<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Bowater Incorporated
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
(BOWATER LOGO)
Bowater Incorporated
55 East Camperdown Way
Post Office Box 1028
Greenville, SC 29602
March 23, 1998
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
Bowater Incorporated (the "Company"), which will be held at The Gunter Theatre,
300 South Main Street, Greenville, South Carolina, on Wednesday, May 20, 1998,
at eleven a.m. Time will be set aside for discussion of each item of business
described in the accompanying Notice of Annual Meeting and Proxy Statement. A
current report on the business operations of the Company will be presented at
the Annual Meeting, and shareholders will have an opportunity to ask questions.
Upon adjournment of the Annual Meeting, a number of the directors and
officers will be available to confer informally with shareholders.
We hope that you will attend the Annual Meeting. Whether or not you plan
to attend, please sign, date and return your proxy promptly in the envelope
provided in order to make certain that your shares will be represented at the
Annual Meeting.
The Company's Annual Report for 1997 is included in this package, and we
urge you to read it carefully.
Sincerely yours,
/s/ Arnold M. Nemirow
ARNOLD M. NEMIROW
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
<PAGE>
BOWATER INCORPORATED
------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 20, 1998
------------------------------------------------------
The 1998 Annual Meeting of Shareholders of BOWATER INCORPORATED (the
"Company") will be held at The Gunter Theatre, 300 South Main Street,
Greenville, South Carolina, on Wednesday, May 20, 1998, at eleven a.m. for the
following purposes:
(1) To elect three directors, each for a term of three years; and
(2) To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Holders of Common Stock of record at the close of business on March 23,
1998, are entitled to notice of and to vote at the Annual Meeting.
By order of the Board of Directors,
/s/ Wendy C. Shiba
WENDY C. SHIBA
Vice President, Secretary and
Assistant General Counsel
Greenville, South Carolina
March 23, 1998
Shareholders are urged to execute and return the proxy promptly in the envelope
provided.
<PAGE>
<PAGE>
BOWATER INCORPORATED
55 East Camperdown Way
P.O. Box 1028
Greenville, South Carolina 29602
---------------
PROXY STATEMENT
Dated March 23, 1998
---------------
For Annual Meeting of Shareholders
to be held at 11:00 a.m. on May 20, 1998
The Gunter Theatre
300 South Main Street
Greenville, South Carolina
The only securities of Bowater Incorporated (the "Company") eligible to
vote at the Annual Meeting are the shares of its common stock, par value $1 per
share (the "Common Stock"). 40,473,842 shares of Common Stock were outstanding
on March 23, 1998, the record date for the Annual Meeting. Each share of Common
Stock outstanding on the record date will be entitled to one vote at the Annual
Meeting. Only holders of record at the close of business on March 23, 1998,
will be eligible to vote at the Annual Meeting. One-third of the outstanding
shares of stock entitled to vote at the Annual Meeting will constitute a
quorum. The enclosed form of proxy is solicited on behalf of the Company and
has been approved by the Board of Directors. The approximate date of mailing of
this Proxy Statement and the accompanying Notice of Annual Meeting and proxy
card is March 31, 1998.
Shares represented by proxies in the accompanying form will be voted in
accordance with instructions indicated thereon. If no contrary instruction is
indicated, shares represented by the proxies will be voted (1) FOR the election
of the three nominees named below to serve as directors for the three-year term
indicated; and (2) in the discretion of the proxy holders on such other matters
as may properly come before the meeting or any adjournments thereof. Should any
nominee named herein for the office of director become unable or unwilling to
accept nomination or election, it is intended that the persons acting under the
proxy will vote for the election of another person recommended by the
Nominating and Governance Committee of the Board and nominated by the Board of
Directors. The Company has no reason to believe that any of the three nominees
will be unable or unwilling to serve if elected to office.
Aside from the election of three directors, the Company does not know of
any other matters that will be presented at the Annual Meeting; however, if any
other matters properly come before the Annual Meeting, or any adjournment
thereof, the person or persons voting the proxies will vote them in accordance
with their best judgment on those matters.
Execution of the enclosed proxy will not affect a shareholder's right to
attend the Annual Meeting and vote in person. Any shareholder giving a proxy
has the right to revoke it by giving written notice of revocation to the
Secretary of the Company at any time before the proxy is voted, or by executing
and delivering to the Company a later-dated proxy at any time before the
earlier proxy is voted, or by attending the Annual Meeting and voting his or
her shares in person (although attendance at the Annual Meeting will not, in
and of itself, constitute revocation of a proxy). No such notice of revocation
or later-dated proxy, however, will be effective until received by the
Secretary of the Company at or prior to the Annual Meeting.
Directors are elected by a plurality of votes of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting. The
affirmative vote of the holders of a majority of the shares that are present in
person or represented by proxy and entitled to vote at the Annual Meeting is
required to act on any other matters properly brought before the Annual Meeting
or any adjournment thereof. In the election of directors, votes may be cast for
or votes may be withheld from each nominee. Abstentions may not be specified
with respect to the election of directors. In the case of broker non-votes
(which occur when a broker or other nominee holding shares for a beneficial
owner reports those shares as present for quorum purposes but does not vote on
a proposal), the broker non-vote will have no effect upon the vote on any
matter submitted for shareholder approval.
1
<PAGE>
Item No. 1
ELECTION OF DIRECTORS
INFORMATION ON NOMINEES AND DIRECTORS
The Board of Directors of the Company is divided into three classes: Class
I, Class II and Class III. Each class consists as nearly as possible of
one-third of the total number of directors, and one class is elected each year
for a three-year term. The term of the Class II directors expires this year,
and the successors are to be elected at the Annual Meeting for a three-year
term expiring in 2001. The terms of the Class I and Class III directors expire
in 2000 and 1999, respectively.
The following information is provided for the three nominees who are the
Class II directors, and also for the Class I and Class III directors.
NOMINEES FOR DIRECTORS TO BE ELECTED AT THE 1998 ANNUAL MEETING OF SHAREHOLDERS
(Class II)
<TABLE>
<S> <C>
Donald R. Melville Retired Chairman and Chief Executive Officer of Norton Company -- Mr. Melville
Age: 71 was Chief Executive Officer of Norton Company, a diversified manufacturing company,
Director since 1984 from 1980 until his retirement at the end of 1987. He was Chairman from 1985 to 1987,
President from 1979 to 1986, and Executive Vice President from 1971 to 1979.
H. David Aycock Retired President and Chief Operating Officer of Nucor Corporation -- Mr. Aycock
Age: 67 was President and Chief Operating Officer of Nucor Corporation, a steel and steel
Director since 1987 products company, from 1984 to 1991. He previously held various management
positions, including that of General Manager, at Nucor Corporation operating units.
Mr. Aycock serves as a director of Nucor Corporation. Since retiring from Nucor
Corporation, Mr. Aycock has been engaged in managing family investments in various
entrepreneurial activities.
Arnold M. Nemirow Chairman of the Board, President and Chief Executive Officer of the Company --
Age: 54 Mr. Nemirow became Chief Executive Officer of the Company in 1995 and became
Director since 1994 Chairman of the Board in 1996. He has served as President of the Company since
September 1994 and served as Chief Operating Officer of the Company from September
1994 through February 1995. Mr. Nemirow was President, Chief Executive Officer and
a director of Wausau Paper Mills Company, a pulp and paper company, from 1990
through July 1994, Chairman, President, Chief Executive Officer and a director of
Nekoosa Papers, Inc., the business papers division of Great Northern Nekoosa
Corporation, from 1988 to 1990, and Vice President of Great Northern Nekoosa
Corporation from 1984 to 1990. Mr. Nemirow is also a director of WPL Holdings, Inc.
