<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 COMMISSION FILE NO. 1-8712
BOWATER INCORPORATED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 62-0721803
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
55 EAST CAMPERDOWN WAY
P. O. BOX 1028
GREENVILLE, SOUTH CAROLINA 29602
(803) 271-7733
(Address and telephone number of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS: ON WHICH REGISTERED:
<S> <C>
Common Stock, par value $1 per share New York Stock Exchange, Inc.
The Pacific Stock Exchange Incorporated
The London Stock Exchange
The Swiss Stock Exchanges
</TABLE>
<TABLE>
<S> <C>
Depositary Shares, each representing one-fourth of New York Stock Exchange, Inc.
a share of 7% PRIDES, Series B Convertible
Preferred Stock, par value
$1 per share
Depositary Shares, each representing one-fourth of New York Stock Exchange, Inc.
a share of 8.40% Series C Cumulative Preferred
Stock, par value $1 per share
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (check) No ( )
Indicate by check mark if the disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of March 10, 1994, was $995,139,248.
As of March 10, 1994, there were 36,468,569 shares of the registrant's
Common Stock outstanding.
Portions of the following documents are incorporated by reference into the
parts of this report indicated below:
<TABLE>
<S> <C>
Annual Report to Shareholders for the year ended Parts I, II and IV
December 31, 1993.
Proxy Statement with respect Part III
to the Annual Meeting of Shareholders to be held
on May 25, 1994.
</TABLE>
This Form 10-K is printed on recycled paper manufactured by the Company.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Bowater Incorporated (together with its consolidated subsidiaries, the
"Company") is engaged in the manufacture, sale and distribution of newsprint,
directory paper, uncoated groundwood specialties, coated publication and
educational workbook paper, market pulp, continuous stock computer forms and
lumber. The Company operates facilities in both the United States and Canada,
manages and controls approximately 4.0 million acres of timberlands to support
these facilities and markets and distributes its various products both
domestically and in the export market.
On December 31, 1991, the Company acquired 80 percent of the stock of Great
Northern Paper, Inc. ("GNP") from Great Northern Nekoosa Corporation ("GNN"), a
subsidiary of Georgia-Pacific Corporation. In July 1992, the Company acquired
the remaining 20 percent of GNP under the terms of its purchase agreement with
GNN.
The Company was incorporated in Delaware in 1964. The Company's principal
executive offices are currently located at 55 East Camperdown Way, Greenville,
South Carolina 29602, and its telephone number at that address is (803)
271-7733.
Information regarding segment, geographic area, and net export sales is
incorporated herein by reference to pages 8 and 27 of the Company's 1993 Annual
Report (the "Annual Report").
Information regarding the pulp and paper industry is incorporated herein by
reference to pages 2 through 5 of the Annual Report.
Information regarding the Company's liquidity and capital resources is
incorporated herein by reference to pages 12 through 14 of the Annual Report.
NEWSPRINT, DIRECTORY PAPERS AND UNCOATED GROUNDWOOD SPECIALTIES
The Company is the largest manufacturer of newsprint in the United States
and, with its Nova Scotia mill, is the third largest manufacturer in North
America. Its annual capacity is approximately 8 percent of the North American
total.
The Company presently manufactures newsprint at five separate locations:
Calhoun, Tennessee; Catawba, South Carolina; Millinocket and East Millinocket,
Maine; and Liverpool, Nova Scotia. Both the Company's Southern Division and
Calhoun Newsprint Company ("CNC") (of which stock with approximately 51 percent
voting power is held by the Company and stock with approximately 49 percent
voting power is held by Advance Publications, Inc.) are located at Calhoun,
Tennessee. The Company's Carolina Division is located at Catawba, South
Carolina, and Bowater Mersey Paper Company ("Mersey") (which is owned 51 percent
by the Company and 49 percent by The Washington Post Company) is located at
Liverpool, Nova Scotia. GNP is comprised of two mills located at Millinocket and
East Millinocket, Maine, the Pinkham Lumber Company in Ashland, Maine, and
approximately 2.1 million acres of timberlands in Maine.
The Calhoun facility, which produces newsprint for Southern Division and
CNC, is located on the Hiwassee River in Tennessee and is the largest newsprint
mill in North America. At this facility, Southern Division operates four paper
machines, which produced 594,550 tons of newsprint and groundwood specialty
papers in 1993. Also located at this facility is CNC's No. 5 paper machine,
which produced 241,627 tons of newsprint in 1993. The continuing modernization
of Southern Division's facilities has contributed substantially to improved
product quality and is helping the mill to maintain its position as one of the
most productive in the industry. Although Southern Division manages and operates
the entire Calhoun facility, CNC owns 68.4 percent of the thermomechanical pulp
("TMP") mill and 100 percent of the recycled fiber plant located at the Calhoun
facility. Southern Division owns the remaining 31.6 percent of the TMP mill and
100 percent of the other facilities at this location. These other facilities
include kraft and stone groundwood pulp mills, a power plant, water treatment
facilities, and other support equipment necessary to produce the finished
product.
The newsprint machine at the Company's Carolina Division, which produced
240,623 tons in 1993, is one of the largest and most productive newsprint
machines in the industry. In 1988, the Company installed a twin-wire former and
other ancillary equipment that have enhanced this machine's capacity and
permitted it to produce a higher quality product.
The Mersey mill is located on an ice-free port providing economical access
to ports along the eastern seaboard of the United States and throughout the
world. Its two paper machines, built in 1929, were completely rebuilt between
1983 and 1985 and produced 263,306 tons of newsprint in 1993. The mill also
operates pulping and other support facilities required to produce the finished
product. A new TMP mill was started up in late 1989 and now supplies 100 percent
of the pulp to the two newsprint machines. This change has resulted in
significant improvements in product quality.
1
<PAGE>
The East Millinocket mill is located on the West Branch of the Penobscot
River in northern Maine. Its two paper machines (Nos. 5 and 6) were built in
1954 and completely rebuilt in 1986. These two machines produced a total of
276,824 tons of newsprint, directory paper and other groundwood specialties in
1993. The mill also operates a groundwood pulp mill and other support facilities
required to produce the finished products. Sulfite pulp is pumped through a
pipeline from the Millinocket mill for use at the East Millinocket mill.
The Millinocket Mill is located eight miles from the East Millinocket mill,
and in 1993 produced 154,207 tons of newsprint, directory papers and uncoated
groundwood specialties. These paper grades are used in magazines, catalogs,
directories, newspaper advertising inserts and business forms and are sold
primarily to customers east of the Mississippi River. During the third quarter
of 1993, the Company announced the phased closure of certain older, higher cost
operations located at the Millinocket mill. The phaseout will involve the
shutdown of the mill's woodyard, groundwood pulping facilities and a small paper
machine that produces uncoated groundwood specialties. Approximately 200
positions will be eliminated throughout the mill's operations over a 12 month
period as a result of this closure. The Company believes that these changes will
significantly improve the mill's cost competitiveness.
The production of all five newsprint mills is sold directly by the Company
through regional sales offices located in major metropolitan areas of the
eastern half of the United States. Advance Publications, Inc. purchases the
equivalent of CNC's entire annual output, and The Washington Post purchases
approximately 80,000 tons annually. Combined, these two customers in 1993
accounted for approximately 8.7 percent of the Company's consolidated net sales
and 21.4 percent of the Company's newsprint sales. The geographical location of
the Company's newsprint mills permits distribution of their products by rail,
truck, ship or barge.
COATED PAPER
The Company is the fifth largest producer in the United States and the
sixth largest North American producer of coated paper. Coated paper produced by
the Company is light weight coated paper ("LWC") and is used in special interest
magazines, mail order catalogs, advertising pieces and coupons.
The Company manufactures a variety of coated grades on two paper machines
(Nos. 1 and 2) at its Catawba, South Carolina, mill site and on three paper
machines (Nos. 7, 8, and 10) at its Millinocket, Maine, mill site. The Company's
No. 2 machine at Catawba began production in July 1986 and reached its design
capacity during 1987. Both machines at Catawba include off-machine coaters. At
Millinocket, the Nos. 7 and 8 machines produce a base stock which is coated on
an off-machine blade coater while the No. 10 machine has an on-machine roll
coater.
In 1993, the two coated machines at Catawba produced 333,490 tons of LWC
and the three coated machines at Millinocket produced 121,425 tons of LWC.
Coated paper is sold by the Company to printers, publishers, mail order
houses and paper merchants. It is distributed by truck and rail from the Catawba
and Millinocket mill sites, which are strategically located to supply the
southeastern and northeastern United States, respectively, as well as jointly
serving the midwestern market.
MARKET PULP
In addition to furnishing its pulp requirements, the Company in 1993
supplied 256,599 tons of bleached kraft market pulp to manufacturers of fine
paper, tissues and other paper products from its market pulp facility at
Catawba, South Carolina. In 1990, the Company replaced its kraft mill at
Calhoun, Tennessee. The new 900 tons per day capacity mill replaced a smaller
34-year old kraft pulp mill. This new mill utilizes the most up-to-date
technology and has provided increased capacity, improved pulp quality, reduced
energy consumption, and an improved environmental impact. During 1993, in
addition to supplying the chemical pulp portion of the newsprint furnish, the
new kraft mill produced an additional 42,438 tons of fully bleached market pulp
for sale to customers.
In 1994, the Southern Division will replace its present recovery boilers,
which are 27 and 39 years old, with a new recovery boiler currently under
construction. A recovery boiler is an essential part of the kraft pulping
process. The new recovery boiler will enable the Company to realize significant
cost reductions and meet currently proposed environmental regulations.
Most of the Company's market pulp is fully bleached, but small amounts of
semi-bleached kraft grades are also produced. In recent years, 70 percent to 80
percent of the Company's pulp sales have been to the export market, which is
sold through agents. United States sales are made directly by the Company.
2
<PAGE>
COMMUNICATION PAPERS
The Company's subsidiary, Bowater Communication Papers Inc. ("BCPI"),
manufactures continuous stock computer forms at eight plants in the United
States. BCPI markets this product and other business communication papers
through its two divisions, Bowater Computer Forms ("BCF") and Star Forms, which
use a network of 30 distribution centers to service customers in major
metropolitan areas throughout the United States. BCF specializes in direct sales
to numerous large-volume end-users, such as banks and governmental entities,
while Star Forms concentrates on sales to smaller businesses and individuals
through sales to numerous business forms distributors, paper merchants, office
product dealers, computer stores and other outlets.
LUMBER, STUMPAGE AND OTHER PRODUCTS
In connection with its primary business of manufacturing and distributing
various paper products and market pulp, the Company is engaged in several
business areas related to its primary business.
The Company currently owns or manages under lease approximately 4.0 million
acres of timberlands throughout eight states and Nova Scotia. Approximately 2.1
million acres of these timberlands were acquired in the GNP acquisition and are
located in the State of Maine. The Company also maintains two nurseries from
which it supplies seedlings to replace trees harvested from its timberlands,
generally planting three trees for each one that is cut.
The Company operates three sawmills that produce construction grade lumber.
The sawmill at Albertville, Alabama, produced 96.5 million board feet of lumber
in 1993. This lumber is sold in the southern and midwestern United States.
Mersey operates a small sawmill in Oak Hill, Nova Scotia, the products of which
are sold to customers in eastern Canada and the United Kingdom. The Oak Hill
sawmill produced 23.7 million board feet of lumber in 1993. The Pinkham Lumber
Company sawmill in Ashland, Maine, produced 72.5 million board feet of lumber in
1993, with the majority of this product sold to customers in New England.
RECYCLING CAPABILITY
The Company has focused its efforts in recent years on meeting the demand
for recycled content paper products, which provides an environmental benefit in
reducing solid waste landfill deposits and creates a marketing imperative for
publishers and other customers trying to meet recycled content standards.
The Company broke ground for its first recycling plant in 1990 at Calhoun,
Tennessee. The mill has been successful since its startup in 1991. Taking a
mixture of 70 percent used newspapers and 30 percent used magazines, the plant
utilizes advanced mechanical and chemical processes to produce high quality
pulp. When up to 20 percent of this mixture is combined with virgin fiber, the
resulting product is comparable in quality to paper produced with 100 percent
virgin fiber pulp. Substantial tonnages of recycled content paper have been made
available to newsprint customers, while increasing quantities of computer forms
papers that contain 20 percent post-consumer or comparable recycled fiber have
been shipped to the Company's communication papers group for conversion to
computer forms.
The first major project at GNP since the acquisition has been the
construction of a similar recycling plant to provide recycled fiber for
newsprint, directory papers and other groundwood papers at that location. When
this second facility reaches full production, expected in the fourth quarter of
1994, the Company will have a combined capacity to supply over 250,000 tons per
year of recycled fiber pulp to its paper mills.
COMPETITION
Newsprint and bleached softwood market pulp, two of the Company's principal
products, are consumed in virtually every country of the world and produced in
nearly all countries with adequate indigenous fiber sources. No proprietary
process is employed in either their manufacture or use. Newsprint and market
pulp from a variety of manufacturers may be used with relatively few process
changes to produce customer products. The Company faces intense competition in
these two products from a number of other producers in the United States and
from pulp and paper companies of Canada, Scandinavia and other forested
countries. In addition to price, quality, service, and the ability to produce
paper with recycled content are important competitive determinants.
Competition in the directory and groundwood specialty markets is intense.
The Company uses price, quality and service to compete with other producers.
3
<PAGE>
The coated paper market is also highly competitive. Price, quality and
service are important competitive determinants, but a degree of proprietary
knowledge is required in both the manufacture and use of this product which
requires close supplier-customer relationships.
As with other globally manufactured and sold commodities, the Company's
competitive position is significantly affected by the volatility of currency
exchange rates. Since several of the Company's primary competitors are located
in Canada, Sweden and Finland, the relative rates of exchange between those
countries' currencies and the United States dollar can have a substantial effect
on the Company's ability to compete. Recently, the Company's competitive
position has been adversely affected by the relative strength of the United
States dollar against these currencies.
In addition, the degree to which the Company competes with foreign
producers depends in part on the level of demand abroad. Shipping costs
generally cause producers to prefer to sell in local markets when the demand is
sufficient in those markets.
Trends in electronic data transmission and storage could adversely affect
traditional print media, including products of the Company's customers; however,
neither the timing nor the extent of those trends can be predicted with
certainty. Industry reports indicate that the Company's newspaper publishing
customers in North America have experienced some loss of market share to other
forms of media and advertising, such as direct mailings and newspaper inserts
(both of which are end uses for selected Company products) and cable television.
These customers are also facing a decline in newspaper readership, circulation
and advertising lineage. The Company does not believe that this is the case in
most overseas markets.
Part of the Company's competitive strategy is to be a low cost producer of
its products while maintaining strict quality standards and being responsive on
environmental issues. The Company believes that its large woodland base,
relative to its paper production, provides it with a competitive advantage in
controlling costs and that its two recycling facilities have further enhanced
its competitive position. The Company believes that the cost advantage of these
recycling facilities, as compared to the more traditional methods of paper
production, should continue until the price for wastepaper significantly rises.
The Company's competitive advantage in the communication papers market has
been to differentiate itself from others by developing new products, including
forms with recycled content, and by gaining the benefits of additional vertical
integration, using the capabilities of its paper mills. Paper is the primary
cost of this business, and the Company is moving toward providing more of BCPI's
paper needs internally to the extent consistent with customer product
requirements. The Company believes that, notwithstanding the increase in use of
business machines using higher grades of paper, customers that generate high
volumes of internal documents will continue to demand groundwood based
continuous stock computer forms.
RAW MATERIALS
The manufacture of pulp and paper requires significant amounts of wood and
energy. Approximately 2.9 million cords of wood were consumed by the Company
during 1993 for pulp and paper production. The Company harvests wood fiber from
Company-owned properties equal to approximately 50% of its total wood fiber
requirements with the balance of virgin wood requirements purchased, primarily
under contract, from local wood producers, private landowners and sawmills (in
the form of chips) at market prices. Wastepaper (in the form of old newspapers
and magazines) is purchased from suppliers in the regions of the Company's two
recycling plants. These suppliers collect, sort and bale the material before
selling it to the Company, primarily under long-term contracts.
Steam and electrical power are the primary forms of energy used in pulp and
paper production. Process steam is produced in boilers at the various mill sites
from a variety of fuel sources. In recent years, the Company has reduced its
dependence upon oil and natural gas by increasing its ability to burn wood
wastes and coal. Internally generated electrical power at the Calhoun and
Catawba facilities is used to supplement purchased electrical power. The GNP
operation is totally self-sufficient electrically with six hydroelectric
facilities located on the West Branch of the Penobscot River (containing 31
hydroelectric generators) and seven steam turbine generators located in the mill
power plants.
The Company operates its Maine hydroelectric facilities pursuant to
long-term licenses granted by the Federal Energy Regulatory Commission ("FERC")
or its predecessor, the Federal Power Commission. The existing licenses for
certain dams expired on December 31, 1993. The Company is currently engaged in
the multi-year relicensing process to obtain new
30-year licenses. The relicensing proceedings have not yet concluded; however,
annual extensions are expected to be granted while FERC proceeds with
preparation of an environmental impact statement now scheduled to be issued in
the third quarter of 1994. In connection with the relicensing process, various
groups have intervened and raised objections that are now being considered by
FERC. Although there can be no assurances, the Company believes that,
notwithstanding these objections, new
4
<PAGE>
licenses will be issued and that such licenses will contain terms and conditions
that will allow the Company to maintain most of the benefits that are provided
under the existing licenses. In the interim period, the Company will continue to
operate under the existing licenses or such annual licenses as FERC issues prior
to the conclusion of the pending relicensing proceedings.
EMPLOYEES
The Company employs approximately 6,600 people, of whom approximately 4,300
are represented by bargaining units. The labor agreement at the Company's
Catawba mill, covering all of the plant's hourly employees, was recently
extended for four years beginning April 19, 1993. A 1991 labor contract at the
Calhoun mill with most of the plant's hourly employees lasts until July, 1996.
The labor contract covering all unionized employees at the Mersey mill has
been renewed as of April 30, 1993, and expires on April 30, 1998. Contracts
covering the large majority of unionized employees of GNP expire in August
1995. All plant facilities are situated in areas where an adequate labor
pool exists and relations with employees are considered good.
TRADEMARKS AND NAME
The Company currently possesses the exclusive worldwide right to use the
trademarked Company logo and, in the western hemisphere, the exclusive right to
use the trade name "Bowater". The Company considers these rights to be valuable
and necessary to the conduct of the Company's business.
ENVIRONMENTAL MATTERS
For a detailed explanation of the Company's environmental issues, see
"Environmental Matters" on page 14 of the Annual Report, incorporated herein by
reference.
The Company believes that its U.S. and Canadian operations are in
substantial compliance with all applicable federal and state environmental
regulations, and that all currently required control equipment is in operation.
While it is impossible to predict future environmental regulations that may be
established, the Company believes that it will not be at a competitive
disadvantage with regard to meeting future U.S. or Canadian standards, and that
related expenditures and costs will not materially affect the Company's
financial position or results of operations.
The Company has taken positive action on the municipal solid waste issue by
constructing two recycle facilities at its Tennessee and Maine mills. See
"Recycling Capability" on page 3.
ITEM 2. PROPERTIES
Reference is made to the information set forth in Item 1, "Business", pages
6 to 8 and the back cover page of the Annual Report for the location and general
character of principal plants and other materially important properties of the
Company.
The Company owns all of its properties with the exception of certain
timberlands, office premises, manufacturing facilities and transportation
equipment which are leased by the Company under long-term leases. See
"Timberland Leases and Operating Leases" on page 26 of the Annual Report,
incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
In January 1994, the Company settled for an aggregate sum of approximately
$10.5 million all pending lawsuits naming the Company and other parties as
defendants in the State Circuit Courts of Hamilton County, Knox County and
McMinn County, Tennessee, and in the United States District Court for the
Eastern District of Tennessee, that claimed compensatory and punitive damages
for wrongful death, personal injury and/or property damage arising out of a
series of vehicular accidents that occurred on December 11, 1990, in fog on
Highway I-75, which passes in the general area of the Company's Calhoun,
Tennessee, mill property. The plaintiffs in these actions had sought to make the
Company liable on the theory that the mill's operations created the fog or
contributed to its density.
The Company's excess insurers reserved rights with respect to coverage of
the plaintiffs' claims on various grounds including their assertion that
coverage is not available for pollution claims, for consequences expected or
intended by the Company or for any punitive damages. On November 22, 1993, the
Company filed a complaint in the United States District Court for the Eastern
District of Tennessee against its first excess insurer, National Union Fire
Insurance Company, which seeks a declaratory judgment in favor of the Company on
the issues in dispute with that insurer.
5
<PAGE>
The settlements will be funded by the Company's insurance carriers,
subject, in the case of approximately $9.5 million funded by the Company's first
excess insurer, to subsequent determination of ultimate coverage responsibility
in the pending insurance coverage lawsuit. Although no assurance can be
provided, the Company believes that it should prevail on the insurance coverage
issue.
The Company is also involved in various litigation relating to contracts,
commercial disputes, tax, environmental, workers' compensation and other
matters. The Company's management is of the opinion that the ultimate
disposition of these matters will not have a material adverse effect on the
Company's operations or its financial condition taken as a whole.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Company's executive officers, who are elected by the Board of Directors
to serve one-year terms, are listed below. There are no family relationships
among officers, or any arrangement or understanding between any officer and any
other person pursuant to which the officer was selected.
<TABLE>
<CAPTION>
AGE AS OF SERVED AS
NAME MARCH 10, 1994 POSITION OFFICER SINCE
<S> <C> <C> <C>
Anthony P. Gammie 59 Chairman of the Board and Chief Executive Officer 1979
Richard D. McDonough 62 Vice Chairman 1979*
John C. Davis 58 Senior Vice President -- Pulp and Paper Sales 1992
Robert C. Lancaster 47 Senior Vice President and Chief Financial Officer 1984
David E. McIntyre 53 Senior Vice President -- Pulp and Paper Manufacturing 1992
Robert J. Pascal 61 Senior Vice President of the Company, President of the Communication 1986
Papers Group
Donald J. D'Antuono 50 Vice President -- Corporate Development 1979
John P. Fucigna 62 Vice President -- Finance 1975
Robert D. Leahy 42 Vice President -- Corporate Relations 1993
David G. Maffucci 43 Vice President -- Treasurer 1992
Ecton R. Manning 56 Vice President -- General Counsel 1988
Robert A. Moran 49 Vice President -- Pulp and Paper Manufacturing Services 1992
Michael F. Nocito 38 Vice President -- Controller 1993
Aubrey S. Rogers 54 Vice President -- Information Services 1992
Wendy C. Shiba 43 Secretary and Assistant General Counsel 1993
Phillip A. Temple 53 Vice President -- Human Resources and Administration 1993
</TABLE>
Anthony P. Gammie became Chairman of the Board in January 1985, and has
been Chief Executive Officer of the Company since January 1983. He was the
President from January 1983 to July 1, 1992. He was President of the Pulp and
Paper Group from August 1981 to December 1982, and Executive Vice President from
1979 to 1982. He was a director of Bowater plc until July 1984, and prior to
being transferred to the United States at the end of 1978, he was the Chairman
and Managing Director of Bowater United Kingdom Limited. He has been a director
of the Company since 1979. He is also a director of Alumax Inc. and The Bank of
New York.
Richard D. McDonough became Vice Chairman on July 1, 1992. He served as
Chief Financial Officer of the Company from March 1979 to June 1993 and as
Senior Vice President -- Finance from March 1979 to June 1992. He was formerly a
Vice President of the Singer Company, where he was employed from 1963 to 1979.
He has been a director of the Company since 1979.* Mr. McDonough also serves as
a director of Geo International, Inc.
John C. Davis became Senior Vice President -- Pulp and Paper Sales in
February 1994. Previously he was Vice President -- Pulp and Paper Sales since
July 1992 and Vice President -- Marketing of the Pulp and Paper Group and
President of Bowater Sales Division since 1983.
Robert C. Lancaster became Senior Vice President and Chief Financial
Officer on July 1, 1993. He was Senior Vice President -- Finance from July 1,
1992 to July 1, 1993. Prior to that he was Vice President -- Controller from
July 1984 to 1992. Previously he was Assistant Controller of ACF Industries
Incorporated from 1980 to 1984, and was a Senior Manager with Price Waterhouse,
where he was employed from 1968 to 1980.
6
<PAGE>
David E. McIntyre became Senior Vice President -- Pulp and Paper
Manufacturing in February 1994. Previously he was Vice President -- Pulp and
Paper Manufacturing since July 1992, Vice President -- Pulp and Paper
Manufacturing Services of the Company's Pulp and Paper Group from 1988 to 1992,
and Vice President-Manufacturing Services of the Pulp and Paper Group from 1986
to 1988.
Robert J. Pascal became Senior Vice President in February 1994. Previously
he was Vice President since December 1986 and President of the Communication
Papers Group since December 1990, prior to which he was General Manager of that
Group. He was Group Vice President of Pitney Bowes, Inc. from 1981 to 1986.
Donald J. D'Antuono was appointed Vice President -- Corporate Development
in September 1991. Previously he had been Vice President -- Investor Relations
since April 1984. He was Controller from 1977 to 1978, Treasurer of Mersey from
1978 to 1979 and Vice President-Controller of the Company from 1979 to 1984.
John P. Fucigna became Vice President -- Finance on July 1, 1992. Prior to
that he had been Vice President -- Treasurer since February 1982, and was
Treasurer from 1975 to January 1982.
Robert D. Leahy was appointed Vice President -- Corporate Relations in
March 1993. Previously he served as Director of Media Communications at
International Paper Company, (a paper products company), from November 1989 to
March 1993 where he was responsible for media, government, and investor
relations, as well as employee communications and advertising. Earlier he held
various senior level communications/public affairs positions in both corporate
and agency settings from 1980 through 1989, most recently as Vice President of
Corporate Communications for Endal Corporation, a metal products company, from
1987 to 1989.
David G. Maffucci has been Vice President -- Treasurer since July 1, 1993.
He served as Treasurer from July 1, 1992 to July 1, 1993. Prior to that he was
Director of Financial Planning and Accounting Operations since 1987 and served
as Assistant Controller since 1984.
Ecton R. Manning has been Vice President since March 1988 and General
Counsel since September 1988. Previously he was Vice President, General Counsel
and Secretary of U.S. Plywood Corporation from 1985 to 1987, and was Vice
President and General Counsel of Continental Forest Industries, Inc., where he
was employed from 1973 to 1984.
Robert A. Moran has been Vice President -- Pulp and Paper Manufacturing
Services since July 1, 1992. Prior to that he was Vice
President -- Manufacturing Services for the Pulp and Paper Group since 1991,
Director of Planning and Development for the Pulp and Paper Group from August
1988 to November 1991 and also served as Assistant General Manager of the
Company's Catawba, South Carolina, mill from April 1988 to August 1988.
Michael F. Nocito has been Vice President -- Controller since July 1, 1993.
He served as Controller of the Company's Southern Division from October 1, 1992
to July 1, 1993. Prior to this he served as Assistant Controller of the Southern
Division since 1988. Mr. Nocito joined the Company in 1978.
Aubrey S. Rogers has been Vice President -- Information Services since July
1, 1992. Prior to that he was Vice President -- Information Services of the Pulp
and Paper Group since 1990 and Assistant Controller-Director of Planning and
Information Services since 1989. He also served in various financial positions
of the Company for more than twenty years.
Wendy C. Shiba has been Secretary since July 28, 1993, and Assistant
General Counsel since June 1993. From January 1992 to June 1993, she was
Corporate Chair of the City of Philadelphia Law Department where she supervised
the work of forty-five attorneys, paralegals and secretaries and was Associate
Professor of Law from 1990 to 1993 and Assistant Professor of Law from 1985 to
1990 at Temple University School of Law where she taught subjects relating to
corporate law and served as a consultant in legal writing and corporate law.
Earlier she practiced corporate law in the private sector.
Phillip A. Temple has been Vice President -- Human Resources and
Administration since March 1993. Prior to that time he served as a consultant
for two years in the areas of human resources, compensation and benefits.
Previously he was Vice President -- Human Resources for the Sara Lee
Corporation, a diversified consumer products company, from 1983 to 1991.
* Except for the period March 1981 through December 1982.
7
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) The Company's Common Stock is listed on the New York Stock Exchange
(stock symbol BOW), U.S. regional exchanges, the London Stock Exchange and the
Swiss Stock Exchanges. Price information with respect to the Company's Common
Stock on page 28 of the Annual Report is incorporated herein by reference.
(b) As of March 10, 1994, there were approximately 7,150 holders of record
of the Company's Common Stock.
(c) The Company paid consecutive quarterly dividends of $.18 per common
share for the period October 1, 1984, to January 1, 1987. In 1987, the Board of
Directors announced two quarterly dividend increases. On January 8, 1987 the
quarterly dividend was increased to $.20 per common share effective with the
dividend payable on April 1, 1987. On November 18, 1987, the quarterly dividend
was again increased to $.23 per common share effective with the dividend payable
on January 1, 1988. On November 16, 1988, the quarterly dividend was increased
to $.28 per common share effective with the dividend payable on January 1, 1989.
On November 15, 1989, the quarterly dividend was increased to $.30 per common
share effective with the dividend payable January 1, 1990. On February 26, 1993,
the quarterly dividend was decreased to $.15 per common share effective with the
dividend payable April 1, 1993. The dividend of $.15 per share was also paid on
July 1 and October 1 of 1993.
Future declarations of dividends on the Company's Common Stock are
discretionary with the Board of Directors, and the declaration of any such
dividends will depend upon, among other things, the Company's earnings, capital
requirements and financial condition. Dividends on the Common Stock may not be
paid if there are any unpaid or undeclared accrued dividends on the Company's
outstanding preferred stock, which currently consists of the Company's LIBOR
Preferred Stock, Series A, the 7% PRIDES, Series B Convertible Preferred Stock,
and 8.40% Series C Cumulative Preferred Stock, and may include, upon the
occurrence of certain events, the Company's Junior Participating Preferred
Stock, Series A. At December 31, 1993, there were no arrearages on dividends
accrued on the Company's LIBOR Preferred Stock, Series A.
In addition, the Company's ability to pay dividends on any of its preferred
stock and on its Common Stock will depend on its maintaining adequate net worth
and compliance with the required ratio of total debt to total capital as defined
in and required by the Company's current credit agreement (the "Credit
Agreement"). The Credit Agreement requires the Company to maintain a minimum net
worth (generally defined therein as common shareholders' equity plus any
outstanding preferred stock) of $750 million. In addition, the Credit Agreement
imposes a maximum 60 percent ratio of total debt to total capital (defined
therein as total debt plus net worth). At December 31, 1993, the net worth of
the Company and the ratio of total debt to total capital were $806.9 million and
58 percent, respectively.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated herein by reference to "Financial and Operating Record"
appearing on pages 30 and 31 of the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Incorporated herein by reference to "Business and Financial Review"
appearing on pages 9 to 14 of the Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference are the Consolidated Financial Statements,
including related notes, and the Independent Auditors' Report appearing on pages
15 through 29 of the Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the Company's directors is incorporated herein by
reference to the material under the heading "Election of
Directors -- Information on Nominees and Directors" in the Company's Proxy
Statement with respect to the Annual Meeting of Shareholders scheduled to be
held May 25, 1994, to be filed pursuant to Regulation 14A under the
8
<PAGE>
Securities Exchange Act of 1934 (the "Proxy Statement"). Information regarding
the Company's executive officers is provided under the caption "Executive
Officers of the Registrant" on pages 6 and 7 of this Form 10-K. Information
regarding compliance with Section 16(a) of the Securities Exchange Act of 1934
is incorporated by reference to the material under the heading "Certain
Information Concerning Stock Ownership" in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the material under the headings
"Election of Directors -- Information on Nominees and Directors -- Director
Compensation", "Executive Compensation", "Human Resources and Compensation
Committee Report on Executive Compensation" and "Total Shareholder Return" in
the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning (1) any person or group known to the Company to be
the beneficial owner of more than five percent of the Company's voting stock,
and (2) ownership of the Company's equity securities by management, is
incorporated herein by reference to the material under the heading "Certain
Information Concerning Stock Ownership" in the Proxy Statement.
The Company knows of no arrangements that may result at a subsequent date
in a change of control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the material under the heading
"Executive Compensation" in the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following are filed as a part of this Report on Form 10-K:
(1) The following are included at the indicated page in the Annual Report
and are incorporated by reference herein:
<TABLE>
<CAPTION>
PAGE(S)
<S> <C>
Consolidated Statement of Operations for Each of the Years in the Three Year Period Ended
December 31, 1993.................................................................................................. 15
Consolidated Balance Sheet at December 31, 1993 and 1992............................................................. 16
Consolidated Statement of Capital Accounts for Each of the Years in the Three Year Period Ended
December 31, 1993.................................................................................................. 17
Consolidated Statement of Cash Flows for Each of the Years in the Three Year Period Ended
December 31, 1993.................................................................................................. 18
Notes to Consolidated Financial Statements........................................................................... 19-28
Independent Auditors' Report......................................................................................... 29
</TABLE>
(2) The following financial statement schedules for each of the years in
the three year period ended December 31, 1993 are submitted herewith:
<TABLE>
PAGE
<S> <C> <C> <C>
Schedule II -- Amounts Receivable from Related Parties and Underwriters, Promoters and Employees Other Than Related F-1
Parties
Schedule V -- Property, Plant and Equipment F-2
Schedule VI -- Accumulated Depreciation and Amortization of Property, Plant and Equipment F-3
Schedule VIII -- Valuation and Qualifying Accounts F-4
Schedule IX -- Short-term Borrowings F-5
Schedule X -- Supplementary Income Statement Information F-6
</TABLE>
All other schedules are omitted because they are not applicable, not
required, or because the required information is included in the financial
statements or notes thereto.
9
<PAGE>
(3) (a) Exhibits (numbered in accordance with Item 601 of Regulation S-K):
<TABLE>
<CAPTION>
<S> <C>
3.1 Restated Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibit 4.2
to the Company's Registration Statement No. 33-51569).
3.2 Certificate of Designations of the 7% PRIDES, Series B Convertible Preferred Stock of the Company
(incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated February 1,
1994).
3.3 Certificate of Designations of the 8.40% Series C Cumulative Preferred Stock of the Company (incorporated
by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated February 1, 1994).
3.4 Bylaws of the Company (incorporated by reference to Exhibit 3.3 to the Company's Registration Statement
No. 33-11228).
4.1 Agreement pursuant to S-K Item 601(b)(4)(iii)(A) to provide the Commission upon request copies of certain
other instruments with respect to long-term debt not being registered where the amount of securities
authorized under each such instrument does not exceed 10% of the total assets of the registrant and its
subsidiaries on a consolidated basis (incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement No. 2-93455).
4.2 Rights Agreement between the Company and Morgan Guaranty Trust Company of New York (incorporated by
reference to Exhibit 4 to the Company's Current Report on Form 8-K dated April 22, l986).
4.2.1 Addendum to Rights Agreement substituting The Bank of New York as successor Rights Agent (incorporated by
reference to Exhibit 4.5A to the Company's Annual Report on Form 10-K for 1988).
4.3 Indenture, dated as of August 1, l989, by and between the Company and Manufacturers Hanover Trust Company,
as Trustee, with respect to the 9% Debentures Due 2009 (incorporated by reference to Exhibit 4.0 to the
Company's Quarterly Report on Form 10-Q dated November 10, 1989).
4.4 Indenture, dated as of December 1, l991, by and between the Company and Marine Midland Bank, N.A., as
Trustee, with respect to the 9 3/8% Debentures Due 2021 (incorporated by reference to Exhibit 4.8 to the
Company's Annual Report on Form 10-K for 1991).
4.5 Indenture, dated as of December 1, l991, by and between the Company and Marine Midland Bank, N.A., as
Trustee, with respect to the 8 1/2% Notes Due 2001 (incorporated by reference to Exhibit 4.9 to the
Company's Annual Report on Form 10-K for 1991).
4.6 Indenture, dated as of October 15, l992, by and between the Company and The Chase Manhattan Bank (N.A.) as
Trustee, with respect to the 8 1/4% Notes Due 1991 (incorporated by reference to Exhibit 4.10 to the
Company's Annual Report on Form 10-K for 1992).
4.7 Indenture, dated as of October 15, l992, between the Company and The Chase Manhattan Bank (N.A.) as
Trustee, with respect to the 9 1/2% Debentures Due 2012 (incorporated by reference to Exhibit 4.11 to the
Company's Annual Report on Form 10-K for 1992).
4.8 Deposit Agreement, dated as of February 1, 1994, by and among the Company, Trust Company Bank, as
Depositary, and the holders from time to time of the Depositary Receipts relating to the Company's 7%
PRIDES, Series B Convertible Preferred Stock, together with form of Depositary Receipt (incorporated by
reference to Exhibit 4.3 to the Company's Current Report on Form 8-K dated February 1, 1994).
4.9 Deposit Agreement, dated as of February 1, 1994, by and among the Company, Trust Company Bank, as
Depositary, and the holders from time to time of the Depositary Receipts relating to the Company's 8.40%
Series C Cumulative Preferred Stock, together with form of Depositary Receipt (incorporated by reference
to Exhibit 4.4 to the Company's Current Report on Form 8-K dated February 1, 1994).
4.10 See Exhibits 3.1, 3.2, 3.3 and 3.4.
(dagger)10.1 Employment Agreement and Severance Agreement, each dated August 25, l988, by and between the Company and
A. P. Gammie (incorporated by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K for
1988).
(dagger)10.1.1 Amendment to Employment Agreement and Amendment to Severance Agreement, each dated August 23, l989, by and
between the Company and A. P. Gammie (incorporated by reference to Exhibit 10.1A to the Company's Annual
Report on Form 10-K for 1989).
(dagger)10.1.2 Supplemental Benefits Conversion Agreement, dated as of November 14, 1990, by and between the Company and
A. P. Gammie (incorporated by reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K for
1990).
(dagger)10.2 Employment Agreement and Severance Agreement, each dated August 25, l988, by and between the Company and
D. G. McMaster (incorporated by reference to Exhibit 10.2 to the Company's Annual Report on Form 10-K for
1988).
10
<PAGE>
(dagger)10.2.1 Amendment to Employment Agreement and Amendment to Severance Agreement, each dated August 23, l989, by and
between the Company and D. G. McMaster (incorporated by reference to Exhibit 10.2A to the Company's Annual
Report on Form 10-K for 1989).
(dagger)10.2.2* Modification of Employment Agreement, Termination of Severance Agreement and Release of Claims dated
November 1, 1993, by and between the Company and D. G. McMaster.
(dagger)10.3 Employment Agreement and Severance Agreement, each dated March 1, 1989, by and between the Company and R.
D. McDonough (incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K for
1988).
(dagger)10.3.1 Amendment to Employment Agreement and Amendment to Severance Agreement, each dated August 23, 1989, by and
between the Company and R. D. McDonough (incorporated by reference to Exhibit 10.3A to the Company's
Annual Report on Form 10-K for 1989).
(dagger)10.3.2* Modification of Employment and Severance Agreements dated as of April 21, 1992, by and between the Company
and R. D. McDonough.
(dagger)10.4* Form of Employment Agreement and Severance Agreement, by and between the Company and each of the executive
officers listed on the schedule attached thereto.
(dagger)10.5 Employment Agreement and Severance Agreement, each dated August 25, 1988, by and between the Company and
D. E. McIntyre (incorporated by reference to Exhibit 10.24 to the Company's Annual Report on Form 10-K for
1991).
(dagger)10.5.1 Amendment to Employment Agreement and Amendment to Severance Agreement, each dated August 23, l989, by and
between the Company and D. E. McIntyre (incorporated by reference to Exhibit 10.24 to the Company's Annual
Report on Form 10-K for 1991).
(dagger)10.6* Employment Agreement and Severance Agreement, each dated as of May 20, 1993, by and between the Company
and Robert J. Pascal.
(dagger)10.7* Employment Agreement and Severance Agreement, each dated as of August 25, 1988, by and between the Company
and Donald J. D'Antuono.
(dagger)10.7.1* Amendment to Employment Agreement and Amendment to Severance Agreement, each dated as of August 23, 1989,
by and between the Company and Donald J. D'Antuono.
(dagger)10.8* Employment Agreement and Severance Agreement, each dated as of August 25, 1988, by and between the Company
and John C. Davis.
(dagger)10.8.1* Amendment to Employment Agreement and Amendment to Severance Agreement, each dated as of August 23, 1989,
by and between the Company and John C. Davis.
(dagger)10.9* Employment Agreement and Severance Agreement, each dated as of August 25, 1988, by and between the Company
and Ecton R. Manning.
(dagger)10.9.1* Amendment to Employment Agreement and Amendment to Severance Agreement, each dated as of August 23, 1989,
by and between the Company and Ecton R. Manning.
(dagger)10.9.2* Modification of Employment and Severance Agreements dated as of June 11, 1992, by and between the Company
and Ecton R. Manning.
(dagger)10.10* Employment Agreement and Severance Agreement, each dated as of August 25, 1988, by and between the Company
and John P. Fucigna.
(dagger)10.10.1* Amendment to Employment Agreement and Amendment to Severance Agreement, each dated as of August 23, 1989,
by and between the Company and John P. Fucigna.
(dagger)10.10.2* Modification of Employment and Severance Agreements dated as of May 26, 1992, by and between the Company
and John P. Fucigna.
(dagger)10.11* Employment Agreement and Severance Agreement, each dated as of March 15, 1993, by and between the Company
and Phillip A. Temple.
(dagger)10.12 Supplemental Benefit Plan of the Company as revised and restated as of August 22, 1990 (incorporated by
reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K for 1990).
(dagger)10.13 Supplementary Executive Medical Plan of the Company (incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement No. 2-90172).
(dagger)10.14 Compensatory Benefits Plan of the Company as revised and restated as of April 30, 1991 (incorporated by
reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K for 1991).
(dagger)10.15 Annual Bonus Plan of the Company (incorporated by reference to Exhibit 10.9 to the Company's Registration
Statement No. 2-90172).
(dagger)10.16 1984 Stock Option Plan of the Company (incorporated by reference to Exhibit 10.10 to the Company's
Registration Statement No. 2-90172).
(dagger)10.17 Amendment effective January 1, 1987 to the 1984 Stock Option Plan of the Company (incorporated by
reference to Exhibit 10.10A to the Company's Registration Statement No. 33-112228).
(dagger)10.18 Amendment to 1984 Stock Option Plan of the Company, dated as of August 23, l989 (incorporated by reference
to Exhibit 10.1B to the Company's Annual Report on Form 10-K for 1989).
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.19 Restated Agreement, dated as of January 1, 1991, by and among the Company, Advance Publications, Inc. and
Calhoun Newsprint Company (incorporated by reference to Exhibit 10.11 to the Company's Annual Report on
Form 10-K for 1990).
10.19.1* Recycle Agreement, dated as of January 1, 1991, by and among the Company, Advance Publications, Inc., and
Calhoun Newsprint Company.
10.20 Agreement, dated as of February 21, 1963, by and between Bowater Canadian Limited and the Washington Post
Company (incorporated by reference to Exhibit 10.12 to the Company's Registration Statement No. 2-90172).
10.21 Licensing Agreement dated as of December 30, 1976, as amended, between the Company and Bowater Industries
plc (incorporated by reference to Exhibit 10.13 to the Company's Registration Statement No. 2-90172).
(dagger)10.22 Directors' Deferred Compensation Plan, effective March 1, 1989 (incorporated by reference to Exhibit 10.14
to the Company's Annual Report on Form 10-K for 1989).
10.23 Trademark Agreement, dated May 8, 1984, between the Company and Bowater Corporation plc (incorporated by
reference to Exhibit 10.17 to the Company's Registration Statement No. 2-90172).
(dagger)10.24 1988 Stock Incentive Plan of the Company (incorporated by reference to the Company's Proxy Statement for
1988).
(dagger)10.24.1 Amendment to 1988 Stock Incentive Plan of the Company, dated as of August 23, 1989 (incorporated by
reference to Exhibit 10.16A to the Company's Annual Report on Form 10-K for 1989).
(dagger)10.25 Benefit Plan Grantor Trust of the Company as of May 20, 1988 (incorporated by reference to Exhibit 10.17
to the Company's Annual Report on Form 10-K for 1989).
(dagger)10.25.1 Amendment to Benefit Plan Grantor Trust, dated as of August 23, 1989 (incorporated by reference to Exhibit
10.17A to the Company's Annual Report on Form 10-K for 1989).
(dagger)10.26 Executive Severance Grantor Trust of the Company, dated as of September 1, 1989 (incorporated by reference
to Exhibit 10.18 to the Company's Annual Report on Form 10-K for 1989).
(dagger)10.27 Outside Directors Benefit Plan Grantor Trust of the Company, dated as of September 5, 1989 (incorporated
by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K for 1989).
(dagger)10.28 Benefits Equalization Plan, dated as of August 22, 1990 (incorporated by reference to Exhibit 10.20 to the
Company's Annual Report on Form 10-K for 1990).
10.29 Stock Purchase Agreement, dated October 9, 1991, by and between the Company and Great Northern Nekoosa
Corporation (incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q dated
November 12, 1991).
(dagger)10.30 1992 Stock Incentive Plan (incorporated by reference to Exhibit 10.23 to the Company's Annual Report on
Form 10-K for 1991).
(dagger)10.31 Long-Term Cash Incentive Plan (incorporated by reference to Exhibit 10.24 to the Company's Annual Report
on Form 10-K for 1992).
10.32 Credit Agreement, dated as of December 8, 1992, between the Company, each of the banks party thereto (the
"Banks") and The Chase Manhattan Bank (N.A.) as agent for the Banks, providing for a lending facility up
to $250,000,000 (incorporated by reference to Exhibit 10.25 to the Company's Annual Report on Form 10-K
for 1992).
10.32.1* Amendment No. 1, dated as of December 20, 1993, to Credit Agreement by and between the Company, each of
the banks party thereto (the "Banks"), and The Chase Manhattan Bank (N.A.) as agent for the Banks.
10.33 Purchase Agreement and Pricing Agreement, each dated as of February 1, 1994, by and among the Company,
Merrill Lynch & Co. and Salomon Brothers Inc as representatives of the several underwriters with respect
to the Company's 7% PRIDES, Series B Convertible Preferred Stock (incorporated by reference to Exhibit 1.1
to the Company's Current Report on Form 8-K dated February 1, 1994).
10.34 Purchase Agreement and Pricing Agreement, each dated as of February 1, 1994, by and among the Company and
the Representatives of the several underwriters listed therein with respect to the Company's 8.40% Series
C Cumulative Preferred Stock (incorporated by reference to Exhibit 1.2 to the Company's Current Report on
Form 8-K dated February 1, 1994).
13.1* Copy of the Company's 1993 Annual Report to Stockholders (except for those portions that are expressly
incorporated by reference in this Report on Form 10-K, this exhibit is furnished for the Information of
the Commission and is not deemed to be filed as part hereof).
21.1 Subsidiaries of the registrant (incorporated by reference to Exhibit 22.1 to the Company's Annual Report
on Form 10-K for 1992).
23.1* Consent of Independent Auditors.
</TABLE>
12
<PAGE>
* Filed herewith
(dagger) This is a management contract or compensatory plan or arrangement.
(b) None.
(c) The response to this portion of Item 14 is submitted as a separate
section of this report.
(d) The response to this portion of Item 14 is submitted as a separate
section of this report.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BOWATER INCORPORATED
By: /s/ A. P. Gammie
A. P. GAMMIE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Date: March 29, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities indicated, on March 29, 1994.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
/s/ A. P. GAMMIE Director, Chairman and Chief Executive Officer
A. P. GAMMIE
/s/ R. D. MCDONOUGH Director and Vice Chairman
R. D. MCDONOUGH
/s/ R. C. LANCASTER Senior Vice President and Chief Financial Officer
R. C. LANCASTER
/s/ M. F. NOCITO Vice President-Controller
M. F. NOCITO
/s/ F. J. AGUILAR Director
F. J. AGUILAR
/s/ H. D. AYCOCK Director
H. D. AYCOCK
/s/ R. BARTH Director
R. BARTH
/s/ K. M. CURTIS Director
K. M. CURTIS
/s/ R. LASTER Director
R. LASTER
/s/ H. G. MACNEILL Director
H. G. MACNEILL
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
<C> <S>
/s/ D. R. MELVILLE Director
D. R. MELVILLE
/s/ J. A. ROLLS Director
J. A. ROLLS
/s/ J. WHITE Director
J. WHITE
</TABLE>
15
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Bowater Incorporated:
Under the date of February 11, 1994, we reported on the consolidated
balance sheets of Bowater Incorporated and Subsidiaries as of December 31, 1993
and 1992, and the related consolidated statements of operations, capital
accounts, and cash flows for each of the years in the three-year period ended
December 31, 1993, as contained in the 1993 Annual Report to Shareholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year 1993. In connection
with our audits of the aforementioned consolidated financial statements, we also
have audited the related financial statement schedules as listed in the
accompanying index [Item 14(a)(2)]. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
Greenville, South Carolina
February 11, 1994
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
SCHEDULE II
AMOUNTS RECEIVABLE FROM RELATED PARTIES
AND UNDERWRITERS, PROMOTERS,
AND EMPLOYEES OTHER THAN RELATED PARTIES
YEARS ENDED DECEMBER 31, 1993, 1992, 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE
AT
BEGINNING AMOUNTS CHARGED TO
OF YEAR ADDITIONS COLLECTED EXPENSES
<S> <C> <C> <C> <C>
Year ended December 31, 1993
Mr. Blanchard..................................................... $-- $ 124 $ 31 $ 13
Mr. Duffy......................................................... 150 116 184 --
Mr. Gregory....................................................... 240 -- 240 --
$ 390 $ 240 $ 455 $ 13
Year ended December 31, 1992
Mr. Duffy......................................................... $-- $ 150 $-- $ --
Mr. Gregory....................................................... -- 240 -- --
Mr. & Mrs. Jamian................................................. 179 -- 179 --
$ 179 $ 390 $ 179 $ --
Year ended December 31, 1991
Mr. Etheridge..................................................... $ 141 $-- $ 113 $ 28
Mr. & Mrs. Jamian................................................. -- 179 -- --
$ 141 $ 179 $ 113 $ 28
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT
END OF
YEAR
<S> <C>
Year ended December 31, 1993
Mr. Blanchard..................................................... $ 80
Mr. Duffy......................................................... 82
Mr. Gregory....................................................... --
$162
Year ended December 31, 1992
Mr. Duffy......................................................... $150
Mr. Gregory....................................................... 240
Mr. & Mrs. Jamian................................................. --
$390
Year ended December 31, 1991
Mr. Etheridge..................................................... -$-
Mr. & Mrs. Jamian................................................. 179
$179
</TABLE>
F-1
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992, 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT FOREIGN BALANCE AT
BEGINNING ADDITIONS CURRENCY OTHER INCREASE END OF
OF YEAR AT COST RETIREMENTS TRANSLATION (DECREASE) (2) YEAR
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Land and land improvements............ $ 30,109 $ 306 $ (276) $ (27) $ -- $ 30,112
Buildings............................. 283,350 8,626 (3,153) (1,794) -- 287,029
Machinery and equipment............... 2,380,370 91,859 (13,573) (10,097) -- 2,448,559
Leasehold improvements................ 4,663 373 (91) -- -- 4,945
Construction in progress.............. 52,988 (22,038)(1) -- -- -- 30,950
Total.............................. $2,751,480 $ 79,126 $ (17,093) $ (11,918) $ -- $2,801,595
Year ended December 31, 1992
Land and land improvements............ $ 19,980 $ 118 $ (66) $ (53) $ 10,130 $ 30,109
Buildings............................. 259,260 5,739 (1,680) (4,023) 24,054 283,350
Machinery and equipment............... 2,386,636 53,827 (38,985) (23,234) 2,126 2,380,370
Leasehold improvements................ 4,600 107 (44) -- -- 4,663
Construction in progress.............. 22,256 31,211(1) (243) -- (236) 52,988
Total.............................. $2,692,732 $ 91,002 $ (41,018) $ (27,310) $ 36,074 $2,751,480
Year ended December 31, 1991
Land and land improvements............ $ 15,674 $ 438 $ (102) $ 2 $ 3,968 $ 19,980
Buildings............................. 218,280 14,021 (273) 137 27,095 259,260
Machinery and equipment............... 2,035,221 156,168 (4,533) 886 198,894 2,386,636
Leasehold improvements................ 4,496 172 (68) -- -- 4,600
Construction in progress.............. 59,443 (39,434)(1) -- -- 2,247 22,256
Total.............................. $2,333,114 $ 131,365 $ (4,976) $ 1,025 $232,204 $2,692,732
</TABLE>
(1) Net of completed construction transferred to other property accounts.
(2) Assets of GNP, acquired December 31, 1991.
F-2
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
SCHEDULE VI
ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992, 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE CHARGED
AT TO COSTS FOREIGN
BEGINNING AND CURRENCY OTHER INCREASE
OF YEAR EXPENSES RETIREMENTS TRANSLATION (DECREASE) (1)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Land and land improvements................. $ 9,377 $ 1,713 $ -- $ -- $ --
Buildings.................................. 75,133 8,066 (1,068) (752) (282)
Machinery and equipment.................... 841,775 139,395 (13,141) (3,728) (9,396)
Leasehold improvements..................... 3,471 313 -- -- --
Total................................... $ 929,756 $ 149,487 $ (14,209) $(4,480) $ (9,678)
Year ended December 31, 1992
Land and land improvements................. $ 7,761 $ 1,616 $ -- $ -- $ --
Buildings.................................. 70,005 9,069 (1,608) (1,582) (751)
Machinery and equipment.................... 752,811 137,631 (26,745) (7,468) (14,454)
Leasehold improvements..................... 3,322 154 (5) -- --
Total................................... $ 833,899 $ 148,470 $ (28,358) $(9,050) $(15,205)
Year ended December 31, 1991
Land and land improvements................. $ 7,121 $ 640 $ -- $ -- $ --
Buildings.................................. 63,861 6,774 (201) 47 (476)
Machinery and equipment.................... 654,555 114,006 (4,123) 164 (11,791)
Leasehold improvements..................... 2,893 443 (14) -- --
Total................................... $ 728,430 $ 121,863 $ (4,338) $ 211 $(12,267)
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT
END OF
YEAR
<S> <C>
Year ended December 31, 1993
Land and land improvements................. $ 11,090
Buildings.................................. 81,097
Machinery and equipment.................... 954,905
Leasehold improvements..................... 3,784
Total................................... $1,050,876
Year ended December 31, 1992
Land and land improvements................. $ 9,377
Buildings.................................. 75,133
Machinery and equipment.................... 841,775
Leasehold improvements..................... 3,471
Total................................... $ 929,756
Year ended December 31, 1991
Land and land improvements................. $ 7,761
Buildings.................................. 70,005
Machinery and equipment.................... 752,811
Leasehold improvements..................... 3,322
Total................................... $ 833,899
</TABLE>
(1) Component replacements charged to accumulated depreciation.
F-3
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1993, 1992, 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE
AT CHARGED TO
BEGINNING COST AND
OF YEAR EXPENSES ADDITIONS DEDUCTIONS (1)
<S> <C> <C> <C> <C>
Year ended December 31, 1993
Allowance for doubtful accounts.............................. 1$,698... $565 $ -- $ (596)
Deferred tax asset valuation allowance....................... $ -- -$- $ 1,740 $ --
Year ended December 31, 1992
Allowance for doubtful accounts.............................. $ 1,131 $395 $ 894 $ (722)
Year ended December 31, 1991
Allowance for doubtful accounts.............................. $ 1,918 $862 $ -- $ (1,649)
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT
END OF
YEAR
<S> <C>
Year ended December 31, 1993
Allowance for doubtful accounts.............................. $1,667
Deferred tax asset valuation allowance....................... $1,740
Year ended December 31, 1992
Allowance for doubtful accounts.............................. $1,698
Year ended December 31, 1991
Allowance for doubtful accounts.............................. $1,131
</TABLE>
(1) Consists primarily of accounts deemed to be uncollectible.
