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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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, 1994 COMMISSION FILE NO. 1-8712
BOWATER INCORPORATED
(Exact name of registrant as specified in its charter)
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DELAWARE 62-0721803
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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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:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS: ON WHICH REGISTERED:
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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
Depositary Shares, each representing one-fourth New York Stock Exchange, Inc.
of a share of 7% PRIDES, Series B Convertible
Preferred Stock, par value $1 per share
Depositary Shares, each representing one-fourth New York Stock Exchange, Inc.
of a share of 8.40% Series C Cumulative
Preferred Stock, par value $1 per share
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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 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 20, 1995, was $1,315,676,324.
As of March 20, 1995, there were 36,919,669 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:
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Annual Report to Shareholders for the year ended December 31, 1994. Parts I, II and IV
Proxy Statement with respect to the Annual Meeting of Shareholders Part III
to be held on May 24, 1995.
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(Recycle Logo) PRINTED ON RECYCLED PAPER MANUFACTURED BY THE
COMPANY
AND CONTAINING AT LEAST 10% RECOVERED FIBER
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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 groundwood paper,
market pulp, continuous stock computer forms and lumber. The Company operates
facilities in both the United States and Canada, and manages and controls
approximately 3.7 million acres of timberlands to support these facilities. The
Company markets and distributes its various products in the United States,
Canada and overseas.
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 page 33 of the Company's 1994 Annual Report
(the "Annual Report"). Information regarding the amount of total revenue
contributed by each of the Company's product lines is incorporated herein by
reference to pages 16 and 17 and the inside cover page of the Annual Report.
Information regarding the Company's products is incorporated herein by
reference to pages 4 through 15 of the Annual Report.
Information regarding the Company's liquidity and capital resources is
incorporated herein by reference to pages 20 through 22 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 second largest manufacturer in North
America. Its annual capacity is approximately 8 percent of the North American
total.
In 1994, the Company manufactured newsprint at five separate locations:
Calhoun, Tennessee; Catawba, South Carolina; Millinocket and East Millinocket,
Maine; and Liverpool, Nova Scotia. Both the Company's Calhoun Mill 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 Mill is located at Catawba, South Carolina, and Bowater
Mersey Paper Company ("Mersey Mill") (which is owned 51 percent by the Company
and 49 percent by The Washington Post Company) is located at Liverpool, Nova
Scotia. Great Northern Paper, Inc. ("GNP") (which is wholly-owned by the
Company) comprises two mills located at Millinocket and East Millinocket, Maine,
the Pinkham Lumber Company in Ashland, Maine, and approximately 2.0 million
acres of timberlands in Maine.
The Calhoun facility is located on the Hiwassee River in Tennessee and is
the largest newsprint mill in North America. At this facility, the Company
operates four paper machines, which produced 609,030 tons of newsprint and
groundwood specialty papers in 1994. Also located at this facility is CNC's No.
5 paper machine, which produced 244,334 tons of newsprint in 1994. The
continuing modernization of the Calhoun facility has contributed substantially
to improved product quality and is helping it to maintain its position as one of
the most productive in the industry. Although the Company manages and operates
the entire facility, CNC owns 68.4 percent of the thermomechanical pulp ("TMP")
mill and 100 percent of the recycled fiber plant. The Company owns the remaining
31.6 percent of the TMP mill and 100 percent of the other assets at this
location. These other assets 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 Carolina Mill, which produced 252,239 tons in
1994, is one of the largest and most productive newsprint machines in the
industry.
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 261,258 tons of newsprint in 1994. 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.
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
290,131
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tons of newsprint, directory paper and other uncoated groundwood specialties in
1994. The East Millinocket 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 1994 produced 148,772 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. Beginning in late 1993,
the Company closed certain obsolete manufacturing facilities and eliminated
approximately 370 positions at the GNP mill sites as of December 31, 1994. These
actions have helped to improve GNP's cost competitiveness.
All newsprint production 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 1994 accounted for approximately
9 percent of the Company's consolidated net sales and approximately 22 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 GROUNDWOOD PAPER
The Company is the fifth largest producer in the United States and the
sixth largest North American producer of coated groundwood paper. Coated
groundwood paper produced by the Company is primarily light weight coated paper
("LWC") and is used in special interest magazines, mail order catalogs,
advertising pieces, textbooks, and coupons.
The Company manufactures a variety of coated grades on two paper machines
(Nos. 1 and 2) at the Carolina Mill and on three paper machines (Nos. 7, 8, and
10) at the Millinocket Mill. Both machines at the Carolina Mill utilize
off-machine coaters. At the Millinocket Mill, 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 1994, the two coated machines at the Carolina Mill produced 344,449 tons
of LWC and the three machines at the Millinocket Mill produced 111,749 tons of
LWC.
Coated groundwood paper is sold by the Company to printers, publishers,
mail order houses and paper merchants. It is distributed by truck and rail from
the Carolina and Millinocket mills, 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 supplied
256,404 tons of market pulp to manufacturers of fine paper, tissues and other
paper products from its Carolina Mill in 1994. In 1990, the Company replaced its
kraft mill at the Calhoun Mill. 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 1994, in addition to supplying the chemical pulp portion of the newsprint
furnish, the new kraft mill produced an additional 55,386 tons of market pulp
for sale to customers.
During 1994, the Calhoun Mill replaced two existing recovery boilers with a
new larger size recovery boiler. A recovery boiler is an essential part of the
kraft pulping process. The new recovery boiler enables the Company to realize
significant cost reductions and meet currently proposed environmental
regulations. The total cost of the project, including capitalized interest, was
approximately $127.5 million, of which approximately $104 million was paid in
1994.
In 1994, the majority of the Company's pulp was sold to the export market.
Export sales are made through agents, while domestic sales are made directly by
the Company. The Company distributes market pulp primarily by rail and ship.
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
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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 3.7 million
acres of timberlands throughout eight states and Nova Scotia. Approximately 2.0
million acres of these timberlands are located in the state of Maine. The
Company also maintains one nursery from which it supplies seedlings to replace
trees harvested from its timberlands, generally planting two trees for each one
that is cut.
The Company operates three sawmills that produce construction grade lumber.
The sawmill at Albertville, Alabama, produced 94.3 million board feet of lumber
in 1994. This lumber is sold in the southern and midwestern United States. The
Mersey Mill 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 31.1 million board feet of lumber in 1994. The Pinkham
Lumber Company sawmill in Ashland, Maine, produced 73.6 million board feet of
lumber in 1994, 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. In addition, this effort allows
publishers and other customers to meet recycled content standards.
The Company broke ground for its first recycling plant in 1990 at Calhoun,
Tennessee. Taking a mixture of approximately 70 percent old newspapers and 30
percent old magazines, the plant utilizes advanced mechanical and chemical
processes to produce high quality pulp. When this recycled fiber is combined
with virgin fiber, the resulting products, which include recycled content
newsprint and recycled content computer forms paper, are comparable in quality
to paper produced with 100 percent virgin fiber pulp.
In 1993, the Company began operating a similar recycling plant at GNP to
provide recycled fiber for newsprint, directory papers and other groundwood
papers. This second facility reached full production in 1994 and the Company now
has a combined capacity to supply approximately 264,000 tons per year of
recycled fiber pulp to its paper mills. This level of output requires
approximately 350,000 tons of wastepaper.
COMPETITION
Newsprint and 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 their manufacture. Newsprint and market pulp from a variety of
manufacturers may be used with relatively few process changes to produce
customer products. There are approximately twenty major producers of newsprint
with which the Company competes. Price, quality, service, and the ability to
produce paper with recycled content are important competitive determinants. The
Company is not a major producer in the pulp market, which includes numerous
suppliers worldwide.
The Company also faces competition in the directory and groundwood
specialty markets. Price, quality, and service as well as the ability to produce
lower basis weight and recycled products are all important competitive
determinants.
The coated paper market is also 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
customer-supplier relationships.
In the communication papers market, the Company has differentiated itself
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.
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. In addition, the degree to which the
Company competes with
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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 several of the Company's 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.
RAW MATERIALS AND ENERGY
The manufacture of pulp and paper requires significant amounts of wood and
energy. Approximately 3.1 million cords of wood were consumed by the Company
during 1994 for pulp and paper production. The Company harvests wood fiber from
Company-owned properties equal to approximately 48% 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. The Company is
one of the largest purchasers of old newspapers and old magazines in North
America.
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. Internally generated electrical power at the
Calhoun and Carolina facilities is used to supplement purchased electrical
power. The GNP operation has the capacity to be 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 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, while currently operating
under interim licenses. In November 1994 FERC issued a draft Environmental
Impact Statement addressing relicensing conditions, upon which comments have
been submitted by various intervening parties. Although there can be no
assurances, the Company believes that new licenses will be issued and that these
licenses will contain terms and conditions that will allow the Company to
maintain most of the benefits provided under the previous licenses.
EMPLOYEES
The Company employs approximately 6,000 people, of whom approximately 3,700
are represented by bargaining units. The labor agreement at the Company's
Carolina Mill, covering all of the plant's hourly employees, expires on April
19, 1997. The labor contract at the Calhoun Mill with most of the plant's hourly
employees expires July 1996. The labor contract covering all unionized employees
at the Mersey Mill expires on April 30, 1998. Contracts covering the large
majority of unionized employees of GNP expire in July 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
Information regarding environmental matters is incorporated herein by
reference to page 22 of the Annual Report.
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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.
The Company has taken positive action to address concerns about municipal
solid waste by constructing two recycle mills at its Calhoun and East
Millinocket facilities. See "Recycling Capability" on page 3.
ITEM 2. PROPERTIES
Information regarding the Company's properties is incorporated herein by
reference to the material included in Item 1, "Business", and to the inside back
cover page and the back cover page of the Annual Report.
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. Information
regarding timberland leases and operating leases is incorporated herein by
reference to page 33 of the Annual Report.
ITEM 3. LEGAL PROCEEDINGS
In October 1994, the Company settled its lawsuit seeking declaratory relief
in its insurance coverage dispute with National Union Fire Insurance Company
("National Union"). The dispute related to lawsuits arising from vehicular
accidents in December 1990 in fog on Highway I-75 in the general area of the
Company's Calhoun mill. In the settlement, National Union conceded its
obligation, as first excess insurer, to cover $9.5 million of the Company's
$10.5 million settlements of the lawsuits in January 1994. The remaining $1
million had already been covered by the Company's primary insurer. Neither the
underlying lawsuits nor the insurance coverage dispute have had a material
adverse effect on the Company's results of operations, financial condition or
liquidity.
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 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT AS OF MARCH 29, 1995
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.
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SERVED AS
NAME AGE POSITION OFFICER SINCE
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Anthony P. Gammie 60 Chairman of the Board 1979
Arnold M. Nemirow 52 Chief Executive Officer and President 1994
Arthur D. Fuller 50 Senior Vice President and President -- Newsprint Division 1995
Robert C. Lancaster 48 Senior Vice President and Chief Financial Officer 1984
Donald G. McNeil 44 Senior Vice President and President -- Great Northern Paper, Inc. 1995
Robert J. Pascal 62 Senior Vice President and President -- Communication Papers Division 1986
Donald J. D'Antuono 51 Vice President -- Corporate Development 1977*
Robert D. Leahy 43 Vice President -- Corporate Relations 1993
David G. Maffucci 44 Vice President -- Treasurer 1992
Ecton R. Manning 57 Vice President -- General Counsel 1988
Robert A. Moran 50 Vice President -- Pulp and Paper Manufacturing Services 1992
Michael F. Nocito 40 Vice President -- Controller 1993
Aubrey S. Rogers 55 Vice President -- Information Services 1992
Wendy C. Shiba 44 Secretary and Assistant General Counsel 1993
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* Except for the period from 1978 to 1979.
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Anthony P. Gammie became Chairman of the Board in January 1985. He served
as Chief Executive Officer of the Company from January 1983 to March 1995.
Previously he was President from January 1983 to July 1992. He was President of
the Pulp and Paper Group from August 1981 to December 1982, and Executive Vice
President of the Company 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 Chairman and Managing Director of Bowater United Kingdom
Limited. (Bowater plc is the former parent company of the Company, but since
1984, the two companies have not been affiliated). He has been a director of the
Company since 1979.
Arnold M. Nemirow became Chief Executive Officer on March 1, 1995. He has
served as President and a director of the Company since September 1994 and
served as Chief Operating Officer from September 1994 through February 1995.
Previously he served as President, Chief Executive Officer and a director of
Wausau Paper Mills Company, a pulp and paper company, from July 1990 through
July 1994, and as Chairman, President and Chief Executive Officer and a director
of Nekoosa Papers, Inc., the business papers division of Great Northern Nekoosa
Corporation, from 1988 to March 1990, and as Vice President of Great Northern
Nekoosa Corporation from 1984 to March 1990.
Arthur D. Fuller became Senior Vice President and President of the
Newsprint Division in January 1995. Previously he was Vice President Finance,
Planning & Administration of MacMillan Bloedel Packaging Inc., the
containerboard and packaging business of MacMillan Bloedel Ltd. From 1991 to
1993 he was a partner of Nukraft, which sought to develop a recycled linerboard
mill, and from 1987 to 1990 he was Vice President and General Manager of Great
Southern Paper Company, the containerboard division of Great Northern Nekoosa
Corporation. Earlier he held various management positions with Great Southern
Paper Company.
Robert C. Lancaster became Senior Vice President and Chief Financial
Officer on July 1, 1993. He was Senior Vice President -- Finance from July 1992
to July 1993. Prior to that he was Vice President -- Controller from July 1984
to July 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.
Donald G. McNeil became Senior Vice President on March 1, 1995, and has
been President of GNP since November 1994. Previously he was President and
General Manager of Bowater Mersey Paper Company ("Mersey") from February 1992 to
November 1994. He was General Manager of Mersey from December 1991 through
January 1992 and Assistant General Manager from January 1990 to December 1991.
From 1977 through 1989 he held various engineering and management positions with
Mersey.
Robert J. Pascal became Senior Vice President in February 1994. Previously
he was Vice President since December 1986 and President of the Communication
Papers Division since December 1990, prior to which he was General Manager of
that unit. 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.
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 and forest products company, from November
1989 to March 1993 where he was responsible for domestic and international media
communications. He was Vice President of Corporate Communications for Andal
Corporation, a metal products company, from 1987 to 1989 where he was
responsible for marketing communications and investor and government relations.
Previously he held various senior level communications/public affairs positions
in both corporate and agency settings.
David G. Maffucci has been Vice President -- Treasurer since July 1, 1993.
He served as Treasurer from July 1992 to July 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
Carolina Mill from April 1988 to August 1988.
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Michael F. Nocito has been Vice President -- Controller since July 1, 1993.
He served as Controller of the Company's Southern Division from October 1992 to
July 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 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 managed the Corporate Group
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.
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), the Pacific Stock Exchange, the London Stock Exchange and
the Swiss Stock Exchanges. Price information with respect to the Company's
Common Stock on the inside back cover page of the Annual Report is incorporated
herein by reference.
(b) As of March 20, 1995, there were approximately 6,420 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, and quarterly during 1994.
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 in the future include,
upon the occurrence of certain events, the Company's Junior Participating
Preferred Stock, Series A. At December 31, 1994, there were no arrearages on
dividends accrued on any of the Company's preferred stock.
In addition, the Company's ability to pay dividends on any of its preferred
stock and on its Common Stock depends 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 $768 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, 1994, the net worth of the Company
and the ratio of total debt to total capital were $961.9 million and 54 percent,
respectively.
ITEM 6. SELECTED FINANCIAL DATA
Information regarding the Company's financial position and operating record
is incorporated herein by reference to pages 16 and 17 of the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Information regarding the Company's business and financial results is
incorporated by reference to pages 18 through 22 of the Annual Report.
7
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 is incorporated herein by reference to
pages 23 through 35 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 24, 1995
(the "Proxy Statement"), to be filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended.
Information regarding the Company's executive officers is provided under
the caption "Executive Officers of the Registrant" on pages 5, 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
Information regarding executive compensation is 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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
incorporated herein by reference to the material under the heading "Transactions
with Management" in the Proxy Statement.
8
<PAGE>
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, 1994.......................................................................... 23
Consolidated Balance Sheet at December 31, 1994 and 1993..................................... 24
Consolidated Statement of Capital Accounts for Each of the Years in the Three Year Period
Ended December 31, 1994.................................................................... 25
Consolidated Statement of Cash Flows for Each of the Years in the Three Year Period Ended
December 31, 1994.......................................................................... 26
Notes to Consolidated Financial Statements................................................... 27-34
Independent Auditors' Report................................................................. 35
</TABLE>
(2) The following financial statement schedule for each of the years in the
three year period ended December 31, 1994, are submitted herewith:
<TABLE>
<CAPTION>
PAGE
<S> <C>
Schedule II -- Valuation and Qualifying Accounts............................................... F-1
</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.
(3) Exhibits (numbered in accordance with Item 601 of Regulation S-K):
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
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).
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
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 1999 (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.
(|)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).
(|)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).
(|)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).
(|)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).
(|)10.2.1 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).
(|)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 (incorporated by reference to Exhibit
10.2.2 to the Company's Annual Report on Form 10-K for 1993).
(|)10.3* Employment Agreement and Severance Agreement, each dated as of July 20, 1994, by and between the
Company and Arnold M. Nemirow.
(|)10.4 Form of Employment Agreement by and between the Company and each of the executive officers listed on
the schedule attached thereto (incorporated by reference to Exhibit 10.4 to the Company's Annual
Report on Form 10-K for 1993).
(|)10.4.1 Form of Severance Agreement, by and between the Company and each of Robert A. Moran and Aubrey S.
Rogers (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for
1993).
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
(|)10.4.2* Form of Severance Agreement, by and between the Company and each of the executive officers listed on
the schedule attached thereto.
(|)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).
(|)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).
(|)10.6 Employment Agreement and Severance Agreement, each dated May 20, 1993, by and between the Company and
Robert J. Pascal (incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form
10-K for 1993).
(|)10.7 Employment Agreement and Severance Agreement, each dated August 25, 1988, by and between the Company
and Donald J. D'Antuono (incorporated by reference to Exhibit 10.7 to the Company's Annual Report on
Form 10-K for 1993).
(|)10.7.1 Amendment to Employment Agreement and Amendment to Severance Agreement, each dated August 23, 1989,
by and between the Company and Donald J. D'Antuono (incorporated by reference to Exhibit 10.7.1 to
the Company's Annual Report on Form 10-K for 1993).
(|)10.8 Employment Agreement and Severance Agreement, each dated August 25, 1988, by and between the Company
and John C. Davis (incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form
10-K for 1993).
(|)10.8.1 Amendment to Employment Agreement and Amendment to Severance Agreement, each dated August 23, 1989,
by and between the Company and John C. Davis (incorporated by reference to Exhibit 10.8.1 to the
Company's Annual Report on Form 10-K for 1993).
(|)10.9 Employment Agreement and Severance Agreement, each dated August 25, 1988, by and between the Company
and Ecton R. Manning (incorporated by reference to Exhibit 10.9 to the Company's Annual Report on
Form 10-K for 1993).
(|)10.9.1 Amendment to Employment Agreement and Amendment to Severance Agreement, each dated August 23, 1989,
by and between the Company and Ecton R. Manning (incorporated by reference to Exhibit 10.9.1 to the
Company's Annual Report on Form 10-K for 1993).
(|)10.9.2 Modification of Employment and Severance Agreements dated as of June 11, 1992, by and between the
Company and Ecton R. Manning (incorporated by reference to Exhibit 10.9.2 to the Company's Annual
Report on Form 10-K for 1993).
(|)10.10* Employment Agreement dated as of January 12, 1995, by and between the Company and Arthur D. Fuller.
(|)10.11 Employment Agreement and Severance Agreement, each dated March 15, 1993, by and between the Company
and Phillip A. Temple (incorporated by reference to Exhibit 10.11 to the Company's Annual Report on
Form 10-K for 1993).
(|)10.12* Employment Agreement dated as of March 1, 1995, by and between the Company and Donald G. McNeil.
(|)10.13 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).
(|)10.14 Supplementary Executive Medical Plan of the Company (incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement No. 2-90172).
(|)10.15 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).
(|)10.16* Annual Bonus Plan of the Company.
(|)10.17 1984 Stock Option Plan of the Company (incorporated by reference to Exhibit 10.10 to the Company's
Registration Statement No. 2-90172).
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
(|)10.17.1 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).
(|)10.17.2 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).
10.18 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 Recycle Agreement, dated as of January 1, 1991, by and among the Company, Advance Publications, Inc.,
and Calhoun Newsprint Company (incorporated by reference to Exhibit 10.19.1 to the Company's Annual
Report on Form 10-K for 1993).
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).
(|)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).
(|)10.24 1988 Stock Incentive Plan of the Company (incorporated by reference to the Company's Proxy Statement
for 1988).
(|)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).
(|)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).
(|)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).
(|)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).
(|)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).
(|)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* Deferred Compensation Plan of the Company, effective July 1, 1994.
(|)10.29.1* Deferred Compensation Plan of the Company, as amended January 1, 1995.
(|)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).
(|)10.31* Description of 1994 Long-Term Cash Incentive Plan.
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 (incorporated by reference
to Exhibit 10.25 to the Company's Annual Report on Form 10-K for 1992).
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
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
(incorporated by reference to Exhibit 10.32.1 to the Company's Annual Report on Form 10-K for 1993).
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 1994 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.
23.1* Consent of Independent Auditors.
27.1* Financial Data Schedule (electronic filing only).
</TABLE>
* Filed herewith
(|) 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/ ARNOLD M. NEMIROW
ARNOLD M. NEMIROW
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Date: March 29, 1995
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, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
/s/ ANTHONY P. GAMMIE Director and Chairman of the Board
ANTHONY P. GAMMIE
/s/ ARNOLD M. NEMIROW Director, President and Chief Executive
ARNOLD M. NEMIROW Officer
/s/ ROBERT C. LANCASTER Senior Vice President and Chief Financial
ROBERT C. LANCASTER Officer
/s/ MICHAEL F. NOCITO Vice President -- Controller
MICHAEL F. NOCITO
/s/ FRANCIS J. AGUILAR Director
FRANCIS J. AGUILAR
/s/ HUGH D. AYCOCK Director
HUGH D. AYCOCK
/s/ RICHARD BARTH Director
RICHARD BARTH
/s/ KENNETH M. CURTIS Director
KENNETH M. CURTIS
/s/ RICHARD LASTER Director
RICHARD LASTER
/s/ H. GORDON MACNEILL Director
H. GORDON MACNEILL
/s/ DONALD R. MELVILLE Director
DONALD R. MELVILLE
/s/ JOHN A. ROLLS Director
JOHN A. ROLLS
</TABLE>
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
BOWATER INCORPORATED:
Under the date of February 10, 1995, we reported on the consolidated
balance sheets of Bowater Incorporated and Subsidiaries as of December 31, 1994
and 1993, 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, 1994, as contained in the 1994 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 1994. In connection
with our audits of the aforementioned consolidated financial statements, we also
have audited the related financial statement schedule as listed in the
accompanying index, Item 14(a)(2). This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statement schedule based on our audit.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
Greenville, South Carolina
February 10, 1995
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1993, 1992
(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, 1994
Allowance for doubtful accounts............................ $1,667 $260 $ 265 $ (652)
Deferred tax asset valuation allowance..................... $1,740 -$- $ 1,980 $--
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)
<CAPTION>
BALANCE AT
END OF YEAR
<S> <C>
Year ended December 31, 1994
Allowance for doubtful accounts............................ $ 1,540
Deferred tax asset valuation allowance..................... $ 3,720
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
</TABLE>
(1) Consists primarily of accounts deemed to be uncollectible.
F-1
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
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 1999 (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.
(|)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).
(|)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).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
(|)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).
(|)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).
(|)10.2.1 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).
(|)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 (incorporated by reference to Exhibit 10.2.2 to the Company's
Annual Report on Form 10-K for 1993).
(|)10.3* Employment Agreement and Severance Agreement, each dated as of July 20, 1994, by and between the Company and
Arnold M. Nemirow.
(|)10.4 Form of Employment Agreement by and between the Company and each of the executive officers listed on the schedule
attached thereto (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for
1993).
(|)10.4.1 Form of Severance Agreement, by and between the Company and each of Robert A. Moran and Aubrey S. Rogers
(incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for 1993).
(|)10.4.2* Form of Severance Agreement, by and between the Company and each of the executive officers listed on the schedule
attached thereto.
(|)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).
(|)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).
(|)10.6 Employment Agreement and Severance Agreement, each dated May 20, 1993, by and between the Company and Robert J.
Pascal (incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K for 1993).
(|)10.7 Employment Agreement and Severance Agreement, each dated August 25, 1988, by and between the Company and Donald
J. D'Antuono (incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for 1993).
(|)10.7.1 Amendment to Employment Agreement and Amendment to Severance Agreement, each dated August 23, 1989, by and
between the Company and Donald J. D'Antuono (incorporated by reference to Exhibit 10.7.1 to the Company's Annual
Report on Form 10-K for 1993).
(|)10.8 Employment Agreement and Severance Agreement, each dated August 25, 1988, by and between the Company and John C.
Davis (incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K for 1993).
(|)10.8.1 Amendment to Employment Agreement and Amendment to Severance Agreement, each dated August 23, 1989, by and
between the Company and John C. Davis (incorporated by reference to Exhibit 10.8.1 to the Company's Annual Report
on Form 10-K for 1993).
