<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8712
BOWATER INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 62-0721803
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 East Camperdown Way, P.O. Box 1028, Greenville, SC 29602
(Address of principal executive offices) (Zip Code)
(803) 271-7733
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
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 X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 8, 1995.
Class Outstanding at August 8, 1995
Common Stock, $1.00 Par Value 38,824,709 Shares
<PAGE>
BOWATER INCORPORATED
I N D E X
Page
Number
PART I FINANCIAL INFORMATION
1. Financial Statements:
Consolidated Balance Sheet at June 30, 1995
and December 31, 1994 3
Consolidated Statement of Operations for the
Three and Six Months Ended June 30, 1995 and
July 2, 1994 4
Consolidated Statement of Capital Accounts
for the Six Months Ended June 30, 1995 5
Consolidated Statement of Cash Flows for the
Six Months Ended June 30, 1995 and July 2, 1994 6
Notes to Consolidated Financial Statements 7-8
2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-13
PART II OTHER INFORMATION
4. Submission of Matters to a Vote of Security Holders 14
6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
(2)
<PAGE>
PART I
BOWATER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
ASSETS
Current assets:
Cash $ 15,604 $ 10,783
Marketable securities (Note 2) 155,285 143,985
Accounts receivable, net 214,563 197,473
Inventories (Note 3) 160,240 151,097
Deferred income taxes 5,717 5,717
Other current assets 9,806 4,770
Total current assets 561,215 513,825
Timber and timberlands 428,501 426,354
Fixed assets, net 1,742,361 1,785,046
Intangible assets 53,477 54,721
Other assets 72,256 71,416
$ 2,857,810 $ 2,851,362
LIABILITIES AND CAPITAL
Current liabilities:
Current instalments of long-term debt $ 1,604 $ 1,604
Accounts payable and accrued liabilities 207,391 184,766
Income taxes payable 42,099 13,966
Dividends payable 10,512 10,276
Total current liabilities 261,606 210,612
Long-term debt, net of current instalments (Note 4) 934,104 1,116,887
Other long-term liabilities 164,819 157,936
Deferred income taxes 292,628 261,923
Minority interests in subsidiaries 135,587 142,087
Commitments and contingencies (Note 5)
Redeemable LIBOR preferred stock 74,556 74,492
Shareholders' equity:
Series B convertible preferred stock 111,333 111,333
Series C cumulative preferred stock 81,892 81,892
Common stock 38,262 37,121
Additional paid-in capital 363,176 336,990
Retained earnings 422,794 344,852
Equity adjustment from foreign currency translation (2,619) (3,410)
Loan to ESOT (8,848) (9,643)
Treasury stock, at cost (11,480) (11,710)
Total shareholders' equity 994,510 887,425
$ 2,857,810 $ 2,851,362
</TABLE>
See accompanying notes to consolidated financial statements.
(3)
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited, In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, July 2, June 30, July 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $ 486,836 $ 320,066 $ 936,314 $ 628,958
Cost of sales (Note 6) 297,815 265,711 582,592 528,619
Depreciation, amortization and cost of timber harvested 42,754 41,071 87,392 83,232
Gross profit 146,267 13,284 266,330 17,107
Selling and administrative expense (Note 6) 28,587 18,960 51,397 37,523
Operating income (loss) 117,680 (5,676) 214,933 (20,416)
Other expense (income):
Interest income (1,393) (2,651) (3,242) (3,947)
Interest expense, net of capitalized interest (Note 7) 20,310 24,684 43,614 49,603
Other, net (4,184) (2,623) (5,200) (2,514)
14,733 19,410 35,172 43,142
Income (loss) before income taxes and minority interests 102,947 (25,086) 179,761 (63,558)
Provision for income taxes (Note 8) 36,935 (9,090) 66,512 (23,515)
Minority interests in net income (loss) of subsidiaries 6,181 (1,115) 8,365 (3,722)
Income (loss) before extraordinary charge 59,831 (14,881) 104,884 (36,321)
Extraordinary charge, net of taxes of $3,808 --- --- (6,084) ---
Net income (loss) $ 59,831 $ (14,881) $ 98,800 $ (36,321)
Earnings (loss) per common and common equivalent share (Note 9):
Income (loss) before extraordinary charge $ 1.35 $ (0.53) $ 2.37 $ (1.20)
Extraordinary charge --- --- (0.15) ---
Net income (loss) $ 1.35 $ (0.53) $ 2.22 $ (1.20)
Average common and common equivalent shares outstanding 42,331 36,499 41,903 36,480
Earnings (loss) per common share - assuming full dilution (Note 9):
Income (loss) before extraordinary charge $ 1.31 $ (0.53) $ 2.30 $ (1.20)
Extraordinary charge --- --- (0.14) ---
Net income (loss) $ 1.31 $ (0.53) $ 2.16 $ (1.20)
Average common and common equivalent shares outstanding 43,428 36,499 43,175 36,480
</TABLE>
See accompanying notes to consolidated financial statements.