</TABLE>
DIRECTORS WHOSE TERMS END AT THE 1999 ANNUAL MEETING OF SHAREHOLDERS
(Class III)
<TABLE>
<S> <C>
Francis J. Aguilar Professor Emeritus, Harvard University Graduate School of Business -- Dr. Aguilar
Age: 65 was a faculty member at the Harvard University Graduate School of Business from 1965
Director since 1984 to 1995. Since 1994, he has served as Executive Director of the Management Education
Alliance, a nonprofit educational corporation. Dr. Aguilar is a director of Dynamics
Research Corporation and Burr-Brown Corporation and also acts as an independent
business consultant.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
John A. Rolls President and Chief Executive Officer of Thermion Systems International --
Age: 56 Mr. Rolls has served as President and Chief Executive Officer of Thermion Systems
Director since 1990 International, an aerospace and industrial heating systems company, since
March 1996. He was President and Chief Executive Officer of Deutsche Bank North
America, an international banking company, from 1992 to March 1996. Mr. Rolls was
Executive Vice President and Chief Financial Officer of United Technologies
Corporation, a diversified aerospace and industrial products company, from 1986 to
1992. Prior to that he was Senior Vice President and Chief Financial Officer of RCA
Corporation. Mr. Rolls is also a director of MBIA Inc., Thermion Systems
International and Arguss Holdings, Inc., formerly Conceptronic, Inc.
Kenneth M. Curtis Senior Member, Curtis Thaxter Stevens Broder & Micoleau, Limited Liability
Age: 67 Company, P.A. -- Mr. Curtis was a partner in the Portland, Maine, law firm of Curtis
Director since 1993 Thaxter Stevens Broder & Micoleau from 1975 to 1979 and from 1981 to January 1995,
when the firm became a limited liability company, of which he currently is a member.
Mr. Curtis also served as President of Maine Maritime Academy from 1986 to 1994. He
was formerly Secretary of State of Maine from 1965 to 1966, Governor of Maine from
1967 to 1975 and U.S. Ambassador to Canada from 1979 to 1981. Mr. Curtis is a
director of Key Corp.
</TABLE>
DIRECTORS WHOSE TERMS END AT THE 2000 ANNUAL MEETING OF SHAREHOLDERS
(Class I)
<TABLE>
<S> <C>
Richard Barth Retired Chairman, President and Chief Executive Officer of Ciba-Geigy
Age: 66 Corporation -- Mr. Barth became Chairman of Ciba-Geigy Corporation, a diversified
Director since 1991 chemical products company, in 1990 and served in that capacity until its merger into
Novartis Corporation in December 1996. Mr. Barth was President and Chief Executive
Officer of Ciba-Geigy Corporation from 1986 to 1996, Chief Financial Officer from
1979 to 1986, Secretary from 1974 to 1986, and General Counsel from 1970 to 1986.
Mr. Barth is also a director of The Bank of New York, Novartis Corporation (USA) and
Imclone Systems, Inc.
James L. Pate Chairman and Chief Executive Officer of Pennzoil Company -- Mr. Pate is
Age: 62 Chairman and Chief Executive Officer of Pennzoil Company. He was named Chairman
Director since 1996 in 1994 and Chief Executive Officer in 1990. He held the additional office of President
from 1990 to 1997. Pennzoil Company is a producer, refiner and marketer of petroleum
and petroleum products.
Charles J. Howard Chairman, Howard, Barclay & Associates Ltd. -- Mr. Howard has been Chairman of
Age: 55 Howard, Barclay & Associates Ltd., an investment counseling firm, since 1994. He also
Director since 1997 has been President, Chief Executive Officer, a director and the largest shareholder of
Ausnoram Holdings Limited, an investment holding company with mining, oil and gas
interests, since 1989. Mr. Howard is also a director of Anderson Exploration Limited,
Petromet Resources Limited, Southern Africa Minerals Corporation and Unicorp Energy
Corporation.
</TABLE>
Board and Committee Meetings
The Board of Directors met eight times during 1997. The Board has an Audit
Committee consisting of Messrs. Curtis, Howard and Pate, a Nominating and
Governance Committee consisting of Messrs. Barth, Aguilar, Curtis and Rolls, a
Human Resources and Compensation Committee consisting of Messrs. Aycock,
Aguilar and Melville, a Finance Committee consisting of Messrs. Rolls, Barth
and Pate, and an Executive Committee consisting of Messrs. Nemirow, Aguilar and
Aycock.
The Audit Committee, which met three times in 1997, reviews the scope and
results of the annual audit of the Company, approves the non-audit services
rendered by the independent auditors to the Company and considers the effect of
such services on the independence of such auditors, recommends to the Board
independent auditors for the ensuing year and reviews the accounting policies
of the Company and the Company's systems of internal controls and internal
auditing procedures.
3
<PAGE>
The Nominating and Governance Committee, which met three times in 1997,
recommends nominees for election to the Board and addresses issues of corporate
governance for Board consideration. Recommendations for director nominees from
shareholders will be considered by the Nominating and Governance Committee.
Shareholders desiring to make a recommendation to the Nominating and Governance
Committee of a director nominee proposed for election at the 1999 Annual
Meeting should comply with the procedure described under "Proposals by
Shareholders". The Committee also serves in an oversight capacity with respect
to the Company's compliance with environmental, health and safety regulations.
The Human Resources and Compensation Committee, which met four times in
1997, approves the adoption, amendment and termination of all employee pension
and savings benefit plans, administers executive bonus plans and awards and
stock option plans and grants thereunder, reviews programs followed by
management in developing executive resources for current and future operations
and reviews and approves the compensation of officers of the Company.
The Finance Committee, which met three times in 1997, reviews and oversees
the financial affairs of the Company. The Committee also provides financial
oversight and direction of the Company's pension and savings plans, including
approving the selection of trustees and the amount of contributions to be made
by the Company under these plans. In addition, the Committee reviews and
approves the adoption of actuarial and accounting methods and assumptions under
these plans and reviews the action of management in establishing investment
policy and administering the plans.
The Executive Committee, which met once during 1997, meets from time to
time to make decisions between meetings of the Board pursuant to authority
delegated by the Board of Directors.
All directors attended at least 75% of the aggregate of the meetings of
the Board of Directors and of Board committees on which they served in 1997.
Director Compensation
Each director who was not an employee of the Company (an "Outside
Director") received in 1997 an annual retainer of $24,000, a fee of $1,000 per
day for each Board meeting attended and a fee of $800 per day for each Board
committee meeting attended. Each director was reimbursed for reasonable
expenses, including but not limited to transportation and lodging, incurred in
attending meetings. In addition, Outside Directors are eligible to receive
awards under the 1997 Stock Option Plan and in February 1997 each Outside
Director other than Mr. Howard was granted options with respect to 1,000 shares
of Common Stock. Mr. Howard became a director in April 1997 and received a
prorated grant of options with respect to 750 shares of Common Stock.
Deferred Compensation Plan for Outside Directors
The Deferred Compensation Plan for Outside Directors of Bowater
Incorporated (the "Deferred Plan") permits Outside Directors to elect
irrevocably to defer receipt of all or a part of their annual retainer and
meeting fees. Compensation that a director has elected to defer under the
Deferred Plan can be allocated to a cash account, a Company Common Stock
account or both accounts, in increments of ten percent, as elected by the
director. On the date on which compensation to be deferred would have been
payable, a participating director who has elected to allocate all or part of
his deferred compensation to his Deferred Plan stock account will be credited
with the number of shares of Common Stock, including fractional shares, having
a value (with a 5% discount) equivalent to the amount of deferred compensation
that he allocated to his stock account. Deferred compensation that is allocated
to a cash account will be credited on the date on which such compensation would
have been payable. Whenever dividends are paid on shares of Common Stock, each
participant's stock account will be credited with additional shares having an
undiscounted value equal to the amount of the dividend paid on a single share
of such stock, multiplied by the number of shares of Common Stock, including
fractional shares, credited to the participant's account on the dividend record
date. Amounts credited to a Deferred Plan cash account will accrue interest on
the average monthly balance of that account at a rate equal to the rate for the
Fixed Income Fund maintained for the Company's Salaried Employees' Savings
Plan. Directors can elect to transfer balances between the cash and stock
accounts subject to certain conditions set forth in the Deferred Plan. A
participant in the Deferred Plan may elect at the time of deferral to have his
Deferred Plan account(s) distributed to him in (i) either Common Stock or cash
as soon as possible or in a stated number of years after he ceases to be an
Outside Director or (ii) cash in either five or ten installments. All of the
Company's Outside Directors except for Messrs. Curtis and Howard have accounts
under the Deferred Plan.
