Dec 08, 2006












 



 


-5-





grants options to purchase Voting Shares of the Corporation and loans for the purpose
of exercising such options;




	 	(m)	 	“Subsidiary” has the meaning ascribed to it in the Canada Business
Corporations Act, as in force on the date hereof; and
	 
	 	(n)	 	“Voting Shares” means any securities of the Corporation ordinarily
carrying the right to vote at elections of directors.






	2.	 	Scope of Agreement





          The parties hereto intend that this Agreement set out their respective rights and obligations
in certain circumstances in which the Executive’s employment is terminated. This Agreement does
not purport to provide for any other terms of the Executive’s employment with the Corporation.





	3.	 	Position, Duties and Responsibilities of Executive





          The Executive shall continue to have the responsibilities and powers that he currently has or
such other responsibilities and powers as he and the Corporation may from time to time agree upon.
The Executive shall devote the whole of his working time to the Executive’s duties and shall use
his best efforts to promote the interests of the Corporation.





	4.	 	Termination of Employment by the Corporation for Just Cause





          The Corporation may terminate the Executive’s employment at any time without notice or further
obligations to the Executive under this Agreement for reasons of Just Cause. Notwithstanding the
foregoing, the Executive shall not be deemed to have been terminated for Just Cause unless and
until there has been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the Board of Directors
of the Corporation (excluding the Executive if the Executive is at that time a director of the
Corporation) at a meeting of the Board called and held for the purpose (after reasonable notice to
the Executive and an opportunity for the Executive, together with his legal counsel, to be heard
before the Board), finding that in the good faith opinion of the Board the Executive was guilty of
conduct constituting Just Cause and specifying the particulars thereof. The effective date of any
termination pursuant to this section shall be the date on which such resolution is given to the
Executive.





	5.	 	Termination of Employment by the Corporation Without Just Cause or by the
Executive for Good Reason





          If at any time within two years following a Change of Control the Executive’s employment is
terminated, (a) by the Corporation other than for Just Cause or (b) by the Executive in response
to a Good Reason, the following provisions shall apply:




	 	 	 	 	 
	 
	Canadian SCA — Yves Laflamme
	 	 	 	Dec 08, 2006












 



 


-6-





	 	(a)	 	The Executive shall be entitled to receive, and the Corporation shall pay to
the Executive, immediately following termination, a cash amount equal to three times
the Annual Compensation of the Executive less required statutory deductions;
	 
	 	(b)	 	The Executive shall continue to receive until the earlier of (i) three years
after the date of termination or (ii) receipt of equivalent benefits from a new
employer, all group benefits including health, dental, life and car allowance
(excluding all maintenance and operating expenses) other than disability insurance
benefits on the scale provided by the Corporation to the Executive as at the date of
termination or in lieu of such continued coverage, the Executive shall be entitled to
receive a cash amount equal to the value to the Executive (as determined by a chartered
accountant or firm of chartered accountants acceptable to the Corporation and the
Executive) of such coverage for such period of time;
	 
	 	(c)	 	The Executive will also be entitled to receive on termination the normal and
any supplementary pension benefits in effect on the date of termination according to
the terms of the Corporation’s registered pension plans and the Retirement Agreement
or according to similar provisions of any successor plan, of which the Executive is a
member at the date of termination (the “Retirement Plans”). The Executive’s total
pension entitlement and retirement options will be determined on the basis that the
Executive had three years of credited service and age under the Retirement Plans at
his date of termination of employment (over and above his actual years of credited
service as otherwise determined). In addition, such additional years of service shall
be included for the purpose of determining final or best average earnings assuming
that the Executive’s monthly rate of salary at date of termination would have
continued unchanged during the period of additional service. For Retirement Plans that
include performance bonuses in the definition of pensionable earnings, the average of
the highest three actual bonuses earned in the five years immediately prior to the
date of termination shall be used for calculating the bonuses for each year during the
severance period used for the purpose of determining final or best average earnings.
Any portion of the total pension entitlement of the Executive not eligible to be paid
under provisions of the registered pension plans of the Corporation shall be payable
as supplementary payments in accordance with the Retirement Agreement;
	 
