<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8712
BOWATER INCORPORATED
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(Exact name of registrant as specified in its charter)
Delaware 62-0721803
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 East Camperdown Way, P.O. Box 1028, Greenville, SC 29602
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(864) 271-7733
----------------------------------------------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 3, 1998.
Class Outstanding at August 3, 1998
----- -----------------------------
Common Stock, $1.00 Par Value 52,864,086 Shares
<PAGE> 2
BOWATER INCORPORATED
I N D E X
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I FINANCIAL INFORMATION
1. Financial Statements:
Consolidated Balance Sheet at June 30, 1998,
and December 31, 1997 3
Consolidated Statement of Operations for the Three and Six
Months Ended June 30, 1998, and
June 30, 1997 4
Consolidated Statement of Capital Accounts
for the Six Months Ended June 30, 1998 5
Consolidated Statement of Cash Flows for the
Six Months Ended June 30, 1998, and
June 30, 1997 6
Notes to Consolidated Financial Statements 7-8
2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-14
PART II OTHER INFORMATION
6. Exhibits and Reports on Form 8-K 15-16
SIGNATURES 17
</TABLE>
2
<PAGE> 3
PART I
BOWATER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited, in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 420,484 $ 228,688
Marketable securities 25,351 176,834
Accounts receivable, net 200,955 190,594
Inventories 104,851 105,514
Other current assets 16,612 16,745
---------------- -----------------
Total current assets 768,253 718,375
---------------- -----------------
Timber and timberlands 382,073 394,039
Fixed assets, net 1,541,681 1,554,529
Other assets 80,210 78,855
---------------- -----------------
$ 2,772,217 $ 2,745,798
================ =================
LIABILITIES AND CAPITAL
Current liabilities:
Current installments of long-term debt $ 1,796 $ 1,800
Accounts payable and accrued liabilities 175,141 168,327
Income taxes payable 7,726 15,861
Dividends payable 8,668 8,663
---------------- -----------------
Total current liabilities 193,331 194,651
---------------- -----------------
Long-term debt, net of current installments 756,205 757,100
Other long-term liabilities 169,151 169,510
Deferred income taxes 348,712 345,166
Minority interests in subsidiaries (Note 2) 115,936 125,206
Commitments and contingencies (Note 3) - -
Shareholders' equity:
Series C cumulative preferred stock 25,465 25,465
Common stock 45,168 44,928
Additional paid-in capital 571,947 563,096
Retained earnings 743,338 716,961
Accumulated other comprehensive income/(loss) (17,179) (15,449)
Loan to ESOT (3,608) (4,536)
Treasury stock, at cost (176,249) (176,300)
---------------- -----------------
Total shareholders' equity 1,188,882 1,154,165
---------------- -----------------
$ 2,772,217 $ 2,745,798
================ =================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
BOWATER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited, in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------------ ------------------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Sales $ 423,908 $ 385,332 $ 835,598 $ 765,037
Distribution Costs 28,145 28,990 56,661 60,188
----------------- ---------------- ----------------- ----------------
Net Sales 395,763 356,342 778,937 704,849
Cost of sales 280,379 272,259 554,773 552,773
Depreciation, amortization and cost of timber harvested 43,133 41,069 88,285 83,718
----------------- ---------------- ----------------- ----------------
Gross profit 72,251 43,014 135,879 68,358
Selling and administrative expense 13,793 19,824 31,087 35,045
----------------- ---------------- ----------------- ----------------
Operating income 58,458 23,190 104,792 33,313
Other expense / (income):
Interest income (6,196) (4,853) (12,730) (10,146)
Interest expense, net of capitalized interest 16,667 16,761 33,251 33,579
Gain on sale of timberlands (Note 4) (48) (12) (21,067) (23)
Other, net (Note 5) 16,664 (770) 21,088 (495)
----------------- ---------------- ----------------- ----------------
27,087 11,126 20,542 22,915
----------------- ---------------- ----------------- ----------------
Income before income taxes and minority interests 31,371 12,064 84,250 10,398
Provision for income taxes (Note 6) 11,922 4,465 32,016 3,848
Minority interests in net income/(loss) of subsidiaries 560 503 8,558 (232)
----------------- ---------------- ----------------- ----------------
Net income 18,889 7,096 43,676 6,782
Other comprehensive income/(loss), net of tax: (Note 7)
Foreign currency translation adjustments (1,740) 198 (1,730) (392)
----------------- ---------------- ----------------- ----------------
Comprehensive income $ 17,149 $ 7,294 $ 41,946 $ 6,390
================= ================ ================= ================
Basic earnings per common share - (Note 8): $ 0.45 $ 0.16 $ 1.05 $ 0.12
================= ================ ================= ================
Average common shares outstanding 40,551 40,677 40,470 40,497
================= ================ ================= ================
Diluted earnings per common share (Note 8): $ 0.44 $ 0.16 $ 1.03 $ 0.12
================= ================ ================= ================
Average common and common equivalent shares outstanding 41,268 40,707 41,156 40,551
================= ================ ================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
BOWATER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CAPITAL ACCOUNTS
Six Months Ended June 30, 1998
(Unaudited, in thousands except per share amounts)
<TABLE>
<CAPTION>
Series C Accumulated
Cumulative Additional Other
Preferred Common Paid in Retained Comprehensive Loan to Treasury
Stock Stock Capital Earnings Income/(Loss) ESOT Stock
----- ----- ------- -------- ------------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $25,465 $44,928 $563,096 $716,961 $(15,449) $(4,536) $(176,300)
Net income - - - 43,676 - - -
Dividends on common stock ($.40 per share) - - - (16,189) - - -
Dividends on preferred stock:
Series C ($4.20 per share) - - - (1,110) - - -
Common stock issued for exercise of stock
options - 240 6,271 - - - -
Tax benefit on exercise of stock options - - 2,568 - - - -
Reduction in loan to ESOT - - - - - 928 -
Treasury stock used for employee benefit
and dividend reinvestment plans - - 12 - - - 51
Foreign currency translation - - - - (1,730) - -
------------------------------------------------------------------------------------
Balance at June 30, 1998 $25,465 $45,168 $571,947 $743,338 $(17,179) $(3,608) $(176,249)
======== ======== ========= ========= ========= ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
BOWATER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------
June 30, June 30,
1998 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 43,676 $ 6,782
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and cost of timber harvested 88,285 83,718
Deferred income taxes 3,168 (319)
Minority interests 8,558 (232)
Gain from sale of timberlands (Note 4) (21,067) (23)
Writedown of Canadian exchange options (Note 5) 22,326 -
Change in working capital:
Accounts receivable, net (10,361) 8,451
Inventories 663 20,481
Accounts payable and accrued liabilities (Note 9) 4,497 (28,426)
Income taxes payable (5,876) (13,717)
Other, net (1,634) (2,482)
------------- -------------
Net cash from operating activities 132,235 74,233
------------- -------------
Cash flows from investing activities:
Cash invested in fixed assets, timber and timberlands (73,226) (45,829)
Disposition of fixed assets, timber and timberlands (Note 4) 31,681 2,342
Cash invested in option contracts (Note 5) (22,738) -
Cash from maturities of marketable securities, net 151,483 87,115
------------- -------------
Net cash from investing activities 87,200 43,628
------------- -------------
Cash flows from financing activities:
Cash dividends, including minority interests (Note 2) (34,141) (38,805)
Purchase of common stock (Note 10) - (57,244)
Payments of long-term debt (936) (884)
Stock options exercised 6,511 13,032
Redemption of LIBOR preferred stock (Note 11) - (25,000)
Other 927 884
------------- -------------
Net cash used for financing activities (27,639) (108,017)
------------- -------------
Net increase in cash and cash equivalents 191,796 9,844
Cash and cash equivalents at beginning of year 228,688 85,259
------------- -------------
Cash and cash equivalents at end of period $ 420,484 $ 95,103
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest, net of capitalized interest $ (34,100) $ (33,087)
Income taxes $ (34,724) $ (17,883)
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
BOWATER INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. The accompanying consolidated financial statements include the accounts
of Bowater Incorporated and Subsidiaries (the Company) as of June 30,
1998. The acquisition of Avenor Inc. and the Daebul newsprint mill in
South Korea, both which closed during the month of July, are not
reflected in these accounts. The consolidated balance sheets, and
statements of operations, capital accounts and cash flows are
unaudited. However, in the opinion of Company management, all
adjustments (consisting of normal recurring adjustments) necessary for
fair presentation of the interim financial statements have been made.
The results of the interim period ended June 30, 1998, are not
necessarily indicative of the results to be expected for the full year.
2. During the first six months of 1998, the Board of Directors of Calhoun
Newsprint Company (CNC) declared dividends totaling $34.4 million. As a
result, $16.9 million was paid to the minority shareholder. A primary
source of cash for these dividends came as a result of a sale of
approximately 26,000 acres of timberlands (See Note 4). In the first
six months of 1997, $19.6 million was paid to the minority shareholder.
3. 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
periodically reviews the status of these proceedings with both inside
and outside counsel. 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.
4. During the first quarter of 1998, the Company sold approximately 26,000
acres of non-strategic timberlands resulting in a pre-tax gain of $21
million, or $.16 per diluted share, after tax and minority interest.
5. During the first quarter of 1998, the Company purchased options on the
Canadian dollar at a cost of $22.7 million to hedge the acquisition of
Avenor Inc. During the first and second quarters, the Company adjusted
the cost of these options to fair market value resulting in pre-tax
charges to the first and second quarters of 1998 of $4.3 million and
$18 million or $.07 and $.28 per diluted share, respectively. In
addition, during the second quarter of 1998, the Company closed out
Korean won foreign exchange contracts resulting in a pre-tax gain of
$2.6 million or $.04 per diluted share.
From June 30, 1998 to July 10, 1998, the Company entered into a series
of Canadian foreign exchange contracts totaling US$800 million to
purchase the major portion of Canadian dollars that the Company
expected to deliver at the closing of the Avenor transaction on July
24, 1998.
6. The effective tax rates for the second quarter of 1998 and 1997 were 38
and 37 percent, respectively.
7. In the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income". This statement requires the disclosure of comprehensive income
items (which include net income and certain changes in shareholders'
equity) in the Consolidated Statement of Operations. These additional
disclosures do not have an impact on the Company's results of
operations or financial condition.
8. The calculations of basic and diluted earnings per share for the three
and six months ended June 30, 1998, included deductions of $.6 million
and $1.1 million, respectively, for Series C preferred stock dividends.
For the three and six months ended June 30, 1997, the calculations
included deductions of $.7 million and $1.8 million for the dividend
requirements of the Company's LIBOR and Series C preferred stock and
the amortization of the difference between the net proceeds from the
LIBOR preferred stock and its mandatory redemption value.
7
<PAGE> 8
BOWATER INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
9. In February 1997, the Company paid $25.4 million for an incentive
compensation plan established in 1994.
10. During the first quarter of 1997, the Company purchased 1.4 million
shares of common stock at a cost of $57.2 million, completing the stock
repurchase program authorized in February 1996. Since the beginning of
the program, 4 million shares were purchased at a total cost of $156
million. In November 1997, under a new stock repurchase program,
220,000 shares of common stock were purchased at a cost of $9.6
million.
11. On May 12, 1997, the Company redeemed for cash all of the remaining
outstanding shares of LIBOR Preferred Stock, Series A, at its par value
of $50 per share.
12. SUBSEQUENT EVENTS
On July 16, 1998, the Company completed the purchase of the Daebul
newsprint mill in South Korea for approximately $201 million and
pre-paid a majority of the current accounts payable for approximately
$22 million. The Company utilized its existing cash reserves to fund
the acquisition. The investment was recorded at cost.
On July 24, 1998, the Company completed its acquisition of Avenor Inc.,
a Canadian pulp and paper company. The total purchase price, including
assumed debt, totaled $2.37 billion (C$3.54 billion). The Company
utilized its existing cash reserves of $168.0 million and $625.0
million of its new $1 billion credit facility to fund the cash portion
of the transaction. The Company also issued 12.3 million common shares
and its indirect wholly owned subsidiary, Bowater Canada Inc., issued
3.8 million exchangeable shares to fund the equity portion of the
transaction. The Company accounted for the transaction using the
purchase method of accounting.
On August 4, 1998, the Company announced the signing of a definitive
agreement to sell its pulp and paper mill and related assets in Dryden,
Ontario, for C$790 million (approximately US$520 million). The
transaction is expected to be finalized in the fourth quarter of 1998,
subject to regulatory approvals. These assets were originally acquired
as part of the Avenor transaction.
8
<PAGE> 9
BOWATER INCORPORATED AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Summary
The Company reported 1998 second quarter earnings of $19 million, or $.44 per
diluted share. This compares to net earnings of $7 million, or $.16 per diluted
share in the second quarter of 1997 and net income of $25 million, or $.59 per
diluted share in the first quarter of 1998. Included in net income for the
second quarter of 1998 was a net after-tax charge of $10 million, or $.24 per
diluted share, from currency hedges associated with the Company's acquisitions
of Avenor Inc. and the Daebul mill in Korea. Second quarter 1998 net sales were
$396 million, compared to $356 million for the second quarter of 1997 and $383
million for the first quarter of 1998.
Product Line Information:
(Unaudited, $ in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------------- -----------------------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Net sales:
Newsprint $ 197,047 $ 178,153 $ 380,496 $ 345,264
Coated groundwood 104,507 83,193 201,805 156,508
Directory paper 42,002 38,529 85,816 88,145
Market pulp 44,711 47,123 87,386 91,308
Uncoated groundwood specialties 8,711 11,647 17,772 23,167
Lumber and other wood products 26,930 26,687 62,323 60,645
Distribution costs (28,145) (28,990) (56,661) (60,188)
------------------- -------------------- --------------------- --------------------
$ 395,763 $ 356,342 $ 778,937 $ 704,849
=================== ==================== ==================== ====================
Operating income $ 58,458 $ 23,190 $ 104,792 $ 33,313
=================== ==================== ===================== ====================
</TABLE>
9
<PAGE> 10
BOWATER INCORPORATED AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Three Months Ended June 30, 1998, versus
June 30, 1997
In the second quarter of 1998, the Company's operating income of $58 million
increased $35 million compared to the second quarter of 1997. Higher average
transaction prices for the Company's newsprint and coated paper products,
coupled with lower selling and administrative expenses, caused operating income
to increase.
Product Line Information
Although all Company operations are grouped in a single segment, market and
operating trends are discussed by major product. In general, the Company's
products are globally traded commodities. Pricing and the level of shipments of
these products are influenced by the balance between supply and demand as
affected by global economic conditions, changes in consumption and capacity, the
level of customer and producer inventories, and fluctuations in exchange rates.
The information provided in the following product line discussions
concerning market and industry conditions was obtained from the following
sources: the Newspaper Association of America; the Canadian Pulp and Paper
Association; the American Forest & Paper Association; the Media Industry
Newsletter; Pulp and Paper Week; and Random Lengths Yardstick publications. This
information is provided to enhance the reader's understanding of the Company's
financial results and the conditions under which these results were achieved.
Newsprint - The Company's newsprint average transaction price in the second
quarter of 1998 was 9 percent higher than the same period last year, and
remained essentially the same compared to the first quarter of 1998. The
increase in the average quarter price versus last year was a result of higher
U.S. consumption during the second half of 1997, as well as the first half of
1998, which allowed the Company to increase prices. The Company implemented a
domestic price increase of $35 per metric tonne in the fourth quarter of 1997,
and announced a domestic price increase of $40 per metric tonne effective April
1, 1998. Despite higher U.S. consumption, the implementation of the April price
increase has been slower than expected and will continue into the third quarter
of 1998. The weak Asian economy has caused North American producer exports to
decline and U.S. consumer imports to increase, resulting in an increase in the
supply of domestic newsprint. This additional supply of newsprint hindered the
Company's ability to implement the price increase completely in the second
quarter. Comparing the second quarter of 1998 to the second quarter of 1997,
consumption of newsprint by U.S. daily newspapers increased. Ad lineage for U.S.
daily newspapers also increased. At the end of the second quarter of 1998, U.S.
daily newspapers' newsprint inventory increased compared to the same time last
year, while North American mill inventories decreased.
Coated Groundwood - The Company's coated groundwood average transaction price in
the second quarter of 1998 was 24 percent higher than the second quarter of
1997. Favorable market conditions in 1997 allowed the Company to implement price
increases in the second half of 1997 and the first quarter of 1998. These price
increases totaled approximately $150 per ton. In the second quarter of 1998,
strong consumption and moderate coated groundwood inventory levels continued
from the previous year and the first quarter. U.S. coated groundwood shipments
were slightly lower in the second quarter of 1998 compared to the same period
last year, while magazine advertising pages increased. Comparing the same
periods, U.S. coated groundwood mill inventory levels decreased slightly.
Directory Paper - The Company's second quarter average transaction price for
directory paper was relatively unchanged from the second quarter of 1997 and
decreased slightly in comparison to the first quarter of 1998. Minor
fluctuations in the Company's average transaction price are normally caused by
the mix of different grades sold. In addition, conservation measures in 1997
reduced consumption in the directory paper market causing prices to decline. So
far in 1998, the market appears to have stabilized.
Market Pulp - The Company's market pulp average transaction price for the second
quarter of 1998 was relatively unchanged from the second quarter of 1997, while
it increased 5 percent compared to the first quarter of 1998. In the fourth
quarter of 1997, the devaluation of Asian currencies negatively affected pulp
consumption and pricing in the export market. This continued into the first and
second quarters of 1998. The impact on the Company's
10
<PAGE> 11
BOWATER INCORPORATED AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
average transaction price was minimal, however, due to the Company's ability to
divert tonnage to other markets. In the second quarter of 1998, NORSCAN (U.S.,
Canada, Finland, Norway and Sweden producers) inventory levels of softwood
market pulp were lower compared to all four quarters of 1997 and the first
quarter of 1998. NORSCAN shipments of softwood market pulp decreased in the
second quarter of 1998 compared to the year ago period. Currently, it is unclear
among industry observers the extent to which the pulp market will continue to be
affected by the currency crisis in Asia.
Upon the acquisition of Avenor Inc., the Company now produces and sells
northern hardwood and softwood market pulp. At the beginning of August 1998, the
Company lowered its U.S. price of these products by $25 per metric tonne, due to
conditions in these particular pulp markets.
Lumber - The average transaction price for the Company's lumber products
decreased 18 percent in the second quarter of 1998 compared to the year ago
period. During the second quarter of 1998, U.S. lumber prices continued to
decline from the first quarter of 1998, as supply outpaced demand. This
imbalance was directly related to a steep decline in Japanese housing
construction caused by the Asian economic crisis, which forced U.S. producers to
divert exports to the U.S. market. Although consumption in the U.S. is strong,
industry analysts expect it to decline slightly from the record levels in 1997,
due to lower housing starts and a small decline in the repair and remodeling
markets.
Cost of Sales and Other Income and Expenses
Cost of sales increased $8 million or 3 percent in the second quarter of 1998
compared to the second quarter of last year. Although the total tons sold were
relatively unchanged comparing the quarters, certain manufacturing costs were
higher in the second quarter of 1998. Comparing the same periods, selling and
administrative expenses decreased $6 million or 30 percent, due to lower
professional and consulting fees and lower charges for employee fringe benefits,
which are linked to the Company's common share price. Interest expense for the
second quarter of 1998 compared to the same period last year was approximately
the same, while interest income increased due to higher average investment
balances. Included in "other expense, net" for the second quarter of 1998, is
the Company's adjustment of the cost of its Canadian dollar option contracts to
fair market value. This resulted in a pre-tax charge of $18 million, or $.28 per
diluted share. Because the Canadian dollar in relation to the U.S. dollar
weakened during the second quarter, the options declined in value to
approximately $.4 million at June 30, 1998. The options were purchased at a cost
of $23 million in the first quarter of 1998 to hedge the Company's pending
acquisition of Avenor Inc. Upon closing the transaction in July, the Company
realized a lower purchase cost as a result of the devaluation of the Canadian
dollar.
The Company's effective tax rate for the second quarter of 1998 was 38
percent versus 37 percent in the prior year second quarter. This increase was
due to higher state and foreign taxes.
Six Months Ended June 30, 1998, versus
June 30, 1997
For the first six months of 1998, the Company's operating income of $105 million
increased $72 million compared to the first six months of 1997. Higher average
transaction prices for the Company's newsprint and coated paper products,
coupled with lower selling and administrative expenses, caused operating income
to increase.
Product Line Information
Newsprint - For the first six months of 1998, the Company's newsprint average
transaction price increased 12 percent compared to the same period last year.
During the second half of 1997, the Company increased domestic prices by $35 per
metric tonne as the newsprint market continued to recover from the prior year.
Total U.S. consumption and U. S. dailies' newsprint consumption during the first
six months of 1998 increased compared to the same period in 1997. In addition,
North American newsprint mill inventory levels at the end of June 1998 were
lower than June 1997 levels, while U.S. dailies' newsprint inventory increased.
During the first six months of 1998, the Company announced an additional
domestic price increase of $40 per metric tonne; however, unfavorable supply
conditions in the domestic market caused by the weak Asian economy, prevented
the Company from completely implementing the price increase. As conditions
allow, the Company intends to continue
11
<PAGE> 12
BOWATER INCORPORATED AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
implementing this increase during the balance of 1998.
Coated Groundwood - The Company's coated groundwood average transaction price
increased 25 percent during the first six months of 1998 compared to the year
ago period, while shipments increased 3 percent. In 1997, consumption in the
coated groundwood paper market increased from the lower levels experienced in
the prior year. This trend continued into 1998, allowing the Company to increase
prices throughout 1997 and again in January of 1998. The January 1998 increase
was approximately $60 per ton. U.S. coated groundwood shipments were slightly
lower in the first six months of 1998 compared to the prior year period, while
magazine ad pages increased.
Directory Paper - The Company's average transaction price for directory paper
decreased 3 percent in the first six months of 1998 compared to the first six
months of 1997, while shipments increased 3 percent. A large portion of the
Company's directory paper sales are based on contracts, the pricing of which was
determined in earlier periods. In 1997, conservation measures by end users
reduced their consumption, causing directory paper prices to decrease.
Market Pulp - The average transaction price for the Company's market pulp
decreased 2 percent in the first six months of 1998 compared to the first six
months of 1997, while shipments decreased 2 percent. The currency crisis in Asia
negatively affected consumption and pricing in the export pulp market over the
past nine months; however, a stronger domestic market helped to offset the
impact during the first six months of 1998. NORSCAN softwood pulp shipments
decreased slightly during the first six months of 1998 compared to the same
period last year, while inventory levels also decreased.
Lumber - The average transaction price for the Company's lumber products
decreased 14 percent in the first six months of 1998 compared to the year ago
period. In the third quarter of 1997, prices in the U.S. lumber market began to
decrease, as a decline in the Japanese housing market forced producers to divert
lumber to the U.S. market, causing an oversupply. This continued into the first
six months of 1998, causing further price declines. U.S. consumption has been
strong during the first half of 1998. Market analysts expect this trend to
decline slightly over the balance of 1998 and do not expect it to replace all of
the consumption shortfall caused by the Japanese housing market.
Cost of Sales and Other Income and Expenses
Cost of sales increased slightly in the first six months of 1998 compared to the
first six months of 1997, due to nominal increases in certain manufacturing
costs. Comparing the same periods, selling and administrative expenses decreased
$4 million or 11 percent, due to lower professional and consulting fees and
lower charges for employee fringe benefits which are linked to the Company's
common share price. Interest expense for the first six months of 1998 compared
to the same period last year was approximately the same, while interest income
increased due to higher average investment balances. In the first six months of
1998, the Company's joint venture company, Calhoun Newsprint Company (CNC) sold
approximately 26,000 acres of non-strategic timberlands resulting in a pre-tax
gain of $21 million, or $.16 per diluted share, after tax and minority interest.
No such sales were made in the corresponding period in 1997. Included in "other
expense, net" for the first six months of 1998, is the Company's adjustment of
the cost of its Canadian dollar option contracts to fair market value. This
resulted in a pre-tax charge of $22 million, or $.34 per diluted share.
The Company's effective tax rate for the first six months of 1998 was 38
percent versus 37 percent in the prior year period. This increase was due to
higher state and foreign taxes.
Liquidity and Capital Resources
The Company's cash, cash equivalents and marketable securities balance on June
30, 1998, totaled $446 million compared to $406 million on December 31, 1997,
and $353 million on June 30, 1997. Aside from cash flow from operations and
capital expenditures, the Company had three other significant cash transactions
from December 31, 1997, through the end of the second quarter. These included
the sale of 26,000 acres of non-strategic timberlands with proceeds of $31
million, the purchase of currency options on the Canadian dollar for $23 million
to hedge the Company's acquisition of Avenor Inc., and a $17 million dividend
payment
12
<PAGE> 13
BOWATER INCORPORATED AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
to the minority shareholder of CNC due to the sale of timberlands.
Cash from Operating Activities:
During the first six months of 1998, the Company's operations generated $132
million of cash compared to $74 million of cash during the first six months of
1997, an increase of $58 million. This increase was primarily the result of an
increase in operating income of $71 million, and higher interest income of $6
million (due to higher average investment balances outstanding in 1998). These
increases were partially offset by higher working capital needs (excluding
taxes) of $6 million, and higher taxes paid of $17 million due to the higher
level of income in the first six months of 1998 versus the first six months of
1997.
Cash from Investing Activities:
Cash flow from investing activities in the first six months of 1998 of $87
million was $43 million higher than the first six months of last year. Comparing
the same periods, capital expenditures were $27 million higher, due mainly to
the modernization of the Calhoun, Tenn., newsprint facility. The Company expects
total capital expenditures for 1998 to approximate $225 million, excluding the
acquisition of Avenor Inc. and the Daebul newsprint mill.
In the first six months of 1998, the Company sold 26,000 acres of
non-strategic timberlands resulting in proceeds of $31 million. The Company's
Forest Products Division periodically reviews timberland holdings and makes
decisions to sell certain non-strategic tracts.
In the first six months of 1998, $151 million of net cash flow was from the
maturity of marketable securities versus $87 million in the first six months of
1997. Offsetting this in 1998 was a cash outflow of $23 million for the purchase
of currency options on the Canadian dollar to hedge the Company's acquisition of
Avenor Inc.
Cash from Financing Activities:
Cash flow used for financing activities was $80 million lower in the first six
months of 1998 compared to the year ago period. The majority of this decrease
was due to the purchase of 1.4 million common shares at a cost of $57 million in
the first six months of 1997. In November 1997, the Company announced the
adoption of a new stock repurchase program, authorizing it to repurchase up to
4.1 million shares of the Company's outstanding common stock in the open market
or in privately-negotiated transactions subject to normal trading restrictions.
Year to date in 1998, no purchases under the program have been made. The Company
continues to consider the most effective use of its cash for internal capital
investments, share repurchases, investments to grow the Company's primary
product lines and additional debt reductions.
In the first six months of 1997, a $20 million dividend was paid to the
minority shareholder of CNC, while $17 million was paid in the same period this
year. Also in the first six months of 1997, the Company redeemed for cash the
remaining 500,000 outstanding shares of LIBOR Preferred Stock at a cost of $25
million and realized $7 million more cash from the exercise of stock options
versus the same period in 1998.
Acquisitions/Disposition
On July 15, 1998, the Company completed the acquisition of the Korean newsprint
mill, which is located in the Daebul Industrial Complex on the southwest coast
of South Korea. Using its existing cash reserves, the Company purchased the
production assets of the mill for approximately $201 million and pre-paid the
majority of the current accounts payable for approximately $22 million as
required by the court in the seller's bankruptcy proceedings. Upon closing, the
mill was free and clear of all indebtedness.
On July 24, 1998, the Company completed the acquisition of Avenor Inc. The
total purchase price, including assumed debt totaled $2.37 billion (C$3.54
billion) or $23.46 (C$35.00) per Avenor common share. The Company utilized $168
million of its existing cash reserves and $625 million of its new $1 billion
credit facility to fund the cash portion of this transaction. In addition, the
Company issued 12.3 million common shares and its indirect wholly-owned
subsidiary, Bowater Canada Inc., issued 3.8 million exchangeable shares to fund
the equity portion of the transaction.
On August 4, 1998, the Company announced the signing of a definitive
agreement to sell the recently acquired pulp and paper mill and related assets
in Dryden, Ontario, for C$790 million (approximately US$520 million). The
transaction is expected to be finalized in the fourth quarter of 1998, subject
to regulatory approvals. The Company plans to use a substantial portion of the
proceeds to repay debt.
13
<PAGE> 14
BOWATER INCORPORATED AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
With the completion of these acquisitions, the Company consists of 12 pulp
and paper mills in the United States, Canada and Korea. These operations are
supported by more than 4 million acres of timberlands owned in the United States
and Canada and over 18 million acres of timber cutting rights in Canada. The
Company has doubled its annual newsprint and groundwood paper making capacity
and is now a major producer of market pulp, making it the second largest
newsprint producer in the world and the third largest market pulp producer in
North America.
Pending Transaction
In January 1998, the Company announced its intention to seek a buyer for its
Millinocket, Maine, paper mill, which no longer meets the Company's long-term
objectives. This facility includes four paper machines and related assets.