(4)
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CAPITAL ACCOUNTS
Six Months Ended June 30, 1995
(Unaudited)
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Series A Series B Series C Equity
LIBOR Convertible Cumulative Additional Adjustment-
Preferred Preferred Preferred Common Paid in Retained Foreign Loan to Treasury
Stock Stock Stock Stock Capital Earnings Currency ESOT Stock
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $74,492 $111,333 $81,892 $37,121 $336,990 $344,852 $(3,410) $(9,643) $(11,710)
Net income - - - - - 98,800 - - -
Dividends on common stock
($.30 per share) - - - - - (11,174) - - -
Dividends on preferred stock:
LIBOR ($1.38 per share) - - - - - (2,070) - - -
Series B ($3.29 per share) - - - - - (4,025) - - -
Series C ($4.20 per share) - - - - - (3,570) - - -
Increase in stated value of LIBOR
preferred stock 64 - - - - (64) - - -
Common stock issued for exercise
of stock options - - - 1,141 26,186 - - - -
Reduction in loan to ESOT - - - - - - - 795 -
Treasury stock used for employee
benefit and dividend
reinvestment plans - - - - - 45 - - 230
Foreign currency translation - - - - - - 791 - -
Balance at June 30, 1995 $74,556 $111,333 $81,892 $38,262 $363,176 $422,794 $(2,619) $(8,848) $(11,480)
</TABLE>
See accompanying notes to consolidated financial statements.
(5)
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30, July 2,
1995 1994
<S> <C> <C>
Cash flow from (used for) operating activities:
Operating income (loss) $ 214,933 $ (20,416)
Depreciation, amortization and cost of timber harvested 87,392 83,232
Changes in working capital:
Receivables (17,090) 1,290
Inventories (9,143) (8,388)
Accounts payable and accrued liabilities 23,903 (8,040)
Other working capital (5,037) 43
Interest paid, net of capitalized interest (43,969) (49,137)
Interest received 3,242 3,947
Income taxes paid (3,562) (20,698)
Other income, net 7,391 7,088
258,060 (11,079)
Cash flow from (used for) investing activities:
Cash invested in fixed assets, timber and
timberlands (43,770) (58,989)
Disposition of fixed assets, timber and timberlands 1,273 1,051
(42,497) (57,938)
Cash flow from (used for) financing activities:
Issuance of Series B & C preferred stock, net of issuance costs -- 193,241
Cash dividends, including minority interests (20,778) (22,315)
Payments of long term debt (191,672) (805)
Redemption of preferred stock of subsidiary (15,000) (2,500)
Stock options exercised 27,327 1,055
Other 681 807
(199,442) 169,483
Increase in cash and marketable securities 16,121 100,466
Cash and marketable securities:
Beginning of year 154,768 81,666
End of period $ 170,889 $ 182,132
</TABLE>
See accompanying notes to consolidated financial statements.
(6)
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) The accompanying consolidated financial statements include the accounts of
Bowater Incorporated and Subsidiaries (the Company). The consolidated
balance sheets, statements of operations, capital accounts and cash flows
are unaudited. However, in the opinion of Company management, all
adjustments (consisting of normal recurring adjustments) necessary for
fair presentation of the interim financial statements have been made. The
results of the interim period ended June 30, 1995 are not necessarily
indicative of the results to be expected for the full year.
(2) The Company's marketable securities are recorded at cost which
approximates market value. The securities are all investment grade with
maturities of fewer than 90 days and the Company has the intent and
ability to hold these securities until maturity.