F-4
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
SCHEDULE IX
SHORT-TERM BORROWINGS
YEARS ENDED DECEMBER 31, 1993, 1992, 1991
(IN THOUSANDS EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
WEIGHTED MAXIMUM AVERAGE
AVERAGE AMOUNT AMOUNT
BALANCE AT INTEREST OUTSTANDING OUTSTANDING
END OF RATE AT END DURING THE DURING THE
YEAR (1) OF YEAR YEAR (2) YEAR (3)
<S> <C> <C> <C> <C>
Year ended December 31, 1993
Revolver Credit and Commercial Paper...................... $ -- $-- $ -- $ --
Year ended December 31, 1992
Revolver Credit and Commercial Paper...................... $ -- $-- $ 165,249 $ 106,589
Year ended December 31, 1991
Revolver Credit and Commercial Paper...................... $ 56,611 5.4% $ 150,392 $ 122,189
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
INTEREST
RATE DURING
THE YEAR
(4)
<S> <C>
Year ended December 31, 1993
Revolver Credit and Commercial Paper...................... $--
Year ended December 31, 1992
Revolver Credit and Commercial Paper...................... 3.4%
Year ended December 31, 1991
Revolver Credit and Commercial Paper...................... 6.7%
</TABLE>
(1) Represents borrowings under available facilities.
(2) Represents maximum amount outstanding at any month end during each year.
(3) Average amount of short-term borrowings is determined by using the average
of month end outstanding balances.
(4) Weighted average interest rate computed by dividing short-term interest
expense by average short-term borrowings.
F-5
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1993, 1992, 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Maintenance and repairs.................................................................. $166,417 $168,302 $101,396
Taxes, other than payroll and income taxes............................................... $ 26,871 $ 28,252 $ 18,010
</TABLE>
NOTE: Depreciation and amortization of intangible assets, royalties and
advertising costs are not presented since each such item does not exceed
one percent of consolidated net sales as shown on the accompanying
Consolidated Statement of Operations.
F-6
EXHIBIT INDEX
Exhibit
Number Description
<TABLE>
<S> <C>
3.1 Restated Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibit 4.2
to the Company's Registration Statement No. 33-51569).
3.2 Certificate of Designations of the 7% PRIDES, Series B Convertible Preferred Stock of the Company
(incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated February 1,
1994).
3.3 Certificate of Designations of the 8.40% Series C Cumulative Preferred Stock of the Company (incorporated
by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated February 1, 1994).
3.4 Bylaws of the Company (incorporated by reference to Exhibit 3.3 to the Company's Registration Statement
No. 33-11228).
4.1 Agreement pursuant to S-K Item 601(b)(4)(iii)(A) to provide the Commission upon request copies of certain
other instruments with respect to long-term debt not being registered where the amount of securities
authorized under each such instrument does not exceed 10% of the total assets of the registrant and its
subsidiaries on a consolidated basis (incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement No. 2-93455).
4.2 Rights Agreement between the Company and Morgan Guaranty Trust Company of New York (incorporated by
reference to Exhibit 4 to the Company's Current Report on Form 8-K dated April 22, l986).
4.2.1 Addendum to Rights Agreement substituting The Bank of New York as successor Rights Agent (incorporated by
reference to Exhibit 4.5A to the Company's Annual Report on Form 10-K for 1988).
4.3 Indenture, dated as of August 1, l989, by and between the Company and Manufacturers Hanover Trust Company,
as Trustee, with respect to the 9% Debentures Due 2009 (incorporated by reference to Exhibit 4.0 to the
Company's Quarterly Report on Form 10-Q dated November 10, 1989).
4.4 Indenture, dated as of December 1, l991, by and between the Company and Marine Midland Bank, N.A., as
Trustee, with respect to the 9 3/8% Debentures Due 2021 (incorporated by reference to Exhibit 4.8 to the
Company's Annual Report on Form 10-K for 1991).
4.5 Indenture, dated as of December 1, l991, by and between the Company and Marine Midland Bank, N.A., as
Trustee, with respect to the 8 1/2% Notes Due 2001 (incorporated by reference to Exhibit 4.9 to the
Company's Annual Report on Form 10-K for 1991).
4.6 Indenture, dated as of October 15, l992, by and between the Company and The Chase Manhattan Bank (N.A.) as
Trustee, with respect to the 8 1/4% Notes Due 1991 (incorporated by reference to Exhibit 4.10 to the
Company's Annual Report on Form 10-K for 1992).
4.7 Indenture, dated as of October 15, l992, between the Company and The Chase Manhattan Bank (N.A.) as
Trustee, with respect to the 9 1/2% Debentures Due 2012 (incorporated by reference to Exhibit 4.11 to the
Company's Annual Report on Form 10-K for 1992).
4.8 Deposit Agreement, dated as of February 1, 1994, by and among the Company, Trust Company Bank, as
Depositary, and the holders from time to time of the Depositary Receipts relating to the Company's 7%
PRIDES, Series B Convertible Preferred Stock, together with form of Depositary Receipt (incorporated by
reference to Exhibit 4.3 to the Company's Current Report on Form 8-K dated February 1, 1994).
4.9 Deposit Agreement, dated as of February 1, 1994, by and among the Company, Trust Company Bank, as
Depositary, and the holders from time to time of the Depositary Receipts relating to the Company's 8.40%
Series C Cumulative Preferred Stock, together with form of Depositary Receipt (incorporated by reference
to Exhibit 4.4 to the Company's Current Report on Form 8-K dated February 1, 1994).
4.10 See Exhibits 3.1, 3.2, 3.3 and 3.4.
(dagger)10.1 Employment Agreement and Severance Agreement, each dated August 25, l988, by and between the Company and
A. P. Gammie (incorporated by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K for
1988).
(dagger)10.1.1 Amendment to Employment Agreement and Amendment to Severance Agreement, each dated August 23, l989, by and
between the Company and A. P. Gammie (incorporated by reference to Exhibit 10.1A to the Company's Annual
Report on Form 10-K for 1989).
(dagger)10.1.2 Supplemental Benefits Conversion Agreement, dated as of November 14, 1990, by and between the Company and
A. P. Gammie (incorporated by reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K for
1990).
(dagger)10.2 Employment Agreement and Severance Agreement, each dated August 25, l988, by and between the Company and
D. G. McMaster (incorporated by reference to Exhibit 10.2 to the Company's Annual Report on Form 10-K for
1988).
<PAGE>
(dagger)10.2.1 Amendment to Employment Agreement and Amendment to Severance Agreement, each dated August 23, l989, by and
between the Company and D. G. McMaster (incorporated by reference to Exhibit 10.2A to the Company's Annual
Report on Form 10-K for 1989).
(dagger)10.2.2* Modification of Employment Agreement, Termination of Severance Agreement and Release of Claims dated
November 1, 1993, by and between the Company and D. G. McMaster.
(dagger)10.3 Employment Agreement and Severance Agreement, each dated March 1, 1989, by and between the Company and R.
D. McDonough (incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K for
1988).
(dagger)10.3.1 Amendment to Employment Agreement and Amendment to Severance Agreement, each dated August 23, 1989, by and
between the Company and R. D. McDonough (incorporated by reference to Exhibit 10.3A to the Company's
Annual Report on Form 10-K for 1989).
(dagger)10.3.2* Modification of Employment and Severance Agreements dated as of April 21, 1992, by and between the Company
and R. D. McDonough.
(dagger)10.4* Form of Employment Agreement and Severance Agreement, by and between the Company and each of the executive
officers listed on the schedule attached thereto.
(dagger)10.5 Employment Agreement and Severance Agreement, each dated August 25, 1988, by and between the Company and
D. E. McIntyre (incorporated by reference to Exhibit 10.24 to the Company's Annual Report on Form 10-K for
1991).
(dagger)10.5.1 Amendment to Employment Agreement and Amendment to Severance Agreement, each dated August 23, l989, by and
between the Company and D. E. McIntyre (incorporated by reference to Exhibit 10.24 to the Company's Annual
Report on Form 10-K for 1991).
(dagger)10.6* Employment Agreement and Severance Agreement, each dated as of May 20, 1993, by and between the Company
and Robert J. Pascal.
(dagger)10.7* Employment Agreement and Severance Agreement, each dated as of August 25, 1988, by and between the Company
and Donald J. D'Antuono.
(dagger)10.7.1* Amendment to Employment Agreement and Amendment to Severance Agreement, each dated as of August 23, 1989,
by and between the Company and Donald J. D'Antuono.
(dagger)10.8* Employment Agreement and Severance Agreement, each dated as of August 25, 1988, by and between the Company
and John C. Davis.
(dagger)10.8.1* Amendment to Employment Agreement and Amendment to Severance Agreement, each dated as of August 23, 1989,
by and between the Company and John C. Davis.
(dagger)10.9* Employment Agreement and Severance Agreement, each dated as of August 25, 1988, by and between the Company
and Ecton R. Manning.
(dagger)10.9.1* Amendment to Employment Agreement and Amendment to Severance Agreement, each dated as of August 23, 1989,
by and between the Company and Ecton R. Manning.
(dagger)10.9.2* Modification of Employment and Severance Agreements dated as of June 11, 1992, by and between the Company
and Ecton R. Manning.
(dagger)10.10* Employment Agreement and Severance Agreement, each dated as of August 25, 1988, by and between the Company
and John P. Fucigna.
(dagger)10.10.1* Amendment to Employment Agreement and Amendment to Severance Agreement, each dated as of August 23, 1989,
by and between the Company and John P. Fucigna.
(dagger)10.10.2* Modification of Employment and Severance Agreements dated as of May 26, 1992, by and between the Company
and John P. Fucigna.
(dagger)10.11* Employment Agreement and Severance Agreement, each dated as of March 15, 1993, by and between the Company
and Phillip A. Temple.
(dagger)10.12 Supplemental Benefit Plan of the Company as revised and restated as of August 22, 1990 (incorporated by
reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K for 1990).
(dagger)10.13 Supplementary Executive Medical Plan of the Company (incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement No. 2-90172).
(dagger)10.14 Compensatory Benefits Plan of the Company as revised and restated as of April 30, 1991 (incorporated by
reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K for 1991).
(dagger)10.15 Annual Bonus Plan of the Company (incorporated by reference to Exhibit 10.9 to the Company's Registration
Statement No. 2-90172).
(dagger)10.16 1984 Stock Option Plan of the Company (incorporated by reference to Exhibit 10.10 to the Company's
Registration Statement No. 2-90172).
(dagger)10.17 Amendment effective January 1, 1987 to the 1984 Stock Option Plan of the Company (incorporated by
reference to Exhibit 10.10A to the Company's Registration Statement No. 33-112228).
(dagger)10.18 Amendment to 1984 Stock Option Plan of the Company, dated as of August 23, l989 (incorporated by reference
to Exhibit 10.1B to the Company's Annual Report on Form 10-K for 1989).
<PAGE>
10.19 Restated Agreement, dated as of January 1, 1991, by and among the Company, Advance Publications, Inc. and
Calhoun Newsprint Company (incorporated by reference to Exhibit 10.11 to the Company's Annual Report on
Form 10-K for 1990).
10.19.1* Recycle Agreement, dated as of January 1, 1991, by and among the Company, Advance Publications, Inc., and
Calhoun Newsprint Company.
10.20 Agreement, dated as of February 21, 1963, by and between Bowater Canadian Limited and the Washington Post
Company (incorporated by reference to Exhibit 10.12 to the Company's Registration Statement No. 2-90172).
10.21 Licensing Agreement dated as of December 30, 1976, as amended, between the Company and Bowater Industries
plc (incorporated by reference to Exhibit 10.13 to the Company's Registration Statement No. 2-90172).
(dagger)10.22 Directors' Deferred Compensation Plan, effective March 1, 1989 (incorporated by reference to Exhibit 10.14
to the Company's Annual Report on Form 10-K for 1989).
10.23 Trademark Agreement, dated May 8, 1984, between the Company and Bowater Corporation plc (incorporated by
reference to Exhibit 10.17 to the Company's Registration Statement No. 2-90172).
(dagger)10.24 1988 Stock Incentive Plan of the Company (incorporated by reference to the Company's Proxy Statement for
1988).
(dagger)10.24.1 Amendment to 1988 Stock Incentive Plan of the Company, dated as of August 23, 1989 (incorporated by
reference to Exhibit 10.16A to the Company's Annual Report on Form 10-K for 1989).
(dagger)10.25 Benefit Plan Grantor Trust of the Company as of May 20, 1988 (incorporated by reference to Exhibit 10.17
to the Company's Annual Report on Form 10-K for 1989).
(dagger)10.25.1 Amendment to Benefit Plan Grantor Trust, dated as of August 23, 1989 (incorporated by reference to Exhibit
10.17A to the Company's Annual Report on Form 10-K for 1989).
(dagger)10.26 Executive Severance Grantor Trust of the Company, dated as of September 1, 1989 (incorporated by reference
to Exhibit 10.18 to the Company's Annual Report on Form 10-K for 1989).
(dagger)10.27 Outside Directors Benefit Plan Grantor Trust of the Company, dated as of September 5, 1989 (incorporated
by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K for 1989).
(dagger)10.28 Benefits Equalization Plan, dated as of August 22, 1990 (incorporated by reference to Exhibit 10.20 to the
Company's Annual Report on Form 10-K for 1990).
10.29 Stock Purchase Agreement, dated October 9, 1991, by and between the Company and Great Northern Nekoosa
Corporation (incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q dated
November 12, 1991).
(dagger)10.30 1992 Stock Incentive Plan (incorporated by reference to Exhibit 10.23 to the Company's Annual Report on
Form 10-K for 1991).
(dagger)10.31 Long-Term Cash Incentive Plan (incorporated by reference to Exhibit 10.24 to the Company's Annual Report
on Form 10-K for 1992).
10.32 Credit Agreement, dated as of December 8, 1992, between the Company, each of the banks party thereto (the
"Banks") and The Chase Manhattan Bank (N.A.) as agent for the Banks, providing for a lending facility up
to $250,000,000 (incorporated by reference to Exhibit 10.25 to the Company's Annual Report on Form 10-K
for 1992).
10.32.1* Amendment No. 1, dated as of December 20, 1993, to Credit Agreement by and between the Company, each of
the banks party thereto (the "Banks"), and The Chase Manhattan Bank (N.A.) as agent for the Banks.
10.33 Purchase Agreement and Pricing Agreement, each dated as of February 1, 1994, by and among the Company,
Merrill Lynch & Co. and Salomon Brothers Inc as representatives of the several underwriters with respect
to the Company's 7% PRIDES, Series B Convertible Preferred Stock (incorporated by reference to Exhibit 1.1
to the Company's Current Report on Form 8-K dated February 1, 1994).
10.34 Purchase Agreement and Pricing Agreement, each dated as of February 1, 1994, by and among the Company and
the Representatives of the several underwriters listed therein with respect to the Company's 8.40% Series
C Cumulative Preferred Stock (incorporated by reference to Exhibit 1.2 to the Company's Current Report on
Form 8-K dated February 1, 1994).
13.1* Copy of the Company's 1993 Annual Report to Stockholders (except for those portions that are expressly
incorporated by reference in this Report on Form 10-K, this exhibit is furnished for the Information of
the Commission and is not deemed to be filed as part hereof).
21.1 Subsidiaries of the registrant (incorporated by reference to Exhibit 22.1 to the Company's Annual Report
on Form 10-K for 1992).
23.1* Consent of Independent Auditors.
</TABLE>
EXHIBIT 10.2.2
MODIFICATION
OF
EMPLOYMENT AGREEMENT
TERMINATION OR SEVERANCE AGREEMENT
AND
RELEASE OF CLAIMS
THIS AGREEMENT is made and entered into as of this 1st day
of November, 1993 by and between BOWATER INCORPORATED, a Delaware
corporation having a mailing address of 55 East Camperdown Way,
P.O. Box 1028, Greenville, South Carolina 29602 (the
"Corporation"), and DAVID G. MCMASTER, 100 Babbs Hollow,
Greenville, South Carolina 29607 (the "Executive").
WHEREAS, the Corporation now employs the Executive as
President and Chief operating Officer pursuant to an Employment
Agreement dated March 1, 1989, and amended August 23, 1989 (the
"Employment Agreement") and a Severance Agreement dated March 1,
1989, and amended August 23, 1989 (the "Severance Agreement");
and
WHEREAS, the Executive and the Corporation wish to continue
the Executive's employment through a period of terminal leave
until a specified and agreed upon date, whereupon the Executive
will retire from the employment of the Corporation and be
entitled to receive certain benefits;
NOW, THEREFORE, the parties hereby agree that the Employment
Agreement shall be modified in the following respects and the
Severance Agreement shall be terminated as hereinafter provided:
1. Employment Agreement. The Employment Agreement is hereby
modified as follows:
(a) Term. Section 2 of the Employment Agreement is amended
to read in its entirety as follows:
"2. Term.
(a) Subject to the provisions of subparagraph (b)
of this Section 2, the term of this
Agreement, having begun on March 1, 1989,
shall continue from the date of this
Modification until December 31, 1993.
(b) Notwithstanding Section 2 (a), the term of
this Agreement shall end upon the death of
the Executive."
<PAGE>
(b) Position and Duties. Section 3 of the Employment
Agreement is amended to read as follows:
3. Position and Duties. The Executive is not
required to render services to the Corporation
after November 1, 1993. From and after that date,
the Executive will be on a terminal paid leave of
absence pursuant to the provisions of Section 8
hereof ending December 31, 1993 or upon the
Executive's earlier death.
(c) Severance Pay. Section 8 of the Employment Agreement is
amended to read as follows:
"8.Severance Pay Following Terminal Leave of Absence.
The effective date of the Executive's retirement shall
be December 31, 1993, and the Executive shall be on a
terminal paid leave of absence from November 1, 1993
through December 31, 1993. The Corporation shall pay
to the Executive during this leave of absence, in two
equal monthly installments, pro-rated annual
compensation of $355,000.00. The Executive's
entitlement to compensation, benefits or payments under
the Corporation's health, accident basic and executive
medical, dental life insurance, retirement and savings
(but not incentive bonus or long term disability)
plans, policies or arrangements shall not, except as
otherwise required by law or regulation, be affected by
the Executive's leave of absence status and shall
continue to be governed by the applicable provisions of
such plans as though the Executive had continued to
render services in the active employment of the
Corporation to the date or event (such as the
Executive's death) that otherwise ends the term of this
Agreement. Specifically, the period of terminal leave
of absence is hereby designated as a "leave of absence
with the consent of the Participant's Employer" which
is intended to be included within the definition of
"Continuous Employment" in the Supplemental Benefit
Plan for Designated Employees of Bowater Incorporated
and Affiliated Companies as Amended and Restated
Effective August 22, 1990 (the "Supplemental Benefit
Plan") and compensation paid during this terminal leave
of absence is intended to be included within the
definition of "Earnings" in the Supplemental Benefit
Plan (without regard to whether such time is credited
for benefit accrual purposes under the Bowater
Incorporated Employee Retirement Plan or whether such
compensation is includable within that Plan's
definition of ("Compensation"). On or before December
<PAGE>
31, 1993, the Executive shall be paid a single sum
severance payment in the amount of One Million Sixty-
Five Thousand ($1,065,000.00) from which there shall be
deducted all amounts required to be withheld by the
Corporation for applicable federal, state and local
taxes, including income, Social Security and Medicare,
and all other amounts the Corporation is authorized or
required to withhold or deduct from the Executive's
compensation. In the event that payment is made in any
future year to active employees pursuant to the
Corporation's existing (1992 through 1994) Long Term
Incentive Plan, the Executive shall be entitled to
receive at the time such payment is made (subject to
applicable withholding and deductions), an amount equal
to two-thirds (2/3) of the amount he would have been
entitled to under such Plan (based on his actual
compensation received in 1992 and 1993), had his active
employment continued through 1994 at the level of
compensation actually received in 1993.
(e) Ratification. In all respects, except as herein
provided, the Employment Agreement is hereby ratified
and confirmed.
2. Severance Agreement. The Severance Agreement is hereby
terminated effective October 30, 1993.
3. Release of Claims. Employee acknowledges that the
payments and accommodations afforded to him by this Modification
Agreement and the letter agreement of even date herewith (the
"Agreements") constitute full satisfaction of all of the
Corporation's obligations and would not be provided if Executive
did not enter into these Agreements.
(a) The Executive, for himself, his assigns, executors,
heirs and representatives, releases and waives any and
all claims, charges, suits or causes of action of any
kind against the Corporation, its affiliates and/or any
of their past, present and future directors, officers,
agents or employees (the "Released Parties") , which
Executive had, has or may have arising from any event
occurring on or before the date Executive signs and
delivers the Agreements to the Corporation, including
but not limited to all claims related to Executive's
employment with the Corporation or the termination of
that employment.
(b) The Executive agrees not to sue any of the Released
Parties or to file or pursue any claim, suit or charge
<PAGE>
against any of them in any court, administrative agency
or arbitral forum for the purpose of recovering damages
or any other personal relief on theories of tort,
contract, defamation, employment discrimination or
otherwise for claims arising from any event occurring
on or before the date the Executive signs this
Agreement, including but not limited to all claims
related to the Executive's employment with the
Corporation or the termination of that employment.
(c) The Executive acknowledges that if he, or any of his
heirs, executors, representatives or assigns, breach
the covenants not to sue set forth in the Agreements,
the Corporation may, in its sole discretion, deem the
Agreements terminated effective on the commencement
date of any such action or at any time thereafter it
may deem appropriate.
(d) The Executive acknowledges that the claims he is
releasing, waiving, and covenanting not to pursue,
include any potential claims for employment
discrimination of any kind, including claims arising
under the Age Discrimination in Employment Act or
otherwise for age, sex, religion, national origin,
disability or other forms of employment discrimination.
(e) The terms of the Agreements shall take effect after
seven days have expired after the Executive signs and
delivers the Agreements to the Corporation, unless
before those seven days expire the Executive rescinds
the Agreements by delivering a written statement of the
rescission to the Corporation's Vice President-Human
Resources and Administration. If the Executive
rescinds, neither party will have any obligation under
these Agreements.
IN WITNESS WHEREOF, the Corporation and the Executive have
executed this Agreement as of the day and year first above
written.
BOWATER INCORPORATED
/s/ Paula W. Overstreet By /s/ P. A. Temple
Its Vice President
Of Human Resources
/s/ Paul W. Overstreet /s/ David G. McMaster
EXHIBIT 10.3.2
MODIFICATION
OF
EMPLOYMENT AND SEVERANCE AGREEMENTS
THIS AGREEMENT is made and entered into as of this 21st day
of April 1992, by and between Bowater Incorporated, a Delaware
corporation having a mailing address of One Parklands Drive, P.O.
Box 4012, Darien, Connecticut 06820-1412, (the "Corporation"),
and R. D. McDonough of 25 East Point Lane, Old Greenwich,
Connecticut 06780, (the "Executive").
WHEREAS, the Corporation now employs the Executive as Senior
Vice President - Finance and Chief Financial Officer and
effective July 1, 1992, will employ the Executive as Vice
Chairman and Chief Financial Officer pursuant to an Employment
Agreement dated March 1, 1989, and amended August 23, 1989, (the
"Employment Agreement") and a Severance Agreement dated March 1,
1989, and amended August 23, 1989, (the "Severance Agreement");
and
WHEREAS, the Executive and the Corporation wish to continue
the Executive's employment as Vice Chairman and Chief Financial
Officer until the Corporation's 1993 Annual Meeting and
thereafter as Vice Chairman until a specified and agreed upon
date, whereupon the Executive will retire from the employment of
the Corporation and be entitled to receive certain benefits;
NOW, THEREFORE, the parties hereto agree that the Employment
Agreement and the Severance Agreement shall be modified in the
following respects:
1. Employment Agreement. The Employment Agreement is
hereby modified as follows:
(a) Term. Section 2 of the Employment Agreement is amended
to read in its entirety as follows:
"2. Term.
(a) Subject to the provisions of subparagraph (b)
of this Section 2, the term of this Agreement,
having begun on March 1, 1989, shall continue from
the date of this Modification until June 1, 1994,
unless earlier terminated by the Corporation for
'Cause' or by the Executive for other than 'Good
Reason' as those terms are defined in the
Severance Agreement.
(b) Notwithstanding Section 2(a), the term of
this Agreement shall end upon the death of the
Executive and shall be suspended following the
<PAGE>
inability of the Executive to perform his duties
properly, whether by reason of ill-health,
accident or other cause, for a period of one
hundred and eighty (180) consecutive days or for
periods totaling one hundred and eighty (180) days
occurring within any twelve (12) consecutive
calendar months, and shall remain suspended for so
long as the Executive's condition qualifies him
for benefits under the Corporation's Long Term
Disability Insurance Program and for credit for
years of service under the Bowater Incorporated
Employees' Retirement Plan (the 'Plan'), but not
beyond the earlier of (i) the end of the
Executive's period of disability or
the Executive's 'Normal Retirement Date', as that
term is defined in the Plan."
(b) Position and Duties. Section 3 of the Employment
Agreement is amended to read as follows:
3. Position and Duties. Until July 1, 1992, the
Executive shall be employed as Senior Vice
President - Finance and Chief Financial Officer of
the Corporation. Thereafter, until the
Corporation's 1993 Annual Meeting, the Executive
shall be employed as Vice Chairman and Chief
Financial Officer of the Corporation. Thereafter
and until the termination of this Agreement, the
Executive shall be employed as Vice Chairman. In
each of these capacities, the Executive shall have
the duties and responsibilities customarily
attendant to that office, provided that the
Executive shall undertake such other and further
assignments and responsibilities of at least
comparable status as the Board of Directors may
direct. The Executive shall diligently and
faithfully devote his full working time and best
efforts to the performance of the services under
this Agreement and to the furtherance of the best
interests of the Corporation."
(c) Place of Employment. Section 4 of the Employment
Agreement is amended to read as follows:
"4. Place of Employment. The Executive will be
employed at the Corporation's offices (or at suitable
facilities provided by the Corporation) in, or with a
ten (10) mile radius of the City of Darien,
Connecticut, (or such other place as the Corporation
and the Executive mutually agree upon)."
(d) Severance Pay. Section 8 of the Employment Agreement
is amended to read as follows:
<PAGE>
"8. Terminal Leave of Absence. If the Executive's
rendering of services hereunder is involuntarily
terminated for any reason other than those set forth in
Section 2 (b) hereof, then unless the Executive shall
have terminated this Agreement for other than 'Good
Reason' or the Corporation shall have terminated the
Executive for 'Cause' (as those terms are defined in
the Severance Agreement), the effective date of such
termination shall be June 1, 1994, and the Executive
shall be on a terminal paid leave of absence from the
date the Corporation notifies the Executive his
services are no longer required through June 1, 1994.
The Corporation shall pay to the Executive in equal
monthly installments annual compensation during any
such leave of absence (pro rated for any period less
than a year) equal to the Executive's annual base
salary on the date the Executive's services are
terminated, plus the greater of (i) an amount equal to
the bonus the Executive would have received under the
Corporation's bonus plan for the year in which the
Executive's services are terminated, had the Executive
continued to render services to the Corporation at the
same level of performance, at the same level of salary
and in the same position as immediately preceding the
termination of his services; or (ii) the bonus received
by the Executive for the year preceding the year in
which the Executive's services are terminated. The
Executive's entitlement to compensation, benefits or
payments under the Corporation's health, accident, life
insurance, retirement, stock option or incentive,
savings and bonus (but not long term disability) plans,
policies or arrangements shall not, except as otherwise
required by law or regulation, be affected by the
Executive's leave of absence status and shall continue
to be governed by the applicable provisions of such
plans as though the Executive had continued to render
services in the active employment of the Corporation to
the date or event (such as the Executive's death) that
otherwise ends the term of this Agreement.
Specifically, the period of any terminal leave of
absence is hereby designated as a "leave of absence
with the consent of the Participant's Employer" which
is intended to be included within the definition of
"Continuous Employment" in the Supplemental Benefit
Plan for Designated Employees of Bowater Incorporated
and Affiliated Companies as Amended and Restated
Effective August 22, 1990, (the "Supplemental Benefit
Plan") and compensation paid during any terminal leave
of absence is intended to be included within the
definition of "Earnings" in the Supplemental Benefit
Plan (without regard to whether such time is credited
for benefit accrual purposes under the Bowater
Incorporated Employee Retirement Plan or such
compensation is includable within that Plan's
<PAGE>
definition of "Compensation"). In lieu hereof, at his
election, the Executive shall be entitled to the
benefits of the Severance Agreement of even date
between the Corporation and the Executive, if
termination occurs prior to the commencement of the
Executive's terminal leave of absence (if any) pursuant
hereto and in a manner and at a time when such
Severance Agreement is applicable.
(e) Ratification. In all respects, except as herein
provided, the Employment Agreement is hereby ratified
and confirmed.
2. Severance Agreement. The Severance Agreement is hereby
modified as follows:
(a) Term. Section 2 of the Severance Agreement is hereby
amended to read as follows:
"2. Term of Agreement
The term of this Agreement, having begun on March 1,
1989, shall extend to June 1, 1994, or the earlier
termination of the Executive's rendering of services to
the Corporation pursuant to the Employment Agreement as
modified hereby; provided, however, that if the
Corporation terminates the Executive's Employment
Agreement for Cause (as defined herein) or the
Executive terminates his Employment Agreement with the
Corporation for other than Good Reason (as defined
herein), then in either case this Agreement shall
terminate upon the termination of the Executive's
Employment Agreement."
(b) Termination. The first paragraph of Section 3 of the
Severance Agreement is hereby amended to read as
follows:
"If a Change in Control of the Corporation shall have
occurred and, during the term of this Agreement, the
Executive's employment by the Corporation is terminated
for any reason other than his death, the expiration of
the Executive's Employment Agreement, by the
Corporation for Cause or by the Executive without Good
Reason, the Executive shall be under no further
obligation to perform services for the Corporation and
shall be entitled to receive the following payments:"
(c) Ratification. In all respects, except as herein
provided, the Severance Agreement is hereby ratified
and confirmed.
3. Expenses of Successful Contest. The Corporation shall
pay or reimburse the Executive for all costs, including
<PAGE>
reasonable attorneys fees and expenses of either litigation or
arbitration, incurred by the Executive in successfully contesting
or disputing any termination of his employment or in seeking to
obtain or enforce any right or benefit provided by his Employment
Agreement, his Severance Agreement or this Modification thereof.
4. Benefit and Eligibility Confirmation. This instrument
confirms that if the Executive survives to June 1, 1994, and his
Employment Agreement has not been terminated in a manner
permitted therein prior to that date, he shall be eligible at
that time to retire from the employment of the Corporation with
fifteen (15) years of "Continuous Employment" and an aggregate
annual benefit under the Supplemental Benefit Plan (from which
there shall be deducted "Other Benefits", as defined in that
Plan) of not less than $175,000.00. Any post-retirement increase
in retirement benefits payable to retired Supplemental Benefit
Plan Participants effected by the Corporation shall inure to the
benefit of the Executive and any post-retirement increase in the
benefits which are described as "Other Benefits" in the
Supplemental Benefit Plan shall be excluded from the amount of
"Other Benefits" to be deducted from the cash benefit payable to
the Executive under the Supplemental Benefit Plan. This
instrument further confirms that if the Executive's Employment
Agreement is terminated at any time by his death, the Executive's
surviving Spouse (as defined in the Supplemental Benefit Plan)
shall be entitled to the sixty (60%) percent Spouse's Pre-
Retirement Death Benefit as provided in the Supplemental Benefit
Plan, determined by reference to the greater of (i) the
Executive's aggregate annual benefit amount recited above, or
(ii) the benefit projected to his Normal Retirement Date. The
determination of the Corporation's Executive Committee of the
Executive's eligibility upon retirement at the time herein
provided (as well as his Spouse's eligibility upon his death) to
receive benefits from the Supplemental Benefit Plan is hereby
confirmed. The Human Resources and Compensation Committee of the
Corporation's Board of Directors has determined that terminal
leave taken pursuant to the Employment Agreement as herein
modified will not interrupt or terminate employment for purposes
of determining the Executive's continued eligibility to exercise
options and or rights awarded pursuant to the Corporation's 1984,
1988 or 1992 Stock Option and Stock Incentive Plans. That
determination is hereby confirmed.
5. Upon the Executive's retirement (at the completion of his
terminal leave of absence, if any) the Executive, his heirs,
executors and administrators shall be granted the longest period
permissible within which to exercise the rights granted to the
Executive pursuant to the Corporation's 1984, 1988 and 1992 Stock
Incentive Plans consistent with applicable law, regulation,
Corporation policy and practice, and provisions of the relevant
plans and awards.
<PAGE>
IN WITNESS WHEREOF, the Corporation and the Executive have
executed this Agreement as of the day and year first above
written.
BOWATER INCORPORATED
/s/ P. A. Temple By /s/ A. P. Gammie
Witness Its
/s/ P. A. Temple /s/ R. D. McDonough
Witness Executive
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of this _________, by
and between BOWATER INCORPORATED, a Delaware corporation having a
mailing address of 55 East Camperdown Way, Greenville, South
Carolina 29602 (the "Corporation"), and _________________ of
_____________ (the "Executive").
WHEREAS, the Corporation desires to employ the Executive
as ___________________; and
WHEREAS, the Executive is desirous of serving the
Corporation in such capacity;
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. During the term of this Agreement
the Corporation agrees to continue to employ the Executive, and
the Executive agrees to continue in the employ of the
Corporation, in accordance with and subject to the provisions of
this Agreement.
2. Term.
(a) Subject to the provisions of subparagraphs
(b) and (c) of this Section 2, the term of
this Agreement shall begin on the Date
hereof and shall continue thereafter until
terminated by either party by written notice
given to the other party at least thirty
(30) days prior to the effective date of any
such termination. The effective date of the
termination shall be the date stated in such
notice, provided that if the Corporation
specifies an effective date that is more
than thirty (30) days following the date of
such notice, the Executive may, upon thirty
(30) days' written notice to the
Corporation, accelerate the effective date
of such termination.
(b) Notwithstanding Section 2(a), upon the
occurrence of a Change in Control as defined
in the Severance Agreement of even date
between the Corporation and the Executive
(the "Severance Agreement"), the term of
<PAGE>
this Agreement shall be deemed to continue
until terminated, but in any event, for a
period of not less than three (3) years
following the date of the Change in Control,
unless such termination shall be at the
Executive's election for other than "Good
Reason" as that term is defined in the
Severance Agreement.
(c) Notwithstanding Section 2(a), the term of
this Agreement shall end upon: (i) the death
of the Executive; (ii) the inability of the
Executive to perform his duties properly,
whether by reason of ill-health, accident or
other cause, for a period of one hundred and
eighty (180) consecutive days or for periods
totaling one hundred and eighty (180) days
occurring within any twelve (12) consecutive
calendar months; or (iii) the executive's
retirement on his early or normal retirement
date.
3. Position and Duties. Throughout the term hereof,
the Executive shall be employed as ________________________
of the Corporation, with the duties and responsibilities
customarily attendant to that office, provided that the Executive
shall undertake such other and further assignments and
responsibilities of at least comparable status as the Board of
Directors may direct. The Executive shall diligently and
faithfully devote his full working time and best efforts to the
performance of the services under this Agreement and to the
furtherance of the best interests of the Corporation.
4. Place of Employment. The Executive will be
employed at the Corporation's offices in the City of Greenville,
South Carolina or at such other place as the Corporation shall
designate from time to time, provided, however, that if the
Executive is transferred to another place of employment,
necessitating a change in his residence, the Executive shall be
entitled to financial assistance in accordance with the terms of
the Corporation's relocation policy then in effect.
5. Compensation and Benefits.
(a) Base Salary. The Corporation shall pay to
the Executive a base salary of ___________,
payable in substantially
equal periodic installments on the
Corporation's regular payroll dates. The
Executive's base salary shall be reviewed at
least annually and from time to time may be
<PAGE>
increased (or reduced, if such reduction is
effected pursuant to across-the-board salary
reductions similarly affecting all
management personnel of the Corporation).
(b) Bonus Plan. In addition to his base salary,
the Executive shall be entitled to receive a
bonus under the Corporation's bonus plan in
effect from time to time determined in the
manner, at the time, and in the amounts set
forth under such plan.
(c) Benefit Plans. The Corporation shall make
contributions on the Executive's behalf to
the various benefit plans and programs of
the Corporation in which the Executive is
eligible to participate in accordance with
the provisions thereof as in effect from
time to time.
(d) Vacations. The Executive shall be entitled
to paid vacation, in keeping with the
Corporation's policy as in effect from time
to time, to be taken at such time or times
as may be approved by the Corporation.
(e) Expenses. The Corporation shall reimburse
the Executive for all reasonable expenses
properly incurred, and appropriately
documented, by the Executive in connection
with the business of the Corporation.
(f) Prerequisites. The Corporation shall make
available to the Executive all prerequisites
to which he is entitled by virtue of his
position.
6. Nondisclosure. During and after the term of this
Agreement, the Executive shall not, without the written consent
of the Board of Directors of the Corporation, disclose or use
directly or indirectly, (except in the course of employment
hereunder and in furtherance of the business of the Corporation
or any of its subsidiaries and affiliates) any of the trade
secrets or other confidential information or proprietary data of
the Corporation or its subsidiaries or affiliates; provided,
however, that confidential information shall not include any
information known generally to the public (other than as a result
of unauthorized disclosure by the Executive) or any information
of a type not otherwise considered confidential by persons
engaged in the same or similar businesses.
<PAGE>
7. Noncompetition. During the term of this
Agreement, and for a period of one (1) year after the date the
Executive's employment terminates, the Executive shall not,
without the prior approval of the Board of Directors of the
Corporation in the same or a similar capacity engage in or invest
in, or aid or assist anyone else in the conduct of any business
(other than the businesses of the Corporation and its
subsidiaries and affiliates) which directly competes with the
business of the Corporation and its subsidiaries and affiliates
as conducted during the term hereof. If any court of competent
jurisdiction shall determine that any of the provisions of this
Section 7 shall not be enforceable because of the duration or
scope thereof, the parties hereto agree that said court shall
have the power to reduce the duration and scope of such provision
to the extent necessary to make it enforceable and this Agreement
in its reduced form shall be valid and enforceable to the extent
permitted by law. The Executive acknowledges that the
Corporation's remedy at law for a breach by the Executive of the
provisions of this Section 7 will be inadequate. Accordingly, in
the event of the breach or threatened breach by the Executive of
this Section 7, the Corporation shall be entitled to injunctive
relief in addition to any other remedy it may have.
8. Severance Pay. If the Executive's employment
hereunder is involuntarily terminated for any reason other than
those set forth in Section 2(c) hereof, then unless the
Corporation shall have terminated the Executive for "Cause", the
Corporation shall pay the Executive severance pay in an amount
equal to __________ months of the Executive's base salary
on the effective date of the termination, plus 1/12 of the amount
of the last bonus paid to the Executive under the Corporation's
bonus plan applicable to the Executive for each month in the
period beginning on January 1 of the year in which the date of
the termination occurs and ending on the date of the termination
and for each months' base salary to which the Executive is
entitled under this Section 8, provided, however, that any amount
paid to the Executive by the Corporation for services rendered
subsequent to the thirtieth (30th) day following the
communication to the Executive of notice of termination shall be
deducted from the severance pay otherwise due hereunder. Such
payment shall be made in a lump sum within ten (10) business days
following the effective date of the termination. The severance
pay shall be in lieu of all other compensation or payments of any
kind relating to the termination of the Executive's employment
hereunder; provided that the Executive's entitlement to
compensation or payments under the Corporation's retirement
plans, stock option or incentive plans, savings plans or bonus
plans attributable to service rendered prior to the effective
date of the termination shall not be affected by this clause and
shall continue to be governed by the applicable provisions of
<PAGE>
such plans; and further provided that in lieu hereof, at his
election, the Executive shall be entitled to the benefits of the
Severance Agreement of even date hereof between the Corporation
and the Executive, if termination occurs in a manner and at a
time when such Severance Agreement is applicable. For purposes
of this Agreement, the term for "Cause" shall mean because of
gross negligence or willful misconduct by the Executive either in
the course of his employment hereunder or which has a material
adverse effect on the Corporation or the Executive's ability to
perform adequately and effectively his duties hereunder.
9. Notices. Any notices required or permitted to be
given under this Agreement shall be in writing and shall be
deemed to have been given when delivered or mailed, by registered
or certified mail, return receipt requested to the respective
addresses of the parties set forth above, or to such other
address as any party hereto shall designate to the other party in
writing pursuant to the terms of this Section 9.
10. Severability. The provisions of this Agreement
are severable, and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of any
other provision.
11. Governing Law. This Agreement shall be governed
by and interpreted in accordance with the substantive laws of the
State of _______________.
12. Supersedure. This Agreement shall cancel and
supersede all prior agreements relating to employment between the
Executive and the Corporation, except the Severance Agreement.
13. Waiver of Breach. The waiver by a party of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any prior or subsequent breach by any of
the parties hereto.
14. Binding Effect. The terms of this Agreement
shall be binding upon and inure to the benefit of the successors
and assigns of the Corporation and the heirs, executors,
administrators and successors of the Executive, but this
Agreement may not be assigned by the Executive.
<PAGE>
IN WITNESS WHEREOF, the Corporation and the Executive
have executed this Agreement as of the day and year first above
written.
BOWATER INCORPORATED
By
Witness Its
Witness ___________________________
Executive
<PAGE>
SEVERANCE AGREEMENT
THIS AGREEMENT, made as of _____________, by
and between BOWATER INCORPORATED, a Delaware corporation having a
mailing address of 55 East Camperdown Way, Greenville, South
Carolina 29602 (the "Corporation"), and ________________ of
___________________________, (the "Executive").
WHEREAS, the Corporation considers it essential to the
best interests of its shareholders to foster the continued
employment of key management personnel; and
WHEREAS, the uncertainty attendant to a change in control
of the Corporation may result in the departure or distraction of
management personnel to the detriment of the Corporation and its
shareholders; and
WHEREAS, the Board of Directors of the Corporation (the
"Board") has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
members of the Corporation's management, including Executive, to
their assigned duties in the event of a change in control of the
Corporation.
NOW THEREFORE, it is hereby agreed as follows:
1. DEFINITIONS
The following terms when used herein shall have the
meanings assigned to them below:
(a) "Acquiring Person" shall mean any Person who is or
becomes a "beneficial owner" (as defined in Rule
13d-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") of securities of the
Corporation representing twenty percent (20%) or
more of the combined voting power of the
Corporation's then outstanding voting securities,
unless such Person has filed Schedule 13G and all
required amendments thereto with respect to its
holdings and continues to hold such securities for
investment in a manner qualifying such Person to
utilize Schedule 13G for reporting of ownership.
<PAGE>
(b) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the
Exchange Act, as in effect on the date hereof.
(c) "Cause" shall mean and be limited to the Executive's
gross negligence, willful misconduct or conviction
of a felony, which negligence, misconduct or
conviction has a demonstrable and material adverse
effect upon the Corporation, provided that the
Corporation shall have given the Executive written
notice of the alleged negligence or misconduct and
the Executive shall have failed to cure such
negligence or misconduct within thirty (30) days
after his receipt of such notice. The Executive
shall be deemed to have been terminated for Cause
effective upon the effective date stated in a
written notice of such termination delivered by the
Corporation to the Executive and accompanied by a
resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the entire
membership of the Board at a meeting of the board
(after reasonable notice to the Executive and an
opportunity for the Executive, with his counsel
present, to be heard before the Board) finding that,
in the good faith opinion of the Board, the
Executive was guilty of conduct constituting Cause
hereunder and setting forth in reasonable detail the
facts and circumstances claimed to provide the basis
for the Executive's termination, provided that the
effective date shall not be less than thirty (30)
days from the date such notice is given.
(d) "Change in Control" of the Corporation shall be
deemed to have occurred if:
(i) any Person is or becomes an Acquiring Person;
(ii) less than two-thirds (2/3) of the total
membership of the Board shall be Continuing
Directors; or
(iii) the shareholders of the Corporation shall
approve a merger or consolidation of the
Corporation or a plan of complete liquidation
of the Corporation or an agreement for the
sale or disposition by the Corporation of all
or substantially all of the Corporation's
assets.
<PAGE>
(e) "Continuing Directors" shall mean any member of the
Board who was a member of the Board prior to the
date hereof, and any successor of a Continuing
Director while such successor is a member of the
Board who is not an Acquiring Person or an Affiliate
or Associate of an Acquiring Person or of any such
Affiliate or Associate and is recommended or elected
to succeed the Continuing Director by a majority of
the Continuing Directors.
(f) "Disability" shall mean the Executive's total and
permanent disability as defined in the Corporation's
long term disability insurance policy covering the
Executive immediately prior to the Change in
Control.
(g) "Good Reason" shall mean:
(i) an adverse change in the Executive's status,
duties or responsibilities as an executive of
the Corporation as in effect immediately
prior to the Change in Control;
(ii) failure of the Corporation to pay or provide
the Executive in a timely fashion the salary
or benefits to which he is entitled under any
Employment Agreement between the Corporation
and the Executive in effect on the date of
the Change in Control, or under any benefit
plans or policies in which the Executive was
participating at the time of the Change in
Control (including, without limitation, any
incentive, bonus, stock option, restricted
stock, health, accident, disability, life
insurance, thrift, vacation pay deferred
compensation and retirement plans or
policies);
(iii) the reduction of the Executive's salary as in
effect on the date of the Change in Control;
(iv) the taking of any action by the Corporation
(including the elimination of a plan without
providing substitutes therefore, the
reduction of the Executive's awards
thereunder or failure to continue the
Executive's participation therein) that would
substantially diminish the aggregate
projected value of the Executive's awards or
benefits under the Corporation's benefit
plans or policies described in section
<PAGE>
1(g)(ii) in which the Executive was participating at
the time of the Change in Control;
(v) a failure by the Corporation to obtain from
any successor the assent to this Agreement
contemplated by Section 5 hereof; or
(vi) the relocation of the principal office at
which the Executive is to perform his services on
behalf of the Corporation to a location more than
thirty-five (35) miles from its location immediately
prior to the Change in Control or a substantial
increase in the Executive's business travel
obligations subsequent to the Change in Control.
Any circumstances described in this Section 1(g)
shall constitute Good Reason even if such
circumstance would not constitute a breach by the
Corporation of the terms of the Employment Agreement
between the Corporation and the Executive in effect
on the date of the Change in Control. The Executive
shall be deemed to have terminated his employment
for Good Reason effective upon the effective date
stated in a written notice of such termination given
by him to the Corporation setting forth in
reasonable detail the facts and circumstances
claimed to provide the basis for termination,
provided that the effective date may not precede,
nor be more than sixty (60) days from, the date such
notice is given. The Executive's continued
employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstances
constituting Good Reason hereunder.
(h) "Normal Retirement Date" shall have the meaning
given to such term in the Corporation's basic
qualified pension plan in which the Executive is a
participant as in effect on the date hereof or any
successor or substitute plan adopted prior to a
Change in Control.
(i) "Person" shall mean any individual, corporation,
partnership, group, association or other "person" as
such term is used in Section 13(d) and 14(d) of the
Exchange Act.
2. TERM OF AGREEMENT
(a) The term of this Agreement shall initially be for
the period beginning on _________________________ and
ending on _________. The term of this Agreement shall
automatically be extended on ________ until _____
without further action by the parties, and shall be
<PAGE>
automatically extended by an additional year on each
succeeding [month and date of Severance Agreement]
unless either the Corporation or the Executive shall
have served notice upon the other party prior to such
[month and date of Severance Agreement] of its or his
intention either that the term of this Agreement shall
not be extended, or that the Executive's Employment
Agreement is terminated, provided, however, that if a
Change in Control of the Corporation shall occur
during the term of this Agreement, this Agreement
shall continue in effect until terminated but in any
event for a period of not less than three (3) years
from the date of the Change in Control.
(b) Notwithstanding Section 2(a), the term of this
Agreement shall end upon the termination of the
Executive's employment if, prior to a Change in
Control of the Corporation, the Executive's
employment with the Corporation shall have
terminated under the provisions of any Employment
Agreement between the Corporation and the Executive
then in effect.
3. COMPENSATION UPON CHANGE IN CONTROL FOLLOWED BY A
TERMINATION
If a Change in Control of the Corporation shall have
occurred and, during the term of this Agreement, the Executive's
employment by the Corporation is terminated for any reason other
than his death, his Disability, his retirement on his Normal
Retirement Date, by the Corporation for Cause, or by the
Executive without Good Reason, the Executive shall be under no
further obligation to perform services for the Corporation and
shall be entitled to receive the following payments:
(a) The Corporation shall pay to the Executive his full
base salary through the effective date of the
termination within five (5) business days thereafter
and all benefits and awards (including both the cash
and stock components) to which the Executive is
entitled under any benefit plans or policies in
which the Executive was a participant prior to the
Change in Control, at the time such payments are due
pursuant to the terms of such benefit plans or
policies as in effect immediately prior to the
Change in Control.
<PAGE>
(b) At the election of the Executive, in addition to the
entitlements set forth in Section 3(a) but in
lieu of any payment to the Executive of any
salary or severance payments or benefits to
which the Executive would be entitled under
the provisions of any Employment Agreement
between the Corporation and the Executive then
in effect, the Corporation shall pay to the
Executive, in a lump sum not later than ten
(10) business days following the effective
date of the termination:
(i) an amount equal to two (2) times the
Executive's annual base salary on the
effective date of the termination or, if
higher, immediately prior to the Change in
Control;
(ii) an amount equal to two (2) times the greater
of (x) the highest amount of the actual bonus
awarded to the Executive in the five (5)
fiscal years immediately preceding the year in
which the Change in Control occurred and (y)
an amount equal to the amount the Executive
would have been awarded under the
Corporation's bonus plan in effect immediately
prior to the Change in Control for the fiscal
year in which the Change in Control occurred
had the Executive continued to render services
to the Corporation at the same level of
performance, at the same level of salary, and
in the same position as immediately prior to
the Change in Control;
(iii) an amount equal to two (2) times the greater
of (x) the largest annual contribution made by
the Corporation to the Corporation's Savings
Plan on the Executive's behalf during the five
(5) fiscal years immediately preceding the
year in which the Change in Control occurred
and (y) an amount equal to the contribution
the Corporation would have made to said Plan
on the Executive's behalf for the fiscal year
in which the Change in Control occurred had he
participated in said Plan for the entire
fiscal year, received a base salary equal to
the salary he was receiving immediately prior
to the Change in Control and had he elected to
contribute to the Plan the same percentage of
his base salary as he was contributing on said
date; and
<PAGE>
(iv) an amount equal to twenty percent (20%) of the
Executive's annual base salary on the
effective date of the termination or, if
higher, immediately prior to the Change in
Control (as compensation for medical, life
insurance and other benefits lost as a result
of termination of the Executive's employment).
(v) For each full or partial month in the period
beginning on January 1st of the year in which
the date of the termination occurs and ending
on the date of the termination, one-twelfth of
the greater of (x) the highest amount of the
actual bonus awarded to the Executive in the
five (5) fiscal years immediately preceding
the year in which the Change in Control
occurred and (y) an amount equal to the amount
the Executive would have been awarded under
the Corporation's bonus plan in effect
immediately prior to the Change in Control for
the fiscal year in which the Change in control
occurred had the Executive continued to render
services to the Corporation at the same level
of performance, at the same level of salary,
and in the same position as immediately prior
to the Change in Control;
(vi) If a payment may be increased by reference to
an alternate calculation which cannot be made
by the time the payment is due, payment of the
lesser, known amount shall be made when due,
and if any additional amount becomes due, such
additional amount shall be paid within ten
(10) days after the information upon which
calculation of such payment is dependent first
becomes available.
The amount of all payments due to the
Executive pursuant to this Section 3(b) shall
be reduced by 1/24 for each full calendar
month by which the date which is two (2) years
from the effective date of the Executive's
termination extends beyond the Executive's
Normal Retirement Date.
Upon entering into this Agreement and for a
period of fourteen (14) days following each
anniversary of the date hereof (the "Election
Period"), the Executive may, in writing,
direct the Corporation to pay any amounts to
which he is entitled under this Section 3(b)in
<PAGE>
equal annual installments (not to exceed ten
(10) annual installments), with the first such
installment payable within ten (10) business
days of the effective date of the termination
and each successive installment payable on the
anniversary of the effective date of the
termination or the next following business day
if such date is not a business day (the
"Deferred Payment Election"). A Deferred
Payment Election, once made, cannot be revoked
except during an Election Period; provided,
however, no Deferred Payment Election can be
made or revoked by the Executive during an
Election Period that occurs after a Change in
Control or at a time when, in the judgment of
the Corporation, a Change in Control may occur
within sixty (60) days of such Election
Period.
(c) The Corporation shall pay or provide to the
Executive such amounts and benefits as may be
required so that the pension and other
post-retirement benefits paid or made available to
the Executive are equal to those, if any, which
would have been paid under the Corporation's Basic
Pension (Benefit) Plan in effect immediately prior
to the Change in Control, assuming the Executive
continued in the employ of the Corporation at the
same compensation until the second anniversary of
the effective date of the termination of the
Executive's employment or until his Normal
Retirement Date, whichever is earlier.
Notwithstanding any conflicting restrictions in the
Plan or the fact of the termination of the
Executive's employment, until the Executive's Normal
Retirement Date, the Executive shall maintain a
continuing right to receive the pension and other
benefits under the above Plan with payments to begin
upon retirement and to elect an imputed retirement
on the Executive's 50th birthdate or any of his
birthdates thereafter until his Normal Retirement
Date, such election to be made by so notifying the
Corporation within one (1) year after termination of
his employment.
(d) The Corporation shall pay for or provide the
Executive individual out-placement assistance as
offered by a member firm of the Association of
Out-Placement Consulting Firms.
<PAGE>
(e) If any payment or benefit to or for the benefit of
the Executive in connection with a Change in Control
of the Corporation or termination of the Executive's
employment following a Change in Control of the
Corporation (whether pursuant to the terms of this
Agreement, or any other plan or arrangement or
agreement with the Corporation, any Person whose
actions result in a Change in Control of the
Corporation or any Affiliate or Associate of the
Corporation or any such Person) is subject to the
Excise Tax (as hereinafter defined), the Corporation
shall pay to the Executive an additional amount such
that the total amount of all such payments and
benefits (including payments made pursuant to this
Section 3(e)) net of the Excise Tax and all other
applicable federal, state and local taxes shall
equal the total amount of all such payments and
benefits to which the Executive would have
been entitled, but for this Section 3(e), net of all
applicable federal, state and local taxes except the
Excise Tax. For purposes of this Section 3(e), the
term "Excise Tax" shall mean the tax imposed by
Section 4999 of the Internal Revenue Code of 1986
(the "Code") and any similar tax that may hereafter
be imposed.
The amount of the payment to the Executive
under this Section 3(e) shall be estimated by a
nationally recognized firm of certified public
accounts (other than the Corporation's independent
auditors) based upon the following assumptions:
(i) all payments and benefits to or for the
benefit of the Executive in connection with
a Change in Control of the Corporation or
termination of the Executive's employment
following a Change in Control of the
Corporation shall be deemed to be "parachute
payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess
parachute payments" shall be deemed to be
subject to the Excise Tax unless, in the
opinion of tax counsel selected by the firm
of certified public accountants charged with
estimating the payment to the Executive
under this Section 3(e), such payments or
benefits are not subject to the Excise Tax;
and
<PAGE>
(ii) the Executive shall be deemed to pay
federal, state and local taxes at the
highest marginal rate of taxation for the
applicable calendar year.
