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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, 1995 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
(864) 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 [X] 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 22, 1996, was $1,571,273,991.
As of March 22, 1996, there were 38,369,387 shares of the registrant's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
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, 1995. Parts I, II and IV
Proxy Statement with respect to the Annual Meeting of Shareholders Part III
to be held on May 21, 1996.
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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, as of December 31, 1995,
managed and controlled approximately 3.6 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 (864)
271-7733.
Information regarding segment, geographic area, and net export sales is
incorporated herein by reference to page 36 of the Company's 1995 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 40 and 41 of the Annual Report.
Information regarding the Company's liquidity and capital resources is
incorporated herein by reference to pages 22 and 23 of the Annual Report.
OPERATING DIVISIONS
During 1995, the Company decentralized its operations into four divisions:
the Bowater Newsprint Division, the Bowater Coated Paper & Pulp Division, the
Great Northern Paper ("GNP") Division, and the Bowater Communication Papers
("BCP") Division.
The Bowater Newsprint Division consists of four manufacturing facilities:
the Calhoun Operation and Calhoun Newsprint Company ("CNC") (which is owned
approximately 51 percent by the Company and approximately 49 percent by Advance
Publications, Inc.) located in Calhoun, Tennessee; the Mersey Operation (which
is owned 51 percent by the Company and 49 percent by The Washington Post
Company) located in Liverpool, Nova Scotia; Bowater Lumber located in
Albertville, Alabama; and the Mersey Sawmill at Oakhill located in Bridgewater,
Nova Scotia. This division is also supported by eight sales offices, which are
responsible for marketing all of the Company's newsprint.
The Bowater Coated Paper & Pulp Division consists of the Carolina Operation
located in Catawba, South Carolina, and three sales offices. This Division is
responsible for selling all of the Company's coated groundwood paper as well as
all of the Company's market pulp.
The GNP Division consists of three manufacturing facilities: the
Millinocket Operation located in Millinocket, Maine; the East Millinocket
Operation located in East Millinocket, Maine; and Pinkham Lumber located in
Ashland, Maine. This division is supported by one sales office.
The BCP Division consists of eight manufacturing facilities and numerous
sales offices throughout the United States. The Company intends to close
three of the eight manufacturing facilities beginning April 1, 1996. The
current production levels from these sites will be completely met by the
remaining facilities.
NEWSPRINT, DIRECTORY PAPERS AND UNCOATED GROUNDWOOD SPECIALTIES
The Company is the largest manufacturer of newsprint in the United States.
Including its Mersey Operation, the Company is one of the largest newsprint
manufacturers in North America and the world. Its annual capacity is
approximately 8 percent of the North American capacity total and approximately
3.5 percent of the worldwide capacity total.
The Calhoun Operation is located on the Hiwassee River in Tennessee and is
the largest and one of the most productive newsprint mills in North America. At
this facility, the Company operates four paper machines, which produced 607,610
tons of newsprint and uncoated groundwood specialty papers in 1995. The
continuing modernization of the Calhoun Operation has contributed substantially
to improved product quality and is helping it to maintain its position as one of
the most productive in the industry. Also located at this facility is CNC's
paper machine, which produced 240,645 tons of newsprint in 1995. Although the
Company manages and operates the entire facility, CNC also 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, wastewater treatment facilities,
and other support equipment necessary to produce the finished product.
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The Mersey Operation 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 252,269 tons of newsprint in 1995. This
facility also operates a TMP mill, a wastewater treatment facility, and other
support equipment required to produce the finished product.
Newsprint is also produced at three other Company locations. The newsprint
machine at the Carolina Operation, located on the Catawba River in South
Carolina, produced 250,489 tons in 1995, and is one of the largest and most
productive newsprint machines in the industry. The Company's East Millinocket
Operation, located on the West Branch of the Penobscot River in northern Maine,
has two paper machines which were built in 1954 and completely rebuilt in 1986.
These two machines produced a total of 287,754 tons of newsprint, directory
paper and other uncoated groundwood specialties in 1995. This facility also
operates a groundwood pulp mill and other support equipment required to produce
the finished products. The Company's Millinocket Operation, located eight miles
from the East Millinocket Operation, has four paper machines which produced
129,635 tons of newsprint, directory papers and uncoated groundwood specialties
in 1995. 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.
Domestic newsprint sales are made directly by the Company through regional
sales offices located in major metropolitan areas of the eastern half of the
United States, while export sales are made directly and through agents. Advance
Publications, Inc. purchases the equivalent of CNC's entire annual output, and
The Washington Post Company purchases approximately 80,000 tons annually.
Combined, these two customers in 1995 accounted for approximately 9 percent of
the Company's consolidated net sales and approximately 20 percent of the
Company's newsprint sales. The Company distributes newsprint by rail, truck,
ship and barge.
COATED GROUNDWOOD PAPER
The Company is one of the largest producers of coated groundwood paper in
the United States and North America. Coated groundwood paper produced by the
Company is 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
at the Carolina Operation and on three paper machines at the Millinocket
Operation. Both machines at the Carolina Operation utilize off-machine blade
coaters. At the Millinocket Operation, two machines produce a base stock which
is coated on an off-machine blade coater while the third machine has an
on-machine roll coater. In 1995, the two coated machines at the Carolina
Operation produced 346,397 tons of LWC and the three machines at the Millinocket
Operation produced 131,976 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 facilities, 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
265,866 tons of softwood market pulp to manufacturers of fine paper, tissues,
and other paper products from its Carolina Operation in 1995. In addition, the
Calhoun Operation supplied 100,048 tons of hardwood market pulp for sale to its
customers. The kraft pulp mill at the Calhoun Operation utilizes current
technology to produce quality pulp with reduced energy consumption and
environmental impact compared to older, less efficient, pulp mills. A recovery
boiler is an essential part of the kraft pulping process. During 1994, the
Calhoun Operation replaced two existing recovery boilers with a new larger size
recovery boiler. The new recovery boiler enables the Company to realize
significant cost reductions and meet current environmental regulations.
In 1995, 57 percent of the Company's market 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 BCP Division, doing business as Star Forms, manufactures continuous
stock computer forms and other business communication papers and markets these
products through a network of approximately 30 distribution centers to service
customers in major metropolitan areas throughout the United States. The division
sells to two broad groups of customers: directly to numerous large-volume
end-users, such as banks and governmental entities, and indirectly to smaller
businesses
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and individuals through sales to business forms distributors, paper merchants,
office product dealers, computer stores, and similar outlets. This division
distributes its products by truck.
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
related business areas.
At December 31, 1995, the Company owned or managed under lease
approximately 3.6 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 maintains one nursery and contracts with numerous
other nurseries in order to replace trees harvested from its timberlands. The
Company also employs harvest activities designed to promote natural
regeneration.
The Company operates three sawmills that produce construction grade lumber.
Bowater Lumber produced 93.1 million board feet of lumber in 1995. This lumber
is sold in the southern and midwestern United States. The Mersey Sawmill at Oak
Hill, which produced 24.9 million board feet of lumber in 1995, sells to
customers in eastern Canada and the United Kingdom. Pinkham Lumber produced 72.3
million board feet of lumber in 1995, with the majority of this product sold to
customers in New England. The Company ships lumber by truck and rail.
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 operates recycling plants at its Calhoun and East Millinocket
operations. Taking a mixture of old newspapers and old magazines (generally 70%
and 30%, respectively, at the Calhoun operation and 90% and 10%, respectively,
at the East Millinocket operation), these plants utilize 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, directory, and specialty papers, are comparable in quality to
paper produced with 100 percent virgin fiber pulp. The Company has a combined
capacity to supply approximately 265,000 tons per year of recycled content 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 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 worldwide producers of newsprint with which the
Company competes. In addition, the Company faces actual and potential
competition from numerous smaller producers located around the world. 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.
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 Company competes with three major producers and several
smaller producers of directory paper.
The coated groundwood 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. The Company competes with
approximately twelve coated groundwood producers located in North America. In
addition, there are approximately seven major offshore suppliers of coated
groundwood paper that sell into the North American market. As a major supplier
to printers in North America, the Company also competes with numerous worldwide
suppliers of other grades of paper such as coated freesheet, supercalendered,
and uncoated groundwood papers.
In the communication papers market, the Company has differentiated itself
by developing products with recycled content and by gaining the benefits of
vertical integration, using the capabilities of its paper mills.
As with other globally manufactured and sold commodities, the competitive
position of the Company's products is significantly affected by the volatility
of currency exchange rates. As 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
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States dollar can have a substantial effect on the Company's ability to compete.
In addition, the degree to which the Company competes with foreign producers
depends in part on the level of demand abroad. Shipping costs generally cause
producers to prefer to sell in local markets when the demand is sufficient in
those markets.
Trends in electronic data transmission and storage could adversely affect
traditional print media, including products of the Company's customers; however,
neither the timing nor the extent of those trends can be predicted with
certainty. Industry reports indicate that the Company's newspaper publishing
customers in North America have experienced some loss of market share to other
forms of media and advertising, such as direct mailings and newspaper inserts
(both of which are end uses for 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 lower cost producer
of its products while maintaining strict quality standards and being responsive
on environmental issues. Aside from cost reduction programs and continuous
improvement projects, the Company believes that its large woodland base,
relative to its paper production, also provides it with a competitive advantage
in controlling costs. The Company's two recycling facilities have further
enhanced its competitive position by enabling it to respond to customer demand
for recycled content newsprint and uncoated specialty papers.
RAW MATERIALS AND ENERGY
The manufacture of pulp and paper requires significant amounts of wood and
energy. Approximately 3.5 million cords of wood were consumed by the Company
during 1995 for pulp, paper and lumber production. The Company harvests wood
fiber from Company-owned properties equal to approximately 58% of its total wood
fiber requirements with the balance of wood requirements purchased, primarily
under contract, from local wood producers, private landowners, and sawmills (in
the form of residual chips) at market prices. Wastepaper (in the form of old
newspapers and magazines) is purchased from suppliers in the regions of the
Company's recycling plants. These suppliers collect, sort, and bale the material
before selling it to the Company, primarily under long-term contracts, with
prices and available quantities fluctuating according to market conditions. 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 Operations is used to supplement purchased electrical
power. The GNP Division 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 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. A settlement conference with all
parties involved has been held, but no final result has been reached. The new
licenses should be issued during 1996, according to FERC's current timetable.
Although there can be no assurances, the Company believes that the new 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 5,500 people, of whom approximately 3,600
are represented by bargaining units. The labor agreement at the Company's
Carolina Operation, covering all of the plant's hourly employees, expires on
April 28, 1997. The labor contract with most of the plant's hourly employees at
the Calhoun Operation was renegotiated in 1995 and expires July 2, 2002. The
wage portion of the labor contract covering all unionized employees at the
Mersey Operation expires on April 30, 1996, while the balance of the labor
contract expires on April 30, 1998. Contracts covering the large majority of
unionized employees of the GNP Division expired during 1995 and were
renegotiated. The new contracts expire July 31, 2001. 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 owns the trademarked Company logo exclusively throughout the
world. The Company is licensed to use the name "Bowater" in connection with the
sale of all products in the Western Hemisphere, and with the sale of paper,
pulp,
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and lumber in the Eastern Hemisphere. In 2001, the Company has an option to
acquire certain ownership rights to the name "Bowater". The Company considers
its interests in the Company logo and name to be valuable and necessary to the
conduct of its business.
ENVIRONMENTAL MATTERS
Information regarding environmental matters is incorporated herein by
reference to page 24 of the Annual Report.
The Company believes that its U.S. and Canadian operations are in
substantial compliance with all applicable federal, state, and provincial
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 a recycle mill at its Calhoun and East Millinocket
Operations. 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 page 38 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 35 of the Annual Report.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings relating to contracts,
commercial disputes, taxes, environmental issues, employment and workers'
compensation claims, and other matters. The Company's management believes 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 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT AS OF MARCH 31, 1996
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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Arnold M. Nemirow 53 Chairman, President and Chief Executive Officer 1994
Anthony H. Barash 53 Senior Vice President -- Corporate Affairs and General Counsel 1996
E. Patrick Duffy 54 Senior Vice President and President -- Coated Paper & Pulp Division 1995
Arthur D. Fuller 51 Senior Vice President and President -- Newsprint Division 1995
David G. Maffucci 45 Senior Vice President -- Chief Financial Officer and Treasurer 1992
Donald G. McNeil 45 Senior Vice President and President -- Great Northern Paper, Inc. 1995
Robert J. Pascal 63 Senior Vice President and President -- Communication Papers Division 1986
Donald J. D'Antuono 52 Vice President -- Corporate Development 1977*
Richard F. Frisch 48 Vice President -- Human Resources 1995
Robert D. Leahy 44 Vice President -- Corporate Relations 1993
Ecton R. Manning 58 Vice President -- General Counsel 1988
Robert A. Moran 51 Vice President -- Pulp and Paper Manufacturing Services 1992
Michael F. Nocito 41 Vice President -- Controller 1993
Aubrey S. Rogers 56 Vice President -- Information Services 1992
Wendy C. Shiba 45 Secretary and Assistant General Counsel 1993
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* Except for the period from 1978 to 1979.
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Arnold M. Nemirow became Chairman on March 31, 1996, and 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, as Chairman, President, 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.
Anthony H. Barash has been appointed Senior Vice President -- Corporate
Affairs and General Counsel, effective as of April 1, 1996. From 1993 through
March 31, 1996, he was a partner of the law firm Seyfarth, Shaw, Fairweather &
Geraldson, where he was a member of the firm's Business Law and Real Estate
Group. Previously, from 1980 to 1993, he was a senior partner of the law firm
Barash & Hill, where he also concentrated in business and real estate law.
E. Patrick Duffy became Senior Vice President and President -- Coated Paper
& Pulp Division in April 1995. Previously he was President of the
Telecommunications Business Unit of R.R. Donnelly and Sons, a printing company
located in Chicago, Illinois, from 1993 to 1995, where he was responsible for
the sale and manufacture of printed products, and President of its Catalog Group
from 1990 to 1992. Previously he was a Senior Vice President of R.R. Donnelly
and Sons.
Arthur D. Fuller became Senior Vice President and President -- 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 1993 to 1995. 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.
David G. Maffucci became Senior Vice President -- Chief Financial Officer
and Treasurer in October 1995 and has served as Vice President -- Treasurer
since July 1993. Previously he was 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.
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
from 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.
Richard F. Frisch became Vice President -- Human Resources in May 1995.
Previously he was Director of Compensation and Benefits from June 1994 to May
1995. Prior to then he was employed by Scott Paper Company, a pulp and paper
company, at its Philadelphia, Pennsylvania, headquarters, most recently as
Director of Benefits from 1991 to June 1994, where he was responsible for
strategic design and management of benefit plans.
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.
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. Pursuant to a prior agreement, Mr. Manning has
resigned his office of Vice President -- General Counsel of the Company as of
April 1, 1996.
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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 from 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.
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 that he served as Assistant Controller of the Southern
Division from 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 from 1990, and Assistant Controller -- Director of Planning and
Information Services from 1989 to 1990. He also served in various other
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. She 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, $1 par value ("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 22, 1996, there were 5,834 holders of record of the
Company's Common Stock.
(c) The Company paid consecutive quarterly dividends of $.15 per share of
Common Stock during 1995 and 1994. On February 9, 1996, the quarterly dividend
was increased to $.20 per share of Common Stock effective with the dividend
payable April 1, 1996.
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, 1995, 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 $874 million as of December 31, 1995. 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, 1995,
the net worth of the Company and the ratio of total debt to total capital were
$1.1 billion and 42 percent, respectively.
ITEM 6. SELECTED FINANCIAL DATA
Information regarding the Company's financial position and operating record
is incorporated herein by reference to pages 40 and 41 of the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information regarding the Company's business and financial results is
incorporated by reference to pages 20 through 24 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 25 through 39 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 21, 1996 (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 as of March 31, 1996" 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, as amended, 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 "Certain
Relationships and Related Transactions" 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, 1995.......................................................................... 25
Consolidated Balance Sheet at December 31, 1995 and 1994..................................... 26
Consolidated Statement of Capital Accounts for Each of the Years in the Three-Year Period
Ended December 31, 1995.................................................................... 27
Consolidated Statement of Cash Flows for Each of the Years in the Three-Year Period Ended
December 31, 1995.......................................................................... 28
Notes to Consolidated Financial Statements................................................... 29-37
Independent Auditors' Report................................................................. 39
</TABLE>
(2) All financial statement schedules are omitted because they are not
applicable, or the amounts associated with them are immaterial, 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, amended and restated as of July 26, 1995 (incorporated by reference to Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1995 (the
"September 1995 10-Q")).
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 4.6 to the Company's Registration No. 33-61219).
4.2.1 Addendum to Rights Agreement substituting The Bank of New York as successor Rights Agent (incorporated by
reference to Exhibit 4.6.1 to the Company's Registration Statement No. 33-61219).
4.3 Indenture, dated as of August 1, 1989, 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 4.7 to the
Company's Registration Statement No. 33-61219).
4.4 Indenture, dated as of December 1, 1991, 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, 1991, 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, 1992, 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, 1992, 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).
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
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, dated August 25, 1988, 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, dated August 23, 1989, 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, dated as of July 20, 1994, by and between the Company and Arnold M. Nemirow
(incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K for the period
ending December 31, 1994 (the "1994 10-K").
+10.3 Employment Agreement, dated as of April 1, 1995, by and between the Company and E. Patrick Duffy
(incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the period
ending March 31, 1995 (the "March 1995 10-Q")).
+10.4 Form of Employment Agreement by and between the Company and each of Robert D. Leahy, Robert A. Moran,
Michael F. Nocito, Aubrey S. Rogers, and Wendy C. Shiba (incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K for 1993).
+10.5 * Form of Change in Control Agreement, by and between the Company and each of the executive officers listed
on the schedule attached thereto.
+10.6 Letter Agreement, dated May 1, 1995, by and between the Company and H. David Aycock (incorporated by
reference to Exhibit 10.5 to the March 1995 10-Q).
+10.6.1 * Letter Agreement, dated October 27, 1995, by and between the Company and H. David Aycock.
+10.7 Employment Agreement, 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).
+10.7.1 * Modification of Employment Agreement and Other Covenants, dated as of February 16, 1996, by and between
the Company and Robert J. Pascal.
+10.8 Employment Agreement, 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).
+10.8.1 Amendment to Employment Agreement, 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).
+10.9 Employment Agreement, dated as of June 1, 1995, by and between the Company and Richard F. Frisch
(incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ending June 30, 1995).
+10.10 Employment Agreement, 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).
+10.10.1 Amendment to Employment Agreement, 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).
+10.10.2 Modification of Employment Agreement, 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).
+10.10.3* Letter Agreement, dated as of February 15, 1996, by and between the Company and Ecton R. Manning.
+10.11 Employment Agreement, dated as of January 12, 1995, by and between the Company and Arthur D. Fuller
(incorporated by reference to Exhibit 10.10 to the 1994 10-K).
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
+10.12 * Employment Agreement, dated as of November 1, 1995, by and between the Company and David G. Maffucci.
+10.13 Employment Agreement, dated as of March 1, 1995, by and between the Company and Donald G. McNeil
(incorporated by reference to Exhibit 10.12 to the 1994 10-K).
+10.14 * Employment Agreement, dated as of April 1, 1996, by and between the Company and Anthony H. Barash.
+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 (incorporated by reference to Exhibit 10.16 to the 1994 10-K).
+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. 33-11228).
+10.17.2* Amendment to 1984 Stock Option Plan of the Company, dated as of July 22, 1987.
+10.17.3 Amendment to 1984 Stock Option Plan of the Company, dated as of August 23, 1989 (incorporated by reference
to Exhibit 10.1B to the Company's Annual Report on Form 10-K for 1989).
+10.17.4* Amendment No. 4 to 1984 Stock Option Plan of the Company, dated as of August 15, 1995.
+10.18 * Deferred Compensation Plan for Outside Directors of the Company, as amended and restated effective January
1, 1996.
+10.19 * Retirement Plan for Outside Directors of the Company, effective July 1, 1988.
+10.19.1* First Amendment to Retirement Plan for Outside Directors.
+10.20 * Supplemental Benefit Plan for Designated Employees of Bowater Incorporated and Affiliated Companies, as
amended and restated effective November 1, 1995.
+10.20.1* First Amendment, dated as of March 18, 1996, to the Supplemental Benefit Plan for Designated Employees of
Bowater Incorporated and Affiliated Companies.
+10.21 Executive Deferred Compensation Plan of the Company, effective July 1, 1994, and as amended January 1,
1995 (incorporated by reference to Exhibit 10.29.1 to the 1994 10-K).
+10.21.1* Amendment to Executive Deferred Compensation Plan, dated as of November 14, 1995.
10.22 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).
10.23 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).
10.24 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).
10.25 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).
10.26 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).
+10.27 1988 Stock Incentive Plan of the Company (incorporated by reference to the Company's Proxy Statement for
1988).
+10.27.1 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).
+10.28 Benefit Plan Grantor Trust of the Company, dated as of May 20, 1988 (incorporated by reference to Exhibit
10.17 to the Company's Annual Report on Form 10-K for 1989).
+10.28.1 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).
+10.28.2* Supplemental Agreement to Benefit Plan Grantor Trust, dated as of May 20, 1988.
+10.29 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).
+10.29.1* Supplemental Agreement to Executive Severance Grantor Trust of the Company, dated as of September 1, 1989.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
+10.30 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).
+10.30.1* Supplemental Agreement to Outside Directors Benefit Plan Grantor Trust of the Company, dated as of
September 5, 1989.
+10.31 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).
+10.32 1992 Stock Incentive Plan (incorporated by reference to Exhibit 10.23 to the Company's Annual Report on
Form 10-K for 1991).
+10.33 * Long-Term Cash Incentive Plan, dated as of January 1, 1994.
+10.33.1* First Amendment, dated as of March 18, 1996, to the Long-Term Cash Incentive Plan dated as of January 1,
1994.
10.34 Credit Agreement, dated as of September 29, 1995, among the Company, each of the banks signatory thereto
(the "Banks"), and The Chase Manhattan Bank (National Association), as administrative agent for the Banks
(incorporated by reference to Exhibit 10.1 to the September 1995 10-Q).
13.1 * Copy of the Company's 1995 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) None.
12
<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
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Date: April 1, 1996
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 April 1, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
/s/ ARNOLD M. NEMIROW Director, Chairman, President and Chief
ARNOLD M. NEMIROW Executive Officer
/s/ DAVID G. MAFFUCCI Senior Vice President -- Chief Financial
DAVID G. MAFFUCCI Officer and Treasurer
/s/ MICHAEL F. NOCITO Vice President -- Controller
MICHAEL F. NOCITO
/s/ FRANCIS J. AGUILAR Director
FRANCIS J. AGUILAR
/s/ H. DAVID AYCOCK Director
H. DAVID AYCOCK
/s/ RICHARD BARTH Director
RICHARD BARTH
/s/ KENNETH M. CURTIS Director
KENNETH M. CURTIS
/s/ H. GORDON MACNEILL Director
H. GORDON MACNEILL
/s/ DONALD R. MELVILLE Director
DONALD R. MELVILLE
/s/ JAMES L. PATE Director
JAMES L. PATE
/s/ JOHN A. ROLLS Director
JOHN A. ROLLS
</TABLE>
13
<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, amended and restated as of July 26, 1995 (incorporated by reference to Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1995 (the
"September 1995 10-Q")).
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 4.6 to the Company's Registration No. 33-61219).
4.2.1 Addendum to Rights Agreement substituting The Bank of New York as successor Rights Agent (incorporated by
reference to Exhibit 4.6.1 to the Company's Registration Statement No. 33-61219).
4.3 Indenture, dated as of August 1, 1989, 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 4.7 to the
Company's Registration Statement No. 33-61219).
4.4 Indenture, dated as of December 1, 1991, 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, 1991, 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, 1992, 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, 1992, 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, dated August 25, 1988, 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, dated August 23, 1989, 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, dated as of July 20, 1994, by and between the Company and Arnold M. Nemirow
(incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K for the period
ending December 31, 1994 (the "1994 10-K").
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
+10.3 Employment Agreement, dated as of April 1, 1995, by and between the Company and E. Patrick Duffy
(incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the period
ending March 31, 1995 (the "March 1995 10-Q")).
+10.4 Form of Employment Agreement by and between the Company and each of Robert D. Leahy, Robert A. Moran,
Michael F. Nocito, Aubrey S. Rogers, and Wendy C. Shiba (incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K for 1993).
+10.5 * Form of Change in Control Agreement, by and between the Company and each of the executive officers listed
on the schedule attached thereto.
+10.6 Letter Agreement, dated May 1, 1995, by and between the Company and H. David Aycock (incorporated by
reference to Exhibit 10.5 to the March 1995 10-Q).
+10.6.1 * Letter Agreement, dated October 27, 1995, by and between the Company and H. David Aycock.
+10.7 Employment Agreement, 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).
+10.7.1 * Modification of Employment Agreement and Other Covenants, dated as of February 16, 1996, by and between
the Company and Robert J. Pascal.
+10.8 Employment Agreement, 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).
+10.8.1 Amendment to Employment Agreement, 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).
+10.9 Employment Agreement, dated as of June 1, 1995, by and between the Company and Richard F. Frisch
(incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ending June 30, 1995).
+10.10 Employment Agreement, 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).
+10.10.1 Amendment to Employment Agreement, 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).
+10.10.2 Modification of Employment Agreement, 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).
+10.10.3* Letter Agreement, dated as of February 15, 1996, by and between the Company and Ecton R. Manning.
+10.11 Employment Agreement, dated as of January 12, 1995, by and between the Company and Arthur D. Fuller
(incorporated by reference to Exhibit 10.10 to the 1994 10-K).
+10.12 * Employment Agreement, dated as of November 1, 1995, by and between the Company and David G. Maffucci.
+10.13 Employment Agreement, dated as of March 1, 1995, by and between the Company and Donald G. McNeil
(incorporated by reference to Exhibit 10.12 to the 1994 10-K).
+10.14 * Employment Agreement, dated as of April 1, 1996, by and between the Company and Anthony H. Barash.
+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 (incorporated by reference to Exhibit 10.16 to the 1994 10-K).
+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. 33-11228).
+10.17.2* Amendment to 1984 Stock Option Plan of the Company, dated as of July 22, 1987.
+10.17.3 Amendment to 1984 Stock Option Plan of the Company, dated as of August 23, 1989 (incorporated by reference
to Exhibit 10.1B to the Company's Annual Report on Form 10-K for 1989).
+10.17.4* Amendment No. 4 to 1984 Stock Option Plan of the Company, dated as of August 15, 1995.
+10.18 * Deferred Compensation Plan for Outside Directors of the Company, as amended and restated effective January
1, 1996.
+10.19 * Retirement Plan for Outside Directors of the Company, effective July 1, 1988.
+10.19.1* First Amendment to Retirement Plan for Outside Directors.
+10.20 * Supplemental Benefit Plan for Designated Employees of Bowater Incorporated and Affiliated Companies, as
amended and restated effective November 1, 1995.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
+10.20.1* First Amendment, dated as of March 18, 1996, to the Supplemental Benefit Plan for Designated Employees of
Bowater Incorporated and Affiliated Companies.
+10.21 Executive Deferred Compensation Plan of the Company, effective July 1, 1994, and as amended January 1,
1995 (incorporated by reference to Exhibit 10.29.1 to the 1994 10-K).
+10.21.1* Amendment to Executive Deferred Compensation Plan, dated as of November 14, 1995.
10.22 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).
10.23 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).
10.24 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).
10.25 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).
10.26 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).
+10.27 1988 Stock Incentive Plan of the Company (incorporated by reference to the Company's Proxy Statement for
1988).
+10.27.1 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).
+10.28 Benefit Plan Grantor Trust of the Company, dated as of May 20, 1988 (incorporated by reference to Exhibit
10.17 to the Company's Annual Report on Form 10-K for 1989).
+10.28.1 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).
+10.28.2* Supplemental Agreement to Benefit Plan Grantor Trust, dated as of May 20, 1988.
+10.29 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).
+10.29.1* Supplemental Agreement to Executive Severance Grantor Trust of the Company, dated as of September 1, 1989.
+10.30 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).
+10.30.1* Supplemental Agreement to Outside Directors Benefit Plan Grantor Trust of the Company, dated as of
September 5, 1989.
+10.31 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).
+10.32 1992 Stock Incentive Plan (incorporated by reference to Exhibit 10.23 to the Company's Annual Report on
Form 10-K for 1991).
+10.33 * Long-Term Cash Incentive Plan, dated as of January 1, 1994.
+10.33.1* First Amendment, dated as of March 18, 1996, to the Long-Term Cash Incentive Plan dated as of January 1,
1994.
10.34 Credit Agreement, dated as of September 29, 1995, among the Company, each of the banks signatory thereto
(the "Banks"), and The Chase Manhattan Bank (National Association), as administrative agent for the Banks
(incorporated by reference to Exhibit 10.1 to the September 1995 10-Q).
13.1 * Copy of the Company's 1995 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.
EXHIBIT 10.5
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, made as of the 1st day of November, 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 _________________ of ______________________________________________
(the"Executive").
WHEREAS, the Corporation considers it essential to the best interests
of its stockholders 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 stockholders; 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. Whenever applicable throughout this Agreement, the
masculine pronoun shall include the feminine pronoun and the singular
shall include the plural.
(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, to the extent that the Corporation contends that Cause
exists by virtue of Executive's gross negligence or willful
misconduct, and such gross negligence or willful misconduct is
capable of being cured, 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 (which notice shall not be
delivered before the end of the thirty (30) day period
described in the preceding sentence, if applicable) 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
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<PAGE>
(iii) the stockholders 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) "Commencement Date" shall mean the date of this Agreement,
which shall be the beginning date of the term of this
Agreement.
(f) "Continuing Directors" shall mean any member of the Board who
was a member of the Board immediately 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.
(g) "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.
(h) "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, provided that the Executive shall
have given the Corporation written notice of the
alleged adverse change and the Corporation shall have
failed to cure such change within thirty (30) days
after its receipt of such notice;
(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
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<PAGE>
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
(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
(which notice shall not be given, in circumstances described in Section
1(g)(i), before the end of the thirty (30) day period described
therein) 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.
(i) "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.
(j) "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 the Commencement Date and
ending on the day before the third anniversary of the
4
<PAGE>
Commencement Date. The term of this Agreement shall
automatically be extended on the first anniversary of
the Commencement Date until the day before the fourth
anniversary of the Commencement Date without further
action by the parties, and shall be automatically
extended by an additional year on each succeeding
anniversary of the Commencement Date, unless either
the Corporation or the Executive shall have served
notice upon the other party prior to such anniversary
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 it expires in accordance with the foregoing,
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,
thereafter 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 (or, if more favorable, at the effective date of
termination), 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 (or, if more
favorable, at the effective date of termination).
(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 (if any), the Corporation
shall pay to the Executive, in
5
<PAGE>
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;
(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
6
<PAGE>
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.
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
surviving spouse 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 surviving spouse, 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 surviving spouse 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
7
<PAGE>
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, which firm may not have provided
services to the Corporation or any Affiliate of the
Corporation within the previous three years and shall not
provide services thereto in the following three years, 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
except to the extent that, 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
8
<PAGE>
(ii) the Executive shall be deemed to pay
federal, state and local taxes at the
highest marginal rate of taxation for the
applicable calendar year.
The estimated amount of the payment due the Executive pursuant
to this Section 3(e) shall be paid to the Executive in a lump
sum not later than thirty (30) business days following the
effective date of the termination. In the event that the
amount of the estimated payment is less than the amount
actually due to the Executive under this Section 3(e), the
amount of any such shortfall shall be paid to the Executive
within ten (10) days after the existence of the shortfall is
discovered.
(f) The Executive shall not be required to mitigate the amount of
any payment provided in this Section 3, nor shall any payment
or benefit provided for in this Section 3 be offset by any
compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, or by
offset against any amount claimed to be owed by the Executive
to the Corporation, or otherwise.
(g) If any payment to the Executive required by this Section 3 is
not made within the time for such payment specified herein,
the Corporation shall pay to the Executive interest on such
payment at the legal rate payable from time to time upon
judgments in the State of 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.
9
<PAGE>
6. NOTICE
Any notices and all other communications provided for herein shall be
in writing and shall be deemed to have been duly given when delivered
or mailed, by certified or registered mail, return receipt requested,
postage prepaid addressed to the respective addresses set forth on the
first page of this Agreement or to such other address as either party
may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt. All notices to the Corporation shall be addressed to the
attention of the Board with a copy to each of the General Counsel, the
Vice President-Human Resources and 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 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
10
<PAGE>
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.
12. SUPERSEDURE
This Agreement shall cancel and supersede any and all prior agreements
between the Executive and the Corporation entitled "Severance
Agreement".
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_________________________________
Its_______________________________
-----------------------------------
11
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SCHEDULE TO EXHIBIT 10.5
CHANGE IN CONTROL AGREEMENTS
NAME DATE OF AGREEMENT
Anthony H. Barash 04/01/96
Donald J. D'Antuono 11/01/95
Edward P. Duffy 11/01/95
Richard F. Frisch 11/01/95
Arthur D. Fuller 11/01/95
Anthony P. Gammie 11/01/95
Robert D. Leahy 11/01/95
David G. Maffucci 11/01/95
Ecton R. Manning 11/01/95
Donald G. McNeil 11/01/95
Robert A. Moran 11/01/95
Arnold M. Nemirow 11/01/95
Michael F. Nocito 11/01/95
Robert J. Pascal 11/01/95
Aubrey S. Rogers 11/01/95
Wendy C. Shiba 11/01/95
12
<PAGE>
EXHIBIT 10.6.1
[Bowater Letterhead]
October 27, 1995
Mr. H. David Aycock
2675 Trotter Road
Florence, SC 29501
Dear David:
I am writing to confirm our agreement that your consulting arrangement
with Bowater will terminate on October 31, 1995. We very much appreciate the
valuable services that you have rendered.
