Document:

2011 AbitibiBowater Inc. Short-Term Incentive Plan

 Exhibit 10.16 

 

			
	2011 Short-Term Incentive Plan	  	

  

			
	Purpose	  	As a means of rewarding employees for their contribution toward the success of the Company, a 2011 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, 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, 2011 to December 31, 2011.
		
	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 or her grade level. Base salary
is the rate in effect at December 31, 2011. 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	  	 Discretionary Plan and Plan Administration
  

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

 
 •   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.”

		
		  	 •   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.

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

		
		  	 •   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 performance levels have been met.

		
		  	 •   Each business unit needs to complete a performance review assessment for each employee to justify an
award under the STIP.

		
		  	 •   Adjustments may be made to the financial metrics for closure costs, severance costs and similar
items.

		
		  	 •   Adjustments may also be made to the cost metrics for specific reasons such as market downtime, major
variation in grade mix, major changes in input price, etc.

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

		
		  	 •   Awards under the STIP are anticipated to be paid in a lump sum no later than March 15,
2012.

  

			
	This plan text replaces and supercedes any and all prior versions and summary fact sheet.	  	May 18, 2011

  
 

 

			
	2011 Short-Term Incentive Plan	  	

  

			
	Performance Metrics	  	 Performance Metrics – Weighting

 Performance Metrics 

 

													
	 Criteria
	  	Threshold	 	  	Target	 	  	Maximum	 
				
	 Income from operations (ABH)
	  	$	337 M	  	  	$	464 M	  	  	$	553 M	  
				
	 Manufacturing costs1
	  	 
 $
	.5% < budget
 20
M
	  
   
	  	 
 $
	2% < budget
 80
M
	  
   
	  	 
 $
	3% < budget
 120
M
	  
   

				
	 SG&A cost
	  	$	150 M	  	  	$	145 M	  	  	$	140 M	  
				
	 Safety – OSHA rate2
	  	 	1.4 points	  	  	 	1.0 point	  	  	 	<1.0 point	  
				
	 Safety – Severity3
	  	 	33	  	  	 	30	  	  	 	£ 25	  

  

	1 	 Targets based on cost of goods sold are set for the recycling division. 

	2 	 The calculation methodology for the mills/divisions varies from the calculation methodology for corporate. 

	3 	 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 (ABH)
	  	 	40%	  	  	 	40%	  	  	 	50%	  	  	 	50%	  
	 Manufacturing costs (mill)
	  	 	40%	  	  	 	40%	  	  				  			
	 SG&A cost or profit/metric ton
	  				  				  	 	30%	  	  	 	30%	  
	 Safety – OSHA (mill/division) (ABH)
	  	 	15%	  	  	 	15%	  	  	 	15% (ABH)	  	  	 	15% (ABH)	  
	 Safety – Severity (mill/division) (ABH)
	  	 	5%	  	  	 	5%	  	  	 	5% (ABH)	  	  	 	5% (ABH)	  

  
 

 

  
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	2011 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 2011 (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 income from operations, adjusted for:

 
 •  Cash
interest

		
		  	 •  Cash reorganization costs

		
		  	 •  Depreciation

		
		  	 •  Pension funding

		
		  	 •  Cash taxes

		
		  	 •  Work capital variation

		
		  	 •  Maintenance capital expenditures

		
		  	 •  Other

		
	Administrative Guidelines	  	New Hires
		
		  	An employee hired into a regular position before October 1, 2011 is eligible to participate pro rata during the performance period. An employee hired into a regular position on or
after October 1, 2011 is not eligible for participation in the STIP.
		
		  	Promotion or Status Changes
		
		  	 •  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,
2011.

		
		  	 •  If an employee’s status changes from temporary to regular or union to non-union during the performance
period, the employee will be eligible to participate for time spent as a regular or non-union employee, as the case may be, and any incentive payout calculation will be prorated for time spent as a regular or non-union employee, as the case may be.
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, 2011.

		
		  	Termination
		
		  	 •  An employee who elects to retire, is involuntarily terminated for reasons other than cause, or who dies during
the performance period 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.

		
		  	 •  An employee who voluntarily resigns from the Company during the performance period (inclusive) will not be
eligible to receive an award. An employee who voluntarily resigns from the Company after the performance period will remain eligible to receive an award, if and when the Company approves the incentive payouts and does not otherwise cancel
payment.

  
 

 

  
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	2011 Short-Term Incentive Plan	  	

  

			
		  	 •   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.

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

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

		
		  	 •   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.

		
		  	 •   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	  	

  
 

 

  
 4 of 4Summary of 2012 AbitibiBowater Inc. Short-Term Incentive Plan

 Exhibit 10.17 
 Summary of 2012 AbitibiBowater Inc. Short-Term Incentive Plan 
 On February 22,
2012, upon the recommendation of the human resources and compensation/nominating and governance committee, the board of directors of AbitibiBowater Inc., doing business as Resolute Forest Products (the “Company”), adopted the material
terms of the 2012 AbitibiBowater Inc. Short-Term Incentive Plan, or the “2012 STIP.” As of the date of the filing of this Annual Report on Form 10-K, the 2012 STIP has not been reduced to writing. The following is a summary of the expected
terms of the 2012 STIP, as previously disclosed in the Company’s Current Report on Form 8-K filed with the SEC on February 28, 2012. 
 The 2012 STIP provides that participating employees, including each of the Company’s named executive officers, are eligible to receive cash incentive awards expressed as a percentage of their base
salaries, based on certain quantitative Company performance goals over the 2012 annual period. In respect of the Company’s named executive officers, the target and maximum incentive awards are 100% and 150% of base salary, with no applicable
minimum, and the applicable performance metrics may include: income from operations, reduction in selling, general and administrative expenses, profit per metric ton, frequency of safety incidents and severity of safety incidents. 

Awards, if granted, are expected to be made in the first quarter of 2013. The aggregate amount payable under the 2012 STIP for all eligible employees is
limited to 7% of the Company’s 2012 free cash flow (defined as income from operations adjusted for cash interest, cash reorganization costs, depreciation, pension funding, cash taxes, working capital variation and maintenance capital
expenditures). 
 Employees remain eligible for pro rated awards if they voluntarily retire or are terminated other than for cause during the
year. Employees who voluntarily resign during the year or are terminated for cause will not be eligible. The Company may adjust financial and cost metrics, and may adjust any and all awards in its discretion. Awards are discretionary and subject to
modification until they are made, including increases, decreases, cancellations, deferrals and other conditions, even if performance levels have been met.

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