(|)10.9 Employment Agreement and Severance Agreement, each dated August 25, 1988, by and between the Company and Ecton R.
Manning (incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for 1993).
(|)10.9.1 Amendment to Employment Agreement and Amendment to Severance Agreement, each dated August 23, 1989, by and
between the Company and Ecton R. Manning (incorporated by reference to Exhibit 10.9.1 to the Company's Annual
Report on Form 10-K for 1993).
(|)10.9.2 Modification of Employment and Severance Agreements dated as of June 11, 1992, by and between the Company and
Ecton R. Manning (incorporated by reference to Exhibit 10.9.2 to the Company's Annual Report on Form 10-K for
1993).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
(|)10.10* Employment Agreement dated as of January 12, 1995, by and between the Company and Arthur D. Fuller.
(|)10.11 Employment Agreement and Severance Agreement, each dated March 15, 1993, by and between the Company and Phillip
A. Temple (incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for 1993).
(|)10.12* Employment Agreement dated as of March 1, 1995, by and between the Company and Donald G. McNeil.
(|)10.13 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).
(|)10.14 Supplementary Executive Medical Plan of the Company (incorporated by reference to Exhibit 10.7 to the Company's
Registration Statement No. 2-90172).
(|)10.15 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).
(|)10.16* Annual Bonus Plan of the Company.
(|)10.17 1984 Stock Option Plan of the Company (incorporated by reference to Exhibit 10.10 to the Company's Registration
Statement No. 2-90172).
(|)10.17.1 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).
(|)10.17.2 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).
10.18 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 Recycle Agreement, dated as of January 1, 1991, by and among the Company, Advance Publications, Inc., and Calhoun
Newsprint Company (incorporated by reference to Exhibit 10.19.1 to the Company's Annual Report on Form 10-K for
1993).
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).
(|)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).
(|)10.24 1988 Stock Incentive Plan of the Company (incorporated by reference to the Company's Proxy Statement for 1988).
(|)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).
(|)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).
(|)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).
(|)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).
(|)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).
(|)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* Deferred Compensation Plan of the Company, effective July 1, 1994.
(|)10.29.1* Deferred Compensation Plan of the Company, as amended January 1, 1995.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
(|)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).
(|)10.31* Description of 1994 Long-Term Cash Incentive Plan.
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 (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 (incorporated by
reference to Exhibit 10.32.1 to the Company's Annual Report on Form 10-K for 1993).
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 1994 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.
23.1* Consent of Independent Auditors.
27.1* Financial Data Schedule (electronic filing only).
</TABLE>
* Filed herewith
(|) This is a management contract or compensatory plan or arrangement.
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the 20th day of July, 1994, by and
between BOWATER INCORPORATED, a Delaware corporation having a
mailing address of 55 EAST CAMPERDOWN WAY, POST OFFICE BOX 1028,
GREENVILLE, SOUTH CAROLINA 29602 (the "Corporation") and ARNOLD M.
NEMIROW of 1714 CRESTVIEW DRIVE, WAUSAU, WISCONSIN 54403 (the
"Executive").
WHEREAS, the Corporation desires immediately to employ the
Executive as its President and Chief Operating Officer and to employ
the Executive as its chief Executive Officer as of March 1995; and
WHEREAS, the Executive is desirous of serving the Corporation
in such capacities;
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 first day on which the Executive reports for work at the
Corporation's main office (which is anticipated to take place
between September 1, 1994, and September 30, 1994, and which
hereafter is referred to as the "Commencement Date") and shall
continue thereafter (i) until terminated by the Corporation upon
<PAGE>
not less than (x) sixty (60) days prior written notice to the
Executive, if without Cause (as defined in subparagraph 2(d) below),
or (y) thirty (30) days prior written notice to the Executive, if
with Cause, or (ii) until terminated by the Executive upon not less
than thirty (30) days' prior written notice to the Corporation. 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, then the Executive may, upon thirty (30) days' written
notice to the Corporation, accelerate the effective date of such
termination.
(b) Notwithstanding Section 2(a) and Sections 2(c)(i) and
2(c)(ii), 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 in no event terminate prior to the date 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 by reason
of Disability within the meaning of the Corporation's Supplemental
Benefit Plan for Designated Employees of Bowater Incorporated and
Affiliated Companies, as the same may be amended (the "SBP"), for a
period of one hundred and eighty (180) consecutive days or forseveral
periods totaling one hundred and eighty (180) days
<PAGE>
occurring within any twelve (12) consecutive calendar months; or (iii) the
Executive's Retirement within the meaning of the SBP, whether on or
prior to his Normal Retirement Date.
(d) For purposes of this Agreement, the term for "Cause"
shall mean the Executive's gross negligence or willful misconduct,
which gross negligence or willful misconduct has a demonstrable and
material adverse effect on the Corporation or on the Executive's
ability to perform adequately and effectively his duties hereunder;
provided that the Corporation has given the Executive written notice
of the alleged gross negligence or willful misconduct and the
Executive shall have failed to cure such negligence or misconduct
within thirty (30) days after receipt of such notice.
3. Position and Duties. The Executive shall be employed as
President and Chief Operating Officer of the Corporation, with the
duties and responsibilities customarily attendant to those offices,
from the Commencement Date to March 1, 1995, or such earlier date on
which the Executive is elected Chief Executive Officer of the
Corporation. The Executive shall be employed as the Chief Executive
Officer of the Corporation, with the duties and responsibilities
customarily attendant to that office, immediately following his term
as Chief Operating Officer, it being agreed that the election of the
Executive as the Corporation's Chief Executive Officer shall take
place not later than six (6) months after the Commencement Date.
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 the
<PAGE>
Executive shall be entitled to serve on the Board of Directors of WPL
Holdings, Inc. and such other Boards of Directors of other profit and
non-profit corporations as the Corporation's Board of Directors deems
appropriate.
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 four hundred fifty
thousand dollars ($450,000) from the Commencement Date until he is
elected Chief Executive Officer and thereafter at the initial annual
rate of five hundred thousand dollars ($500,000), in each case
payable in substantially equal periodic installments on the
Corporation's regular payroll dates. The Executive's base salary
level shall be reviewed at least annually by the Compensation and
Human Resources Committee of the Corporation's Board of Directors.
(b) Initial Bonus. The Corporation shall pay to the
Executive an initial bonus of two hundred thousand dollars
($200,000) upon the Commencement Date, which shall be deemed to have
been fully earned by the Executive as of such date. This bonus
shall be considered a bonus paid and earned in 1994 for the
<PAGE>
purposes of determining benefits payable to the Executive under the
Corporation's benefit or other plans.
(c) Bonus Plans. (i) In addition to his base salary, the
Executive shall be entitled to receive an annual bonus under the
Corporation's Annual Incentive Plan, as amended from time to time,
which shall be payable at the time and in the amounts set forth
under such plan, it being agreed that the Executive's target award
for calendar year 1995 under the Corporation's Annual Incentive Plan
will be 60% of the Executive's total compensation in 1995 and the
Executive's bonuses in that year will be based 35% an individual
performance criteria and 65% on absolute ROCE performance.
(ii) In addition to receiving his base salary and
the annual bonus provided above, the Executive shall be granted as
of the Commencement Date not less than 32,700 Units with respect to
the Corporation's 1994-1996 Long-Term Cash Incentive Plan, it being
agreed that (x) the Executive's Target Annual Incentive as a % of
Salary, his Target Annual Incentive, his Target Value of Long Term
Cash Award Opportunity and his Units Granted for purposes of the
Corporation's 1994-1996 Long-Term Cash Incentive Plan shall be not
less than those shown in Exhibit A hereto and (y) the number of
Units and the amounts payable to the Executive shall not be prorated
because the Executive did not commence employment as of January 1,
1994.
(iii) In addition to his base salary and the bonuses
described in subparagraphs (i) and (ii) above, the Executive shall
be entitled to participate in such other bonus plans as the
<PAGE>
Corporation may from time to time adopt for its executive personnel,
and shall be entitled to receive bonuses thereunder determined in
such manner, and payable at such times and in such amounts as
provided in such plans.
(d) Benefit Plans. (i) The Corporation shall make
contributions on the Executive's behalf to the various benefit plans
and programs of the Corporation in which the Executive in eligible
to participate in accordance with the provisions thereof as in
effect from time to time. It is further agreed that, notwithstanding
anything to the contrary set forth in the SBP or any other benefit
plans or documents of the Corporation, for purposes of determining
the benefits due under the SBP or under any other benefit plan or
document of the Corporation, (A) the Executive shall receive credit
for Continuous Employment beginning immediately upon the
Commencement Date and (B) the Executive shall receive credit (x) for
ten (10) years of Continuous Employment at such time as he has been
employed by the Corporation for a period of five (5) years from the
Commencement Date, and then (y) for two years of Continuous
Employment for each year employed by the Corporation until the
Executive has earned credit for twenty (20) years of Continuous
Employment from the Commencement Date (which will occur after the
Executive has been employed for 10 years). The Executive's annual
benefit under the SBP will increase by 2.5% of the Executive's Final
Average-Earnings for each year employed after he has accrued the
aforesaid credit for twenty years of Continuous Employment, until
such time as the Executive's annual
<PAGE>
benefit under the SBP equals 60% of the Executive's Final-Average Earnings.
For example:
(bullet) If the Commencement Date were September 1, 1994, and
the Executive were to retire on September 1, 1999,
then the Executive would receive credit for 10 years
of Continuous Employment and thereby would be paid a
benefit of 25% of his Final-Average Earnings (2.5%
per year multiplied by 10 years) each year after his
retirement.
(bullet) If the Commencement Date were September 1, 1994, and
the Executive were to retire on September 1, 2003,
then the Executive would receive credit for 18 years
of Continuous Employment and thereby would be paid a
benefit of 45% of his Final-Average Earnings (2.5%
multiplied by 18) each year after his retirement.
(bullet) If the Commencement Date were September 1, 1994, and
the Executive were to retire on September 1, 2007,
then the Executive would be paid a benefit of 57.5%
of his Final-Average Earnings (50%, which is 2.5%
multiplied by 20 for the first 10 years of
employment, plus 2.5% for each of the 3 years
employed in excess of 10 years) each year after his
retirement.
<PAGE>
(ii) Notwithstanding anything to the contrary set
forth above or in the SBP, or in any other benefit plan or
compensation agreement applicable to the Executive, and without in
any way limiting any other benefits payable to the Executive under
the SBP or any such other plan, the Executive shall be paid a
minimum annual benefit from the Corporation as follows as a
retirement benefit if he retires at such time as he has been
employed by the Corporation for the number of years of Continuous
Employment noted below:
Years of Minimum
Continuous Annual
Employment Benefit
5 $220,000
6 238,000
7 256,000
8 274,000
9 292,000
10 or more 310,000
The Corporation's obligation to pay such minimum annual retirement
benefit shall be unconditional and shall not be terminated or
reduced for any reason whatsoever, including the sale, merger or
other transfer or disposition of the Corporation or its business.
The benefit payable to the Executive's spouse and children under the
SBP after the Executive's death shall be adjusted consistent with
such minimum annual benefit payable to the Executive.
(e) Vacations. The Executive shall be entitled to five
(5) weeks paid vacation per year.
<PAGE>
(f) Relocation. The Executive shall be entitled to all
benefits available under the Corporation's Employee Relocation
Policy, Standard Practice No. G-4, dated 1/15/92 (the "Relocation
Policy"). It is further agreed that:
(i) The Corporation shall, at its own expense, lease
a furnished apartment which is satisfactory to the Executive in his
reasonable discretion, for use by the Executive for 12 months
following the Commencement Date. The Corporation shall pay or
promptly reimburse the Executive for all reasonable living costs
during such 12 months, including without limitation travel and other
expenses incurred to make a reasonable number of visits to his family.
(ii) Notwithstanding Section V. of the Relocation
Policy, the Corporation shall purchase the house in Wausau,
Wisconsin currently owned by the Executive (the "Wisconsin House")
from the Executive for its appraised value at the request and on a
closing date specified by the Executive by not less than 60 days
prior notice to the Corporation. That appraised value shall be
determined in accordance with paragraph 1 of Section V of the
Relocation Policy, except that the Executive and the Corporation
shall each be entitled select one of the first two independent
appraisers and if a third is required, he shall be selected by the
first two appraisers. The appraised value of the Wisconsin House
shall be binding on the parties as the price at which it is
purchased by the Corporation under this subparagraph. The
Corporation shall pay or promptly reimburse the Executive for such
appraiser's fee and for all other normal and reasonable costs
<PAGE>
incurred in connection with the sale, including without limitation
attorneys' fees, real estate transfer fees and taxes, documentary
stamps, state and county mortgage transfer taxes, where applicable,
and any mortgage prepayment penalty.
(iii) The Corporation shall pay or promptly
reimburse the Executive for all reasonable and customary costs he
may incur in connection with the identification, selection and
purchase of a new house in or around Greenville, South Carolina,
including without limitation, all closing costs, attorneys' fees,
real estate transfer fees and taxes, and documentary stamps, where
applicable, and all moving, packing and transportation expenses, but
excluding the purchase price itself.
(iv) In addition to the amounts expressly required
to be paid by the Corporation under this Section 5(f), the
Corporation, in accordance with paragraph IV.A.2 of the Relocation
Policy, shall pay to the Executive upon the Commencement Date, ten
thousand dollar ($10,000) to cover miscellaneous costs relating to
the Executive's relocation.
(g) Stock Options. (i) On the Commencement Date, the
Corporation shall grant to the Executive a non-qualified stock
option for 250,000 shares of the Corporation's common stock
substantially in the form of Exhibit B hereto (the "Stock Option"),
which option will first become exercisable with respect to 125,000
of such shares on the first anniversary of the Commencement Date if
the Executive is then employed by the Corporation, and will first
become exercisable with respect to the remaining 125,000 shares
covered by the option on the second anniversary of the Commencement
<PAGE>
Date if the Executive is then employed by the Corporation, in either
case at a purchase price equal to the Fair Market Value of the stock
(as defined in the Bowater Incorporated 1992 Stock Incentive Plan)
as of the date the Stock Option is granted, and which option shall
expire ten years following the date the Stock Option is granted.
(ii) The Compensation and Human Resources Committee
of the Corporation's Board of Directors shall annually consider
granting additional stock options to the Executive as additional
compensation for his services under this Agreement.
(h) 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.
(i) Perquisites. The Corporation shall make available to
the Executive all perquisites to which he is entitled by virtue of
his position.
6. Nondisclosure.
(a) 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
<PAGE>
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.
(b) The Corporation shall not release any public
announcement of the Executive's employment with the Corporation
without the Executive's prior review and consent.
7. Competition by Executive. Nothing in this Agreement
shall be construed to limit the Executive's right to compete
directly or indirectly with the Corporation following termination of
his employment with the Corporation for any reason whatsoever.
Notwithstanding anything to the contrary in the SBP, or in any other
benefit plan or agreement of the Corporation, the benefits due and
payable to the Executive under this Agreement, under the SBP or
under any such plan, or otherwise payable following termination of
the Executive's employment with the Corporation for any reason
whatsoever shall not be reduced in the event the Executive competes
directly or indirectly with the Corporation following any such
termination of his employment.
8. Severance Pay; Severance Agreement.
(a) If the Executive's employment hereunder is terminated
by the Corporation 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 the sum of (i) two
times the Executive's annual base salary in effect on the effective
date of the termination plus (ii) 1/12 of the aggregate
<PAGE>
amount of the most recent annual bonuses paid to the Executive under any plan
applicable to the Executive multiplied by the number of months from
January 1 of the year in which the termination occurs through the
date of the termination; and provided however, that any amount paid
to the Executive as wages 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 severance 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 arising solely by virtue of the
termination of the Executive's employment hereunder; provided,
however, 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 the severance payment and shall continue to
be governed by the applicable provisions of such plans and this
Agreement.
(b) Notwithstanding paragraph (a) above, the Executive
shall, at his election, be entitled to the benefits of the Severance
Agreement, if termination occurs in a manner and at a time when the
Severance Agreement would be applicable.
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
<PAGE>
addresses of the parties set forth above, with a copy of any notice to the
Executive delivered to Michael A. Gaffin, Esq., Gaffin & Krattenmaker, P.C.,
2400 Prudential Tower, 800 Boylston Street, Boston, MA 02199, 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.
12. Arbitration. All disputes arising under this Agreement
shall be submitted to binding arbitration to be conducted under the
auspices and appropriate rules of Endispute, Inc. before a single
arbitrator at a location of the arbitrator's selection. The
arbitrator so selected shall be entitled to award legal fees to the
prevailing party in the arbitration. All parties shall abide by any
decision rendered in such an arbitration proceeding, and any such
decision may be enforced in a court of competent jurisdiction.
13. Supersedure. This Agreement shall cancel and supersede
all prior agreements relating to employment between the Executive
and the Corporation, except for the Severance Agreement and except
for the letters from the Corporation to the Executive dated May 20,
1994 and May 26, 1994, to the extent they are not inconsistent with
this Agreement.
<PAGE>
14. 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.
15. Binding Effect. The terms of this Agreement and the
letters from the Corporation to the Executive dated May 20, 1994 and
May 26, 1994, 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.
16. Attorneys' Fees. The Corporation shall reimburse the
Executive for all reasonable attorneys' fees incurred by the
Executive in connection with the negotiation and execution of this
Agreement.
17. Authority. This Agreement has been duly authorized by the
Corporation's Board of Directors and is a valid and binding
obligation of the Corporation, enforceable in accordance with its
terms. The Stock Option has been duly authorized by the
Compensation and Human Resources Committee of the Corporation's
Board of Directors and by the Corporation's Board of Directors, and
is a valid and binding obligation of the Corporation, enforceable in
accordance with its terms.
18. Further Actions. The Corporation shall take such
actions,
including without limitation causing the SBP, the 1992 Stock
Incentive Plan and other Corporation benefit plans to be amended, as
may be required to implement this Agreement and the intentions of
the parties expressed hereunder. Furthermore, the
<PAGE>
Corporation shall not permit the SBP, or any other benefit plan of the
Corporation, to be terminated or amended, if such termination or amendment
would in any way alter (i) the terms of the Executive's participation in the
Corporation's Annual Incentive Plan as provided for in subparagraph
5(c)(i) above; (ii) the terms of the Executive's participation in
the Corporation's 1994-1996 Long-Term Cash Incentive Plan as
provided for in subparagraph 5(c)(ii) above; (iii) the Executive's
minimum annual retirement benefit as described in subparagraph
5(d)(ii) above; or (iv) the terms of the Executive's Stock Option
granted pursuant to subparagraph 5(g)(i) above.
IN WITNESS WHEREOF, the Corporation and the Executive have
executed this Agreement as of the day and year first above written.
BOWATER INCORPORATED
\s\ Phillip A. Temple By: \s\ A. P. Gammie
Witness Its
\s\ Tammie Prochaska \s\ Arnold M. Nemirow
Witness ARNOLD M. NEMIROW
<PAGE>
Exhibit "A"
1994 - 1996 Long Term Cash Incentive Plan Award Opportunity
for
ARNIE NEMIROW
Your Long Term Incentive award opportunity for the 1994 - 1996 has
been computed as follows:
Salary Grade: 21/23
Salary Grade Midpoint: $437,700
Target Annual Incentive as a % of Salary: 56.67%
Target Annual Incentive $: $248,045
Target Value of Long Term Cash Award
Opportunity (3x Target Annual Incentive $): $744,135
Units Granted (rounded to nearest 100)*: 32,700
The Potential Value of your award at the end of 1996 assuming
various stock prices is as follows:
50% of 150% of
Target Target Target
Stock Price = $22.75 $371,962 $743,925 $1,115,888
Stock Price = $30.00 $490,500 $961,000 $1,471,500
Stock Price = $40.00 $654,000 $1,308,000 $1,962,000
*Based on December 1993 average stock price of $22.75
<PAGE>
EXHIBIT B
BOWATER INCORPORATED
NON-QUALIFIED STOCK OPTION
Granted to
Grant Date Expiration Number of Option Price per
Date Common Shares Share
This stock option is granted to you by Bowater Incorporated, a
Delaware corporation (the "Company"), upon the terms and conditions
set forth below and those contained in the Bowater Incorporated
1992 Stock Incentive Plan (the "Plan").
1. The Company hereby grants you a non-qualified stock option
(the "Option") to purchase on or before the expiration date
indicated above, at the purchase price stated above, the number
of shares of the Common Stock of Bowater Incorporated, par
value $1.00 per share (the "Common Stock"), set forth above.
No option granted under the Plan shall be exercised or will
vest unless and until the Plan is approved by the Company's
shareholders.
2. No stock may be purchased hereunder unless you remain in the
continuous employ of the Company or one of its subsidiaries for
one year following the grant date. Thereafter, this Option may
be exercised in the manner hereinafter set forth, provided that
(a) you are at the time of such exercise in the employ of the
Company or one of its subsidiaries, and (b) this Option may be
exercised only to the extent of 50% of the number of shares of
the Common Stock to which it relates on or after the first
anniversary of the grant date, and may be exercised to the
extent of the remaining 50% of such shares only on or after the
second anniversary of such date. This Option shall become
immediately exercisable in the event of a Change in Control (as
that term is defined in Article 16 of the Plan).
3. The Option may be exercised, in whole or in part, by written
notification delivered in person or by mail to the Secretary of
the Company at its Executive Office. Such notification shall
specify the number of shares with respect to which the Option
is being exercised and shall be accompanied by payment for such
shares. The Secretary of the Company will provide you with a
form of exercise notice upon request. The Option may not be
exercised with respect to a fractional share or with respect to
fewer than 100 shares. Payment is to be made by check payable
to the order of the Company or by one of the alternative
methods of payment described in the Plan. No shares shall be
sold or delivered hereunder until full payment for such shares
has been made and all checks delivered in payment therefor have
been collected. You shall not have any rights of a shareholder
with respect to any Common Stock received upon exercise of the
Option until certificates for such Common Stock have been
actually issued to you in accordance with the terms hereof.
4. The Company shall not be required to issue or deliver any
certificate or certificates for shares of its Common Stock
purchased upon the exercise of any part of this Option prior to
(i) the admission of such shares to listing on any stock
exchange on which the stock may then be listed, (ii) the
completion of any registration or other qualification of such
shares under any applicable law, rule or regulation, (iii) the
obtaining of any consent or approval or other clearance from
any governmental agency which the Company determines to be
necessary or advisable, and (iv) the payment to the Company,
upon its demand, of any amount requested by the Company for the
purpose of satisfying its liability, if any, to withhold
federal, state or local income or earnings tax or any other
applicable tax or assessment (plus interest or penalties
thereon, if any, caused by a delay in making such payment)
incurred by reason of the exercise of this Option or the
transfer of such shares thereupon. The Option shall be
exercised and shares of the Company's Common Stock issued only
upon compliance with the Securities Act of 1933, as amended
(the "Act"), and any other applicable securities laws, and you
agree to comply with any requirements imposed by the Company's
Human Resources and Compensation Committee under such laws. If
you are an "affiliate" of the Company (as that term is defined
in Rule 144 promulgated under the Act, and which generally
includes directors), by accepting this Agreement, you agree
that you will dispose of the stock acquired upon exercise of
the Option only in compliance with Rule 144 or in such other
manner as will not violate the Act and the rules and
regulations promulgated thereunder, and any other applicable
securities law.
<PAGE>
5. This Option is not transferrable by you otherwise than by will
or by the laws of descent and distribution, and is exercisable,
during your life, only by you or by your guardian or legal
representative. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to
the provisions hereof shall be null and void. This Option does
not confer upon you any right with respect to continuation of
employment with the Company or any of its subsidiaries, and
will not interfere in any way with the right of the Company or
any of its subsidiaries to terminate your employment.
6. An Option which has not become exercisable shall terminate at
the time of your death or the termination for any reason of
your employment with the Company or its subsidiaries, and no
shares may thereafter be delivered pursuant to the Option.
Subject to the condition that the Option may not be exercised
in whole or in part after the expiration date, the Plan
provides for certain circumstances under which options may be
exercised upon your death, disability or retirement. An Option
terminates upon termination of employment for reasons other
than death, disability or retirement.
7. This Option shall be irrevocable during the Option period and
its validity and construction shall be governed by the laws of
the State of Delaware. The terms and conditions herein set
forth are subject in all respects to the terms and conditions
of the Plan, which shall be controlling. You agree to execute
such other agreements, documents or assignments as may be
necessary or desirable to effect the purposes of this Agreement.
8. The grant of this Option shall be binding and effective only if
this Agreement is executed by or on behalf of the Company and
by you and a signed copy is returned to the Company.
BOWATER INCORPORATED
/s/ Anthony P. Gammie
By Anthony P. Gammie
Chairman, President and CEO
-------------------------------------------------------------------
I hereby acknowledge receipt of the Incentive Stock Option (the
"Option") granted on the date shown above, which has been issued to
me under the terms and conditions of the Bowater Incorporated 1992
Stock Incentive Plan (the "Plan"). I agree to conform to all of the
terms and conditions of the Option and Plan.