Please indicate your agreement by signing the enclosed copy of this
letter and returning it to me.
Sincerely,
/s/ Arnold Nemirow
AMN:ds
Agreed to:
/s/ H. David Aycock
H. David Aycock
Date: 11/1/95
1
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EXHIBIT 10.7.1
MODIFICATION OF EMPLOYMENT AGREEMENT
AND OTHER COVENANTS
THIS AGREEMENT is made and entered into as of this 16th day of
February, 1996, by and between Bowater Incorporated, a Delaware corporation
having a mailing address of 55 East Camperdown Way, Greenville, South Carolina
29602 (the "Corporation"), and Robert J. Pascal, of 49 Leeuwarden Road, Darien,
Connecticut 06820 (the "Executive").
WHEREAS, the Corporation now employs the Executive pursuant to an
Employment Agreement dated as of May 20, 1993 (the "Employment Agreement") and a
Severance Agreement dated as of May 20, 1993 (the "Severance Agreement"); and
WHEREAS, the Executive and the Corporation wish to continue the
Executive's employment until a specified and agreed upon date, whereupon the
Executive will retire from the employment of the Corporation and be entitled to
receive certain benefits.
NOW, THEREFORE, the parties hereto agree to the following:
1. Severance Agreement. The Severance Agreement is hereby replaced by a
Change of Control Agreement dated as of November 1, 1995. All references to the
Severance Agreement in the Employment Agreement (as hereby amended and ratified)
are now deemed to refer to the Change in Control Agreement.
2. Employment Agreement. The Employment Agreement is hereby modified as
follows:
(a) Term. Section 2 of the Employment Agreement is amended in its entirety to
read as follows:
"2. Term.
(a) Subject to the provisions of subparagraph (b) of this Section 2,
the term of this Agreement shall continue until September 30, 1997,
unless earlier terminated by the Corporation for "Cause" or by the
Executive for other than "Good Reason" as those terms are defined in
the Severance Agreement.
(b) Notwithstanding Section 2(a), the term of this Agreement shall end
upon (i) the death of the Executive, or (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."
(b) Compensation and Benefits. The first sentence of Section 5(a) of the
Employment
<PAGE>
Agreement is amended in its entirety, and a new subsection 5(g) is added, as
follows:
"5. Compensation and Benefits.
(a) Base Salary. The Corporation will pay to the Executive a base
salary at his current annual rate of $270,000, in substantially equal
periodic installments on the Corporation's regular pay dates.
(g) Pension Service Credit. The Executive will be credited with five
additional years of service under the Supplemental Benefit Plan for
Designated Employees of Bowater Incorporated and Affiliated Companies
as Amended and Restated Effective November 1, 1995, (the "Supplemental
Benefit Plan"), for purposes of computing the benefits due the
Executive, his surviving Spouse, or his Children, under the
Supplemental Benefit Plan."
(c) Severance Pay. The first sentence of Section 8 of the Employment Agreement
is amended in its entirety to read as follows:
"8. Severance Pay. Upon termination of the Executive's employment
hereunder prior to the date set forth in Section 2(a) for any reason
other than those set forth in Section 2(b) hereof, then, unless the
Executive terminated his employment for other than "Good Reason" or the
Corporation shall have terminated the Executive's employment for
"Cause" (as those terms are defined in the Change in Control
Agreement), the Corporation shall pay the Executive severance pay in
the amount equal to 1/12 of the amount of the annual base salary being
paid to the Executive as of the date of termination, times the number
of months in the period beginning on the date of termination and ending
on September 30, 1997 (any partial month shall be counted as one
month), plus 1/12 of the amount of the last bonus paid to the Executive
under the Corporation's bonus plan applicable to the Executive, times
the number of months in the period beginning on January 1 of the year
in which the date of the termination occurs and ending on September 30,
1997."
(d) Governing Law. Section 11 of the Employment Agreement is amended in its
entirety to read as follows:
"11. Governing Law. This Agreement shall be governed by and interpreted
in accordance with the substantive laws of the State of Delaware."
(e) Ratification. In all respects, except as herein provided, the Employment
Agreement is hereby ratified and confirmed.
3. Accelerated Vesting of Stock Options. By approval of this modification, the
Human Resources and Compensation Committee (the "HRCC") of the Board of
Directors, hereby agrees that the stock option agreements for any stock options
(or the agreements for any equivalent benefits) which are unexercisable as of
the date of the Executive's retirement shall be amended to make them exercisable
immediately prior to such retirement date.
<PAGE>
4. Effectiveness Contingent Upon HRCC Approval and Release. This Modification
shall not be effective unless and until the HRCC has approved the terms hereof.
The Modification shall be canceled if the Executive fails to execute a certain
Waiver and Release Agreement (the "Release Agreement"), which is attached as
Attachment I, as of his retirement date, for any reason other than death or
incompetence. If the Executive should fail to sign the Release Agreement for any
reason other than death or incompetence, breach the terms of the Release
Agreement after its execution, or revoke the Release Agreement within the
seven-day period provided for therein, this Modification, the Employment
Agreement, the Severance Agreement, and the Change in Control Agreement (and
specifically including the additional credit of five-years' of pension service
and any accelerated vesting of stock options that shall have occurred pursuant
to such agreements) shall immediately become null and void, and be deemed
canceled.
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/ A. M. Nemirow /s/ Robert J. Pascal
Name: A. M. Nemirow Robert J. Pascal
Title: President
<PAGE>
ATTACHMENT I
BOWATER INCORPORATED
WAIVER AND RELEASE AGREEMENT
(1) In consideration for the special benefits in the form of pension service
credit and the acceleration of options (the "Special Benefits") to be provided
to me pursuant to the modification (the "Modification Agreement") of my
employment agreement dated as of May 20, 1993, (the "Employment Agreement") and
of my severance agreement dated as of May 20, 1993, (the "Severance Agreement"),
I, on behalf of myself and my heirs, executors, administrators, attorneys and
assigns, hereby waive, release and forever discharge BOWATER INCORPORATED
(hereinafter the "Company"), and its subsidiaries, divisions and affiliates,
whether direct or indirect, its and their joint ventures and joint venturers
(including its and their respective directors, officers, associates, employees,
shareholders, partners and agents, (past, present, and future), and each of its
and their respective successors and assigns (hereinafter collectively referred
to as "Releasees")), from any and all known or unknown actions, causes of
action, claims or liabilities of any kind which have been or could be asserted
against the Releasees arising out of or related to my employment with and/or my
separation from employment with the Company and/or any of the other Releasees on
the terms described in the Modification Agreement and/or any other occurrence up
to and including the date of this Waiver and Release Agreement, except relating
to the enforcement of my rights to the Special Benefits, including but not
limited to:
(a) claims, actions, causes of action or liabilities arising under
Title VII of the Civil Rights Act, as amended, the Age Discrimination
in Employment Act, as amended, the Employee Retirement Income Security
Act, as amended, the Rehabilitation Act, as amended, the Americans with
Disabilities Act, as amended, the Family and Medical Leave Act, as
amended, and/or any other federal, state, municipal, or local
employment discrimination statutes (including, but not limited to,
claims based on age, sex, attainment of benefit plan rights, race,
religion, national origin, marital status, sexual orientation,
ancestry, harassment, parental status, handicap, disability,
retaliation, and veteran status); and/or
(b) claims, actions, causes of action or liabilities arising under any
other federal, state, municipal, or local statute, law, ordinance or
regulation; and/or
(c) any other claim whatsoever including, but not limited to, claims
for severance pay, claims based upon breach of contract, wrongful
termination, defamation, intentional infliction of emotional distress,
tort, personal injury, invasion of privacy, violation of public policy,
negligence and/or any other common law, statutory or other claim
whatsoever arising out of or relating to my employment with and/or
separation from employment with the Company and/or any of the other
Releasees,
but excluding the filing of an administrative charge, any claims which I may
make under state
<PAGE>
workers' compensation or unemployment laws, and/or any claims which by law I
cannot waive.
(2) I also agree never to sue any of the Releasees or participate in a lawsuit
on the basis of any claim of any type whatsoever arising out of or related to my
employment with and/or separation from employment with the Company and/or any of
the other Releasees.
(3) I further acknowledge and agree in the event that I breach the provisions of
paragraph (2) above, (a) the Company shall be entitled to apply for and receive
an injunction to restrain any violation of paragraph (2) above, (b) the Company
shall not be obligated to provide the Special Benefits to me and they shall be
deemed canceled if already granted, and the Employment Agreement, the Change in
Control Agreement, the Severance Agreement and the Modification Agreement shall
be deemed canceled, and (c) I shall be obligated to pay to the Company its costs
and expenses in enforcing this Waiver and Release Agreement and defending
against such lawsuit including court costs, expenses and reasonable legal fees).
(4) I further waive my right to any monetary recovery should any federal, state,
or local administrative agency pursue any claims on my behalf arising out of or
related to my employment with and/or separation from employment with the Company
and/or any of the other Releasees.
(5) I further waive, release, and discharge Releasees from any reinstatement
rights which I have or could have.
(6) I acknowledge that I have been given at least twenty-one days to consider
this Waiver and Release Agreement thoroughly and I was encouraged to consult
with my personal attorney, if desired, before signing below.
(7) I understand that I may revoke this Waiver and Release Agreement within
seven (7) calendar days after its signing and that any revocation must be made
in writing and submitted within such seven-day period to the Legal Department. I
further understand that if I revoke this Waiver and Release Agreement, I shall
not receive the Special Benefits.
(8) I FURTHER UNDERSTAND THAT THIS WAIVER AND RELEASE AGREEMENT INCLUDES A
RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.
(9) I acknowledge and agree that if any provision of this Waiver and Release
Agreement is found, held or deemed by a court of competent jurisdiction to be
void, unlawful or unenforceable under any applicable statute or controlling law,
the remainder of this Waiver and Release Agreement shall continue in full force
and effect.
(10) This Waiver and Release Agreement is deemed made and entered into in the
State of Delaware, and in all respects shall be interpreted, enforced and
governed under the internal laws of the State of Delaware. Any dispute under
this Waiver and Release Agreement shall be adjudicated by a court of competent
jurisdiction in the State of Delaware.
(11) I further acknowledge and agree that I have carefully read and fully
understand all of the
<PAGE>
provisions of this Waiver and Release Agreement and that I voluntarily enter
into this Waiver and Release Agreement by signing below.
- ---------------------------
Robert J. Pascal
- ---------------------------
(Date)
ON SEPTEMBER 23, 1997, SIGN, DATE AND RETURN TO:
Legal Department
Bowater Incorporated
P. O. Box 1028
55 East Camperdown Way
Greenville, SC 29602
<PAGE>
EXHIBIT 10.10.3
[Bowater Letterhead]
February 15, 1996
Mr. Ecton R. Manning
Vice President and General Counsel
Bowater Incorporated
55 East Camperdown Way
Greenville, SC 29602
Re: Employment Status Letter Agreement
Dear Ecton:
In accordance with the terms of your Employment Agreement with Bowater
Incorporated (the "Company") dated August 25, 1988, and as amended August 23,
1989 and June 11, 1992, this letter is to confirm your resignation from the
office of Vice President and General Counsel of the Company as of April 1, 1996
and the attendant duties, responsibilities and obligations of you and the
Company for the remainder of your continued employment with the Company until
April 1, 1998.
Therefore, pursuant to the terms of your Employment Agreement, and in exchange
for the further consideration offered you under Item 6 hereof, you, Ecton R.
Manning and the Company hereby agree to the following effective as of April 1,
1996 and continuing through April 1, 1998.
1. RESIGNATION AND EMPLOYMENT STATUS. You shall resign, effective April 1, 1996
from the office of Vice President and General Counsel of the Company. You shall
remain an employee under contract with the Company until April 1, 1998 or until
the earlier of (i) your prior voluntary termination of employment with the
Company, (ii) your involuntary termination for "Cause," as defined under the
terms of your Change in Control Agreement dated November 1, 1995, as it may be
amended, or (iii) your breach of either Section 6 (Nondisclosure) or Section 7
(Noncompete) of your amended Employment Agreement. While an employee of the
Company, you shall devote such of your working time to render services to the
Company as may be required by the Chief Executive Officer or his designee. Your
duties and assignments for the Company shall be directed at the sole discretion
of the Chief Executive Officer or his designee. Notwithstanding your resignation
as an officer of the Company you shall continue to be entitled to
indemnification by the Company to the extent provided in its By-laws, as they
may be amended, as if you had remained an officer during the performance of any
such duties and assignments. With respect to the performance of all such duties
and assignments you shall also be an insured under any directors and officers
liability insurance coverage the Company may have in effect from time to time as
well as the Company's general, automobile and other liability insurance
coverages.
<PAGE>
Mr. Ecton R. Manning
Page 2
2. RELOCATION. Effective April 1, 1996, but no later than June 1, 1996, the
Company shall relocate you and your family to your existing home in Connecticut.
The Company shall pay for or reimburse you for the costs of your relocation in
accordance with the Company's relocation policy then in effect. Prior to June 1,
1996 you shall return to the Company all right, title, interest and possession
of all Greenville, SC real or personal property purchased or reimbursed by the
Company for your use in Greenville SC (unless you have otherwise reached an
agreement with the Company to purchase certain pieces of said personal property
at its fair market value as determined by the Company or its representatives),
including but not limited to the residence located at 14 Hickory Lane,
Greenville, SC 29609 and its Company-paid furnishings, the 1993 Mitsubishi
Diamanti station wagon leased on your behalf by the Company and related Company
property.
You shall permanently vacate the Greenville, SC residence on or before June 1,
1996. Toward this end, effective February 1, 1996 the Company shall place the
Greenville, SC residence on the real estate market with real estate agents of
its choice and you shall permit the Company or its representatives or agents
access to the Greenville, SC residence for the purpose of real estate
appraisals, inspections, showings and related visitations reasonably required of
residence sales. You shall be responsible for the cost to the Company of any
delay in your relocation and continued inhabitancy of the Greenville, SC
residence beyond June 1, 1996 including but not limited to the fair market value
of rental income or the loss of income from the inability to sell the property,
real estate taxes, utilities, upkeep and maintenance and such related costs and
expenses.
3. BUSINESS EXPENSES. You shall not commit to the expenditure of funds on behalf
of the Company with regard to travel, entertainment, or other business related
expense without securing the prior approval of the Chief Executive Officer or
his designee.
4. VACATION. You shall continue to be eligible for five weeks of annual vacation
in accordance with the Company's vacation policy currently in effect; provided,
that your vacation leave shall be approved in advance by the Chief Executive
Officer or his designee and may not interfere with the duties and assignments
assigned to you by the Chief Executive Officer or his designee.
5. BENEFITS. You shall continue to be eligible to participate in all employee
benefit plans maintained by the Company from time to time in which employees at
your present executive level are eligible to participate in accordance with the
terms of those plans, including its medical plan. The Company shall continue to
provide you benefits and make contributions and premium payments on your behalf,
as applicable, for or to those Company benefit programs in which you
participate. You shall continue to be responsible for your share, which may
change from time to time, of any premium payments required for the maintenance
of applicable benefit coverage.
6. CONSIDERATION. In consideration for your agreement to the terms of its letter
and for
<PAGE>
Mr. Ecton R. Manning
Page 3
your cooperation with respect to the matters discussed herein, the Company has
agreed to increase your salary to $220,000 effective January 1, 1996 and has
awarded you as of January 17, 1996, the grant of 15,000 stock options in
accordance with the 1992 Stock Option Plan.
7. ANNOUNCEMENT. Any public announcement of the change in your position with the
Company shall be subject to the prior mutual approval of yourself and the Chief
Executive Officer or his designee.
The remaining provisions of your amended Employment Agreement and amended Change
in Control Agreement shall remain in full force and effect, to the extent not
superseded by the terms of this letter agreement, including the severance
payment obligations of the Company and your obligations regarding nondisclosure
of confidential information and noncompetition against the Company and its
subsidiaries.
Please review this letter, sign the agreement as provided below and return this
signed original to me at your earliest convenience.
Sincerely,
/s/ Arnold M. Nemirow
Arnold M. Nemirow
President
* * * *
I, Ecton R. Manning, for the good and valuable consideration discussed herein,
hereby agree to the terms of this letter agreement as to the conditions of my
continued employment with Bowater Incorporated as of this 15th day of February,
1996.
/s/ Ecton R. Manning
Ecton R. Manning
c: Richard F. Frisch
<PAGE>
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is made as of this 1st day of November, 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 David Granelli Maffucci, 206 Sun Meadow Road, Greenville, SC 29650 (the
"Executive").
WHEREAS, the Corporation desires to employ the Executive as Senior Vice
President-Chief Financial Officer and Treasurer; and
WHEREAS, the Executive is desirous of serving the Corporation in such
capacity;
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. During the term of this Agreement the Corporation
agrees to continue to employ the Executive, and the Executive agrees to continue
in the employ of the Corporation, in accordance with and subject to the
provisions of this Agreement.
2. Term.
(a) Subject to the provisions of subparagraphs (b) and
(c) of this Section 2, the term of this Agreement
shall begin on the Date hereof and shall continue
thereafter until terminated by either party by
written notice given to the other party at least
thirty (30) days prior to the effective date of any
such termination. The effective date of the
termination shall be the date stated in such notice,
provided that if the Corporation specifies an
effective date that is more than (30)
1
<PAGE>
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 Change in Control
Agreement of even date herewith between the
Corporation and the Executive (the "Change in Control
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 Change in Control 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-Chief Financial Officer and Treasurer, 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
2
<PAGE>
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 $178,000 payable in
substantially equal periodic installments on the
Corporation's regular payroll dates. The Executive's
base salary shall be reviewed at least annually and
from time to time may be increased (or reduced, if
such reduction is effected pursuant to
across-the-board salary reductions similarly
affecting all management personnel of the
Corporation).
(b) Bonus Plan. In addition to his base salary, the
Executive shall be entitled to receive a bonus under
the Corporation's bonus plan in effect from time to
time determined in the manner, at the time, and in
the amounts set forth under such plan.
(c) Benefit Plans. The Corporation shall make
contributions on the Executive's behalf to the
various benefit plans and programs of the Corporation
in which the Executive is eligible to participate in
accordance with the provisions thereof as in effect
from time to time.
(d) Vacations. The Executive shall be entitled to paid
vacation, in keeping with the Corporate policy as in
effect from time to time, to be taken at such time or
times as may be approved by the Corporation.
(e) Expenses. The Corporation shall reimburse the
Executive for all reasonable expenses properly
incurred, and appropriately documented, by the
Executive in connection with the business of the
Corporation.
(f) Perquisites. The Corporation 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
4
<PAGE>
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 Change
in Control 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 Change in Control 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
5
<PAGE>
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/ Arnold M. Nemirow
Arnold M. Nemirow
President and Chief Executive Officer
/s/ David Granelli Maffucci
David Granelli Maffucci
6
<PAGE>
Exhibit 10.14
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is made as of this 1st day of April, 1996, by and
between BOWATER INCORPORATED, a Delaware corporation having a mailing address of
55 East Camperdown Way, Greenville, South Carolina 29602 (the "Corporation"),
and Anthony H. Barash residing at 2102 Century Park Lane, Apt. 416, Los Angeles,
CA 90067 (the "Executive").
WHEREAS, the Corporation desires to employ the Executive as Senior Vice
President, Corporate Affairs and General Counsel; and
WHEREAS, the Executive is desirous of serving the Corporation in such
capacity;
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. During the term of this Agreement the Corporation
agrees to continue to employ the Executive, and the Executive agrees to continue
in the employ of the Corporation, in accordance with and subject to the
provisions of this Agreement.
2. Term.
(a) Subject to the provisions of subparagraphs (b) and
(c) of this Section 2, the term of this Agreement
shall begin on the Date hereof and shall continue
thereafter until terminated by either party by
written notice given to the other party at least
thirty (30) days prior to the effective date of any
such termination. The effective date of the
termination shall be the date stated in such notice,
provided that if the Corporation specifies an
effective date that is more than (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 Change in
Control Agreement of even date herewith between the
Corporation and the Executive, the term of this
Agreement shall be deemed to continue until
terminated, but in any event,
1
<PAGE>
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 Change in Control 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, Corporate Affairs and General Counsel of
the Corporation with the duties and responsibilities customarily attendant to
that office, including, but not limited to, serving as Chief Legal Officer of
the Corporation and supervisor of the Corporation's external communications,
including legislative and government affairs, and shareholder and other public
communications. The Executive shall report to the Chief Executive Officer of the
Corporation and shall undertake such other and further assignments and
responsibilities of at least comparable status as the Chief Executive Officer
and the Board of Directors may direct, provided that the Executive shall not be
required to do anything inconsistent with the normal and customary
responsibilities of the General Counsel of a comparable company or the Rules of
Professional Conduct governing attorneys. 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 that the Executive may serve on corporate, civic or
charitable boards or committees, attend and participate in professional and
educational activities, and manage personal investments and business affairs, so
long as such activities do not require substantial services or other commitments
which interfere with the performance of his duties hereunder.
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.
2
<PAGE>
(a) Base Salary. The Corporation shall pay to the
Executive an annual base salary of $260,000 payable
in substantially equal periodic installments on the
Corporation's regular payroll dates. The Executive's
base salary shall be reviewed at least annually and
from time to time may be increased (or reduced, if
such reduction is effected pursuant to
across-the-board salary reductions similarly
affecting all management personnel of the
Corporation).
(b) Bonus Plan. In addition to his base salary, the
Executive shall be entitled to receive a bonus under
the Corporation's bonus plan in effect from time to
time determined in the manner, at the time, and in
the amounts set forth under such plan. The target
bonus formula for this position is 40%. Any 1996
bonus will be prorated to the nearest full month of
active employment.
(c) Equity Participation Rights (EPR). The Executive
shall also receive a grant of 30,000 EPR's under the
January 1996 Plan. The grant price will be the "Fair
Market Value", as defined, on April 1, 1996.
(d) 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. Additionally, the Executive shall
be entitled to an additional 5 years of credited
service upon his early or normal retirement. Further,
the Executive shall be entitled to the benefits of
the Bowater relocation policy, enhanced to include up
to one year of temporary housing.
(e) Vacations. The Executive shall be entitled to paid
vacation, in the amount of 5 weeks, 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
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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. Nothing contained herein shall be deemed to limit or
restrict the Executive, at any time after the expiration or termination of this
Agreement, from engaging in the private practice of law and representing any
client whatsoever, without regard to whether such client competes, directly or
indirectly, with the business of the Corporation.
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. If any payment to the Executive required by this Section 8 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 the terms hereof until paid. 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
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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 Change in Control Agreement of even date
hereof between the Corporation and the Executive, if termination occurs in a
manner and at a time when such Change in Control 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 Change in Control 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.
15. 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
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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. Judgement 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. In any such
action or arbitration, the prevailing party shall be entitled to recover all his
or its costs and expenses incurred with respect thereto, including but not
limited to, attorney's fees.
16. 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 Corporation and the Executive have executed
this Agreement as of the day and year first above written.
BOWATER INCORPORATED
/s/ Carolann C. Gilbertson By /s/ Richard F. Frisch
Witness Richard F. Frisch
Vice President - Human Resources
/s/ Carolann C. Gilbertson /s/ Anthony H. Barash
Witness Anthony H. Barash
6
<PAGE>
EXHIBIT 10.17.2
AMENDMENT TO THE
BOWATER INCORPORATED
1984 STOCK OPTION PLAN
The Bowater Incorporated 1984 Stock Option Plan (the "Plan") is hereby
amended effective as of July 22, 1987 as follows:
1. Section 11 of the Plan is hereby amended by
adding the following to the end thereof:
"(d) Each employee exercising an option or stock
appreciation right as a condition to such
exercise shall pay to the Corporation the
amount, if any, required to be withheld from
distributions resulting from such exercise
under applicable Federal and State income tax
laws ("Withholding Taxes"). Such Withholding
Taxes shall be payable as of the date income
from the exercise of the option or stock
appreciation right is includible in the
employee's gross income for Federal income tax
purposes (the "Tax Date"). The Employee may
satisfy this requirement by electing one of
the following methods (or a combination
thereof): (i) remitting to the Corporation a
certified check in the amount of such
Withholding Taxes, (ii) remitting to the
Corporation a number of shares of the
Corporation's common stock having an aggregate
fair market value as of the Tax Date as
computed pursuant to Section 10 hereof equal
to the amount of such Withholding Taxes, (iii)
if the employee is exercising a stock
appreciation right for cash, electing to have
the Corporation withhold from the resulting
cash distribution an amount equal to the
amount of such Withholding Taxes, or (iv) if
the employee is exercising a stock option or
exercising a stock appreciation right for
stock, electing to have the Corporation
withhold from such distribution the number of
shares of the Corporation's common stock
required to satisfy such Withholding Taxes.
Any election by an employee pursuant to
clauses (ii), (iii) or (iv) of this Section
11(d) must be made on or prior to the Tax Date
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and will be irrevocable and subject to the approval
of the Committee. In addition, if the employee is a
director or officer of the Corporation within the
meaning of Section 16(a) of the Securities Exchange
Act of 1934, an election pursuant to clauses (ii),
(iii) or (iv) of this Section 11(d) cannot be made
until at least six months after the grant of the
option or stock appreciation right to be exercised
(except that this limitation shall not apply in the
event the death or disability of the employee occurs
prior to expiration of the six-month period), and
such election must be made either by the date which
is at least six months prior to the Tax Date or
during the period beginning on the third business day
following the date of release of the Corporation's
quarterly or annual summary statements of sales and
earnings and ending on the twelfth business day
following such date, which period begins prior to the
Tax Date."
IN WITNESS WHEREOF, Bowater Incorporated has caused this Amendment to
be executed by its duly designated officers and its corporate seal to be affixed
hereto on the 22nd day of July, 1987.
BOWATER INCORPORATED
By /s/ R. E. Gustafson
Vice President
ATTEST:
By: /s/ Leonard M. Saari
Secretary
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EXHIBIT 10.17.4
AMENDMENT NO. 4 TO THE BOWATER INCORPORATED
1984 STOCK OPTION PLAN
The Bowater Incorporated 1984 Stock Option Plan, as amended to date
(the "Plan") is hereby amended effective as of August 15, 1995 as follows:
1. The text appearing in Section 11 entitled "Exercise of Options and
Rights", item (c) following the phrase "received by the Corporation in cash"
shall be deleted and replaced with the following:
, by check or in stock as provided in paragraph 10 hereof. In
addition, in the case of options that are not intended to be
incentive stock options within the meaning of Section 422 of
the Code, payment of the option price may be made, if
authorized by the Committee's regulations and accomplished in
accordance therewith, by delivery of a properly executed
exercise notice together with irrevocable instructions to a
broker to deliver promptly to the Corporation the portion of
sale or loan proceeds sufficient to pay the option price.
Neither the holder of an option or stock appreciation right
nor such holder's legal representative, legatee, or
distributee shall be or be deemed to be a holder of any shares
subject to such option or stock appreciation right unless and
until a certificate or certificates therefor is issued in his
or her name or a person designated by him or her.
In all other respects the Plan shall remain unchanged.
IN WITNESS WHEREOF, Bowater Incorporated has caused this Amendment to
be executed by its duly designated officers and its corporate seal to be affixed
hereto on the 27th day of March, 1996.
BOWATER INCORPORATED
By: /s/ Richard F. Frisch
Richard F. Frisch
Vice President -- Human Resources
Attest:
By: /s/ Wendy C. Shiba
Wendy C. Shiba, Secretary
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EXHIBIT 10.18
DEFERRED COMPENSATION PLAN
FOR OUTSIDE DIRECTORS OF
BOWATER INCORPORATED
As Amended and Restated
Effective January 1, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I - DEFINITIONS
<S> <C>
Section 1.01. "Account"........................................................................ 1
Section 1.02. "Administrator".................................................................. 1
Section 1.03. "Beneficiary" or "Beneficiaries"................................................. 1
Section 1.04. "Board of Directors"............................................................ 1
Section 1.05. "Cash Account"................................................................... 1
Section 1.06. "Company"........................................................................ 1
Section 1.07. "Compensation"................................................................... 2
Section 1.08. "Effective Date"................................................................. 2
Section 1.09. "Officer Committee".............................................................. 2
Section 1.10. "Outside Director"............................................................... 2
Section 1.11. "Participant".................................................................... 2
Section 1.12. "Plan"........................................................................... 2
Section 1.13. "Plan Year"...................................................................... 2
Section 1.14. "Stock".......................................................................... 2
Section 1.15. "Stock Account".................................................................. 2
ARTICLE II - PARTICIPATION ............................................................................ 3
Section 2.01. Participation is Voluntary....................................................... 3
Section 2.02. Application to Participate....................................................... 3
Section 2.03. Designation of Beneficiary....................................................... 4
Section 2.04. Allocation of Deferrals.......................................................... 4
ARTICLE III - ACCRUAL OF BENEFITS ..................................................................... 6
Section 3.01. Deferred Compensation............................................................ 6
Section 3.02. Earnings and Adjustments......................................................... 7
Section 3.03. Vesting.......................................................................... 8
ARTICLE IV - DISTRIBUTION OF BENEFITS ................................................................. 9
Section 4.01. Time of Distribution............................................................. 9
Section 4.02. Payment Upon Death .............................................................. 9
Section 4.03. Methods of Payment .............................................................. 10
ARTICLE V - THE ADMINISTRATOR ......................................................................... 11
Section 5.01. Appointment ..................................................................... 11
Section 5.02. Rights and Duties ............................................................... 11
Section 5.03. Annual Reports .................................................................. 12
<PAGE>
Section 5.04. Information ..................................................................... 12
Section 5.05. Compensation, Indemnity and Liability............................................ 12
ARTICLE VI - AMENDMENT AND DISCONTINUANCE ............................................................. 13
Section 6.01. Amendments...................................................................... 13
Section 6.02. Discontinuance of Plan.......................................................... 13
ARTICLE VII - MISCELLANEOUS ........................................................................... 14
Section 7.01. No Interest in Assets ........................................................... 14
Section 7.02. Restriction Against Assignment .................................................. 14
Section 7.03. Receipt or Release ............................................................. 15
Section 7.04. Payment on Behalf of Minors or Incompetents .................................... 15
Section 7.05. Forfeiture ...................................................................... 15
Section 7.06. Withholding ..................................................................... 16
Section 7.07. Delaware Law Governs ............................................................ 16
Section 7.08. Headings Not Part of Agreement................................................... 16
Section 7.09. Successors and Assigns ......................................................... 16
</TABLE>
<PAGE>
DEFERRED COMPENSATION PLAN
FOR OUTSIDE DIRECTORS OF
BOWATER INCORPORATED
As Amended and Restated
Effective January 1, 1996
PREAMBLE
The Deferred Compensation Plan for Outside Directors of Bowater
Incorporated is hereby amended and restated, effective January 1, 1996, for the
benefit of Directors of Bowater Incorporated who are not employees of the
Company. The Company has amended and restated this Plan to provide outside
Directors with (i) a vehicle through which they may accumulate funds for
retirement, and (ii) an opportunity to acquire Company stock and, with it, a
direct and personal stake in the performance of the Company.
<PAGE>
DEFERRED COMPENSATION PLAN
FOR OUTSIDE DIRECTORS OF
BOWATER INCORPORATED
As Amended and Restated
Effective January 1, 1996
ARTICLE I.
DEFINITIONS
This Plan shall be known as the "Deferred Compensation Plan for Outside
Directors of Bowater Incorporated As Amended and Restated Effective January 1,
1996," as now adopted or hereafter further amended.
Whenever the following terms are used herein, with the first letter
capitalized, they shall, unless the context clearly indicates otherwise, have
the meanings specified below. Whenever applicable, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
Section 1.01. "Account" shall mean the account maintained by the
Administrator for each Participant, which shall consist of the Participant's
Cash Account and the Participant's Stock Account.
Section 1.02. "Administrator" shall mean the individual (who shall not
be a Participant) appointed by the Officer Committee to administer the Plan.
Section 1.03. "Beneficiary" or "Beneficiaries" shall mean the person or
persons (including, without limitation, any trustee) last designated by a
Participant to receive the benefits specified hereunder in the event of the
Participant's death, or if there is no designated Beneficiary or surviving
Beneficiary, the Participant's estate.
Section 1.04. "Board of Directors" shall mean the Board of Directors of
the Company.
Section 1.05. "Cash Account" shall mean the record of (i) deferrals
made hereunder and designated by the Participant for allocation to the Cash
Account; and (ii) earnings on the amounts described in clause (i) credited
pursuant to Section 3.02(a).
Section 1.06. "Company" shall mean Bowater Incorporated.
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Section 1.07. "Compensation" shall mean, for any Plan Year, all
retainer, meeting and committee fees payable to an Outside Director for service
on the Board of Directors, before any reduction pursuant to this Plan.
Section 1.08. "Effective Date" shall mean January 1, 1996.
Section 1.09. "Officer Committee" shall mean the following officers of
the Company: Chief Executive Officer, Chief Financial Officer and Vice
President, Human Resources.
Section 1.10. "Outside Director" shall mean a member of the Board of
Directors who is not an employee of the Company or its subsidiaries or
affiliates.
Section 1.11. "Participant" shall mean any Outside Director who
actually participates in this Plan in any Plan Year and who is entitled to a
benefit hereunder.
Section 1.12. "Plan" shall mean the Deferred Compensation Plan for
Outside Directors of Bowater Incorporated, As Amended and Restated Effective
January 1, 1996, as set forth herein and as the same shall from time to time be
further amended.
Section 1.13. "Plan Year" shall mean each year beginning on the first
day of January and ending on the 31st day of December.
Section 1.14. "Stock" shall mean Common Stock of the Company, $1.00
par value per share.
Section 1.15. "Stock Account" shall mean the record of (i) deferrals
made hereunder and designated by the Participant for allocation to the Stock
Account; and (ii) credits and adjustments made pursuant to Section 3.02(b) and
(c).
2
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ARTICLE II.