The estimated amount of the payment due the
Executive pursuant to this Section 3(e) shall be
paid to the Executive in a lump sum not later
than thirty (30) business days following the
effective date of the termination. In the event
that the amount of the estimated payment is less
than the amount actually due to the Executive
under this Section 3(e), the amount of any such
shortfall shall be paid to the Executive within
ten (10) days after the existence of the
shortfall is discovered.
(f) The Executive shall not be required to mitigate
the amount of any payment provided in this
Section 3, nor shall any payment or benefit
provided for in this Section 3 be offset by any
compensation earned by the Executive as the
result of employment by another employer, by
retirement benefits, or by offset against any
amount claimed to be owed by the Executive to the
Corporation, or otherwise.
(g) If any payment to the Executive required by this
Section 3 is not made within the time for such
payment specified herein, the Corporation shall
pay to the Executive interest on such payment at
the legal rate payable from time to time upon
judgments in the State of ______________ from the
date such payment is payable under terms hereof
until paid.
4. EXECUTIVE'S EXPENSES
The Corporation shall pay or reimburse the Executive for
all costs, including reasonable attorney's fees and expenses of
either litigation or arbitration, incurred by the Executive in
contesting or disputing any termination of his employment
following a Change in Control or in seeking to obtain or enforce
any right or benefit provided by this Agreement.
5. BINDING AGREEMENT
This Agreement shall inure to the benefit of and be
enforceable by the Executive, his heirs, executors,
administrators, successors and assigns. This Agreement shall be
binding upon the Corporation, its successors and assigns. The
<PAGE>
Corporation shall 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 expressly to assume and agree to perform this
Agreement in accordance with its terms. The Corporation shall
obtain such assumption and agreement prior to the effectiveness
of any such succession.
6. NOTICE
Any notices and all other communications provided for
herein shall be in writing and shall be deemed to have been duly
given when delivered or mailed, by certified or registered mail,
return receipt requested, postage prepaid addressed to the
respective addresses set forth on the first page of this
Agreement or to such other address as either party may have
furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt. All notices to the Corporation shall be addressed to
the attention of the Board with a copy to each of the General
Counsel, the Vice President-Human Resources and Administration
and the Secretary of the Corporation.
7. AMENDMENTS; WAIVERS
No provision of this Agreement may be modified, waived or
discharged except in a writing specifically referring to such
provision and signed by the party against which enforcement of
such modification, waiver or discharge is sought. No waiver by
either party hereto of the breach of any condition or provision
of this Agreement shall be deemed a waiver of any other condition
or provision at the same or any other time.
8. GOVERNING LAW
The validity, interpretation, construction and
performance of this Agreement shall be governed by the
substantive laws of the State of ___________________.
9. VALIDITY
The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full
force and effect.
10. ARBITRATION
If the Executive so elects, any dispute or controversy
arising under or in connection with this Agreement shall be
settled exclusively by arbitration in the city nearest to the
<PAGE>
Executive's principal residence (or, at the Executive's election,
in the city within the state in which the Executive's principal
residence is located nearest to such principal residence) which
has an office of the American Arbitration Association by one
arbitrator in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction. The
Corporation hereby waives its right to contest the personal
jurisdiction or venue of any court, federal or state, in an
action brought to enforce this Agreement or any award of an
arbitrator hereunder which action is brought in the jurisdiction
in which such arbitration was conducted, or, if no arbitration
was elected, in which arbitration could have been conducted
pursuant to this provision.
11. COUNTERPARTS
This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to
be executed as of the day and year first above written.
BOWATER INCORPORATED
By
Witness Its
Witness _______________________________
Executive
<PAGE>
Schedule Accompanying
Exhibit 10.4
The Company has entered into Employment and Severance
Agreements, the form of which are attached hereto, with seven of
its executive officers. Each of the agreements is identical in all
material respects to the form filed as Exhibit 10.4 except for the
date, the title of the executive, the base salary, the number of
months used in severance pay calculation, the state law that
governs the agreements and whose interest rate is used for purposes
of legal interest rate calculations, and the initial term of the
severance agreements. Set forth below are the names of the seven
executive officers who are parties to the Employment and Severance
Agreements and a summary of the manner is which their agreements
differ from the Form.
Robert Lancaster:
Name and Title: Robert Lancaster, Senior Vice President and
Chief Financial Officer
Date of Agreements: July 1, 1993
Employment Agreement:
Base Salary: $210,000 as of July 1, 1993
Number of Months Used in Severance Pay Calculation:
Twenty-Four Months of Base Salary
Governing Law: South Carolina
Severance Agreement
Initial Term of Severance Agreement: July 1, 1993 until
July 30, 1994. The term of the Severance Agreement
shall be automatically extended on July 1, 1994
until June 30, 1995 without further action of the
parties.
State law governing the agreement and whose interest rate
is used for purposes of determining the legal rate
of interest in Section 3(g): South Carolina.
Robert D. Leahy
Name and Title: Robert D. Leahy, Vice President-Corporate Relations
Date of Agreements: March 15, 1993
Employment Agreement:
Base Salary: $117,000 as of March 15, 1993
Number of Months Used in Severance Pay Calculation:
Twelve Months of Base Salary
Governing Law: Connecticut
Severance Agreement
Initial Term of Severance Agreement: March 15, 1993
until March 14, 1995. The term of the Severance
Agreement shall be automatically extended on March
14, 1994 until March 14, 1996 without further
action of the parties.
State law governing the agreement and whose interest rate
<PAGE>
is used for purposes of determining the legal rate of
interest in Section 3(g): Connecticut.
David G. Maffucci
Name and Title: David G. Maffucci, Vice President and
Treasurer
Date of Agreements: July 1, 1992
Employment Agreement:
Base Salary: payable at the annual rate of $132,000 as
of July 1, 1992, increased to an annual
rate of $136,000 as of January 1, 1993,
and further increased to an annual rate
of $144,000 as of January 1, 1994.
Number of Months Used in Severance Pay Calculation:
Twelve Months of Base Salary
Governing Law: South Carolina
Severance Agreement
Initial Term of Severance Agreement: July 1, 1992 until
July 30, 1993. The term of the Severance Agreement
shall be automatically extended on July 1, 1993
until June 30, 1994 without further action of the
parties.
State law governing the agreement and whose interest rate
is used for purposes of determining the legal rate of
interest in Section 3(g): South Carolina
Robert A. Moran
Name and Title: Robert A. Moran, Vice President-Manufacturing
Services
Date of Agreements: November 19, 1991
Employment Agreement:
Base Salary: $144,000 as of November 19, 1991
Number of Months Used in Severance Pay Calculation:
Twelve Months of Base Salary
Governing Law: Connecticut
Severance Agreement
Initial Term of Severance Agreement: November 19, 1991
until November 18, 1993. The term of the Severance
Agreement shall be automatically extended on Novem-
ber 19, 1992 until November 18, 1994 without fur-
ther action of the parties.
State law governing the agreement and whose interest rate
is used for purposes of determining the legal rate of
interest in Section 3(g): Connecticut.
<PAGE>
Michael F. Nocito
Name and Title: Michael F. Nocito, Vice President and Controller
Date of Agreements: July 1, 1993
Employment Agreement:
Base Salary: payable at the annual rate of $120,000 as
of July 1, 1993, then increased to
$128,000 as of January 1, 1994.
Number of Months Used in Severance Pay Calculation:Twelve
Months of Base Salary
Governing Law: South Carolina
Severance Agreement
Initial Term of Severance Agreement: July 1, 1993 until
June 30, 1994. The term of the Severance Agreement
shall be automatically extended on July 1, 1994
until June 30, 1995 without further action of the
parties.
State law governing the agreement and whose interest rate
is used for purposes of determining the legal rate of
interest in Section 3(g): South Carolina
Aubrey S. Rogers
Name and Title: Aubrey S. Rogers, Vice President-Information
Services, Pulp and Paper
Date of Agreements: February 1, 1990
Employment Agreement:
Base Salary: $130,000 as of February 1, 1990
Number of Months Used in Severance Pay Calculation:
Twenty Four Months of Base Salary
Governing Law: Connecticut
Severance Agreement
Initial Term of Severance Agreement: February 1, 1990
until January 31, 1992. The term of the Severance
Agreement shall be automatically extended on Febru-
ary 1, 1991 until February 1, 1993 without further
action by the parties
State law governing the agreement and whose interest rate
is used for purposes of determining the legal rate of
interest in Section 3(g): Connecticut.
Wendy C. Shiba
Name and Title: Wendy C. Shiba, Secretary and Assistant General Counsel
Date of Agreements: June 14, 1993
Employment Agreement:
Base Salary: $110,000 as of June 14, 1993
Number of Months Used in Severance Pay Calculation:
<PAGE>
Twelve Months of Base Salary
Governing Law: Connecticut
Severance Agreement
Initial Term of Severance Agreement: June 14, 1993
until June 13, 1995. The term of the Severance
Agreement shall be automatically extended on June
14, 1994 until June 13, 1996 without further action
of the parties.
State law governing the agreement and whose interest rate
is used for purposes of determining the legal rate of
interest in Section 3(g): Connecticut.
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 20TH day of MAY, 1993, by and
between BOWATER INCORPORATED, a Delaware corporation having a
mailing address of ONE PARKLANDS DRIVE, DARIEN, CONNECTICUT
06820, (the "Corporation"), and ROBERT J. PASCAL of 49 LEEUWARDEN
ROAD, DARIEN, CONNECTICUT 06820 (the "Executive").
WHEREAS, the Corporation desires to employ the Executive as
Vice President; President Communication Papers Group; and
WHEREAS, the Executive is desirous of serving the Cor-
poration in such capacity;
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. During the term of this Agreement the
Corporation agrees to continue to employ the Executive, and the
Executive agrees to continue in the employ of the Corporation, in
accordance with and subject to the provisions of this Agreement.
2. Term.
(a) Subject to the provisions of subparagraphs (b) and
(c)of this Section 2, the term of this Agreement shall
begin on the date hereof and shall continue thereafter
until terminated by either party by written notice
given to the other party at least thirty (30) days
prior to the effective date of any such termination.
The effective date of the termination shall be the date
stated in such notice, provided that if the Corporation
specifies an effective date that is more than thirty
(30) days following the date of such notice, the
Executive may, upon thirty (30) days' written notice to
the Corporation, accelerate the effective date of such
termination.
(b) Notwithstanding Section 2(a), upon the occurrence of a
Change in Control as defined in the Severance Agreement
of even date between the Corporation and the Executive
(the "Severance Agreement"), the term of this Agreement
shall be deemed to continue until terminated, but in
any event, for a period of not less than three (3)
years following the date of the Change in control,
unless such termination shall be at the Executive's
election for other than "Good Reason" as that term is
<PAGE>
defined in the Severance Agreement.
(c) Notwithstanding Section 2(a), the term of this
Agreement shall end upon: (i) the death of the
Executive; (ii) the inability of the Executive to
perform his duties properly, whether by reason of ill-
health, accident or other cause, for a period of one
hundred and eighty (180) consecutive days or for
periods totaling one hundred and eighty (180) days
occurring within any twelve (12) consecutive calendar
months; or (iii) the executives retirement on his early
or normal retirement date.
3. Position and Duties. Throughout the term hereof, the
Executive shall be employed as Vice President; President
Communication Papers Group of the Corporation, with the duties
and responsibilities customarily attendant to that office,
provided that the Executive shall undertake such other and
further assignments and responsibilities of at least comparable
status as the Board of Directors may direct. The Executive shall
diligently and faithfully devote his full working time and best
efforts to the performance of the services under this Agreement
and to the furtherance of the best interests of the Corporation.
4. Place of Employment. The Executive will be employed at
the Corporation's offices in the City of Darien,
Connecticut or at such other place as the Corporation shall
designate from time to time, provided, however, that if the
Executive is transferred to another place of employment,
necessitating a change in his residence, the Executive shall be
entitled to financial assistance in accordance with the terms of
the Corporation's relocation policy then in effect.
5. Compensation and Benefits.
(a) Base Salary. The Corporation shall pay to the
Executive a base salary at the annual rate of $213,000,
payable in substantially equal periodic installments on
the Corporation's regular payroll dates. The
Executive's base salary shall be reviewed at least
annually and from time to time may be increased (or
reduced, if such reduction is effected pursuant to
across-the-board salary reductions similarly affecting
all management personnel of the Corporation).
(b) Bonus Plan. In addition to his base salary, the
Executive-shall be entitled to receive a bonus under
the Corporation's bonus plan in effect from time to
time determined in the manner, at the time, and in the
amounts set forth under such plan.
(c) Benefit Plans. The Corporation shall make con-
tributions on the Executive's behalf to the various
benefit plans and programs of the corporation in which
<PAGE>
the Executive is eligible to participate in accordance
with the provisions thereof as in effect from time to
time.
(d) Vacations. The Executive shall be entitled to paid
vacation, in keeping with the Corporation's policy as
in effect from time to time, to be taken at such time
or times as may be approved by the Corporation.
(e) Expenses. The Corporation shall reimburse the
Executive for all reasonable expenses properly
incurred, and appropriately documented, by the
Executive in connection with the business of the
Corporation.
(f) Perquisites. The Corporation shall make available to
the Executive all perquisites to which he is entitled
by virtue of his position.
6. Nondisclosure. During and after the term of this
Agreement, the Executive shall not, without the written consent
of the Board of Directors of the Corporation, disclose or use
directly or indirectly, (except in the course of employment
hereunder and in furtherance of the business of the Corporation
or any of its subsidiaries and affiliates) any of the trade
secrets or other confidential information or proprietary data of
the Corporation or its subsidiaries or affiliates; provided,
however, that confidential information shall not include any
information known generally to the public (other than as a result
of unauthorized disclosure by the Executive) or any information
of a type not otherwise considered confidential by persons
engaged in the same or similar businesses.
7. Noncompetition. During the term of this Agreement,and
for a period of one (1) year after the date the Executive's
employment terminates, the Executive shall not, without the prior
approval of the Board of Directors of the Corporation in the same
or a similar capacity engage in or invest in, or aid or assist
anyone else in the conduct of any business (other than the
businesses of the Corporation and its subsidiaries and
affiliates) which directly competes with the business of the
Corporation and its subsidiaries and affiliates as conducted
during the term hereof. If any court of competent jurisdiction
shall determine that any of the provisions of this Section 7
shall not be enforceable because of the duration or scope
thereof, the parties hereto agree that said court shall have the
power to reduce the duration and scope of such provision to the
extent necessary to make it enforceable and this Agreement in its
reduced form shall be valid and enforceable to the extent
permitted by law. The Executive acknowledges that the
Corporation's remedy at law for a breach by the Executive of the
provisions of this Section 7 will be inadequate. Accordingly, in
the event of the breach or threatened breach by the Executive of
this Section 7, the Corporation shall be entitled to injunctive
<PAGE>
relief in addition to any other remedy it may have.
8. Severance Pay. If the Executive's employment hereunder
is involuntarily terminated for any reason other than those set
forth in Section 2(c) hereof, then unless the Corporation shall
have terminated the Executive for "Cause", the Corporation shall
pay the Executive severance pay in the amount equal to thirty-six
(36) months of the Executive's base salary on the effective date
of the termination plus 1/12 of the amount of the last bonus paid
to the Executive under the Corporation's bonus plan applicable to
the Executive for each month in the period beginning on January 1
of the year in which the date of the termination occurs and
ending on the date of the termination and for each months' base
salary to which the Executive is entitled under this Section 8,
provided however, that any amount paid to the Executive for
services rendered subsequent to the thirtieth (30th) day
following the communication to the Executive of notice of
termination shall be deducted from the severance pay otherwise
due hereunder. Such payment shall be made in a lump sum within
ten (10) business days following the effective date of the
termination. The severance pay shall be in lieu of all other
compensation or payments of any kind relating to the termination
of the Executive's employment hereunder; provided that the
Executive's entitlement to compensation or payments under the
Corporation's retirement plans, stock option or incentive plans,
savings plans or bonus plans attributable to service rendered
prior to the effective date of the termination shall not be
affected by this clause and shall continue to be governed by the
applicable provisions of such plans; and further provided that in
lieu hereof, at his election, the Executive shall be entitled to
the benefits of the Severance Agreement of even date between the
Corporation and the Executive, if termination occurs in a manner
and at a time when such Severance Agreement is applicable. For
purposes of this Agreement, the term for "Cause" shall mean
because of gross negligence or willful misconduct by the
Executive either in the course of his employment hereunder or
which has a material adverse effect on the Corporation or the
Executive's ability to perform adequately and effectively his
duties hereunder.
9. Notices. Any notices required or permitted to be given
under this Agreement shall be in writing and shall be deemed to
have been given when delivered or mailed, by registered or
certified mail, return receipt requested to the respective
addresses of the parties set forth above, or to such other
address as any party hereto shall designate to the other party in
writing pursuant to the terms of this Section 9 .
10. Severability. The provisions of this Agreement are
severable, and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of any
other provision.
11. Governing Law. This Agreement shall be governed by and
<PAGE>
interpreted in accordance with the substantive laws of the State
of Connecticut.
12. Supersedure. This Agreement shall cancel and supersede
all prior agreements relating to employment between the Executive
and the Corporation, except the Severance Agreement.
13. Waiver of Breach. The waiver by a party of a breach
of any provision of this Agreement shall not operate or be
construed as a waiver of any prior or subsequent breach by any of
the parties hereto.
14. Binding Effect. The terms of this Agreement shall be
binding upon and inure to the benefit of the successors and
assigns of the Corporation and the heirs, executors,
administrators and successors of the Executive, but this
Agreement may not be assigned by the Executive.
IN WITNESS WHEREOF, the Corporation and the Executive have
executed this Agreement as of the day and year first above
written.
BOWATER INCORPORATED
/s/ Susan R. Wasilko By /s/ A. P. Gammie
Witness Its
/s/ R. E. Gustafson /s/ Robert J. Pascal
<PAGE>
SEVERANCE AGREEMENT
THIS AGREEMENT, made the 20TH day of MAY, 1993, by and
between BOWATER INCORPORATED, a Delaware corporation having a
mailing address of ONE PARKLANDS DRIVE, DARIEN, CONNECTICUT
06820, (the "Corporation"), and ROBERT J. PASCAL of 49 LEEUWARDEN
ROAD, DARIEN, CONNECTICUT 06820 (the "Executive").
WHEREAS, the Corporation considers it essential to the best
interests of its shareholders to foster the continued employment
of key management personnel; and
WHEREAS, the uncertainty attendant to a change in control of
the Corporation may result in the departure or distraction of
management personnel to the detriment of the Corporation and its
shareholders; and
WHEREAS, the Board of Directors of the Corporation (the
"Board") has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
members of the Corporation's management, including Executive, to
their assigned duties in the event of a change in control of the
Corporation.
NOW THEREFORE, it is hereby agreed as follows:
1. DEFINITIONS
The following terms when used herein shall have the meanings
assigned to them below:
(a) "Acquiring Person" shall mean any Person who is or
becomes a "beneficial owner" (as defined in Rule 13d-3
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") of securities of the Corporation
representing twenty percent (20%) or more of the
combined voting power of the Corporation's then
outstanding voting securities, unless such Person has
filed Schedule 13G and all required amendments thereto
with respect to its holdings and continues to hold such
securities for investment in a manner qualifying such
Person to utilize Schedule 13G for reporting of
ownership.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act,
as in effect on the date hereof.
<PAGE>
(c) "Cause" shall mean and be limited to the Executive's
gross negligence, willful misconduct or conviction of a
felony, which negligence, misconduct or conviction has
a demonstrable and material adverse effect upon the
Corporation, provided that the Corporation shall have
given the Executive written notice of the alleged
negligence or misconduct and the Executive shall have
failed to cure such negligence or misconduct within
thirty (30) days after his receipt of such notice. The
Executive shall be deemed to have been terminated for
Cause effective upon the effective date stated in a
written notice of such termination delivered by the
Corporation to the Executive and accompanied by a
resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board (after
reasonable notice to the Executive and an opportunity
for the Executive, with his counsel present, to be
heard before the Board) finding that, in the good faith
opinion of the Board, the Executive was guilty of
conduct constituting Cause hereunder and setting forth
in reasonable detail the facts and circumstances
claimed to provide the basis for the Executive's
termination, provided that the effective date shall not
be less than thirty (30) days from the date such notice
is given.
(d) "Change in Control" of the Corporation shall be deemed
to have occurred if:
(i) any Person is or becomes an Acquiring Person;
(ii) less than two-thirds (2/3) of the total membership
of the Board shall be Continuing Directors; or
(iii) the shareholders of the Corporation shall approve
a merger or consolidation of the Corporation or a
plan of complete liquidation of the Corporation or
an agreement for the sale or disposition by the
Corporation of all or substantially all of the
Corporation's assets.
(e) "Continuing Directors" shall mean any member of the
Board who was a member of the Board prior to the date
hereof, and any successor of a Continuing Director
while such successor is a member of the Board who is
not an Acquiring Person or an Affiliate or Associate of
an Acquiring Person or of any such Affiliate or
Associate and is recommended or elected to succeed the
Continuing Director by a majority of the Continuing
Directors.
(f) "Disability" shall mean the Executive's total and
permanent disability as defined in the Corporation's
<PAGE>
long term disability insurance policy covering the
Executive immediately prior to the Change in Control.
(g) "Good Reason" shall mean:
(i) an adverse change in the Executive's status,
duties or responsibilities as an executive of the
Corporation as in effect immediately prior to the
Change in Control;
(ii) failure of the Corporation to pay or provide the
Executive in a timely fashion the salary or
benefits to which he is entitled under any
Employment Agreement between the Corporation and
the Executive in effect on the date of the Change
in Control, or under any benefit plans or policies
in which the Executive was participating at the
time of the Change in Control (including, without
limitation ' any incentive, bonus, stock option,
restricted stock, health, accident, disability,
life insurance, thrift, vacation pay, deferred
compensation and retirement plans or policies);
(iii) the reduction of the Executive's salary as in
effect on the date of the Change in Control;
(iv) the taking of any action by the Corporation
(including the elimination of a plan without
providing substitutes therefor, the reduction of
the Executive's awards thereunder or failure to
continue the Executive's participation therein)
that would substantially diminish the aggregate
projected value of the Executive's awards or
benefits under the Corporation's benefit plans or
policies described in Section l(g)(ii) in which
the Executive was participating at the time of the
Change in Control;
(v) a failure by the Corporation to obtain from any
successor the assent to this Agreement
contemplated by Section 5 hereof; or
(vi) the relocation of the principal office at which
the Executive is to perform his services on behalf
of the Corporation to a location more than thirty-
five (35) miles from its location immediately
prior to the Change in Control or a substantial
increase in the Executive's business travel
obligations subsequent to the Change in Control.
Any circumstance described in this Section l(g) shall
constitute Good Reason even if such circumstance would
not constitute a breach by the Corporation of the terms
of the Employment Agreement between the Corporation and
<PAGE>
the Executive in effect on the date of the Change in
Control. The Executive shall be deemed to have
terminated his employment for Good Reason effective
upon the effective date stated in a written notice of
such termination given by him to the Corporation
setting forth in reasonable detail the facts and
circumstances claimed to provide the basis for
termination, provided that the effective date may not
precede, nor be more than sixty (60) days from, the
date such notice is given. The Executive's continued
employment shall not constitute consent to, or a waiver
of rights with respect to, any circumstance
constituting Good Reason hereunder.
(h) "Normal Retirement Date" shall have the meaning given
to such term in the Corporation's basic qualified
pension plan in which the Executive is a participant as
in effect on the date hereof or any successor or
substitute plan adopted prior to a Change in Control.
(i) "Person" shall mean any individual, corporation,
partnership, group, association or other "person" as
such term is used in Section 13(d) and 14(d) of the
Exchange Act.
2. TERM OF AGREEMENT
(a) The term of this Agreement shall initially be for the
period beginning on May 20, 1993 and ending on May 19,
1996. The term of this Agreement shall automatically
be extended on May 20, 1994 until May 19, 1997 without
further action by the parties, and shall be
automatically extended by an additional year on each
succeeding May 20, unless either the Corporation or the
Executive shall have served notice upon the other party
prior to such May 20 of its or his intention either
that the term of this Agreement shall not be extended,
or that the Executive's Employment Agreement is-
terminated, provided,,however, that if a Change in
Control of the Corporation shall occur during the term
of this Agreement, this Agreement shall continue in
effect until terminated but in any event for a period
of not less than three (3) years from the date of the
Change in Control.
(b) Notwithstanding Section 2(a), the term of this
Agreement shall end upon the termination of the
Executive's Employment if, prior to a Change in Control
of the Corporation, the Executive's employment with the
Corporation shall have terminated under the provisions
of any Employment Agreement between the Corporation and
the Executive then in effect.
<PAGE>
3. COMPENSATION UPON CHANGE IN CONTROL FOLLOWED BY A
TERMINATION
If a Change in Control of the Corporation shall have
occurred and, during the term of this Agreement, the Executive's
employment by the Corporation is terminated for any reason other
than his death, his Disability, his retirement on his Normal
Retirement Date, by the Corporation for Cause, or by the
Executive without Good Reason, the Executive shall be under no
further obligation to perform services for the Corporation and
shall be entitled to receive the following payments:
(a) The Corporation shall pay to the Executive his full
base salary through the effective date of the ter-
mination within five (5) business days thereafter and
all benefits and awards (including both the cash and
stock components,) to which the Executive is entitled
under any benefit plans or policies in which the
Executive was a participant prior to the Change in
Control, at the time such payments are due pursuant to
the terms of such benefit plans or policies as in
effect immediately prior to the Change in Control.
(b) At the election of the Executive, in addition to the
entitlements set forth in Section 3(a) but in lieu of
any payment to the Executive of any salary or severance
payments or benefits to which the Executive would be
entitled under the provisions of any Employment
Agreement between the Corporation and the Executive
then in effect, the Corporation shall pay to the
Executive, in a lump sum not later than ten
(10)business days following the effective date of the
termination:
(i) an amount equal to three (3) times the Executive's
annual base salary on the effective date of the
termination or, if higher, immediately prior to
the Change in Control;
(ii) an amount equal to three (3) times the greater of
(x) the highest amount of the actual bonus awarded
to the Executive in the five (5) fiscal years
immediately preceding the year in which the Change
in Control occurred and (y) an amount equal to the
amount the Executive would have been awarded under
the Corporation's bonus plan in effect immediately
prior to the Change in Control for the fiscal year
in which the Change in Control occurred had the
Executive continued to render services to the
Corporation at the same level of performance, at
the same level of salary, and in the same position
as immediately prior to the Change in Control;
(iii) an amount equal to three (3) times the greater of
<PAGE>
(x) the largest annual contribution made by the
Corporation to the Corporation's Savings Plan on
the Executive's behalf during the five
(5)fiscal years immediately preceding the year in
which the Change in Control occurred and (y) an
amount equal to the contribution the Corporation
would have made to said Plan on the Executive's
behalf for the fiscal year in which the Change in
Control occurred had he participated in said Plan
for the entire fiscal year, received a base salary
equal to the salary he was receiving immediately
prior to the Change in Control and had he elected
to contribute to the Plan the same percentage of
his base salary as he was contributing on said
date; and
(iv) an amount equal to thirty percent (30%) of the
Executive's annual base salary on the effective
Date of the termination or, if higher, immediately
prior to the Change in Control (as compensation
for medical, life insurance and other benefits
lost as a result of termination of the Executive's
employment).
(v) For each full or partial month in the period
beginning on January lst of the year in which the
date of the termination occurs and ending on the
date of the termination, one-twelfth of the
greater of (x) the highest amount of the actual
bonus awarded to the Executive in the five (5)
fiscal years immediately preceding the year in
which the Change in Control occurred-and (y) an
amount equal to the amount the Executive would
have been awarded under the Corporation's bonus
plan in effect immediately prior to the Change in
Control for the fiscal year in which the Change in
Control occurred had the Executive continued to
render services to the Corporation at the same
level of performance, at the same level of salary,
and in the same position as immediately prior to
the Change in Control;
(vi) If a payment may be increased by reference to an
alternate calculation which cannot be made by the
time the payment is due, payment of the lesser,
known amount shall be made when due, and if any
additional amount becomes due, such additional
amount shall be paid within ten (10)days after the
information upon which calculation of such payment
is dependent first becomes available.
The amount of all payments due to the Executive
pursuant to this Section 3(b) shall be reduced by
1/36 for each full calendar month by which the
<PAGE>
date which is three (3) years from the effective
date of the Executive's termination extends beyond
the Executive's Normal Retirement Date.
Upon entering into this Agreement and for a period
of fourteen (14) days following each anniversary
of the date hereof (the "Election Period"), the
Executive may, in writing, direct the Corporation
to pay any amounts to which he is entitled under
this Section 3(b) in equal annual installments
(not to exceed ten (10) annual installments), with
the first such installment payable within ten (10)
business days of the effective date of the
termination and each successive installment
payable on the anniversary of the effective date
of the termination or the next following business
day if such date is not a business day (the
"Deferred Payment Election"). A Deferred Payment
Election, once made, cannot be revoked except
during an Election Period; provided, however, no
Deferred Payment Election can be made or revoked
by the Executive during an Election Period that
occurs after a Change in Control or at a time
when, in the judgment of the Corporation, a change
in control may occur within sixty (60) days of
such Election Period.
(c) The Corporation shall pay or provide to the Executive
or his widow or children as the case may be, such
amounts and benefits as may be required so that the
pension and other post-retirement benefits paid or made
available to the Executive, his widow and his children
are equal to those, if any, which would have been paid
under the Corporation's Basic and Supplemental Pension
(Benefit) Plans in effect immediately prior to the
Change in Control, assuming the Executive continued in
the employ of the Corporation at the same compensation
until the third anniversary of the effective date of
the termination of the Executive's employment or until
his Normal Retirement Date, whichever is earlier.
Notwithstanding any conflicting restrictions in the
Plans or the fact of the termination of the Executive's
employment, until the Executive's Normal Retirement
Date, the Executive or his widow and his children shall
maintain a continuing right to receive the pension and
other benefits under the above Plans with payments to
begin upon retirement and to elect an imputed
retirement on the Executive's 50th birthdate or any of
his birthdates thereafter until his Normal Retirement
Date, such election to be made by so notifying the
Corporation within one (1) year after termination of
his employment.
<PAGE>
(d) The Corporation shall pay for or provide the Executive
individual out-placement assistance as offered by a
member firm of the Association of Out-Placement
Consulting Firms.
(e) If any payment or benefit to or for the benefit of the
Executive in connection with a Change in Control of the
Corporation or termination of the Executive's
employment following a Change in Control of the
Corporation (whether pursuant to the terms of this
Agreement, or any other plan or arrangement or
agreement with the Corporation, any Person whose
actions result in a Change in Control of the Cor-
poration or any Affiliate or Associate of the Cor-
poration or any such Person) is subject to the Excise
Tax (as hereinafter defined), the Corporation shall pay
to the Executive an additional amount such that the
total amount of all such payments and benefits
(including payments made pursuant to this Section 3(e))
net of the Excise Tax and all other applicable federal,
state and local taxes shall equal the total amount of
all such payments and benefits to which the Executive
would have been entitled, but for this Section 3(e),
net of all applicable, federal, state and local taxes
except the Excise Tax. For purposes of this Section
3(e), the term "Excise Tax" shall mean the tax imposed
by Section 4999 of the Internal Revenue Code of 1986
(the "Code") and any similar tax that may hereafter be
imposed.
The amount of the payment to the Executive under
this Section 3(e) shall be estimated by a nationally
recognized firm of certified public accountants (other than
the Corporation's independent auditors) based upon the
following assumptions:
(i) all payments and benefits to or for the benefit of the
Executive in connection with a Change in Control of the
Corporation or termination of the Executive's
employment following a Change in Control of the
Corporation shall be deemed to be "parachute payments"
within the meaning of Section 280G(b)(2) of the Code,
and all "excess parachute payments" shall be deemed to
be subject to the Excise Tax unless, in the opinion of
tax counsel selected by the firm of certified public
accountants charged with estimating the payment to the
Executive under this Section 3(e), such payments or
benefits are not subject to the Excise Tax; and
(ii) the Executive shall be deemed to pay federal, state and
local taxes at the highest marginal rate of taxation
for the applicable calendar year.
The estimated amount of the payment due the Executive
<PAGE>
pursuant to this Section 3(e) shall be paid to the Executive
in a lump sum not later than thirty (30) business days
following the effective date of the termination. In the
event that the amount of the estimated payment is less than
the amount actually due to the Executive under this Section
3(e), the amount of any such shortfall shall be paid to the
Executive within ten (10) days after the existence of the
shortfall is discovered.
(f) The Executive shall not be required to mitigate the
amount of any payment provided in this Section 3, nor
shall any payment or benefit provided for in this
Section 3 be offset by any compensation earned by the
Executive as the result of employment by another
employer, by retirement benefits, or by offset against
any amount claimed to be owned by the Executive to the
Corporation, or otherwise.
(g) If any payment to the Executive required by this
Section 3 is not made within the time for such payment
specified herein, the Corporation shall pay to the
Executive interest on such payment at the legal rate
payable from time to time upon judgments in the State
of Connecticut from the date such payment is payable
under the terms hereof until paid.
4. EXECUTIVE'S EXPENSES
The Corporation shall pay or reimburse the Executive for
all costs, including reasonable attorney's fees and expenses of
either litigation or arbitration, incurred by the Executive in
contesting or disputing any termination of his employment
following a Change in Control or in seeking to obtain or enforce
any right or benefit provided by this Agreement.
5. BINDING AGREEMENT
This Agreement shall inure to the benefit of and be
enforceable by the Executive, his heirs, executors, adminis-
trators, successors and assigns. This Agreement shall be binding
upon the Corporation, its successors and assigns. The
Corporation shall 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 expressly to assume and agree to perform this
Agreement in accordance with its terms. The Corporation shall
obtain such assumption and agreement prior to the effectiveness
of any such succession.
<PAGE>
6. NOTICE
Any notices and all other communications provided for
herein shall be in writing and shall be deemed to have been duly
given when delivered or mailed, by certified or registered mail,
return receipt requested, postage prepaid addressed to the
respective addresses set forth on the first page of this
Agreement or to such other address as either party may have
furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt. All notices to the Corporation shall be addressed to
the attention of the Board with a copy to each of the General
Counsel, the Vice President-Human Resources and Administration
and the Secretary of the Corporation.
7. AMENDMENTS; WAIVERS
No provision of this Agreement may be modified, waived
or discharged except in a writing specifically referred to such
provision and signed by the party against which enforcement of
such modification, waiver or discharge is sought. No waiver by
either party hereto of the breach of any condition or provision
of this Agreement shall be deemed a waiver of any other condition
or provision at the same or any other time.
8. GOVERNING LAW
The validity, interpretation, construction and per-
formance of this Agreement shall be governed by the substantive
laws of the State of Connecticut.
9. VALIDITY
The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full
force and effect.
10. ARBITRATION
If the Executive so elects, any dispute or controversy
arising under or in connection with this Agreement shall be
settled exclusively by arbitration in the city nearest to the
Executive's principal residence (or, at the Executive's election,
in the city within the state in which the Executive's principal
residence is located nearest to such principal residence) which
has an office of the American Arbitration Association by one
arbitrator in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction. The
Corporation hereby waives its right to contest the personal
<PAGE>
jurisdiction or venue of any court, federal or state, in an
action brought to enforce this Agreement or any award of an
arbitrator hereunder which action is brought in the jurisdiction
in which such arbitration was conducted, or, if no arbitration
was elected, in which arbitration could have been conducted
pursuant to this provision.
11. COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
BOWATER INCORPORATED
/s/ Susan R. Wasilko By/s/ A. P.Gammie
Witness Its
/s/ R. E. Gustafson /s/Robert J. Pascal
Witness
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 25TH day of AUGUST, 1988, by and
between BOWATER INCORPORATED, a Delaware corporation having a
mailing address of ONE PARKLANDS DRIVE, DARIEN, CONNECTICUT
06820, (the "Corporation"), and D. J. D'ANTUONO of 35 ELIOT LANE,
STAMFORD, CONNECTICUT 06903 (the "Executive").
WHEREAS the Corporation desires to employ the Executive as
Vice President-Investor Relations; and
WHEREAS, the Executive is desirous of serving the
Corporation in such capacity;
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. During the term of this Agreement the
Corporation agrees to continue to employ the Executive, and the
Executive agrees to continue in the employ of the Corporation, in
accordance with and subject to the provisions of this Agreement.
2. Term.
(a) Subject to the provisions of subparagraphs (b) and
(c) of this Section 2, the term of this Agreement shall begin on
the date hereof and shall continue thereafter until terminated by
either party by written notice given to the other party at least
thirty (30) days prior to the effective date of any such
termination. The effective date of the termination shall be the
date stated in such notice, provided that if the Corporation
specifies an effective date that is more than thirty (30) days
following the date of such notice, the Executive may, upon thirty
(30) days' written notice to the Corporation, accelerate the
effective date of such termination.
(b) Notwithstanding Section 2(a), upon the occurrence of a
Change in Control as defined in the Severance Agreement of even
date between the Corporation and the Executive (the "Severance
Agreement"), the term of this Agreement shall be deemed to
continue until terminated, but in any event, for a period of not
less than three (3) years following the date of the Change in
Control, unless such termination shall be at the Executive's
election for other than "Good Reason" as that term is defined in
the Severance Agreement.
(c) Notwithstanding Section 2(a), the term of this
Agreement shall end upon: (i) the death of the Executive; (ii)
<PAGE>
the inability of the Executive to perform his duties properly,
whether by reason of ill-health, accident or other cause, for a
period of one hundred and eighty (180) consecutive days or for
periods totaling one hundred and eighty (180) days occurring
within any twelve (12) consecutive calendar months; or (iii) the
executive's retirement on his early or normal retirement date.
3. Position and Duties. Throughout the term hereof,
the Executive shall be employed as Vice President-Investor
Relations of the Corporation, with the duties and respon-
sibilities customarily attendant to that office, provided that
the Executive shall undertake such other and further assignments
and responsibilities of at least comparable status as the Board
of Directors may direct. The Executive shall diligently and
faithfully devote his full working time and best efforts to the
performance of the services under this Agreement and to the
furtherance of the best interests of the Corporation.
4. Place of Employment. The Executive will be employed at
the Corporation's offices in the City of Darien, Connecticut or
at such other place as the Corporation shall designate from time
to time, provided, however, that if the Executive is transferred
to another place of employment, necessitating a change in his
residence, the Executive shall be entitled to financial
assistance in accordance with the terms of the Corporation's
relocation policy then in effect.
5. Compensation and Benefits.
(a) Base Salary. The Corporation shall pay to the
Executive a base salary at the annual rate of $144,000,
payable in substantially equal periodic installments on
the Corporation's regular payroll dates. The
Executive's base salary shall be reviewed at least
annually and from time to time may be increased (or
reduced, if such reduction is effected pursuant to
across-the-board salary reductions similarly affecting
all management personnel of the Corporation).
(b) Bonus Plan. In addition to his base salary, the Executive
shall be entitled to receive a bonus under
the Corporation's bonus plan in effect from time to
time determined in the manner, at the time, and in the
amounts set forth under such plan.
(c) Benefit Plans. The Corporation shall make contribu-
tions on the Executive's behalf to the various benefit
plans and programs of the Corporation in which the
Executive is eligible to participate in accordance with
the provisions thereof as in effect from time to time.
(d) Vacations. The Executive shall be entitled to paid
vacation, in keeping with the Corporation's policy as
<PAGE>
in effect from time to time, to be taken at such time
or times as may be approved by the Corporation.
(e) Expenses. The Corporation shall reimburse the Executive
for all reasonable expenses properly
incurred, and appropriately documented, by the
Executive in connection with the business of the
Corporation.
(f) Perquisites. The Corporation shall make available to
the Executive all perquisites to which he is entitled
by virtue of his position.
6. Nondisclosure. During and after the term of this
Agreement, the Executive shall not, without the written consent
of the Board of Directors of the Corporation, disclose or use
directly or indirectly, (except in the course of employment
hereunder and in furtherance of the business of the Corporation
or any of its subsidiaries and affiliates) any of the trade
secrets or other confidential information or proprietary data of
the Corporation or its subsidiaries or affiliates; provided,
however, that confidential information shall not include any
information known generally to the public (other than as a result
of unauthorized disclosure by the Executive) or any information
of a type not otherwise considered confidential by persons
engaged in the same or similar businesses.
7. Noncompetition. During the term of this Agreement, and
for a period of one (1) year after the date the Executive's
employment terminates, the Executive shall not, without the prior
approval of the Board of Directors of the Corporation in the same
or a similar capacity engage in or invest in, or aid or assist
anyone else in the conduct of any business (other than the
businesses of the Corporation and its subsidiaries and
affiliates) which directly competes with the business of the
Corporation and its subsidiaries and affiliates as conducted
during the term hereof. If any court of competent jurisdiction
shall determine that any of the provisions of this Section 7
shall not be enforceable because of the duration or scope
thereof, the parties hereto agree that said court shall have the
power to reduce the duration and scope of such provision to the
extent necessary to make it enforceable and this Agreement in its
reduced form shall be valid and enforceable to the extent
permitted by law. The Executive acknowledges that the
Corporation's remedy at law for a breach by the Executive of the
provisions of this Section 7 will be inadequate. Accordingly, in
the event of the breach or threatened breach by the Executive of
this Section 7, the Corporation shall be entitled to injunctive
relief in addition to any other remedy it may have.
8. Severance Pay. If the Executive's employment hereunder
is involuntarily terminated for any reason other than those set
<PAGE>
forth in Section 2(c) hereof, then unless the Corporation shall
have terminated the Executive for "Cause", the Corporation shall
pay the Executive severance pay in an amount equal to twenty (24)
months of the Executive's base salary on the effective date of
the termination, provided, however, that any amount paid to the
Executive by the Corporation for services rendered subsequent to
the thirtieth (30th) day following the communication to the
Executive of notice of termination shall be deducted from the
severance pay otherwise due hereunder. Such payment shall be
made in a lump sum within ten (10) business days following the
effective date of the termination. The severance pay shall be in
lieu of all other compensation or payments of any kind relating
to the termination of the Executive's employment hereunder;
provided that the Executive's entitlement to compensation or
payments under the Corporation's retirement plans, stock option
or incentive plans, savings plans or bonus plans attributable to
service rendered prior to the effective date of the termination
shall not be affected by this clause and shall continue to be
governed by the applicable provisions of such plans; and further
provided that in lieu hereof, at his election, the Executive
shall be entitled to the benefits of the Severance Agreement of
even date between the Corporation and the Executive, if termina-
tion occurs in a manner and at a time when such Severance
Agreement is applicable. For purposes of this Agreement, the
term for "Cause" shall mean because of gross negligence or
willful misconduct by the Executive either in the course of his
employment hereunder or which has a material adverse effect on
the Corporation or the Executive's ability to perform adequately
and effectively his duties hereunder.
9. Notices. Any notices required or permitted to be given
under this Agreement shall be in writing and shall be deemed to
have been given when delivered or mailed, by registered or
certified mail, return receipt requested to the respective
addresses of the parties set forth above, or to such other
address as any party hereto shall designate to the other party in
writing pursuant to the terms of this Section 9.
10. Severability. The provisions of this Agreement are
severable, and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of any
other provision.
11. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the substantive laws of the State
of Connecticut.
12. Supersedure. This Agreement shall cancel and supersede
all prior agreements relating to employment between the Executive
and the Corporation, except the Severance Agreement.
<PAGE>
13. Waiver of Breach. The waiver by a party of a breach
of any provision of this Agreement shall not operate or be
construed as a waiver of any prior or subsequent breach by any of
the parties hereto.
14. Binding Effect. The terms of this Agreement shall be
binding upon and inure to the benefit of the successors and
assigns of the Corporation and the heirs, executors,
administrators and successors of the Executive, but this
Agreement may not be assigned by the Executive.
IN WITNESS WHEREOF, the Corporation and the Executive have
executed this Agreement as of the day and year first above
written.
BOWATER INCORPORATED
/s/ R. E. Gustafson By: /s/ A. P. Gammie
Witness Its
/s/ Leoanrd M. Saari /s/ D. J. D'Antuono
Witness D. J. D'ANTUONO
<PAGE>
SEVERANCE AGREEMENT
THIS AGREEMENT, made the 25TH day of AUGUST, 1988, by and
between BOWATER INCORPORATED, a Delaware corporation having a
mailing address of ONE PARKLANDS DRIVE, DARIEN, CONNECTICUT
06820, (the "Corporation"), and D. J. D'ANTUONO of 35 ELIOT LANE,
STAMFORD, CONNECTICUT 06903 (the "Executive").
WHEREAS, the Corporation considers it essential to the best
interests of its shareholders to foster the continued employment
of key management personnel; and
WHEREAS, the uncertainty attendant to a change in control of
the Corporation may result in the departure or distraction of
management personnel to the detriment of the Corporation and its
shareholders; and
WHEREAS, the Board of Directors of the Corporation (the
"Board") has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
members of the Corporation's management, including Executive, to
their assigned duties in the event of a change in control of the
Corporation.
NOW THEREFORE, it is hereby agreed as follows:
1. DEFINITIONS
The following terms when used herein shall have the meanings
assigned to them below:
(a) "Acquiring Person" shall mean any Person who is or
becomes a "beneficial owner" (as defined in Rule 13d-3
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") of securities of the Corporation
representing twenty percent (20%) or more of the
combined voting power of the Corporation's then
outstanding voting securities, unless such Person has
filed Schedule 13G and all required amendments thereto
with respect to its holdings and continues to hold such
securities for investment in a manner qualifying such
Person to utilize Schedule 13G for reporting of
ownership.
(b) "Affiliate" and "Associate," shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act,
as in effect on the date hereof.
<PAGE>
(c) "Cause" shall mean and be limited to the Executive's
gross negligence, willful misconduct or conviction of a
felony, which negligence, misconduct or conviction has
a demonstrable and material adverse effect upon the
Corporation, provided that the Corporation shall have
given the Executive written notice of the alleged
negligence or misconduct and the Executive shall have
failed to cure such negligence or misconduct within
thirty (30) days after his receipt of such notice. The
Executive shall be deemed to have been terminated for
Cause effective upon the effective date stated in a
written notice of such termination delivered by the
Corporation to the Executive and accompanied by a
resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board (after
reasonable notice to the Executive and an opportunity
for the Executive, with his counsel present, to be
heard before the Board) finding that, in the good faith
opinion of the Board, the Executive was guilty of
conduct constituting Cause hereunder and setting forth
in reasonable detail the facts and circumstances
claimed to provide the basis for the Executive's
termination, provided that the effective date shall not
be less than thirty (30) days from the date such notice
is given.
(d) "Change in Control" of the Corporation shall be deemed
to have occurred if:
(i) any Person is or becomes an Acquiring Person;
(ii) less than two-thirds (2/3) of the total
membership of the Board shall be Continuing
Directors; or
(iii) the shareholders of the Corporation shall
approve a merger or consolidation of the
Corporation or a plan of complete liquidation
of the Corporation or an agreement for the
sale or disposition by the Corporation of all
or substantially all of the Corporation's
assets.
(e) "Continuing Directors" shall mean any member of the
Board who was a member of the Board prior to the date
hereof, and any successor of a Continuing Director
while such successor is a member of the Board who is
not an Acquiring Person or an Affiliate or Associate of
an Acquiring Person or of any such Affiliate or
Associate and is recommended or elected to succeed the
<PAGE>
Continuing Director by a majority of the Continuing
Directors.
(f) "Disability" shall mean the Executive's total and
permanent disability as defined in the Corporation's
long term disability insurance policy covering the
Executive immediately prior to the Change in Control.
(g) "Good Reason" shall mean:
(i) an adverse change in the Executive's status,
duties or responsibilities as an executive of the
Corporation as in effect immediately prior to the
Change in Control;
(ii) failure of the Corporation to pay or provide the
Executive in a timely fashion the salary or
benefits to which he is entitled under any
Employment Agreement between the Corporation and
the Executive in effect on the date of the Change
in Control, or under any benefit plans or policies
in which the Executive was participating at the
time of the Change in Control (including, without
limitation, any incentive, bonus, stock option,
restricted stock, health, accident, disability,
life insurance, thrift, vacation pay, deferred
compensation and retirement plans or policies);
(iii) the reduction of the Executive's salary as in
effect on the date of the Change in Control;
(iv) the taking of any action by the Corporation
(including the elimination of a plan without
providing substitutes therefor, the reduction of
the Executive's awards thereunder or failure to
continue the Executive's participation therein)
that would substantially diminish the aggregate
projected value of the Executive's awards or
benefits under the Corporation's benefit plans or
policies described in Section l(g)(ii) in which
the Executive was participating at the time of the
Change in Control;
(v) a failure by the Corporation to obtain from any
successor the assent to this Agreement contem-
plated by Section 5 hereof; or
(vi) the relocation of the principal office at which
the Executive is to perform his services on behalf
of the Corporation to a location more than thirty-
five (35) miles from its location immediately
prior to the Change in Control or a substantial
<PAGE>
increase in the Executive's business travel
obligations subsequent to the Change in Control.
Any circumstance described in this Section l(g) shall
constitute Good Reason even if such circumstance would
not constitute a breach by the Corporation of the terms
of the Employment Agreement between the Corporation and
the Executive in effect on the date of the Change in
Control. The Executive shall be deemed to have
terminated his employment for Good Reason effective
upon the effective date stated in a written notice of
such termination given by him to the Corporation
setting forth in reasonable detail the facts and
circumstances claimed to provide the basis for
termination, provided that the effective date may not
precede, nor be more than sixty (60) days from, the
date such notice is given. The Executive's continued
employment shall not constitute consent to, or a waiver
of rights with respect to, any circumstance con-
stituting Good Reason hereunder.
(h) "Normal Retirement Date" shall have the meaning given
to such term in the Corporation's basic qualified
pension plan in which the Executive is a participant as
in effect on the date hereof or any successor or
substitute plan adopted prior to a Change in Control.
(i) "Person" shall have the meaning assigned to it in
Sections 13(d) and 14(d) of the Exchange Act.
2. TERM OF AGREEMENT
(a) The term of this Agreement shall initially be for the
period beginning on July 1, 1988 and ending on June 30,
1991. The term of this Agreement shall automatically
be extended on July 1, 1989 until June 30, 1992 without
further action by the parties, and shall be
automatically extended by an additional year on each
succeeding July 1, unless either the Corporation or the
Executive shall have served notice upon the other party
prior to such July 1 of its or his intention either
that the term of this Agreement shall not be extended,
or that the Executive's Employment Agreement is
terminated, provided, however, that if a Change in
Control of the Corporation shall occur during the term
of this Agreement, this Agreement shall continue in
effect until terminated but in any event for a period
of not less than three (3) years from the date of the
Change in Control.
(b) Notwithstanding Section 2(a), the term of this
Agreement shall end upon the termination of the
<PAGE>
Executive's Employment if, prior to a Change in Control
of the Corporation, the Executive's employment with the
Corporation shall have terminated under the provisions
of any Employment Agreement between the Corporation and
the Executive then in effect.
3. COMPENSATION UPON CHANGE IN CONTROL FOLLOWED BY A
TERMINATION
If a Change in Control of the Corporation shall have
occurred and, during the term of this Agreement, the Executive's
employment by the Corporation is terminated for any reason other
than his death, his Disability, his retirement on his Normal
Retirement Date, by the Corporation for Cause, or by the
Executive without Good Reason, the Executive shall be under no
further obligation to perform services for the Corporation and
shall be entitled to receive the following payments:
(a) The Corporation shall pay to the Executive his full
base salary through the effective date of the
termination within five (5) business days thereafter
and all benefits and awards (including both the cash
and stock components,) to which the Executive is
entitled under any benefit plans or policies in which
the Executive was a participant prior to the Change in
Control, at the time such payments are due pursuant to
the terms of such benefit plans or policies as in
effect immediately prior to the Change in Control.
(b) At the election of the Executive, in addition to the
entitlements set forth in Section 3(a) but in lieu of
any payment to the Executive of any salary or severance
payments or benefits to which the Executive would be
entitled under the provisions of any Employment
Agreement between the Corporation and the Executive
then in effect, the Corporation shall pay to the
Executive, in a lump sum not later than ten (10)
business days following the effective date of the
termination:
(i) an amount equal to two (2) times the Executive's
annual base salary on the effective date of the
termination or, if higher, immediately prior to
the Change in Control;
(ii) an amount equal to two (2) times the greater of
(x) the highest amount of the actual bonus awarded
to the Executive in the five (5) fiscal years
immediately preceding the year in which the Change
in Control occurred and (y) an amount equal to the
amount the Executive would have been awarded under
<PAGE>
the Corporation's bonus plan in effect immediately
prior to the Change in Control for the fiscal year
in which the Change in Control occurred had the
Executive continued to render services to the
Corporation at the same level of performance, at
the same level of salary, and in the same position
as immediately prior to the Change in Control;
(iii) an amount equal to two (2) times the greater of
(x) the largest annual contribution made by the
Corporation to the Corporation's Savings Plan on
the Executive's behalf during the five (5) fiscal
years immediately preceding the year in which the
Change in Control occurred and (y) an amount equal
to the contribution the Corporation would have
made to said Plan on the Executive's behalf for
the fiscal year in which the Change in Control
occurred had he participated in said Plan for the
entire fiscal year, received a base salary equal
to the salary he was receiving immediately prior
to the Change in Control and had he elected to
contribute to the Plan the same percentage of his
base salary as he was contributing on said date;
and
(iv) an amount equal to twenty percent (20%) of the
Executive's annual base salary on the effective
Date of the termination or, if higher, immediately
prior to the Change in Control (as compensation
for medical, life insurance and other benefits
lost as a result of termination of the Executive's
employment).
(v) If a payment may be increased by reference to an
alternate calculation which cannot be made by the
time the payment is due, payment of the lesser,
known amount shall be made when due, and if any
additional amount becomes due, such additional
amount shall be paid within ten (10) days after
the information upon which calculation of such
payment is dependent first becomes available. The
amount of all payments due to the Executive
pursuant to this Section 3(b) shall be reduced by
1/24 for each full calendar month by which the
date which is two (2) years from the effective
date of the Executive's termination extends beyond
the Executive's Normal Retirement Date.
Upon entering into this Agreement and for a period of
fourteen (14) days following each anniversary of the
date hereof (the "Election Period"), the Executive may,
in writing, direct the Corporation to pay any amounts
<PAGE>
to which he is entitled under this Section 3(b) in
equal annual installments (not to exceed ten (10)
annual installments), with the first such installment
payable within ten (10) business days of the effective
date of the termination and each successive installment
payable on the anniversary of the effective date of the
termination or the next following business day if such
date is not a business day (the "Deferred Payment
Election"). A Deferred Payment Election, once made,
cannot be revoked except during an Election Period;
provided, however, no Deferred Payment Election can be
made or revoked by the Executive during an Election
Period that occurs after a Change in Control or at a
time when, in the judgment of the Corporation, a change
in control may occur within sixty (60) days of such
Election Period.
(c) The Corporation shall pay or provide to the Executive
or his widow or children as the case may be, such
amounts and benefits as may be required so that the
pension and other post-retirement benefits paid or made
available to the Executive, his widow and his children
are equal to those, if any, which would have been paid
under the Corporation's Basic and Supplemental Pension
(Benefit) Plans in effect immediately prior to the
Change in Control, assuming the Executive continued in
the employ of the Corporation at the same compensation
until the second anniversary of the effective date of
the termination of the Executive's employment or until
his Normal Retirement Date, whichever is earlier.