During the course of marketing the Millinocket properties, the Company received
unsolicited expressions of interest in purchasing all of the Company's
properties located in the State of Maine (which includes the Millinocket mill, a
mill located in East Millinocket, a hydroelectric facility, a sawmill and two
million acres of timberlands). The Company continues to examine its options in
light of the foregoing.
Year 2000 Compliance
The following discussion is as of June 30, 1998, before the Avenor acquisition,
unless otherwise noted.
Since 1990, the Company has reengineered its major internally developed
software programs. During this effort, the Company examined potential problems
arising from the inability of certain application software programs to recognize
the year 2000. A formal review of all internally developed software was
completed in 1997. No major problems were encountered.
In addition, all major third-party licensed application software programs
have been reviewed and are either compliant or the licenser has released a
compliant version to which the Company will migrate in 1998. The costs
associated with these projects are currently expected to be less than $1
million.
An expanded year 2000 team has been established to review the last phase,
which includes process control, manufacturing systems, suppliers, business
partners, customers, safety, environmental, and other non-traditional
information systems areas. Although the results of these reviews are not yet
complete, the Company currently estimates these costs to be in the range of $2.5
million to $4.5 million.
Subsequent to the acquisition of Avenor Inc., the Company began assessing
the year 2000 compliance issues at all of the newly acquired locations. Although
compliance procedures had already begun at these sites, the Company continues to
make its own assessment. Currently, the Company estimates the cost of year 2000
compliance for the newly acquired locations to be in the range of $7.5 million
to $11 million. As more information becomes available, the Company anticipates
changes to these estimates.
In connection with its year 2000 compliance program, the Company will be
developing a contingency plan in the event certain solutions prove to be
ineffective in solving the year 2000 compliance problems.
Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This standard requires a public company to
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The Company is
required to adopt this standard in the third quarter of 1999. The Company has
not yet assessed the impact this standard will have on its financial condition
or results of operations at the time of adoption; however, the impact will
ultimately depend on the amount and type of derivative instruments held at the
time of adoption.
14
<PAGE> 15
BOWATER INCORPORATED AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
On May 20, 1998, at the Company's Annual Meeting of Shareholders, the
following matters were submitted to a vote of the shareholders:
A resolution electing the following class of directors for a term of
three years: H. David Aycock (35,992,071 votes in favor; 343,007 votes
withheld); Donald R. Melville (35,918,067 votes in favor; 347,011 votes
withheld); and Arnold M. Nemirow (35,907,868 votes in favor; 357,210 votes
withheld). The names of each other director whose term of office as a director
continued after the meeting are: Francis J. Aguilar, Kenneth M. Curtis, Donald
R. Melville, Richard Barth, Charles J. Howard, and John A. Rolls.
On July 21, 1998, a Special Meeting of Shareholders was held and the
following matter was submitted to a vote of the shareholders:
A resolution to approve the issuance of shares pursuant to the
Amended and Restated Agreement dated as of March 9, 1998, between Bowater
Incorporated and Avenor Inc. and the transactions related thereto. The results
were: 33,441,530 votes for; 55,736 votes against; and 72,773 abstentions.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits (numbered in accordance with Item 601 of Regulation
S-K):
Exhibit No. Description
----------- -----------
2.1 Amended and Restated Arrangement Agreement dated as
of March 9, 1998, by and between the Company and
Avenor Inc. (incorporated by reference to Annex D of
the Joint Management Information Circular and Proxy
Statement filed on June 18, 1998, on Schedule 14A
(the "Schedule 14A")).
3.1 Certificate of Designation of Special Voting Stock of
Bowater Incorporated (incorporated by reference to
the Company's Exhibit 4.11 to Registration Statement
on the Form S-3 filed on July 24, 1998, No. 333-57839
(the "Form S-3")).
3.2 By-Laws of the Company as amended and restated as of
May 20, 1998 (incorporated by reference to Exhibit
4.12 to the Form S-3).
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).
10.1 Amended and Restated Bowater Incorporated Benefit
Plan Grantor Trust effective as of April 15, 1998.
15
<PAGE> 16
10.2 Amended and Restated Bowater Incorporated Outside
Directors Benefit Plan Grantor Trust effective as of
April 15, 1998.
10.3 Amended and Restated Bowater Incorporated Executive
Severance Grantor Trust effective as of April 15,
1998.
10.4 364-Day Credit Agreement dated as of June 24, 1998,
among the Company, The Chase Manhattan Bank, as
Administrative Agent, and the lenders signatory
thereto (incorporated by reference to the Schedule
13D filed on August 3, 1998, by Bowater Incorporated,
Bowater Canadian Holdings Incorporated and Bowater
Canada Inc. with respect to the common shares of
Avenor Inc. (the "Schedule 13D")).
10.5 Five Year Credit Agreement dated as of June 24,1998,
among the Company, The Chase Manhattan Bank, as
Administrative Agent, and the lenders signatory
thereto (incorporated by reference to the Schedule
13D).
10.6 Support Agreement dated as of July 24, 1998, between
the Company, Bowater Canadian Holdings Incorporated
and Bowater Canada Inc. (incorporated by reference to
Annex G of the Schedule 14A).
10.7 Voting and Exchange Trust Agreement dated as of July
24, 1998, between the Company, Bowater Canadian
Holdings Incorporated, Bowater Canada Inc. and
Montreal Trust Company of Canada (incorporated by
reference to Annex F of the Schedule 14A).
27.1 Financial Data Schedule (electronic filing only).
(b) Reports on Form 8-K:
The Company filed with the Securities and Exchange
Commission Current Report on Form 8-K as follows:
On August 7, 1998, the Company filed a current report on
Form 8-K dated July 24, 1998, to report the completion of
the acquisition of Avenor Inc.
16
<PAGE> 17
BOWATER INCORPORATED AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOWATER INCORPORATED
By /s/ David G. Maffucci
-----------------------------
David G. Maffucci
Senior Vice President and
Chief Financial Officer
By /s/ Michael F. Nocito
-----------------------------
Michael F. Nocito
Vice President and Controller
Dated: August 14, 1998
17
<PAGE> 18
INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
2.1 Amended and Restated Arrangement Agreement dated as
of March 9, 1998, by and between the Company and
Avenor Inc. (incorporated by reference to Annex D of
the Joint Management Information Circular and Proxy
Statement filed on June 18, 1998, on Schedule 14A
(the "Schedule 14A")).
3.1 Certificate of Designation of Special Voting Stock of
Bowater Incorporated (incorporated by reference to
the Company's Exhibit 4.11 to Registration Statement
on the Form S-3 filed on July 24, 1998, No. 333-57839
(the "Form S-3")).
3.2 By-Laws of the Company as amended and restated as of
May 20, 1998 (incorporated by reference to Exhibit
4.12 to the Form S-3).
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).
10.1 Amended and Restated Bowater Incorporated Benefit
Plan Grantor Trust effective as of April 15, 1998.
10.2 Amended and Restated Bowater Incorporated Outside
Directors Benefit Plan Grantor Trust effective as of
April 15, 1998.
10.3 Amended and Restated Bowater Incorporated Executive
Severance Grantor Trust effective as of April 15,
1998.
10.4 364-Day Credit Agreement dated as of June 24, 1998,
among the Company, The Chase Manhattan Bank, as
Administrative Agent, and the lenders signatory
thereto (incorporated by reference to the Schedule
13D filed on August 3, 1998, by Bowater Incorporated,
Bowater Canadian Holdings Incorporated and Bowater
Canada Inc. with respect to the common shares of
Avenor Inc. (the "Schedule 13D")).
10.5 Five Year Credit Agreement dated as of June 24,1998,
among the Company, The Chase Manhattan Bank, as
Administrative Agent, and the lenders signatory
thereto (incorporated by reference to the Schedule
13D).
10.6 Support Agreement dated as of July 24, 1998, between
the Company, Bowater Canadian Holdings Incorporated
and Bowater Canada Inc. (incorporated by reference to
Annex G of the Schedule 14A).
10.7 Voting and Exchange Trust Agreement dated as of July
24, 1998, between the Company, Bowater Canadian
Holdings Incorporated, Bowater Canada Inc. and
Montreal Trust Company of Canada (incorporated by
reference to Annex F of the Schedule 14A).
27.1 Financial Data Schedule (electronic filing only).
<PAGE> 1
EXHIBIT 10.1
AMENDED AND RESTATED
BOWATER INCORPORATED
BENEFIT PLAN GRANTOR TRUST
Effective April 15, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
Title-Purpose-Policy-Effect.....................................................................................1
1.1 Name.............................................................................................1
1.2 Definitions......................................................................................1
1.3 Purpose..........................................................................................5
1.4 Effect...........................................................................................6
ARTICLE II
Valuation 6
2.1 Valuation of Trust Fund..........................................................................6
ARTICLE III
Administration of the Plans.....................................................................................7
3.1 Payments From Trust Fund.........................................................................7
3.2 Participant Data.................................................................................7
3.3 Creditors........................................................................................8
3.4 Reliance on Company..............................................................................8
3.5 Responsibility for Plan Administration...........................................................9
3.6 Trustee Not Responsible for Administration of Judgments..........................................9
ARTICLE IV
Investment of Trust Assets......................................................................................9
4.1 Asset Managers...................................................................................9
4.2 Investment Discretion...........................................................................10
4.3 Limitations on Investment Discretion............................................................10
4.4 Responsibility for Diversification..............................................................10
ARTICLE V
Responsibility for Directed Funds..............................................................................10
5.1 Responsibility for Selection of Agents..........................................................10
5.2 Trustee Not Responsible for Investments in Directed Funds.......................................11
5.3 Investment Vehicles.............................................................................11
5.4 Reliance on Asset Manager.......................................................................11
5.5 Merger of Funds.................................................................................11
5.6 Notification of Company in Event of Breach......................................................12
5.7 Definition of Knowledge.........................................................................12
5.8 Duty to Enforce Claims..........................................................................12
5.9 Restrictions on Transfer........................................................................13
5.10 Section 4.1(b) Controlling......................................................................13
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE VI
Powers of Asset Managers.......................................................................................13
6.1 General Powers..................................................................................13
6.2 Additional Powers of Trustee....................................................................14
6.3 Annuity and Insurance Contracts.................................................................15
ARTICLE VII
Records and Accounts of Trustees...............................................................................17
7.1 Records.........................................................................................17
7.2 Annual Account..................................................................................17
7.3 Account Stated..................................................................................17
7.4 Judicial Accountings............................................................................17
7.5 Necessary Parties...............................................................................18
ARTICLE VIII
Compensation, Taxes and Expenses...............................................................................18
8.1 Compensation and Expenses.......................................................................18
8.2 Taxes...........................................................................................19
ARTICLE IX
Resignation or Removal of Trustee..............................................................................19
9.1 Resignation or Removal..........................................................................19
9.2 Designation of a Successor......................................................................19
9.3 Reserve for Expenses............................................................................19
ARTICLE X
Amendment or Termination.......................................................................................20
10.1 Amendment of Agreement.........................................................................20
10.2 Termination of Plan............................................................................20
10.3 Distribution of Residual Assets................................................................21
10.4 Distribution of Excess Assets..................................................................21
ARTICLE XI
Prohibition Against Diversion..................................................................................21
11.1 No Right of Alienation or Employment...........................................................21
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE XII
Sufficiency of Trust Fund......................................................................................22
12.1 Payment of Benefits............................................................................22
12.2 Contribution to Fund...........................................................................22
ARTICLE XIII
Authorities....................................................................................................23
13.1 Company........................................................................................23
13.2 Investment Manager.............................................................................24
13.3 Form of Communications.........................................................................24
13.4 Continuation of Authority......................................................................24
13.5 No Obligation to Act on Unsatisfactory Notice..................................................24
ARTICLE XIV
General Provisions.............................................................................................24
14.1 Governing Law..................................................................................24
14.2 Entire Agreement...............................................................................24
14.3 Mistake........................................................................................24
14.4 Reliance on Experts............................................................................25
14.5 Successor to the Trustee.......................................................................25
14.6 Notices........................................................................................25
14.7 Plan Documents.................................................................................25
14.8 No Waiver; Reservation of Rights...............................................................25
14.9 Descriptive Headings...........................................................................25
14.10 Counterparts...................................................................................25
ARTICLE XV
Undertaking by Company.........................................................................................26
15.1 Undertaking....................................................................................26
15.2 Limitation on Undertaking......................................................................26
15.3 Survival of Undertakings.......................................................................26
LIST A .....................................................................................................28
</TABLE>
iii
<PAGE> 5
This Grantor Trust Agreement, initially made and entered into the 20th
day of May, 1988, and amended on August 23, 1989, is by and between BOWATER
INCORPORATED, a Delaware corporation (the "Company"), and WACHOVIA BANK, N.A. a
national banking association organized and existing under the laws of the
United States (the "Trustee").
W I T N E S S E T H :
WHEREAS, the Company established this Grantor Trust to serve as a
funding vehicle for certain designated non-qualified employee benefit plans
described on List A (the "Plans") and as a medium for holding amounts payable
to eligible participants under the Plans;
WHEREAS, the Trustee has agreed to hold and administer all sums of
money and such other property acceptable to the Trustee as shall from time to
time be contributed, paid or delivered to it hereunder, IN TRUST, on the terms
and conditions set forth in the Grantor Trust Agreement (the "Agreement"); and
WHEREAS, the Company and the Trustee desire to amend and restate the
Agreement governing the Grantor Trust.
NOW, THEREFORE, the Company and the Trustee hereby agree to continue
the Bowater Incorporated Benefit Plan Grantor Trust on the following terms and
conditions as of April 15, 1998:
ARTICLE I
Title-Purpose-Policy-Effect
1.1 Name. The trust established hereunder shall be known as the
Bowater Incorporated Benefit Plan Grantor Trust and is sometimes hereinafter
referred to as the "Trust".
1.2 Definitions. Where used in this Agreement, unless the context
otherwise requires or unless otherwise expressly provided:
(a) "Account Party" shall mean an officer of the Company designated
to represent the Company for this purpose and any Person to whom the Trustee
shall be instructed by the Company to deliver its annual account under Section
7.2.
(b) "Accounting Period" shall mean the twelve consecutive month
period coincident with the calendar year or the shorter period in any year in
which the Trustee accepts appointment as Trustee hereunder or ceases to act as
Trustee for any reason.
(c) "Agreement" shall mean all of the provisions of this instrument
and of all other instruments amendatory hereof.
1
<PAGE> 6
(d) "Asset Manager" shall mean the Trustee (other than for purposes
of Article V), the Company, or an Investment Manager, individually or
collectively as the context shall require, but only with respect to those
assets held in an Investment Account over which it exercises, or to the extent
it is authorized to exercise, discretionary investment authority or control.
(e) "Bank Business Day" shall mean a day on which the Trustee is
open for business.
(f) An individual or entity is a "beneficiary" if such individual or
entity is receiving benefits, or entitled to receive benefits solely upon the
lapse of time, under any of the Plans in respect of a deceased participant.
(g) "Board of Directors" shall mean the Board of Directors of the
Company.
(h) A "Change in Control" shall be deemed to have occurred upon:
(a) The date that any Person is or becomes an Acquiring
Person.
(b) The date that the Corporation's shareholders approve a
merger, consolidation or reorganization of the
Corporation with another corporation or other Person,
unless, immediately following such merger,
consolidation or reorganization, (i) at least 50% of
the combined voting power of the outstanding
securities of the resulting entity would be held in
the aggregate by the shareholders of the Corporation
as of the record date for such approval (provided that
securities held by any individual or entity that is an
Acquiring Person, or who would be an Acquiring Person
if 5% were substituted for 20% in the definition of
such term, shall not be counted as securities held by
the shareholders of the Corporation, but shall be
counted as outstanding securities for purposes of this
determination), or (ii) at least 50% of the board of
directors or similar body of the resulting entity are
Continuing Directors.
(c) The date the Corporation sells or otherwise transfers
all or substantially all of its assets to another
corporation or other Person, unless, immediately after
such sale or transfer, (i) at least 50% of the
combined voting power of the then-outstanding
securities of the resulting entity immediately
following such transaction is held in the aggregate by
the Corporation's shareholders as determined
immediately prior to such transaction (provided that
securities held by any individual or entity that is
an Acquiring Person, or who would be an Acquiring
Person if 5% were substituted for 20% in the
definition of such term, shall not be counted as
securities held by the shareholders of the
Corporation, but shall be counted as
2
<PAGE> 7
outstanding securities for purposes of this
determination), or (ii) at least 50% of the board of
directors or similar body of the resulting entity
are Continuing Directors.
(d) The date on which less than two-thirds (2/3) of the
total membership of the Board consists of Continuing
Directors.
For purposes of this Section:
(i) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934 (the "Act").
(ii) "Acquiring Person" means the Beneficial Owner,
directly or indirectly, of Common Stock representing
20% or more of the combined voting power of the
Corporation's then outstanding securities, not
including (except as provided in clause (i) of the
next sentence) securities of such Beneficial Owner
acquired pursuant to an agreement allowing the
acquisition of up to and including 50% of such
voting power approved by two-thirds of the members
of the Board who are Board members before the Person
becomes Beneficial Owner, directly or indirectly, of
Common Stock representing 5% or more of the combined
voting power of the Corporation's then outstanding
securities. Notwithstanding the foregoing, (i)
securities acquired pursuant to an agreement
described in the preceding sentence will be included
in determining whether a Beneficial Owner is an
Acquiring Person if, subsequent to the approved
acquisition, the Beneficial Owner acquires 5% or
more of such voting power other than pursuant to
such an agreement so approved and (ii) a Person
shall not be an Acquiring Person if such Person is
eligible to and files a Schedule 13G with respect to
such Person's status as a Beneficial Owner of all
Common Stock of the Corporation of which the Person
is a Beneficial Owner.
(iii) A "Beneficial Owner" of Common Stock means (A) a
Person who beneficially owns such Common Stock,
directly or indirectly, or (B) a Person who has the
right to acquire such Common Stock (whether such
right is exercisable immediately or only with the
passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights,
exchange rights, warrants, options or otherwise.
(iv) "Continuing Directors" means any member of the Board
who (A) was a member of the Board prior to the date
of the event that
3
<PAGE> 8
would constitute a Change in Control, and any
successor of a Continuing Director while such
successor is a member of the Board, (B) is not an
Acquiring Person or an Affiliate or Associate of an
Acquiring Person, and (C) is recommended or elected
to succeed the Continuing Director by a majority of
the Continuing Directors.
(v) "Person" means any individual, firm, corporation,
partnership, trust or other entity.
Notice to the Trustee from the Company that a Change in Control has
occurred shall be binding and conclusive on the Trustee. The Trustee shall have
not independent duty to investigate whether or not a Change in Control has
occurred. In performing any of its obligations or taking any discretionary
action under this Agreement which is dependent upon a Change in Control having
occurred, the Trustee may rely on such notice and such notice shall be binding
and conclusive on all Plan participants and beneficiaries.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and regulations issued thereunder.
(j) "Company" shall mean Bowater Incorporated or any successor
thereto.
(k) "Directed Fund" shall mean an Investment Account, or part
thereof, subject to the discretionary management and control of the Company or
any Investment Manager.
(l) "Discretionary Fund" shall mean any Investment Account, or part
thereof, subject to the discretionary management and control of the Trustee.
(m) "Investment Account" shall mean each pool of assets in the Trust
in which the Plans have an interest during an Accounting Period.
(n) "Investment Manager" shall mean a bank, as defined under the
Investment Advisers Act of 1940, insurance company or investment adviser
registered under the Investment Advisers Act of 1940.
(o) "Investment Vehicle" shall mean any common, collective or
commingled trust, mutual fund, investment company, corporation functioning as
an investment intermediary, insurance contract, letter of credit, partnership,
joint venture or other entity or arrangement to which, or pursuant to which,
assets of the Trust have been transferred or in which the Trust has an
interest, beneficial or otherwise.
(p) "Participant Data" shall mean certain information regarding the
participants (or beneficiaries) under each Plan and the determination of the
benefits under each Plan, including the following information: (i) name,
address, date of birth, date of hire (when applicable) and social security
number; (ii) the pension benefit accrued by the participant under
4
<PAGE> 9
any qualified pension plan sponsored or maintained by the Company or an
affiliate; (iii) a schedule of the estimated payments under each Plan; and (iv)
any other information regarding each Plan which the Trustee may reasonably
request or which the Company may deem necessary.
Notwithstanding the foregoing, "Participant Data" shall not include
any information regarding the participants and beneficiaries under a Plan who
are residents, for income tax purposes, of Canada.
(q) "Person" shall mean a natural person, trust, estate, corporation
of any kind or purpose, mutual company, joint-stock company, unincorporated
organization, association, partnership, joint venture, employee organization,
committee, board, participant, beneficiary, trustee, partner, or venturer
acting in an individual, company, or representative capacity, as the context
may require.
(r) "Plan" or "Plans" shall mean, collectively, the plans,
agreements or arrangements maintained by the Company or to which the Company is
a party and which have been designated by the Board of Directors for
participation in this Trust, as set forth on List A hereto.
(s) "Trust Fund" shall mean all cash and other property contributed,
paid or delivered to the Trustee hereunder, all investments made therewith and
proceeds thereof and all earnings and profits thereon, less payments, transfers
or other distributions which, at the time of reference, shall have been made by
the Trustee as authorized herein. The Trust Fund shall include all evidences of
ownership, interest or participation in an Investment Vehicle, but shall not,
solely by reason of the Trust Fund's investment therein, be deemed to include
any assets of such Investment Vehicle.
(t) "Trust" shall mean the grantor trust established under this
Agreement.
(u) "Trustee" shall mean Wachovia Bank, N.A., as Trustee of the
Trust and its successors.
(v) "Valuation Date" shall mean the last day of the Accounting
Period, calendar quarter or any more frequent reporting date determined by the
Company and agreed to by the Trustee.
(w) "Wachovia" shall mean Wachovia Bank, N.A.
Wherever applicable, masculine pronouns shall include the feminine, and the
singular shall include the plural.
1.3 Purpose. The Trust is established as a grantor trust within the
meaning of Sections 671 through 677 of the Code, to hold the interests of
participants and their beneficiaries in the Plans, other than those
participants and beneficiaries who are residents, for income tax purposes, of
Canada. The interests which may be held and paid out by the Trust shall include
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benefits accrued under any Plan with respect to any employee or former employee
of the Company who is or has been a participant in any such Plan and their
beneficiaries. The Company shall administer the Plans so that each of the Plans
will be at all times during which any amount is deposited with the Trust, a
non-qualified deferred compensation plan or non-qualified supplemental benefits
plan which is either an excess benefit plan, as defined in Section 3(36) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a
plan that provides deferred compensation or supplemental benefits only for a
select group of management or highly compensated employees within the
contemplation of ERISA, or both. Except as may otherwise be permitted by law
and the terms of each Plan or pursuant to the terms of this Agreement, at no
time prior to the satisfaction of all liabilities with respect to participants
and their beneficiaries under the Plans shall any portion of the Trust Fund be
used for, or diverted to, any purposes other than for the exclusive benefit of
such participants and their beneficiaries, and for defraying the reasonable
expenses of administering each such Plan. The establishment of the Trust is
intended to provide a funding vehicle for the payment of benefits under the
Plans and is not intended to relieve the Company of its duties under the Plans
to the participants therein or to their beneficiaries.
1.4 Effect. All Persons at any time interested in the Plans shall be
bound by the provisions of this Agreement and, in the event of any conflict
between this Agreement and the provisions of the Plans or any other instrument
or agreement forming part of each such Plan, the provisions of this Agreement
shall control.
ARTICLE II
Valuation
2.1 Valuation of Trust Fund. The Trustee shall determine the value
of the assets of the Trust Fund as of each Valuation Date. In addition, prior
to a Change in Control and for the convenience of the Company and without
imposing any obligation on the Trustee, the Company may request the Trustee to
include in its periodic reports under this Article II or its annual account
under Section 7.2 assets which do not constitute part of the Trust Fund. Assets
will be valued at their market values at the close of business on the Valuation
Date, or, in the absence of readily ascertainable market values, at such values
as the Trustee shall determine in accordance with methods consistently followed
and uniformly applied. Anything in this Agreement to the contrary
notwithstanding, with respect to assets constituting part of a Directed Fund or
assets included at the request of the Company as hereinabove provided, the
Trustee may rely for all purposes of this Agreement on the latest valuation and
transaction information submitted to it by the Persons responsible for the
investment of such assets even if such information predates the Valuation Date.
The Company will cause such Persons to provide the Trustee with all information
needed by the Trustee to discharge its obligations to value such assets and to
account under this Agreement.
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ARTICLE III
Administration of the Plans
3.1 Payments From Trust Fund. (a) Subject to Sections 3.2, 3.3 and
6.3(b), the Trustee, upon receipt of direction from the Company prior to a
Change in Control, shall pay moneys directly to or for the benefit of
participants and their beneficiaries, or to a paying or disbursing agent (which
may be the Company) for the benefit of participants or their beneficiaries.
Prior to a Change in Control, the Company may direct that moneys be paid to
itself or an affiliate or subsidiary thereof, however, only if and only to the
extent that such payment is for the reimbursement of moneys paid under a Plan
to a participant or his beneficiary which could have been paid from the Trust
Fund. After a Change in Control, the Trustee may follow the directions of the
Company as noted in the preceding sentence only upon receipt of evidence that
such amounts have been paid to a participant or beneficiary in lieu of a
payment from the Trust Fund. Any such payment to the Company or an affiliate or
subsidiary thereof shall be deemed a payment for the benefit of a participant
or his beneficiary. Any assets disbursed or paid over by the Trustee pursuant
to the foregoing provisions of this Section 3.1, or pursuant to Section 3.3
hereof, shall no longer be part of the Trust Fund.
(b)(1) In the event it shall be determined prior to a Change in
Control that the participants and/or beneficiaries of the Trust Fund, prior to
the payment of benefits hereunder, are subject to any tax under the terms of
the trust created hereunder, then the Trustee, upon a receipt of written
direction from the Company, shall make payments from the Trust Fund to such
persons, in such manner and in such amounts as the Company shall direct, for
the purpose of paying the amount of Federal, State and Local tax and interest
and any penalties thereon which such participants and/or beneficiaries may
incur arising out of such determination. In the event such a determination is
made after a Change in Control occurs, then each participant or beneficiary who
is subject to such tax, may direct the Trustee, in writing, to make payments
from the Trust Fund for the purpose set forth in the preceding sentence and
shall deliver to the Trustee evidence of such determination. In the event a
final judicial determination is made after a Change in Control occurs that a
participant or beneficiary, prior to the payment of benefits hereunder, is
subject to any tax under the terms of the trust created hereunder and a
governmental agency authorized to execute such determination directs the
Trustee to pay such tax from the Trust Fund, then the Trustee may make such
payment and shall incur no liability hereunder because of the Trustee's
compliance with such direction. The Trustee's decision as to whether the final
judicial determination referenced in the preceding sentence has occurred shall
be binding and conclusive on all participants and beneficiaries.
(b)(2) Any payment from the Trust Fund pursuant to paragraph (b)(1) of
this Section 3.1 attributable to a Plan shall actuarially reduce the benefits
of those participants and beneficiaries to whom such a distribution is made
under such Plan.
3.2 Participant Data. The Company has heretofore submitted
Participant Data to the Trustee and may, from time to time hereafter, furnish
the Trustee with updated Participant Data. In addition, the Company shall
provide information concerning participants and
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beneficiaries to the Company's actuarial consultants on a quarterly basis
sufficient to permit such consultants to assist the Company in determining
Participant Data and the contributions to be made hereunder upon a Change in
Control and to discharge the Company's duties under Section 12.2(b). The
Company shall keep the Trustee informed of the identity of the actuarial
consultants responsible for such information and such consultants shall be
formally retained on an ongoing basis to provide these services. The Company or
its actuarial consultants shall, upon a Change in Control, furnish the Trustee
with Participant Data and, after a Change in Control, furnish the Trustee with
Participant Data at least once each Accounting Period. After a Change in
Control, all expenses of the actuarial consultants may be paid from the Trust
assets to the extent not paid by the Company. After a Change in Control,
participants and beneficiaries shall have the right to receive from the Company
or the Trustee (i) a copy of the most recent Participant Data that has been
supplied to the Trustee on his or her behalf, and (ii) a list of the names and
addresses of all participants and beneficiaries in each Plan, within thirty
(30) days after a request for such information is made.
In the event of a Change in Control and notwithstanding any other
provision of this Agreement, the Trustee shall, without direction from the
Company, make payments to participants or beneficiaries in such manner and in
such amounts as the Trustee shall determine they are entitled to be paid under
each Plan based upon the most recent Participant Data furnished to the Trustee
by the Company or its actuarial consultants prior to or upon a Change in
Control and any supplemental information furnished to the Trustee by a
participant, a beneficiary, the Company or its actuarial consultants upon which
the Trustee may reasonably rely in making such determination. The Trustee's
determination as to the amount of payments to participants and beneficiaries
after a Change in Control occurs shall be binding and conclusive on all
participants and beneficiaries and the Trustee shall be fully protected under
the terms of the trust created hereunder in making such determination but the
Trustee's determination shall not relieve the Company of its obligations to
such participants and beneficiaries under the Plans.