(3) The composition of inventories at June 30, 1995 and December 31, 1994 was
as follows (in thousands):
June 30, 1995 December 31, 1994
(Unaudited)
At lower of cost or market:
Raw materials $ 49,372 $ 37,597
Work in process 2,939 3,333
Finished goods 41,976 38,971
Mill stores and other supplies 82,454 80,723
176,741 160,624
Excess of current cost over
LIFO inventory value (16,501) (9,527)
$160,240 $151,097
(4) On March 7, 1995, the Company completed an offer repurchasing
approximately $182 million of the $200 million principal amount of
8.5% Notes previously outstanding. As a result, the Company recorded an
extraordinary charge of $6.1 million, net of taxes of $3.8 million, for
the premium and expenses relating to the repurchase. On a fully diluted
basis, the earnings per share effect was $.14.
On July 19, 1995, the Company commenced an offer to repurchase its
outstanding 8.25% Notes due October 15, 1999, having a face value of $125
million. On July 31, 1995, the Company completed the offer repurchasing
approximately $117 million of the $125 million principal amount of Notes
previously outstanding. As a result, the Company will incur a third
quarter extraordinary charge of approximately $5.3 million, net of taxes
of $3.2 million, for the premium and expenses relating to the repurchase.
On a fully diluted basis, the earnings per share effect will be $.12.
(7)
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) The Company is involved in various litigation relating to contracts,
commercial disputes, tax, environmental issues, 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.
(6) The line items entitled "Cost of sales" and "Selling and administrative
expense" in the Company's 1995 Consolidated Statement of Operations
include charges of approximately $18,000,000 and $6,000,000, respectively,
relating to previously announced companywide personnel reductions.
(7) Total interest expense for the second quarter of 1995 and 1994 was
$20,782,000 and $24,735,000, respectively, and for the first six months of
1995 and 1994 interest expense totaled $44,181,000 and $49,734,000,
respectively. The 1995 expense was based on a lower level of borrowings
compared to the 1994 expense.
(8) The effective tax rate for the second quarter of 1995 was 35.9 percent
versus 36.2 percent for the second quarter of 1994. On a year to date
basis, the tax rate in both periods was 37.0 percent.
(9) The average number of common and common equivalent shares outstanding
increased at June 30, 1995, by 4,012,765 and 4,893,616 for the primary
and fully diluted earnings per share calculations, respectively, as
compared to July 2, 1994. The shares of Series B preferred stock are
common stock equivalents. The effect of the conversion of the Series B
preferred stock was antidilutive in 1994 and therefore those shares were
not used in calculating 1994's loss per share. The calculation of earnings
per share for the second quarter and six months ended June 30, 1995
includes a deduction of $2,851,000 and $5,703,000, respectively, for the
dividend requirements of the Company's LIBOR and Series C preferred stock
and the amortization of the difference between the net proceeds from the
LIBOR preferred stock and its mandatory redemption value. For the second
quarter and six months ended July 2, 1994, the calculation of loss per
share included a deduction of $4,471,000 and $7,512,000 respectively, for
the same items as well as the dividend requirement of the Company's Series
B preferred stock.
(8)
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Summary
Net income for the second quarter of 1995 totaled $59.8 million, or
$1.31 per fully diluted share, on net sales of $486.8 million. Included in
1995's second quarter earnings is a pretax charge of $24.0 million, or $.33
per fully diluted share after tax, related to previously announced companywide
personnel reductions. For the second quarter of 1994, the Company incurred a
net loss of $14.9 million, or $.53 per share, on net sales of $320.1 million.
For the first six months of 1995, the Company's net income was $98.8
million, or $2.16 per fully diluted share, on sales of $936.3 million. In
addition to the second quarter charge, net income includes an extraordinary
charge of $6.1 million after tax, or $.14 per fully diluted share, for premium
and expenses related to the repurchase of approximately $182 million of the
$200 million outstanding 8.5% Notes due December 15, 2001. For the first six
months of 1994, the Company incurred a net loss of $36.3 million, or $1.20 per
share, on sales of $629.0 million.