Notwithstanding any conflicting restrictions in the
Plans or the fact of the termination of the Executive's
employment, until the Executive's Normal Retirement
Date, the Executive or his widow and his children shall
maintain a continuing right to receive the pension and
other benefits under the above Plans with payments to
begin upon retirement and to elect an imputed
retirement on the Executive's 50th birthdate or any of
his birthdates thereafter until his Normal Retirement
Date, such election to be made by so notifying the
Corporation within one (1) year after termination of
his employment.
(d) The Executive shall not be required to mitigate the
amount of any payment provided in this Section 3, nor
shall any payment or benefit provided for in this
Section 3 be offset by any compensation earned by the
Executive as the result of employment by another
employer, by retirement benefits, or by offset against
any amount claimed to be owned by the Executive to the
Corporation, or otherwise.
<PAGE>
(e) If any payment to the Executive required by this Section 3
is not made within the time for such payment
specified herein, the Corporation shall pay to the
Executive interest on such payment at the legal rate
payable from time to time upon judgments in the State
of Connecticut from the date such payment is payable
under the terms hereof until paid.
4. EXECUTIVE'S EXPENSES
The Corporation shall pay or reimburse the Executive
for all costs, including reasonable attorney's fees and expenses
of either litigation or arbitration, incurred by the Executive in
contesting or disputing any termination of his employment
following a Change in Control or in seeking to obtain or enforce
any right or benefit provided by this Agreement.
5. BINDING AGREEMENT
This Agreement shall inure to the benefit of and be
enforceable by the Executive, his heirs, executors,
administrators, successors and assigns. This Agreement shall be
binding upon the Corporation, its successors and assigns. The
Corporation shall 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 expressly to assume and agree to perform this
Agreement in accordance with its terms. The Corporation shall
obtain such assumption and agreement prior to the effectiveness
of any such succession.
6. NOTICE
Any notices and all other communications provided for
herein shall be in writing and shall be deemed to have been duly
given when delivered or mailed, by certified or registered mail,
return receipt requested, postage prepaid addressed to the
respective addresses set forth on the first page of this
Agreement or to such other address as either party may have
furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt. All notices to the Corporation shall be addressed to
the attention of the Board with a copy to each of the General
Counsel, the Vice President-Human Resources and Administration
and the Secretary of the Corporation.
7. AMENDMENTS; WAIVERS
No provision of this Agreement may be modified, waived
or discharged except in a writing specifically referred to such
provision and signed by the party against which enforcement of
such modification, waiver or discharge is sought. No waiver by
<PAGE>
either party hereto of the breach of any condition or provision
of this Agreement shall be deemed a waiver of any other condition
or provision at the same or any other time.
8. GOVERNING LAW
The validity, interpretation, construction and perfor-
mance of this Agreement shall be governed by the substantive laws
of the State of Connecticut.
9. VALIDITY
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full
force and effect.
10. ARBITRATION
If the Executive so elects, any dispute or controversy
arising under or in connection with this Agreement shall be
settled exclusively by arbitration in the city nearest to the
Executive's principal residence (or, at the Executive's election,
in the city within the state in which the Executive's principal
residence is located nearest to such principal residence) which
has an office of the American Arbitration Association by one
arbitrator in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction. The
Corporation hereby waives its right to contest the personal
jurisdiction or venue of any court, federal or state, in an
action brought to enforce this Agreement or any award of an
arbitrator hereunder which action is brought in the jurisdiction
in which such arbitration was conducted, or, if no arbitration
was elected, in which arbitration could have been conducted pur-
suant to this provision.
11. COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
BOWATER INCORPORATED
/s/ R. E. Gustafson By /s/ A. P. Gammie
Witness Its
/s/ Leonard M. Saari /s/ D. J. D'Antuono
Witness D. J. D'ANTUONO
EXHIBIT 10.7.1
THIS AMENDMENT, made the 23rd day of August, 1989 by BOWATER
INCORPORATED, a Delaware corporation having a mailing address of
One Parklands Drive, Darien, Connecticut 06820 (the
"Corporation"), and D. J. D'ANTUONO of 35 Eliot Lane, Stamford,
Connecticut 06903 the ("Executive").
WHEREAS, the Corporation and the Executive entered into an
Employment Agreement dated August 25, 1988 (the "Employment
Agreement"); and
WHEREAS, the Corporation and the Executive now wish to amend
the Employment Agreement in the manner hereinafter set forth;
NOW, THEREFORE, the Employment Agreement is hereby amended,
effective August 23, 1989, as follows:
1. The first sentence of Section 8 of the Employment
Agreement shall be deleted and the following shall be substituted
therefor:
8. Severance Pay. If the Executive's employment hereunder
is involuntarily terminated for any reason other than
those set forth in Section 2(c) hereof, then unless the
Corporation shall have terminated the Executive for
"Cause", the Corporation shall pay the Executive
severance pay in the amount equal to twenty-four (24)
months of the Executive's base salary on the effective
date of the termination plus 1/12 of the amount of the
last bonus paid to the Executive under the
Corporation's bonus plan applicable to the Executive
for each month in the period beginning on January 1 of
the year in which the date of the termination occurs
and ending on the date of the termination and for each
months' base salary to which the Executive is entitled
under this Section 8, provided however, that any amount
paid to the Executive for services rendered subsequent
to the thirtieth (30th) day following the communication
to the Executive of notice of termination shall be
deducted from the severance pay otherwise due
hereunder.
Except as hereby amended, all other provisions of the
Employment Agreement shall remain in full force and in effect.
All capitalized terms not otherwise defined herein shall have the
meaning assigned to such terms in the Employment Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of the day and year first above written.
BOWATER INCORPORATED
/s/ R. E. Gustafson By /s/ A. P. Gammie
Witness Its
/s/ J. Anastasio /s/ D. J. D'Antuono
Witness D. J. D'ANTUONO
<PAGE>
THIS AMENDMENT, made the 23rd day of August, 1989 by BOWATER
INCORPORATED, a Delaware corporation having a mailing address of
One Parklands Drive, Darien, Connecticut 06820 (the
"Corporation"), and D. J. D'ANTUONO of 35 Eliot Lane, Stamford,
Connecticut 06903 the ("Executive").
WHEREAS, the Corporation and the Executive entered into a
Severance Agreement dated August 25, 1988 (the "Severance
Agreement"); and
WHEREAS, the Executive and the Corporation now wish to amend
the Severance Agreement in the manner hereinafter set forth;
NOW, THEREFORE, the Severance Agreement is hereby amended,
effective August 23, 1989 in the following respects:
1. Section l(i) of the Severance Agreement shall be
deleted and the following shall be substituted therefor:
(i) "Person" shall mean any individual, corporation,
partnership, group, association or other "person" as
such term is used in Section 13(d) and 14(d) of the
Exchange Act.
2. Section 3(b)(v) of the Severance Agreement shall be
renumbered as Section (b)(vi).
3. A new Section (b)(v) shall be added to the Severance
Agreement to read as follows:
(v) For each full or partial month in the period
beginning on January lst of the year in which the
date of the termination occurs and ending on the
date of the termination, one-twelfth of the
greater of (x) the highest amount of the actual
bonus awarded to the Executive in the five (5)
fiscal years immediately preceding the year in
which the Change in Control occurred and (y) an
amount equal to the amount the Executive would
have been awarded under the Corporation's bonus
plan in effect immediately prior to the Change in
Control for the fiscal year in which the Change in
Control occurred had the Executive continued to
render services to the Corporation at the same
level of performance, at the same level of salary,
and in the same position as immediately prior to
the Change in Control;
4. Section 3(d) and 3(e) of the Severance Agreement shall
be renumbered as Section 3(f) and 3(g), respectively.
<PAGE>
5. The following new Sections 3(d) and 3(e) shall be added
to the Severance Agreement:
(d) The Corporation shall pay for or provide the Executive
individual out-placement assistance as offered by a
member firm of the Association of Out-Placement
Consulting Firms.
(e) If any payment or benefit to or for the benefit of the
Executive in connection with a Change in Control of the
Corporation or termination of the Executive's
employment following a Change in Control of the
Corporation (whether pursuant to the terms of this
Agreement, or any other plan or arrangement or
agreement with the Corporation, any Person whose
actions result in a Change in Control of the
Corporation or any Affiliate or Associate of the
Corporation or any such Person) is subject to the
Excise Tax (as hereinafter defined), the Corporation
shall pay to the Executive an additional amount such
that the total amount of all such payments and benefits
(including payments made pursuant to this Section 3(e))
net of the Excise Tax and all other applicable federal,
state and local taxes shall equal the total amount of
all such payments and benefits to which the Executive
would have been entitled, but for this Section 3(e),
net of all applicable, federal, state and local taxes
except the Excise Tax. For purposes of this Section
3(e), the term "Excise Tax" shall mean the tax imposed
by Section 4999 of the Internal Revenue Code of 1986
(the "Code") and any similar tax that may hereafter be
imposed.
The amount of the payment to the Executive under this
Section 3(e) shall be estimated by a nationally
recognized firm of certified public accountants (other
than the Corporation's independent auditors) based upon
the following assumptions:
(i) all payments and benefits to or for the benefit
of the Executive in connection with a Change in
Control of the Corporation or termination of the
Executive's employment following a Change in
Control of the Corporation shall be deemed to be
"parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute
payments" shall be deemed to be subject to the
Excise Tax unless, in the opinion of tax counsel
selected by the firm of certified public
accountants charged with estimating the payment to
the Executive under this Section 3(e), such
payments or benefits are not subject to the Excise
<PAGE>
Tax; and
(ii) The Executive shall be deemed to pay federal,
state and local taxes at the highest marginal rate
of taxation for the applicable calendar year.
The estimated amount of the payment due the Executive
pursuant to this Section 3(e) shall be paid to the
Executive in a lump sum not later than thirty (30)
business days following the effective date of the
termination. In the event that the amount of the
estimated payment is less than the amount actually due
to the Executive under this Section 3(e), the amount of
any such shortfall shall be paid to the Executive
within ten (10) days after the existence of the
shortfall is discovered.
Except as hereby amended, all other provisions of the
Severance Agreement shall remain in full force and effect. All
capitalized terms not otherwise defined herein shall have the
meaning assigned to such terms in the Severance Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed as of the 23rd day of August, 1989.
BOWATER INCORPORATED
/S/ R. E. Gustafson By /s/ A. P. Gammie
Its
Witness
/s/ J. Anastasio /s/ D. J. D'Antuono
Witness D. J. D'ANTUONO
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 25TH day of AUGUST, 1988, by and
between BOWATER INCORPORATED, a Delaware corporation having a
mailing address of ONE PARKLANDS DRIVE, DARIEN, CONNECTICUT
06820, (the "Corporation"), and J. C. DAVIS of 11 BABBS HOLLOW,
GREENVILLE, SOUTH CAROLINA 29607 (the "Executive").
WHEREAS, the Corporation desires to employ the Executive as
Vice President Marketing - Pulp & Paper Group; and
WHEREAS, the Executive is desirous of serving the
Corporation in such capacity;
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. During the term of this Agreement the
Corporation agrees to continue to employ the Executive, and the
Executive agrees to continue in the employ of the Corporation, in
accordance with and subject to the provisions of this Agreement.
2. Term.
(a) Subject to the provisions of subparagraphs (b) and
(c)of this Section 2, the term of this Agreement shall
begin on the date hereof and shall continue thereafter
until terminated by either party by written notice
given to the other party at least thirty (30) days
prior to the effective date of any such termination.
The effective date of the termination shall be the date
stated in such notice, provided that if the Corporation
specifies an effective date that is more than thirty
(30) days following the date of such notice, the
Executive may, upon thirty (30) days' written notice to
the Corporation, accelerate the effective date of such
termination.
(b) Notwithstanding Section 2(a), upon the occurrence of a
Change in Control as defined in the Severance Agreement
of even date between the Corporation and the Executive
(the "Severance Agreement"), the term of this Agreement
shall be deemed to continue until terminated, but in
any event, for a period of not less than three (3)
years following the date of the Change in Control,
<PAGE>
unless such termination shall be at the Executive's
election for other than "Good Reason" as that term is
defined in the Severance Agreement.
(c) Notwithstanding Section 2(a), the term of this
Agreement shall end upon: (i) the death of the
Executive; (ii) the inability of the Executive to
perform his duties properly, whether by reason of ill-
health, accident or other cause, for a period of one
hundred and eighty (180) consecutive days or for
periods totaling one hundred and eighty (180) days
occurring within any twelve (12) consecutive calendar
months; or (iii) the executive's retirement on his
early or normal retirement date.
3. Position and Duties. Throughout the term hereof,
the Executive shall be employed as Vice President Marketing -
Pulp & Paper Group of the Corporation, with the duties and
responsibilities customarily attendant to that office, provided
that the Executive shall undertake such other and further
assignments and responsibilities of at least comparable status as
the Board of Directors may direct. The Executive shall
diligently and faithfully devote his full working time and best
efforts to the performance of the services under this Agreement
and to the furtherance of the best interests of the Corporation.
4. Place of Employment. The Executive will be employed at
the Corporation's offices in the City of Greenville, South
Carolina or at such other place as the Corporation shall
designate from time to time, provided, however, that if the
Executive is transferred to another place of employment,
necessitating a change in his residence, the Executive shall be
entitled to financial assistance in accordance with the terms of
the Corporation's relocation policy then in effect.
5. Compensation and Benefits.
(a) Base Salary. The Corporation shall pay to the
Executive a base salary at the annual rate of
$151,000, payable in substantially equal periodic
installments on the Corporation's regular payroll
dates. The Executive's base salary shall be reviewed
at least annually and from time to time may be
increased (or reduced, if such reduction is effected
pursuant to across-the-board salary reductions
similarly affecting all management personnel of the
Corporation).
(b) Bonus Plan. In addition to his base salary, the
Executive shall be entitled to receive a bonus under
the Corporation's bonus plan in effect from time to
<PAGE>
time determined in the manner, at the time, and in the
amounts set forth under such plan.
(c) Benefit Plans. The Corporation shall make contribu-
tions on the Executive's behalf to the various benefit
plans and programs of the Corporation in which
the Executive is eligible to participate in accordance
with the provisions thereof as in effect from time to
time.
(d) Vacations. The Executive shall be entitled to paid
vacation, in keeping with the Corporation's policy
as in effect from time to time, to be taken at such
time or times as may be approved by the Corporation.
(e) Expenses. The Corporation shall reimburse the Exe-
cutive for all reasonable expenses properly incurred,
and appropriately documented, by the Executive in
connection with the business of the Corporation.
(f) Perquisites. The Corporation shall make available to
the Executive all perquisites to which he is entitled
by virtue of his position.
6. Nondisclosure. During and after the term of this
Agreement, the Executive shall not, without the written consent
of the Board of Directors of the Corporation, disclose or use
directly or indirectly, (except in the course of employment
hereunder and in furtherance of the business of the Corporation
or any of its subsidiaries and affiliates) any of the trade
secrets or other confidential information or proprietary data of
the Corporation or its subsidiaries or affiliates; provided,
however, that confidential information shall not include any
information known generally to the public (other than as a result
of unauthorized disclosure by the Executive) or any information
of a type not otherwise considered confidential by persons
engaged in the same or similar businesses.
7. Noncompetition. During the term of this Agreement, and
for a period of one (1) year after the date the Executive's
employment terminates, the Executive shall not, without the prior
approval of the Board of Directors of the Corporation in the same
or a similar capacity engage in or invest in, or aid or assist
anyone else in the conduct of any business (other than the
businesses of the Corporation and its subsidiaries and
affiliates) which directly competes with the business of the
Corporation and its subsidiaries and affiliates as conducted
during the term hereof. If any court of competent jurisdiction
shall determine that any of the provisions of this Section 7
shall not be enforceable because of the duration or scope
thereof, the parties hereto agree that said court shall have the
power to reduce the duration and scope of such provision to the
<PAGE>
extent necessary to make it enforceable and this Agreement in its
reduced form shall be valid and enforceable to the extent
permitted by law. The Executive acknowledges that the
Corporation's remedy at law for a breach by the Executive of the
provisions of this Section 7 will be inadequate. Accordingly, in
the event of the breach or threatened breach by the Executive of
this Section 7, the Corporation shall be entitled to injunctive
relief in addition to any other remedy it may have.
8. Severance Pay. If the Executive's employment hereunder
is involuntarily terminated for any reason other than those set
forth in Section 2(c) hereof, then unless the Corporation shall
have terminated the Executive for "Cause", the Corporation shall
pay the Executive severance pay in an amount equal to twenty-four
(24) months of the Executive's base salary on the effective date
of the termination, provided, however, that any amount paid to
the Executive by the Corporation for services rendered subsequent
to the thirtieth (30th) day following the communication to the
Executive of notice of termination shall be deducted from the
severance pay otherwise due hereunder. Such payment shall be
made in a lump sum within ten (10) business days following the
effective date of the termination. The severance pay shall be in
lieu of all other compensation or payments of any kind relating
to the termination of the Executive's employment hereunder;
provided that the Executive's entitlement to compensation or
payments under the Corporation's retirement plans, stock option
or incentive plans, savings plans or bonus plans attributable to
service rendered prior to the effective date of the termination
shall not be affected by this clause and shall continue to be
governed by the applicable provisions of such plans; and further
provided that in lieu hereof, at his election, the Executive
shall be entitled to the benefits of the Severance Agreement of
even date between the Corporation and the Executive, if
termination occurs in a manner and at a time when such Severance
Agreement is applicable. For purposes of this Agreement, the
term for "Cause" shall mean because of gross negligence or
willful misconduct by the Executive either in the course of his
employment hereunder or which has a material adverse effect on
the Corporation or the Executive's ability to perform adequately
and effectively his duties hereunder.
9. Notices. Any notices required or permitted to be given
under this Agreement shall be in writing and shall be deemed to
have been given when delivered or mailed, by registered or
certified mail, return receipt requested to the respective
addresses of the parties set forth above, or to such other
address as any party hereto shall designate to the other party in
writing pursuant to the terms of this Section 9.
10. Severability. The provisions of this Agreement are
severable, and the invalidity or unenforceability of any
<PAGE>
provision shall not affect the validity or enforceability of any
other provision.
11. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the substantive laws of the State
of Connecticut.
12. Supersedure. This Agreement shall cancel and supersede
all prior agreements relating to employment between the Executive
and the Corporation, except the Severance Agreement.
13. Waiver of Breach. The waiver by a party of a breach of
any provision of this Agreement shall not operate or be construed
as a waiver of any prior or subsequent breach by any of the
parties hereto.
14. Binding Effect. The terms of this Agreement shall be
binding upon and inure to the benefit of the successors and
assigns of the Corporation and the heirs, executors,
administrators and successors of the Executive, but this
Agreement may not be assigned by the Executive.
IN WITNESS WHEREOF, the Corporation and the Executive have
executed this Agreement as of the day and year first above
written.
BOWATER INCORPORATED
/s/ R. E. Gustafson By:/s/ A. P. Gammie
Witness Its
/s/ James R. Harte /s/ J. C. Davis
Witness J. C. DAVIS
<PAGE>
SEVERANCE AGREEMENT
THIS AGREEMENT, made the 25TH day of AUGUST, 1988, by and
between BOWATER INCORPORATED, a Delaware corporation having a
mailing address of ONE PARKLANDS DRIVE, DARIEN, CONNECTICUT
06820, (the "Corporation"), and J. C. DAVIS of 11 BABBS HOLLOW,
GREENVILLE, SOUTH CAROLINA 29607 (the "Executive")
WHEREAS, the Corporation considers it essential to the best
interests of its shareholders to foster the continued employment
of key management personnel; and
WHEREAS, the uncertainty attendant to a change in control of
the Corporation may result in the departure or distraction of
management personnel to the detriment of the Corporation and its
shareholders; and
WHEREAS, the Board of Directors of the Corporation (the
"Board") has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
members of the Corporation's management, including Executive, to
their assigned duties in the event of a change in control of the
Corporation.
NOW THEREFORE, it is hereby agreed as follows:
1. DEFINITIONS
The following terms when used herein shall have the meanings
assigned to them below:
(a) "Acquiring Person" shall mean any Person who is or
becomes a "beneficial owner" (as defined in Rule 13d-3
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") of securities of the Corporation
representing twenty percent (20%) or more of the
combined voting power of the Corporation's then
outstanding voting securities, unless such Person has
filed Schedule 13G and all required amendments thereto
with respect to its holdings and continues to hold such
securities for investment in a manner qualifying such
Person to utilize Schedule 13G for reporting of
ownership.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act,
as in effect on the date hereof.
<PAGE>
(c) "Cause" shall mean and be limited to the Executive's
gross negligence, willful misconduct or conviction of a
felony, which negligence, misconduct or conviction has
a demonstrable and material adverse effect upon the
Corporation, provided that the Corporation shall have
given the Executive written notice of the alleged
negligence or misconduct and the Executive shall have
failed to cure such negligence or misconduct within
thirty (30) days after his receipt of such notice. The
Executive shall be deemed to have been terminated for
Cause effective upon the effective date stated in a
written notice of such termination delivered by the
Corporation to the Executive and accompanied by a
resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board (after
reasonable notice to the Executive and an opportunity
for the Executive, with his counsel present, to be
heard before the Board) finding that, in the good faith
opinion of the Board, the Executive was guilty of
conduct constituting Cause hereunder and setting forth
in reasonable detail the facts and circumstances
claimed to provide the basis for the Executive's
termination, provided that the effective date shall not
be less than thirty (30) days from the date such notice
is given.
(d) "Change in Control" of the Corporation shall be deemed
to have occurred if:
(i) any Person is or becomes an Acquiring Person;
(ii) less than two-thirds (2/3) of the total membership
of the Board shall be Continuing Directors; or
(iii) the shareholders of the Corporation shall approve
a merger or consolidation of the Corporation or a
plan of complete liquidation of the Corporation or
an agreement for the sale or disposition by the
Corporation of all or substantially all of the
Corporation's assets.
(e) "Continuing Directors" shall mean any member of the
Board who was a member of the Board prior to the date
hereof, and any successor of a Continuing Director
while such successor is a member of the Board who is
not an Acquiring Person or an Affiliate or Associate of
an Acquiring Person or of any such Affiliate or
Associate and is recommended or elected to succeed the
Continuing Director by a majority of the Continuing
Directors.
<PAGE>
(f) "Disability" shall mean the Executive's total and
permanent disability as defined in the Corporation's
long term disability insurance policy covering the
Executive immediately prior to the Change in Control.
(g) "Good Reason" shall mean:
(i) an adverse change in the Executive's status,
duties or responsibilities as an executive of the
Corporation as in effect immediately prior to the
Change in Control;
(ii) failure of the Corporation to pay or provide the
Executive in a timely fashion the salary or
benefits to which he is entitled under any
Employment Agreement between the Corporation and
the Executive in effect on the date of the Change
in Control, or under any benefit plans or policies
in which the Executive was participating at the
time of the Change in Control (including, without
limitation, any incentive, bonus, stock option,
restricted stock, health, accident, disability,
life insurance, thrift, vacation pay, deferred
compensation and retirement plans or policies);
(iii) the reduction of the Executive's salary as in
effect on the date of the Change in Control;
(iv) the taking of any action by the Corporation
(including the elimination of a plan without
providing substitutes therefor, the reduction of
the Executive's awards thereunder or failure to
continue the Executive's participation therein)
that would substantially diminish the aggregate
projected value of the Executive's awards or
benefits under the Corporation's benefit plans or
policies described in Section l(g)(ii) in which
the Executive was participating at the time of the
Change in Control;
(v) a failure by the Corporation to obtain from any
successor the assent to this Agreement contem-
plated by Section 5 hereof; or
(vi) the relocation of the principal office at which
the Executive is to perform his services on behalf
of the Corporation to a location more than thirty-
five (35) miles from its location immediately
prior to the Change in Control or a substantial
increase in the Executive's business travel
obligations subsequent to the Change in Control.
<PAGE>
Any circumstance described in this Section l(g) shall
constitute Good Reason even if such circumstance would
not constitute a breach by the Corporation of the terms
of the Employment Agreement between the Corporation and
the Executive in effect on the date of the Change in
Control. The Executive shall be deemed to have
terminated his employment for Good Reason effective
upon the effective date stated in a written notice of
such termination given by him to the Corporation
setting forth in reasonable detail the facts and
circumstances claimed to provide the basis for
termination, provided that the effective date may not
precede, nor be more than sixty (60) days from, the
date such notice is given. The Executive's continued
employment shall not constitute consent to, or a waiver
of rights with respect to, any circumstance con-
stituting Good Reason hereunder.
(h) "Normal Retirement Date" shall have the meaning given
to such term in the Corporation's basic qualified
pension plan in which the Executive is a participant as
in effect on the date hereof or any successor or
substitute plan adopted prior to a Change in Control.
(i) "Person" shall have the meaning assigned to it in
Sections 13(d) and 14(d) of the Exchange Act.
2. TERM OF AGREEMENT
(a) The term of this Agreement shall initially be for the
period beginning on July 1, 1988 and ending on June 30,
1991. The term of this Agreement shall automatically
be extended on July 1, 1989 until June 30, 1992 without
further action by the parties, and shall be
automatically extended by an additional year on each
succeeding July 1, unless either the Corporation or the
Executive shall have served notice upon the other party
prior to such July 1 of its or his intention either
that the term of this Agreement shall not be extended,
or that the Executive's Employment Agreement is
terminated, provided, however, that if a Change in
Control of the Corporation shall occur during the term
of this Agreement, this Agreement shall continue in
effect until terminated but in any event for a period
of not less than three (3) years from the date of the
Change in Control.
(b) Notwithstanding Section 2(a), the term of this
Agreement shall end upon the termination of the
Executive's Employment if, prior to a Change in Control
of the Corporation, the Executive's employment with the
<PAGE>
Corporation shall have terminated under the provisions
of any Employment Agreement between the Corporation and
the Executive then in effect.
3. COMPENSATION UPON CHANGE IN CONTROL FOLLOWED BY A
TERMINATION
If a Change in Control of the Corporation shall have
occurred and, during the term of this Agreement, the Executive's
employment by the Corporation is terminated for any reason other
than his death, his Disability, his retirement on his Normal
Retirement Date, by the Corporation for Cause, or by the
Executive without Good Reason, the Executive shall be under no
further obligation to perform services for the Corporation and
shall be entitled to receive the following payments:
(a) The Corporation shall pay to the Executive his full
base salary through the effective date of the
termination within five (5) business days thereafter
and all benefits and awards (including both the cash
and stock components,) to which the Executive is
entitled under any benefit plans or policies in which
the Executive was a participant prior to the Change in
Control, at the time such payments are due pursuant to
the terms of such benefit plans or policies as in
effect immediately prior to the Change in Control.
(b) At the election of the Executive, in addition to the
entitlements set forth in Section 3(a) but in lieu of
any payment to the Executive of any salary or severance
payments or benefits to which the Executive would be
entitled under the provisions of any Employment
Agreement between the Corporation and the Executive
then in effect, the Corporation shall pay to the
Executive, in a lump sum not later than ten (10)
business days following the effective date of the
termination:
(i) an amount equal to two (2) times the Executive's
annual base salary on the effective date of the
termination or, if higher, immediately prior to
the Change in Control;
(ii) an amount equal to two (2) times the greater of
(x) the highest amount of the actual bonus awarded
to the Executive in the five (5) fiscal years
immediately preceding the year in which the Change
in Control occurred and (y) an amount equal to the
amount the Executive would have been awarded under
the Corporation's bonus plan in effect immediately
prior to the Change in Control for the fiscal year
<PAGE>
in which the Change in Control occurred had the
Executive continued to render services to the
Corporation at the same level of performance, at
the same level of salary, and in the same position
as immediately prior to the Change in Control;
(iii) an amount equal to two (2) times the greater of
(x) the largest annual contribution made by the
Corporation to the Corporation's Savings Plan on
the Executive's behalf during the five (5) fiscal
years immediately preceding the year in which the
Change in Control occurred and (y) an amount equal
to the contribution the Corporation would have
made to said Plan on the Executive's behalf for
the fiscal year in which the Change in Control
occurred had he participated in said Plan for the
entire fiscal year, received a base salary equal
to the salary he was receiving immediately prior
to the Change in Control and had he elected to
contribute to the Plan the same percentage of his
base salary as he was contributing on said date;
and
(iv) an amount equal to twenty percent (20%) of the
Executive's annual base salary on the effective
Date of the termination or, if higher, immediately
prior to the Change in Control (as compensation
for medical, life insurance and other benefits
lost as a result of termination of the Executive's
employment).
(v) If a payment may be increased by reference to an
alternate calculation which cannot be made by the
time the payment is due, payment of the lesser,
known amount shall be made when due, and if any
additional amount becomes due, such additional
amount shall be paid within ten (10) days after
the information upon which calculation of such
payment is dependent first becomes available.
The amount of all payments due to the Executive
pursuant to this Section 3(b) shall be reduced by 1/24
for each full calendar month by which the date which is
two (2) years from the effective date of the
Executive's termination extends beyond the Executive's
Normal Retirement Date.
Upon entering into this Agreement and for a period of
fourteen (14) days following each anniversary of the
date hereof (the "Election Period"), the Executive may,
in writing, direct the Corporation to pay any amounts
to which he is entitled under this Section 3(b) in
<PAGE>
equal annual installments (not to exceed ten (10)
annual installments), with the first such installment
payable within ten (10) business days of the effective
date of the termination and each successive installment
payable on the anniversary of the effective date of the
termination or the next following business day if such
date is not a business day (the "Deferred Payment
Election"). A Deferred Payment Election, once made,
cannot be revoked except during an Election Period;
provided, however, no Deferred Payment Election can be
made or revoked by the Executive during an Election
Period that occurs after a Change in Control or at a
time when, in the judgment of the Corporation, a change
in control may occur within sixty (60) days of such
Election Period.
(c) The Corporation shall pay or provide to the Executive
or his widow or children as the case may be, such
amounts and benefits as may be required so that the
pension and other post-retirement benefits paid or made
available to the Executive, his widow and his children
are equal to those, if any, which would have been paid
under the Corporation's Basic and Supplemental Pension
(Benefit) Plans in effect immediately prior to the
Change in Control, assuming the Executive continued in
the employ of the Corporation at the same compensation
until the second anniversary of the effective date of
the termination of the Executive's employment or until
his Normal Retirement Date, whichever is earlier.
Notwithstanding any conflicting restrictions in the
Plans or the fact of the termination of the Executive's
employment, until the Executive's Normal Retirement
Date, the Executive or his widow and his children shall
maintain a continuing right to receive the pension and
other benefits under the above Plans with payments to
begin upon retirement and to elect an imputed
retirement on the Executive's 50th birthdate or any of
his birthdates thereafter until his Normal Retirement
Date, such election to be made by so notifying the
Corporation within one (1) year after termination of
his employment.
(d) The Executive shall not be required to mitigate the
amount of any payment provided in this Section 3, nor
shall any payment or benefit provided for in this
Section 3 be offset by any compensation earned by the
Executive as the result of employment by another
employer, by retirement benefits, or by offset against
any amount claimed to be owned by the Executive to the
Corporation, or otherwise.
<PAGE>
(e) If any payment to the Executive required by this
Section 3 is not made within the time for such payment
specified herein, the Corporation shall pay to the
Executive interest on such payment at the legal rate
payable from time to time upon judgments in the State
of Connecticut from the date such payment is payable
under the terms hereof until paid.
4. EXECUTIVE'S EXPENSES
The Corporation shall pay or reimburse the Executive
for all costs, including reasonable attorney's fees and expenses
of either litigation or arbitration, incurred by the Executive in
contesting or disputing any termination of his employment
following a Change in Control or in seeking to obtain or enforce
any right or benefit provided by this Agreement.
5. BINDING AGREEMENT
This Agreement shall inure to the benefit of and be
enforceable by the Executive, his heirs, executors,
administrators, successors and assigns. This Agreement shall be
binding upon the Corporation, its successors and assigns. The
Corporation shall 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 expressly to assume and agree to perform this
Agreement in accordance with its terms. The Corporation shall
obtain such assumption and agreement prior to the effectiveness
of any such succession.
6. NOTICE
Any notices and all other communications provided for
herein shall be in writing and shall be deemed to have been duly
given when delivered or mailed, by certified or registered mail,
return receipt requested, postage prepaid addressed to the
respective addresses set forth on the first page of this
Agreement or to such other address as either party may have
furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt. All notices to the Corporation shall be addressed to
the attention of the Board with a copy to each of the General
Counsel, the Vice President-Human Resources and Administration
and the Secretary of the Corporation.
<PAGE>
7. AMENDMENTS; WAIVERS
No provision of this Agreement may be modified, waived
or discharged except in a writing specifically referred to such
provision and signed by the party against which enforcement of
such modification, waiver or discharge is sought. No waiver by
either party hereto of the breach of any condition or provision
of this Agreement shall be deemed a waiver of any other condition
or provision at the same or any other time.
8. GOVERNING LAW
The validity, interpretation, construction and performance
of this Agreement shall be governed by the substantive laws of
the State of Connecticut.
9. VALIDITY
The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full
force and effect.
10. ARBITRATION
If the Executive so elects, any dispute or controversy
arising under or in connection with this Agreement shall be
settled exclusively by arbitration in the city nearest to the
Executive's principal residence (or, at the Executive's election,
in the city within the state in which the Executive's principal
residence is located nearest to such principal residence) which
has an office of the American Arbitration Association by one
arbitrator in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction. The
Corporation hereby waives its right to contest the personal
jurisdiction or venue of any court, federal or state, in an
action brought to enforce this Agreement or any award of an
arbitrator hereunder which action is brought in the jurisdiction
in which such arbitration was conducted, or, if no arbitration
was elected, in which arbitration could have been conducted pur-
suant to this provision.
11. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
BOWATER INCORPORATED
/s/ R. S. Gustafson By /s/ A. P. Gammie
Witness Its
/s/ James R. Harte /s/ J. C. Davis
Witness J. C. Davis
EXHIBIT 10.8.1
THIS AMENDMENT, made the 23rd day of August, 1989 by BOWATER
INCORPORATED, a Delaware corporation having a mailing address of
One Parklands Drive, Darien, Connecticut 06820 (the
"Corporation"), and J. C. DAVIS of 11 Babbs Hollow, Greenville,
South Carolina 29607 the ("Executive").
WHEREAS, the Corporation and the Executive entered into an
Employment Agreement dated August 25, 1988 (the "Employment
Agreement"); and
WHEREAS, the Corporation and the Executive now wish to amend
the Employment Agreement in the manner hereinafter set forth;
NOW, THEREFORE, the Employment Agreement is hereby amended,
effective August 23, 1989, as follows:
1. The first sentence of Section 8 of the Employment
Agreement shall be deleted and the following shall be substituted
therefor:
8. Severance Pay. If the Executive's employment hereunder
is involuntarily terminated for any reason other than
those set forth in Section 2(c) hereof, then unless the
Corporation shall have terminated the Executive for
"Cause", the Corporation shall pay the Executive
severance pay in the amount equal to twenty-four (24)
months of the Executive's base salary on the effective
date of the termination plus 1/12 of the amount of the
last bonus paid to the Executive under the
Corporation's bonus plan applicable to the Executive
for each month in the period beginning on January 1 of
the year in which the date of the termination occurs
and ending on the date of the termination and for each
months' base salary to which the Executive is entitled
under this Section 8, provided however, that any amount
paid to the Executive for services rendered subsequent
to the thirtieth (30th) day following the communication
to the Executive of notice of termination shall be
deducted from the severance pay otherwise due
hereunder.
Except as hereby amended, all other provisions of the
Employment Agreement shall remain in full force and in effect.
All capitalized terms not otherwise defined herein shall have the
meaning assigned to such terms in the Employment Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of the day and year first above written.
BOWATER INCORPORATED
/s/ R. E. Gustafson By:/s/ A. P. Gammie
Witness
/s/ Harriet S. Hubson /s/ John C. Davis
Witness J. C. DAVIS
<PAGE>
THIS AMENDMENT, made the 23rd day of August, 1989 by BOWATER
INCORPORATED, a Delaware corporation having a mailing address of
One Parklands Drive, Darien, Connecticut 06820 (the
"Corporation"), and J. C. DAVIS of 11 Babbs Hollow, Greenville,
South Carolina 29607 the ("Executive").
WHEREAS, the Corporation and the Executive entered into a
Severance Agreement dated August 25, 1988 (the "Severance
Agreement"); and
WHEREAS, the Executive and the Corporation now wish to amend
the Severance Agreement in the manner hereinafter set forth;
NOW, THEREFORE, the Severance Agreement is hereby amended,
effective August 23, 1989 in the following respects:
1. Section l(i) of the Severance Agreement shall be
deleted and the following shall be substituted therefor:
(i) "Person" shall mean any individual, corporation,
partnership, group, association or other "person" as
such term is used in Section 13(d) and 14(d) of the
Exchange Act.
2. Section 3(b)(v) of the Severance Agreement shall be
renumbered as Section (b)(vi).
3. A new Section (b)(v) shall be added to the Severance
Agreement to read as follows:
(v) For each full or partial month in the period beginning
on January lst of the year in which the date of the
termination occurs and ending on the date of the
termination, one-twelfth of the greater of (x) the
highest amount of the actual bonus awarded to the
Executive in the five (5) fiscal years immediately
preceding the year in which the Change in Control
occurred and (y) an amount equal to the amount the
Executive would have been awarded under the
Corporation's bonus plan in effect immediately prior to
the Change in Control for the fiscal year in which the
Change in Control occurred had the Executive continued
to render services to the Corporation at the same level
of performance, at the same level of salary, and in the
same position as immediately prior to the Change in
Control;
4. Sections 3(d) and 3(e) of the Severance Agreement
shall be renumbered as Section 3(f) and 3(g), respectively.
5. The following new Sections 3(d) and 3(e) shall be
added to the Severance Agreement:
<PAGE>
(d) The Corporation shall pay for or provide the Executive
individual out-placement assistance as offered by a
member firm of the Association of Out-Placement
Consulting Firms.
(e) If any payment or benefit to or for the benefit of the
Executive in connection with a Change in Control of the
Corporation or termination of the Executive's
employment following a Change in Control of the
Corporation (whether pursuant to the terms of this
Agreement, or any other plan or arrangement or
agreement with the Corporation, any Person whose
actions result in a Change in Control of the Cor-
poration or any Affiliate or Associate of the
Corporation or any such Person) is subject to the
Excise Tax (as hereinafter defined), the Corporation
shall pay to the Executive an additional amount such
that the total amount of all such payments and benefits
(including payments made pursuant to this Section 3(e))
net of the Excise Tax and all other applicable federal,
state and local taxes shall equal the total amount of
all such payments and benefits to which the Executive
would have been entitled, but for this Section 3(e),
net of all applicable, federal, state and local taxes
except the Excise Tax. For purposes of this Section
3(e), the term "Excise Tax" shall mean the tax imposed
by Section 4999 of the Internal Revenue Code of 1986
(the "Code") and any similar tax that may hereafter be
imposed.
The amount of the payment to the Executive under this
Section 3(e) shall be estimated by a nationally
recognized firm of certified public accountants (other
than the Corporation's independent auditors) based upon
the following assumptions:
(i) all payments and benefits to or for the benefit of
the Executive in connection with a Change in
Control of the Corporation or termination of the
Executive's employment following a Change in
Control of the Corporation shall be deemed to be
"parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute
payments" shall be deemed to be subject to the
Excise Tax unless, in the opinion of tax counsel
selected by the firm of certified public
accountants charged with estimating the payment to
the Executive under this Section 3(e), such
payments or benefits are not subject to the Excise
Tax; and
<PAGE>
(ii) the Executive shall be deemed to pay federal,
state and local taxes at the highest marginal rate
of taxation for the applicable calendar year.
The estimated amount of the payment due the
Executive pursuant to this Section 3(e) shall be
paid to the Executive in a lump sum not later than
thirty (30) business days following the effective
date of the termination. In the event that the
amount of the estimated payment is less than the
amount actually due to the Executive under this
Section 3(e), the amount of any such shortfall
shall be paid to the Executive within ten (10)
days after the existence of the shortfall is
discovered.
Except as hereby amended, all other provisions of the
Severance Agreement shall remain in full force and effect. All
capitalized terms not otherwise defined herein shall have the
meaning assigned to such terms in the Severance Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed as of the 23rd day of August, 1989.
BOWATER INCORPORATED
/s/ R. E. Gustafson By /s/ A. P. Gammie
Witness Its
/s/ Harriet S.Hubson /s/ John C. Davis
Witness J. C. DAVIS
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 25TH day of AUGUST, 1988, by and
between BOWATER INCORPORATED, a Delaware corporation having a
mailing address of ONE PARKLANDS DRIVE, DARIEN, CONNECTICUT
06820, (the "Corporation"), and E. R. MANNING of 741 WASHINGTON
ROAD, WOODBURY, CONNECTICUT 06798 (the "Executive").
WHEREAS, the Corporation desires to employ the Executive as
Vice President-General Counsel; and
WHEREAS, the Executive is desirous of serving the
Corporation in such capacity;
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. During the term of this Agreement the
Corporation agrees to continue to employ the Executive, and the
Executive agrees to continue in the employ of the Corporation, in
accordance with and subject to the provisions of this Agreement.
2. Term.
(a) Subject to the provisions of subparagraphs (b) and
(c)of this Section 2, the term of this Agreement shall
begin on the date hereof and shall continue thereafter
until terminated by either party by written notice
given to the other party at least thirty (30) days
prior to the effective date of any such termination.
The effective date of the termination shall be the date
stated in such notice, provided that if the Corporation
specifies an effective date that is more than thirty
(30) days following the date of such notice, the
Executive may, upon thirty (30) days' written notice to
the Corporation, accelerate the effective date of such
termination.
(b) Notwithstanding Section 2(a), upon the occurrence of a
Change in Control as defined in the Severance Agreement
of even date between the Corporation and the Executive
(the "Severance Agreement"), the term of this Agreement
shall be deemed to continue until terminated, but in
any event, for a period of not less than three (3)
years following the date of the Change in Control,
unless such termination shall be at the Executive's
election for other than "Good Reason" as that term is
defined in the Severance Agreement.
<PAGE>
(c) Notwithstanding Section 2(a), the term of this
Agreement shall end upon: (i) the death of the
Executive; (ii) the inability of the Executive to
perform his duties properly, whether by reason of ill-
health, accident or other cause, for a period of one
hundred and eighty (180) consecutive days or for
periods totaling one hundred and eighty (180) days
occurring within any twelve (12) consecutive calendar
months; or (iii) the executives retirement on his early
or normal retirement date.
3. Position and Duties. Throughout the term hereof, the
Executive shall be employed as Vice President-General Counsel of
the Corporation, with the duties and responsibilities customarily
attendant to that office, provided that the Executive shall
undertake such other and further assignments and responsibilities
of at least comparable status as the Board of Directors may
direct. The Executive shall diligently and faithfully devote his
full working time and best efforts to the performance of the
services under this Agreement and to the furtherance of the best
interests of the Corporation.
4. Place of Employment. The Executive will be employed at
the Corporation's offices in the City of Darien, Connecticut or
at such other place as the Corporation shall designate from time
to time, provided, however, that if the Executive is transferred
to another place of employment, necessitating a change in his
residence, the Executive shall be entitled to financial
assistance in accordance with the terms of the Corporation's
relocation policy then in effect.
5. Compensation and Benefits.
(a) Base Salary. The Corporation shall pay to the
Executive a base salary at the annual rate of $142,000,
payable in substantially equal periodic installments on
the Corporation's regular payroll dates. The
Executive's base salary shall be reviewed at least
annually and from time to time may be increased (or
reduced, if such reduction is effected pursuant to
across-the-board salary reductions similarly affecting
all management personnel of the Corporation).
(b) Bonus Plan. In addition to his base salary, the
Executive shall be entitled to receive a bonus under
the Corporation's bonus plan in effect from time to
time determined in the manner, at the time, and in the
amounts set forth under such plan.
(c) Benefit Plans. The Corporation shall make contribu-
tions on the Executive's behalf to the various benefit
plans and programs of the Corporation in which the
Executive is eligible to participate in accordance with
the provisions thereof as in effect from time to time.
<PAGE>
(d) Vacations. The Executive shall be entitled to paid
vacation, in keeping with the Corporation's policy as
in effect from time to time, to be taken at such time
or times as may be approved by the Corporation.
(e) Expenses. The Corporation shall reimburse the Exe-
cutive for all reasonable expenses properly incurred,
and appropriately documented, by the Executive in
connection with the business of the Corporation.
(f) Perquisites. The Corporation shall make available to
the Executive all perquisites to which he is entitled
by virtue of his position.
6. Nondisclosure. During and after the term of this
Agreement, the Executive shall not, without the written consent
of the Board of Directors of the Corporation, disclose or use
directly or indirectly, (except in the course of employment
hereunder and in furtherance of the business of the Corporation
or any of its subsidiaries and affiliates) any of the trade
secrets or other confidential information or proprietary data of
the Corporation or its subsidiaries or affiliates; provided,
however, that confidential information shall not include any
information known generally to the public (other than as a result
of unauthorized disclosure by the Executive) or any information
of a type not otherwise considered confidential by persons
engaged in the same or similar businesses.
7. Noncompetition. During the term of this Agreement, and
for a period of one (1) year after the date the Executive's
employment terminates, the Executive shall not, without the prior
approval of the Board of Directors of the Corporation in the same
or a similar capacity engage in or invest in, or aid or assist
anyone else in the conduct of any business (other than the
businesses of the Corporation and its subsidiaries and
affiliates) which directly competes with the business of the
Corporation and its subsidiaries and affiliates as conducted
during the term hereof. If any court of competent jurisdiction
shall determine that any of the provisions of this Section 7
shall not be enforceable because of the duration or scope
thereof, the parties hereto agree that said court shall have the
power to reduce the duration and scope of such provision to the
extent necessary to make it enforceable and this Agreement in its
reduced form shall be valid and enforceable to the extent
permitted by law. The Executive acknowledges that the
Corporation's remedy at law for a breach by the Executive of the
provisions of this Section 7 will be inadequate. Accordingly, in
the event of the breach or threatened breach by the Executive of
this Section 7, the Corporation shall be entitled to injunctive
relief in addition to any other remedy it may have.
8. Severance Pay. If the Executive's employment hereunder
is involuntarily terminated for any reason other than those set
forth in Section 2(c) hereof, then unless the Corporation shall
<PAGE>
have terminated the Executive for "Cause", the Corporation shall
pay the Executive severance pay in an amount equal to twenty-four
(24) months of the Executive's base salary on the effective date
of the termination, provided, however, that any amount paid to
the Executive by the Corporation for services rendered subsequent
to the thirtieth (30th) day following the communication to the
Executive of notice of termination shall be deducted from the
severance pay otherwise due hereunder. Such payment shall be
made in a lump sum within ten (10) business days following the
effective date of the termination. The severance pay shall be in
lieu of all other compensation or payments of any kind relating
to the termination of the Executive's employment hereunder;
provided that the Executive's entitlement to compensation or
payments under the Corporation's retirement plans, stock option
or incentive plans, savings plans or bonus plans attributable to
service rendered prior to the effective date of the termination
shall not be affected by this clause and shall continue to be
governed by the applicable provisions of such plans; and further
provided that in lieu hereof, at his election, the Executive
shall be entitled to the benefits of the Severance Agreement of
even date between the Corporation and the Executive, if
termination occurs in a manner and at a time when such Severance
Agreement is applicable. For purposes of this Agreement, the
term for "Cause" shall mean because of gross negligence or
willful misconduct by the Executive either in the course of his
employment hereunder or which has a material adverse effect on
the Corporation or the Executive's ability to perform adequately
and effectively his duties hereunder.
9. Notices. Any notices required or permitted to be given
under this Agreement shall be in writing and shall be deemed to
have been given when delivered or mailed, by registered or
certified mail, return receipt requested to the respective
addresses of the parties set forth above, or to such other
address as any party hereto shall designate to the other party in
writing pursuant to the terms of this Section 9.
10. Severability. The provisions of this Agreement are
severable, and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of any
other provision.
11. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the substantive laws of the State
of Connecticut.
12. Supersedure. This Agreement shall cancel and supersede
all prior agreements relating to employment between the Executive
and the Corporation, except the Severance Agreement.
13. Waiver of Breach. The waiver by a party of a breach of
any provision of this Agreement shall not operate or be construed
as a waiver of any prior or subsequent breach by any of the
parties hereto.
<PAGE>
14. Binding Effect. The terms of this Agreement shall be
binding upon and inure to the benefit of the successors and
assigns of the Corporation and the heirs, executors,
administrators and successors of the Executive, but this
Agreement may not be assigned by the Executive.
IN WITNESS WHEREOF, the Corporation and the Executive have
executed this Agreement as of the day and year first above
written.
BOWATER INCORPORATED
/s/ R. E. Gustafson By /s/ A. P. Gammie
Witness
/s/ E. H. Beaver /s/ E. R. Manning
Witness
<PAGE>
SEVERANCE AGREEMENT
THIS AGREEMENT, made the 25TH day of AUGUST, 1988, by and
between BOWATER INCORPORATED, a Delaware corporation having a
mailing address of ONE PARKLANDS DRIVE, DARIEN, CONNECTICUT
06820, (the "Corporation"), and E. R. MANNING of 741 WASHINGTON
ROAD, WOODBURY, CONNECTICUT 06798 (the "Executive").
WHEREAS, the Corporation considers it essential to the best
interests of its shareholders to foster the continued employment
of key management personnel; and
WHEREAS, the uncertainty attendant to a change in control of
the Corporation may result in the departure or distraction of
management personnel to the detriment of the Corporation and its
shareholders; and
WHEREAS, the Board of Directors of the Corporation (the
"Board") has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
members of the Corporation's management, including Executive, to
their assigned duties in the event of a change in control of the
Corporation.
NOW THEREFORE, it is hereby agreed as follows:
1. DEFINITIONS
The following terms when used herein shall have the meanings
assigned to them below:
(a) "Acquiring Person" shall mean any Person who is or
becomes a "beneficial owner" (as defined in Rule 13d-3
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") of securities of the Corporation
representing twenty percent (20%) or more of the
combined voting power of the Corporation's then
outstanding voting securities, unless such Person has
filed Schedule 13G and all required amendments thereto
with respect to its holdings and continues to hold such
securities for investment in a manner qualifying such
Person to utilize Schedule 13G for reporting of
ownership.
(b) "Affiliate" and "Associate,, shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act,
as in effect on the date hereof.
<PAGE>
(c) "Cause" shall mean and be limited to the Executive's
gross negligence, willful misconduct or conviction of a
felony, which negligence, misconduct or conviction has
a demonstrable and material adverse effect upon the
Corporation, provided that the Corporation shall have
given the Executive written notice of the alleged
negligence or misconduct and the Executive shall have
failed to cure such negligence or misconduct within
thirty (30) days after his receipt of such notice. The
Executive shall be deemed to have been terminated for
Cause effective upon the effective date stated in a
written notice of such termination delivered by the
Corporation to the Executive and accompanied by a
resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board (after
reasonable notice to the Executive and an opportunity
for the Executive, with his counsel present, to be
heard before the Board) finding that, in the good faith
opinion of the Board, the Executive was guilty of
conduct constituting Cause hereunder and setting forth
in reasonable detail the facts and circumstances
claimed to provide the basis for the Executive's
termination, provided that the effective date shall not
be less than thirty (30) days from the date such notice
is given.
(d) "Change in Control" of the Corporation shall be deemed
to have occurred if:
(i) any Person is or becomes an Acquiring Person;
(ii) less than two-thirds (2/3) of the total membership
of the Board shall be Continuing Directors; or
(iii) the shareholders of the Corporation shall approve
a merger or consolidation of the Corporation or a
plan of complete liquidation of the Corporation or
an agreement for the sale or disposition by the
Corporation of all or substantially all of the
Corporation's assets.
(e) "Continuing Directors" shall mean any member of the
Board who was a member of the Board prior to the date
hereof, and any successor of a Continuing Director
while such successor is a member of the Board who is
not an Acquiring Person or an Affiliate or Associate of
an Acquiring Person or of any such Affiliate or
Associate and is recommended or elected to succeed the
Continuing Director by a majority of the Continuing
Directors.
<PAGE>
(f) "Disability" shall mean the Executive's total and
permanent disability as defined in the Corporation's
long term disability insurance policy covering the
Executive immediately prior to the Change in Control.
(g) "Good Reason" shall mean:
(i) an adverse change in the Executive's status,
duties or responsibilities as an executive of the
Corporation as in effect immediately prior to the
Change in Control;
(ii) failure of the Corporation to pay or provide the
Executive in a timely fashion the salary or
benefits to which he is entitled under any
Employment Agreement between the Corporation and
the Executive in effect on the date of the Change
in Control, or under any benefit plans or policies
in which the Executive was participating at the
time of the Change in Control (including, without
limitation, any incentive, bonus, stock option,
restricted stock, health, accident, disability,
life insurance, thrift, vacation pay, deferred
compensation and retirement plans or policies);
(iii) the reduction of the Executive's salary as in
effect on the date of the Change in Control;
(iv) the taking of any action by the Corporation
(including the elimination of a plan without
providing substitutes therefor, the reduction of
the Executive's awards thereunder or failure to
continue the Executive's participation therein)
that would substantially diminish the aggregate
projected value of the Executive's awards or
benefits under the Corporation's benefit plans or
policies described in Section l(g)(ii) in which
the Executive was participating at the time of the
Change in Control;
(v) a failure by the Corporation to obtain from any
successor the assent to this Agreement contem-
plated by Section 5 hereof; or
(vi) the relocation of the principal office at which
the Executive is to perform his services on behalf
of the Corporation to a location more than thirty-
five (35) miles from its location immediately
prior to the Change in Control or a substantial
increase in the Executive's business travel
obligations subsequent to the Change in Control.
<PAGE>
Any circumstance described in this Section l(g) shall
constitute Good Reason even if such circumstance would
not constitute a breach by the Corporation of the terms
of the Employment Agreement between the Corporation and
the Executive in effect on the date of the Change in
Control. The Executive shall be deemed to have
terminated his employment for Good Reason effective
upon the effective date stated in a written notice of
such termination given by him to the Corporation
setting forth in reasonable detail the facts and
circumstances claimed to provide the basis for
termination, provided that the effective date may not
precede, nor be more than sixty (60) days from, the
date such notice is given. The Executive's continued
employment shall not constitute consent to, or a waiver
of rights with respect to, any circumstance con-
stituting Good Reason hereunder.
(h) "Normal Retirement Date" shall have the meaning given
to such term in the Corporation's basic qualified
pension plan in which the Executive is a participant as
in effect on the date hereof or any successor or
substitute plan adopted prior to a Change in Control.
(i) "Person" shall have the meaning assigned to it in
Sections 13(d) and 14(d) of the Exchange Act.
2. TERM OF AGREEMENT
(a) The term of this Agreement shall initially be for the
period beginning on July 1, 1988 and ending on June 30,
1991. The term of this Agreement shall automatically
be extended on July 1, 1989 until June 30, 1992 without
further action by the parties, and shall be
automatically extended by an additional year on each
succeeding July 1, unless either the Corporation or the
Executive shall have served notice upon the other party
prior to such July 1 of its or his intention either
that the term of this Agreement shall not be extended,
or that the Executive's Employment Agreement is
terminated, provided, however, that if a Change in
Control of the Corporation shall occur during the term
of this Agreement, this Agreement shall continue in
effect until terminated but in any event for a period
of not less than three (3) years from the date of the
Change in Control.