3.3 Creditors. The Company has the duty to inform the Trustee of the
Company's insolvency (i.e., its inability to pay debts as they mature) or
bankruptcy (i.e., the Company is subject to a pending proceeding under the
federal Bankruptcy Code). The insolvency or bankruptcy of a subsidiary of the
Company shall not be deemed to be the insolvency or bankruptcy of the Company
or any other subsidiary. When the Trustee is in receipt of a copy of a
bankruptcy petition relating to the Company or a notification from the Company
that it is insolvent, the Trustee will suspend payments to the participants and
beneficiaries under the Trust and will hold assets of the Trust for the benefit
of the Company's general creditors. Thereafter, the Trustee will deliver assets
of the Trust to satisfy claims of the Company's general creditors as directed
by a court of competent jurisdiction. However, if the Trustee makes a good
faith determination that the Company is solvent, it shall continue to make or
resume making payments under each Plan until a final order to the contrary is
received by the Trustee.
3.4 Reliance on Company. Any directions pursuant to Section 3.1 may,
but need not, specify the application to be made of moneys so ordered. Each
direction to the Trustee under Section 3.1 or Section 3.3 shall constitute a
certification by the Company, as the case may
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be, that such direction is in accordance with applicable law or with the terms
of each Plan, and with the terms of this Agreement. The Trustee shall have no
duty to make any independent inquiry or investigation as to any of the
foregoing before acting upon such direction.
3.5 Responsibility for Plan Administration. Subject to Section 3.2
or subject to any delegation by the Company and assumption by the Trustee of
the duties of administering each Plan, the Trustee shall not be responsible in
any way respecting the determination, computation, payment or application of
any payment (other than the execution of any documents incidental thereto and
transfer or receipt of funds thereunder on the directions of the Company), or
for any other matter affecting the administration of each Plan by the Company
or any other Person to whom such responsibility is allocated or delegated
pursuant to the terms of each Plan.
3.6 Trustee Not Responsible for Administration of Judgments. The
Trustee shall not be responsible in any way respecting the administration,
computation, payment or application of any payment, satisfaction, or for any
other matter affecting the response of the Company to any creditor in the event
of insolvency, other than for the execution of any documents incidental thereto
and transfer or receipt of funds thereunder on the directions of the Company.
ARTICLE IV
Investment of Trust Assets
4.1 Asset Managers. (a) Prior to a Change in Control, discretionary
authority for the management and control of assets from time to time held in
the Trust Fund may be retained, allocated or delegated, as the case may be, for
one or more purposes, to and among the Asset Managers by the Company, in its
absolute discretion. To the extent an Asset Manager is the Trustee, the assets
shall be part of the Discretionary Fund; to the extent an Asset Manager is
either the Company or an Investment Manager, the assets shall be part of a
Directed Fund. Prior to a Change in Control, the terms and conditions of
appointment, authority and retention of any Asset Manager shall be the sole
responsibility of the Company. The Company shall promptly notify the Trustee in
writing of the appointment or removal of an Asset Manager. Any notice of
appointment pursuant to this Section 4.1 shall constitute a representation and
warranty that the Asset Manager has been appointed in accordance with the
provisions of each Plan and that any Asset Manager (other than the Trustee or
the Company) is an Investment Manager.
(b) After a Change in Control, discretionary authority for the
management and control of assets from time to time held in the Trust Fund shall
be in the Trustee. After a Change in Control occurs and subject to paragraph
(g) of Section 6.3, the Trustee shall continue to manage the assets of the
Trust in accordance with Section 6.1. The Trustee may appoint, terminate or
continue the appointment of Asset Managers for all permissible types of
securities, until such time as at least 51% in number of the participants and
beneficiaries request that the assets of the Trust be invested and reinvested,
without distinction between principal and income, in an immunized or dedicated
portfolio of bonds, debentures, equipment or collateral trust certificates,
notes or other evidences of indebtedness, unsecured or secured by mortgages on
real
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or personal property wherever situated (including any part interest in a bond
and mortgage or note and mortgage whether insured or uninsured) and any
portfolio of other property, or part interest in property, real or personal,
foreign or domestic in which such event the Trustee shall have the power to
appoint Asset Manager(s) solely for such specified investments. The rates of
return and maturity dates of the instruments of such portfolio shall reasonably
be expected to yield assets of the Trust Fund sufficient to discharge the
Company's obligations under the Plans as set forth in the most recent
Participant Data furnished to the Trustee prior to or upon such Change in
Control.
(c) After a Change in Control, the Trustee, subject to Section
4.1(b), shall have full discretion and responsibility for the investment of
Trust assets, including responsibility for the appointment of Asset Managers
and for formulation of funding, investment and diversification policies, and
shall have all the duties and responsibilities of the Company set forth in
Sections 4.1(a), 4.3 and 4.4.
4.2 Investment Discretion. Subject to Section 4.1(b), the Trust Fund
shall be invested and reinvested, without distinction between principal and
income, at such time or times in such investments and pursuant to such
investment strategies or courses of action and in such shares and proportions,
as the Asset Managers, in their sole discretion, shall deem advisable.
4.3 Limitations on Investment Discretion. Prior to a Change in
Control, the Company may limit, restrict or impose guidelines affecting the
exercise of the discretion hereinabove conferred in Section 4.2 on any Asset
Manager. Any limitations, restrictions or guidelines applicable to the Trustee,
as Asset Manager, shall be communicated in writing to the Trustee. Prior to a
Change in Control, the Trustee shall have no responsibility with respect to the
formulation of any funding policy or any investment or diversification policies
embodied therein. Prior to a Change in Control, the Company shall be
responsible for communicating, and monitoring adherence to, any limitations or
guidelines imposed on any other Asset Manager.
4.4 Responsibility for Diversification. Prior to a Change in
Control, the Company shall be responsible for determining the diversification
policy of the Trust Fund, for monitoring adherence by the Asset Managers to
such policy, and for advising the Asset Managers with respect to limitations on
employer or other securities or property contained in each Plan or imposed on
each Plan by applicable statute.
ARTICLE V
Responsibility for Directed Funds
5.1 Responsibility for Selection of Agents. Prior to a Change in
Control, all transactions of any kind or nature in or from a Directed Fund
shall be made upon such terms and conditions and from or through such
principals and agents as the responsible Asset Manager shall direct. No such
transactions shall be executed through the facilities of the Trustee except
where the Trustee shall make available its facilities solely for the purpose of
temporary investment of
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cash reserves of a Directed Fund. (However, nothing in the preceding sentence
shall confer any authority upon the Trustee to invest the cash balances of any
Directed Fund unless and until it receives directions from the responsible
Asset Manager.)
5.2 Trustee Not Responsible for Investments in Directed Funds. Prior
to a Change in Control and except as provided in Section 5.6, the Trustee shall
be under no duty or obligation to review or to question any direction of any
Asset Manager, or to review securities or any other property held in any
Directed Fund with respect to prudence or proper diversification or compliance
with any limitation on the Asset Manager's authority under the terms of each
Plan, any agreement entered into between the Company and the Asset Manager or
imposed by applicable law, or to make any suggestions or recommendations to the
Company or the Asset Manager with respect to the retention or investment of any
assets of any Directed Fund, and shall have no authority to take any action or
to refrain from taking any action with respect to any asset of a Directed Fund
unless and until it is directed to do so by the Asset Manager.
5.3 Investment Vehicles. Any Investment Vehicle, or interest
therein, acquired by or transferred to the Trustee upon the directions of the
Asset Manager shall be allocated to the appropriate Directed Fund, and the
Trustee's duties and responsibilities under this Agreement shall not be
increased or otherwise affected thereby. The Trustee shall be responsible
solely for the safekeeping of the evidence of the Trust's ownership of or
interest or participation in such Investment Vehicle.
5.4 Reliance on Asset Manager. The Trustee shall be required under
this Agreement to execute documents, to settle transactions, to take action on
behalf of or in the name of the Trust and to make and receive payments on the
direction of the Asset Manager. Any direction of the Asset Manager shall
constitute a certification to the Trustee (i) that the investment is authorized
under the terms of this Agreement and any other agreement or law affecting the
Asset Manager's authority to deal with the Directed Fund, (ii) that any
contract, agency, joinder, adoption, participation or partnership agreement,
deed, assignment or other document of any kind which the Trustee is required to
execute to effectuate the transaction has been reviewed by the Asset Manager
and, to the extent it deems advisable and prudent, its counsel, (iii) that such
instrument or document is in proper form for execution by the Trustee, (iv)
that, where appropriate, insurance protecting the Trust against loss or
liability has been or will be maintained in the name of or for the benefit of
the Trustee, and (v) that all other acts to perfect and protect the Trust's
rights have been taken, and the Trustee shall have no duty to make any
independent inquiry or investigation as to any of the foregoing before acting
upon such direction. In addition, the Trustee shall not be liable for the
default of any Person with respect to any investment in a Directed Fund or for
the form, genuineness, validity, sufficiency or effect of any document executed
by, delivered to or held by it for any Directed Fund on account of such
investment, or if, for any reason (other than the negligence or willful
misconduct of the Trustee) any rights of the Trust therein shall lapse or shall
become unenforceable or worthless.
5.5 Merger of Funds. Except pursuant to Section 4.1(b), the Trustee
shall not have any discretionary responsibility or authority to manage or
control any asset held in a Directed Fund upon the resignation or removal of an
Asset Manager unless and until it has been
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notified in writing by the Company that the Asset Manager's authority has
terminated and that such Directed Fund's assets are to be integrated with the
Discretionary Fund. Such notice shall not be deemed effective until two Bank
Business Days after it has been received by the Trustee unless the Trustee
shall agree otherwise. The Trustee shall not be liable for any losses to the
Trust Fund resulting from the disposition of any investment made by the Asset
Manager or for the retention of any illiquid or unmarketable investment or any
investments which are not actively traded publicly held securities or for the
holding of any other investment acquired by an Asset Manager if the Trustee is
unable to dispose of such investment because of any restrictions imposed by the
Securities Act of 1933 or other federal or state law, or if an orderly
liquidation of such investment is impractical under prevailing conditions
imposed pursuant to Section 4.2, or for any other violation of the terms of
this Agreement, each Plan or applicable law as a result of the addition of
Directed Fund assets to the Discretionary Fund.
5.6 Notification of Company in Event of Breach. Prior to a Change in
Control, if the Trustee has knowledge of a breach committed by an Asset
Manager, it shall notify the Company thereof, and the Company shall thereafter
assume full responsibility to all Persons interested in each Plan to remedy
such breach. After a Change in Control, if the Trustee has knowledge of a
breach committed by an Asset Manager, the Trustee shall thereafter assume full
responsibility to all Persons interested in each Plan to remedy such breach.
5.7 Definition of Knowledge. While the Trustee will perform certain
duties (such as custodial, reporting, recording, valuation and bookkeeping
functions) with respect to Directed Funds, such duties will not involve the
exercise of any discretionary authority to manage or control the assets of the
Directed Funds and such certain duties will be the responsibility of officers
or other employees of the Trustee who are not familiar with and have no
responsibility for investment management. Therefore, the Company agrees that in
the event that knowledge of the Trustee shall be a prerequisite to imposing a
duty upon or to determining liability of the Trustee under this Agreement or
any statute regulating the conduct of the Trustee with respect to such Directed
Funds or relieving the Company of its undertakings under Section 15.2, the
Trustee will not be deemed to have knowledge of, or to have participated in,
any act or omission of an Asset Manager involving the investment of assets
allocated to the Directed Funds solely as a result of the receipt and
processing of information in the course of performing such duties.
5.8 Duty to Enforce Claims. Prior to a Change in Control, the
Trustee shall have no duty to commence or maintain any action, suit or legal
proceeding on behalf of the Trust on account of or growing out of any
investment made in or for a Directed Fund unless the Trustee has been directed
to do so by the Asset Manager and unless the Trustee is either in possession of
funds sufficient for such purpose or unless it has been indemnified by the
Company or the Investment Manager, to its satisfaction, for counsel fees, costs
and other expenses and liabilities to which it, in its sole judgment, may be
subject by beginning or maintaining such action, suit or legal proceeding.
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5.9 Restrictions on Transfer. Nothing herein shall be deemed to
empower any Asset Manager to direct the Trustee to transfer any asset of a
Directed Fund to itself except for purposes enumerated in Section 6.1(a).
5.10 Section 4.1(b) Controlling. All provisions of this Article V are
subject to Section 4.1(b).
ARTICLE VI
Powers of Asset Managers
6.1 General Powers. Subject to Section 4.1(b) hereof and without in
any way limiting the powers and discretions conferred upon any Asset Manager by
the other provisions of this Agreement or by law, each Asset Manager, including
the Trustee, shall be vested with the following powers and discretions with
respect to the assets of the Trust subject to its management and control, and,
upon the directions of the Asset Manager of a Directed Fund, the Trustee shall
make, execute, acknowledge and deliver any and all documents of transfer and
conveyance and any and all other instruments that may be necessary or
appropriate to enable such Asset Manager to carry out such powers and
discretions:
(a) to hold marketable securities subject to appropriate objectives
and guidelines set by the Company, including stocks, bonds and money market
instruments. However, the Trustee shall have no responsibility or obligation to
monitor objectives and guidelines set forth by the Company;
(b) to sell, exchange, convey, transfer or otherwise dispose of any
property by private contract or at public auction, and no person dealing with
the Asset Manager shall be bound to see to the application of the purchase
money or to inquire into the validity, expediency or propriety of any such sale
or other disposition;
(c) to enter into contracts or to make commitments either alone or
in company with others to sell or acquire property;
(d) to delegate to a manager or holder or holders of a majority
interest in any real property, the management and operation of any part
interest in such property or properties (including the authority to sell such
part interests or otherwise carry out the decision of such manager or the
holder or holders of such majority interest);
(e) to lease to others for any term without regard to the duration
of the Trust any real property or part interest in real property;
(f) to vote upon any stocks, bonds or other securities (but subject
to the suspension of any voting rights as a result of any broker loan or
similar agreement); to give general or special proxies or powers of attorney
with or without power of substitution; to exercise
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any conversion privileges, subscription rights or other options and to make any
payments incidental thereto; to consent to or otherwise participate in
corporate reorganizations or other changes affecting corporate securities and
to delegate discretionary powers and to pay any assessments or charges in
connection therewith; and generally to exercise any of the powers of an owner
with respect to stocks, bonds, securities or other property;
(g) to organize corporations under the laws of any state for the
purpose of acquiring or holding title to property (or to direct the Trustee to
organize such corporations or to appoint any ancillary trustee acceptable to
the Trustee for such purpose);
(h) to invest in a fund consisting of securities issued by
corporations and selected and retained solely because of their inclusion in,
and in accordance with, one or more commonly used indices of such securities,
with the objective of providing investment results for the fund which
approximate the overall performance of such designated index;
(i) to enter into any partnership, as a general or limited partner,
or joint venture;
(j) to purchase units or certificates issued by an investment
company or pooled trust or comparable entity;
(k) to transfer money or other property to an insurance company
issuing an insurance contract; and
(l) to be reimbursed for the expenses incurred in exercising any of
the foregoing powers or for paying the reasonable expenses incurred by any
agent, manager or trustee appointed pursuant hereto.
6.2 Additional Powers of Trustee. In addition, the Trustee is hereby
authorized:
(a) to register any securities held in the Trust Fund in its own
name or in the name of a nominee and to hold any securities in bearer form, and
to combine certificates representing such securities with certificates of the
same issue held by the Trustee in other fiduciary or representative capacities
or as agent for customers, or to deposit or to arrange for the deposit of such
securities in any qualified central depository even though, when so deposited,
such securities may be merged and held in bulk in the name of the nominee of
such depository with other securities deposited therein by other depositors, or
to deposit or arrange for the deposit of any securities issued by the United
States Government, or any agency or instrumentality thereof, with a Federal
Reserve Bank, but the books and records of the Trustee shall at all times show
that all such investments are part of the Trust Fund;
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(b) to employ suitable agents, depositories and counsel, domestic or
foreign, and to charge their reasonable expenses and compensation against the
Trust Fund, and to confer upon any such depository the powers conferred upon
the Trustee by paragraph (a) of this Section 6.2 as well as the power to
appoint subagents and depositories, wherever situated, in connection with the
retention of securities or other property;
(c) to borrow money from any source as may be necessary or advisable
to effectuate the purposes of the Trust on such terms and conditions as the
Trustee, in its absolute discretion, may deem advisable;
(d) to deposit funds in interest bearing account deposits maintained
by or savings certificates issued by Wachovia, in its separate corporate
capacity, or in any other banking institution;
(e) to compromise or otherwise adjust all claims in favor of or
against the Trust Fund other than claims solely affecting the right of any
Person to benefits under each Plan;
(f) to make any distribution or transfer of assets authorized under
the terms of this Agreement in cash or in kind as the Trustee, in its absolute
discretion, shall determine and, in furtherance thereof, to value such assets,
which valuation shall be conclusive and binding on all persons;
(g) upon the direction of the Company, to maintain and operate one
or more market inventory funds as a vehicle to exchange securities among
Discretionary and Directed Funds without alienating the property from the
Trust; and
(h) to hold uninvested cash awaiting investment and such additional
cash balances as it shall deem reasonable or necessary, without incurring any
liability for the payment of interest thereon.
6.3 Annuity and Insurance Contracts. (a) The Trustee, upon written
direction of the Company prior to a Change in Control, shall pay from the Trust
Fund sums (including periodic premiums) to such insurance company or companies
as the Company may direct for the purpose of procuring individual or group
annuity or life insurance contracts for each Plan (hereinafter in this Article
referred to as "Contracts"). The Trustee may reimburse the Company from the
Trust Fund any sums paid by the Company to such insurance company or companies
in connection with procuring or maintaining such Contracts. The Company shall
prepare, or cause to be prepared in such form as it shall prescribe, the
application for any Contract to be applied for. The Trustee shall receive and
hold in the Fund, subject to the provisions hereinafter set forth in this
Article, all Contracts so obtained.
(b) The Trustee shall be the owner of Contracts held in the Trust
Fund and, upon written direction of the Company prior to a Change in Control,
shall have power, without the consent of any other person, to exercise any and
all of the rights, options and privileges that belong to the absolute owner of
any Contract held in the Trust Fund or that are granted by the
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terms of any such Contract or by the terms of this Agreement. The Trustee shall
have no discretion with respect to the exercise of any of the foregoing powers
or to take any other action permitted by any Contract held in the Trust Fund,
but shall exercise such powers or take such action only upon the written
direction of the Company prior to a Change in Control; the Trustee shall have
no duty to exercise any of such powers or to take any such action unless and
until it shall have received such direction. The Trustee, upon the written
direction of the Company prior to a Change in Control, shall deliver any
Contract held in the Trust Fund to such person or persons as may be specified
in the direction.
(c) The Trustee shall hold in the Trust Fund the proceeds of any
sale, assignment or surrender of any Contract held in the Trust Fund and any
and all dividends and other payments of any kind received in respect of any
Contract held in the Trust Fund.
(d) Upon the written direction of the Company prior to a Change in
Control, the Trustee shall pay from the Trust Fund premiums, assessments, dues,
charges and interest, if any, upon any Contract held in the Trust Fund. The
Trustee shall have no duty to make any such payment unless and until it shall
have received such direction. After a Change in Control occurs, the Trustee
shall pay from the Trust Fund premiums, assessments, dues, charges and
interest, if any, upon any Contract held in the Trust Fund, without direction
from the Company.
(e) No insurance company that may issue any Contract or Contracts
held in the Trust Fund shall be deemed to be a party to this Agreement for any
purpose, or to be responsible in any way for the validity of this Agreement or
to have any liability under this Agreement other than as stated in each
Contract that it may issue. Any insurance company may deal with the Trustee as
sole owner of any Contract issued by it and held in the Fund, without inquiry
as to the authority of the Trustee to act, and may accept and rely upon any
written notice, instruction, direction, certificate or other communication from
the Trustee believed by it to be genuine and to be signed by an officer of the
Trustee and shall incur no liability or responsibility for so doing. Any sums
paid out by any insurance company under any of the terms of a Contract issued
by it and held in the Trust Fund either to the Trustee, or, in accordance with
its direction, to any other person or persons designated as payees in such
Contract shall be a full and complete discharge of the liability to pay such
sums, and the insurance company shall have no obligation to look to the
disposition of any sums so paid. No insurance company shall be required to look
into the terms of this Agreement, to question any action of the Trustee or to
see that any action of the Trustee is authorized by the terms of this
Agreement.
(f) Anything contained herein to the contrary notwithstanding,
neither the Company nor the Trustee shall be liable for the refusal of any
insurance company to issue or change any Contract or Contracts or to take any
other action requested by the Trustee; nor for the form, genuineness, validity,
sufficiency or effect of any Contract or Contracts held in the Trust Fund; nor
for the act of any person or persons that may render any such Contract or
Contracts null and void; nor for the failure of any insurance company to pay
the proceeds and avails of any such Contract or Contracts as and when the same
shall become due and payable; nor for any
16
<PAGE> 21
delay in payment resulting from any provision contained in any such Contract or
Contracts; nor for the fact that for any reason whatsoever (other than their
own negligence or willful misconduct) any Contract or Contracts shall lapse or
otherwise become uncollectible.
(g) After a Change in Control occurs, the Trustee may exercise any
of the powers set forth in paragraphs (a) through (f) of this Section 6.3
without direction from the Company to purchase Contracts the rates of return
and maturity dates of which may reasonably be expected to yield assets of the
Trust Fund sufficient to discharge the Company's obligations under each Plan as
set forth in the most recent Participant Data furnished to the Trustee prior to
or upon the Change in Control and to pay all expenses and fund all reserves
anticipated under this Agreement. In making its decision to purchase Contracts,
the Trustee shall, in good faith, determine whether the investment policy of
the Fund at such time will, in its judgment, discharge the Company's
obligations under the Plans and this Agreement without undue risk to the Trust.
The Trustee, in exercising the powers set forth in the preceding sentence,
shall incur no liability under the terms of this Agreement, except for the
Trustee's gross negligence or willful misconduct.
ARTICLE VII
Records and Accounts of Trustees
7.1 Records. The Trustee shall keep accurate and detailed accounts
of all investments, receipts, disbursements and other transactions in the Trust
Fund and all accounts, books and records relating thereto shall be open to
inspection and audit at all reasonable times during normal business hours by
any Person designated by the Company.
7.2 Annual Account. Within ninety (90) days following the close of
each Accounting Period, the Trustee shall file with the Account Party a written
account setting forth the receipts and disbursements of the Trust Fund and the
investments and other transactions effected by it upon its own authority or
pursuant to the directions of any Person as herein provided during the
Accounting Period.
7.3 Account Stated. Upon the expiration of ninety (90) days from the
date of filing its annual account with the Account Party, the Trustee shall be
forever released and discharged from all liability and further accountability
to the Company, the Account Party or any other Person with respect to the
accuracy of such accounting and the propriety of all acts and failures to act
of the Trustee reflected in such account, except with respect to any such acts
or transactions as to which the Account Party shall, within such ninety (90)
day period, file with the Trustee specific written objections.
7.4 Judicial Accountings. Nothing herein shall in any way limit the
Trustee's right to bring any action or proceeding in a court of competent
jurisdiction to settle its account or for such other relief as it may deem
appropriate.
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<PAGE> 22
7.5 Necessary Parties. In order to protect the Trust Fund from the
expense of litigation, no Person other than the Company shall be a necessary
party in any proceeding under Section 7.4 or may require the Trustee to account
or may institute any other action or proceeding against the Trustee or the
Trust.
ARTICLE VIII
Compensation, Taxes and Expenses
8.1 Compensation and Expenses. (a) Prior to a Change in Control, the
Trustee shall, upon receipt of written direction from the Company, pay out of
the Trust Fund any expenses incurred by the Trustee in connection with its
administration of the Trust including, but not limited to, fees for legal
services rendered to the Trustee (whether or not rendered in connection with a
judicial or administrative proceeding), such compensation to the Trustee as
shall be agreed upon from time to time between the Trustee and the Company, and
all other proper charges and disbursements of the Trustee.
(b) After a Change in Control occurs, (i) the Trustee shall, without
any direction from the Company, pay out of the Trust Fund any reasonable
expenses incurred by the Trustee including, but not limited to, amounts
assessed against the Trustee in connection with liability incurred by the
Trustee as a result of any discretionary action which the Trustee may take
under the Trust after such Change in Control occurs, fees for legal services
rendered to the Trustee (whether or not rendered in connection with a judicial
or administrative proceeding), fees for actuarial and/or accounting services
rendered to the Trustee for purposes of determining benefits under a Plan, such
compensation to the Trustee as was agreed upon between the Trustee and the
Company prior to such Change in Control or as shall be agreed upon from time to
time between the Trustee and the Company after such Change in Control occurs,
and all other proper charges and disbursements of the Trustee, and (ii) such
expenses shall be paid prior to any other payments required to be made under
the terms of the trust created hereunder.
(c) In accordance with Section 9.3, the Trustee shall be authorized
after a Change in Control occurs to reserve such amount as it may deem
advisable for payments of its fees and expenses as set forth in paragraph (b)
of this Section 8.1.
(d) Anything in preceding paragraphs (a), (b) or (c) of this Section
8.1 to the contrary notwithstanding, the Company shall reimburse the Trustee
for any such reasonable expenses if for any reason such expenses are not paid
out of the Trust Fund. The Trustee's entitlement to reimbursement hereunder
shall not be affected by the resignation or removal of the Trustee or by the
termination of the Trust.
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<PAGE> 23
8.2 Taxes. The Company shall pay from its own assets any Federal,
State, Local or other taxes imposed or levied with respect to the corpus and/or
income of the Trust Fund or any part thereof under existing or future laws and
the Company, in its discretion, or the Trustee, in its discretion, may contest
the validity or amount of any tax, assessment, claim or demand respecting the
Trust Fund or any part thereof.
ARTICLE IX
Resignation or Removal of Trustee
9.1 Resignation or Removal. Prior to a Change in Control, the
Trustee may be removed by the Company at any time upon sixty (60) days' notice
in writing to the Trustee. After a Change in Control occurs, (i) the Trustee
may be removed by the Company through action of its Board of Directors at any
time upon sixty (60) days notice in writing to the Trustee except that the
Trustee may be not so removed by the Company, except with the consent of
seventy-five (75) percent in number of the participants and beneficiaries of
the Plans, or (ii) the Trustee may be removed by the participants upon sixty
(60) days' notice in writing to the Trustee, provided such notice is executed
by at least fifty-one (51) percent in number of the participants and
beneficiaries of each Plan. The Trustee may resign at any time upon sixty (60)
days' notice in writing to the Company.
9.2 Designation of a Successor. Upon the removal or resignation of
the Trustee, the Company, by action of its Board of Directors, shall appoint a
successor trustee which shall be a bank as defined under the Investment
Advisers Act of 1940, having a net worth in excess of $100,000,000 or having
assets in excess of $2,000,000,000 to act hereunder after the effective date of
such removal or resignation. Each successor trustee shall have the same powers
and duties as those conferred upon the Trustee hereunder, and upon acceptance
of such appointment by the successor trustee, the Trustee shall assign,
transfer and pay over the Trust Fund to such successor trustee. If, for any
reason, the Company cannot or does not act promptly to appoint a successor
trustee in the event of the resignation or removal of the Trustee, the Trustee
may apply to a court of competent jurisdiction for the appointment of a
successor trustee. Any expenses incurred by the Trustee in connection therewith
shall be charged to and paid from the Trust Fund as an expense of
administration.
9.3 Reserve for Expenses. Prior to a Change in Control, the Trustee
is authorized to reserve such amount as is agreed by the Company for payment of
its fees and expenses in connection with the settlement of its account or
otherwise, and any balance of such reserve remaining after payment of its fees
and expenses shall be paid over in accordance with the directions of the
Company. After a Change in Control occurs, the Trustee is authorized to reserve
such amount as it may deem advisable and reasonable at any time for payment of
its fees and expenses in connection with the settlement of its account or
otherwise, and any balance of such reserve remaining after payment of such fees
and expenses shall be paid over in accordance with the directions of the
Company under the last sentence of Section 10.4. The Trustee is authorized to
invest such reserve in any investment authorized under the terms of this
Agreement
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<PAGE> 24
appropriate for the temporary investment of cash reserves of trusts, the
earnings on which are to be credited to each Plan and the participants'
accounts. After a Change in Control, the Company agrees to keep the Trust
sufficiently funded at all times to allow for a reserve for the fees and
expenses and to enable the Trustee to reimburse itself in accordance with the
terms of this section and the terms of Article XV hereof.
ARTICLE X
Amendment or Termination
10.1 Amendment of Agreement. (a) This Agreement is irrevocable by the
Company. Subject to paragraph (b) hereof, the Company expressly reserves the
right at any time to amend this Agreement and the trust created thereby by
action of its Board of Directors to any extent that it may deem advisable. No
such amendment shall be made that affects the duties or responsibilities of the
Trustee without its consent thereto in writing; and provided further, that no
amendment may be made unless the Company, in its reasonable judgment, believes
that such amendment would have no material adverse impact on participants or
beneficiaries or that such amendment is necessary to avoid a greater adverse
impact on the participants or their beneficiaries. Such amendment shall become
effective upon delivery to the Trustee of a written instrument of amendment,
duly executed and acknowledged by the Company and accompanied by a certified
copy of a resolution of the Board of Directors of the Company authorizing such
amendment. The Company also shall deliver to the Trustee a copy of any
modifications or amendments to any Plan.