PARTICIPATION
Section 2.01. Participation is Voluntary
Participation in the Plan is voluntary.
Section 2.02. Application to Participate
An Outside Director who wishes to participate in the Plan for any Plan
Year must deliver a written application to the Administrator no later than: (i)
except as provided in clause (ii), the last day of the month immediately
preceding such Plan Year or (ii) in the Plan Year commencing with the Effective
Date, the Outside Director's first Board of Directors or committee meeting of
such Plan Year. The Administrator shall notify each Outside Director of his
prospective eligibility to participate in the Plan at least thirty (30) days
prior to the time he must deliver his application for participation.
Notwithstanding the foregoing, the Administrator may accept such an application
delivered after the day specified in the first sentence of this Section 2.02 if
it is an application of an Outside Director who was not an Outside Director as
of such day, in which case the application must be delivered within thirty (30)
days of the date the individual becomes an Outside Director. The application for
participation shall constitute the Outside Director's acceptance of the benefits
and terms of the Plan, shall be implemented with respect to compensation
allocable to the period to which the election relates, and shall state the
portion of his Compensation that he elects to defer and the time at and manner
in which the Outside Director desires a distribution of his benefits under the
Plan, as hereinafter specified. An election to defer Compensation shall remain
in effect (and be irrevocable) with respect to the Plan Year in which it first
becomes effective; provided
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that any election permitted hereunder to be made after the start of a Plan Year
will only be effective for Compensation payable after such election is made. The
election shall apply also to each subsequent Plan Year unless the election
expressly provides otherwise or it is revoked or changed. An election to defer
Compensation may be revoked or changed for future Plan Years if such revocation
or change is made prior to the beginning of the Plan Year to which it relates.
Section 2.03. Designation of Beneficiary
Each Participant shall designate, on forms provided by the
Administrator, signed by the Participant and delivered to the Administrator, the
Beneficiary or Beneficiaries to receive the amounts distributable in the event
of such Participant's death. A Participant may from time to time change the
designated Beneficiary or Beneficiaries, without the consent of such Beneficiary
or Beneficiaries, by delivering to the Administrator a new written designation
of Beneficiary signed by the Participant, provided that the spouse of a
Participant shall be required to consent in writing to any designation of a
primary Beneficiary or Beneficiaries other than such spouse. The Company and the
Administrator may rely upon the Beneficiary designation last delivered in
accordance with the terms of the Plan.
Section 2.04. Allocation of Deferrals
(a) An election to defer Compensation shall specify whether deferrals
are to be allocated to the Cash Account or the Stock Account (or both Accounts
in increments of ten percent). The allocation election shall apply to the Plan
Year for which the deferral election is filed, and also shall apply to each
subsequent Plan Year unless the election expressly provides
4
<PAGE>
otherwise or it is changed. An allocation election may be changed for future
Plan Years if such change is made prior to the beginning of the Plan Year to
which the change relates.
(b) A Participant's Account attributable to deferrals made before the
Effective Date shall be allocated to the Stock Account, with such Account being
credited with the same number of shares of Stock as are credited to the
Participant hereunder immediately before the Effective Date. On or before
January 17, 1996, each Participant may elect to allocate to the Cash Account a
specified dollar amount or percentage of the amount so allocated to his Stock
Account, on such forms and consistent with such procedures as are established by
the Administrator. The amount allocated to the Cash Account shall be determined
by multiplying the number of shares of stock being allocated by the "Stock
Price" (as defined below) as of the date that the Participant elects to have
such allocation made. Amounts so allocated to the Cash Account shall be credited
with interest in the manner described in Section 3.02.
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ARTICLE III.
ACCRUAL OF BENEFITS
Section 3.01. Deferred Compensation
Each Outside Director who elects to be a Participant in the Plan for
any Plan Year must irrevocably elect to defer the receipt of all or a specified
percentage of his Compensation for at least one (1) Plan Year in accordance with
the terms of Section 2.02. The amount deferred shall be credited to the
Participant's Account in the following manner: (i) amounts allocated to the
Participant's Cash Account pursuant to Section 2.04 shall be credited on the
date on which such Compensation would have been payable to the Participant (but
for his election to defer), and (ii) amounts allocated to the Participant's
Stock Account pursuant to Section 2.04 shall be converted to a number of shares
of Stock by dividing the amount of the Compensation to be deferred by that
amount which is 95% of the "Stock Price" on such date, and the resulting number
of shares shall be credited to such Participant's Stock Account as of the date
on which such Compensation would have been payable to the Participant (but for
such election). The "Stock Price" shall be the closing market price of one (1)
share of the Stock on the Composite Tape of the New York Stock Exchange for that
date. If the Composite Tape is not operating on such date, or Stock is not
traded there on such date, the value shall be computed using the closing price
on the next preceding business day on which such Stock was traded thereon.
The Quotient shall be expressed in whole or fractional shares of Stock
to the nearest one/one hundredth (1/100th) of a share. The credits to a
Participant's account shall be paid in accordance with Article IV.
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Section 3.02. Earnings and Adjustments
(a) As of the last day of each month, the Cash Account of each
Participant shall be credited with interest, on the average balance of such
Account during such month, at a rate equal to the rate at which earnings have
accrued for such month in the Fixed Income Fund maintained for the Bowater
Incorporated Salaried Employees' Savings Plan.
(b) Whenever dividends are paid with respect to shares of Stock, each
Participant's Stock Account shall be credited with an additional number of
shares of Stock (including fractions to the nearest one/one hundredth (1/100th))
equal in value to the amount of the dividend paid on a single share of Stock
multiplied by the number of shares of Stock (including fractions) credited to a
Participant's Account as of the date of record for dividend purposes. For
purposes of crediting dividends, the value of Stock shall be the Stock Price as
of the day dividends are actually paid on Stock.
(c) The number of shares of Stock in each Participant's Stock Account
shall be appropriately adjusted and modified upon the occurrence of any stock
split, reverse stock split, stock dividend or stock consolidation. In the event
of a merger, consolidation or an acquisition of more than 50% of the issued and
outstanding shares of Stock, the Officer Committee shall have the authority to
amend the Plan to provide for conversion of Stock credited to Participants'
Stock Accounts into stock of the resulting or acquiring company (or a related
company), as appropriate, if such stock is publicly traded or, if not, into cash
of equal value on the date of merger, consolidation or acquisition. If cash is
credited pursuant to the foregoing, it shall be allocated to Participants' Cash
Accounts. If publicly traded stock of the resulting or acquiring company (or a
related company) is credited to Participants' Stock Accounts, dividends shall be
credited thereto in
7
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the same manner as dividends are credited on Stock credited to Stock Accounts.
Section 3.03. Vesting
The interest of each Participant in any benefit accrued hereunder shall
be fully vested and nonforfeitable at all times. Notwithstanding the foregoing,
the Company is not obligated to acquire, issue or hold any Stock, cash or other
asset by reason of the crediting to Participants' Accounts of shares of Stock or
cash required by this Plan, and no Participant shall have any right to compel
the Company to acquire, issue or hold Stock, cash or other asset in any amount
by reason of the provisions of this Plan.
8
<PAGE>
ARTICLE IV.
DISTRIBUTION OF BENEFITS
Section 4.01. Time of Distribution
A Participant may elect to have the balance of his Account distributed
to him (i) as soon as reasonably possible after the Participant ceases to be an
Outside Director, or (ii) on a stated date occurring a stated number of years
after the Participant ceases to be an Outside Director (subject to such
limitations as the Administrator may reasonably impose). Such an election shall
be made on the application filed pursuant to Section 2.02. A Participant may
change any election made pursuant to this Section 4.01 from time to time;
provided that, an election will only be effective if it is made prior to the
January 1 that is at least one (1) year before the date on which the Participant
ceases to be an Outside Director. If an election is not effective by virtue of
the foregoing proviso, the immediately preceding election of the Participant
shall be given effect.
Section 4.02. Payment Upon Death
Notwithstanding any election under Section 4.01, if a Participant dies
prior to distribution of his Account, the balance credited to the Participant's
Account as of the date of death shall be paid, as soon as reasonably possible
thereafter, to the Participant's Beneficiary or Beneficiaries.
Section 4.03. Methods of Payment
All distributions under the Plan shall be in the form of a single lump
sum, or in up to ten annual installments, as elected by the Participant. Such an
election shall be made on the
9
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application filed pursuant to Section 2.02. A Participant may change any
election made pursuant to this Section 4.03 from time to time; provided that, an
election will only be effective if it is made prior to the January 1 that is at
least one (1) year before the date on which the Participant ceases to be an
Outside Director. If an election is not effective by virtue of the foregoing
proviso, the immediately preceding election of the Participant shall be given
effect. A Participant may elect to have his Account distributed either in cash,
or in Stock based upon the value of the Stock Price on the date as of which such
distribution occurs. Such election shall be made no less than thirty (30) days
prior to the date on which the distribution is to occur and may be made
separately with respect to each installment distribution in the case of an
Account distributed in installments. No election by the Participant to receive
the balance of his Cash Account in Stock may be made if the Participant is then
acting as a disinterested administrator of a plan of the Company under 17 CFR
ss.240.16b-3.
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ARTICLE V.
THE ADMINISTRATOR
Section 5.01. Appointment
An Administrator shall be appointed by the Officer Committee to
administer the Plan as provided herein.
Section 5.02. Rights and Duties
The Administrator, on behalf of the Participants and their
Beneficiaries, shall enforce the Plan, in accordance with its terms, shall be
charged with the general administration of the Plan and shall have all powers
necessary to accomplish those purposes, including, but not by way of limitation,
the following:
(a) to compute and certify the amount and kind of benefits payable
to Participants and their Beneficiaries;
(b) to maintain or to designate any person or entity to maintain
all the necessary records for the administration of the Plan;
(c) to make and publish such rules for the regulation of the Plan
as are not inconsistent with the terms hereof; and
(d) to provide for disclosure of such information and filing or
provision of such reports and statements to Participants or
Beneficiaries under this Plan as the Administrator deems
appropriate.
All actions and decisions of the Administrator shall be conclusive on all
persons interested in the Plan except to the extent otherwise specifically
indicated herein. The Administrator may appoint a Plan administrator and agents,
and delegate thereto such powers and duties in connection with the
administration of the Plan as the Administrator may from time to time prescribe.
11
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Section 5.03. Annual Reports
The Administrator shall, within sixty (60) days after the end of each
Plan Year, furnish each Participant with a written annual report indicating the
number of shares of Stock and the amount of cash credited to his Account as of
the end of the preceding Plan Year.
Section 5.04. Information
To enable the Administrator to perform his functions, the Company shall
supply full and timely information to the Administrator on all matters relating
to the Compensation of all Participants, their status as Outside Directors,
their deferral elections and such other pertinent facts as the Administrator may
require.
Section 5.05. Compensation, Indemnity and Liability
The Administrator shall serve without bond, except as otherwise
required by law, and without compensation for his services hereunder. All
expenses of the Administrator shall be paid by the Company and the Company shall
furnish the Administrator with such clerical and other assistance as is
necessary in the performance of his duties.
The Administrator shall not be liable for any act or omission on his
part, excepting only his own willful misconduct or gross negligence. The Company
shall indemnify and save harmless the Administrator against any and all expenses
and liabilities arising out of his administration of the Plan, excepting only
expenses and liabilities arising out of his own willful misconduct or gross
negligence.
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ARTICLE VI.
AMENDMENT AND DISCONTINUANCE
Section 6.01. Amendments
The Officer Committee shall have the right to amend the Plan from time
to time, and to amend or cancel any amendments, provided, however, that no
amendment shall reduce any amount already credited to a Participant's Account as
of the effective date of such amendment.
Section 6.02. Discontinuance of Plan
It is the expectation of the Company that the Plan will be continued
indefinitely, but continuance of the Plan is not assumed as a contractual
obligation of the Company, and the right is reserved by the Company at any time
to reduce, suspend or discontinue the Plan, provided, however, the Company shall
in no event have the power to reduce the amount already credited to a
Participant's Account as of the effective date of any such reduction, suspension
or discontinuance nor to discontinue the crediting of earnings on such amounts
subsequent to said date. In the event of a reduction, suspension or
discontinuance of the Plan, the payment of benefits accrued hereunder shall
continue to be made in accordance with the provisions of the Plan.
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ARTICLE VII.
MISCELLANEOUS
Section 7.01. No Interest in Assets
No Participant or any other person shall have any interest in any
shares of Stock credited to his Account or in any specific asset of the Company
by reason of any amount credited to him hereunder, nor any right to receive any
distribution under the Plan except as and to the extent expressly provided in
the Plan. There shall be no funding of any benefits which may become payable
hereunder. No trust shall be created by the execution of adoption of this Plan
or be required to be created in connection herewith. Any benefits which become
payable hereunder shall be paid from the general assets of the Company. Nothing
in the Plan shall be deemed to give any Outside Director any right to
participate in the Plan, except in accordance with the provisions of the Plan.
Section 7.02. Restriction Against Assignment
The Company shall pay all amounts payable hereunder only to the person
or persons designated by the Plan as Participant or Beneficiary, as appropriate,
and not to any other person or corporation. No part of a Participant's Account
shall be liable for the debts, contracts or engagements of any Participant, his
Beneficiaries or successors in interest, nor shall it be subject to execution by
levy, attachment or garnishment or by any other legal or equitable proceeding,
nor shall any such person have any right to alienate, anticipate, commute,
pledge, encumber or assign any benefits or payments hereunder in any manner
whatsoever.
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Section 7.03. Receipt or Release
Any payment to any Participant or his Beneficiary in accordance with
the provisions of the Plan shall, to the extent thereof, be made in full
satisfaction of all claims against the Administrator and the Company, and the
Administrator may require such Participant or Beneficiary, as a condition
precedent to such payment, to execute a receipt, release and indemnification to
such effect.
Section 7.04. Payment on Behalf of Minors or Incompetents
In the event any amount becomes payable under the Plan to a minor or a
person who, in the sole judgment of the Administrator, is considered by reason
of physical or mental condition to be unable to make valid receipt therefor, the
Administrator may direct that such payment be made to any person found by the
Administrator, in his sole judgment, to have assumed the care of such minor or
other person. Any payment made pursuant to such determination shall constitute a
full release and discharge of the Administrator and the Company.
Section 7.05. Forfeiture
Any payment or distribution to a Participant under the Plan which is
not claimed by the Participant, Beneficiary or other person entitled thereto
within three (3) years after becoming payable shall be forfeited and canceled
and shall remain with the Company and no other person shall have any right
thereto or interest therein. The Company shall not have any duty to give notice
that amounts are payable under the Plan to any person other than the Participant
and the designated Beneficiary or Beneficiaries.
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Section 7.06. Withholding
The Company may deduct from the amount of all distributions under the
Plan any taxes required to be withheld by the Federal or any State or local
government.
Section 7.07. Delaware Law Governs
This Plan shall be construed, regulated and administered in accordance
with the laws of the State of Delaware.
Section 7.08. Headings Not Part of Agreement
Headings and subheadings in this Plan are inserted for convenience of
reference only and are not to be considered in the construction of the provision
hereto.
Section 7.09. Successors and Assigns
This Plan shall inure to the benefit of, and be binding upon, the
parties hereto and their successors and assigns.
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EXHIBIT 10.19
BOWATER INCORPORATED
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
(Effective July 1, 1988)
PREAMBLE
Establishment of Plan
The Bowater Incorporated Retirement Plan for Outside Directors is
established effective July 1, 1988 for the benefit of Directors of
Bowater Incorporated who are not employees of the Company.
Objective of Plan
Bowater recognizes that its long-term success and achievements are
significantly influenced by the expertise and continuity of its
leadership. In view of this, the Company has adopted this Plan.
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BOWATER INCORPORATED
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
(Effective July 1, 1988)
Table of Contents
<TABLE>
-Page-
<S> <C>
PREAMBLE........................................................................i
ARTICLE 1: DEFINITIONS
1.01 "Affiliate .....................................................1
1.02 "Board".........................................................1
1.03 "Committee" ....................................................1
1.04 "Company" ......................................................1
1.05 "Continuous Service"............................................1
1.06 "Director"......................................................1
1.07 "Earnings"......................................................1
1.08 "Effective Date"................................................1
1.09 "Final Average Earnings"........................................1
1.10 "Inside Director"...............................................2
1.11 "Outside Director"..............................................2
1.12 "Participating Director"........................................2
1.13 "Plan" .........................................................2
1.14 "Retire"........................................................2
1.15 "Service".......................................................2
ARTICLE 2: ELIGIBILITY TO RETIRE
2.01 General Service Requirement.........................................2
2.02 Waiver of Service and Other Requirements............................2
ARTICLE 3: COMMENCEMENT OF RETIREMENT INCOME
3.01 Early Retirement................................................3
3.02 Normal Retirement...............................................3
3.03 Postponed Retirement............................................3
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<PAGE>
ARTICLE 4: AMOUNT OF RETIREMENT INCOME
4.01 Normal Retirement Benefifts.....................................3
4.02 Early Retirement Benefits.......................................3
4.03 Postponed Retirement Benefits...................................3
4.04 Benefits........................................................4
ARTICLE 5: DEATH AND DISABILITY BENEFITS.......................................4
ARTICLE 6: COVENANTS OF DIRECTOR
6.01 During Continuation of Service..................................4
6.02 Following Retirement............................................4
ARTICLE 7: REMEDIES OF THE COMPANY.............................................4
ARTICLE 8: GENERAL PROVISIONS
8.01 Limitation of Rights of the Director...........................5
8.02 Discharge of Obligations.......................................5
8.03 No Assignment of Benefits......................................6
8.04 Payments to Incompetents.......................................6
8.05 Construction...................................................6
8.06 Amendment or Termination.......................................6
8.07 Funding........................................................6
8.08 Governing Law..................................................7
ARTICLE 9: CLAIMS PROCEDURE
9.01 Submission of Claims............................................7
9.02 Written Notice of Denied Claim..................................7
9.03 Review of Decision Denying Claim................................7
9.04 Hearing.........................................................8
9.05 Written Decision of Committee...................................8
</TABLE>
iii
<PAGE>
BOWATER INCORPORATED RETIREMENT PLAN
FOR
OUTSIDE DIRECTORS
(Effective July 1, 1988, subject to
subsequent shareholder approval)
ARTICLE 1: DEFINITIONS
The following words and phrases, when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall
have the following meanings. Wherever applicable the masculine pronoun
shall include the feminine pronoun and the singular shall include the
plural.
1.01 AFFILIATE: Any company directly or indirectly controlled by,
controlling, or under common control with the Company.
1.02 BOARD: The Board of Directors of the Company.
1.03 COMMITTEE: The Executive Committee of the Board exclusive of any member
thereof who is at the time a "Participating Director" as that term is
hereinafter defined.
1.04 COMPANY: Bowater Incorporated.
1.05 CONTINUOUS SERVICE: Incumbency as a Director without interruption. For
the purpose hereof, Continuous Service shall include periods of
incumbency during disability or leave of absence granted by the
Company. Although incumbency while an Inside Director will not be
credited as Service, Service will not be deemed to be interrupted by
incumbency while an Inside Director.
1.06 DIRECTOR: Any individual who is elected and qualifies to serve as a
member of the Board. At all times of incumbency as a Director, an
individual is either an "Inside Director" or an "Outside Director" as
those terms are hereinafter defined.
1.07 EARNINGS: The regular retainer paid to a Director by the Company for
serving as a Director, excluding any reimbursement for out-of-pocket
expenses or fees paid for attendance at meetings of committees.
1.08 EFFECTIVE DATE: The date after which the provisions of this Plan shall
be effective, which is July 1, 1988, subject, however, to obtaining the
approval of a majority of those of the Company's shareholders who vote
at the next Annual or Special Shareholders' Meeting following such
date.
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1.09 FINAL AVERAGE EARNINGS: The amount determined by dividing by four (4)
the annualized Earnings of a Director at the termination of his
Service.
1.10 INSIDE DIRECTOR: A Director who is an employee of the Company or any of
its Affiliates (but only during such times as such employment
continues).
1.11 OUTSIDE DIRECTOR: A Director who is not an Inside Director.
1.12 PARTICIPATING DIRECTOR: An Outside Director who continues to have
rights or contingent rights to benefits payable under this Plan, as
provided in Articles 2 and 3 and subject to the terms and conditions of
Articles 6 and 7.
1.13 PLAN: The Bowater Incorporated Retirement Plan for Outside Directors,
as stated herein, and as it may be amended from time to time.
1.14 RETIRE: To terminate incumbency as a Director for any reason other than
death under circumstances which entitle a terminating Participating
Director to receive retirement income under this Plan. A change in
status which does not interrupt Continuous Service under Section 1.05
shall not constitute a termination for the purposes of this Section.
1.15 SERVICE: Incumbency, measured in years and months to the nearest whole
month, as an Outside Director of the Company. (While credit for Service
is not given for incumbency as an Inside Director, Continuous Service
is not deemed interrupted by such incumbency. See Section 1.05.)
ARTICLE 2: ELIGIBILITY TO RETIRE
2.01 GENERAL SERVICE REQUIREMENT: Except as provided in Section 2.02, a
Participating Director shall not be eligible to Retire until he has
completed five (5) years of Service in Continuous Service.
2.02 WAIVER OF SERVICE AND OTHER REQUIREMENTS: Any Participating Director
who was a Director immediately prior to a change in control of the
Company who is removed from or not renominated to his directorship by
reason of such change in control shall be eligible to Retire early
pursuant to Section 3.01 without the consent of the Company and without
regard to his attained age at the time of such retirement.
ARTICLE 3: COMMENCEMENT OF RETIREMENT INCOME
3.01 EARLY RETIREMENT: A Participating Director may, with the consent of the
Company, Retire on the first day of any month on or after his
attainment of age fifty-five (55) and the completion of five (5) years
of Service in Continuous Service, and may elect to commence
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<PAGE>
receiving benefits on or after that date.
3.02 NORMAL RETIREMENT: A Participating Director may, with the consent of
the Company, Retire on the first day of the month following his
attainment of age sixty-five (65) and the completion of five (5) years
of Service in Continuous Service and commence receiving benefits on
that date.
3.03 POSTPONED RETIREMENT: A Participating Director who remains a Director
of the Company beyond attainment of age sixty-five (65), may Retire on
the first day of any month following his attainment of age sixty-five
(65) and the completion of five (5) years of Service in Continuous
Service but not later than the expiration of the term to which he was
elected at the time he attained age seventy (70). He may commence
receiving benefits as of the date he retires.
ARTICLE 4: AMOUNT OF RETIREMENT INCOME
4.01 NORMAL RETIREMENT BENEFITS: The normal retirement income benefit
payable under this Plan shall be a quarterly payment commencing as of
the first day of the month following the Participating Director's
sixty-fifth (65th) birthday equal to ten percent (10%) of the
Participating Director's Final Average Earnings multiplied by the
Participating Director's years of Service in Continuous Service up to a
maximum of 10 with proportionate credit for completed months.
4.02 EARLY RETIREMENT BENEFITS: If a Participating Director retires early
pursuant to Section 3.01 hereof, his retirement benefits will be based
on his accrued benefit determined under Section 4.01 as of the date of
his early retirement. Such benefits shall be actuarially reduced for
the period (if any) by which the commencement of benefits precedes the
first day of the month following the Participating Director's
sixty-fifth (65th) birthday. The mortality table used for purposes of
calculating the actuarial reduction hereunder shall be the Unisex
Pension Table, 1984 (set forward one year) and the assumed interest
rate shall be eight percent (8%) per annum.
4.03 POSTPONED RETIREMENT BENEFITS: In the event of postponed retirement
pursuant to Section 3.03 hereof, a Participating Director's retirement
benefits will be based on his accrued benefit determined under Section
4.01 as of the date of his termination of Service. Such benefits shall
commence as of the Participating Director's termination of Service, but
shall not be actuarially increased to reflect commencement subsequent
to the attainment of age sixty-five (65).
4.04 BENEFIT PAYMENTS: Retirement benefits payable pursuant to this Article
shall be paid in arrears as quarterly payments on the first day of each
calendar quarter. The first payment shall be paid on the first day of
the calendar quarter next following the date as of which benefits are
scheduled to commence pursuant to the provisions of Section 4.01, 4.02
or 4.03, as applicable. In any event, the last installment shall be
payable as of the first day of the
3
<PAGE>
month in which the Participting Director dies and paid on the first day
of the next following calendar quarter.
ARTICLE 5: DEATH AND DISABILITY BENEFITS
There are no death or disability benefits under this Plan.
ARTICLE 6: COVENANTS OF DIRECTOR
6.01 DURING CONTINUATION OF SERVICE: As long as a Director continues in
Service, the Director shall devote his best efforts and undivided
loyalty to the Company, and devote such time to his tasks as a Director
as shall be required to discharge his obligations to the best of his
abilities.
6.02 FOLLOWING RETIREMENT: If a Participating Director's Service to the
Company terminates under circumstances which obligate the Company to
make quarterly payments under the provisions of Article 4, the
Participating Director shall not, for a period of five (5) years
thereafter, serve as a principal, director, officer or employee of a
corporation or other entity which competes directly or indirectly with
the Company or any of its Affiliates in any geographic area where the
Company or any of its Affiliates is conducting or actively proposing to
conduct its business, and shall be available to the Company at the
mutual convenience of the parties, from time to time, to consult with
the Company in an advisory capacity if, and when, the Participating
Director is reasonably requested to do so by the Company.
ARTICLE 7: REMEDIES OF THE COMPANY
Upon the occurrence of any one or more of the following circumstances:
(a) If the Director's Service is terminated whether by the
Director, by the Company or its shareholders, for any reason
prior to the Director's completion of five (5) years of
Service in Continuous Service;
(b) If the Participating Director is at any time removed from
incumbency as a Director for reasons deriving from his gross
negligence or misconduct, detrimental to the business
interests of the Company, or for criminal conduct of any type
(regardless of the effect thereof on the business interests of
the Company); or
(c) If the Participating Director at any time fails to comply with
the requirements of Article 6 hereof;
4
<PAGE>
then and in any such event the Company's obligation to pay or provide
benefits hereunder to any such Participating Director shall
automatically cease and terminate, and neither said Participating
Director nor any other person claiming any benefits pursuant to said
Participating Director's participation in this Plan shall have any
rights, claims or causes of action hereunder against the Board, the
Company or any person acting on their behalf. The Company's sole remedy
for breach by the Participating Director of the provisions of Article 6
hereof shall be to cease paying or providing benefits pursuant to the
provisions of this Article 7, but this shall not preclude the Company
from recovering from a Participating Director damages inflicted on the
Company or its affiliates by conduct of a Participating Director which
renders the Participating Director liable to the Company independently
of the fact that such conduct constitutes a breach of the Participating
Director's covenants in Article 6 hereof.
ARTICLE 8: GENERAL PROVISIONS
8.01 LIMITATION OF RIGHTS OF THE DIRECTOR: Inclusion under the Plan shall
not give a Director any right or claim to a benefit, except as
specifically defined in this Plan. The establishment of the Plan shall
not be construed as giving any Director a right to be continued in
Service as a Director of the Company.
8.02 DISCHARGE OF OBLIGATIONS: The Company may at any time fully and
completely satisfy and discharge all its obligations hereunder to a
Participating Director by:
(a) delivering, or causing to be delivered, to the Participating
Director a fully-paid annuity policy issued by a corporate
insurer, providing quarterly or more frequent payments equal
to (or greater than) the amount the Company is obligated to
pay hereunder, or
(b) making some other comparable arrangement for the Participating
Director; provided that provision is made for not less than
the benefits to which the Participating Director may be
entitled under the provisions hereof, whether or not such
rights are enforceable at the time.
8.03 NO ASSIGNMENT OF BENEFITS: None of the rights of the Participating
Director under this Plan shall be assignable in whole or in part either
inter vivos or by will or succession, but shall be personal to the
individual Participating Director.
8.04 PAYMENTS TO INCOMPETENTS: In the event that any quarterly payment
hereunder becomes payable to a person adjudicated to be incompetent,
payment thereof to the guardian or legal representative of such person
shall constitute full and complete compliance herewith and entitle the
Company to discharge with respect thereto.
8.05 CONSTRUCTION: Subject to the provisions of Article 9, the decision of
the Committee
5
<PAGE>
on all matters concerning the interpretation and administration of this
Plan shall be final. Each Director agrees, as a condition to
participation herein, to be bound by all actions and interpretations
regarding this Plan by the Committee. Neither the Board, the Committee,
any individual Director nor any persons acting on their behalf shall be
subject to any liability to any Director or other person in the
construction and administration of this Plan.
8.06 AMENDMENT OR TERMINATION: The Company reserves the right at any time,
and from time to time, by action of a majority of the Committee at a
meeting at which all members thereof are present and voting or the
required notice of which contained an accurate summary of the action
proposed for vote, to amend, in whole or in part, any or all of the
provisions of this Plan including the right to terminate the Plan at
any time; provided, however, that no such amendment or termination
shall affect adversely benefits under this Plan already being paid or
having become unconditionally payable pursuant to the terms hereof
either due to Participating Director's completion of Five (5) years of
Service in Continuous Service prior to the date of such amendment or
termination, or because the Participating Director was removed from or
not renominated to his directorship (whether before or after such
amendment or termination) under circumstances entitling the
Participating Director to Retire.
8.07 FUNDING: The Company's obligations under this Plan shall be unfunded,
and the Company shall not be obligated under any circumstances to fund
its obligations under this Plan. The Company may, however, at its sole
and exclusive option, informally fund all or a part of this Plan. If
the Company decides upon such informal funding, the manner, continuance
or discontinuance of such informal funding shall be the sole and
exclusive decision of the Company.
If the Company shall decide to purchase life insurance on the lives of
Participants, the Company (or, in any event a nominee, agent or
fiduciary of the Company whose duty it is to deliver or pay over such
policies to the Company or its creditors in the event of insolvency)
shall be the owner of such insurance, and the form and amount of such
insurance shall be the sole and exclusive decision of the Company.
If the Company decides to formally fund this Plan through the purchase
of insurance, any Participating Director shall agree to submit to
medical examinations, supply any information, and execute any documents
required by the insurance company or companies to which the Company may
have applied for such insurance.
8.08 GOVERNING LAW: To the extent not preempted by the Employee Retirement
Income Security Act of 1974, as amended from time to time, this Plan
shall be governed by and interpreted in accordance with the laws of the
State of Connecticut and, subject to Section 8.06 above, shall be
binding upon the Company and its successors, including any successor
which acquires all or substantially all of the assets of the Company.
6
<PAGE>
ARTICLE 9: CLAIMS PROCEDURE
9.01 SUBMISSION OF CLAIMS: Claims for benefits under the Plan shall be
submitted in writing to the Committee or a person designated by the
Committee for this purpose. Written notice of the disposition of a
claim shall be furnished to the claimant within 90 days after the
application therefor is filed. (The 90-day notice period shall,
however, be extended for an additional 90 days if the Committee
determines that such an extension of time is necessary to process the
claim and so advises the claimant in writing within 90 days after
receipt of the claim, which writing shall also indicate the special
circumstances requiring an extension of time and the date by which the
Committee expects to render the final decisions.)
9.02 WRITTEN NOTICE OF DENIED CLAIM: The Committee shall provide adequate
notice in writing to any person whose claim for benefits has been
denied. Such notice shall set forth the specific reason or reasons for
the denial and shall be written in a manner calculated to be understood
by the recipient. Such notice shall also refer specifically to
pertinent Plan provisions on which the denial is based; shall describe
any additional material or information necessary for the claimant to
perfect the claims; and shall explain why such material or information
is necessary. Such notice shall also explain the Plan's claims review
procedure.
9.03 REVIEW OF DECISION DENYING CLAIM: The Committee shall afford to any
person whose claim for benefits has been denied a reasonable
opportunity for a full and fair review of the decision denying the
claim. The claimant or his duly authorized representative shall request
such review in writing not more than 90 days after receipt by the
claimant of written notification of denial of a claim. Within ten days
after, or as part of, a timely request for review, the claimant may
submit issues and comments in writing and may review pertinent
documents.
9.04 HEARING: Upon receipt of a timely request for review, the Committee
may, in its discretion, appoint one or more of its members to hear the
claimant's request and inquire into the merits of the matter. Such
member(s) shall meet promptly with the claimant and/or his duly
authorized representative and hear such arguments and/or examine such
documents as the claimant or his representative shall present. The
member(s) shall then report his (their) findings to the Committee
orally or in writing.
9.05 WRITTEN DECISION OF COMMITTEE: A decision of the Committee on review of
a claim shall be in writing and shall include specific reasons for the
decision, written in a manner calculated to be understood by the
claimant. Such decision shall include specific references to the
pertinent Plan provisions on which the decision is based. The decision
shall be made promptly and not later than 60 days after a request for
review, unless special circumstances require an extension. In such
case, the claimant shall be so advised in writing prior to the
expiration of the initial 60-day period and a decision shall be
rendered as soon as possible, but not later than 120 days after receipt
of a request for review.
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this document to be executed
by its duly authorized officers and the seal of the Company to be affixed hereto
as of July 1, 1988, subject to the subsequent approval of shareholders
hereinbefore provided for.
BOWATER INCORPORATED
By: /s/ R. E. Gustafson
Title: V.P. Human Resources and
Administration
8
<PAGE>
EXHIBIT 10.19.1
First Amendment
to the
BOWATER INCORPORATED
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
WHEREAS, the Bowater Incorporated Retirement Plan for outside Directors
(the "Plan") was established, effective July 1, 1988, for the benefit of
Directors of Bowater Incorporated (the "Company") who are not employees of the
Company; and
WHEREAS, pursuant to the provisions of Section 8.06 of the Plan, the
Company reserved the right, by action of a majority of the Executive Committee
(the "Committee") of the Board of Directors (the "Board") of the Company, to
amend the Plan;
NOW, THEREFORE, pursuant to and in accordance with Section 8.06 of the
Plan, the Plan is hereby amended effective immediately, as follows:
1. Section 1.03 of the Plan is hereby amended to read as follows and
Sections 1.03 through 1.15 of the Plan are hereby renumbered as Section 1.04
through 1.16, respectively (and all references in the Plan to the renumbered
Sections are hereby amended to correspond to the new Section numbers):
1
<PAGE>
"1.03 CHANGE IN CONTROL: Change in Control of the Company 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 Company shall approve a merger or
consolidation of the Company or a plan of complete liquidation
of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's.
