<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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8712
BOWATER INCORPORATED
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 62-0721803
-------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 East Camperdown Way, P.O. Box 1028, Greenville, SC 29602
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(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 10, 1999.
Class Outstanding at August 10, 1999
----- ------------------------------
Common Stock, $1.00 Par Value 51,215,540 Shares
<PAGE> 2
BOWATER INCORPORATED
I N D E X
Page
Number
------
PART I FINANCIAL INFORMATION
1. Financial Statements:
Consolidated Balance Sheet at June 30, 1999,
and December 31, 1998 3
Consolidated Statement of Operations for the Three and Six
Months Ended June 30, 1999, and June 30, 1998 4
Consolidated Statement of Capital Accounts
for the Six Months Ended June 30, 1999 5
Consolidated Statement of Cash Flows for the
Six Months Ended June 30, 1999, and June 30, 1998 6
Notes to Consolidated Financial Statements 7-11
2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-20
PART II OTHER INFORMATION
Exhibits and Reports on Form 8-K 21-22
SIGNATURES 23
2
<PAGE> 3
BOWATER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited, in millions of US dollars)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 36.5 $ 58.3
Marketable securities 2.1 1.2
Accounts receivable, net 301.0 372.4
Inventories 187.4 186.3
Other current assets 71.3 77.2
-------- --------
Total current assets 598.3 695.4
-------- --------
Timber and timberlands (Note 2) 372.0 472.8
Fixed assets, net (Note 3) 2,722.8 2,885.2
Goodwill 889.9 921.7
Other assets 141.5 116.3
-------- --------
$4,724.5 $5,091.4
======== ========
LIABILITIES AND CAPITAL
Current liabilities:
Current installments of long-term debt (Note 4) $ 20.0 $ 86.2
Short-term bank debt 70.5 210.0
Accounts payable and accrued liabilities 321.3 464.4
Income taxes payable (Note 2) 57.2 --
Dividends payable 10.9 11.9
-------- --------
Total current liabilities 479.9 772.5
-------- --------
Long-term debt, net of current installments (Note 4) 1,463.5 1,534.6
Other long-term liabilities 340.2 356.3
Deferred income taxes 454.1 522.2
Minority interests in subsidiaries 128.6 128.8
Commitments and contingencies (Note 6) -- --
Shareholders' equity:
Series C cumulative preferred stock (Note 7) -- 25.5
Common stock 59.6 59.0
Exchangeable shares (Note 4) 151.2 110.8
Additional paid-in capital 1,260.4 1,230.2
Retained earnings 746.7 657.4
Accumulated other comprehensive income/(loss) (26.2) (28.9)
Loan to ESOT (1.7) (2.6)
Treasury stock, at cost (Note 8) (331.8) (274.4)
-------- --------
Total shareholders' equity 1,858.2 1,777.0
-------- --------
$4,724.5 $5,091.4
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
BOWATER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited, in millions of US dollars except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- ------------------------
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
---------- ------- --------- -------
(Note 1) (Note 1)
<S> <C> <C> <C> <C>
Sales $ 573.3 $ 423.9 $ 1,193.1 $ 835.6
Distribution costs 45.9 28.2 94.4 56.7
---------- ------- --------- -------
Net sales 527.4 395.7 1,098.7 778.9
Cost of sales 417.4 280.3 840.8 554.7
Depreciation, amortization and cost of timber harvested 76.0 43.1 151.8 88.3
Impairment of asset (Note 3) 92.0 -- 92.0 --
---------- ------- --------- -------
Gross profit/(loss) (58.0) 72.3 14.1 135.9
Selling and administrative expense 21.3 13.7 42.6 31.0
---------- ------- --------- -------
Operating income/(loss) (79.3) 58.6 (28.5) 104.9
Other expense/(income):
Interest income (1.3) (6.2) (1.8) (12.7)
Interest expense, net of capitalized interest 30.6 16.7 63.0 33.3
Gain on sale of timberlands (Note 2) (108.3) (0.1) (253.7) (21.1)
Other, net (Note 9) (15.9) 16.8 (28.2) 21.1
---------- ------- --------- -------
(94.9) 27.2 (220.7) 20.6
---------- ------- --------- -------
Income before income taxes and minority interests 15.6 31.4 192.2 84.3
Provision for income taxes (Note 10) 7.8 11.9 77.5 32.0
Minority interests in net income of subsidiaries 2.6 0.6 3.0 8.6
---------- ------- --------- -------
Net income 5.2 18.9 111.7 43.7
Other comprehensive income/(loss), net of tax:
Foreign currency translation adjustments 7.0 (1.7) 2.7 (1.7)
---------- ------- --------- -------
Comprehensive income $ 12.2 $ 17.2 $ 114.4 $ 42.0
========== ======= ========= =======
Basic earnings per common share (Note 11): $ 0.10 $ 0.45 $ 2.03 $ 1.05
========== ======= ========= =======
Average common shares outstanding 54.3 40.6 54.4 40.5
========== ======= ========= =======
Diluted earnings per common share (Note 11): $ 0.10 $ 0.44 $ 2.00 $ 1.03
========== ======= ========= =======
Average common and common equivalent shares outstanding 55.0 41.3 55.3 41.2
========== ======= ========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
BOWATER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CAPITAL ACCOUNTS
For The Six Months Ended June 30, 1999
(Unaudited, in millions of US dollars except per share amounts)
<TABLE>
<CAPTION>
Series C Accumulated
Cumulative Additional Other
Preferred Common Exchangeable Paid-in Retained Comprehensive Loan to Treasury
Stock Stock Shares Capital Earnings Income/(Loss) ESOT Stock
---------- ------ ------------ ---------- -------- ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $25.5 $59.0 $110.8 $1,230.2 $ 657.4 $ (28.9) $ (2.6) $ (274.4)
Net income -- -- -- -- 111.7 -- -- --
New issuance of stock (Note 4) -- -- 66.2 -- -- -- -- --
Retractions of Exchangeable
Shares -- 0.5 (25.8) 25.3 -- -- -- --
Redemption of Series C
Preferred Stock (Note 7) (25.5) (0.9)
Dividends ($.40 per share) -- -- -- -- (21.4) -- -- --
Dividends on preferred stock:
Series C ($.14 per share) -- -- -- -- (0.1) -- -- --
Stock options exercised -- 0.1 -- 3.4 -- -- -- --
Tax benefit on exercise of
stock options -- -- -- 1.5 -- -- -- --
Reduction in loan to ESOT -- -- -- -- -- -- 0.9 --
Purchase of common stock (Note 8) -- -- -- -- -- -- -- (57.4)
Foreign currency translation -- -- -- -- -- 2.7 -- --
----- ----- ------ -------- -------- -------- -------- --------
Balance at June 30, 1999 $-- $59.6 $151.2 $1,260.4 $ 746.7 $ (26.2) $ (1.7) $ (331.8)
===== ===== ====== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
BOWATER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions of US Dollars)
<TABLE>
<CAPTION>
Six Months Ended
-----------------------
June 30, June 30,
1999 1998
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $111.7 $ 43.7
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and cost of timber harvested 151.8 88.3
Deferred income taxes (50.6) 3.1
Minority interests 3.0 8.6
Gain from sale of timberlands (Note 2) (253.7) (21.1)
Writedown of Canadian exchange options (Note 9) -- 22.3
Writedown of asset due to impairment (Note 3) 92.0 --
Change in working capital:
Accounts receivable, net 70.1 (10.4)
Inventories (7.9) 0.6
Accounts payable and accrued liabilities (116.8) 4.5
Income taxes payable 57.2 (5.9)
Other, net (9.4) (1.5)
------ ------
Net cash from operating activities 47.4 132.2
------ ------
Cash flows from investing activities:
Cash invested in fixed assets, timber and timberlands (93.7) (73.2)
Disposition of fixed assets, timber and timberlands (Note 2) 360.8 31.7
Cash invested in option contracts -- (22.7)
Cash paid on maturity of hedging contracts (19.9) --
Cash invested in marketable securities (2.4) (40.9)
Cash from maturities of marketable securities 1.6 192.3
------ ------
Net cash from investing activities 246.4 87.2
------ ------
Cash flows from financing activities:
Proceeds from short-term borrowings 254.7 --
Payments of short-term borrowings (394.2) --
Cash dividends, including minority interests (Note 5) (28.0) (34.1)
Purchase of common stock (Note 8) (57.4) --
Redemption of Convertible Subordinated Debentures (Note 4) (65.9) --
Payments of long-term debt (3.0) (0.9)
Redemption of Series C Preferred Stock (Note 7) (26.4) --
Stock options exercised 3.5 6.5
Other 1.1 0.9
------ ------
Net cash used for financing activities (315.6) (27.6)
------ ------
Net increase/(decrease) in cash and cash equivalents (21.8) 191.8
Cash and cash equivalents at beginning of year 58.3 228.7
------ ------
Cash and cash equivalents at end of period $ 36.5 $420.5
====== ======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of capitalized interest $(63.6) $(34.1)
Income taxes $(59.3) $(34.7)
Noncash investing and financing activity:
Conversion of 7.50% Convertible Unsecured
Subordinated Debentures into
Exchangeable Shares (Note 4) $ 66.2 $ --
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
BOWATER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The accompanying consolidated financial statements include the accounts of
Bowater Incorporated and Subsidiaries (the Company) as of June 30, 1999.
The acquisition of Avenor Inc. (Avenor) and the South Korean newsprint
mill, both of which closed in July 1998, are not reflected in the accounts
for the comparable period ended June 30, 1998. The consolidated balance
sheets, statements of operations, capital accounts and cash flows are
unaudited. However, in the opinion of Company management, all adjustments
(consisting of normal recurring adjustments) necessary for fair
presentation of the interim financial statements have been made. The
results of the interim period ended June 30, 1999, are not necessarily
indicative of the results to be expected for the full year.
2. During the second quarter of 1999, the Company completed the sale of
approximately 650,000 acres of timberlands resulting in a pre-tax gain of
$108.3 million, or $1.20 per diluted share after tax. As part of the
timberland sale, approximately $50 million of proceeds were received in the
form of a long-term note. During the second quarter, this note was
monetized through a special purpose subsidiary of the Company. The cash
from the monetization is included in "Disposition of fixed assets, timber,
and timberlands" in the Statement of Cash Flows. A portion of the debt of
the special purpose entity of approximately $12.7 million has been
guaranteed by the Company.
Since the beginning of 1999, the Company has sold approximately 1,630,000
acres of timberlands resulting in a pre-tax gain of $253.7 or $2.80 per
diluted share after tax. In addition, the Company recognized severance
charges of $2.3 million pre-tax related to the sale during the first
quarter of 1999.
3. During the second quarter of 1999, the Company signed an agreement with
Inexcon Maine, Inc. for the purchase of Great Northern Paper (GNP). This
agreement prompted a re-evaluation of the assets at GNP in accordance with
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets to Be Disposed Of". Accordingly, the
Company recorded a pre-tax impairment charge to its newsprint segment of
$92.0 million, or $1.02 per diluted share. This charge is shown as a
reduction to fixed assets in the Consolidated Balance Sheet. The assets
were written to fair value, based on the proposed sale to Inexcon Maine,
Inc. The sale is expected to close in August 1999.
4. In February 1999, the Company redeemed all of its outstanding 7.50%
Convertible Unsecured Subordinated Debentures due 2004. In connection with
the redemption, the Company paid cash of approximately $65.9 million and
issued 1,359,620 Exchangeable shares.
5. During the first six months of 1999, the Board of Directors of Calhoun
Newsprint Company (CNC) declared dividends totaling $10.1 million, of which
$5.0 million was paid to the minority shareholder. In the first six months
of 1998, $16.9 million was paid to the minority shareholder. The primary
source of the 1998 dividends was the proceeds of a sale of approximately
26,000 acres of timberlands.
6. 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.
7
<PAGE> 8
BOWATER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
7. In February 1999, the Company redeemed all the remaining shares of its
8.40% Series C Cumulative Preferred Stock for $26.6 million, including
accrued dividends.
8. In May 1999, the Board of Directors authorized the repurchase of up to 5.5
million shares of Bowater Incorporated common stock (or approximately 10
percent of the Company's outstanding shares) in the open market. In April
1999, the Company completed its second stock repurchase program, purchasing
1.4 million shares of its common stock at a cost of $57.4 million in 1999.
The Company purchased a total of 4.1 million shares at a cost of $165.2
million under this program.
9. During the second quarter and first six months of 1999, "Other, net" in the
Consolidated Statement of Operations includes $16.6 million and $29.2
million of foreign exchange gains, respectively. For the same periods in
1998, the amounts were insignificant.
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. During the first six months of 1998, the Company adjusted the cost
of these options to fair market value resulting in a pre-tax charge of
$22.3 million. 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.
10. The effective tax rates for the second quarter of 1999 and 1998 were 50
percent and 38 percent, respectively. The majority of the increase in the
effective tax rate for 1999 reflects the non-deductible amortization of
goodwill recorded upon the acquisition of Avenor. For the first six months
of 1999 and 1998, the effective tax rate was 40 percent and 38 percent,
respectively.
11. The calculation of basic and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
----------------------------------------- ---------------------------------- -------------------------------
Three Months Ended Six Months Ended
(In millions, except per share amounts)
----------------------------------------- ---------------------------------- -------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
---------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
Basic Computation:
Net income $ 5.2 $ 18.9 $ 111.7 $ 43.7
Less:
Series C Preferred Stock
Dividends -- (0.6) (0.1) (1.1)
Deferred issuance costs associated
with Series C Preferred Stock -- -- (1.0) --
---------------- ----------------- --------------- ---------------
Basic income available to common
shareholders $ 5.2 $ 18.3 $ 110.6 $ 42.6
---------------- ----------------- --------------- ---------------
Basic weighted average shares
outstanding 54.3 40.6 54.4 40.5
---------------- ----------------- --------------- ---------------
Basic earnings per common share $ 0.10 $ 0.45 $ 2.03 $ 1.05
---------------- ----------------- --------------- ---------------
----------------------------------------- ---------------- ----------------- --------------- ---------------
</TABLE>
8
<PAGE> 9
BOWATER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------- --------------------------------- ----------------------------------
(In millions, except per share amounts) Three Months Ended Six Months Ended
--------------------------------- ----------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
----------------- --------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Diluted Computation:
Diluted income available to common
shareholders $ 5.2 $ 18.3 $ 110.6 $ 42.6
----------------- --------------- ----------------- ----------------
Basic weighted average shares
outstanding 54.3 40.6 54.4 40.5
Effect of dilutive securities:
Options 0.7 0.7 0.9 0.7
----------------- --------------- ----------------- ----------------
Diluted weighted average shares
outstanding 55.0 41.3 55.3 41.2
----------------- --------------- ----------------- ----------------
Diluted earnings per common share $ 0.10 $ 0.44 $ 2.00 $ 1.03
----------------- --------------- ----------------- ----------------
- --------------------------------------- ----------------- --------------- ----------------- ----------------
</TABLE>
12. Segment Information:
The Company is organized into four divisions, three of which are: the
Newsprint & Directory Division, the Coated Paper Division and the Forest
Products Division.
* The Newsprint & Directory Division is responsible for the
manufacturing operations of nine sites in the United States, Canada
and South Korea. It is also responsible for the worldwide marketing of
newsprint, directory paper and uncoated groundwood specialties.
* The Coated Paper Division manufactures coated groundwood paper,
newsprint, market pulp and uncoated groundwood specialties at one
manufacturing site in the United States. This Division is responsible
for the worldwide marketing and sales of coated groundwood paper.
* The Forest Products Division operates three sawmills and manages 2.4
million acres of owned and leased timberlands in the United States and
Canada, as well as 14 million acres of Crown-owned land in Canada on
which the Company has cutting rights. This Division sells wood fiber
to the Newsprint & Directory Division and Coated Paper Division, as
well as markets and sells timber and lumber to third parties in North
America.
The Company's Pulp Division has marketing and sales responsibility for all
of the Company's market pulp sales; however, the financial results from
these sales are included in both the Newsprint & Directory Division and the
Coated Paper Division. Accordingly, no results are reported for the Pulp
Division.
The following tables summarize information about segment profit and loss
and segment assets for the three months ended June 30, 1999 and 1998, six
months ended June 30, 1999 and 1998, and at June 30, 1999 and 1998,
respectively:
9
<PAGE> 10
BOWATER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
(In millions of US. dollars)
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
Newsprint & Coated Forest Corporate/
THREE MONTHS ENDED Directory Paper Products Other
JUNE 30, 1999 Division Division Division Eliminations Total
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales-including internal sales $ 384.4 $ 110.7 $ 130.5 $ 0.1 $ 625.7
Elimination of intersegment sales --- --- (98.3) --- (98.3)
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
Net sales - external customers 384.4 110.7 32.2 0.1 527.4
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
Operating income (1) (92.7) 15.6 12.3 (14.5) (79.3)
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
Newsprint & Coated Forest Corporate/
THREE MONTHS ENDED Directory Paper Products Other
JUNE 30, 1998 Division Division Division Eliminations Total
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales-including internal sales $ 242.9 $ 125.9 $ 102.5 $ --- $ 471.3
Elimination of intersegment sales --- --- (75.6) --- (75.6)
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
Net sales - external customers 242.9 125.9 26.9 --- 395.7
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
Operating income 23.3 33.3 7.9 (5.9) 58.6
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
</TABLE>
<TABLE>
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
Newsprint & Coated Forest Corporate/
SIX MONTHS ENDED Directory Paper Products Other
JUNE 30, 1999 Division Division Division Eliminations Total
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales-including internal sales $ 799.1 $ 221.7 $ 262.0 $ 2.4 $ 1,285.2
Elimination of intersegment sales --- --- (186.5) --- (186.5)
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
Net sales - external customers 799.1 221.7 75.5 2.4 1,098.7
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
Operating income 1 (62.2) 32.1 24.8 (23.2) (28.5)
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
Total assets at 6/30/99 $3,564.8 $ 476.0 $ 498.0 $ 185.7 $4,724.5
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
</TABLE>
<TABLE>
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
Newsprint & Coated Forest Corporate/
SIX MONTHS ENDED Directory Paper Products Other
JUNE 30, 1998 Division Division Division Eliminations Total
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales-including internal sales $ 475.1 $ 241.5 $ 212.6 $ --- $ 929.2
Elimination of intersegment sales --- --- (150.3) --- (150.3)
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
Net sales - external customers 475.1 241.5 62.3 --- 778.9
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
Operating income 36.3 61.6 24.3 (17.3) 104.9
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
Total assets at 6/30/98 $1,360.0 $ 491.5 $ 423.0 $497.7 $2,772.2
- -------------------------------------- --------------- -------------- --------------- ---------------- ------------
</TABLE>
(1) Operating income for the Newsprint & Directory Division includes the $92.0
million impairment charge recorded in the second quarter of 1999.
10
<PAGE> 11
BOWATER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
13. Using Canadian dollar range forward contracts, the Company actively hedges
against the risk of a rising Canadian dollar. At June 30, 1999, the Company
had $899.4 million of Canadian dollar contracts. Information regarding the
carrying value, fair market value, and range of exchange rates of the
contracts is summarized in the table below:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Liability
(In millions of US$) Notional ------------------------------ Range of
Foreign currency exchange Amount of Carrying Fair Canadian$/US$
agreements and options Derivatives Amount Market Value Exchange Rates
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Buy Currency:
Canadian dollar
Due in 1999 $ 258.6 $ 16.2 $ 16.2 1.2820 - 1.4531
Due in 2000 457.8 24.8 24.8 1.2975 - 1.4853
Due in 2001 183.0 2.0 2.0 1.3625 - 1.5083
---------------------------------------------------------------------------------------------
Total $ 899.4 $ 43.0 $ 43.0 1.2820 - 1.5083
---------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
BOWATER INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ORGANIZATION
The Company is organized into four divisions: the Newsprint & Directory
Division, the Coated Paper Division, the Pulp Division and the Forest Products
Division. Each Division, with the exception of the Pulp Division, is responsible
for the sales and marketing of distinct product lines and the operation of
certain manufacturing sites. The Pulp Division is primarily a marketing and
distribution Division. Therefore, the Company's financial results are collected,
analyzed and reported through the Newsprint & Directory, Coated Paper and Forest
Products Divisions.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999, VERSUS
JUNE 30, 1998
For the second quarter of 1999, the Company had an operating loss of $79.3
million, compared to operating income of $58.6 million for the second quarter of
1998. In the second quarter of 1999, the Company recorded a pre-tax impairment
charge of $92.0 million, reducing the book value of assets at its Great Northern
Paper operations. Without the impairment charge, operating income decreased
$45.9 million from the second quarter of 1998. This decrease was due to lower
prices for most of the Company's products and higher operating costs as a result
of market-related downtime, which were partially offset by synergies achieved.
The Company's shipments of newsprint and market pulp increased due to the
acquisition of Avenor Inc. (Avenor) in July 1998.
Net income for the second quarter of 1999 was $5.2 million, or $0.10 per
diluted share, compared to net income of $18.9 million, or $0.44 per diluted
share for the second quarter of 1998. Included in net income for the second
quarter of 1999 was a pre-tax impairment charge of $92.0 million ($56.1 million
after tax) or $1.02 per diluted share and a pre-tax gain on the sale of
timberlands of $108.3 million ($66.1 million after tax), or $1.20 per diluted
share. In addition, the Company recorded pre-tax foreign currency exchange gains
of $16.6 million, or $0.22 per diluted share during the second quarter of 1999.