	 	(d)	 	if at the date of termination of the Executive’s employment, the Executive
holds options for the purchase of shares under the Stock Option Plans, all options so
held shall, unless the Executive has breached the terms of section 13 hereof, (i)
immediately vest to the extent they have not already vested at such date and (ii)
continue to be held, in both cases, notwithstanding the terms of the Stock Option
Plans, on the same terms and conditions as if the Executive continued to be employed
by the Corporation;





					
	 	 	 	 	 
	Canadian SCA — Yves Laflamme
	 	 	 	Dec 08, 2006












 



 


-7-





	 	(e)	 	If at the date of the termination of the Executive’s employment, the Executive
owes any money to the Corporation pursuant to loans to the Executive for the purchase
of shares under the Stock Option Plans or for assisting the Executive to purchase
property, such loans shall, notwithstanding the terms of any other agreement between
the Corporation and the Executive respecting these loans, be repayable by the
Executive in the same manner and at the same time as if the Executive continued to be
employed by the Corporation following such termination, provided that if the Executive
has breached the terms of section 13 hereof, the loans shall become immediately due on
the date of such breach and shall be repaid forthwith.




For greater certainty, this section 5 applies with respect to each Change of Control until this
Agreement has been terminated in accordance with section 14 hereof. In addition, with respect to a
particular Change of Control, this section 5 expires two years following such Change of Control
unless this Agreement is otherwise terminated in accordance with section 14 hereof. This section 5
does not apply in the event of the termination of the employment of the Executive as a result of
death, Disability or Retirement or by the Executive otherwise than in response to a Good Reason or
by the Corporation for Just Cause. If the Executive or the Corporation intend to terminate the
Executive’s employment as contemplated in this section, the party having such intention shall give
the other notice thereof and the effective date of such termination shall be the date on which such
notice is given to the other party.





	6.	 	Disability





          In the event of Disability of the Executive, this Agreement may be terminated by the
Corporation on thirty days’ notice. Notwithstanding anything contained in this Section 6, the
Executive shall be entitled to all benefits provided under the disability and pension plans of the
Corporation applicable to the Executive at the date of this Agreement.





	7.	 	No Obligation to Mitigate





          The Executive shall not be required to mitigate the amount of any payment or benefit provided
for in section 5 of this Agreement by seeking other employment or otherwise, nor shall the amount
of any payment provided for in section 5(a) be reduced by any compensation earned by the Executive
as a result of employment by another employer after termination or otherwise.





	8.	 	Binding on Successors






	 	(a)	 	The Corporation will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Corporation, by agreement in form and substance
satisfactory to the Executive, to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Corporation would be required to
perform it if no such succession had taken place. Failure of the Corporation to obtain
such agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle the Executive to compensation from the Corporation on
the same terms and conditions as the Executive would be entitled hereunder if the





					
	 	 	 	 	 
	Canadian SCA — Yves Laflamme
	 	 	 	Dec 08, 2006












 



 


-8-





Executive terminated his employment for Good Reason. As used in this Agreement,
“Corporation” shall mean the Corporation as hereinbefore defined and any successor
to its business and/or assets as aforesaid which executes and delivers the agreement
provided for in this section 8 (a) or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law.




	 	(b)	 	This Agreement shall ensure to the benefit of and be enforceable by the
Executive’s successors or legal representatives but otherwise it is not assignable. If
the Executive should die while any amounts would still be payable to the Executive
hereunder if the Executive had continued to live, all such amounts unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to the
Executive’s estate.






	9.	 	Expenses





          The Corporation agrees to pay all legal fees and expenses incurred by the Executive as a
result of the termination of his employment in circumstances covered by this Agreement (including
all such fees and expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement).





	10.	 	Entire Agreement





          Except for the Executive’s rights to continued participation in the Corporation’s employee
benefit plans, including, without limitation, the Corporation’s Stock Option Plans, this Agreement
constitutes the entire agreement between the parties hereto pertaining to the subject matter
hereof and superceedes and replaces the terms of the Prior Agreements. Upon execution of the
present Agreement, the Prior Agreements will be of no further force or effect. No amendment or
waiver of this Agreement shall be binding unless executed in writing by both parties hereto.





	11.	 	Confidential Information





          In the event of termination of employment of the Executive, the Executive agrees to keep
confidential all information of a confidential or proprietary nature concerning the Corporation,
its subsidiaries and affiliates and their respective operations, assets, finances, business and
affairs and further agrees not to use such information for personal advantage, provided that
nothing herein shall prevent disclosure of information which is publicly available or which is
required to be disclosed under appropriate statutes, rules or law or legal process.