For purposes of this Section 1.03:
(a) "Acquiring Person" shall mean any Person who is or becomes a
"beneficial owner" (as defined in Rule 13d-3 of the Exchange
Act) of securities of the Company representing twenty percent
(20%) or more of the combined voting power of the Company'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
2
<PAGE>
terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as in effect on the date hereof.
(c) "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.
(d) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(e) "Person" shall have the meaning assigned to it in Section
13(d) and 14(d) of the Exchange Act.
2. Section 2.02 of the Plan is hereby amended to read as follows:
"2.02 WAIVER OF SERVICE AND OTHER REQUIREMENTS: Any Participating
Director who was a Director immediately prior to a Change in
Control of the company who is removed from or not renominated
to his directorship by reason of such Change in Control shall
not be required to meet the service requirement imposed by
Section 2.01 hereof and shall be eligible to Retire early
pursuant to Section 3.01 without the consent of the Company
and without
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regard to his attained age at the time of such retirement."
BOWATER INCORPORATED
By /s/ R. E. Gustafson
Title: Vice President
/s/ Leonard M. Saari, Secretary
Attest
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EXHIBIT 10.20
SUPPLEMENTAL BENEFIT PLAN FOR DESIGNATED EMPLOYEES OF
BOWATER INCORPORATED AND AFFILIATED COMPANIES
As Amended and Restated
Effective November 1, 1995
<PAGE>
PREAMBLE
Establishment of Prior Plans
The Supplemental Benefit Plan of Bowater Incorporated (the "Bowater Plan") was
established effective December 31, 1971, for the benefit of designated employees
of Bowater Incorporated. The Supplemental Benefit Plan for Designated Employees
of Bowater Southern Paper Company and Bowater Carolina Company, Divisions of
Bowater Incorporated, and other Participating Divisions of Bowater Incorporated
(the "Southern Plan") was established effective July 1, 1981, for the benefit of
designated employees of Bowater Southern Paper Company, Bowater Carolina Company
and certain other divisions of Bowater Incorporated.
Consolidation and Restatement of Plans
Each of the Bowater Plan and the Southern Plan provided that it could be amended
at any time and from time to time. The Bowater Plan and the Southern Plan were
amended and restated in their entirety effective August 22, 1990. From and after
the effective date thereof, the Bowater Plan and the Southern Plan were deemed
to be one plan. Anyone who was a participant under either of these prior plans
on the effective date of this consolidation and restatement was a participant in
this Supplemental Benefit Plan for Designated Employees of Bowater Incorporated
and Affiliated Companies (the "Plan"). The continued eligibility of such persons
to participate in the Plan is determined by the provisions hereof. The Plan is
now being restated in its entirety as of November 1, 1995, in order to
incorporate amendments that have been previously adopted and to clarify the
meaning of certain provisions.
Objective of Plan
The purpose of the Plan is to provide an inducement to key employees of Bowater
Incorporated (the "Corporation") and key employees of affiliated companies to
which the Board of Directors of Bowater Incorporated extends the Plan to remain
in the employment of the Employer (as hereinafter defined) by providing
retirement benefits supplemental to those available under the Corporation's
basic qualified benefit plans.
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Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Preamble........................................................................i
ARTICLE I: DEFINITIONS
1.01 "Acquiring Person".........................................................1
1.02 "Affiliated Company" ......................................................1
1.03 "Age" .....................................................................1
1.04 "Board" ...................................................................1
1.05 "Cause" ...................................................................1
1.06 "Change in Control" .......................................................1
1.07 "Child or Children"........................................................2
1.08 "Code".....................................................................2
1.09 "Committee"................................................................2
1.10 "Compensation" ............................................................2
1.11 "Continuing Director"......................................................2
1.12 "Corporation"..............................................................2
1.13 "Disability"...............................................................2
1.14 "Effective Date"...........................................................3
1.15 "Eligible Dependents"......................................................3
1.16 "Employee".................................................................3
1.17 "Employer".................................................................3
1.18 "ERISA"....................................................................3
1.19 "Exchange Act".............................................................3
1.20 "Final Average Monthly Compensation" ......................................3
1.21 "Normal Retirement Age"....................................................3
1.22 "Normal Retirement Date" ..................................................3
1.23 "Other Benefits" ..........................................................3
1.24 "Participant"..............................................................4
1.25 "Person"...................................................................4
1.26 "Plan" ....................................................................4
1.27 "Plan Administrator".......................................................4
1.28 "Plan Name"................................................................4
1.29 "Retirement"...............................................................4
1.30 "Spouse"...................................................................4
1.31 "Years of Service".........................................................4
ARTICLE 2: PARTICIPATION AND ELIGIBILITY FOR BENEFITS
2.01 Participation..............................................................4
2.02 Pension Plan Contingent Annuitant Option...................................5
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2.03 Effect on Other Plans......................................................5
ARTICLE 3: AMOUNT OF RETIREMENT INCOME
3.01 Normal Retirement Benefits.................................................5
3.02 Early Retirement Reduction.................................................5
3.03 Benefit Payments ..........................................................5
3.04 Calculation of Deductions for Other Benefits ..............................6
ARTICLE 4: DEATH AND DISABILITY BENEFITS
4.01 Spouse's Pre-Retirement Death Benefits.....................................6
4.02 Spouse's Post-Retirement Death Benefits ...................................6
4.03 Children's Death Benefits .................................................7
4.04 Disability Benefits .......................................................8
ARTICLE 5: GROUP MEDICAL INSURANCE AND LIFE INSURANCE
5.01 Medical Insurance .........................................................8
5.02 Life Insurance ............................................................9
ARTICLE 6: COVENANTS OF EMPLOYEE
6.01 During Continuation of Employment .........................................10
6.02 Following Termination of Employment........................................10
6.03 Remedy for Breach..........................................................11
ARTICLE 7: OBLIGATION TO PAY BENEFITS
7.01 Employer Obligated to Pay .................................................11
7.02 Amendment or Termination of the Plan.......................................11
7.03 Subsequent to a Change in Control of the Corporation.......................12
7.04 Transfers of Employment ...................................................13
ARTICLE 8: GENERAL PROVISIONS
8.01 Limitation of Rights of the Employee ......................................14
8.02 Discharge of Obligations ..................................................14
8.03 No Assignment of Benefits..................................................14
8.04 Administrative Powers Relating to Payments ................................14
8.05 Multiple Claimants ........................................................15
8.06 Administration.............................................................15
8.07 Indemnification ...........................................................15
8.08 Expenses ..................................................................16
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8.09 Funding ...................................................................16
8.10 Payment of Participant's Expenses .........................................16
8.11 Governing Law..............................................................16
8.12 Severability...............................................................16
8.13 Named Fiduciary............................................................16
ARTICLE 9: CLAIMS PROCEDURE
9.01 Submission of Claims ......................................................16
9.02 Written Notice of Denied Claim.............................................16
9.03 Review of Decision Denying Claims..........................................17
9.04 Hearing....................................................................17
9.05 Written Decision of Plan Administrator ....................................17
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ARTICLE 1: DEFINITIONS
Unless the context clearly indicates otherwise, the following words and
phrases, when used herein with an initial capital letter, shall have the
following meanings. Wherever applicable the masculine pronoun shall include the
feminine pronoun and the singular shall include the plural.
1.01 "ACQUIRING PERSON" shall mean any Person who is or becomes a
"beneficial owner" (as defined in Rule 13d-3 of 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 the Person has filed Schedule 13G and all
required amendments thereto with respect to its holdings and continues
to hold the securities for investment in a manner qualifying the Person
to utilize Schedule 13G for reporting of ownership.
1.02 "AFFILIATED COMPANY" shall mean any corporation that is a member of a
controlled group of corporations (as defined in Code Section 414(b))
which includes the Corporation; any trade or business (whether or not
incorporated) which is under common control (as defined in Code Section
414(c)) with the Corporation; any organization (whether or not
incorporated) which is a member of an affiliated service group (as
defined in Code Section 414(m)) that includes the Corporation; and any
other entity required to be aggregated with the Corporation pursuant to
regulations under Code Section 414(o). With respect to periods prior to
July 23, 1984, Affiliated Company includes any corporation that would
have been an Affiliated Company prior to the separation under United
Kingdom law of Bowater Incorporated from Bowater plc.
1.03 "AGE" shall mean an Employee's attained age in years and completed
months.
1.04 "BOARD" shall mean the Board of Directors of the Corporation, as
constituted from time to time.
1.05 "CAUSE" shall mean the Participant's gross negligence or willful
misconduct, which negligence or misconduct has a demonstrable and
material adverse effect upon the Corporation or an Affiliated Company,
provided that the Plan Administrator or the Employer shall have given
the Participant written notice of the alleged negligence or misconduct
and the Participant shall have failed to cure the negligence or
misconduct within thirty (30) days after receipt of the notice. The
Participant shall be deemed to have been terminated for Cause effective
upon the effective date stated in a written notice of termination
delivered by the Plan Administrator or the Employer to the Participant
setting forth in reasonable detail the facts and circumstances claimed
to provide the basis for the Participant's termination.
1.06 "CHANGE IN CONTROL" shall be deemed to have occurred if:
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(a) any Person is or becomes an Acquiring Person;
(b) less than two-thirds (2/3) of the total membership of the
Board shall be Continuing Directors; or
(c) 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.
1.07 "CHILD OR CHILDREN" of the Participant shall mean any child or children
who are issue of any marriage contracted by the Participant (either
before or after their birth) or who have been legally adopted by the
Participant by the age of twenty-one (21).
1.08 "CODE" shall mean the Internal Revenue Code of 1986, and any amendments
thereto.
1.09 "COMMITTEE" shall mean the Human Resources and Compensation Committee
of the Board of Directors of the Corporation.
1.10 "COMPENSATION" shall mean the entire cash compensation paid to, or
deferred for the benefit of, a Participant by the Employer as salary,
wages, commissions, overtime pay, regular bonuses paid under the
Bowater Incorporated Annual Incentive Plan, severance pay paid in
periodic installments, Employer contributions made pursuant to a salary
reduction agreement that are not includible in the gross income of the
Participant under Code Sections 125, 401(e)(3), 402(h) or 403(b), and
any compensation that is contributed to a plan maintained by an
Employer on behalf of the Participant under Code Section 401(k), but
excluding any non-cash remuneration, income received upon the exercise
of a stock option or stock appreciation right, bonuses received under a
long term cash incentive plan, other special remuneration, and any
benefits and credits under this or any other employee benefit plan of
the Employer.
1.11 "CONTINUING DIRECTOR" shall mean a member of the Board who was a member
of the Board prior to the date hereof, and any successor of a
Continuing Director who is not an Acquiring Person or an "Affiliate" or
"Associate" (within the meaning of Rule 12b-2 of the General Rules and
Regulations under the Exchange Act as in effect on the date hereof) of
an Acquiring Person or of any such Affiliate or Associate and is
recommended to be elected to succeed the Continuing Director by a
majority of the Continuing Directors.
1.12 "CORPORATION" shall mean Bowater Incorporated and any successor to its
business or assets, whether by purchase, merger, consolidation or
otherwise.
1.13 "DISABILITY" shall mean the status of being eligible for and receiving
the benefits provided under the Long-Term Disability Plan of the
Participant's Employer, provided
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<PAGE>
that if a Participant is enrolled in a Long-Term Disability Plan of the
Corporation or an Affiliated Company and the plan is discontinued while
the Participant is a Participant in the plan, for purposes of this
Plan, the Participant shall be deemed disabled at the time he would
have been eligible for benefits under the Long-Term Disability Plan in
effect immediately prior to its termination had that plan not been
terminated. The determination of whether and when a Participant would
have been eligible for benefits under any terminated plan shall be made
by the Plan Administrator in its sole discretion.
1.14 "EFFECTIVE DATE" shall mean the date on which the provisions of this
amended and restated Plan shall be effective, which is November 1,
1995, unless otherwise provided herein.
1.15 "ELIGIBLE DEPENDENTS" shall mean those dependents of the Participant
that are considered eligible to receive medical benefits under the
Corporation's group medical benefit plan.
1.16 "EMPLOYEE" shall mean any individual employed by the Employer other
than an independent contractor.
1.17 "EMPLOYER" shall mean the Corporation and any subsidiary or affiliated
employer authorized by the Corporation to adopt and participate in this
Plan.
1.18 "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
1.19 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
1.20 "FINAL AVERAGE MONTHLY COMPENSATION" shall mean the average of the
Participant's Compensation for the highest thirty-six (36) consecutive
calendar months in the last sixty (60) months immediately preceding his
termination date and further divided by thirty-six (36); except that
(i) if the Participant earns Compensation in fewer than sixty (60)
months preceding his termination date, his "Final Average Monthly
Compensation" shall be based on Compensation for the highest thirty-six
(36) consecutive calendar months preceding his termination date, and
(ii) if the Participant earns Compensation in fewer than thirty-six
(36) consecutive calendar months preceding his termination date, his
"Final Average Monthly Compensation" shall be based on Compensation for
all months preceding his termination date.
1.21 "NORMAL RETIREMENT AGE" shall mean the day on which the Participant
attains his sixty-fifth (65th) birthday.
1.22 "NORMAL RETIREMENT DATE" shall mean the first day of the calendar month
coinciding with or next following the Participant's Normal Retirement
Age.
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1.23 "OTHER BENEFITS" shall mean any benefits payable to a Participant, or
his Spouse or Children on behalf of the Participant, under the Bowater
Incorporated Benefits Equalization Plan or under any qualified defined
benefit pension plan of the Corporation or any Affiliated Company.
1.24 "PARTICIPANT" shall mean anyone who is eligible to participate in the
Plan as provided in Article 2, and who continues to have rights or
contingent rights to benefits payable under this Plan, subject to the
terms and conditions of Article 6. A Participant whose employment is
terminated for Cause shall no longer be a Participant, and his Spouse
and Children will no longer be entitled to benefits.
1.25 "PERSON" shall mean any individual, corporation, partnership, group,
association or other "person" as such term is used in Sections 13(d)
and 14(d) of the Exchange Act.
1.26 "PLAN" shall mean this Supplemental Benefit Plan for Designated
Employees of Bowater Incorporated and Affiliated Companies, as stated
herein, and as it may be amended from time to time.
1.27 "PLAN ADMINISTRATOR" shall mean the Committee or any successor
appointed by the Board or its designee.
1.28 "PLAN NAME" shall be Supplemental Benefit Plan for Designated Employees
of Bowater Incorporated and Affiliated Companies.
1.29 "RETIREMENT" shall mean the status of having terminated employment and
being eligible for the payment of benefits either immediately or at
some future date under any qualified defined benefit pension plans of
the Participant's Employer and any Affiliated Company in which he
participates, provided a Participant whose employment is terminated for
Cause shall not be deemed to have retired for purposes of the Plan.
1.30 "SPOUSE" shall mean the person legally married to a Participant and
from whom the Participant is not legally separated at the time of his
death.
1.31 "YEARS OF SERVICE" shall mean the Participant's aggregate period of
employment consisting of years of service and parts thereof as
computed, for benefit accrual purposes, according to the qualified
defined benefit pension plan of the Corporation; provided that "Years
of Service" for an Employee who is not a Participant hereunder as of
his termination date shall not include any period after the last date
on which he was a Participant.
ARTICLE 2: PARTICIPATION AND ELIGIBILITY FOR BENEFITS
2.01 PARTICIPATION: Employees of the Corporation who (i) are in salary
grades fourteen (14) and above, or (ii) are designated as eligible by
the Committee, shall be Participants
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in the Plan. Should the Plan be extended to an Affiliated Company that
adopts the Plan, the Committee shall designate which Employees of such
Affiliated Company shall participate in the Plan. Subject to the
provisions of Section 7.04(a)(i), a Participant who ceases to be an
Employee of the Corporation or an Affiliated Company that has adopted
the Plan or who (a) is no longer in salary grade fourteen (14) or
above, or (b) is designated by the Committee as no longer eligible to
participate in the Plan, will cease accruing benefits under the Plan,
unless and until the Participant again becomes eligible to be a
Participant in the Plan.
Notwithstanding the foregoing, the Employee's Compensation shall
continue to be included for purposes of determining his Final Average
Monthly Compensation under Article 3.
2.02 PENSION PLAN CONTINGENT ANNUITANT OPTION: A Participant who is
married on the date benefits become payable under Section 3.03 must
have elected, and not subsequently revoked, a fifty percent (50%) or
higher contingent annuitant option (with his Spouse as contingent
annuitant) under all qualified defined benefit pension plans of his
Employer and any Affiliated Company in which he participates in order
for him, his Spouse or his Children to be eligible for benefits under
the Plan.
2.03 EFFECT ON OTHER PLANS: Although the Plan references the provisions of
other plans established by the Corporation and its Affiliated
Companies, the provisions of those plans will not be changed or
enlarged hereby.
ARTICLE 3: AMOUNT OF RETIREMENT INCOME
3.01 NORMAL RETIREMENT BENEFITS: Subject to the provisions of Sections 2.01,
2.02, 6.03, 7.02 and 7.04, a Participant (i) whose Retirement occurs on
or after his Normal Retirement Date, or (ii) whose Retirement occurs
before his Normal Retirement Date but who does not commence receiving
benefits under the qualified defined benefit pension plan of his
Employer or an Affiliated Employer in which he participates until on or
after his Normal Retirement Date, shall be entitled to a monthly
benefit equal to (a) plus (b) minus (c) below:
(a) Two-and-one-half percent (2-1/2%) of Final Average Monthly
Compensation for each Year of Service up to twenty (20) Years
of Service.
(b) One percent (1%) of Final Average Monthly Compensation for
each Year of Service greater than twenty (20) and up to thirty
(30) Years of Service.
(c) Any Other Benefits which may be payable in any month to the
Participant.
3.02 EARLY RETIREMENT REDUCTION: Subject to the provisions of Sections 2.01,
2.02, 6.03, 7.02 and 7.04, when a Participant commences receiving
benefits under a qualified
5
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defined benefit pension plan of his Employer or an Affiliated Company
prior to his Normal Retirement Date, he also shall begin receiving the
monthly benefit determined under paragraphs (a) and (b) of Section 3.01
as of the date of commencement, reduced by one-half of one percent
(1/2%) for each month by which the commencement of benefits precedes
the Participant's attainment of age sixty (60), less the amount
determined under Section 3.01(c). This amount shall not be increased
upon the Participant's attainment of age sixty (60).
3.03 BENEFIT PAYMENTS: Retirement benefits payable pursuant to this Article
shall be payable monthly on the first day of each month commencing with
the date on which benefit payments commence under any qualified defined
benefit pension plan of the Participant's Employer or an Affiliated
Company in which he participates and continuing through the first day
of the month in which the Participant dies or is re-employed by the
Employer.
3.04 CALCULATION OF DEDUCTIONS FOR OTHER BENEFITS: If any Other Benefits
shall be due to the Participant, his estate, Spouse or Children in a
lump sum or over a period shorter or longer than the period herein
provided with respect to payments hereunder, or at different intervals,
or if they commence at a different time, then and in such case, the
aggregate of all Other Benefits shall for the purposes hereof be
actuarially converted into benefits payable over the monthly periods
provided for payments hereunder based on the actuarial assumptions used
in the Employer's qualified defined benefit pension plan covering the
Participant at the time benefits commence hereunder in order to arrive
at the deductions herein provided for the Other Benefits.
ARTICLE 4: DEATH AND DISABILITY BENEFITS
4.01 SPOUSE'S PRE-RETIREMENT DEATH BENEFITS: Subject to the provisions of
Articles 6 and 7, the surviving Spouse of a Participant who dies prior
to his Retirement or who, at the time of his death, was receiving a
Disability benefit under Section 4.04 (excluding benefits payable
pursuant to the next to the last sentence of Section 4.04), will be
entitled to receive a monthly benefit, payable on the first day of each
month, commencing with the month following the Participant's death.
Payments shall cease with the payment for the month in which the Spouse
dies.
The amount of the Spouse's monthly benefit shall be sixty percent (60%)
of the projected monthly benefit the Participant would have been
entitled to receive under Section 3.01(a) and 3.01(b) calculated in the
manner hereinafter specified and reduced by any Other Benefits which
may be payable to the Spouse.
For purposes of determining such projected monthly benefit, the
Participant's rate of annual Compensation at the time of his death or
Disability will be assumed to have remained unchanged to his Normal
Retirement Date, and his Years of Service will be deemed to include the
period between his date of death and his Normal Retirement Date.
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4.02 SPOUSE'S POST-RETIREMENT DEATH BENEFITS: Subject to the provisions of
Articles 6 and 7, the surviving Spouse of a Participant who dies
subsequent to his Retirement or who, at the time of his death, was
receiving a Retirement benefit pursuant to the next to the last
sentence of Section 4.04, will be entitled to receive a monthly
benefit, payable on the first day of each month commencing with the
month following the Participant's death. Payments shall cease with the
payment for the month in which the Spouse dies.
In the case of a Participant who, prior to his death, had commenced
receiving benefits under Article 3 or under the next to the last
sentence of Section 4.04, the amount of the Spouse's monthly benefit
shall be sixty percent (60%) of the total monthly benefit determined
under Sections 3.01(a) and 3.01(b) (or the next to the last sentence of
Section 4.04 where applicable) that was being paid to the Participant
at the time of his death, reduced by the amount of any Other Benefits
which may be payable to the Spouse.
In the case of a Participant who had not commenced receiving benefits
under Article 3 or under the next to the last sentence of Section 4.04,
the amount of the Spouse's monthly benefit shall be sixty percent (60%)
of (i) the total monthly benefit determined under Section 3.01(a) and
3.01(b) reduced by (ii) one-half of one percent (1/2%) for each month
by which the date of the Participant's death precedes the date on which
the Participant would have attained age sixty (60), less the amount of
any Other Benefits which may be payable to the Spouse.
4.03 CHILDREN'S DEATH BENEFITS: On the death of a Spouse who was receiving
benefits under Section 4.01 or Section 4.02, the Participant's Children
who are under the age of twenty-one (21) will be entitled to receive
collectively a monthly benefit, payable on the first day of each month
commencing with the month following the Spouse's death.
Notwithstanding the provisions of Section 3.04 hereof, subject to the
provisions of Articles 6 and 7, on the death of a Participant who is
not survived by a Spouse, the Participant's Children who are under the
age of twenty-one (21) will be entitled to receive collectively a
monthly benefit, payable on the first day of each month commencing with
the month following the Participant's death.
The amount of the Childrens' monthly benefit payable under this Section
4.03 shall be twenty percent (20%) of the monthly benefit the Spouse
was receiving, or would have been entitled to receive (in instances
where there is no surviving Spouse), under Section 4.01 or Section
4.02, as the case may be, multiplied by the number of Children under
age twenty-one (21) during the month. The maximum Childrens' monthly
benefit shall, however, in no case be more than one hundred percent
(100%) of the amount of the benefit to which the Participant's
surviving Spouse was or would have been entitled. Benefits payable to
Children of a Participant pursuant to this Section shall be reduced
proportionately as each Child attains the age of twenty-one (21) years
or sooner dies and shall terminate with the payment on the first day of
the month in which the last remaining
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Child of the Participant attains the age of twenty-one (21) years or
sooner dies.
The benefits that a Child or Children are entitled to receive shall
accrue and be paid for the collective use and benefit of the Child or
Children under age twenty-one (21) to their duly appointed
conservator(s), guardian(s) or trustee(s) where applicable. If the
Children have different fiduciaries representing them, the payment to
each fiduciary on behalf of the Children shall be proportionate to the
number of Children each fiduciary represents. The receipt by the
fiduciaries of the amount of the benefit paid shall constitute a full
and complete discharge therefor to the Employer.
4.04 DISABILITY BENEFITS: In the event of the Disability of a Participant,
the Participant shall be entitled to a monthly supplemental disability
income benefit payable on the first day of each month commencing with
the month following the date of Disability equal to (a) or (b) below:
(a) If the Participant is enrolled in and declared disabled under
the Employer's Long-Term Disability Plan, forty percent (40%)
of that portion of the Participant's Compensation as of the
date of such Disability in excess of the maximum Compensation
(i.e., $200,000 as of January 1, 1995) covered by the
Long-Term Disability Plan divided by twelve (12), less any
Other Benefits that may be payable in any month to the
Participant as a consequence of his Disability.
(b) If the Participant was enrolled in his Employer's Long-Term
Disability Plan and the plan was discontinued while the
Participant was a Participant in the plan, forty percent (40%)
of that portion of the Participant's Compensation as of the
date of the termination of the Long-Term Disability Plan in
excess of the maximum Compensation covered by the Long-Term
Disability Plan as of the termination date divided by twelve
(12), less any Other Benefits that may be payable in any month
to the Participant as a consequence of his Disability to the
extent Other Benefits had accrued as of the date of
termination of the Long-Term Disability Plan.
Supplemental disability income shall continue until the monthly payment
preceding the earliest of the Participant's Normal Retirement Date, or
death, or the date on which the Participant's Disability ends. Upon the
Participant's reaching his Normal Retirement Date, the payments
pursuant to this Section 4.04 shall cease, and the Participant shall be
entitled to retirement benefits calculated in accordance with the
provisions of Section 3.01 based upon his Final Average Monthly
Compensation on the date of such Disability and his Years of Service to
his Normal Retirement Date.
A Participant who is eligible for, but not enrolled in, his Employer's
Long-Term Disability Plan shall not be entitled to a Disability benefit
under the Plan.
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ARTICLE 5: GROUP MEDICAL INSURANCE AND LIFE INSURANCE
5.01 MEDICAL INSURANCE: (a) If, under the group medical benefit plan
maintained by the Employer, a Participant has in effect medical
insurance as of the date of Retirement and is entitled to the immediate
payment of annuity benefits under his Employer's qualified defined
benefit pension plan:
(i)After Retirement of the Participant and until midnight
ending the day prior to the Participant's 65th birthday, the
Employer will continue to provide to the Participant at its
sole cost and expense the medical insurance and other medical
benefits in effect immediately prior to his Retirement subject
to such changes as may be made to the coverage offered to
active salaried exempt Employees of the Employer from time to
time.
(ii) Beginning immediately after midnight of the day prior to
the Participant's 65th birthday, the Employer will provide to
the Participant at its sole cost and expense a supplemental
medical plan designed to supplement Parts A and B of Medicare
(or whatever the equivalent coverage may be at some future
date). The coverage provided under this Section 5.01(a)(ii)
may be amended from time to time, either before or after a
Participant's Retirement.
(b) After the Retirement or death of a Participant, the medical
insurance and other medical benefits provided active salaried
exempt Employees will be made available to Eligible Dependents
of the Participant at the Employer's sole cost and expense
until they reach the age of sixty-five (65) or cease to
qualify as Eligible Dependents. Upon reaching the age of
sixty-five (65), the Participant's Eligible Dependents will be
provided a supplemental medical plan at the Employer's sole
cost and expense designed to supplement Parts A and B of
Medicare (or whatever the equivalent coverage may be at some
future date). The coverage provided under this Section 5.01(b)
may be amended from time to time.
(c) All medical insurance or other medical benefits provided to
any person pursuant to this Article shall be reduced by the
amount of corresponding employer-provided (or any other
third-party provided) medical insurance and medical benefits
provided to that person at any time under a group or
governmental plan.
5.02 LIFE INSURANCE: If, under a group life insurance program of the
Employer, the Participant has in effect basic group life insurance up
to the date of his Retirement and is entitled to the immediate payment
of annuity benefits under his Employer's qualified defined benefit
pension plan, the Employer will continue to carry life insurance on the
Participant's life after Retirement, with premiums paid solely by the
Employer, to the extent of, and in accordance with, the following:
9
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(a) Effective immediately after midnight of the day prior to
Retirement, the amount of basic group life insurance coverage
in effect for the Participant will be reduced by fifty percent
(50%).
(b) Effective immediately after midnight of the day prior to the
Participant's sixty-sixth (66th) birthday, the amount of basic
group life insurance coverage will be further reduced by ten
percent (10%) of the amount of pre-Retirement coverage. The
amount of basic group life insurance coverage will be further
reduced each succeeding year effective immediately after
midnight of the day prior to the Participant's birthday by ten
percent (10%) of the pre-Retirement amount, provided that the
amount of basic group life insurance coverage shall not be
reduced below $10,000.
(c) If the Participant continues to be an Employee after his
Normal Retirement Age, the Employer will continue to provide
basic group life insurance for which the Participant is
eligible as an active Employee under the group insurance
program of the Employer until the Participant's Retirement.
Effective immediately after midnight of the day prior to
Retirement, the amount of basic group life insurance coverage
in effect will be reduced by fifty percent (50%) plus ten
percent (10%) for every year by which the Participant's age at
Retirement exceeds sixty-five (65); provided, however, that
the amount of basic group life insurance in effect shall not
be reduced below $10,000. The amount of basic group life
insurance coverage in effect for the Participant (if in excess
of $10,000) will be further reduced each year effective
immediately after midnight of the day prior to the
Participant's birthday by ten percent (10%) of the
pre-Retirement amount, which annual reduction will be repeated
until the amount of basic group life insurance coverage
reaches $10,000, which amount will then continue unchanged
until the Participant's death.
ARTICLE 6: COVENANTS OF EMPLOYEE
6.01 DURING CONTINUATION OF EMPLOYMENT: As long as a Participant continues
as an Employee of the Employer, the Participant shall devote his entire
working time to the service of the Employer, except to the extent that
the Committee shall waive this provision.
6.02 FOLLOWING TERMINATION OF EMPLOYMENT: Upon termination of
employment, the Participant, until the earlier of his death or the date
which is five (5) years from the date of termination of employment:
(a) shall from time to time consult with the Corporation and its
Affiliated Companies in an advisory capacity if, and when, the
Participant is reasonably requested to do so by the
Corporation or any such Affiliated Company;
(b) shall not, without the written consent of the Committee,
compete directly or indirectly, or participate in any business
that competes directly or indirectly, with
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the Corporation or any Affiliated Company in any geographic
area where the Corporation or any such Affiliated Company is
conducting or actively proposing to conduct its business at
the time of such termination of employment. The foregoing
shall include but not be limited to (i) serving as an
executive officer, employee, agent or representative of, or
consultant to, or having any direct or indirect interest, as a
stockholder, partner or joint venturer or any other financial
interest in, any business that manufactures or markets
products manufactured or marketed by the Corporation or an
Affiliated Company in areas in which any of the foregoing is,
at the time of such termination of employment, marketing or
actively proposing to market such products, provided that
ownership by the Participant, directly or indirectly, of less
than five percent (5%) of the outstanding shares of stock of
any company listed on any national securities exchange shall
be deemed not to be a participation in a business; and (ii)
directly or indirectly soliciting customers or employees of
the Corporation or an Affiliated Company at the time of the
termination of employment or enterprises or individuals that
were customers or employees of the Corporation or an
Affiliated Company at any time during the twelve-month period
ending upon the termination of employment or which were at
such time being actively solicited by the Corporation or an
Affiliated Company to become customers or employees of the
Corporation or an Affiliated Company;
(c) shall cooperate and assist in any litigation, arbitration or
similar proceeding in which the Corporation or any Affiliated
Company is a party or has an interest if, and when, the
Participant is reasonably requested to do so by the
Corporation or any such Affiliated Company (the Corporation
shall pay any out-of-pocket expenses); and
(d) shall not, except with the written consent of the Committee,
or to the extent compelled by a court of competent
jurisdiction, disclose or use directly or indirectly any trade
secrets or other confidential information or proprietary data
of the Corporation or any Affiliated Company; provided,
however, that confidential information shall not include any
information known to the public (other than as a result of
unauthorized disclosure by the Participant) or any information
of a type not otherwise considered confidential by persons
engaged in the same or similar businesses.
6.03 REMEDY FOR BREACH: If the Participant at any time fails to comply with
the requirements of Sections 6.01 or 6.02, the Employer's obligation to
pay or provide benefits hereunder to any Participant or to the
Participant's surviving Spouse or Children shall automatically
terminate and neither said Participant nor the Participant's surviving
Spouse, Children or any other person claiming any benefits pursuant to
the Participant's participation in the Plan shall have any rights,
claims or causes of action hereunder against the Board, the Committee,
the Corporation, the Plan Administrator, the Employer or any Affiliated
Company, any trust or other funding vehicle maintained in respect of
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<PAGE>
the Plan, or any person acting on their behalf. The remedy provided in
this Section 6.03 for breach by the Participant of the provisions of
Section 6.02 hereof shall be exclusive; provided, however, that the
Employer shall not be precluded from pursuing any other remedies
available to it under any other plan or agreement with the Participant
that contains non-compete provisions and other restrictive covenants.
ARTICLE 7: OBLIGATION TO PAY BENEFITS
7.01 EMPLOYER OBLIGATED TO PAY: Except as otherwise provided in Articles 6
and 7, the Employer employing the Participant on the date of
termination of the Participant's employment shall be obligated to pay
or provide the benefits to which the Participant, his Spouse and
Children are entitled under the Plan.
7.02 AMENDMENT OR TERMINATION OF THE PLAN: The Committee reserves the right
at any time, and from time to time, to amend, in full or in part, any
or all of the provisions of the Plan, or to terminate the Plan at any
time.