Second quarter 1999 net sales were $527.4 million, compared with $395.7 million
for the second quarter of 1998 and $571.3 for the first quarter of 1999.
Presented below is a discussion of each significant product line followed by
a discussion of the results of each of the reported Divisions.
PRODUCT LINE INFORMATION
In general, the Company's products are globally traded commodities. Pricing and
the level of shipments of these products will continue to be 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; Resource Information System, Inc. (RISI);
Random Lengths; World Wood Review; and the Media Industry Newsletter. 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.
NET SALES BY PRODUCT:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
THREE MONTHS ENDED
---------------------------
JUNE 30, JUNE 30,
(In millions of US dollars) 1999 1998
-----------------------------------------------------------------
<S> <C> <C>
Net sales:
Newsprint $310.8 $197.0
Coated groundwood paper 78.1 104.5
Directory paper 31.9 42.0
Market pulp 106.9 44.7
Uncoated groundwood specialties 13.3 8.8
Lumber and other wood products 32.3 26.9
Distribution costs (45.9) (28.2)
------ ------
Total net sales $527.4 $395.7
-----------------------------------------------------------------
</TABLE>
12
<PAGE> 13
BOWATER INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Newsprint The Company's average transaction price for newsprint was 17 percent
lower in the second quarter of 1999 compared to the second quarter of 1998, due
to a supply and demand imbalance caused in part by the financial and economic
problems in Asia, lowering demand from this region. During the second quarter of
1999, the Company reduced newsprint production by approximately 100,000 metric
tons to correct an orderbook imbalance. Comparing the same periods, 1999
shipments were significantly higher as a result of the Company's acquisition of
Avenor and the South Korean newsprint mill, both in July 1998. Total U.S.
consumption of newsprint and consumption by U.S. daily newspapers increased in
the second quarter of 1999 compared to the second quarter of 1998. Advertising
lineage for U.S. daily newspapers also increased. At the end of the second
quarter of 1999, newsprint inventory for the U.S. daily newspapers decreased
compared to the same time last year. North American mill inventories decreased
during the second quarter of 1999, but remained 29 percent higher than the
levels at the end of the second quarter of 1998. Comparing the same quarters,
U.S. newsprint imports decreased while North American newsprint exports
decreased slightly. In July 1999, the Company announced a newsprint price
increase for North America of $50 per metric ton effective October 1, 1999.
Coated Groundwood Paper The Company's coated groundwood paper average
transaction price in the second quarter of 1999 was 17 percent lower than in the
second quarter of 1998 and shipments were 10 percent lower than the year ago
quarter. Magazine advertising pages and catalogue mailings, measured by Standard
A mail weight, continued to increase slightly over a strong period a year ago.
These positive indicators of consumption were offset, however, by the available
supply of competing grades of paper and imported paper. U.S. mill inventories of
coated groundwood paper were approximately 20 percent higher in the second
quarter of 1999, compared to the second quarter of 1998; however, June's level
declined compared to the previous months. With improving market conditions, the
Company began implementing some price increases in the third quarter of 1999.
Directory Paper Following the decline in newsprint pricing, the average
transaction price for the Company's directory paper was 7 percent lower for the
second quarter of 1999 compared to the same period last year. Shipments declined
19 percent comparing the same quarter periods, due in part to the market-related
downtime taken during the second quarter of 1999.
Market Pulp The second quarter average transaction price for the Company's
market pulp increased 4 percent compared to the second quarter of 1998. In
addition to improved market conditions, the Company's Avenor acquisition in July
1998 caused a change in the Company's product mix, which now includes northern
bleached softwood and hardwood pulp. This change had a favorable price impact
when comparing the two quarters. Shipments in the second quarter of 1999 were
significantly higher than the year ago period, also due to the inclusion of
market pulp products acquired with the acquisition of Avenor. The world pulp
markets continued to strengthen during the second quarter of 1999. Second
quarter 1999 pulp shipments from NORSCAN (U.S., Canada, Finland, Norway and
Sweden) producing regions, at 5.6 million metric tons, increased 1 percent
compared to the first quarter of 1999 and increased 8 percent compared to the
second quarter of 1998. NORSCAN shipments increased to all major regions of the
world. NORSCAN producer inventories decreased 171,000 metric tons during the
quarter to 1.4 million metric tons, or a 22 days supply. NORSCAN inventories at
June 1999 were 144,000 metric tons lower than June 1998. With these improving
fundamentals, the Company announced and implemented market pulp price increases
during the second quarter of 1999. In August 1999, the Company announced an
additional price increase of $40 per metric ton effective September 1, 1999.
Lumber The average transaction price for the Company's lumber products remained
stable in the second quarter of 1999 compared to the second quarter of 1998.
Industry prices increased; however, a change in the Company's mix resulting from
the inclusion of a sawmill acquired with Avenor in July 1998 offset other price
increases. The Company's lumber shipments for the second quarter of 1999
increased 13 percent from the corresponding period in 1998, reflecting increased
production efficiency and the Avenor acquisition, partially offset by the sale
of Pinkham Lumber Company (sold as part of the timberlands transaction) in March
1999. U.S. demand for lumber was strong through the second quarter of 1999 with
the price for Spruce-Pine-Fir (2 x 4) rising 20 percent from March to June 1999.
Housing starts of 1.6 million units increased 4 percent
13
<PAGE> 14
BOWATER INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
on a seasonally annual adjusted rate (SAAR) when compared to June 1998.
Timber For the second quarter of 1999, shipments of the Company's timber
products increased 78 percent compared to the second quarter of 1998. The
increased shipments were due to the application of intensive forest management
practices in the U.S. south and an increased focus on external sales. The
average transaction price for the Company's timber products decreased 27 percent
in the second quarter compared to the same period in 1998. Prices also decreased
26 percent from the first quarter of 1999. The Company's sale of timberlands in
the state of Maine reduced average transaction prices for the second quarter of
1999. Slight improvements in saw timber prices were offset by continued declines
in both softwood and hardwood pulpwood pricing.
DIVISIONAL PERFORMANCE
NET SALES BY DIVISION:
- -----------------------------------------------------
THREE MONTHS ENDED
JUNE 30,
--------------------
(In millions of US dollars) 1999 1998
- -----------------------------------------------------
DIVISION: (1)
Newsprint & Directory $384.4 $242.9
Coated Paper 110.7 125.9
Forest Products 32.2 26.9
Corporate/Other Eliminations 0.1 -
--------------------
Total Net Sales $527.4 $395.7
- -----------------------------------------------------
OPERATING INCOME/(LOSS) BY DIVISION:
- -----------------------------------------------------
THREE MONTHS ENDED
JUNE 30,
--------------------
(In millions of US dollars) 1999 1998
- -----------------------------------------------------
DIVISION: (1)
Newsprint & Directory $(92.7) $23.3
Coated Paper 15.6 33.3
Forest Products 12.3 7.9
Corporate/Other Eliminations (14.5) (5.9)
--------------------
Income/(Loss) $(79.3) $58.6
- -----------------------------------------------------
(1) Financial results for the production and sale of market pulp are included in
the Newsprint & Directory Division and the Coated Paper Division. The Pulp
Division is responsible for the marketing and distribution of the product.
Newsprint & Directory Division: In July 1998, this Division added five new
manufacturing sites with the acquisitions of Avenor and the South Korean
newsprint mill. Net sales for the Division increased 58 percent, from $242.9
million for second quarter 1998 to $384.4 million for second quarter 1999,
primarily the result of adding the new sites. This increase was partially offset
by lower average transaction prices for newsprint and directory paper. See the
previous discussion of product line results.
Operating income decreased $116.0 million, from $23.3 million for second
quarter 1998 to a loss of $92.7 million for the second quarter 1999. The Company
recorded a pre-tax impairment charge of $92.0 million, reducing the book value
of assets at its Great Northern Paper operations. Without the impairment charge,
operating income decreased $24.0 million. This decrease was due to lower
transaction prices for newsprint and directory paper and higher operating costs
as a result of market-related downtime, which were partially offset by synergies
achieved.
Coated Paper Division: Net sales decreased $15.2 million, from $125.9 million
for second quarter 1998 to $110.7 million for second quarter 1999, due to lower
average prices for newsprint and coated groundwood paper, offset partially by
higher shipments. See the previous discussion of product line results.
Operating income decreased 53 percent, from $33.3 million for second quarter
1998 to $15.6 million for second quarter 1999. This decrease was primarily the
result of lower prices for newsprint and coated groundwood paper.
In July 1999, the Company acquired a coating facility in Benton Harbor,
Michigan.
Forest Products Division: Net sales for the Division increased 20 percent, from
$26.9 million for second quarter 1998 to $32.2 million for second quarter 1999,
primarily as a result of higher shipments partially offset by lower transaction
prices. See the previous discussion of product line results.
Operating income for the Division increased $4.4 million or 56 percent for
second quarter of 1999 compared to the second quarter of 1998 as a result of
increased timber shipments and higher profitability from the lumber operations.
In the second quarter of 1999, the Company completed the sale of
approximately 650,000 acres of timberlands in the state of Maine.
14
<PAGE> 15
BOWATER INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Corporate/Other Eliminations: Included in this category are general and
administrative expenses. For second quarter 1999, this category also includes
administrative expenses of the Pulp Division and market pulp financial activity
from the Gold River pulp mill, which was permanently closed in February 1999.
Comparing the second quarter of 1999 to the second quarter of 1998, operating
expenses increased $8.6 million. This increase was due primarily to the
inclusion of the Pulp Division as well as other general and administrative
expenses resulting from the acquisition of Avenor in July 1998.
INTEREST AND OTHER INCOME AND EXPENSES
Interest expense for the second quarter of 1999 increased $13.9 million over the
same period in 1998. This increase was due to the assumption of Avenor's debt
and higher borrowings on the Company's revolving credit facility for the period.
Interest income decreased compared to the prior year quarter due to lower
average investment balances. In April 1999, the Company completed the sale of
approximately 650,000 acres of timberlands located in the state of Maine. In
connection with this sale, the Company reported a pre-tax gain of $108.3
million. "Other, net" for the second quarter of 1999 was a gain of $15.9
million, compared with a loss of $16.8 million for the same period in 1998. The
Company reported a foreign exchange gain of $16.6 million during the second
quarter of 1999, compared with a loss of $1.4 million during the second quarter
of 1998. The majority of the gains recorded in the second quarter of 1999
resulted from marking to market the Company's $900 million hedging program.
During the second quarter of 1998, the Company recorded a $18.0 million charge
to adjust the cost of the Company's Canadian dollar option contracts to fair
market value.
The Company's effective tax rate for the second quarter of 1999 was 50
percent versus 38 percent in the prior year period. The increase in 1999 is due
to the non-deductibility of the amortization of goodwill recorded upon the
acquisition of Avenor.
SIX MONTHS ENDED JUNE 30, 1999, VERSUS
JUNE 30, 1998
For the first six months of 1999, the Company had an operating loss of $28.5
million compared to operating income of $104.9 for the first six months of 1998.
In the first six months of 1999, the Company recorded a pre-tax impairment
charge of $92.0 million, reducing the book value of assets at its Great Northern
Paper operations. Excluding the impairment charge, operating income was $41.4
million lower than the first six months of 1998. Lower transaction prices
accounted for the majority of this decrease, partially offset by lower costs
due to synergies.
PRODUCT LINE INFORMATION
NET SALES BY PRODUCT:
- ---------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30,
------------------------
(In millions of US dollars) 1999 1998
- ---------------------------------------------------------------
NET SALES:
Newsprint $658.2 $380.5
Coated groundwood paper 158.1 201.8
Directory paper 68.2 85.8
Market pulp 203.4 87.4
Uncoated groundwood specialties 29.5 17.8
Lumber & other wood products 75.7 62.3
Distribution costs (94.4) (56.7)
------------------------
Total net sales $1,098.7 $778.9
- ---------------------------------------------------------------
Newsprint For the first six months of 1999, the Company's newsprint average
transaction price decreased 13 percent compared to the same period last year,
due to an imbalance in supply and demand caused in part by the financial and
economic problems in Asia, which lowered demand from this region. During the
second quarter of 1999, the Company reduced newsprint production by
approximately 100,000 metric tons to correct an orderbook imbalance. As a result
of the Avenor and the South Korean newsprint mill acquisitions in July 1998,
shipments of newsprint for the first six months of 1999 increased significantly
compared to the same period last year. Total U.S. consumption and consumption by
U.S. daily newspapers increased during the first six months of 1999 when
compared to the same period 1998. North American mill inventory levels at the
end of June 1999 increased 29 percent compared to June 1998, while newsprint
inventory at the U.S. daily newspapers decreased. North American offshore
exports for the first half of 1999 decreased slightly compared to the first half
of 1998, while U.S. imports of newsprint increased.
15
<PAGE> 16
BOWATER INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In July 1999, the Company announced a newsprint price increase for North America
of $50 per metric ton effective October 1, 1999.
Coated Groundwood Paper The Company's coated groundwood paper average
transaction price decreased 14 percent when compared to the first six months of
1998, while shipments decreased 9 percent. This product line continues to be
influenced by increased coated paper imports and an increased supply of other
printing and writing papers. For the industry, U.S. coated groundwood paper
shipments were down 5 percent compared to the first half of 1998. Coated
groundwood paper inventory held by the U.S. mills at the end of June 1999
increased 20 percent compared to the end of June 1998. Magazine advertising
pages and catalogue mailings, measured by Standard A mail weight, increased for
the first six months of 1999 compared to the same period last year. With
improving market conditions, the Company began implementing some price increases
in the third quarter of 1999.
Directory Paper The Company's average transaction price for directory paper
decreased 5 percent in the first six months of 1999 compared to the first six
months of 1998. Directory paper prices generally trend similarly to newsprint
pricing, but with a lag due to the contract nature of the directory business.
Shipments of the Company's directory paper decreased by 16 percent, primarily as
a result of decreased shipments into the export market.
Market Pulp The average transaction price for the Company's market pulp for the
first six months of 1999 increased slightly when compared to the first six
months of 1998. In addition to market conditions, a change in product mix that
includes northern bleached softwood and hardwood pulp, as a result of the Avenor
acquisition, had a favorable impact on the comparison of first half 1999 market
pulp prices to the same period in 1998. Shipments of the Company's market pulp
products more than doubled as a result of the acquisition of Avenor in July
1998. NORSCAN (U.S., Canada, Finland, Norway and Sweden) pulp shipments
increased 6 percent when compared to the first six months of 1998 while NORSCAN
producer inventories decreased 144,000 metric tons to 1.4 million metric tons
compared to June 1998. The Company announced and implemented market pulp price
increases during the second quarter of 1999. In August 1999, the Company
announced an additional price increase of $40 per metric ton effective September
1, 1999.
Lumber The average transaction price for the Company's lumber products declined
5 percent for the first half of 1999 compared to the first half of 1998.
Industry prices increased for the first six months of 1999 compared to the same
period last year; however, a change in the Company's product mix offset other
price increases. The Company's lumber shipments in the first half of 1999
increased 25 percent over the same period last year, due mainly to the inclusion
of a sawmill, acquired upon the purchase of Avenor. This increase was partially
offset by the sale of Pinkham Lumber Company in March 1999. Housing starts in
the first half of 1999 increased 7 percent on a seasonally adjusted basis, when
compared to the first half of 1998.
Timber For the first six months of 1999, timber shipments increased 49 percent
compared to the first six months of 1998. Application of intensive forest
management practices and development of third party sales opportunities continue
to increase shipments. The average transaction price for the Company's timber
products for the first half of 1999 decreased 16 percent compared to the first
half of 1998, due to lower demand in the southeast United States timber markets
and the Company's sale of timberlands in the state of Maine.
DIVISIONAL PERFORMANCE
NET SALES BY DIVISION:
- -----------------------------------------------------
SIX MONTHS ENDED
JUNE 30,
--------------------
(In millions of US dollars) 1999 1998
- -----------------------------------------------------
DIVISION: (1)
Newsprint & Directory $799.1 $475.1
Coated Paper 221.7 241.5
Forest Products 75.5 62.3
Corporate/Other Eliminations 2.4 -
--------------------
Total Net Sales $1,098.7 $778.9
- -----------------------------------------------------
16
<PAGE> 17
BOWATER INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING INCOME/(LOSS) BY DIVISION:
- -----------------------------------------------------
SIX MONTHS ENDED
JUNE 30,
--------------------
(In millions of US dollars) 1999 1998
- -----------------------------------------------------
DIVISION: (1)
Newsprint & Directory $(62.2) $36.3
Coated Paper 32.1 61.6
Forest Products 24.8 24.3
Corporate/Other Eliminations (23.2) (17.3)
--------------------
Total Operating
Income/(Loss) $(28.5) $104.9
- -----------------------------------------------------
(1) Financial results for the production and sale of market pulp are included in
the Newsprint & Directory Division and the Coated Paper Division. The Pulp
Division is responsible for the marketing and distribution of the product.
Newsprint & Directory Division: In July 1998, this Division added five new
manufacturing sites with the acquisitions of Avenor and the South Korean
newsprint mill. Net sales for the Division increased 68 percent, from $475.1
million for the first six months of 1998 to $799.1 million for the first six
months of 1999, primarily the result of adding the new sites, offset partially
by lower average transaction prices for newsprint and directory paper. See the
previous discussion of product line results.
Operating income decreased $98.5 million, from $36.3 million for the first
half of 1998 to a loss of $62.2 million for the first half of 1999. In the
second quarter of 1999, the Company recorded a pre-tax impairment charge of
$92.0 million, reducing the book value of assets at its Great Northern Paper
operations. Without the impairment charge, operating income decreased $6.5
million. This decrease was due to lower transaction prices for newsprint and
directory paper and higher operating costs as a result of market-related
downtime, which were partially offset by synergies achieved. Shipments increased
for the first half of 1999 compared to the same period last year due to the
acquisitions of Avenor and the South Korean newsprint mill.
Coated Paper Division: Net sales decreased $19.8 million, from $241.5 million
for the first six months of 1998 to $221.7 million for first six months of 1999,
due to lower average prices for newsprint, market pulp and coated groundwood
paper, offset partially by higher shipments. See the previous discussion of
product line results.
Operating income for the Division decreased $29.5 million, from $61.6
million for the first half of 1998 to $32.1 million for the first half of 1999,
primarily the result of lower transaction prices for newsprint, coated
groundwood paper, and market pulp.
In July 1999, the Company acquired a coating facility in Benton Harbor,
Michigan.
Forest Products Division: Net sales for the Division increased 21 percent, from
$62.3 million for the first half of 1998 to $75.5 million for first half of
1999, primarily a result of higher shipments partially offset by lower prices.
See the previous discussion of product line results.
Operating income for the Division increased $0.5 million for the first six
months of 1999 compared to the first six months of 1998, primarily the result of
higher profitability for lumber products.
In the first six months of 1999, the Company completed the sale of
approximately 1.6 million acres of timberland in the state of Maine and the
Pinkham Lumber Company.
Corporate/Other Eliminations: Included in this category are general and
administrative expenses. For the first six months of 1999, this category also
includes administrative expenses of the Pulp Division and market pulp sales from
the Gold River pulp mill, which was permanently closed in February 1999.
Comparing the first half of 1999 to the first half of 1998, higher general and
administrative expenses are due to the inclusion of the Pulp Division and other
administration expenses resulting from the purchase of Avenor in July 1998.
INTEREST AND OTHER INCOME AND EXPENSES
Interest expense for the first six months of 1999 increased $29.7 million over
the same period in 1998 due to the assumption of Avenor's debt, and higher
borrowings on the Company's revolving credit facility in the current period.
Interest income decreased for the first six months of 1999 due to lower average
investment balances. During the first six months of 1999, the Company sold
approximately 1.6 million acres of timberlands located in the state of Maine and
the Pinkham Lumber Company. In connection with these sales, the Company recorded
a pre-tax gain of $253.7 million. "Other, net" for the
17
<PAGE> 18
BOWATER INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
first six months of 1999 was a gain of $28.2 million compared with a loss of
$21.1 million for the first six months of 1998. The Company reported foreign
exchange gains of $29.2 million during the first six months of 1999, compared
with a loss of $1.1 million during the same period in 1998. The majority of the
gains reported in 1999 resulted from marking to market the Company's $900
million hedging program. During the first six months of 1998, the Company
recorded a $22.3 million charge to adjust the cost of the Company's Canadian
dollar option contracts to fair market value.
The Company's effective tax rate for the first six months of 1999 was 40
percent versus 38 percent in the prior year period. The higher effective tax
rate in 1999 reflects the non-deductibility of the amortization of goodwill
recorded upon the acquisition of Avenor.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents decreased to $36.5 million at June 30,
1999, from $58.3 million at December 31, 1998. The company generated cash from
operations of $47.4 million and cash from investing activities of $246.4
million, and used $315.6 million for financing activities. In addition to cash
flow from operations, capital expenditures, and changes in investments and
short-term borrowings, the Company had several other significant cash
transactions since December 31, 1998. These transactions include: cash proceeds
of $356.0 million for the sale of approximately 1.6 million acres of
timberlands; cash paid of $65.9 million for the redemption of the Company's
7.50% Convertible Unsecured Subordinated Debentures; cash paid of $26.4 million
for the redemption of the Company's 8.40% Series C Preferred Stock; and common
stock purchases requiring cash of $57.4 million.