4
<PAGE>
Retirement Plan for Outside Directors
The Company adopted a Retirement Plan for Outside Directors during 1988
(the "Outside Directors' Retirement Plan"). All of the Company's current
Outside Directors participate in the Outside Directors' Retirement Plan. The
Outside Directors' Retirement Plan provides for normal retirement benefits
equal to ten percent of the participant's annualized retainer at the
termination of service multiplied by the participant's years of service as an
Outside Director of the Company up to a maximum of ten years. Normal retirement
benefits may begin at age 65 after the completion of five or more years of
service, although early retirement is permitted (with the Company's consent)
upon attainment of age 55 and the completion of five years of service.
Participants who elect early commencement of benefit payments after retirement
receive a reduced benefit.
The Outside Directors' Retirement Plan provides that a participant who was
an Outside Director immediately prior to a change in control of the Company and
who is removed from or not renominated to his directorship by reason of such
change in control is entitled to the early retirement benefits provided by the
plan regardless of whether the plan requirements for early retirement have been
satisfied.
CERTAIN INFORMATION CONCERNING STOCK OWNERSHIP
The Company knows of no person who, or group that, owns beneficially more
than 5% of the outstanding shares of Common Stock of the Company as of March
23, 1998, except as set forth below:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
- ----------------------------------------------- ---------------------- -----------
<S> <C> <C>
MacKay-Shields Financial Corporation(1) 3,862,150(1) 9.54%
9 West 57th Street
New York, New York 10019
The Capital Group Companies, Inc.(2) 3,147,900(2) 7.78%
333 South Hope Street
Los Angeles, California 90071
Franklin Resources, Inc.(3) 3,142,392(3) 7.76%
777 Mariners Island Boulevard
San Mateo, California 94404
Lord, Abbett & Co. 2,435,125(4) 6.02%
767 Fifth Avenue
New York, New York 10153
Wellington Management Company, LLP 2,202,080(5) 5.44%
(including shares held by
Vanguard/Windsor Funds, Inc.)(5)
75 State Street
Boston, Massachusetts 02109
</TABLE>
- ---------
(1) In an amendment dated February 13, 1998, to Schedule 13G, MacKay-Shields
Financial Corporation ("MSFC") reported that it has shared voting power and
shared dispositive power with respect to all of the shares shown. The
Schedule 13G reported that MSFC serves as investment manager to a number of
clients who have the right to receive and the ultimate power to direct the
receipt of dividends from, or the proceeds of the sale of, the shares shown
in the table above. The Schedule 13G reported that none of such clients had
an interest with respect to more than 5% of the outstanding shares of
Common Stock.
(2) In an amendment dated February 10, 1998, to Schedule 13G, The Capital
Group Companies, Inc. ("CGC") reported that it is the parent holding
company of a group of investment management companies that hold investment
power and in some cases voting power over the shares shown in the table
above. It reported that its subsidiary, Capital Research and Management
Company, a registered investment adviser with the same address as CGC, has
sole dispositive power with respect to 2,905,000 of the shares shown in the
table as a result of acting as investment adviser to various investment
companies. The Schedule 13G reported that the remaining shares reported as
being beneficially owned by CGC are beneficially owned by its other
subsidiaries, Capital International Limited and Capital International S.A.
The Schedule 13G reported that CGC does not have investment power or voting
power over any of the shares shown in the table above; however, by virtue
of its subsidiaries, CGC reported that it may be deemed to have sole voting
power with respect to 242,900 of the shares shown in the table above and
sole dispositive power with respect to all of the shares.
5
<PAGE>
(3) In an amendment dated January 16, 1998, to Schedule 13G, Franklin
Resources, Inc. ("FRI") reported that the securities shown in the table
above are beneficially owned by one or more investment companies or other
managed accounts that are advised by direct or indirect investment advisory
subsidiaries of FRI. The investment advisory subsidiaries have investment
and/or voting power over the securities owned by their investment advisory
clients. Accordingly, such subsidiaries may be deemed to be the beneficial
owner of the securities shown in the table. Charles B. Johnson and Rupert
H. Johnson, Jr. (the "FRI Principal Shareholders") (each of whom has the
same business address as FRI) each own in excess of 10% of the outstanding
common stock of FRI and may be deemed to be the beneficial owners of
securities held by persons and entities advised by FRI subsidiaries. The
Schedule 13G reported that one of the investment adviser subsidiaries,
Templeton Global Advisors Limited (whose address is Lyford Cay, P.O. Box
N-7759, Nassau, Bahamas), has sole voting and dispositive power with
respect to 1,922,000 of the shares shown; Franklin Mutual Advisers, Inc.
(whose address is 51 John F. Kennedy Parkway, Short Hills, NJ 07078) has
sole voting and dispositive power with respect to 1,193,100 of the shares
shown; Templeton Investment Counsel, Inc. (whose address is 500 E. Broward
Blvd., Suite 2100, Fort Lauderdale, FL 33394) has sole voting and
dispositive power with respect to 10,000 of the shares shown; Franklin
Advisers, Inc. (who has the same address as FRI) has sole voting and
dispositive power with respect to 8,800 of the shares shown; and Templeton
Investment Management Limited (whose address is Saltire Court, 20 Castle
Terrace, Edinburgh, Scotland EH1 2EH) has sole voting and dispositive power
with respect to 8,492 of the shares shown. Each of FRI, the FRI Principal
Shareholders and the investment advisory subsidiaries disclaims any
economic interest or beneficial ownership in the shares shown in the table
above and are of the view that they are not acting as a "group" for
purposes of Securities Exchange Act of 1934, as amended.
(4) Lord, Abbett & Co. reported in a Schedule 13G dated February 13, 1998,
that it has sole voting and dispositive power with respect to all of the
shares shown in the table.
(5) In a Schedule 13G dated January 13, 1998, Wellington Management Company,
LLP ("WMC") reported that it has shared voting power with respect to 14,200
of the shares shown and shared dispositive power with respect to all of the
shares shown. The Schedule 13G reported that WMC serves as investment
adviser to a number of clients, which have the right to receive, or the
power to direct the receipt of, dividends from, or the proceeds of the sale
of, the shares shown in the table and that one of those clients,
Vanguard/Windsor Funds, Inc., has such rights with respect to more than 5%
of the outstanding shares of Common Stock. In a Schedule 13G dated February
9, 1998, Vanguard/Windsor Funds, Inc. (whose address is 100 Vanguard Blvd.,
P. O. Box 2600, Malvern, PA 19355) reported that it has sole voting power
and shared dispositive power with respect to 2,187,880 of the shares shown
in the table.
No officer or director owns any of the Company's Series C Cumulative
Preferred Stock. As of March 23, 1998, ownership of Common Stock by each of the
directors and nominees for director, by each of the executive officers named in
the Summary Compensation Table, and by all directors and executive officers of
the Company, as a group, was as follows:
<TABLE>
<CAPTION>
Name of Amount and Nature of
Beneficial Owner Beneficial Ownership(1) Percent of Class(2)
- ---------------------------------------- ------------------------- --------------------
<S> <C> <C>
Arnold M. Nemirow 326,353.22(3) *
Arthur D. Fuller 59,545.92(4) *
E. Patrick Duffy 58,141.07(5) *
Anthony H. Barash 11,609.42(6) *
David G. Maffucci 47,963.14(7) *
Francis J. Aguilar 21,239.06(8) *
H. David Aycock 12,471.83(9) *
Richard Barth 9,540.05(10) *
Kenneth M. Curtis 1,500.00(11) *
Charles J. Howard 6,375.00(12) *
Donald R. Melville 5,054.74(13) *
James L. Pate 3,265.61(14) *
John A. Rolls 10,680.06(15) *
Directors and Executive Officers 803,300.15(16) 1.95%
as a Group (21 persons)
</TABLE>
- ---------
* Represents holdings of less than 1% of the outstanding shares of Common
Stock.