(b) Notwithstanding Section 2(a), the term of this
Agreement shall end upon the termination of the
Executive's Employment if, prior to a Change in Control
of the Corporation, the Executive's employment with the
<PAGE>
Corporation shall have terminated under the provisions
of any Employment Agreement between the Corporation and
the Executive then in effect.
3. COMPENSATION UPON CHANGE IN CONTROL FOLLOWED BY A
TERMINATION
If a Change in Control of the Corporation shall have
occurred and, during the term of this Agreement, the Executive's
employment by the Corporation is terminated for any reason other
than his death, his Disability, his retirement on his Normal
Retirement Date, by the Corporation for Cause, or by the
Executive without Good Reason, the Executive shall be under no
further obligation to perform services for the Corporation and
shall be entitled to receive the following payments:
(a) The Corporation shall pay to the Executive his full
base salary through the effective date of the
termination within five (5) business days thereafter
and all benefits and awards (including both the cash
and stock components,) to which the Executive is
entitled under any benefit plans or policies in which
the Executive was a participant prior to the Change in
Control, at the time such payments are due pursuant to
the terms of such benefit plans or policies as in
effect immediately prior to the Change in Control.
(b) At the election of the Executive, in addition to the
entitlements set forth in Section 3(a) but in lieu of
any payment to the Executive of any salary or severance
payments or benefits to which the Executive would be
entitled under the provisions of any Employment
Agreement between the Corporation and the Executive
then in effect, the Corporation shall pay to the
Executive, in a lump sum not later than ten (10)
business days following the effective date of the
termination:
(i) an amount equal to two (2) times the Executive's
annual base salary on the effective date of the
termination or, if higher, immediately prior to
the Change in Control;
(ii) an amount equal to two (2) times the greater of
(x) the highest amount of the actual bonus awarded
to the Executive in the five (5) fiscal years
immediately preceding the year in which the Change
in Control occurred and (y) an amount equal to the
amount the Executive would have been awarded under
the Corporation's bonus plan in effect immediately
<PAGE>
prior to the Change in Control for the fiscal year
in which the Change in Control occurred had the
Executive continued to render services to the
Corporation at the same level of performance, at
the same level of salary, and in the same position
as immediately prior to the Change in Control;
(iii) an amount equal to two (2) times the greater of
(x) the largest annual contribution made by the
Corporation to the Corporation's Savings Plan on
the Executive's behalf during the five (5) fiscal
years immediately preceding the year in which the
Change in Control occurred and (y) an amount equal
to the contribution the Corporation would have
made to said Plan on the Executive's behalf for
the fiscal year in which the Change in Control
occurred had he participated in said Plan for the
entire fiscal year, received a base salary equal
to the salary he was receiving immediately prior
to the Change in Control and had he elected to
contribute to the Plan the same percentage of his
base salary as he was contributing on said date;
and
(iv) an amount equal to twenty percent (20%) of the
Executive's annual base salary on the effective
Date of the termination or, if higher, immediately
prior to the Change in Control (as compensation
for medical, life insurance and other benefits
lost as a result of termination of the Executive's
employment).
(v) If a payment may be increased by reference to an
alternate calculation which cannot be made by the
time the payment is due, payment of the lesser,
known amount shall be made when due, and if any
additional amount becomes due, such additional
amount shall be paid within ten (10) days after
the information upon which calculation of such
payment is dependent first becomes available.
The amount of all payments due to the Executive
pursuant to this Section 3(b) shall be reduced by
1/24 for each full calendar month by which the
date which is two (2) years from the effective
date of the Executive's termination extends beyond
the Executive's Normal Retirement Date.
Upon entering into this Agreement and for a period
of fourteen (14) days following each anniversary
of the date hereof (the "Election Period"), the
<PAGE>
Executive may, in writing, direct the Corporation
to pay any amounts to which he is entitled under
this Section 3(b) in equal annual installments
(not to exceed ten (10) annual installments), with
the first such installment payable within ten (10)
business days of the effective date of the
termination and each successive installment
payable on the anniversary of the effective date
of the termination or the next following business
day if such date is not a business day (the
"Deferred Payment Election"). A Deferred Payment
Election, once made, cannot be revoked except
during an Election Period; provided, however, no
Deferred Payment Election can be made or revoked
by the Executive during an Election Period that
occurs after a Change in Control or at a time
when, in the judgment of the Corporation, a change
in control may occur within sixty (60) days of
such Election Period.
(c) The Corporation shall pay or provide to the Execu-
tive or his widow or children as the case may be,
such amounts and benefits as may be required so
that the pension and other post-retirement
benefits paid or made available to the Executive,
his widow and his children are equal to those, if
any, which would have been paid under the
Corporation's Basic and Supplemental Pension
(Benefit) Plans in effect immediately prior to the
Change in Control, assuming the Executive
continued in the employ of the Corporation at the
same compensation until the second anniversary of
the effective date of the termination of the
Executive's employment or until his Normal
Retirement Date, whichever is earlier.
Notwithstanding any conflicting restrictions in
the Plans or the fact of the termination of the
Executive's employment, until the Executive's
Normal Retirement Date, the Executive or his widow
and his children shall maintain a continuing right
to receive the pension and other benefits under
the above Plans with payments to begin upon
retirement and to elect an imputed retirement on
the Executive's 50th birthdate or any of his
birthdates thereafter until his Normal Retirement
Date, such election to be made by so notifying the
Corporation within one (1) year after termination
of his employment.
(d) The Executive shall not be required to mitigate
the amount of any payment provided in this Section
3, nor shall any payment or benefit provided for
<PAGE>
in this Section 3 be offset by any compensation
earned by the Executive as the result of
employment by another employer, by retirement
benefits, or by offset against any amount claimed
to be owned by the Executive to the Corporation,
or otherwise.
(e) If any payment to the Executive required by this
Section 3 is not made within the time for such
payment specified herein, the Corporation shall
pay to the Executive interest on such payment at
the legal rate payable from time to time upon
judgments in the State of Connecticut from the
date such payment is payable under the terms
hereof until paid.
4. EXECUTIVE'S EXPENSES
The Corporation shall pay or reimburse the Executive
for all costs, including reasonable attorney's fees and expenses
of either litigation or arbitration, incurred by the Executive in
contesting or disputing any termination of his employment
following a Change in Control or in seeking to obtain or enforce
any right or benefit provided by this Agreement.
5. BINDING AGREEMENT
This Agreement shall inure to the benefit of and be
heirs, executors, administrators, successors and assigns.
This Agreement shall be binding upon the Corporation, its
successors and assigns. The Corporation shall require any
successor (whether direct or indirect, by purchase, merger or
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Corporation expressly to assume and
agree to perform this Agreement in accordance with its terms.
The Corporation shall obtain such assumption and agreement prior
to the effectiveness of any such succession.
6. NOTICE
Any notices and all other communications provided for
herein shall be in writing and shall be deemed to have been duly
given when delivered or mailed, by certified or registered mail,
return receipt requested, postage prepaid addressed to the
respective addresses set forth on the first page of this
Agreement or to such other address as either party may have
furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt. All notices to the Corporation shall be addressed to
<PAGE>
the attention of the Board with a copy to each of the General
Counsel, the Vice President-Human Resources and Administration
and the Secretary of the Corporation.
7. AMENDMENTS; WAIVERS
No provision of this Agreement may be modified, waived
or discharged except in a writing specifically referred to such
provision and signed by the party against which enforcement of
such modification, waiver or discharge is sought. No waiver by
either party hereto of the breach of any condition or provision
of this Agreement shall be deemed a waiver of any other condition
or provision at the same or any other time.
8. GOVERNING LAW
The validity, interpretation, construction and perfor-
mance of this Agreement shall be governed by the substantive laws
of the State of Connecticut.
9. VALIDITY
The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full
force and effect.
10. ARBITRATION
If the Executive so elects, any dispute or controversy
arising under or in connection with this Agreement shall be
settled exclusively by arbitration in the city nearest to the
Executive's principal residence (or, at the Executive's election,
in the city within the state in which the Executive's principal
residence is located nearest to such principal residence) which
has an office of the American Arbitration Association by one
arbitrator in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction. The
Corporation hereby waives its right to contest the personal
jurisdiction or venue of any court, federal or state, in an
action brought to enforce this Agreement or any award of an
arbitrator hereunder which action is brought in the jurisdiction
in which such arbitration was conducted, or , if no arbitration
was elected, in which arbitration could have been conducted pur-
suant to this provision.
<PAGE>
11. COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
BOWATER INCORPORATED
/s/ Ronald E. Gustafson By /s/ A. P. Gammie
Witness Its
/s/ E. H. Beaver /s/ Ecton R. Manning
Witness
EXHIBIT 10.9.1
THIS AMENDMENT, made the 23rd day of August, 1989 by
BOWATER INCORPORATED, a Delaware corporation having a mailing
address of One Parklands Drive, Darien, Connecticut 06820 (the
"Corporation"), and E. R. MANNING of 741 Washington Road, Woodbury,
Connecticut 06798 the ("Executive").
WHEREAS, the Corporation and the Executive entered into an
Employment Agreement dated August 25, 1988 (the "Employment
Agreement"); and
WHEREAS, the Corporation and the Executive now wish to amend
the Employment Agreement in the manner hereinafter set forth;
NOW, THEREFORE, the Employment Agreement is hereby amended,
effective August 23, 1989, as follows:
1. The first sentence of Section 8 of the Employment
Agreement shall be deleted and the following shall be substituted
therefor:
8. Severance Pay. If the Executive's employment hereunder
is involuntarily terminated for any reason other than
those set forth in Section 2(c) hereof, then unless the
Corporation shall have terminated the Executive for
"Cause", the Corporation shall pay the Executive
severance pay in the amount equal to twenty-four (24)
months of the Executive's base salary on the effective
date of the termination plus 1/12 of the amount of the
last bonus paid to the Executive under the Corporation's
bonus plan applicable to the Executive for each month in
the period beginning on January 1 of the year in which
the date of the termination occurs and ending on the date
of the termination and for each months' base salary to
which the Executive is entitled under this Section 8,
provided however, that any amount paid to the Executive
for services rendered subsequent to the thirtieth (30th)
day following the communication to the Executive of
notice of termination shall be deducted from the
severance pay otherwise due hereunder.
Except as hereby amended, all other provisions of the
Employment Agreement shall remain in full force and in effect. All
capitalized terms not otherwise defined herein shall have the
meaning assigned to such terms in the Employment Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day and year first above written.
BOWATER INCORPORATED
/s/ R. E. Gustafson By /s/ A. P. Gammie
Witness Its
/s/ Leonard M. Saari /s/ E. R. Manning
Witness
<PAGE>
THIS AMENDMENT, made the 23rd day of August, 1989 by BOWATER
INCORPORATED, a Delaware corporation having a mailing address of
One Parklands Drive, Darien, Connecticut 06820 (the "Corporation"),
and E. R. MANNING of 741 Washington Road, Woodbury, Connecticut
06798 the ("Executive").
WHEREAS, the Corporation and the Executive entered into a
Severance Agreement dated August 25, 1988 (the "Severance
Agreement"); and
WHEREAS, the Executive and the Corporation now wish to amend
the Severance Agreement in the manner hereinafter set forth;
NOW, THEREFORE, the Severance Agreement is hereby amended,
effective August 23, 1989 in the following respects:
1. Section i(i) of the Severance Agreement shall be deleted
and the following shall be substituted therefor:
(i) "Person" shall mean any individual, corporation,
partnership, group, association or other "person"
as such term is used in Section 13(d) and 14(d) of
the Exchange Act.
2. Section 3(b)(v) of the Severance Agreement shall be
renumbered as Section (b)(vi).
3. A new Section (b)(v) shall be added to the Severance
Agreement to read as follows:
(v) For each full or partial month in the period beginning on
January lst of the year in which the date of the
termination occurs and ending on the date of the
termination, one-twelfth of the greater of (x) the
highest amount of the actual bonus awarded to the
Executive in the five (5) fiscal years immediately
preceding the year in which the Change in Control occur-
red and (y) an amount equal to the amount the Executive
would have been awarded under the Corporation's bonus
plan in effect immediately prior to the Change in Control
for the fiscal year in which the Change in Control
occurred had the Executive continued to render services
to the Corporation at the same level of performance, at
the same level of salary, and in the same position as
immediately prior to the Change in Control;
4. Sections 3(d) and 3(e) of the Severance Agreement shall be
renumbered as Section 3(f) and 3(g), respectively.
5. The following new Sections 3(d) and 3(e) shall be added to
the Severance Agreement:
(d) The Corporation shall pay for or provide the Executive
individual out-placement assistance as offered by a
<PAGE>
member firm of the Association of Out-Placement Consult-
ing Firms.
(e) If any payment or benefit to or for the benefit of the
Executive in connection with a Change in Control of the
Corporation or termination of the Executive's employment
following a Change in Control of the Corporation (whether
pursuant to the terms of this Agreement, or any other
plan or arrangement or agreement with the Corporation,
any Person whose actions result in a Change in Control of
the Corporation or any Affiliate or Associate of the
Corporation or any such Person) is subject to the Excise
Tax (as hereinafter defined), the Corporation shall pay
to the Executive an additional amount such that the total
amount of all such payments and benefits (including
payments made pursuant to this Section 3(e)) net of the
Excise Tax and all other applicable federal, state and
local taxes shall equal the total amount of all such
payments and benefits to which the Executive would have
been entitled, but for this Section 3(e), net of all
applicable, federal, state and local taxes except the
Excise Tax. For purposes of this Section 3(e), the term
"Excise Tax" shall mean the tax imposed by Section 4999
of the Internal Revenue code of 1986 (the "Code") and any
similar tax that may hereafter be imposed.
The amount of the payment to the Executive under this
Section 3(e) shall be estimated by a nationally
recognized firm of certified public accountants (other
than the Corporation's independent auditors) based upon
the following assumptions:
(i) all payments and benefits to or for the benefit of
the Executive in connection with a Change in
Control of the Corporation or termination of the
Executive's employment following a Change in
Control of the Corporation shall be deemed to be
"parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute
payments" shall be deemed to be subject to the
Excise Tax unless, in the opinion of tax counsel
selected by the firm of certified public
accountants charged with estimating the payment to
the Executive under this Section 3(e), such
payments or benefits are not subject to the Excise
Tax; and
(ii) the Executive shall be deemed to pay federal, state
and local taxes at the highest marginal rate of
taxation for the applicable calendar year.
The estimated amount of the payment due the Executive
pursuant to this Section 3(e) shall be paid to the
<PAGE>
Executive in a lump sum not later than thirty (30) busi-
ness days following the effective date of the
termination. In the event that the amount of the
estimated payment is less than the amount actually due to
the Executive under this Section 3(e), the amount of any
such shortfall shall be paid to the Executive within ten
(10) days after the existence of the shortfall is
discovered.
Except as hereby amended, all other provisions of the
Severance Agreement shall remain in full force and effect. All
capitalized terms not otherwise defined herein shall have the
meaning assigned to such terms in the Severance Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed as of the 23rd day of August, 1989.
BOWATER INCORPORATED
By /s/ A. P. Gammie
Its
/s/ R. E. Gustafson
Witness
/s/ Leonard M. Saari
Witness
/s/ E. R. Manning
EXHIBIT 10.9.2
MODIFICATION
OF
EMPLOYMENT AND SEVERANCE AGREEMENTS
THIS AGREEMENT is made and entered into as of this llth day
of June, 1992, by and between Bowater Incorporated, a Delaware
corporation having a mailing address of One Parklands Drive, P.O.
Box 4012, Darien, Connecticut 06820-1412, (the "Corporation") ,
and E. R. Manning of 741 Washington Road, Woodbury, Connecticut
06798 (the "Executive").
WHEREAS, the Corporation now employs the Executive as Vice
President and General Counsel pursuant to an Employment Agreement
dated March 24, 1988, and amended August 23, 1989, (the
"Employment Agreement") and the Corporation and the Executive are
parties to a Severance Agreement dated March 24, 1988, and
amended August 23, 1989, (the "Severance Agreement"); and
WHEREAS, the Corporation has determined to relocate its
Headquarters offices from Darien, Connecticut to Greenville,
South Carolina, and
WHEREAS, the Corporation wishes to continue the Executive's
employment under circumstances that give the Executive a high
level of assurance regarding his tenure as the Corporation's
General Counsel to induce the Executive to relocate to the
Greenville, South Carolina area and continue to serve as its
General Counsel for a period sufficient to assure continuity in
the conduct of the corporate counsel function over the transition
period created by the Headquarters move; and
WHEREAS, in consideration of the inducements offered by the
Corporation, the Executive is willing to commit to a minimum
period of continued service in Greenville following the
Headquarters relocation, ending no sooner than April 1, 1996;
NOW, THEREFORE, the parties hereto agree that the Employment
Agreement and the Severance Agreement shall be modified in the
following respects:
1. Employment Agreement. The Employment Agreement is
hereby modified as follows:
(a) Term. Section 2 of the Employment Agreement is amended
to read in its entirety as follows:
2. "Term.
(a) Subject to the provisions of subparagraph (b) of this
Section 2, the term of this Agreement, having begun on
March 24, 1988, shall continue from the date of this
Modification until the earlier of the termination of
<PAGE>
the Executive's employment by the Corporation for
'Cause' (as defined in the Severance Agreement); (ii)
any date prior to April 1, 1996, on which date the
Executive ceases (by his own decision or action,
prompted by reasons other than 'Good Reason', as
defined in the Severance Agreement) to serve as General
Counsel of the Corporation; (iii) April 1, 1998; or
(iv) such later date as may be agreed upon in writing
by the Corporation and the Executive prior to the
earlier of (i), (ii), or (iii) above.
(b) Notwithstanding Section 2(a), the term of this
Agreement shall end upon the death of the Executive and
shall be suspended following the inability of the
Executive to perform his duties properly, whether by
reason of ill-health, accident or other cause, for a
period of one hundred and eighty (180) consecutive days
or for periods totaling one hundred and eighty (180)
days occurring within any twelve (12) consecutive
calendar months, and shall remain suspended for so long
as the Executive's condition qualifies him for benefits
under the Corporation's Long Term Disability Insurance
Program and for credit for years of service under the
Bowater Incorporated Employees' Retirement Plan (the
'Plan'), but not beyond the earlier of (i) the end of
the Executive's period of disability or the Executive's
'Normal Retirement Date', as that term is defined in
the Plan. Notwithstanding the termination of the term
of this Agreement upon the Executive's death, the
provisions of subsection 5 (g) shall remain in effect
for such reasonable period following the Executive's
death as shall be required for orderly evacuation and
disposition of the Executive's Greenville residence by
his surviving spouse (and/or the Executive's Executor,
Administrator or personal representative)."
(b) Position and Duties. Section 3 of the Employment Agreement
is amended to read as follows:
"3. Position and Duties. At least until April 1, 1996, and
thereafter until such later date as the Executive and
the Corporation may agree upon as the termination of
his tenure as General Counsel, the Executive shall be
employed as Vice President and General Counsel of the
Corporation, with the duties and responsibilities
customarily attendant to that office, provided that the
Executive shall undertake such other and further
assignments and responsibilities of at least comparable
status and consistent with his professional
capabilities as the Board of Directors may direct.
After the termination of the Executive's tenure as
General Counsel and until the termination of this
Employment Agreement, the Executive shall continue to
render services to the Corporation and shall undertake
<PAGE>
such other and further assignments and responsibilities
as the Board of Directors may direct. The Executive
shall diligently and faithfully devote his full working
time and best efforts to the performance of the
services under this Agreement and to the furtherance of
the best interests of the Corporation; provided,
however that if, after the Executive ceases to serve as
General Counsel to the Corporation, the assignments and
responsibilities assigned to the Executive by the
Corporation's Board of Directors shall require less
than the full time efforts of the Executive, the
Corporation shall be deemed to have waived, and the
Executive shall be relieved of, the obligation to
devote his full working time to the Corporation."
(c) Place of Employment. Section 4 of the Employment
Agreement is amended to read as follows:
"4. Place of Employment. Until the relocation of the
Executive to the Corporation's Headquarters
offices in Greenville, South Carolina, the
Executive will be employed at the Corporation's
offices in the City of Darien, Connecticut.
Following such relocation and for so long as the
Executive remains General Counsel to the
Corporation, the Executive will be employed at the
Corporation's Headquarters offices in the City of
Greenville, South Carolina (or such other place as
the Corporation and the Executive mutually agree
upon). During any portion of the term of this
Employment Agreement that the Executive is not
employed as General Counsel to the Corporation,
the Executive will be employed at a suitable
facility within a twenty (20) mile radius of the
Executive's residence in Connecticut (or, with the
Executive's consent, at an appropriate location
outside the State of Connecticut)."
(d) Compensation and Benefits. Section 5 of the Employment
Agreement is amended by substituting for subsections
(a), (b) and (c) thereof the following amended
subsections (a), (b) and (c) and adding thereto the
following new subsection (g):
"(a) Base Salary. The Corporation shall pay to the
Executive a base salary at the annual rate of $188,000
(effective as of January 1, 1992), payable in
substantially equal periodic installments on the
Corporation's regular payroll dates. The Executive's
base salary shall be reviewed at least annually and
from time to time may be increased (or reduced, if such
reduction is effected pursuant to across-the-board
salary reductions similarly affecting all management
personnel of the Corporation at and above the
<PAGE>
Executives salary grade."
"(b) Bonus Plan. In addition to his base salary, the
Executive shall be entitled to receive a bonus(es)
under the Corporation's bonus plan(s) in effect from
time to time determined in the manner, at the time, and
in the amount set forth under such plan; provided,
however, that the annual bonus (or pro rata share
thereof for periods less than one (1) year) payable to
the Executive during his continued employment by the
Corporation after he ceases to serve as General Counsel
to the Corporation shall not be less than the sum of
(i) an amount equal to the bonus the Executive would
have received under the Corporation's annual bonus plan
for the year in which the Executive ceased to serve as
the Corporations's General Counsel, had the Executive
continued to render services to the Corporation as its
General Counsel at the same level of performance and at
the same level of salary (or, if greater, the
Executive's bonus for the preceding year), plus (ii) an
amount equal to the pro-rated annual portion of the
bonus most recently received by the Executive under the
Corporation's Long Term Cash Incentive Plan prior to
the termination of his tenure as General Counsel to the
Corporation."
"(c) Benefit Plans. Throughout the term hereof, the
Corporation shall provide benefits or make
contributions or premium payments, as appropriate, on
the Executive's behalf to the various benefit plans and
programs of the corporation (including, but not limited
to, the Corporation's health, accident, disability, and
life insurance, stock option or incentive, bonus,
savings, and retirement plans, policies or
arrangements) in which executive level employees of the
Corporation are eligible to participate in accordance
with the provisions thereof as in effect from time to
time."
"(g) Expenses of Acquiring and Maintaining Duplicate
Residential Facilities. Upon the relocation of the
Executive from the Corporation's Headquarters Offices
in Darien, Connecticut, to the Corporation's
Headquarters Offices in Greenville, South Carolina, the
Corporation agrees to underwrite (through purchase, net
after-tax cost reimbursement, interest-free loan with
any necessary income tax 'gross-up' or other similar
method of the Corporation's choice) the additional
costs incurred by the Executive in acquiring, improving
and maintaining a suitable residence in the Greenville,
South Carolina area, and to reimburse the Executive,
net of income tax on such reimbursements, for the
reasonable costs of (i) reasonable occasional travel
for the Executive and his spouse to the Executive's
<PAGE>
existing residence in Connecticut to see to the proper
maintenance thereof; (ii) regular periodic surveillance
of the condition of the Executive's Connecticut
residence during absences and oversight of activities
of service providers; and (iii) the cost of relocation
to Connecticut from South Carolina at the termination
of the Executive's tenure as General Counsel, in
accordance with the Corporation's practices and polices
then in effect. The Corporation acknowledges that such
reimbursable costs will include the cost of acquisition
of an additional motor vehicle by the Executive, title
to which shall be transferred to the Corporation upon
the Executive's permanent return to Connecticut. Any
loss sustained by the Executive upon disposition of his
Greenville area residence at the termination of this
Employment Agreement shall be borne by the Corporation.
Any capital appreciation in the Greenville area
residence at the termination of this Employment
Agreement (net of tax, if any, imposed upon the
Executive and/or his spouse, and net of improvements
made at the Executive's expense) shall inure to the
benefit of the Corporation (without regard to whether
such residence is owned by the Corporation or the
Executive). Any amounts loaned to the Executive by the
Corporation for the acquisition of relocation-related
assets shall be repaid to the Corporation not later
than October 1, 1996."
(e) Severance Pay. Section 8 of the Employment Agreement
is amended to read as follows:
"8. Severance Pay. Upon termination of the Executive's
employment hereunder for any reason other than those
set forth in Section 2(b) hereof, in a manner and at a
time when the Severance Agreement of even date between
the Corporation and the Executive is applicable, then,
unless the Corporation shall have terminated the
Executive's employment for 'Cause" (as defined in the
Severance Agreement), at his election, in lieu of the
benefits hereof, the Executive shall be entitled to the
benefits of said Severance Agreement."
(f) Ratification. In all respects, except as herein
provided, the Employment Agreement is hereby ratified
and confirmed.
2. Severance Agreement. The Severance Agreement is hereby
modified as follows:
(a) Term. Section 2 of the Severance Agreement is hereby
amended to read in its entirety as follows:
<PAGE>
"2. TERM OF AGREEMENT
The term of this Agreement, having begun on March 24,
1988, shall extend to the date on which the Executive's
rendering of services to the corporation is terminated
pursuant to the Employment Agreement as amended by a
Modification thereof dated June 11, 1992; provided,
however, that if the Corporation terminates the
Executive's Employment Agreement for Cause (as defined
herein) , or the Executive terminates his Employment
Agreement with the Corporation for other than Good
Reason (as defined herein), then in either case this
Agreement shall terminate upon the termination of the
Executive's Employment Agreement."
(b) Termination. The first paragraph of Section 3 of the
Severance Agreement is hereby amended to read as
follows:
"If a Change in Control of the Corporation shall have
occurred and, during the term of this Agreement, the
Executive's employment by the Corporation is terminated
for any reason other than his death, the expiration of
the Executive's Employment Agreement, by the
Corporation for Cause or by the Executive without Good
Reason, the Executive shall be under no further
obligation to perform services for the Corporation and
shall be entitled to receive the following payments:"
(c) Ratification. In all respects, except as herein
provided, the Severance Agreement is hereby ratified
and confirmed.
3. Expenses of Successful Contest. The Corporation shall
pay or reimburse the Executive for all costs, including
reasonable attorney's fees and expenses of either
litigation or arbitration, incurred by the Executive in
successfully contesting or disputing any termination of
his employment or in seeking to obtain or enforce any
right or benefit provided by his Employment Agreement,
his Severance Agreement or this modification thereof.
4. Benefit and Eligibility Confirmation. This instrument
confirms that if the Executive survives to April 1,
1998, and his Employment Agreement has not been
terminated in a manner permitted therein prior to that
date, he shall be eligible at that time to retire from
the employment of the Corporation with an aggregate
annual cash benefit under the Supplemental Benefit Plan
(from which there shall be deducted "Other Benefits",
as defined in that Plan) of not less than $100,000.00.
Any post-retirement increase in retirement benefits
payable to retired Supplemental Benefit Plan
Participants effected by the Corporation shall inure to
<PAGE>
the benefit of the Executive and any post-retirement
increase in the benefits which are described as "Other
Benefits" in the Supplemental Benefit Plan shall be
excluded from the amount of "Other Benefits" to be
deducted from the cash benefit payable to the Executive
under the Supplemental Benefit Plan. This instrument
further confirms that if the Executive's Employment
Agreement is terminated at any time by his death, the
Executive's surviving Spouse (as defined in the
Supplemental Benefit Plan) shall be entitled (without
regard to the Executive's Satisfaction of the
eligibility criteria therefor) to the sixty (60%)
percent Spouse's Pre-Retirement Death Benefit as
provided in the Supplemental Benefit Plan, determined
by reference to the greater of (i) the Executive's
aggregate annual benefit amount recited above, or (ii)
the benefit projected to his Normal Retirement Date as
provided in the Supplemental Benefit Plan. The
determination of the Corporation's Executive Committee
of the Executive's eligibility upon retirement at the
time herein provided (as well as his Spouse's
eligibility upon his death) to receive benefits from
the Supplemental Benefit Plan is hereby confirmed.
5. Upon the Executive's retirement, the Executive, his
heirs, executors and administrators shall be granted
the longest period permissible within which to exercise
the rights granted to the Executive pursuant to the
Corporation's 1984, 1988 and 1992 (and any subsequently
adopted) Stock Incentive Plans consistent with
applicable law, regulation, Corporation policy and
practice, and provisions of the relevant plans and
awards.
IN WITNESS WHEREOF, the Corporation and the Executive have
executed this Agreement as of the day and year first above
written.
BOWATER INCORPORATED
/s/ Susan R. Wasilko By/s/ A. P. Gammie
Witness
/s/ R. E. Gustafson /s/ Ecton R. Manning
Witness Executive
Exhibit 10.10
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 25TH day of AUGUST, 1988, by and
between BOWATER INCORPORATED, a Delaware corporation having a
mailing address of ONE PARKLANDS DRIVE, DARIEN, CONNECTICUT
06820, (the "Corporation"), and J. P. FUCIGNA of 18 CEDAR PLACE,
GARDEN CITY, NEW YORK 11530 (the "Executive").
WHEREAS, the Corporation desires to employ the Executive as
Vice President-Treasurer; and
WHEREAS, the Executive is desirous of serving the
Corporation in such capacity;
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. During the term of this Agreement the
Corporation agrees to continue to employ the Executive, and the
Executive agrees to continue in the employ of the Corporation, in
accordance with and subject to the provisions of this Agreement.
2. Term.
(a) Subject to the provisions of subparagraphs (b) and
(c)of this Section 2, the term of this Agreement shall
begin on the date hereof and shall continue thereafter
until terminated by either party by written notice
given to the other party at least thirty (30) days
prior to the effective date of any such termination.
The effective date of the termination shall be the date
stated in such notice, provided that if the Corporation
specifies an effective date that is more than thirty
(30) days following the date of such notice, the
Executive may, upon thirty (30) days' written notice to
the Corporation, accelerate the effective date of such
termination.
(b) Notwithstanding Section 2(a), upon the occurrence of a
Change in Control as defined in the Severance Agreement
of even date between the Corporation and the Executive
(the "Severance Agreement"), the term of this Agreement
shall be deemed to continue until terminated, but in
any event, for a period of not less than three (3)
years following the date of the Change in Control,
<PAGE>
unless such termination shall be at the Executive's
election for other than "Good Reason" as that term is
defined in the Severance Agreement.
(c) Notwithstanding Section 2(a), the term of this
Agreement shall end upon: (i) the death of the
Executive; (ii) the inability of the Executive to
perform his duties properly, whether by reason of ill-
health, accident or other cause, for a period of one
hundred and eighty (180) consecutive days or for
periods totaling one hundred and eighty (180) days
occurring within any twelve (12) consecutive calendar
months; or (iii) the Executive's retirement on his
early or normal retirement date.
3. Position and Duties. Throughout the term hereof,
the Executive shall be employed as Vice President-Treasurer of
the Corporation, with the duties and responsibilities customarily
attendant to that office, provided that the Executive shall
undertake such other and further assignments and responsibilities
of at least comparable status as the Board of Directors may
direct. The Executive shall diligently and faithfully devote his
full working time and best efforts to the performance of the
services under this Agreement and to the furtherance of the best
interests of the Corporation.
4. Place of Employment. The Executive will be employed at
the Corporation's offices in the City of Darien, Connecticut or
at such other place as the Corporation shall designate from time
to time, provided, however, that if the Executive is transferred
to another place of employment, necessitating a change in his
residence, the Executive shall be entitled to financial
assistance in accordance with the terms of the Corporation's
relocation policy then in effect.
5. Compensation and Benefits.
(a) Base Salary. The Corporation shall pay to the
Executive a base salary at the annual rate of $126,000,
payable in substantially equal periodic installments on
the Corporation's regular payroll dates. The
Executive's base salary shall be reviewed at least
annually and from time to time may be increased (or
reduced, if such reduction is effected pursuant to
across-the-board salary reductions similarly affecting
all management personnel of the Corporation).
(b) Bonus Plan. In addition to his base salary, the
Executive shall be entitled to receive a bonus under
the Corporation's bonus plan in effect from time to
time determined in the manner, at the time, and in the
amounts set forth under such plan.
(c) Benefit Plans. The Corporation shall make contribu-
<PAGE>
tions on the Executive's behalf to the various benefit
plans and programs of the Corporation in which the
Executive is eligible to participate in accordance with
the provisions thereof as in effect from time to time.
(d) Vacations. The Executive shall be entitled to paid
vacation, in keeping with the Corporation's policy as
in effect from time to time, to be taken at such time
or times as may be approved by the Corporation.
(e) Expenses. The Corporation shall reimburse the Exe-
cutive for all reasonable expenses properly incurred,
and appropriately documented, by the Executive in
connection with the business of the Corporation.
(f) Perquisites. The Corporation shall make available to
the Executive all perquisites to which he is entitled
by virtue of his position.
6. Nondisclosure. During and after the term of this
Agreement, the Executive shall not, without the written consent
of the Board of Directors of the Corporation, disclose or use
directly or indirectly, (except in the course of employment
hereunder and in furtherance of the business of the Corporation
or any of its subsidiaries and affiliates) any of the trade
secrets or other confidential information or proprietary data of
the Corporation or its subsidiaries or affiliates; provided,
however, that confidential information shall not include any
information known generally to the public (other than as a result
of unauthorized disclosure by the Executive) or any information
of a type not otherwise considered confidential by persons
engaged in the same or similar businesses.
7. Noncompetition. During the term of this Agreement, and
for a period of one (1) year after the date the Executive's
employment terminates, the Executive shall not, without the prior
approval of the Board of Directors of the Corporation in the same
or a similar capacity engage in or invest in, or aid or assist
anyone else in the conduct of any business (other than the
businesses of the Corporation and its subsidiaries and
affiliates) which directly competes with the business of the
Corporation and its subsidiaries and affiliates as conducted
during the term hereof. If any court of competent jurisdiction
shall determine that any of the provisions of this Section 7
shall not be enforceable because of the duration or scope
thereof, the parties hereto agree that said court shall have the
power to reduce the duration and scope of such provision to the
extent necessary to make it enforceable and this Agreement in its
reduced form shall be valid and enforceable to the extent
permitted by law. The Executive acknowledges that the
Corporation's remedy at law for a breach by the Executive of the
provisions of this Section 7 will be inadequate. Accordingly, in
the event of the breach or threatened breach by the Executive of
this Section 7, the Corporation shall be entitled to injunctive
<PAGE>
relief in addition to any other remedy it may have.
8. Severance Pay. If the Executive's employment hereunder
is involuntarily terminated for any reason other than those set
forth in Section 2(c) hereof, then unless the Corporation shall
have terminated the Executive for "Cause", the Corporation shall
pay the Executive severance pay in an amount equal to twenty-four
(24) months of the Executive's base salary on the effective date
of the termination, provided, however, that any amount paid to
the Executive by the Corporation for services rendered subsequent
to the thirtieth (30th) day following the communication to the
Executive of notice of termination shall be deducted from the
severance pay otherwise due hereunder. Such payment shall be
made in a lump sum within ten (10) business days following the
effective date of the termination. The severance pay shall be in
lieu of all other compensation or payments of any kind relating
to the termination of the Executive's employment hereunder;
provided that the Executive's entitlement to compensation or
payments under the Corporation's retirement plans, stock option
or incentive plans, savings plans or bonus plans attributable to
service rendered prior to the effective date of the termination
shall not be affected by this clause and shall continue to be
governed by the applicable provisions of such plans; and further
provided that in lieu hereof, at his election, the Executive
shall be entitled to the benefits of the Severance Agreement of
even date between the Corporation and the Executive, if
termination occurs in a manner and at a time when such Severance
Agreement is applicable. For purposes of this Agreement, the
term for "Cause" shall mean because of gross negligence or
willful misconduct by the Executive either in the course of his
employment hereunder or which has a material adverse effect on
the Corporation or the Executive's ability to perform adequately
and effectively his duties hereunder.
9. Notices. Any notices required or permitted to be given
under this Agreement shall be in writing and shall be deemed to
have been given when delivered or mailed, by registered or
certified mail, return receipt requested to the respective
addresses of the parties set forth above, or to such other
address as any party hereto shall designate to the other party in
writing pursuant to the terms of this Section 9.
10. Severability. The provisions of this Agreement are
severable, and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of any
other provision.
11. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the substantive laws of the State
of Connecticut.
12. Supersedure. This Agreement shall cancel and supersede
all prior agreements relating to employment between the Executive
and the Corporation, except the Severance Agreement.
<PAGE>
13. Waiver of Breach. The waiver by a party of a breach
of any provision of this Agreement shall not operate or be
construed as a waiver of any prior or subsequent breach by any of
the parties hereto.
14. Binding Effect. The terms of this Agreement shall be
binding upon and inure to the benefit of the successors and
assigns of the Corporation and the heirs, executors,
administrators and successors of the Executive, but this
Agreement may not be assigned by the Executive.
IN WITNESS WHEREOF, the Corporation and the Executive have
executed this Agreement as of the day and year first above
written.
BOWATER INCORPORATED
/s/ R. E. Gustafson By /s/ A. P. Gammie
Its
/s/ Kathleen Melchionne /s/ J. P. Fucigna
<PAGE>
SEVERANCE AGREEMENT
THIS AGREEMENT, made the 25TH day of AUGUST, 1988, by and
between BOWATER INCORPORATED, a Delaware corporation having a
mailing address of ONE PARKLANDS DRIVE, DARIEN, CONNECTICUT
06820, (the "Corporation"), and J. P. FUCIGNA of 18 CEDAR PLACE,
GARDEN CITY, NEW YORK 11530 (the "Executive").
WHEREAS, the Corporation considers it essential to the best
interests of its shareholders to foster the continued employment
of key management personnel; and
WHEREAS, the uncertainty attendant to a change in control of
the Corporation may result in the departure or distraction of
management personnel to the detriment of the Corporation and its
shareholders; and
WHEREAS, the Board of Directors of the Corporation (the
"Board") has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
members of the Corporation's management, including Executive, to
their assigned duties in the event of a change in control of the
Corporation.
NOW THEREFORE, it is hereby agreed as follows:
1. DEFINITIONS
The following terms when used herein shall have the
meanings assigned to them below:
(a) "Acquiring Person" shall mean any Person who is or
becomes a "beneficial owner" (as defined in Rule 13d-3
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") of securities of the Corporation
representing twenty percent (20%) or more of the
combined voting power of the Corporation's then
outstanding voting securities, unless such Person has
filed Schedule 13G and all required amendments thereto
with respect to its holdings and continues to hold such
securities for investment in a manner qualifying such
Person to utilize Schedule 13G for reporting of
ownership.
(b) "Affiliate" and "Associate,, shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act,
as in effect on the date hereof.
(c) "Cause" shall mean and be limited to the Executive's
<PAGE>
gross negligence, willful misconduct or conviction of a
felony, which negligence, misconduct or conviction has
a demonstrable and material adverse effect upon the
Corporation, provided that the Corporation shall have
given the Executive written notice of the alleged
negligence or misconduct and the Executive shall have
failed to cure such negligence or misconduct within
thirty (30) days after his receipt of such notice. The
Executive shall be deemed to have been terminated for
Cause effective upon the effective date stated in a
written notice of such termination delivered by the
Corporation to the Executive and accompanied by a
resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board (after
reasonable notice to the Executive and an opportunity
for the Executive, with his counsel present, to be
heard before the Board) finding that, in the good faith
opinion of the Board, the Executive was guilty of
conduct constituting Cause hereunder and setting forth
in reasonable detail the facts and circumstances
claimed to provide the basis for the Executive's
termination, provided that the effective date shall not
be less than thirty (30) days from the date such notice
is given.
(d) "Change in Control" of the Corporation shall be deemed
to have occurred if:
(i) any Person is or becomes an Acquiring Person;
(ii) less than two-thirds (2/3) of the total membership
of the Board shall be Continuing Directors; or
(iii) the shareholders of the Corporation shall approve
a merger or consolidation of the Corporation or a
plan of complete liquidation of the Corporation or
an agreement for the sale or disposition by the
Corporation of all or substantially all of the
Corporation's assets.
(e) "Continuing Directors" shall mean any member of the
Board who was a member of the Board prior to the date
hereof, and any successor of a Continuing Director
while such successor is a member of the Board who is
not an Acquiring Person or an Affiliate or Associate of
an Acquiring Person or of any such Affiliate or
Associate and is recommended or elected to succeed the
Continuing Director by a majority of the Continuing
Directors.
(f) "Disability" shall mean the Executive's total and
permanent disability as defined in the Corporation's
long term disability insurance policy covering the
<PAGE>
Executive immediately prior to the Change in Control.
(g) "Good Reason" shall mean:
(i) an adverse change in the Executive's status,
duties or responsibilities as an executive of the
Corporation as in effect immediately prior to the
Change in Control;
(ii) failure of the Corporation to pay or provide the
Executive in a timely fashion the salary or
benefits to which he is entitled under any
Employment Agreement between the Corporation and
the Executive in effect on the date of the Change
in Control, or under any benefit plans or policies
in which the Executive was participating at the
time of the Change in Control (including, without
limitation, any incentive, bonus, stock option,
restricted stock, health, accident, disability,
life insurance, thrift, vacation pay, deferred
compensation and retirement plans or policies);
(iii) the reduction of the Executive's salary as in
effect on the date of the Change in Control;
(iv) the taking of any action by the Corporation
(including the elimination of a plan without
providing substitutes therefor, the reduction of
the Executive's awards thereunder or failure to
continue the Executive's participation therein)
that would substantially diminish the aggregate
projected value of the Executive's awards or
benefits under the Corporation's benefit plans or
policies described in Section l(g)(ii) in which
the Executive was participating at the time of the
Change in Control;
(v) a failure by the Corporation to obtain from any
successor the assent to this Agreement contem-
plated by Section 5 hereof; or
(vi) the relocation of the principal office at which
the Executive is to perform his services on behalf
of the Corporation to a location more than thirty-
five (35) miles from its location immediately
prior to the Change in Control or a substantial
increase in the Executive's business travel
obligations subsequent to the Change in Control.
Any circumstance described in this Section l(g) shall
constitute Good Reason even if such circumstance would
not constitute a breach by the Corporation of the terms
of the Employment Agreement between the Corporation and
the Executive in effect on the date of the Change in
<PAGE>
Control. The Executive shall be deemed to have
terminated his employment for Good Reason effective
upon the effective date stated in a written notice of
such termination given by him to the Corporation
setting forth in reasonable detail the facts and
circumstances claimed to provide the basis for
termination, provided that the effective date may not
precede, nor be more than sixty (60) days from, the
date such notice is given. The Executive's continued
employment shall not constitute consent to, or a waiver
of rights with respect to, any circumstance con-
stituting Good Reason hereunder.
(h) "Normal Retirement Date" shall have the meaning given
to such term in the Corporation's basic qualified
pension plan in which the Executive is a participant as
in effect on the date hereof or any successor or
substitute plan adopted prior to a Change in Control.
(i) "Person" shall have the meaning assigned to it in
Sections 13(d) and 14(d) of the Exchange Act.
2. TERM OF AGREEMENT
(a) The term of this Agreement shall initially be for the
period beginning on July 1, 1988 and ending on June 30,
1991. The term of this Agreement shall automatically
be extended on July 1, 1989 until June 30, 1992 without
further action by the parties, and shall be
automatically extended by an additional year on each
succeeding July 1, unless either the Corporation or the
Executive shall have served notice upon the other party
prior to such July 1 of its or his intention either
that the term of this Agreement shall not be extended,
or that the Executive's Employment Agreement is
terminated, provided, however, that if a Change in
Control of the Corporation shall occur during the term
of this Agreement, this Agreement shall continue in
effect until terminated but in any event for a period
of not less than three (3) years from the date of the
Change in Control.
(b) Notwithstanding Section 2(a), the term of this
Agreement shall end upon the termination of the
Executive's Employment if, prior to a Change in Control
of the Corporation, the Executive's employment with the
Corporation shall have terminated under the provisions
of any Employment Agreement between the Corporation and
the Executive then in effect.
<PAGE>
3. COMPENSATION UPON CHANGE IN CONTROL FOLLOWED BY A
TERMINATION
If a Change in Control of the Corporation shall have
occurred and, during the term of this Agreement, the Executive's
employment by the Corporation is terminated for any reason other
than his death, his Disability, his retirement on his Normal
Retirement Date, by the Corporation for Cause, or by the
Executive without Good Reason, the Executive shall be under no
further obligation to perform services for the Corporation and
shall be entitled to receive the following payments:
(a) The Corporation shall pay to the Executive his full
base salary through the effective date of the
termination within five (5) business days thereafter
and all benefits and awards (including both the cash
and stock components,) to which the Executive is
entitled under any benefit plans or policies in which
the Executive was a participant prior to the Change in
Control, at the time such payments are due pursuant to
the terms of such benefit plans, or policies as in
effect immediately prior to the Change in Control.
(b) At the election of the Executive, in addition to the
entitlements set forth in Section 3(a) but in lieu of
any payment to the Executive of any salary or severance
payments or benefits to which the Executive would be
entitled under the provisions of any Employment
Agreement between the Corporation and the Executive
then in effect, the Corporation shall pay to the
Executive, in a lump sum not later than ten (10)
business days following the effective date of the
termination:
(i) an amount equal to two (2) times the Executive's
annual base salary on the effective date of the
termination or, if higher, immediately prior to
the Change in Control;
(ii) an amount equal to two (2) times the greater of
(x) the highest amount of the actual bonus awarded
to the Executive in the five (5) fiscal years
immediately preceding the year in which the Change
in Control occurred and (y) an amount equal to the
amount the Executive would have been awarded under
the Corporation's bonus plan in effect immediately
prior to the Change in Control for the fiscal year
in which the Change in Control occurred had the
Executive continued to render services to the
Corporation at the same level of performance, at
the same level of salary, and in the same position
as immediately prior to the Change in Control;
<PAGE>
(iii) an amount equal to two (2) times the greater of
(x) the largest annual contribution made by the
Corporation to the Corporation's Savings Plan on
the Executive's behalf during the five (5) fiscal
years immediately preceding the year in which the
Change in Control occurred and (y) an amount equal
to the contribution the Corporation would have
made to said Plan on the Executive's behalf for
the fiscal year in which the Change in Control
occurred had he participated in said Plan for the
entire fiscal year, received a base salary equal
to the salary he was receiving immediately prior
to the Change in Control and had he elected to
contribute to the Plan the same percentage of his
base salary as he was contributing on said date;
and
(iv) an amount equal to twenty percent (20%) of the
Executive's annual base salary on the effective
Date of the termination or, if higher, immediately
prior to the Change in Control (as compensation
for medical, life insurance and other benefits
lost as a result of termination of the Executive's
employment).
(v) If a payment may be increased by reference to an
alternate calculation which cannot be made by the
time the payment is due, payment of the lesser,
known amount shall be made when due, and if any
additional amount becomes due, such additional
amount shall be paid within ten (10) days after
the information upon which calculation of such
payment is dependent first becomes available. The
amount of all payments due to the Executive
pursuant to this Section 3(b) shall be reduced by
1/24 for each full calendar month by which the
date which is two (2) years from the effective
date of the Executive's termination extends beyond
the Executive's Normal Retirement Date.
Upon entering into this Agreement and for a period
of fourteen (14) days following each anniversary
of the date hereof (the "Election Period"), the
Executive may, in writing, direct the Corporation
to pay any amounts to which he is entitled under
this Section 3(b) in equal annual installments
(not to exceed ten (10) annual installments), with
the first such installment payable within ten (10)
business days of the effective date of the
termination and each successive installment
payable on the anniversary of the effective date
of the termination or the next following business
day if such date is not a business day (the
"Deferred Payment Election"). A Deferred Payment
<PAGE>
Election, once made, cannot be revoked except
during an Election Period; provided, however, no
Deferred Payment Election can be made or revoked
by the Executive during an Election Period that
occurs after a Change in Control or at a time
when, in the judgment of the Corporation, a change
in control may occur within sixty (60) days of
such Election Period.
(c) The Corporation shall pay or provide to the Execu-
tive or his widow or children as the case may be,
such amounts and benefits as may be required so
that the pension and other post-retirement
benefits paid or made available to the Executive,
his widow and his children are equal to those, if
any, which would have been paid under the
Corporation's Basic and Supplemental Pension
(Benefit) Plans in effect immediately prior to the
Change in Control, assuming the Executive
continued in the employ of the Corporation at the
same compensation until the second anniversary of
the effective date of the termination of the
Executive's employment or until his Normal
Retirement Date, whichever is earlier.
Notwithstanding any conflicting restrictions in
the Plans or the fact of the termination of the
Executive's employment, until the Executive's
Normal Retirement Date, the Executive or his widow
and his children shall maintain a continuing right
to receive the pension and other benefits under
the above Plans with payments to begin upon
retirement and to elect an imputed retirement on
the Executive's 50th birthdate or any of his
birthdates thereafter until his Normal Retirement
Date, such election to be made by so notifying the
Corporation within one (1) year after termination
of his employment.
(d) The Executive shall not be required to mitigate
the amount of any payment provided in this Section
3, nor shall any payment or benefit provided for
in this Section 3 be offset by any compensation
earned by the Executive as the result of
employment by another employer, by retirement
benefits, or by offset against any amount claimed
to be owned by the Executive to the Corporation,
or otherwise.
(e) If any payment to the Executive required by this
Section 3 is not made within the time for such
payment specified herein, the Corporation shall
pay to the Executive interest on such payment at
the legal rate payable from time to time upon
judgments in the State of Connecticut from the
<PAGE>
date such payment is payable under the terms
hereof until paid.
4. EXECUTIVE'S EXPENSES
The Corporation shall pay or reimburse the Executive
for all costs, including reasonable attorney's fees and expenses
of either litigation or arbitration, incurred by the Executive in
contesting or disputing any termination of his employment
following a Change in Control or in seeking to obtain or enforce
any right or benefit provided by this Agreement.
5. BINDING AGREEMENT
This Agreement shall inure to the benefit of and be
enforceable by the Executive, his heirs, executors, adminis-
trators, successors and assigns. This Agreement shall be binding
upon the Corporation, its successors and assigns. The
Corporation shall 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 expressly to assume and agree to perform this
Agreement in accordance with its terms. The Corporation shall
obtain such assumption and agreement prior to the effectiveness
of any such succession.
6. NOTICE
Any notices and all other communications provided for
herein shall be in writing and shall be deemed to have been
duly given when delivered or mailed, by certified or registered
mail, return receipt requested, postage prepaid addressed to the
respective addresses set forth on the first page of this
Agreement or to such other address as either party may have
furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt. All notices to the Corporation shall be addressed to
the attention of the Board with a copy to each of the General
Counsel, the Vice President-Human Resources and Administration
and the Secretary of the Corporation.
7. AMENDMENTS; WAIVERS
No provision of this Agreement may be modified, waived
or discharged except in a writing specifically referred to such
provision and signed by the party against which enforcement of
such modification, waiver or discharge is sought. No waiver by
either party hereto of the breach of any condition or provision
of this Agreement shall be deemed a waiver of any other condition
or provision at the same or any other time.
<PAGE>
8. GOVERNING LAW
The validity, interpretation, construction and perfor-
mance of this Agreement shall be governed by the substantive laws
of the State of Connecticut.
9. VALIDITY
The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full
force and effect.
10. ARBITRATION
If the Executive so elects, any dispute or controversy
arising under or in connection with this Agreement shall be
settled exclusively by arbitration in the city nearest to the
Executive's principal residence (or, at the Executive's election,
in the city within the state in which the Executive's principal
residence is located nearest to such principal residence) which
has an office of the American Arbitration Association by one
arbitrator in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction. The
Corporation hereby waives its right to contest the personal
jurisdiction or venue of any court, federal or state, in an
action brought to enforce this Agreement or any award of an
arbitrator hereunder which action is brought in the jurisdiction
in which such arbitration was conducted, or , if no arbitration
was elected, in which arbitration could have been conducted pur-
suant to this provision.
11. COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
BOWATER INCORPORATED
/s/ R. E. Gustafson By /s/ A. P. Gammie
Witness Its
/s/ Kathleen Melchionne /s/ J. P. Fucigna
Witness
EXHIBIT 10.10.1
THIS AMENDMENT, made the 23rd day of August, 1989 by BOWATER
INCORPORATED, a Delaware corporation having a mailing address of
One Parklands Drive, Darien, Connecticut 06820 (the
"Corporation"), and J. P. FUCIGNA of 18 Cedar Place, Garden City,
New York 11530 the ("Executive").
WHEREAS, the Corporation and the Executive entered into a
Severance Agreement dated August 25, 1988 (the "Severance
Agreement"); and
WHEREAS, the Executive and the Corporation now wish to amend
the Severance Agreement in the manner hereinafter set forth;
NOW, THEREFORE, the Severance Agreement is hereby amended,
effective August 23, 1989 in the following respects:
1. Section l(i) of the Severance Agreement shall be
deleted and the following shall be substituted therefor:
(i) "Person" shall mean any individual, corporation,
partnership, group, association or other "person" as
such term is used in Section 13(d) and 14(d) of the
Exchange Act.
2. Section 3(b)(v) of the Severance Agreement shall be
renumbered as Section (b)(vi).
3. A new Section (b)(v) shall be added to the Severance
Agreement to read as follows:
(v) For each full or partial month in the period beginning
on January 1st of the year in which the date of the
termination occurs and ending on the date of the
termination, one-twelfth of the greater of (x) the
highest amount of the actual bonus awarded to the
Executive in the five (5) fiscal years immediately
preceding the year in which the Change in Control
occurred and (y) an amount equal to the amount the
Executive would have been awarded under the
Corporation's bonus plan in effect immediately prior to
the Change in Control for the fiscal year in which the
Change in Control occurred had the Executive continued
to render services to the Corporation at the same level
of performance, at the same level of salary, and in the
same position as immediately prior to the Change in
Control;
4. Sections 3(d) and 3(e) of the Severance Agreement shall
be renumbered as Section 3(f) and 3(g), respectively.
5. The following new Sections 3(d) and 3(e) shall be added
to the Severance Agreement:
<PAGE>
(d) The Corporation shall pay for or provide the Executive
individual out-placement assistance as offered by a
member firm of the Association of Out-Placement
Consulting Firms.
(e) If any payment or benefit to or for the benefit of the
Executive in connection with a Change in Control of the
Corporation or termination of the Executive's
employment following a Change in Control of the
Corporation (whether pursuant to the terms of this
Agreement, or any other plan or arrangement or
agreement with the Corporation, any Person whose
actions result in a Change in Control of the Cor-
poration or any Affiliate or Associate of the
Corporation or any such Person) is subject to the
Excise Tax (as hereinafter defined), the Corporation
shall pay to the Executive an additional amount such
that the total amount of all such payments and benefits
(including payments made pursuant to this Section 3(e))
net of the Excise Tax and all other applicable federal,
state and local taxes shall equal the total amount of
all such payments and benefits to which the Executive
would have been entitled, but for this Section 3(e),
net of all applicable, federal, state and local taxes
except the Excise Tax. For purposes of this Section
3(e), the term "Excise Tax" shall mean the tax imposed
by Section 4999 of the Internal Revenue Code of 1986
(the "Code") and any similar tax that may hereafter be
imposed.