Date: Your Signature
<PAGE>
SEVERANCE AGREEMENT
THIS AGREEMENT, made as of the 20th day of July, 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 Arnold M. Nemirow of 1714 Crestview Drive, Wausau,
Wisconsin 54403 (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 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 reason
able 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 consituting 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 con-
solidation 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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<PAGE>
(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 Corporations 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 September 1, 1994, and ending on August 31, 1997. The term of this Agreement
shall automatically be extended on September 1, 1995, until August 31, 1998,
without further action by the parties,
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and shall be automatically extended by an additional year on each
succeeding September 1, unless either the Corporation or the Executive shall
have served notice upon the other party prior to such September 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.
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.
5
<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 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 (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;
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<PAGE>
(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);
and
(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 1/36 for each full calendar month by which the
date which is three (3) years from the effective date of the Executive's
termination extends beyond the Executive's Normal Retirement Date.
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<PAGE>
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.
(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.
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(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 Executive in a lump sum not later
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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 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.
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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 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
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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. 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 /s/ Anthony P. Gammie
Its Chairman of the Board
/s/ Arnold M. Nemirow
Arnold M. Nemirow
12
SEVERANCE AGREEMENT
THIS AGREEMENT, restated as of the _____ day 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 ________________________________________ (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.
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(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.
(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
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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;
(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
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(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 _________________, and ending on __________________. The term of
this Agreement shall automatically be extended on _____________, until
_________________, without further action by the parties, and shall be
automatically extended by an additional year on each succeeding
_____________, unless either the Corporation or the Executive shall
have served notice upon the other party prior to such ______________,
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
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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:
(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)
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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 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,
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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 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
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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.
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
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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 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.
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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 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.
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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. 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.
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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
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Schedule Accompanying
Exhibit 10.4.2
The Company has entered into 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 10.4.2 except
for the information set forth below. Set forth below are the names of the seven
executive officers who are parties to the Severance Agreements and a summary of
the manner in which their agreements materially differ from the Form.
Arthur D. Fuller
Date of Agreement: January 12, 1995
Initial Term of Agreement: January 12, 1995, and ending on January 11,
1998. The term of the Severance Agreement shall be automatically
extended on January 12, 1996, until January 11, 1999, without
further action by the parties, and shall be automatically
extended by an additional year on each succeeding January 12,
unless either the Corporation or the executive shall have served
notice upon the other party prior to such January 12 of its or
his intention either that the term of the Agreement shall not be
extended, or that the executive's Employment Agreement is
terminated.
Robert C. Lancaster
Date of Agreement: July 1, 1993
Initial Term of Agreement: July 1, 1993, and ending on June 30, 1996.
The term of the Severance Agreement shall be automatically
extended on July 1, 1994, until June 30, 1997, 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 the Agreement shall not be extended, or that the
executive's Employment Agreement is terminated.
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Robert D. Leahy
Date of Agreement: March 15, 1993
Initial Term of Agreement: March 15, 1993, and ending on March 14,
1995. The term of the Severance Agreement shall be automatically
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 Agreement shall not be extended, or that the executive's
Employment Agreement is terminated.
David G. Maffucci
Date of Agreement: July 1, 1992
Initial Term of Agreement: July 1, 1992, and ending on June 30, 1994.
The term of the Severance Agreement shall be automatically
extended on July 1, 1993 until June 30, 1995, 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 the Agreement shall not be extended, or that the
executive's Employment Agreement is terminated.
Michael F. Nocito
Date of Agreement: July 1, 1993
Initial Term of Agreement: July 1, 1993, and ending on June 30, 1995.
The term of the Severance Agreement shall be automatically
extended on July 1, 1994 until June 30, 1996, 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 the Agreement shall not be extended, or that the
executive's Employment Agreement is terminated.
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Wendy C. Shiba
Date of Agreement: June 14, 1993
Initial Term of Agreement: June 14, 1993, and ending on June 13, 1995.
The term of the Severance Agreement shall be automatically
extended on June 14, 1994, until June 13, 1996, without further
action by the parties, and shall be automatically extended by an
additional year on each succeeding June 14, unless either the
Corporation or the executive shall have served notice upon the
other party prior to such June 14 of its or her intention either
that the term of the Agreement shall not be extended, or that the
executive's Employment Agreement is terminated.
Donald G. McNeil
Date of Agreement: March 1, 1995
Initial Term of Agreement: March 1, 1995, and ending on the last day
of February, 1997. The term of the Severance Agreement shall be
automatically extended on March 1, 1996 until the last day of
February, 1999, without further action by the parties, and shall
be automatically extended by an additional year on each
succeeding March 1, unless either the Corporation or the
executive shall have served notice upon the other party prior to
such March 1 of its or his intention either that the term of the
Agreement shall not be extended, or that the executive's
Employment Agreement is terminated.
15
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is made as of this 12th day of January, 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 Arthur D. Fuller of 55 East Camperdown Way, Greenville, South Carolina 29602
(the "Executive").
WHEREAS, the Corporation desires to employ the Executive as Senior Vice
President; 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 (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
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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 Senior Vice President 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 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 $250,000 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
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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.
(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
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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 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.
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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.
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
By /s/ Phillip A. Temple
Phillip A. Temple
/s/ Arthur D. Fuller
Arthur D. Fuller
5
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of this 1st day of March, 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 Donald
G. McNeil of Great Northern Paper, Inc., One Katahdin Avenue, Millinocket, Maine
04462 (the "Executive").
WHEREAS, the Corporation desires to employ the Executive as Senior Vice
President of the Corporation and President and General Manager of Great Northern
Paper, Inc. ("GNP").
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 as of the Date set
forth above 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.
1
<PAGE>
(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 Senior Vice President of the Corporation and President and
General Manager of GNP, 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 GNP
offices in the Town of Millinocket, Maine 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
2
<PAGE>
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. GNP shall pay to the Executive a base salary of
$160,000 as of March 1, 1995, 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 and GNP shall make contributions
on the Executive's behalf to the various benefit plans and programs of the
Corporation and GNP 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 policy of the Corporation and GNP as in effect from time to
time, to be taken at such time or times as may be approved by the Corporation
and GNP.
(e) Expenses. GNP shall reimburse the Executive for all reasonable
expenses properly incurred, and appropriately documented, by the Executive in
connection with the business of GNP.
(f) Perquisites. The Corporation and GNP shall make available to the
Executive all perquisites to which he is entitled by virtue of his position.
3
<PAGE>
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 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.
4
<PAGE>
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.
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.
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<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/ Ecton R. Manning By /s/ Arnold M. Nemirow
Witness Arnold M. Nemirow
President and Chief Executive Officer
/s/ Carol Hinton /s/ Donald G. McNeil
Witness Donald G. McNeil
BOWATER INCORPORATED
ANNUAL BONUS PLAN
(as amended and restated effective as of January 1, 1989)
<PAGE>
BOWATER INCORPORATED
ANNUAL BONUS PLAN
(as amended and restated effective as of January 1, 1988)
CONTENTS
1. Name and Purpose
2. Regulations
3. Administration
4. Policy
5. Participation
6. Incentive Reserve
7. Bonus Awards
8. Expenses, etc.
9. Amendment or Discontinuance
10. Effective Date
<PAGE>
BOWATER INCORPORATED
ANNUAL BONUS PLAN
1. Name and Purpose
The name of this plan is the Bowater Incorporated Annual Bonus Plan
(hereinafter referred to as the "Annual Bonus Plan" or the "Plan"),
and its purpose is to promote the interests of the stockholders of
Bowater Incorporated (hereinafter referred to as the "Corporation"),
to attract and retain employees who will strive for excellence, and to
motivate those employees to set and achieve above average objectives
by providing rewards for those who contribute most to the operating
progress and earning power of the Corporation and its subsidiaries.
2. Regulations
The Board of Directors shall have the power to adopt eligibility and
other rules and regulations not inconsistent with the provisions of
the Plan (hereinafter referred to as the "Regulations") for the
administration thereof, and to alter, amend, or revoke any Regulation
so adopted.
3. Administration
A Human Resources and Compensation Committee (hereinafter referred to
as the "Committee") of the Board of Directors shall be chosen by the
board from those of its members not eligible to participate in the
benefits of the Plan, and such Committee shall have full power and
authority to interpret and administer the Plan in accordance with the
Regulations.
4. Policy
The Annual Bonus Plan is an integral part of total compensation for
participating managers of the Corporation. It is designed to
contribute toward producing total compensation (base salary plus
annual bonus), in a normal year, at or near the 75th percentile of
U.S. corporations of comparable size.
<PAGE>
5. Participation
Participation in the benefits of the Plan shall be limited to those
employees of the Corporation and its subsidiaries selected by the
Committee in accordance with the Regulations.
6. Incentive Reserve
The Corporation shall establish and maintain an Incentive Reserve to
which shall be credited for each fiscal year beginning January 1, 1984
(except years for which such credit is prohibited by the Plan, the
Regulations, or specific order of the Board of Directors) an incentive
provision the amount of which shall be five percent of consolidated
earnings, before income taxes and before extraordinary items, in
excess of 12 percent of net equity for each year, or such lesser
amount as may be determined by the Committee in accordance with the
Regulations. No such provision shall be made for any year in which no
dividends are paid on the common stock of the Corporation, and the
amount of such provisions made for any year shall in no event exceed
the amount or value of dividends paid thereon during such year.
As promptly as may be after the end of each fiscal year, the
independent accountants employed by the Corporation from year to year
for the purpose of submitting an opinion on its financial statements
for publication shall determine in accordance with the Plan and the
Regulations and report to the Committee the maximum amount available
for credit to the Incentive Reserve for such year, and the amount of
any balance in such reserve credited thereto but unawarded in prior
years and currently available for award; and the Committee shall rely
upon and be bound by such reports.
7. Bonus Awards
(a) Upon the determination by the Committee of the amount of the
incentive provision for a particular year and the credit thereof
to the Incentive Reserve, an amount not exceeding the resulting
unawarded credit in the Reserve may be allotted by the Committee
as awards for such year to such employees as it may select and in
such amounts as it may determine in accordance with the
<PAGE>
Regulations. The Regulations shall require the Committee in
fixing the amounts of such awards to take into consideration the
distinct contributions of the selected employees' organizational
units to the operating progress and earning power of the
Corporation and its subsidiaries. The Committee's selection of
the employees to whom awards for such year shall be made and its
determination of the amount of each such award shall be final.
(b) Subject to such conditions as may be provided or authorized by
the Regulations, the awards so made to selected employees shall
be paid or distributed to them or their legal representatives in
cash or otherwise pursuant to an election made under the
Corporation's 1988 Stock Incentive Plan.
(c) The Committee may, in any year, make a preliminary determination
of the incentive provision for such year and may elect, in their
sole discretion, to make advance payments of awards in and for
such year with respect to such recipients as the Committee may
designate. The aggregate amount of such advance payments in any
year shall not exceed the amount of unawarded credit balance in
the Incentive Reserve at the time of payment. The remainder of
any such awards shall be paid at the discretion of the Committee
upon the final determination by the Committee of such incentive
provision for such year and the resulting unawarded credit
balance in the Incentive Reserve.
8. Expenses, etc.
All expenses incurred by the Committee in interpreting and
administering the Plan, including meeting expenses and auditing
fees, amy be charged against the Incentive Reserve. The amount
of each award forfeited by the person to whom made shall be
retained by the Corporation and may not be recredited to the
Incentive Reserve.
9. Amendment or Discontinuance
The Board of Directors may alter, suspend, or discontinue the
Plan, subject to meeting any and all payment obligations incurred
prior to such board actions. Periodically, at least every three
years, the Board of Directors shall review the Plan and assess
its effectiveness in achieving its purposes. The Board of
<PAGE>
Directors has the authority and the responsibility to make such
changes in the Plan as it deems appropriate after each such
review.
10. Effective Date
The plan shall become effective on January 1, 1984 if approved by
the Board of Directors of the Corporation.
BOWATER INCORPORATED
EXECUTIVE DEFERRED COMPENSATION PLAN
Bowater Incorporated (the "Sponsor") hereby establishes a non- qualified
deferred compensation program for certain employees as described herein. The
following shall constitute the terms and conditions of the Executive Deferred
Compensation Plan, effective July 1, 1994.
A. Purpose and Administration
1. Statement of Purpose. The purpose of the Executive Deferred
Compensation Plan (the "Plan") is to provide certain employees of Bowater
Incorporated and its subsidiaries (individually and collectively, the "Company")
with recurrent opportunities to defer receipt of a portion of salary and bonus
amounts before they are earned. Such deferrals, until a date certain in the
future, would apply to amounts which otherwise would be payable currently.
2. Top Hat Plan. The Sponsor intends that the Plan constitute an
unfunded "top hat" plan maintained for the purpose of providing deferred
compensation to a select group of management or highly compensated employees,
within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee
Retirement Income Security Act of 1974, as amended from time to time, and the
rules and regulations thereunder ("ERISA").
3. Plan Administration. Full power and authority to construe, interpret
and administer the Plan and to change requirements for eligibility and
investment options shall be vested in the Human Resources and Compensation
Committee of the Board of Directors of the Company (the "Committee"). The
Committee shall have the authority to make determinations provided for or
permitted to be made under the Plan and to establish such rules and regulations,
if any, that the Committee deems necessary and appropriate for the ongoing
administration and operation of the Plan.
No member of the Committee shall be liable to any person for any action
taken or omitted in connection with the interpretation and administration of the
Plan unless attributable to his own willful misconduct or lack of good faith.
B. Eligibility
4. Eligible Employees. Participants in this plan shall consist of
employees of the Company and its subsidiaries who participate in a company
sponsored bonus plan (collectively referred to hereinafter as "Participants").
<PAGE>
C. Deferral Elections
5. Agreements. The initial deferral agreement (the "Initial
Agreement"), in a form approved by the Committee shall be executed by the
Company and each Participant to effectuate the deferrals described in Section
6(a) below. Subsequent deferral agreements (the "Subsequent Agreements"), in a
form approved by the Committee shall be executed by the Sponsor and each
Participant to effectuate the deferrals described in Section 6(b) below (the
Initial Agreement and the Subsequent Agreements are collectively referred to
herein as the "Deferral Agreements"). Execution of the Deferral Agreements
between the Company and each Participant shall constitute the sole means for
each Participant to effectuate deferral elections pursuant to the Plan.
6. Deferral Elections.
(a) Initial Deferral. Each Participant may elect in writing to defer
an amount of salary up to a maximum of thirty-two percent (32%) for the initial
deferral period of July 1, 1994 through December 31, 1994 (the "Initial Deferral
Period"). Each Participant may elect in writing to defer either (i) up to one
hundred percent (100%) of his or her 1994 bonus for the 1994 calendar-year, or
(ii) all of his or her 1994 bonus in excess of a designated sum, if any. The
election with respect to salary for the Initial Deferral Period and/or the 1994
bonus shall be made in the month of June 1994.
(b) Subsequent Deferrals. Each Participant may elect in writing to
defer an amount of salary up to a maximum of sixteen percent (16%) for
subsequent calendar year deferrals (the "Subsequent Deferral Period"). Each
Participant may also elect in writing to defer either (i) up to one hundred
percent (100%) of his or her bonus for the subsequent calendar year (the
"Subsequent Bonus"), or (ii) all of bonus in excess of a designated sum, if any.
The election with respect to salary for the Subsequent Deferral Period and/or a
Subsequent Bonus shall be made in the month of December prior to the calendar
year in which any of the salary or bonus is earned.
(c) New Participant Deferrals. Each new Employee to the company and
each continuing Employee who becomes eligible to participate in the Plan
subsequent to the Plan's commencement date of July 1, 1994, may elect salary
and/or bonus deferrals during the next regular deferral election period.
(d) Deferral Amounts. Deferral elections of at least $1,000 must be made.
<PAGE>
D. Deferral Accounts
7. Deferral Account. The Company shall establish a deferral account in
the name of each Participant on the Company's books and records which shall
reflect the amount of actual deferrals plus any earnings and less any losses
thereon (the "Adjustment") as described in Section 9 hereinafter as an unfunded
liability of the Company to the Participant (the actual deferrals plus or minus
the Adjustment is collectively referred to herein as the "Deferral Account").
8. Irrevocability of Deferral Elections. Once a Participant elects to
defer salary and/or bonus pursuant to the terms of a Deferral Agreement,
including elections as to amount, timing and method of payout, such election
shall be irrevocably binding upon the Participant.
9. Investment Options. The Sponsor has selected the investment options
shown on Schedule A which may be modified from time to time by the Committee (
the "Investment Options"). Each Participant shall allocate deferrals among the
Investment Options as a measure of the investment performance of the contents of
his Deferral Account on a form provided by the Committee. Each Participant will
be able to reallocate his Deferral Account quarterly by February 28, May 31,
August 31 and November 30. Until a Participant delivers a new Investment Option
form to the Committee, his prior Investment Options shall control. The Sponsor
shall use the Participant's Investment Option designations to calculate the
Adjustment component of the Deferral Account. If a Participant changes his or
her Investment Option designations for either amounts then in the Deferral
Account or future amounts to be allocated to the Deferral Account, then such
change shall supersede the previous designation effective the last business day
of the month following the month the change is made. The Sponsor shall begin
crediting the Participant's Deferral Account with the amount deferred by the
Participant on the last day of the month in which the salary or bonus would have
otherwise been paid. As to the applicable amount distributed, the Sponsor shall
cease crediting or debiting Adjustments to the Participant's Deferral Account on
the last day of the month of the applicable distribution event set forth in
Sections 10, 11, 12, 13, 14 or 15 (the "Valuation Date").
Allocation of investment selections shall be made among the Investment
Options. A Participant shall have absolutely no ownership interest in any
Investment Option. The Sponsor may, but is not required to, invest the amounts
represented by the Deferral Accounts in the Investment Options. The Sponsor
shall be the sole owner of any funds invested in any such Investment Option, as
well as all amounts accounted for in the Deferral Accounts, all of which shall
at all times be subject to the claims of the Company's creditors.
A Participant shall be entitled to payment of an amount equal to the amount
in his Deferral Account in accordance with Sections 10, 11, 12, 13, 14 or 15.
<PAGE>
E. Distributions
10. Pre-Deferral Irrevocable Payout Election. A Participant may
irrevocably elect to receive the distribution of the Deferral Account, as
follows:
(a) in a one-time partial distribution of a specified amount on a
specified future date with the remainder to be distributed in accordance with
subsection (c) or (d), and with such partial distribution to be made on or
before the fifteenth day of the month following the specified date; and/or
(b) in a lump sum distribution of the entire Deferral Account on a
specified future date that is more than five (5) years from the date of
execution of the Deferral Agreement with payment made on or before the fifteenth
day of the month following the specified date; or
(c) upon Retirement from the Company, in a lump sum distribution on
or before the fifteenth day following the Valuation Date ("Retirement" means a
Participant's retirement date under the provisions of any qualified defined
benefit pension plan of the Company, including any special early retirement
programs thereunder); or
(d) upon Retirement from the Company, in annual payments for a period
of up to fifteen (15) years beginning on or before the fifteenth day following
the Valuation Date and continuing on each anniversary thereof until paid in
full. Under this method, for example, assuming a fifteen year payment election,
the first year distribution will equal one-fifteenth (1/15) of the total
Deferral Account, the second year distribution will equal one-fourteenth (1/14)
of the remaining Deferral Account, and so forth.
Notwithstanding the Participant's irrevocable election, the distribution of
the Deferral Account to a Participant shall be accelerated in the event of total
and permanent disability (Section 11), death (Section 12), termination of
employment other than by retirement (Section 13) or a Change of Control, as
defined hereinafter (Section 14), and may be accelerated in the event of an
Unforeseeable Emergency, as defined hereinafter (Section 15).
11. Payment in Event Participant Becomes Totally and Permanently Disabled.
In the event a Participant terminates employment as a result of total and
permanent disability, as that term is defined in the Sponsor's then existing
Long Term Disability Plan, the method of payment shall be a lump sum
distribution on or before the fifteenth day following the Valuation Date.
12. Payment in Event of Participant's Death. In the event a Participant
pre-deceases his or her election date for payment of the Deferral Account or has
not received all of his or her payments, the method of payment shall be a lump
sum distribution to the beneficiary designated by the Participant on or before
the fifteenth day following the Valuation Date.
<PAGE>
Each Participant shall designate in writing to the Committee on a form
provided by the Company a beneficiary to whom benefits hereunder are to be paid,
if the Participant dies prior to receiving his or her entire Deferral Account.
A Participant may change his or her beneficiary designation at any time by
filing a revised beneficiary designation form with the Committee.
If a Participant fails to designate a beneficiary as provided above, or if
all designated beneficiaries predecease the Participant, or die before the
completion of all payments due hereunder, the Sponsor shall pay the Deferral
Account to the Participant's estate.
13. Payment in Event of Participant's Termination of Employment. Upon
termination of employment for reasons other than Retirement, total and permanent
disability or death, the Company shall pay the terminated Participant his or her
Deferral Account in a lump sum distribution on or before the fifteenth day
following the Valuation Date.
14. Payment in Event of Change of Control. Notwithstanding any other
Section, if the Participant's employment with the Employer terminates, for any
reason other than death, within the five-year period beginning on the date that
a Change of Control of the Company (as described below) occurs, then the
Employers shall pay to the Participant within the first fifteen (15) days of the
month following the termination a lump sum distribution. If the Participant
dies after termination of employment but before payment of any amount under this
Section, then such amount shall be paid to the Beneficiary within the first
fifteen (15) days of the month after the Participant's death. A "Change in
Control of the Company" shall be deemed to have occurred if during, or following
the consummation of, a stock purchase program, tender offer, exchange offer,
merger, consolidation, sale of assets, contested election, or any combination of
the foregoing transactions, any person or group of persons acting in concert,
directly or indirectly,
(a) acquires ownership of the power to vote in excess of 20 percent
(20%) of the voting securities of the Company and one or more of that person's
or group's representatives are elected to the Board of Directors of the Company,
or
(b) acquires ownership of the power to vote in excess of 50 percent
(50%) of the voting securities of the Company, or
(c) otherwise acquires effective control of the business and affairs
of the Company.
15. Payment in Event of Unforeseeable Emergency
(a) A distribution of a portion of the Participant's Deferral Account
because Of an Unforeseeable Emergency will be permitted only to the extent
required by the Participant to satisfy the emergency need. Whether an
Unforeseeable Emergency has occurred will be determined solely by the Committee
in accordance with Treas. Reg. 1.457-2(h)(4) and 1.4572(h)(5). Distributions in
the event of an Unforeseeable Emergency may be made by and with the approval of
the Committee upon written request by a Participant.
<PAGE>
(b) An "Unforeseeable Emergency" is defined as a severe financial
hardship to the Participant caused by sudden and unexpected illness or accident
of the Participant or of a dependent of the Participant (as defined in Code
Section 152(a)), loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances caused by a result of
events beyond the Participant's control. The circumstances that will constitute
an unforeseeable emergency will depend upon the facts of each case, but, in any
event, any distribution under this Section shall not exceed the remaining amount
required by the Participant to resolve the hardship after (i) reimbursement or
compensation through insurance or otherwise, (ii) obtaining liquidation of the
Participant's assets, to the extent such liquidation would not itself cause a
severe financial hardship, or (iii) suspension of deferrals under the Plan.
F. Participants' Rights
16. Participant Rights in the Unfunded Plan. Any liability of the Company
to any Participant with respect to any benefit shall be based solely upon the
contractual obligations created by the Plan and the Deferral Agreements
(collectively, the "Agreements"); no such obligation shall be deemed to be
secured by any pledge or any encumbrance on any property of the Company. The
Company's obligations under the agreement shall be an unfunded and unsecured
promise to pay. No Participant or his designated beneficiaries shall have any
rights under the Plan other than those of a creditor of the Company. Assets
segregated or identified by the Company for the purpose of paying benefits
pursuant to the Plan remain general corporate assets subject to the claims of
the Company's creditors. The Agreements do not create a trust or fiduciary
relationship between the Company and any Participant or his or her beneficiary.
17. Non-Assignability. Except as provided in Section 12, neither the
Participant, his designated beneficiary nor any other beneficiary under the
Agreements shall have any power or right to transfer, assign, anticipate,
hypothecate or otherwise encumber any part or all of the amounts payable
hereunder, which are expressly declared to be unassignable and nontransferable.
Any such attempted assignment or transfer shall be void and the Company shall
thereupon have no further liability to such Participant or such beneficiaries
hereunder. No amount payable hereunder shall, prior to actual payment thereof,
be subject to seizure by any creditor of any Participant or beneficiary for the
payment of debt, judgement or other obligation, by a proceeding at law or in
equity, nor transferable by operation of law in the event of the bankruptcy,
insolvency or death of the Participant, his designated beneficiary or any other
beneficiary hereunder.
G. The Sponsor's Reservation of Rights
18. Termination or Amendment of Plan. The Sponsor retains the right, at
any time and in its sole discretion, to amend or terminate the Plan, in whole or
in part. Any amendment of the Plan shall be approved by the Board of Directors
of the Sponsor, shall be in writing, shall be executed by an officer of Sponsor
and shall be communicated to the Participants. Notwithstanding the above, the
Committee shall have the authority to change the requirements of eligibility or
to modify the Investment Options hereunder. No amendment of the Plan shall
substantially impair or curtail the Sponsor's contractual obligations arising
from Deferral Agreements previously entered into for benefits accrued prior to
such amendment.
<PAGE>
Notwithstanding any other provision herein to the contrary, in the event of Plan
termination, payment of Deferral Accounts shall occur not later than the last
business day of the month following the month in which the termination is made
effective.