	12.	 	Choice of Law





          This Agreement shall be governed and interpreted in accordance with the laws of the Province
of Québec and the courts of the Province of Quebéc shall be the sole and proper forum with respect
to any suits brought with respect to this Agreement. The present agreement has been drafted in
English at the request of the Executive. La présente entente a été rédigée en anglais à
 la demande
de 1’employé.




					
	 	 	 	 	 
	Canadian SCA — Yves Laflamme
	 	 	 	Dec 08, 2006












 



 


-9-





	13.	 	Non-Competition





          The Executive agrees that in the event of his termination of service with the Corporation
under Section 5 of this Agreement, the Executive will not for a period of 2 years beginning on the
date of such termination, without written approval of the Board of Directors, undertake or carry
on, either alone or in partnership, or either on his own account or on behalf of or as agent or
employee or director of any person or persons, firm or corporation (other than the Corporation), or
be employed or interested or engaged (other than as a holder of securities of not more than five
percent (5%) of the stock or equity of any corporation the capital stock of which is publicly
traded) in any business in competition with that carried on by the Corporation at the date of
termination.





	14.	 	Notices





          Any notice or other communication required or permitted to be given hereunder shall be in
writing and shall be given by prepaid first-class mail, by facsimile or other means of electronic
communication or by hand-delivery as hereinafter provided. Any such notice or other communication,
if mailed by prepaid first-class mail at any time other than during a general discontinuance of
postal service due to strike, lockout or otherwise, shall be deemed to have been received on the
fourth business day following the sending, or if delivered by hand shall be deemed to have been
received at the time it is delivered to the applicable address noted below either to the
individual designated below or to an individual at such address having apparent authority to
accept deliveries on behalf of the addressee. Notice of change of address shall also be governed
by this section. In the event of a general discontinuance of postal service due to strike,
lock-out or otherwise, notices or other communications shall be delivered by hand or sent by
facsimile or other means of electronic communication and shall be deemed to have been received in
accordance with this section. Notices and other communications shall be addressed as follows:



(a) If to the Executive:



Yves Laflamme

Senior Vice-President, Woodlands & Sawmills



(b) If to the Corporation:



Abitibi-Consolidated Inc.

Att. Jacques Vachon

1155, Metcalfe Street, Suite 800

Montréal (Québéc) H3B 5H2



Attention: Chairman of the H.R.C.C.

Telecopier: (416) 367-3549




			
	 	 	 
	Canadian SCA — Yves Laflamme
	 	Dec 08, 2006












 



 


-10-





	15.	 	Termination





          This Agreement shall terminate immediately on the occurrence of any of the following
events: (i) the date of death of the Executive; (ii) voluntary resignation by the Executive from
the Corporation otherwise than in response to a Good Reason; (iii) the giving of notice by the
Corporation in the event of Disability as contemplated by section 6 hereof; (iv) termination for
Just Cause; (v) termination of employment of the Executive at any time when there has been no
Change of Control or more than two years after the immediately preceding Change of Control; or
(vi) satisfaction by the Corporation of its obligations under section 5 of this Agreement in the
event of termination of the Executive in the circumstances contemplated by section 5.





	16.	 	Copy of Agreement





          The Executive hereby acknowledges receipt of a copy of this Agreement duly signed by the
Corporation.




          IN WITNESS WHEREOF the parties hereto have duly executed and delivered this Agreement.




	 	 	 	 	 
	 	ABITIBI-CONSOLIDATED INC.

 	 
	 	By:  	/s/ John W. Weaver
 	 
	 	 	John Weaver  	 
	 	 	President and Chief Executive Officer 	 
	 
	 	 	 
	 	  	                                                      /s/ John A. Tory
 	 
	 	 	John A. Tory 	 
	 	 	Chairman of the H.R.C.C. 	 
	 



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Witness:

	 	 	 	(name unrecognizable)
	 	 	 	
	 	 	 	/s/ Yves Laflamme
	 	 
	 

	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	Yves Laflamme	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	Senior Vice-President, Woodlands & Sawmills	 	 






					
	 	 	 	 	 
	Canadian SCA — Yves Laflamme
	 	 	 	Dec 08, 2006