Product Line Information:
(Unaudited, $ in thousands)
Quarter Ended Six Months Ended
June 30, July 2, June 30, July 2,
1995 1994 1995 1994
Net sales:
Newsprint $197,173 $146,818 $365,686 $285,111
Directory and uncoated
specialties 47,237 38,057 92,613 78,155
Coated groundwood 114,308 71,176 209,580 144,811
Pulp 63,387 32,477 120,123 54,435
Communication papers 69,683 43,555 136,750 88,938
Lumber, stumpage and
other products 22,309 21,310 63,738 43,303
Distribution costs (27,261) (33,327) (52,176) (65,795)
$486,836 $320,066 $936,314 $628,958
Operating income (loss) $117,680 $ (5,676) $214,933 $(20,416)
In the first quarter of 1995, the Company changed its classification of
mill handling expenses. These expenses are now classified as a cost of sale.
In 1994, the Company classified these expenses as a distribution cost. For
comparison purposes, the second quarter and six months ended July 2, 1994
amounts for the line entitled "Distribution costs" would be approximately $3.2
million and $6.4 million lower, respectively. Prior year financial statements
have not been restated due to the prospective nature of the change.
(9)
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Second Quarter Ended June 30, 1995 versus July 2, 1994
For the second quarter of 1995, the Company's operating income was
$117.7 million, which included a restructuring charge of $24.0 million,
compared to an operating loss of $5.7 million in the second quarter of 1994.
All of the Company's major product lines had improved operating results due to
higher transaction prices. A detailed review of the Company's major product
lines for the second quarter of 1995 follows.
The Company's average newsprint transaction price for the second
quarter of 1995 increased 46 percent compared to the same period last year and
increased 17 percent compared to first quarter 1995 prices. The Company
implemented several reductions in discounts allowed off list price in 1994, and
during the second quarter of 1995, reduced newsprint discounts and increased
the list price by a total of $125 per metric ton. Since the first quarter of
1994, several developments enabled transaction prices to rise: Economic
recoveries in many countries around the world have increased demand; North
American customer inventory levels decreased in 1994 and remained moderate in
the first six months of 1995; and no significant additions to the supply of
newsprint in North America were made during 1994 or the first six months of
1995. Recently, the Company announced an additional increase to the
newsprint list price of $75 per metric ton, effective September 1, 1995.
During the second quarter of 1995, the Company's coated groundwood
paper average transaction prices increased 44 percent from the same period last
year and increased 14 percent comparing the second quarter of 1995 to the first
quarter of 1995. Effective October 1, 1994, the Company increased the list
price of its coated groundwood paper by approximately $70 per short ton and on
January 1, 1995, reduced the discounts allowed off list price approximately
$100 per short ton. On April 1, 1995, a list price increase/discount reduction
of approximately $100 per short ton went into effect. Low customer inventories
coupled with strong demand led to the price increases. Strong demand was
evidenced by two factors: U. S. magazine advertising pages increased 4 percent
in the second quarter of 1995 compared to the second quarter of 1994; and total
U. S. coated groundwood paper purchases increased 3 percent, comparing the same
periods. The Company's tonnage shipments of coated groundwood paper increased
12 percent during the second quarter compared to the year ago period. The
continuation of favorable market conditions enabled the Company to announce an
additional list price increase and discount reduction totaling approximately
$100 per short ton, effective July 1, 1995.
(10)
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Second Quarter Ended June 30, 1995 versus July 2, 1994
The Company's average transaction prices for market pulp increased 83
percent in the second quarter of 1995 compared to the second quarter of 1994
and 13 percent compared to the first quarter of 1995. The Company increased
prices by $60 per metric ton on January 1, 1995, $75 per metric ton on March
1, 1995, and $85 ($100 export) per metric ton on June 1, 1995. The impetus
for these price increases came from a worldwide economic expansion, especially
in the Far East and Europe. NORSCAN (U.S., Canada, Finland, Norway, and
Sweden) shipments of softwood market pulp increased 3 percent during the
second quarter of 1995 compared to the same period last year, while the
Company's tonnage shipments increased 7 percent comparing the same periods.
NORSCAN softwood inventory levels at the end of June, 1995, decreased 23
percent compared to June, 1994 levels, and there was moderate market pulp
expansion during the first half of 1995.
The Communication Papers Division results improved in the second
quarter of 1995 compared to the same period last year. Average transaction
prices significantly increased in the second quarter of 1995, offset in part by
higher raw material costs. Transaction prices have also increased comparing
the second quarter of 1995 to the first quarter of 1995.