H. Claims for Benefits
19. Claims Procedure. Any claim by a Participant or his or her
Beneficiary (hereafter "Claimant") for benefits shall be submitted to the
Committee. The Committee shall be responsible for deciding whether such claim
is within the scope provided by the Plan (a "Covered Claim") and for providing
full and fair review of the decision of such claim. In addition, the Committee
shall provide a full and fair review in accordance with ERISA, including without
limitation Section 503 thereof.
Each claimant or other interested person shall file with the Committee such
pertinent information as the Committee may specify, and in such manner and form
as the Committee may specify and provide, and such person shall not have any
rights or be entitled to any benefits or further benefits hereunder, as the case
may be, unless such information is filed by the Claimant or on behalf of the
Claimant. Each Claimant shall supply at such times and in such manner as may be
required, written proof that the benefit is covered under the Plan. If it is
determined that a Claimant has not incurred a Covered Claim or if the Claimant
shall fail to furnish such proof as is requested, no benefits or no further
benefits hereunder, as the case may be, shall be payable to such Claimant.
Notice of a decision by the Committee with respect to a Claim shall be
furnished to the Claimant within ninety (90) days following the receipt of the
claim by the Committee (or within ninety (90) days following the expiration of
the initial ninety (90) day period, in a case where there are special
circumstances requiring extension of time for processing the claim). If special
circumstances require an extension of time for processing the claim, written
notice of the extension shall be furnished by the Committee to the Claimant
prior to the expiration of the initial ninety (90) day period. The notice of
extension shall indicate the special circumstances requiring the extension and
the date by which the notice of decisions with respect to the claim shall be
furnished. Commencement of benefit payments shall constitute notice of approval
of a claim to the extent of the amount of the approved benefit. If such claim
shall be wholly or partially denied, such notice shall be in writing and worded
in a manner calculated to be understood by the Claimant, and shall set forth (i)
the specific reason or reasons for the denial; (ii) specific reference to
pertinent provisions of the Plan on which the denial is based; (iii) a
description of any additional material or information necessary for the Claimant
to perfect the claim and an explanation of why such material or information is
necessary; and (iv) an explanation of the Plan's claims review procedure. If
the Committee fails to notify the Claimant of the decision regarding his or her
claim in accordance with these "Claims Procedure" provisions, the claim shall be
deemed denied and the Claimant then shall be permitted to proceed with the
claims review procedure provided herein.
Within sixty (60) days following receipt by the Claimant of notice of the
claim denial, or within sixty (60) days following the close of the ninety (90)
day period referred to herein, or if the Committee fails to notify the Claimant
of the decision within such ninety (90)
<PAGE>
day period, the Claimant may appeal denial of the claim by filing a written
application for review with the Committee. Following such request for review,
the Committee shall fully and fairly review the decision denying the claim.
Prior to the decision of the Committee, the Claimant shall be given an
opportunity to review pertinent documents and to submit issues and comments to
the Committee in writing. The decision of the Committee shall be made within
sixty (60) days following receipt by the Committee of the request for review (or
within one hundred and twenty (120) days after such receipt, in a case where
there are special circumstances requiring extension of time for reviewing such
denied claim). The Committee shall deliver its decision to the Claimant in
writing. If the decision on review is not furnished within the prescribed time,
the claim shall be deemed denied on review.
For all purposes under the Plan, the decision with respect to a claim if no
review is requested and the decision with respect to a claim if review is
requested shall be final, binding and conclusive on all interested parties as to
matters relating to the Plan.
20. Committee Determinations Final: Each determination provided for in
the Plan shall be made in the absolute discretion of the Committee. Any such
determination shall be final, binding and conclusive on all persons.
I. Miscellaneous Provisions
21. Effect on Other Benefits. Except as otherwise required by applicable
law, the salary deferred by a Participant shall be included in the Participant's
annual compensensation for purposes of calculating the Participant's bonuses and
awards, insurance and other employee benefits. However, in accordance with the
terms of any plan qualified under Section 401 of the Internal Revenue Code
maintained by the Sponsor, the amount of salary deferrals under the Plan shall
not be included as compensation in calculating the Participant's benefits or
contributions by or on behalf of the Participant. Distributions made under the
Plan shall be excluded from compensation in years paid for purposes of
calculating a Participant's bonuses and awards, insurance and other employee
benefits.
22. Plan Year. The Plan Year shall be the calendar year.
23. Tax Withholding. The Sponsor shall withhold from any payment made by
it under the Plan such amount or amounts as may be required by applicable
federal, state or local laws.
24. Participant's Incapacity. If, in the Committee's opinion, a
Participant or other person entitled to receive benefits under the Plan is in
any way incapacitated so as to be unable to manage his or her financial affairs,
then the Committee may make such payment(s) into a separate interest-bearing
account established for the benefit of and on behalf of the Participant or other
recipient, for release at such time as a claim is made by a conservator or other
person
<PAGE>
legally charged with the care of his or her person or of his or her estate.
Thereafter, any benefits payable under the Plan shall be made to the conservator
or other person legally charged with the care of his or her person or estate.
Such payment will be a complete discharge of the liabilities of the Company
under the Agreements.
25. Independence of Plan. Except as otherwise expressly provided herein,
this Plan shall be independent of, and in addition to, any other employment
agreement or employment benefit agreement or plan or rights that may exist from
time to time between the parties hereto. This Plan shall not be deemed to
constitute a contract of employment between the Company and a Participant, nor
shall any provision hereof restrict the right of the Company at any time to
discharge a Participant, with or without assigning a reason therefore, or
restrict the right of a Participant to terminate his or her employment with the
Company.
26. Responsibility for Legal Effect. Neither the Committee nor the
Company makes any representations or warranties, express or implied, or assumes
any responsibility concerning the legal, tax, or other implications or effects
of this Plan.
27. Successors, Acquisitions, Mergers, Consolidations. The terms and
conditions of the Plan and each Deferral Agreement shall inure to the benefit of
and bind the Company and the Participants, and their successors, assigns, and
personal representatives.
28. Controlling Law. The Plan shall be governed by and construed in
accordance with the internal laws, and not the law of conflicts, of the State of
South Carolina to the extent not preempted by laws of the United States of
America. Venue shall lie in Greenville County, South Carolina.
29. Gender. All references in this document to the words "he" or "his"
shall include the feminine, masculine and neuter genders.
30. Entire Agreement. This document sets forth all of the promises,
covenants, agreements, conditions and understandings with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements,
understandings, inducement or conditions, express or implied, oral or written,
with respect thereto, expect as contained herein.
31. Captions. The captions of the various Sections are solely for
convenience and shall not control or affect the meaning or construction of this
document.
32. Fiduciary. The named fiduciary of this Plan is the Sponsor.
BOWATER INCORPORATED
EXECUTIVE DEFERRED COMPENSATION PLAN
Bowater Incorporated (the "Sponsor") hereby establishes a non- qualified
deferred compensation program for certain employees as described herein. The
following shall constitute the terms and conditions of the Executive Deferred
Compensation Plan, effective July 1, 1994, and as amended January 1, 1995.
A. PURPOSE AND ADMINISTRATION
1. Statement of Purpose. The purpose of the Executive Deferred Compensation
Plan (the "Plan") is to provide certain employees of Bowater Incorporated
and its subsidiaries (individually and collectively, the "Company") with
recurrent opportunities to defer receipt of a portion of salary and bonus
amounts before they are earned. Such deferrals, until a date certain in
the future, would apply to amounts which otherwise would be payable
currently.
2. Top Hat Plan. The Sponsor intends that the Plan constitute an unfunded
"top hat" plan maintained for the purpose of providing deferred
compensation to a select group of man- agement or highly compensated
employees, within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1)
of the Employee Retirement Income Security Act of 1974, as amended from
time to time, and the rules and regulations thereunder ("ERISA").
3. Plan Administration. Full power and authority to construe, interpret and
administer the Plan and to change requirements for eligibility and
investment options shall be vested in the Company's Pension Administration
Committee (the "Committee"). The Committee shall have the authority to make
determinations provided for or permitted to be made under the Plan and to
establish such rules and regulations, if any, that the Committee deems
necessary and appropriate for the ongoing administration and operation of
the Plan.
No member of the Committee shall be liable to any person for any action taken or
omitted in connection with the interpretation and administration of the Plan
unless attributable to his own willful misconduct or lack of good faith.
B. ELIGIBILITY
4. Eligible Employees. Participants in this plan shall consist of employees
of the Company and its subsidiaries who participate in a company sponsored
bonus plan (collectively referred to hereinafter as "Participants").
<PAGE>
C. DEFERRAL ELECTIONS
5. Agreements. The 1995 deferral agreement (the "Agreement"), in a form
approved by the Committee shall be executed by the Company and each
Participant to effectuate the deferrals described in Section 6(a) below.
Subsequent deferral agreements (the "Subsequent Agreements"), in a form
approved by the Committee shall be executed by the Sponsor and each
Participant to effectuate the deferrals described in Section 6(b) below
(the Agreement and the Subsequent Agreements are collectively referred to
herein as the "Deferral Agreements"). Execution of the Deferral Agreements
between the Company and each Participant shall constitute the sole means
for each Participant to effectuate deferral elections pursuant to the Plan.
6. Deferral Elections.
(a) Current Deferral. Each Participant may elect in writing to defer an
amount of salary up to a maximum of sixteen percent (16%) for the 1995
deferral period of January 1, 1995 through December 31, 1995 (the
"Deferral Period"). Each Participant may elect in writing to defer
either (i) up to one hundred percent (100%) of his or her 1995 bonus
for the 1995 calendar-year, or (ii) all of his or her 1995 bonus in
excess of a designated sum, if any. The election with respect to
salary for the Deferral Period and/or the 1995 bonus shall be made in
the month of December 1994.
(b) Subsequent Deferrals. Each Participant may elect in writing to defer
an amount of salary up to a maximum of sixteen percent (16%) for
subsequent calendar year defer- rals (the "Subsequent Deferral
Period"). Each Participant may also elect in writing to defer either
(i) up to one hundred percent (100%) of his or her bonus for the
subsequent calendar year (the "Subsequent Bonus"), or (ii) all of
bonus in excess of a designated sum, if any. The election with respect
to salary for the Subsequent Deferral Period and/or a Subsequent Bonus
shall be made in the month of December prior to the calendar year in
which any of the salary or bonus is earned.
(c) New Participant Deferrals. Each new Employee to the company and each
continuing Employee who becomes eligible to participate in the Plan
subsequent to the Plan's commencement date of January 1, 1995, may
elect salary and/or bonus deferrals during the next regular deferral
election period.
(d) Deferral Amounts. Deferral elections of at least $1,000 must be made.
<PAGE>
D. DEFERRAL ACCOUNTS
7. Deferral Account. The Company shall establish a deferral account in the
name of each Participant on the Company's books and records which shall
reflect the amount of actual deferrals plus any earnings, less any losses
thereon, and less any allocable administrative expenses, which are
estimated to be approximately 1% of the amount deferred (the "Adjustment"),
as described in Section 9 hereinafter as an unfunded liability of the
Company to the Participant (the actual deferrals plus or minus the
Adjustment is collectively referred to herein as the "Deferral Account").
Ail participants are fully vested in their deferrals and in the interest
credited up to the Valuation Date.
8. Irrevocability of Deferral Elections. Once a Participant elects to defer
salary and/or bonus pursuant to the terms of a Deferral Agreement,
including elections as to amount, timing and method of payout, such
election shall be irrevocably binding upon the Participant.
9. Investment Options. The Sponsor has selected the investment options shown
on Schedule A which may be modified from time to time by the Committee (the
"Investment Options"). Each Participant shall allocate deferrals among the
Investment Options as a measure of the investment performance of the
contents of his Deferral Account on a form provided by the Committee. Each
Participant will be able to reallocate his Deferral Account quarterly by
March 31, June 30, September 30, and December 31. Until a Participant
delivers a new Investment Option form to the Committee, his prior
Investment Options shall control. The Sponsor shall use the Participant's
Investment Option designations to calculate the Adjustment component of the
Deferral Account. If a Participant changes his or her Investment Option
designations for either amounts then in the Deferral Account or future
amounts to be allocated to the Deferral Account, then such change shall
supersede the previous designation effective the last business day of the
month the change is made. The Sponsor shall begin crediting the
Participant's Deferral Account with the amount deferred by the Participant
on the last day of the month in which the salary or bonus would have
otherwise been paid. As to the applicable amount distributed, the Sponsor
shall cease crediting or debiting Adjustments to the Participant's Deferral
Account on the last day of the month of the applicable distribution event
set forth in Sections 10, 11, 12, 13, 14 or 15 (the "Valuation Date").
Allocation of investment selections shall be made among the Investment
Options. A Participant shall have absolutely no ownership interest in any
Investment Option. The Sponsor may, but is not required to, invest the
amounts represented by the Deferral Accounts in the Investment Options.
The Sponsor shall be the sole owner of any funds invested in any such
Investment Option, as well as all amounts accounted for in the Deferral
Accounts, all of which shall at all times be subject to the claims of the
Company's creditors.
A Participant shall be entitled to payment of an amount equal to the amount
in his Deferral Account in accordance with Sections 10, 11, 12, 13, 14 or
15.
<PAGE>
E. DISTRIBUTIONS
10. Pre-Deferral Irrevocable Payout Election. A Participant may irrevocably
elect to receive the distribution of the Deferral Account, as follows:
(a) in a one-time partial distribution of a specified amount or a
specified percentage of the Deferral Account on a specified future
date with the remainder to be distributed in accordance with
subsection (c) or (d), and with such partial distribution to be made
on or before the fifteenth day of the month following the specified
date; and/or
(b) in a lump sum distribution of the entire Deferral Account on a
specified future date with payment made on or before the fifteenth day
of the month following the specified date; or
(c) upon Retirement from the Company, in a lump sum distribution on or
before the fifteenth day following the Valuation Date ("Retirement"
means a Participant"s retirement date under the provisions of any
qualified defined benefit pension plan of the Company, including any
special early retirement programs thereunder); or
(d) upon Retirement from the Company, in annual payments for a period of
up to fifteen (15) years beginning on or before the fifteenth day
following the Valuation Date and continuing on each anniversary
thereof until paid in full. Under this method, for example, assuming
a fifteen year payment election, the first year distribution will
equal one-fifteenth (1/15) of the total Deferral Account, the second
year distribution will equal one-fourteenth (1/14) of the remaining
Deferral Account, and so forth.
Notwithstanding the Participant's irrevocable election, the distribution of the
Deferral Account to a Participant shall be accelerated in the event of total and
permanent disability (Section 11), death (Section 12), termination of employment
other than by retirement (Section 13) or a Change of Control, as defined
hereinafter (Section 14), and may be accelerated in the event of an
Unforeseeable Emergency, as defined hereinafter (Section 15).
11. Payment in Event Participant Becomes Totally and Permanently Disabled. In
the event a Participant terminates employment as a result of total and
permanent disability, as that term is defined in the Sponsor's then
existing Long Term Disability Plan, the method of payment shall be a lump
sum distribution on or before the fifteenth day following the Valuation
Date.
12. Payment in Event of Participant's Death. In the event a Participant
pre-deceases his or her election date for payment of the Deferral Account
or has not received all of his or her payments, the method of payment shall
be a lump sum distribution to the beneficiary designated by the Participant
on or before the fifteenth day following the Valuation Date.
<PAGE>
Each participant shall designate in writing to the Committee on a form provided
by the Company a beneficiary to whom benefits hereunder are to be paid, if the
Participant dies prior to receiving his or her entire Deferral Account. A
Participant may change his or her beneficiary designation at any time by filing
a revised beneficiary designation form with the Committee.
If a Participant fails to designate a beneficiary as provided above, or if all
designated beneficiaries predecease the Participant, or die before the
completion of all payments due hereunder, the Sponsor shall pay the Deferral
Account to the Participant's estate.
13. Payment in Event of Participant's Termination of Employment. Upon
termination of employment for reasons other than Retirement, total and
permanent disability or death, the Company shall pay the terminated
Participant his or her Deferral Account in a lump sum distribution on or
before the fifteenth day following the Valuation Date.
14. Payment in Even of Change of Control. Notwithstanding any other Section,
if the Participant's employment with the Employer terminates, for any
reason other than death, within the five-year period beginning on the date
that a Change in Control of the Company (as described below) occurs, then
the Employers shall pay to the Participant within the first fifteen (15)
days of the month following the termination of a lump sum distribution. If
the Participant dies after termination of employment but before payment of
any amount under this Section, then such amount shall be paid to the
Beneficiary within the first fifteen (15) days of the month after the
Participant's death. A "Change in Control of the Company" shall be deemed
to have occurred if during, or following the consummation of, a stock
purchase program, tender offer, exchange offer, merger, consolidation, sale
of assets, contested election, or any combination of the foregoing
transactions, any person or group of persons acting in concert, directly or
indirectly,
(a) acquires ownership of the power to vote in excess of 20 percent
(20%) of the voting securities of the Company and one or more of
that person's or group's representatives are elected to the Board
of Directors of the Company, or
(b) acquires ownership of the power to vote in excess of 50 percent
(50%) of the voting securities of the Company, or
(c) otherwise acquires effective control of the business and affairs
of the Company.
<PAGE>
15. Payment in Event of Unforeseeable Emergency
(a) A distribution of a portion of the Participant's Deferral Account
because of an Unforeseeable Emergency will be permitted only to
the extent required by the Participant to satisfy the emergency
need. Whether an Unforeseeable Emergency has occurred will
determined solely by the Committee in accordance with Treas.
Reg. 1.457- 2(h)(4) and 1.457-2(h)(5). Distributions in the event
of an Unforeseeable Emergency may be made by and with the
approval of the Committee upon written request by a Participant.
(b) An "Unforeseeable Emergency" is defined as a severe financial
hardship to the Participant caused by sudden and unexpected
illness or accident of the Participant or of a dependent of the
Participant (as defined in Code Section 152(a), loss of the
Participant's property due to casualty, or other similar
extraordinary and unforeseeable circum- stances caused by a
result of events beyond the Participant's control. The
circumstances that will constitute an unforeseeable emergency
will depend upon the facts of each case, but, in any event, any
distribution under this Section shall not exceed the remaining
amount required by the Participant to resolve the hardship after
(i) reimbursement or compensation through insurance or otherwise,
(ii) obtaining liquidation of the Participant's assets, to the
extent such liquidation would not itself cause a severe financial
hardship, or (iii) suspension of deferrals under the Plan.
<PAGE>
F. PARTICIPANTS' RIGHTS
16. Participant Rights in the Unfunded Plan. Any liability of the Company to
any Participant with respect to any benefit shall be based solely upon the
contractual obligations created by the Plan and the Deferral Agreements
(collectively, the "Agreements"); no such obligation shall be deemed to be
secured by any pledge or any encumbrance on any property of the Company.
The Company's obligations under the agreement shall be an unfunded and
unsecured promise to pay. No Participant or his designated beneficiaries
shall have any rights under the Plan other than those of a creditor of the
Company. Assets segregated or identified by the Company for the purpose of
paying benefits pursuant to the Plan remain general corporate assets
subject to the claims of the Company's creditors. The Agreements do not
create a trust or fiduciary relationship between the Company and any
Participant or his or her beneficiary.
17. Non-Assignability. Except as provided in Section 12, neither the
Participant, his designated beneficiary nor any other beneficiary under the
Agreements shall have any power or right to transfer, assign, anticipate,
hypothecate or otherwise encumber any part or all of the amounts payable
hereunder, which are expressly declared to be unassignable and non-
transferable. Any such attempted assignment or transfer shall be void and
the Company shall thereupon have no further liability to such Participant
or such beneficiaries hereunder. No amount payable hereunder shall, prior
to actual payment thereof, be subject to seizure by any creditor of any
Participant or beneficiary for the payment of debt, judgement or other
obligation, by a proceeding at law or in equity, nor transferable by
operation of law in the event of the bankruptcy, insolvency or death of the
Participant, his designated beneficiary or any other beneficiary hereunder.
G. THE SPONSOR'S RESERVATION OF RIGHTS
18. Termination or Amendment of Plan. The Sponsor retains the right, at any
time and in its sole discretion, to amend or terminate the Plan, in whole
or in part. Any amendment of the Plan shall be approved by the Board of
Directors of the Sponsor, shall be in writing, shall be executed by an
officer of Sponsor and shall be communicated to the Participants.
Notwithstanding the above, the Committee shall have the authority to change
the requirements of eligibility or to modify the Investment Options
hereunder. No amendment of the Plan shall substantially impair or curtail
the Sponsor's contractual obligations arising from Deferral Agreements
previously entered into for benefits accrued prior to such amendment.
Notwithstanding any other provision herein to the contrary, in the event of
Plan termination, payment of Deferral Accounts shall occur not later than
the last business day of the month following the month in which the
termination is made effective.
<PAGE>
H. CLAIMS FOR BENEFITS
19. Claims Procedure. Any claim by a Participant or his or her Beneficiary
(hereafter "Claimant") for benefits shall be submitted to the Committee.
The Committee shall be respon- sible for deciding whether such claim is
within the scope provided by the Plan (a "Covered Claim") and for providing
full and fair review of the decision of such claim. In addition, the
Committee shall provide a full and fair review in accordance with ERISA,
including without limitation Section 503 thereof.
Each claimant or other interested person shall file with the Committee such
pertinent information as the Committee may specify, and in such manner and
form as the Committee may specify and provide, and such person shall not
have any rights or be entitled to any benefits or further benefits
hereunder, as the case may be, unless such information is filed by the
Claimant or on behalf of the Claimant. Each Claimant shall supply at such
times and in such manner as may be required, written proof that the benefit
is covered under the Plan. If it is determined that a Claimant has not
incurred a Covered Claim or if the Claimant shall fail to furnish such
proof as is requested, no benefits or no further benefits hereunder, as the
case may be, shall be payable to such Claimant.
Notice of a decision by the Committee with respect to a Claim shall be
furnished to the Claimant within ninety (90) days following the receipt of
the claim by the Committee (or within ninety (90) days following the
expiration of the initial ninety (90) day period, in a case where there are
special circumstances requiring extension of time for processing the
claim). If special circumstances require an extension of time for
processing the claim, written notice of the extension shall be furnished by
the Committee to the Claimant prior to the expiration of the initial ninety
(90) day period. The notice of extension shall indicate the special
circumstances requiring the extension and the date by which the notice of
decisions with respect to the claim shall be furnished. Commencement of
benefit payments shall constitute notice of approval of a claim to the
extent of the amount of the approved benefit. If such claim shall be
wholly or partially denied, such notice shall be in writing and worded in a
manner calculated to be understood by the Claimant, and shall set forth (i)
the specific reason or reasons for the denial; (ii) specific reference to
pertinent provisions of the Plan on which the denial is based; (iii) a
description of any additional material or information necessary for the
Claimant to perfect the claim and an explanation of why such material or
information is necessary; and (iv) an explanation of the Plan's claims
review procedure. If the Committee fails to notify the Claimant of the
decision regarding his or her claim in accordance with these "Claims
Procedure" provisions, the claim shall be deemed denied and the Claimant
then shall be permitted to proceed with the claims review procedure
provided herein.
<PAGE>
Within (60) days following the close of the ninety (90) day period referred
to herein, or if the Committee fails to notify the Claimant of the decision
within such ninety (90) day period, the Claimant may appeal denial of the
claim by filing a written application for review with the Committee.
Following such request for review, the Committee shall fully and fairly
review the decision denying the claim. Prior to the decision of the
Committee, the Claimant shall be given an opportunity to review pertinent
documents and to submit issues and comments to the Committee in writing.
The decision of the Committee shall be made within sixty (60) days
following receipt by the Committee of the request for review (or within one
hundred and twenty (120) days after such receipt, in a case where there are
special circumstances requiring extension of time for reviewing such denied
claim). The Committee shall deliver its decision to the Claimant in
writing. If the decision on review is not furnished within the prescribed
time, the claim shall be deemed denied on review.
For all purposes under the Plan, the decision with respect to a claim if no
review is requested and the decision with respect to a claim if review is
requested shall be final, binding and conclusive on all interested parties
as to matters relating to the Plan.
20. Committee Determinations Final: Each determination provided for in the Plan
shall be made in the absolute discretion of the Committee. Any such
determination shall be final, binding and conclusive on all persons.
<PAGE>
I. MISCELLANEOUS PROVISIONS
21. Effect on Other Benefits. Except as otherwise required by applicable law,
the salary deferred by a Participant shall be included in the Participant's
annual compensation for purposes of calculating the Participant's bonuses
and awards, insurance and other employee benefits. However, in accordance
with the terms of any plan qualified under Section 401 of the Internal
Revenue Code maintained by the Sponsor, the amount of salary deferrals
under the Plan shall not be included as compensation in calculating the
Participant's benefits or contributions by or on behalf of the Participant.
Distributions made under the Plan shall be excluded from compensation in
years paid for purposes of calculating a Participant's bonuses and awards,
insurance and other employee benefits.
22. Plan Year. The Plan Year shall be the calendar year.
23. Tax Withholding. The Sponsor shall withhold from any payment made by it
under the Plan such amount or amounts as may be required by applicable
federal, state or local laws.