CASH FROM OPERATING ACTIVITIES:
During the first six months of 1999, the Company's operations generated $47.4
million of cash compared to $132.2 million of cash during the first six months
of 1998, a decrease of $84.8 million. This was largely attributable to a
decrease in operating income of $41.4 million (excluding an impairment charge of
$92.0 million in 1999), and higher working capital needs. The 1999 operating
cash flow includes the activities of the newly acquired mills.
CASH FROM INVESTING ACTIVITIES:
Cash proceeds from investing activities in the first six months of 1999 totaled
$246.4 million, compared with proceeds of $87.2 million during the first six
months of 1998, an increase of $159.2 million. Comparing the same periods,
capital expenditures were $20.5 million higher, due mainly to the modernization
of the Calhoun, Tennessee, facility. The Company expects total capital
expenditures for 1999 to approximate $220.0 million.
In March 1999, the company completed the sale of 981,000 acres of Maine
timberlands resulting in net cash proceeds of $211.8 million, after fees and
expenses. In April 1999, the company completed another sale of 650,000 acres of
Maine timberlands resulting in net cash proceeds of $144.2 million, after fees
and expenses. 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 1999, the company paid $19.9 million on the
maturity of Canadian dollar hedging contracts and had net cash invested in
marketable securities of $0.8 million, compared with net proceeds from maturity
of securities of $151.4 million for the same period in 1998. During 1998, the
Company invested $22.7 million in Canadian dollar option contracts.
CASH FROM FINANCING ACTIVITIES:
Cash used for financing activities was $315.6 million for the first six months
of 1999 compared to cash used of $27.6 million for the first six months of 1998.
During the first six months of 1999, the company made net payments of $139.5
million on its revolving credit facility and other short term borrowings and
paid $65.9 million for the redemption of it 7.50% Convertible Unsecured
Subordinated Debentures due 2004. In addition to the cash payment, Bowater
Canada Inc. issued 1.4 million Exchangeable shares. Also in 1999, the Company
paid $26.4 million for the redemption of the Company's 8.40% Series C Preferred
Stock. Dividends paid decreased $6.1 million from the prior year period due to
higher dividend payments to the minority shareholder of Calhoun Newsprint
Company and Series C Preferred dividends during the first six months of 1998.
In November 1997, the Company announced the adoption of a 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. In April 1999, the Company
completed its second stock repurchase program, which totaled approximately 4.1
million shares at a cost of $165.2 million. Of this total, 1.4 million shares
were purchased during 1999 at a cost
18
<PAGE> 19
BOWATER INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
of $57.4 million. In May 1999, the Board of Directors authorized a new stock
repurchase program allowing the Company to buy back up to 5.5 million shares.
The Company considers various options for the use of its cash including share
repurchases, internal capital investments, investments to grow the Company's
primary product lines, and additional debt reduction.
In the second quarter of 1999, the Company's $650 million, 364-day credit
facility expired and was renewed at a reduced level of $150 million. The $350
million, five-year facility was not changed.
In July 1999, the Company received cash proceeds of $31.7 million (before
fees and expenses) from revenue bonds issued by the Industrial Development Board
of the County of McMinn, Tennessee, which the Company previously applied for in
conjunction with the modernization of its Calhoun, Tennessee, newsprint
facility. The balance of the principal amount of $1.8 million will be received
in the near future. The bonds are variable rate and mature on June 1, 2029.
DISPOSITIONS
In April 1999, the Company completed the sale of approximately 650,000 acres of
timberland in the state of Maine to affiliates of McDonald Investment Company,
Inc. of Birmingham, Alabama, for $150.0 million. As part of the sale, an
agreement with McDonald was made to supply wood fiber from the purchased
timberlands to the Company's paper making operation at Great Northern Paper in
Millinocket and East Millinocket, Maine.
During the second quarter of 1999, the Company signed an agreement with
Inexcon Maine, Inc. for the purchase of Great Northern Paper. Based on the sale
price, the Company recorded a $92.0 million impairment charge in the second
quarter. The sale is expected to close in August 1999.
YEAR 2000 COMPLIANCE
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. The Company has separated its compliance analysis into three
categories.
The first category is business systems. A formal review of all internally
developed software was completed in 1997 and systemwide testing was successfully
completed during 1998. No major problems were encountered. In July 1998, the
Company acquired new operations. To achieve business synergies and year 2000
compliance, the new operations' order fulfillment, order tracking and invoicing
processes were migrated to the Company's internally developed software programs.
In addition, all major third party licensed application software programs have
been reviewed and are either compliant or the licenser released a compliant
version to which the Company migrated. The costs associated with these business
systems projects are currently estimated to be $2.8 million. As of June 30,
1999, approximately $2.5 million has been spent. The readiness percentage for
items in this category is approximately 98 percent as of June 30, 1999, which
assumes no interruption caused by external suppliers.
The second category includes manufacturing process control, manufacturing
equipment and systems, safety, environmental and other non-traditional
information systems areas. The Company currently estimates cost associated with
this category to be $6.6 million. As of June 30, 1999, approximately $3.8
million has been spent. The readiness percentage for this category is
approximately 98 percent as of June 30, 1999, which assumes no interruption
caused by external suppliers.
The third category is the Company's business partners, customers and
suppliers. Testing with e-commerce customers is continuing. Briefings have been
conducted for a number of customers at both mill and customer sites. The Company
identified 665 critical suppliers and is continuing to assess their year 2000
readiness. As of June 30, 1999, approximately 84 percent of the critical
suppliers have responded.
The cost estimates to complete the Company's year 2000 projects do not
include any internal costs incurred such as payroll costs for the Company's
information systems group. Although these costs are not separately tracked, the
Company has devoted a substantial amount of its internal resources to complete
these projects. As of June 30, 1999, the Company has completed 98 percent of all
of its major
19
<PAGE> 20
BOWATER INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
year 2000 compliance work. In the event any aspect of the year 2000 program
proves to be ineffective in resolving year 2000 compliance issues, the Company
is developing a contingency plan covering all significant business functions and
sites. The Company currently expects to complete this plan in October 1999.
The Company's year 2000 compliance projects were designed and implemented to
prevent an interruption of normal business activities or operations due to a
system's inability to recognize the year 2000. Despite these efforts, if a
material year 2000 problem does occur internally or with any of the Company's
significant suppliers or vendors who cannot be replaced, it could materially
adversely affect the Company's results of operations, liquidity or financial
condition.
The following is a cautionary statement for the purposes of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995. The
Company is including this statement to take advantage of these provisions for
forward looking statements regarding its year 2000 compliance. In its
disclosure, the Company stated estimated completion dates and costs to complete
the project based on assumptions it believes to be reasonable. These estimates
and assumptions almost always vary from actual results and the difference
between the estimate and the actual result may be material, depending on the
circumstances. Although made in good faith, there can be no assurance that the
estimates and assumptions will be the actual result achieved or accomplished.
Factors that could cause results to differ materially from those expressed in
the forward looking statements include (but are not limited to), the ability to
verify year 2000 compliance by third parties including suppliers, the ability to
locate and correct all relevant computer code and the ability to identify all
areas of year 2000 risks.
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 first quarter of 2001. 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.
20
<PAGE> 21
BOWATER INCORPORATED AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
On May 12, 1999, at the Company's Annual Meeting of Shareholders, the
following matter was submitted to a vote of the shareholders:
A resolution electing the following class of directors for a term of
three years: Francis J. Aguilar (46,429,533 votes in favor; 166,362 votes
withheld); John A. Rolls (46,421,907 votes in favor; 173,988 votes withheld);
and Kenneth M. Curtis (46,430,232 votes in favor; 165,663 votes withheld). The
names of each other director whose term of office as a director continued after
the meeting are: Arnold M. Nemirow, H. David Aycock, Richard Barth, Charles J.
Howard, James L. Pate and Arthur R. Sawchuk.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits (numbered in accordance with Item 601 of Regulation
S-K):
Exhibit No. Description
----------- -----------
10.1 Amended and Restated 364-Day Credit Agreement dated
as of June 23, 1999, amending and restating 364-Day
Credit Agreement dated as of June 24, 1998, between
the Company, The Chase Manhattan Bank, as
Administrative Agent, and the lenders signatory
thereto.
10.2 Amendment No. 1 dated as of June 23, 1999, to the
Five-Year Credit Agreement dated as of June 24, 1998,
between the Company, The Chase Manhattan Bank, as
Administrative Agent, and the lenders signatory
thereto.
10.3 Form of First Amendment to Change in Control
Agreement dated as of February 26, 1999, by and
between the Company and each of E. Patrick Duffy,
David G. Maffucci, Donald G. McNeil, Robert A. Moran,
Arnold M. Nemirow and Michael F. Nocito.
10.4 Form of First Amendment to Change in Control
Agreement dated as of February 26, 1999, by and
between the Company and each of Anthony H. Barash,
James H. Dorton, Arthur D. Fuller, Jerry R. Gilmore,
Richard K. Hamilton, Steven G. Lanzl, R. Donald
Newman and Wendy C. Shiba.
10.5 Form of First Amendment to Change in Control
Agreement dated as of February 26, 1999, by and
between the Company and each of William G. Harvey and
David J. Steuart.
10.6 Compensatory Benefits Plan of the Company, as amended
and restated effective February 26, 1999.
10.7 Retirement Plan for Outside Directors of the Company,
amended and restated as of February 26, 1999.
10.8 Supplemental Benefit Plan for Designated Employees of
Bowater Incorporated and Affiliated Companies, as
amended and restated effective February 26, 1999.
10.9 Equity Participation Rights Plan of the Company,
amended and restated as of February 26, 1999.
21
<PAGE> 22
BOWATER INCORPORATED AND SUBSIDIARIES
PART II
OTHER INFORMATION
10.10 Third Amendment, effective February 26, 1999, to the
1988 Stock Incentive Plan of the Company.
10.11 First Amendment, effective February 26, 1999, to the
Amended and Restated Benefit Plan Grantor Trust of
the Company.
10.12 First Amendment, effective February 26, 1999, to the
Amended and Restated Executive Severance Grantor
Trust of the Company.
10.13 First Amendment, effective February 26, 1999, to the
Amended and Restated Outside Directors Benefit Plan
Grantor Trust of the Company.
10.14 Benefits Equalization Plan of the Company, amended
and restated as of February 26, 1999.
10.15 Second Amendment, effective February 26, 1999, to the
1992 Stock Incentive Plan of the Company.
10.16 Second Amendment, effective February 26, 1999, to the
1997 Stock Option Plan of the Company, as amended
and restated January 1, 1997.
27.1 Financial Data Schedule (electronic filing only).
(b) Reports on Form 8-K:
On May 19, 1999, the Company filed with the Securities and
Exchange Commission a Current Report on Form 8-K dated May 19,
1999, reporting under Item 5 (Other Events) the issuance of a
press release announcing the signing of an agreement for the
sale of Great Northern Paper, Inc.
22
<PAGE> 23
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 16, 1999
23
<PAGE> 24
INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
10.1 Amended and Restated 364-Day Credit Agreement dated
as of June 23, 1999, amending and restating 364-Day
Credit Agreement dated as of June 24, 1998, between
the Company, The Chase Manhattan Bank, as
Administrative Agent, and the lenders signatory
thereto.
10.2 Amendment No. 1 dated as of June 23, 1999, to the
Five-Year Credit Agreement dated as of June 24, 1998,
between the Company, The Chase Manhattan Bank, as
Administrative Agent, and the lenders signatory
thereto.
10.3 Form of First Amendment to Change in Control
Agreement dated as of February 26, 1999, by and
between the Company and each of E. Patrick Duffy,
David G. Maffucci, Donald G. McNeil, Robert A. Moran,
Arnold M. Nemirow and Michael F. Nocito.
10.4 Form of First Amendment to Change in Control
Agreement dated as of February 26, 1999, by and
between the Company and each of Anthony H. Barash,
James H. Dorton, Arthur D. Fuller, Jerry R. Gilmore,
Richard K. Hamilton, Steven G. Lanzl, R. Donald
Newman and Wendy C. Shiba.
10.5 Form of First Amendment to Change in Control
Agreement dated as of February 26, 1999, by and
between the Company and each of William G. Harvey and
David J. Steuart.
10.6 Compensatory Benefits Plan of the Company, as amended
and restated effective February 26, 1999.
10.7 Retirement Plan for Outside Directors of the Company,
amended and restated as of February 26, 1999.
10.8 Supplemental Benefit Plan for Designated Employees of
Bowater Incorporated and Affiliated Companies, as
amended and restated effective February 26, 1999.
10.9 Equity Participation Rights Plan of the Company,
amended and restated as of February 26, 1999.
10
<PAGE> 25
10.10 Third Amendment, effective February 26, 1999, to the
1988 Stock Incentive Plan of the Company.
10.11 First Amendment, effective February 26, 1999, to the
Amended and Restated Benefit Plan Grantor Trust of
the Company.
10.12 First Amendment, effective February 26, 1999, to the
Amended and Restated Executive Severance Grantor
Trust of the Company.
10.13 First Amendment, effective February 26, 1999, to the
Amended and Restated Outside Directors Benefit Plan
Grantor Trust of the Company.
10.14 Benefits Equalization Plan of the Company, amended
and restated as of February 26, 1999.
10.15 Second Amendment, effective February 26, 1999, to the
1992 Stock Incentive Plan of the Company.
10.16 Second Amendment, effective February 26, 1999, to the
1997 Stock Option Plan of the Company, as amended
and restated January 1, 1997.
27.1 Financial Data Schedule (electronic filing only).
<PAGE> 1
EXHIBIT 10.1
AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT
AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT dated as of June
23, 1999 between BOWATER INCORPORATED, a corporation duly organized and validly
existing under the laws of the State of Delaware (the "Company"); each of the
Subsidiaries of the Company from time to time designated as "Subsidiary
Borrowers" hereunder pursuant to Section 7.02(a) of the Existing Credit
Agreement as defined below (each, a "Subsidiary Borrower" and, together with the
Company, the "Borrowers"); each of the lenders that is a signatory hereto
identified under the caption "BANKS" on the signature pages hereto or that,
pursuant to Section 12.06(b) of the Existing Credit Agreement (individually, a
"Bank" and, collectively, the "Banks"); and THE CHASE MANHATTAN BANK, as
Administrative Agent for the Banks (in such capacity, together with its
successors in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Company, the Subsidiary Borrowers, the Banks, and
the Administrative Agent are party to a 364-Day Credit Agreement dated as of
June 24, 1998 (as in effect prior to the date hereof, the "Existing Credit
Agreement"), providing for the making of loans by the Banks to the Company and
the Borrowers in an aggregate original principal amount up to $650,000,000; and
WHEREAS, the parties hereto desire to amend in certain
respects and to restate in its entirety the Existing Credit Agreement;
NOW, THEREFORE, the parties hereto agree to amend the Existing
Credit Agreement as set forth in Section 2 hereof and to restate the Existing
Credit Agreement to read in its entirety as set forth in the Existing Credit
Agreement (which Existing Credit Agreement is incorporated herein by this
reference), as amended by the amendments set forth in Section 2 hereof:
Section 1. Definitions. Capitalized terms used but not
otherwise defined herein have the meanings given them in the Existing Credit
Agreement.
Section 2. Amendments. Subject to the satisfaction of the
conditions specified in Section 3 hereof (and, in the case of Sections 2.03 and
2.04 below, Section 4 hereof), the Existing Credit Agreement shall be amended as
follows:
2.01. General. Each reference to the "Agreement" or to the
"Existing Credit Agreement" and words of similar import in the Existing
Credit Agreement, as amended and restated hereby, and in the promissory
notes (provided for in Section 2.08(d) of the Existing Credit
Agreement) shall be a reference to the Existing Credit Agreement as
<PAGE> 2
-2-
amended and restated hereby and as the same may be further amended,
supplemented and otherwise modified and in effect from time to time.
2.02. Definitions. Section 1.01 of the Existing Credit
Agreement shall be amended by adding and amending and restating the
following definitions (to the extent already included in said Section
1.01), as follows:
"Amendment and Restatement" shall mean the Amended
and Restated 364-Day Credit Agreement dated as of June 23,
1999 between the Company, the Subsidiary Borrowers, the Banks
and the Administrative Agent.
"Commitment" shall mean, for each Bank, the
obligation of such Bank to make Syndicated Loans in an
aggregate amount at any one time outstanding up to but not
exceeding (a) in the case of a Bank that is a party to the
Amendment and Restatement on the date thereof, the amount set
opposite the name of such Bank on the signature pages to the
Amendment and Restatement or (b) in the case of any other
Bank, the aggregate amount of the Commitments of other Banks
acquired by it pursuant to Section 12.06 hereof (in each case,
as the same may be reduced from time to time pursuant to
Section 2.04 hereof or increased or reduced pursuant to said
Section 12.06(b)).
"Revolving Credit Termination Date" shall mean June
21, 2000, as such date may from time to time be extended as
provided in Section 2.10 of the Existing Credit Agreement.
2.03 Utilization Fee. (a) Section 2.05 of the Existing Credit
Agreement is amended by (i) (for convenience of reference only)
re-entitling said Section 2.05 "Facility and Utilization Fees", (ii)
placing the existing text of said Section 2.05 in its entirety and
without change into a paragraph designated "(a)" under said Section
2.05 and (iii) adding a new paragraph "(b)" thereto to read in its
entirety as follows:
"(b) The Company shall pay to the Administrative
Agent for account of each Bank a utilization fee at a rate per
annum equal to 0.25% on the aggregate outstanding principal
amount of the Syndicated Loans made by such Bank hereunder for
any period (during the period from and including June 23, 1999
to but not including the earlier of the date Commitments are
terminated and the Revolving Credit Termination Date) that the
aggregate principal outstanding amount of all Syndicated Loans
hereunder exceeds 50% of the net amount of the Commitments
after deducting the aggregate principal outstanding amount of
all Money Market Loans hereunder at such time. Accrued
utilization fee shall be payable on each Quarterly Date and on
the earlier of the date the Commitments are terminated and the
Revolving Credit Termination Date."
<PAGE> 3
-3-
(b) Sections 4.02 and 11.03 of the Existing Credit Agreement
are amended by adding the words "or utilization fee" after the term
"facility fee" appearing therein.
(c) Section 4.03 of the Existing Credit Agreement is amended
by adding the words "and utilization fee" after the term "facility fee"
appearing therein.
2.04. Lien Basket. Section 9.06(j) of the Existing Credit
Agreement is amended by replacing "10%" with "15%".
2.05. Indebtedness Basket. Section 9.11(f) of the Existing
Credit Agreement is amended by replacing "10%" with "15%".
Section 3. Conditions. The amendment and restatement of the
Existing Credit Agreement contemplated hereby shall become effective as of June
23, 1999 (the "Restatement Effective Date") upon the satisfaction prior to such
date of each of the following conditions to effectiveness (including, without
limitation, that each document to be received by the Administrative Agent shall
be in form and substance satisfactory to the Administrative Agent):
3.01. Execution. The Administrative Agent (or its counsel)
shall have received from each party hereto either (a) a counterpart of
this Amended and Restated 364-Day Credit Agreement signed on behalf of
such party or (b) written evidence satisfactory to the Administrative
Agent (which may include telecopy transmission of a signed signature
page of this Amended and Restated 364-Day Credit Agreement) that such
party has signed a counterpart of this Amended and Restated 364-Day
Credit Agreement.
3.02. Opinion. The Administrative Agent shall have received a
favorable written opinion (addressed to the Administrative Agent and
the Banks and dated the Restatement Effective Date) of Wendy C. Shiba,
Esq., Vice President, Secretary and Assistant General Counsel of the
Company, substantially in the form of Exhibit B to the Existing Credit
Agreement (with appropriate modifications to reflect the amendment and
restatement thereof contemplated hereby). The Company hereby requests
such counsel to deliver such opinion.
3.03. Certificate as to Incumbency. The Administrative Agent
shall have received a certificate of the Secretary or an Assistant
Secretary of the Company in respect of each of the officers (a) who are
authorized to sign this Amended and Restated 364-Day Credit Agreement
on the Company's behalf and (b) who will, until replaced by another
officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices
and other communications in connection with this Amended and Restated
364-Day Credit Agreement, the promissory notes and the transactions
contemplated hereby.
3.04. Certificate of Authorized Officer. The Administrative
Agent shall have received a certificate of a duly authorized financial
officer of the Company, dated the
<PAGE> 4
-4-
Restatement Effective Date, stating that (a) no Default has occurred
and is continuing as of such date, and (b) the representations and
warranties contained in Section 8 of the Existing Credit Agreement, as
amended and restated hereby, are true and complete on and as of such
date with the same force and effect as if made on and as of such date
(or, if any such representation or warranty is expressly stated to have
been made as of a specific date, as of such specific date).
3.05. Aggregate Outstanding Amount. On the Restatement
Effective Date, the aggregate outstanding principal amount of all Loans
made by the Banks to the Borrowers shall not be greater than
$150,000,000.
3.06. Fees and Expenses. The Administrative Agent shall have
received all fees and other amounts due and payable on or prior to the
Restatement Effective Date, including, to the extent invoiced,
reimbursement or payment of all out-of-pocket expenses required to be
reimbursed or paid by the Company hereunder.
The Administrative Agent shall notify the Company and the Banks of the
occurrence of the Restatement Effective Date, and such notice shall be
conclusive and binding.