Operating results of the Company's lumber and stumpage products
increased during the second quarter of 1995 compared to the second quarter of
1994 due mainly to higher stumpage prices and volume, offset by lower lumber
prices. Due to the slowdown in the housing market that began in the first
quarter of 1995, lumber prices continued to fall in the second quarter 1995.
Cost Reduction Programs
The Company's manufacturing costs for the second quarter of 1995 and
the first six months of 1995 increased compared to the same periods last year
due to higher prices of ONP/OMG (old newspapers and old magazines used in the
recycling process), fuel and chemicals. Controllable fixed costs, however,
decreased comparing these same periods, partly offsetting the rise in raw
material pricing. The Company's current operating results continue to benefit
from cost reduction programs initiated over the last several years. In the
second quarter of 1995, the Company implemented a plan to further reduce
employment levels by approximately 20 percent of the salaried workforce or 350
positions companywide. As a result of the personnel reductions, the Company
recorded a pretax charge of approximately $24 million ($.33 per fully diluted
share after tax) in the second quarter of 1995.
(11)
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Six Months Ended June 30, 1995 versus July 2, 1994
For the first six months of 1995, the Company's operating income was
$214.9 million, compared to an operating loss of 20.4 million in the first six
months of 1994. All of the Company's major product lines had improved
operating results due to higher transaction prices.
The Company's average newsprint transaction price for the first six
months of 1995 increased 37 percent compared to the same period last year,
while distribution costs decreased comparing the same periods. During the
first six months of 1995, the Company implemented a $125 per metric ton price
increase.
During the first six months of 1995, the Company's coated groundwood
average transaction prices increased 33 percent from the same period last year,
while tonnage shipments increased 9 percent comparing the same periods. During
the first six months of 1995, the Company reduced discounts and increased the
list price by a total of approximately $200 per short ton.
Average transaction prices for market pulp also increased in the first
six months of 1995. The Company's average transaction prices increased by
approximately $220 per metric ton, or 84 percent compared to the first six
months of 1994.
Liquidity and Capital Resources
The Company's operations generated $258.1 million of cash in the first
six months of 1995 compared to using $11.1 million in the same period last
year. This $269.2 million improvement came from several sources, the most
significant of which was the $235.3 million improvement in operating income.
Tax payments in the first six months were $17.1 million lower than the same
period last year which included a tax payment of $29.4 million related to prior
tax years. Cash required for working capital decreased $7.7 million. Interest
paid decreased $5.2 million, comparing the same periods, due to a lower level
of borrowings outstanding in 1995.
The Company anticipates that the improvement in cash flow from
operations experienced in the first six months will continue and will exceed
its capital spending and dividend requirements for 1995.
Capital spending in the first six months of 1995 was $15.2 million
below spending levels in 1994. The largest single capital expenditure in 1995
will be $14 million to complete a new effluent treatment facility at Bowater's
Liverpool, Nova Scotia mill. The Company will continue to closely monitor its
investment of capital and expects total capital expenditures for 1995 of
approximately $110 million to be funded from internal cash flow.
(12)
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and Capital Resources
On June 30, 1995, the Company's subsidiary, Calhoun Newsprint Company,
redeemed the remaining 150,000 shares of Series A Cumulative Serial Preferred
Stock ($100 par value) from its minority shareholder, Advance Publications,
Inc., requiring a cash payment of $15,000,000.
In the first quarter of 1995, the Company prepaid approximately $182
million of its 8.5% notes due 2001 having a face value of $200 million. On
July 19, 1995, the Company announced an offer to repurchase its outstanding
8.25% Notes due 1999, having a face value of $125 million. The Company
completed the offer on July 31, 1995, repurchasing approximately $117 million
of the $125 million principal amount of Notes previously outstanding. The
Company funded this debt prepayment from its available cash and marketable
securities. The amount and timing of additional debt reductions are subject
to, among other factors, the strength of the Company's cash flow and
alternative uses of cash.
On May 22, 1995, as part of its ongoing consideration of asset
monetization opportunities, the Company announced its intention to sell its
wholly-owned subsidiary, Bowater Communications Paper, Inc. (BCPI), a leading
converter and marketer of stock continuous forms. Although a well managed,
profitable operation, BCPI no longer fits within the Company's plans to focus
on core pulp and papermaking businesses.