24. Participant's Incapacity. If, in the Committee's opinion, a Participant or
other person entitled to receive benefits under the Plan is in any way
incapacitated so as to be unable to manage his or her financial affairs,
then the Committee may make such payment(s) into a separate
interest-bearing account established for the benefit of and on behalf of
the Partici- pant or other recipient, for release at such time as a claim
is made by a conservator or other person legally charged with the care of
his or her person or of his or her estate. Thereafter, any benefits payable
under the Plan shall be made to the conservator or other person legally
charged with the care of his or her person or estate. Such payment will be
a complete discharge of the liabilities of the Company under the
Agreements.
25. Independence of Plan. Except as otherwise expressly provided herein, this
Plan shall be independent of, and in addition to, any other employment
agreement or employment benefit agreement or plan or rights that may exist
from time to time between the parties hereto. This Plan shall not be
deemed to constitute a contract of employment between the Company and a
Participant, nor shall any provision hereof restrict the right of the
Company at any time to discharge a Participant, with or without assigning a
reason therefore, or restrict the right of a Participant to terminate his
or her employment with the Company.
26. Responsibility for Legal Effect. Neither the Committee nor the Company
makes any representations or warranties, express or implied, or assumes any
responsibility concerning the legal, tax, or other implications or effects
of this Plan.
<PAGE>
27. Successors, Acquisitions, Mergers, Consolidations. The terms and
conditions of the Plan and each Deferral Agreement shall inure to the
benefit of and bind the Company and the Participants, and their successors,
assigns, and personal representatives.
28. Controlling Law. The Plan shall be governed by and construed in accordance
with the internal laws, and not the law of conflicts, of the State of South
Carolina to the extent not preempted by laws of the United States of
America. Venue shall lie in Greenville County, South Carolina.
29. Gender. All references in this document to the words "he" or "his" shall
include the feminine, masculine and neuter genders.
30. Entire Agreement. This document sets forth all of the promises, covenants,
agreements, conditions and understandings with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements,
understandings, inducement or conditions, express or implied, oral or
written, with respect thereto, expect as contained herein.
31. Captions. The captions of the various Sections are solely for convenience
and shall not control or affect the meaning or construction of this
document.
32. Fiduciary. The named fiduciary of this Plan is the Sponsor.
<PAGE>
SCHEDULE A:
General American Money Market Fund
General American Bond Index Fund
Fidelity Equity-Income Portfolio
Fidelity Growth Portfolio
Fidelity Overseas Portfolio
1994 LONG TERM CASH INCENTIVE PLAN
BOWATER INCORPORATED
1. PURPOSE
The purposes of the Bowater Incorporated (the "Corporation") Long-Term Cash
Incentive Plan (the "Cash Plan") are to:
(bullet) Focus executives on the Corporation's long-term strategic and
financial objectives which will lead to the creation of value for the
shareholders,
(bullet) Encourage management to achieve goals by providing incentive
opportunities which are commensurate with performance, and
(bullet) Enhance the Corporation's ability to attract and retain highly
talented individuals.
2. GENERAL PLAN PROVISIONS
The Cash Plan provides the opportunity for key employees to receive cash awards
based on the Corporation's performance relative to a group of peer companies
over a three-year period.
Each participant is granted a target number of units at the beginning of the
three-year performance period, with each unit having a value equal to one share
of Bowater stock. At the end of the three years, the Corporation's ranking
among the peer companies on Return on Capital Employed ("ROCE") will determine
the number of units earned. Awards to participants will equal the number of
units earned times the price of a share of Bowater stock at the end of the
period and will be paid in cash.
3. PLAN PARTICIPANTS
Plan participation is extended to the Chief Executive Officer (the "CEO") and
selected employees who, in the opinion of the CEO and the Human Resources and
Compensation Committee (the "HRCC") of the Board of Directors, have the ability
to have a significant impact on the long term performance of the Corporation.
Participation in the Cash Plan will be more limited than in either the Annual
Bonus Plan or the Stock Option Plan.
If any participants are added mid-cycle, they will be eligible for a pro-rata
award based on the amount of time they were a participant. Similarly, if a
participant is promoted mid-cycle, his/her units may be adjusted to reflect
this.
4. TARGET AWARDS
Target Cash Plan awards for the total three-year payout are equal to three times
a participant's annual target incentive opportunity at the date of grant. The
annual target incentive opportunity equals the midpoint salary for the
participant's grade times the target annual incentive percentage for that grade.
The number of units granted to a participant will be equal to his/her target
Cash Plan award divided by the average daily stock price for December of the
year preceeding the first year of the cycle.
1
<PAGE>
5. ESTABLISHING PERFORMANCE GOALS
At the outset of a Cash Plan cycle, a schedule is developed which determines
what percentage of the target award will be paid for each relative rank
positioning. Relative rank positioning is based on ROCE in the final year of
the plan cycle.
For purposes of this plan, ROCE is computed before interest and tax:
ROCE = Net Operating Earnings after Depreciation but before Interest and Tax
Average Capital Employed
where average capital employed equals total equity plus long term debt plus
minority interest plus deferred taxes over the four quarters of a year. If
fourth quarter data are unavailable at the time of the award computation, the
average may be for the most recently available four quarters.
6. DETERMINING AWARD AMOUNTS AND PAYMENTS
Calculation of Total Award Amounts
Following the end of the three-year cycle, the ranking of the Corporation based
on ROCE in the final year of the performance period will be calculated. This
ranking will be compared with the schedule established at the beginning of the
cycle. Once the percentage of units earned has been determined, cash payments
will be made to participants equal to the number of units earned times the
average daily stock price for December of the final year of the cycle.
HRCC Approval of Awards
The Human Resources and Compensation Committee of the Board will approve all
awards before payments are made. The Committee reserves the right to adjust any
or all awards; this includes the right to eliminate awards for a performance
period if, in the Committee's judgment, they are not warranted.
2
<PAGE>
1994 ANNUAL REPORT
BOWATER
INCORPORATED
Customer
FOCUSED
and Quality
DRIVEN
<PAGE>
FINANCIAL HIGHLIGHTS
BOWATER INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
(In millions, except per-share amounts) 1994 1993
<S> <C> <C>
Net sales $ 1,359.0 $ 1,353.7
Operating income (loss) 42.1 (63.3)
Loss before income taxes and minority interests (6.8) (109.0)
Net loss (4.8) (64.5)
Net loss per common share (.59) (1.84)
Average common shares outstanding 36.6 36.4
Dividends paid per common share $ .60 $ .75
Working capital 303.2 180.2
Total assets 2,851.4 2,726.2
Shareholders' equity 887.4 732.5
Total debt 1,118.5 1,120.2
Total debt as a percentage of total capitalization 50.3% 54.1%
Current ratio 2.44x 1.75x
</TABLE>
Net Sales
IN MILLIONS OF DOLLARS
(Bar graph appears here. Plot points are listed below.)
94 1,359
93 1,354
92 1,361
91 1,190
90 1,289
89 1,361
88 1,331
87 1,155
86 847
85 842
84 830
Net Income (Loss)
IN MILLIONS OF DOLLARS
(Bar graph appears here. Plot points are listed below.)
94 (4.8)
93 (64.5)
92 (82.0)
91 45.6
90 78.4
89 144.6
88 164.3
87 81.1
86 49.4
85 67.5
84 72.1
Dividends Paid
Per Common Share
IN DOLLARS
(Bar graph appears here. Plot points are listed below.)
94 .60
93 .75
92 1.20
91 1.20
90 1.20
89 1.12
88 .92
87 .78
86 .72
85 .72
Return on Equity
PERCENT
(Bar graph appears here. Plot points are listed below.)
94 (2.7)
93 (8.6)
92 (9.6)
91 4.4
90 7.9
89 16.0
88 20.7
87 13.1
86 10.2
85 16.8
84 20.2
Sales, Newsprint
IN THOUSANDS OF SHORT TONS
(Bar graph appears here. Plot points are listed below.)
94 1,460
93 1,437
92 1,604
91 1,244
90 1,266
89 1,278
88 1,233
87 1,246
86 1,237
85 1,200
84 1,112
Sales, Directory and
Specialty Grades
IN THOUSANDS OF SHORT TONS
(Bar graph appears here. Plot points are listed below.)
94 265
93 278
92 191
Sales, Coated Paper
IN THOUSANDS OF SHORT TONS
(Bar graph appears here. Plot points are listed below.)
94 453
93 454
92 447
91 346
90 352
89 343
88 337
87 316
86 188
85 128
84 129
Sales, Pulp
IN THOUSANDS OF SHORT TONS
(Bar graph appears here. Plot points are listed below.)
94 300
93 312
92 318
91 317
90 300
89 261
88 250
87 253
86 260
85 242
84 239
Capital Expenditures,
Including Timberlands
IN MILLIONS OF DOLLARS
(Bar graph appears here. Plot points are listed below.)
94 216.1
93 121.8
92 139.5
91 159.7
90 214.1
89 423.4
88 214.3
87 88.1
86 308.5
85 297.3
84 176.7
Total Debt As a Percentage
of Total Capitalization
PERCENT
(Bar graph appears here. Plot points are listed below.)
94 50.3
93 54.1
92 51.9
91 41.9
90 29.4
89 31.3
88 21.4
87 28.2
86 49.0
85 36.0
84 37.2
<PAGE>
BOWATER DESCRIBED
Bowater Incorporated, headquartered in Greenville, South Carolina, is a
major producer of wood fiber products. The company is the largest manufacturer
of newsprint in the United States and the second largest in North America.
Bowater is also one of the largest U.S. producers of newsprint containing
recycled fiber.
Other important wood fiber products made by Bowater include coated papers,
book papers, ground-wood specialties and market pulp as well as virgin fiber and
recycled directory paper. The company's products are marketed worldwide.
Bowater owns and operates fully integrated manufacturing facilities in
Catawba, South Carolina; Calhoun, Tennessee; Millinocket and East Millinocket,
Maine; and Liverpool, Nova Scotia, Canada.
Supporting these operations are 3.7 million acres of timberlands controlled
by the company. Approximately one-half this total is located in Maine, with the
balance split between the southeastern United States and Nova Scotia. This
timberland base also supplies the company's three sawmills, which produce
construction grade lumber in Alabama, Maine and Nova Scotia.
Bowater is also a leading converter and marketer of communication papers,
primarily stock continuous computer forms. The raw materials used for conversion
are increasingly being supplied by the company. Communication papers are
converted at eight plants and sold throughout the United States.
In July 1994, Bowater celebrated its tenth anniversary as a publicly traded,
U.S.-based company. Its common stock is traded on the New York Stock Exchange,
regional U.S. exchanges, the London Stock Exchange and the Swiss Stock
Exchanges.
TABLE OF CONTENTS
Shareholders' Letter 2
Newsprint 4
Coated Groundwood Papers 6
Directory Papers 8
Market Pulp 10
Communication Papers 12
Woodlands 14
Environmental Commitment 15
Financial and Operating Record 16
Business and Financial Review 18
Consolidated Financial Statements 23
Notes to Consolidated Financial Statements 27
Management's and Auditors' Statements 35
Directors and Officers 36
Shareholder Information Inside Back Cover
Directory Back Cover
<PAGE>
TO OUR SHAREHOLDERS
(Photo of Anthony P. Gammie here) (Photo of Arnold M.Nemirow here)
Anthony P. Gammie, Arnold M. Nemirow,
Chairman of the Board President and Chief Executive Officer
Following quarterly losses from January 1992 through June 1994, Bowater
restored operating profitability in the third quarter of last year. Higher
pricing for key product grades coupled with better operating efficiencies and
rigorous cost controls are yielding improved performance. The company is clearly
focused on its customers' needs and market requirements.
1994 Review
For the year, Bowater incurred a net loss of $4.8 million, or $.59 per
share, on sales of $1.36 billion. This compares to a net loss of $64.5 million,
or $1.84 per share, on sales of $1.35 billion for 1993.
Most recent quarterly results are encouraging. Excluding a gain on the sale
of timberlands, Bowater's net income for 1994's fourth quarter reached $11.1
million, or $.17 per share, the company's best quarterly performance since the
second quarter of 1991.
Performance of the newsprint segment of our business improved significantly,
due in part to a 3.6 percent increase in worldwide consumption in 1994. Also
contributing to this improvement was the removal of substantial amounts of
marginal capacity from the North American market during the past four years. As
a result, three price increases were implemented during the year.
After a difficult start to 1994, our coated groundwood paper business
enjoyed rising demand and higher prices during the second half of the year.
Magazine paging advanced 5.3 percent during the year as improvements in the U.S.
economy produced a 10.9 percent rise in magazine advertising expenditures.
Additional support was provided by a leveling off of European imports into the
U.S., in response to greater demand in their home markets.
Market pulp demand was particularly strong during 1994, with selling prices
doubling by the end of 1994 compared to December 1993. International fiber
shortages and improving economies were largely responsible for this improvement.
The communication papers segment faced competitive pressures in 1994, but
nonetheless improved its operating performance compared to 1993. Higher selling
prices and attention to operating costs were key factors in this performance.
Cost reduction programs in 1994 included closure of certain obsolete
manufacturing facilities at Great Northern Paper's Millinocket, Maine, mill as
well as continued reduction of companywide operating costs.
Sales of nonstrategic timberlands continued during the year, amounting to
221,000 acres of woodlands, which added $20.8 million, or $.57 per share, to net
income.
Strategic Focus
1995 marks a transition for the company in terms of both leadership and
strategy. Arnold M. Nemirow, who joined Bowater as President and Chief Operating
Officer and a member of the Board of Directors in September 1994, became
President and Chief Executive Officer on March 1, while Anthony P. Gammie
continues as Chairman of the Board. Completing 40 years of service with the
company, Mr. Gammie has announced plans to step down as Chairman in early 1996.
As part of this transition, the company will concentrate its efforts this
year on debt reduction, continued cost reduction and asset monetization,
decentralization and customer focus.
2
<PAGE>
In order to strengthen the balance sheet and better position the company to
invest in future growth opportunities, Bowater last month undertook a public
tender offer to prepay up to $200 million of its indebtedness. Any further debt
reduction in 1995 will depend on the strength of the company's cash flow.
The company recently decentralized its operations into four divisions:
Newsprint, Coated Papers and Pulp, Great Northern Paper (directory and specialty
grades) and Bowater Communication Papers. Each has a management team directly
responsible for the profitability of its products and assets as well as clearly
defined performance goals. This change will enhance customer focus in our major
markets and bring senior management closer to manufacturing and marketing
activities.
We have started a companywide cost reduction program utilizing a team-
oriented, participatory approach to improve our operating efficiencies.
Emphasis on customer focus will include ongoing ISO 9000 international
quality certifications. Participation and feedback are encouraged at all levels
of the organization, with a new focus on incentive and reward systems for
employees.
Outlook
Market indicators for our primary grades are promising. Healthy conditions
in the newsprint market are a global phenomenon with especially strong demand
and pricing in Europe, Asia and Latin America. U.S. demand remains strong and no
significant new North American capacity has been announced. Based on these
conditions, Bowater has recently announced a price increase for May 1995.
Strong growth in demand is anticipated this year for coated groundwood
papers for magazine and commercial printing uses. Improved European demand
continues to impact favorably the North American market, while there have been
no reports of major capacity expansions in this grade. The company has recently
announced a price increase for April 1995.
We continue to be optimistic about market pulp's performance for this year.
Demand remains strong in both domestic and export markets, industry operating
rates are at full capacity, and transaction prices have increased since the
beginning of 1995.
As alluded to at the beginning of this letter, improved conditions come on
the heels of one of the most punishing downturns witnessed by this industry and
the company in recent times. It is our belief Bowater's people remain the
company's greatest asset. We take this opportunity to thank them for their
contributions during this period.
In large part our current and future successes hinge on the ability to forge
partnerships with our customers to meet their needs. These relations are based
on trust and commitment, shared information, cooperation and continuous
improvement. The following sections of this report highlight this pursuit.
Anthony P. Gammie
Chairman of the Board
Arnold M. Nemirow
President and Chief Executive Officer
March 14, 1995
3
<PAGE>
NEWSPRINT
Added
Value
When the Greensboro News & Record sought to reduce the paper's inventory
levels, Bowater instantly recognized an opportunity to add value to a core
customer and secure sole supplier status. Thus, an Ideal Inventory System (IIS)
was designed and instituted.
The IIS was created by a cross-functional team of employees from Greensboro,
the Carolina Mill and our Sales and Information Services departments. Now in
full operation, using daily electronic data interchange transactions, the system
permits us to manage the paper's inventory levels and replenish them as
consumed.
The result is a "win-win" situation. The News & Record eliminated the
expense of holding and managing inventory, while we were better able to plan
mill production for a 100% contracted customer.
It's hard to argue with results. That's why Bowater is now planning to
expand the system's availability to other newsprint customers as well.
Larry M. Young
Customer Service,
Newsprint
4
<PAGE>
Bowater Incorporated is the largest producer of newsprint in the United
States and the second largest in North America. We are committed to our
newsprint business, quality production and total customer satisfaction.
1994 marked the start of a cyclical upturn for the newsprint industry.
Strong rebounds in the U.S., European and Asian economies produced increased
consumption and operating rates, as well as improved business conditions for our
primary customers, newspaper publishers.
Bowater's newsprint customer base, some 500 strong, ranges from well
established small hometown newspapers such as The Index-Journaland The Daily
Jeffersonian,to globally respected national publications, including The Wall
Street Journal, The New York Times, USA Todayand The Washington Post.
US dailies'
newsprint
consumption
increased 4.9%
in 1994
compared
to 1993
SOURCE: AF&PA
Annual
production
of 1.5 million
tons of
newsprint
includes
935,000 tons
containing
recycled fiber
In this year's tight newsprint market, a primary challenge has been
satisfying our customers' rising level of demand. From order inception,
manufacturing schedules and forecasts have required ongoing scrutiny to assure
on-time delivery.
To better serve our customers, Bowater is utilizing state-of-the-art
information tracking systems. Inquiries concerning order status - from
initiation through production, shipment and delivery to the pressroom - are now
answered instantly. This technology also allows us to anticipate potential
production or delivery problems in time to preempt them.
Our commitment requires working with customers to help them overcome market
challenges. Newspaper publishers are increasingly faced with regulatory
requirements to use varying amounts of recycled fiber in their products. Bowater
has responded with capital investments totaling $126 million at two
newsprint/magazine recycling facilities. Now one of the largest manufacturers
of recycled newsprint in North America, the company produced nearly 1 million
tons of newsprint containing recycled fiber in 1994. Demand growth is certain
to continue.
Bowater's ability to provide this level of service is the result of
listening to our customers and striving to understand their operations and
products. This knowledge, coupled with manufacturing expertise and awareness of
market requirements, yields top quality newsprint and consistent on-time
delivery.
In essence, our customer relations are defined by earned trust. It is one of
our most valued and protected traits. At Bowater Incorporated, customer service
is not merely a cordial or cooperative voice on the phone. It is a business
partnership backed by technical know-how that translates into reliability and
excellence.
The
North American
1994 operating
rate was 96.3%
SOURCE: AF&PA 5
<PAGE>
COATED GROUNDWOOD PAPERS
Rapid
Response
In the fast-paced world of commercial printing, swift response to customers'
needs is crucial. When Alden Press placed a "rush" order last spring for a
unique printing job, Bowater's assistance was immediate.
In less than 24 hours, the required production specifications were confirmed
and customer service personnel alerted the Carolina Mill's production and
transportation departments of the impending shipment.
A prompt scheduling adjustment resulted in the customer receiving their
order within 48 hours of inception, thus completing the printing job on time.
This was accomplished without disruption to our other customers.
When this need arose, Bowater was able to meet the challenge.
6
<PAGE>
Bowater is the nation's fifth largest producer of coated groundwood papers,
producing 456,000 tons of 36 pound to 55 pound gloss and matte finished coated
papers in 1994. As the U.S. economy improved during the year, so did the U.S.
demand for coated groundwood papers, increasing 3.7% over 1993.
Bowater's array of over 200 U.S. "coated" customers includes The New York
Times, Conde Nast, R.R. Donnelley, Houghton Mifflin and Prentice Hall. Also
included are magazines from Cosmopolitanto Golf Digest,and catalogs such as J.
Crew and L.L. Bean. These are but a few of the many valued publishers, printers
and other end-users of Bowater's coated groundwood papers.
Quality color printing requires paper that meets high standards for
brightness, smoothness, opacity, gloss, basis weight and runnability.
Independent testing confirms Bowater's ranking as one of the preferred suppliers
in the U.S. for both quality and service.
The dynamics of this market demand a personal approach to customer service,
with on-site visits and attention to details. Utilizing advanced information
technology and more than 30 years of production experience, our employees are
able to fill orders on a timely basis and in accordance with customer
specifications. Tightening market conditions in 1994 required company
representatives to work closely with customers to optimize production and
delivery schedules so as to minimize adverse effects on their printing
operations.
Attention to our customers' needs partially explains our success. Customer
service is the responsibility of all departments within Bowater and is handled
by well-trained and dedicated personnel. These factors, together with quality
papers, go a long way to assure customer satisfaction.
U.S. magazine
advertising
paging
increased 5.3%
in 1994
compared
to 1993
SOURCE: PUBLISHERS INFORMATION BUREAU
Rebecca B. Donivan
Customer Service Representative,
Coated Groundwood Papers
7
<PAGE>
DIRECTORY PAPERS
Reliability
Located in Maine, Bowater's Great Northern Paper is accustomed to harsh
weather, but the winter of 1994 repeatedly tested the company's ability to
deliver product on time.
All was on schedule when five railcars, carrying nearly 300 tons of directory
paper, routinely left the mill in late January en route to R.R. Donnelley in
Illinois via Quebec. Delivery was slated for February 4. Unfortunately, a major
snowstorm in Montreal soon made tracks impassable. The customer was notified
immediately of a possible late arrival, and printing schedules were stretched
to their maximum.
By February 3, it became apparent the delivery date was in jeopardy. Only
one alternative remained - to remake the entire order and ship by truck. While
more expensive, it was ultimately faster and the most reliable approach.
The mill reproduced the order within 24 hours and delivered the paper to
Donnelley on February 6, just hours before press time.
Bowater realizes its customers must also meet demanding schedules. "Neither
rain, nor sleet, nor snow" will deter us from helping them do so.
8
<PAGE>
Yellow page
advertising revenues
rose an
estimated 3.2%
in 1994
compared
to 1993
SOURCE: R. J. COEN/MCCANN-ERICKSON
Great Northern Paper Division (GNP) is a major supplier of directory paper.
Today's directory paper market, particularly the mature North American
arena, is characterized by high levels of competition, brought on by a
relatively small number of customers matched against ample capacity.
Opportunities remain greatest in export markets, due to higher population growth
rates in developing countries and movement toward free market economies.
Order scheduling for directory is different than that for Bowater's other
grades. Rather than working from a forecast of annual contracted tonnage or
filling spot requests, directory paper is generally ordered twice each year,
under contract terms ranging from two to seven years. Customer needs dictate our
production schedule, necessitating close communications to determine tonnage and
delivery dates. Depending on prevailing market conditions, semiannual orders may
require modification on a moment's notice.
Bowater's 15 major U.S. directory paper customers are primarily telephone
companies and include such regional giants as SBC Communications Inc.
(Southwestern Bell), BellSouth and Bell Atlantic. We also service 20 foreign
clients, including Nippon Telephone and Telegraph, Carvajal S.A. of Colombia and
Australia Telecom. Niche markets include printers of airline guides and auto
parts catalogs as well as compact, easily transportable directories for cellular
phone users.
The directory market is changing. There has been a shift from yellow pages
to white, to allow four-color printing of "knock-out" ads consisting of white
boxes with yellow backgrounds, thus producing bolder, cleaner, eye-catching
presentations. A movement from standard 22.5 lb. paper to lighter basis weights
is also evident. Bowater is now supplying a majority of white directory at 20
lb., for printing of the alpha pages. However, we are increasingly accommodating
demands for 18 lb. stock due to expanding directory page counts.
Requests for recycled content are also on the upswing. In 1994, Bowater
produced directory paper that met or exceeded customer needs for 20 percent
recycled content. We will manufacture approximately 200,000 tons of directory
paper with a minimum of 25 percent recycled fiber content in 1995.
Heated competition has resulted in heightened emphasis on product quality,
as many customers insist their suppliers meet ISO 9000 international quality
standards. GNP recently started the ISO certification process.
Customers also issue "report cards," which grade technical service, stock
bright ness and opacity. Bowater is ranked first in a clear majority of cases.
Overall, we strive to make our customers' jobs easier. This may be as
simple as providing legible order acknowledgments or as complex as implementing
electronic access to our production and delivery systems. Across the entire
spectrum of service offerings, we believe our customers and Bowater are
profiting from the experience.
GG Galarneau
Customer Service Representative,
Directory Papers
9
<PAGE>
MARKET PULP
Commitment
When Penntech Papers called a Bowater representative at home on Easter
Sunday, it was all in a day's work. The customer had only a few bales of pulp
left and was facing the prospect of taking a machine down if it didn't procure
supply within 24 hours. The shortage was the result of another supplier's
failure to deliver.
Bowater's service personnel immediately contacted a mill order planner at
home, who in turn contacted transportation and the loading dock. Shipments began
that very evening, with deliveries on Monday and Tuesday.
Penntech has not forgotten the service provided that early Sunday morning.
Neither have we, simply because it is our business and commitment.