Section 4. Effectiveness of Five-Year Credit Agreement
Amendments. Subject to the conditions precedent set forth in Section 3 hereof,
Sections 2.03 and 2.04 hereof shall become effective as of the Restatement
Effective Date upon the due execution and delivery of an amendment by the
required parties to the Five-Year Credit Agreement dated as of June 24, 1998
(the "Five-Year Agreement"), between the Company, the Subsidiary Borrowers, the
Banks party thereto and The Chase Manhattan Bank, as administrative agent
thereunder, that effects amendments to the Five-Year Agreement corresponding to
those contained in Sections 2.03 and 2.04 hereof.
Section 5. Readjustment of Loans. On the Restatement Effective
Date, the Banks shall take such actions, and make such adjustments among
themselves, as shall be necessary so that their outstanding Syndicated Loans are
held hereunder ratably in accordance with their respective Commitments as set
forth on the signature pages hereto under the caption "Commitment".
Section 6. Counterparts. This Amended and Restated 364-Day
Credit Agreement may be executed in any number of counterparts, each of which
shall be identical and all of which, when taken together, shall constitute one
and the same instrument, and any of the parties hereto may execute this Amended
and Restated 364-Day Credit Agreement by signing any such counterpart.
Section 7. Expenses. Without limiting its obligations under
Section 12.03 of the Existing Credit Agreement, the Company agrees to pay, on
demand, all reasonable out-of-pocket expenses incurred by the Administrative
Agent and its affiliates, including the reasonable fees, charges and
disbursements of counsel for the Administrative Agent, in connection with the
<PAGE> 5
-5-
preparation and administration of this Amended and Restated 364-Day Credit
Agreement and the transactions contemplated hereby.
Section 8. Binding Effect. This Amended and Restated 364-Day
Credit Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
Section 9. Governing Law. This Amended and Restated 364-Day
Credit Agreement shall be governed by, and construed in accordance with, the law
of the State of New York.
<PAGE> 6
-6-
IN WITNESS WHEREOF, the parties hereto have caused this
Amended and Restated 364-Day Credit Agreement to be duly executed as of the date
first above written.
COMPANY
BOWATER INCORPORATED
Witness: /s/ Duane A. Owens By: /s/ William Harvey
-------------------- -----------------------------------------
Name: William Harvey
Title: Vice President & Treasurer
ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK,
as Administrative Agent
By: /s/ Robert Anastasio
-----------------------------------------
Name: Robert Anastasio
Title: Vice President
BANKS
Commitment
$16,500,000 THE CHASE MANHATTAN BANK
By: /s/ Robert Anastasio
-----------------------------------------
Name: Robert Anastasio
Title: Vice President
$15,000,000 THE BANK OF NEW YORK
By: /s/ Ann Marie Hughes
-----------------------------------------
Name: Ann Marie Hughes
Title: Vice President
<PAGE> 7
-7-
$15,000,000 NATIONSBANK, N.A
By: /s/ Michael W. Colon
-----------------------------------------
Name: Michael W. Colon
Title: Vice President
$15,000,000 FIRST UNION NATIONAL BANK
By: /s/ J. Andrew Phelps
-----------------------------------------
Name: J. Andrew Phelps
Title: AVP
$15,000,000 TORONTO DOMINION (TEXAS), INC.
By: /s/ Alva J. Jones
-----------------------------------------
Name: Alva J. Jones
Title: Vice President
$15,000,000 WACHOVIA BANK, N.A.
By: /s/ Suzanne Morrison
-----------------------------------------
Name: Suzanne Morrison
Title: Vice President
$12,000,000 MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ Robert Bottamedi
-----------------------------------------
Name: Robert Bottamedi
Title: Vice President
<PAGE> 8
-8-
$12,000,000 THE BANK OF NOVA SCOTIA
By: /s/ Patrick J. Hawes
-----------------------------------------
Name: Patrick J. Hawes
Title: Comptroller
$12,000,000 SUNTRUST BANK, NASHVILLE, N.A.
By: /s/ J. Lee Lamprecht
-----------------------------------------
Name: J. Lee Lamprecht
Title: S.V.P.
$7,500,000 WESTDEUTSCHE LANDESBANK
GIROZENTRALE
NEW YORK BRANCH
By: /s/ Cynthia M. Niesen
-----------------------------------------
Name: Cynthia M. Niesen
Title: Managing Director
By: /s/ Walter T. Duffy
-----------------------------------------
Name: Walter T. Duffy III
Title: Vice President
$7,500,000 BANK OF MONTREAL
By: /s/ Brian L. Banke
-----------------------------------------
Name: Brian L. Banke
Title: Director
<PAGE> 9
-9-
$7,500,000 DG BANK, DEUTSCHE
GENOSSENSCHAFTSBANK, AG
CAYMAN ISLANDS BRANCH
By: /s/ Eric K. Zimmerman
-----------------------------------------
Name: Eric K. Zimmerman
Title: Assistant Vice President
By: /s/ Kurt A. Morris
-----------------------------------------
Name: Kurt A. Morris
Title: Vice President
<PAGE> 1
EXHIBIT 10.2
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of June 23, 1999 (this "Amendment"),
to the Five-Year Credit Agreement dated as of June 24, 1998 (as in effect prior
to the date hereof, the "Credit Agreement"), between BOWATER INCORPORATED (the
"Company"), the Subsidiary Borrowers, the Banks and THE CHASE MANHATTAN BANK, as
Administrative Agent (the "Administrative Agent").
The Company desires to modify certain covenants of the Credit
Agreement, and the Banks are willing to make such modifications on the terms and
conditions of this Amendment below. Accordingly, in consideration of the
foregoing premises and the mutual agreements contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Except as otherwise defined in this
Amendment, terms defined in the Credit Agreement are used herein as defined
therein.
Section 2. Amendments. Subject to the satisfaction of the
conditions precedent set forth in Section 3 hereof, with effect as of the date
hereof, the parties hereby agree that the Credit Agreement shall be amended as
follows:
(a) Clause (j) of Section 9.06 of the Credit Agreement shall
be amended by deleting the percentage "10%" and replacing it with
"15%".
(b) Clause (f) of Section 9.11 of the Credit Agreement shall
be amended by deleting the percentage "10%" and replacing it with
"15%".
Section 3. Conditions Precedent. Section 2 hereof shall become
effective as of the date hereof upon the satisfaction of each of the following:
(a) the due execution and delivery of this Amendment by the
Company, any and all Subsidiary Borrowers, the Majority Banks and the
Administrative Agent; and
(b) the due execution and delivery of an amendment and
restatement (or other amendatory agreement) by the parties to the
364-Day Credit Agreement dated as of June 24, 1998 (the "364-Day
Agreement"), between the Company, the Subsidiary Borrowers, the Banks
party thereto and The Chase Manhattan Bank, as administrative agent
thereunder, that effects amendments to the 364-Day Agreement
corresponding to those contained in Section 2 hereof.
Section 4. Miscellaneous. Except as herein provided, the
Credit Agreement shall remain unchanged and in full force and effect, and each
reference to the Credit Agreement in the Credit Agreement, as amended hereby,
shall be a reference to the Credit Agreement as amended hereby and as the same
may be further amended, supplemented and otherwise modified and in effect from
time to time. This Amendment may be executed in any number of counterparts, each
of which shall be identical and all of which, when taken together, shall
constitute one and the same instrument. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. This Amendment shall be governed by, and construed in accordance with,
the law of the State of New York.
<PAGE> 2
-2-
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of the day and year first above
written.
COMPANY
BOWATER INCORPORATED
Witness: /s/ Duane A. Owens By: /s/ William Harvey
------------------- -----------------------------------------
Name: William Harvey
Title: Vice President & Treasurer
ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK,
as Administrative Agent
By: /s/ Robert Anastasio
-----------------------------------------
Name: Robert Anastasio
Title: Vice President
BANKS
THE CHASE MANHATTAN BANK,
By: /s/ Robert Anastasio
-----------------------------------------
Name: Robert Anastasio
Title: Vice President
<PAGE> 3
-3-
THE BANK OF NEW YORK
By: /s/ Ann Marie Hughes
-----------------------------------------
Name: Ann Marie Hughes
Title: Vice President
NATIONSBANK, N.A
By: /s/ Michael W. Colon
-----------------------------------------
Name: Michael W. Colon
Title: Vice President
ABN AMRO BANK
By: /s/ Leif H. Olsson
-----------------------------------------
Name: Leif H. Olsson
Title: Senior Vice President
By: /s/ David McGinnis
-----------------------------------------
Name: David McGinnis
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ J. Andrew Phelps
-----------------------------------------
Name: J. Andrew Phelps
Title: AVP
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ Robert Bottamedi
-----------------------------------------
Name: Robert Bottamedi
Title: Vice President
NATIONAL BANK OF CANADA
By: [not signed]
-----------------------------------------
Name:
Title:
By: [not signed]
-----------------------------------------
Name:
Title:
<PAGE> 4
-4-
WESTDEUTSCHE LANDESBANK
GIROZENTRALE
NEW YORK BRANCH
By: /s/ Cynthia M. Niesen
-----------------------------------------
Name: Cynthia M. Niesen
Title: Managing Director
By: /s/ Walter T. Duffy III
-----------------------------------------
Name: Walter T. Duffy III
Title: Vice President
TORONTO DOMINION (TEXAS), INC.
By: /s/ Alva J. Jones
-----------------------------------------
Name: Alva J. Jones
Title: Vice President
WACHOVIA BANK, N.A.
By: /s/ Suzanne Morrison
-----------------------------------------
Name: Suzanne Morrison
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ Patrick J. Hawes
-----------------------------------------
Name: Patrick J. Hawes
Title: Comptroller
SUNTRUST BANK, NASHVILLE, N.A.
By: /s/ J. Lee Lamprecht
-----------------------------------------
Name: J. Lee Lamprecht
Title: S.V.P.
BANK OF MONTREAL
By: /s/ Brian L. Banke
-----------------------------------------
Name: Brian L. Banke
Title: Director
<PAGE> 5
-5-
PNC BANK, NATIONAL ASSOCIATION
By: [not signed]
-----------------------------------------
Name:
Title:
DG BANK, DEUTSCHE
GENOSSENSCHAFTSBANK, AG
CAYMAN ISLANDS BRANCH
By: /s/ Eric K. Zimmerman
-----------------------------------------
Name: Eric K. Zimmerman
Title: Assistant Vice President
By: /s/ Kurt A. Morris
-----------------------------------------
Name: Kurt A. Morris
Title: Vice President
<PAGE> 1
EXHIBIT 10.3
FIRST AMENDMENT
CHANGE IN CONTROL AGREEMENT
THIS FIRST AMENDMENT, made as of this 26th day of February, 1999, by
and between BOWATER INCORPORATED, a Delaware corporation having a mailing
address of 55 East Camperdown Way, Greenville, South Carolina 29602 (the
"Corporation"), and __________________of ___________________________________
(the "Executive").
WHEREAS, the Corporation and the Executive entered into a Change in
Control Agreement dated November 1, 1995 (the "Agreement") and
WHEREAS, in consideration of the grant of an Equity Participation Right
Award to Executive as of February 22, 1999, for 1,000 units at a grant price of
$39.78, the Executive has agreed to amend the definition of "Change in Control"
in the Agreement.
NOW THEREFORE, the Agreement is amended as follows:
1. Section 1(a) of the Agreement is amended to read as follows:
"(a) "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."
2. Section 1(b) is amended to read as follows:
"(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934."
<PAGE> 2
3. A new Section 1(c) is added to the Agreement as follows, and succeeding
subsections are redesignated accordingly:
"(c) "Beneficial Owner" of common stock means (i) a Person who
beneficially owns such common stock, directly or indirectly,
or (ii) 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."
4. Section 1(e) (as redesignated) of the Agreement is amended to read as
follows:
"(e) "Change in Control" shall be deemed to have occurred upon:
(i) The date that any Person is or becomes an Acquiring
Person;
(ii) 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, (A) 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
(B) at least 50% of the board of directors or similar
body of the resulting entity are Continuing
Directors.
(iii) 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, (A) 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 an 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 (B) at
2
<PAGE> 3
least 50% of the board of directors or similar body
of the resulting entity are Continuing Directors; or
(iv) The date on which less than 50% of the total
membership of the Board consists of Continuing
Directors."
5. Section 1(g) (as redesignated) of the Agreement is amended to read as
follows:
"(g) "Continuing Directors" shall mean any member of the Board who
(i) 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, (ii) is not an Acquiring Person or an Affiliate or
Associate of an Acquiring Person, and (iii) is recommended or
elected to succeed the Continuing Director by a majority of
the Continuing Directors."
6. Section 1(i)(iv) (as redesignated) of the Agreement and the narrative
paragraph in Section 1(i) (as redesignated) of the Agreement, are amended,
solely to correct erroneous paragraph references, as follows:
"(iv) the taking of any action by the Corporation (including the
elimination of a plan without providing substitutes therefor,
the reduction of the Executive's awards thereunder or failure
to continue the Executive's participation therein) that would
substantially diminish the aggregate projected value of the
Executive's awards or benefits under the Corporation's benefit
plans or policies described in Section 1(i)(ii) in which the
Executive was participating at the time of the Change in
Control;
. . .
Any circumstance described in this Section 1(i) shall constitute Good
Reason even if such circumstance would not constitute a breach by the
Corporation of the terms of the Employment Agreement between the
Corporation and the Executive in effect on the date of the Change in
Control. The Executive shall be deemed to have terminated his
employment for Good Reason effective upon the effective date stated in
a written notice of such termination given by him to the Corporation
(which notice shall not be given, in circumstances described in Section
1(i)(i), before the end of the thirty (30) day period described
therein) setting forth in reasonable detail the facts and circumstances
claimed to provide the basis for termination, provided that the
effective date may not precede, nor be more than sixty (60) days from,
the date such notice is given. The Executive's continued employment
shall not constitute consent to, or a waiver of rights with respect to,
any circumstances constituting Good Reason hereunder."
3
<PAGE> 4
7. Section 1(k) (as redesignated) of the Agreement is amended to read as
follows:
"(k) "Person" means any individual, firm, corporation, partnership,
trust or other entity."
Except as hereby amended, all other provisions of the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
executed as of the day and year first above written.
BOWATER INCORPORATED
By: ___________________________________ ___________________________________
Name:__________________________________ Name: _____________________________
Title:_________________________________ Date Signed: ______________________
Date Signed:___________________________
4
<PAGE> 5
SCHEDULE TO EXHIBIT 10.3
FIRST AMENDMENT
CHANGE IN CONTROL AGREEMENTS
NAME DATE OF AGREEMENT
E. Patrick Duffy 02/26/99
David G Maffucci 02/26/99
Donald G. McNeil 02/26/99
Robert A. Moran 02/26/99
Arnold M. Nemirow 02/26/99
Michael F. Nocito 02/26/99
<PAGE> 1
EXHIBIT 10.4
FIRST AMENDMENT
CHANGE IN CONTROL AGREEMENT
THIS FIRST AMENDMENT, made as of this 26th day of February, 1999, by
and between BOWATER INCORPORATED, a Delaware corporation having a mailing
address of 55 East Camperdown Way, Greenville, South Carolina 29602 (the
"Corporation"), and ___________________ of _______________________________ (the
"Executive").
WHEREAS, the Corporation and the Executive entered into a Change in
Control Agreement dated April 1, 1996 (the "Agreement") and
WHEREAS, in consideration of the grant of an Equity Participation Right
Award to Executive as of February 22, 1999, for 1,000 units at a grant price of
$39.78, the Executive has agreed to amend the definition of "Change in Control"
in the Agreement.
NOW THEREFORE, the Agreement is amended as follows:
1. Section 1(a) of the Agreement is amended to read as follows:
"(a) "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."
2. Section 1(b) is amended to read as follows:
"(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934."
<PAGE> 2
3. A new Section 1(c) is added to the Agreement as follows, and succeeding
subsections are redesignated accordingly:
"(c) "Beneficial Owner" of common stock means (i) a Person who
beneficially owns such common stock, directly or indirectly,
or (ii) 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."
4. Section 1(e) (as redesignated) of the Agreement is amended to read as
follows:
"(e) "Change in Control" shall be deemed to have occurred upon:
(i) The date that any Person is or becomes an Acquiring
Person;
(ii) 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, (A) 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
(B) at least 50% of the board of directors or similar
body of the resulting entity are Continuing
Directors.
(iii) 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, (A) 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 an 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 (B) at
2
<PAGE> 3
least 50% of the board of directors or similar body
of the resulting entity are Continuing Directors; or
(iv) The date on which less than 50% of the total
membership of the Board consists of Continuing
Directors."
5. Section 1(g) (as redesignated) of the Agreement is amended to read as
follows:
"(g) "Continuing Directors" shall mean any member of the Board who
(i) 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, (ii) is not an Acquiring Person or an Affiliate or
Associate of an Acquiring Person, and (iii) is recommended or
elected to succeed the Continuing Director by a majority of
the Continuing Directors."
6. Section 1(k) (as redesignated) of the Agreement is amended to read as
follows:
"(k) "Person" means any individual, firm, corporation, partnership,
trust or other entity."
Except as hereby amended, all other provisions of the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
executed as of the day and year first above written.
BOWATER INCORPORATED
By: ___________________________________ ___________________________________
Name:__________________________________ Name: _____________________________
Title:_________________________________ Date Signed: ______________________
Date Signed:___________________________
3
<PAGE> 4
SCHEDULE TO EXHIBIT 10.4
FIRST AMENDMENT
CHANGE IN CONTROL AGREEMENTS
NAME DATE OF AGREEMENT
Anthony H. Barash 02/26/99
James H. Dorton 02/26/99
Arthur D. Fuller 02/26/99
Jerry R. Gilmore 02/26/99
Richard K. Hamilton 02/26/99
Steven G. Lanzl 02/26/99
R. Donald Newman 02/26/99
Wendy C. Shiba 02/26/99
<PAGE> 1
EXHIBIT 10.5
FIRST AMENDMENT
CHANGE IN CONTROL AGREEMENT
THIS FIRST AMENDMENT, made as of this 26th day of February, 1999, by
and between BOWATER INCORPORATED, a Delaware corporation having a mailing
address of 55 East Camperdown Way, Greenville, South Carolina 29602 (the
"Corporation"), and _____________________ of _____________________________ (the
"Executive").
WHEREAS, the Corporation and the Executive entered into a Change in
Control Agreement dated July 24, 1998 (the "Agreement") and
WHEREAS, in consideration of the grant of an Equity Participation Right
Award to Executive as of February 22, 1999, for 1,000 units at a grant price of
US $39.78, the Executive has agreed to amend the definition of "Change in
Control" in the Agreement.
NOW THEREFORE, the Agreement is amended as follows:
Section 1(e)(iv) of the Agreement is amended to read as follows:
"(iv) The date on which less than 50% of the total
membership of the Board consists of Continuing
Directors."
Except as hereby amended, all other provisions of the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
executed as of the day and year first above written.
BOWATER INCORPORATED
By: _______________________________________ __________________________________
Name:______________________________________ Name: ____________________________
Title:_____________________________________ Date Signed: _____________________
Date Signed:_______________________________
<PAGE> 2
SCHEDULE TO EXHIBIT 10.5
FIRST AMENDMENT
CHANGE IN CONTROL AGREEMENTS
NAME DATE OF AGREEMENT
William G. Harvey 02/26/99
David J. Steuart 02/26/99
<PAGE> 1
EXHIBIT 10.6
BOWATER INCORPORATED
COMPENSATORY BENEFITS PLAN
AS AMENDED AND RESTATED
EFFECTIVE FEBRUARY 26, 1999
<PAGE> 2
TABLE OF CONTENTS
1. Purpose of the Plan........................................................1
2. Definitions................................................................1
3. Eligibility and Participation..............................................1
4. Benefits...................................................................1
5. Deemed Investment of Book Account Balances.................................3
6. Maintenance and Valuation of Book Account..................................3
7. Benefits Upon Retirement, Death, Disability or Termination of Employment...4
8. Administration.............................................................7
9. Claims and Review..........................................................7
10. Amendment or Discontinuance................................................8
11. Plan Unfunded..............................................................9
12. No Contract of Employment..................................................9
13. Inalienability of Benefits.................................................9
14. Governing Law..............................................................9
15. Effective Date.............................................................9
i
<PAGE> 3
BOWATER INCORPORATED
COMPENSATORY BENEFITS PLAN
As Amended and Restated
Effective February 26, 1999
1. Purpose of the Plan. The purpose of the Bowater Incorporated
Compensatory Benefits Plan (the "Plan") is to provide benefits payable out of
the general assets of Bowater Incorporated (the "Company") to employees
participating in the Bowater Incorporated Salaried Employees' Savings Plan (the
"Savings Plan") whose benefits under the Savings Plan are limited by the
application of Section 415, Section 401(a)(17) and/or Section 401(k)(3) of the
Internal Revenue Code of 1986. The Plan was adopted on January 1, 1985, and was
subsequently amended and restated as of April 30, 1991. It is now being amended
and restated as of February 26, 1999, to incorporate all amendments that have
been adopted as of such date.
The Plan shall consist of two separate plans, one that is maintained
solely for the purpose of providing benefits for employees in excess of the
limitations on contributions imposed by Section 415 of the Internal Revenue Code
of 1986 (an "Excess Benefit Plan"), and one which is maintained primarily for
the purpose of providing deferred compensation for a select group of management
or highly compensated employees (a "Top-Hat Plan").