(b) Notwithstanding any other provisions of this Agreement, the
provisions of this Agreement and the trust created thereby may not be amended
after the date a Change in Control occurs without the written consent of
seventy-five (75) percent in number of the participants and beneficiaries. The
Trustee may request that the Company furnish evidence to establish that such a
percentage of participants and beneficiaries have granted written consent to
such an amendment. The Company reserves the right to amend or eliminate this
paragraph (b) prior to the date of a Change in Control.
10.2 Termination of Plan. In the event a Plan is terminated in whole
or in part prior to a Change in Control, the Trustee (subject to the provisions
of Articles XI and XII hereof and reserving such sums as the Trustee shall deem
reasonably necessary in settling its accounts and to discharge any obligation
of the Trust Fund for which the Trustee may be liable) shall apply or
distribute the Trust Fund attributable to such Plan in accordance with the
written directions of the Company. After the date a Change in Control occurs, a
Plan may not be terminated without the written consent of seventy-five (75)
percent in number of the participants of such Plan and their beneficiaries. In
case a Plan is terminated in whole or in part after a Change in Control occurs,
then the Trustee (subject to the provisions of Articles XI and XII hereof and
reserving such sums as the Trustee shall deem reasonably necessary in settling
its accounts and to discharge any obligation of the Trust Fund for which the
Trustee may be liable) shall apply or distribute the Trust Fund attributable to
such Plan in such manner and in such
20
<PAGE> 25
amounts as the Trustee shall determine based upon the most recent Participant
Data with respect to such Plan forwarded by the Company to the Trustee prior to
or upon such Change in Control and any supplemental information furnished to
the Trustee by a participant, beneficiary, the Company or its actuaries upon
which the Trustee may reasonably rely in making such a determination. Upon such
termination of a Plan in whole or in part, the Trustee shall have a right to
have its accounts settled with respect to such Plan as provided in Article VII
hereof. When the Trust Fund shall have been so applied or distributed and the
accounts of the Trustee shall have been so settled, the Trustee shall be
released and discharged from all further accountability or liability respecting
the Trust Fund with respect to such Plan (or that part of the Trust Fund so
applied or distributed, if such Plan is terminated only in part) and shall not
be responsible in any way for the further disposition of the Trust Fund with
respect to such Plan (or that part of the Trust Fund so applied or distributed,
if the Plan is terminated only in part) or any part thereof so applied or
distributed. Notwithstanding the above, no distribution shall be made from the
Trust to a participant or beneficiary attributable to the termination of a Plan
during the ninety (90) day period following such termination of each Plan. Any
distribution made thereafter shall be subject to the provisions of Section 3.3
hereof.
10.3 Distribution of Residual Assets. In the event of the termination
of a Plan prior to a Change in Control, any residual assets with respect to
such Plan shall be distributed to the Company if all liabilities of such Plan
and all other Plans to participants and their beneficiaries have been satisfied
and the distribution does not contravene any provision of law.
10.4 Distribution of Excess Assets. In the event that the fair market
value of the assets of the Trust, determined as of the close of each calendar
year by an actuary chosen by the Company, exceeds one hundred ten (110) percent
of the present value of the aggregate benefits payable to participants under
each Plan, the Company may, in its sole discretion, prior to a Change in
Control, direct the Trustee to distribute such excess assets, in whole or in
part, to the Company provided such distribution does not contravene any
provisions of law. After a Change in Control, subject to Section 3.3, no assets
may be distributed to the Company until (i) all obligations to all Plan
participants and beneficiaries have been satisfied, and (ii) provision has been
made for (A) the payment of expenses incurred or reasonably projected by the
Trustee to be incurred under the terms of this Agreement and (B) the
establishment and maintenance of reserves as contemplated hereunder.
ARTICLE XI
Prohibition Against Diversion
11.1 No Right of Alienation or Employment. Except as otherwise
provided under the terms of this Agreement, at no time prior to the
satisfaction of all liabilities with respect to participants and their
beneficiaries under this trust shall any part of the corpus and/or income of
the Trust Fund be used for, or diverted to, purposes other than for the
exclusive benefit of such participants or their beneficiaries and the assets of
the Trust Fund shall never inure to the benefit of the Company and shall be
held for the exclusive purposes of providing benefits to
21
<PAGE> 26
participants in a Plan and their beneficiaries and defraying reasonable
expenses of administering such Plan and this Trust. The assets of the Trust
Fund shall not be subject to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge by any participant or beneficiary.
The participants and beneficiaries have no beneficial ownership in or preferred
claim on the assets of the Trust. Amounts payable under the Plans consist of
the Company's unsecured promise to pay such amounts and, with respect to such
amounts, the participants have the status of unsecured creditors. Participation
in a Plan does not give any employee a right to continued employment with the
Company or any subsidiary or affiliate.
ARTICLE XII
Sufficiency of Trust Fund
12.1 Payment of Benefits. (a) Prior to a Change in Control, if the
assets of the Trust Fund are, as of any Valuation Date, which is the last day
of the Accounting Period, including, without limitation, at the time of
termination of a Plan or as a result of the payment of expenses as set forth in
paragraph (b) of Section 8.1, insufficient to fulfill the Company's obligations
under the Plans to participants or beneficiaries, then (i) the accrued benefits
under such Plan of each affected participant or beneficiary from the Trust Fund
shall be reduced by multiplying such accrued benefit by a fraction, the
numerator of which shall be the current value of assets in the Trust, and the
denominator of which shall be the aggregate present value of the accrued
benefits payable to participants under such Plan as determined by an actuary
chosen by the Company; and (ii) the Company shall pay to such participants or
beneficiaries the remaining amounts owed at such time as provided pursuant to
such Plan.
(b) From time to time (at least annually) after a Change in Control
occurs, if the assets of the Trust Fund are, as of any Valuation Date (the last
day of the Accounting Period), including, without limitation, at the time of
termination of a Plan or as a result of the payment of expenses as set forth in
paragraph (b) of Section 8.1, insufficient to fulfill the Company's accrued
obligations as of such date under the Plans to participants or beneficiaries
and to pay the expenses previously incurred or reasonably projected to be
incurred by the Trustee, under this Agreement, then the Trustee shall so notify
the Company, setting forth the additional aggregate amount required and the
Company shall, within ten (10) days of the receipt of such notice pay to the
Trustee the amount set forth in such notice.
12.2 Contribution to Fund. (a) After the execution of this Agreement
and prior to a Change in Control, the Company may, but is not required to, make
a single contribution of a sinking fund of actuarially determined contributions
in an amount as shall be necessary, as determined by the Company, to ensure
that the assets of the Fund shall be sufficient to discharge the Company's
obligations under the Plans.
During a calendar year, the Company may, but is not required to, make
contributions to the Trust to insure that the assets of the Trust exceed as a
minimum the present value of accrued benefits as of the end of that year for
all participants who have retired or are
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<PAGE> 27
eligible for retirement or early retirement during the year. The present value
shall be determined by using the interest rate used for funding purposes in the
Bowater Incorporated Employees' Retirement Plan's most recent actuarial
valuation ("Plan Valuation"). In lieu of the foregoing, the Company may make
such provisions for the funding of the Trust as it deems appropriate.
(b) After a Change in Control occurs, the Company shall make such
contributions within ten (10) days of the Change in Control, and thereafter as
of the first day of each calendar month, to the trust created hereunder as
shall be necessary to ensure that the assets of the Trust shall at all times be
sufficient to discharge the Company's obligations under the Plans and under the
terms of this Agreement. The Company's obligations under the Plans shall be
equal to the aggregate present value of the future benefits payable to the
participants and beneficiaries under the Plans as determined by using the 1983
Group Annuity Mortality Table (weighted 50% male), and the lower of (i) the
"applicable interest rate" under Section 417(e)(3)(A)(ii)(II) of the Code which
would be used for purposes of such Section for the last full month before the
month for which such present value is being calculated, and (ii) the interest
rate used in the most recent Plan valuation for funding purposes.
Anything herein to the contrary notwithstanding, the Trustee shall
under no circumstances be responsible for the adequacy of the Trust, whether
before or after a Change in Control, as the result of the distribution of
excess Trust assets to the Company, the payment of claims of judgment creditors
of the Company, the payment of taxes of the Trust or of the participants and/or
beneficiaries, the payment of expenses of the Trust or the Trustee or otherwise
to fulfill the obligations of the Company under the Plans to participants and
beneficiaries.
(c) For purposes of calculating the contribution that the Company
may or is required to make under Section 12.2, the Company and the Trustee
shall make reasonable projections of (i) increases in the obligations under the
Plans, including but not limited to those caused by increases in compensation,
increases in tax rates, increases in the number of participants included in the
Plans, and the likelihood that increased or accelerated amounts will be payable
pursuant to provisions of such Plans as a result of a Change in Control, and
(ii) potential future expenses or reserves that may be payable or required to
be maintained under the terms of this Agreement.
ARTICLE XIII
Authorities
13.1 Company. Whenever the provisions of this Agreement specifically
require or permit any action to be taken by "the Company", such action must be
authorized by an officer of the Company, who has been duly authorized by the
Board of Directors to act on the Company's behalf. The Company shall furnish
the Trustee from time to time with a list of the
23
<PAGE> 28
names and signatures of all individual officers authorized to act for the
Company hereunder and certified by the Secretary or an Assistant Secretary of
the Company, and the Trustee shall be fully protected in acting upon any
notices or directions received from any of them.
13.2 Investment Manager. The Company shall cause each Investment
Manager to furnish the Trustee from time to time with the names and signatures
of those persons authorized to direct the Trustee on its behalf hereunder.
13.3 Form of Communications. Any agreement between the Company and
any Person (including an Investment Manager) or any other provision of this
Agreement to the contrary notwithstanding other than Section 14.6, all notices,
directions and other communications to the Trustee shall be in writing or in
such other form, including transmission by electronic means through the
facilities of third parties or otherwise, specifically agreed to in writing by
the Trustee, and the Trustee shall be fully protected in acting in accordance
therewith. Notice of a Change in Control shall be communicated to the Trustee
in a writing signed by an officer of the Company which notice shall be
conclusive and binding on the Trustee and on which the Trustee shall be
entitled to rely.
13.4 Continuation of Authority. The Trustee shall have the right to
assume, in the absence of written notice to the contrary, that no event
constituting a change in the Company's officers or terminating the authority of
any Person, including any Investment Manager, has occurred.
13.5 No Obligation to Act on Unsatisfactory Notice. The Trustee shall
incur no liability under this Agreement for any failure to act pursuant to any
notice, direction or any other communication from any Asset Manager, the
Company, or any other Person or the designee of any of them unless and until it
shall have received instructions in a form satisfactory to it.
ARTICLE XIV
General Provisions
14.1 Governing Law. This Agreement shall be administered, construed
and enforced according to the laws of the State of Delaware. Nothing in this
Agreement shall be construed to subject either the Trust or the Plans to ERISA
other than Part 1 or 5 of Title I thereof.
14.2 Entire Agreement. The Trustee's duties and responsibilities to
the Plan or any Person interested therein shall be limited to those
specifically set forth in this Agreement.
14.3 Mistake. No mistake made in good faith and in the exercise of
due care in connection with the administration of the Trust Fund shall be
deemed to be a breach of the Trustee's duties if, promptly after discovery of
the mistake, the Trustee takes whatever action may be practicable in the
circumstances to remedy the mistake.
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<PAGE> 29
14.4 Reliance on Experts. The Trustee and the Company may consult
with experts (who may be experts employed by the Company), including legal
counsel, appraisers, pricing services, accountants or actuaries, selected by
them with due care, with respect to the meaning and construction of this
Agreement or any provision hereof, or concerning their powers and duties
hereunder, and shall be protected for any action taken or omitted by them in
good faith pursuant to or on the basis of the opinion of any such expert.
14.5 Successor to the Trustee. Any successor, by merger or otherwise,
to substantially all of the trust business of Wachovia shall automatically and
without further action become the Trustee hereunder if and only if such
successor meets the requirements of Section 9.2. If the successor does not meet
such requirements, then the Trustee shall be deemed to have resigned as of the
date of such merger or other event and the provisions of Section 9.2 shall
apply. Any successor shall be subject to all the terms and conditions and
entitled to all the benefits and immunities hereof.
14.6 Notices. All notices, reports, annual accounts and other
communications to the Company, Investment Manager, or any other Person shall be
deemed to have been duly given if mailed, postage prepaid, electronically
delivered or delivered in hand to such Person at its address appearing on the
records of the Trustee, which address shall be filed with the Trustee at the
time of the establishment of the Trust and shall be kept current hereafter by
the Company. All directions, notices, statements, objections and other
communications to the Trustee shall be deemed to have been given when received
by the Trustee at its offices.
14.7 Plan Documents. The Company shall provide the Trustee with a
complete, current copy of each Plan. The Trustee shall be entitled to rely
upon the Company's attention to this obligation and shall be under no duty to
inquire of any Person as to the existence of any documents not provided
hereunder.
14.8 No Waiver; Reservation of Rights. The rights, remedies,
privileges and immunities expressed herein are cumulative and are not
exclusive, and the Trustee shall be entitled to claim all other rights,
remedies, privileges and immunities to which it may be entitled under
applicable law.
14.9 Descriptive Headings. The captions in this Agreement are solely
for convenience of reference and shall not define or limit the provisions
hereof.
14.10 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be an original and both of which shall
constitute together but one and the same document.
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<PAGE> 30
ARTICLE XV
Undertaking by Company
15.1 Undertaking. In consideration of Wachovia's agreeing to enter
into this Agreement, the Company hereby agrees to hold harmless Wachovia,
individually and as Trustee ("Wachovia" or "Trustee" within this Section 15.1
shall include any parent or subsidiary of Wachovia and any corporation the
stock of which is wholly owned by Wachovia Corporation as well as any successor
corporation to those previously described) and Wachovia's directors, officers,
and employees, from and against all amounts, including without limitation
taxes, expenses (including reasonable counsel fees), liabilities, claims,
damages, actions, suits or other charges, incurred by or assessed against
Wachovia, individually or as Trustee, or its directors, officers or employees,
(i) as a result of any act or omission of any predecessor trustee appointed
under a Plan; (ii) as a result of anything done in good faith, or alleged to
have been done, by or on behalf of Wachovia in reliance upon the directions of
any Investment Manager or the Company, or anything omitted to be done in good
faith, or alleged to have been omitted, in the absence of such directions;
(iii) as a result of the failure of the Company, directly or indirectly, to
adequately, carefully and diligently discharge its fiduciary responsibilities,
if any, with respect to a Plan; (iv) as a result of any other event or
occurrence beyond the Trustee's control, including, but not limited to, claims,
actions, or suits which challenge the authority of the Company to enter into
this Agreement, which challenge the validity of a Plan and the liabilities of
the Company thereunder, or which make other similar challenges or allegations;
or (v) as a result of any discretionary action taken by the Trustee after a
Change in Control occurs pursuant to the terms of the Trust, except for the
Trustee's negligence or willful misconduct.
15.2 Limitation on Undertaking. Anything hereinabove to the contrary
notwithstanding, the Company shall have no responsibility to Wachovia under
Section 15.1 if Wachovia knowingly participated in or knowingly concealed any
act or omission of any Person described in such Section knowing that such act
or omission constituted a breach of such Person's fiduciary responsibilities,
or if Wachovia fails to perform any of the duties specifically undertaken by it
under the provisions of this Agreement, or if Wachovia fails to act in
conformity with duly given and authorized directions hereunder.
15.3 Survival of Undertakings. The Company further agrees that the
undertakings made in this Article XV shall be binding on its successors or
assigns and shall survive termination, amendment or restatement of this
Agreement, or the resignation or removal of the Trustee, and that this Article
shall be construed as a contract between the Company and the Trustee according
to the laws of the State of Delaware in effect from time to time.
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<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
15th day of April, 1998.
BOWATER INCORPORATED
By: /s/ David G. Maffucci
-----------------------------------------------
Name: David G. Maffucci
-----------------------------------------------
Title: Sr. Vice President and Chief Financial Officer
-----------------------------------------------
Date signed: May 7, 1998
------------------------------------------
WACHOVIA BANK, N.A.
By: /s/ Beverly H. Wood
-----------------------------------------------
Name: Beverly H. Wood
-----------------------------------------------
Title: Senior Vice President
-----------------------------------------------
Date signed: May 14, 1998
------------------------------------------
27
<PAGE> 32
LIST A
PARTICIPATING PLANS, AGREEMENTS OR ARRANGEMENTS
Supplemental Benefit Plan for Designated Employees of Bowater Incorporated and
Affiliated Companies
Bowater Incorporated Compensatory Benefit Plan
Bowater Incorporated Benefits Equalization Plan
28
<PAGE> 1
EXHIBIT 10.2
AMENDED AND RESTATED
BOWATER INCORPORATED
OUTSIDE DIRECTORS BENEFIT PLAN GRANTOR TRUST
Effective April 15, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
Title-Purpose-Policy-Effect............................................. 1
1.1 Name........................................................... 1
1.2 Definitions.................................................... 1
1.3 Purpose........................................................ 5
1.4 Effect......................................................... 6
ARTICLE II
Valuation............................................................... 6
2.1 Valuation of Trust Fund........................................ 6
ARTICLE III
Administration of the Plans............................................. 6
3.1 Payments From Trust Fund....................................... 6
3.2 Participant Data............................................... 7
3.3 Creditors...................................................... 8
3.4 Reliance on Company............................................ 8
3.5 Responsibility for Plan Administration......................... 8
3.6 Trustee Not Responsible for Administration of Judgments........ 9
ARTICLE IV
Investment of Trust Assets.............................................. 9
4.1 Asset Managers................................................. 9
4.2 Investment Discretion.......................................... 10
4.3 Limitations on Investment Discretion........................... 10
4.4 Responsibility for Diversification............................. 10
ARTICLE V
Responsibility for Directed Funds....................................... 10
5.1 Responsibility for Selection of Agents......................... 10
5.2 Trustee Not Responsible for Investments in Directed Funds...... 11
5.3 Investment Vehicles............................................ 11
5.4 Reliance on Asset Manager...................................... 11
5.5 Merger of Funds................................................ 11
5.6 Notification of Company in Event of Breach..................... 12
5.7 Definition of Knowledge........................................ 12
5.8 Duty to Enforce Claims......................................... 12
</TABLE>
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<TABLE>
<S> <C>
5.9 Restrictions on Transfer...................................... 12
5.10 Section 4.1(b) Controlling.................................... 12
ARTICLE VI
Powers of Asset Managers................................................ 13
6.1 General Powers................................................ 13
6.2 Additional Powers of Trustee.................................. 14
6.3 Annuity and Insurance Contracts............................... 15
6.4 Letters of Credit............................................. 17
ARTICLE VII
Records and Accounts of Trustees........................................ 17
7.1 Records....................................................... 17
7.2 Annual Account................................................ 17
7.3 Account Stated................................................ 17
7.4 Judicial Accountings.......................................... 17
7.5 Necessary Parties............................................. 17
ARTICLE VIII
Compensation, Taxes and Expenses........................................ 18
8.1 Compensation and Expenses..................................... 18
8.2 Taxes......................................................... 18
ARTICLE IX
Resignation or Removal of Trustee....................................... 19
9.1 Resignation or Removal........................................ 19
9.2 Designation of a Successor.................................... 19
9.3 Reserve for Expenses.......................................... 19
ARTICLE X
Amendment or Termination................................................ 20
10.1 Amendment of Agreement........................................ 20
10.2 Termination of Plan........................................... 20
10.3 Distribution of Residual Assets............................... 21
10.4 Distribution of Excess Assets................................. 21
ARTICLE XI
Prohibition Against Diversion........................................... 21
11.1 No Right of Alienation or Employment.......................... 21
</TABLE>
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<TABLE>
<S> <C>
ARTICLE XII
Sufficiency of Trust Fund............................................... 22
12.1 Payment of Benefits.......................................... 22
12.2 Contribution to Fund......................................... 22
ARTICLE XIII
Authorities............................................................. 23
13.1 Company...................................................... 23
13.2 Investment Manager........................................... 23
13.3 Form of Communications....................................... 23
13.4 Continuation of Authority.................................... 24
13.5 No Obligation to Act on Unsatisfactory Notice................ 24
ARTICLE XIV
General Provisions...................................................... 24
14.1 Governing Law................................................ 24
14.2 Entire Agreement............................................. 24
14.3 Mistake...................................................... 24
14.4 Reliance on Experts.......................................... 24
14.5 Successor to the Trustee..................................... 24
14.6 Notices...................................................... 25
14.7 Plan Documents............................................... 25
14.8 No Waiver; Reservation of Rights............................. 25
14.9 Descriptive Headings......................................... 25
14.10 Counterparts................................................. 25
ARTICLE XV
Undertaking by Company.................................................. 25
15.1 Undertaking.................................................. 25
15.2 Limitation on Undertaking.................................... 26
15.3 Survival of Undertakings..................................... 26
LIST A....................................................................... 27
LIST B....................................................................... 28
</TABLE>
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<PAGE> 5
THIS GRANTOR TRUST AGREEMENT was initially made and entered into as of
the 5th day of September, 1989, by and between BOWATER INCORPORATED, a Delaware
corporation (the "Company"), and WACHOVIA BANK, N.A., a national banking
association organized and existing under the laws of the United States (the
"Trustee").
W I T N E S S E T H :
WHEREAS, the Company established this Grantor Trust to serve as a
funding vehicle for certain designated non-qualified benefit plans, agreements
or arrangements and as a medium for holding amounts payable to eligible
participants under the Bowater Incorporated Retirement Plan for Outside
Directors and the Deferred Compensation Plan for Outside Directors of Bowater
Incorporated (the "Plans"), and any plans, agreements or arrangements hereafter
adopted by Bowater Incorporated and designated for participation in this Trust;
and
WHEREAS, the Trustee has agreed to hold and administer all sums of
money and such other property acceptable to the Trustee as shall from time to
time be contributed, paid or delivered to it hereunder, IN TRUST, upon all of
the terms and conditions of the Grantor Trust Agreement (the "Agreement"), and
WHEREAS, the Company and the Trustee desire to amend and restate the
Agreement governing this Grantor Trust.
NOW THEREFORE, the Company and the Trustee hereby agree to continue the
Bowater Incorporated Outside Directors Grantor Trust on the following terms and
conditions as of April 15, 1998:
ARTICLE I
Title-Purpose-Policy-Effect
1.1 Name. The trust established hereunder shall be known as the Bowater
Incorporated Outside Directors Benefit Plan Grantor Trust and is sometimes
hereinafter referred to as the "Trust".
1.2 Definitions. Where used in this Agreement, unless the context
otherwise requires or unless otherwise expressly provided:
(a) "Account Party" shall mean an officer of the Company designated to
represent the Company for this purpose and any Person to whom the Trustee shall
be instructed by the Company to deliver its annual account under Section 7.2.
(b) "Accounting Period" shall mean the twelve consecutive month period
coincident with the calendar year or the shorter period in any year in which the
Trustee accepts appointment as Trustee hereunder or ceases to act as Trustee for
any reason.
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(c) "Agreement" shall mean all of the provisions of this instrument and
of all other instruments amendatory hereof.
(d) "Asset Manager" shall mean the Trustee (other than for purposes of
Article V), Company or Investment Manager, individually or collectively as the
context shall require, but only with respect to those assets held in an
Investment Account over which it exercises, or to the extent it is authorized to
exercise, discretionary investment authority or control.
(e) "Bank Business Day" shall mean a day on which the Trustee is open
for business.
(f) An individual or entity is a "beneficiary" if such individual or
entity is receiving benefits, or entitled to receive benefits solely upon the
lapse of time under any of the Plans in respect of a deceased participant.
(g) "Board of Directors" shall mean the Board of Directors of the
Company.
(h) A "Change in Control" shall be deemed to have occurred upon:
(a) The date that any Person is or becomes an Acquiring
Person.
(b) The date that the Corporation's shareholders approve
a merger, consolidation or reorganization of the
Corporation with another corporation or other Person,
unless, immediately following such merger,
consolidation or reorganization, (i) at least 50% of
the combined voting power of the outstanding
securities of the resulting entity would be held in
the aggregate by the shareholders of the Corporation
as of the record date for such approval (provided
that securities held by any individual or entity that
is an Acquiring Person, or who would be an Acquiring
Person if 5% were substituted for 20% in the
definition of such term, shall not be counted as
securities held by the shareholders of the
Corporation, but shall be counted as outstanding
securities for purposes of this determination), or
(ii) at least 50% of the board of directors or
similar body of the resulting entity are Continuing
Directors.
(c) The date the Corporation sells or otherwise transfers
all or substantially all of its assets to another
corporation or other Person, unless, immediately
after such sale or transfer, (i) at least 50% of the
combined voting power of the then-outstanding
securities of the resulting entity immediately
following such transaction is held in the aggregate
by the Corporation's shareholders as determined
immediately prior to such transaction (provided that
securities held by any individual or entity that is
an Acquiring Person, or who
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<PAGE> 7
would be an Acquiring Person if 5% were substituted
for 20% in the definition of such term, shall not be
counted as securities held by the shareholders of the
Corporation, but shall be counted as outstanding
securities for purposes of this determination), or
(ii) at least 50% of the board of directors or
similar body of the resulting entity are Continuing
Directors.
(d) The date on which less than two-thirds (2/3) of the
total membership of the Board consists of Continuing
Directors.
For purposes of this Section:
(i) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities
Exchange Act of 1934 (the "Act").
(ii) "Acquiring Person" means the Beneficial Owner,
directly or indirectly, of Common Stock representing
20% or more of the combined voting power of the
Corporation's then outstanding securities, not
including (except as provided in clause (i) of the
next sentence) securities of such Beneficial Owner
acquired pursuant to an agreement allowing the
acquisition of up to and including 50% of such voting
power approved by two-thirds of the members of the
Board who are Board members before the Person becomes
Beneficial Owner, directly or indirectly, of Common
Stock representing 5% or more of the combined voting
power of the Corporation's then outstanding
securities. Notwithstanding the foregoing, (i)
securities acquired pursuant to an agreement
described in the preceding sentence will be included
in determining whether a Beneficial Owner is an
Acquiring Person if, subsequent to the approved
acquisition, the Beneficial Owner acquires 5% or more
of such voting power other than pursuant to such an
agreement so approved and (ii) a Person shall not be
an Acquiring Person if such Person is eligible to and
files a Schedule 13G with respect to such Person's
status as a Beneficial Owner of all Common Stock of
the Corporation of which the Person is a Beneficial
Owner.
(iii) A "Beneficial Owner" of Common Stock means (A) a
Person who beneficially owns such Common Stock,
directly or indirectly, or (B) a Person who has the
right to acquire such Common Stock (whether such
right is exercisable immediately or only with the
passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights,
exchange, rights, warrants, options or otherwise.
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<PAGE> 8
(iv) "Continuing Directors" means any member of the Board
who (A) was a member of the Board prior to the date
of the event that would constitute a Change in
Control, and any successor of a Continuing Director
while such successor is a member of the Board, (B) is
not an Acquiring Person or an Affiliate or Associate
of an Acquiring Person, and (C) is recommended or
elected to succeed the Continuing Director by a
majority of the Continuing Directors.
(v) "Person" means any individual, firm, corporation,
partnership, trust or other entity.
Notice to the Trustee from the Company that a Change in Control has
occurred shall be binding and conclusive on the Trustee. The Trustee shall have
no independent duty to investigate whether or not a Change in Control has
occurred. In performing any of its obligations or taking any discretionary
action under this Agreement which is dependent upon a Change in Control having
occurred, the Trustee may rely on such notice and such notice shall be binding
and conclusive on all Plan participants and beneficiaries.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and Regulations issued thereunder.
(j) "Company" shall mean Bowater Incorporated or successor thereto.
(k) "Directed Fund" shall mean an Investment Account, or part thereof,
subject to the discretionary management and control of the Company or any
Investment Manager.
(l) "Discretionary Fund" shall mean any Investment Account, or part
thereof, subject to the discretionary management and control of the Trustee.
(m) "Investment Account" shall mean each pool of assets in the Trust in
which the Plans have an interest during an Accounting Period.
(n) "Investment Manager" shall mean a bank, as defined under the
Investment Advisers Act of 1940, insurance company or investment adviser
registered under the Investment Advisers Act of 1940.
(o) "Investment Vehicle" shall mean any common, collective or
commingled trust, mutual fund, investment company, corporation functioning as an
investment intermediary, insurance contract, letter of credit, partnership,
joint venture or other entity or arrangement to which, or pursuant to which,
assets of the Trust have been transferred or in which the Trust has an interest,
beneficial or otherwise.
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<PAGE> 9
(p) "Participant Data" shall mean certain information regarding the
participants (or beneficiaries) under each Plan and the determination of the
benefits under each Plan, including the following information: (i) name,
address, date of birth, date of election as a Director (when applicable) and
social security number; (ii) a schedule of the estimated payments under each
Plan; and (iii) any other information regarding each Plan which the Trustee may
reasonably request or which the Company may deem necessary.
(q) "Person" shall mean a natural person, trust, estate, corporation of
any kind or purpose, mutual company, joint-stock company, unincorporated
organization, association, partnership, joint venture, employee organization,
committee, board, participant, beneficiary, trustee, partner, or venturer acting
in an individual, fiduciary, or representative capacity, as the context may
require.