The right to amend the Plan shall include the right to provide for
additional benefits for a Participant or to waive the applicability of
certain Plan provisions to a Participant pursuant to a separate
contractual agreement. All amendments (including any contractual
agreements providing for additional benefits or waivers) shall be
authorized by the Committee and signed by a duly authorized
representative thereof. Notwithstanding the foregoing, however, no such
amendment or termination shall have the effect of reducing the
benefits:
(a) payable under Articles 3 and 4 hereof to a Participant whose
employment terminated prior to the effective date of such
amendment or termination of the Plan or payable to such
Participant's Spouse or Children; or
(b) to which a Participant, his surviving Spouse or Children are
entitled under Articles 3 and 4 hereof assuming, for purposes
of computing those benefits, that (i) the date of the
amendment or termination, as applicable, is the date of the
Participant's Retirement; (ii) the amount of Other Benefits to
which the Participant, his Spouse or Children are entitled,
includes only Other Benefits as had accrued prior to the date
of the amendment or termination; and (iii) the Participant is
not given credit in computing his Years of Service under the
last sentence of Section 4.01 or the next to last sentence of
Section 4.04 for any period subsequent to the date of the
amendment or termination; or
(c) to which any Participant and any Participant's surviving
Spouse or Children are entitled upon Retirement or death under
Article 5 hereof as in effect prior to any amendment or
termination, except as specifically allowed pursuant to
Section 5.01(a)(i) and the last sentences of Sections
5.01(a)(ii) and 5.01(b).
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7.03 SUBSEQUENT TO A CHANGE IN CONTROL OF THE CORPORATION: If, after a
Change in Control of the Corporation shall have occurred, a
Participant's employment is terminated for any reason other than
Retirement, death or Disability or for Cause, the Employer nonetheless
shall be unconditionally obligated notwithstanding the provisions of
Article 6, to pay or provide benefits to such Participant and to the
Participant's surviving Spouse and Children under Articles 3 and 4
hereof that are not less than the benefits that would be payable under
such provisions assuming that:
(a) the date of the Change in Control were the date of the
Participant's Retirement;
(b) the amount of Other Benefits to which the Participant, his
Spouse or Children were entitled included only the Other
Benefits as had accrued prior to the date of the Change in
Control; and
(c) the Participant were not given credit in computing his Years
of Service under the last sentence of Section 4.01 or the next
to last sentence of Section 4.04 for any period subsequent to
the date of the Change in Control.
7.04 TRANSFERS OF EMPLOYMENT:
(a) In the event a Participant is transferred to an Affiliated
Company that does not have a supplemental retirement benefit
plan:
(i) If the Affiliated Company to which the Participant is
transferred so agrees, the Participant shall continue
to accrue benefits under the Plan, whereupon the
Employer employing the Participant immediately prior
to the transfer shall transfer to the Affiliated
Company all assets, if any, held by the Employer for
purposes of funding any liability to the Participant
hereunder, and the Affiliated Company shall assume
(and the Employer employing the Participant
immediately prior to the transfer will be relieved
of) all liability for payment of benefits hereunder
to the Participant;
(ii) Otherwise, the responsibility for providing the
accrued benefits hereunder shall remain with the
Employer employing the Participant prior to the
transfer. The accrued benefits shall be limited to
the benefits that would be payable to the
Participant, his Spouse and Children under Section
7.02 had the Plan been terminated with respect to the
Participant on the date of the transfer of
employment.
(b) In the event a Participant is transferred to an Affiliated
Company that has a supplemental retirement plan that does not
give credit for Years of Service with the Corporation and any
other Affiliated Company prior to the date of the transfer,
the responsibility for providing the accrued benefits
hereunder shall
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<PAGE>
remain with the Employer employing the Participant prior to
the transfer unless there is a mutual agreement between the
two employers that the successor employer shall be responsible
for providing accrued benefits. The accrued benefits shall be
limited to the benefits that would be payable to the
Participant, his Spouse and Children under Section 7.02 had
the Plan been terminated with respect to the Participant on
the date of the transfer of employment.
(c) In the event a Participant is transferred to an Affiliated
Company that has a supplemental retirement plan that gives
credit for Years of Service with the Corporation and any other
Affiliated Company prior to the date of the transfer, and if
the Participant accepts designation as a participant in that
plan, the Participant shall be entitled only to the benefits
of the supplemental retirement plan of the Employer employing
the Participant subsequent to the transfer, and the Employer
employing the Participant immediately prior to the transfer
shall have no further obligation hereunder; however, to the
extent that the benefits payable to the Participant on account
of service to an Employer prior to the date of the transfer
are less than the benefits that would be payable to the
Participant under Section 7.02(b) had the Plan been terminated
with respect to the Participant on the date of the transfer of
employment, the Employer employing the Participant prior to
the transfer shall be liable to the Participant to the extent
of any shortfall. If the Participant does not accept
designation as a participant in the plan, then the Participant
shall be treated as though he had transferred to an Affiliated
Company that does not have a supplemental retirement benefit
plan.
ARTICLE 8: GENERAL PROVISIONS
8.01 LIMITATION OF RIGHTS OF THE EMPLOYEE: Inclusion under the Plan shall
not give a Participant, his Spouse, or his Children any right or claim
to a benefit, except as specifically defined in this Plan. The
establishment of the Plan shall not be construed as giving any Employee
a right to be continued in the service of the Corporation or any
Affiliated Company.
8.02 DISCHARGE OF OBLIGATIONS: The Employer and the Committee may at any
time fully and completely satisfy and discharge all its obligations
hereunder to the Participant, his Spouse or his Children by:
(a) delivering, or causing to be delivered, to the Participant,
his Spouse, or his Children a fully-paid policy issued by a
corporate insurer rated "A" or "A-plus" in Best's Insurance
Guide; or
(b) instituting or amending a pension plan in which the
Participant is a Participant to provide an equal benefit; or
(c) making some other arrangement for the Participant, his Spouse,
or his Children;
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<PAGE>
provided that, in any case mentioned in (a), (b), or (c)
hereof, provision is made for not less than the benefits to
which the Participant, his Spouse or his Children, as the case
may be, may be entitled under the provisions hereof; or
(d) entering into a contract with the Participant, containing
terms mutually agreed upon by the Employer and the
Participant, to provide benefits in lieu of those provided
hereunder.
8.03 NO ASSIGNMENT OF BENEFITS: None of the rights of the Participant or of
other beneficiaries under this Plan shall be assignable in whole or in
part either directly or by will or succession, but shall be personal to
the individual Participant, the Participant's surviving Spouse, or the
Participant's Children as the case may be.
8.04 ADMINISTRATIVE POWERS RELATING TO PAYMENTS: (a) If any person eligible
to receive payments under the provisions of this Plan is under a legal
disability or, by reason of illness or mental or physical disability,
is, in the opinion of the Plan Administrator, unable to properly
administer payments made pursuant to the Plan, the Committee or its
designee shall make payments in any of the following ways:
(i) Directly to the person eligible to receive the
payments;
(ii) To the legal representative of such person eligible
to receive payments or;
(iii) To some relative by blood or marriage, or friend, for
the benefit of such person eligible to receive
payments.
(b) Any payment made pursuant to this Section shall be in complete
discharge of the obligation therefor under the Plan.
8.05 MULTIPLE CLAIMANTS: If two or more persons other than the Participant
shall claim to be entitled to any payment hereunder on the ground that
any one or more of such persons is the surviving Spouse or a Child of
the Participant, payment to one or more of those persons as shall in
the opinion of the Employer be entitled thereto shall discharge all
obligations of the Employer hereunder in respect of that payment.
8.06 ADMINISTRATION: The Plan Administrator shall have full authority to
control and manage the operation and administration of the Plan,
including the right to appoint other fiduciaries, to appoint or employ
individuals to assist in the administration of the Plan and any other
agents it deems advisable (including legal and actuarial counsel) and
to delegate to others any administrative procedures that are necessary
for the administration of the Plan. Subject to the provisions of
Article 9, the decision of the Plan Administrator on all matters
concerning the interpretation and administration of this Plan shall be
final. Neither the Board, the Corporation, the Committee, the Plan
Administrator, any Affiliated Company, nor any persons acting on their
behalf shall be subject to any
15
<PAGE>
liability to any Participant or other person in connection with the
construction and administration of this Plan.
8.07 INDEMNIFICATION: The Corporation shall indemnify each member of the
Committee, the Board of Directors, and the Plan Administrator (if
different from the Committee), or any of their delegees, against costs,
expenses and liabilities, including attorney's fees, incurred in
connection with any action, suit or proceeding instituted against them
or any one of them because of any act of omission or commission
performed by them or any one of them as a director, committee member or
Plan Administrator, or designee or delegee thereof, as the case may be,
while acting in good faith and exercising his judgment for the best
interest of the Plan.
Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the Corporation,
notify the Corporation of the commencement thereof, and the omission so
to notify the Corporation will relieve it from the liability hereunder,
but not from any other liability which it may have to such person. The
Corporation shall be entitled to participate at its own expense in the
defense or to assume the defense of any action brought against any
party indemnified hereunder.
In the event the Corporation elects to assume the defense of any such
suit, such defense shall be conducted by counsel chosen by it and
reasonably satisfactory to the indemnified party, and the indemnified
party shall bear the fees and expenses of any additional counsel
retained by him.
8.08 EXPENSES: Any expenses reasonably incurred by the Committee, the Board,
or the Plan Administrator (if different from the Committee), or their
designees, in the performance of their duties shall be paid by the
Corporation. Reasonable expenses include the cost of insurance obtained
to protect the Committee, the Board, the Plan Administrator, or their
designees, from personal liability resulting from their actions taken
in a fiduciary capacity with respect to this Plan.
8.09 FUNDING: The Employer's obligations under this Plan shall be unfunded,
and the Employer shall not be obligated under any circumstances to fund
its obligations under this Plan.
8.10 PAYMENT OF PARTICIPANT'S EXPENSES: The Employer shall pay or reimburse
a Participant for all costs, including reasonable attorneys' fees and
expenses of litigation and/or arbitration, incurred by the Participant
in seeking to obtain or enforce any right or benefit provided by the
Plan, provided that the Participant is the prevailing party in any such
litigation or arbitration proceeding.
8.11 GOVERNING LAW: To the extent not preempted by ERISA, this Plan shall be
governed by and interpreted in accordance with the substantive laws of
the State of
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Delaware and shall be binding upon the Corporation.
8.12 SEVERABILITY: The provisions of this Plan are severable, and the
invalidity or unenforceability of any provision shall not affect the
validity or enforceability of any other provision.
8.13 NAMED FIDUCIARY: The Plan Administrator is the named fiduciary.
ARTICLE 9: CLAIMS PROCEDURE
9.01 SUBMISSION OF CLAIMS: Claims for benefits under the Plan shall be
submitted in writing to the Plan Administrator or a person designated
by the Plan Administrator for this purpose. Written notice of the
disposition of a claim shall be furnished the claimant within ninety
(90) days after the application therefor is filed. The ninety-day
notice period shall, however, be extended for an additional ninety (90)
days if the Plan Administrator determines that an extension of time is
necessary to process the claim and so advises the claimant in writing
within ninety (90) days after receipt of the claim, which writing shall
also indicate the special circumstances requiring an extension of time
and the date by which the Plan Administrator expects to render the
final decision.
9.02 WRITTEN NOTICE OF DENIED CLAIM: The Plan Administrator or its designee
shall provide adequate notice in writing to any person whose claim for
benefits has been denied. The notice shall set forth the specific
reason or reasons for the denial and shall be written in a manner
calculated to be understood by the recipient. The notice shall also
refer specifically to pertinent Plan provisions on which the denial is
based; shall describe any additional material or information necessary
for the claimant to perfect the claim; and shall explain why the
additional material or information is necessary. The notice shall also
explain the Plan's claims review procedure.
9.03 REVIEW OF DECISION DENYING CLAIM: The Plan Administrator or its
designee shall afford to any person whose claim for benefits has been
denied a reasonable opportunity for a full and fair review of the
decision denying the claim. The claimant or his duly authorized
representative shall request a review in writing not more than ninety
(90) days after receipt by the claimant of written notification of
denial of a claim. Within ten (10) days after, or as part of, a timely
request for review, the claimant may submit issues and comments in
writing and may review pertinent documents.
9.04 HEARING: Upon receipt of a timely request for review, the Plan
Administrator or its designee may hear the claimant's request and
inquire into the merits of the matter. The Plan Administrator or its
designee shall meet promptly with the claimant and/or his duly
authorized representative and hear arguments and/or examine documents
the claimant or his representative present.
9.05 WRITTEN DECISION OF PLAN ADMINISTRATOR: A decision of the Plan
17
<PAGE>
Administrator or its designee on review of a claim shall be in writing
and shall include specific reasons for the decision, written in a
manner calculated to be understood by the claimant. The decision shall
include specific references to the pertinent Plan provisions on which
the decision is based. The decision shall be made promptly and not
later than sixty (60) days after a request for review, unless special
circumstances require an extension. In that case, the claimant shall be
so advised in writing prior to the expiration of the initial sixty (60)
day period and a decision shall be rendered as soon as possible, but
not later than one hundred and twenty (120) days after receipt of a
request for review.
IN WITNESS WHEREOF, the Corporation has caused this document to be
executed by its duly authorized officer this 17th day of November, 1995, but
effective as of November 1, 1995.
BOWATER INCORPORATED
By: /s/ Ecton Manning
Name: Ecton Manning
Title: Vice President - General Counsel
18
<PAGE>
EXHIBIT 10.20.1
First Amendment to the
Supplemental Benefit Plan
for Designated Employees of
Bowater Incorporated and
Affiliated Companies
as Amended and Restated November 1, 1995
WHEREAS, Bowater Incorporated (the "Company") previously amended and
restated the Supplemental Benefit Plan for Designated Employees of Bowater
Incorporated and Affiliated Companies as of November 1, 1995 (the "Plan");
WHEREAS, Section 7.02 of the Plan permits the Human Resources and
Compensation Committee of the Board of Directors of the Company (the "HRCC") to
amend the Plan;
WHEREAS, the HRCC desires to amend the Plan to change the references to
salary grade fourteen (14) and above to salary grade thirty-one (31) and above
to conform to the Company's revised salary administration program;
NOW, THEREFORE, BE IT RESOLVED that:
Effective January 1, 1996, Section 2.01 entitled
"Participation" is hereby amended by changing the references to "salary
grades fourteen (14) and above" to "salary grades thirty-one (31) and
above."
IN WITNESS WHEREOF, the HRCC has caused this First Amendment to the
Plan to be executed by a duly authorized officer of the Company on this 18 day
of March, 1996.
BOWATER INCORPORATED
By: /s/ Richard F. Frisch
Name: Richard F. Frisch
Title: Vice President - Human Resources
<PAGE>
EXHIBIT 10.21.1
NOVEMBER 14, 1995, AMENDMENT TO
BOWATER INCORPORATED
EXECUTIVE DEFERRED COMPENSATION PLAN
WHEREAS, Bowater Incorporated (the "Sponsor") has established the
Bowater Incorporated Executive Deferred Compensation Plan (the "Plan"), has
reserved the right to amend and terminate the Plan, and has previously amended
the Plan effective January 1, 1995; and
WHEREAS, in anticipation of the Sponsor's termination of the Plan
effective October 1, 1996, the Sponsor desires to further amend the Plan to
cease future deferrals thereunder and to change the manner in which earnings are
credited;
NOW THEREFORE, the Plan is hereby terminated as of October 1, 1996, and
is amended, effective January 1, 1996, as follows:
1. Paragraph (b) of Section 6 is amended to read as follows:
"(b) Subsequent Deferrals. No deferral of (i) salary payable
after December 31, 1995, or (ii) bonus subsequent to the 1995
bonus, may be made under the Plan."
2. Paragraph (c) of Section 6 is deleted.
3. The following is added between the second and third paragraphs
of Section 9:
"Notwithstanding the foregoing, from and after January 1,
1996, the Adjustment component of the Deferral Account shall
be an imputed annual interest rate of eight percent (8%),
which shall be credited to the Participants' Deferred Accounts
as of the end of each month. From and after January 1, 1996,
the Investment Options shall no longer be used to calculate
the Adjustment component of the Deferral Account."
IN WITNESS WHEREOF, this Amendment has been executed on behalf of the
Company by its duly authorized officers as of November 14, 1995, on this 17th
day of November, 1995.
BOWATER INCORPORATED
By: /s/ Ecton R. Manning
Ecton R. Manning
Vice President - General Counsel
<PAGE>
EXHIBIT 10.28.2
SUPPLEMENTAL AGREEMENT
TO THE
BOWATER INCORPORATED BENEFIT PLAN
GRANTOR TRUST
This Supplemental Agreement ("Supplemental Agreement") made as of May 20,
1988, by and between Bowater Incorporated ("Bowater"), a Delaware corporation
with offices in Darien, Connecticut, and Wachovia Bank and Trust Company, N.A.
("Wachovia"), a national banking association with an office in Winston-Salem,
N.C.
This Supplemental Agreement is to detail the use of an Irrevocable
Letter of Credit (referred to as "Credit") in connection with the Trust
Agreement made as of May 20, 1988, by and between Bowater and Wachovia entitled
the Bowater Incorporated Benefit Plan Grantor Trust ("Trust") for which Wachovia
serves as Trustee.
Neither the existence of this Supplemental Agreement nor the Credit
shall alter the characterization of the Bowater Incorporated Benefit Plans
covered by the Bowater Incorporated Benefit Plan Grantor Trust ("Plans") as
"unfunded" for purposes of the Employee Retirement Income Security Act of 1974
as amended
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<PAGE>
("ERISA"), and shall not be construed to provide income to any participant under
the Plan or Trust prior to the actual payment of benefits under the Plan.
Bowater and Wachovia agree as follows:
1. Letter of Credit
(a) Bowater contributions to the Trust may be in the form of a
Credit or one or more Credits. Such Credit shall be Irrevocable Letters of
Credit, which shall be in the form of Schedule I hereto. Bowater shall give
Wachovia a copy of each Credit established for the Trust, executed by the Bank
issuing such Credit (the "Credit Bank"). Wachovia shall draw on a Credit as
directed in writing by any two of the individuals named in Schedule III as
having authority to do so or their named designees whose names have been
communicated to Wachovia in writing signed by any two of the individuals named
in Schedule III. Schedule III shall be updated from time to time as needed to
reflect changes, if any, in the names of individuals designated therein.
Wachovia shall not draw on any Credit unless so directed.
Such Credit shall not be less than an amount determined at
least annually by Bowater to be sufficient for the covering of Benefits under
the Trust and as communicated in writing to Wachovia by the Administrative
Committee. Wachovia shall have no duty or responsibility to determine the amount
of the Credit.
(b) At least annually, the Administrative Committee
shall notify Wachovia in writing of the current total of unfunded
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<PAGE>
obligations under the Trust, (the "Credit Draw"). Wachovia agrees that upon
receipt of notification of a change in control, it shall promptly draw on the
Credit by presenting Credit Bank with a draft in the amount of the Credit Draw.
(c) Any direction to Wachovia pursuant to this
Section shall be addressed as follows:
Mr. David Harrison
Assistant Vice President
Wachovia Bank and Trust Co., N.A.
301 N. Main Street
P.O. Box 3099
Winston-Salem, NC 27102
All directions shall plainly reference the Plan and Trust and provide
all necessary information for Wachovia to act.
(d) Wachovia shall draw on any Credit only if and to the
extent specifically directed in the foregoing provisions of this Agreement. In
the event that Wachovia shall resign or be removed, and a successor trustee
shall be appointed hereunder, the rights and obligations of Wachovia under each
Credit shall automatically become the rights and obligations of the successor
trustee, and Wachovia shall have no further rights, duties, obligations or
liabilities with respect to any Credit.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Supplemental
Agreement on this 20th day of May 1988.
BOWATER INCORPORATED
/s/ Leonard Saari By /s/ R. D. McDonough
Secretary
WACHOVIA BANK AND TRUST
COMPANY, N.A.
/s/ Charles G. Thacker By /s/ Joe O. Long
Asst. Secretary Vice President
4
<PAGE>
EXHIBIT 10.29.1
SUPPLEMENTAL AGREEMENT
TO THE
BOWATER INCORPORATED EXECUTIVE SEVERANCE
GRANTOR TRUST
This Supplemental Agreement ("Supplemental Agreement") made as of
September 1, 1989, by and between Bowater Incorporated ("Bowater"), a Delaware
corporation with offices in Darien, Connecticut, and Wachovia Bank and Trust
Company, N.A. ("Wachovia"), a national banking association with an office in
Winston-Salem, N.C.
This Supplemental Agreement is to detail the use of an Irrevocable
Letter of Credit or Letters of Credit (referred to as "Credit") in connection
with the Trust Agreement made as of September 1, 1989, by and between Bowater
and Wachovia entitled the Bowater Incorporated Executive Severance Grantor Trust
("Trust") for which Wachovia serves as Trustee.
Neither the existence of this Supplemental Agreement nor the Credit
shall alter the characterization of the Bowater Incorporated Executive Severance
Agreements "(Agreements") covered by the Trust as "unfunded" for purposes of the
Employee Retirement Income Security Act of 1974 as amended ("ERISA"), and shall
not be construed to provide income to any participant under the
1
<PAGE>
Agreements or Trust prior to the actual payment of benefits under the
Agreements.
Bowater and Wachovia agree as follows:
1. Letter of Credit
(a) Bowater contributions to the Trust may be in the form of a
Credit or one or more Credits. Such Credit shall be Irrevocable Letters of
Credit, which shall be in the form of Schedule I hereto. Bowater shall give
Wachovia a copy of each Credit established for the Trust, executed by the Bank
issuing such Credit (the "Credit Bank"). Wachovia shall draw on a Credit as
directed in writing by any two of the individuals name in Schedule III as having
authority to do so or their named designees whose names have been communicated
to Wachovia in writing signed by any two of the individuals named in Schedule
III. Schedule III shall be updated from time to time as needed to reflect
changes, if any, in the names of individuals designated therein. Wachovia shall
not draw on any Credit unless so directed.
Such Credit shall not be less than an amount determined at least
annually by Bowater to be sufficient for the covering of obligations under the
Trust and as communicated in writing to Wachovia by the Administrative
Committee. Wachovia shall have no duty or responsibility to determine the amount
of the Credit.
(b) At least annually, the Administrative Committee
shall notify Wachovia in writing of the current total of unfunded
2
<PAGE>
obligations under the Trust, (the "Credit Draw"). Wachovia agrees that upon
receipt of notification of a change in control as provided for in Schedule II,
it shall promptly draw on the Credit by presenting Credit Bank with a draft in
the amount of the Credit Draw.
(c) Any direction to Wachovia pursuant to this Section
shall be addressed as follows:
Ms. Jane Price
Vice President
Wachovia Bank and Trust Co., N.A.
301 N. Main Street
P.O. Box 3099
Winston-Salem, NC 27150
with a copy to Mr. Joe Long at the same address.
All directions shall plainly reference the Trust and provide
all necessary information for Wachovia to act.
(d) Wachovia shall draw on any Credit only if and to the
extent specifically directed in the foregoing provisions of this Agreement. In
the event that Wachovia shall resign or be removed, and a successor trustee
shall be appointed hereunder, the rights and obligations of Wachovia under each
Credit shall automatically become the rights and obligations of the successor
trustee, and Wachovia shall have no further rights, duties, obligations or
liabilities with respect to any Credit.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this
Supplemental Agreement on this 1st day of September 1989.
BOWATER INCORPORATED
/s/ Leonard M. Saari By /s/ R. E. Gustafson
Attest - Secretary
WACHOVIA BANK AND TRUST
COMPANY, N.A.
/s/ Charles G. Thacker By /s/ Joe O. Long
Attest - Assistant Vice President
Secretary
4
<PAGE>
EXHIBIT 10.30.1
SUPPLEMENTAL AGREEMENT
TO THE
BOWATER INCORPORATED OUTSIDE DIRECTORS BENEFIT PLAN
GRANTOR TRUST
This Supplemental Agreement ("Supplemental Agreement") made as of
September 5, 1989, by and between Bowater Incorporated ("Bowater"), a Delaware
corporation with offices in Darien, Connecticut, and Wachovia Bank and Trust
Company, N.A. ("Wachovia"), a national banking association with an office in
Winston-Salem, N.C.
This Supplemental Agreement is to detail the use of an Irrevocable
Letter of Credit or Letters of Credit (referred to as "Credit") in connection
with the Trust Agreement made as of September 5, 1989, by and between Bowater
and Wachovia entitled the Bowater Incorporated Outside Directors Benefit Plan
Grantor Trust ("Trust") for which Wachovia serves as Trustee.
Neither the existence of this Supplemental Agreement nor the Credit
shall alter the characterization of the Bowater Incorporated Outside Directors
Plans ("Outside Directors Plans") covered by the Trust as "unfunded" for
purposes of the Employee Retirement Income Security Act of 1974 as amended
("ERISA"), and shall not be construed to provide income to any participant under
1
<PAGE>
the Outside Directors Plans or Trust prior to the actual payment of benefits
under the outside Directors Plans.
Bowater and Wachovia agree as follows:
1. Letter of Credit
(a) Bowater contributions to the Trust may be in the form of a
Credit or one or more Credits. Such Credit shall be Irrevocable Letters of
Credit, which shall be in the form of Schedule I hereto. Bowater shall give
Wachovia a copy of each Credit established for the Trust, executed by the Bank
issuing such Credit (the "Credit Bank"). Wachovia shall draw on a Credit as
directed in writing by any two of the individuals named in Schedule III as
having authority to do so or their named designees whose names have been
communicated to Wachovia in writing signed by any two of the individuals name in
Schedule III. Schedule III shall be updated from time to time as needed to
reflect changes, if any, in the names of individuals designated therein.
Wachovia shall not draw on any Credit unless so directed.
Such Credit shall not be less than an amount determined at least
annually by Bowater to be sufficient for the covering of obligations under the
Trust and as communicated in writing to Wachovia by the Administrative
Committee. Wachovia shall have no duty or responsibility to determine the amount
of the Credit.
(b) At least annually, the Administrative Committee
shall notify Wachovia in writing of the current total of unfunded
2
<PAGE>
obligations under the Trust, (the "Credit Draw"). Wachovia agrees that upon
receipt of notification of a change in control as provided for in Schedule II,
it shall promptly draw on the Credit by presenting Credit Bank with a draft in
the amount of the Credit Draw.
(c) Any direction to Wachovia pursuant to this Section
shall be addressed as follows:
Ms. Jane Price
Vice President
Wachovia Bank and Trust Co., N.A.
301 N. Main Street
P.O. Box 3099
Winston-Salem, NC 27150
with a copy to Mr. Joe Long at the same address.
All directions shall plainly reference the Trust and provide all
necessary information for Wachovia to act.
(d) Wachovia shall draw on any Credit only if and to the
extent specifically directed in the foregoing provisions of this Agreement. In
the event that Wachovia shall resign or be removed, and a successor trustee
shall be appointed hereunder, the rights and obligations of Wachovia under each
Credit shall automatically become the rights and obligations of the successor
trustee, and Wachovia shall have no further rights, duties, obligations or
liabilities with respect to any Credit.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this
Supplemental Agreement on this lst day of September 1989.
BOWATER INCORPORATED
/s/ Leonard M. Saari By /s/ R. E. Gustafson
Attest - Secretary
WACHOVIA BANK AND TRUST
COMPANY, N.A.
/s/ Charles G. Thacker By /s/ Joe O. Long
Attest - Assistant Vice President
Secretary
4
<PAGE>
EXHIBIT 10.33
BOWATER INCORPORATED
LONG TERM CASH INCENTIVE PLAN
1. PURPOSE
The purposes of the Bowater Incorporated (the "Corporation") Long Term Cash
Incentive Plan (the "Plan") are to:
- Focus executives on the Corporation's long term strategic and financial
objectives that will lead to the creation of value for the
shareholders,
- Encourage management to achieve goals by providing incentive
opportunities that are commensurate with performance, and
- Enhance the Corporation's ability to attract and retain highly talented
individuals.
2. DEFINITIONS
"Actual Award" or "Award" refers to the incentive amount earned by a Participant
under the terms and provisions of the Plan.
"Average Capital Employed" is the average of the Capital Employed as of the
beginning of the last year in the Plan Cycle compared to the end of the last
year of the Plan Cycle.
"Active Participant" or "Active Employee" does not include Participants or
Employees who are receiving periodic severance payments.
"Board" means the Board of Directors of the Corporation.
"Capital Employed" is total shareholders' equity (including redeemable preferred
stock) plus long-term debt, deferred income taxes, and minority interests in
subsidiaries, all as recorded on the Corporation's or on a Peer Company's
consolidated balance sheet.
"CEO" means the Chief Executive Officer of the Corporation.
"Disability" means total and permanent disability as defined in the
Corporation's long-term disability insurance policy.
"Employee" refers to an employee of the Corporation or a subsidiary that is at
least 50% owned by the Corporation.
"HRCC" refers to the Human Resources and Compensation Committee of the Board.
<PAGE>
"Net Operating Earnings" means operating income, after depreciation, but before
interest, as recorded on the Corporation's or on a Peer Company's consolidated
statement of operations.
"Participant" refers to an Employee of the Corporation designated to participate
in the Plan.
"Payout Schedule" refers to a schedule that correlates the Corporation's rank
among Peer Companies with a percentage of Units earned.
"Peer Company" refers to each of the companies specified at the outset of a Plan
Cycle against which the Corporation's financial performance will be evaluated.
"Performance Goals" refer to the pre-established criteria upon which the
Corporation's performance will be assessed.
"Plan Cycle" refers to the three-year periods specified by the HRCC over which
performance under the Plan provisions will be measured.
"Retirement" as applied to a Participant, has the meaning given to such term in
the qualified pension plan applicable to the Participant.
"Return on Capital Employment" or "ROCE" means Net Operating Earnings divided by
Average Capital Employed.
"Target Annual Incentive" refers to the bonus percentage assigned as of the
beginning of the Plan Cycle to the Participant's salary grade level.
"Target Award" refers to the product of three times a Participant's Target
Annual Incentive and the midpoint as of the beginning of the Plan Cycle of the
Participant's salary grade.
"Target Number of Units" means a Participant's Target Award divided by the
average daily price of the Corporation's common stock in the month prior to the
start of the Plan Cycle.
"Termination" means the cessation of a Participant's status as Employee for any
reason whatsoever, whether voluntary or involuntary, including by reason of
death or Disability.
"Unit" refers to units granted to Participants pursuant to the Plan, each of
which has a value equal to one share of the Corporation's common stock.
3. GENERAL PLAN DESCRIPTION
The Plan provides the opportunity for key Employees to receive cash awards
based on the Corporation's financial performance relative to that of a group of
Peer Companies and the Corporation's stock performance over a Plan Cycle.
Certain Employees will be selected to participate in the Plan at the beginning
of or during each Plan Cycle pursuant to Section 4 of the Plan. Upon selection
to participate in the Plan during a Plan Cycle, each Participant will be granted
a Target Number of Units, with each unit having a value equal to one share of
the
<PAGE>
Corporation's common stock.
At the end of each Plan Cycle, the number of Units earned will be based on
the Corporation's ROCE in the final year of the Plan Cycle relative to the ROCE
of a group of Peer Companies. Actual Awards to Participants will be paid in cash
in an amount equal to the number of Units earned times the average price of a
share of the Corporation's common stock during the last month of the Plan Cycle.
4. PARTICIPATION
Plan participation is extended to Employees in salary grades 14 and above
and to selected Employees who, in the opinion of the CEO and the HRCC, have the
ability to have a significant impact on the long term performance of the
Corporation. These Employees will be notified in writing of their selection to
participate in the Plan by a letter signed by the CEO.
Participation in the Plan is intended to be more limited than in either the
Corporation's Annual Incentive Plan or the Stock Option Plan. Participation in
one Plan Cycle does not guarantee participation in another Plan Cycle.
5. TARGET AWARDS
Each Participant will be granted a Target Number of Units based on the
value of his or her Target Award. The Target Award is equal to three times each
Participant's Target Annual Incentive (the bonus percentage assigned to the
Participant's grade level) during the first year of the Plan Cycle times the
midpoint of the Participant's salary grade in that year:
Target Annual Salary Grade
Target Award = 3 X Incentive X Midpoint
The Target Number of Units granted to each Participant will be equal to the
Target Award divided by the average daily stock price for a share of the
Corporation's common stock during the month preceding the start of the Plan
Cycle (e.g., December 1993 for the Plan Cycle covering 1994 through 1996).
Target Number of Units = Target Award
________________________________
Corporation's Common Stock Price
6. PERFORMANCE GOALS
At the beginning of each Plan Cycle, a Payout Schedule will be developed
that correlates the percentage of Units earned with the Corporation's ROCE rank
positioning as of the final year of the Plan Cycle within a group of Peer
Companies specified at the outset of a Plan Cycle.
<PAGE>
For purposes of this Plan, ROCE is computed as follows:
ROCE = Net Operating Earnings
________________________
Average Capital Employed
where:
- Net Operating Earnings is net operating income after depreciation but
before interest and income taxes.
- Capital Employed is total shareholders' equity plus long-term debt,
minority interests, and deferred income taxes.
- Average Capital Employed is the average of Capital Employed as of the
the beginning of the last year of the Plan Cycle as compared to the
Capital Employed at the end of the last year of the Plan Cycle.
At the end of the Plan Cycle, ROCE will be computed for the Corporation and
the Peer Companies and the Corporation's results will be ranked against the Peer
Companies' results. The Payout Schedule will translate this ranking into the
percentage of the Target Number of Units earned.
7. ACTUAL AWARDS
The Payout Schedule for the appropriate Plan Cycle will determine the
percentage of the Target Number of Units earned for each Participant based upon
the Corporation's ranking among the Peer Companies. The number of units earned
for each Participant is determined by multiplying the Target Number of Units
times the applicable percentage determined by the Payout Schedule.
A Participant's Actual Award will be determined by multiplying the number
of Units earned times the applicable average daily stock price of a share of the
Corporation's common stock during the last month of the last year of the Plan
Cycle.
8. PAYMENT OF AWARDS
Actual Awards to Participants will be paid in cash within 90 days following
the end of the Plan Cycle. In order to receive payment, the Participant must be
an Active Employee (except, see below) of the Corporation or one of its
subsidiaries as of the end of the Plan Cycle.