2. Definitions. Except as otherwise specified herein, all capitalized
terms and phrases used herein shall have the same meanings ascribed to such
terms and phrases in the Savings Plan.
3. Eligibility and Participation. All Participants in the Savings Plan
("Eligible Employees") shall be eligible to participate in the Plan. An Eligible
Employee who is not a member of a select group of management or highly
compensated employees, within the contemplation of the Employee Retirement
Income Security Act of 1974 (as determined by the Plan Administrator), shall be
eligible to participate only in the portion of the Plan that is an "Excess
Benefit Plan," and shall not be eligible to participate in the portion of the
Plan that is a "Top-Hat Plan."
4. Benefits.
(a) A book account ("Book Account") shall be established for each
Eligible Employee at such time as an amount becomes creditable
thereto hereunder. There shall be credited to each Eligible
Employee's Book Account the amount, if any, by which the
Employer regular contributions and additional contributions
that would have been made to the Savings Plan on behalf of the
Eligible Employee pursuant to Sections 4.01 and 4.02 of the
Savings Plan without regard to:
1
<PAGE> 4
(i) if the Eligible Employee participates in the portion
of the Plan that is a Top-Hat Plan, the dollar
limitation on compensation in Section 1.14 of the
Savings Plan,
(ii) if the Eligible Employee participates in the portion
of the Plan that is a Top-Hat Plan, the statutory
limitation on additions in Section 4.07 of the
Savings Plan, or
(iii) the combined plan limitation in Section 4.08 of the
Savings Plan
exceeds the Employer regular and additional contributions
actually contributed to the Savings Plan on the Eligible
Employee's behalf; provided, however, that any amount credited
to the Book Account of an Eligible Employee which is also
credited to a suspense account maintained by the Trustee of
the Savings Plan pursuant to the provisions of Section 4.07
thereof (or such other section thereof as shall be adopted or
incorporated to conform to the requirements of Section 415 of
the Code and the regulations thereunder) shall be
provisionally credited. Whenever, in subsequent Plan Years
under the Savings Plan, an Eligible Employee receives an
allocation from such a suspense account of an amount which
also gave rise to a provisional credit to the Book Account
maintained for his or her benefit under this Plan, the
provisional credit shall be reduced (but not below zero).
Subject to the limitation in the preceding sentence, the
amount of the reduction shall be the amount by which such
allocation under the Savings Plan in such subsequent Plan Year
exceeds the amount that the Company would have been obligated
(by provisions of the Savings Plan or by its actions pursuant
thereto) to contribute to the Savings Plan for the Eligible
Employee in such subsequent Plan Year but for the availability
of funds from the suspense account. Any amount remaining
provisionally credited to the Book Account of an Eligible
Employee subsequent to the later of (1) the Eligible
Employee's termination of Employment with the Company or (2)
the total depletion of the suspense account through the
process of allocation and re-allocation, shall no longer be
provisionally credited, but shall be fully and finally
credited to the Eligible Employee's Book Account. Earnings
(including amounts deemed earned by reason of reference to
realized gains and losses) attributable to provisionally
credited amounts (but not unrealized appreciation or
depreciation in the value of assets deemed to be held) shall
be fully and finally credited hereunder when and as earned or
realized by the Trust maintained under the Savings Plan. An
Eligible Employee's right to amounts "fully and finally",
credited to his or her Book Account shall remain subject to
this Plan's vesting provisions.
2
<PAGE> 5
(b) Credits to the Eligible Employee's Book Account pursuant to
Section 4(a) shall be made as of the date the Employer regular
or additional contributions would have been allocated to the
Eligible Employee's Account pursuant to Section 4.01 or 4.02
of the Savings Plan had such amounts been contributed to the
Savings Plan on the Eligible Employee's behalf.
5. Deemed Investment of Book Account Balances.
(a) Subject to Section 5(c) hereof, the deemed investment of all
amounts credited to an Eligible Employee's Book Account prior
to January 1, 1989, shall be the same as provided by this Plan
as of such date.
(b) All amounts credited to an Eligible Employee's Book Account
pursuant to Section 4(a) hereof on or after January 1, 1989,
shall be deemed to be invested initially in the Bowater Stock
Fund offered as an investment under the Savings Plan. The
number of shares of Company Stock in which such amounts will
be deemed to be invested shall be determined in the same
manner as is provided in Section 4.03 of the Savings Plan for
determining the number of shares of Company Stock contributed
to the Savings Plan, except that (i) the Valuation Date shall
be the date determined in accordance with Section 4(b) hereof,
and (ii) the Book Account shall be deemed to be invested in
fractional shares (computed to the nearest one-one hundredth
of a share).
(c) As of the last business day prior to the last day of any
month, but not more frequently than once in any twelve-month
period, an Eligible Employee who has attained age fifty-five
may direct that all, or part, in multiples of 25%, of the
value of his or her Book Account balance be deemed to be
transferred to and invested in the Fixed Income Fund. The
procedures to be followed by such Eligible Employee in
directing the deemed investment of his or her Book Account
balance pursuant to this Section 5(c) shall be the same as the
procedure set forth in Section 5.04 of the Savings Plan for
directing investment of a Participant's Account Balance.
6. Maintenance and Valuation of Book Account.
(a) Not less often than quarterly, and in any event, as of the
date as of which a distribution is to be made to an Eligible
Employee pursuant to the terms hereof, an Eligible Employee's
Book Account will be adjusted to reflect increases or
decreases in the fair market value of the assets in which such
Book Account balances are deemed to be invested and income
earned by such assets and to reflect any distribution to such
Eligible Employee. To the greatest extent practicable, the
same valuation and accounting methods shall be used as are
used to recalculate Account balances under the Savings Plan.
3
<PAGE> 6
(b) As promptly as practicable after the end of each calendar
quarter, the Plan Administrator shall furnish to each Eligible
Employee a statement indicating the total amount allocated to
such Eligible Employee's Book Account.
7. Benefits Upon Retirement, Death Disability or Termination of
Employment.
(a) Upon the Retirement or Disability of an Eligible Employee, the
value of such Eligible Employee's Book Account shall be
distributed to the Eligible Employee either as a lump sum
payment in cash or, in the discretion of the Plan
Administrator, in substantially equal annual installments over
a period not to exceed ten years.
(b) Upon the death of an Eligible Employee prior to complete
distribution of the value of such Eligible Employee's Book
Account, the undistributed value of such Eligible Employee's
Book Account shall be distributed to the Eligible Employee's
Beneficiary in a lump sum payment in cash.
(c) Upon termination of Employment of an Eligible Employee other
than by Retirement, death or Disability, and other than by
transfer to an Affiliated Company, the vested value of such
Eligible Employee's Book Account shall be paid to him or her
in a lump sum. The vested value of an Eligible Employee's Book
Account shall include the entire value of such Eligible
Employee's Book Account if he or she has completed at least
three Years of Service upon such termination of Employment. An
Eligible Employee who has completed less than three Years of
Service as of such termination of Employment shall forfeit his
entire Book Account; provided, however that the Forfeiture
shall be reinstated if the Eligible Employee is reemployed by
the Company, at any time before he or she has five years of
Break in Service. For purposes of this Section 7(c), a change
in control of the Company shall be deemed to have occurred on
the occurrence of any event(s) which constitute(s) a "change
in control" of the Company as defined herein.
Anything in this Plan to the contrary notwithstanding, upon
and following a Change in Control, the vested value of an
Eligible Employee's Book Account shall be the value of the
Eligible Employee's Book Account. The following definitions
apply for purposes of this Section 7(c):
(i) "Acquiring Person" means the Beneficial Owner,
directly or indirectly, of Common Stock representing
20% or more of the combined voting power of the
Company's then outstanding securities, not including
(except as provided in clause (A) 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
4
<PAGE> 7
5% or more of the combined voting power of the
Company's then outstanding securities.
Notwithstanding the foregoing, (A) 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 (B) 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 Company
of which the Person is a Beneficial Owner.
(ii) "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.
(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) "Board" shall mean the Board of Directors of the
Company.
(v) A "Change in Control" shall occur upon:
(A) the date that any Person is or becomes an
Acquiring Person;
(B) the date that the Company's shareholders
approve a merger, consolidation or
reorganization of the Company 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 Company as of such
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 Company, 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;
5
<PAGE> 8
(C) the date the Company 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
Company'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 Company, 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; or
(D) the date on which less than 50% of the total
membership of the Board consists of
Continuing Directors.
(vi) "Continuing Director" 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.
(vii) "Person" means any individual, firm, corporation,
partnership, trust or other entity.
The provisions of this Section 7(c) related to a Change in Control shall not be
amended upon or following a Change in Control in any manner that might have the
effect of reducing the vested value of an Eligible Employee's Book Account under
the Plan. Nothing in this Section 7(c) shall be construed to prohibit, prior to
a Change in Control, any amendment to the Plan, including to this Section 7(c),
or any termination of the Plan pursuant to its terms.
An Eligible Employee who transfers to an Affiliated Company and subsequently
terminates his Employment with that Affiliated Company shall be deemed to have
terminated his or her Employment under this Section at the time of termination
of employment with the Affiliated Company unless he or she transfers without
intervening employment to employment with the Company or another Affiliated
Company.
(d) Distribution shall be paid or made available under the Plan
upon the direction of the Plan Administrator as soon as
practicable after the event triggering distribution occurs.
6
<PAGE> 9
8. Administration.
(a) The Company shall be the "named fiduciary" and the Human
Resources and Compensation Committee of the Board of Directors
of the Company shall be the Plan Administrator with authority
to control and manage the operation and administration of the
Plan, including the appointment of other fiduciaries.
(b) The Plan Administrator shall have such powers as may be
necessary to discharge its duties under the Plan, including
the power:
(i) To interpret the Plan and to make all determinations
as to the right of any person to a benefit under the
Plan and to cause the Company to pay such benefits
accordingly;
(ii) To appoint or employ individuals to assist in the
Administration of the Plan and any other agents it
deems advisable, including legal and actuarial
counsel; and
(iii) To delegate to others any administrative procedures
which are necessary for the administration of the
Plan.
(c) Decisions of the Plan Administrator with respect to the Plan
shall be conclusive and binding on all persons.
9. Claims and Review. All inquiries and claims respecting the Plan
shall be submitted in writing and directed to the Plan Administrator or a person
designated by the Plan Administrator for this purpose.
(a) In the case of a claim respecting a benefit, a written
determination allowing or denying the claim shall be furnished
to the claimant promptly upon receipt of the claim. A denial
or partial denial of a claim shall be dated (the
"Determination Date") and signed by the Plan Administrator and
shall clearly set forth the following information:
(i) the specific reason or reasons for the denial;
(ii) a specific reference to pertinent Plan provisions on
which the denial is based;
(iii) a description of any additional material or
information necessary for the claimant to perfect the
claim and an explanation of why such material or
information is necessary; and
(iv) an explanation of the claim review procedures.
7
<PAGE> 10
If no written determination is furnished to the claimant
within thirty (30) days after receipt of the claim, then the
claim shall be deemed denied and the 30th day after such
receipt shall be the Determination Date.
(b) A claimant may obtain review of an adverse determination by
filing a written notice of appeal with the Plan Administrator
within sixty (60) days after the Determination Date or, if
later, within sixty (60) days after the receipt of a written
notice denying the claim. The Plan Administrator shall then
appoint one or more persons who shall conduct a full and fair
review. As part of such review, the claimant shall have the
right:
(i) to be represented by a spokesman;
(ii) to present a written statement of facts and of the
claimant's interpretation of any pertinent document,
statute or regulation; and
(iii) to receive a prompt written decision clearly setting
forth findings of fact and the specific reasons for
the decision written in a manner calculated to be
understood by the claimant and containing specific
reference to pertinent Plan provisions on which the
decision is based.
A decision shall be rendered no more than thirty (30) days
after the request for review, except that such period may be
extended for an additional thirty (30) days if the person or
persons reviewing the claim determine that special
circumstances, including the advisability of a hearing,
require such extension. The Plan Administrator may appoint any
person or persons, whether or not connected with the Company,
to review a claim. All applicable governmental regulations
regarding claims and review shall be observed by the Plan
Administrator in connection with its administration of the
Plan.
10. Amendment or Discontinuance.
(a) The Human Resources and Compensation Committee of the Company
reserves the right to amend, suspend or discontinue the Plan
at any time for whatever reasons it may deem appropriate. No
such amendment, suspension or termination, however, may reduce
the balance in the Book Account established for an Eligible
Employee or the Eligible Employee's right to have such
benefits distributed to him or her in accordance with the
terms hereof, which rights are fully vested and
non-forfeitable. The Company hereby makes a contractual
commitment on behalf of itself and its successors to pay the
benefits accrued under the Plan to the extent it is
financially capable of meeting such obligation.
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<PAGE> 11
(b) Upon complete or partial termination of the Savings Plan, or a
complete discontinuance of contributions thereunder, the value
of an Eligible Employee's Book Account shall be nonforfeitable
and shall be distributed to such Eligible Employee in
accordance with the election of the Plan Administrator under
Section 11.03 of the Savings Plan except that the reference
therein to Section 7.06 of the Savings Plan shall be deemed to
be a reference to Section 7 hereof.
11. Plan Unfunded. The benefits payable under the Plan shall not be
funded for purposes of the Internal Revenue Code of 1986 or the Employee
Retirement Income Security Act of 1974, but shall be payable out of the general
funds of the Company or its Benefit Plan Grantor Trust, when and as benefits
become payable.
12. No Contract of Employment. Nothing contained in the Plan shall be
construed as a contract of employment between the Company and an Employee or as
a right of any Employee to be continued in the employment of the Company or as a
limitation on the right of the Company to discharge any Employee, with or
without cause.
13. Inalienability of Benefits. To the maximum extent permitted by law,
benefits under the Plan may not be assigned or hypothecated, and no such
benefits shall be subject to legal process or attachment for the payment of any
claims against any person entitled to receive the same.
14. Governing Law. The Plan shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. Effective Date. The Effective Date of this Amended and Restated
Plan shall be February 26, 1999.
IN WITNESS WHEREOF, the Company has caused this Plan document to be
executed by its duly authorized officer as of February 26, 1999.
BOWATER INCORPORATED
By: /s/ James T. Wright
-----------------------------------
Name: James T. Wright
Title: Vice President - Human Resources
Date Signed: June 2, 1999
9
<PAGE> 1
EXHIBIT 10.7
BOWATER INCORPORATED
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
(AMENDED AND RESTATED AS OF FEBRUARY 26, 1999)
<PAGE> 2
TABLE OF CONTENTS
-Page-
PREAMBLE .................................................................iii
ARTICLE 1: DEFINITIONS
1.01 "Affiliate".....................................................1
1.02 "Board".........................................................1
1.03 "Change in Control".............................................1
1.04 "Committee".....................................................3
1.05 "Company".......................................................3
1.06 "Continuous Service"............................................3
1.07 "Director"......................................................3
1.08 "Earnings"......................................................3
1.09 "Effective Date"................................................3
1.10 "Final Average Earnings"........................................3
1.11 "Inside Director"...............................................3
1.12 "Outside Director"..............................................3
1.13 "Participating Director"........................................3
1.14 "Plan"..........................................................4
1.15 "Retire"........................................................4
1.16 "Service".......................................................4
ARTICLE 2: ELIGIBILITY TO RETIRE
2.01 General Service Requirement.....................................4
2.02 Waiver of Service and Other Requirements........................4
ARTICLE 3: COMMENCEMENT OF RETIREMENT INCOME
3.01 Early Retirement................................................4
3.02 Normal Retirement...............................................4
3.03 Postponed Retirement............................................5
ARTICLE 4: AMOUNT OF RETIREMENT INCOME
4.01 Normal Retirement Benefits......................................5
4.02 Early Retirement Benefits.......................................5
4.03 Postponed Retirement Benefits...................................5
4.04 Benefit Payments................................................5
ARTICLE 5: DEATH AND DISABILITY BENEFITS..................................6
i
<PAGE> 3
ARTICLE 6: COVENANTS OF DIRECTOR
6.01 During Continuation of Service..................................6
6.02 Following Retirement............................................6
ARTICLE 7: REMEDIES OF THE COMPANY........................................6
ARTICLE 8: GENERAL PROVISIONS
8.01 Limitation of Rights of the Director............................7
8.02 Discharge of Obligations........................................7
8.03 No Assignment of Benefits.......................................7
8.04 Payments to Incompetents........................................7
8.05 Construction....................................................7
8.06 Amendment or Termination........................................8
8.07 Funding.........................................................8
8.08 Governing Law...................................................8
ARTICLE 9: CLAIMS PROCEDURE
9.01 Submission of Claims............................................9
9.02 Written Notice of Denied Claim..................................9
9.03 Review of Decision Denying Claim................................9
9.04 Hearing.........................................................9
9.05 Written Decision of Committee...................................9
ii
<PAGE> 4
BOWATER INCORPORATED
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
(Amended and Restated as of February 26, 1999)
PREAMBLE
Establishment of Plan
The Bowater Incorporated Retirement Plan for Outside Directors (the "Plan") was
established effective July 1, 1988, for the benefit of Directors of Bowater
Incorporated who are not employees of the Company. The Plan is hereby amended
and restated as of February 26, 1999, to incorporate all amendments made through
such date.
Objective of Plan
Bowater recognizes that its long-term success and achievements are significantly
influenced by the expertise and continuity of its leadership. In view of this,
the Company has adopted this Plan.
iii
<PAGE> 5
BOWATER INCORPORATED RETIREMENT PLAN
FOR
OUTSIDE DIRECTORS
(Amended and Restated as of
February 26, 1999)
ARTICLE 1: DEFINITIONS
The following words and phrases, when used in this Plan with an initial capital
letter, unless the context clearly indicates otherwise, shall have the following
meanings. Wherever applicable the masculine pronoun shall include the feminine
pronoun and the singular shall include the plural.
1.01 AFFILIATE: Any company directly or indirectly controlled by,
controlling, or under common control with the Company.
1.02 BOARD: The Board of Directors of the Company.
1.03 CHANGE IN CONTROL: 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 an 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
1
<PAGE> 6
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),
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, 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 50% of the total membership of the
Board consists of Continuing Directors.
For purposes of this definition:
(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 (A) 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, (A) 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 (B) 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.
2
<PAGE> 7
(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.
1.04 COMMITTEE: The Executive Committee of the Board exclusive of any member
thereof who is at the time a "Participating Director" as that term is
hereinafter defined.
1.05 COMPANY: Bowater Incorporated.
1.06 CONTINUOUS SERVICE: Incumbency as a Director without interruption. For
the purpose hereof, Continuous Service shall include periods of
incumbency during disability or leave of absence granted by the
Company. Although incumbency while an Inside Director will not be
credited as Service, Service will not be deemed to be interrupted by
incumbency while an Inside Director.
1.07 DIRECTOR: Any individual who is elected and qualifies to serve as a
member of the Board. At all times of incumbency as a Director, an
individual is either an "Inside Director" or an "Outside Director" as
those terms are hereinafter defined.
1.08 EARNINGS: The regular retainer paid to a Director by the Company for
serving as a Director, excluding any reimbursement for out-of-pocket
expenses or fees paid for attendance at meetings of committees.
1.09 EFFECTIVE DATE: The date after which the provisions of this amended and
restated Plan shall be effective, which is February 26, 1999.
1.10 FINAL AVERAGE EARNINGS: The amount determined by dividing by four (4)
the annualized Earnings of a Director at the termination of his
Service.
1.11 INSIDE DIRECTOR: A Director who is an employee of the Company or any of
its Affiliates (but only during such times as such employment
continues).
1.12 OUTSIDE DIRECTOR: A Director who is not an Inside Director.
1.13 PARTICIPATING DIRECTOR: An Outside Director who continues to have
rights or contingent rights to benefits payable under this Plan, as
provided in Articles 2 and 3 and subject to the terms and conditions of
Articles 6 and 7.
3
<PAGE> 8
1.14 PLAN: The Bowater Incorporated Retirement Plan for Outside Directors,
as restated herein, and as it may be amended from time to time.
1.15 RETIRE: To terminate incumbency as a Director for any reason other than
death under circumstances which entitle a terminating Participating
Director to receive retirement income under this Plan. A change in
status which does not interrupt Continuous Service under Section 1.06
shall not constitute a termination for the purposes of this Section.
1.16 SERVICE: Incumbency, measured in years and months to the nearest whole
month, as an Outside Director of the Company. (While credit for Service
is not given for incumbency as an Inside Director, Continuous Service
is not deemed interrupted by such incumbency. See Section 1.06.)
ARTICLE 2: ELIGIBILITY TO RETIRE
2.01 GENERAL SERVICE REQUIREMENT: Except as provided in Section 2.02, a
Participating Director shall not be eligible to Retire until he has
completed five (5) years of Service in Continuous Service.
2.02 WAIVER OF SERVICE AND OTHER REQUIREMENTS: Any Participating Director
who was a Director immediately prior to a Change in Control of the
Company who is removed from or not renominated to his directorship
following such Change in Control shall not be required to meet the
service requirement imposed by Section 2.01 hereof and shall be
eligible to Retire early pursuant to Section 3.01 without the consent
of the Company and without regard to his attained age at the time of
such retirement.