(r) "Plan" or "Plans" shall mean, collectively, the Plans, and such
other plans, agreements or arrangements maintained by the Company or to which
the Company is a party and which have been designated by the Board of Directors
for participation in this Trust, as are set forth on List A hereto.
(s) "Trust Fund" shall mean all cash and other property contributed,
paid or delivered to the Trustee hereunder, all investments made therewith and
proceeds thereof and all earnings and profits thereon, less payments, transfers
or other distributions which, at the time of reference, shall have been made by
the Trustee, as authorized herein. The Trust Fund shall include all evidences of
ownership, interest or participation in an Investment Vehicle, but shall not,
solely by reason of the Trust Fund's investment therein, be deemed to include
any assets of such Investment Vehicle.
(t) "Trust" shall mean the grantor trust established under this
Agreement.
(u) "Trustee" shall mean Wachovia Bank, N.A., as Trustee of the Trust
and its successors.
(v) "Valuation Date" shall mean the last day of the Accounting Period,
calendar quarter or any more frequent reporting date determined by the Company
and agreed to by the Trustee.
(w) "Wachovia" shall mean Wachovia Bank, N.A.
The plural of any term shall have a meaning corresponding to the
singular thereof as so defined and any neuter or masculine pronoun used herein
shall include the masculine or feminine, as the context may require.
1.3 Purpose. The Trust is established as a grantor trust within the
meaning of Sections 671 through 677 of the Code, to hold the interests of
participants and their beneficiaries in the Plans. Except as may otherwise be
permitted by law and the terms of the Plans or pursuant to the terms of this
Agreement, at no time prior to the satisfaction of all liabilities with respect
to
5
<PAGE> 10
participants and their beneficiaries under the Plans shall any portion of the
Trust Fund be used for, or diverted to, any purposes other than for the
exclusive benefit of such participants and their beneficiaries, and for
defraying the reasonable expenses of administering each such Plan. The
establishment of the Trust is intended to provide a funding vehicle for the
payment of benefits under the Plans and is not intended to relieve the Company
of its duties under the Plans to the participants therein.
1.4 Effect. All Persons at any time interested in the Plans shall be
bound by the provisions of this Agreement and, in the event of any conflict
between this Agreement and the provisions of the Plans or any other instrument
or agreement forming part of each such Plan, the provisions of this Agreement
shall control.
ARTICLE II
Valuation
2.1 Valuation of Trust Fund. The Trustee shall determine the value of
the assets of the Trust Fund as of each Valuation Date. In addition, prior to a
Change in Control and for the convenience of the Company and without imposing
any obligation on the Trustee, the Company may request the Trustee to include in
its periodic reports under this Article II or its annual account under Section
7.2 assets which do not constitute part of the Trust Fund. Assets will be valued
at their market values at the close of business on the Valuation Date, or, in
the absence of readily ascertainable market values, at such values as the
Trustee shall determine in accordance with methods consistently followed and
uniformly applied. Anything in this Agreement to the contrary notwithstanding,
with respect to assets constituting part of a Directed Fund or assets included
at the request of the Company as hereinabove provided, the Trustee may rely, for
all purposes of this Agreement, on the latest valuation and transaction
information submitted to it by the Persons responsible for the investment of
such assets even if such information predates the Valuation Date. The Company
will cause such Persons to provide the Trustee with all information needed by
the Trustee to discharge its obligations to value such assets and to account
under this Agreement.
ARTICLE III
Administration of the Plans
3.1 Payments From Trust Fund. (a) Subject to Sections 3.2, 3.3 and
6.3(b), the Trustee, upon receipt of direction from the Company prior to a
Change in Control, shall pay moneys directly to or for the benefit of
participants and their beneficiaries, or to a paying or disbursing agent (which
may be the Company) for the benefit of participants and their beneficiaries.
Prior to a Change in Control, the Company may direct that moneys be paid to the
Company or an affiliate or subsidiary thereof, however, only if and only to the
extent that such payment is for the reimbursement of moneys paid under the Plan
to a participant or beneficiary
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<PAGE> 11
which could have been paid from the Trust Fund. After a Change in Control, the
Trustee may follow the directions of the Company as noted in the preceding
sentence only upon receipt of evidence that such amounts have been paid to a
participant or beneficiary in lieu of a payment from the Trust Fund. Any such
payment to the Company or an affiliate or subsidiary thereof shall be deemed a
payment for the benefit of a participant or beneficiary. Any assets disbursed or
paid over by the Trustee pursuant to the foregoing provisions of this Section
3.1, or pursuant to Section 3.3 hereof, shall no longer be part of the Trust
Fund.
(b)(1) In the event it shall be determined prior to a Change in Control
that the participants in the Plans and/or beneficiaries of the Trust Fund, prior
to the payment of benefits hereunder, are subject to any tax under the terms of
the trust created hereunder, then the Trustee, upon a receipt of written
direction from the Company, shall make payments from the Trust Fund to such
persons, in such manner and in such amounts as the Company shall direct, for the
purpose of paying the amount of Federal, State and Local tax and interest and
any penalties thereon which such participants and/or beneficiaries may incur
arising out of such determination. In the event such a determination is made
after a Change in Control occurs, then each participant or beneficiary who is
subject to such tax, may direct the Trustee, in writing, to make payments from
the Trust Fund for the purpose set forth in the preceding sentence and shall
deliver to the Trustee evidence of such determination. In the event a final
judicial determination is made after a Change in Control occurs that a
participant or beneficiary, prior to the payment of benefits hereunder, is
subject to any tax under the terms of the trust created hereunder and a
governmental agency authorized to execute such determination directs the Trustee
to pay such tax from the Trust Fund, then the Trustee may make such payment and
shall incur no liability hereunder because of the Trustee's compliance with such
direction. The Trustee's decision as to whether the final judicial determination
referenced in the preceding sentence has occurred shall be binding and
conclusive on all participants and beneficiaries.
(b)(2) Any payment from the Trust Fund pursuant to paragraph (b)(1) of
this Section 3.1 attributable to a Plan shall actuarially reduce the benefits of
those participants and/or beneficiaries to whom such a distribution is made
under the Plans.
3.2 Participant Data. The Company has heretofore submitted Participant
Data to the Trustee and may, from time to time hereafter, furnish the Trustee
with updated Participant Data. In addition, the Company shall provide
information concerning participants and beneficiaries to the Company's actuarial
consultants on a quarterly basis sufficient to permit such consultants to assist
the Company in determining Participant Data and the contributions to be made
hereunder upon a Change in Control, and to discharge the Company's duties under
Section 12.2(b). The Company shall keep the Trustee informed of the identity of
the actuarial consultants responsible for such information, and such consultants
shall be formally retained on an ongoing basis to provide these services. The
Company shall, upon a Change in Control, furnish the Trustee with Participant
Data and, after a Change in Control, furnish the Trustee with Participant Data
at least once each Accounting Period. After a Change in Control, all expenses of
the actuarial consultants may be paid from the Trust Assets to the extent not
paid by the Company.
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<PAGE> 12
The Company shall maintain and provide to the Trustee at least annually
a current list (List B) of participants in each Plan. After a Change in Control,
participants and beneficiaries shall have the right to receive from the Company
or the Trustee (i) a copy of the most recent Participant Data that has been
supplied to the Trustee on his or her behalf, and (ii) a list of the names and
addresses of all participants and beneficiaries in each Plan, within thirty (30)
days after a request for such information is made.
In the event of a Change in Control and notwithstanding any other
provision of this Agreement, the Trustee shall, without direction from the
Company, make payments to participants or beneficiaries in such manner and in
such amounts as the Trustee shall determine they are entitled to be paid under
each Plan based upon the most recent Participant Data furnished to the Trustee
by the Company prior to or upon such Change in Control and any supplemental
information furnished to the Trustee by a participant, a beneficiary thereof,
the Company or its actuarial consultants upon which the Trustee may reasonably
rely in making such a determination. The Trustee's determination as to the
amount of such payments after a Change in Control occurs shall be binding and
conclusive on all participants and beneficiaries thereof and the Trustee shall
be fully protected under the terms of the trust created hereunder in making such
determination but the Trustee's determination shall not relieve the Company of
its obligations to such participants and beneficiaries.
3.3 Creditors. The Company has the duty to inform the Trustee of the
Company's insolvency (i.e., its inability to pay debts as they mature) or
bankruptcy (i.e., the Company is subject to a pending proceeding under the
federal Bankruptcy Code). The insolvency or bankruptcy of a subsidiary of the
Company shall not be deemed to be the insolvency or bankruptcy of the Company or
any other subsidiary. When the Trustee is in receipt of a copy of a bankruptcy
petition relating to the Company or a notification from the Company that it is
insolvent, the Trustee will suspend payments to the participants and their
beneficiaries under the Trust and will hold assets of the Trust for the benefit
of the Company's general creditors. Thereafter, the Trustee will deliver assets
of the Trust to satisfy claims of the Company's general creditors as directed by
a court of competent jurisdiction. However, if the Trustee makes a good faith
determination that the Company is solvent, it shall continue to make or resume
making payments under the Plans until a final order to the contrary is received
by the Trustee.
3.4 Reliance on Company. Any directions pursuant to Section 3.1 may,
but need not, specify the application to be made of moneys so ordered. Each
direction to the Trustee under Section 3.1 or Section 3.3 shall constitute a
certification by the Company, as the case may be, that such direction is in
accordance with applicable law, or with the terms of each Plan, and with the
terms of this Agreement. The Trustee shall have no duty to make any independent
inquiry or investigation as to any of the foregoing before acting upon such
direction.
3.5 Responsibility for Plan Administration. Subject to Section 3.2 or
subject to any delegation by the Company and assumption by the Trustee of the
duties of administering the Plans, the Trustee shall not be responsible in any
way respecting the determination,
8
<PAGE> 13
computation, payment or application of any payment (other than the execution of
any documents incidental thereto and transfer or receipt of funds thereunder on
the directions of the Company), or for any other matter affecting the
administration of the Plans by the Company or any other Person to whom such
responsibility is allocated or delegated pursuant to the terms of each Plan.
3.6 Trustee Not Responsible for Administration of Judgments. The
Trustee shall not be responsible in any way respecting the administration,
computation, payment or application of any payment, satisfaction, or for any
other matter affecting the response of the Company to any creditor in the event
of insolvency, other than for the execution of any documents incidental thereto
and transfer or receipt of funds thereunder on the directions of the Company.
ARTICLE IV
Investment of Trust Assets
4.1 Asset Managers. (a) Prior to a Change in Control, discretionary
authority for the management and control of assets from time to time held in the
Trust Fund may be retained, allocated or delegated, as the case may be, for one
or more purposes, to and among the Asset Managers by the Company, in its
absolute discretion. To the extent an Asset Manager is the Trustee, the assets
shall be part of the Discretionary Fund; to the extent an Asset Manager is
either the Company or an Investment Manager, the assets shall be part of a
Directed Fund. Prior to a Change in Control, the terms and conditions of
appointment, authority and retention of any Asset Manager shall be the sole
responsibility of the Company. The Company shall promptly notify the Trustee in
writing of the appointment or removal of an Asset Manager. Any notice of
appointment pursuant to this Section 4.1 shall constitute a representation and
warranty that the Asset Manager has been appointed in accordance with the
provisions of each Plan and that any Asset Manager (other than the Trustee or
the Company) is an Investment Manager.
(b) After a Change in Control, discretionary authority for the
management and control of assets from time to time held in the Trust Fund shall
be in the Trustee. After a Change in Control occurs and subject to paragraph (g)
of Section 6.3 and Section 6.4 the Trustee shall continue to manage the assets
of the Trust in accordance with Section 4.1(a). The Trustee may appoint,
terminate or continue the appointment of Asset Managers for all permissible
types of securities, until such time as at least fifty-one (51) percent in
number of the participants and beneficiaries thereof request that the assets of
the Trust be invested and reinvested, without distinction between principal and
income, in an immunized or dedicated portfolio of bonds, debentures, equipment
or collateral trust certificates, notes or other evidences of indebtedness,
unsecured or secured by mortgages on real or personal property wherever situated
(including any part interest in a bond and mortgage or note and mortgage whether
insured or uninsured) and any portfolio of other property, or part interest in
property, real or personal, foreign or domestic in which such event the Trustee
shall have the power to appoint Asset Manager(s) solely for such specified
investments. The rates of return and maturity dates of the instruments of such
portfolio
9
<PAGE> 14
shall reasonably be expected to yield assets of the Trust Fund sufficient to
discharge the Company's obligations under each Plan as set forth in the most
recent Participant Data furnished to the Trustee prior to or upon such Change in
Control.
(c) After a Change in Control, the Trustee, subject to Section 4.1(b),
shall have full discretion and responsibility for investment of Trust assets,
including responsibility for the appointment of Asset Managers and for
formulation of funding, investment and diversification policies and shall have
all the duties and responsibilities of the Company set forth in Sections 4.1(a),
4.3 and 4.4.
4.2 Investment Discretion. Subject to Section 4.1(b), the Trust Fund
shall be invested and reinvested, without distinction between principal and
income, at such time or times in such investments and pursuant to such
investment strategies or courses of action and in such shares and proportions,
as the Asset Managers, in their sole discretion, shall deem advisable.
4.3 Limitations on Investment Discretion. Prior to a Change in Control,
the Company may limit, restrict or impose guidelines affecting the exercise of
the discretion hereinabove conferred in Section 4.2 on any Asset Manager. Any
limitations, restrictions or guidelines applicable to the Trustee, as Asset
Manager, shall be communicated in writing to the Trustee. Prior to a Change in
Control, the Trustee shall have no responsibility with respect to the
formulation of any funding policy or any investment or diversification policies
embodied therein. Prior to a Change in Control, the Company shall be responsible
for communicating, and monitoring adherence to, any limitations or guidelines
imposed on any other Asset Manager.
4.4 Responsibility for Diversification. Prior to a Change in Control,
the Company shall be responsible for determining the diversification policy of
the Trust Fund, for monitoring adherence by the Asset Managers to such policy,
and for advising the Asset Managers with respect to limitations on employer or
other securities or property contained in each Plan or imposed on each Plan by
applicable statute.
ARTICLE V
Responsibility for Directed Funds
5.1 Responsibility for Selection of Agents. Prior to a Change in
Control, all transactions of any kind or nature in or from a Directed Fund shall
be made upon such terms and conditions and from or through such principals and
agents as the responsible Asset Manager shall direct. No such transactions shall
be executed through the facilities of the Trustee except where the Trustee shall
make available its facilities solely for the purpose of temporary investment of
cash reserves of a Directed Fund. (However, nothing in the preceding sentence
shall confer any authority upon the Trustee to invest the cash balances of any
Directed Fund unless and until it receives directions from the responsible Asset
Manager.)
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<PAGE> 15
5.2 Trustee Not Responsible for Investments in Directed Funds. Prior to
a Change in Control, and except as provided in Section 5.6, the Trustee shall be
under no duty or obligation to review or to question any direction of any Asset
Manager, or to review securities or any other property held in any Directed Fund
with respect to prudence or proper diversification or compliance with any
limitation on the Asset Manager's authority under the terms of each Plan, any
agreement entered into between the Company and the Asset Manager or imposed by
applicable law, or to make any suggestions or recommendations to the Company or
the Asset Manager with respect to the retention or investment of any assets of
any Directed Fund, and shall have no authority to take any action or to refrain
from taking any action with respect to any asset of a Directed Fund unless and
until it is directed to do so by the Asset Manager.
5.3 Investment Vehicles. Any Investment Vehicle, or interest therein,
acquired by or transferred to the Trustee upon the directions of the Asset
Manager shall be allocated to the appropriate Directed Fund, and the Trustee's
duties and responsibilities under this Agreement shall not be increased or
otherwise affected thereby. The Trustee shall be responsible solely for the
safekeeping of the evidence of the Trust's ownership of or interest or
participation in such Investment Vehicle.
5.4 Reliance on Asset Manager. The Trustee shall be required under this
Agreement to execute documents, to settle transactions, to take action on behalf
of or in the name of the Trust and to make and receive payments on the direction
of the Asset Manager. Any direction of the Asset Manager shall constitute a
certification to the Trustee (i) that the investment is authorized under the
terms of this Agreement and any other agreement or law affecting the Asset
Manager's authority to deal with the Directed Fund, (ii) that any contract,
agency, joinder, adoption, participation or partnership agreement, deed,
assignment or other document of any kind which the Trustee is required to
execute to effectuate the transaction has been reviewed by the Asset Manager
and, to the extent it deems advisable and prudent, its counsel, (iii) that such
instrument or document is in proper form for execution by the Trustee, (iv)
that, where appropriate, insurance protecting the Trust against loss or
liability has been or will be maintained in the name of or for the benefit of
the Trustee, and (v) that all other acts to perfect and protect the Trust's
rights have been taken, and the Trustee shall have no duty to make any
independent inquiry or investigation as to any of the foregoing before acting
upon such direction. In addition, the Trustee shall not be liable for the
default of any Person with respect to any investment in a Directed Fund or for
the form, genuineness, validity, sufficiency or effect of any document executed
by, delivered to or held by it for any Directed Fund on account of such
investment, or if, for any reason (other than the negligence or willful
misconduct of the Trustee) any rights of the Trust therein shall lapse or shall
become unenforceable or worthless.
5.5 Merger of Funds. Except pursuant to Section 4.1(b), the Trustee
shall not have any discretionary responsibility or authority to manage or
control any asset held in a Directed Fund upon the resignation or removal of an
Asset Manager unless and until it has been notified in writing by the Company
that the Asset Manager's authority has terminated and that such Directed Fund's
assets are to be integrated with the Discretionary Fund. Such notice shall not
be deemed effective until two Bank Business Days after it has been received by
the Trustee unless the Trustee shall agree otherwise. The Trustee shall not be
liable for any losses to the
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Trust Fund resulting from the disposition of any investment made by the Asset
Manager or for the retention of any illiquid or unmarketable investment or any
investments which are not actively traded publicly held securities or for the
holding of any other investment acquired by the Asset Manager if the Trustee is
unable to dispose of such investment because of any restrictions imposed by the
Securities Act of 1933 or other federal or state law, or if an orderly
liquidation of such investment is impractical under prevailing conditions
imposed pursuant to Section 4.2, or for any other violation of the terms of this
Agreement, the Plans or applicable law as a result of the addition of Directed
Fund assets to the Discretionary Fund.
5.6 Notification of Company in Event of Breach. Prior to a Change in
Control, if the Trustee has knowledge of a breach committed by an Asset Manager,
it shall notify the Company thereof, and the Company shall thereafter assume
full responsibility to all Persons interested in each Plan to remedy such
breach. After a Change in Control, if the Trustee has knowledge of a breach
committed by an Asset Manager, it shall thereafter assume full responsibility to
all Persons interested in each Plan to remedy such breach.
5.7 Definition of Knowledge. While the Trustee will perform certain
duties (such as custodial, reporting, recording, valuation and bookkeeping
functions) with respect to Directed Funds, such duties will not involve the
exercise of any discretionary aucertain duties will be the responsibility of
officers or other employees of the Trustee who are not familiar with and have no
responsibility for investment management. Therefore, the Company agrees that in
the event that knowledge of the Trustee shall be a prerequisite to imposing a
duty upon or to determining liability of the Trustee under this Agreement or any
statute regulating the conduct of the Trustee with respect to such Directed
Funds or relieving the Company of its undertakings under Section 15.2, the
Trustee will not be deemed to have knowledge of, or to have participated in, any
act or omission of an Asset Manager involving the investment of assets allocated
to the Directed Funds solely as a result of the receipt and processing of
information in the course of performing such duties.
5.8 Duty to Enforce Claims. Prior to a Change in Control, the Trustee
shall have no duty to commence or maintain any action, suit or legal proceeding
on behalf of the Trust on account of or growing out of any investment made in or
for a Directed Fund unless the Trustee has been directed to do so by the Asset
Manager and unless the Trustee is either in possession of funds sufficient for
such purpose or unless it has been indemnified by the Company or the Investment
Manager, to its satisfaction, for counsel fees, costs and other expenses and
liabilities to which it, in its sole judgment, may be subject by beginning or
maintaining such action, suit or legal proceeding.
5.9 Restrictions on Transfer. Nothing herein shall be deemed to empower
any Asset Manager to direct the Trustee to transfer any asset of a Directed Fund
to itself except for purposes enumerated in Section 6.1(a).
5.10 Section 4.1(b) Controlling. All provisions of this Article V are
subject to Section 4.1(b).
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ARTICLE VI
Powers of Asset Managers
6.1 General Powers. Subject to Section 4.1(b) hereof and without in any
way limiting the powers and discretions conferred upon any Asset Manager by the
other provisions of this Agreement or by law, each Asset Manager, including the
Trustee, shall be vested with the following powers and discretions with respect
to the assets of the Trust subject to its management and control, and, upon the
directions of the Asset Manager of a Directed Fund, the Trustee shall make,
execute, acknowledge and deliver any and all documents of transfer and
conveyance and any and all other instruments that may be necessary or
appropriate to enable such Asset Manager to carry out such powers and
discretions:
(a) to hold marketable securities subject to appropriate objectives
and guidelines set by the Company, including stocks, bonds and money market
instruments. However, the Trustee shall have no responsibility or obligation to
monitor objectives and guidelines set forth by the Company;
(b) to sell, exchange, convey, transfer or otherwise dispose of any
property by private contract or at public auction, and no person dealing with
the Asset Manager shall be bound to see to the application of the purchase money
or to inquire into the validity, expediency or propriety of any such sale or
other disposition;
(c) to enter into contracts or to make commitments either alone or
in company with others to sell or acquire property;
(d) to delegate to a manager or holder or holders of a majority
interest in any real property, the management and operation of any part interest
in such property or properties (including the authority to sell such part
interests or otherwise carry out the decision of such manager or the holder or
holders of such majority interest);
(e) to lease to others for any term without regard to the duration
of the Trust any real property or part interest in real property;
(f) to vote upon any stocks, bonds or other securities (but subject
to the suspension of any voting rights as a result of any broker loan or similar
agreement); to give general or special proxies or powers of attorney with or
without power of substitution; to exercise any conversion privileges,
subscription rights or other options and to make any payments incidental
thereto; to consent to or otherwise participate in corporate reorganizations or
other changes affecting corporate securities and to delegate discretionary
powers and to pay any assessments or charges in connection therewith; and
generally to exercise any of the powers of an owner with respect to stocks,
bonds, securities or other property;
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(g) to organize corporations under the laws of any state for the
purpose of acquiring or holding title to property (or to direct the Trustee to
organize such corporations or to appoint any ancillary trustee acceptable to the
Trustee for such purpose);
(h) to invest in a fund consisting of securities issued by
corporations and selected and retained solely because of their inclusion in, and
in accordance with, one or more commonly used indices of such securities, with
the objective of providing investment results for the fund which approximate the
overall performance of such designated index;
(i) to enter into any partnership, as a general or limited partner,
or joint venture;
(j) to purchase units or certificates issued by an investment
company or pooled trust or comparable entity;
(k) to transfer money or other property to an insurance company
issuing an insurance contract; and
(l) to be reimbursed for the expenses incurred in exercising any of
the foregoing powers or for paying the reasonable expenses incurred by any
agent, manager or trustee appointed pursuant hereto.
6.2 Additional Powers of Trustee. In addition, the Trustee is hereby
authorized:
(a) to register any securities held in the Trust Fund in its own
name or in the name of a nominee and to hold any securities in bearer form, and
to combine certificates representing such securities with certificates of the
same issue held by the Trustee in other fiduciary or representative capacities
or as agent for customers, or to deposit or to arrange for the deposit of such
securities in any qualified central depository even though, when so deposited,
such securities may be merged and held in bulk in the name of the nominee of
such depository with other securities deposited therein by other depositors, or
to deposit or arrange for the deposit of any securities issued by the United
States Government, or any agency or instrumentality thereof, with a Federal
Reserve Bank, but the books and records of the Trustee shall at all times show
that all such investments are part of the Trust Fund;
(b) to employ suitable agents, depositories and counsel, domestic or
foreign, and to charge their reasonable expenses and compensation against the
Trust Fund, and to confer upon any such depository the powers conferred upon the
Trustee by paragraph (a) of this Section 6.2 as well as the power to appoint
subagents and depositories, wherever situated, in connection with the retention
of securities or other property;
(c) to borrow money from any source as may be necessary or advisable
to effectuate the purposes of the Trust on such terms and conditions as the
Trustee, in its absolute discretion, may deem advisable;
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(d) to deposit funds in interest bearing account deposits maintained
by or savings certificates issued by Wachovia, in its separate corporate
capacity, or in any other banking institution;
(e) to compromise or otherwise adjust all claims in favor of or
against the Trust Fund other than claims solely affecting the right of any
Person to benefits under each Plan;
(f) to make any distribution or transfer of assets authorized under
the terms of this Agreement in cash or in kind as the Trustee, in its absolute
discretion, shall determine and, in furtherance thereof, to value such assets,
which valuation shall be conclusive and binding on all Persons;
(g) upon the direction of the Company, to maintain and operate one
or more market inventory funds as a vehicle to exchange securities among
Discretionary and Directed Funds without alienating the property from the Trust;
and
(h) to hold uninvested cash awaiting investment and such additional
cash balances as it shall deem reasonable or necessary, without incurring any
liability for the payment of interest thereon.
6.3 Annuity and Insurance Contracts. (a) The Trustee, upon written
direction of the Company prior to a Change in Control, shall pay from the Trust
Fund sums (including periodic premiums) to such insurance company or companies
as the Company may direct for the purpose of procuring individual or group
annuity or life insurance contracts for each Plan (hereinafter in this Article
referred to as "Contracts"). The Trustee may reimburse the Company from the
Trust Fund any sums paid by the Company to such insurance company or companies
in connection with procuring or maintaining such Contracts. The Company shall
prepare, or cause to be prepared in such form as it shall prescribe, the
application for any Contract to be applied for. The Trustee shall receive and
hold in the Fund, subject to the provisions hereinafter set forth in this
Article, all Contracts so obtained.
(b) The Trustee shall be the owner of Contracts held in the Trust
Fund and, upon written direction of the Company prior to a Change in Control,
shall have power, without the consent of any other person, to exercise any and
all of the rights, options and privileges that belong to the absolute owner of
any Contract held in the Trust Fund or that are granted by the terms of any such
Contract or by the terms of this Agreement. The Trustee shall have no discretion
with respect to the exercise of any of the foregoing powers or to take any other
action permitted by any Contract held in the Trust Fund, but shall exercise such
powers or take such action only upon the written direction of the Company prior
to a Change in Control; the Trustee shall have no duty to exercise any of such
powers or to take any such action unless and until it shall have received such
direction. The Trustee, upon the written direction of the Company prior to a
Change in Control, shall deliver any Contract held in the Trust Fund to such
person or persons as may be specified in the direction.
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(c) The Trustee shall hold in the Trust Fund the proceeds of any
sale, assignment or surrender of any Contract held in the Trust Fund and any and
all dividends and other payments of any kind received in respect of any Contract
held in the Trust Fund.
(d) Upon the written direction of the Company prior to a Change in
Control, the Trustee shall pay from the Trust Fund premiums, assessments, dues,
charges and interest, if any, upon any Contract held in the Trust Fund. The
Trustee shall have no duty to make any such payment unless and until it shall
have received such direction. After a Change in Control occurs, the Trustee
shall pay from the Trust Fund premiums, assessments, dues, charges and interest,
if any, upon any Contract held in the Trust Fund, without direction from the
Company.
(e) No insurance company that may issue any Contract or Contracts
held in the Trust Fund shall be deemed to be a party to this Agreement for any
purpose, or to be responsible in any way for the validity of this Agreement or
to have any liability under this Agreement other than as stated in each Contract
that it may issue. Any insurance company may deal with the Trustee as sole owner
of any Contract issued by it and held in the Fund, without inquiry as to the
authority of the Trustee to act, and may accept and rely upon any written
notice, instruction, direction, certificate or other communication from the
Trustee believed by it to be genuine and to be signed by an officer of the
Trustee and shall incur no liability or responsibility for so doing. Any sums
paid out by any insurance company under any of the terms of a Contract issued by
it and held in the Trust Fund either to the Trustee, or, in accordance with its
direction, to any other person or persons designated as payees in such Contract
shall be a full and compete discharge of the liability to pay such sums, and the
insurance company shall have no obligation to look to the disposition of any
sums so paid. No insurance company shall be required to look into the terms of
this Agreement, to question any action of the Trustee or to see that any action
of the Trustee is authorized by the terms of this Agreement.
(f) Anything contained herein to the contrary notwithstanding,
neither the Company nor the Trustee shall be liable for the refusal of any
insurance company to issue or change any Contract or Contracts or to take any
other action requested by the Trustee; nor for the form, genuineness, validity,
sufficiency or effect of any Contract or Contracts held in the Trust Fund; nor
for the act of any person or persons that may render any such Contract or
Contracts null and void; nor for the failure of any insurance company to pay the
proceeds and avails of any such Contract or Contracts as and when the same shall
become due and payable; nor for any delay in payment resulting from any
provision contained in any such Contract or Contracts; nor for the fact that for
any reason whatsoever (other than their own negligence or willful misconduct)
any Contract or Contracts shall lapse or otherwise become uncollectible.