MONOPOLY,(R) THE GAMEBOARD AND
CERTAIN OF ITS ELEMENTS AND PLAYING
PIECES ARE REGISTERED TRADEMARKS
OF TONKA CORPORATION. USED WITH
PERMISSION. (c)1935, 1946, 1961,
1992, 1994 PARKER BROTHERS,
A DIVISION OF TONKA CORPORATION.
ALL RIGHTS RESERVED.
10
<PAGE>
Average prices
realized by Bowater
at the end
of 1994
were double those
at the
end of 1993
There was a very significant improvement in the pulp market in 1994.
Stronger world economic growth fueled increased paper usage and, in turn, the
demand for market pulp, a primary raw material used in paper production.
Improved demand, as well as supply shortages caused by capacity limitations and
disruptions in the availability of wood in certain areas of the world, led to
significant increases in prices in 1994. Demand in the U.S., Europe and the
Pacific rim countries was particularly strong.
Although Bowater sold a major portion of its pulp in overseas markets in
1994, we began selling more domestically as markets tightened in order to
provide better service to our nearly three dozen key U.S. customers, including
manufacturers such as Chesapeake, Deerfield, Penntech and Simpson. This shift in
market emphasis helped ensure on-time delivery of our contracted domestic
tonnage.
Most U.S. accounts place orders on a monthly basis. In this environment,
providing a daily flow of production, shipping and quality testing information
to our customers is critical. Producing pulp that meets or exceeds the
strictest international criteria for brightness, cleanliness and consistency
offers a distinct edge.
Consistent attention to customer specifications and quality documentation
are the "extras" that Bowater's pulp customers have come to appreciate in a
world of fleeting loyalties. They are essential ingredients in a recipe that has
permitted us to retain a following stronger than ever.
Sandy N. Bolding
Customer Service Representative,
Market Pulp
11
<PAGE>
COMMUNICATION PAPERS
Dedication
When NationsBank, the country's third largest commercial banking operation,
found itself critically short of EB-20(R) computer forms at its Nashville,
Tennessee, data processing center on a New Year's Day, they knew a call to
their Bowater Computer Forms (BCF) account representative would result in
prompt assistance.
Under emergency service procedures, the BCF representative contacted a plant
manager in Scottsburg, Indiana. Though officially closed for the holiday
weekend, the manager opened the facility and filled the order. Since routine
trucking lines were unavailable, BCF's plant Quality Control Technician
volunteered to make the 500-mile round trip delivery.
Total time from NationsBank's initial call to on-site arrival of EB-20(R)
was less than 24 hours.
From the first day of the year to the last, dedication to customer
requirements is a given. The approach gives a whole new look to life, as well as
market success.
12
<PAGE>
Bowater Communication Papers (BCP) is one of the U.S.'s largest suppliers of
stock computer forms. While selling directly to major corporate, government and
institutional users, it reaches smaller businesses as well as individual
consumers through resellers and mass merchandising outlets. The market for stock
computer forms is very competitive.
BCP differentiates itself through innovative service and quality proprietary
products, sold via an advanced two-channel distribution system.
Bowater Computer Forms (BCF) specializes in direct sales to approximately
1,000 large volume, diverse end users. Star Forms deals with nearly 5,000
resellers of stock computer forms, servicing every U.S. market. Their customers
include business forms distributors, paper merchants, office product dealers and
computer supply retailers throughout the U.S. Recognized names such as JCPenney
Company, OfficeMax and Quill Corporation are included among this clientele.
Servicing thousands of end users, whether directly or through distributors,
requires reliable delivery of product. BCP's nationwide network of eight
converting plants and 30 distribution centers ensures that customer orders will
be filled and delivered on time and to precise specifications.
Superior quality is a necessity as well. BCP's computer forms consistently
meet the exacting performance criteria set for high-speed impact and nonimpact
laser printers. The group's Total Quality Management initiative continues to
produce process improvements in products and service to reach the highest levels
of customer satisfaction. This starts with orders placed through BCP's customer
service representatives who, working with an on-line system, can instantly
confirm an order or respond to inquiries. Delivery to major metropolitan areas
is usually accomplishedwithin one day of order placement. Handling over200,000
orders annually, BCP's record for accurate, on-time shipment and delivery is 98
percent and improving.
BCP has responded to the market's demand for environmentally friendly
products. EB-20(R) and EW-20,(R) developed jointly with Bowater's Calhoun Mill,
contain 20 percent post-consumer waste, thus qualifying them for use under
federal procurement guidelines.
Further advances in customer service are planned, including refinement of
already implemented Electronic Data Interchange programs. Eventually, the entire
order process, including scheduling, invoicing and payment, will be completed
via direct connection of customers' computers to Bowater's. Benefits to both
include lower costs, faster service and increased control.
Continuous forms and service go hand in hand. Today, they are a clearly
recognized part of BCP's stock in trade.
Tight
cost controls
produced
a 4.5% decrease
in unit costs
in 1994
compared
to 1993
Pat A. Barth
Sales Service Manager,
Communication Papers
13
<PAGE>
WOODLANDS
Quality
Assurance
Fresh, uniform fiber is essential to the efficient manufacture of quality
paper. Fiber arriving at Bowater's South Carolina and Tennessee mills is
generally just a few days old. Although harsher weather at our Maine and Nova
Scotia mills necessitates larger inventories, wood quality receives constant
attention.
Research after a pulping process change at our Nova Scotia mill indicated
the potential for significant savings. A quality team developed new wood
specifications, wood aging identification methodology and a procurement
implementation plan. Hundreds of private woodlot owners, timber cutters and
contract haulers were educated in the new standards. The result - improved paper
quality and annual chemical savings in excess of $800,000.
Providing our customers with cost-effective quality products and services
starts in our woodlands - an area where our expertise is not only natural, but
certain.
Approximately 48 percent of Bowater's total wood requirements are presently
provided by 3.7 million acres of owned and leased timberlands in Maine, the
southeastern U.S. and Nova Scotia. The balance is supplied by independent
loggers and wood dealers from mostly private lands. The company's timberland
holdings offer a welcome hedge against intermittent fiber shortages prompted by
various restrictions on growth and supply.
Bowater's Woodlands people are responsible for managing all aspects of
forestry operations. After satisfying internal needs, Woodlands sells logs to
numerous private lumber companies, which often resell the residual products to
Bowater in the form of chips, bark and sawdust.
During the past year, increased production of paper and lumber as well as
recent regulatory restrictions on cutting from public lands has increased the
demand for fiber from private lands. As a result, favorable prices for lumber,
stumpage and timberlands have been important contributors to Bowater's financial
position.
Tomorrow's wood fiber needs are just as critical as those of today.
Development efforts at Bowater's two research facilities have resulted in trees
that grow taller, faster and straighter while being more resistant to disease.
Forests comprised of these improved trees will grow up to 35 percent more wood
per acre than unimproved plantations. Each year Bowater's tree orchards produce
seed for nearly 30 million superior seedlings, which are used for replanting
company landand donation to private landowners.
Maintaining accurate inventory of extensive tracts of land is essential for
providing an efficient flow of raw materials. Tech nologically advanced
computer mapping systems enable our foresters to maintain current data on
harvesting, replanting, thin ning and species growth rates for each geographic
sector. The data base is updated regularly by aerial photographs to record
effects of forest fires, insect damage and other natural forces.
Every product Bowater produces begins its life cycle as a tree. The
company's roots in forest management run deep. Woodlands' use of scientific
research and modern silvicultural practices guarantees availability of this
renewable natural resource for use by
future generations.
Three
sawmills
produce nearly
200 million
board feet
of construction
grade lumber
annually
George W. Flanders
Vice President and
Woodlands Manager,
Carolina Mill
14
<PAGE>
ENVIRONMENTAL COMMITMENT
Protection of our environment has been a hallmark of Bowater's operating
philosophy since our first paper mill was founded in Calhoun, Tennessee, in
1954. During the past 20 years, Bowater has spent in excess of $450 million on
capital projects and processes designed to clean our air and water, sustain
vibrant and healthy forests and alleviate the burden of solid waste disposal.
A partial list of environmental projects undertaken in 1994 includes the
following:
(Photo appears with the caption as follows.)
CAROLINA TIRE FUEL
Carolina Mill
(Bullet) After intense environmental studies, the South Carolina Department
of Health and Environmental Control granted permission for the mill to burn 1.5
tons per hour of old tires to generate electricity for the plant, thus removing
approximately 1.3 million tires per year from the state's annual waste stream
of 3.8 million. Mill use of fossil fuel is consequently reduced.
(Bullet) In its first full year of operation, a new $4.5 million bleach
plant scrubber has reduced chlorine and chlorine dioxide air emissions by
approximately 290,000 pounds, or 82 percent.
(Bullet) A novel program designed to reclaim a portion of "fly ash,"
generated by the combustion of wood and fossil fuels, is now paying
environmental and financial dividends. Previously, this ash was captured by air
pollution control units and sent to on-site sludge ponds. The mill now reclaims
the ash and sells it to a third party for use as a potting soil additive.
(Photo appears with the caption as follows.)
NORTH CHICKAMAUGA
Calhoun Mill
(Bullet) The North Chickamauga tract, comprising 1,100 acres of
breathtaking overlooks, scenic trails and waterfalls, was set aside for public
use as part of the company's "Pocket Wilderness" program. Nine parcels of
company land possessing rare natural beauty, historical significance or
wilderness characteristics have now been reserved for public use in Tennessee,
North Carolina and Alabama.
(Bullet) The mill's recycling facility consumed nearly 200,000 tons of old
newspapers, magazines and telephone directories. A partnership was formed with
Orange Grove Center, Inc., a community-based handicapped rehabilitation center
that operates Chattanooga, Tennessee's, waste collection programs, to supply
old paper to the mill.
(Bullet) A new $127.5 million boiler was commissioned. This boiler not only
meets federal and state air standards, but also reduces odor from the
manufacturing process.
(Bullet) The burning of sludge for energy began, further lessening
dependence on fossil fuel and reducing the amount of material sent to
landfills.
(Photo appears with the caption as follows.)
RIVER POND
Great Northern Paper
(Bullet) In its first full year of operation, a new $59.4 million recycling
facility reclaimed approximately 150,000 tons of old newspapers, magazines and
directories to produce 300 tons per day of recycled fiber for use in paper-
making operations.
(Bullet) At River Pond, a 230 acre "outdoor classroom and hiking trail" was
dedicated for the enjoyment and education of the general public. A 5.8 mile
trail passes through harvested, unharvested and recently replanted woodlands.
The project demonstrates compatability of the many different uses of a working
forest.
(Bullet) GNP received a pollution prevention award from Maine's Department
of Environmental Protection (DEP) for its $14 million program to replace
electrical equipment containing PCBs with non-PCB units.
(Bullet) Following extensive testing, Maine's DEP approved the use of
sludge from the recycling facility for use as a compost agent.
(Photo appears with the caption as follows.)
PANUKE LAKE
Mersey Mill
(Bullet) Construction began this year on a new $21 million waste-water
treatment plant, which will enable the mill to meet the effluent standards of
Canada's Fisheries Act. The project will result in substantial improvements in
levels of suspended solids and biological oxygen demand in the mill effluent.
The plant is scheduled to be completed in 1995.
(Bullet) A new conservation/reuse program was implemented to reduce water
usage by several million gallons daily.
(Bullet) In July 1994, the mill was honored by the Canadian Council on
Ecological Areas for their role in the preservation of the Panuke Lake Nature
Reserve. Included in this stand of timberlands are some of the finest examples
of old growth Acadian forest in Nova Scotia. These lands have been opened to
the scientific community for research into old growth ecosystems.
PHOTO CREDITS
CAROLINA TIRE FUEL PHOTO: THE HERALD, ROCK HILL, SC
NORTH CHICKAMAUGA PHOTO: STEPHEN GREENFIELD
15
<PAGE>
FINANCIAL AND OPERATING RECORD
<TABLE>
<CAPTION>
(Dollars in millions, except per-share amounts) 1994 1993 1992
<S> <C> <C> <C>
Income Statement Data
Net sales $ 1,359.0 $1,353.7 $ 1,360.8
Operating income (loss) 42.1 (63.3) (74.1)
Income (loss) from continuing operations before cumulative
effect of changes in accounting principles and
extraordinary charge 1,2 (4.8) (64.5) (92.9)
Net income (loss) (4.8) (64.5) (82.0)
Fully diluted earnings (loss) per common share (.59) (1.84) (2.34)
Dividends declared per common share 3 .60 .60 1.20
Product Sales Information
Newsprint $ 604.0 $ 607.6 $ 649.6
Directory and uncoated specialties 165.9 178.5 124.7
Coated paper 307.0 316.2 296.1
Pulp 130.6 98.9 136.4
Lumber, stumpage and other products 87.9 103.1 79.5
Communication papers 190.7 191.8 207.5
Distribution costs (127.1) (142.4) (133.0)
$ 1,359.0 $1,353.7 $ 1,360.8
Financial Position 4
Timber and timberlands $ 426.4 $ 422.5 $ 432.6
Fixed assets, net 1,785.0 1,750.7 1,821.7
Total assets 2,851.4 2,726.2 2,881.6
Total debt 1,118.5 1,120.2 1,134.3
Total capitalization 5 2,222.5 2,071.8 2,186.4
Additional Information
Percent return on average common equity (2.7)% (8.6)% (9.6)%
Income from continuing operations as percent of net sales (0.4)% (4.8)% (6.8)%
Total debt as percent of total capitalization 50.3% 54.1% 51.9%
Total debt and redeemable preferred stock as percent
of shareholders' equity 134.4% 163.1% 147.7%
Effective tax rate 70.0% 32.0% 37.0%
Cash flow from (used for) operations $ 80.9 $ (30.6) $ 109.5
Capital expenditures, including timberlands $ 216.1 $ 121.8 $ 139.5
Shareholders' equity per common share $ 24.18 $ 20.10 $ 22.55
Common stock price range $20-1/2 - 29-1/2 $18 - 24-5/8 $17-5/8 - 27-1/4
Sales (thousands of short tons)
Newsprint 1,460 1,437 1,604
Directory and uncoated specialties 265 278 191
Coated paper 453 454 447
Pulp 300 312 318
Registered shareholders 6,600 7,300 8,200
Employees 4 6,000 6,600 6,900
</TABLE>
1. In 1984, the company sold its subsidiary, Bowater Home Center, Inc.
2. In 1990, the company redeemed all of 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 1984 is not considered meaningful due to
the separation of the company from its former parent in 1984. Dividends are
declared quarterly.
4. 1991 and subsequent year amounts include GNP, acquired December 31, 1991.
5. Total capitalization includes total debt, minority interests in
subsidiaries, redeemable preferred stock and shareholders' equity.
16 BOWATER INCORPORATED
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987 1986 1985 1984
<S> <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
103.7 174.9 280.5 334.1 218.5 124.0 136.0 137.1
45.6 87.4 144.6 164.3 81.1 49.4 67.5 62.5
45.6 78.4 144.6 164.3 81.1 49.4 67.5 72.1
1.15 2.05 3.86 4.37 2.12 1.49 2.21 2.57
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
- - - - - - - -
259.9 279.0 279.2 269.7 203.7 126.4 103.7 95.6
138.0 170.7 182.6 153.2 125.1 98.3 78.8 98.2
34.3 32.6 32.7 37.2 37.7 36.0 33.1 39.3
254.9 280.9 310.2 279.0 257.4 102.9 76.2 56.4
(98.1) (91.3) (89.0) (79.6) (76.5) (73.0) (62.2) (57.8)
$ 1,190.4 $ 1,289.1 $ 1,361.0 $ 1,330.8 $1,154.5 $ 846.7 $ 841.8 $ 829.9
$ 414.1 $ 297.9 $ 285.7 $ 273.5 $ 256.6 $ 243.6 $ 231.2 $ 216.0
1,858.8 1,604.7 1,529.5 1,223.8 1,079.8 1,021.6 843.1 552.8
2,780.0 2,297.9 2,284.2 1,880.5 1,699.8 1,600.7 1,315.0 1,032.7
864.5 498.2 532.4 293.2 367.6 631.8 345.3 273.6
2,061.7 1,694.5 1,700.5 1,368.0 1,301.7 1,288.7 960.4 734.8
4.4% 7.9% 16.0% 20.7% 13.1% 10.2% 16.8% 20.2%
3.8% 6.8% 10.6% 12.4% 7.0% 5.8% 8.0% 7.5%
41.9% 29.4% 31.3% 21.4% 28.2% 49.0% 36.0% 37.2%
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%
$ 156.6 $ 238.4 $ 327.3 $ 324.3 $ 247.3 $ 123.7 $151.3 $ 171.5
$ 159.7 $ 214.1 $ 423.4 $ 214.3 $ 88.1 $ 308.5 $297.3 $ 176.7
$ 26.21 $ 26.24 $ 25.37 $ 23.07 $ 19.60 $ 15.33 $14.45 $ 12.97
$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
- - - - - - - -
346 352 343 337 316 188 128 129
317 300 261 250 253 260 242 239
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
</TABLE>
1994 ANNUAL REPORT 17
<PAGE>
BUSINESS AND FINANCIAL REVIEW
Results of Operations
Bowater Incorporated began emerging in 1994 from a three-year down-turn in a
business cycle characterized by weak worldwide demand and substantial
overcapacity for its primary pulp and paper products. Operating income of $42.1
million was achieved in 1994 after consecutive operating losses of $63.3 million
and $74.1 million in 1993 and 1992, respectively. The net loss for 1994 was $4.8
million, or $.59 per share, a substantial improvement over 1993's net loss of
$64.5 million, or $1.84 per share, and 1992's loss before accounting changes of
$92.9 million, or $2.64 per share.
Included in 1994's net income is a gain of $20.8 million, or $.57 per share,
on sales of 221,000 acres of nonstrategic timberlands.
Net sales of $1.36 billion were approximately equal to those of the two
prior years.
Early signs of sustained improvement in the U.S. economy were noted late in
1993, followed by gains in major European economies by the second and third
quarters of 1994. As a result, consumption of most paper products rose
throughout 1994.
Benefits were realized throughout 1994 from companywide cost reduction
programs initiated in 1993. On a per-ton basis, operating costs for the
company's major products either declined from 1993 levels or were held to
increases below the general inflation rate.
Prior to the turnaround in business activity begun in 1994, the company
labored through a punishing cyclical down turn. 1993 marked the third
successive yearof recessionary conditions for the industry and the second year
of losses for Bowater. Consumer confidence, battered by employment concerns,
remained low throughout the 1991-1993 period, thus dampening print advertising
expenditures. Consumption growth for the company's products faltered, selling
prices declined and margins fell. Added to this was substantial excess industry
capacity in key grades brought on-line between 1989 and 1991.
In response, Bowater's management instituted numerous efficiency and cost
reduction programs in 1993. The relocation of the corporate staff from
Connecticut to Greenville, South Carolina, was completed; the quarterly dividend
was reduced from $.30 to $.15; certain obsolete manufacturing facilities at
Great Northern Paper (GNP) were slated for closure; and approximately 600
positions were eliminated by the end of 1994.
A pretax charge of $20.0 million, or $.34 per share after tax, was recorded
in 1993, covering the restructuring at GNP and the company-wide personnel
reduction. An additional tax charge of $6.0 million, or $.16 per share, was
incurred, reflecting an increase in federal tax rates.
Also in 1993, $73.3 million in cash was raised through the sale of
approximately 70,000 acres of nonstrategic timberlands. This equated to a gain
of $32.6 million after tax, or $.90 per share.
In 1992, consumer hesitancy, prompted by worldwide recession, caused
advertising spending in newspapers, magazines and promotional inserts to fall
from the high levels of the late 1980s. When combined with a glut of new
industry capacity, the result was a continuation of the decline in selling
prices for Bowater's key products which started in 1991.
Strategic Focus
In 1995, Bowater will concentrate on debt reduction, continued cost
reduction and asset monetization, decentralization and customer focus.
In order to strengthen the balance sheet and better position the company to
invest in future growth opportunities, the company under-took a public tender
offer to prepay up to $200 million of its indebtedness. Any further debt
reduction in 1995 will depend on the strength of the company's cash flow.
The company has decentralized its operations into four divisions: Newsprint,
Coated Papers and Pulp, Great Northern Paper (directory and specialty grades)
and Bowater Communication Papers. Each has a management team responsible for the
profitability of its products and assets and clearly defined performance goals.
This change will enhance customer focus and bring senior management closer to
manufacturing and marketing activities. Emphasis on customer focus will include
ongoing ISO 9000 international quality certifications.
We have started a companywide cost reduction program utilizing a team-
oriented, participatory approach to improve our operating efficiencies.
Product Line Information
During the first quarter of 1994, the company modified its segment
information by including its Communication Papers operation with the Pulp and
Paper and Related Products segment. This resulted from the company's strategy to
manufacture a substantial portion of the paper required in the communication
papers converting business. All company operations are now grouped in a single
segment, however, market and operating trends are discussed by major product.
Newsprint
Newsprint is Bowater's single largest product. With annual sales of
approximately 1.5 million tons, the company is the largest producer of newsprint
in the U.S. and the second largest in North America.
Operating
Income (Loss)
$ MILLIONS
(Bar graph appears with the following plot points.)
90 174.9
91 103.7
92 (74.1)
93 (63.3)
94 42.1
18 BOWATER INCORPORATED
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
The newsprint industry has exited a prolonged period of poor business
conditions. Between 1988 and 1993, 4.5 million metric tons of newsprint were
added to global supply. This coincided with weak economic activity in many of
the world's most important markets, including the U.S.
By 1992, prices realized by the company were down 16 percent from the prior
year and 25 percent from their 1988 peak. Domestic consumption began to improve
during the second half of 1992 and ended the year with a 2.1 percent gain over
1991. A modest price increase went into effect in August 1992.
The company's December 1991 acquisition of GNP yielded additional available
production, causing 1992 company newsprint tonnage sales to rise 31 percent over
the prior year.
In early 1993, newsprint consumption increased in concert with the
strengthening U.S. economy, and publishers began stockpiling inventories in
anticipation of labor unrest in British Columbia. The economic recovery was
short-lived, and new Canadian labor agreements were signed, thereby eliminating
the possibility of a strike in 1993. By midyear, advertising declined along with
consumer confidence, and consumption year over year was essentially flat.
While external economic forces depressed markets for its products, Bowater
concentrated on strategic areas within its control. In addition to cost
reduction programs previously mentioned, the company's annual newsprint capacity
was decreased by 16 percent, or 264,500 short tons. Of this total, 86,500 tons
were permanently removed, and the balance shifted to production of higher margin
grades. Other North American suppliers cut back production as well, focus ing
on older, inefficient machines. Between 1990 and 1994, approximately 1.8
million metric tons of North American newsprint capacity was either converted
to other grades or permanently shut down.
In response to marketplace demands, Bowater also expanded its newsprint recy
cling capabilities. In September 1993, the company's second recycling plant,
located at GNP's East Millinocket, Maine, site, was successfully started. It
reached full oper ation in 1994, using nearly 150,000 tons of old newspapers,
magazines and tele phone directories during the year. In this plant and at the
recycling plant opened in 1991 at its Calhoun Mill, Bowater now processes
approximately 350,000 tons per year of waste paper into recycled newsprint,
directory and communication
papers.
Bowter Incorporated
Newsprint Sales
$ MILLIONS
(Bar graph appears with the following plot points.)
90 617.2
91 601.4
92 649.6
93 607.6
94 604.0
A 4.0 percent increase in U.S. Gross Domestic Product in 1994 sparked a rise
in consumer spending, which in turn drove up advertising expenditures.
Consumption by U.S. daily newspapers thus advanced each succeeding quarter
compared to the prior year and ended the full year with a 4.9 percent gain over
1993. With the stage already set by North American manufacturers' closure of
inefficient capacity and the increased demand in foreign markets, newsprint
supply tightened considerably.
Based on these factors, the company implemented three price increases in
1994, and as a result, average prices for 1994's final quarter were 10.3 percent
higher than 1993's final quarter. Bowater has recently announced a price
increase for May 1995.
Coated Groundwood Papers
A three-year fall in selling prices, brought on by weak demand and a glut of
supply, came to a halt in 1992. Consumption by magazines, catalogs and coupon
printers during the second half of that year firmed significantly and carried
over into 1993. The company implemented a midyear price increase in 1993.
Shortly thereafter, increased European tonnage entered the U.S., driven by
the devaluation of Scandinavian currencies and European over-capacity. Imports
of coated groundwood into the U.S. reached 523,000 short tons in 1993, a 73
percent increase over 1992. Resulting market pressures caused selling prices to
fall back once again.
Highly competitive conditions con tinued into the second quarter of 1994.
At that point, the U.S. economy improved as did magazine ad paging, a key
factor in coated paper consumption, and advance orders from catalog publishers
signaled expectations of a stronger second half. In response, the company
announced a midyear price increase for noncontract business.
During the second half of 1994, the coated paper market tightened appre
ciably. European economic growth started to improve, resulting in a leveling of
exports to the U.S. In addition, domestic advertising expenditures were
strong throughout the year, causing a rise in magazine paging. Catalog demand
was also robust, in anticipation of a good holiday season. As a consequence,
the company announced a price increase effective October 1, 1994. Overall, U.S.
demand for coated groundwood papers jumped 3.7 percent in 1994 compared to 1993
and by the fourth quarter of 1994, average prices realized by Bowater were 3.5
percent higher than in the comparable 1993 period.