ARTICLE 3: COMMENCEMENT OF RETIREMENT INCOME
3.01 EARLY RETIREMENT: A Participating Director may, with the consent of the
Company, Retire on the first day of any month on or after his
attainment of age fifty-five (55) and the completion of five (5) years
of Service in Continuous Service, and may elect to commence receiving
benefits on or after that date.
3.02 NORMAL RETIREMENT: A Participating Director may, with the consent of
the Company, Retire on the first day of the month following his
attainment of age sixty-five (65) and the completion of five (5) years
of Service in Continuous Service and commence receiving benefits on
that date.
4
<PAGE> 9
3.03 POSTPONED RETIREMENT: A Participating Director who remains a Director
of the Company beyond attainment of age sixty-five (65) may Retire on
the first day of any month following his attainment of age sixty-five
(65) and the completion of five (5) years of Service in Continuous
Service but not later than the expiration of the final term on the
Board of Directors to which he was elected in accordance with Section
4.15 of the Company's By-laws. He may commence receiving benefits as of
the date he retires.
ARTICLE 4. AMOUNT OF RETIREMENT INCOME
4.01 NORMAL RETIREMENT BENEFITS: The normal retirement income benefit
payable under this Plan shall be a quarterly payment commencing as of
the first day of the month following the Participating Director's
sixty-fifth (65th) birthday equal to ten percent (10%) of the
Participating Director's Final Average Earnings multiplied by the
Participating Director's years of Service in Continuous Service up to a
maximum of 10 with proportionate credit for completed months.
4.02 EARLY RETIREMENT BENEFITS: If a Participating Director retires early
pursuant to Section 3.01 hereof, his retirement benefits will be based
on his accrued benefit determined under Section 4.01 as of the date of
his early retirement. Such benefits shall be actuarially reduced for
the period (if any) by which the commencement of benefits precedes the
first day of the month following the Participating Director's
sixty-fifth (65th) birthday. The mortality table used for purposes of
calculating the actuarial reduction hereunder shall be the Unisex
Pension Table, 1984 (set forward one year) and the assumed interest
rate shall be eight percent (8%) per annum.
4.03 POSTPONED RETIREMENT BENEFITS: In the event of postponed retirement
pursuant to Section 3.03 hereof, a Participating Director's retirement
benefits will be based on his accrued benefit determined under Section
4.01 as of the date of his termination of Service. Such benefits shall
commence as of the Participating Director's termination of Service, but
shall not be actuarially increased to reflect commencement subsequent
to the attainment of age sixty-five (65).
4.04 BENEFIT PAYMENTS: Retirement benefits payable pursuant to this Article
shall be paid in arrears as quarterly payments on the first day of each
calendar quarter. The first payment shall be paid on the first day of
the calendar quarter next following the date as of which benefits are
scheduled to commence pursuant to the provisions of Section 4.01, 4.02
or 4.03, as applicable. In any event, the last installment shall be
payable as of the first day of the month in which the Participating
Director dies and paid on the first day of the next following calendar
quarter.
5
<PAGE> 10
ARTICLE 5: DEATH AND DISABILITY BENEFITS
There are no death or disability benefits under this Plan.
ARTICLE 6: COVENANTS OF DIRECTOR
6.01 DURING CONTINUATION OF SERVICE: As long as a Director continues in
Service, the Director shall devote his best efforts and undivided
loyalty to the Company, and devote such time to his tasks as a Director
as shall be required to discharge his obligations to the best of his
abilities.
6.02 FOLLOWING RETIREMENT: If a Participating Director's Service to the
Company terminates under circumstances which obligate the Company to
make quarterly payments under the provisions of Article 4, the
Participating Director shall not, for a period of five (5) years
thereafter, serve as a principal, director, officer or employee of a
corporation or other entity which competes directly or indirectly with
the Company or any of its Affiliates in any geographic area where the
Company or any of its Affiliates is conducting or actively proposing to
conduct its business, and shall be available to the Company at the
mutual convenience of the parties, from time to time, to consult with
the Company in an advisory capacity if, and when, the Participating
Director is reasonably requested to do so by the Company.
ARTICLE 7: REMEDIES OF THE COMPANY
Upon the occurrence of any one or more of the following circumstances:
(a) If the Director's Service is terminated whether by the
Director, by the Company or its shareholders, for any reason
prior to the Director's completion of five (5) years of
Service in Continuous Service;
(b) If the Participating Director is at any time removed from
incumbency as a Director for reasons deriving from his gross
negligence or misconduct, detrimental to the business
interests of the Company, or for criminal conduct of any type
(regardless of the effect thereof on the business interest of
the Company); or
(c) If the Participating Director at any time fails to comply with
the requirements of Article 6 hereof;
then and in any such event the Company's obligation to pay or provide
benefits hereunder to any such Participating Director shall
automatically cease and terminate, and neither said Participating
Director nor any other person claiming any benefit pursuant to said
Participating Director's participation in this Plan shall have any
rights, claims or causes of action hereunder against the Board, the
6
<PAGE> 11
Company or any person acting on their behalf. The Company's sole remedy
for breach by the Participating Director of the provisions of Article 6
hereof shall be to cease paying or providing benefits pursuant to the
provisions of this Article 7, but this shall not preclude the Company
from recovering from a Participating Director damages inflicted on the
Company or its affiliates by conduct of a Participating Director which
renders the Participating Director liable to the Company independently
of the fact that such conduct constitutes a breach of the Participating
Director's covenants in Article 6 hereof.
ARTICLE 8: GENERAL PROVISIONS
8.01 LIMITATION OF RIGHTS OF THE DIRECTOR: Inclusion under the Plan shall
not give a Director any right or claim to a benefit, except as
specifically defined in this Plan. The establishment of the Plan shall
not be construed as giving any Director a right to be continued in
Service as a Director of the Company.
8.02 DISCHARGE OF OBLIGATIONS: The Company may at any time fully and
completely satisfy and discharge all its obligations hereunder to a
Participating Director by:
(a) delivering, or causing to be delivered, to the Participating
Director a fully-paid annuity policy issued by a corporate
insurer, providing quarterly or more frequent payments equal
to (or greater than) the amount the Company is obligated to
pay hereunder, or
(b) making some other comparable arrangement for the Participating
Director; provided that provision is made for not less than
the benefits to which the Participating Director may be
entitled under the provisions hereof, whether or not such
rights are enforceable at the time.
8.03 NO ASSIGNMENT OF BENEFITS: None of the rights of the Participating
Director under this Plan shall be assignable in whole or in part either
inter vivos or by will or succession, but shall be personal to the
individual Participating Director.
8.04 PAYMENTS TO INCOMPETENTS: In the event that any quarterly payment
hereunder becomes payable to a person adjudicated to be incompetent,
payment thereof to the guardian or legal representative of such person
shall constitute full and complete compliance herewith and entitle the
Company to discharge with respect thereto.
8.05 CONSTRUCTION: Subject to the provisions of Article 9, the decision of
the Committee on all matters concerning the interpretation and
administration of this Plan shall be final. Each Director agrees, as a
condition to participation herein, to be bound by all actions and
interpretations regarding this Plan by the Committee.
7
<PAGE> 12
Neither the Board, the Committee, any individual Director nor any
persons acting on their behalf shall be subject to any liability to any
Director or other person in the construction and administration of this
Plan.
8.06 AMENDMENT OR TERMINATION: The Company reserves the right at any time,
and from time to time, by action of a majority of the Committee at a
meeting at which all members thereof are present and voting or the
required notice of which contained an accurate summary of the action
proposed for vote, to amend, in whole or in part, any or all of the
provisions of this Plan including the right to terminate the Plan at
any time; provided, however, that no such amendment or termination
shall affect adversely benefits under this Plan already being paid or
having become unconditionally payable pursuant to the terms hereof
either due to Participating Director's completion of Five (5) years of
Service in Continuous Service prior to the date of such amendment or
termination, or because the Participating Director was removed from or
not renominated to his directorship (whether before or after such
amendment or termination) under circumstances entitling the
Participating Director to Retire.
8.07 FUNDING: The Company's obligations under this Plan shall be unfunded,
and the Company shall not be obligated under any circumstances to fund
its obligations under this Plan. The Company may, however, at its sole
and exclusive option, informally fund all or a part of this Plan. If
the Company decides upon such informal funding, the manner, continuance
or discontinuance of such informal funding shall be the sole and
exclusive decision of the Company.
If the Company shall decide to purchase life insurance on the lives of
Participants, the Company (or, in any event a nominee, agent or
fiduciary of the Company whose duty it is to deliver or pay over such
policies to the Company or its creditors in the event of insolvency)
shall be the owner of such insurance, and the form and amount of such
insurance shall be the sole and exclusive decision of the Company.
If the Company decides to formally fund this Plan through the purchase
of insurance, any Participating Director shall agree to submit to
medical examinations, supply any information, and execute any documents
required by the insurance company or companies to which the Company may
have applied for such insurance.
8.08 GOVERNING LAW: To the extent not preempted by the Employee Retirement
Income Security Act of 1974, as amended from time to time, this Plan
shall be governed by and interpreted in accordance with the laws of the
State of Connecticut and, subject to Section 8.06 above, shall be
binding upon the Company and its successors, including any successor
which acquires all or substantially all of the assets of the Company.
8
<PAGE> 13
ARTICLE 9: CLAIMS PROCEDURE
9.01 SUBMISSION OF CLAIMS: Claims for benefits under the Plan shall be
submitted in writing to the Committee or a person designated by the
Committee for this purpose. Written notice of the disposition of a
claim shall be furnished to the claimant within 90 days after the
application therefor is filed. (The 90-day notice period shall,
however, be extended for an additional 90 days if the Committee
determines that such an extension of time is necessary to process the
claim and so advises the claimant in writing within 90 days after
receipt of the claim, which writing shall also indicate the special
circumstances requiring an extension of time and the date by which the
Committee expects to render the final decision.)
9.02 WRITTEN NOTICE OF DENIED CLAIM: The Committee shall provide adequate
notice in writing to any person whose claim for benefits has been
denied. Such notice shall set forth the specific reason or reasons for
the denial and shall be written in a manner calculated to be understood
by the recipient. Such notice shall also refer specifically to
pertinent Plan provisions on which the denial is based; shall describe
any additional material or information necessary for the claimant to
perfect the claims; and shall explain why such material or information
is necessary. Such notice shall also explain the Plan's claims review
procedure.
9.03 REVIEW OF DECISION DENYING CLAIM: The Committee shall afford to any
person whose claim for benefits has been denied a reasonable
opportunity for a full and fair review of the decision denying the
claim. The claimant or his duly authorized representative shall request
such review in writing not more than 90 days after receipt by the
claimant of written notification of denial of a claim. Within ten days
after, or as part of, a timely request for review, the claimant may
submit issues and comments in writing and may review pertinent
documents.
9.04 HEARING: Upon receipt of a timely request for review the Committee may,
in its discretion, appoint one or more of its members to hear the
claimant's request and inquire into the merits of the matter. Such
member(s) shall meet promptly with the claimant and/or his duly
authorized representative and hear such arguments and/or examine such
documents as the claimant or his representative shall present. The
member(s) shall then report his (their) findings to the Committee
orally or in writing.
9.05 WRITTEN DECISION OF COMMITTEE: A decision of the Committee on review of
a claim shall be in writing and shall include specific reasons for the
decision, written in a matter calculated to be understood by the
claimant. Such decision shall include specific references to the
pertinent Plan provision on which the decision is based. The decision
shall be made promptly and not later than 60 days after a request for
review, unless special circumstances require an extension. In such
case, the claimant shall be so advised in writing prior to the
expiration of
9
<PAGE> 14
the initial 60-day period and a decision shall be rendered as soon as
possible, but not later than 120 days after receipt of a request for
review.
IN WITNESS WHEREOF, the Company has caused this document to be executed
by its duly authorized officer as of February 26, 1999.
BOWATER INCORPORATED
By: /s/ James T. Wright
------------------------------------
Name: James T. Wright
Title: Vice President - Human Resources
Date Signed: June 2, 1999
10
<PAGE> 1
EXHIBIT 10.8
SUPPLEMENTAL BENEFIT PLAN FOR DESIGNATED EMPLOYEES OF
BOWATER INCORPORATED AND AFFILIATED COMPANIES
AS AMENDED AND RESTATED
EFFECTIVE FEBRUARY 26, 1999
<PAGE> 2
PREAMBLE
Establishment of Prior Plans
The Supplemental Benefit Plan of Bowater Incorporated (the "Bowater
Plan") was established effective December 31, 1971, for the benefit of
designated employees of Bowater Incorporated. The Supplemental Benefit
Plan for Designated Employees of Bowater Southern Paper Company and
Bowater Carolina Company, Divisions of Bowater Incorporated, and other
Participating Divisions of Bowater Incorporated (the "Southern Plan")
was established effective July 1, 1981, for the benefit of designated
employees of Bowater Southern Paper Company, Bowater Carolina Company
and certain other divisions of Bowater Incorporated.
Consolidation and Restatement of Plans
Each of the Bowater Plan and the Southern Plan provided that it could be
amended at any time and from time to time. The Bowater Plan and the
Southern Plan were amended and restated in their entirety effective
August 22, 1990. From and after the effective date thereof, the Bowater
Plan and the Southern Plan were deemed to be one plan. Anyone who was a
participant under either of these prior plans on the effective date of
this consolidation and restatement was a participant in this
Supplemental Benefit Plan for Designated Employees of Bowater
Incorporated and Affiliated Companies (the "Plan"). The continued
eligibility of such persons to participate in the Plan is determined by
the provisions hereof. The Plan was restated in its entirety as of
November 1, 1995, in order to incorporate previous amendments and to
clarify the meaning of certain provisions. The Plan is now being
restated in its entirety as of February 26, 1999, in order to
incorporate amendments that have been previously adopted.
Objective of Plan
The purpose of the Plan is to provide an inducement to key employees of
Bowater Incorporated (the "Corporation") and key employees of affiliated
companies to which the Board of Directors of Bowater Incorporated
extends the Plan to remain in the employment of the Employer (as
hereinafter defined) by providing retirement benefits supplemental to
those available under the Corporation's basic qualified benefit plans.
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<PAGE> 3
Table of Contents
Page
Preamble ...........................................................i
ARTICLE I: DEFINITIONS
1.01 "Acquiring Person".........................................1
1.02 "Affiliate" and "Associate"................................1
1.03 "Affiliated Company".......................................1
1.04 "Age" .....................................................1
1.05 "Beneficial Owner".........................................1
1.06 "Board"....................................................2
1.07 "Cause"................................................... 2
1.08 "Change in Control"........................................2
1.09 "Child or Children" .......................................3
1.10 "Code".................................................... 3
1.11 "Committee"................................................3
1.12 "Compensation".............................................3
1.13 "Continuing Director"..................................... 3
1.14 "Corporation"..............................................3
1.15 "Disability"...............................................3
1.16 "Effective Date"...........................................3
1.17 "Eligible Dependents" .....................................4
1.18 "Employee" ................................................4
1.19 "Employer".................................................4
1.20 "ERISA"....................................................4
1.21 "Exchange Act".............................................4
1.22 "Final Average Monthly Compensation"...................... 4
1.23 "Normal Retirement Age"....................................4
1.24 "Normal Retirement Date" ..................................4
1.25 "Other Benefits" ..........................................4
1.26 "Participant"..............................................4
1.27 "Person".................................................. 4
1.28 "Plan".....................................................5
1.29 "Plan Administrator" ......................................5
1.30 "Plan Name"................................................5
1.31 "Retirement".............................................. 5
1.32 "Spouse" ..................................................5
1.33 "Years of Service" .......................................5
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ARTICLE 2: PARTICIPATION AND ELIGIBILITY FOR BENEFITS
2.01 Participation............................................. 5
2.02 Pension Plan Contingent Annuitant Option ..................6
2.03 Effect on Other Plans .....................................6
ARTICLE 3: AMOUNT OF RETIREMENT INCOME
3.01 Normal Retirement Benefits ................................6
3.02 Early Retirement Reduction................................ 6
3.03 Benefit Payments ..........................................6
3.04 Calculation of Deductions for Other Benefits ..............7
ARTICLE 4: DEATH AND DISABILITY BENEFITS
4.01 Spouse's Pre-Retirement Death Benefits.................... 7
4.02 Spouse's Post-Retirement Death Benefits ...................7
4.03 Children's Death Benefits .................................8
4.04 Disability Benefits .......................................8
ARTICLE 5: GROUP MEDICAL INSURANCE AND LIFE INSURANCE
5.01 Medical Insurance......................................... 9
5.02 Life Insurance............................................10
ARTICLE 6: COVENANTS OF EMPLOYEE
6.01 During Continuation of Employment.........................11
6.02 Following Termination of Employment.......................11
6.03 Remedy for Breach .......................................12
ARTICLE 7: OBLIGATION TO PAY BENEFITS
7.01 Employer Obligated to Pay.................................12
7.02 Amendment or Termination of the Plan......................12
7.03 Subsequent to a Change in Control of the Corporation......13
7.04 Transfers of Employment...................................13
ARTICLE 8: GENERAL PROVISIONS
8.01 Limitation of Rights of the Employee......................14
8.02 Discharge of Obligations..................................14
8.03 No Assignment of Benefits.................................15
8.04 Administrative Powers Relating to Payment.................15
iii
<PAGE> 5
8.05 Multiple Claimants .......................................15
8.06 Administration............................................15
8.07 Indemnification...........................................16
8.08 Expenses..................................................16
8.09 Funding ..................................................16
8.10 Payment of Participant's Expenses.........................16
8.11 Governing Law ............................................16
8.12 Severability .............................................17
8.13 Named Fiduciary ..........................................17
ARTICLE 9: CLAIMS PROCEDURE
9.01 Submission of Claims .....................................17
9.02 Written Notice of Denied Claim ...........................17
9.03 Review of Decision Denying Claims ........................17
9.04 Hearing ..................................................17
9.05 Written Decision of Plan Administrator ...................17
iv
<PAGE> 6
ARTICLE 1: DEFINITIONS
Unless the context clearly indicates otherwise, the following words and
phrases, when used herein with an initial capital letter, shall have the
following meanings. Wherever applicable the masculine pronoun shall include the
feminine pronoun and the singular shall include the plural.
1.01 "ACQUIRING PERSON" shall mean 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.
1.02 "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 and Exchange Act of 1934.
1.03 "AFFILIATED COMPANY" shall mean any corporation that is a member of a
controlled group of corporations (as defined in Code Section 414(b))
which includes the Corporation; any trade or business (whether or not
incorporated) which is under common control (as defined in Code
Section 414(c)) with the Corporation; any organization (whether or
not incorporated) which is a member of an affiliated service group
(as defined in Code Section 414(m)) that includes the Corporation;
and any other entity required to be aggregated with the Corporation
pursuant to regulations under Code Section 414(o). With respect to
periods prior to July 23, 1984, Affiliated Company includes any
corporation that would have been an Affiliated Company prior to the
separation under United Kingdom law of Bowater Incorporated from
Bowater plc.
1.04 "AGE" shall mean an Employee's attained age in years and completed
months.
1.05 "BENEFICIAL OWNER" of Common Stock means (i) a Person who
beneficially owns such Common Stock, directly or indirectly, or (ii)
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> 7
1.06 "BOARD" shall mean the Board of Directors of the Corporation, as
constituted from time to time.
1.07 "CAUSE" shall mean the Participant's gross negligence or willful
misconduct, which negligence or misconduct has a demonstrable and
material adverse effect upon the Corporation or an Affiliated
Company, provided that the Plan Administrator or the Employer shall
have given the Participant written notice of the alleged negligence
or misconduct and the Participant shall have failed to cure the
negligence or misconduct within thirty (30) days after receipt of the
notice. The Participant shall be deemed to have been terminated for
Cause effective upon the effective date stated in a written notice of
termination delivered by the Plan Administrator or the Employer to
the Participant setting forth in reasonable detail the facts and
circumstances claimed to provide the basis for the Participant's
termination.
1.08 "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 such 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
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; or
(d) the date on which less than 50% of the total membership of
the Board consists of Continuing Directors.
2
<PAGE> 8
1.09 "CHILD OR CHILDREN" of the Participant shall mean any child or
children who are issue of any marriage contracted by the Participant
(either before or after their birth) or who have been legally adopted
by the Participant by the age of twenty-one (21).
1.10 "CODE" shall mean the Internal Revenue Code of 1986, and any
amendments thereto.
1.11 "COMMITTEE" shall mean the Human Resources and Compensation Committee
of the Board of Directors of the Corporation.
1.12 "COMPENSATION" shall mean the entire cash compensation paid to, or
deferred for the benefit of, a Participant by the Employer as salary,
wages, commissions, overtime pay, regular bonuses paid under the
Bowater Incorporated Annual Incentive Plan, severance pay paid in
periodic installments, Employer contributions made pursuant to a
salary reduction agreement that are not includible in the gross
income of the Participant under Code Sections 125, 401(e)(3), 402(h)
or 403(b), and any compensation that is contributed to a plan
maintained by an Employer on behalf of the Participant under Code
Section 401(k), but excluding any non-cash remuneration, income
received upon the exercise of a stock option or stock appreciation
right, bonuses received under a long term cash incentive plan, other
special remuneration, and any benefits and credits under this or any
other employee benefit plan of the Employer.