(1) Units in one or more Common Stock funds of the Bowater Incorporated
Salaried Employees' Savings Plan (the "Savings Plan") are allocated to the
accounts of officers of the Company. These funds hold Common Stock and
relatively
6
<PAGE>
small amounts of short-term investments. The number of shares of Common
Stock shown in the table is an approximation provided by the Savings Plan
administrator in a statement for the period ending December 31, 1997, based
on the market value of the applicable units. This table also includes
shares allocated under the Company's Compensatory Benefits Plan based on a
statement for the period ending December 31, 1997. Additional shares of
Common Stock may have been allocated to the accounts of participants in the
Savings Plan or Compensatory Benefits Plan since the date of the last
statements from the plan administrators. Participants in the Compensatory
Benefits Plan have no voting power with respect to share allocations, but
receive cash payouts based on the number of shares allocated to their
accounts under the plan upon their retirement from the Company, death,
disability or other termination of employment (if they have three years of
service), and do not have investment power over share allocations prior to
that time. The number of shares allocated under each of the Savings Plan
and the Compensatory Benefits Plan is subject to revision in order to
comply with requirements respecting nondiscrimination standards and
limitations on contributions under the Internal Revenue Code of 1986, as
amended (the "Code").
(2) Pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended, percentages of total outstanding shares have been
computed on the assumption that shares of Common Stock that can be
acquired within 60 days of March 23, 1998, upon the exercise of options by
a given person are outstanding, but no other shares similarly subject to
acquisition by other persons are outstanding.
(3) Represents 20,000 shares owned directly, 392.88 shares owned in the Savings
Plan, 305,000 shares that may be acquired under options currently
exercisable and 960.34 shares allocated under the Compensatory Benefits
Plan.
(4) Represents 10,000 shares owned directly, 1,639.57 shares owned in the
Savings Plan, 47,500 shares that may be acquired under options currently
exercisable and 406.35 shares allocated under the Compensatory Benefits
Plan.
(5) Represents 318.18 shares owned in the Savings Plan, 57,500 shares that may
be acquired under options currently exercisable and 322.89 shares
allocated under the Compensatory Benefits Plan.
(6) Represents 1,000 shares owned directly, 100 shares held in the Seyfarth,
Shaw, Fairweather & Geraldson Retirement Plan for Partners, 353.23 shares
owned in the Savings Plan, 10,000 shares that may be acquired under
options currently exercisable and 156.19 shares allocated under the
Compensatory Benefits Plan.
(7) Represents 2,100 shares owned directly, 663.99 shares owned in the Savings
Plan, 45,000 shares that may be acquired under options currently
exercisable and 199.15 shares allocated under the Compensatory Benefits
Plan.
(8) Represents 12,880.98 shares owned directly, 7,858.08 shares allocated under
the Deferred Plan and 500 shares that may be acquired under options
currently exercisable.
(9) Represents 500 shares owned directly, 11,471.83 shares allocated under the
Deferred Plan and 500 shares that may be acquired under options currently
exercisable.
(10) Represents 9,040.05 shares allocated under the Deferred Plan and 500
shares that may be acquired under options currently exercisable.
(11) Represents 1,000 shares owned directly and 500 shares that may be acquired
under options currently exercisable.
(12) Represents 1,000 shares owned directly, 5,000 shares owned by Ausnoram
Holdings Limited, of which Mr. Howard is the President, Chief Executive
Officer and largest shareholder, and 375 shares subject to options
exercisable within 60 days of March 23, 1998.
(13) Represents 500 shares owned directly, 4,054.74 shares allocated under the
Deferred Plan and 500 shares that may be acquired under options currently
exercisable.
(14) Represents 1,000 shares owned directly, 1,765.61 shares allocated under
the Deferred Plan and 500 shares that may be acquired under options
currently exercisable.
(15) Represents 10,180.06 shares allocated under the Deferred Plan and 500
shares that may be acquired under options currently exercisable.
(16) This total represents 57,030.77 shares owned directly, 10,965.31 shares
allocated under the Savings Plan, 2,558.70 shares allocated under the
Compensatory Benefits Plan, 44,370.37 shares allocated under the Deferred
Plan, 688,000 shares subject to options currently exercisable, and 375
shares subject to options exercisable within 60 days of March 23, 1998.
The number of shares allocated to the accounts of certain executive
officers under each of the Savings Plan and Compensatory Benefits Plan is
subject to revision in order to comply with requirements respecting
nondiscrimination standards and limitations on contributions under the
Code. The beneficial ownership stated above represents sole voting and
investment power, except as indicated above.
7
<PAGE>
HUMAN RESOURCES AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Human Resources and Compensation Committee (the "Committee") develops
and administers the compensation programs for the Company's executive officers.
The Committee's goal is to develop executive compensation programs that are
consistent with strategic business objectives.
The Committee is composed entirely of independent, nonemployee directors
who have not served as officers of the Company and have no interlocking
relationships, as defined by the Securities and Exchange Commission.
Key Elements and Policies for Compensation of Executive Officers
The Company's basic policy for executive officers is that compensation
should vary depending on the Company's success in the following areas:
o Performance versus the Company's financial and strategic objectives, and
o Creation of shareholder value.
The key elements of the Company's 1997 executive compensation program were
base salary, the Annual Bonus Plan, the 1997-1999 Long-Term Incentive Plan (the
"LTIP Plan") and stock options.
o To determine appropriate compensation levels within each pay component,
the Committee considered all elements of the executive compensation
program. Base salaries and targeted annual bonus payouts for executive
officers generally were set near the median of comparable executives in
the paper and forest products industry. Executive officers had the
opportunity to earn above-median levels of compensation through the Annual
Bonus Plan if the Company attained above-median performance. Actual total
compensation depended on the Company's performance.
o Competitive market data were provided by an independent compensation
consultant. The Company reviewed the pay practices of companies in the
paper and forest products industry, as well as other general industry
companies with annual revenues similar to the Company's. The Committee
believed this criterion provided reasonable pay comparisons, enabling the
Company to assure that executives were being paid fairly, while assuring
shareholders and the Company that executive pay levels were reasonable.
o The group of companies used for independent compensation comparisons
included many of the Company's peer companies included in the Dow Jones
Paper Products Group listed in the Total Shareholder Return chart below.
The list was expanded, however, to include other paper and forest products
companies and similar-sized general industry companies that are not a part
of the Dow Jones Paper Products Group. This decision was based on the
Committee's belief that the recruitment of executive talent should not
necessarily be limited to the companies used in the Dow Jones group.
Base Salary
Executive officers' salaries are generally set to place them near median
levels of executive compensation at comparable companies as described above,
considering the scope of the individual's responsibilities relative to the
responsibilities of executives at comparable companies.
o Competitive market considerations form the primary basis for setting base
salary levels, since performance plays such a large role in determining
annual and long-term incentives. However, in setting base salary levels,
the Committee also considers the officer's performance against individual
objectives during the preceding year, the profits of the individual's
business unit relative to plan during the preceding year for business unit
executives, and the profits of the Company during the preceding year for
officers with corporate-wide responsibilities.
Annual Bonus Plan
The Annual Bonus Plan for 1997 used three performance measures: Return on
Net Assets ("RONA") (weighted 50%), Return on Capital Spending (weighted 25%)
and Mill Performance (weighted 25%):
o RONA was measured at the divisional and corporate levels (50%
consolidated RONA for corporate employees; 25% consolidated RONA and 25%
divisional RONA for divisional employees), with awards based on
performance relative to goals established at the beginning of the year.
The capital intensive nature of the Company's business means that
8
<PAGE>
it is critical to evaluate earnings in the context of the resources
required to generate them. In addition, there has been a strong historical
relationship between RONA and market valuation for companies in the paper
and forest products industry.
o Return on Capital Spending targets were set at the divisional level to
reflect the Company's priority to spend capital dollars on the highest
return capital projects. Consolidated results were used for corporate
employees.
o Mill Performance goals were established to reflect the Company's desire
to improve performance in the areas of safety, productivity, quality and
cost reduction. These goals mirror the performance criteria established
for the Company's gainsharing programs, which generally apply to employees
not in the Annual Bonus Plan. Divisional results were used for divisional
employees and consolidated results were used for corporate employees.
The Company's performance during 1997 was substantially above budgeted
levels in two measures and below budgeted levels in the remaining measure,
resulting in bonus payouts that generally were above targeted levels.
Long-Term Incentive Plan
The LTIP Plan, which was approved by the Company's shareholders, is
designed to link rewards paid to key executives with the Company's performance.