(g) After a Change in Control occurs, the Trustee may exercise any
of the powers set forth in paragraphs (a) through (f) of this Section 6.3
without direction from the Company to purchase Contracts the rates of return and
maturity dates of which may reasonably be expected to yield assets of the Trust
Fund sufficient to discharge the Company's obligations under the Plans as set
forth in the most recent Participant Data furnished to the Trustee prior to or
upon such Change in Control and to pay all expenses and fund all reserves
anticipated under this Agreement. In making its decision to purchase Contracts,
the Trustee shall, in good faith,
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determine whether the investment policy of the Fund at such time will, in its
judgment, discharge the Company's obligations under the Plans and this Agreement
without undue risk to the Trust. The Trustee, in exercising the powers set forth
in the preceding sentence, shall incur no liability under the terms of this
Agreement, except for the Trustee's gross negligence or willful misconduct.
6.4 Letters of Credit. The Trustee, upon written direction of the
Company prior to a Change in Control, shall pay from the Trust Fund sums to such
banking company or companies as the Company may direct for purposes of
establishing a letter of credit to fund the Company's obligations under the
Plans. The Trustee shall receive and hold in the Fund all letters of credit so
obtained.
ARTICLE VII
Records and Accounts of Trustees
7.1 Records. The Trustee shall keep accurate and detailed accounts of
all investments, receipts, disbursements and other transactions in the Trust
Fund and all accounts, books and records relating thereto shall be open to
inspection and audit at all reasonable times during normal business hours by any
Person designated by the Company.
7.2 Annual Account. Within ninety (90) days following the close of each
Accounting Period, the Trustee shall file with the Account Party a written
account setting forth the receipts and disbursements of the Trust Fund and the
investments and other transactions effected by it upon its own authority or
pursuant to the directions of any Person as herein provided during the
Accounting Period.
7.3 Account Stated. Upon the expiration of ninety (90) days from the
date of filing its annual account with the Account Party, the Trustee shall be
forever released and discharged from all liability and further accountability to
the Company, the Account Party or any other Person with respect to the accuracy
of such accounting and the-propriety of all acts and failures to act of the
Trustee reflected in such account, except with respect to any such acts or
transactions as to which the Account Party shall, within such ninety (90) day
period, file with the Trustee specific written objections.
7.4 Judicial Accountings. Nothing herein shall in any way limit the
Trustee's right to bring any action or proceeding in a court of competent
jurisdiction to settle its account or for such other relief as it may deem
appropriate.
7.5 Necessary Parties. In order to protect the Trust Fund from the
expense of litigation, no Person other than the Company shall be a necessary
party in any proceeding under Section 7.4 or may require the Trustee to account
or may institute any other action or proceeding against the Trustee or the
Trust.
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ARTICLE VIII
Compensation, Taxes and Expenses
8.1 Compensation and Expenses. (a) Prior to a Change in Control, the
Trustee shall, upon receipt of written direction from the Company, pay out of
the Trust Fund any expenses incurred by the Trustee in connection with its
administration of the Trust including, but not limited to, fees for legal
services rendered to the Trustee (whether or not rendered in connection with a
judicial or administrative proceeding), such compensation to the Trustee as
shall be agreed upon from time to time between the Trustee and the Company, and
all other proper charges and disbursements of the Trustee.
(b) After a Change in Control occurs, (i) the Trustee shall, without
any direction from the Company, pay out of the Trust Fund any reasonable
expenses incurred by the Trustee including, but not limited to, amounts assessed
against the Trustee in connection with liability incurred by the Trustee as a
result of any discretionary action which the Trustee may take under the Trust
after such Change in Control occurs, fees for legal services rendered to the
Trustee (whether or not rendered in connection with a judicial or administrative
proceeding), fees for actuarial and/or accounting services rendered to the
Trustee for purposes of determining benefits under each Plan, such compensation
to the Trustee as was agreed upon between the Trustee and the Company prior to
such Change in Control or as shall be agreed upon from time to time between the
Trustee and the Company after such Change in Control occurs, and all other
proper charges and disbursements of the Trustee, and (ii) such expenses shall be
paid prior to any other payments required to be made under the terms of the
trust created hereunder.
(c) In accordance with Section 9.3, the Trustee shall be authorized
after a Change in Control occurs to reserve such amount as it may deem advisable
for payments of its fees and expenses as set forth in paragraph (b) of this
Section 8.1.
(d) Anything in preceding paragraphs (a), (b) or (c) of this Section
8.1 to the contrary notwithstanding, the Company shall reimburse the Trustee for
any such reasonable expenses if for any reason such expenses are not paid out of
the Trust Fund. The Trustee's entitlement to reimbursement hereunder shall not
be affected by the resignation or removal of the Trustee or by the termination
of the Trust.
8.2 Taxes. The Company shall from its own assets pay any Federal,
State, Local or other taxes imposed or levied with respect to the corpus and/or
income of the Trust Fund or any part thereof under existing or future laws and
the Company, in its discretion, or the Trustee, in its discretion, may contest
the validity or amount of any tax, assessment, claim or demand respecting the
Trust Fund or any part thereof.
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ARTICLE IX
Removal or Resignation of Trustee
9.1 Removal or Resignation. Prior to a Change in Control, the Trustee
may be removed by the Company at any time upon sixty (60) days' notice in
writing to the Trustee. After a Change in Control occurs, (i) the Trustee may be
removed by the Company, through action of its Board of Directors, at any time
upon sixty (60) days notice in writing to the Trustee except that the Trustee
may be not so removed by the Company except with the consent of seventy-five
(75) percent in number of the participants of the Plans, or (ii) the Trustee may
be removed by the participants upon sixty (60) days' notice in writing to the
Trustee, provided such notice is executed by at least fifty-one (51) percent in
number of the participants of the Plans. The Trustee may resign at any time upon
sixty (60) days' notice in writing to the Company.
9.2 Designation of a Successor. Upon the removal or resignation of the
Trustee, the Company, by action of its Board of Directors, shall appoint a
successor trustee which shall be a bank as defined under the Investment Advisers
Act of 1940, having a net worth in excess of $100,000,000 or having assets in
excess of $2,000,000,000 to act hereunder after the effective date of such
removal or resignation. Each successor trustee shall have the same powers and
duties as those conferred upon the Trustee hereunder, and upon acceptance of
such appointment by the successor trustee, the Trustee shall assign, transfer
and pay over the Trust Fund to such successor trustee. If, for any reason, the
Company cannot or does not act promptly to appoint a successor trustee in the
event of the resignation or removal of the Trustee, the Trustee may apply to a
court of competent jurisdiction for the appointment of a successor trustee. Any
expenses incurred by the Trustee in connection therewith shall be charged to and
paid from the Trust Fund as an expense of administration.
9.3 Reserve for Expenses. Prior to a Change in Control, the Trustee is
authorized to reserve such amount as is agreed by the Company for payment of its
fees and expenses in connection with the settlement of its account or otherwise,
and any balance of such reserve remaining after payment of its fees and expenses
shall be paid over in accordance with the directions of the Company. After a
Change in Control occurs, the Trustee is authorized to reserve such amount as it
may deem advisable and reasonable at any time for payment of its fees and
expenses in connection with the settlement of its account or otherwise, and any
balance of such reserve remaining after payment of such fees and expenses shall
be paid over in accordance with the directions of the Company under the last
sentence of Section 10.4. The Trustee is authorized to invest such reserve in
any investment authorized under the terms of this Agreement appropriate for the
temporary investment of cash reserves of trusts, the earnings on which are to be
credited to each Plan and the participants' accounts. After a Change in Control,
the Company agrees to keep the Trust sufficiently funded at all times to allow
for a reserve for the Trustee's fees and expenses and to enable the Trustee to
reimburse itself in accordance with the terms of this section and the terms of
Article XV hereof.
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ARTICLE X
Amendment or Termination
10.1 Amendment of Agreement. (a) This Agreement is irrevocable by the
Company. Subject to paragraph (b) hereof, the Company expressly reserves the
right at any time to amend this Agreement and the trust created thereby by
action of its Board of Directors to any extent that it may deem advisable. No
such amendment shall be made that affects the duties or responsibilities of the
Trustee without its consent thereto in writing; and provided further, that no
amendment may be made unless the Company, in its reasonable judgment, believes
that such amendment would have no material adverse impact on participants or
their beneficiaries or that such amendment is necessary to avoid a greater
adverse impact on the participants or their beneficiaries. Such amendment shall
become effective upon delivery to the Trustee of a written instrument of
amendment, duly executed and acknowledged by the Company and accompanied by a
certified copy of a resolution of the Board of Directors of the Company
authorizing such amendment.
(b) Notwithstanding any other provisions of this Agreement, the
provisions of this Agreement and the trust created thereby may not be amended
after the date a Change in Control occurs without the written consent of
seventy-five (75) percent in number of the participants and beneficiaries. The
Trustee may request that the Company furnish evidence to establish that such a
percentage of participants and beneficiaries have granted written consent to
such an amendment. The Company reserves the right to amend or eliminate this
paragraph (b) prior to the date of a Change in Control.
10.2 Termination of Plan. In the event a Plan is terminated in whole or
in part prior to a Change in Control, the Trustee (subject to the provisions of
Articles XI and XII hereof and reserving such sums as the Trustee shall deem
reasonably necessary in settling its accounts and to discharge any obligation of
the Trust Fund for which the Trustee may be liable) shall apply or distribute
the Trust Fund attributable to such Plan in accordance with the written
directions of the Company. After the date a Change in Control occurs, a Plan may
not be terminated without the written consent of seventy-five (75) percent in
number of the participants of such Plan and their beneficiaries. In case a Plan
is terminated in whole or in part after a Change in Control occurs, then the
Trustee (subject to the provisions of Articles XI and XII hereof and reserving
such sums as the Trustee shall deem reasonably necessary in settling its
accounts and to discharge any obligation of the Trust Fund for which the Trustee
may be liable) shall apply or distribute a portion of the Trust Fund
attributable to such Plan in such manner and in such amounts as the Trustee
shall determine based upon the most recent Participant Data with respect to such
Plan forwarded by the Company to the Trustee prior to or upon such Change in
Control and any supplemental information furnished to the Trustee by a
participant, beneficiary, the Company or its actuaries upon which the Trustee
may reasonably rely in making such a determination. Upon such termination of a
Plan in whole or in part, the Trustee shall have a right to have its accounts
settled with respect to such Plan as provided in Article VII hereof. When the
Trust Fund shall have been so applied or distributed and the accounts of the
Trustee shall have been so settled, the Trustee shall be released and discharged
from all further accountability or
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liability respecting the Trust Fund with respect to such Plan (or that part of
the Trust Fund so applied or distributed, if a Plan is terminated only in part)
and shall not be responsible in any way for the further disposition of the Trust
Fund with respect to such Plan (or that part of the Trust Fund so applied or
distributed, if such Plan is terminated only in part). Notwithstanding the
above, no distribution shall be made from the Trust to a participant or
beneficiary attributable to the termination of a Plan during the ninety (90) day
period following such termination of each Plan. Any distribution made thereafter
shall be subject to the provisions of Section 3.3 hereof.
10.3 Distribution of Residual Assets. In the event of the termination
of a Plan prior to a Change in Control, any residual assets with respect to such
Plan shall be distributed to the Company if all liabilities of the Plan to
participants and their beneficiaries have been satisfied and the distribution
does not contravene any provision of law.
10.4 Distribution of Excess Assets. In the event that the fair market
value of the assets of the Trust, determined as of the close of each calendar
year by an actuary chosen by the Company, exceeds one-hundred ten percent (110%)
of the present value of the aggregate benefits payable to participants under
each Plan, the Company may, in its sole discretion, prior to a Change in
Control, direct the Trustee to distribute such excess assets, in whole or in
part, to the Company provided such distribution does not contravene any
provisions of law. After a Change in Control, subject to Section 3.3 no assets
may be distributed to the Company until (i) all obligations as to participants
in all the Plans, or their beneficiaries, have been satisfied and (ii) provision
has been made for (A) the payment of expenses incurred or reasonably projected
by the Trustee to be incurred under the terms of this Agreement and (B) the
establishment and maintenance of reserves as contemplated hereunder.
ARTICLE XI
Prohibition Against Diversion
11.1 No Right of Alienation or Employment. The assets of the Trust Fund
shall not be subject to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge by any participant or beneficiary. The
participants and beneficiaries have no beneficial ownership in or preferred
claim on the assets of the Trust. Amounts payable under the Plans consist of the
Company's unsecured promise to pay such amounts and, with respect to such
amounts, the participants have the status of unsecured creditors. Participation
in a Plan does not give any employee a right to continued employment with the
Company or any subsidiary or affiliate or to interfere with the right of the
Company or any subsidiary or affiliate to discharge any employee at any time for
any reason without prior notice and to treat him without regard to the effect
which such treatment might have upon him as a participant in a Plan.
Participation in a Plan does not give any director a right to continue as a
director or be renominated for election as a director.
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ARTICLE XII
Sufficiency of Trust Fund
12.1 Payment of Benefits. (a) Prior to a Change in Control if the
assets of the Trust Fund are, as of any Valuation Date, including, without
limitation, at the time of termination of a Plan or as a result of the payment
of expenses as set forth in paragraph (b) of Section 8.1, insufficient to
fulfill the Company's obligations under the Plan to participants or
beneficiaries, then (i) the Trustee shall apply the Trust Fund to pay a portion
of the accrued benefits of each participant or beneficiary under the Plan which
shall be determined by multiplying each participant's or beneficiary's accrued
benefit by a fraction, the numerator of which shall be the current value of
assets in the Trust, and the denominator of which shall be the aggregate present
value of the accrued benefits payable to participants under the Plan as
determined by an actuary chosen by the Company; and (ii) the Company shall pay
to such participants or beneficiaries the remaining amounts owed at such time as
provided pursuant to the Plan.
(b) At least annually, after a Change in Control occurs, if the assets
of the Trust Fund are, as of any Valuation Date, including, without limitation,
at the time of termination of a Plan or as a result of the payment of expenses
as set forth in paragraph (b) of Section 8.1, insufficient to fulfill the
Company's accrued obligations as of such date under the Plan to participants or
beneficiaries and to pay the expenses previously incurred or reasonably
projected by the Trustee to be incurred under this Agreement, then the Trustee
shall so notify the Company, setting forth the additional aggregate amount
required and the Company shall, within ten (10) days of the receipt of such
notice pay to the Trustee the amount set forth in such notice.
12.2 Contribution to Fund. (a) After the execution of this Agreement
and prior to a Change in Control, the Company may, but is not required to, make
a single contribution of a sinking fund of actuarially determined contributions
in an amount as shall be necessary, as determined by the Company, to ensure that
the assets of the Fund shall be sufficient to discharge the Company's
obligations under the Plans.
During a calendar year, the Company may, but is not required to, make
contributions to the Trust to insure that the assets of the Trust exceed as a
minimum the present value of accrued benefits as of the end of that year for all
participants who have retired or are eligible for retirement or early retirement
during the year. The present value shall be determined by using the interest
rate used for funding purposes in the Bowater Incorporated Employees' Retirement
Plan's most recent actuarial valuation ("Plan Valuation"). In lieu of the
foregoing, the Company may make such provisions for the funding of the Trust as
it deems appropriate.
(b) After a Change in Control occurs, the Company shall make such
contributions within ten (10) days of the Change in Control, and thereafter as
of the first day of each calendar month, to the trust created hereunder as shall
be necessary to ensure that the assets of the Trust shall at all times be
sufficient to discharge the Company's obligations under the Plans and under the
terms of this Agreement. Notwithstanding the foregoing however, the Company
shall have no obligation to fund the Trust to the extent that a participant or
beneficiary waives the
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funding obligation for the benefits attributable to such participant or
beneficiary. The Company's obligations under the Plans shall be equal to the
aggregate present value of the future benefits payable to the participants under
the Plans as determined by using the 1983 Group Annuity Mortality Table
(weighted 50% male), and the lower of (i) the "applicable interest rate" under
Section 417(e)(3)(A)(ii)(II) of the Code which would be used for purposes of
such Section for the last full month before the month for which such present
value is being calculated, and (ii) the interest rate used in the most recent
Plan valuation for funding purposes.
Anything herein to the contrary notwithstanding, the Trustee shall
under no circumstances be responsible for the adequacy of the Trust, whether
before or after a Change in Control, as the result of the distribution of excess
Trust assets to the Company, the payment of claims of judgment creditors of the
Company, the payment of taxes of the Trust or of the participants and/or
beneficiaries, the payment of expenses of the Trust or the Trustee or otherwise
to fulfill the obligations of the Company under the Plan to participants and
beneficiaries.
(c) For purposes of calculating the contribution that the Company may
or is required to make under this Section12.2, the Company shall make reasonable
projections of (i) increases in the obligations under the Plans, including but
not limited to those caused by increases in compensation, increases in tax
rates, increases in the number of participants included in the Plans, and the
likelihood that increased or accelerated amounts will be payable pursuant to
provisions of such Plans as a result of a Change in Control, and (ii) potential
future expenses or reserves that may be payable or required to be maintained
under the terms of this Agreement.
ARTICLE XIII
Authorities
13.1 Company. Whenever the provisions of this Agreement specifically
require or permit any action to be taken by "the Company", such action must be
authorized by an officer of the Company, who has been duly authorized by the
Board of Directors to act on the Company's behalf. The Company shall furnish the
Trustee from time to time with a list of the names and signatures of all
individual officers authorized to act for the Company hereunder and certified by
the Secretary or an Assistant Secretary of the Company, and the Trustee shall be
fully protected in acting upon any notices or directions received from any of
them.
13.2 Investment Manager. The Company shall cause each Investment
Manager to furnish the Trustee from time to time with the names and signatures
of those persons authorized to direct the Trustee on its behalf hereunder.
13.3 Form of Communications. Any agreement between the Company and any
Person (including an Investment Manager) or any other provision of this
Agreement to the contrary notwithstanding other than Section 14.6, all notices,
directions and other communications to the Trustee shall be in writing or in
such other form, including transmission
23
<PAGE> 28
by electronic means through the facilities of third parties or otherwise,
specifically agreed to in writing by the Trustee, and the Trustee shall be fully
protected in acting in accordance therewith. Notice of a Change in Control shall
be communicated to the Trustee in a writing signed by an officer of the Company,
which notice shall be conclusive and binding on the Trustee and on which the
Trustee shall be entitled to rely.
13.4 Continuation of Authority. The Trustee shall have the right to
assume, in the absence of written notice to the contrary, that no event
constituting a change in the Company's officers or terminating the authority of
any Person, including any Investment Manager, has occurred.
13.5 No Obligation to Act on Unsatisfactory Notice. The Trustee shall
incur no liability under this Agreement for any failure to act pursuant to any
notice, direction or any other communication from any Asset Manager, the Company
or any other Person or the designee of any of them unless and until it shall
have received instructions in form satisfactory to it.
ARTICLE XIV
General Provisions
14.1 Governing Law. This Agreement shall be administered, construed and
enforced according to the laws of the State of Delaware. Nothing in this
Agreement shall be construed to subject either the Trust or the Plans to ERISA
other than Part 1 of Title I thereof.
14.2 Entire Agreement. The Trustee's duties and responsibilities to the
Plans or any Person interested therein shall be limited to those specifically
set forth in this Agreement.
14.3 Mistake. No mistake made in good faith and in the exercise of due
care in connection with the administration of the Trust Fund shall be deemed to
be a breach of the Trustee's duties if, promptly after discovery of the mistake,
the Trustee takes whatever action may be practicable in the circumstances to
remedy the mistake.
14.4 Reliance on Experts. The Trustee and the Company may consult with
experts (who may be experts employed by the Company), including legal counsel,
appraisers, pricing services, accountants or actuaries, selected by them with
due care with respect to the meaning and construction of this Agreement or any
provision hereof, or concerning their powers and duties hereunder, and shall be
protected for any action taken or omitted by them in good faith pursuant to or
on the basis of the opinion of any such expert.
14.5 Successor to the Trustee. Any successor, by merger or otherwise,
to substantially all of the trust business of Wachovia shall automatically and
without further action become the Trustee hereunder if and only if such
successor meets the requirements of Section 9.2. If the successor does not meet
such requirements, then the Trustee shall be deemed to have
24
<PAGE> 29
resigned as of the date of such merger or other event and the provisions of
Section 9.2 shall apply. Any successor shall be subject to all the terms and
conditions and entitled to all the benefits and immunities hereof.
14.6 Notices. All notices, reports, annual accounts and other
communications to the Company, Investment Manager, or any other Person shall be
deemed to have been duly given if mailed, postage prepaid, electronically
delivered or delivered in hand to such Person at its address appearing on the
records of the Trustee, which address shall be filed with the Trustee at the
time of the establishment of the Trust and shall be kept current hereafter by
the Company. All directions, notices, statements, objections and other
communications to the Trustee shall be deemed to have been given when received
by the Trustee at its offices.
14.7 Plan Documents. The Company shall provide the Trustee with a
complete, current copy of each Plan. The Company also shall deliver to the
Trustee a copy of any modifications or amendments to a Plan. The Trustee shall
be entitled to rely upon the Company's attention to this obligation and shall be
under no duty to inquire of any Person as to the existence of any documents not
provided hereunder.
14.8 No Waiver; Reservation of Rights. The rights, remedies, privileges
and immunities expressed herein are cumulative and are not exclusive, and the
Trustee shall be entitled to claim all other rights, remedies, privileges and
immunities to which it may be entitled under applicable law.
14.9 Descriptive Headings. The captions in this Agreement are solely
for convenience of reference and shall not define or limit the provisions
hereof.
14.10 Counterparts. This Agreement may be executed in two counterparts,
each of which shall be an original and both of which shall constitute together
but one and the same document.
ARTICLE XV
Undertaking by Company
15.1 Undertaking. In consideration of Wachovia's agreeing to enter into
this Agreement, the Company hereby agrees to hold harmless Wachovia,
individually and as Trustee ("Wachovia" or "Trustee" within this Section 15.1
shall include any parent or subsidiary of Wachovia and any corporation the stock
of which is wholly owned by Wachovia Corporation as well as any successor
corporation to those previously described) and Wachovia's directors, officers,
and employees, from and against all amounts, including without limitation taxes,
expenses (including reasonable counsel fees), liabilities, claims, damages,
actions, suits or other charges, incurred by or assessed against Wachovia,
individually or as Trustee, or its directors, officers or employees, (i) as a
result of any act or omission of any predecessor trustee appointed under a Plan;
(ii) as a result of anything done in good faith, or alleged to have been done,
by or
25
<PAGE> 30
on behalf of Wachovia in reliance upon the directions of any Investment Manager
or the Company or anything omitted to be done in good faith, or alleged to have
been omitted, in the absence of such directions; (iii) as a result of the
failure of the Company, directly or indirectly, to adequately, carefully and
diligently discharge its fiduciary responsibilities with respect to a Plan; (iv)
as a result of any other event or occurrence beyond the Trustee's control,
including, but not limited to, claims, actions, or suits which challenge the
authority of the Company to enter into this Agreement, which challenge the
validity of a Plan and the liabilities of the Company thereunder, or which make
other similar challenges or allegations; or (v) as a result of any discretionary
action taken by the Trustee after a Change in Control occurs pursuant to the
terms of the Trust, except for the Trustee's negligence or willful misconduct.
15.2 Limitation on Undertaking. Anything hereinabove to the contrary
notwithstanding, the Company shall have no responsibility to Wachovia under
Section 15.1 if Wachovia knowingly participated in or knowingly concealed any
act or omission of any Person described in such Section knowing that such act or
omission constituted a breach of such Person's fiduciary responsibilities, or if
Wachovia fails to perform any of the duties specifically undertaken by it under
the provisions of this Agreement, or if Wachovia fails to act in conformity with
duly given and authorized directions hereunder.
15.3 Survival of Undertakings. The Company further agrees that the
undertakings made in this Article XV shall be binding on its successors or
assigns and shall survive termination, amendment or restatement of this
Agreement, or the resignation or removal of the Trustee, and that this Article
shall be construed as a contract between the Company and the Trustee according
to the laws of the State of Delaware in effect from time to time.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the 15th
day of April, 1998.
BOWATER INCOPORATED
By: /s/ David G. Maffucci
----------------------------------------------
Name: David G. Maffucci
----------------------------------------------
Title: Sr. Vice President and Chief Financial Officer
----------------------------------------------
Date signed: May 7, 1998
----------------------------------------
WACHOVIA BANK, N.A.
By: /s/ Beverly H. Wood
----------------------------------------------
Name: Beverly H. Wood
----------------------------------------------
Title: Senior Vice President
----------------------------------------------
Date signed: May 14, 1998
----------------------------------------
26
<PAGE> 31
LIST A
PARTICIPATING PLANS, AGREEMENTS OR ARRANGEMENTS
Bowater Incorporated Retirement Plan for Outside Directors
Deferred Compensation Plan for Outside Directors of Bowater Incorporated
27
<PAGE> 32
List B
Participants In The Plans (As of January 1, 1998)
Bowater Incorporated Retirement Plan for Outside Directors:
F. J. Aguilar J. A. Rolls
H. D. Aycock K. M. Curtis
R. Laster R. Barth
H. G. MacNeill J. L. Pate
D. R. Melville C. J. Howard
Deferred Compensation Plan for Outside Directors of Bowater Incorporated:
H. D. Aycock F. J. Aguilar
R. Barth J. A. Rolls
D. R. Melville J. L. Pate
28
<PAGE> 1
EXHIBIT 10.3
AMENDED AND RESTATED
BOWATER INCORPORATED
EXECUTIVE SEVERANCE GRANTOR TRUST
Effective April 15, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
Title-Purpose-Policy-Effect.....................................................................................1
1.1 Name.............................................................................................1
1.2 Definitions......................................................................................1
1.3 Purpose..........................................................................................5
1.4 Effect...........................................................................................6
ARTICLE II
Valuation 6
2.1 Valuation of Trust Fund..........................................................................6
ARTICLE III
Administration of the Contracts.................................................................................6
3.1 Payments From Trust Fund.........................................................................6
3.2 Executive Data...................................................................................7
3.3 Creditors........................................................................................8
3.4 Reliance on Company..............................................................................8
3.5 Trustee Not Responsible for Administration of Judgments..........................................8
ARTICLE IV
Investment of Trust Assets......................................................................................9
4.1 Asset Managers...................................................................................9
4.2 Investment Discretion...........................................................................10
4.3 Limitations on Investment Discretion............................................................10
4.4 Responsibility for Diversification..............................................................10
ARTICLE V
Responsibility for Directed Funds..............................................................................10
5.1 Responsibility for Selection of Agents..........................................................10
5.2 Trustee Not Responsible for Investments in Directed Funds.......................................10
5.3 Investment Vehicles.............................................................................11
5.4 Reliance on Asset Manager.......................................................................11
5.5 Merger of Funds.................................................................................11
5.6 Notification of Company in Event of Breach......................................................12
5.7 Definition of Knowledge.........................................................................12
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
5.8 Duty to Enforce Claims..........................................................................12
5.9 Restrictions on Transfer........................................................................12
5.10 Section 4.1(b) Controlling......................................................................12
ARTICLE VI
Powers of Asset Managers.......................................................................................12
6.1 General Powers..................................................................................12
6.2 Additional Powers of Trustee....................................................................14
6.3 Letters of Credit...............................................................................15
ARTICLE VII
Records and Accounts of Trustees...............................................................................15
7.1 Records.........................................................................................15
7.2 Annual Account..................................................................................15
7.3 Account Stated..................................................................................15
7.4 Judicial Accountings............................................................................16
7.5 Necessary Parties...............................................................................16
ARTICLE VIII
Compensation, Taxes and Expenses...............................................................................16
8.1 Compensation and Expenses.......................................................................16
8.2 Taxes...........................................................................................17
ARTICLE IX
Resignation or Removal of Trustee..............................................................................17
9.1 Removal or Resignation..........................................................................17
9.2 Designation of a Successor......................................................................17
9.3 Reserve for Expenses............................................................................17
ARTICLE X
Amendment or Termination.......................................................................................18
10.1 Amendment of Agreement.........................................................................18
10.2 Termination of a Contract......................................................................18
10.3 Distribution of Residual Assets................................................................19
10.4 Distribution of Excess Assets..................................................................19
ARTICLE XI
Prohibition Against Diversion..................................................................................20
11.1 No Right of Alienation or Employment...........................................................20
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE XII
Sufficiency of Trust Fund......................................................................................20
12.1 Payment of Benefits............................................................................20
12.2 Contribution to Fund...........................................................................20
ARTICLE XIII
Authorities....................................................................................................21
13.1 Company........................................................................................21
13.2 Investment Manager.............................................................................21
13.3 Form of Communications.........................................................................22
13.4 Continuation of Authority......................................................................22
13.5 No Obligation to Act on Unsatisfactory Notice..................................................22
ARTICLE XIV
General Provisions.............................................................................................22
14.1 Governing Law..................................................................................22
14.2 Entire Agreement...............................................................................22
14.3 Mistake........................................................................................22
14.4 Reliance on Experts............................................................................22
14.5 Successor to the Trustee.......................................................................22
14.6 Notices........................................................................................23
14.7 Contracts......................................................................................23
14.8 No Waiver; Reservation of Rights...............................................................23
14.9 Descriptive Headings...........................................................................23
14.10 Counterparts...................................................................................23
ARTICLE XV
Undertaking by Company.........................................................................................23
15.1 Undertaking....................................................................................23
15.2 Limitation on Undertaking......................................................................24
15.3 Survival of Undertakings.......................................................................24
LIST A .....................................................................................................25
</TABLE>
iii
<PAGE> 5
THIS GRANTOR TRUST AGREEMENT was initially made and entered into as of
the 1st day of September, 1989, by and between BOWATER INCORPORATED, a Delaware
corporation (the "Company"), and WACHOVIA BANK, N.A., a national banking
association organized and existing under the laws of the United States (the
"Trustee").