1.13 "CONTINUING DIRECTOR" shall mean any member of the Board who (i) 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, (ii) is not
an Acquiring Person or an Affiliate or Associate of an Acquiring
Person, and (iii) is recommended or elected to succeed the Continuing
Director by a majority of the Continuing Directors.
1.14 "CORPORATION" shall mean Bowater Incorporated and any successor to
its business or assets, whether by purchase, merger, consolidation or
otherwise.
1.15 "DISABILITY" shall mean the status of being eligible for and
receiving the benefits provided under the Long-Term Disability Plan
of the Participant's Employer, provided that if a Participant is
enrolled in a Long-Term Disability Plan of the Corporation or an
Affiliated Company and the plan is discontinued while the Participant
is a Participant in the plan, for purposes of this Plan, the
Participant shall be deemed disabled at the time he would have been
eligible for benefits under the Long-Term Disability Plan in effect
immediately prior to its termination had that plan not been
terminated. The determination of whether and when a Participant would
have been eligible for benefits under any terminated plan shall be
made by the Plan Administrator in its sole discretion.
1.16 "EFFECTIVE DATE" shall mean the date on which the provisions of this
amended and restated Plan shall be effective, which is February 26,
1999, unless otherwise provided herein.
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<PAGE> 9
1.17 "ELIGIBLE DEPENDENTS" shall mean those dependents of the Participant
that are considered eligible to receive medical benefits under the
Corporation's group medical benefit plan.
1.18 "EMPLOYEE" shall mean any individual employed by the Employer other
than an independent contractor.
1.19 "EMPLOYER" shall mean the Corporation and any subsidiary or
affiliated employer authorized by the Corporation to adopt and
participate in this Plan.
1.20 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
1.21 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
1.22 "FINAL AVERAGE MONTHLY COMPENSATION" shall mean the average of the
Participant's Compensation for the highest thirty-six (36)
consecutive calendar months in the last sixty (60) months immediately
preceding his termination date and further divided by thirty-six
(36); except that (i) if the Participant earns Compensation in fewer
than sixty (60) months preceding his termination date, his "Final
Average Monthly Compensation" shall be based on Compensation for the
highest thirty-six (36) consecutive calendar months preceding his
termination date, and (ii) if the Participant earns Compensation in
fewer than thirty-six (36) consecutive calendar months preceding his
termination date, his "Final Average Monthly Compensation" shall be
based on Compensation for all months preceding his termination date.
1.23 "NORMAL RETIREMENT AGE" shall mean the day on which the Participant
attains his sixty-fifth (65th) birthday.
1.24 "NORMAL RETIREMENT DATE" shall mean the first day of the calendar
month coinciding with or next following the Participant's Normal
Retirement Age.
1.25 "OTHER BENEFITS" shall mean any benefits payable to a Participant, or
his Spouse or Children on behalf of the Participant, under the
Bowater Incorporated Benefits Equalization Plan or under any
qualified defined benefit pension plan of the Corporation or any
Affiliated Company.
1.26 "PARTICIPANT" shall mean anyone who is eligible to participate in the
Plan as provided in Article 2, and who continues to have rights or
contingent rights to benefits payable under this Plan, subject to the
terms and conditions of Article 6. A Participant whose employment is
terminated for Cause shall no longer be a Participant, and his Spouse
and Children will no longer be entitled to benefits.
1.27 "PERSON" means any individual, firm, corporation, partnership, trust
or other entity.
4
<PAGE> 10
1.28 "PLAN" shall mean this Supplemental Benefit Plan for Designated
Employees of Bowater Incorporated and Affiliated Companies, as stated
herein, and as it may be amended from time to time.
1.29 "PLAN ADMINISTRATOR" shall mean the Committee or any successor
appointed by the Board or its designee.
1.30 "PLAN NAME" shall be Supplemental Benefit Plan for Designated
Employees of Bowater Incorporated and Affiliated Companies.
1.31 "RETIREMENT" shall mean the status of having terminated employment
and being eligible for the payment of benefits either immediately or
at some future date under any qualified defined benefit pension plans
of the Participant's Employer and any Affiliated Company in which he
participates, provided a Participant whose employment is terminated
for Cause shall not be deemed to have retired for purposes of the
Plan.
1.32 "SPOUSE" shall mean the person legally married to a Participant and
from whom the Participant is not legally separated at the time of his
death.
1.33 "YEARS OF SERVICE" shall mean the Participant's aggregate period of
employment consisting of years of service and parts thereof as
computed, for benefit accrual purposes, according to the qualified
defined benefit pension plan of the Corporation; provided that "Years
of Service" for an Employee who is not a Participant hereunder as of
his termination date shall not include any period after the last date
on which he was a Participant.
ARTICLE 2: PARTICIPATION AND ELIGIBILITY FOR BENEFITS
2.01 PARTICIPATION: Employees of the Corporation who (i) are in salary
grades thirty-one (31) and above, or (ii) are designated as eligible
by the Committee, shall be Participants in the Plan. Should the Plan
be extended to an Affiliated Company that adopts the Plan, the
Committee shall designate which Employees of such Affiliated Company
shall participate in the Plan. Subject to the provisions of Section
7.04(a)(i), a Participant who ceases to be an Employee of the
Corporation or an Affiliated Company that has adopted the Plan or who
(a) is no longer in salary grade thirty-one (31) or above, or (b) is
designated by the Committee as no longer eligible to participate in
the Plan, will cease accruing benefits under the Plan, unless and
until the Participant again becomes eligible to be a Participant in
the Plan.
Notwithstanding the foregoing, the Employee's Compensation shall
continue to be included for purposes of determining his Final Average
Monthly Compensation under Article 3.
5
<PAGE> 11
2.02 PENSION PLAN CONTINGENT ANNUITANT OPTION: A Participant who is
married on the date benefits become payable under Section 3.03 must
have elected, and not subsequently revoked, a fifty percent (50%) or
higher contingent annuitant option (with his Spouse as contingent
annuitant) under all qualified defined benefit pension plans of his
Employer and any Affiliated Company in which he participates in order
for him, his Spouse or his Children to be eligible for benefits under
the Plan.
2.03 EFFECT ON OTHER PLANS: Although the Plan references the provisions of
other plans established by the Corporation and its Affiliated
Companies, the provisions of those plans will not be changed or
enlarged hereby.
ARTICLE 3: AMOUNT OF RETIREMENT INCOME
3.01 NORMAL RETIREMENT BENEFITS: Subject to the provisions of Sections
2.01, 2.02, 6.03, 7.02 and 7.04, a Participant (i) whose Retirement
occurs on or after his Normal Retirement Date, or (ii) whose
Retirement occurs before his Normal Retirement Date but who does not
commence receiving benefits under the qualified defined benefit
pension plan of his Employer or an Affiliated Employer in which he
participates until on or after his Normal Retirement Date, shall be
entitled to a monthly benefit equal to (a) plus (b) minus (c) below:
(a) Two-and-one-half percent (2-1/2%) of Final Average Monthly
Compensation for each Year of Service up to twenty (20)
Years of Service.
(b) One percent (1%) of Final Average Monthly Compensation for
each Year of Service greater than twenty (20) and up to
thirty (30) Years of Service.
(c) Any Other Benefits which may be payable in any month to
the Participant.
3.02 EARLY RETIREMENT REDUCTION: Subject to the provisions of Sections
2.01, 2.02, 6.03, 7.02 and 7.04, when a Participant commences
receiving benefits under a qualified defined benefit pension plan of
his Employer or an Affiliated Company prior to his Normal Retirement
Date, he also shall begin receiving the monthly benefit determined
under paragraphs (a) and (b) of Section 3.01 as of the date of
commencement, reduced by one-half of one percent (1/2%) for each
month by which the commencement of benefits precedes the
Participant's attainment of age sixty (60), less the amount
determined under Section 3.01(c). This amount shall not be increased
upon the Participant's attainment of age sixty (60).
3.03 BENEFIT PAYMENTS: Retirement benefits payable pursuant to this
Article shall be payable monthly on the first day of each month
commencing with the date on which benefit payments commence under any
qualified defined benefit pension plan of the Participant's Employer
or an Affiliated Company in which he participates and continuing
through the first day of the month in which the Participant dies or
is re-employed by the Employer.
6
<PAGE> 12
3.04 CALCULATION OF DEDUCTIONS FOR OTHER BENEFITS: If any Other Benefits
shall be due to the Participant, his estate, Spouse or Children in a
lump sum or over a period shorter or longer than the period herein
provided with respect to payments hereunder, or at different
intervals, or if they commence at a different time, then and in such
case, the aggregate of all Other Benefits shall for the purposes
hereof be actuarially converted into benefits payable over the
monthly periods provided for payments hereunder based on the
actuarial assumptions used in the Employer's qualified defined
benefit pension plan covering the Participant at the time benefits
commence hereunder in order to arrive at the deductions herein
provided for the Other Benefits.
ARTICLE 4: DEATH AND DISABILITY BENEFITS
4.01 SPOUSE'S PRE-RETIREMENT DEATH BENEFITS: Subject to the provisions of
Articles 6 and 7, the surviving Spouse of a Participant who dies
prior to his Retirement or who, at the time of his death, was
receiving a Disability benefit under Section 4.04 (excluding benefits
payable pursuant to the next to the last sentence of Section 4.04),
will be entitled to receive a monthly benefit, payable on the first
day of each month, commencing with the month following the
Participant's death. Payments shall cease with the payment for the
month in which the Spouse dies.
The amount of the Spouse's monthly benefit shall be sixty percent
(60%) of the projected monthly benefit the Participant would have
been entitled to receive under Section 3.01(a) and 3.01(b) calculated
in the manner hereinafter specified and reduced by any Other Benefits
which may be payable to the Spouse.
For purposes of determining such projected monthly benefit, the
Participant's rate of annual Compensation at the time of his death or
Disability will be assumed to have remained unchanged to his Normal
Retirement Date, and his Years of Service will be deemed to include
the period between his date of death and his Normal Retirement Date.
4.02 SPOUSE'S POST-RETIREMENT DEATH BENEFITS: Subject to the provisions of
Articles 6 and 7, the surviving Spouse of a Participant who dies
subsequent to his Retirement or who, at the time of his death, was
receiving a Retirement benefit pursuant to the next to the last
sentence of Section 4.04, will be entitled to receive a monthly
benefit, payable on the first day of each month commencing with the
month following the Participant's death. Payments shall cease with
the payment for the month in which the Spouse dies.
In the case of a Participant who, prior to his death, had commenced
receiving benefits under Article 3 or under the next to the last
sentence of Section 4.04, the amount of the Spouse's monthly benefit
shall be sixty percent (60%) of the total monthly benefit determined
under Sections 3.01(a) and 3.01(b) (or the next to the last sentence
of Section 4.04 where applicable) that was being paid to the
Participant at the time of his death, reduced by the amount of any
Other Benefits which may be payable to the Spouse.
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<PAGE> 13
In the case of a Participant who had not commenced receiving benefits
under Article 3 or under the next to the last sentence of Section
4.04, the amount of the Spouse's monthly benefit shall be sixty
percent (60%) of (i) the total monthly benefit determined under
Section 3.01(a) and 3.01(b) reduced by (ii) one-half of one percent
(1/2%) for each month by which the date of the Participant's death
precedes the date on which the Participant would have attained age
sixty (60), less the amount of any Other Benefits which may be
payable to the Spouse.
4.03 CHILDREN'S DEATH BENEFITS: On the death of a Spouse who was receiving
benefits under Section 4.01 or Section 4.02, the Participant's
Children who are under the age of twenty-one (21) will be entitled to
receive collectively a monthly benefit, payable on the first day of
each month commencing with the month following the Spouse's death.
Notwithstanding the provisions of Section 3.04 hereof, subject to the
provisions of Articles 6 and 7, on the death of a Participant who is
not survived by a Spouse, the Participant's Children who are under
the age of twenty-one (21) will be entitled to receive collectively a
monthly benefit, payable on the first day of each month commencing
with the month following the Participant's death.
The amount of the Childrens' monthly benefit payable under this
Section 4.03 shall be twenty percent (20%) of the monthly benefit the
Spouse was receiving, or would have been entitled to receive (in
instances where there is no surviving Spouse), under Section 4.01 or
Section 4.02, as the case may be, multiplied by the number of
Children under age twenty-one (21) during the month. The maximum
Childrens' monthly benefit shall, however, in no case be more than
one hundred percent (100%) of the amount of the benefit to which the
Participant's surviving Spouse was or would have been entitled.
Benefits payable to Children of a Participant pursuant to this
Section shall be reduced proportionately as each Child attains the
age of twenty-one (21) years or sooner dies and shall terminate with
the payment on the first day of the month in which the last remaining
Child of the Participant attains the age of twenty-one (21) years or
sooner dies.
The benefits that a Child or Children are entitled to receive shall
accrue and be paid for the collective use and benefit of the Child or
Children under age twenty-one (21) to their duly appointed
conservator(s), guardian(s) or trustee(s) where applicable. If the
Children have different fiduciaries representing them, the payment to
each fiduciary on behalf of the Children shall be proportionate to
the number of Children each fiduciary represents. The receipt by the
fiduciaries of the amount of the benefit paid shall constitute a full
and complete discharge therefor to the Employer.
4.04 DISABILITY BENEFITS: In the event of the Disability of a Participant,
the Participant shall be entitled to a monthly supplemental
disability income benefit payable on the first day of each month
commencing with the month following the date of Disability equal to
(a) or (b) below:
(a) If the Participant is enrolled in and declared disabled
under the Employer's Long-Term Disability Plan, forty
percent (40%) of that portion of the
8
<PAGE> 14
Participant's Compensation as of the date of such
Disability in excess of the maximum Compensation covered
by the Long-Term Disability Plan divided by twelve (12),
less any Other Benefits that may be payable in any month
to the Participant as a consequence of his Disability.
(b) If the Participant was enrolled in his Employer's
Long-Term Disability Plan and the plan was discontinued
while the Participant was a Participant in the plan, forty
percent (40%) of that portion of the Participant's
Compensation as of the date of the termination of the
Long-Term Disability Plan in excess of the maximum
Compensation covered by the Long-Term Disability Plan as
of the termination date divided by twelve (12), less any
Other Benefits that may be payable in any month to the
Participant as a consequence of his Disability to the
extent Other Benefits had accrued as of the date of
termination of the Long-Term Disability Plan.
Supplemental disability income shall continue until the monthly
payment preceding the earliest of the Participant's Normal Retirement
Date, or death, or the date on which the Participant's Disability
ends. Upon the Participant's reaching his Normal Retirement Date, the
payments pursuant to this Section 4.04 shall cease, and the
Participant shall be entitled to retirement benefits calculated in
accordance with the provisions of Section 3.01 based upon his Final
Average Monthly Compensation on the date of such Disability and his
Years of Service to his Normal Retirement Date.
A Participant who is eligible for, but not enrolled in, his
Employer's Long-Term Disability Plan shall not be entitled to a
Disability benefit under the Plan.
ARTICLE 5: GROUP MEDICAL INSURANCE AND LIFE INSURANCE
5.01 MEDICAL INSURANCE: (a) If, under the group medical benefit plan
maintained by the Employer, a Participant has in effect medical
insurance as of the date of Retirement and is entitled to the
immediate payment of annuity benefits under his Employer's qualified
defined benefit pension plan:
(i) After Retirement of the Participant and until
midnight ending the day prior to the
Participant's 65th birthday, the Employer will
continue to provide to the Participant at its
sole cost and expense the medical insurance and
other medical benefits in effect immediately
prior to his Retirement subject to such changes
as may be made to the coverage offered to
active salaried exempt Employees of the
Employer from time to time.
(ii) Beginning immediately after midnight of the day
prior to the Participant's 65th birthday, the
Employer will provide to the Participant at its
sole cost and expense a supplemental medical
plan designed to supplement Parts A and B of
Medicare (or whatever the equivalent coverage
may be at some future date). The coverage
provided under this Section 5.01(a)(ii) may be
amended from time to time, either before or
after a Participant's Retirement.
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<PAGE> 15
(b) After the Retirement or death of a Participant, the
medical insurance and other medical benefits provided
active salaried exempt Employees will be made available to
Eligible Dependents of the Participant at the Employer's
sole cost and expense until they reach the age of
sixty-five (65) or cease to qualify as Eligible
Dependents. Upon reaching the age of sixty-five (65), the
Participant's Eligible Dependents will be provided a
supplemental medical plan at the Employer's sole cost and
expense designed to supplement Parts A and B of Medicare
(or whatever the equivalent coverage may be at some future
date). The coverage provided under this Section 5.01(b)
may be amended from time to time.
(c) All medical insurance or other medical benefits provided
to any person pursuant to this Article shall be reduced by
the amount of corresponding employer-provided (or any
other third-party provided) medical insurance and medical
benefits provided to that person at any time under a group
or governmental plan.
5.02 LIFE INSURANCE: If, under a group life insurance program of the
Employer, the Participant has in effect basic group life insurance up
to the date of his Retirement and is entitled to the immediate
payment of annuity benefits under his Employer's qualified defined
benefit pension plan, the Employer will continue to carry life
insurance on the Participant's life after Retirement, with premiums
paid solely by the Employer, to the extent of, and in accordance
with, the following:
(a) Effective immediately after midnight of the day prior to
Retirement, the amount of basic group life insurance
coverage in effect for the Participant will be reduced by
fifty percent (50%).
(b) Effective immediately after midnight of the day prior to
the Participant's sixty-sixth (66th) birthday, the amount
of basic group life insurance coverage will be further
reduced by ten percent (10%) of the amount of
pre-Retirement coverage. The amount of basic group life
insurance coverage will be further reduced each succeeding
year effective immediately after midnight of the day prior
to the Participant's birthday by ten percent (10%) of the
pre-Retirement amount, provided that the amount of basic
group life insurance coverage shall not be reduced below
$10,000.
(c) If the Participant continues to be an Employee after his
Normal Retirement Age, the Employer will continue to
provide basic group life insurance for which the
Participant is eligible as an active Employee under the
group insurance program of the Employer until the
Participant's Retirement. Effective immediately after
midnight of the day prior to Retirement, the amount of
basic group life insurance coverage in effect will be
reduced by fifty percent (50%) plus ten percent (10%) for
every year by which the Participant's age at Retirement
exceeds sixty-five (65); provided, however, that the
amount of basic group life insurance in effect shall not
be reduced below $10,000. The amount of basic group life
insurance coverage in effect for the Participant (if in
excess of $10,000) will be further reduced each year
effective immediately after midnight of the day prior to
the Participant's birthday by ten percent (10%) of the
pre-Retirement amount, which
10
<PAGE> 16
reduction will be repeated until the amount of basic group
life annual insurance coverage reaches $10,000, which
amount will then continue unchanged until the
Participant's death.
ARTICLE 6: COVENANTS OF EMPLOYEE
6.01 DURING CONTINUATION OF EMPLOYMENT: As long as a Participant continues
as an Employee of the Employer, the Participant shall devote his
entire working time to the service of the Employer, except to the
extent that the Committee shall waive this provision.
6.02 FOLLOWING TERMINATION OF EMPLOYMENT: Upon termination of employment,
the Participant, until the earlier of his death or the date which is
five (5) years from the date of termination of employment:
(a) shall from time to time consult with the Corporation and
its Affiliated Companies in an advisory capacity if, and
when, the Participant is reasonably requested to do so by
the Corporation or any such Affiliated Company;
(b) shall not, without the written consent of the Committee,
compete directly or indirectly, or participate in any
business that competes directly or indirectly, with the
Corporation or any Affiliated Company in any geographic
area where the Corporation or any such Affiliated Company
is conducting or actively proposing to conduct its
business at the time of such termination of employment.
The foregoing shall include but not be limited to (i)
serving as an executive officer, employee, agent or
representative of, or consultant to, or having any direct
or indirect interest, as a stockholder, partner or joint
venturer or any other financial interest in, any business
that manufactures or markets products manufactured or
marketed by the Corporation or an Affiliated Company in
areas in which any of the foregoing is, at the time of
such termination of employment, marketing or actively
proposing to market such products, provided that ownership
by the Participant, directly or indirectly, of less than
five percent (5%) of the outstanding shares of stock of
any company listed on any national securities exchange
shall be deemed not to be a participation in a business;
and (ii) directly or indirectly soliciting customers or
employees of the Corporation or an Affiliated Company at
the time of the termination of employment or enterprises
or individuals that were customers or employees of the
Corporation or an Affiliated Company at any time during
the twelve-month period ending upon the termination of
employment or which were at such time being actively
solicited by the Corporation or an Affiliated Company to
become customers or employees of the Corporation or an
Affiliated Company;
(c) shall cooperate and assist in any litigation, arbitration
or similar proceeding in which the Corporation or any
Affiliated Company is a party or has an interest if, and
when, the Participant is reasonably requested to do so by
the Corporation or any such Affiliated Company (the
Corporation shall pay any out-of-pocket expenses); and
11
<PAGE> 17
(d) shall not, except with the written consent of the
Committee, or to the extent compelled by a court of
competent jurisdiction, disclose or use directly or
indirectly any trade secrets or other confidential
information or proprietary data of the Corporation or any
Affiliated Company; provided, however, that confidential
information shall not include any information known to the
public (other than as a result of unauthorized disclosure
by the Participant) or any information of a type not
otherwise considered confidential by persons engaged in
the same or similar businesses.