The LTIP Plan has a three-year plan cycle consisting of fiscal years 1997, 1998
and 1999. At the beginning of the plan cycle, units were assigned to each
participant based on the participant's position rank. Payouts under the LTIP
Plan will depend upon the Company's average RONA as compared to the RONA of a
group of designated peer companies, as well as upon the average daily closing
price of the Common Stock for each year during the plan cycle. No payout will
be made under the LTIP Plan unless the Company's average RONA exceeds the
average RONA of the peer group companies. The current number of participants in
the LTIP Plan is 24.
Stock Options
Stock options continue to play an important role in linking executives'
compensation to the Company's Common Stock performance, and thus to the
interests of shareholders. The 1997 Stock Option Plan, which was approved by
the Company's shareholders, provides 1,000,000 shares of Common Stock available
to be distributed to key employees, officers and nonemployee directors. The
number of options granted to each executive officer is based on the executive's
position rank. In 1997 stock options were granted with an exercise price equal
to the fair market value (as defined in the Stock Option Plan) of the Common
Stock on the date of grant. Accordingly, the options have value to the option
holder only if the stock price appreciates.
The Committee believes this design focuses executives on the creation of
shareholder wealth over the long term.
Policy with Respect to Corporate Tax Deduction Limit
The Committee generally intends to administer the executive pay program so
that the corporate tax deduction for compensation to executives is maximized
under Section 162(m) of the Code. In order to maintain flexibility to attract
and retain qualified executives, the Committee may allow for non-deductible
compensation. The Company paid certain non-deductible compensation to Mr.
Nemirow in 1997, the impact of which was not material to the Company.
Compensation of the CEO During 1997
The Committee annually reviews Mr. Nemirow's salary level and considers
such factors as tenure, individual performance and contribution to the
Company's success when contemplating future salary adjustments. Mr. Nemirow's
1997 salary and his payout under the Annual Bonus Plan for 1997 were determined
on the same basis as the base salaries and payouts under the Annual Bonus Plan
for all executive officers, as described above. In addition, stock options for
50,000 shares of Common Stock were granted to Mr. Nemirow in 1997 and 10,524
units were assigned to him under the LTIP Plan formula. These options and units
have terms identical to, and were determined on the same basis as, those of all
executive officers as described above.
All members of the Human Resources and Compensation Committee concur in
this report.
H.D. Aycock (Chairman)
F.J. Aguilar
D.R. Melville
9
<PAGE>
TOTAL SHAREHOLDER RETURN
THE COMPANY VS. DOW JONES PAPER PRODUCTS GROUP* AND S&P 500
1992-1997
The table below compares the cumulative shareholder return of the Common
Stock for the last five years with the cumulative total return of the Dow Jones
Paper Products Group and the S&P 500, assuming a $100 investment on December
31, 1992.
(The Performance Graph appears here. The plot points are listed in the table
below.)
<TABLE>
<CAPTION>
12/92 12/93 12/94 12/95 12/96 12/97
------------ ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Bowater Incorporated .......... $ 100.00 $ 98.12 $ 116.32 $ 157.43 $ 170.43 $ 204.91
S&P 500 ....................... $ 100.00 $ 110.03 $ 111.53 $ 153.30 $ 188.40 $ 251.71
Dow Jones Paper Products Group $ 100.00 $ 109.17 $ 120.91 $ 132.26 $ 139.69 $ 150.76
</TABLE>
* Companies include: Boise Cascade Corporation, Champion International
Corporation, Consolidated Papers, Inc., International Paper Company, The
Mead Corporation, Union Camp Corporation, and Westvaco Corporation.
EXECUTIVE COMPENSATION
The following table sets forth information concerning all compensation
paid by the Company and its subsidiaries during the last three fiscal years
ended December 31, 1997, to the Chief Executive Officer and to each of the four
executive officers other than the Chief Executive Officer with the highest
salaries and bonuses during fiscal year 1997 (such officers are referred to
collectively as the "Named Executive Officers") for services rendered in all
capacities to the Company and its subsidiaries during these fiscal years.
10
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------
Name and Other Annual
Principal Position Compensation
during 1997 Year Salary ($) Bonus ($) ($)(1)
- ------------------------------ ------------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Arnold M. Nemirow 1997 650,000 466,869 --
Chairman, President and 1996 600,000 267,120 --
Chief Executive Officer 1995 491,667 573,000 --
Arthur D. Fuller
Executive Vice President 1997 333,333 182,248 --
and President -- 1996 290,000 110,200 1,301(5)
Newsprint & Directory 1995 242,629 198,000 --
Division
E. Patrick Duffy
Senior Vice President 1997 310,000 157,220 --
and President -- Coated 1996 290,000 92,104 --
Paper & Pulp Division 1995(7) 187,500 144,750 --
Anthony H. Barash
Senior Vice President -- 1997 280,000 134,075 --
Corporate Affairs and 1996(9) 195,000 57,876 --
General Counsel
David G. Maffucci 1997 275,000 131,681 --
Senior Vice President and 1996 234,900 71,766 --
Chief Financial Officer 1995 157,647 94,721 --
<CAPTION>
Long-Term
Compensation
---------------------------
Awards Payouts
-------------- ------------
Securities
Name and Underlying LTIP All Other
Principal Position Options/SARs Payouts Compensation
during 1997 (#) ($)(2) ($)
- ------------------------------ -------------- ------------ -----------------
<S> <C> <C> <C>
Arnold M. Nemirow 50,000 0 31,250(3)
Chairman, President and 50,000 3,050,501 25,320
Chief Executive Officer 250,000 0 1,860
Arthur D. Fuller
Executive Vice President 20,000 0 16,060(4)
and President -- 27,500 845,807 12,649
Newsprint & Directory 20,000 0 0
Division
E. Patrick Duffy
Senior Vice President 20,000 0 13,987(6)
and President -- Coated 27,500 740,081 9,222
Paper & Pulp Division 20,000 0 0
Anthony H. Barash
Senior Vice President -- 20,000 0 12,664(8)
Corporate Affairs and 30,000 0 8,268
General Counsel
David G. Maffucci 20,000 0 12,344(10)
Senior Vice President and 27,500 852,544 10,909
Chief Financial Officer 8,000 0 6,399
</TABLE>
- ---------
(1) Perquisites and other personal benefits did not exceed the lesser of
$50,000 or 10% of the total salary and bonus of any Named Executive
Officer for the years shown.
(2) The totals shown in this column for 1996 include amounts paid in 1997
pursuant to the Company's Long-Term Cash Incentive Plan for the
performance period of January 1, 1994, to December 31, 1996.
(3) Amounts included under "All Other Compensation" for Mr. Nemirow for 1997
consist of Company contributions of $6,095 under the Savings Plan, $22,905
under the Compensatory Benefits Plan and $2,250, which is the amount that
a third party would charge to provide Mr. Nemirow with life insurance
coverage in excess of that otherwise available under the Company's
standard group insurance plan. The Company is self-insured with respect to
its group life insurance for any excess amounts.
(4) Amounts included under "All Other Compensation" for Mr. Fuller for 1997
consist of Company contributions of $4,400 under the Savings Plan and
$11,660 under the Compensatory Benefits Plan.
(5) This amount represents interest paid with respect to a deferred portion of
Mr. Fuller's payout under the 1994-1996 LTIP Plan.
(6) Amounts included under "All Other Compensation" for Mr. Duffy for 1997
consist of Company contributions of $4,400 under the Savings Plan and
$9,587 under the Compensatory Benefits Plan.
(7) Mr. Duffy joined the Company in April 1995.
(8) Amounts included under "All Other Compensation" for Mr. Barash for 1997
consist of Company contributions of $7,354 under the Savings Plan and
$5,310 under the Compensatory Benefits Plan.
(9) Mr. Barash joined the Company in April 1996.
(10) Amounts included under "All Other Compensation" for Mr. Maffucci for 1997
consist of Company contributions of $7,288 under the Savings Plan and
$5,056 under the Compensatory Benefits Plan.