(13)
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
On May 24, 1995, at the Company's Annual Meeting of Shareholders,
the following matters were submitted to a vote of the shareholders:
A resolution electing the following class of directors for a term
of three years: Hugh D. Aycock (33,824,595 votes in favor; 70,062 votes
withheld); Donald R. Melville (33,793,559 votes in favor; 101,098 votes
withheld); and Arnold M. Nemirow (33,827,404 votes in favor; 67,253 votes
withheld). The names of each other director whose term of office as a
director continued after the meeting are: Francis J. Aguilar, John A.
Rolls, Kenneth M. Curtis, Anthony P. Gammie, H. Gordon MacNeill, and
Richard Barth.
A resolution ratifying the appointment of KPMG Peat Marwick LLP as
independent auditors for the Company. The resolution was passed by a vote
of 33,837,049 votes in favor; 18,679 votes against; and 38,929 abstentions.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits (numbered in accordance with Item 601 of
Regulation S-K):
Exhibit No. Description
10.1 Employment Agreement and Severance Agreement, each dated as
of June 1, 1995, by and between the Company and Richard F.
Frisch.
27.1 Financial Data Schedule (electronic filing only).
(b) Reports on Form 8-K:
None.
(14)
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOWATER INCORPORATED
By R. C. Lancaster
R. C. Lancaster
Senior Vice President and
Chief Financial Officer
By M. F. Nocito
M. F. Nocito
Vice President - Controller
Dated: August 14, 1995
(15)
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
10.1 Employment Agreement and Severance Agreement, each dated as
of June 1, 1995, by and between the Company and Richard F.
Frisch.
27.1 Financial Data Schedule (electronic filing only).
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is made as of this 24th day of May, 1995, by and
between BOWATER INCORPORATED, a Delaware corporation having a mailing
address of 55 East Camperdown Way, Greenville, South Carolina 29602
(the "Corporation"), and Richard F. Frisch residing at 413 Sugar Mill
Road, Greer, South Carolina 29650 (the "Executive").
WHEREAS, the Corporation desires to employ the Executive as Vice
President - Human Resources; 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
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termination shall be the date stated in such
notice, provided that if the Corporation
specifies an effective date that is more than (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 herewith 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) 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 - Human Resources 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.
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4. Place of Employment. The Executive will be employed at the
corporate 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 $140,000 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
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 Corporate 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.
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(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 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, plus
1/12 of the amount
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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 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
Delaware.
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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/ Doris Simpson By /s/ Arnold M. Nemirow
Witness Arnold M. Nemirow,
President and Chief Executive Officer
/s/ Carol D. Hinton /s/ Richard F. Frisch
Witness Richard F. Frisch
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SEVERANCE AGREEMENT
THIS AGREEMENT, made as of the 24th day of May, 1994, by and
between Bowater Incorporated, a Delaware corporation having a mailing
address of 55 East Camperdown Way, Greenville, South Carolina 29602 (the
"Corporation"), and Richard F. Frisch residing at 413 Sugar Mill Road,
Greer, South Carolina 29650 (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
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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 gross
negligence, willful miscon duct 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.
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(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 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 1(g)(ii) in which the
Executive was participating at the time of the
Change in Control;
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(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 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 May 24, 1995, and ending on May 23, 1998. The
term of this Agreement shall automatically be extended on May
24, 1996, until May 23, 1999, without further action by the
parties, and shall be automatically extended by an additional
year on each succeeding May 24, unless either the Corporation
or the Executive shall
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have served notice upon the other party prior to such May 24
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.
(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:
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(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;
(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); and
(v) For each full or partial month in the period
beginning on January 1 of the year in which the date
of the termination
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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 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 instal
lment 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.
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(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 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.
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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
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
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pay to the Executive interest on such payment at the legal
rate payable from time to time upon judgments in the State
of Delaware 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 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
and the Secretary of the Corporation.
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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
Delaware.
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 pursuant to this provision.
11
<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/ Doris Simpson By /s/ Arnold M. Nemirow
Witness Arnold M. Nemirow
President and Chief Executive Officer
/s/ Carol D. Hinton /s/ Richard F. Frisch
Witness Richard F. Frisch
12
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