W I T N E S S E T H :
WHEREAS, the Company established this grantor trust to serve as a
funding vehicle for certain designated Contracts (as defined in Section 1.2(k)
hereof) and as a medium for holding amounts payable to eligible executives
party to the Contracts and their beneficiaries;
WHEREAS, the Trustee has agreed to hold and administer all sums of
money and such other property acceptable to the Trustee as shall from time to
time be contributed, paid or delivered to it hereunder, IN TRUST, upon all of
the terms and conditions of the Grantor Trust Agreement (the "Agreement"), and
WHEREAS, the Company and the Trustee desire to amend and restate the
Agreement governing this Grantor Trust.
NOW THEREFORE, the Company and the Trustee hereby agree to continue
the Bowater Incorporated Executive Severance Grantor Trust on the following
terms and conditions as of April 15, 1998:
ARTICLE I
Title-Purpose-Policy-Effect
1.1 Name. The trust established hereunder shall be known as the
Bowater Incorporated Executive Severance Grantor Trust and is sometimes
hereinafter referred to as the "Trust".
1.2 Definitions. Where used in this Agreement unless the context
otherwise requires or unless otherwise expressly provided:
(a) "Account Party" shall mean an officer of the Company designated
to represent the Company for this purpose and any Person to whom the Trustee
shall be instructed by the Company to deliver its annual account under Section
7.2.
(b) "Accounting Period" shall mean the twelve consecutive month
period coincident with the calendar year or the shorter period in any year in
which the Trustee accepts appointment as Trustee hereunder or ceases to act as
Trustee for any reason.
(c) "Agreement" shall mean all of the provisions of this instrument
and of all other instruments amendatory hereof.
1
<PAGE> 6
(d) "Asset Manager" shall mean the Trustee (other than for purposes
of Article V), Company or an Investment Manager, individually or collectively
as the context shall require, but only with respect to those assets held in an
Investment Account over which it exercises, or to the extent it is authorized
to exercise, discretionary investment authority or control.
(e) "Bank Business Day" shall mean a day on which the Trustee is
open for business.
(f) An individual or entity is a "beneficiary" if such individual or
entity is receiving benefits, or entitled to receive benefits solely upon the
lapse of time, under any of the Contracts in respect of a deceased executive
who was party to a Contract.
(g) "Board of Directors" shall mean the Board of Directors of the
Company.
(h) A "Change in Control" shall be deemed to have occurred upon:
(a) The date that any Person is or becomes an Acquiring
Person.
(b) The date that the Corporation's shareholders approve
a merger, consolidation or reorganization of the
Corporation with another corporation or other
Person, unless, immediately following such merger,
consolidation or reorganization, (i) at least 50% of
the combined voting power of the outstanding
securities of the resulting entity would be held in
the aggregate by the shareholders of the Corporation
as of the record date for such approval (provided
that securities held by any individual or entity
that is an Acquiring Person, or who would be an
Acquiring Person if 5% were substituted for 20% in
the definition of such term, shall not be counted as
securities held by the shareholders of the
Corporation, but shall be counted as outstanding
securities for purposes of this determination), or
(ii) at least 50% of the board of directors or
similar body of the resulting entity are Continuing
Directors.
(c) The date the Corporation sells or otherwise
transfers all or substantially all of its assets to
another corporation or other Person, unless,
immediately after such sale or transfer, (i) at
least 50% of the combined voting power of the
then-outstanding securities of the resulting entity
immediately following such transaction is held in
the aggregate by the Corporation's shareholders as
determined immediately prior to such transaction
(provided that securities held by any individual or
entity that is an Acquiring Person, or who would be
an Acquiring Person if 5% were substituted for 20%
in the definition of such term, shall not be counted
as securities held by the shareholders of the
Corporation, but shall be counted as
2
<PAGE> 7
outstanding securities for purposes of this
determination), or (ii) at least 50% of the board of
directors or similar body of the resulting entity
are Continuing Directors.
(d) The date on which less than two-thirds (2/3) of the
total membership of the Board consists of Continuing
Directors.
For purposes of this Section:
(i) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934 (the "Act").
(ii) "Acquiring Person" means the Beneficial Owner,
directly or indirectly, of Common Stock representing
20% or more of the combined voting power of the
Corporation's then outstanding securities, not
including (except as provided in clause (i) of the
next sentence) securities of such Beneficial Owner
acquired pursuant to an agreement allowing the
acquisition of up to and including 50% of such
voting power approved by two-thirds of the members
of the Board who are Board members before the Person
becomes Beneficial Owner, directly or indirectly, of
Common Stock representing 5% or more of the combined
voting power of the Corporation's then outstanding
securities. Notwithstanding the foregoing, (i)
securities acquired pursuant to an agreement
described in the preceding sentence will be included
in determining whether a Beneficial Owner is an
Acquiring Person if, subsequent to the approved
acquisition, the Beneficial Owner acquires 5% or
more of such voting power other than pursuant to
such an agreement so approved and (ii) a Person
shall not be an Acquiring Person if such Person is
eligible to and files a Schedule 13G with respect to
such Person's status as a Beneficial Owner of all
Common Stock of the Corporation of which the Person
is a Beneficial Owner.
(iii) A "Beneficial Owner" of Common Stock means (A) a
Person who beneficially owns such Common Stock,
directly or indirectly, or (B) a Person who has the
right to acquire such Common Stock (whether such
right is exercisable immediately or only with the
passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights,
exchange rights, warrants, options or otherwise.
3
<PAGE> 8
(iv) "Continuing Directors" means any member of the Board
who (A) was a member of the Board prior to the date of
the event that would constitute a Change in Control,
and any successor of a Continuing Director while such
successor is a member of the Board, (B) is not an
Acquiring Person or an Affiliate or Associate of an
Acquiring Person, and (C) is recommended or elected to
succeed the Continuing Director by a majority of the
Continuing Directors.
(v) "Person" means any individual, firm, corporation,
partnership, trust or other entity.
Notice to the Trustee from the Company that a Change in Control has
occurred shall be binding and conclusive on the Trustee. The Trustee shall have
no independent obligations or duty to investigate whether or not a Change in
Control has occurred. In performing any of its obligations or taking any
discretionary action under this Agreement which is dependent upon a Change in
Control having occurred, the Trustee may rely on such notice and such notice
shall be binding and conclusive on all Plan participants and beneficiaries.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and Regulations issued thereunder.
(j) "Company" shall mean Bowater Incorporated or any successor
thereto.
(k) "Contract" or "Contracts" shall mean, collectively, the
designated severance agreements between certain designated executives and the
Company, and such other plans, agreements or arrangements maintained by the
Company or to which the Company is a party and which have been designated by
the Board of Directors for participation in this Trust, as are set forth on
List A hereto.
(1) "Directed Fund" shall mean an Investment Account, or part
thereof, subject to the discretionary management and control of the Company or
any Investment Manager.
(m) "Discretionary Fund" shall mean any Investment Account, or part
thereof, subject to the discretionary management and control of the Trustee.
(n) "Executive Data" shall mean certain information regarding the
executives party to a Contract (or their beneficiaries) and such information as
is necessary to determine benefits under each Contract, including the following
information: (i) name, address, date of birth, date of hire and social security
number of each executive party to a Contract, (ii) the estimated payments under
each Contract, and (iii) any other information regarding each Contract which
the Trustee may reasonably request or which the Company may deem necessary.
(o) "Investment Account" shall mean each pool of assets in the Trust
in which the Contracts have an interest during an Accounting Period.
4
<PAGE> 9
(p) "Investment Manager" shall mean a bank, as defined under
Investment Advisers Act of 1940, insurance company or investment adviser
registered under the Investment Advisers Act of 1940.
(q) "Investment Vehicle" shall mean any common, collective or
commingled trust, mutual fund, investment company, corporation functioning as
an investment intermediary, insurance contract, letter of credit, partnership,
joint venture or other entity or arrangement to which, or pursuant to which,
assets of the Trust have been transferred or in which the Trust has an
interest, beneficial or otherwise.
(r) "Person" shall mean a natural person, trust, estate, corporation
of any kind or purpose, mutual company, joint-stock company, unincorporated
organization, association, partnership, joint venture, employee organization,
committee, board, executives, beneficiary, trustee, partner, or venturer acting
in an individual, fiduciary, or representative capacity, as the context may
require.
(s) "Trust Fund" shall mean all cash and other property contributed,
paid or delivered to the Trustee hereunder, all investments made therewith and
proceeds thereof and all earnings and profits thereon, less payments, transfers
or other distributions which, at the time of reference, shall have been made by
the Trustee as authorized herein. The Trust Fund shall include all evidences of
ownership, interest or participation in an Investment Vehicle, but shall not,
solely by reason of the Trust Fund's investment therein, be deemed to include
any assets of such Investment Vehicle.
(t) "Trust" shall mean the grantor trust established under this
Agreement.
(u) "Trustee" shall mean Wachovia Bank, N.A., as Trustee of the
Trust and its successors.
(v) "Valuation Date" shall mean the last day of the Accounting
Period, calendar quarter or any more frequent reporting date determined by the
Company and agreed to by the Trustee.
(w) "Wachovia" shall mean Wachovia Bank, N.A.
The plural of any term shall have a meaning corresponding to the
singular thereof as so defined and any neuter or masculine pronoun used herein
shall include the masculine and feminine, as the context may require.
1.3 Purpose. The Trust is established as a grantor trust within the
meaning of Sections 671 through 677 of the Code, to hold the interests under
the Contracts of executives party to Contracts and their beneficiaries. Except
as may otherwise be permitted by law and the terms of each Contract or pursuant
to the terms of this Agreement, at no time prior to the satisfaction of all
liabilities under the Contracts with respect to executives party to Contracts
and
5
<PAGE> 10
their beneficiaries shall any portion of the Trust Fund be used for, or
diverted to, any purposes other than for the exclusive benefit of such
executives and their beneficiaries, and for defraying the reasonable expenses
of administering each such Contract. The establishment of the Trust is intended
to provide a funding vehicle for the payment of benefits under the Contracts
and is not intended to relieve the Company of its duties under the Contracts to
the executives party thereto or to their beneficiaries.
1.4 Effect. All Persons at any time interested in the Contracts
shall be bound by the provisions of this Agreement and, in the event of any
conflict between this Agreement and the provisions of the Contracts or any
other instrument or agreement forming part of each such Contract, the
provisions of this Agreement shall control.
ARTICLE II
Valuation
2.1 Valuation of Trust Fund. The Trustee shall determine the value
of the assets of the Trust Fund as of each Valuation Date. In addition, prior
to a Change in Control and for the convenience of the Company and without
imposing any obligation on the Trustee, the Company may request the Trustee to
include in its periodic reports under this Article II or its annual account
under Section 7.2 assets which do not constitute part of the Trust Fund. Assets
will be valued at their market values at the close of business on the Valuation
Date, or, in the absence of readily ascertainable market values, at such values
as the Trustee shall determine in accordance with methods consistently followed
and uniformly applied. Anything in this Agreement to the contrary
notwithstanding, with respect to assets constituting part of a Directed Fund or
assets included at the request of the Company as hereinabove provided, the
Trustee may rely for all purposes of this Agreement on the latest valuation and
transaction information submitted to it by the Persons responsible for the
investment of such assets even if such information predates the Valuation Date.
The Company will cause such Persons to provide the Trustee with all information
needed by the Trustee to discharge its obligations to value such assets and to
account under this Agreement.
ARTICLE III
Administration of the Contracts
3.1 Payments From Trust Fund. (a) Subject to Sections 3.2 and 3.3,
the Trustee, upon receipt of direction from the Company prior to a Change in
Control, shall pay moneys directly to or for the benefit of executives party to
Contracts and their beneficiaries, or to a paying or disbursing agent (which
may be the Company) for the benefit of executives party to Contracts or their
beneficiaries. Prior to a Change in Control, the Company may direct that moneys
be paid to the Company or an affiliate or subsidiary thereof, however, only if
and only to the extent that such payment is for the reimbursement of moneys
paid under a Contract to an
6
<PAGE> 11
executive party to a Contract or his beneficiary which could have been paid
from the Trust Fund. After a Change in Control, the Trustee may follow the
directions of the Company as noted in the preceding sentence only upon receipt
of evidence that such amounts have been paid to an executive party to a
Contract or beneficiary in lieu of a payment from the Trust Fund. Any such
payment to the Company or an affiliate or subsidiary thereof shall be deemed a
payment for the benefit of an executive party to a Contract or his beneficiary.
Any assets disbursed or paid over by the Trustee pursuant to the foregoing
provisions of this Section 3.1, or pursuant to Section 3.3 hereof, shall no
longer be part of the Trust Fund.
(b)(1) In the event it shall be determined prior to a Change in
Control that the executives party to Contracts and/or beneficiaries of the
Trust Fund, prior to the payment of benefits hereunder, are subject to any tax
under the terms of the trust created hereunder, then the Trustee, upon a
receipt of written direction from the Company, shall make payments from the
Trust Fund to such persons, in such manner and in such amounts as the Company
shall direct, for the purpose of paying the amount of Federal, State and Local
tax and interest and any penalties thereon which such executives and/or
beneficiaries may incur arising out of such determination. In the event such a
determination is made after a Change in Control occurs, then each executive or
beneficiary who is subject to such tax, may direct the Trustee, in writing, to
make payments from the Trust Fund for the purpose set forth in the preceding
sentence and shall deliver to the Trustee evidence of such determination. In
the event a final judicial determination is made after a Change in Control
occurs that an executive party to a Contract or beneficiary, prior to the
payment of benefits hereunder, is subject to any tax under the terms of the
trust created hereunder and a governmental agency authorized to execute such
determination directs the Trustee to pay such tax from the Trust Fund, then the
Trustee may make such payment and shall incur no liability hereunder because of
the Trustee's compliance with such direction. The Trustee's decision as to
whether the final judicial determination referenced in the preceding sentence
has occurred shall be binding and conclusive on all executives party to
Contracts and their beneficiaries.
(b)(2) Any payment from the Trust Fund pursuant to paragraph (b)(1) of
this Section 3.1 attributable to a Contract shall actuarially reduce the
benefits of those executives and beneficiaries to whom such a distribution is
made under such Contract.
3.2 Executive Data. The Company has heretofore submitted Executive
Data to the Trustee and may, from time to time hereafter, furnish the Trustee
with updated Executive Data. In addition, the Company shall provide information
concerning executives party to a Contract to the Company's actuarial
consultants on a quarterly basis sufficient to permit such consultants to
assist the Company in determining Executive Data and the contributions to be
made hereunder upon a Change in Control and to discharge the Company's duties
under Section 12.2(b). The Company shall keep the Trustee informed of the
identity of the actuarial consultants responsible for such information, and
such consultants shall be formally retained on an ongoing basis to provide
these services. The Company shall, upon a Change in Control, furnish the
Trustee with Executive Data and, after a Change in Control, furnish the Trustee
with Executive Data at least once each Accounting Period. After a Change in
Control, all expenses of the actuarial consultants may be paid from the Trust
assets to the extent not paid by the
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Company. The Company shall maintain and provide to the Trustee at least
annually a current list (List A) of those executives party to a Contract. After
a Change in Control, executives party to a Contract and their beneficiaries
shall have the right to receive from the Company or the Trustee (i) a copy of
the most recent Executive Data that has been supplied to the Trustee on his or
her behalf, and (ii) a list of the names and addresses of all executives party
to a Contract or their beneficiaries, within thirty (30) days after a request
for such information is made.
In the event of a Change in Control and notwithstanding any other
provision of this Agreement, the Trustee shall, without direction from the
Company, make payments to executives party to a Contract or beneficiaries
thereof in such manner and in such amounts as the Trustee shall determine they
are entitled to be paid under the applicable Contract based upon the most
recent Executive Data furnished to the Trustee by the Company or its actuarial
consultants prior to or upon a Change in Control and any supplemental
information furnished to the Trustee by an executive party to a Contract, a
beneficiary thereof, the Company or its actuarial consultants upon which the
Trustee may reasonably rely in making such determination. The Trustee's
determination as to the amount of such payments after a Change in Control
occurs shall be binding and conclusive on all executives party to a Contract or
his or her beneficiary and the Trustee shall be fully protected under the terms
of the trust created hereunder in making such determination but the Trustee's
determination shall not relieve the Company of its obligations to such
executive or beneficiary under such Contract.
3.3 Creditors. The Company has the duty to inform the Trustee of the
Company's insolvency (i.e., its inability to pay debts as they mature) or
bankruptcy (i.e., the Company is subject to a pending proceeding under the
federal Bankruptcy Code). The insolvency or bankruptcy of a subsidiary of the
Company shall not be deemed to be the insolvency or bankruptcy of the Company
or any other subsidiary. When the Trustee is in receipt of a copy of a
bankruptcy petition relating to the Company or a notification from the Company
that it is insolvent, the Trustee will suspend payments to the executives and
beneficiaries under the Trust and will hold assets of the Trust for the benefit
of the Company's general creditors. Thereafter, the Trustee will deliver assets
of the Trust to satisfy claims of the Company's general creditors as directed
by a court of competent jurisdiction. However, if the Trustee makes a good
faith determination that the Company is solvent, it shall continue to make or
resume making payments that are due under any Contract until a final order to
the contrary is received by the Trustee.
3.4 Reliance on Company. Any directions pursuant to Section 3.1 may,
but need not, specify the application to be made of moneys so ordered. Each
direction to the Trustee under Section 3.1 or Section 3.3 shall constitute a
certification by the Company, as the case may be, that such direction is in
accordance with applicable law, or with the terms of the applicable Contract,
and with the terms of this Agreement. The Trustee shall have no duty to make
any independent inquiry or investigation as to any of the foregoing before
acting upon such direction.
3.5 Trustee Not Responsible for Administration of Judgments. The
Trustee shall not be responsible in any way respecting the administration,
computation, payment or application of any payment, satisfaction, or for any
other matter affecting the response of the
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Company to any creditor in the event of insolvency, other than for the
execution of any documents incidental thereto and transfer or receipt of funds
thereunder on the directions of the Company.
ARTICLE IV
Investment of Trust Assets
4.1 Asset Managers. (a) Prior to a Change in Control, discretionary
authority for the management and control of assets from time to time held in
the Trust Fund may be retained, allocated or delegated, as the case may be, for
one or more purposes, to and among the Asset Managers by the Company, in its
absolute discretion. To the extent an Asset Manager is the Trustee, the assets
shall be part of the Discretionary Fund; to the extent an Asset Manager is
either the Company or an Investment Manager, the assets shall be part of a
Directed Fund. Prior to a Change in Control, the terms and conditions of
appointment, authority and retention of any Asset Manager shall be the sole
responsibility of the Company. The Company shall promptly notify the Trustee in
writing of the appointment or removal of an Asset Manager. Any notice of
appointment pursuant to this Section 4.1 shall constitute a representation and
warranty that the Asset Manager has been appointed in accordance with the
provisions of each Contract and that any Asset Manager (other than the Trustee
or the Company) is an Investment Manager.
(b) After a Change in Control, discretionary authority for the
management and control of assets from time to time held in the Trust Fund shall
be in the Trustee. After a Change in Control occurs and subject to paragraph
(b) of Section 6.3, the Trustee shall continue to manage the assets of the
Trust in accordance with Section 4.1(a). The Trustee may appoint, terminate or
continue the appointment of Asset Managers for all permissible types of
securities, until such time as at least fifty-one (51) percent in number of the
executives party to Contracts or beneficiaries thereof request that the assets
of the Trust be invested and reinvested, without distinction between principal
and income, in an immunized or dedicated portfolio of bonds, debentures,
equipment or collateral trust certificates, notes or other evidences of
indebtedness, unsecured or secured by mortgages on real or personal property
wherever situated (including any part interest in a bond and mortgage or note
and mortgage whether insured or uninsured) and any portfolio of other property,
or part interest in property, real or personal, foreign or domestic in which
such event the Trustee shall have the power to appoint Asset Manager(s) solely
for such specified investments. The rates of return and maturity dates of the
instruments of such portfolio shall reasonably be expected to yield assets of
the Trust Fund sufficient to discharge the Company's obligations under the
Contracts as set forth in the most recent Executive Data furnished to the
Trustee prior to or upon such Change in Control.
(c) After a Change in Control, the Trustee, subject to Section 4.1
(b), shall have full discretion and responsibility for investment of Trust
assets, including responsibility for the appointment of Asset Managers and for
formulation of funding, investment and diversification policies and shall have
all the duties and responsibilities of the Company set forth in Sections
4.1(a), 4.3 and 4.4.
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4.2 Investment Discretion. Subject to Section 4.1(b), the Trust Fund
shall be invested and reinvested, without distinction between principal and
income, at such time or times in such investments and pursuant to such
investment strategies or courses of action and in such shares and proportions,
as the Asset Managers, in their sole discretion, shall deem advisable.
4.3 Limitations on Investment Discretion. Prior to a Change in
Control, the Company may limit, restrict or impose guidelines affecting the
exercise of the discretion hereinabove conferred in Section 4.2 on any Asset
Manager. Any limitations, restrictions or guidelines applicable to the Trustee,
as Asset Manager, shall be communicated in writing to the Trustee. Prior to a
Change in Control, the Trustee shall have no responsibility with respect to the
formulation of any funding policy or any investment or diversification policies
embodied therein. Prior to a Change in Control, the Company shall be
responsible for communicating, and monitoring adherence to, any limitations or
guidelines imposed on any other Asset Manager.
4.4 Responsibility for Diversification. Prior to a Change in
Control, the Company shall be responsible for determining the diversification
policy of the Trust Fund and for monitoring adherence by the Asset Managers to
such policy.
ARTICLE V
Responsibility for Directed Funds
5.1 Responsibility for Selection of Agents. Prior to a Change in
Control, all transactions of any kind or nature in or from a Directed Fund
shall be made upon such terms and conditions and from or through such
principals and agents as the responsible Asset Manager shall direct. No such
transactions shall be executed through the facilities of the Trustee except
where the Trustee shall make available its facilities solely for the purpose of
temporary investment of cash reserves of a Directed Fund. (However, nothing in
the preceding sentence shall confer any authority upon the Trustee to invest
the cash balances of any Directed Fund unless and until it receives directions
from the responsible Asset Manager.)
5.2 Trustee Not Responsible for Investments in Directed Funds. Prior
to a Change in Control, and except as provided in Section 5.6, the Trustee
shall be under no duty or obligation to review or to question any direction of
any Asset Manager, or to review securities or any other property held in any
Directed Fund with respect to prudence or proper diversification or compliance
with any limitation on the Asset Manager's authority under the terms of any
Contract, any agreement entered into between the Company and the Asset Manager
or imposed by applicable law, or to make any suggestions or recommendations to
the Company or the Asset Managers with respect to the retention or investment
of any assets of any Directed Fund, and shall have no authority to take any
action or to refrain from taking any action with respect to any asset of a
Directed Fund unless and until it is directed to do so by the Asset Manager.
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5.3 Investment Vehicles. Any Investment Vehicle, or interest
therein, acquired by or transferred to the Trustee upon the directions of the
Asset Manager shall be allocated to the appropriate Directed Fund, and the
Trustee's duties and responsibilities under this Agreement shall not be
increased or otherwise affected thereby. The Trustee shall be responsible
solely for the safekeeping of the evidence of the Trust's ownership of or
interest or participation in such Investment Vehicle.
5.4 Reliance on Asset Manager. The Trustee shall be required under
this Agreement to execute documents, to settle transactions, to take action on
behalf of or in the name of the Trust and to make and receive payments on the
direction of the Asset Manager. Any direction of the Asset Manager shall
constitute a certification to the Trustee (i) that the investment is authorized
under the terms of this Agreement and any other agreement or law affecting the
Asset Manager's authority to deal with the Directed Fund, (ii) that any
contract, agency, joinder, adoption, participation or partnership agreement,
deed, assignment or other document of any kind which the Trustee is required to
execute to effectuate the transaction has been reviewed by the Asset Manager
and, to the extent it deems advisable and prudent, its counsel, (iii) that such
instrument or document is in proper form for execution by the Trustee, (iv)
that, where appropriate, insurance protecting the Trust against loss or
liability has been or will be maintained in the name of or for the benefit of
the Trustee, and (v) that all other acts to perfect and protect the Trust's
rights have been taken, and the Trustee shall have no duty to make any
independent inquiry or investigation as to any of the foregoing before acting
upon such direction. In addition, the Trustee shall not be liable for the
default of any Person with respect to any investment in a Directed Fund or for
the form, genuineness, validity, sufficiency or effect of any document executed
by, delivered to or held by it for any Directed Fund on account of such
investment, or if, for any reason (other than the negligence or willful
misconduct of the Trustee) any rights of the Trust therein shall lapse or shall
become unenforceable or worthless.
5.5 Merger of Funds. Except pursuant to Section 4.1(b), the Trustee
shall not have any discretionary responsibility or authority to manage or
control any asset held in a Directed Fund upon the resignation or removal of an
Asset Manager unless and until it has been notified in writing by the Company
that the Asset Manager's authority has terminated and that such Directed Fund's
assets are to be integrated with the Discretionary Fund. Such notice shall not
be deemed effective until two Bank Business Days after it has been received by
the Trustee unless the Trustee shall agree otherwise. The Trustee shall not be
liable for any losses to the Trust Fund resulting from the disposition of any
investment made by the Asset Manager or for the retention of any illiquid or
unmarketable investment or any investments which are not actively traded
publicly held securities or for the holding of any other investment acquired by
an Asset Manager if the Trustee is unable to dispose of such investment because
of any restrictions imposed by the Securities Act of 1933 or other federal or
state law, or if an orderly liquidation of such investment is impractical under
prevailing conditions imposed pursuant to Section 4.2, or for any other
violation of the terms of this Agreement, each Contract or applicable law as a
result of the addition of Directed Fund assets to the Discretionary Fund.
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5.6 Notification of Company in Event of Breach. Prior to a Change in
control, if the Trustee has knowledge of a breach committed by an Asset
Manager, it shall notify the Company thereof, and the Company shall thereafter
assume full responsibility to all Persons interested in each Contract to remedy
such breach. After a Change in Control, if the Trustee has knowledge of a
breach committed by an Asset Manager, it shall thereafter assume full
responsibility to all Persons interested in each Contract to remedy such
breach.
5.7 Definition of Knowledge. While the Trustee will perform certain
duties (such as custodial, reporting, recording, valuation and bookkeeping
functions) with respect to Directed Funds, such duties will not involve the
exercise of any discretionary authority to manage or control the assets of the
Directed Funds and such certain duties will be the responsibility of officers
or other employees of the Trustee who are not familiar with and have no
responsibility for investment management. Therefore, the Company agrees that in
the event that knowledge of the Trustee shall be a prerequisite to imposing a
duty upon or to determining liability of the Trustee under this Agreement or
any statute regulating the conduct of the Trustee with respect to such Directed
Funds or relieving the Company of its undertakings under Section 15.2, the
Trustee will not be deemed to have knowledge of, or to have participated in,
any act or omission of an Asset Manager involving the investment of assets
allocated to the Directed Funds solely as a result of the receipt and
processing of information in the course of performing such duties.
5.8 Duty to Enforce Claims. Prior to a Change in Control, the
Trustee shall have no duty to commence or maintain any action, suit or legal
proceeding on behalf of the Trust on account of or growing out of any
investment made in or for a Directed Fund unless the Trustee has been directed
to do so by the Asset Manager and unless the Trustee is either in possession of
funds sufficient for such purpose or unless it has been indemnified by the
Company or the Investment Manager, to its satisfaction, for counsel fees, costs
and other expenses and liabilities to which it, in its sole judgment, may be
subject by beginning or maintaining such action, suit or legal proceeding.
5.9 Restrictions on Transfer. Nothing herein shall be deemed to
empower any Asset Manager to direct the Trustee to transfer any asset of a
Directed Fund to itself except for purposes enumerated in Section 6.1(a).
5.10 Section 4.1(b) Controlling. All provisions of this Article V are
subject to Section 4.1(b).