9. TERMINATION
If Termination of a Participant's employment occurs during the Plan Cycle
by reason of Retirement, death or Disability, or because of an involuntary
Termination by the Corporation without cause (e.g., because of a reduction in
force, or the sale of an operating unit), the
<PAGE>
Participant (or his or her estate) will be eligible to receive a pro-rata Award
for that Plan Cycle based on the time employed as an Active Participant, with
Awards paid at the same time as other Participants are paid (i.e., following the
end of the Plan Cycle), based on actual performance achieved through the end of
the Plan Cycle.
A Participant whose employment with the Corporation is terminated for
cause, as determined by the HRCC, prior to the end of the Plan Cycle will
forfeit all Awards that have not yet been paid.
Participants who voluntarily terminate during a Plan Cycle will forfeit all
Awards for the Plan Cycle that has not yet been completed prior to Termination.
10. NEW HIRES AND CHANGES IN POSITION
If an Employee is hired or promoted into a position that would qualify for
Plan participation during the first two years of a Plan cycle, he or she will
begin participation in the Plan Cycle on a prorated basis. If the date of hire
or promotion is during the final year of a Plan Cycle, the Employee will be
eligible for the next Plan Cycle. If an Employee who is already participating in
a Plan is promoted into a higher position or demoted to a lower position, then
his or her Target Award will be adjusted as of the date of the change in
position and the Actual Award will be computed on a prorated basis.
11. CHANGE IN CONTROL
Upon the occurrence of a Change in Control (as defined herein) during a
Plan Cycle, the Plan Cycle shall terminate and the Actual Awards shall be
computed as of the date of the Change in Control assuming the highest percentage
allowable on the Payout Schedule and the highest stock price achieved during the
Plan Cycle. The amounts due shall be paid to the Participants within ninety (90)
days after the Change in Control occurs.
A "Change in Control" is the occurrence of one of the following events:
- Any Person (other than the Corporation or any trustee or other
fiduciary holding securities under an employee benefit plan of the
Corporation (or any subsidiary of the Corporation)) is or becomes an
"Acquiring Person" (as defined below);
- Less than two-thirds (2/3) of the total membership of the Board shall
be Continuing Directors; or
- 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 of all or
substantially all of the Corporation's assets.
For purposes of this Section 11:
- "Acquiring Person" shall mean any person who is or becomes a beneficial
owner (as
<PAGE>
defined in Rule 13d-3 of the Securities 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.
- "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 of the date hereof.
- "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 and is recommended or elected to succeed the Continuing Director
by a majority of the Continuing Directors.
- "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.
12. PLAN ADMINISTRATION
All decisions concerning overall plan design, eligibility, the
determination of Target Awards and the determination of Actual Awards to
Participants will be subject to the final approval of the HRCC. If extraordinary
events occur during the Plan Cycle that significantly alter the basis upon which
the relationship between Performance Goals and the Payout Schedule was
established, the HRCC may, in its sole discretion, make adjustments to the
Performance Goals and Payout Schedule as appropriate. The HRCC will have the
authority to interpret the provisions of the Plan, and to make any rules and
regulations necessary to administer the Plan, including but not limited to:
- Designation of Plan Participants
- Establishment of Target Awards for each Participant
- Adjustment of Target Awards
- Establishment of the Performance Goals
- Establishment of the Payout Schedule
- Designation of Peer Companies
- Determination of the Corporation's actual performance relative to the
Performance Goals
- Adjustments to the Performance Goals due to extraordinary events
<PAGE>
- Adjustment or Elimination of Actual Awards to Participants
- Approval of Actual Awards to Participants
The HRCC shall have the power to amend or terminate the Plan at any time.
Any such amendment shall be evidenced by a writing signed by a duly authorized
officer of the Corporation.
All decisions made by the HRCC pursuant to the provisions of the Plan shall
be final and conclusive, and binding on all parties concerned.
13. ASSIGNMENT OF EMPLOYEE RIGHTS
No Employee has a claim or right to be a Participant in the Plan, to
continue as a Participant, or to be granted an Award under the Plan. The HRCC is
not obligated to give uniform treatment (e.g., Target Awards, Actual Awards,
etc.) to Participants under the Plan. Participation in the Plan does not give a
Participant the right to be retained in the employment of the Corporation, nor
does it imply or confer any other employment rights.
Nothing contained in the Plan will be deemed to require the Corporation to
deposit, invest or set aside amounts for the payment of any Awards.
Participation in the Plan does not give a Participant any ownership, security,
or other rights in any assets of the Corporation.
14. WITHHOLDING TAXES FOR AWARDS
Awards made pursuant to the Plan are subject to applicable withholding for
federal, state, local, and social security taxes.
15. VALIDITY
In the event any provision of the Plan is held invalid, void, or
unenforceable, the same will not affect, in any respect whatsoever, the validity
of any other provision of the Plan.
16. APPLICABLE LAW
The validity, interpretation and administration of the Plan and of any
rules, regulations, determination or decisions made thereunder, and the rights
of any and all persons having or claiming to have interest therein or
thereunder, shall be determined exclusively in accordance with the laws of the
State of Delaware.
<PAGE>
EXECUTED on behalf of the Corporation as of January 1, 1994, on the 17th
day of August, 1995.
BOWATER INCORPORATED
BY: /s/ Richard F. Frisch
Name: Richard F. Frisch
Title: Vice President - Human Resources
<PAGE>
EXHIBIT 10.33.1
First Amendment to the
Bowater Incorporated
Long Term Cash Incentive Plan
WHEREAS, Bowater Incorporated (the "Company") has adopted the Bowater
Incorporated Long Term Cash Incentive Plan (the "Plan") effective as of January
1, 1994;
WHEREAS, Section 12 of the Plan permits the Human Resources and
Compensation Committee of the Board of Directors (the "HRCC") to amend the Plan;
WHEREAS, the HRCC desires to amend the Plan to change the reference to
salary grades fourteen (14) and above to salary grades thirty-one (31) and above
to conform to the Company's revised salary administration program;
NOW, THEREFORE, BE IT RESOLVED that:
Effective January 1, 1996, the first sentence of Section 14 entitled
"Participation" shall be amended and restated as follows:
"Plan participation is extended to salary grades 31 and above and to
selected Employees who, in the opinion of the CEO and the HRCC, have
the ability to have a significant impact on the long term performance
of the Corporation."
IN WITNESS WHEREOF, the HRCC has caused this First Amendment to the
Plan to be executed by a duly authorized officer of the Company on this 18 day
of March, 1996.
BOWATER INCORPORATED
By: /s/ Richard F. Frisch
Name: Richard F. Frisch
Title: Vice President - Human Resources
<PAGE>
<PAGE>
1995
BOWATER Incorporated
ANNUAL
REPORT
(Photo of two Bowater employees looking at a roll of newsprint)
<PAGE>
EXCELLENT RESULTS Bowater Incorporated and Subsidiaries
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(In millions, except per-share amounts) 1995 1994
<S> <C> <C>
Net sales $ 2,001.1 $ 1,359.0
Operating income 549.3 42.1
Income (loss) before taxes and minority interests 464.6 (6.8)
Net income (loss) 246.9 (4.8)
Fully diluted income (loss) per common share $ 5.22 $ (.59)
Average common and common equivalent shares outstanding 43.4 36.6
Dividends paid per common share $ .60 $ .60
Working capital 388.7 303.2
Total assets 2,908.2 2,851.4
Total shareholders' equity 1,095.4 887.4
Total debt $ 818.1 $ 1,118.5
Total debt as a percentage of total capitalization 38.7% 50.3%
Current ratio 2.36X 2.44x
</TABLE>
FIVE YEAR FINANCIALS
Return on Equity
(Percent)
(Bar graph appears here with the following plot points.)
91 92 93 94 95
4.4 (9.6) (8.6) (3.0) 26.5
Net Sales
($ billions)
(Bar graph appears here with the following plot points.)
91 92 93 94 95
1.19 1.36 1.35 1.36 2.00
Net Income (Loss)
($ millions)
(Bar graph appears here with the following plot points.)
91 92 93 94 95
45.6 (82.0) (64.5) (4.8) 246.9
Total Debt as a
Percentage of Total
Capitalization
(Percent)
(Bar graph appears here with the following plot points.)
91 92 93 94 95
41.9 51.9 54.1 50.3 38.7
CONTENTS
To Our Shareholders 1
Newsprint 4
Coated Paper and Pulp 8
Great Northern Paper 12
Communication
Papers 16
This is Bowater 18
Financial Report 19
Directors and Officers 42
Shareholder
Information-Inside
back cover
Operating Divisions
-Back cover
FRONT COVER: 30-ton
reel of 30 lb. newsprint
produced at Calhoun, TN,
for Cox Newspapers'
DAYTON DAILY NEWS.
<PAGE>
TO OUR SHAREHOLDERS:
1995 was a record year for Bowater. Strong demand for newsprint throughout
the year resulted in significantly improved pricing and record sales levels.
Market demand for coated groundwood papers and pulp also improved greatly, as
did prices for these products. By year end, however, shipment levels weakened
and inventories rose. Directory paper pricing remained constant throughout 1995,
due to previous commitments, but increases were implemented in January 1996.
Lumber markets were weaker than in 1994.
Sales were a record $2.0 billion compared to $1.4 billion in 1994. Net
income for 1995 was $301 million, or $6.70 per fully diluted share, before
charges related to the write-down of the company's investment in the
Communication Papers Division, the repurchase of outstanding debt and preferred
stock, and a company-wide personnel reduction program. Net income for 1995,
after these charges, was a record $247 million, or $5.22 per share, compared to
a net loss for 1994 of $5 million, or $.59 per share. Reflecting these results,
our common stock price rose by more than 33% in 1995, compared to a 12% increase
in the Dow Jones Paper Products Group, a stock price composite of eight other
industry companies.
1995 markets were robust, but our management did not wait for the next
downturn before implementing important changes. Instead, five major goals were
established for the company. Essentially these were financial and organizational
objectives to better position Bowater for the inevitable downturns in our
business and for new growth opportunities. I am pleased to report that we have
accomplished almost all of these goals.
COST AND DEBT REDUCTION
Following the devastating industry recession of 1992-1994, our primary focus
in 1995 was cost and debt reduction. We established a two-year goal of reducing
controllable costs and improving efficiencies by more than $150 million. And
through the exceptional efforts of our employees, more than $70 million of
improvements were achieved in 1995.
(Photo appears here with the following caption.)
Arnold M. Nemirow
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE>
Debt was reduced by $300 million, or 27% over 1994, and almost $100 million
of preferred stock was removed from the balance sheet. Debt, as a percentage of
total capitalization at year end, was 38.7% compared to 50.3% for 1994.
ASSET MONETIZATION
Our Communication Papers Division was put up for sale in May 1995, after
determining that the converting business did not fit our long-term strategic
goals. Since then, however, we have not concluded a definitive agreement for its
sale, so we are continuing to operate that division. We did take other steps to
monetize non-strategic assets last year, including the recent sale of $90
million of timberland.
DIVISIONALIZATION AND CUSTOMER FOCUS
We successfully reorganized our business into four divisions: Newsprint,
Coated Paper & Pulp, Great Northern Paper (directory and specialty grades) and
Communication Papers. Each has a president who is responsible for division
profitability as well as asset management. This enabled each division management
team to focus on customer relations, marketing opportunities and capital
investment priorities. We further streamlined the organization at each division
by driving decisions down to those closest to the issue and creating team
approaches for customer interaction. With improved information flow and a shift
of the transportation function to each mill, our customers now enjoy more
consistent, effective service from the Bowater organization. Our commitment to
certify each of our five pulp and paper mills by the end of 1996, under the ISO
9000 program, is well under way.
GOING FORWARD
Even though we expect the paper business to remain cyclical, our improved
cost structure, quality programs and organizational changes will help to weather
the next down cycle more effectively than in the past. With these
accomplishments, Bowater is now positioned to become a larger, lower cost
producer of groundwood-based papers for growing world markets, without
jeopardizing product quality or financial strength.
Although growth in demand for newsprint in North America over the next few
years is forecast to be flat, we expect that growth on a global scale will be
better. Moreover, coated groundwood paper, our second largest grade, has a
healthy outlook in North America as well as overseas. Bowater is now exploring
growth opportunities while continuing to improve internal operating
efficiencies. With basic markets healthy, our strategy will be to increase
productive capacity and market share without burdening the balance sheet, or
building new capacity unless the fundamentals of supply and demand support it.
2
<PAGE>
In order to accomplish these goals, Bowater's organization must be properly
motivated. We recently adopted plans to provide incentives to a broad group of
employees and more closely align management with the long-term interests of
shareholders. For example, incentive compensation for senior management will now
be based on achieving specified goals, including returns on net assets and
capital investments, as well as cost and efficiency improvements. A stock
retention policy, requiring corporate officers to maintain an equity interest in
company stock, has been implemented to assure that management will act in the
best long-term interests of shareholders. We are also in the process of
establishing an incentive feature in our 401(k) savings plan for salaried
employees, as well as gainsharing plans for employees at our mills, so that our
entire organization will be refocused on shareholder value.
Bowater's new management team is charged with the responsibility for
optimizing returns on an asset rich company. Our future is bright, and our
opportunities are vast. As a reflection of confidence in the future, our board
of directors last month increased the dividend on common stock by 33% and
authorized a 10% common stock repurchase program. At the same time, the board
was strengthened by the election of a new director, James L. Pate, who is
Chairman, President and Chief Executive Officer of Pennzoil Company, an
international producer, refiner and marketer of petroleum products.
In succeeding Anthony P. Gammie as Chairman today, I wish Tony all the best
in his well-deserved retirement after 41 years with Bowater. During his watch,
the company went public in 1984 and began the process of establishing itself as
one of the preeminent paper companies in the world. All of his Bowater
colleagues join me in expressing our appreciation for his years of dedicated
service.
Sincerely,
(Signature of Arnold M. Nemirow)
Arnold M. Nemirow
Chairman, President and Chief
Executive Officer
March 31, 1996
3
<PAGE>
NEWSPRINT
(Photos appear here of these 4 men and newspapers printed on Bowater paper)
C. RANDY ELLINGTON ARTHUR D.FULLER
VICE PRESIDENT - SENIOR
DOMESTIC SALES VICE PRESIDENT
& PRESIDENT -
BOWATER
NEWSPRINT
JERRY R. GILMORE
WILLIAM C. MORRIS VICE PRESIDENT -
VICE PRESIDENT - ADMINISTRATION
INTERNATIONAL & PLANNING
SALES
<PAGE>
Bowater is the largest newsprint producer in the U.S. and one of the
largest in North America. Bowater Newsprint consists of our operations
in Calhoun, TN, and our Mersey mill in Liverpool, Nova Scotia. In addition to
five newsprint machines at Calhoun and two at Mersey, there is one at our
Catawba, SC, mill and our GNP facilities in East Millinocket, ME. Our machines
at Calhoun have ranked among the 12 most efficient in the world since 1990 and
"Ol' Blue," at Catawba, is rated among the lowest cost machines in North America
as well.
Annual division sales total approximately 1.4 million tons. Current North
American market share is about 8%.
1995 showed a dramatic improvement for newsprint from the tough economic
environment of the previous four years with price increases in both domestic and
international markets. Bowater order books remained full as industry operating
rates reached 98% of capacity.
Fiber sources are provided for through company ownership of approximately
3.6 million acres of well-managed woodlands providing northern and southern
fiber. Additionally, state-of-the-art recycling plants at our Maine and
Tennessee facilities combine to make Bowater one of the world's leading
producers of recycled content newsprint.
Bowater Newsprint has an excellent customer base that includes some of the
leading newspapers in the U.S., Canadian and international markets. We continue
to develop partnerships with customers through which sales, manufacturing and
end users are better able to appreciate each other's concerns and work together.
One of the first opportunities for our employees to work together in a
redesigned organization has been through streamlining our "order fulfillment
cycle." This is a process that begins with our customer and involves all areas
of our organization. Whereas in the past these functions were located in
separate departments, they are now consolidated into mill-specific, cross-
functional sales and service teams. Each mill's team includes sales, customer
service, quality assurance and planning functions. Credit, billing and claims
functions support all four mills. The team approach is facilitating the exchange
of ideas. This improves the understanding of each employee's role in the order
fulfillment process and results in improved communications and quicker response
time. Our employees share a sense of optimism about what we are doing within the
division in particular and where the company as a whole is headed.
As an extension of our service team strategy, we continue to work to develop
our customer partnership opportunities. The basic goal is for the people who
make the paper and those who use it to better understand and appreciate each
other's concerns and work toward mutually beneficial solutions. Several
supplier/customer relationships are already well established, featuring
regularly scheduled mill and pressroom visits, crew exchanges, quality audits
and ongoing training programs. Improvements achieved through these programs
ultimately translate into a higher level of quality and service for all of our
customers.
Further evidence of our long-term view toward quality is our commitment to
ISO 9002 certification at our mill sites. ISO certification is about satisfying
customer expectations. It is an assurance to our customers that we are doing
what we say we will do and that we are meeting their agreed-upon requirements.
Our Mersey operation became the first
LEFT: OVER THE
COURSE OF 42 YEARS,
BOWATER'S NEWS-
PRINT CLIENTELE
HAS EXPANDED TO
INCLUDE NEARLY
450 DOMESTIC AND
DOZENS OF FOREIGN
CUSTOMERS. PIC-
TURED IN THE BACK-
GROUND AT LEFT ARE
A SMALL SAMPLE
OF U.S.DAILIES TO
WHICH COMPANY
MANUFACTURED
NEWSPRINT IS
SUPPLIED.
Shipments by Mill
(Pie chart appears here with the following plot points.)
Calhoun 54%
Mersey 18%
Catawba 17%
GNP 11%
5
<PAGE>
Bowater mill and the second newsprint mill in North America to achieve ISO 9002
certification, and other facilities are actively working toward completion of
certification. Once certification is attained, the process continues with
audits, changes to procedures and improvements to the system. Our challenge is
continually to improve process and product quality. ISO certification is a
significant and measurable component of our quality assurance program and our
customer focus.
To be the best, we have enhanced our ongoing efforts to be a low-cost
producer, as well as a top-quality one. Cost reduction initiatives will con-
tinue at the manufacturing level to move all our mills into the industry's
lowest-cost quartile. We will also strive to refine our long-term growth
strategy to increase the return on invested capital. We plan to be competitive
in all market conditions, including cyclical downturns.
As we continue to examine and re-examine everything we do, our customers
will remain at the center of our decisions. In 1996, our customer focus will
include a new "Customer Profile" data base to provide our entire newsprint
organization with better information. We are extremely proud and protective of
our long-term customer relationships developed and solidified over many years
of anticipating and meeting their needs. Our customers have come to rely on our
ability to provide dependable supply, exceptional quality, reliable delivery
and competitive prices. Add to this, friendly service, a partnership attitude
and our commitment to uniquely exceed expectations, and you have a formula
designed to get and keep satisfied customers.
That satisfaction is showing. Our order book is filled with growing,
successful and healthy customers worldwide. We intend to continue growing with
our customers and be more intricately linked with them in order to help
them become more successful.
While so much these days is geared toward short-term results, our challenge
in 1996 will be to make decisions that make sense for 2006 and beyond.
Ultimately, it is our customers who will determine if we meet our vision to be
the best newsprint organization in the world.
(Photos of advertisements appear here with the following captions.)
ABOVE: THE INSERT
MARKET CONTINUES
TO GROW IN THE U.S.
*REPRINTED WITH
PERMISSION FROM
SAM'S CLUB, A DIVI-
SION OF WAL-MART
STORES, INC.
SHIPMENTS BY MARKET
(Pie chart appears here with the following plot points.)
Export Newsprint 13%
Domestic Newsprint 84%
Canadian Newsprint 3%
BOWATER NEWSPRINT
TEAM VISION:
"WE ARE THE BEST NEWSPRINT
ORGANIZATION IN THE WORLD.
WE UNIQUELY EXCEED OUR
CUSTOMERS' EXPECTATIONS.
WE VALUE COMMITMENTS AND
RELATIONSHIPS. WE ARE A
DYNAMIC TEAM - INSPIRING
IMPROVEMENT IN PEOPLE,
PROCESSES AND PRODUCTS."
6
<PAGE>
AT NO.5 PAPER MACHINE, CALHOUN, TN, WHICH CONSISTENTLY RANKS AMONG THE FIVE
MOST EFFICIENT NEWSPRINT MACHINES WORLDWIDE.
(Photo appears here with the following caption.)
FROM LEFT TO RIGHT:
JACK H. DUNLOP
PRESIDENT & GENERAL
MANAGER
MERSEY OPERATIONS
R. DONALD NEWMAN
VICE PRESIDENT -
OPERATIONS &
RESIDENT MANAGER
CALHOUN OPERATIONS
RICHARD K. HAMILTON
VICE PRESIDENT -
WOOD PRODUCTS
<PAGE>
COATED PAPER
AND PULP
(Photo appears here of these 5 men and magazines printed on Bowater paper)
STEPHEN ELVIN F. WALKER
L. NAMAN PRESIDENT &
VICE PRESIDENT - GENERAL MANAGER
COATED PAPER CAROLINA
SALES OPERATIONS &
WOODLANDS
(RETIRED
JANUARY 1996)
BEN L. PELTON
VICE PRESIDENT -
PULP SALES CRAIG B. STEVENS
VICE PRESIDENT -
ADMINISTRATION
& PLANNING
E. PATRICK DUFFY
SENIOR
VICE PRESIDENT
& PRESIDENT -
COATED PAPER
& PULP DIVISION
8
<PAGE>
The Coated Paper & Pulp Division, located in Catawba, SC, manufactures
coated groundwood paper, market pulp and newsprint. Coated paper is used in the
production of a variety of printed materials, including magazines, catalogs,
coupons, fliers and direct mail items. Market pulp is used in the manufacture
of products such as paper, tissue and filters.
The division is responsible for the sale of all coated groundwood paper,
including that produced at Great Northern Paper, as well as market pulp
production from the Newsprint Division's Calhoun operation. In turn, newsprint
manufactured at the Catawba facility is marketed by the Newsprint Division.
Bowater's coated groundwood paper production constitutes approximately
10% of U.S. capacity. The division's market pulp output is roughly 6% and 2% of
U.S. softwood and hardwood capacity, respectively.
Demand for coated paper was strongly supported by healthy growth of such
drivers as advertising spending, disposable personal income and retail sales
throughout 1995, particularly in the first half of the year. Magazines, the
largest consumers of coated groundwood paper, have shown steady growth in
advertising pages since the second half of 1993 through the end of 1995.
Catalogs, another major user of coated groundwood paper, increased mailings
in the first part of 1995 as measured by growth in third class mail volumes and
weight. These mailings, coupled with a growing economy, helped fuel the demand
for coated paper. Nevertheless, market demand weakened by the end of the year.
After three years of deterioration, the strong markets of late 1994 and
1995 allowed a rebound of Bowater's pricing to more favorable levels for each
of the division's products.
Market pulp was one of the first commodities to see strong demand growth in
early 1994. Demand growth continued through the first half of 1995 bringing
with it significantly higher pricing. The division's pulp shipments slowed in
the latter part of 1995 as demand by paper manufacturers softened.
Nevertheless, the division recorded unprecedented pulp and coated groundwood
pricing increases.
The changing market conditions surfacing at the end of 1995 have set the
stage for 1996. Most printing and writing paper, as well as market pulp
producers, recorded increases in inventories that will likely be drawn down
during the first half of 1996. This should result in supply and demand coming
into a more even balance around midyear.
In 1995, the division established as its primary goal meeting customers'
quality and service demands with lower costs. Objectives to reach this goal
included closer alignment
(Photos of catalogs appear here with the following caption.)
ABOVE: THE
DIVISION HOLDS
AN APPROXIMATE
11% SHARE OF THE
U.S. CATALOG
PAPER MARKET.
Shipments by Segments
(A pie chart appears here with the following plot points.)
Magazines 5.7%
Cagalogs 33.0%
Coupons and inserts 13.0%
Books 8.3%
Gift wrap 6.3%
Other 33.7%
The Coated Paper Sales and Marketing Team continues to refine and
optimize our product mix.
9
<PAGE>
BELOW: BOWATER STRIVES FOR CONTINUOUS QUALITY IMPROVEMENT TO MEET OUR
CUSTOMERS' INCREASING PRINTING REQUIREMENTS.
(Photos of catalogs printed on Bowater paper
appear here with the above caption.)
of marketing and manufacturing, ongoing mill and product optimization, division
cost reduction and continuous production improvements. High employee
involvement and an ever increasing knowledge of our customers and their
products and services are the keys to successfully achieving these objectives.
Coated paper customer service and sales management was relocated to the
Catawba mill to provide faster, direct support to our customers. The synergies
of having customer service, sales, scheduling, manufacturing, quality
assurance, shipping and division management at one site have contributed to
enhanced customer service and communications levels.
During 1995, all machines for which this division has manufacturing or
sales responsibilities ran full. Initiatives to optimize the division's mill
and product mix, along with distribution cost reduction activities, resulted in
over $4 million dollars in savings to Bowater. While the impact of increased
production of lower basis weights and rotogravure grades had a slight dampening
effect on efficiencies, the division is firmly committed to meeting those
needs of our customers as they continue to evolve.
As alluded to above, division priorities include ongoing cost reduction
initiatives. We expect a 20% reduction of the division's controllable costs from
1994 to the end of 1996. Incremental changes in pulp bleaching will allow the
elimination of elemental chlorine within the next three years. The division
plans to install equipment that will measurably improve the printability of our
coated paper on wide, high-speed printing presses.
The division will also pursue the major initiative begun in late 1995 to
improve delivery schedules and overall service levels as part of its commitment
to increase customer focus.
Productivity, as measured by tons per hour worked, is among the highest in
the industry and will further improve as the division achieves greater
efficiencies. As part of an ongoing quality management program, the division
continues to emphasize problem solving, statistical analysis and teamwork
methods to our employees. This emphasis, supplemented by ongoing training, will
facilitate attainment of ISO 9002 certification, which is expected in 1996.
Ongoing investments have enabled the division to meet increasingly
stringent environmental standards while producing savings through the use of
alternate energy sources such as biomass and tire derived fuels.
The division continues to place high priority on developing the full
potential of our employees. The use of the principles of continuous
improvement, education, involvement and mutual trust will forge winning partner-
ships with our employees, suppliers and customers.
By maintaining an aggressive approach to continuous improvement and prudent
cost reduction, the division will furnish its customers with quality products
and services, while providing its employees with a progressive, forward-
thinking workplace where their contributions are valued.
Sales (in millions of $)
(Bar graph appears of Market pulp and coated paper
sales with the following plot points)
1995 1994 1993
------ ------ ------
Market pulp 233.3 130.6 98.9
Coated paper 463.8 307.0 316.2
BELOW: BOWATER
MARKET PULP IS
SOLD WORLDWIDE.
(Photo appears here with the above caption.)
10
<PAGE>
FROM THE CONTROL ROOM, OPERATORS AT THE CATAWBA, SC, MILL USE STATE-OF-THE-ART
PROCESS CONTROL SYSTEMS TO IMPROVE PRODUCT QUALITY AND PRODUCTION.
(Photo appears here with the following caption.)
FROM LEFT TO RIGHT:
VICTOR W. SMITH
CHIEF MACHINE
OPERATOR
GARY R. ALLEY
CHIEF MACHINE
OPERATOR
<PAGE>
GREAT NORTHERN
PAPER
(Photos appear here with the following caption.)
DONALD JAMES
G. MCNEIL A. BLICKLE
SENIOR VICE VICE PRESIDENT
PRESIDENT & - DIRECTORY
PRESIDENT - & UNCOATED
GREAT NORTHERN SPECIALTY SALES
PAPER, INC.
ROBERT MARCIA A.
W. MARTIN MCKEAGUE
MANAGER OF MANAGER OF
MANUFACTURING WOODLANDS
<PAGE>
Bowater's Great Northern Paper (GNP) Division is located in the state of
Maine. It is comprised of a paper mill in Millinocket with four
machines annually producing 260,000 tons of directory, specialty and coated
paper,as well as a paper mill in East Millinocket with two machines
producing 290,000 tons annually of directory and newsprint. Our Pinkham
saw mill located in Ashland produces 73 million board feet of dimension
lumber. We also own and operate the largest private hydroelectric system in the
United States with an installed capacity of 127 megawatts of hydroelectric
power per annum. GNP also has over 2 million acres of land throughout the
northern part of the state.
Market conditions permitted GNP to increase prices for its paper
products in 1995. Net sales increased 34%. Although prices didn't change for
directory paper in 1995 due to contractual agreements, significant price
increases for directory will occur in 1996. Approximately 40% of GNP's
production is directory paper, which is marketed by the division. GNP's share of
the domestic directory market continues to grow stronger, rising from 22% in
1994 to 30% in 1995. GNP-manufactured newsprint and coated paper is sold by the
Bowater division responsible for each of those products.
While lumber markets fluctuated, efficiencies realized at Pinkham Lumber
increased production over 1994 levels, and the sawmill is poised to benefit
when new housing demand improves.
A key goal at GNP in 1995 was to reduce the division's operating costs.
An aggressive cost assessment program was started in January to scrutinize
every aspect of GNP's operations. Ideas generated among employees reduced
operating costs by $19 million for the year. Other major objectives centered
on realizing the benefits of the 1994 shutdown of the Millinocket mill's old
groundwood facility and wood yard. Emphasis was also placed on quality
improvements and increased productivity on GNP's six paper machines.
The employees at GNP worked together to accomplish many achievements in
1995. Total machine productivity increased 3.3%. This effort was led by an 18%
increase in the production of lightweight coated papers. In fact, three of
GNP's six paper machines, along with the division's off-machine coater, had
higher productivity than in the previous year. The off-machine coater led the
way with a 14.7% improvement. GNP's No. 6 and 11 machines, used for the
manufacture of directory, are world leaders. No. 6 is rated the fastest running
machine and No. 11 produces the widest sheet. Improvements on No. 11 in 1995
have increased its annual capacity by approximately 4,500 tons.
(Photos appear here with the following caption.)
ABOVE: BAXTER TEXT IS A PREFERRED PAPER BY MANY PUBLISHERS OF WORK BOOKS. GNP'S
UNCOATED SPECIALTY PAPER IS FREQUENTLY USED FOR PRINTING TRAVEL SCHEDULES.
Directory Sales by Region
(Pie chart appears here with the following plot points.)
Northeast 59.4%
Southwest 2.2%
Southeast 7.9%
Northwest 11.4%
Export 19.1%
13
<PAGE>
Major Areas of 1995
Cost Reduction
Total Savings $19.0 million
(Pie chart appears here with the following plot points.)
Coated Papers 28.5%
Pinkham 1.6%
Uncoated Papers 24.2%
Woodlands 9.5%
Pulps 16.8%
Utilities 6.8%
Administration 12.6%
Other significant production improvements were made possible by a new
management structure in which GNP now operates its two pulp and paper mills as
one unit. GNP continued to focus on quality improvements for its products.
Customer complaints have declined 24.5% compared to 1994.
A majority of directory customers rate GNP as their number one supplier or
a close second. Most New England newsprint customers continue to identify the
division as their preferred supplier. The quality of GNP's coated offset sheet
is described by some customers as among the best manufactured. A new $4 million
peroxide bleaching system, which will improve brightness in coated and uncoated
paper grades and allow opportunities for development of new grades, has just
been installed at the Millinocket mill.
At Pinkham Lumber, capital improvements were made that will
lead to improved productivity in 1996.
The introduction of participative management encourages employees to work
together. Problem solving is done and decisions are being made by teams of union
and salaried workers.
In the first half of 1996, GNP expects to achieve ISO 9002 certification
for its quality management system, placing it among a select number of pulp and
paper facilities to have received such status. Employees have embraced this
system of quality that will assure a more consistent product and create
additional cost efficiencies.
GNP's unions are strongly supporting a new management team and philosophy
demonstrated by the successful negotiation of multiple six-year contracts
involving the major maintenance and operating bargaining units at both mills. A
program led by employees to address all potential safety hazards throughout
GNP's facilities was completed in 1995. A federal congressional subcommittee
invited GNP to testify on this unique effort, and the U.S. Occupational Safety
and Health Administration has adopted the program for use at other
manufacturing sites throughout the nation.
Pinkham Lumber employees worked a full year (more than 300,000 man hours)
without any accidents causing lost time at the sawmill.
GNP's focus and priorities in 1996 will involve continuing programs aimed at
cost reduction, safety and productivity improvement to better serve and develop
an already strong relationship with its customers. Customer visits to GNP's
mills and employee visits to customers will be increased to assure we provide
even better service under higher quality standards.
Markets for GNP's products, especially directory paper, should continue to
be strong through 1996. GNP's vast natural resources (wood and hydro) and a
loyal work force provide an extremely strong foundation to consider and evaluate
many new opportunities to meet the needs of an ever-changing market. These
efforts, coupled with the division's ongoing programs focusing on being a low
cost producer, will carry GNP and its tradition of quality and service for the
customer into the next century.
BELOW: PICTURED IS RIPOGENUS DAM, PART OF GNP'S HYDROSYSTEM COMPRISED OF SIX
HYDROELECTRIC POWER STATIONS AND 19 DAMS. THE POWER SYSTEM HAS A NAMEPLATE
CAPACITY OF 127 MEGAWATTS.
(Photo appears here with the above caption.)
14
<PAGE>
(Full page photo appears here with the following caption.)
BUILT TO SERVE THE GROWING NEEDS OF DIRECTORY AND NEWSPRINT CUSTOMERS, GNP'S
$59.4 MILLION RECYCLE PLANT IS THE LARGEST OF ITS TYPE IN NEW ENGLAND. THE
FACILITY CONSUMES APPROXIMATELY 150,000 TONS OF OLD NEWSPAPERS, MAGAZINES AND
TELEPHONE DIRECTORIES PER YEAR COLLECTED THROUGHOUT THIS REGION AND THE MID-
ATLANTIC STATES. THE PLANT PRODUCES 109,000 TONS PER YEAR OF RECYCLED FIBER.