Bowater Incorporated
Coated Paper Sales
$ MILLIONS
(Bar graph appears with the following plot points.)
90 279.0
91 259.9
92 296.1
93 316.2
94 307.0
1994 ANNUAL REPORT 19
<PAGE>
BUSINESS AND FINANCIAL REVIEW
(CONTINUED)
To date, the only new capacity addition announced in North America,
according to the Canadian Pulp and Paper Association and American Forest & Paper
Association, is the phased conversion of a Canadian newsprint machine, scheduled
to begin production in late 1995. Favorable business conditions in Europe,
combined with higher pulp costs for nonintegrated producers, should serve to
minimize exports to the U.S. markets. Bowater has announced additional price
increases for 1995.
Directory and Uncoated Groundwood Specialties
Directory paper is a relatively new product for Bowater, added to the
company's line with the December 1991 acquisition of GNP.
Bowater's tonnage sales of directory in 1994 and 1993 were substantially
higher than in 1992, due primarily to the shift of a portion of Bowater's
newsprint production to directory papers. During this period, however, margins
came under severe pressure as a number of customers substituted lower cost
newsprint for directory paper, and additional competition entered the market.
The company's average transaction prices realized in 1993 slid 4.2 percent below
1992 prices. Prices and margins realized by Bowater in 1994 were approximately
equal to those of 1993.
Uncoated groundwood specialty papers are also produced at GNP and used for
TV listings, advertising inserts and school supplies.
Selling prices for uncoated groundwood specialties declined in 1994 and
1993.
Market Pulp
Market pulp is a world-traded commodity, and in 1994 Bowater sold a
significant portion of its production in export markets. The operating results
from this product are determined by such factors as the general economic health
of major consuming countries, available supply and prevailing exchange rates
compared to the U.S. dollar.
This market tends to be more volatile than those for Bowater's other major
products, as evidenced by the dramatic shifts experienced during the last cycle.
Record high prices for market pulp were reached in 1989, just prior to the
beginning of worldwide recession and the introduction of significant new, low-
cost manufacturing capacity from non-traditional areas such as South America.
By 1992, average selling prices had fallen 39 percent from their peak, though
the company's pulp operations were still profitable.
Bowater Incorporated
Market Pulp Sales
$ Millions
(Bar graph appears with the following plot points.)
90 170.7
91 138.0
92 136.4
93 98.9
94 130.6
The low point in this cycle was reached in 1993. Weak European demand and
continuing excess supply put pressure on global selling prices. By the fourth
quarter, selling prices were at their lowest level in at least the last ten
years.
In late 1993, signs of a revival in the world pulp market became apparent.
Supplies had contracted, due to production cutbacks and wood shortages in
Scandinavia, Iberia and the Far East stemming from political and environmental
factors. Shutdowns of some high-cost production also served to lower industry
capacity.
During 1994, demand was aided by steady improvements in both U.S. and
European economies, as well as threats of labor disruptions in British Columbia.
Selling prices rose rapidly throughout 1994, and by year-end, average prices
were double those of December 1993. Further price increases have been
implemented during the first quarter of 1995.
Communication Papers
Bowater's Communication Papers Division 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 government users;
the other focusing on distributors and mass merchandisers. The market for
continuous stock computer forms is mature and gradually shrinking, particularly
in North America.
Intense competition and declining demand adversely affected operations in
1992 and 1993 as both price realizations and sales volume declined.
Although the market remained competitive in 1994, the operating performance
of Bowater's Communication Papers Division improved. Much of this rebound
reflected benefits realized from strict cost containment programs initiated in
1993. Higher selling prices, driven by the rapid rise in raw material costs,
also contributed to improved results in 1994. After declining through the first
half of the year, selling prices trended upward during the latter six months,
ending 1994 11.6 percent above those at December 1993.
Liquidity and Capital Resources
Cash from Operations
The company's operations generated $80.9 million in 1994, an increase of $111.5
million over the $30.6 million that operations used in 1993. This increase
arose primarily from an improvement in operating income.
Bowater Incorporated
Communication
Paper Sales
$ MILLIONS
(Bar graph appears with the following plot points.)
90 280.9
91 254.9
92 207.5
93 191.8
94 190.7
20 BOWATER INCORPORATED
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
The uses of cash in 1993 of $30.6 million compares to a cash generation in 1992
of $109.5 million. The reduction in 1993 operating cash flow resulted primarily
from the company's decision to discontinue the sale of receivables under an
asset securitization program. Although the company received an additional $18.0
million in tax refunds and realized lower operating losses of $10.8 million, it
paid significantly higher interest costs in 1993 compared to 1992.
Cash from operations in 1994 was insufficient to meet capital spending and
dividend requirements. The shortfall was supplemented with two preferred stock
offerings, which generated cash of $193.2 million, and nonstrategic asset sales
which contributed an additional $48.1 million. The company ended the year with
cash and marketable securities of $154.8 million. It anticipates the improvement
in business conditions experienced in 1994 will continue, and cash from
operations will exceed its capital spending and dividend requirements for 1995.
Capital Expenditures
The company operates in an extremely capital intensive industry, requiring
large investments of cash for productive capacity and maintenance. As the
business environment softened during the early 1990s, cash conservation measures
necessitated cutbacks in Bowater's capital program. In 1993 and 1992, capital
expenditures totaled $121.8 million and $139.5 million, respectively. The
largest single outlay during that two-year period was $59.4 million for the
recycling plant at the East Millinocket, Maine, mill.
Total capital outlays in 1994 were $216.1 million, including $104.0 million
for the completion of a new recovery boiler at the Calhoun, Tennessee, mill. The
balance of cash outlays during 1994 was mainly for normal maintenance to ensure
efficient operations at the company's facilities.
Strict compliance with cash conservation programs will remain in effect
through 1995. Bowater's capital expenditures will approximate $110.0 million
and will be concentrated on maintenance of machinery and equipment. The single
most significant outlay in 1995 will be approximately $15.0 million for
completion of a new $21.0 million effluent treatment facility at the Mersey
Mill. Bowater's capital outlays in 1995 are expected to be funded by internally
generated funds.
Capital Expenditures
Including Timberlands
$ MILLIONS
(Bar graph appears with the following plot points.)
90 214.1
91 159.7
92 139.5
93 121.8
94 216.1
Financings
Since the beginning of the economic downturn in 1990, the company's ratio of
debt to total capitalization has risen from 29.4 percent to its current 50.3
percent. The bulk of this increase reflects long-term financing put into place
in 1991 and 1992. Maturities on the company's major debt issues range from 1999
to 2022. Between 1995 and 1998, long-term debt maturities approximate only $1.6
million per year. However, the company will redeem the $75.0 million LIBOR
preferred stock issue at $25.0 million per year, commencing in 1996.
The December 1991 acquisition of GNP was financed by the issuance of $400.0
million of combined notes and debentures in late 1991. Borrowings in 1992
included a total of $250.0 million in notes and debentures, with a portion of
the proceeds used to repay $150.0 million in revolving credit obligations and
other short-term borrowings.
During 1992, the company also placed a total of $101.5 million in tax-exempt
financing through the Finance Authority of Maine and McMinn County, Tennessee,
to fund construction of the two recycling facilities.
In February 1994, the company completed the sale of 7% Series B Convertible
Preferred Stock and 8.40% Series C Cumulative Preferred Stock. Net proceeds of
$193.2 million were used to finance the recovery boiler and to cover costs
associated with the closure of obsolete facilities at the Millinocket, Maine,
site, companywide personnel reductions and general corporate purposes.
The company intends to use the cash and marketable securities on hand at the
end of 1994 and a portion of cash flow in 1995 to reduce debt. Towards this end,
the company in February 1995 undertook a public tender offer to prepay its
outstanding 8 1/2% Notes due 2001 having a face value of $200 million. As a
result, the company repurchased approximately $182.0 million and will incur an
after-tax charge of $6.1 million or $.15 per share in the first quarter of 1995.
The amount and timing of additional debt reductions in 1995 are subject to,
among other factors, the market conditions for the company's products and
alternative uses of the company's cash.
In addition to long-term financing, the company has two sources of short-
term liquidity: a $200 million Credit Agreement and $80 million available under
a receivables securitization program. The $200 million
Total Capitalization
and Total Debt
$ MILLIONS
90 91 92 93 94
Capitalization 1,695 2,062 2,186 2,072 2,223
Debt 498 865 1,134 1,120 1,119
21 BOWATER INCORPORATED
<PAGE>
BUSINESS AND FINANCIAL REVIEW
(CONTINUED)
Credit Agreement expires in December 1995, and the company expects to replace
it with a similar facility. The receivables securitization is an uncommitted
facility with no maturity and can be canceled at any time. There were no
borrowings outstanding under either facility at December 31, 1994, or December
31, 1993.
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 all its operations are currently in sub-
stantial compliance with all applicable environmental laws and regulations.
Recent Canadian federal regulations governing the discharge of pulp
and paper mill effluent require the installation of a wastewater treatment
facility at the Mersey Mill, estimated to cost $21.0 million. The regulations
were originally announced in 1993, with compliance mandated by the end of
that year. Like many other companies, the Mersey Mill could not meet such a
short deadline and received a transitional authorization extension until
December 31, 1995. Construction of the new effluent system began during
the second half of 1994, and the company believes all necessary equipment
will be operational by December 31, 1995.
Dioxins and other chlorinated organics have been found in trace amounts in
the effluents of U.S. 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 expected to occur during 1996, although this time frame is
uncertain due to EPA's stated intention to reopen the comment period for the
proposed regulations. The regulations, if adopted, would require compliance
over a three year period. If adopted as proposed, these new rules would
require capital expenditures at all 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 proposed
regulations, and the amount of required capital expenditures will depend
upon which of several alternative courses of action the company may
undertake consistent with final regulations. Given the uncertainty as
to the outcome of the final regulations, the company currently
estimates that these alternatives could require capital expenditures of
approximately $150 million to $250 million during the three year
compliance period. 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
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 capital expenditures to maintain compliance with
environmental regulations should require outlays of approximately $10 million
to $15 million per year for the foreseeable future.
Bowater has been identified as a potential responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended ("CERCLA" or "Superfund"), for the cleanup of contamination at
two Superfund sites. Based upon its percentage share in each proceeding,
the company believes 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 it will not be at a competitive
disadvantage in meeting future United States or Canadian standards.
Lawsuit Settlement
In October 1994, the company settled its lawsuit seeking declaratory
relief in its insurance coverage dispute with National Union Fire
Insurance Company ("National Union"). The dispute related to lawsuits
arising from vehicular accidents in December 1990 in fog on Highway I-75
in the general area of the company's Tennessee mill. In the settlement,
National Union conceded its obligation, as first excess insurer, to cover
$9.5 million of the company's $10.5 million settlement of the lawsuits in
January 1994. The remaining $1 million had already been covered by the
company's primary insurer. Neither the underlying lawsuits nor the insurance
coverage dispute have had a material adverse effect on the company's results
of operations, financial condition or liquidity.
22 BOWATER INCORPORATED
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
BOWATER INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
(In thousands, except per-share amounts)
Years Ended December 31, 1994 1993 1992
<S> <C> <C> <C>
Net sales $ 1,358,996 $1,353,684 $1,360,818
Cost of sales 1,072,492 1,182,125 1,197,343
Depreciation, amortization and cost of timber harvested 168,352 163,086 161,910
Gross profit 118,152 8,473 1,565
Selling and administrative expense 76,052 71,805 75,673
Operating income (loss) 42,100 (63,332) (74,108)
Other expense (income):
Interest income (8,255) (4,105) (1,702)
Interest expense 98,848 98,333 78,202
Gain on sale of timberlands (43,100) (52,220) -
Write-off of non-operating asset - - 12,251
Other, net 1,442 3,696 9,095
Loss before income taxes, minority
interests, and cumulative effect of changes
in accounting principles (6,835) (109,036) (171,954)
Provision for income tax expense (benefit) (4,783) (34,886) (63,621)
Minority interests in net income (loss) of subsidiaries 2,772 (9,651) (15,465)
Loss before cumulative effect of changes
in accounting principles (4,824) (64,499) (92,868)
Cumulative effect of changes in accounting
principles, net of income taxes of $12,930 - - 10,911
Net loss (4,824) (64,499) (81,957)
Dividends and accretion on preferred stock 16,925 2,393 2,554
Net loss available to common shareholders $(21,749) $(66,892) $(84,511)
Loss per common share:
Before cumulative effect of changes in accounting
principles $ (.59) $ (1.84) $ (2.64)
Cumulative effect of changes in accounting principles - - .30
Net loss $ (.59) $ (1.84) $ (2.34)
Average common shares outstanding 36,566 36,368 36,141
</TABLE>
See accompanying notes to consolidated financial statements.
1994 ANNUAL REPORT 23
<PAGE>
CONSOLIDATED BALANCE SHEET
BOWATER INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
(In thousands, except share amounts)
At December 31, 1994 1993
<S> <C> <C>
Assets
Current assets:
Cash $ 10,783 $ 16,258
Marketable securities, at cost which approximates
market 143,985 65,408
Accounts receivable, net 197,473 170,737
Inventories 151,097 149,431
Deferred income taxes 5,717 10,923
Other current assets 4,770 6,720
Total current assets 513,825 419,477
Timber and timberlands 426,354 422,521
Fixed assets, net 1,785,046 1,750,719
Intangible assets 54,721 57,208
Other assets 71,416 76,253
$2,851,362 $2,726,178
Liabilities and Capital
Current liabilities:
Current instalments of long-term debt $ 1,604 $ 1,796
Accounts payable and accrued liabilities 184,766 195,546
Income taxes payable 13,966 35,882
Dividends payable 10,276 6,079
Total current liabilities 210,612 239,303
Long-term debt, net of current instalments 1,116,887 1,118,403
Other long-term liabilities 157,936 144,802
Deferred income taxes 261,923 272,065
Minority interests in subsidiaries 142,087 144,749
Commitments and contingencies (See note 10)
Redeemable preferred stock: $1 par value. Issued, LIBOR
preferred stock, Series A, 1,500,000 shares (redemption value
$75,000) 74,492 74,368
Shareholders' equity:
Convertible preferred stock, $1 par value. Issued, 7%
(PRIDES) Series B, 1,223,404 shares 111,333 -
Cumulative preferred stock, $1 par value. Issued, 8.40%
Series C, 850,000 shares
(liquidation value $85,000) 81,892 -
Common stock, $1 par value. Authorized 100,000,000 shares;
issued 37,120,518 shares
and 36,913,422 shares at December 31, 1994 and 1993,
respectively 37,121 36,913
Additional paid-in capital 336,990 332,661
Retained earnings 344,852 388,663
Equity adjustment from foreign currency translation (3,410) (1,351)
Loan to ESOT (9,643) (11,245)
Treasury stock at cost, 422,282 shares at December 31,
1994, and 474,330 shares at December 31, 1993 (11,710) (13,153)
Total shareholders' equity 887,425 732,488
$2,851,362 $2,726,178
</TABLE>
See accompanying notes to consolidated financial statements.
24 BOWATER INCORPORATED
<PAGE>
CONSOLIDATED STATEMENT OF CAPITAL ACCOUNTS
BOWATER INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
Series B Series C Equity
LIBOR Convertible Cumulative Additional Adjustment-
Preferred Preferred Preferred Common Paid-in Retained Foreign Loan to Treasury
(In thousands, except per-share Stock Stock Stock Stock Capital Earnings Currency ESOT Stock
amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 LIBOR 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 LIBOR preferred
stock ($1.45 per share) - - - - - (2,175) - - -
Increase in stated value of
LIBOR preferred stock 109 - - - - (109) - - -
Reduction in loan to ESOT - - - - - - - 1,598 -
Foreign currency translation - - - - - - (1,817) - -
Common stock issued under
stock option plans - - - 6 129 - - - -
Treasury stock used for
employee benefit and
dividend reinvestment plans - - - - - (993) - - 4,216
Balance at December 31, 1993 74,368 - - 36,913 332,661 388,663 (1,351) (11,245) (13,153)
Net loss - - - - - (4,824) - - -
Dividends on common
stock ($.60 per share) - - - - - (22,062) - - -
Dividends on LIBOR preferred
stock ($1.93 per share) - - - - - (2,895) - - -
Dividends on Series B Preferred
Stock ($5.90 per share) - - - - - (7,222) - - -
Dividends on Series C Preferred
Stock ($7.86 per share) - - - - - (6,684) - - -
Increase in stated value
of LIBOR preferred stock 124 - - - - (124) - - -
Reduction in loan to ESOT - - - - - - - 1,602 -
Foreign currency translation - - - - - - (2,059) - -
Common stock issued under
stock option plans - - - 208 4,329 - - - -
Preferred stock issued, net of
issuance costs - 111,333 81,892 - - - - - -
Treasury stock used for
employee benefit and
dividend reinvestment plans - - - - - - - - 1,443
Balance at December 31, 1994 $74,492 $111,333 $81,892 $37,121 $336,990 $344,852 $ (3,410) $ (9,643) $ (11,710)
</TABLE>
See accompanying notes to consolidated financial statements.
1994 ANNUAL REPORT 25
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
BOWATER INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
(In thousands)
<S> <C> <C> <C>
Years Ended December 31, 1994 1993 1992
Cash flow from (used for) operating activities:
Operating income (loss) $ 42,100 $ (63,332) $ (74,108)
Depreciation, amortization and cost of timber
harvested 168,352 163,086 161,910
Changes in working capital:
Receivables (26,736) (66,265) 79,334
Inventories (1,666) 13,666 8,469
Accounts payable and accrued liabilities 4,458 (9,332) 7,332
Other working capital 7,158 8,256 (2,406)
Interest paid, net of capitalized interest (97,885) (97,768) (71,586)
Interest received 8,255 4,105 1,702
Income taxes refunded (paid) (22,521) 19,002 1,050
Other (611) (2,064) (2,221)
80,904 (30,646) 109,476
Cash flow from (used for) investing activities:
Cash invested in fixed assets, timber and
timberlands (216,052) (121,771) (139,499)
Disposition of fixed assets, timber and timberlands 48,081 78,708 1,714
Acquisition of Great Northern Paper, Inc. - - (16,522)
(167,971) (43,063) (154,307)
Cash flow from (used for) financing activities:
Cash dividends, including minority interests (34,900) (29,846) (46,323)
Proceeds from sale of Series B and C preferred
stock, net of issuance costs 193,225 - -
Long-term debt borrowings - - 345,340
Funds on deposit with trustee - 34,506 (34,506)
Long-term debt repayments (1,795) (14,152) (81,228)
Other 3,639 (1,075) (837)
160,169 (10,567) 182,446
Increase (decrease) in cash and marketable securities 73,102 (84,276) 137,615
Cash and marketable securities:
Beginning of year 81,666 165,942 28,327
End of year $ 154,768 $ 81,666 $ 165,942
</TABLE>
See accompanying notes to consolidated financial statements.
26 BOWATER INCORPORATED
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BOWATER INCORPORATED AND SUBSIDIARIES
1 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 average cost and last-in, first-out (LIFO) 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. The company assesses the recoverability of its intangible assets by
determining whether the amortization of the goodwill balance over its remaining
life can be recovered through undiscounted future operating cash flows of the
acquired operation.
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 shareholders' equity.
Pension Plans
The company has contributory and noncontributory 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 or when customers assume risk of ownership of products in transit.
Sales are shown net of distribution costs in the accompanying Consolidated
Statement of Operations.
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 dividend requirements of the
company's LIBOR, Series B 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. The shares of Series B preferred stock are common
stock equivalents. However, the effect on the 1994 loss per common share
calculation was antidilutive.
2 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 quarterly
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. As a result, the company
recorded pre-tax charges totaling approximately $20,000,000 in 1993. The charges
included approximately $6,000,000 for asset retirements and $14,000,000 for
employee termination costs, including severance costs and costs recognized under
SFAS No. 88, "Employers' Accounting for Settlement and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits" and SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." As of
December 31, 1994, substantially all of the employee termination costs had been
settled.
1994 ANNUAL REPORT 27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
In the first quarter of 1994, the company changed its classification of
certain selling and administrative expenses and allocation of certain costs due
to the consolidation of the corporate office with operations in Greenville,
South Carolina. These changes are reflected in the Consolidated Statement of
Operations for 1994. Prior year amounts have not been restated due to the
prospective nature of the change. The comparable amounts for the years 1993 and
1992 "Cost of Goods Sold" and "Selling and Administrative Expense" are
$1,170,386,000 and $83,544,000, and $1,183,854,000 and $89,162,000,
respectively.
3 Sales of Real Property
During 1994, the company sold 221,000 acres of nonstrategic timber lands,
primarily in Nova Scotia and Maine. Proceeds totaled $46,500,000, resulting in
a pre-tax gain of $43,100,000, or $.57 per share, after tax.
During 1993, the company sold 70,000 acres of nonstrategic real property
holdings located in Alabama, Georgia, Mississippi, Ohio and South Carolina.
Proceeds totaled $73,300,000, resulting in a pre-tax gain of $52,200,000, or
$.90 per share, after tax.
4 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. 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, borrowing costs and a commitment fee. During
the first quarter of 1993, the company discontinued selling receivables under
the program.
The total cost of the program in 1994, 1993 and 1992 was $185,000, $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.
5 Inventories
(In thousands) 1994 1993
At lower of cost or market:
Raw materials $ 37,597 $ 33,090
Work in process 3,333 2,697
Finished goods 38,971 41,070
Mill stores and other supplies 80,723 79,209
160,624 156,066
Excess of current cost
over inventory value (9,527) (6,635)
$151,097 $149,431
Inventories valued using the LIFO method comprised 37.5 and 36.8 percent,
respectively, of total inventories at December 31, 1994, and December 31, 1993.
6 Fixed Assets
Range of
Estimated
Useful Lives
(In thousands) 1994 1993 in Years
Land and
land improvements $ 32,417 $ 30,112 10-20
Buildings 289,847 287,029 20-40
Machinery
and equipment 2,607,737 2,448,559 10-30
Leasehold
improvements 3,821 4,945 10-20
Construction
in progress 27,264 30,950 -
2,961,086 2,801,595
Less accumulated
depreciation
and amortization 1,176,040 1,050,876
$1,785,046 $1,750,719
7 Accounts Payable and Accrued Liabilities
(In thousands) 1994 1993
Trade accounts payable $102,894 $102,727
Accrued interest 20,704 20,883
Property and franchise taxes payable 11,877 13,789
Accrued payroll and payroll taxes 26,211 22,743
Other 23,080 35,404
$184,766 $195,546
28 BOWATER INCORPORATED
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
8 Long-term Debt, Net of Current Instalments
<TABLE>
<CAPTION>
(In thousands) 1994 1993
<S> <C> <C>
Unsecured:
9% debentures, due 2009 $ 300,000 $ 300,000
8 1/2% notes due 2001 200,000 200,000
9 3/8 debentures due 2021, net
of unamortized discount of $1,350
in 1994 and $1,400 in 1993 198,650 198,600
8 1/4% notes due in 1999, net of
unamortized discount of $74 in
1994 and $89 in 1993 124,926 124,911
9 1/2% debentures due in 2012, net
of unamortized discount of $405
in 1994 and $428 in 1993 124,595 124,572
7 3/4% recycling facilities revenue
bonds, due 2022 62,000 62,000
7 4/10% recycling facilities revenue
bonds, due 2022 39,500 39,500
7 5/8% pollution control revenue
bonds due 2016, net of unamortized
discount of $140 in 1994 and $141
in 1993 29,860 29,859
Pollution control revenue bonds
due at various dates from 2001
to 2010 with interest at varying
rates from 6.85% to 7 5/8% 23,300 23,300
ESOP note, due 2000 8,043 9,645
Industrial revenue bonds, due at
various dates from 1999 to 2010,
with interest at varying rates from
7 1/8% to 8 1/2% 6,013 6,016
$1,116,887 $1,118,403
</TABLE>
Long-term debt maturities for the next five years are as follows:
(In thousands)
1995 $ 1,604
1996 $ 1,604
1997 $ 1,604
1998 $ 1,604
1999 $131,600
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 provided for a reduction in the credit line to $200,000,000 on March
31, 1994. No amounts were borrowed under the three-year revolving credit
facility during 1993 and 1994.
Subsequent to December 31, 1994, the company undertook a public tender offer
to prepay its outstanding 8 1/2% Notes due 2001, having a face value of
$200,000,000.
9 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, net
of current instalments, was approximately $1,100,000,000 and $1,270,000,000 at
December 31, 1994, and 1993, respectively.
10 Commitments and Contingencies
The company is involved in various litigation relating to contracts, com-
mercial 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.
11 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.
The company is authorized to issue 10,000,000 shares of Serial Preferred
Stock, $1 par value, of which the LIBOR Preferred Stock constitutes Series A.
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, 1994, totaled $15,000,000.
12 Convertible and Cumulative Preferred Stock
On February 8, 1994, the company completed two public offerings of
preferred stock. The company sold 4,893,616 depositary shares, priced at $23.50
per share, each 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, each 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 $193,200,000. The
1994 ANNUAL REPORT 29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
proceeds of the offerings were used by the company to fund: a new recovery
boiler at the Calhoun, Tennessee, mill; capital expenditures and other costs
associated with closure of certain obsolete facilities at the Millinocket,
Maine, mill; the costs associated with the companywide personnel reductions and
general corporate purposes.