The amount of the payment to the Executive under this
Section 3(e) shall be estimated by a nationally
recognized firm of certified public accountants (other
than the Corporation's independent auditors) based upon
the following assumptions:
(i) all payments and benefits to or for the benefit of
the Executive in connection with a Change in
Control of the Corporation or termination of the
Executive's employment following a Change in
Control of the Corporation shall be deemed to be
"parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute
payments" shall be deemed to be subject to the
Excise Tax unless, in the opinion of tax counsel
selected by the firm of certified public
accountants charged with estimating the payment to
the Executive under this Section 3(e), such
payments or benefits are not subject to the Excise
Tax; and
(ii) the Executive shall be deemed to pay federal,
state and local taxes at the highest marginal rate
of taxation for the applicable calendar year.
<PAGE>
The estimated amount of the payment due the Executive
pursuant to this Section 3(e) shall be paid to the
Executive in a lump sum not later than thirty (30)
business days following the effective date of the
termination. In the event that the amount of the
estimated payment is less than the amount actually due
to the Executive under this Section 3(e), the amount of
any such shortfall shall be paid to the Executive
within ten (10) days after the existence of the
shortfall is discovered.
Except as hereby amended, all other provisions of the
Severance Agreement shall remain in full force and effect. All
capitalized terms not otherwise defined herein shall have the
meaning assigned to such terms in the Severance Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed as of the 23rd day of August, 1989.
BOWATER INCORPORATED
By /s/ A. P. Gammie
/s/ R. E. Gustafson
Witness
/s/ Virginia M. Reed /s/ J. P. Fucigna
Witness
<PAGE>
THIS AMENDMENT, made the 23rd day of August, 1989 by BOWATER
INCORPORATED, a Delaware corporation having a mailing address of
One Parklands Drive, Darien, Connecticut 06820 (the
"Corporation"), and J. P. FUCIGNA of 18 Cedar Place, Garden City,
New York 11530 the ("Executive").
WHEREAS, the Corporation and the Executive entered into an
Employment Agreement dated August 25, 1988 (the "Employment
Agreement"); and
WHEREAS, the Corporation and the Executive now wish to amend
the Employment Agreement in the manner hereinafter set forth;
NOW, THEREFORE, the Employment Agreement is hereby amended,
effective August 23, 1989, as follows:
1. The first sentence of Section 8 of the Employment
Agreement shall be deleted and the following shall be substituted
therefor:
8. Severance Pay. If the Executive's employment hereunder
is involuntarily terminated for any reason other than
those set forth in Section 2(c) hereof, then unless the
Corporation shall have terminated the Executive for
"Cause", the Corporation shall pay the Executive
severance pay in the amount equal to twenty-four (24)
months of the Executive's base salary on the effective
date of the termination plus 1/12 of the amount of the
last bonus paid to the Executive under the
Corporation's bonus plan applicable to the Executive
for each month in the period beginning on January 1 of
the year in which the date of the termination occurs
and ending on the date of the termination and for each
months' base salary to which the Executive is entitled
under this Section 8, provided however, that any amount
paid to the Executive for services rendered subsequent
to the thirtieth (30th) day following the communication
to the Executive of notice of termination shall be
deducted from the severance pay otherwise due
hereunder.
Except as hereby amended, all other provisions of the
Employment Agreement shall remain in full force and in effect.
All capitalized terms not otherwise defined herein shall have the
meaning assigned to such terms in the Employment Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of the day and year first above
written.
BOWATER INCORPORATED
By /s/ A. P. Gammie
Its
/s/ R. E. Gustafson
Witness
/s/ Virginia M. Reed
Witness
/s/ J. P. Fucigna
EXHIBIT 10.10.2
MODIFICATION
OF
EMPLOYMENT AND SEVERANCE AGREEMENTS
THIS AGREEMENT is made and entered into as of this 26th day
of May, 1992, by and between Bowater Incorporated, a Delaware
corporation having a mailing address of one Parklands Drive, P.O.
Box 4012, Darien, Connecticut 06820-1412, (the "Corporation") ,
and J. P. Fucigna of 18 Cedar Place, Garden City, New York 11530,
(the "Executive").
WHEREAS, the Corporation now employs the Executive as Vice
President-Finance pursuant to an Employment Agreement dated
August 25, 1988, and amended August 23, 1989, (the "Employment
Agreement") and a Severance Agreement dated August 25, 1988, and
amended August 23, 1989, (the "Severance Agreement"); and
WHEREAS, the Executive and the Corporation wish to continue
the Executive's employment until a specified and agreed upon
date, whereupon the Executive will retire from the employment of
the Corporation and be entitled to receive certain benefits;
NOW, THEREFORE, the parties hereto agree that the Employment
Agreement and the Severance Agreement shall be modified in the
following respects:
1. Employment Agreement. The Employment Agreement is
hereby modified as follows:
(a) Term. Section 2 of the Employment Agreement is amended
to read in its entirety as follows:
"2. Term.
(a) Subject to the provisions of subparagraph (b) of
this Section 2, the term of this Agreement, having
begun on March 1, 1989, shall continue from the
date of this Modification until December 1, 1994,
unless earlier terminated by the Corporation for
'Cause' or by the Executive for other than 'Good
Reason' as those terms are defined in the
Severance Agreement.
(b) Notwithstanding Section 2(a), the term of this
Agreement shall end upon the death of the
Executive and shall be suspended following the
inability of the Executive to perform his duties
properly, whether by reason of ill-health,
accident or other cause, for a period of one
hundred and eighty (180) consecutive days or for
periods totaling one hundred and eighty (180) days
<PAGE>
occurring within any twelve (12) consecutive
calendar months, and shall remain suspended for so
long as the Executive's condition qualifies him
for benefits under the Corporation's Long Term
Disability Insurance Program and for credit for
years of service under the Bowater Incorporated
Employees' Retirement Plan (the 'Plan'), but not
beyond the earlier of (i) the end of the
Executive's period of disability or (ii) the
Executive's 'Normal Retirement Date', as that term
is defined in the Plan."
(b) Place of Employment. Section 4 of the Employment
Agreement is amended to read as follows:
"4.Place of Employment. The Executive will be
employed at the Corporation's offices (or at
suitable facilities provided by the Corporation)
in, or with a ten (10) mile radius of the City of
Darien, Connecticut (or such other place as the
Corporation and the Executive mutually agree
upon)."
(c) Severance Pay. Section 8 of the Employment
Agreement is amended to read as follows:
"8. Terminal Leave of Absence. If the Executive's
rendering of services hereunder is involuntarily
terminated for any reason other than those set
forth in Section 2 (b) hereof, then unless the
Executive shall have terminated this Agreement for
other than 'Good Reason' or the Corporation shall
have terminated the Executive for 'Cause' (as
those terms are defined in the Severance
Agreement), the effective date of such termination
shall be December 1, 1994, and the Executive shall
be on a terminal paid leave of absence from the
date the Corporation notifies the Executive his
services are no longer required through December
1, 1994. The Corporation shall pay to the
Executive in equal monthly installments annual
compensation during any such leave of absence (pro
rated for any period less than a year) equal to
the Executive's annual base salary on the date the
Executive's services are terminated, plus the
greater of (i) an amount equal to the bonus the
Executive would have received under the
Corporation's bonus plan for the year in which the
Executive's services are terminated, had the
Executive continued to render services to the
Corporation at the same level of performance, at
the same level of salary and in the same position
as immediately preceding the termination of his
services; or (ii) the bonus received by the
<PAGE>
Executive for the year preceding the year in which
the Executive's services are terminated. The
Executive's entitlement to compensation, benefits
or payments under the Corporation's health,
accident, life insurance, retirement, stock option
or incentive, savings and bonus (but not long term
disability) plans, policies or arrangements shall
not, except as otherwise required by law or
regulation, be affected by the Executive's leave
of absence status and shall continue to be
governed by the applicable provisions of such
plans as though the Executive had continued to
render services in the active employment of the
Corporation to the date or event (such as the
Executive's death) that otherwise ends the term of
this Agreement. Specifically, the period of any
terminal leave of absence is hereby designated as
a "leave of absence with the consent of the
Participant's Employer" which is intended to be
included within the definition of "Continuous
Employment" in the Supplemental Benefit Plan for
Designated Employees of Bowater Incorporated and
Affiliated Companies as Amended and Restated
Effective August 22, 1990, (the "Supplemental
Benefit Plan") and compensation paid during any
terminal leave of absence is intended to be
included within the definition of "Earnings" in
the Supplemental Benefit Plan (without regard to
whether such time is credited for benefit accrual
purposes under the Bowater Incorporated Employee
Retirement Plan or such compensation is includable
within that Plan's definition of "Compensation").
In lieu hereof, at his election, the Executive
shall be entitled to the benefits of the Severance
Agreement of even date between the Corporation and
the Executive, if termination occurs prior to the
commencement of the Executive's terminal leave of
absence (if any) pursuant hereto and in a manner
and at a time when such Severance Agreement is
applicable.
(d) Ratification. In all respects, except as herein
provided, the Employment Agreement is hereby
ratified and confirmed.
2. Severance Agreement. The Severance Agreement is
hereby modified as follows:
(a) Term. Section 2 of the Severance Agreement is
hereby amended to read as follows:
"2. Term of Agreement
The term of this Agreement, having begun on
<PAGE>
March 1, 1989, shall extend to December 1,
1994, or the earlier termination of the
Executive's rendering of services to the
Corporation pursuant to the Employment
Agreement as modified hereby; provided,
however, that if the Corporation terminates
the Executive's Employment Agreement for
Cause (as defined herein) or the Executive
terminates his Employment Agreement with the
Corporation for other than Good Reason (as
defined herein) , then in either case this
Agreement shall terminate upon the
termination of the Executive's Employment
Agreement."
(b) Termination. The first paragraph of Section 3 of the
Severance Agreement is hereby amended to read as
follows:
"If a Change in Control of the Corporation shall have
occurred and, during the term of this Agreement, the
Executive's employment by the Corporation is terminated
for any reason other than his death, the expiration of
the Executive's Employment Agreement, by the
Corporation for Cause or by the Executive without Good
Reason, the Executive shall be under no further
obligation to perform services for the Corporation and
shall be entitled to receive the following payments:"
(c) Ratification. In all respects, except as herein
provided, the Severance Agreement is hereby ratified
and confirmed.
3. Expenses of Successful Contest. The Corporation shall
pay or reimburse the Executive for all costs, including
reasonable attorney's fees and expenses of either litigation or
arbitration, incurred by the Executive in successfully contesting
or disputing any termination of his employment or in seeking to
obtain or enforce any right or benefit provided by his Employment
Agreement, his Severance Agreement or this Modification thereof.
4. Benefit and Eligibility Confirmation. This instrument
confirms that if the Executive survives to December 1, 1994, and
his Employment Agreement has not been terminated in a manner
permitted therein prior to that date, he shall be eligible at
that time to retire from the employment of the Corporation with
nineteen (19) years of "Continuous Employment" and an aggregate
annual benefit under the Supplemental Benefit Plan (from which
there shall be deducted "Other Benefits", as defined in that
Plan) of not less than $100,000.00. Any post-retirement
increase in retirement benefits payable to retired Supplemental
Benefit Plan Participants effected by the Corporation shall inure
to the benefit of the Executive and any post-retirement increase
in the benefits which are described as "Other Benefits" in the
<PAGE>
Supplemental Benefit Plan shall be excluded from the amount of
"Other Benefits" to be deducted from the cash benefit payable to
the Executive under the Supplemental Benefit Plan. This
instrument further confirms that if the Executive's Employment
Agreement is terminated at any time by his death, the Executive's
surviving Spouse (as defined in the Supplemental Benefit Plan)
shall be entitled to the sixty (60%) percent Spouse's Pre-
Retirement Death Benefit as provided in the Supplemental Benefit
Plan, determined by reference to the greater of (i) the
Executive's aggregate annual benefit amount recited above, or
(ii) the benefit projected to his Normal Retirement Date. The
determination of the Corporation's Executive Committee of the
Executive's eligibility upon retirement at the time herein
provided (as well as his Spouse's eligibility upon his death) to
receive benefits from the Supplemental Benefit Plan is hereby
confirmed. The Human Resources and Compensation Committee of the
Corporation's Board of Directors has determined that terminal
leave taken pursuant to the Employment Agreement as herein
modified will not interrupt or terminate employment for purposes
of determining the Executive's continued eligibility to exercise
options and or rights awarded pursuant to the Corporation's 1984,
1988 or 1992 Stock Option and Stock Incentive Plans. That
determination is hereby confirmed.
5. Upon the Executive's retirement (at the completion of
his terminal leave of absence, if any) the Executive, his heirs,
executors and administrators shall be granted the longest period
permissible within which to exercise the rights granted to the
Executive pursuant to the Corporation's 1984, 1988 and 1992 Stock
Incentive Plans consistent with applicable law, regulation,
Corporation policy and practice, and provisions of the relevant
plans and awards.
IN WITNESS WHEREOF, the Corporation and the Executive have
executed this Agreement as of the day and year first above
written.
BOWATER INCORPORATED
/s/ P. A. Temple By /s/ A. P. Gammie
Witness Its
/s/ P. A. Temple /s/ J. P. Fucigna
Witness Executive
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 15TH day of MARCH, 1993, by
and between BOWATER INCORPORATED, a Delaware corporation
having a mailing address of ONE PARKLANDS DRIVE, DARIEN,
CONNECTICUT 06820, (the "Corporation"), and PHILLIP A.
TEMPLE of 1500 LAKE SHORE DRIVE, CHICAGO, ILLINOIS 60610
(the "Executive").
WHEREAS, the Corporation desires to employ the Executive
as Vice President-Human Resources and Administration; and
WHEREAS, the Executive is desirous of serving the Cor-
poration in such capacity;
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. During the term of this Agreement the
Corporation agrees to continue to employ the Executive, and
the Executive agrees to continue in the employ of the Cor-
poration, in accordance with and subject to the provisions of
this Agreement.
2. Term.
(a) Subject to the provisions of subparagraphs (b) and
(c) of this Section 2, the term of this Agreement
shall begin on the date hereof and shall continue
thereafter until terminated by either party by
written notice given to the other party at least
thirty (30) days prior to the effective date of any
such termination. The effective date of the ter-
mination shall be the date stated in such notice,
provided that if the Corporation specifies an effec-
tive date that is more than thirty (30) days fol-
lowing the date of such notice, the Executive may,
upon thirty (30) days' written notice to the Cor-
poration, accelerate the effective date of such
termination.
(b) Notwithstanding Section 2(a), upon the occurrence of
a Change in Control as defined in the Severance
Agreement of even date between the Corporation and
the Executive (the "Severance Agreement"), the term
of this Agreement shall be deemed to continue until
terminated, but in any event, for a period of not
<PAGE>
less than three (3) years following the date of the
Change in Control, unless such termination shall be
at the Executive's election for other than "Good
Reason" as that term is defined in the Severance
Agreement.
(c) Notwithstanding Section 2(a), the term of this
Agreement shall end upon: (i) the death of the
Executive; (ii) the inability of the Executive to
perform his duties properly, whether by reason of
ill-health, accident or other cause, for a period of
one hundred and eighty (180) consecutive days or for
periods totaling one hundred and eighty (180) days
occurring within any twelve (12) consecutive calen-
dar months; or (iii) the executive's retirement on
his early or normal retirement date.
3. Position and Duties. Throughout the term hereof,
the Executive shall be employed as Vice President-Human
Resources and Administration of the Corporation, with the
duties and responsibilities customarily attendant to that
office, provided that the Executive shall undertake such
other and further assignments and responsibilities of at
least comparable status as the Board of Directors may direct.
The Executive shall diligently and faithfully devote his full
working time and best efforts to the performance of the
services under this Agreement and to the furtherance of the
best interests of the Corporation.
4. Place of Employment. The Executive will be employed
at the Corporation's offices in the City of Greenville, South
Carolina or at such other place as the Corporation shall
designate from time to time, provided, however, that if the
Executive is transferred to another place of employment,
necessitating a change in his residence, the Executive shall
be entitled to financial assistance in accordance with the
terms of the Corporation's relocation policy then in effect.
5. Compensation and Benefits.
(a) Base Salary. The Corporation shall pay to the
Executive a base salary at the annual rate of
$180,000, payable in substantially equal periodic
installments on the Corporation's regular payroll
dates. The Executive's base salary shall be re-
viewed at least annually and from time to time may
be increased (or reduced, if such reduction is
effected pursuant to across-the-board salary reduc-
tions similarly affecting all management personnel
of the Corporation).
<PAGE>
(b) Bonus Plan. In addition to his base salary, the
Executive shall be entitled to receive a bonus under
the Corporation's bonus plan in effect from time to
time determined in the manner, at the time, and in
the amounts set forth under such plan.
(c) Benefit Plans. The Corporation shall make con-
tributions on the Executive's behalf to the various
benefit plans and programs of the Corporation in
which the Executive is eligible to participate in
accordance with the provisions thereof as in effect
from time to time.
(d) Vacations. The Executive shall be entitled to paid
vacation, in keeping with the Corporation's policy
as in effect from time to time, to be taken at such
time or times as may be approved by the Corporation.
(e) Expenses. The Corporation shall reimburse the
Executive for all reasonable expenses properly
incurred, and appropriately documented, by the
Executive in connection with the business of the
Corporation.
(f) Perquisites. The Corporation shall make available
to the Executive all perquisites to which he is
entitled by virtue of his position.
6. Nondisclosure. During and after the term of this
Agreement, the Executive shall not, without the written
consent of the Board of Directors of the Corporation, dis-
close or use directly or indirectly, (except in the course of
employment hereunder and in furtherance of the business of
the Corporation or any of its subsidiaries and affiliates)
any of the trade secrets or other confidential information or
proprietary data of the Corporation or its subsidiaries or
affiliates; provided, however, that confidential information
shall not include any information known generally to the
public (other than as a result of unauthorized disclosure by
the Executive) or any information of a type not otherwise
considered confidential by persons engaged in the same or
similar businesses.
7. Noncompetition. During the term of this Agreement,
and for a period of one (1) year after the date the Execu-
tive's employment terminates, the Executive shall not, with-
out the prior approval of the Board of Directors of the
Corporation in the same or a similar capacity engage in or
invest in, or aid or assist anyone else in the conduct of any
business (other than the businesses of the Corporation and
its subsidiaries and affiliates) which directly competes with
the business of the Corporation and its subsidiaries and
affiliates as conducted during the term hereof. If any court
<PAGE>
of competent jurisdiction shall determine that any of the
provisions of this Section 7 shall not be enforceable because
of the duration or scope thereof, the parties hereto agree
that said court shall have the power to reduce the duration
and scope of such provision to the extent necessary to make
it enforceable and this Agreement in its reduced form shall
be valid and enforceable to the extent permitted by law. The
Executive acknowledges that the Corporation's remedy at law
for a breach by the Executive of the provisions of this
Section 7 will be inadequate. Accordingly, in the event of
the breach or threatened breach by the Executive of this
Section 7, the Corporation shall be entitled to injunctive
relief in addition to any other remedy it may have.
8. Severance Pay. If the Executive's employment here-
under is involuntarily terminated for any reason other than
those set forth in Section 2(c) hereof, then unless the
Corporation shall have terminated the Executive for "Cause",
the Corporation shall pay the Executive severance pay in the
amount equal to twenty-four months of the Executive's base
salary on the effective date of the termination plus 1/12 of
the amount of the last bonus paid to the Executive under the
Corporation's bonus plan applicable to the Executive for each
month in the period beginning on January 1 of the year in
which the date of the termination occurs and ending on the
date of the termination and for each months' base salary to
which the Executive is entitled under this Section 8, pro-
vided however, that any amount paid to the Executive for
services rendered subsequent to the thirtieth (30th) day
following the communication to the Executive of notice of
termination shall be deducted from the severance pay other-
wise due hereunder. Such payment shall be made in a lump sum
within ten (10) business days following the effective date of
the termination. The severance pay shall be in lieu of all
other compensation or pay ments of any kind relating to the
termination of the Executive's employment hereunder; provided
that the Executive's entitlement to compensation or payments
under the Corporation's retirement plans, stock option or
incentive plans, savings plans or bonus plans attributable to
service rendered prior to the effective date of the termina-
tion shall not be affected by this clause and shall continue
to be governed by the applicable provisions of such plans;
and further provided that in lieu hereof, at his election,
the Executive shall be entitled to the benefits of the Sever-
ance Agreement of even date between the Corporation and the
Executive, if termination occurs in a manner and at a time
when such Severance Agreement is applicable. For purposes of
this Agreement, the term for "Cause" shall mean because of
gross negligence or willful misconduct by the Executive
either in the course of his employment hereunder or which has
a material adverse effect on the Corporation or the Execu-
tive's ability to perform adequately and effectively his
duties hereunder.
<PAGE>
9. Notices. Any notices required or permitted to be
given under this Agreement shall be in writing and shall be
deemed to have been given when delivered or mailed, by re-
gistered or certified mail, return receipt requested to the
respective addresses of the parties set forth above, or to
such other address as any party hereto shall designate to the
other party in writing pursuant to the terms of this Section
9.
10. Severability. The provisions of this Agreement are
severable, and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of
any other provision.
11. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the substantive laws of
the State of Connecticut.
12. Supersedure. This Agreement shall cancel and super-
sede all prior agreements relating to employment between the
Executive and the Corporation, except the Severance Agree-
ment.
13. Waiver of Breach. The waiver by a party of a breach
of any provision of this Agreement shall not operate or be
construed as a waiver of any prior or subsequent breach by
any of the parties hereto.
14. Binding Effect. The terms of this Agreement shall
be binding upon and inure to the benefit of the successors
and assigns of the Corporation and the heirs, executors,
administrators and successors of the Executive, but this
Agreement may not be assigned by the Executive.
IN WITNESS WHEREOF, the Corporation and the Executive
have executed this Agreement as of the day and year first
above written.
BOWATER INCORPORATED
/s/Doris Simpson By/s/ Anthony P. Gammie
Witness Its
/s/Harriet Shaw /s/ Phillip A. Temple
Witness
<PAGE>
SEVERANCE AGREEMENT
THIS AGREEMENT, made the 15TH day of MARCH, 1993, by and
between BOWATER INCORPORATED, a Delaware corporation having a
mailing address of ONE PARKLANDS DRIVE, DARIEN, CONNECTICUT
06820, (the "Corporation"), and PHILLIP A. TEMPLE of 1500
LAKE SHORE DRIVE, CHICAGO, ILLINOIS 60610 (the "Executive").
WHEREAS, the Corporation considers it essential to the
best interests of its shareholders to foster the continued
employment of key management personnel; and
WHEREAS, the uncertainty attendant to a change in con-
trol of the Corporation may result in the departure or dis-
traction of management personnel to the detriment of the
Corporation and its shareholders; and
WHEREAS, the Board of Directors of the Corporation (the
"Board") has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and
dedication of members of the Corporation's management, in-
cluding Executive, to their assigned duties in the event of a
change in control of the Corporation.
NOW THEREFORE, it is hereby agreed as follows:
1. DEFINITIONS
The following terms when used herein shall have the
meanings assigned to them below:
(a) "Acquiring Person" shall mean any Person who is or
becomes a "beneficial owner" (as defined in Rule
13d-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") of securities of the
Corporation representing twenty percent (20%) or
more of the combined voting power of the Corpora-
tion's then outstanding voting securities, unless
such Person has filed Schedule 13G and all required
amendments thereto with respect to its holdings and
continues to hold such securities for investment in
a manner qualifying such Person to utilize Schedule
13G for reporting of ownership.
<PAGE>
(b) "Affiliate" and "Associate" shall have the respec-
tive meanings ascribed to such terms in Rule 12b-2
of the General Rules and Regulations under the
Exchange Act, as in effect on the date hereof.
(c) "Cause" shall mean and be limited to the Executive's
gross negligence, willful misconduct or conviction
of a felony, which negligence, misconduct or con-
viction has a demonstrable and material adverse
effect upon the Corporation, provided that the
Corporation shall have given the Executive written
notice of the alleged negligence or misconduct and
the Executive shall have failed to cure such negli-
gence or misconduct within thirty (30) days after
his receipt of such notice. The Executive shall be
deemed to have been terminated for Cause effective
upon the effective date stated in a written notice
of such termination delivered by the Corporation to
the Executive and accompanied by a resolution duly
adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the
Board at a meeting of the Board (after reasonable
notice to the Executive and an opportunity for the
Executive, with his counsel present, to be heard
before the Board) finding that, in the good faith
opinion of the Board, the Executive was guilty of
conduct constituting Cause hereunder and setting
forth in reasonable detail the facts and circum-
stances claimed to provide the basis for the Execu-
tive's termination, provided that the effective date
shall not be less than thirty (30) days from the
date such notice is given.
(d) "Change in Control" of the Corporation shall be
deemed to have occurred if:
(i) any Person is or becomes an Acquiring Person;
(ii) less than two-thirds (2/3) of the total mem-
bership of the Board shall be Continuing
Directors; or
(iii) the shareholders of the Corporation shall ap-
prove a merger or consolidation of the Cor-
poration or a plan of complete liquidation of
the Corporation or an agreement for the sale
or disposition by the Corporation of all or
substantially all of the Corporation's assets.
(e) "Continuing Directors" shall mean any member of the
Board who was a member of the Board prior to the
date hereof, and any successor of a Continuing
Director while such successor is a member of the
<PAGE>
Board who is not an Acquiring Person or an Affiliate
or Associate of an Acquiring Person or of any such
Affiliate or Associate and is recommended or elected
to succeed the Continuing Director by a majority of
the Continuing Directors.
(f) "Disability" shall mean the Executive's total and
permanent disability as defined in the Corporation's
long term disability insurance policy covering the
Executive immediately prior to the Change in Con-
trol.
(g) "Good Reason" shall mean:
(i) an adverse change in the Executive's status,
duties or responsibilities as an executive of
the Corporation as in effect immediately
prior to the Change in Control;
(ii) failure of the Corporation to pay or provide
the Executive in a timely fashion the salary
or benefits to which he is entitled under any
Employment Agreement between the Corporation
and the Executive in effect on the date of
the Change in Control, or under any benefit
plans or policies in which the Executive was
participating at the time of the Change in
Control (including, without limitation, any
incentive, bonus, stock option, restricted
stock, health, accident, disability, life
insurance, thrift, vacation pay, deferred
compensation and retirement plans or
policies);
(iii) the reduction of the Executive's salary as in
effect on the date of the Change in Control;
(iv) the taking of any action by the Corporation
(including the elimination of a plan without
providing substitutes therefor, the reduction
of the Executive's awards thereunder or
failure to continue the Executive's partici-
pation therein) that would substantially
diminish the aggregate projected value of the
Executive's awards or benefits under the
Corporation's benefit plans or policies
described in Section 1(g)(ii) in which the
Executive was participating at the time of
the Change in Control;
(v) a failure by the Corporation to obtain from
any successor the assent to this Agreement
contemplated by Section 5 hereof; or
<PAGE>
(vi) the relocation of the principal office at
which the Executive is to perform his ser-
vices on behalf of the Corporation to a
location more than thirty-five (35) miles
from its location immediately prior to the
Change in Control or a substantial increase
in the Executive's business travel obliga-
tions subsequent to the Change in Control.
Any circumstance described in this Section 1(g)
shall constitute Good Reason even if such circum-
stance would not constitute a breach by the Corpora-
tion of the terms of the Employment Agreement
between the Corporation and the Executive in effect
on the date of the Change in Control. The Executive
shall be deemed to have terminated his employment
for Good Reason effective upon the effective date
stated in a written notice of such termination given
by him to the Corporation setting forth in reason-
able detail the facts and circumstances claimed to
provide the basis for termination, provided that the
effective date may not precede, nor be more than
sixty (60) days from, the date such notice is given.
The Executive's continued employment shall not
constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good
Reason hereunder.
(h) "Normal Retirement Date" shall have the meaning
given to such term in the Corporation's basic
qualified pension plan in which the Executive is a
participant as in effect on the date hereof or any
successor or substitute plan adopted prior to a
Change in Control.
(i) "Person" shall mean any individual, corporation,
partnership, group, association or other "person" as
such term is used in Section 13(d) and 14(d) of the
Exchange Act.
2. TERM OF AGREEMENT
(a) The term of this Agreement shall initially be for
the period beginning on March 15, 1993 and ending on
March 14, 1995. The term of this Agreement shall
automatically be extended on March 15, 1994 until
March 14, 1996 without further action by the
parties, and shall be automatically extended by an
additional year on each succeeding March 15, unless
either the Corporation or the Executive shall have
served notice upon the other party prior to such
March 15 of its or his intention either that the
<PAGE>
term of this Agreement shall not be extended, or
that the Executive's Employment Agreement is termi-
nated, provided, however, that if a Change in
Control of the Corporation shall occur during the
term of this Agreement, this Agreement shall con-
tinue in effect until terminated but in any event
for a period of not less than three (3) years from
the date of the Change in Control.
(b) Notwithstanding Section 2(a), the term of this
Agreement shall end upon the termination of the
Executive's employment if, prior to a Change in
Control of the Corporation, the Executive's employ-
ment with the Corporation shall have terminated
under the provisions of any Employment Agreement
between the Corporation and the Executive then in
effect.
3. COMPENSATION UPON CHANGE IN CONTROL FOLLOWED BY A
TERMINATION
If a Change in Control of the Corporation shall have
occurred and, during the term of this Agreement, the Execu-
tive's employment by the Corporation is terminated for any
reason other than his death, his Disability, his retirement
on his Normal Retirement Date, by the Corporation for Cause,
or by the Executive without Good Reason, the Executive shall
be under no further obligation to perform services for the
Corporation and shall be entitled to receive the following
payments:
(a) The Corporation shall pay to the Executive his full
base salary through the effective date of the ter-
mination within five (5) business days thereafter
and all benefits and awards (including both the cash
and stock components,) to which the Executive is
entitled under any benefit plans or policies in
which the Executive was a participant prior to the
Change in Control, at the time such payments are due
pursuant to the terms of such benefit plans or
policies as in effect immediately prior to the
Change in Control.
(b) At the election of the Executive, in addition to the
entitlements set forth in Section 3(a) but in lieu
of any payment to the Executive of any salary or
severance payments or benefits to which the Execu-
tive would be entitled under the provisions of any
Employment Agreement between the Corporation and the
Executive then in effect, the Corporation shall pay
to the Executive, in a lump sum not later than ten
(10) business days following the effective date of
the termination:
<PAGE>
(i) an amount equal to two (2) times the Execu-
tive's annual base salary on the effective
date of the termination or, if higher, immedi-
ately prior to the Change in Control;
(ii) an amount equal to two (2) times the greater of (x)
the highest amount of the actual bonus awarded to
the Executive in the five (5) fiscal years
immediately preceding the year in which the Change
in Control occurred and (y) an amount equal to the
amount the Executive would have been awarded under
the Corporation's bonus plan in effect immediately
prior to the Change in Control for the fiscal year
in which the Change in Control occurred had the
Executive continued to render services to the
Corporation at the same level of performance, at
the same level of salary, and in the same position
as immediately prior to the Change in Control;
(iii) an amount equal to two (2) times the greater
of (x) the largest annual contribution made by
the Corporation to the Corporation's Savings
Plan on the Executive's behalf during the five
(5) fiscal years immediately preceding the
year in which the Change in Control occurred
and (y) an amount equal to the contribution
the Corporation would have made to said Plan
on the Executive's behalf for the fiscal year
in which the Change in Control occurred had he
participated in said Plan for the entire
fiscal year, received a base salary equal to
the salary he was receiving immediately prior
to the Change in Control and had he elected to
contribute to the Plan the same percentage of
his base salary as he was contributing on said
date; and
(iv) an amount equal to twenty percent (20%) of the
Executive's annual base salary on the effec-
tive Date of the termination or, if higher,
immediately prior to the Change in Control (as
compensation for medical, life insurance and
other benefits lost as a result of termination
of the Executive's employment).
(v) For each full or partial month in the period
beginning on January 1st of the year in which
the date of the termination occurs and ending
on the date of the termination, one-twelfth of
the greater of (x) the highest amount of the
actual bonus awarded to the Executive in the
five (5) fiscal years immediately preceding
<PAGE>
the year in which the Change in Control occur-
red and (y) an amount equal to the amount the
Executive would have been awarded under the
Corporation's bonus plan in effect immediately
prior to the Change in Control for the fiscal
year in which the Change in Control occurred
had the Executive continued to render services
to the Corporation at the same level of per-
formance, at the same level of salary, and in
the same position as immediately prior to the
Change in Control;
(vi) If a payment may be increased by reference to
an alternate calculation which cannot be made
by the time the payment is due, payment of the
lesser, known amount shall be made when due,
and if any additional amount becomes due, such
additional amount shall be paid within ten
(10) days after the information upon which
calculation of such payment is dependent first
becomes available.
The amount of all payments due to the Execu-
tive pursuant to this Section 3(b) shall be
reduced by 1/24 for each full calendar month
by which the date which is two (2) years from
the effective date of the Executive's termina-
tion extends beyond the Executive's Normal
Retirement Date.
Upon entering into this Agreement and for a
period of fourteen (14) days following each
anniversary of the date hereof (the "Election
Period"), the Executive may, in writing,
direct the Corporation to pay any amounts to
which he is entitled under this Section 3(b)
in equal annual installments (not to exceed
ten (10) annual installments), with the first
such installment payable within ten (10)
business days of the effective date of the
termination and each successive installment
payable on the anniversary of the effective
date of the termination or the next following
business day if such date is not a business
day (the "Deferred Payment Election"). A
Deferred Payment Election, once made, cannot
be revoked except during an Election Period;
provided, however, no Deferred Payment Elec-
tion can be made or revoked by the Executive
during an Election Period that occurs after a
Change in Control or at a time when, in the
judgment of the Corporation, a change in
control may occur within sixty (60) days of
such Election Period.
<PAGE>
(c) The Corporation shall pay or provide to the Execu-
tive such amounts and benefits as may be required so
that the pension and other post-retirement benefits
paid or made available to the Executive are equal to
those, if any, which would have been paid under the
Corporation's Basic Pension (Benefit) Plan in effect
immediately prior to the Change in Control, assuming
the Executive continued in the employ of the Cor-
poration at the same compensation until the second
anniversary of the effective date of the termination
of the Executive's employment or until his Normal
Retirement Date, whichever is earlier. Notwith-
standing any conflicting restrictions in the Plan or
the fact of the termination of the Executive's
employment, until the Executive's Normal Retirement
Date, the Executive shall maintain a continuing
right to receive the pension and other benefits
under the above Plan with payments to begin upon
retirement and to elect an imputed retirement on the
Executive's 50th birthdate or any of his birthdates
thereafter until his Normal Retirement Date, such
election to be made by so notifying the Corporation
within one (1) year after termination of his employ-
ment.
(d) The Corporation shall pay for or provide the Execu-
tive individual out-placement assistance as offered
by a member firm of the Association of Out-Placement
Consulting Firms.
(e) If any payment or benefit to or for the benefit of
the Executive in connection with a Change in Control
of the Corporation or termination of the Executive's
employment following a Change in Control of the
Corporation (whether pursuant to the terms of this
Agreement, or any other plan or arrangement or
agreement with the Corporation, any Person whose
actions result in a Change in Control of the Cor-
poration or any Affiliate or Associate of the Cor-
poration or any such Person) is subject to the
Excise Tax (as hereinafter defined), the Corporation
shall pay to the Executive an additional amount such
that the total amount of all such payments and
benefits (including payments made pursuant to this
Section 3(e)) net of the Excise Tax and all other
applicable federal, state and local taxes shall
equal the total amount of all such payments and
benefits to which the Executive would have been
entitled, but for this Section 3(e), net of all
applicable, federal, state and local taxes except
the Excise Tax. For purposes of this Section 3(e),
the term "Excise Tax" shall mean the tax imposed by
<PAGE>
Section 4999 of the Internal Revenue Code of 1986
(the "Code") and any similar tax that may hereafter
be imposed.
The amount of the payment to the Executive
under this Section 3(e) shall be estimated by a
nationally recognized firm of certified public
accountants (other than the Corporation's indepen-
dent auditors) based upon the following assumptions:
(i) all payments and benefits to or for the benefit
of the Executive in connection with a Change in
Control of the Corporation or termination of the
Executive's employment following a Change in
Control of the Corporation shall be deemed to be
"parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute
payments" shall be deemed to be subject to the
Excise Tax unless, in the opinion of tax counsel
selected by the firm of certified public
accountants charged with estimating the payment to
the Executive under this Section 3(a), such
payments or benefits are not subject to the Excise
Tax; and
(ii) the Executive shall be deemed to pay federal, state
and local taxes at the highest marginal rate of
taxation for the applicable calendar year.
The estimated amount of the payment due the
Executive pursuant to this Section 3(e) shall be
paid to the Executive in a lump sum not later than
thirty (30) business days following the effective
date of the termination. In the event that the
amount of the estimated payment is less than the
amount actually due to the Executive under this
Section 3(e), the amount of any such shortfall
shall be paid to the Executive within ten (10)
days after the existence of the shortfall is dis-
covered.
(f) The Executive shall not be required to mitigate the
amount of any payment provided in this Section 3,
nor shall any payment or benefit provided for in
this Section 3 be offset by any compensation earned
by the Executive as the result of employment by
another employer, by retirement benefits, or by
offset against any amount claimed to be owned by the
Executive to the Corporation, or otherwise.
(g) If any payment to the Executive required by this
Section 3 is not made within the time for such
payment specified herein, the Corporation shall pay
to the Executive interest on such payment at the
legal rate payable from time to time upon judgments
<PAGE>
in the State of Connecticut from the date such
payment is payable under the terms hereof until
paid.
4. EXECUTIVE'S EXPENSES
The Corporation shall pay or reimburse the Executive for
all costs, including reasonable attorney's fees and expenses
of either litigation or arbitration, incurred by the Execu-
tive in contesting or disputing any termination of his
employment following a Change in Control or in seeking to
obtain or enforce any right or benefit provided by this
Agreement.
5. BINDING AGREEMENT
This Agreement shall inure to the benefit of and be
enforceable by the Executive, his heirs, executors, adminis-
trators, successors and assigns. This Agreement shall be
binding upon the Corporation, its successors and assigns.
The Corporation shall 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 expressly to assume and agree to perform this
Agreement in accordance with its terms. The Corporation
shall obtain such assumption and agreement prior to the
effectiveness of any such succession.
6. NOTICE
Any notices and all other communications provided for
herein shall be in writing and shall be deemed to have been
duly given when delivered or mailed, by certified or regis-
tered mail, return receipt requested, postage prepaid
addressed to the respective addresses set forth on the first
page of this Agreement or to such other address as either
party may have furnished to the other in writing in accor-
dance herewith, except that notices of change of address
shall be effective only upon receipt. All notices to the
Corporation shall be addressed to the attention of the Board
with a copy to each of the General Counsel, the Vice
President-Human Resources and Administration and the
Secretary of the Corporation.
7. AMENDMENTS; WAIVERS
No provision of this Agreement may be modified, waived
or discharged except in a writing specifically referred to
such provision and signed by the party against which en-
forcement of such modification, waiver or discharge is
<PAGE>
sought. No waiver by either party hereto of the breach of
any condition or provision of this Agreement shall be deemed
a waiver of any other condition or provision at the same or
any other time.
8. GOVERNING LAW
The validity, interpretation, construction and per-
formance of this Agreement shall be governed by the sub-
stantive laws of the State of Connecticut.
9. VALIDITY
The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforce-
ability of any other provision of this Agreement, which shall
remain in full force and effect.
10. ARBITRATION
If the Executive so elects, any dispute or controversy
arising under or in connection with this Agreement shall be
settled exclusively by arbitration in the city nearest to the
Executive's principal residence (or, at the Executive's
election, in the city within the state in which the Execu-
tive's principal residence is located nearest to such prin-
cipal residence) which has an office of the American
Arbitration Association by one arbitrator in accordance with
the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction. The Corporation hereby waives
its right to contest the personal jurisdiction or venue of
any court, federal or state, in an action brought to enforce
this Agreement or any award of an arbitrator hereunder which
action is brought in the jurisdiction in which such arbitra-
tion was conducted, or, if no arbitration was elected, in
which arbitration could have been conducted pursuant to this
provision.
11. COUNTERPARTS
This Agreement may be executed in one or more counter-
parts, each of which shall be deemed to be an original but
all of which together will constitute one and the same in-
strument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
BOWATER INCORPORATED
/s/Doris Simpson By /s/ Anthony P. Gammie
Witness Its
/s/ Harriet Shaw /s/ Phillip A. Temple
Witness
RECYCLE AGREEMENT
AGREEMENT dated as of January 1, 1991, by and among BOWATER
INCORPORATED, a Delaware corporation (herein "Bowater"), ADVANCE
PUBLICATIONS, INC., a New York corporation (herein "Advance"),
and CALHOUN NEWSPRINT COMPANY, a Delaware corporation (herein
"Newsprint").
WHEREAS, the parties hereto have executed a Restated
Agreement dated as of this date incorporating certain amendments
to an agreement entered into by and among them or their
predecessor corporations and/or predecessors in interest dated as
of October 19, 1966 (the "Restated Agreement"); and
WHEREAS, Newsprint intends to build at its manufacturing
facility in Calhoun, Tennessee, a mill to supply recycled fiber
pulp to its newsprint paper machine and to sell additional
recycled fiber pulp to Bowater for Bowater's use with its four
newsprint paper machines at the Bowater pulp and paper mill in
Calhoun, Tennessee; and
WHEREAS, Newsprint requests that Bowater supervise the
design and construction of such recycled fiber pulp mill on
behalf of Newsprint; and
WHEREAS, Newsprint also requests that Bowater provide the
labor, supervision and management for the operation of the
recycled fiber pulp mill during the term of the Restated
Agreement;
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements herein contained, the parties agree as
follows:
1. Construction. Bowater agrees to supervise the design
and construction of a recycled fiber pulp mill (the "Recycle
Mill") on land to be sold at fair market value to Newsprint by
Bowater at its facility in Calhoun, Tennessee, which mill will
have a rated production capacity of three hundred tons per day of
recycled fiber pulp ("Recycle") . The currently projected startup
date for the Recycle Mill is December 1, 1991.
2. Financing. Newsprint will finance the construction of
the Recycle Mill using any tax-free financing available from the
State of Tennessee, available cash and funds generated by the
operations of Newsprint. If additional funds are necessary,
Bowater agrees to loan the funds to Newsprint as interest bearing
debt in the same manner and on the same terms that apply to
Newsprint's loan of funds to Bowater.
3. Startup Costs. Bowater and Newsprint shall be
responsible for all costs associated with the startup of the
Recycle Mill in proportion to the annual tonnage of Recycle
projected to be utilized in 1993 for the production of Recycle
Newsprint Paper (as defined below) for Bowater purchasers other
than those affiliated with Advance and for the production of
Recycle Newsprint Paper for purchasers affiliated with Advance,
i.e. fifty-seven percent (57%) and forty-three percent (43%),
respectively.
<PAGE>
4. Amendments to the Restated Agreement. The parties
agree to amend the Restated Agreement in the following respects,
to be effective upon the commencement of the Recycle Mill's
production of commercially usable (as agreed by the parties)
Recycle:
a. Add to Clause 1.12 the words "a recycled fiber pulp
mill", after "newsprint machine,".
b. Add Clause 1.15 - "Recycle Mill" shall mean the
recycled fiber pulp mill owned by Newsprint and located at the
Plant.
c. Add to Clause 3.1.2 (i) -
(a) "Standard Newsprint Paper" shall mean
Newsprint Paper made entirely with virgin fiber pulp.
(b) "Recycle Newsprint Paper" shall mean
Newsprint Paper made with virgin fiber pulp and recycled fiber
pulp.
d. Insert in Clause 3.1.2(vi) at the end", as such
amounts may be reduced pursuant to Clause 3.7(iii)."
e. Substitute the following for Clause 3.1.3 (ii) -
Promptly following the close of each accounting quarter, the
price per ton (the "Adjusted Price") shall be determined for
Standard Newsprint Paper or Recycle Newsprint Paper, as
appropriate, purchased during the preceding quarter in accordance
with the following procedures:
Advance shall notify Bowater forty (40) days
following the close of each calendar quarter of the actual
<PAGE>
Newhouse Group Price paid during the prior accounting quarter for
Newsprint Paper Purchases of Standard Newsprint Paper or Recycle
Newsprint Paper, as appropriate. As soon as practical after the
end of each calendar year, Advance will forward, in support of
the notification, a certification by its certified public
accountants that the Newhouse Group Price for Standard Newsprint
Paper and Recycle Newsprint Paper has been prepared in accordance
with Clause 3.1.3 of this Agreement.
f. Substitute the following for the first three sentences
of Clause 3.1.3 (iii) - If the Adjusted Price for either Standard
Newsprint Paper or Recycle Newsprint Paper, or both, differs from
the anticipated Newhouse Group Price paid during the prior
accounting quarter, then a price adjustment payment shall be
made. If any Standard Newsprint Paper or Recycle Newsprint
Paper, or both, was purchased under this Agreement for less than
the Adjusted Price for such Newsprint Paper, then Advance shall
pay to Bowater the amount of such deficiency. If any Standard
Newsprint Paper or Recycle Newsprint Paper, or both, was
purchased under this Agreement for more than the Adjusted Price
for such Newsprint Paper, then Bowater shall pay to Advance the
amount of such excess.
g. Substitute the following for the first three sentences
of Clause 3.1.3 (iv) - If the certified Adjusted Price for either
Standard Newsprint Paper or Recycle Newsprint Paper, or both,
differs from the Adjusted Price for such Newsprint Paper in any
of the accounting quarters for that Fiscal Year, then a further
<PAGE>
price adjustment shall be made. If any Standard Newsprint Paper
or Recycle Newsprint Paper, or both, was purchased under this
Agreement for less than the certified Adjusted Price for such
Newsprint Paper, then Advance shall pay to Bowater the amount of
such deficiency. If any Standard Newsprint Paper or Recycle
Newsprint Paper, or both, was purchased under this Agreement for
more than the certified Adjusted Price for such Newsprint Paper,
then Bowater shall pay to Advance the amount of such excess.
h. Add at the end of the last paragraph of Clause 3.3 -
provided, however, that if the switch to attain maximum mill net
would deprive Advance of Recycle Newsprint Paper, then the
objective of maximizing mill net will be sacrificed to meet
Advance's requirements for Recycle Newsprint Paper.
i. Add Clause 3.7 - Recycle Content.
(i) Until the year 2000, forty-nine percent
(49%) of the Contract Tonnage each year shall be Recycle
Newsprint Paper that will contain forty percent (40%) Recycle
("40% Recycle Paper"). The remaining fifty-one percent (51%) of
the Contract Tonnage may be all Standard Newsprint Paper until
the year 2000 and may, at Bowater's discretion, be produced for
Advance either at the Plant or at one of Bowater's other wholly
or partially owned mills, provided such Newsprint Paper satisfies
Advance's quality and delivery requirements.
(ii) It is the intention of the parties, and the
parties will use their best efforts to provide, that commencing
January 1, 2000, all the Contract Tonnage shall be 40% Recycle
<PAGE>
Paper. Bowater and Advance agree to negotiate in good faith for
appropriate modification of those intentions if prior to the year
2000 significant changes in legislation or other state or federal
requirements relating to Recycle Newsprint Paper should occur,
adverse conditions in the newsprint or old newsprint paper
markets should develop or environmental regulations or other
relevant considerations should arise which would make the
fulfillment of the intention of the parties uneconomic or
impossible.
(iii) In the event the parties cannot agree
that a modification of the intentions referred to in Clause 3.7
(ii), above, is appropriate and Bowater elects, by giving Advance
written notice no later than October 1, 1997, to provide Advance,
as of January 1, 2000, with 40% Recycle Paper in a specified
amount less than all (but at least forty-nine percent) of the
Contract Tonnage, then Advance shall have the right, in its sole
discretion and by giving Bowater written notice no later than
January 1, 1998, to be relieved from any and all obligations to
purchase any of the Contract Tonnage from Bowater that is not 40%
Recycled Paper, on and after January 1, 2000. During the first
year following Advance's notice, Advance's obligations under
Clause 3.1.3(i) shall be reduced by an amount
equal to one-third of the total tonnage to be reduced. During
the second year following Advance's notice, Advance's obligations
under Clause 3.1.3(i) shall be reduced by an amount equal to two-
thirds of the total tonnage to be reduced. On and after January
<PAGE>
1, 2000, Advance's obligations under Clause 3.1.3 (i) shall be
reduced by an amount equal to the total tonnage to be reduced.
Should Bowater fail to give Advance the notice provided for
above, then commencing January 1, 2000, all Newsprint Paper sold
to Advance by Bowater under this Agreement shall be 40% Recycle
Paper.
j. Add Clause 3.8 - Second Recycle Mill. In the event
that Newsprint and/or Bowater does not have adequate production
capacity, excluding the capacity of the Recycle Mill, to provide
the additional fifty-one percent of 40% Recycle Paper as
contemplated by the first sentence of Clause 3.7 (ii), then the
parties agree that Newsprint will finance, construct and own a
second recycle mill to be operational by January 1, 2000, subject
to any renegotiation as provided in Clause 3.7 (ii), above.
k. Add Clause 4.9 - Pulp Content. All Newsprint Paper and
other grades produced on Southern's and Newsprint's paper
machines will contain TMP (as defined below) and/or Groundwood
and/or Kraft Pulp and/or recycled fiber pulp ("Recycle") and such
other pulps as the parties may agree. The proportion of each
pulp actually used to make paper on each machine will be
determined by Southern using its best judgment on how to operate
Newsprint's and Southern's paper machines to their maximum
efficiency, consistent with the quality and other requirements of
Advance and Southern's customers, provided, however, that
Southern's best judgment is subject to the limitations set forth
in Clause 3.7 with respect to the Newsprint Paper purchased by
<PAGE>
Advance.
1. Renumber Clause 5.2 ("Charges for TMP") of the Restated
Agreement as Clause 5.3 and substitute the following language for
this Clause: 5.3 Charges for TMP and Recycle. On a monthly basis
Newsprint will charge Southern for the cost of the TMP and
Recycle sold to and used by Southern in the production of its
finished product. The tons of each furnish supplied to Southern
by Newsprint will be determined by apportioning the total
furnish, such total furnish having been calculated based upon
finished production plus sewer losses, between the various types
of furnish, using the percentage of each type of furnish as
calculated from the weighted average meter measurements.
m. Add a new Clause 5.2
5.2.1 Recycle. Newsprint agrees to sell and supply
Recycle to Southern and Southern agrees to buy and accept Recycle
from Newsprint. The quantity of Recycle to be sold to Southern
by Newsprint shall be the full output of the Recycle Mill less
the quantities used by the Plant. Recycle shall be defined as
having a brightness of 55-68 points G.E. and shall have been
produced from old newsprint and old magazine waste or from such
other waste material as agreed from time to time by the parties.
5.2.2 The Recycle to be supplied by Newsprint will
be of a quality suitable for use in the manufacture of standard
or specialty Newsprint Paper. The Recycle will be delivered to
Southern at the point where the Recycle enters each pipeline
connected directly to each Southern paper machine furnish
<PAGE>
delivery system from the common Recycle header, at which point
title shall pass to Southern and any loss occurring at or after
that point will be for Southern's account. The Recycle delivered
to Southern will be at an appropriate consistency as agreed from
time to time by the parties.
5.2.3 For purposes of measuring the percentage of
Recycle in the furnish mix being used on Southern's paper
machines, the Recycle delivered by Newsprint to Southern will be
measured by means of a magnetic flow meter and a consistency
meter installed by Newsprint at its expense, and located at such
point in the delivery system as Newsprint may designate. The
meters will be calibrated at least Monthly by Southern or by an
independent instrument firm agreed upon by the parties.
5.2.4 Accurate cost and pulp production records
will be maintained by Southern on behalf of Newsprint showing
total Recycle production; the quantities used by Southern to
produce its finished product, as calculated in accordance with
Clause 5.3; the total cost of Recycle production; and the
proportions of such costs charged to Southern, together with such
other information and data as may be required to accomplish the
purposes hereof.
5.2.5 Southern will pay Newsprint the Cost to
Newsprint of the Recycle used by Southern. The Cost to Newsprint
shall be determined by multiplying the number of tons of Recycle
used by Southern by the average cost per ton of Recycle incurred
by Newsprint in producing and processing Recycle (including both
<PAGE>
the Recycle used by Newsprint and the Recycle used by Southern)
to the point of separation of Recycle for Newsprint and Recycle
for Southern and adding to such average cost the Cost to
Newsprint of any chemicals and other supplies or materials used
in further processing Recycle for Southern to the point of
delivery to Southern. The average cost of Recycle to Newsprint
will be determined by dividing the total costs incurred by
Newsprint in producing and processing all Recycle (for both
Newsprint and Southern) up to the point in the manufacturing
process where the Recycle for Southern is physically separated
from Newsprint's Recycle, by the total number of tons of Recycle
processed to that point. "Ton" as used in this Clause 5.2 shall
mean 2,000 pounds air dry weight.
n. Renumber Clause 5.3 ("Insufficient Supply by
Newsprint") of the Restated Agreement as Clause 5.5.
o. Add a new Clause 5.4.
5.4.1 IDLE CAPACITY. The parties recognize and
understand that the operation of the Recycle Mill may result in
the underutilization of the productive capacity of the TMP Mill
and the Groundwood mill. Therefore, the Fixed Costs (as defined
below) relating to the idle capacity of the TMP Mill and
Groundwood mill resulting from the operation of the Recycle Mill
will be allocated to Newsprint in the same ratio as the use of
Recycle by Newsprint bears to the total use of Recycle by
Newsprint and Southern and will be allocated to Southern in the
same ratio as the use of Recycle by Southern bears to the total
<PAGE>
use of Recycle by Newsprint and Southern.
5.4.2 The proportion of Fixed Costs to be
allocated shall be determined using a fraction, the numerator of
which is the difference between the average daily TMP production
and/or Groundwood production (as the case may be) for the twelve
Months immediately preceding the startup of the Recycle Mill and
the average daily production of the TMP Mill and/or Groundwood
mill (if both, calculated individually) for the Month and the
denominator of which is the average daily TMP production and/or
Groundwood production (as the case may be) for the twelve Months
immediately preceding the startup of the Recycle Mill, such
startup date having been agreed by the parties.
5.4.3 For purposes of this Clause 5.4, "Fixed
Costs" shall mean those costs incurred during each Month at the
TMP Mill and the Groundwood mill which are not directly related
to, or which do not vary in accordance with, the quantity of TMP
or Groundwood being produced. Costs to be considered as Fixed
Costs shall include, but not be limited to, Labor Costs, repair,
insurance, property taxes, depreciation, and base load utilities.
p. Add to Clause 6.1 the words "and the Recycle Mill)"
after the words "(including the TMP Mill". Add to Clause 6.1.1
the words ",the Recycle Mill (and any warehousing facilities for
the storage of waste paper)" after the words "the TMP Mill".
q. Add Clause 6.1.10 - Supervision of Recycle Mill
operations (including any warehousing facilities for the storage
of waste paper).
<PAGE>
r. Add to Clause 6.2.1 the words "and the Recycle Mill,
including any warehousing facilities for the storage of waste
paper)" after the words "(including the TMP Mill".
s. Add Clause 6.2.10 - Supervision of Recycle Mill- The
Cost to Southern of general Supervision in connection with the
Recycle Mill (including the waste paper warehousing facilities)
will be apportioned and charged to Newsprint based upon a
management determined percentage of time required for direct
Supervision of that operation. Any Supervision, including
Overhead, that is dedicated solely to Newsprints Recycle Mill
operations, will be charged entirely to Newsprint.
t. Add to Clause 8.5.2 the words "or the Recycle Mill, or
both," after all references to "the TMP Mill".