<PAGE>
COMMUNICATION
PAPERS
(Photos appear here with the following captions.)
SHELY SAIDMAN
PRESIDENT, ROBERTJ.PASCAL
STAR FORMS SENIOR VICE
PRESIDENT &
PRESIDENT -
COMMUNICATION
PAPERS DIVISION
DENIS TONTODONATO JIM FEENEY
SENIOR VICE VICE PRESIDENT,
PRESIDENT & SALES & MARKETING
CONTROLLER -
COMMUNICATION
PAPERS DIVISION
<PAGE>
Bowater's Communication Papers Division (BCP), headquartered in Moline,
IL, is one of the nation's leading producers and marketers of stock continuous
computer forms for impact and high-speed laser printers. The division has a
particularly strong presence within the growing recycled-product segment of
this market.
BCP utilizes a network of 30 distribution centers to service customers in
major metropolitan areas throughout the United States. Products are marketed
primarily through two sales units. One sells directly to large corporate and
government users, typically national accounts with multiple data sites. The
other concentrates on reaching end-user customers through sales to business
forms distributors, paper merchants, office product dealers and large retailers
who feature computer supplies.
Starting in the last half of 1994 and continuing through the first five
months of 1995, the combination of a healthy U.S. economy, no new papermaking
capacity and increased demand from European markets resulted in a shortage of
uncoated free sheet, the primary raw material used by the industry to convert
mill-supplied rolls into stock continuous forms. As a result, uncoated free
sheet producers implemented an unprecedented series of price increases and
allocated to all business forms convertors, including BCP, less tonnage in 1995
than the prior year. In response, selling prices for all computer forms rose
dramatically.
With less uncoated free sheet available for sale, and then only at prices
never before experienced, customer demand was satisfied with BCP's exclusive
recycled-content products, EB-20(R) and EW-20(R) produced at Bowater's Calhoun,
TN, mill. Given adequate supply and a price position below comparable virgin
uncoated free sheet products, EB-20 and EW-20 were successfully marketed as an
alternative. Market-driven selling prices across all product lines, coupled with
sustained strict control over product costs and operating expenses, led to
record results for BCP in 1995.
Despite the extraordinary market conditions in early 1995, BCP upheld
its reputation for excellence in product quality and customer service. The
company successfully demonstrated its integrity by assuring its customers fair
and equal treatment throughout this period.
In mid-1995, supply and demand came into better balance leading to a degree
of inventory buildup by end users and distributors alike. While this resulted in
a reduction in volumes sold, market prices stabilized at reasonable profit
levels in the fourth quarter. These market prices will face more pressure as
uncoated free sheet is expected to remain sufficiently available in the early
part of 1996. Industry forecasts indicate, however, that in the second half of
the year, fundamentals that influenced the more favorable market conditions
experienced in 1995 will likely return.
The market for stock continuous computer forms, as a broad product category,
is considered mature. In contrast, market demand for recycled-content computer
forms, promoted by BCP, is expected to grow. In 1996, BCP will build on its
proven success with its proprietary products while remaining focused on cost
assessment efforts that constantly improve its business processes.
Recycled-content products, combined with a streamlined cost structure and a
strong base of satisfied customers, strategically position BCP to meet the
challenges of 1996 and the future.
Sales by Region
(Pie chart appears here with the following plot points.)
Northeast 24.5%
Southeast 14.5%
Midwest 27.3%
Southwest 17.4%
West 16.3%
LEFT: PICTURED ARE BCP'S EXCLUSIVE, CALHOUN-PRODUCED EB-20(R) AND EW-20(R)
STOCK CONTINUOUS COMPUTER FORMS COMPLEMENTED BY A SAMPLING OF THE DIVISION'S
CUT SHEET OFFERING OF DUAL PURPOSE BOND AND 3M LASER PERFED PAPER.
17
<PAGE>
THIS IS BOWATER
(Background photo appears of two Bowater workers.)
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 one of the 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, groundwood specialties and market pulp as well as virgin fiber and
recycled directory paper. The company's products are marketed worldwide.
Bowater owns and operates manufacturing facilities in Catawba, South
Carolina; Calhoun, Tennessee; Millinocket and East Millinocket, Maine; and
Liverpool, Nova Scotia, Canada.
Supporting these operations are 3.6 million acres of timberlands controlled
by the company. Approximately one-half of 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.
18
<PAGE>
FINANCIAL
REPORT
CONTENTS:
BUSINESS AND FINANCIAL REVIEW 20
CONSOLIDATED FINANCIAL STATEMENTS 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 29
MANAGEMENT'S AND AUDITORS' STATEMENTS 39
FINANCIAL AND OPERATING RECORD 40
19
<PAGE>
BUSINESS AND FINANCIAL REVIEW Bowater Incorporated and Subsidiaries
(Two graphs appear here with the following plot points.)
Operating Income (Loss) ($ millions)
91 92 93 94 95
- ---- ---- ---- ---- ----
104 (74) (63) 42 549
Newsprint Sales ($ millions)
91 92 93 94 95
- ---- ---- ---- ---- ----
601 650 608 604 842
RESULTS OF OPERATIONS:
Bowater achieved record sales and earnings in 1995. Net sales for the year
were $2.0 billion, a 47% increase over sales of $1.36 billion in 1994 and 48%
greater than $1.35 billion of sales in 1993. Net income of $246.9 million, or
$5.22 per fully diluted share, was a substantial improvement over 1994's net
loss of $4.8 million, or $.59 per share and 1993's net loss of $64.5 million,
or $1.84 per share.
Included in 1995's net income is a pretax charge of $24 million, or $.33 per
fully diluted share after tax, relating to salaried personnel reductions;
extraordinary charges of $11.3 million after tax, or $.26 per fully diluted
share, for premiums and expenses related to the repurchase of approximately $300
million of outstanding debt; and a pretax charge of $30 million, or $.69 per
fully diluted share after tax, relating to the writedown of the company's
investment in its communication papers division. Also included in the $5.22 per
fully diluted share is a charge of $.23 per share relating to the partial
redemption of the company's 8.40% Series C Cumulative Preferred Stock.
1994's net income included a pretax gain of $43.1 million, or $.57 per share
after tax, from sales of 221,000 acres of nonstrategic timberlands.
Included in 1993's net income is a pretax charge of $20 million, or $.34 per
share covering various restructuring activities, a pretax gain of $52.2 million
or $.90 per share for the sale of approximately 70,000 acres of nonstrategic
timberlands, and an additional deferred tax charge of $6.0 million, or $.16 per
share reflecting an increase in Federal tax rates.
Improved global economies increased demand for both paper and pulp in 1994
and 1995. This combined with limited worldwide capacity additions resulted in
much improved pricing for all of the company's major products beginning in 1994.
The company's cost reduction and operating efficiency programs benefited
1995's operating results by approximately $70 million, which is almost halfway
to the goal of $150 million of annualized improvements by the end of the first
quarter of 1997. Lower debt and preferred stock levels also benefited 1995
results and will continue to do so in 1996.
Prior to the turnaround in business activity in 1994, the company labored
through a punishing cyclical downturn. 1993 marked the third successive year of
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, dampening print advertising expenditures.
Consumption growth for the company's products weakened, selling prices declined
and margins fell. Added to this was substantial excess industry capacity in key
grades brought on-line between 1989 and 1991.
To improve its competitive condition and address the significant losses
incurred in the 1992-1994 time frame, the company embarked on several programs
to reduce its costs. In addition to the salaried personnel reductions completed
in 1995, Bowater's management had instituted numerous efficiency and cost
reduction programs beginning 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 closed; and approximately 600 positions were
eliminated companywide by the end of 1994.
PRODUCT LINE INFORMATION: Although all company operations are grouped in a
single segment, market and operating trends are discussed by major product.
NEWSPRINT: Bowater is the largest producer of newsprint in the U.S. and one
of the largest in North America, with 1.4 million tons sold in 1995.
Newsprint revenues in 1995 of $842 million established a new record for the
company. Although U.S. daily newsprint consumption declined by 4.1% in 1995,
primarily as a result of conservation measures taken by the publishers, prices
continued to rise. Foreign market demand combined with a lack of significant
capacity growth caused higher prices. Bowater implemented two price increases
in 1995, totaling $180 per ton. Average transaction prices for 1995 were 45%
greater than in 1994.
20
<PAGE>
(Two graphs appear here with the following plot points.)
Coated Paper Sales ($ millions)
91 92 93 94 95
- ---- ---- ---- ---- ----
260 296 316 307 464
Market Pulp Sales ($ millions)
91 92 93 94 95
- ---- ---- ---- ---- ----
138 136 99 131 233
World population growth, increased literacy rates and more democratic,
consumer oriented societies should support a healthy demand for newsprint in the
future. However, Bowater recently canceled a previously announced newsprint
price increase scheduled for April 1996, due to current market conditions.
Growth in U.S. consumption, improving economic conditions and demand in
foreign markets, and the closure or conversion of North American capacity all
combined to tighten the availability of newsprint in 1994. Consumption by U.S.
daily newspapers advanced by 4.9% as compared to 1993. These improved market
conditions permitted the company to implement three price increases in 1994,
and, as a result, average prices for 1994's final quarter were 10.3% higher than
1993's final quarter.
In early 1993, newsprint consumption strengthened, driven by improved
economic conditions in the U.S. Also, publishers began an inventory buildup in
anticipation of possible industrywide strikes in eastern Canada. As the year
progressed, however, economic growth slowed, and by midyear, advertising
declined with consumer confidence resulting in consumption being essentially
flat as compared to the prior year. In light of these depressed economic
conditions and markets, Bowater undertook a series of cost reduction programs
that continue today, and in 1993, decreased annual newsprint capacity by 16%, or
264,500 tons.
COATED GROUNDWOOD: Bowater is one of the largest producers of coated
groundwood papers in the U.S. and North America.
Sales of coated groundwood papers were at a record level in 1995 as demand
remained strong throughout most of the year. This, combined with a lack of
significant new capacity in North America, resulted in prices increasing four
times in 1995. Average transaction prices for our coated papers increased by 48%
during the year.
Demand for coated groundwood papers has weakened in the first quarter of
1996, as customers appear to be reducing inventories and consumption.
The coated groundwood paper market tightened during the second half of 1994
as magazine ad paging increased and overseas imports leveled off due to stronger
European demand. The company was able to implement a midyear price increase for
non-contract business. Magazine ad paging continued to improve, and catalog
demand was strong in anticipation of a good holiday season. The company
implemented another price increase in October 1994.
Consumption by magazine, catalog and coupon printers improved throughout
1993. The company, based on firming demand, increased prices at midyear.
However, increasing European tonnage entered the U.S., driven by the devaluation
of Scandinavian currencies and European over-capacity. The resulting market
pressures caused selling prices to decline, virtually eliminating the impact of
the midyear increase.
MARKET PULP: Operating results from market pulp are dependent upon such
factors as global economic conditions, supply and prevailing exchange rates
compared to the U.S. dollar. Market pulp tends to be more volatile than
Bowater's other major products.
Healthy world economies, which resulted in strong paper demand, kept world
pulp markets firm for most of 1995. The company increased prices three times
during the year, and market pulp prices were 64% higher in 1995 than in the
prior year.
Demand for market pulp began to decline in the fourth quarter of 1995. This
softness is continuing into the first quarter of 1996, and prices have declined
significantly.
Demand in 1994 benefited from improvements in the U.S. and European
economies. Selling prices rose rapidly throughout 1994, and by year-end, average
prices were double those of December 1993.
The low point of the last cycle was reached during the fourth quarter of
1993 as a result of weak European demand and excess capacity. By late 1993, it
became apparent that market conditions were about to improve. Production
cutbacks, wood shortages in Scandinavia, Iberia and the Far East and the
shutdown of some high-cost capacity brought supply and demand into better
balance.
21
<PAGE>
(Two graphs appear here with the following plot points.)
Communication Papers Sales ($ millions)
91 92 93 94 95
- ---- ---- ---- ---- ----
255 208 192 191 249
Capital Expenditures Including Timberlands ($ millions)
91 92 93 94 95
- ---- ---- ---- ---- ----
160 140 122 216 96
DIRECTORY AND GROUNDWOOD SPECIALTIES: The company is a leading producer of
directory paper in the U.S. with an estimated 30% share of the market. Directory
paper is produced at the GNP Division in Maine.
Directory paper sales volumes and prices increased in 1995 by 21% and 4%,
respectively, as compared to 1994. Volumes increased as the company continued
to shift a portion of newsprint capacity to directory papers.
Prices for directory papers were increased on January 1, 1996, as a result
of the strong rise in prices of other uncoated groundwood papers and continued
strong demand.
Sales volumes in 1994 and 1993 reflect a shift of a portion of the company's
newsprint production to directory papers. Prices for directory paper came under
pressure during this period as some customers used lower priced newsprint, and
additional capacity and competition entered the market. Average transaction
prices in 1993 were 4.2% below 1992 prices, while prices in 1994 were
essentially equal to those of 1993.
Groundwood specialty papers are also produced at GNP and are used for TV
listings, advertising inserts and school supplies. After declining in 1994 and
1993, selling prices for uncoated groundwood specialties increased in 1995.
COMMUNICATION PAPERS: Bowater Communication Papers (BCP) Division is a
major supplier of stock continuous computer forms used by computer driven impact
and high speed laser printers. The market for the division's products is mature
and continues to shrink.
Higher prices from uncoated free sheet mills generated by supply constraints
resulted in raw material cost increases of 70% over 1994 which caused selling
prices to rise accordingly. Improved margins offset an 18% decline in volume and
operating results were at a record level.
Operating results began to improve in 1994 as higher selling prices, driven
by the rapid rise in raw material costs, and the benefits from strict cost
containment programs initiated in 1993 began taking effect. Declining demand and
strong competition adversely affected operating results in 1993 as both price
realizations and sales volume declined.
During the second quarter of 1995, the company announced its intention to
sell the BCP Division and focus on its core pulp and papermaking businesses. As
a result, the company recorded a pretax charge of $30 million for the estimated
loss on the planned sale. In the fourth quarter of 1995, negotiations for the
sale of BCP ended without reaching a definitive agreement.
CASH FROM OPERATIONS: The company's operations generated $607.7 million of
cash in 1995, $526.8 million more than the $80.9 million generated in 1994. The
increase arose primarily from the improvement in operating income. Operating
cash flow also benefited from $15.5 million of lower interest payments and the
deferral of approximately $75 million of tax payments to the first quarter of
1996. These benefits were partially offset by a $19.5 million increase in
working capital. Net cash flow, after capital spending, dividends, debt and
preferred stock repayments, was $109.8 million resulting in a year-end balance
of cash and cash equivalents of $264.6 million. The company anticipates that it
will continue to generate significant levels of cash flow during 1996.
The generation of cash from operations in 1994 of $80.9 million represented
a $111.5 million increase over the net cash usage from operations in 1993 of
$30.6 million. The improvement resulted from an operating income increase of
$105.4 million and lower working capital requirements of $36.9 million offset by
an increase in cash taxes of $41.5 million. Despite the improvement, the cash
generated by the company in 1994 was insufficient to meet capital spending and
dividend requirements. The shortfall was supplemented with two preferred stock
offerings, which generated $193.2 million of cash, and nonstrategic asset sales,
which contributed an additional $48.1 million.
CAPITAL EXPENDITURES: The production facilities used to manufacture the
company's principal products require the reinvestment of substantial amounts of
cash to maintain efficient and cost effective capacity. Management, however,
controls capital spending to coincide with the cyclicality of the cash flows and
to generate adequate returns on investments.
In 1995, the company reduced its capital spending by $120.1 million to $96.0
million from $216.1 million in 1994. In 1995, the most significant expenditure
was $12.5 mil-
22
<PAGE>
(A graph appear here with the following plot points.)
Total Capitalization and Total Debt ($ millions)
91 92 93 94 95
---- ---- ---- ---- ----
Total Debt 865 1,134 1,120 1,118 818
Total Capitalization 2,062 2,186 2,072 2,222 2,114
lion for the completion of a new effluent treatment plant at its Nova Scotia
mill. The cash required for other capital projects in 1995 was limited in order
to permit the company to use the excess cash flow to restore the strength of the
balance sheet.
The significantly higher capital spending in 1994 included $104.0 million
for the completion of a new recovery boiler at the company's Calhoun Operation.
In 1996, Bowater's capital spending will approximate $170 million permitting
it to take advantage of a backlog of high return projects whose aggregate return
on investment will significantly exceed the company's cost of capital.
The company plans to complete additional nonstrategic timberland sales in
the first quarter of 1996 with gross proceeds of approximately $114 million.
FINANCING ACTIVITIES: During 1995, the company undertook several financial
transactions to strengthen the balance sheet and reduce the impact of fixed
charges from interest expense and preferred dividends on earnings. In March
1995, the company repurchased $182 million of its $200 million, 8.5% Notes due
December 2001. In July 1995, the company repurchased $117 million of its $125
million, 8.25% Notes due October 1999. The remaining $15 million of preferred
stock of Calhoun Newsprint Company (CNC) held by a minority shareholder was
redeemed at par in June 1995, and in November 1995, the company completed a
tender offer for $59 million of its $85 million, 8.40% Series C Cumulative
Preferred Stock. Finally, the company made the first of three installments to
redeem its $75 million LIBOR Series A Preferred Stock.
In 1995, the company's outstanding debt was reduced by $299 million, the
debt to total capital ratio improved from 50.3% to 38.7%, and interest expense
and preferred dividends were lowered on an annual basis by approximately $25.0
million and $7.5 million, respectively. The company expects that at its current
debt levels, additional earnings in 1996 will reduce its debt to total capital
ratio further. Also, in 1996, the company expects that interest on current
indebtedness and dividends on preferred stock will approximate $72 million and
$13 million, respectively.
In connection with the 1995 financing transactions, the company incurred
after tax charges for premiums and transaction fees of $11.3 million for the
debt repurchases and incurred a $9.9 million retained earnings charge for the
partial redemption of the 8.40% Series C Preferred Stock.
In 1994, the company anticipated that cash flow from operations would be
insufficient to meet its requirements and that it faced the potential for a debt
ratings downgrade to below investment grade levels. In response to this, 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 at its Calhoun Operation and to cover costs
associated with the closure of obsolete facilities at the Millinocket, Maine,
site, company-wide personnel reductions and for general corporate purposes.
In 1995, the company put in place a new five-year credit facility with eight
banks for $150 million expiring September 2000. At December 31, 1995, there were
no amounts outstanding under the agreement. Also in 1995, the company canceled
its asset securitization program which allowed the company to sell up to $80
million of its receivables. There were no receivables sold under this program
during 1995 and 1994.
As a result of its opening cash position of $264.6 million and expectations
for significant free cash flow in 1996, the company will seek opportunities for
appropriate use of what it anticipates will be substantial cash balances. As
part of its analysis, company management will consider an array of opportunities
that encompass both internal and external investment alternatives. This analysis
will also consider additional financial transactions. With respect to additional
financing transactions, on February 9, 1996, the company announced a stock
repurchase program of up to 10% of its outstanding common shares and a 33%
increase in its quarterly common dividend from $.15 per share to $.20 per share.
On January 4, 1996, the Board of Directors of CNC declared a $60 million
dividend out of the undistributed earnings and profits of CNC. As a result,
$29.4 million was paid to the minority shareholder on January 5, 1996.
23
<PAGE>
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
substantial compliance with all applicable environmental laws and regulations.
Recent Canadian federal regulations governing the discharge of pulp and
paper mill effluent required the installation of a $21 million wastewater
treatment facility at the Mersey mill. The treatment plant started up in late
1995 to permit the mill's effluent to remain in substantial compliance with
Canadian regulations.
Dioxins and other chlorinated organics have been found in trace amounts in
the effluents of U.S. bleached kraft pulp mills. Both the Calhoun and Carolina
Operations, 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. 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 paper
mills, but most significantly at its Carolina Operation.
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 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 the determination by the company as to whether to maintain
production levels or operate certain equipment.
Other than 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.
The company is not involved in any proceeding under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, that
it believes will result in liabilities that will have a material adverse effect
on the company'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.
ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued two Statements of
Financial Accounting Standards (SFAS) which the company intends to adopt
effective as of January 1, 1996.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," requires long-lived assets to be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. It also requires that long-
lived assets to be disposed of be reported at the lower of carrying amount or
fair value less cost to sell.
SFAS No. 123, "Accounting for Stock-Based Compensation," permits a change
from the intrinsic value based method of accounting for stock options
(Accounting Principles Board Opinion No. 25) to a fair value based method for
employee stock options and similar equity investments.
As an alternative, the Statement allows the continued use of the intrinsic
value based method accompanied with pro forma disclosures of the fair value
based method. The company plans to adopt this alternative.
Other than the disclosure required by SFAS No. 123, the implementation of
these standards will not have a material impact on the company's results of
operations in 1996.
24
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS Bowater Incorporated and Subsidiaries
<TABLE>
<CAPTION>
(In thousands, except per-share amounts)
Years ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Net sales $2,001,141 $ 1,358,996 $ 1,353,684
Cost of sales 1,183,977 1,072,492 1,182,125
Depreciation, amortization and cost of timber harvested 174,176 168,352 163,086
Gross profit 642,988 118,152 8,473
Selling and administrative expense 93,737 76,052 71,805
OPERATING INCOME (LOSS) 549,251 42,100 (63,332)
Other expense (income):
Interest income (8,923) (8,255) (4,105)
Interest expense, net of capitalized interest 80,513 98,848 98,333
Gain on sale of timberlands (2,152) (43,100) (52,220)
Writedown of investment in BCPI and related expenses 30,000 - -
Other, net (14,757) 1,442 3,696
INCOME (LOSS) BEFORE TAXES AND MINORITY INTERESTS 464,570 (6,835) (109,036)
Provision for income tax expense (benefit) 183,090 (4,783) (34,886)
Minority interests in net income (loss) of subsidiaries 23,235 2,772 (9,651)
Income (loss) before extraordinary charge 258,245 (4,824) (64,499)
Extraordinary charge from early extinguishment of debt,
net of income tax benefit of $7,084 (11,317) - -
NET INCOME (LOSS) $ 246,928 $ (4,824) $ (64,499)
EARNINGS (LOSS) PER SHARE:
Net income (loss) $ 246,928 $ (4,824) $ (64,499)
Common stock equivalent adjustments:
Dividends and accretion on preferred stock 10,042 16,925 2,393
Redemption costs of Series C preferred stock 9,883 - -
Net income (loss) available to common shareholders $ 227,003 $ (21,749) $ (66,892)
Net income (loss) per common and common equivalent share:
Income (loss) before extraordinary charge $ 5.60 $ (.59) $ (1.84)
Extraordinary charge (.27) - -
Net income (loss) $ 5.33 $ (.59) $ (1.84)
Average common and common equivalent shares outstanding 42,567 36,566 36,368
Net income (loss) per common share - assuming full
dilution:
Income (loss) before extraordinary charge $ 5.48 $ (.59) $ (1.84)
Extraordinary charge (.26) - -
Net income (loss) $ 5.22 $ (.59) $ (1.84)
Average common and common equivalent shares outstanding 43,448 36,566 36,368
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE>
CONSOLIDATED BALANCE SHEET Bowater Incorporated and Subsidiaries
<TABLE>
<CAPTION>
(In thousands, except share amounts)
At December 31, 1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 264,571 $ 154,768
Accounts receivable, net 241,847 197,473
Inventories 154,662 151,097
Other current assets 12,943 10,487
TOTAL CURRENT ASSETS 674,023 513,825
Timber and timberlands 430,400 426,354
Fixed assets, net 1,711,003 1,785,046
Intangible assets, net 23,733 54,721
Other assets 69,006 71,416
$2,908,165 $2,851,362
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Current installments of long-term debt $ 1,600 $ 1,604
Accounts payable and accrued liabilities 189,424 184,766
Income taxes payable 85,472 13,966
Dividends payable 8,826 10,276
TOTAL CURRENT LIABILITIES 285,322 210,612
Long-term debt, net of current installments 816,532 1,116,887
Other long-term liabilities 181,411 157,936
Deferred income taxes 329,101 261,923
Minority interests in subsidiaries 150,768 142,087
Commitments and contingencies (See note 9)
Redeemable preferred stock: $1 par value. Issued LIBOR
preferred stock,
Series A, 1,000,000 and 1,500,000 shares at December
31, 1995 and 1994,
respectively (redemption value $50,000) 49,619 74,492
SHAREHOLDERS' EQUITY:
Convertible preferred stock, $1 par value. Issued, 7%
(PRIDES) Series B, 1,223,404 shares 111,333 111,333
Cumulative preferred stock, $1 par value. Issued, 8.40%
Series C, 264,318 and 850,000
shares at December 31, 1995 and 1994, respectively
(liquidation value $26,432) 25,465 81,892
Common stock, $1 par value. Authorized 100,000,000 shares;
issued 39,500,555 and
37,120,518 shares at December 31, 1995 and 1994,
respectively 39,501 37,121
Additional paid-in capital 410,007 336,990
Retained earnings 541,205 344,852
Equity adjustments (13,128) (3,410)
Loan to ESOT (8,033) (9,643)
Treasury stock at cost, 400,283 and 422,282 shares at
December 31, 1995
and 1994, respectively (10,938) (11,710)
TOTAL SHAREHOLDERS' EQUITY 1,095,412 887,425
$2,908,165 $2,851,362
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CAPITAL ACCOUNTS Bowater Incorporated and Subsidiaries
Series B Series C
LIBOR Convertible Cumulative Additional
Preferred Preferred Preferred Common Paid-in Retained Equity Loan to Treasury
(In thousands,except per-
share amounts) Stock Stock Stock Stock Capital Earnings Adjustments ESOT Stock
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 for
exercise of stock
options - - - 6 129 - - - -
Use of treasury stock - - - - - (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) - - - - - (21,841) - - -
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 for
exercise
of stock options - - - 208 4,329 - - - -
Preferred stock issued, net
of
issuance costs - 111,333 81,892 - - - - - -
Use of treasury stock - - - - - (221) - - 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)
Net income - - - - - 246,928 - - -
Dividends on common stock
($.60 per share) - - - - - (22,600) - - -
Dividends on LIBOR preferred
stock ($2.67 per share) - - - - - (4,005) - - -
Dividends on Series B
preferred
stock ($6.58 per share) - - - - - (8,050) - - -
Dividends on Series C
preferred
stock ($8.40 per share) - - - - - (5,910) - - -
Increase in stated value of
LIBOR preferred stock 127 - - - - (127) - - -
Reduction in loan to ESOT - - - - - - - 1,610 -
Foreign currency translation - - - - - - 1,071 - -
Common stock issued for
exercise of stock
options - - - 2,380 55,350 - - - -
Tax benefit on exercise of
stock options - - - - 17,602 - - - -
Partial redemption of LIBOR
and
Series C preferred stock (25,000) - (56,427) - - (9,883) - - -
Pension plan additional
minimum liability , net
of
tax benefit of $6,941 - - - - - - (10,789) - -
Use of treasury stock - - - - 65 - - - 772
BALANCE AT DECEMBER 31, 1995 $ 49,619 $ 111,333 $ 25,465 $39,501 $ 410,007 $ 541,205 $ (13,128) $ (8,033) $ (10,938)
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS Bowater Incorporated and Subsidiaries
(In thousands)
Years ended December 31, 1995 1994 1993
<S> <C> <C> <C>
CASH FLOW FROM (USED FOR) OPERATING ACTIVITIES:
Operating income (loss) $ 549,251 $ 42,100 $ (63,332)
Depreciation, amortization and cost of timber
harvested 174,176 168,352 163,086
Changes in working capital:
Receivables (44,374) (26,736) (66,265)
Inventories (3,565) (1,666) 13,666
Accounts payable and accrued liabilities 11,272 4,458 (9,332)
Other working capital 412 7,158 8,256
Interest paid, net of capitalized interest (82,428) (97,885) (97,768)
Interest received 8,923 8,255 4,105
Income taxes refunded (paid) (16,388) (22,521) 19,002
Other 10,402 (611) (2,064)
607,681 80,904 (30,646)
CASH FLOW FROM (USED FOR) INVESTING ACTIVITIES:
Cash invested in fixed assets, timber and timberlands (95,972) (216,052) (121,771)
Disposition of fixed assets, timber and timberlands 4,256 48,081 78,708
(91,716) (167,971) (43,063)
CASH FLOW FROM (USED FOR) FINANCING ACTIVITIES:
Cash dividends, including minority interests (41,783) (34,900) (29,846)
Proceeds from sale of Series B and C preferred stock,
net of issuance costs - 193,225 -
Funds on deposit with trustee - - 34,506
Payments of long-term debt (317,282) (1,795) (14,152)
Redemption of preferred stock of subsidiary (15,000) (2,500) (2,500)
Stock options exercised 57,730 4,537 134
Partial redemption of LIBOR and Series C preferred
stock (91,309) - -
Other 1,482 1,602 1,291
(406,162) 160,169 (10,567)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 109,803 73,102 (84,276)
CASH AND CASH EQUIVALENTS:
Beginning of year 154,768 81,666 165,942
End of year $ 264,571 $ 154,768 $ 81,666
</TABLE>
See accompanying notes to consolidated financial statements.
28
<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 approximately 51% owned. All material intercompany items
are eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents generally consist of cash and investment grade
marketable securities. Such investments are stated at cost, which approximates
fair value, and are considered cash equivalents for purposes of reporting cash
flows.
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 and timber, real estate taxes, lease payments,
site preparation 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 (goodwill) is amortized by the straight-line method. The company
assesses the recoverability of its goodwill 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
Income taxes are recorded under the provisions of SFAS No. 109,
"Accounting for Income Taxes." Deferred taxes are provided for significant
temporary differences. The company has not provided income taxes on the
undistributed earnings of its Canadian subsidiary and, prior to 1993, on CNC's
undistributed earnings, 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 as they are earned.
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, entitled "Equity adjustments."
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. Sales are shown net of
distribution costs in the accompanying Consolidated Statement of
Operations.
PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
Primary and fully diluted earnings per common share are computed using the
weighted average number of common shares outstanding adjusted for the
incremental shares attributed to common share equivalents (exercisable stock
options and Series B convertible preferred stock).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
(See note 9) at the date of the financial statements. In addition, they affect
the reported amounts of expenses during the reporting period. Actual results
could differ from these estimates and assumptions.
29
<PAGE>
2. COST REDUCTIONS
During the past three years, the company has implemented programs designed
to reduce operating and administrative costs to globally competitive levels.
In 1995, approximately 350 salaried positions were eliminated throughout the
company. This resulted in a pretax charge of $24,000,000 or $.33 per fully
diluted share after tax for employee termination costs which included 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, 1995, substantially all of the employee
termination costs had been settled.
In 1993, the company announced the closure of certain obsolete facilities at
its Maine operations and the resulting elimination of approximately 200
positions. Employment levels were reduced by an additional 450 positions
companywide during 1993 and 1994. The company recorded a pretax charge of
$20,000,000 in 1993, or $.34 per share after tax covering asset retirement and
employee termination costs. In addition, the company completed the consolidation
of its corporate offices to Greenville, South Carolina.
3. SALES OF REAL PROPERTY
During 1995, the company sold 2,300 acres of non-strategic timberlands
primarily in North and South Carolina. The proceeds were $2,603,000, resulting
in a pre-tax gain of $2,152,000 or $.03 per fully diluted share, after tax. The
company plans to complete additional nonstrategic timberland sales in the first
quarter of 1996 with proceeds of approximately $114,000,000 and a pre-tax gain
of approximately $76,000,000, or $.86 per fully diluted share, after tax.
During 1994, the company sold 221,000 acres of nonstrategic timberlands,
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 $52,220,000, or
$.90 per share, after tax.
4. WRITEDOWN OF INVESTMENT IN SUBSIDIARY
In the second quarter of 1995, the company announced its intention to
sell its wholly-owned subsidiary, Bowater Communication Papers Inc. (BCPI), a
leading producer and marketer of stock continuous forms. In the third quarter
of 1995, based on the offers received, the company recorded an estimated loss
on the planned sale of BCPI, including fees and expenses, totaling $30,000,000.
The company reflected the loss in the Consolidated Balance Sheet as a writedown
of the purchased goodwill associated with BCPI. In the fourth quarter of 1995,
negotiations for the sale of BCPI ended without reaching a definitive
agreement. At December 31, 1995, the company reduced the useful life of the
remaining goodwill to five years.
5. INVENTORIES
(In thousands) 1995 1994
At lower of cost or market:
Raw materials $ 39,520 $ 37,597
Work in process 3,014 3,333
Finished goods 48,854 38,971
Mill stores and other supplies 81,301 80,723
172,689 160,624
Excess of current cost over
inventory value (18,027) (9,527)
$154,662 $151,097
Inventories valued using the LIFO method comprised 41.6% and 37.5%,
respectively, of total inventories at December 31, 1995, and December 31, 1994.