ARTICLE VI
Powers of Asset Managers
6.1 General Powers. Subject to Section 4.1(b) hereof and without in
any way limiting the powers and discretions conferred upon any Asset Manager by
the other provisions of this Agreement or by law, each Asset Manager, including
the Trustee, shall be vested with the following powers and discretions with
respect to the assets of the Trust subject to its
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management and control, and, upon the directions of the Asset Manager of a
Directed Fund, the Trustee shall make, execute, acknowledge and deliver any and
all documents of transfer and conveyance and any and all other instruments that
may be necessary or appropriate to enable such Asset Manager to carry out such
powers and discretions:
(a) to hold marketable securities subject to appropriate objectives
and guidelines set by the Company, including stocks, bonds and money market
instruments. However, the Trustee shall have no responsibility or obligation to
monitor objectives and guidelines set forth by the Company;
(b) to sell, exchange, convey, transfer or otherwise dispose of any
property by private contract or at public auction, and no person dealing with
the Asset Manager shall be bound to see to the application of the purchase
money or to inquire into the validity, expediency or propriety of any such sale
or other disposition;
(c) to enter into contracts or to make commitments either alone or
in company with others to sell or acquire property;
(d) to delegate to a manager or holder or holders of a majority
interest in any real property, the management and operation of any part
interest in such property or properties (including the authority to sell such
part interests or otherwise carry out the decision of such manager or the
holder or holders of such majority interest);
(e) to lease to others for any term without regard to the duration
of the Trust any real property or part interest in real property;
(f) to vote upon any stocks, bonds or other securities (but subject
to the suspension of any voting rights as a result of any broker loan or
similar agreement); to give general or special proxies or powers of attorney
with or without power of substitution; to exercise any conversion privileges,
subscription rights or other options and to make any payments incidental
thereto; to consent to or otherwise participate in corporate reorganizations or
other changes affecting corporate securities and to delegate discretionary
powers and to pay any assessments or charges in connection therewith; and
generally to exercise any of the powers of an owner with respect to stocks,
bonds, securities or other property;
(g) to organize corporations under the laws of any state for the
purpose of acquiring or holding title to property (or to direct the Trustee to
organize such corporations or to appoint any ancillary trustee acceptable to
the Trustee for such purpose);
(h) to invest in a fund consisting of securities issued by
corporations and selected and retained solely because of their inclusion in,
and in accordance with, one or more commonly used indices of such securities,
with the objective of providing investment results for the fund which
approximate the overall performance of such designated index;
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(i) to enter into any partnership, as a general or limited partner,
or joint venture;
(j) to purchase units or certificates issued by an investment
company or pooled trust or comparable entity;
(k) to transfer money or other property to an insurance company
issuing an insurance contract; and
(l) to be reimbursed for the expenses incurred in exercising any of
the foregoing powers or for paying the reasonable expenses incurred by any
agent, manager or trustee appointed pursuant hereto.
6.2 Additional Powers of Trustee. In addition, the Trustee is hereby
authorized:
(a) to register any securities held in the Trust Fund in its own
name or in the name of a nominee and to hold any securities in bearer form, and
to combine certificates representing such securities with certificates of the
same issue held by the Trustee in other fiduciary or representative capacities
or as agent for customers, or to deposit or to arrange for the deposit of such
securities in any qualified central depository even though, when so deposited,
such securities may be merged and held in bulk in the name of the nominee of
such depository with other securities deposited therein by other depositors, or
to deposit or arrange for the deposit of any securities issued by the United
States Government, or any agency or instrumentality thereof, with a Federal
Reserve Bank, but the books and records of the Trustee shall at all times show
that all such investments are part of the Trust Fund;
(b) to employ suitable agents, depositories and counsel, domestic or
foreign, and to charge their reasonable expenses and compensation against the
Trust Fund, and to confer upon any such depository the powers conferred upon
the Trustee by paragraph (a) of this Section 6.2 as well as the power to
appoint subagents and depositories, wherever situated, in connection with the
retention of securities or other property;
(c) to borrow money from any source as may be necessary or advisable
to effectuate the purposes of the Trust on such terms and conditions as the
Trustee, in its absolute discretion, may deem advisable;
(d) to deposit funds in interest bearing account deposits maintained
by or savings certificates issued by Wachovia, in its separate corporate
capacity, or in any other banking institution;
(e) to compromise or otherwise adjust all claims in favor of or
against the Trust Fund other than claims solely affecting the right of any
Person to benefits under each Contract;
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(f) to make any distribution or transfer of assets authorized under
the terms of this Agreement in cash or in kind as the Trustee, in its absolute
discretion, shall determine and, in furtherance thereof, to value such assets,
which valuation shall be conclusive and binding on all Persons;
(g) upon the direction of the Company, to maintain and operate one
or more market inventory funds as a vehicle to exchange securities among
Discretionary and Directed Funds without alienating the property from the
Trust; and
(h) to hold uninvested cash awaiting investment and such additional
cash balances as it shall deem reasonable or necessary, without incurring any
liability for the payment of interest thereon.
6.3 Letters of Credit. The Trustee, upon written direction of the
Company prior to a Change in Control, shall pay from the Trust Fund sums to
such banking company or companies as the Company may direct for purposes of
establishing a letter of credit to fund the Company's obligations under the
Contracts. The Trustee shall receive and hold in the Fund all letters of credit
so obtained.
ARTICLE VII
Records and Accounts of Trustees
7.1 Records. The Trustee shall keep accurate and detailed accounts
of all investments, receipts, disbursements and other transactions in the Trust
Fund and all accounts, books and records relating thereto shall be open to
inspection and audit at all reasonable times during normal business hours by
any Person designated by the Company.
7.2 Annual Account. Within ninety (90) days following the close of
each Accounting Period, the Trustee shall file with the Account Party a written
account setting forth the receipts and disbursements of the Trust Fund and the
investments and other transactions effected by it upon its own authority or
pursuant to the directions of any Person as herein provided during the
Accounting Period.
7.3 Account Stated. Upon the expiration of ninety (90) days from the
date of filing its annual account with the Account Party, the Trustee shall be
forever released and discharged from all liability and further accountability
to the Company, the Account Party or any other Person with respect to the
accuracy of such accounting and the propriety of all acts and failures to act
of the Trustee reflected in such account, except with respect to any such acts
or transactions as to which the Account Party shall, within such ninety (90)
day period, file with the Trustee specific written objections.
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7.4 Judicial Accountings. Nothing herein shall in any way limit the
Trustee's right to bring any action or proceeding in a court of competent
jurisdiction to settle its account or for such other relief as it may deem
appropriate.
7.5 Necessary Parties. In order to protect the Trust Fund from the
expense of litigation, no Person other than the Company shall be a necessary
party in any proceeding under Section 7.4 or may require the Trustee to account
or may institute any other action or proceeding against the Trustee or the
Trust.
ARTICLE VIII
Compensation, Taxes and Expenses
8.1 Compensation and Expenses. (a) Prior to a Change in Control, the
Trustee shall, upon receipt of written direction from the Company, pay out of
the Trust Fund any expenses incurred by the Trustee in connection with its
administration of the Trust including, but not limited to, fees for legal
services rendered to the Trustee (whether or not rendered in connection with a
judicial or administrative proceeding), such compensation to the Trustee as
shall be agreed upon from time to time between the Trustee and the Company, and
all other proper charges and disbursements of the Trustee.
(b) After a Change in Control occurs, (i) the Trustee shall, without
any direction from the Company, pay out of the Trust Fund any reasonable
expenses incurred by the Trustee including, but not limited to, amounts
assessed against the Trustee in connection with liability incurred by the
Trustee as a result of any discretionary action which the Trustee may take
under the Trust after such Change in Control occurs, fees for legal services
rendered to the Trustee (whether or not rendered in connection with a judicial
or administrative proceeding), fees for actuarial and/or accounting services
rendered to the Trustee for purposes of determining benefits under a Contract,
such compensation to the Trustee as was agreed upon between the Trustee and the
Company prior to such Change in Control or as shall be agreed upon from time to
time between the Trustee and the Company after such Change in Control occurs,
and all other proper charges and disbursements of the Trustee, and (ii) such
expenses shall be paid prior to any other payments required to be made under
the terms of the trust created hereunder.
(c) In accordance with Section 9.3, the Trustee shall be authorized
after a Change in Control occurs to reserve such amount as it may deem
advisable for payments of its fees and expenses as set forth in paragraph (b)
of this Section 8.1.
(d) Anything in preceding paragraph (a), (b) or (c) of this Section
8.1 to the contrary notwithstanding, the Company shall reimburse the Trustee
for any such reasonable expenses if for any reason such expenses are not paid
out of the Trust Fund. The Trustee's entitlement to reimbursement hereunder
shall not be affected by the resignation or removal of the Trustee or by the
termination of the Trust.
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8.2 Taxes. The Company shall pay from its own assets any Federal,
State, Local or other taxes imposed or levied with respect to the corpus and/or
income of the Trust Fund or any part thereof under existing or future laws and
the Company, in its discretion, or the Trustee, in its discretion, may contest
the validity or amount of any tax, assessment, claim or demand respecting the
Trust Fund or any part thereof.
ARTICLE IX
Resignation or Removal of Trustee
9.1 Removal or Resignation. Prior to a Change in Control, the
Trustee may be removed by the Company at any time upon sixty (60) days' notice
in writing to the Trustee. After a Change in Control occurs, (i) the Trustee
may be removed by the Company through action of its Board of Directors at any
time upon sixty (60) days' notice in writing to the Trustee except that the
Trustee may be not so removed by the Company, except with the consent of
seventy-five (75) percent in number of the executives party to Contracts and
their beneficiaries, or (ii) the Trustee may be removed by the executives party
to Contracts and their beneficiaries upon sixty (60) days' notice in writing to
the Trustee, provided such notice is executed by at least fifty-one (51)
percent in number of the executives party to Contracts and their beneficiaries.
The Trustee may resign at any time upon sixty (60) days' notice in writing to
the Company.
9.2 Designation of a Successor. Upon the removal or resignation of
the Trustee, the Company, by action of its Board of Directors, shall appoint a
successor trustee which shall be a bank as defined under the Investment
Advisers Act of 1940, having a net worth in excess of $100,000,000 or having
assets in excess of $2,000,000,000 to act hereunder after the effective date of
such removal or resignation. Each successor trustee shall have the same powers
and duties as those conferred upon the Trustee hereunder, and upon acceptance
of such appointment by the successor trustee, the Trustee shall assign,
transfer and pay over the Trust Fund to such successor trustee. If, for any
reason, the Company cannot or does not act promptly to appoint a successor
trustee in the event of the resignation or removal of the Trustee, the Trustee
may apply to a court of competent jurisdiction for the appointment of a
successor trustee. Any expenses incurred by the Trustee in connection therewith
shall be charged to and paid from the Trust Fund as an expense of
administration.
9.3 Reserve for Expenses. Prior to a Change in Control, the Trustee
is authorized to reserve such amount as is agreed by the Company for payment of
its fees and expenses in connection with the settlement of its account or
otherwise, and any balance of such reserve remaining after payment of its fees
and expenses shall be paid over in accordance with the directions of the
Company. After a Change in Control occurs, the Trustee is authorized to reserve
such amount as it may deem advisable and reasonable at any time for payment of
its fees and expenses in connection with the settlement of its account or
otherwise, and any balance of such reserve remaining after payment of such fees
and expenses shall be paid over in accordance with the directions of the
Company under the last sentence of Section 10.4. The Trustee is authorized to
invest such reserve in any investment authorized under the terms of this
Agreement
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appropriate for the temporary investment of cash reserves of trusts, the
earnings on which are to be credited to each Contract and the executives'
accounts. After a Change in Control, the Company agrees to keep the Trust
sufficiently funded at all times to allow for a reserve for the fees and
expenses and to enable the Trustee to reimburse itself in accordance with the
terms of this section and the terms of Article XV hereof.
ARTICLE X
Amendment or Termination
10.1 Amendment of Agreement. (a) This Agreement is irrevocable by the
Company. Subject to paragraph (b) hereof, the Company expressly reserves the
right at any time to amend this Agreement and the trust created thereby by
action of its Board of Directors to any extent that it may deem advisable. No
such amendment shall be made that affects the duties or responsibilities of the
Trustee without its consent thereto in writing; and provided, further, that no
amendment may be made unless the Company, in its reasonable judgment, believes
that such amendment would have no material adverse impact on executives party
to Contracts or their beneficiaries or that such amendment is necessary to
avoid a greater adverse impact on the executives party to Contracts or their
beneficiaries. Such amendment shall become effective upon delivery to the
Trustee of a written instrument of amendment, duly executed and acknowledged by
the Company and accompanied by a certified copy of a resolution of the Board of
Directors of the Company authorizing such amendment.
(b) Notwithstanding any other provisions of this Agreement, the
provisions of this Agreement and the trust created thereby may not be amended
after the date a Change in Control occurs without the written consent of
seventy-five (75) percent in number of the executives party to Contracts and
their beneficiaries. The Trustee may request that the Company furnish evidence
to establish that such a percentage of executives and beneficiaries have
granted written consent to such an amendment. The Company reserves the right to
amend or eliminate this paragraph (b) prior to the date of a Change in Control.
10.2 Termination of a Contract. In the event a Contract is terminated
in whole or in part prior to a Change in Control, the Trustee (subject to the
provisions of Articles XI and XII hereof and reserving such sums as the Trustee
shall deem reasonably necessary in settling its accounts and to discharge any
obligation of the Trust Fund for which the Trustee may be liable) shall apply
or distribute the Trust Fund attributable to such Contract in accordance with
the written directions of the Company. After the date a Change in Control
occurs, a Contract may not be terminated without the written consent of the
executive party to such Contract or his beneficiary. In case a Contract is
terminated in whole or in part after a Change in Control occurs, then the
Trustee (subject to the provisions of Articles XI and XII hereof and reserving
such sums as the Trustee shall deem reasonably necessary in settling its
accounts and to discharge any obligation of the Trust Fund for which the
Trustee may be liable) shall apply or distribute a portion of the Trust Fund
attributable to such Contract in such manner and in such amounts as the Trustee
shall determine based upon the most recent Executive Data with respect to such
18
<PAGE> 23
Contract forwarded by the Company to the Trustee prior to or upon such Change
in Control and any supplemental information furnished to the Trustee by an
executive party to a Contract, beneficiary, the Company or its actuaries upon
which the Trustee may reasonably rely in making such a determination. Upon such
termination of a Contract in whole or in part, the Trustee shall have a right
to have its accounts settled with respect to such Contract as provided in
Article VII hereof. When the Trust Fund shall have been so applied or
distributed and the accounts of the Trustee shall have been so settled, the
Trustee shall be released and discharged from all further accountability or
liability respecting the Trust Fund with respect to such Contract (or that part
of the Trust Fund so applied or distributed, if such Contract is terminated
only in part) and shall not be responsible in any way for the further
disposition of the Trust Fund with respect to such Contract (or that part of
the Trust Fund so applied or distributed, if the Contract is terminated only in
part). Notwithstanding the above, no distribution shall be made from the Trust
to an executive party to a Contract or beneficiary thereof attributable to the
termination of that Contract during the ninety (90) day period following such
termination of that Contract. Any distribution made thereafter shall be subject
to the provisions of Section 3.3 hereof.
10.3 Distribution of Residual Assets. In the event of the termination
of a Contract prior to a Change in Control, any residual assets with respect to
such Contract shall be distributed to the Company if all liabilities under such
Contract and all other Contracts to executives party to Contracts and their
beneficiaries have been satisfied and the distribution does not contravene any
provision of law.
10.4 Distribution of Excess Assets. (a) In the event that the fair
market value of the assets of the Trust, determined as of the close of each
calendar year by an actuary chosen by the Company, exceeds one hundred ten
(110) percent of the present value of the aggregate benefits payable to
executives under each Contract, the Company may, in its sole discretion prior
to a Change in Control, direct the Trustee to distribute such excess assets, in
whole or in part, to the Company provided such distribution does not contravene
any provisions of law. After a Change in Control, subject to Section 3.3 and
paragraph (b) of this Section 10.4, no assets may be distributed to the Company
until all obligations as to all executives party to Contracts, or their
beneficiaries, have been satisfied, and (ii) provision has been made for (A)
the payment of expenses incurred or reasonably projected by the Trustee to be
incurred under the terms of this Agreement and (B) the establishment and
maintenance of reserves as contemplated hereunder.
(b) If, after seventy-eight (78) months following a Change in Control
there are outstanding no claims for benefits under any Contract and all
obligations under the Contracts as to executives party to Contracts, or their
beneficiaries, have been satisfied, all assets remaining in the Trust shall be
transferred to the Company.
19
<PAGE> 24
ARTICLE XI
Prohibition Against Diversion
11.1 No Right of Alienation or Employment. The assets of the Trust
Fund shall not be subject to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge by any executive or beneficiary. The
executives and beneficiaries have no beneficial ownership in or preferred claim
on the assets of the Trust. Amounts payable under the Contracts consist of the
Company's unsecured promise to pay such amounts when due under the terms of
such Contracts and, with respect to such amounts, the executives have the
status of unsecured creditors. Except as otherwise provided in such Contract,
being a party to a Contract does not give any employee a right to continued
employment with the Company or any subsidiary or affiliate except as otherwise
provided in such Contract.
ARTICLE XII
Sufficiency of Trust Fund
12.1 Payment of Benefits. At least annually, after a Change in
Control occurs, if the assets of the Trust Fund are, as of any Valuation Date,
including, without limitation, at the time of termination of a Contract or as a
result of the payment of expenses as set forth in paragraph (b) of Section 8.1,
when taking into account the maximum total amount of potential obligations
(based on the most recent Executive Data) under all Contracts then in effect,
insufficient to fulfill such potential obligations as of such date under all
such Contracts, then the Trustee shall so notify the Company, setting forth the
additional aggregate amount required to pay all such potential obligations
under the Contracts then in effect and the Company shall, within ten (10) days
of the receipt of such notice, pay to the Trustee the amount set forth in such
notice.
12.2 Contribution to Fund. (a) After the execution of this Agreement
and prior to a Change in Control, the Company may, but is not required to, make
a single contribution of a sinking fund of actuarially determined contributions
in an amount as shall be necessary, as determined by the Company, to ensure
that the assets of the Fund shall be sufficient to discharge the Company's
obligations under the Contracts.
During a calendar year, the Company may, but is not required to, make
contributions to the Trust to insure that the assets of the Trust exceed as a
minimum the present value of the maximum potential obligations as of the end of
that year under the Contracts then in effect. In lieu of the foregoing, the
Company may make such provisions for the funding of the Trust as it deems
appropriate.
(b) After a Change in Control occurs, the Company shall make such
contributions within ten (10) days of the Change in Control, and thereafter as
of the first day of each calendar month, to the trust created hereunder as
shall be necessary to ensure that the assets
20
<PAGE> 25
of the Trust shall at all times be sufficient to discharge the Company's
maximum potential obligations under the Contracts and this Agreement. The
Company's maximum obligations under the Contracts shall be equal to the
aggregate amount payable under the Contracts assuming that the employment of
all executives party to a Contract was terminated other than for cause
following a Change in Control, which termination of employment gives rise to
severance benefits under the Contracts. Notwithstanding the foregoing however,
the Company shall have no obligation to fund the Trust to the extent that an
executive or a beneficiary waives the funding obligation with respect to his
Contract. Any imputed retirement benefits included as a severance benefit under
the Contracts shall be computed on a lump sum basis by using the 1983 Group
Annuity Mortality Table (weighted 50% male), and the lower of (A) the
"applicable interest rate" under Section 417(e)(3)(A)(ii)(II) of the Code which
would be used for purposes of such Section for the last full month before the
month for which such present value is being calculated, and (B) the interest
rate used in the Company's most recent qualified plan valuation for funding
purposes.
Anything herein to the contrary notwithstanding, the Trustee shall
under no circumstances be responsible for the adequacy of the Trust, whether
before or after a Change in Control, as the result of the distribution of
excess Trust assets to the Company, the payment of claims of judgment creditors
of the Company, the payment of taxes of the Trust or of the executives and/or
beneficiaries, the payment of expenses of the Trust or the Trustee or otherwise
to fulfill the obligations of the Company under the Contracts to executives and
beneficiaries.
(c) For purposes of calculating the contribution that the Company may
or is required to make under this Section 12.2, the Company and the Trustee
shall make reasonable projections of (i) increases in the obligations under the
Contracts, including but not limited to those caused by increases in
compensation and increases in tax rates, and (ii) potential future expenses or
reserves that may be payable or required to be maintained under the terms of
this Agreement.
ARTICLE XIII
Authorities
13.1 Company. Whenever the provisions of this Agreement specifically
require or permit any action to be taken by "the Company", such action must be
authorized by an officer of the Company, who has been duly authorized by the
Board of Directors to act on the Company's behalf. The Company shall furnish
the Trustee from time to time with a list of the names and signatures of all
individual officers authorized to act for the Company hereunder and certified
by the Secretary or an Assistant Secretary of the Company, and the Trustee
shall be fully protected in acting upon any notices or directions received from
any of them.
13.2 Investment Manager. The Company shall cause each Investment
Manager to furnish the Trustee from time to time with the names and signatures
of those persons authorized to direct the Trustee on its behalf hereunder.
21
<PAGE> 26
13.3 Form of Communications. Any agreement between the Company and
any Person (including an Investment Manager) or any other provision of this
Agreement to the contrary notwithstanding other than Section 14.6, all notices,
directions and other communications to the Trustee shall be in writing or in
such other form, including transmission by electronic means through the
facilities of third parties or otherwise, specifically agreed to in writing by
the Trustee, and the Trustee shall be fully protected in acting in accordance
therewith. Notice of a Change in Control shall be communicated to the Trustee
in a writing signed by an officer of the Company, which notice shall be
conclusive and binding on the Trustee and on which the Trustee shall be
entitled to rely.
13.4 Continuation of Authority. The Trustee shall have the right to
assume, in the absence of written notice to the contrary, that no event
constituting a change in the Company's officers or terminating the authority of
any Person, including any Investment Manager, has occurred.
13.5 No Obligation to Act on Unsatisfactory Notice. The Trustee shall
incur no liability under this Agreement for any failure to act pursuant to any
notice, direction or any other communication from any Asset Manager, the
Company, or any other Person or the designee of any of them unless and until it
shall have received instructions in a form satisfactory to it.
ARTICLE XIV
General Provisions
14.1 Governing Law. This Agreement shall be administered, construed
and enforced according to the laws of the State of Delaware. Nothing in this
Agreement shall be construed to subject either the Trust or the Contracts to
ERISA.
14.2 Entire Agreement. The Trustee's duties and responsibilities with
respect to any Contract or any Person interested therein shall be limited to
those specifically set forth in this Agreement.
14.3 Mistake. No mistake made in good faith and in the exercise of
due care in connection with the administration of the Trust Fund shall be
deemed to be a breach of the Trustee's duties if, promptly after discovery of
the mistake, the Trustee takes whatever action may be practicable in the
circumstances to remedy the mistake.
14.4 Reliance on Experts. The Trustee and the Company may consult
with experts (who may be experts employed by the Company), including legal
counsel, appraisers, pricing services, accountants or actuaries, selected by
them with due care with respect to the meaning and construction of this
Agreement or any provision hereof, or concerning their powers and duties
hereunder, and shall be protected for any action taken or omitted by them in
good faith pursuant to or on the basis of the opinion of any such expert.
22
<PAGE> 27
14.5 Successor to the Trustee. Any successor, by merger or otherwise,
to substantially all of the trust business of Wachovia shall automatically and
without further action become the Trustee hereunder if and only if such
successor meets the requirements of Section 9.2. If the successor does not meet
such requirements, then the Trustee shall be deemed to have resigned as of the
date of such merger or other event and the provisions of Section 9.2 shall
apply. Any successor shall be subject to all the terms and conditions and
entitled to all the benefits and immunities hereof.
14.6 Notices. All notices, reports, annual accounts and other
communications to the Company, Investment Manager, or any other Person shall be
deemed to have been duly given if mailed, postage prepaid, electronically
delivered or delivered in hand to such Person at its address appearing on the
records of the Trustee, which address shall be filed with the Trustee at the
time of the establishment of the Trust and shall be kept current hereafter by
the Company. All directions, notices, statements, objections and other
communications to the Trustee shall be deemed to have been given when received
by the Trustee at its offices.
14.7 Contracts. The Company shall provide the Trustee with a
complete, current copy of each Contract. The Company also shall deliver to the
Trustee a copy of any modifications or amendments to any Contract. The Trustee
shall be entitled to rely upon the Company's attention to this obligation and
shall be under no duty to inquire of any Person as to the existence of any
documents not provided hereunder.
14.8 No Waiver; Reservation of Rights. The rights, remedies,
privileges and immunities expressed herein are cumulative and are not
exclusive, and the Trustee shall be entitled to claim all other rights,
remedies, privileges and immunities to which it may be entitled under
applicable law.
14.9 Descriptive Headings. The captions in this Agreement are solely
for convenience of reference and shall not define or limit the provisions
hereof.
14.10 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be an original and both of which shall
constitute together but one and the same document.
ARTICLE XV
Undertaking by Company
15.1 Undertaking. In consideration of Wachovia's agreeing to enter
into this Agreement, the Company hereby agrees to hold harmless Wachovia,
individually and as Trustee ("Wachovia" or "Trustee" within this Section 15.1
shall include any parent or subsidiary of Wachovia and any corporation the
stock of which is wholly owned by Wachovia Corporation as well as any successor
corporation to those previously described) and Wachovia's directors, officers,
and employees, from and against all amounts, including without limitation
taxes, expenses (including reasonable counsel fees), liabilities, claims,
damages, actions, suits or other
23
<PAGE> 28
charges, incurred by or assessed against Wachovia, individually or as Trustee,
or its directors, officers or employees, (i) as a result of anything done in
good faith, or alleged to have been done, by or on behalf of Wachovia in
reliance upon the directions of any Investment Manager or the Company or
anything omitted to be done in good faith, or alleged to have been omitted, in
the absence of such directions; (ii) as a result of the failure of the Company,
directly or indirectly, to adequately, carefully and diligently discharge its
fiduciary responsibilities, if any, with respect to a Contract; (iii) as a
result of any other event or occurrence beyond the Trustee's control,
including, but not limited to, claims, actions, or suits which challenge the
authority of the Company to enter into this Agreement, which challenge the
validity of a Contract and the liabilities of the Company thereunder, or which
make other similar challenges or allegations; or (iv) as a result of any
discretionary action taken by the Trustee after a Change in Control occurs
pursuant to the terms of the Trust, except for the Trustee's negligence or
willful misconduct.
15.2 Limitation on Undertaking. Anything hereinabove to the contrary
notwithstanding, the Company shall have no responsibility to Wachovia under
Section 15.1 if Wachovia knowingly participated in or knowingly concealed any
act or omission of any Person described in such Section knowing that such act
or omission constituted a breach of such Person's fiduciary responsibilities,
or if Wachovia fails to perform any of the duties specifically undertaken by it
under the provisions of this Agreement, or if Wachovia fails to act in
conformity with duly given and authorized directions hereunder.
15.3 Survival of Undertakings. The Company further agrees that the
undertakings made in this Article XV shall be binding on its successors or
assigns and shall survive termination, amendment or restatement of this
Agreement, or the resignation or removal of the Trustee, and that this Article
shall be construed as a contract between the Company and the Trustee according
to the laws of the State of Delaware in effect from time to time.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
15th day of April 1998.
BOWATER INCORPORATED
By: /s/ David G. Maffucci
----------------------------------------------
Name: David G. Maffucci
----------------------------------------------
Title: Sr. Vice President and Chief Financial Officer
----------------------------------------------
Date signed: May 7, 1998
-----------------------------------------
WACHOVIA BANK, N.A.
By: /s/ Beverly H. Wood
----------------------------------------------
Name: Beverly H. Wood
----------------------------------------------
Title: Senior Vice President
----------------------------------------------
Date signed: May 14, 1998
-----------------------------------------
24
<PAGE> 29
List A
Participating Contracts, Agreements or Arrangements
As Of April 15, 1998
BOWATER INCORPORATED CHANGE IN CONTROL AGREEMENTS WITH:
<TABLE>
<CAPTION>
NAME DATE OF AGREEMENT
---- -----------------
<S> <C>
Anthony H. Barash 04/01/96
Owen Cardell 08/01/97
James H. Dorton 08/06/96
E. Patrick Duffy 11/01/95
Curtis Randolph Ellington 08/01/97
Richard F. Frisch 11/01/95
Arthur D. Fuller 08/01/97
Harry F. Geair 11/01/95
Richard G. Gilbert 11/18/96
Jerry R. Gilmore 08/01/97
Richard K. Hamilton 08/01/97
D. Alvin Humphrey 01/01/96
Steven G. Lanzl 10/21/96
David G. Maffucci 11/01/95
Donald G. McNeil 11/01/95
Robert A. Moran 11/01/95
William C. Morris 08/01/97
Stephen L. Naman 11/01/95
Arnold M. Nemirow 11/01/95
R. Donald Newman 11/01/95
Michael F. Nocito 11/01/95
Ben L. Pelton 11/01/95
Philip Pirovitz 11/01/95
Wendy C. Shiba 05/21/97
Craig B. Stevens 11/01/95
</TABLE>
25
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 420,484
<SECURITIES> 25,351
<RECEIVABLES> 200,955
<ALLOWANCES> 0
<INVENTORY> 104,851
<CURRENT-ASSETS> 768,253
<PP&E> 3,064,948
<DEPRECIATION> 1,545,537
<TOTAL-ASSETS> 2,772,217
<CURRENT-LIABILITIES> 193,331
<BONDS> 756,205
0
25,465
<COMMON> 45,168
<OTHER-SE> 1,118,249
<TOTAL-LIABILITY-AND-EQUITY> 2,772,217
<SALES> 778,937
<TOTAL-REVENUES> 778,937
<CGS> 554,773
<TOTAL-COSTS> 643,058
<OTHER-EXPENSES> (12,709)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,251
<INCOME-PRETAX> 84,250
<INCOME-TAX> 32,016
<INCOME-CONTINUING> 43,676
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,676
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.03
</TABLE>