5. Public Disclosure. The parties agree that any public
announcement of the transactions contemplated by this Agreement
shall be made only after consultation with the other.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the date first above written.
BOWATER INCORPORATED
By /s/ Robert C. Lancaster
Its
ADVANCE PUBLICATIONS, INC.
By /s/ Richard Diamond
Its
CALHOUN NEWSPRINT COMPANY
By /s/ Mark Newhouse
Its
EXHIBIT 10.32.1
CONFORMED
COPY
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of December 20, 1993, between
BOWATER INCORPORATED, a corporation duly organized and validly
existing under the laws of the State of Delaware (the "Company");
each of the lenders that is a signatory hereto (individually, a
"Bank" and, collectively, the "Banks"); and THE CHASE MANHATTAN
BANK (NATIONAL ASSOCIATION), a national banking association, as
agent for the Banks (in such capacity, together with its
successors in such capacity, the "Agent").
The Company, the Banks and the Agent are parties to a
Credit Agreement dated as of December 8, 1992 (as heretofore
modified and supplemented and in effect on the date hereof, the
"Credit Agreement"), providing, subject to the terms and
conditions thereof, for loans to be made by said Banks to the
Company in an aggregate principal amount not exceeding
$250,000,000. The Company, the Banks and the Agent wish to amend
the Credit Agreement in certain respects, and accordingly, the
parties hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in
this Amendment No. 1, terms defined in the Credit Agreement are
used herein as defined therein.
Section 2. Amendments. Subject to the satisfaction of
the conditions precedent specified in Section 6 below, but
effective as of the date hereof, the Credit Agreement shall be
amended as follows:
2.01 Section 2.04 of the Credit Agreement is hereby
amended by adding a new clause (d) following clause (c) therein
to read as follows:
" (d) In the event that on or before March 31, 1994 the
Company shall receive net cash proceeds in an amount not
less than $150,000,000 from an issuance by the Company of
its capital stock, the aggregate amount of the Commitments
shall be automatically reduced to $200,000,000 at the close
of business on March 31, 1994."
2.02 Clause (b) of Section 8.01 of the Credit
Agreement is hereby amended in its entirety to read as follows:
<PAGE>
"(b) as soon as available and in any event within 120
days after the end of each fiscal year of the Company,
consolidated statements of income, capital accounts and
cash flows of the Company and its Consolidated
Subsidiaries for such fiscal year and the related
consolidated balance sheet of the Company and its
Consolidated Subsidiaries as at the end of such fiscal
year, setting forth in each case in comparative form
the corresponding consolidated figures for the
preceding fiscal year, and accompanied by an opinion
thereon of independent certified public accountants of
recognized national standing, which opinion shall state
that said consolidated financial statements fairly
present the consolidated financial condition and
results of operations of the Company and its
Consolidated Subsidiaries as at the end of, and for,
such fiscal year in accordance with generally accepted
accounting principles;"
Section 3. Consent. Anything in Section 8.05 of the
Credit Agreement to the contrary notwithstanding, upon
satisfaction of the conditions set forth in Section 6 hereof, the
Banks hereby consent to the liquidation of Bowater International
Inc. (which is a Delaware corporation and a Wholly Owned
Subsidiary of the Company) and Bowater International Newsprint
Sales Ltd. (which is a Bermuda corporation and a Wholly owned
Subsidiary of Bowater International Inc.).
Section 4. Waiver. Upon satisfaction of the conditions
in Section 6 hereof, but effective as of the date hereof, the
Banks hereby waive compliance by the Company with Section 8.07 of
the Credit Agreement for the period of four consecutive fiscal
quarters ended December 31, 1993, April 2, 1994, July 2, 1994 and
October 1, 1994.
Section 5. Representations and Warranties. The Company
represents and warrants to the Banks that the representations and
warranties set forth in Section 7 of the Credit Agreement are
true and complete on the date hereof as if made on and as of the
date hereof and as if each reference in said Section 7 to "this
Agreement" included reference to this Amendment No. 1.
Section 6. Conditions Precedent. The amendments to the
Credit Agreement set forth in said Section 2, the consent set
forth in Section 3 and the waiver set forth in Section 4 shall
become effective, as of the date hereof, upon the satisfaction of
the following conditions precedent:
6.01 Execution. This Amendment No. 1 shall have been
executed and delivered by the Company, the Agent and the Majority
Banks.
<PAGE>
6.02 Amendment Fee. The Company shall have paid to the
Agent for account of the Banks that have executed this Amendment
No. 1 pro rata according to the amounts of their
respective Commitments an amendment fee in an amount equal to
$100,000.
Section 7. Miscellaneous. Except as herein provided,
the Credit Agreement shall remain unchanged and in full force and
effect. This Amendment No. 1 may be executed in any number of
counterparts, all of which taken together shall constitute one
and the same amendatory instrument and any of the parties hereto
may execute this Amendment No. 1 by signing any such counterpart.
This Amendment No. 1 shall be governed by, and construed in
accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed and delivered as of the day
and year first above written.
COMPANY
BOWATER INCORPORATED
By /s/ David G. Maffucci
Title: Vice President & Treasurer
BANKS
THE CHASE MANHATTAN BANK (NATIONAL
ASSOCIATION)
By /s/ Hans H. Heinsen
Title: Managing Director
BANK OF MONTREAL
By /s/ William Grieve
Title: Director
BARCLAYS BANK PLC
By /s/ Douglas P. Butler
Title: Associate Director
CIBC, INC.
By /s/ E. Roger Colden
Title: Vice President
<PAGE>
NATIONSBANK OF NORTH CAROLINA, N.A.
By /s/ Michael A. Contrad
Title: Vice President
THE TORONTO-DOMINION BANK
By /s/ Jorge A. Garcia
Title: Manager, Credit
Administration
THE BANK OF NEW YORK
By /s/ Ian K. Stewart
Title: Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ David Common
Title: Vice President
THIRD NATIONAL BANK IN NASHVILLE
By /s/ Robert W. Meyer
Title: First Vice President
THE SOUTH CAROLINA NATIONAL BANK
By /s/ Robert W. Derrick
Title: Vice President
WESTDEUTSCHE LANDESBANK
GIROZENTRALE
By /s/ Cynthia M. Niesen
Title: Vice President
By /s/ Karen E. Hoplock
Title: Associate
<PAGE>
AGENT
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
By /s/ Hans H. Heinsen
Title: Managing Director
BOWATER
INCORPORATED
1993
ANNUAL
REPORT
<PAGE>
BOWATER
DESCRIBED
The company is a producer of world-traded wood fiber products, which
include virgin and recycled-content newsprint and directory papers,
coated publication and book papers, groundwood specialties, market
pulp and lumber. It is also a leading
converter of communication papers for use in computers and other
business applications. Pulp and paper products are manufactured at
five mills: Calhoun, Tennessee; Catawba, South Carolina; Liverpool,
Nova Scotia, Canada; and Great Northern Paper's
mills at Millinocket and East Millinocket, Maine. All mills are
integrated and are supported by over 4 million acres of owned and
leased timberlands. Newsprint is produced at all these mills. A
significant portion of Bowater's newsprint tonnage is
made under joint-venture arrangements with two major publishers. Each
publisher partner has a 49 percent
voting interest in its joint-venture operation. Coated and uncoated
groundwood papers for magazines, catalogs, printed promotional pieces,
directories and other uses are produced at the Catawba, Millinocket
and East Millinocket locations. Bleached
kraft market pulps are manufactured at the Catawba and Calhoun mills
and sold worldwide. Dimension lumber is produced at three sawmills in
Alabama, Maine and Nova Scotia. Communication papers, mainly stock
continuous computer forms, are converted at
eight plants and sold nationwide.
Financial Highlights (in millions, except per-share amounts)
1993 1992
Net Sales $1,353.7 $1,360.8
Operating loss (63.3) (74.1)
Loss before income taxes, minority
interests and cumulative effect of
changes in accounting principles (109.0) (172.0)
Effect of changes in accounting principles -- 10.9
Net loss (64.5) (82.0)
Net loss per common share (1.84) (2.34)
Average common shares outstanding 36.4 36.1
Dividends paid per common share $ .75 $ 1.20
Total assets 2,726.2 2,881.6
Common shareholders' equity 732.5 818.0
Total debt 1,120.2 1,134.3
Total debt as a percent of total capitalization 48.0% 45.9%
Table of Contents
Chairman's Letter 1
State of the Industry 2
Operations Map 6
Segment and Nominal
Annual Capacity Information 8
Business and Financial Review 9
Consolidated Financial Statements 15
Notes to Consolidated
Financial Statements 19
Management's and Auditors' Statements 29
Financial and Operating Record 30
Directors and Officers 32
Shareholder Information Inside back cover
Directory Back cover
<PAGE>
CHAIRMAN'S (Photo)
LETTER
Bowater's performance in 1993 was unsatisfactory, and we are taking
steps to improve our results.
Continued economic uncertainty, combined with overcapacity in our
major product lines, caused markets to remain weak in 1993. For the
twelve months of 1993, Bowater incurred a net loss of $64.5 million,
or $1.84 per share, on sales of $1.35 billion.
This compares to a net loss for 1992 of $82.0 million, or $2.34 per
share.
The newsprint segment of our business continued to suffer from
oversupply and essentially flat demand. The company responded to the
situation by reducing capacity by 264,500 tons. Most of the reduction
was achieved by shifting production from
newsprint to higher margin grades.
Total purchases of coated groundwood papers increased
by 3.7 percent in 1993, but domestic shipments decreased by 1.5
percent. Favorable exchange rates and overcapacity in Europe
encouraged overseas producers to increase exports to the U.S. market
by an estimated 74 percent. As a consequence, prices,
after having strengthened, weakened during the latter part of the
year. A price increase that went into effect July 1 has essentially
been eliminated.
The lack of economic growth in Europe and Japan, combined with excess
industry supply, resulted in weak pulp markets during most of 1993.
The communication papers segment once again faced intense competitive
pressure as a result of weak demand and overcapacity. Because of this,
we continued our efforts to differentiate ourselves from our
competitors by developing new products through
vertical integration with our mill at Calhoun, Tennessee. Indications
are that these actions have been successful and have resulted in
improved corporate profitability and cash flow.
Although we cannot control the prices of our commodity grades, we can
influence areas that affect our competitiveness and financial
strength. Actions taken or announced in 1993 included a 50 percent
reduction in the common stock dividend; closure in
1994 of older, higher-cost operations at our Millinocket, Maine, mill;
a planned 10 percent personnel reduction program by the end of 1994;
and the consolidation of the Darien, Connecticut, and Greenville,
South Carolina, corporate offices. We also
sold approximately 70,000 acres of non-strategic timberlands as well
as some other assets, resulting in $73.3 million in cash and $32.6
million of net income. Sales of non-strategic assets will continue in
1994.
To strengthen our balance sheet and provide funding for essential
capital projects, we sold two issues of preferred stock for
approximately $193.5 million in February 1994.
Other notable events affected us in 1993. Our second recycling
facility, located at the East Millinocket, Maine, mill was
completed ahead of schedule and within budget. This plant will produce
350 tons per day of recycled fiber when fully operational.
The Communication Papers Group introduced a pro-
prietary environmental computer paper known as EW-20(Register mark)
which contains 20 percent post-consumer or comparable recovered material.
We are particularly proud of the Southern Division in Calhoun,
Tennessee, for its repeated shattering of world safety records with
over 5 million continuous safe hours at a newsprint mill. We
congratulate Great Northern for receiving the American
Forest and Paper Association's Environmental and Energy Achievement
Award for Energy Management and Innovation associated with its
hydroelectric system.
James White and Kenneth M. Curtis are welcome additions to our Board.
Their contributions have already been substantial. We further wish to
acknowledge Sir Derek Mitchell, who retired in May 1993, for his many
years of distinguished service.
Although it is easy to be pessimistic about the prospects for 1994,
there are signs that our markets may be improving. Newsprint
consumption for the last two months of 1993 was up about 2.0 percent
while the supply/demand ratio has come into balance
so that the climate for price increases has now been created. Improved
demand and worldwide industry downtime permitted us to increase market
pulp prices in January 1994.
As economic conditions improve in Europe, we should see a decline in
lightweight coated groundwood paper exports to the U.S. market. This
combined with an improving U.S. economy plus the absence of any new
North American capacity should lead to
better operating rates for lightweight coated groundwood papers and
hopefully improved pricing.
Bowater's greatest strength has always been its people. I believe we
have some of the brightest and most dedicated employees in the
industry. You see a representative sample portrayed throughout this
year's report. Their ongoing support and hard
work are critical to the restoration of sustained profitability. We
thank our employees and other shareholders for their continued
patience and commitment.
(Signature of Anthony P. Gammie)
Anthony P. Gammie
Chairman and Chief Executive Officer
March 13, 1994
1
<PAGE>
STATE OF THE
INDUSTRY
The pulp and paper industry has just completed the third year of a
severe downturn in its business cycle. A combination of weak demand
resulting from worldwide economic slowdown and excess industry supply
has caused selling prices for most grades of
paper to decline from the record levels reached in the late 1980s.
Through December 1993, the U.S. economy has recorded 11 successive
quarters of growth in Gross Domestic Product (GDP), but advancement
has occurred at a rate roughly half that of previous recoveries.
Economic conditions in other major industrial regions of the world,
notably Europe and Japan, have also been lackluster for the past three
years. Recovery in these economies is also occurring at a slower pace.
An analysis of market conditions for major industry sectors of
relevance to Bowater's operations follows.
Newsprint
Worldwide demand for newsprint in 1993 is estimated to have reached
33.0 million metric tons, a slight increase over 1992. In approximate
terms, North America accounts for 40 percent of world newsprint
demand; Europe, 29 percent; the Asian, African
and Oceanic nations combined, 26 percent; and Latin America, 5
percent.
During the past three years, stagnant economies in the major markets
of the world have kept global growth in newsprint consumption at low
levels. Further affecting the world market was a glut of new
production, brought on by high levels of demand
during the mid-1980s. Since 1988, an additional 4.5 million metric
tons of newsprint has entered the market. The combined result of these
factors was a severe decline in newsprint selling prices.
As the world's largest consumer of newsprint, the United States
dominates the North American market. Demand has traditionally been
served by U.S. and Canadian paper mills. Over the past two decades,
U.S. producers have increased their newsprint
manufacturing output to the point that they now supply about half the
domestic demand, up from only one-third 15 years ago. Although the
Canadian share of the U.S. market has gone down, Canada continues as
the world's leading producer of newsprint.
North American newsprint production capacity totals about 16.2 million
metric tons annually, and the top three producers account for nearly
28 percent of the total North American production.
During most of the 1980s, U.S. and Canadian newsprint producers
profited greatly from the world's economic expansion. From 1980 to
1987, total North American demand grew by a healthy 21 percent. Global
operating rates peaked in 1987-1988 at 93
percent. This successful performance attracted substantial investment
in new newsprint machines, the output of which the world's markets are
just now absorbing. In North America alone, 12 new machines began
operation during 1989-1991. At the same
time supply was expanding, the U.S. economy began to weaken.
(Capacity and Shipments bar graph appears here--see appendix)
Total North American newsprint demand increased slightly from 1989 to
1990, but fell by 6 percent in 1991. At that point, excess newsprint
capacity was estimated to exceed 2.0 million metric tons. In order to
keep machines running and to maintain
market share, producers increased discounts from list prices.
North American demand rebounded slightly in 1992, up 2 percent. The
outlook appeared somewhat brighter entering 1993, though recovery
stalled during the second quarter. Supply quickly overtook demand;
prices fell once again and a number of producers
announced production cutbacks.
The end of this prolonged down cycle now appears in sight. Nearly all
North American newsprint output
(Photos--see appendix)
2
<PAGE>
entering the market since 1988 is
currently being absorbed. More importantly, no new machines have been
announced in North America, and some
closures have occurred. The next two to four years should show marked
improvement for North American producers.
The newsprint markets of Western Europe face the same problems as
those of North America, namely increasing supply and weakening demand.
European economies are emerging from recession at a slow pace, thereby
keeping consumption growth at low levels.
Between 1988 and 1992, Western European newsprint manufacturing
capability rose 18 percent, to 9.6 million metric tons. Demand,
however, increased only 6.2 percent, to 8.0 million metric tons during
that period.
Despite this, some slight gains were made in 1993. After two
consecutive years of small declines, newsprint demand managed an
estimated 0.7 percent increase for 1993. Growth was supported by
inventory rebuilding as publishers took advantage of low
prices. An additional factor was an increase in advertising paging in
the large United Kingdom market. This positive trend is expected to
continue, along with a favorable outlook for newspaper inserts. These
factors, in concert with a predicted rise
in incomes in southern Europe and eastern Germany, are expected to
keep newsprint growth at a pace exceeding that of the overall European
economy during the balance of this decade.
Newsprint demand in Asia, Africa and Oceania grew 22 percent between
1988 and 1993, to an estimated 8.3 million metric tons. With the
exception of Japan, most countries of this region contributed to this
increase.
Weak economic conditions hampered growth in Japan in 1993. This
translated to an estimated 7.6 percent decline in newsprint
consumption in 1993 following a 3.1 percent drop for 1992. The
Japanese economy is forecast to begin expansion during 1994,
but newsprint demand growth will probably not match the healthy rates
of the late 1980s.
Other areas of the Far East have produced strong growth. In 1993,
demand advanced an estimated 9.1 percent on top of an 11.4 percent
rise the previous year. These increases were propelled by rapidly
rising personal incomes as local economies
expanded. GDP growth in areas such as Indonesia, Malaysia and Taiwan
ranged from 5.9 percent to 7.4 percent in 1993 and is predicted to
increase further in 1994.
Latin America is another area registering strong gains in newsprint
consumption. Fueled by healthy gains in population and GDP,
consumption grew an estimated 5.1 percent in 1993. Many countries in
this region of the world are also benefiting from
recent movements toward free markets.
Coated Groundwood Papers
This market is dominated by North American and European producers,
with Japanese manufacturers running
in third place. There are about 10 major producers
in North America, with annual production of approximately 5.2 million
short tons. The three largest American and Canadian producers have an
approximate 40 percent share of the North American market.
(Groundwood Papers Capacity and Shipments bar graph appears here--see appendix)
In 1993, U.S. demand grew by a respectable 3.7 percent due primarily
to strong demand for catalogs, coupons and advertising inserts.
Magazine advertising pages, an important determinant of coated
groundwood sales, grew by a modest 1.2 percent. In
all, North American producers shipped 4.9 million short tons of coated
groundwood paper in 1993, down 0.6 percent from last year.
European inroads to the North American market were much more
pronounced in 1993. With the major European economies showing slower
growth for the past three years, an increasing share of their
production has been directed to the U.S. market. Annual
European consumption of coated groundwood papers approximates 5.0
(Photos appear here--see appendix)
3
<PAGE>
STATE OF THE
INDUSTRY CONTINUED
million metric tons. Production is just over 7.0 million metric tons,
providing a substantial amount of tonnage for export. Favorable
exchange rates have given European producers
added impetus to ship to the U.S. market. As a result, virtually all
of the growth in U.S. demand during 1993 was absorbed by increased
supply from Europe, thereby placing additional pressure on selling
prices.
Japanese manufacturers have made significant investments in coated
groundwood, and their capacity is now about one-third that of the U.S.
Between 1986 and 1993, Japan's annual capacity of coated groundwoods
tripled to 1.2 million metric tons,
resulting in current market conditions similar to those in North
America.
The primary international coated groundwood producers are looking to
the next few years with greater optimism. No new machines will be
coming on stream in the major producing countries of the world during
at least the next two years. Improving
European and U.S. economies should by then yield a better
supply/demand ratio and improved operating rates.
(Grounwood Speciality Papers Capacity and Shipments bar graph appears
here--see appendix)
Directory Paper
Consumption growth patterns in directory are determined by such
factors as advertising volume in yellow pages and the number of
household and business formations. During the past three years, global
demand for directory paper has remained flat due
to a maturing of the yellow pages market, generally depressed business
conditions and increased competition from electronic media. These
factors are most pronounced in the more highly developed regions of
the world.
The North American market slowed considerably during the early 1990s
as the yellow pages directory business matured. Additional capacity
has recently entered the market, as newsprint manufacturers shifted
production to directory grades in search of
higher margins. Demand was flat during 1993, with total directory
paper shipments by U.S. and Canadian suppliers totaling approximately
750,000 short tons.
Future growth in North American consumption is expected to be small
due to market saturation, tight circulation control and inroads from
electronic systems.
As a result, exports of directory paper are increasing in importance
for major North American suppliers. Less developed areas of the world,
such as Mexico, South America, the Far East and emerging countries of
Eastern Europe, offer the greatest
growth potential. High population growth rates in many of these areas
will result in the use of additional telephones, thereby increasing
directory demand. Recent trends toward market-driven economies and
privatization of industry also bode well for
growth in directory paper consumption.
Stock Computer Forms
Throughout the 1990s, the business forms industry has faced recession-
induced weak demand and excess industry output. The dollar value of
U.S. sales of stock continuous computer forms reached a high in 1990
of $1.97 billion and has declined each
year since. Sales expressed in terms of tonnage have remained
essentially flat year-to-year. Utilization rates during the past three
years have averaged between 59 percent and 62 percent.
Many of the problems facing the forms industry today stem from the
maturity of certain of its products. While there are good growth
prospects for newer items such as pre-printed cutsheets, pressure-
sensitive labels and electronic forms, the
industry's core products have reached maturity.
The cost of forms bond paper, the principal raw material for stock
computer forms, remains the determining factor in the profitability of
the products converted from it. Since a substantial supply overhang
continues in this
(Photos appear here--see appendix)
4
<PAGE>
paper grade, cost and
end-product prices and margins have dropped steadily since 1989.
The outlook for the business forms industry, including the continuous
stock forms sector, is one of continuing high levels of competition,
as total demand is not forecast to increase.
Market Pulp
The three primary market pulp consuming regions of the world today are
the United States, Western Europe and Japan, with South America
becoming an increasingly significant factor. Annual global demand for
market chemical paper grade pulps in 1993 is
estimated at 28.1 million metric tons, an 11 percent increase since
1990.
Prior to 1990, the major producers of market pulp tended to be located
in North America and Scandinavia. Historically, these regions have
accounted for about two-thirds of the world's production. During the
1986-1988 period, North American and
Nordic producers (Norscan) enjoyed very profitable market conditions,
with operating rates ranging from 93 percent to 98 percent. This
performance spawned significant capacity expansions around the globe.
Between 1990 and 1993, the world's annual
paper grade pulp production capability grew 14 percent, to 33.0
million metric tons.
Although some of this new production was offset by permanent shutdowns
of older mills and extended closures, by 1993 world supply of all
grades of pulp was estimated to exceed demand by 4.9 million metric
tons annually. Further, much of the new
output came from low-cost areas of the world such as Brazil and Chile,
placing additional price pressures on traditional suppliers.
Compounding the problem of excess supply have been serious slowdowns
in the European, U.S. and Asian economies over
the past three years. As a result, average selling prices during 1993
dropped to less than half the peak levels reached in 1989.
There is recent evidence, however, that the pulp market is gaining
strength, at least in the short-term outlook. Positive signs include
raw material shortages, pulp capacity reductions and generally
improving economic conditions.
Beginning in late 1993, a lack of wood supply in certain parts of the
world and mill closures tightened supply. This shortage stemmed from
such varied factors as turmoil in Russia, which restricted wood
supplies to Scandinavian mills; production
cutbacks in Iberia; restrictions on cutting of tropical hardwoods in
Indonesia and increased government regulations on cutting on federal
and crown lands by the governments of the United States and Canada.
(Chemical Grade Market Pulp, Norscan Shipments bar graph appears here--
see appendix)
Placing additional pressure on supplies has been the substitution in
Japan of imported market pulp
for domestic production, which has become relatively costly due to the
strength of the Japanese yen.
In addition, customer inventories are at very low levels. Many
customers operated throughout 1993 with very lean inventories,
anticipating further price declines. As a result of the recent
strengthening of the pulp market, prices have begun to rise
without objection from the marketplace.
Longer term, the outlook is guardedly optimistic. Growth in world
demand is expected to outpace capacity additions, thereby bringing the
supply/demand ratio into better balance. This is expected to be a slow
process, however, and the outlook is
varied, depending on region. Economic expansion in the U.S. is
proceeding at a more rapid pace than most other highly industrialized
nations and should contribute to growth in pulp consumption. Recovery
in Western Europe has been slower than
previously assumed, and improvement is expected to be gradual.
Continued weakness in the Japanese economy caused decreases in paper
and board consumption during the past two years, but market pulp
demand increased an estimated 2.1 percent in 1993,
much of it supplied by North American producers.
5
<PAGE>
(Map appears here--see appendix)
6
<PAGE>
(Map appears here--see appendix)
7
<PAGE>
SEGMENT INFORMATION
Bowater Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Depreciation, Capital
Operating Amortization and Expenditures,
Net Income Cost of Timber Including Identifiable
(In thousands) Sales (Loss) Harvested Timberlands Assets
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Pulp and paper and related products $1,329,173 $(32,759) $155,238 $117,835 $2,311,588
Communication papers 191,769 (6,419) 7,485 2,741 122,058
Distribution costs (142,413) -- -- -- --
Corporate -- (24,154) 363 1,195 292,532
Eliminations (24,845) -- -- -- --
Total $1,353,684 $(63,332) $163,086 $121,771 $2,726,178
Year ended December 31, 1992
Pulp and paper and related products $1,298,898 $(46,138) $153,890 $137,100 $2,560,480
Communication papers 207,523 (2,277) 7,734 2,399 132,851
Distribution costs (133,051) -- -- -- --
Corporate -- (25,693) 286 -- 188,270
Eliminations (12,552) -- -- -- --
Total $1,360,818 $(74,108) $161,910 $139,499 $2,881,601
Year ended December 31, 1991
Pulp and paper and related products $1,033,627 $108,496 $123,466 $156,249 $2,575,049
Communication papers 254,890 14,361 8,299 3,343 138,347
Distribution costs (98,112) -- -- -- --
Corporate -- (19,142) 261 63 66,623
Total $1,190,405 $103,715 $132,026 $159,655 $2,780,019
</TABLE>
NOMINAL ANNUAL CAPACITY AND PRODUCTION
by grade and mill
Annual 1993
(In short tons) Capacity Production
Newsprint and uncoated groundwood papers
Calhoun, Tennessee 839,000 836,177
Catawba, South Carolina 260,300 240,623
Liverpool, Nova Scotia 264,600 263,306
Millinocket, Maine 154,200(1) 154,207
East Millinocket, Maine 285,000 276,824
Coated publication paper
Catawba, South Carolina 350,700 333,490
Millinocket, Maine 138,300 121,425
Market pulp
Catawba, South Carolina 268,600 256,599
Calhoun, Tennessee 66,800 42,438
1. Annual capacity of approximately 40,000 tons will be eliminated on
or about July 1, 1994.
8
<PAGE>
BUSINESS
AND FINANCIAL
REVIEW
Results of Operations
Financial results for 1993 and 1992 include the operations of Great
Northern Paper, Inc., (GNP) acquired at the end of 1991.
Net sales for 1993 totaled $1.35 billion, approximately equal to 1992
net sales of $1.36 billion. The operating loss for 1993 was $63.3
million, compared to an operating loss of $74.1 million in 1992.
Contributing to the reduction in operating loss in 1993 were higher
selling prices for the company's two main products: newsprint and
coated paper. These gains were partially offset by lower selling
prices for pulp.
Throughout 1993, the company suffered the lingering effects of a
three-year global economic slowdown. Consumer confidence remained low
due to employment security concerns, while advertising expenditures, a
key indicator of business conditions, remained weak during 1993. In
addition, excess capacity continued to plague the markets for
Bowater's primary products, hampering efforts to obtain needed price
increases.
(Cash Dividends Paid on Common Stock bar graph--see appendix)
As a result of the continuing poor market conditions, management
implemented a program to review all aspects of the company's
operations in an effort to reduce costs and improve cash flow. During
1993 a number of activities were undertaken. The consolidation of the
Darien, Connecticut, corporate office with the operations in
Greenville, South Carolina, was completed. Commencing with the
dividend paid April 1, 1993, the Board of Directors reduced the
dividend per share of common stock to $.15 per share from $.30 per
share, resulting in an annual savings of approximately $21.0 million.
In August 1993, the company announced the closure of certain obsolete
facilities at the Millinocket, Maine, mill and the resulting
elimination of approximately 200 positions. In November 1993, the
company announced the additional elimination of approximately 450
positions companywide to be completed by the end of 1994. Total
savings associated with both these decisions are estimated at
approximately $40.0 million per year. When completed, the announced
personnel actions will represent a reduction of approximately 10
percent in Bowater's work force.
Finally, during 1993, the company sold approximately 70,000 acres of
non-strategic land holdings and properties in Alabama, Georgia,
Mississippi, Ohio and South Carolina. The company's cost reduction and
cash conservation programs will continue into 1994.
Bowater recorded a net loss of $64.5 million, or $1.84 per share, in
1993 compared to a loss before accounting changes of $92.9 million, or
$2.64 per share, in 1992. After accounting changes, 1992's net loss
was $82.0 million, or $2.34 per share.
The net loss for 1993 included a pre-tax charge of $20.0 million, or
$.34 per share after tax, for the restructuring at GNP and the phased
elimination of the additional 450 positions companywide by the end of
1994. Also included in the net loss for 1993 was a $6.0 million
deferred tax expense, or $.16 per share, reflecting higher deferred
tax liabilities resulting from an increase in federal corporate tax
rates. Offsetting these additional charges was the sale of $73.3
million of non-strategic real property holdings, resulting in $32.6
million of net income, or $.90 per share.
During 1992, Bowater recorded pre-tax charges against income of $12.3
million, or $.21 per share after tax, for expenses related to a write-
off of non-operating equipment; $5.0 million, or $.09 per share after
tax, for expenses related to a corporate restructuring and relocation;
and $34.9 million, or $.59 per share after tax, for adoption of an
accounting standard covering postretirement benefits, primarily health
care. The company also adopted a new accounting standard for income
taxes, which added $32.3 million, or $.89 per share, to the net
results.
Net sales in 1991 totaled $1.19 billion, and operating income was
$103.7 million, representing decreases of 7.7 percent and 40.7
percent, respectively, from the strong results of the prior year. The
beginning of the global economic slump was felt by the company as
prices for major products, particularly market pulp and coated paper,
weakened from 1990 levels.
Segment Performance
The company's operations are divided into two primary segments: Pulp
and Paper and Related Products, and the Communication Papers Group.
The Pulp and Paper and Related Products segment includes the company's
uncoated groundwood papers (newsprint, directory paper and specialty
papers); lightweight coated groundwood
9
<PAGE>
BUSINESS AND FINANCIAL REVIEW Continued
Bowater Incorporated and Subsidiaries
paper; hardwood and softwood market pulp; timber and lumber. The
Communication Papers Group converts and distributes continuous stock
computer forms and other business communication papers. Following is a
detailed review of the results from major product lines within
these segments.
Newsprint
Bowater is the United States' largest supplier of newsprint, which
remains the company's primary product line.
The combined effect of poor market economics and substantial
overcapacity in the industry caused the company's newsprint results to
decline each year from 1989 through 1992. In 1991, domestic
consumption of newsprint dropped 6 percent, the largest single year
decline since 1974-1975. Average transaction prices realized by
Bowater in 1991 were just slightly below 1990 levels, but fell by 16
percent in 1992 compared to 1991. The company's newsprint tonnage
shipments in 1992 increased by 31 percent over 1991, due mainly to the
availability of tonnage from GNP acquired at the end of 1991. During
1992, the company doubled newsprint exports, mainly to areas of the
world with higher demand growth rates than North America.
The downward spiral in newsprint prices was temporarily halted in the
first quarter of 1993, as U.S. consumption increased by 3.2 percent
over the first quarter of 1992. The U.S. economy began to show signs
of steady albeit slow growth, and publishers started to build
inventories in anticipation of possible labor strikes in Canada.
However, by the end of the second quarter, U.S. consumer confidence
weakened, leading to a drop in advertising, and additional tonnage
entered the U.S. market from overseas, adding to already high
inventory levels. Finally, Canadian producers signed new labor
contracts, thereby eliminating the possibility of strikes in 1993. As
a result, the company's average transaction price for newsprint, after
increasing 6.4 percent through the first half of 1993, ended the year
4.1 percent higher than the previous year.
Bowater announced a number of steps during 1993 to improve its
competitive position in the newsprint market. At GNP in Millinocket,
Maine, a phased shutdown of the mill's woodyard, stone groundwood
pulping facilities and a small uncoated groundwood paper machine will
remove obsolete, high cost facilities in 1994. The company also
reduced its annual maximum newsprint production by 264,500 short tons,
or 16 percent. This was accomplished by shifting 178,000 tons to the
production of higher margin grades of paper and shutting down 86,500
tons. As a result, the company's tonnage sales of newsprint declined
approximately 12 percent in 1993 compared to 1992.
(Newsprint Sales bar graph appears here--see appendix)
The ability to supply substantial amounts of high quality recycled
newsprint is becoming increasingly important in today's
environmentally conscious marketplace. Bowater's position was enhanced
in 1993 by the successful completion and startup of its second
newsprint recycling plant. Located at GNP's East Millinocket, Maine,
site, the new facility is scheduled to reach full operation in late
1994. At that point, it will use about 175,000 short tons of old
newspapers, old magazines and old telephone directories each year.
GNP's new facility is similar in design to the company's Calhoun,
Tennessee, recycling plant, which was completed in August 1991.
After suffering the damaging financial effects produced by the
introduction of 12 new North American newsprint machines between 1989
and 1991, the industry is looking to the future with guarded optimism.
Total U.S.and Canadian newsprint capacity at the end of 1993 was
approximately 17.8 million short tons, slightly less than in 1992.
Further, no new machines are expected in the U.S. before 1996. During
the past four years, more than 1.6 million short tons of Canadian
newsprint and uncoated groundwood have been removed from the market.
Although much of this tonnage has been replaced by new output, total
Canadian production is not expected to increase substantially over the
next three years.
With the U.S. economy finally showing signs of sustained recovery, and
the supply/demand ratio moving toward equilibrium, the next two to
four years should produce improved results for newsprint
manufacturers. In December 1993, Bowater announced, as have many other
major East Coast producers, a 7 percent reduction in discounts allowed
off list price, effective March 1994. No assurance can be given, however,
that a price increase can be achieved.
10
<PAGE>
Directory and Uncoated Specialties
With the December 1991 acquisition of GNP, the company added important
new grades such as directory paper, used for telephone books and
yellow pages, to its product mix. The acquisition also expanded
Bowater's production capacity of uncoated groundwood specialties, used
in television listings and newspaper advertising inserts.
The company's tonnage sales of directory paper
rose 60 percent in 1993 compared to 1992. This increase stemmed mainly
from the company's decision to shift newsprint manufacturing capacity
to higher margin directory grades.
Export tonnage increased more than fivefold in 1993, as Bowater
entered the first year of a three-year contract to supply 30,000 tons
per year of directory paper to Japan's telephone company, NTT.
Directory selling prices suffered during 1993, however, due to the
decline in newsprint prices, which caused some customers to substitute
grades. Adding to the problem was the effect of new competition
entering the market. The result of these factors was a 4.2 percent
drop in directory selling prices compared to 1992.
The company's production of uncoated specialty papers nearly doubled
in 1993 from 1992 as the shift from newsprint production freed
manufacturing capacity. Much of the additional production was directed
to Bowater's communications papers segment, allowing the company to
realize the benefits of vertical integration.
Unfortunately, heightened competitive pressures in 1993, including
increased Swedish and Finnish imports, contributed to a 6.3 percent
decline in average selling prices for uncoated specialties compared to
1992.
Coated Groundwood Paper
During the past three years, the coated paper market has encountered
many of the same difficulties prevalent in the newsprint market,
although to a lesser degree.
After reaching a peak in 1989, selling prices realized for coated
paper fell steadily for the next three years. By 1992, average prices
had declined 19 percent from 1989 levels as excess industry supply
coupled with weak demand took its toll.
By the latter half of 1992, early signs of recovery became evident.
U.S magazine advertising, one of the engines
of coated paper consumption, started to increase, and catalog
merchandisers also contributed to a rise in demand. Further,
consumption of coated paper for advertising
inserts and coupons strengthened. These positive trends continued into
1993, and average selling prices started to rise, although slowly. By
mid-year, demand had become strong enough to permit the company to
implement a 7 percent price increase. Since then, competitive
pressures and a significantly increased flow of imports into the U.S.
market have brought a renewal of price discounting, eroding
substantially all of the mid-year price increase.
Even though highly competitive conditions prevailed during 1993, the
company shipped nearly 2 percent more coated paper, at average prices
5 percent higher than last year. In addition, operating costs declined
slightly. As a result of these factors, coated paper operating margins
improved in 1993.
(Coated Paper Sales bar graph appears here--see appendix)
Despite the resurgence of price discounting, the company believes the
outlook for coated paper is positive. The U.S. economic recovery
appears to be strengthening, which should boost general advertising
expenditures. No new coated machines are projected by the industry
through 1996, meaning any growth in demand must be met with existing
capacity or imports. Finally, if economic conditions improve in
Europe, the U.S. market will witness a lessening of pressure from
imports. This trend should be accelerated by increases in selling
prices for market pulp, since most European mills are not integrated.
Market Pulp
The company produces both softwood and hardwood bleached kraft market
pulp. In recent years, approximately 70 to 80 percent of the company's
pulp sales have been to export markets. Financial results from
Bowater's market pulp operations are dependent on general economic
conditions in export markets, available production capacity and the
relative strength of the U.S. dollar versus other competitors'
currencies.
Pulp selling prices realized by the company reached record levels in
1989. Prices began to slide in 1990 as new global capacity came on
stream and the economies of the major pulp-consuming countries of the
world began to weaken. This is particularly true in Europe, the
company's largest single export market.
The company's market pulp operations remained profitable during 1991
and 1992. Operating margins,
11
<PAGE>
BUSINESS AND FINANCIAL REVIEW Continued
Bowater Incorporated and Subsidiaries
(Market Pulp Sales bar graph appears here--see appendix)
however, declined steadily from the levels achieved during the 1989-
1990 period, as lackluster demand and excess industry capacity placed
pressure on selling prices. Average prices realized in 1992 were 25
percent lower than those of 1990.
The past year did not bring relief for the company's pulp operations.
In 1993, global demand remained weak, while world capacity additions
continued to flood the market with low-cost pulp from areas such as
South America and Indonesia. The result was a substantial drop in
selling prices. Although the company's 1993 tonnage sales of market
pulp were approximately equal to the prior year's, average selling
prices dropped by 25 percent.
The company, as well as many of its competitors, continues to face
problems selling bleached market pulp in Germany and certain other
European markets. Bowater does not produce elemental chlorine-free
pulp or total chlorine-free pulp.
There is reason to believe 1994 should be better. Some European
economies are slowly improving, as evidenced by the decline of
inventories held in foreign ports. In addition, production
curtailments and permanent reductions in capacity in some regions of
the world have tightened the supply of pulp, which should lead to a
better market balance. Most major pulp producers implemented price
increases in the first quarter of 1994, with future price hikes
dependent on the rate of recovery in the economies of our primary
trading partners.
Communication Papers
Bowater's Communication Papers Group is one of the nation's leading
suppliers of stock continuous computer forms. Its products are
marketed through two divisions: one selling directly to large
corporate and governmental users, the other focusing on distributors
and mass merchandisers.
The past three years have produced mixed results for this segment of
the company's business. In 1991, although weak demand caused an 8.9
percent drop in average selling prices compared to the prior year, the
cost of raw materials declined by an even greater amount. As a result,
operating income increased by 26.4 percent to $14.4 million in 1991.
This pattern reversed itself in the succeeding two years, as
continuing weak demand caused selling prices to fall at a faster rate
than raw material costs. Average selling prices realized by the
company during 1993 were 13.7 percent lower than price levels achieved
in 1991, while operating costs dropped only 5.5 percent. The
communication papers segment recorded operating losses of $6.4 million
and $2.3 million in 1993 and 1992, respectively.
(Paper Sales bar graph appears here--see appendix)
To reinforce its competitive position, the company has concentrated
its efforts on new product development during the past two years. In
1992, EB-20,(register mark) a bond paper containing 20 percent post-consumer or
equivalent recycled waste, was successfully introduced. During 1993,
the company introduced "Environmental White 20" or EW-20,(register mark) also
containing 20 percent post-consumer or equivalent waste. EW-20 is
brighter than EB-20 but slightly less bright than traditional register
bond paper, making printed data easier to read. These new products are
very appealing to those customers wishing to buy forms containing
recycled fiber. Both were developed as joint efforts between Bowater's
Communication Papers Group and Bowater's Southern Division, thereby
allowing the company to realize the cost-saving benefits of vertical
integration. The company believes the future profitability of this
operating segment will depend to a great degree on its ability to
continue developing new products, particularly those maximizing the
vertical integration capabilities within the company, while
maintaining tight control over costs.
Liquidity and Capital Resources
Since becoming an independent, publicly traded company in 1984, the
company has relied upon both internal and external sources of funds.
Beginning in 1990, however, deteriorating economic conditions in the
company's major markets have adversely affected operating cash flows.
These conditions, when combined with the costs associated with the
acquisition of GNP, have prompted the company to place more emphasis
upon external funding sources for its operating, financial and capital
requirements.
12
<PAGE>
(Cash Flow From Operations bar graph appears here--see appendix)
The company's operations used $30.6 million of cash in 1993 compared
to generating $109.5 million of cash in 1992. The decline in operating
cash flow resulted primarily from the company's decision to
discontinue the sale of receivables under an asset securitization
program. In addition, the company received an additional $18.0 million
in tax refunds, realized a lower operating loss, but paid higher
interest costs during 1993 compared to 1992.
As part of the company's plan to conserve cash during this period of
poor economic conditions, capital expenditures have been cut
significantly each year since 1989. In 1993, total outlays for capital
equipment were $121.8 million, down from $139.5 million and $159.7
million in 1992 and 1991, respectively. The largest single expenditure
in 1993 was $21.7 million for the completion of the company's new
recycling plant at the East Millinocket, Maine, mill. Much of the
balance of 1993's expenditures was for normal good order maintenance
at each of the company's mills. Outlays in 1993 were funded by
internally generated cash and 1992 borrowings.
Capital expenditures in 1994 are estimated to total approximately
$255.0 million. Completion of construction of a new recovery boiler at
the Calhoun, Tennessee, mill at $105.0 million represents the largest
single cash expenditure for the year. Other outlays are planned for
good order maintenance and expenditures associated with the closure of
obsolete facilities at the Millinocket, Maine, mill.
Financing for the 1994 capital program will come from the proceeds of
two preferred stock offerings completed by the company in February
1994. The company sold $115.0 million of Preferred Redeemable
Increased Dividend Equity Securities (PRIDESSM),* 7% Series B
Convertible Preferred Stock and $85.0 million of 8.40% Series C
Cumulative Preferred Stock.
Borrowings during 1992 included the October 1992 issuance of $125.0
million of 81/4% Notes due 1999 and $125.0 million of 91/2% Debentures
due 2012. Approximately $150.0 million of the net proceeds were used
to repay revolving credit obligations and other short-term
borrowings. The remaining proceeds are being invested in investment
grade marketable securities pending application to general corporate
purposes.
(Capital Expenditures Including Timberlands bar graph appears here--
see appendix)
Also in October 1992, the company borrowed $62.0 million in proceeds
of tax-exempt 73/4% revenue bonds due 2022, through the Finance
Authority of Maine, and in December 1992 borrowed $39.5 million in
proceeds of tax-exempt 7.40% revenue bonds through McMinn County,
Tennessee. Proceeds from these issues were used to fund the
construction and completion of the recycling facilities at East
Millinocket and Calhoun, respectively.
As the company secured the long-term financing in the capital markets
described above, its reliance on other credit facilities has
decreased. Accordingly, the company has from time to time sought and
put in place more appropriately sized credit facilities.
Prior to 1992, the company's general liquidity needs were met by a
$400.0 million multiple option credit facility and a $350.0 million
revolving credit agreement. The company replaced these facilities in
the first quarter of 1992 with a $500.0 million credit agreement (the
"1992 Credit Agreement"). By the fourth quarter of 1992, the company
believed that compliance with certain financial covenants in the 1992
Credit Agreement was not assured, due to the increased operating
losses discussed above and the company's increased indebtedness. In
December 1992, after reassessing the company's liquidity needs, the
company requested and received a $250.0 million, three-year revolving
credit facility provided by a new Credit Agreement. All financial
obligations outstanding under the 1992 Credit Agreement were repaid as
of December 31, 1992.
The new Credit Agreement, under which no amounts were borrowed as of
December 31, 1993, expires in December 1995 and is used to meet
working capital requirements. In anticipation of raising additional
equity capital through the combined sale of prides and Series C
Preferred Stock, the company determined it would not need the full
$250.0 million credit line provided by the Credit Agreement. An
amendment to the Credit Agreement provides for a reduction in the
credit line to $200.0 million on March 31, 1994.
13
<PAGE>
BUSINESS AND FINANCIAL REVIEW Continued
Bowater Incorporated and Subsidiaries
(Total Capitalization and Total Debt bar graph appears here--see appendix)
In November 1993, S&P lowered Bowater's senior debt and preferred
stock ratings and changed the company's outlook from negative to
stable. The company's senior debt rating was reduced from BBB to BBB-,
and its LIBOR preferred stock, Series A rating was reduced from BBB-
to BB+. Moody's Investor Service rates the company's senior debt and
LIBOR preferred stock, Series A as Baa1 and commercial paper as P-2.
Environmental Matters
The company is subject to a variety of federal, state and provincial
environmental and pollution control laws and regulations in all
jurisdictions in which it operates.
Bowater believes that all its operations are currently in substantial
compliance with all applicable environmental laws and regulations.
New Canadian federal regulations governing the discharge of pulp and
paper mill effluent will require the installation of a wastewater
treatment facility at the Mersey mill. This facility is estimated to
cost approximately $22.0 million, spread over 1994-95. The company has
obtained an extension to December 31, 1995, of the effective date of
compliance with these new regulations, which the company believes will
give it sufficient time to install the necessary equipment.
Dioxins and other chlorinated organics have been found in trace
amounts in the effluents of bleached kraft pulp mills. Both the South
Carolina and Tennessee facilities, which have bleached kraft pulp
mills, have received discharge permits with dioxin limitations.
Currently, the effluents of both mills are well below the respective
current discharge limits for dioxin.
On November 1, 1993, the U.S. Environmental Protection Agency (EPA)
proposed regulations that would impose new air and water quality
standards aimed at further reductions of pollutants. Final
promulgation of these regulations is due by the fall of 1995. The
regulations, if adopted, will require compliance by 1998. If adopted
as proposed, these new rules will require capital expenditures at all
of the company's United States facilities, but most significantly at
its Catawba, South Carolina, facility.
The company has a number of options in complying with the new
regulations, and the amount of required
capital expenditures will depend upon which of several
alternative courses of action the company undertakes
consistent with the regulations. Bowater believes that these
alternatives would require aggregate capital expenditures by the
company of approximately $150.0 million through 1998. The ultimate
financial impact to the company of compliance will depend upon the
nature of the final regulations, the timing of required
implementation, the cost of available technology, the development of
new technology and determination by the company as to whether to
maintain certain production levels or operate certain equipment.
Other than capital expenditures needed to comply with the new Canadian
federal regulations and the EPA's proposed regulations described
above, the company anticipates that continued upgrading of its
facilities to maintain environmental compliance should require capital
expenditures of approximately $10.0 million to $15.0 million per year
for the foreseeable future.
Bowater has been identified as a potential respon-sible party under
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA" or "Superfund"), for the cleanup of
contamination at five Superfund sites. Based upon
its percentage share in each proceeding, the amount of capital
expenditures and deferred charges or charges to income involved, the
company believes that these matters will not result in liabilities
that will have a material adverse effect on Bowater's future cash
flow, financial condition or results of operations.
While it is difficult to predict with certainty the nature of future
environmental regulations, Bowater believes that, compared to many of
its North American competitors, it will not be at a competitive
disadvantage in meeting future United States or Canadian standards.
Lawsuit Settlement
In January 1994, the company settled, for approximately $10.5 million,
all pending lawsuits relating to vehicular accidents that occurred on
December 11, 1990, in fog on Highway I-75, which passes in the general
area of the company's Calhoun, Tennessee, mill property. The
settlement will be funded by the company's insurance carriers, subject
to the outcome of an insurance coverage lawsuit for $9.5 million that
the company initiated against its first excess insurer, in which the
company believes it should prevail. The settlement of these matters
will not have a material adverse effect on the company's results of
operations, financial condition or liquidity.
14
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
Bowater Incorporated and Subsidiaries
(In thousands, except per-share amounts)
<TABLE>
<CAPTION>
Years Ended December 31, 1993 1992 1991
<S> <C> <C> <C>
Net sales $1,353,684 $1,360,818 $1,190,405
Cost of sales 1,182,125 1,197,343 892,114
Depreciation, amortization and cost of timber harvested 163,086 161,910 132,026
Gross profit 8,473 1,565 166,265
Selling and administrative expense 71,805 75,673 62,550
Operating income (loss) (63,332) (74,108) 103,715
Other expense (income):
Interest income (4,105) (1,702) (1,988)
Interest expense 98,333 78,202 41,993
Gain on sale of timberlands (52,220) -- --
Write-off of non-operating asset -- 12,251 --
Other, net 3,696 9,095 (5,025)
Income (loss) before income taxes, minority
interests, and cumulative effect of changes
in accounting principles (109,036) (171,954) 68,735
Provision for income taxes (34,886) (63,621) 25,432
Minority interests in net loss of subsidiaries (9,651) (15,465) (2,286)
Income (loss) before cumulative effect of changes
in accounting principles (64,499) (92,868) 45,589
Cumulative effect of changes in accounting
principles, net of income taxes of $12,930 -- 10,911 --
Net income (loss) $ (64,499) $ (81,957) $ 45,589
Earnings (loss) per common share:
Before cumulative effect of changes in accounting
principles $ (1.84) $ (2.64) $ 1.15
Cumulative effect of changes in accounting principles -- .30 --
Net income (loss) $ (1.84) $ (2.34) $ 1.15
Average common shares outstanding 36,368 36,141 35,880
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE>
CONSOLIDATED BALANCE SHEET
Bowater Incorporated and Subsidiaries
<TABLE>
<CAPTION>
(In thousands, except share amounts)
At December 31, 1993 1992
<S> <C> <C>
Assets
Current assets:
Cash $ 16,258 $ 12,030
Marketable securities, at cost which approximates market 65,408 153,912
Accounts receivable, net 170,737 104,472
Inventories 149,431 163,097
Deferred income taxes 10,923 13,257
Other current assets 6,720 12,643
Total current assets 419,477 459,411
Timber and timberlands 422,521 432,577
Fixed assets, net 1,750,719 1,821,724
Intangible assets 57,208 59,695
Other assets 76,253 108,194
$2,726,178 $2,881,601
Liabilities and Capital
Current liabilities:
Current instalments of long-term debt $ 1,796 $ 14,058
Accounts payable and accrued liabilities 195,546 213,985
Income taxes payable 35,882 26,562
Dividends payable 6,079 11,474
Total current liabilities 239,303 266,079
Long-term debt, net of current instalments 1,118,403 1,120,206
Other long-term liabilities 144,802 143,619
Deferred income taxes 272,065 299,648
Minority interests in subsidiaries 144,749 159,823
Commitments and contingencies (See note on page 21.)
Redeemable preferred stock: $1 par value. Authorized, 10,000,000 shares;
issued, LIBOR preferred stock, Series A, 1,500,000 shares
(redemption value $75,000) 74,368 74,259
Common shareholders' equity:
Common stock, $1 par value. Authorized, 100,000,000 shares;
issued 36,913,422 shares at December 31, 1993, and 36,907,172
at December 31, 1992 36,913 36,907
Additional paid-in capital 332,661 332,532
Retained earnings 388,663 478,274
Equity adjustment from foreign currency translation (1,351) 466
Loan to ESOT (11,245) (12,843)
Treasury stock at cost, 474,330 shares at December 31, 1993,
and 626,365 shares at December 31, 1992 (13,153) (17,369)
Total common shareholders' equity 732,488 817,967
$2,726,178 $2,881,601
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE>
CONSOLIDATED STATEMENT OF CAPITAL ACCOUNTS
Bowater Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Equity
LIBOR Additional Adjustment-
Preferred Common Paid-in Retained Foreign Loan to Treasury
(In thousands, except per-share Stock Stock Capital Earnings Currency ESOT Stock
amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1990 $74,055 $36,897 $332,336 $611,044 $ 5,359 $(15,690) $(34,473)
Net income -- -- -- 45,589 -- -- --
Dividends on common
stock ($1.20 per share) -- -- -- (43,073) -- -- --
Dividends on preferred
stock ($2.71 per share) -- -- (4,065) -- -- --
Increase in stated value
of LIBOR preferred stock 95 -- -- (95) -- -- --
Reduction in loan to ESOT -- -- -- -- -- 1,329 --
Foreign currency translation -- -- -- -- 239 -- --
Common stock issued under
stock option plans -- 3 59 -- -- -- --
Treasury stock used for employee benefit
and dividend reinvestment plans -- -- -- (1,377) -- -- 8,528
Balance at December 31, 1991 74,150 36,900 332,395 608,023 5,598 (14,361) (25,945)
Net loss -- -- -- (81,957) -- -- --
Dividends on common stock
($1.20 per share) -- -- -- (43,364) -- -- --
Dividends on preferred stock
($1.63 per share) -- -- -- (2,445) -- -- --
Increase in stated value of
LIBOR preferred stock 109 -- -- (109) -- -- --
Reduction in loan to ESOT -- -- -- -- -- 1,518 --
Foreign currency translation -- -- -- -- (5,132) -- --
Common stock issued under
stock option plans -- 7 137 -- -- -- --
Treasury stock used for employee benefit
and dividend reinvestment plans -- -- -- (1,874) -- -- 8,576
Balance at December 31, 1992 74,259 36,907 332,532 478,274 466 (12,843) (17,369)
Net loss -- -- -- (64,499) -- -- --
Dividends on common stock
($.60 per share) -- -- -- (21,835) -- -- --
Dividends on preferred stock
($1.45 per share) -- -- -- (2,175) -- -- --
Increase in stated value of
LIBOR preferred stock 109 -- -- (109) -- -- --
Reduction in loan to ESOT -- -- -- -- -- 1,598 --
Foreign currency translation -- -- -- -- (1,817) -- --
Common stock issued under
stock option plans -- 6 129 -- -- -- --
Treasury stock used for employee benefit
and dividend reinvestment plans -- -- -- (993) -- -- 4,216
Balance at December 31, 1993 $74,368 $36,913 $332,661 $388,663 $(1,351) $(11,245) $(13,153)
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Bowater Incorporated and Subsidiaries
<TABLE>
<CAPTION>
(In thousands)
Years Ended December 31, 1993 1992 1991
<S> <C> <C>
Cash flow from (used for) operating activities:
Operating income (loss) $ (63,332) $ (74,108) $ 103,715
Depreciation, amortization and cost of timber harvested 163,086 161,910 132,026
Changes in working capital:
Receivables (66,265) 79,334 4,801
Inventories 13,666 8,469 (17,327)
Accounts payable and accrued liabilities (9,332) 7,332 (6,745)
Other working capital 8,256 (2,406) (1,299)
Interest paid, net of capitalized interest (97,768) (71,586) (40,715)
Income taxes refunded (paid) 19,002 1,050 (22,574)
Other 2,041 (519) 4,698
(30,646) 109,476 156,580
Cash flow from (used for) investing activities:
Acquisition of Great Northern Paper, Inc. -- (16,522) (305,457)
Cash invested in fixed assets, timber and timberlands (121,771) (139,499) (159,655)
Disposition of fixed assets, timber and timberlands 78,708 1,714 1,040
(43,063) (154,307) (464,072)
Cash flow from (used for) financing activities:
Cash dividends, including minority interests (29,846) (46,323) (44,654)
Long-term debt borrowings -- 345,340 457,272
Funds on deposit with trustee 34,506 (34,506) --
Long-term debt repayments (14,152) (81,228) (94,092)
Other (1,075) (837) (1,115)
(10,567) 182,446 317,411
Increase (decrease) in cash and marketable securities (84,276) 137,615 9,919
Cash and marketable securities:
Beginning of year 165,942 28,327 18,408
End of year $ 81,666 $ 165,942 $ 28,327
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bowater Incorporated and Subsidiaries
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements include the accounts of Bowater
Incorporated and Subsidiaries (the company). All subsidiaries are
wholly owned except Calhoun Newsprint Company (CNC) and Bowater Mersey
Paper Company, Ltd. (Mersey), which are 51 percent owned. All material
intercompany items are eliminated.