6. FIXED ASSETS
Range of
Estimated
Useful Lives
(In thousands) 1995 1994 in Years
Land and land
improvements $ 32,523 $ 32,417 10-30
Buildings 290,543 289,847 20-40
Machinery
and equipment 2,675,798 2,607,737 5-20
Leasehold
improvements 3,735 3,821 10-30
Construction
in progress 10,868 27,264 -
3,013,467 2,961,086
Less accumulated
depreciation and
amortization 1,302,464 1,176,040
$ 1,711,003 $1,785,046
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
(In thousands) 1995 1994
Trade accounts payable $ 78,607 $102,894
Accrued interest 17,921 20,704
Property and franchise taxes payable 13,258 11,877
Payroll, bonuses and severance 39,022 21,554
Employee benefits 24,615 21,042
Other 16,001 6,695
$189,424 $184,766
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8. LONG-TERM DEBT, NET OF CURRENT INSTALLMENTS
(In thousands) 1995 1994
Unsecured:
9% debentures, due 2009 $ 300,000 $ 300,000
9 3/8% debentures due 2021, net
of unamortized discount of $1,300
in 1995 and $1,350 in 1994 198,700 198,650
9 1/2% debentures due in 2012,
net of unamortized discount of
$382 in 1995 and $405 in 1994 124,618 124,595
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 $138
in 1995 and $140 in 1994 29,862 29,860
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
8 1/2% notes due 2001 18,140 200,000
8 1/4% notes due in 1999, net of
unamortized discount of $5 in
1995 and $74 in 1994 7,970 124,926
ESOT note, due 2000 6,433 8,043
Industrial revenue bonds, due at
various dates from 1999 to 2010,
with interest at varying rates
from 7 1/8% to 8 1/2% 6,009 6,013
$ 816,532 $1,116,887
Long-term debt maturities for the next five years are as follows:
(In thousands)
1996 $ 1,600
1997 $ 1,600
1998 $ 1,600
1999 $ 14,628
2000 $ 1,633
The company's $200,000,000 Credit Agreement was due to expire in December
1995. During the third quarter of 1995, the company canceled this agreement and
signed a new $150,000,000 Credit Agreement which expires in September 2000. At
December 31, 1995, there were no amounts outstanding under the new agreement.
In March 1995, the company completed its offer to repurchase its outstanding
8.5% Notes due December 15, 2001. Approximately $182,000,000 of $200,000,000
principal amount of Notes were repurchased. Premium and expenses related to this
transaction resulted in an extraordinary charge of $6,084,000 after tax, or $.14
per fully diluted share.
In July 1995, the company completed its offer to repurchase its outstanding
8.25% Notes due October 15, 1999. Approximately $117,000,000 of $125,000,000
principal amount of Notes were repurchased. Premium and expenses related to this
transaction resulted in an extraordinary charge of $5,233,000 after tax, or $.12
per fully diluted share.
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 installments, was approximately $982,000,000 and $1,100,000,000 at
December 31, 1995, and 1994, respectively.
9. COMMITMENTS AND CONTINGENCIES
The company is 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.
10. 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% 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. On December 22, 1995, the company redeemed 500,000 shares by
irrevocably placing $25,325,000, including accrued dividends, in trust for the
LIBOR shareholders. This satisfied the 1996 payment requirement. The company
may, at its option, redeem any or all of the remaining LIBOR preferred stock 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 with
annual dividends of $7.30 per share.
As required, CNC redeemed 25,000 shares per year from 1991 through 1994 at a
cost of $10,000,000. At its option, CNC redeemed the remaining 150,000 shares on
June 30, 1995, at a cost of $15,547,500, including accrued dividends.
11. CONVERTIBLE AND CUMULATIVE PREFERRED STOCK
In February 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%. 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.
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<PAGE>
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 shares of Series B preferred stock are common stock
equivalents. When dilutive, the shares of Series B preferred stock increase the
number of common shares outstanding by 4,012,765 and 4,893,616 for the primary
and fully diluted per share calculations, respectively. In 1994, the shares of
Series B preferred stock were antidilutive.
On October 16, 1995, the company commenced an offer to purchase the
outstanding depositary shares, each representing a one-fourth interest in a
share of its 8.40% Series C Cumulative Preferred Stock having a face value of
$85,000,000. The purchase price for each depositary share was $27.875. Upon
expiration of the offer on November 15, 1995, 2,342,727 depositary shares of the
outstanding depositary shares were tendered for an aggregate purchase price,
including fees and expenses, of $66,309,495. The company recorded a charge to
retained earnings of $9,883,000 or $.23 per fully diluted share for the costs
associated with this transaction. As of December 31, 1995, 1,057,273 depositary
shares remained outstanding.
12.TREASURY STOCK
Through December 31, 1995, the company purchased 1,403,050 shares of its
common stock at an aggregate purchase price of $40,134,000 and used 555,739
shares of such stock to pay employee/director benefits and 447,028 shares to
fund the company's Dividend Reinvestment Plan. The remaining shares are included
in treasury stock at cost.
On February 9, 1996, the company announced that its Board of Directors
authorized the repurchase of up to 10% of the company's outstanding common stock
during the next twelve months.
13. 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, or the average fair
market value of the company's common stock for the twenty business days
immediately preceding the date of grant.
All options granted through December 31,1993 were exercisable at December
31, 1995. Options granted in 1995 and 1994 become exercisable over a period of
two years. 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:
1995 1994
NUMBER OPTION Number Option
OF SHARES PRICE of Shares Price
Outstanding 4,272,794 $ 19.06 3,792,394 $ 16.50
at beginning TO $37.75 to $37.75
of year
Granted during 768,700 $ 26.86 813,000 $ 22.88
the year TO $38.07 to $27.63
Exercised (2,380,144) $ 19.06 (207,100) $ 16.50
during TO $37.75 to $28.88
the year
Canceled (85,600) $ 21.00 (125,500) $ 21.00
during TO $37.75 to $37.75
the year
Outstanding 2,575,750 $ 21.00 4,272,794 $ 19.06
at end TO $37.75 to $37.75
of year
Exercisable at 1,486,000 $ 21.00 3,119,544 $ 19.06
end of year TO $37.75 to $37.75
The company received $57,730,000 from the exercise of stock options in 1995.
The large increase in the amount of exercises compared to 1994 was due to
significant increases in the price of the company's common stock since January
1, 1995. The stock option exercises also generated $17,602,000 of tax benefits
for the company.
14. 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.
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15. 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% or more of
the company's outstanding common stock or announces a tender offer for 30% 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% 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.
16. INCOME TAXES
The components of income (loss) before income taxes and minority interests
consist of U.S. income (loss) of $427,768,000, $(12,955,000), and $(85,509,000)
and Canadian income (loss) of $36,802,000, $6,120,000, and $(23,527,000) in
1995, 1994 and 1993, respectively.
The provision for income tax expense (benefit) consists of:
(In thousands) 1995 1994 1993
Federal:
Current $ 96,853 $ 240 $ (9,992)
Deferred 52,628 (3,993) (12,296)
149,481 (3,753) (22,288)
State:
Current 8,590 - -
Deferred 14,860 (588) (4,391)
23,450 (588) (4,391)
Canadian:
Current 2,525 365 310
Deferred 7,634 (807) (8,517)
10,159 (442) (8,207)
Total:
Current 107,968 605 (9,682)
Deferred 75,122 (5,388) (25,204)
$183,090 $ (4,783) $ (34,886)
The components of deferred income taxes at December 31, 1995, and 1994, in
the accompanying Consolidated Balance Sheet are as follows:
(In thousands) 1995 1994
Inventories* $ - $ (746)
Timber and timberlands** (68,541) (62,936)
Fixed assets (428,725) (411,948)
Other assets (18,012) (19,867)
Deferred tax liabilities (515,278) (495,497)
Accounts receivable* 281 269
Inventories* 1,446 -
Other current assets* 872 432
Current liabilities* 5,538 5,762
Other long-term liabilities 74,079 58,075
U.S. tax credit carryforwards 83,344 62,216
Canadian investment tax
credit carryforwards 29,001 27,441
Net operating loss carryforwards 3,473 88,816
Valuation allowance (3,720) (3,720)
Deferred tax assets 194,314 239,291
Net deferred tax liability $ (320,964) $ (256,206)
*Included in Other current assets in the accompanying Consolidated Balance
Sheet.
**Includes the deferred tax impact of the capitalization of lease payments,
management fees and property taxes of approximately $139,751,000 and
$131,273,000 at December 31, 1995 and 1994 respectively.
The following is a reconciliation of the U.S. federal statutory and
effective tax rates as a percentage of income (loss) before income taxes and
minority interests:
1995 1994 1993
U.S federal statutory
income tax rate 35.0% 35.0% 35.0%
State income taxes,
net of federal
income tax benefit 3.3 5.6 2.6
Tax rate increase - - (5.5)
Canadian taxes (.6) 37.8 .6
Other, net 1.7 (8.4) (.7)
Effective income tax rate 39.4% 70.0% 32.0%
The large change in the company's effective income tax rate in 1994 was due
to the favorable capital gains rate applied to the sale of nonstrategic
timberlands in Nova Scotia.
In August 1993, the federal statutory corporate tax rate was increased from
34% to 35%. As a result, the company recorded a $6,000,000 deferred tax expense,
reflecting higher deferred tax liabilities.
At December 31, 1995, $29,001,000 of Canadian investment credit
carryforwards, $83,344,000 of U.S. tax credit carryforwards and approximately
$8,912,000 of U.S. 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,
1995. The net increase in the valuation allowance for
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<PAGE>
the year ended December 31, 1994, was $1,980,000. The Canadian investment
credit carryforwards expire at various dates between 1996 and 2005. The majority
of the U.S. tax credit carryforwards have no expiration. The U.S. net operating
loss carryforwards expire at various dates between 1999 and 2007.
The cumulative amount of CNC's undistributed earnings through 1992, on which
the company has not provided deferred income taxes, is $95,169,000. Distribution
of these earnings would qualify for the 80% dividend exclusion.
The company has also not provided deferred income taxes on the cumulative
amount of undistributed earnings related to its 51% investment in its Canadian
subsidiary since that investment is considered permanent in duration and
determination of such liability is not practicable.
17. INTEREST CAPITALIZED
Total interest incurred in the years 1995, 1994 and 1993 was $81,796,000,
$99,163,000 and $100,517,000, respectively. In 1995, 1994 and 1993, $1,283,000,
$315,000 and $2,184,000 of interest expense was capitalized, respectively.
18. 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 1995, 1994 and 1993
included the following components:
(In thousands) 1995 1994 1993
Service cost $ 11,425 $ 13,743 $ 13,104
Interest cost 31,423 29,631 28,112
Actual return
on plan assets (81,371) (3,208) (46,000)
Net amortization
and deferral 42,975 (33,064) 7,690
Net pension expense $ 4,452 $ 7,102 $ 2,906
The following table sets forth the funded status of
the Plans at December 31, 1995:
Plan Assets Plan Liabilities
Exceed Plan Exceed Plan
(In thousands) Liabilities Assets
Actuarial present value of
accumulated benefit obligation:
Vested $ 311,317 $ 67,952
Non-vested 8,508 27,474
319,825 95,426
Benefits attributable to
future salaries 54,329 3,748
Project benefit obligation 374,154 99,174
Plan assets at fair value 395,756 49,834
Excess (deficit) of plan assets over
projected benefit obligation 21,602 (49,340)
Unrecognized prior service cost 833 5,512
Unrecognized net loss 44,903 19,985
Unrecognized transition
liability (asset) (19,829) 969
Additional minimum liability
recognized as an intangible asset - (6,481)
Additional minimum liability
recognized as a reduction of
shareholders' equity - (17,730)
Prepaid pension cost
(pension liability) $ 47,509 $ (47,085)
The following table sets forth the funded status
of the Plans at December 31, 1994:
Plan Assets Plan Liabilities
Exceed Plan Exceed Plan
(In thousands) Liabilities Assets
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
Additional minimum liability
recognized as an intangible asset - (5,139)
Prepaid pension cost
(pension liability) $ 48,614 $ (24,836)
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As of December 31, 1995, the company decreased the Plans' discount rate
assumption used to determine the Plans' projected benefit obligation from 8.5%
to 7.0%, which approximates more closely current interest rates on high-quality
long-term obligations. In addition, the company decreased the long-term rate of
return on Plan assets assumption from 10% to 9.5%. The assumed rate of
compensation increase was also decreased from 5% to 4%. Plan assets consist
principally of common stocks and fixed income securities.
Due to the decrease in the Plans' discount rate assumption to 7% at December
31, 1995, the additional minimum liability relating to two of the company's
Plans increased as of December 31, 1995. As a result, the company recorded a
$10,789,000 reduction in shareholders' equity, net of tax benefits of $6,941,000
and increased the intangible asset associated with the minimum liability in
accordance with SFAS No. 87, "Employers' Accounting for Pensions."
19. 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.
The accumulated postretirement benefit obligation at December 31, 1995, and
December 31, 1994, was comprised of the following:
(In thousands) 1995 1994
Retirees $ 43,473 $17,011
Fully eligible active plan participants 17,213 19,911
Other active plan participants 52,773 47,162
Unrecognized net (loss) gain (14,837) 8,236
$ 98,622 $92,320
Unlike the company's retirement plans, there are no assets dedicated to
fund retiree benefits. Net periodic cost for 1995, 1994 and 1993 included the
following:
(In thousands) 1995 1994 1993
Service cost $2,434 $2,832 $2,648
Interest cost on
accumulated obligation 7,617 6,886 6,259
Net amortization (203) 189 -
$9,848 $9,907 $8,907
As of December 31, 1995, the company decreased the Plans' discount rate
assumption used to determine the Plans' accumulated postretirement benefit
obligation from 8.5% to 7.0%, which approximates more closely current interest
rates on high-quality long-term obligations. During the next 4 years, the Plans
assume that the annual cost of postretirement benefits will increase at an
annual rate starting at 8.5% and decreasing to 5.5%. Variations in this health
care cost trend rate can have a significant effect on the amounts reported. An
increase of 1% in this assumption would increase the accumulated postretirement
benefit obligation by approximately 15% and would increase the annual cost by
approximately 16%.
20. TIMBERLAND LEASES AND OPERATING LEASES
The company controls timberlands under long-term leases expiring 2001 to
2059, for which aggregate lease payments were $943,000, $862,000 and $868,000
for 1995, 1994 and 1993, respectively. In addition, the company leases certain
office premises, manufacturing facilities and transportation equipment under
operating leases. Total rental expense for operating leases was $9,036,000,
$9,786,000 and $9,168,000 in 1995, 1994 and 1993, respectively.
At December 31, 1995, the future minimum rental payments under timberland
leases and operating leases are:
Timberland Operating
Lease Leases,
(In thousands) Payments net
1996 $ 789 $ 7,417
1997 709 6,012
1998 709 4,754
1999 709 3,663
2000 709 2,447
Thereafter 20,716 11,945
$ 24,341 $36,238
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21. SEGMENT AND GEOGRAPHIC INFORMATION
Due to the integrated nature of the company's operations, all four divisions
have been classified within a single business segment; Pulp, Paper and Related
Products.
Net sales and operating income (loss) for the three years ended December 31,
1995, 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>
1995
Net sales to
unaffiliated
customers $1,845,531 $155,610 $2,001,141
Operating income $ 500,960 $ 48,291 $ 549,251
Identifiable assets $2,705,261 $202,904 $2,908,165
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
</TABLE>
22. NET EXPORT SALES
The breakdown of total net export sales by geographic area was:
(In thousands) 1995 1994 1993
Europe $ 67,393 $ 50,536 $ 60,944
Latin America 83,763 45,748 55,929
Asia 133,736 102,697 114,964
Canada 24,345 13,372 19,401
Mexico 7,828 5,332 12,310
Other 4,642 4,084 6,631
Sub-total 321,707 221,769 270,179
Less: distribution costs (37,203) (41,732) (59,162)
Net export sales $284,504 $180,037 $211,017
23. RECONCILIATION OF NET INCOME (LOSS) TO CASH
FLOW FROM OPERATIONS
(In thousands) 1995 1994 1993
Net income (loss) $246,928 $ (4,824) $ (64,499)
Depreciation, amorti-
zation and cost of
timber harvested 174,176 168,352 163,086
Deferred income taxes 75,122 (5,388) (25,204)
Minority interests 23,235 2,772 (9,651)
Writedown of
investment in BCPI
and related expenses 30,000 - -
Extraordinary charge,
net of taxes 11,317 - -
Gain on sale
of timberlands (2,152) (43,100) (52,220)
Changes in
working capital:
Receivables (44,374) (26,736) (66,265)
Inventories (3,565) (1,666) 13,666
Accounts payable and
accrued liabilities 11,272 4,458 (9,332)
Income taxes payable 91,580 (21,916) 9,320
Other (5,858) 8,952 10,453
Cash flow from
operations $607,681 $ 80,904 $ (30,646)
36
<PAGE>
24. QUARTERLY INFORMATION (unaudited)
Quarterly financial results for the years 1995, 1994 and 1993 are
summarized as follows:
<TABLE>
<CAPTION>
(In thousands, except per-share amounts)
YEAR ENDED DECEMBER 31, 1995 First Second Third Fourth Year
<S> <C> <C> <C> <C> <C>
Net sales $ 449,478 $ 486,836 $ 520,907 $ 543,920 $ 2,001,141
Gross profit $ 120,063 $ 146,267 $ 178,278 $ 198,380 $ 642,988
Operating income $ 97,253 $ 117,680 $ 154,636 $ 179,682 $ 549,251
Net income $ 38,969 $ 59,831 $ 52,870 $ 95,258 $ 246,928
Fully diluted earnings per common share $ .85 $ 1.31 $ 1.13 $ 1.88 $ 5.22
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)
Fully diluted earnings (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)
Fully diluted earnings (loss) per common share $ (.65) $ (.45) $ (.86) $ .12 $ (1.84)
</TABLE>
37
<PAGE>
NOMINAL ANNUAL CAPACITY AND PRODUCTION BY GRADE AND MILL
Annual 1995
(In short tons) Capacity PRODUCTION
Newsprint and uncoated groundwood papers
Calhoun, Tennessee 853,500 848,255 1
Catawba, South Carolina 260,300 250,489
Liverpool, Nova Scotia 265,500 252,269
Millinocket, Maine 134,800 129,635
East Millinocket, Maine 292,600 287,754
Coated groundwood paper
Catawba, South Carolina 356,000 346,397
Millinocket, Maine 133,000 131,976
Market pulp
Catawba, South Carolina 268,600 265,866
Calhoun, Tennessee 115,500 100,048
Lumber 200,000 2 190,315 2
1. Includes tonnage produced for Bowater Communication Papers Division.
2. Figures are in MBF (thousands of board feet).
38
<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 three
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 31,1995 and 1994, 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, 1995. 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, 1995 and 1994, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
(Signature of KPMG Peat Marwick LLP)
KPMG Peat Marwick LLP
Greenville, South Carolina
February 2, 1996
39
<PAGE>
FINANCIAL AND OPERATING RECORD
<TABLE>
<CAPTION>
Dollars in millions, except per-share amounts 1995 1994 1993
<S> <C> <C> <C>
INCOME STATEMENT DATA
Net sales $ 2,001.1 $ 1,359.0 $ 1,353.7
Operating income (loss) 549.3 42.1 (63.3)
Income (loss) from continuing operations before cumulative
effect
of changes in accounting principles and extraordinary
charge 1 258.2 (4.8) (64.5)
Net income (loss) 246.9 (4.8) (64.5)
Fully diluted earnings (loss) per common share 5.22 (.59) (1.84)
Dividends declared per common share 2 .60 .60 .60
PRODUCT SALES INFORMATION
Newsprint $ 841.6 $ 604.0 $ 607.6
Directory and groundwood specialties 203.6 165.9 178.5
Coated groundwood 463.8 307.0 316.2
Market pulp 233.3 130.6 98.9
Lumber, stumpage and other products 116.8 87.9 103.1
Communication papers 248.9 190.7 191.8
Distribution costs (106.9) (127.1) (142.4)
$ 2,001.1 $ 1,359.0 $ 1,353.7
FINANCIAL POSITION 3
Timber and timberlands $ 430.4 $ 426.4 $ 422.5
Fixed assets, net 1,711.0 1,785.0 1,750.7
Total assets 2,908.2 2,851.4 2,726.2
Total debt 818.1 1,118.5 1,120.2
Total capitalization 4 2,113.9 2,222.5 2,071.8
ADDITIONAL INFORMATION
Percent return on average common equity 26.5% (3.0)% (8.6)%
Income from continuing operations as a percentage of net
sales 12.9% (0.4)% (4.8)%
Total debt as a percentage of total capitalization 38.7% 50.3% 54.1%
Total debt and redeemable preferred stock as
a percentage of shareholders' equity 79.2% 134.4% 163.1%
Effective tax rate 39.4% 70.0% 32.0%
Cash flow from (used for) operations $ 607.7 $ 80.9 $ (30.6)
Capital expenditures, including timberlands $ 96.0 $ 216.1 $ 121.8
Common shareholders' equity per common share $ 24.52 $ 18.92 $ 20.10
Common stock price range $26 1/2-53 1/2 $20 1/2-29 3/8 $18-24 5/8
Sales (thousands of short tons)
Newsprint 1,402 1,460 1,437
Directory and groundwood specialties 289 265 278
Coated groundwood 476 453 454
Market pulp 325 300 312
Registered shareholders 5,900 6,600 7,300
Employees 3 5,500 6,000 6,600
1. In 1995, the company repurchased approximately $182 million of its $200 million
8.5% Notes due 2001, and repurchased approximately $117 million of its $125
million 8.25% Notes due 1999. Premium paid and related expenses resulted in
an extraordinary charge of $11.3 million after tax ($.26 per fully diluted
share). 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 share).
2. Dividends are declared quarterly. Effective with the first quarter dividend payable
April 1, 1996, the company increased its common share quarterly cash
dividend from $.15 per share to $.20 per share.
3. 1991 and subsequent year amounts include GNP, acquired December 31, 1991.
4. Total capitalization includes total debt, minority interests in
subsidiaries, redeemable preferred stock and shareholders' equity.
40
<PAGE>
Bowater Incorporated and Subsidiaries
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1992 1991 1990 1989 1988 1987 1986 1985
$ 1,360.8 $ 1,190.4 $ 1,289.1 $ 1,361.0 $ 1,330.8 $1,154.5 $ 846.7 $ 841.8
(74.1) 103.7 174.9 280.5 334.1 218.5 124.0 136.0
(92.9) 45.6 87.4 144.6 164.3 81.1 49.4 67.5
(82.0) 45.6 78.4 144.6 164.3 81.1 49.4 67.5
(2.34) 1.15 2.05 3.86 4.37 2.12 1.49 2.21
1.20 1.20 1.20 1.14 .97 .83 .72 .72
$ 649.6 $ 601.4 $ 617.2 $ 645.3 $ 671.3 $ 607.1 $ 556.1 $ 612.2
124.7 - - - - - - -
296.1 259.9 279.0 279.2 269.7 203.7 126.4 103.7
136.4 138.0 170.7 182.6 153.2 125.1 98.3 78.8
79.5 34.3 32.6 32.7 37.2 37.7 36.0 33.1
207.5 254.9 280.9 310.2 279.0 257.4 102.9 76.2
(133.0) (98.1) (91.3) (89.0) (79.6) (76.5) (73.0) (62.2)
$ 1,360.8 $ 1,190.4 $ 1,289.1 $ 1,361.0 $ 1,330.8 $1,154.5 $ 846.7 $ 841.8
$ 432.6 $ 414.1 $ 297.9 $ 285.7 $ 273.5 $ 256.6 $ 243.6 $ 231.2
1,821.7 1,858.8 1,604.7 1,529.5 1,223.8 1,079.8 1,021.6 843.1
2,881.6 2,780.0 2,297.9 2,284.2 1,880.5 1,699.8 1,600.7 1,315.0
1,134.3 864.5 498.2 532.4 293.2 367.6 631.8 345.3
2,186.4 2,061.7 1,694.5 1,700.5 1,368.0 1,301.7 1,288.7 960.4
(9.6)% 4.4% 7.9% 16.0% 20.7% 13.1% 10.2% 16.8%
(6.8)% 3.8% 6.8% 10.6% 12.4% 7.0% 5.8% 8.0%
51.9% 41.9% 29.4% 31.3% 21.4% 28.2% 49.0% 36.0%
147.7% 99.6% 61.2% 66.9% 44.4% 61.9% 156.1% 99.1%
37.0% 37.0% 37.0% 36.0% 36.5% 43.0% 30.2% 29.2%
$ 109.5 $ 156.6 $ 238.4 $ 327.3 $ 324.3 $ 247.3 $ 123.7 $ 151.3
$ 139.5 $ 159.7 $ 214.1 $ 423.4 $ 214.3 $ 88.1 $ 308.5 $ 297.3
$ 22.55 $ 26.21 $ 26.24 $ 25.37 $ 23.07 $ 19.60 $ 15.33 $ 14.45
$17 5/8-27 1/4 $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
1,604 1,244 1,266 1,278 1,233 1,246 1,237 1,200
191 - - - - - - -
447 346 352 343 337 316 188 128
318 317 300 261 250 253 260 242
8,200 9,500 14,000 15,600 17,000 18,000 21,000 24,000
6,900 7,200 5,100 5,100 5,000 5,000 4,800 4,400
</TABLE>
41
<PAGE>
BOARD OF DIRECTORS
Francis J. Aguilar
PROFESSOR EMERITUS
HARVARD UNIVERSITY
GRADUATE SCHOOL OF BUSINESS
H. David 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.
H. Gordon MacNeill
CHAIRMAN
JANNOCK LIMITED
(BUILDING PRODUCTS)
Donald R. Melville
RETIRED CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
NORTON COMPANY
(DIVERSIFIED MANUFACTURING)
Arnold M. Nemirow
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
BOWATER INCORPORATED
James L. Pate
CHAIRMAN, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
PENNZOIL COMPANY
(PETROLEUM AND PETROLEUM
PRODUCTS)
John A. Rolls
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
THERMION SYSTEMS
INTERNATIONAL
(AEROSPACE AND INDUSTRIAL
HEATING SYSTEMS)
Anthony P. Gammie
RETIRED AS CHAIRMAN OF THE
BOARD ON MARCH 31, 1996
BOARD COMMITTEES
EXECUTIVE COMMITTEE
A. M. Nemirow (CHAIRMAN)
H. D. Aycock
H. G. MacNeill
AUDIT COMMITTEE
J. A. Rolls (CHAIRMAN)
R. Barth
K. M. Curtis
HUMAN RESOURCES AND
COMPENSATION COMMITTEE
D. R. Melville (CHAIRMAN)
F. J. Aguilar
H. G. MacNeill
NOMINATING AND
GOVERNANCE COMMITTEE
F. J. Aguilar (CHAIRMAN)
H. D. Aycock
K. M. Curtis
D. R. Melville
FINANCE COMMITTEE
R. Barth (CHAIRMAN)
H. G. MacNeill
J. A. Rolls
OFFICERS
Arnold M. Nemirow
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
E. Patrick Duffy
SENIOR VICE PRESIDENT AND
PRESIDENT - COATED PAPER
& PULP DIVISION
Arthur D. Fuller
SENIOR VICE PRESIDENT AND
PRESIDENT - NEWSPRINT
DIVISION
David G. Maffucci
SENIOR VICE PRESIDENT -
CHIEF FINANCIAL OFFICER
AND TREASURER
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
Richard F. Frisch
VICE PRESIDENT -
HUMAN RESOURCES
Robert D. Leahy
VICE PRESIDENT -
CORPORATE RELATIONS
Ecton R. Manning
VICE PRESIDENT -
GENERAL COUNSEL
Robert A. Moran
VICE PRESIDENT - PULP AND
PAPER MANUFACTURING SERVICES
Michael F. Nocito
VICE PRESIDENT - CONTROLLER
Aubrey S. Rogers
VICE PRESIDENT - INFORMATION
SERVICES
Wendy C. Shiba
SECRETARY AND ASSISTANT
GENERAL COUNSEL
42
<PAGE>
SHAREHOLDERINFORMATION Bowater Incorporated and Subsidiaries
ANNUAL MEETING
The company's annual meeting of shareholders will be held on Tuesday, May
21, 1996, at 10:30 a.m. at the Hotel Inter-Continental, New York, NY.
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
SUNTRUST BANK, ATLANTA
P.O. BOX 4625
ATLANTA, GA 30302
800/568-3476
INVESTOR INFORMATION
Investor inquiries about Bowater should be directed to the Investor
Relations Department 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
864/250-2600
COMMON STOCK PRICES
Price ranges of the company's common stock during 1995 and 1994 as reported
on the New York Stock Exchange were:
1995 1994
High Low High Low
First quarter $37 5/8 $26 1/2 $24 7/8 $21 3/8
Second quarter 44 7/8 33 1/8 25 1/4 20 1/2
Third quarter 53 1/2 44 5/8 29 3/8 24 1/4
Fourth quarter 47 7/8 32 3/8 29 1/4 23 1/8
<PAGE>
CORPORATE HEADQUARTERS AND DIVISIONS Bowater Incorporated and Subsidiaries
HEADQUARTERS
BOWATER INCORPORATED
55 EAST CAMPERDOWN WAY
P.O. BOX 1028
GREENVILLE, SC 29602
864/271-7733
864/282-9482 (FAX)
DIVISIONS
BOWATER NEWSPRINT
MANUFACTURING
FACILITIES
CALHOUN OPERATIONS
CALHOUN NEWSPRINT
COMPANY
CALHOUN, TN 37309
423/336-2211
MERSEY OPERATIONS
P.O. BOX 1150
LIVERPOOL, NS B0T 1K0
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
CANADA
902/543-4637
SALES OFFICES
15310 AMBERLY DRIVE
SUITE 250-50
TAMPA, FL 33647
813/977-4945
284 SOUTH MAIN STREET
SUITE 1200
ALPHARETTA, GA 30201
770/569-5752
POINT WEST PLACE
111 SPEEN STREET
SUITE 305
FRAMINGHAM, MA 01701
508/872-5828
426 FOX HOLLOW LANE
ANNAPOLIS, MD 21403
410-280-0249
2000 REGENCY PARKWAY
SUITE 380
CARY, NC 27511
919/467-6422
100 MERCHANT STREET
SUITE 195
CINCINNATI, OH 45246
55 EAST CAMPERDOWN WAY
P.O. BOX 1028
GREENVILLE, SC 29602
864/271-7733
624 CROFTON PARK LANE
FRANKLIN, TN 37069-6514
615/591-4377
BOWATER
COATED PAPER & PULP
MANUFACTURING
FACILITY
CAROLINA OPERATIONS
P.O. BOX 7
CATAWBA, SC 29704
803/981-8000
SALES OFFICES
1025 OAKVALE RISE
ALPHARETTA, GA 30201
770/772-4148
650 WARRENVILLE ROAD
SUITE 410
LISLE, IL 60532
708/960-9797
PARK 80 WEST, PLAZA 2
SADDLE BROOK, NJ 07663
201/368-3611
GREAT NORTHERN PAPER
MANUFACTURING
FACILITIES
MILLINOCKET OPERATIONS
ONE KATAHDIN AVENUE
MILLINOCKET, ME 04462
207/723-5131
EAST OPERATIONS
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
864/271-7733
BOWATER
COMMUNICATION PAPERS
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
SAN DIEGO, CA
SAN RAMON, CA
YORBA LINDA, CA
CLEARWATER, FL
LAKELAND, FL
ATLANTA, GA
SNELLVILLE, GA
LISLE, IL
MOLINE, IL
ROSELLE, IL
WOBURN, MA
TROY, MI
ROSEMOUNT, MN
WHITE BEAR LAKE, MN
CHESTERFIELD, MO
CEDAR KNOLLS, NJ
NEW YORK, NY
BEACHWOOD, OH
TOLEDO, OH
STILLWATER, OK
LEOLA, PA
WAYNE, PA
JOHNSTON, RI
GERMANTOWN, TN
DUNCANVILLE, TX
HUMBLE, TX
IRVING, TX
BOTHELL, WA
PRODUCED BY
CORPORATE RELATIONS,
BOWATER INCORPORATED
(C) 1996 BOWATER INCORPORATED,
PRINTED IN U.S.A
BOWATER INCORPORATED IS AN
EQUAL OPPORTUNITY EMPLOYER.
(Recycled Logo)PRINTED ON RECYCLED PAPER.
Exhibit 21.1
Bowater Incorporated
Subsidiaries
As of March 31, 1996
Jurisdiction of
Name Incorporation
Bowater Canadian Limited Canada
Bowater Communication Papers Inc. Delaware
(doing business as Star Forms)
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 (the "Company"), except for Calhoun Newsprint Company, which is
approximately 51% owned by the Company, and Bowater Mersey Paper Co., Ltd.,
which is 51% owned by Bowater Canadian Limited.
1
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Bowater Incorporated:
We consent to incorporation by reference in the following Registration
Statements, of our report dated February 2, 1996, relating to the consolidated
balance sheet of Bowater Incorporated and Subsidiaries as of December 31, 1995
and 1994 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, 1995, which report is incorporated by reference in the December 31,
1995, annual report on Form 10-K of Bowater Incorporated.
<TABLE>
<CAPTION>
Filing
Form S-1 Date
<S> <C> <C>
No. 33-2444 -Dividend Reinvestment and Stock Purchase Plan 12/27/85
of Bowater Incorporated
Form S-8
No. 2-92899 -Bowater Incorporated 1984 Stock Option Plan 8/23/84
No. 2-92900 -Bowater Incorporated Salaried Employees' 8/23/84
Savings Plan
No. 33-7468 -Bowater Carolina Hourly Employees' 7/24/86
Profit-Sharing Plan
No. 33-16277 -Bowater Southern Hourly Employees' 8/25/87
Profit-Sharing Plan
No. 33-25166 -Bowater Incorporated 1988 Stock Incentive Plan 10/27/88
No. 33-44887 -Great Northern Paper, Inc. Salaried Employees' 12/31/91
Savings and Capital Growth Plan
No. 33-50152 -Bowater Incorporated 1992 Stock Incentive Plan 7/28/92
No. 33-61219 -The Deferred Compensation Plan for Outside 7/21/95
Directors of Bowater Incorporated
No. 33-64371 -Great Northern Paper, Inc. Hourly 401(k) Savings 11/17/95
Plan
No. 33-64373 -Bowater Communication Papers Inc. Employees' 11/17/95
Savings Plan
No. 333-00555 -Bowater Incorporated Salaried Employees' 1/30/96
Savings Plan
No. 333-00587 -Great Northern Paper, Inc. Savings and Capital 1/31/96
Growth Plan for Salaried Employees
</TABLE>
/s/ KPMG Peat Marwick LLP
Greenville, South Carolina
March 27, 1996
<PAGE>
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<PERIOD-START> OCT-01-1995 JAN-01-1995
<PERIOD-END> DEC-31-1995 DEC-31-1995
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