11
<PAGE>
Stock Options
The following table sets forth information regarding options granted with
respect to Common Stock made by the Company to the Named Executive Officers
during 1997.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
- --------------------------------------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Grant Date
Options Employees Exercise Expiration Present Value
Name Granted (#)(1) in 1997 Price ($/Sh) Date(2) ($)(3)
- --------------------- ---------------- ------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Arnold M. Nemirow 50,000(4) 9.53% 41.8750 1/22/07 682,000
Arthur D. Fuller 20,000(4) 3.81% 41.8750 1/22/07 272,800
E. Patrick Duffy 20,000(4) 3.81% 41.8750 1/22/07 272,800
Anthony H. Barash 20,000(4) 3.81% 41.8750 1/22/07 272,800
David G. Maffucci 20,000(4) 3.81% 41.8750 1/22/07 272,800
</TABLE>
- ---------
(1) These options were granted subject to shareholder approval of the 1997
Stock Option Plan, which was obtained at the Company's 1997 Annual Meeting
of Shareholders.
(2) The plan pursuant to which the options were granted and the option
agreement set forth certain earlier expiration dates.
(3) The present value of these options was calculated using the Black-Scholes
option pricing model and assuming volatility of 29.5%, a risk free return
rate of 6.4%, dividends at the rate of $.80 per share and an average
expected option life of 5.5 years. The ultimate values of the options will
depend on the future market price of the Common Stock. The actual value,
if any, an optionee will realize upon exercise of an option will depend on
the excess of the market value of the Common Stock over the exercise price
on the date the option is exercised.
(4) Options with respect to 50% of the shares of Common Stock covered thereby
became exercisable on January 22, 1998, and options with respect to the
remaining 50% of the shares of Common Stock will become exercisable on
January 22, 1999, if certain conditions are met. In addition, the stock
option plan pursuant to which the options were granted provides that the
exercisability date is accelerated and the Company is required to
repurchase outstanding options at a defined acceleration price upon the
occurrence of a change in control event as defined in the stock option
plan.
Option Exercises
The following table sets forth information concerning options exercised by
Named Executive Officers and the value at the end of 1997 of SARs and
unexercised options held by the Named Executive Officers to purchase the
Company's Common Stock.
Aggregated Option Exercises in 1997
and 1997 Year-End Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares 12/31/1997 (#) 12/31/1997 ($)(1)
Acquired Value --------------------------- --------------------------
Name on Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---------------------- ----------------- --------------- --------------------------- --------------------------
<S> <C> <C> <C> <C>
Arnold M. Nemirow 20,000 302,188.00 255,000 / 75,000 4,180,630.75 / 364,843.75
Arthur D. Fuller 10,000 152,625.00 27,500 / 30,000 342,234.375 / 145,937.50
E. Patrick Duffy 0 0.00 37,500 / 30,000 411,921.875 / 145,937.50
Anthony H. Barash 0 0.00 15,000 / 35,000 109,218.75 / 159,843.75
David G. Maffucci 2,900 40,515.70 25,000 / 30,000 360,393.75 / 145,937.50
</TABLE>
- ---------
(1) Based on the difference between the option exercise price and the average
of the highest and lowest prices per share of the Company's Common Stock
on the New York Stock Exchange on December 31, 1997, of $44.40625.
12
<PAGE>
Long-Term Incentive Plan
The number of units shown in the target column of the table below
represents the target value of the performance units awarded pursuant to the
Company's 1997-1999 Long-Term Incentive Plan. At the beginning of the LTIP Plan
cycle, each participant received the number of units assigned to his or her
position rank. Each year during the LTIP Plan cycle, the Committee will
determine a unit value for each participant by multiplying each participant's
units by the average daily closing price of the Common Stock for each such
year. At the end of the LTIP Plan cycle, the Committee will determine the final
award for each participant by multiplying the sum of each participant's unit
values for all fiscal years in the LTIP Plan cycle by a percentage determined
based on the Company's financial performance with respect to average RONA
during the plan cycle relative to designated peer companies. No payout will be
made under the LTIP Plan unless the Company's average RONA exceeds the peer
group average. If the Company's average RONA exceeds the peer group average
RONA, payouts will be made based on the Company average RONA as a multiple of
the peer group average RONA with a maximum payout of 250% of the accumulated
unit values if the Company's average is at least 1.5 times the peer group
average. At the end of the LTIP Plan cycle, payouts, if any, will be made in
Common Stock of the Company having a value equal to one-half of the
participant's final award and the remainder of the final award and will be paid
in cash. This proportion may change for participants other than the Named
Executive Officers for the year in which the payout occurred in the discretion
of the Board, and will change if the payment of Common Stock would exceed
991,878 shares in the aggregate.
The following table sets forth information concerning units allocated in
1997 under the Company's LTIP Plan.
Long-Term Incentive Plan
Awards in Last Fiscal Year
<TABLE>
<CAPTION>
Estimated Future Payouts(1)
-------------------------------------------------------
Threshold Target Maximum
------------------ ------------------ -----------------
Performance Period
Number of Until Maturation or Estimated Dollar Estimated Dollar Estimated Dollar
Name Units (#) Payout Value ($)(2) Value ($)(2) Value ($)(2)
- ----------------------- ----------- ---------------------- ------------------ ------------------ -----------------
<S> <C> <C> <C> <C> <C>
Arnold M. Nemirow 10,524 01/01/97 to 12/31/99 0(3) 1,450,449 3,626,123
Arthur D. Fuller(4) 5,189 01/01/97 to 12/31/99 0(3) 669,774 1,674,435
E. Patrick Duffy 3,488 01/01/97 to 12/31/99 0(3) 480,727 1,201,817
Anthony H. Barash 3,488 01/01/97 to 12/31/99 0(3) 480,727 1,201,817
David G. Maffucci 3,488 01/01/97 to 12/31/99 0(3) 480,727 1,201,817
</TABLE>
- ---------
(1) Payouts, if any, to the Named Executive Officers under the LTIP Plan will
be made in early 2000, one-half in cash and one-half in shares of the
Company's Common Stock.
(2) The Estimated Dollar values of payouts under the plan are based on the
average closing price of a share of the Company's Common Stock during 1997
($45.941) and are solely for illustrative purposes. The actual value of
the payout may be higher or lower than the amount shown as a result of the
average closing price of a share of the Company's Common Stock for each of
1998 and 1999. See the description of the plan above. For performance
between threshold and maximum, the payout will be prorated on a
straight-line basis.
(3) As discussed above, no payout will be made under the LTIP Plan unless the
Company's average RONA exceeds the peer group's average RONA.
(4) Initially, Mr. Fuller was assigned 3,488 units under the LTIP Plan. On
August 1, 1997, he was promoted to a higher position rank and was assigned
the number of units shown in the table. His unit value for 1997 was
adjusted to give proportionate effect to the number of days he served in
each position rank.
13
<PAGE>
Stock Retention Program
In 1996 the Company established stock ownership guidelines for executive
officers as a way to better align the financial interests of its officers with
those of its shareholders. These officers are expected to make continuing
progress towards compliance with these guidelines and to comply fully with the
guidelines by the later of January 1999 or three years after the officer's
employment with the Company. Officers are required, as a condition of
eligibility for future bonus payments, to own Common Stock with a value equal
to a specified multiple of their base salaries. Under these guidelines, the
requisite multiples are three for the chief executive officer, two for
executive and senior vice presidents and one-half to one for corporate vice
presidents, divisional vice presidents and others, depending on their
respective position ranks. Common Stock owned outright or through qualified
Company benefit plans and vested stock options count toward meeting this goal.
In order to emphasize the importance of outright ownership of Company
stock, the stock ownership guidelines have been modified to require
satisfaction of at least one-half of the ownership requirement through stock
held outright or through Company benefit plans. At the same time, the Company's
directors will be expected to own Common Stock as determined under the
guidelines with a value equal to three times their annual retainers. Compliance
with the new guidelines will be expected by the later of February 1, 2002, or
three years after employment or election.