13 Treasury Stock
Through December 31, 1994, the company purchased 1,403,050 shares of its
common stock at an aggregate purchase price of $40,134,000 and used 550,009
shares of such stock to pay employee benefits and 430,759 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, 1994.
14 Stock Option Plans
The company has three stock option plans - 1984, 1988 and 1992. The 1988
and 1992 Stock Incentive Plans authorize the grant of up to 2,000,000 and
3,000,000 shares, respectively, of the company's common stock in the form of
incentive stock options (ISOs), non-qualified stock options, stock appreciation
rights (SARs), performance stock and restricted stock awards. No further grants
may be made under the 1984 Stock Option Plan.
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 1985 and 1991 were exercisable at December 31,
1994. Options granted in 1992, 1993 and 1994 become exercisable over a period of
one to three 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:
<TABLE>
<CAPTION>
1994 1993
Number Option Number Option
of Shares Price of Shares Price
<S> <C> <C> <C> <C>
Outstanding 3,792,394 $ 16.50 3,462,544 $ 16.50
at beginning to $37.75 to $37.75
of year
Granted during 813,000 $ 22.88 387,000 $ 20.19
the year to $27.63 to $23.94
Exercised (207,100) $ 16.50 (6,250) $ 21.00
during to $28.88 to $22.69
the year
Cancelled (125,500) $ 21.00 (50,900) $ 21.00
during to $37.75 to $37.75
the year
Outstanding 4,272,794 $ 19.06 3,792,394 $ 16.50
at end to $37.75 to $37.75
of year
Exercisable at 3,119,544 $ 19.06 2,713,069 $ 16.50
end of year to $37.75 to $37.75
</TABLE>
15 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.
16 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.
17 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.
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 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.
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.
30 BOWATER INCORPORATED
<PAGE>
BOWATER INCORPORATED AND SUBSIDIARIES
The components of loss before income taxes, minority interests and
cumulative effect of changes in accounting principles consist of U.S. loss of
$(12,955,000), $(85,509,000) and $(129,816,000) and Canadian income (loss) of
$6,120,000, $(23,527,000) and $(42,138,000) in 1994, 1993 and 1992,
respectively.
The provision for income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
<S> <C> <C> <C>
Federal:
Current $ 240 $ (9,992) $ (14,416)
Deferred (3,993) (12,296) (26,516)
(3,753) (22,288) (40,932)
State:
Current - - 1,914
Deferred (588) (4,391) (8,140)
(588) (4,391) (6,226)
Canadian:
Current 365 310 536
Deferred (807) (8,517) (16,999)
(442) (8,207) (16,463)
Total:
Current 605 (9,682) (11,966)
Deferred (5,388) (25,204) (51,655)
$ (4,783) $ (34,886) $ (63,621)
</TABLE>
The components of Deferred income taxes at December 31, 1994, and 1993, in
the accompanying Consolidated Balance Sheet are as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
<S> <C> <C>
Inventories* $ (746) $ (1,037)
Timber and timberlands (62,936) (61,058)
Fixed assets (411,948) (406,915)
Other assets (19,867) (15,270)
Deferred tax liabilities (495,497) (484,280)
Accounts receivable* 269 330
Other current assets* 432 432
Current liabilities* 5,762 11,198
Other long-term liabilities 58,075 48,144
U.S. tax credit carryforwards 62,216 59,314
Canadian investment tax
credit carryforwards 27,441 29,706
Net operating loss carryforwards 88,816 75,754
Valuation allowance (3,720) (1,740)
Deferred tax assets 239,291 223,138
Net deferred tax liability $(256,206) $(261,142)
</TABLE>
*Included in Current assets in the accompanying Consolidated Balance Sheet.
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:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
U.S. federal statutory
income tax rate 35.0% 35.0% 34.0%
State income taxes,
net of federal
income tax benefit 5.6 2.6 2.7
Tax rate increase - (5.5) -
Canadian taxes 37.8 .6 1.2
Other, net (8.4) (.7) (.9)
Effective income tax rate 70.0% 32.0% 37.0%
</TABLE>
The large increase in the company's effective income tax rate in 1994 was
due to the capital gains rate applied to the sale of non-strategic timberlands
in Nova Scotia.
At December 31, 1994, $27,441,000 of Canadian investment credit
carryforwards, $62,216,000 of U.S. tax credit carryforwards and approximately
$203,110,000 of net operating loss carryforwards were available to reduce future
income taxes. The company believes that such deferred tax assets will be
ultimately realized, net of the existing valuation allowance at December 31,
1994. The net increase in the valuation allowance for the years ended December
31, 1994, and December 31, 1993, was $1,980,000 and $1,740,000, respectively.
The Canadian investment credit carryforwards expire at various dates between
1995 and 2004. The majority of the U.S. tax credit carryforwards have no
expiration. The net operating loss carryforwards expire at various dates between
1999 and 2009.
The cumulative amount of undistributed earnings of CNC, on which the company
has not provided deferred income taxes, was approximately $89,345,000 at
December 31, 1994. 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.
18 Interest Capitalized
Total interest incurred in the years 1994, 1993 and
1992 was $99,163,000, $100,517,000 and $79,661,000, respectively. In 1994, 1993
and 1992, $315,000, $2,184,000 and $1,459,000 of interest expense was
capitalized, respectively.
19 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 for 1994, 1993 and 1992
included the following components:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
<S> <C> <C> <C>
Service cost $13,743 $13,104 $11,164
Interest cost 29,631 28,112 26,968
Actual return
on plan assets (3,208) (46,000) (30,033)
Net amortization
and deferral (33,064) 7,690 (7,626)
Net pension
expense $ 7,102 $ 2,906 $ 473
</TABLE>
1994 ANNUAL REPORT 31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The following table sets forth the funded status of the Plans at
December 31, 1994:
<TABLE>
<CAPTION>
Plan Assets Plan Liabilities
Exceed Plan Exceed Plan
(In thousands) Liabilities Assets
<S> <C> <C>
Actuarial present value of
accumulated benefit obligation:
Vested $228,551 $45,461
Non-vested 7,176 19,037
235,727 64,498
Benefits attributable to future salaries 46,806 4,866
Projected benefit obligation 282,533 69,364
Plan assets at fair value 325,112 41,199
Excess (deficit) of plan assets over
projected benefit obligation 42,579 (28,165)
Unrecognized prior service cost 3,167 1,716
Unrecognized net loss 26,133 5,592
Unrecognized transition liability (asset) (23,265) 1,160
Excess accumulated benefit obligation
recognized as intangible asset - (5,139)
Prepaid pension cost (pension liability) $ 48,614 $(24,836)
</TABLE>
The following table sets forth the funded status of the plans at
December 31, 1993:
<TABLE>
<CAPTION>
Plan Assets Plan Liabilities
Exceed Plan Exceed Plan
(In thousands) Liabilities Assets
<S> <C> <C>
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 liability (asset) (26,881) 1,335
Excess accumulated benefit
obligation recognized as
intangible asset - (4,793)
Prepaid pension cost
(pension liability) $50,945 $(11,826)
</TABLE>
As of December 31, 1994, the company increased the Plans' discount rate
assumption used to determine the Plans' projected benefit obligation from 7.5
percent to 8.5 percent, which approximates more closely current interest rates
on high-quality long-term obligations. The assumed rates of compensation
increase and long-term rate of return on Plan assets remained at 5 percent and
10 percent, respectively. Plan assets consist principally of common stocks and
fixed income securities.
20 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.
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 $21,431,000 ($.59 per share).
The accumulated postretirement benefit obligation at December 31, 1994, and
December 31, 1993, was comprised of the following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
<S> <C> <C>
Retirees $17,011 $13,657
Fully eligible active plan participants 19,911 24,139
Other active plan participants 47,162 48,162
Unrecognized net (loss) gain 8,236 (3,845)
$92,320 $82,113
</TABLE>
Unlike the company's retirement plans, there are no assets dedicated to fund
retiree benefits. Net periodic cost for 1994, 1993 and 1992 included the
following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
<S> <C> <C> <C>
Service cost $2,832 $2,648 $2,138
Interest cost on
accumulated obligation 6,886 6,259 6,301
Net amortization 189 - -
$9,907 $8,907 $8,439
</TABLE>
As of December 31, 1994, the company increased the Plans' discount rate
assumption used to determine the Plans' accumulated post-retirement benefit
obligation from 7.5 percent to 8.5 percent, which approximates more closely
current interest rates on high-quality long-term obligations. The assumed rate
of compensation increase remained at 5 percent. During the next 10 years, the
Plans assume that the annual cost of postretirement benefits will increase at an
annual rate starting at 9 percent and decreasing to 5.5 percent. 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.
32 BOWATER INCORPORATED
<PAGE>
21 Timberland Leases and Operating Leases
The company controls timberlands under long-term leases expiring 2001 to
2059, for which aggregate lease payments were $862,000, $868,000 and $862,000
for 1994, 1993 and 1992, respectively. In addition, the company leases certain
office premises, manufacturing facilities and transportation equipment under
operating leases. Total rental expense for operating leases was $9,786,000,
$9,168,000, and $8,750,000 in 1994, 1993 and 1992, respectively.
At December 31, 1994, the future minimum rental payments under timberland
leases and operating leases are:
<TABLE>
<CAPTION>
Timberland Operating
Lease Leases,
(In thousands) Payments net
<S> <C> <C>
1995 $ 879 $ 8,268
1996 879 6,709
1997 879 5,092
1998 879 4,436
1999 878 3,565
Thereafter 25,476 14,138
$ 29,870 $ 42,208
</TABLE>
22 Segment and Geographic Information
In 1994, the company changed its method of presenting segment information.
For financial reporting purposes, the Communication Papers Division is now
classified within Pulp, Paper and Related Products, the company's single
operating segment. This change resulted from the company's decision to
integrate a portion of its papermaking capacity with the raw material needs of
its communication papers converting operation. Prior years' segment disclosure
has been reclassified to conform to this presentation.
Net sales and operating loss for the three years ended December 31, 1994,
and identifiable assets at the end of each of those years, classified by
geographic area, were as follows:
<TABLE>
<CAPTION>
(In thousands) United States Canada Consolidated
<S> <C> <C> <C>
1994
Net sales to
unaffiliated customers $1,251,000 $107,996 $1,358,996
Operating income $ 41,422 $ 678 $ 42,100
Identifiable assets $2,647,662 $203,700 $2,851,362
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
</TABLE>
23 Net Export Sales
The breakdown of total net export sales by geographic area was:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
<S> <C> <C> <C>
Europe $ 50,536 $ 60,944 $ 95,604
Latin America 45,748 55,929 45,214
Asia 102,697 114,964 82,959
Canada 13,372 19,401 13,933
Mexico 5,332 12,310 13,636
Other 4,084 6,631 19,865
Sub-total 221,769 270,179 271,211
Less: distribution costs (41,732) (59,162) (52,897)
Total net export sales $180,037 $211,017 $218,314
</TABLE>
24 Reconciliation of Net Loss to Cash Flow from Operations
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
<S> <C> <C> <C>
Net loss $ (4,824) $ (64,499) $ (81,957)
Changes in
accounting principles - - (10,911)
Depreciation, amorti-
zation and cost of
timber harvested 168,352 163,086 161,910
Deferred income taxes (5,388) (25,204) (51,655)
Minority interests 2,772 (9,651) (15,465)
Gain on sale
of timberlands (43,100) (52,220) -
Changes in
working capital:
Receivables (26,736) (66,265) 79,334
Inventories (1,666) 13,666 8,469
Accounts payable and
accrued liabilities 4,458 (9,332) 7,332
Income taxes payable (21,916) 9,320 (10,916)
Other 8,952 10,453 23,335
Cash flow from operations $ 80,904 $ (30,646) $ 109,476
</TABLE>
1994 ANNUAL REPORT 33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED) BOWATER INCORPORATED AND SUBSIDIARIES
25 Quarterly Information (unaudited)
Quarterly financial results for the years 1994, 1993 and 1992 are
summarized as follows:
<TABLE>
<CAPTION>
(In thousands, except per-share amounts)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1994 First Second Third Fourth Year
Net sales $ 308,892 $ 320,066 $ 348,151 $ 381,887 $1,358,996
Gross profit $ 3,823 $ 13,284 $ 38,064 $ 62,981 $ 118,152
Operating income (loss) $ (14,740) $ (5,676) $ 20,823 $ 41,693 $ 42,100
Net income (loss) $ (21,440) $ (14,881) $ 10,526 $ 20,971 $ (4,824)
Net income (loss) per common share $ (.67) $ (.53) $ .16 $ .44 $ (.59)
Year Ended December 31, 1993 First Second Third Fourth Year
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
Operating loss $ (17,895) $ (5,259) $ (20,386) $ (19,792) $ (63,332)
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
Operating loss $ (22,111) $ (26,816) $ (12,713) $ (12,468) $ (74,108)
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)
</TABLE>
NOMINAL ANNUAL CAPACITY AND PRODUCTION BY GRADE AND MILL
<TABLE>
<CAPTION>
Annual 1994
(In short tons) Capacity Production
<S> <C> <C>
Newsprint and uncoated groundwood papers
Calhoun, Tennessee 853,400 853,364 3
Catawba, South Carolina 260,300 252,239
Liverpool, Nova Scotia 264,600 261,258
Millinocket, Maine 122,000 1 148,772
East Millinocket, Maine 290,200 290,131
Coated groundwood paper
Catawba, South Carolina 350,700 344,449
Millinocket, Maine 138,300 111,749
Market pulp
Catawba, South Carolina 268,600 256,404
Calhoun, Tennessee 66,800 55,386
Lumber 200,000 2 198,999 2
</TABLE>
1. The new annual capacity reflects the shutdown of No. 1 paper machine in mid-
1994.
2. Figures are in MBF (thousands of board feet).
3. Includes tonnage produced for Bowater Communication Papers Division.
34 BOWATER INCORPORATED
<PAGE>
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
BOWATER INCORPORATED AND SUBSIDIARIES
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
corporatewide 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 LLP, 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 two
nonemployee directors who meet regularly with management, the internal auditors
and KPMG Peat Marwick LLP 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, 1994 and 1993, 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, 1994. 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, 1994 and 1993, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1994, 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.
KPMG Peat Marwick LLP
Greenville, South Carolina
February 10, 1995
1994 ANNUAL REPORT 35
<PAGE>
DIRECTORS AND OFFICERS
BOWATER INCORPORATED
(Photo appears here. Caption is as follows:)
(Seated from left):
Anthony P. Gammie, Arnold M. Nemirow.
(Standing from left):
Hugh D. Aycock, Donald R. Melville, Richard Barth, Francis J. Aguilar, John A.
Rolls, Richard Laster, Kenneth M. Curtis, H. Gordon MacNeill.
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
Attorney At Law
Curtis, Thaxter, Stevens,
Broder & Micoleau
Limited Liability
Company, P.A.
Anthony P. Gammie
Chairman of the Board
Bowater Incorporated
Richard Laster
Retired Chairman, Chief
Executive Officer and Director
DNA Plant Technology Corporation
(agricultural biotechnology)
H. Gordon MacNeill
Chairman
Jannock Limited
(building products)
Donald R. Melville
Retired Chairman and
Chief Executive Officer
Norton Company
(diversified manufacturing)
Arnold M. Nemirow
President and
Chief Executive Officer
Bowater Incorporated
John A. Rolls
President and
Chief Executive Officer
Deutsche Bank North America
(international banking)
BOARD COMMITTEES
Executive Committee
A. P. Gammie (Chairman)
F. J. Aguilar
H. G. MacNeill
Audit Committee
J. A. Rolls (Chairman)
K. M. Curtis
Human Resources and
Compensation Committee
D.R. Melville (Chairman)
R. Barth
R. Laster
Nominating and
Governance Committee
F. J. Aguilar (Chairman)
H. D. Aycock
R. Laster
Finance Committee
R. Barth (Chairman)
H. G. MacNeill
J. A. Rolls
OFFICERS
Anthony P. Gammie
Chairman of the Board
Arnold M. Nemirow
President and
Chief Executive Officer
Arthur D. Fuller
Senior Vice President and
President - Newsprint Division
Robert C. Lancaster
Senior Vice President and
Chief Financial Officer
Donald G. McNeil
Senior Vice President and
President - Great Northern
Paper, Inc.
Robert J. Pascal
Senior Vice President and
President - Communication
Papers Division
Donald J. D'Antuono
Vice President -
Corporate Development
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 -
Contoller
Aubrey S. Rogers
Vice President -
Information Services
Wendy C. Shiba
Secretary and
Assistant General Counsel
36 BOWATER INCORPORATED
<PAGE>
SHAREHOLDER INFORMATION
BOWATER INCORPORATED
Annual Meeting
The company's annual meeting of shareholders will be held on Wednesday, May
24, 1995, at 10:30 a.m. at the Omni Charlotte Hotel, Charlotte, North Carolina.
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 the Investor
Relations Department, at Bowater's headquarters.
Dividend Reinvestment and Stock Purchase Plan
The company has a Dividend Reinvestment and Stock Purchase Plan.
Information is available from the Investor Relations Department at Bowater's
headquarters.
Auditors
KPMG Peat Marwick LLP
One Insignia Financial Plaza
Suite 600
P.O. Box 10529
Greenville, SC 29603
803/250-2600
Common Stock Prices
Price ranges of the company's common stock during 1994 and 1993 as reported
on the New York Stock Exchange were:
<TABLE>
<CAPTION>
1994 1993
High Low High Low
<S> <C> <C> <C> <C>
First quarter $24 7/8 $21 5/8 $24 5/8 $20
Second quarter 25 5/8 20 1/2 23 19 1/2
Third quarter 29 1/2 24 1/4 21 18
Fourth quarter 29 1/4 23 3/8 24 3/8 18 1/4
</TABLE>
(A map of the United States and Nova Scotia, Canada appears here
showing Bowater's corporate headquarters, paper mills, sawmills,
woodlands offices, owned/leased timberlands, divisional sales
offices, communication papers division administrative
office, BCP converting plants, computer forms sales offices
and star forms sales offices, with the following legend.)
CORPORATE HEADQUARTERS
PAPER MILLS
SAWMILLS
WOODLANDS OFFICES
OWNED/LEASED TIMBERLANDS
BOWATER DIVISIONAL SALES OFFICES
BOWATER COMMUNICATION PAPERS DIVISION ADMINISTRATIVE OFFICE
BCP CONVERTING PLANTS
BOWATER COMPUTER FORMS SALES OFFICES
STAR FORMS SALES OFFICES
<PAGE>
CORPORATE HEADQUARTERS
Bowater Incorporated
55 East Camperdown Way
P.O. Box 1028
Greenville, SC 29602
803/271-7733
803/282-9482 (Fax)
BOWATER NEWSPRINT
DIVISION
Manufacturing Facilities
Calhoun Mill
Calhoun Newsprint Company
Calhoun, TN 37309
615/336-2211
Mersey Mill
P.O. Box 1150
Liverpool, NS BOT 1KO
Canada
902/354-3411
Bowater Lumber
660 Industrial Boulevard
Albertville, AL 35959
205/878-7987
Mersey Sawmill at Oakhill
P.O. Box 499
Bridgewater, NS B4V 2X6
902/543-4637
Sales Offices
Suite 250-50
15310 Amberly Drive
Tampa, FL 33647
813/977-4945
400 Northridge Road
Suite 620
Atlanta, GA 30350
404/998-1176
650 Warrenville Road, Suite 410
Lisle, IL 60532
708/960-9792
Point West Place
111 Speen Street, Suite 305
Framingham, MA 01701
508/872-5828
Park 80 West, Plaza 2
Saddle Brook, NJ 07662
201/368-3611
2000 Regency Parkway, Suite 380
Cary, NC 27511
919/467-6422
4055 Executive Park Drive
Cincinnati, OH 45241
513/563-9210
55 East Camperdown Way
P.O. Box 1028
Greenville, SC 29602
803/271-7733
Suite 270, 5728 LBJ Freeway
Dallas, TX 75240
214/980-4117
BOWATER COATED PAPERS
AND PULP DIVISION
Manufacturing Facility
Carolina Mill
P.O. Box 7
Catawba, SC 29704
803/329-6600
Sales Offices
400 Northridge Road
Suite 620
Atlanta, GA 30350
404/998-2623
650 Warrenville Road
Suite 410
Lisle, IL 60532
708/960-9797
Park 80 West, Plaza 2
Saddle Brook, NJ 07662
201/368-3332
55 East Camperdown Way
P.O. Box 1028
Greenville, SC 29602
803/271-7733
GREAT NORTHERN
PAPER DIVISION
Manufacturing Facilities
Millinocket Mill
One Kathadin Avenue
Millinocket, ME 04462
207/723-5131
East Millinocket Mill
Main Street
East Millinocket, ME 04430
207/746-9912
Pinkham Lumber
P.O. Box 0
Ashland, ME 04732
207/435-3281
Directory and Specialties
Sales Office
55 East Camperdown Way
P.O. Box 1028
Greenville, SC 29602
803/271-7733
BOWATER COMMUNICATION
PAPERS DIVISION
Administration
1515 Fifth Avenue, Suite 400
Moline, IL 61625
309/797-1389
Manufacturing Facilities
Bowater Communication Papers Inc.
5461 East Santa Ana Street
Ontario, CA 91761-8626
Lincoln Denver Business Center II
11685 E. 53rd Avenue - Unit A
Denver, CO 80239-2322
5120 Great Oak Drive
Lakeland, FL 33801-3180
1165 S. Elm Street
Scottsburg, IN 47170-2168
3129 State Street
Bettendorf, IA 52722-5253
550 Lillard Drive
Sparks, NV 89434-8955
42 Industrial Circle
Conestoga Valley Industrial Center
Leola, PA 17540
3000 East Plano Parkway
Plano, TX 75074-7421
Sales Offices
Bowater
Computer Forms Star Forms
Pleasanton, CA Fullerton, CA
Van Nuys, CA San Ramon, CA
Yorba Linda, CA San Diego, CA
Englewood, CO Temecula, CA
Clearwater, FL Englewood, CO
Orange Park, FL Lakeland, FL
Atlanta, GA Atlanta, GA
Lisle, IL Snellville, GA
Overland Park, KS Moline, IL
Troy, MI Roselle, IL
Chesterfield, MO Woburn, MA
Cedar Knolls, NJ Rosemount, MN
New York, NY White Bear
Charlotte, NC Lake, MN
Cincinnati, OH Cedar Knolls, NJ
Columbus, OH New York, NY
Tulsa, OK Beachwood, OH
Wayne, PA Toledo, OH
Dallas, TX Stillwater, OK
The Woodlands, TX Leola, PA
Wayne, PA
Johnston, RI
Germantown, TN
Duncanville, TX
Humble, TX
Bothell, WA
PRODUCED BY CORPORATE RELATIONS, BOWATER INCORPORATED
(c) 1995 BOWATER INCORPORATED, PRINTED IN U.S.A.
BOWATER INCORPORATED IS AN EQUAL OPPORTUNITY EMPLOYER.
(Recycled Logo) PRINTED ON RECYCLED PAPER.
Bowater Incorporated
Subsidiaries
As of March 1995
Name Jurisdiction of
Incorporation
Bowater Canadian Limited Canada
Bowater Communication Papers Inc.
(doing business through its Star Forms
and Bowater Computer Forms Divisions) Delaware
Bowater Foreign Sales Corporation U.S. Virgin Islands
Bowater Mersey Paper Co., Ltd. Nova Scotia
Calhoun Newsprint Company Delaware
Calhoun Energy, Inc. Delaware
Carolina Export Corporation Delaware
Great Northern Paper, Inc. Delaware
NOTE: Each of the above entities is a wholly-owned direct subsidiary of Bowater
Incorporated, except for Calhoun newsprint Company (formerly named Catawba
Newsprint Company), which is 51% owned, and Bowater Mersey Paper Co., Ltd.,
which is 51% owned by Bowater Canadian Limited.
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Bowater Incorporated:
We consent to incorporation by reference in the Registration Statements (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 10, 1995, relating to the consolidated balance sheet of
Bowater Incorporated and Subsidiaries as of December 31, 1994 and 1993, 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, 1994, which reports appear or are incorporated by reference in the
December 31, 1994 annual report on Form 10-K of Bowater Incorporated.
/s/ KPMG Peat Marwick LLP
Greenville, South Carolina
March 29, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 10,783
<SECURITIES> 143,985
<RECEIVABLES> 197,473
<ALLOWANCES> 0
<INVENTORY> 151,097
<CURRENT-ASSETS> 513,825
<PP&E> 2,961,086
<DEPRECIATION> 1,176,040
<TOTAL-ASSETS> 2,851,362
<CURRENT-LIABILITIES> 210,612
<BONDS> 1,116,887
<COMMON> 37,121
74,492
193,225
<OTHER-SE> 657,079
<TOTAL-LIABILITY-AND-EQUITY> 2,851,362
<SALES> 1,358,996
<TOTAL-REVENUES> 1,358,996
<CGS> 1,072,492
<TOTAL-COSTS> 1,316,896
<OTHER-EXPENSES> (49,913)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 98,848
<INCOME-PRETAX> (6,835)
<INCOME-TAX> (4,783)
<INCOME-CONTINUING> (4,824)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,824)
<EPS-PRIMARY> $(.59)
<EPS-DILUTED> $(.59)
</TABLE>