Marketable Securities
Marketable securities consist of short-term investments in investment
grade securities.
Inventories
Inventories are stated at the lower of cost or market, determined by
using the last-in, first-out (LIFO) and average cost methods.
Timber and Timberlands
The acquisition cost of land, timber, real estate taxes, lease
payments, site preparations and other costs related to the planting
and growing of timber are capitalized. Such costs, excluding land, are
charged against revenue at the time the timber is harvested.
Fixed Assets and Depreciation
Fixed assets are stated at cost less accumulated depreciation.
Depreciation is computed generally on the straight-line basis. The
units of production method is used to depreciate fixed assets of major
expansion projects until design level production is reasonably
sustained. Repairs and maintenance are charged to operations as
incurred.
Intangible Assets
The excess of purchase price over fair value of net tangible assets
acquired is allocated to intangible assets and amortized by the
straight-line method over 30 years.
Income Taxes
Effective January 1, 1992, the company adopted SFAS No. 109,
"Accounting for Income Taxes," which requires the use of the asset and
liability method. Deferred taxes are provided for significant
temporary differences. The company has not provided income taxes on
the undistributed earnings of its Canadian subsidiaries or of CNC as
it has specific plans for reinvestment of such earnings.
The company accounts for Canadian investment tax credits using
the flow-through method, whereby the provision for income taxes is
reduced to reflect investment credits when they become available.
Foreign Currency Translation
Assets and liabilities of the company's Canadian operations are
translated using the exchange rate in effect at the balance sheet
date. Results of operations are translated using the average exchange
rates throughout each year. The effects of exchange rate fluctuations
are accumulated as a separate component of common shareholders'
equity.
Pension Plans
The company has contributory and non-contributory pension plans which
cover substantially all employees.
The company's cash contributions to the plans are sufficient
to provide pension benefits to participants and meet the funding
requirements of ERISA.
Revenue Recognition
The company recognizes revenue from product sales upon shipment to its
customers. Beginning in 1993, sales are shown net of distribution
costs in the accompanying Consolidated Statement of Operations. Sales
in 1992 and 1991 have been restated.
Earnings Per Common Share
The computation of earnings per common share is based on the weighted
average number of outstanding common shares and equivalents (stock
options). Net income used in this computation is reduced by the LIBOR
preferred stock dividend requirement and the amortization of the
difference between the net proceeds from the LIBOR preferred stock and
its mandatory redemption value.
Cost Reductions/Restructuring Charges
In 1993, management focused on cost reduction programs to improve cash
flow. As part of these cost cutting activities, the company finalized
the closure of the Darien, Connecticut, corporate office,
consolidating it with other operations in Greenville, South Carolina.*
Commencing with the dividend paid April 1, 1993, the Board of
Directors reduced the dividend per share of Common Stock to $.15 per
share from $.30 per share.
In August 1993, the company announced the closure of certain
obsolete facilities at the Millinocket, Maine, mill and the resulting
elimination of approximately 200 jobs. In November 1993, the company
announced the additional elimination of approximately 450 positions
companywide to be completed by the end of 1994. As a result, the
company recorded pre-tax charges totaling approximately $20,000,000 in
1993. The charges
*In 1992, the company recorded a $5.0 million pre-tax ($.09 per share
after tax) restructuring charge to cover the cost of the relocation.
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
Bowater Incorporated and Subsidiaries
included approximately $14,000,000 for employee
termination costs (anticipated 1994 cash outflow -- $10,000,000) and
approximately $6,000,000 for asset retirements. Savings associated
with both of these moves are estimated to be approximately $40,000,000
per year. The personnel reductions will be achieved through attrition,
early retirements and terminations, and, when completed, will
represent a total reduction of approximately 10 percent of the
company's work force.
Sale of Real Property
During 1993, the company sold 70,000 acres of non-strategic real
property holdings located in Alabama, Georgia, Mississippi, Ohio and
South Carolina. Proceeds totaled approximately $73.3 million,
resulting in a pre-tax gain of approximately $52.2 million, or $0.90
per share, after tax.
Acquisition of GNP
On December 31, 1991, the company acquired 80 percent of the stock of
Great Northern Paper, Inc. (GNP), from Great Northern Nekoosa
Corporation (GNN), a subsidiary of Georgia-Pacific Corporation. In
1992, the company acquired the remaining 20 percent of the stock of
GNP.
The balance sheet of GNP is consolidated in the company's
Consolidated Balance Sheet at December 31, 1993 and 1992. The
company's Consolidated Statement of Operations for the year ended
December 31, 1991, does not include the results of operations of GNP.
Pro forma condensed consolidated results of operations for the year
ended December 31, 1991, would have been as follows:
(In thousands, except per-share amounts, unaudited) 1991
Net sales $1,555,477
Operating income $ 129,950
Income before income taxes $ 66,010
Income before extraordinary charge $ 47,095
Earnings per common share before
extraordinary charge $ 1.20
Receivables
In August 1992, the company completed a sale of its receivables in the
amount of $74,000,000 under an asset securitization program. The net
cash proceeds were reported as cash flow from operations in the
accompanying Consolidated Statement of Cash Flows and as a
reduction of accounts receivable in the accompanying Consolidated
Balance Sheet. During the first quarter of 1993, the company
discontinued selling receivables under the program.
Under the terms of the program, the maximum amount of the
purchaser's investment in the company's receivables at any one time is
$80,000,000. The cost of the program is based on the purchaser's level
of investment and borrowing costs. The total cost of the program in
1993 and 1992 was $605,000 and $1,127,000, respectively, and was
included in Other expense in the accompanying Consolidated Statement
of Operations. Risk of credit loss is retained by the company.
Inventories
(In thousands) 1993 1992
At lower of cost or market:
Raw materials $ 33,090 $ 35,910
Work in process 2,697 3,095
Finished goods 41,070 52,153
Mill stores and other supplies 79,209 79,806
156,066 170,964
Excess of current cost over LIFO
inventory value (6,635) (7,867)
$149,431 $163,097
Inventories valued using the LIFO method comprised 36.8 and
44.0 percent, respectively, of total inventories at December 31, 1993,
and December 31, 1992.
Fixed Assets
Range of
Estimated
Useful
Lives
(In thousands) 1993 1992 in Years
Land and land
improvements $ 30,112 $ 30,109 10-20
Buildings 287,029 283,350 20-40
Machinery and equipment 2,448,559 2,380,370 10-30
Leasehold improvements 4,945 4,663 10-20
Construction in progress 30,950 52,988 --
2,801,595 2,751,480
Less accumulated
depreciation and
amortization 1,050,876 929,756
$1,750,719 $1,821,724
20
<PAGE>
Accounts Payable and Accrued Liabilities
(In thousands) 1993 1992
Trade accounts payable $102,727 $120,799
Accrued interest 20,883 21,424
Property and franchise taxes payable 13,789 14,373
Accrued payroll and payroll taxes 22,743 26,653
Other 35,404 30,736
$195,546 $213,985
Long-term Debt, Net of Current Instalments
(In thousands) 1993 1992
Secured:
Mortgage notes secured by
timberlands and machinery
and equipment $ 16 $ 214
Unsecured:
Industrial Revenue Bonds, due at
various dates from 1999 to 2010,
with interest at varying rates from
71/8% to 81/2% 6,000 6,000
Pollution Control Revenue Bonds,
due at various dates from 2001 to
2016, with interest at varying rates
from 6.85% to 75/8% 53,159 53,154
9% Debentures, due August 1, 2009 300,000 300,000
ESOP note, 73/5%, due April 1, 2000 9,645 11,343
81/2% Notes Due 2001 200,000 200,000
93/8% Debentures Due 2021, net of
unamortized discount of $1,400
in 1993 and $1,450 in 1992 198,600 198,550
81/4% Notes Due 1999, net of
unamortized discount of $89
in 1993 and $105 in 1992 124,911 124,895
91/2% Debentures Due 2012, net of
unamortized discount
of $428 in 1993
and $450 in 1992 124,572 124,550
73/4% Recycling Facilities
Revenue Bonds, due 2022 62,000 62,000
74/10% Recycling Facilities
Revenue Bonds, due 2022 39,500 39,500
$1,118,403 $1,120,206
Long-term debt maturities for the next five years are as
follows:
(In thousands)
1994 $1,796
1995 $1,504
1996 $1,504
1997 $1,504
1998 $1,504
In October 1992, the company sold $125,000,000 of 81/4% Notes
Due 1999 and $125,000,000 of 91/2% Debentures Due 2012. Approximately
$150,000,000 of the net proceeds of these issues were used to repay
revolving credit obligations and certain other short-term borrowings.
Also in October 1992, the company sold $62,000,000 of tax-
exempt 73/4% Revenue Bonds, due 2022, through the Finance Authority of
Maine. Proceeds from this issue were used for the construction of the
new recycling facility at GNP's mill in East Millinocket, Maine.
In December 1992, the company sold $39,500,000 of tax-exempt
74/10% Revenue Bonds, due 2022, through McMinn County, Tennessee.
Proceeds from this issue were used to pay a portion of the costs of
the recycling facility at the company's mill in Calhoun, Tennessee.
In December 1992, the company replaced its prior Credit
Agreement with a new $250,000,000, three-year revolving credit
facility with less restrictive financial covenants. All financial
obligations outstanding under the prior Credit Agreement were repaid
as of December 31, 1992. An amendment to the Credit Agreement provides
for a reduction in the credit line to $200,000,000 on March 31, 1994.
Fair Value of Long-term Debt,
Net of Current Instalments
Based on the borrowing rates currently available to the company for
debt with similar terms and maturities as those issues included in the
accompanying Consolidated Balance Sheet, the fair value of the
company's long-term debt was approximately $1,270,000,000 and
$1,160,000,000 at December 31, 1993 and 1992, respectively.
Commitments and Contingencies
In September 1992, the company entered into a contract for the
construction of a new recovery boiler at the Calhoun, Tennessee, mill.
The project is expected to be completed in the second quarter of 1994.
Payment for the project (approximately $105,000,000) will be made from
the proceeds of the two preferred stock offerings. (See note on page
22.)
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
Bowater Incorporated and Subsidiaries
The company is also involved in various litigation relating to
contracts, commercial disputes, tax, environmental, workers'
compensation and other matters. The company's management is of the
opinion that the ultimate disposition of these matters will not have a mate-
rial adverse effect on the company's operations or its
financial condition taken as a whole.
Redeemable Preferred Stock
LIBOR preferred stock
In December 1985, the company sold $75,000,000 principal amount of
redeemable preferred stock with cumulative quarterly dividends equal
to 85 percent of the arithmetic mean of three month LIBOR for United
States dollar deposits.
The company is required to redeem 500,000 shares per year in
1996 through 1998 at a redemption price of $50.00 per share plus any
accrued and unpaid dividends.
In addition, the company may, at its option, redeem any or all
of the LIBOR preferred stock at any time prior to January 1996 at
$50.00 per share plus any accrued and unpaid dividends.
Preferred stock of subsidiary
During 1985, CNC sold $25,000,000 principal amount of its Cumulative
Serial preferred stock, par value $100.00 per share, to the minority
shareholder. Annual dividends are $7.30 per share. CNC is required to
provide an annual sinking fund payment of $2,500,000 each year through
2000. At its option, CNC may at any time redeem this issue at 100
percent of par value.
The preferred stock is carried on the Consolidated Balance
Sheet in Minority interest and at December 31, 1993, totaled $17,500,000.
Convertible and Cumulative Preferred Stock
On February 4, 1994, the company completed two public offerings of
preferred stock. The company sold 4,893,616 depositary shares, priced
at $23.50 per share, representing one-fourth of a share of 7% Series B
Convertible Preferred Stock referred to as Preferred Redeemable
Increased Dividend Equity Securities (PRIDES). The conversion premium
is 22 percent. The company also sold 3,400,000 depositary shares,
priced at $25.00 per share, representing one-fourth of a share of
8.40% Series C Cumulative Preferred Stock.
Each depositary share representing the PRIDES will
mandatorily convert into one share of company common stock on January
1, 1998. The company may redeem the PRIDES on or after January 1,
1997, and the holder has the option at any time prior to mandatory
conversion to convert the depositary shares into company common stock
at a rate as low as .82 shares of common stock for each depositary
share. The Series C Cumulative Preferred Stock has a liquidation value
of $25.00 per depositary share.
The net proceeds of both offerings, after deducting applicable
issuance costs and expenses, were approximately $193,500,000. The
proceeds of the offerings will be used by the company to fund: a new
recovery boiler presently under construction at its Calhoun,
Tennessee, mill; capital expenditures and other costs associated with
closure of certain obsolete facilities at its Millinocket, Maine,
mill; the costs associated with its recently announced companywide
personnel reductions and general corporate purposes.
Treasury Stock
Through December 31, 1993, the company purchased 1,403,050 shares of
its common stock at an aggregate purchase price of $40,134,000 and
used 528,312 shares of such stock to pay employee benefits and 400,408
shares to fund the company's Dividend Reinvestment Plan. The remaining
shares are included in treasury stock at cost. There remained
1,575,000 shares authorized for future purchase at December 31, 1993.
Stock Option Plans
The company has three stock option plans. The 1984 Stock Option Plan
and the 1988 Stock Incentive Plan authorized the grant of up to
3,000,000 shares of common stock of the company in the form of
incentive stock options (ISOs), non-qualified stock options (NSOs),
stock appreciation rights (SARs), Performance Stock and restricted
stock awards. Option grants have been made for all such shares under
these plans. The 1992 Stock Incentive Plan authorized the grant of up
to 3,000,000 shares of the company's common stock in the form of ISOs,
NSOs, SARs, Performance Stock and restricted stock awards.
22
<PAGE>
The option price of all options granted to date represents the
fair market value of the company's common stock on the date of grant.
All options granted between 1984 and 1990 were exercisable at
December 31, 1993. Options granted in 1991, 1992 and 1993 become
exercisable over a period of one to five years, depending upon the
type of option granted. The plans provide that any outstanding options
will become immediately exercisable upon a change in control of the
company. In such event, grantees of options (except for grantees of
ISO options under the 1984 plan) have the right to require the company
to purchase such options for cash in lieu of the issuance of common
stock and to exercise fully for cash all SARs.
Information with respect to options granted under the stock
option plans is as follows:
1993 1992
Number Option Number Option
of Shares Price of Shares Price
Outstanding 3,462,544 $16.50 2,296,779 $16.50
at beginning to $37.75 to $37.75
of year
Granted during 387,000 $20.19 1,243,800 $19.06
the year to $23.94 to $22.69
Exercised during (6,250) $21.00 (6,900) $21.00
the year to $22.69
Cancelled during (50,900) $21.00 (71,135) $21.00
the year to $37.75 to $37.75
Outstanding at 3,792,394 $16.50 3,462,544 $16.50
end of year to $37.75 to $37.75
Exercisable at 2,713,069 $16.50 1,970,194 $16.50
end of year to $37.75 to $37.75
Employee Stock Ownership Plan
The company has an Employee Stock Ownership Plan (ESOP) as a component
of the company's Salaried Employees' Savings Plan. The ESOP was funded
by a $17,500,000 loan, the proceeds of which were then loaned to an
Employee Stock Ownership Trust (ESOT). The ESOT purchased 574,160
shares of the company's common stock at an average purchase price of
$30.59. The unallocated shares serve as security for the loan.
Shareholder Rights Plan
The company has a rights plan designed to assure the company's
shareholders of receiving fair and equal treatment in the event of any
proposed takeover of the company. Each right will entitle common
shareholders to buy 1/100 of a share of Junior Preferred Stock at an
exercise price of $90.00, subject to adjustment. The rights will be
exercisable only if a person or group acquires 20 percent or more of
the company's outstanding common stock or announces a tender offer for
30 percent or more of the common stock. Upon the occurrence of certain
other events, each right entitles the holder thereof to receive (in
lieu of Preferred Stock) shares of common stock of the company (or,
where applicable, of a successor company) having a value of two times
the exercise price above. The company will be entitled to redeem the
rights at $.01 per right at any time not later than 10 days after the
acquisition of a 20 percent position. Until such time as they may be
subject to exercise, these rights will not be issued in separate form
and may not be traded other than with the shares to which they attach.
If unexercised, the rights expire May 2, 1996.
Income Taxes
Effective January 1, 1992, the company adopted SFAS No. 109,
"Accounting for Income Taxes." This Statement requires the asset and
liability method of accounting for deferred income taxes, which
applies enacted statutory tax rates to the differences between the
carrying amounts of assets and liabilities on the financial statements
and their respective tax bases. As permitted by the provisions of SFAS
109, prior years' financial statements were not restated.
Adoption of the Statement did not have any effect on the loss
before cumulative effect of changes in accounting principles and
extraordinary charge for the year ended December 31, 1992. The
cumulative effect of the change to January 1, 1992, was a reduction in
Deferred taxes of $36,371,000, an increase in Net income of
$32,343,000 ($.89 per common share) and a $4,028,000 allocation to
Minority interests in subsidiaries. In the accompanying Consolidated
Statement of Operations, this effect is accounted for as the
cumulative effect of a change in accounting principles.
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
Bowater Incorporated and Subsidiares
In August 1993, the federal statutory corporate tax rate was
increased from 34 percent to 35 percent. As a result, the company
recorded a $6,000,000 deferred tax expense, reflecting higher deferred
tax liabilities.
The components of income (loss) before income taxes, minority
interests and cumulative effect of changes in accounting principles
consist of U.S. income (loss) of $(85,509,000), $(129,816,000),
$90,839,000 and Canadian loss of $(23,527,000), $(42,138,000) and
$(22,104,000) in 1993, 1992 and 1991, respectively.
The provision for income taxes consists of:
(In thousands) 1993 1992 1991
Federal:
Current $ (9,992) $(14,416) $19,140
Deferred (12,296) (26,516) 11,930
(22,288) (40,932) 31,070
State:
Current -- 1,914 799
Deferred (4,391) (8,140) 3,558
(4,391) (6,226) 4,357
Canadian:
Current 310 536 (1,427)
Deferred (8,517) (16,999) (8,568)
(8,207) (16,463) (9,995)
Total:
Current (9,682) (11,966) 18,512
Deferred (25,204) (51,655) 6,920
$(34,886) $(63,621) $25,432
The components of Deferred income taxes at December 31, 1993, and
1992, in the accompanying Consolidated Balance Sheet are as follows:
(In thousands) 1993 1992
Inventories* $(1,037) $(2,127)
Timber and timberlands (61,058) (60,359)
Fixed assets (406,915) (398,186)
Other assets (15,270) (23,315)
Deferred tax liabilities (484,280) (483,987)
Accounts receivable* $330 481
Other current assets* 432 --
Current liabilities* 11,198 14,903
Other long-term liabilities 48,144 52,264
Alternative minimum tax
credit carryforwards 59,314 69,785
Canadian investment tax
credit carryforwards 29,706 34,134
Net operating loss carryforwards 75,754 26,029
Valuation allowance (1,740) --
Deferred tax assets 223,138 197,596
Net deferred
tax liability $(261,142) $(286,391)
*Included in Current assets in the accompanying Consolidated
Balance Sheet.
The components of deferred tax expense are as follows:
(In thousands) 1993 1992 1991
U.S. federal and state:
Accelerated tax depreciation $ 11,664 $ 13,208 $15,361
Tax loss and tax credit
carryforwards (35,947) (42,664) (8,636)
Growing timber 317 4,453 7,126
Pension expense 2,032 5,844 1,507
Basis difference of
GNP net assets (1,066) (9,284) --
Tax rate increase 6,000 -- --
Other 313 (6,213) 130
(16,687) (34,656) 15,488
Canadian:
Accelerated tax depreciation (5,027) (5,471) (5,445)
Tax loss and tax
credit carryforwards (4,833) (11,411) (4,240)
Other 1,343 (117) 1,117
(8,517) (16,999) (8,568)
$(25,204) $(51,655) $ 6,920
24
<PAGE>
The following is a reconciliation of the U.S. federal
statutory and effective tax rates as a percentage of income before
income taxes, minority interests and cumulative effect of changes in
accounting principles:
1993 1992 1991
U.S. federal statutory
income tax rate 35.0% 34.0% 34.0%
State income taxes, net of
federal income tax benefit 2.6 2.7 4.2
Tax rate increase 5.5 -- --
Canadian taxes .6 1.2 (3.6)
Other, net (.7) (.9) 2.4
Effective income
tax rate 32.0% 37.0% 37.0%
At December 31, 1993, $29,706,000 of Canadian investment
credit carryforwards, $59,314,000 of U.S. alternative minimum tax
credit carryforwards and approximately $174,000,000 of net operating
loss carryforwards were available to reduce future income taxes. The
company believes that such deferred tax assets will be ultimately
realized. The Canadian investment credit carryforwards expire at
various dates between 1994 and 2001. During 1994, $1,369,000 of
Canadian investment credit carryforwards are due to expire. There is
no expiration for alternative minimum tax credit carryforwards. The
net operating loss carryforwards expire at various dates between 1999
and 2008.
The cumulative amount of undistributed earnings of CNC, on
which the company has not provided deferred income taxes, was
approximately $91,267,000 at December 31, 1993. Distribution of these
earnings would qualify for the 80 percent dividend exclusion.
The company has also not provided deferred income taxes on the
cumulative amount of undistributed earnings related to its 51 percent
investment in its Canadian subsidiary since that investment is
considered permanent in duration and determination of such liability
is not practicable.
Interest Capitalized
Total interest incurred in the years 1993, 1992 and 1991 was
$100,517,000, $79,661,000 and $45,597,000, respectively. In 1993, 1992
and 1991, $2,184,000, $1,459,000 and $3,604,000 of interest expense
was capitalized, respectively.
Pension Plans
The company has defined benefit pension plans covering substantially
all employees. Benefits are based upon years of service and, depending
on the plan, average compensation earned by employees either during
their last years of employment or over their career.
Pension expense (credit) for 1993, 1992 and 1991 included the
following components:
(In thousands) 1993 1992 1991
Service cost $13,104 $11,164 $ 8,422
Interest cost 28,112 26,968 21,961
Actual return on
plan assets (46,000) (30,033) (45,201)
Net amortization
and deferral 7,690 (7,626) 14,198
Net pension
expense (credit) $ 2,906 $ 473 $ (620)
The following table sets forth the funded status of the plans
at December 31, 1993:
Plan Assets Plan Liabilities
Exceed Plan Exceed Plan
(In thousands) Liabilities Assets
Actuarial present value of
accumulated benefit obligation:
Vested $249,425 $ 51,154
Non-vested 9,127 13,821
258,552 64,975
Benefits attributable to
future salaries 59,672 3,841
Projected benefit obligation 318,224 68,816
Plan assets at fair value 355,648 44,239
Excess (deficit) of plan assets over
projected benefit obligation 37,424 (24,577)
Unrecognized prior service cost 4,773 1,353
Unrecognized net loss 35,629 14,856
Unrecognized transition asset (26,881) 1,335
Excess accumulated benefit
obligation recognized as
intangible asset -- (4,793)
Prepaid pension cost
(pension liability) $ 50,945 $(11,826)
During 1993, the company changed actuarial assumptions used in
calculating pension expense. The discount rate used to determine the
Plans' projected benefit obligation was decreased from 9 percent to
7.5 percent to approximate more closely rates on high quality long-
term obligations. The company also decreased the Plans' return on
assets
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
Bowater Incorporated and Subsidiaries
assumption from 11 percent to 10 percent. Plan assets consist
principally of common stocks and fixed income securities. In addition,
the company decreased the Plans' assumed long-term rate of
compensation increase from 6 percent to 5 percent. The net effect of
these changes on the company's 1993 results of operations and
financial condition was not material.
Retiree Health Care Plans
The company provides certain health care and life insurance benefits
to retired employees. Substantially all of the company's employees may
become eligible for these benefits upon reaching retirement age while
working for the company. Employees are required to contribute a
portion of the cost of such benefits.
Effective January 1, 1992, the company adopted SFAS 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions." SFAS 106 requires employers to accrue the cost of
postretirement benefits such as health care over the working life of
employees in a manner similar to that currently used to account for
pension costs. Adoption of this standard caused Income before income
taxes, minority interests and cumulative effect of changes in
accounting principles for 1992 to decrease by an additional $7,200,000
($.13 per common share after tax).
In accordance with the provisions of the standard, the company
elected to recognize immediately the cumulative effect of the unfunded
transition obligation as the effect of a change in accounting
principle in the accompanying financial statements. The cumulative
effect of this change to January 1, 1992, was an increase in Other
long-term liabilities of $34,944,000 and a corresponding after- tax
charge of $21,431,000 to Net income ($.59 per share).
The accumulated postretirement benefit obligation at December
31, 1993, and December 31, 1992, was comprised of the following:
(In thousands) 1993 1992
Retirees $13,657 $12,495
Fully eligible active plan participants 24,139 21,474
Other active plan participants 48,162 41,730
Unrecognized net (loss)/gain (3,845) --
$82,113 $75,699
Unlike the company's retirement plans, there are no assets
dedicated to fund benefits. Net periodic cost for 1993 and 1992
included the following:
(In thousands) 1993 1992
Service cost $2,648 $2,138
Interest cost on accumulated obligation 6,259 6,301
$8,907 $8,439
Prior to 1992, such benefits were expensed as paid and totaled
approximately $1,400,000 in 1991.
During 1993, the company decreased the Plans' discount rate
assumption, used to determine the accumulated postretirement benefit
obligation, from 9 percent to 7.5 percent which approximates more
closely rates on high quality long-term obligations. The
assumption of the annual cost of postretirement benefits was also
changed. During the next 10 years, the Plans assume that such costs
will increase at an annual rate starting at 12 percent and decreasing
to 5.5 percent. The rates were 15 percent and 6.5 percent,
respectively, in 1992. The net effect of these changes on the
company's 1993 results of operations and financial condition was not
material. Variations in this health care cost trend rate can have a
significant effect on the amounts reported. An increase of 1 percent
in this assumption would increase the accumulated postretirement
benefit obligation by approximately 14 percent and would increase the
annual cost by approximately 18 percent.
Timberland Leases and Operating Leases
The company controls timberlands under long-term leases expiring 1994
to 2059, for which aggregate lease payments were $868,000, $862,000
and $1,209,000 for 1993, 1992 and 1991, respectively. In addition, the
company leases certain office premises, manufacturing facilities and
transportation equipment under operating leases. Total rental expense
for operating leases was $9,168,000, $8,750,000 and $6,437,000 in
1993, 1992 and 1991, respectively.
26
<PAGE>
At December 31, 1993, the future minimum rental payments under
timberland leases and operating leases are:
Timberland Operating
Lease Leases,
(In thousands) Payments net
1994 $ 868 $ 8,585
1995 868 6,624
1996 868 4,716
1997 868 3,931
1998 868 3,676
Thereafter 25,975 17,192
$30,315 $44,724
Segment and Geographic Information
Information concerning the company's business segments for the three
years ended December 31, 1993, appears on page 8.
Net sales and operating income (loss) for the three years
ended December 31, 1993, and identifiable assets at the end of each of
those years, classified by geographic area, were as follows:
(In thousands) United States Canada Consolidated
1993
Net sales to
unaffiliated
customers $1,253,775 $ 99,909 $1,353,684
Operating loss $ (52,968) $ (10,364) $ (63,332)
Identifiable assets $2,514,408 $211,770 $2,726,178
1992
Net sales to
unaffiliated
customers $1,263,772 $ 97,046 $1,360,818
Operating loss $ (51,479) $ (22,629) $ (74,108)
Identifiable assets $2,650,878 $230,723 $2,881,601
1991
Net sales to
unaffiliated
customers $1,090,743 $ 99,662 $1,190,405
Operating
income (loss) $ 118,878 $ (15,163) $ 103,715
Identifiable assets $2,606,169 $ 173,850 $2,780,019
Net Export Sales
The breakdown of total net export sales by geographic
area was:
(In thousands) 1993 1992 1991
Europe $ 60,944 $ 95,604 $ 92,131
Latin America 55,929 45,214 38,824
Asia 114,964 82,959 43,663
Canada 19,401 13,933 1,262
Mexico 12,310 13,636 4,462
Other 6,631 19,865 11,990
Sub-total 270,179 271,211 192,332
Less: distribution costs (59,162) (52,897) (35,518)
Total net export sales $211,017 $218,314 $156,814
Reconciliation of Net Income (Loss)
to Cash Flow from Operations
(In thousands) 1993 1992 1991
Net income (loss) $(64,499) $(81,957) $ 45,589
Changes in accounting
principles -- (10,911) --
Depreciation, amortization
and cost of timber
harvested 163,086 161,910 132,026
Deferred income taxes (25,204) (51,655) 6,920
Minority interests (9,651) (15,465) (2,286)
Gain on sale
of timberlands (52,220) -- --
Changes in working capital:
Receivables (66,265) 79,334 4,801
Inventories 13,666 8,469 (17,327)
Accounts payable and
accrued liabilities (9,332) 7,332 (6,745)
Income taxes payable 9,320 (10,916) (4,062)
Other 10,453 23,335 (2,336)
Cash flow from operations $(30,646) $109,476 $156,580
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
Bowater Incorporated and Subsidiaries
Quarterly Information (Unaudited)
Quarterly financial results for the years 1993 and 1992 are summarized
as follows:
(In thousands, except per-share amounts)
<TABLE>
<CAPTION>
Year Ended December 31, 1993 First Second Third Fourth Year
<S> <C> <C> <C> <C> <C>
Net sales $348,921 $328,702 $335,673 $340,388 $1,353,684
Gross profit (loss) $ (1,102) $ 12,343 $ (2,722) $ (46) $ 8,473
Net income (loss) $ (22,945) $ (15,609) $ (30,832) $ 4,887 $ (64,499)
Net income (loss) per common share $ (.65) $ (.45) $ (.86) $ .12 $ (1.84)
Year Ended December 31, 1992 First Second Third Fourth Year
Net sales $340,503 $323,295 $333,847 $363,173 $1,360,818
Gross profit (loss) $ 1,201 $ (8,401) $ 2,898 $ 5,867 $ 1,565
Loss before cumulative effect of changes
in accounting principles $ (29,657) $ (24,416) $(17,904) $ (20,891) $ (92,868)
Net loss $ (18,746) $ (24,416) $(17,904) $ (20,891) $ (81,957)
Loss per common share before cumulative
effect of changes in accounting
principles $ (.84) $ (.70) $ (.51) $ (.59) $ (2.64)
Net loss per common share $ (.54) $ (.70) $ (.51) $ (.59) $ (2.34)
Price ranges of the company's common stock during
1993 and 1992 as reported on the New York Stock
Exchange were:
1993 1992
High Low High Low
First quarter $24-5/8 $20 $27-1/4 $20-1/4
Second quarter 23 19-1/2 24-3/4 20
Third quarter 21 18 21-1/8 17-5/8
Fourth quarter 24-3/8 18-1/4 25-5/8 17-7/8
28
<PAGE>
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
The management of the company is responsible for the information
contained in the financial statements and in the other parts of this
report. The accompanying consolidated financial statements of Bowater
Incorporated and Subsidiaries have been
prepared in accordance with generally accepted accounting principles.
In preparing these statements, management has made judgments based
upon available information. To ensure that this information will be as
accurate and factual as possible,
management has communicated to all appropriate employees requirements
for accurate recordkeeping and accounting.
The company maintains a system of internal accounting controls
designed to provide reasonable assurances for the safeguarding of
assets and the reliability of financial records. The system is subject
to continuous review through a corporate-wide
internal audit program with appropriate management follow-up action.
Management believes that through the careful selection of employees,
the division of responsibilities and the application of formal
policies and procedures, the company has an
effective and responsive system of internal accounting controls.
The company's independent auditors, KPMG Peat Marwick, are
responsible for conducting an audit of the company's consolidated
financial statements in accordance with generally accepted auditing
standards and for expressing their opinion as to
whether these consolidated financial statements present fairly, in all
material respects, the financial position, results of operations and
cash flows of the company and its subsidiaries in conformity with
generally accepted accounting principles.
Their report appears on this page.
There is an Audit Committee of the Board of Directors composed
of three non-employee directors who
meet regularly with management, the internal auditors and KPMG Peat
Marwick to discuss specific accounting, reporting and internal control
matters. Both the independent auditors and internal auditors have full
and free access to the Audit Committee.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Bowater Incorporated:
We have audited the accompanying consolidated balance sheet of Bowater
Incorporated and Subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of operations, capital accounts,
and cash flows for each of the years in
the three-year period ended December 31, 1993. These consolidated
financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Bowater Incorporated and Subsidiaries at
December 31, 1993 and 1992, and the results of their operations and
their cash flows for each of the years in the
three-year period ended December 31, 1993, in conformity with
generally accepted accounting principles.
As discussed in the notes to the consolidated financial
statements, the company adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," and Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," in 1992.
(Signature of KPMG Peat Marwick)
KPMG Peat Marwick
Greenville, South Carolina
February 11, 1994
29
<PAGE>
Financial and Operating Record
Bowater Incorporated and Subsidiaries
</TABLE>
<TABLE>
<CAPTION>
(Dollars in millions, except per-share amounts) 1993 1992
<S> <C> <C>
Income Statement Data
Net sales $1,353.7 $ 1,360.8
Operating income (loss) (63.3) (74.1)
Income (loss) from continuing operations before cumulative effect
of changes in accounting principles and extraordinary charge1,2 (64.5) (92.9)
Net income (loss) (64.5) (82.0)
Fully diluted earnings (loss) per common share (1.84) (2.34)
Dividends declared per common share3 .60 1.20
Segment Information
Net sales:
Pulp, paper and related products
Newsprint $ 607.6 $ 662.2
Directory and uncoated specialties 203.4 124.7
Coated paper 316.2 296.1
Pulp 98.9 136.4
Lumber, stumpage and other products 103.1 79.5
$ 1,329.2 $ 1,298.9
Communication papers 191.8 207.5
Distribution costs (142.4) (133.0)
Eliminations (24.9) (12.6)
$ 1,353.7 $ 1,360.8
Operating income (loss):
Pulp, paper and related products $ (32.8) $ (46.1)
Communication papers (6.4) (2.3)
Financial Position4
Timber and timberlands $ 422.5 $ 432.6
Fixed assets, net 1,750.7 1,821.7
Total assets 2,726.2 2,881.6
Total debt 1,120.2 1,134.3
Total capitalization5 2,332.9 2,472.7
Additional Information
Percent return on average common equity (8.6)% (9.6)%
Income from continuing operations as percent of net sales (4.8)% (6.8)%
Total debt as percent of total capitalization 48.0% 45.9%
Total debt and redeemable preferred stock as percent of common shareholders' equity 163.1% 147.7%
Effective tax rate 32.0% 37.0%
Cash flow (used for) from operations $ (30.6) $ 109.5
Capital expenditures, including timberlands $ 121.8 $ 139.5
Common shareholders' equity per share $ 20.10 $ 22.55
Common stock price range $18 - 24-5/8 $17-5/8-27-1/4
Shipments (thousands of short tons)
Newsprint 1,437 1,631
Directory and uncoated specialties 331 191
Coated paper 454 447
Pulp 312 318
Registered shareholders 7,300 8,200
Employees4 6,600 6,900
</TABLE>
1. In 1984, the company sold its subsidiary, Bowater Home Center, Inc.
2. In 1990, the company redeemed all its $125 million 12-3/8% Sinking
Fund Debentures Due 2015. Premium paid and related expenses resulted
in an extraordinary
charge of $9.0 million after tax ($.25 per common share).
3. Dividend per-share information for years prior to 1985 is not
considered meaningful due to the separation of the company from its
former parent in 1984.
4. 1993, 1992 and 1991 amounts include GNP, acquired December 31,1991.
5. Total capitalization includes total debt, deferred income taxes,
minority interests in subsidiaries, redeemable preferred stock and
common shareholders' equity.
30
<PAGE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987 1986 1985 1984 1983
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,190.4 $1,289.1 $1,361.0 $1,330.8 $1,154.5 $846.7 $841.8 $829.9 $706.8
103.7 174.9 280.5 334.1 218.5 124.0 136.0 137.1 85.2
45.6 87.4 144.6 164.3 81.1 49.4 67.5 62.5 39.6
45.6 78.4 144.6 164.3 81.1 49.4 67.5 72.1 38.0
1.15 2.05 3.86 4.37 2.12 1.49 2.21 2.57 1.52
1.20 1.20 1.14 .97 .83 .72 .72 -- --
$ 601.4 $ 617.2 $ 645.3 $ 671.3 $ 607.1 $556.1 $612.2 $598.2 $509.3
-- -- -- -- -- -- -- -- --
259.9 279.0 279.2 269.7 203.7 126.4 103.7 95.6 78.0
138.0 170.7 182.6 153.2 125.1 98.3 78.8 98.2 83.5
34.3 32.6 32.7 37.2 37.7 36.0 33.1 39.3 54.8
$ 1,033.6 $ 1,099.5 $ 1,139.8 $ 1,131.4 $973.6 $816.8 $827.8 $831.3 $725.6
254.9 280.9 310.2 279.0 257.4 102.9 76.2 56.4 35.8
(98.1) (91.3) (89.0) (79.6) (76.5) (73.0) (62.2) (57.8) (54.6)
-- -- -- -- -- -- -- -- --
$ 1,190.4 $ 1,289.1 $ 1,361.0 $ 1,330.8 $1,154.5 $846.7 $841.8 $829.9 $706.8
$ 108.5 $ 183.0 $ 284.6 $ 345.1 $ 224.3 $139.6 $147.1 $148.6 $ 98.8
14.4 11.4 17.5 9.7 10.1 (1.3) 3.6 1.2 (3.3)
$ 414.1 $ 297.9 $ 285.7 $ 273.5 $ 256.6 $243.6 $231.2 $216.0 $204.0
1,858.8 1,604.7 1,529.5 1,223.8 1,079.8 1,021.6 843.1 552.8 452.2
2,780.0 2,297.9 2,284.2 1,880.5 1,699.8 1,600.7 1,315.0 1,032.7 935.2
864.5 498.2 532.4 293.2 367.6 631.8 345.3 273.6 216.8
2,452.7 2,078.2 2,058.8 1,671.6 1,549.4 1,482.8 1,124.7 885.6 746.1
4.4% 7.9% 16.0% 20.7% 13.1% 10.2% 16.8% 20.2% 11.0%
3.8% 6.8% 10.6% 12.4% 7.0% 5.8% 8.0% 7.5% 6.0%
35.2% 24.0% 25.9% 17.5% 23.7% 42.6% 30.7% 30.9% 29.1%
99.6% 61.2% 66.9% 44.4% 61.9% 156.1% 99.1% -- --
37.0% 37.0% 36.0% 36.5% 43.0% 30.2% 29.2% 38.8% 29.5%
$ 156.6 $ 238.4 $ 327.3 $ 324.3 $ 247.3 $ 123.7 $151.3 $ 171.5 $ 50.6
$ 159.7 $ 214.1 $ 423.4 $ 214.3 $ 88.1 $ 308.5 $297.3 $ 176.7 $ 70.1
$ 26.21 $ 26.24 $ 25.37 $ 23.07 $ 19.60 $ 15.33 $ 14.45 $ 12.97 $ 13.38
$18-5/8-30-3/8 $16-1/8-28-1/2 $25-3/4-34-1/8 $25-1/4-36-7/8 $22-44-1/2 $23-3/8-33-1/8 $19-7/8-25-7/8 $14-7/8-25-1/8 --
1,244 1,266 1,278 1,233 1,246 1,237 1,200 1,112 1,066
-- -- -- -- -- -- -- -- --
346 352 343 337 316 188 128 129 127
317 300 261 250 253 260 242 239 247
9,500 14,000 15,600 17,000 18,000 21,000 24,000 38,800 --
7,200 5,100 5,100 5,000 5,000 4,800 4,400 4,600 4,600
<PAGE>
BOARD OF DIRECTORS AND OFFICERS
Board of Directors
Francis J. Aguilar
Professor
Harvard University
Graduate School of Business
Hugh D. Aycock
Retired President,
Chief Operating Officer
and Director
Nucor Corporation
(steel and steel products)
Richard Barth
Chairman, President,
and Chief Executive Officer
Ciba-Geigy Corporation
(diversified chemical products)
Kenneth M. Curtis
President
Maine Maritime Academy
Anthony P. Gammie
Chairman and
Chief Executive Officer
Bowater Incorporated
Richard Laster
Chairman and Director
DNA Plant Technology Corporation
(agricultural biotechnology)
H. Gordon MacNeill
Chairman
Jannock Limited
(diversified manufacturing)
Richard D. McDonough
Vice Chairman
Bowater Incorporated
Donald R. Melville
Retired Chairman and
Chief Executive Officer
Norton Company
(diversified manufacturing)
John A. Rolls
President and
Chief Executive Officer
Deutsche Bank North America
(international banking)
James White
Chairman
Aerospace Composite
Technologies Ltd.
(aerospace components)
Board Committees
Executive Committee
A.P. Gammie
R.D. McDonough
Audit Committee
J.A. Rolls (Chairman)
J. White
K.M. Curtis
Human Resources and
Compensation Committee
D.R. Melville (Chairman)
R. Barth
R. Laster
Nominating Committee
F.J. Aguilar (Chairman)
H.D. Aycock
D.R. Melville
Pension Plan Committee
R. Laster (Chairman)
H.G. MacNeill
H.D. Aycock
R.D. McDonough
Finance Committee
R. Barth (Chairman)
H.G. MacNeill
J.A. Rolls
R.D. McDonough
Officers
Anthony P. Gammie
Chairman and
Chief Executive Officer
Richard D. McDonough
Vice Chairman
John C. Davis
Senior Vice President -
Pulp and Paper Sales
Robert C. Lancaster
Senior Vice President and
Chief Financial Officer
David E. McIntyre
Senior Vice President -
Pulp and Paper Manufacturing
Robert J. Pascal
Senior Vice President
President - Communication
Papers Group
Donald J. D'Antuono
Vice President -
Corporate Development
John P. Fucigna
Vice President - Finance
Robert D. Leahy
Vice President - Corporate Relations
David G. Maffucci
Vice President - Treasurer
Ecton R. Manning
Vice President - General Counsel
Robert A. Moran
Vice President - Pulp and Paper
Manufacturing Services
Michael F. Nocito
Vice President - Controller
Aubrey S. Rogers
Vice President - Information Services
Wendy C. Shiba
Secretary and Assistant General Counsel
Phillip A. Temple
Vice President - Human Resources
and Administration
32
<PAGE>
SHAREHOLDER INFORMATION
Annual Meeting
The company's annual meeting of shareholders will be held on
Wednesday, May 25, 1994, at 10:30 a.m. at the Omni Charlotte Hotel,
Charlotte, North Carolina.
An information meeting for shareholders will be held in London on
Tuesday, June 21, 1994, at 11:30 a.m. at the May Fair Intercontinental
Hotel, Stratton Street, London W1A 2AN.
Stock Listings
Bowater Incorporated common stock is listed on the
New York Stock Exchange (stock symbol BOW), U.S. regional exchanges,
the London Stock Exchange and the Swiss Stock Exchanges.
Depositary shares, each representing a one-fourth interest in a share
of the company's 7% PRIDES, Series B Convertible Preferred Stock, and
Depositary shares, each representing a one-fourth interest in a share
of the company's 8.40% Series C
Cumulative Preferred Stock, are listed on the New York Stock Exchange
(stock symbols BOW Pr B and BOW Pr C, respectively).
Common Stock
Registrars and Transfer Agents
The Bank of New York
101 Barclay Street
Stock Transfer Administration-22W
New York, NY 10286
800/524-4458
The R-M Trust Co.
Balfour House
390 High Road
Ilford, Essex 1G1 1NQ, England
081-478-1888
LIBOR Preferred Stock, Series A
Registrar and Transfer Agent
Mellon Securities Trust Company
120 Broadway
New York, NY 10271
800/526-0801
Series B Convertible Preferred Stock and
Series C Cumulative Preferred Stock Depositary,
Registrar and Transfer Agent
Trust Company Bank
P.O. Box 4625
Atlanta, GA 30302
800/568-3476
Investor Information
Investor inquiries about Bowater should be directed to SuAnne B. Aune,
Director -- Investor Relations, at Bowater's headquarters.
10-K Report
Bowater files an annual report on Form 10-K with the Securities and
Exchange Commission. A free copy may be obtained by writing to Maryann
Quinn at Bowater's headquarters.
Dividend Reinvestment and Stock Purchase Plan
The company has a Dividend Reinvestment and Stock Purchase Plan.
Information is available from Maryann Quinn at Bowater's headquarters.
Auditors
KPMG Peat Marwick
One Insignia Financial Plaza
Suite 600
P.O. Box 10529
Greenville, SC 29603
803/250-2600
<PAGE>
HEADQUARTERS
Bowater Incorporated
55 East Camperdown Way
P.O. Box 1028
Greenville, SC 29602
803/271-7733
803/282-9482 (Fax)
OPERATIONS
Bowater Incorporated
Carolina Division
P.O. Box 7
Catawba, SC 29704
803/329-6600
Bowater Incorporated
Southern Division
Calhoun Newsprint Company
Calhoun, TN 37309
615/336-2211
Great Northern Paper, Inc.
One Katahdin Avenue
Millinocket, ME 04462
207/723-5131
Bowater Mersey Paper Company, Ltd.
P.O. Box 1150
Liverpool, Nova Scotia BOT 1KO
Canada
902/354-3411
Bowater Incorporated
Communication Papers Group
1120 Post Road, 3rd Floor
P.O. Box 4012
Darien, CT 06820
203/656-7200
Bowater Communication Papers Inc.
Star Forms
1515 Fifth Avenue, Suite 400
Moline, IL 61625
309/797-1389
Bowater Computer Forms
3000 East Plano Parkway
P.O. Box 869020
Plano, TX 75086-9020
214/578-2000
LUMBER COMPANIES
Bowater Lumber
660 Industrial Boulevard
Albertville, AL 35959
Bowater Mersey Sawmill at Oakhill
Bridgewater, NS
Pinkham Lumber
P.O. Box 0
Ashland, ME 04732
COMMUNICATION PAPERS--CONVERTING PLANTS
Bowater Communication Papers Inc.
5461 East Santa Ana Street
Ontario, CA 91761-8626
Bowater Communication Papers Inc.
Lincoln Denver Business Center II
11685 E. 53rd Avenue -- Unit A
Denver, CO 80239-2322
Bowater Communication Papers Inc.
5120 Great Oak Drive
Lakeland, FL 33801-3180
Bowater Communication Papers Inc.
1165 S. Elm Street
Scottsburg, IN 47170-2168
Bowater Communication Papers Inc.
3129 State Street
Bettendorf, IA 52722-5253
Bowater Communication Papers Inc.
550 Lillard Drive
Sparks, NV 89434-8955
Bowater Communication Papers Inc.
42 Industrial Circle
Conestoga Valley Industrial Center
Leola, PA 17540
Bowater Communication Papers Inc.
3000 East Plano Parkway
Plano, TX 75074-7421
BOWATER
INCORPORATED
SALES OFFICES
Bowater Sales - Atlanta
Suite 1070
Two Ravinia Drive
Atlanta, GA 30346
Bowater Sales - Boston
Point West Place
111 Speen Street, Suite 305
Framingham, MA 01701
Bowater Sales - Cincinnati
4055 Executive Park Drive
Cincinnati, Ohio 45241
Bowater Sales - Dallas
Suite 270, 5728 LBJ Freeway
Dallas, TX 75240
Bowater Sales - Jacksonville
Suite 200, 4190 Belfort Road
Jacksonville, FL 32216
Bowater Sales - Lisle
650 Warrenville Road, Suite 410
Lisle, Illinois 60532
Bowater Sales - Raleigh
2000 Regency Parkway, Suite 300
Cary, NC 27511
Bowater Sales - Saddle Brook
Park 80 West, Plaza 2
Saddle Brook, NJ 07662
BOWATER
COMMUNICATION
PAPERS INC.
Sales Office Locations
Bowater Computer Forms
Irvine, CA
Pleasanton, CA
Van Nuys, CA
Englewood, CO
Clearwater, FL
Orange Park, FL
Atlanta, GA
Lisle, IL
Overland Park, KS
Louisville, KY
Southfield, MI
Chesterfield, MO
Cedar Knolls, NJ
New York, NY
Charlotte, NC
Cincinnati, OH
Columbus, OH
Mentor, OH
Tulsa, OK
Wayne, PA
Dallas, TX
The Woodlands, TX
Star Forms
Fullerton, CA
San Ramon, CA
Solana Beach, CA
Temecula, CA
Englewood, CO
Lakeland, FL
Atlanta, GA
Snellville, GA
Moline, IL
Roselle, IL
Woburn, MA
White Bear Lake, MN
Cedar Knolls, NJ
New York, NY
Beachwood, OH
Toledo, OH
Stillwater, OK
Leola, PA
Wayne, PA
Johnston, RI
Germantown, TN
Duncanville, TX
Humble, TX
Bothell, WA
Produced by Corporate Relations,
Bowater Incorporated
(Copyright)1994 Bowater Incorporated
Printed in U.S.A.
Bowater Incorporated is an equal opportunity employer.
(Bowater logo) (Recycled logo)Printed on recycled paper.
******************************************************************************
APPENDIX
On Page 1 of Exhibit 13 there is a photo of Anthony P. Gammie in the upper
right corner and the signature of Anthony P. Gammie where noted.
On Page 2 of Exhibit 13 there are three photos at the bottom of the page.
Each one of workers in the Bowater company.
Also on Page 2 there is a bar graph where indicated. The plot points are
as listed below:
N.A. Newsprint
Capacity and Shipments
Thousands of Metric Tons
'89 '90 '91 '92 '93
Capacity 15,732 16,262 16,685 16,704 16,518
Shipments 15,121 15,081 14,880 15,606 15,736
Source: American Forest and Paper Association
On Page 3 of Exhibit 13 there are three photos at the bottom of the page.
Each one of workers in the Bowater company.
There is also a bar graph where indicated. The plot points are
as listed below:
N.A. Coated
Groundwood Papers
Capacity and Shipments
Thousands of
Short Tons
'89 '90 '91 '92 '93
Capacity 4,760 4,960 4,971 5,171 5,293
Shipments 4,429 4,723 4,543 4,912 4,883
Source: American Forest and Paper Association,
Canadian Pulp and Paper Association
On Page 4 of Exhibit 13 there are three photos at the bottom of the page.
Two are photos of workers in the Bowater company. One is of a Bowater site
with a sign that says Congratulations 5,000,000 SAFE EMPLOYEE HOURS on it.
There is also a bar graph where indicated. The plot points are
as listed below:
N.A. Uncoated
Groundwood
Specialty Papers
Capacity and Shipments
Thousands of
Short Tons
'89 '90 '91 '92 '93
Capacity 3,906 4,018 4,465 4,052 4,121
Shipments 3,583 3,762 3,706 3,471 3,845
Source: American Forest and Paper Association
On Page 5 of Exhibit 13 there are three photos at the bottom of the page.
Each one of workers in the Bowater company.
There is also a bar graph where indicated. The plot points are
as listed below:
Chemical Grade
Market Pulp,
Norscan Shipments
Thousands of
Metric Tons
'89 '90 '91 '92 '93
18,254 17,107 17,956 18,969 19,552
Source: American Forest and Paper Association
On Pages 6 and 7 of Exhibit 13 there is a 2 page spread of a
map of the United States, British Columbia, Alberta, Saskatchewan,
Manitoba, Ontario, Quebec, New Brunswick and Nova Scotia listing
the sites of Bowater's Corporate Headquarters,
Paper Mills, Sawmills, Woodlands Offices, Owned/Leased Timberlands,
Bowater Incorporated Sales Offices, Bowater Communication Papers Inc.
Star Forms Corporate Office, BCPI Converting Plants, Bowater Computer
Forms Sales Offices and Star Forms Sales Offices. In the left corner of
the page there is a Global Market map.
On Page 9 of Exhibit 13 there is a bar graph where indicated.
The plot points are as listed below:
Cash Dividends Paid
on Common Stock
$ Per Share
'89 '90 '91 '92 '93
1.14 1.20 1.20 1.20 .75
On Page 10 of Exhibit 13 there is a bar graph where indicated.
The plot points are as listed below:
Bowater Incorporated
Newsprint Sales
$ Millions
'89 '90 '91 '92 '93
645.3 617.2 601.4 662.2 607.6
On Page 11 of Exhibit 13 there is a bar graph where indicated.
The plot points are as listed below:
Bowater Incorporated
Coated Paper Sales
$ millions
'89 '90 '91 '92 '93
279.2 279.0 259.9 296.1 316.2
On Page 12 of Exhibit 13 there are two bar graphs where indicated.
The plot points are as listed below:
Bowater Incorporated
Market Pulp Sales
$ Millions
'89 '90 '91 '92 '93
182.6 170.7 138.0 136.4 98.9
Bowater Incorporated
Communication
Paper Sales
$ Millions
'89 '90 '91 '92 '93
310.2 280.9 254.9 207.5 191.8
On Page 13 of Exhibit 13 there are two bar graphs where indicated.
The plot points are as listed below:
Cash Flow
From Operations
$ Millions
'89 '90 '91 '92 '93
327.3 238.4 156.6 109.5 (30.6)
Capital Expenditures
Including Timberland
$ Millions
'89 '90 '91 '92 '93
423.4 214.1 159.7 139.5 121.8
On Page 14 of Exhibit 13 there is a bar graph where indicated.
The plot points are as listed below:
Total Capitalization
and Total Debt
$ Millions
'89 '90 '91 '92 '93
Debt 532.4 498.2 864.5 1,134.3 1,120.2
Total Cap. 2,058.8 2,078.2 2,452.7 2,472.7 2,332.9
On Page 29 of Exhibit 13 there is a signature of KPMG Peat Marwick
where indicated.
On the Back Cover of Exhibit 13 the Bowater logo and recycled logo
both appear where noted.
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Bowater Incorporated:
We consent to incorporation by reference in the Registration Statement
(No. 2-92899, No. 2-92900, No. 33-7468, No. 33-16277, No. 33-22297,
No. 33-25166, No. 33-44887 and No. 33-50152) on Form S-8 and (No. 33-2444)
on Form S-1 of our reports dated February 11, 1994, relating to the
consolidated balance sheets of Bowater Incorporated and subsidiaries as of
December 31, 1993 and 1992, and the related consolidated statements of
operations, capital accounts, and cash flows and related schedules for each
of the years in the three-year period ended December 31, 1993, which reports
appear or are incorporated by reference in the December 31, 1993 annual
report on Form 10-K of Bowater Incorporated.
KPMG Peat Marwick
Greenville, South Carolina
March 31, 1994