Employment and Change in Control Agreements
Each Named Executive Officer (collectively, the "Executives") is party to
an employment agreement (collectively, the "Agreements"). Each Agreement
continues until death, disability, retirement or written notice of termination
by either the Company or the Executive. In the event of a Change in Control, as
defined in the CIC Agreements described below, the term of the Agreements
continues for not less than three years thereafter unless the Executive
terminates his employment for other than Good Reason (also as defined in the
CIC Agreements). The Agreements provide for payment to each Executive of an
annual base salary and for the Executive's participation in the Company's
various bonus and benefit plans as in effect from time to time while the
Agreements are in effect. In the event the Executive's employment is
involuntarily terminated for reasons other than death, disability, retirement
or Cause (defined in the Agreements as gross negligence or willful misconduct
by the Executive either in the course of his employment or that has a material
adverse effect on the Company or on the Executive's ability to perform his
duties adequately and effectively), the Agreements provide for payments equal
to two years of annual base salaries and bonuses, plus a pro rata share of
their bonuses for the year of termination.
With respect to employee benefit plans, Mr. Nemirow's Agreement provides
that, for purposes of determining the benefits due under the Company's benefits
plans, he shall receive credit for continuous employment at an accelerated rate
and entitles him to receive certain minimum annual benefits upon his retirement
from the Company if certain conditions are met; Mr. Duffy's Agreement provides
that he is entitled to immediate vesting under the Company's Supplemental
Benefits Plan; and Mr. Barash's Agreement provides for a grant to him of 30,000
equity participation rights and provides him with an additional five years of
credited service under the Company's retirement plans upon his early or normal
retirement.
Each Executive also is a party to a change in control agreement with the
Company (collectively, the "CIC Agreements"). The CIC Agreements have a
three-year term that is automatically extended at the end of each year for an
additional one year. The CIC Agreements generally provide that, in the event of
a Change in Control (as defined below), the CIC Agreements shall continue in
effect until they expire in accordance with the above-described extensions, but
in any event for a period of not less than three years from the date of the
Change in Control. Following a Change in Control of the Company, if an
Executive's employment is terminated by the Company (except for a termination
due to death, disability, or retirement, or for Cause (defined as gross
negligence that has not been cured, willful misconduct that has not been cured,
or conviction of a felony, which action has a demonstrable and material adverse
effect upon the Company)) or if the Executive elects to terminate his
employment for Good Reason as defined below, the Executive shall receive his
full base salary and all benefits and awards under the Company's benefit plans
and policies (in which he was a participant prior to the Change in Control) to
which he is entitled through his date of termination and may elect to receive,
in lieu of any severance payments provided in his employment agreement
described above, an amount equal to: (i) three times the Executive's annual
base salary in effect when the Executive is terminated or, if higher, the
Executive's annual base salary in effect immediately prior to the Change in
Control; plus (ii) three times the largest annual bonus awarded to the
Executive during the five fiscal years immediately preceding the year in which
the Change in Control occurred or, if higher, the annual bonus the Executive
would have been awarded under the bonus plan had he continued in the Company's
employ on the same basis as immediately before the Change in Control; plus
(iii) three times the largest annual contribution made by the Company to the
Savings Plan on the Executive's behalf during the five fiscal years immediately
preceding the Change in Control or, if higher, the contribution the Company
would have made to the Savings Plan on the Executive's behalf for the fiscal
year in which the Change in Control occurred had he continued in the Company's
employ at the same base salary and with the same
14
<PAGE>
contribution level as immediately prior to the Change in Control; plus (iv)
thirty percent of the Executive's annual base salary in effect when the
Executive is terminated, or, if higher, the Executive's annual base salary in
effect immediately prior to the Change in Control (as compensation for medical,
life insurance and other benefits lost as a result of the termination of
employment). In addition, each of the CIC Agreements provides that the
Executive will be entitled to a pro rata portion of the annual bonus calculated
in the manner specified in (ii) above for the year in which the termination
occurred. The CIC Agreements provide that the foregoing payments shall be
reduced by 1/36th for each month by which the date that is three years from the
effective date of the Executive's termination extends beyond the Executive's
normal retirement date.
The CIC Agreements define a Change in Control as occurring if: (i) any
person becomes a beneficial owner of securities of the Company representing 20%
or more of the Company's outstanding voting securities (unless that person has
filed a Schedule 13G indicating such person's intent to hold such securities
for investment); (ii) less than two-thirds of the total membership of the Board
shall be continuing directors (as defined in the CIC Agreements); or (iii) the
shareholders of the Company approve a merger, consolidation, complete
liquidation or sale of all or substantially all of the Company's assets. The
CIC Agreements define Good Reason as: (i) an adverse change in the Executive's
status, duties or responsibilities as in effect immediately prior to the Change
in Control after the Executive has given notice of the adverse change and the
Company has failed to cure; or (ii) failure of the Company to pay or provide
the Executive the salary or benefits to which he is entitled; or (iii) the
reduction of the Executive's salary as in effect on the date of the Change in
Control; or (iv) the taking of any action by the Company that would
substantially diminish the value of the Executive's awards or benefits under
the Company's benefit plans in which the Executive was participating at the
time of the Change in Control; or (v) the Company's failure to obtain from any
successor assent to the CIC Agreement; or (vi) the relocation of the
Executive's principal office to a location more than 35 miles from its location
immediately prior to the Change in Control; or (vii) a substantial increase in
the Executive's travel obligations subsequent to the Change in Control.
The CIC Agreements also generally provide a terminated Executive with
outplacement assistance, a grossed up reimbursement of certain excise taxes
that may be levied on "excess parachute payments" and reimbursement for all
costs incurred in connection with enforcing the terms of the CIC Agreement. In
addition, the CIC Agreements generally provide that the Company will pay or
provide the Executives, their surviving spouses or children the amounts and
benefits that they would have received, assuming certain conditions, under the
Company's Retirement Plan and Supplemental Benefit Plan in effect immediately
prior to the Change in Control if the Executive had continued to be employed
until the third anniversary of the effective date of the termination of the
Executive's employment or until the Executive's normal retirement date,
whichever is earlier.
Retirement Benefits
The following table shows the total estimated annual pension benefits
payable for the Named Executive Officers under the Company's qualified,
nonqualified benefits restoration and nonqualified supplemental retirement
plans upon retirement at age 65, calculated on a straight life annuity basis.
Benefits to Named Executive Officers are not reduced by any offset for Social
Security benefits.
Combined Retirement Plans Table of Estimated Benefits
<TABLE>
<CAPTION>
Final Average 5 Years 10 Years 15 Years 20 Years 25 Years 30 or More
Earnings* Service Service Service Service Service Years Service
- --------------- ----------- ---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 25,000 $ 50,000 $ 75,000 $100,000 $110,000 $120,000
250,000 31,250 62,500 93,750 125,000 137,500 150,000
300,000 37,500 75,000 112,500 150,000 165,000 180,000
350,000 43,750 87,500 131,250 175,000 192,500 210,000
400,000 50,000 100,000 150,000 200,000 220,000 240,000
800,000 100,000 200,000 300,000 400,000 440,000 480,000
900,000 112,500 225,000 337,500 450,000 495,000 540,000
</TABLE>
- ---------
* Average annual earnings for best 36 consecutive months in the 60 months
preceding retirement.
Retirement benefits are payable under one or more of the following plans:
a qualified plan covering all salaried employees, which provides pension
benefits based on earnings; a nonqualified benefits restoration plan, which
provides a make-up of qualified plan benefits limited by the imposition of
statutory Code limitations; and a nonqualified supplemental plan covering
designated senior executives including the Named Executive Officers (the
"Supplemental Plan"), which provides benefits in addition to those under the
two preceding plans. The definition of compensation under the Supplemental Plan
includes
15
<PAGE>
those categories of compensation under the salary and bonus headings in the
Summary Compensation Table and does not include compensation in any of the
other headings of the Summary Compensation Table. The Supplemental Plan
provides for vesting of accrued benefits in the event of a change in control
followed by termination of employment of a covered employee not for cause. The
two other plans described above provide that in the event of a change in
control, each participant in such plans will become 100% vested in his accrued
benefits. This table assumes retirement in 1997. At such time, the individuals
listed in the Summary Compensation Table above had the following final average
earnings (as defined above) and credited number of years of service (determined
by actual years of service): Mr. Nemirow, $879,536, 3.3 years; Mr. Fuller,
$408,970, 2.9 years; Mr. Duffy, $372,492, 2.8 years; Mr. Barash, $304,501, 1.8
years; and Mr. Maffucci, $235,150, 20.5 years.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company during and with respect to its most recent fiscal
year, and written representations that no Form 5 was required, the Company
believes that all of its executive officers, directors and persons who may have
been deemed to be greater than 10% shareholders during the year have made all
filings required to be made under Section 16(a) of the Securities Exchange Act
of 1934, as amended, except as follows: Mr. Michael Nocito, an officer of the
Company, filed on September 12, 1997, a Form 4 that was due on September 10,
1997, to report a transaction in the Company's Common Stock.
RELATED PARTY TRANSACTIONS
Pursuant to an investment management and participation agreement, both
dated July 1, 1997 (the "Agreement"), Wellington Trust Company, NA ("Wellington
Trust") provides investment management services to a collective investment fund
of which four qualified pension plans sponsored by the Company and its
subsidiaries are participants. Pursuant to the terms of the Agreement,
Wellington Trust is paid by the trustee of the Company's benefit plans a fee
for each calendar quarter based on the average of the asset values of the
accounts managed by Wellington Trust. The Agreement generally continues in
effect until terminated by the Company or Wellington Trust on fifteen days'
notice. The Company paid to Wellington Trust approximately $90,800 for
providing services to the pension plans during 1997. The Company expects to pay
approximately $262,500 for these services provided during 1998. As of December
31, 1997, Wellington Management Company, LLP, a registered investment adviser
and the parent of Wellington Trust, reported on a Schedule 13G that it had
shared dispositive power with respect to 2,202,080 shares of Common Stock and
shared voting power with respect to 14,200 shares of Common Stock. The Schedule
13G reported that the clients of Wellington Management Company, LLP have the
right to receive, or the power to direct the receipt of, dividends from, or the
proceeds of the sale of, such securities. The Company believes that its
arrangements with Wellington Trust are on terms as favorable as could be
obtained from an unrelated party.
APPOINTMENT OF INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee of the Board of Directors, the
Board of Directors has appointed KPMG Peat Marwick LLP as independent auditors
for the Company to audit its consolidated financial statements for the year
ended December 31, 1998. KPMG Peat Marwick LLP currently serves the Company and
its subsidiaries as independent auditors and from time to time advises the
Company on tax and other matters. Representatives of KPMG Peat Marwick LLP will
be present at the Annual Meeting with the opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions
from shareholders.
PROPOSALS BY SHAREHOLDERS
A shareholder who wishes to present a proposal for inclusion in the proxy
materials relating to the Annual Meeting of Shareholders to be held in 1999
should submit his or her proposal to the Secretary of the Company, 55 East
Camperdown Way, Post Office Box 1028, Greenville, South Carolina 29602. Any
proposal must be received on or before the earlier of December 1, 1998, or the
date specified in the Company's Bylaws as described below, and the proponent
must comply with the proxy rules under the Securities Exchange Act of 1934, as
amended, as well as the Bylaw requirements described below.
The Bylaws of the Company require timely advance written notice of
shareholder nominations of director candidates and of any other proposals to be
presented at an annual meeting of shareholders. In the case of director
nominations by shareholders, the Bylaws require that 120 days advance written
notice be delivered to the Company's Secretary (at the address indicated
above). The notice must be given, either by personal delivery or by United
States mail, postage prepaid,
16
<PAGE>
to the Secretary of the Company no later than: (i) with respect to an election
to be held at an annual meeting of shareholders, 120 days prior to the
anniversary date of the immediately preceding annual meeting; and (ii) with
respect to an election to be held at a special meeting of shareholders for the
election of directors, the close of business on the seventh day following the
date on which notice of such meeting shall first be given to shareholders. In
the case of other proposals by shareholders at an annual meeting, the Bylaws
require that advance written notice be delivered to the Company's Secretary (at
the address indicated above). The notice must be received by the Secretary of
the Company by the earlier of: (i) 120 days prior to the anniversary date of
the immediately preceding annual meeting; or (ii) 10 days after notice or
public disclosure of the date of the annual meeting was given or made to
shareholders. The Bylaws contain specific requirements with respect to the
contents of each of these notices. A copy of the Bylaws is available upon
request to the Secretary of the Company at the address indicated above.
EXPENSES OF SOLICITATION
The Company will bear the cost of soliciting proxies. In addition to
soliciting proxies by mail, it is expected that some of the Company's officers
and regular employees may solicit, without additional compensation, proxies by
telephone, telegraph or oral communication. The Company has requested that
brokerage houses and other custodians, nominees and fiduciaries forward
soliciting materials to their principals, the beneficial owners of Common Stock
of the Company, and will reimburse them for their reasonable out-of-pocket
expenses in so doing. The firm of Morrow & Co., Inc. has been retained to
assist in the soliciting of proxies for a fee of $5,500, plus expenses.
FINANCIAL INFORMATION
The Company's 1997 Annual Report is enclosed herewith. The Company will
provide without charge to any shareholder of record as of March 23, 1998, who
so requests in writing, a copy of the 1997 Annual Report or the Company's 1997
Annual Report on Form 10-K (without exhibits) filed with the Securities and
Exchange Commission. Any such request should be directed to the Company, 55
East Camperdown Way, Post Office Box 1028, Greenville, South Carolina 29602,
Attention: Investor Relations Department.
By order of the Board of Directors,
/s/ Wendy C. Shiba
WENDY C. SHIBA
Vice President, Secretary and
Assistant General Counsel
March 23, 1998
17
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
<PAGE>
NOTICE OF
ANNUAL MEETING
AND
PROXY STATEMENT
(BOWATER LOGO)
DATE AND TIME
Wednesday, May 20, 1998
at 11:00 a.m.
PLACE
The Gunter Theatre
300 South Main Street
Greenville, South Carolina
-----------------------------------
Please sign your proxy and return it in the
enclosed postage-paid envelope so that you may
be represented at the meeting if you do not plan
to attend personally.
----------------------------------------
<PAGE>
********************************************************************************
APPENDIX
P R O X Y
BOWATER INCORPORATED
Proxy Solicited on Behalf of the Board of Directors
of the Company for Annual Meeting May 20, 1998
The undersigned appoints David G. Maffucci and Wendy C. Shiba, or any one
of them, each with full power of substitution, as proxies for the undersigned,
to vote as designated below, all of the shares of common stock of Bowater
Incorporated held of record by the undersigned on March 23, 1998, at the annual
meeting of shareholders to be held May 20, 1998, and any adjournment thereof and
in their discretion, to vote upon any other matters that may properly come
before the annual meeting and any postponement or adjournment thereof.
Election of Directors, Nominees: Donald R. Melville, H. David Aycock, Arnold M.
Nemirow
COMMENTS (Change of Address) [ ]
_____________________________________________
_____________________________________________
_____________________________________________
_____________________________________________
(If you have written in the above space,
please mark the corresponding box on the
reverse side of this card.)
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. The Proxy Committee cannot vote
your shares unless you sign and return this card.
-----------
SEE REVERSE
SIDE
-----------
<PAGE>
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, the proxy will
be voted FOR Proposal 1, and proxyholders will vote, in their discretion, upon
such other business as may properly come before the annual meeting and any
postponement or adjournment thereof.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS FOR ALL NOMINEES [ ] WITHHOLD AUTHORITY [ ] EXCEPTIONS* [ ] (as indicated
LISTED BELOW (to vote for all nominees listed below) to the contrary below)
</TABLE>
Donald R. Melville, H. David Aycock, Arnold M. Nemirow
(INSTRUCTIONS: To withhold authority to vote for any individual nominee
mark the "Exceptions" box and write that nominee's name in the space
provided below.)
*EXCEPTIONS _______________________________________________________________
2. At their discretion upon such other matters as may properly If your address
come before the annual meeting and any postponement or has changed
adjournment thereof. mark here [ ]
Please mark any change of address on reverse side.
Dated: _____________________________________, 1998
(Please be sure to insert date)
Signed: __________________________________________
(Signature should conform exactly to name shown on
this proxy. Executors, administrators, guardians,
trustees, attorneys and officers signing for
corporations should give full title.)
Vote MUST be indicated
(x) in Black or Blue Ink. [ ]
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