6.03 REMEDY FOR BREACH: If the Participant at any time fails to comply
with the requirements of Sections 6.01 or 6.02, the Employer's
obligation to pay or provide benefits hereunder to any Participant or
to the Participant's surviving Spouse or Children shall automatically
terminate and neither said Participant nor the Participant's
surviving Spouse, Children or any other person claiming any benefits
pursuant to the Participant's participation in the Plan shall have
any rights, claims or causes of action hereunder against the Board,
the Committee, the Corporation, the Plan Administrator, the Employer
or any Affiliated Company, any trust or other funding vehicle
maintained in respect of the Plan, or any person acting on their
behalf. The remedy provided in this Section 6.03 for breach by the
Participant of the provisions of Section 6.02 hereof shall be
exclusive; provided, however, that the Employer shall not be
precluded from pursuing any other remedies available to it under any
other plan or agreement with the Participant that contains
non-compete provisions and other restrictive covenants.
ARTICLE 7: OBLIGATION TO PAY BENEFITS
7.01 EMPLOYER OBLIGATED TO PAY: Except as otherwise provided in Articles 6
and 7, the Employer employing the Participant on the date of
termination of the Participant's employment shall be obligated to pay
or provide the benefits to which the Participant, his Spouse and
Children are entitled under the Plan.
7.02 AMENDMENT OR TERMINATION OF THE PLAN: The Committee reserves the
right at any time, and from time to time, to amend, in full or in
part, any or all of the provisions of the Plan, or to terminate the
Plan at any time. The right to amend the Plan shall include the right
to provide for additional benefits for a Participant or to waive the
applicability of certain Plan provisions to a Participant pursuant to
a separate contractual agreement. All amendments (including any
contractual agreements providing for additional benefits or waivers)
shall be authorized by the Committee and signed by a duly authorized
representative thereof. Notwithstanding the foregoing, however, no
such amendment or termination shall have the effect of reducing the
benefits:
(a) payable under Articles 3 and 4 hereof to a Participant
whose employment terminated prior to the effective date of
such amendment or termination of the Plan or payable to
such Participant's Spouse or Children; or
(b) to which a Participant, his surviving Spouse or Children
are entitled under Articles 3 and 4 hereof assuming, for
purposes of computing those benefits, that (i) the date of
the amendment or termination, as applicable, is the date
of the
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<PAGE> 18
Participant's Retirement; (ii) the amount of Other
Benefits to which the Participant, his Spouse or Children
are entitled, includes only Other Benefits as had accrued
prior to the date of the amendment or termination; and
(iii) the Participant is not given credit in computing his
Years of Service under the last sentence of Section 4.01
or the next to last sentence of Section 4.04 for any
period subsequent to the date of the amendment or
termination; or
(c) to which any Participant and any Participant's surviving
Spouse or Children are entitled upon Retirement or death
under Article 5 hereof as in effect prior to any amendment
or termination, except as specifically allowed pursuant to
Section 5.01(a)(i) and the last sentences of Sections
5.01(a)(ii) and 5.01(b).
7.03 SUBSEQUENT TO A CHANGE IN CONTROL OF THE CORPORATION: If, after a
Change in Control of the Corporation shall have occurred, a
Participant's employment is terminated for any reason other than
Retirement, death or Disability or for Cause, the Employer
nonetheless shall be unconditionally obligated notwithstanding the
provisions of Article 6, to pay or provide benefits to such
Participant and to the Participant's surviving Spouse and Children
under Articles 3 and 4 hereof that are not less than the benefits
that would be payable under such provisions assuming that:
(a) the date of the Change in Control were the date of the
Participant's Retirement;
(b) the amount of Other Benefits to which the Participant, his
Spouse or Children were entitled included only the Other
Benefits as had accrued prior to the date of the Change in
Control; and
(c) the Participant were not given credit in computing his
Years of Service under the last sentence of Section 4.01
or the next to last sentence of Section 4.04 for any
period subsequent to the date of the Change in Control.
7.04 TRANSFERS OF EMPLOYMENT:
(a) In the event a Participant is transferred to an Affiliated
Company that does not have a supplemental retirement
benefit plan:
(i) If the Affiliated Company to which the
Participant is transferred so agrees, the
Participant shall continue to accrue benefits
under the Plan, whereupon the Employer
employing the Participant immediately prior to
the transfer shall transfer to the Affiliated
Company all assets, if any, held by the
Employer for purposes of funding any liability
to the Participant hereunder, and the
Affiliated Company shall assume (and the
Employer employing the Participant immediately
prior to the transfer will be relieved of) all
liability for payment of benefits hereunder to
the Participant;
(ii) Otherwise, the responsibility for providing the
accrued benefits hereunder shall remain with
the Employer employing the Participant prior to
the transfer. The accrued benefits shall be
limited to the benefits that would
13
<PAGE> 19
be payable to the Participant, his Spouse and
Children under Section 7.02 had the Plan been
terminated with respect to the Participant on
the date of the transfer of employment.
(b) In the event a Participant is transferred to an Affiliated
Company that has a supplemental retirement plan that does
not give credit for Years of Service with the Corporation
and any other Affiliated Company prior to the date of the
transfer, the responsibility for providing the accrued
benefits hereunder shall remain with the Employer
employing the Participant prior to the transfer unless
there is a mutual agreement between the two employers that
the successor employer shall be responsible for providing
accrued benefits. The accrued benefits shall be limited to
the benefits that would be payable to the Participant, his
Spouse and Children under Section 7.02 had the Plan been
terminated with respect to the Participant on the date of
the transfer of employment.
(c) In the event a Participant is transferred to an Affiliated
Company that has a supplemental retirement plan that gives
credit for Years of Service with the Corporation and any
other Affiliated Company prior to the date of the
transfer, and if the Participant accepts designation as a
participant in that plan, the Participant shall be
entitled only to the benefits of the supplemental
retirement plan of the Employer employing the Participant
subsequent to the transfer, and the Employer employing the
Participant immediately prior to the transfer shall have
no further obligation hereunder; however, to the extent
that the benefits payable to the Participant on account of
service to an Employer prior to the date of the transfer
are less than the benefits that would be payable to the
Participant under Section 7.02(b) had the Plan been
terminated with respect to the Participant on the date of
the transfer of employment, the Employer employing the
Participant prior to the transfer shall be liable to the
Participant to the extent of any shortfall. If the
Participant does not accept designation as a participant
in the plan, then the Participant shall be treated as
though he had transferred to an Affiliated Company that
does not have a supplemental retirement benefit plan.
ARTICLE 8: GENERAL PROVISIONS
8.01 LIMITATION OF RIGHTS OF THE EMPLOYEE: Inclusion under the Plan shall
not give a Participant, his Spouse, or his Children any right or
claim to a benefit, except as specifically defined in this Plan. The
establishment of the Plan shall not be construed as giving any
Employee a right to be continued in the service of the Corporation or
any Affiliated Company.
8.02 DISCHARGE OF OBLIGATIONS: The Employer and the Committee may at any
time fully and completely satisfy and discharge all its obligations
hereunder to the Participant, his Spouse or his Children by:
(a) delivering, or causing to be delivered, to the
Participant, his Spouse, or his Children a fully-paid
policy issued by a corporate insurer rated "A" or "A-plus"
in Best's Insurance Guide; or
14
<PAGE> 20
(b) instituting or amending a pension plan in which the
Participant is a Participant to provide an equal benefit;
or
(c) making some other arrangement for the Participant, his
Spouse, or his Children; provided that, in any case
mentioned in (a), (b), or (c) hereof, provision is made
for not less than the benefits to which the Participant,
his Spouse or his Children, as the case may be, may be
entitled under the provisions hereof; or
(d) entering into a contract with the Participant, containing
terms mutually agreed upon by the Employer and the
Participant, to provide benefits in lieu of those provided
hereunder.
8.03 NO ASSIGNMENT OF BENEFITS: None of the rights of the Participant or
of other beneficiaries under this Plan shall be assignable in whole
or in part either directly or by will or succession, but shall be
personal to the individual Participant, the Participant's surviving
Spouse, or the Participant's Children as the case may be.
8.04 ADMINISTRATIVE POWERS RELATING TO PAYMENTS: (a) If any person
eligible to receive payments under the provisions of this Plan is
under a legal disability or, by reason of illness or mental or
physical disability, is, in the opinion of the Plan Administrator,
unable to properly administer payments made pursuant to the Plan, the
Committee or its designee shall make payments in any of the following
ways:
(i) Directly to the person eligible to receive the
payments;
(ii) To the legal representative of such person
eligible to receive payments or;
(iii) To some relative by blood or marriage, or
friend, for the benefit of such person eligible
to receive payments.
(b) Any payment made pursuant to this Section shall be in
complete discharge of the obligation therefor under the
Plan.
8.05 MULTIPLE CLAIMANTS: If two or more persons other than the Participant
shall claim to be entitled to any payment hereunder on the ground
that any one or more of such persons is the surviving Spouse or a
Child of the Participant, payment to one or more of those persons as
shall in the opinion of the Employer be entitled thereto shall
discharge all obligations of the Employer hereunder in respect of
that payment.
8.06 ADMINISTRATION: The Plan Administrator shall have full authority to
control and manage the operation and administration of the Plan,
including the right to appoint other fiduciaries, to appoint or
employ individuals to assist in the administration of the Plan and
any other agents it deems advisable (including legal and actuarial
counsel) and to delegate to others any administrative procedures that
are necessary for the administration of the Plan. Subject to the
provisions of Article 9, the decision of the Plan Administrator on
all matters concerning the interpretation and administration of this
Plan shall be final. Neither the Board, the Corporation, the
Committee, the Plan Administrator, any
15
<PAGE> 21
Affiliated Company, nor any persons acting on their behalf shall be
subject to any liability to any Participant or other person in
connection with the construction and administration of this Plan.
8.07 INDEMNIFICATION: The Corporation shall indemnify each member of the
Committee, the Board of Directors, and the Plan Administrator (if
different from the Committee), or any of their delegees, against
costs, expenses and liabilities, including attorney's fees, incurred
in connection with any action, suit or proceeding instituted against
them or any one of them because of any act of omission or commission
performed by them or any one of them as a director, committee member
or Plan Administrator, or designee or delegee thereof, as the case
may be, while acting in good faith and exercising his judgment for
the best interest of the Plan.
Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the
Corporation, notify the Corporation of the commencement thereof, and
the omission so to notify the Corporation will relieve it from the
liability hereunder, but not from any other liability which it may
have to such person. The Corporation shall be entitled to participate
at its own expense in the defense or to assume the defense of any
action brought against any party indemnified hereunder.
In the event the Corporation elects to assume the defense of any such
suit, such defense shall be conducted by counsel chosen by it and
reasonably satisfactory to the indemnified party, and the indemnified
party shall bear the fees and expenses of any additional counsel
retained by him.
8.08 EXPENSES: Any expenses reasonably incurred by the Committee, the
Board, or the Plan Administrator (if different from the Committee),
or their designees, in the performance of their duties shall be paid
by the Corporation. Reasonable expenses include the cost of insurance
obtained to protect the Committee, the Board, the Plan Administrator,
or their designees, from personal liability resulting from their
actions taken in a fiduciary capacity with respect to this Plan.
8.09 FUNDING: The Employer's obligations under this Plan shall be
unfunded, and the Employer shall not be obligated under any
circumstances to fund its obligations under this Plan.
8.10 PAYMENT OF PARTICIPANT'S EXPENSES: The Employer shall pay or
reimburse a Participant for all costs, including reasonable
attorneys' fees and expenses of litigation and/or arbitration,
incurred by the Participant in seeking to obtain or enforce any right
or benefit provided by the Plan, provided that the Participant is the
prevailing party in any such litigation or arbitration proceeding.
8.11 GOVERNING LAW: To the extent not preempted by ERISA, this Plan shall
be governed by and interpreted in accordance with the substantive
laws of the State of Delaware and shall be binding upon the
Corporation.
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<PAGE> 22
8.12 SEVERABILITY: The provisions of this Plan are severable, and the
invalidity or unenforceability of any provision shall not affect the
validity or enforceability of any other provision.
8.13 NAMED FIDUCIARY: The Plan Administrator is the named fiduciary.
ARTICLE 9: CLAIMS PROCEDURE
9.01 SUBMISSION OF CLAIMS: Claims for benefits under the Plan shall be
submitted in writing to the Plan Administrator or a person designated
by the Plan Administrator for this purpose. Written notice of the
disposition of a claim shall be furnished the claimant within ninety
(90) days after the application therefor is filed. The ninety-day
notice period shall, however, be extended for an additional ninety
(90) days if the Plan Administrator determines that an extension of
time is necessary to process the claim and so advises the claimant in
writing within ninety (90) days after receipt of the claim, which
writing shall also indicate the special circumstances requiring an
extension of time and the date by which the Plan Administrator
expects to render the final decision.
9.02 WRITTEN NOTICE OF DENIED CLAIM: The Plan Administrator or its
designee shall provide adequate notice in writing to any person whose
claim for benefits has been denied. The notice shall set forth the
specific reason or reasons for the denial and shall be written in a
manner calculated to be understood by the recipient. The notice shall
also refer specifically to pertinent Plan provisions on which the
denial is based; shall describe any additional material or
information necessary for the claimant to perfect the claim; and
shall explain why the additional material or information is
necessary. The notice shall also explain the Plan's claims review
procedure.
9.03 REVIEW OF DECISION DENYING CLAIM: The Plan Administrator or its
designee shall afford to any person whose claim for benefits has been
denied a reasonable opportunity for a full and fair review of the
decision denying the claim. The claimant or his duly authorized
representative shall request a review in writing not more than ninety
(90) days after receipt by the claimant of written notification of
denial of a claim. Within ten (10) days after, or as part of, a
timely request for review, the claimant may submit issues and
comments in writing and may review pertinent documents.
9.04 HEARING: Upon receipt of a timely request for review, the Plan
Administrator or its designee may hear the claimant's request and
inquire into the merits of the matter. The Plan Administrator or its
designee shall meet promptly with the claimant and/or his duly
authorized representative and hear arguments and/or examine documents
the claimant or his representative present.
9.05 WRITTEN DECISION OF PLAN ADMINISTRATOR: A decision of the Plan
Administrator or its designee on review of a claim shall be in
writing and shall include specific reasons for the decision, written
in a manner calculated to be understood by the claimant. The decision
shall include specific references to the pertinent Plan provisions on
which the decision is based. The decision shall be made promptly and
not later than sixty (60) days after a request for review, unless
special circumstances require an
17
<PAGE> 23
extension. In that case, the claimant shall be so advised in writing
prior to the expiration of the initial sixty (60) day period and a
decision shall be rendered as soon as possible, but not later than
one hundred and twenty (120) days after receipt of a request for
review.
IN WITNESS WHEREOF, the Corporation has caused this document to be
executed by its duly authorized officer this 11th day of May 1999, but effective
as of February 26, 1999.
BOWATER INCORPORATED
By: /s/ James T. Wright
-------------------------------------
Name: James T. Wright
Title: Vice President - Human Resources
18
<PAGE> 1
EXHIBIT 10.9
BOWATER INCORPORATED
EQUITY PARTICIPATION RIGHTS PLAN
AMENDED AND RESTATED
AS OF FEBRUARY 26, 1999
<PAGE> 2
TABLE OF CONTENTS
1. Purposes................................................................1
2. Definitions.............................................................1
"Acceleration Price".................................................1
"Board of Directors".................................................1
"Change in Control"..................................................1
"Code"...............................................................3
"Committee"..........................................................4
"Common Stock".......................................................4
"Disability".........................................................4
"Equity Participation Right".........................................4
"Fair Market Value"..................................................4
"Grant Date".........................................................4
"Grantee"............................................................4
"Plan"...............................................................4
"Retirement".........................................................4
"Subsidiary".........................................................4
3. Administration..........................................................5
4. Eligibility and Participation...........................................5
5. Effective Date of the Plan and Term of Exercise Period..................5
6. Awards..................................................................5
7. Equity Participation Rights.............................................6
8. Exercises...............................................................6
9. Withholding Taxes for Awards............................................7
10. Change in Control.......................................................7
11. Transfer of Awards......................................................7
12. Death, Disability, Retirement and Termination of Employment.............7
13. Changes in Common Stock.................................................8
14. No Right to Employment..................................................8
15. Legal Restrictions......................................................8
16. No Rights as Shareholders...............................................8
17. Choice of Law...........................................................9
18. Amendment and Discontinuance............................................9
i
<PAGE> 3
BOWATER INCORPORATED
EQUITY PARTICIPATION RIGHTS PLAN
AMENDED AND RESTATED AS OF FEBRUARY 26, 1999
1. PURPOSES.
The purpose of the Bowater Incorporated Equity Participation Rights
Plan (the "Plan") is to promote the interests of Bowater Incorporated (the
"Corporation") and its stockholders by attracting, retaining and stimulating the
performance of selected employees by giving such employees the opportunity to
earn additional compensation related to the success of the Corporation's
business based upon appreciation in the Company's stock price. The Plan was
first adopted on January 17, 1996. It was subsequently amended and restated
effective as of January 1, 1999, to incorporate amendments that had been
previously approved. It is now being amended and restated as of February 26,
1999, to reflect an additional amendment.
2. DEFINITIONS.
Unless the context clearly indicates otherwise, the following terms
have the meanings set forth below.
"Acceleration Price" means the excess over the reference price of an
Equity Participation Right of the highest of (A) through (D), on the date of a
Change in Control:
(A) The highest reported sales price of the Common Stock
within the sixty (60) days preceding the date of the
Change in Control, as reported on any securities
exchange upon which the Common Stock is listed,
(B) The highest price of the Common Stock as reported in
a Schedule 13D or an amendment thereto that is paid
within the sixty (60) days preceding the date of the
Change in Control,
(C) The highest tender offer price paid for the Common
Stock, and
(D) Any cash merger or similar price.
"Board of Directors" or "Board" means the Board of Directors of the
Corporation.
2
<PAGE> 4
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 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 50% of the total
membership of the Board consists of Continuing
Directors.
For purposes of this Definition:
(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").
3
<PAGE> 5
(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 (A) 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, (A)
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 (B) 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 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.
4
<PAGE> 6
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Human Resources and Compensation Committee of the
Board. A majority of the members of the Committee shall constitute a
quorum. All determinations of the Committee shall be made by a majority
of its members. Any decision or determination of the Committee reduced
to writing and signed by all of the members of the Committee shall be
fully as effective as if it had been made at a meeting duly called and
held.
"Common Stock" means the common stock of Bowater Incorporated, $1 par
value.
"Disability", as applied to a Grantee, shall have the meaning contained
in the Company's long-term disability plan.
"Equity Participation Right" means a contractual right to receive a
cash payment determined with reference to the increase in Fair Market
Value of a share of Common Stock subject to the terms and conditions
hereof.
"Fair Market Value" of a share of Common Stock on any particular date
is (1) the simple arithmetic mean between the highest and lowest prices
per share at which the Common Stock is traded on the New York Stock
Exchange Composite Transactions as reported in the Eastern Edition of
the Wall Street Journal for that date or, if not so traded, (2) the
simple arithmetic mean between the closing bid-and-asked prices thereof
as reported on such Exchange on that date.
"Grant Date" means the date on which an Equity Participation Right is
granted by the Committee pursuant to the Plan.
"Grantee" means the individual to whom an Equity Participation Right is
granted pursuant to the Plan.
"Plan" means the Bowater Incorporated Equity Participation Rights Plan
as set forth herein and as amended from time to time.
"Retirement" means the status of having terminated employment and being
immediately eligible for the payment of normal or early retirement
benefits under the qualified pension plan of the Company or Subsidiary
applicable to the Grantee.
"Subsidiary" means each entity with respect to which the Company owns
directly or indirectly interests embodying at least 40% of the voting
power.
Except where otherwise indicated by the context, any masculine term
used herein also
5
<PAGE> 7
shall include the feminine, the plural shall include the singular, and the
singular shall include the plural.
3. ADMINISTRATION.
(a) The Committee shall have all the powers vested in it by the terms
of the Plan, including exclusive authority (within the limitations described
herein) to select the employees to be granted Equity Participation Rights under
the Plan, to determine the type, size and terms of awards to be made to each
employee selected, to determine the time when Equity Participation Rights will
be granted to employees and, to establish objectives and conditions, if any, for
earning such awards. The Committee shall have full power and authority to
administer and interpret the Plan and to adopt such rules, regulations,
agreements, guidelines and instruments for the administration of the Plan and
for the conduct of its business as the Committee deems necessary or advisable.
The Committee's interpretation of the Plan and all actions taken and
determinations made by the Committee pursuant to the powers vested in it
hereunder shall be conclusive and binding on all parties concerned, including
the Corporation, its stockholders, any Grantees and any other employee of the
Corporation or any of its Subsidiaries.
(b) Equity Participation Rights shall be evidenced by written
agreements which shall contain such terms and conditions consistent with the
Plan as may be determined by the Committee.
(c) All decisions made by the Committee pursuant to the provisions of
the Plan shall be final and conclusive.
4. ELIGIBILITY AND PARTICIPATION.
The participants in the Plan shall consist of selected employees or
officers of the Corporation or its present or future parent or Subsidiaries, who
serve in executive, administrative or professional capacities, as may from time
to time be so designated by the Committee.
5. EFFECTIVE DATE OF THE PLAN AND TERM OF EXERCISE PERIOD.
This amended and restated Plan shall become effective upon its adoption
by the Committee. Subject to the provisions of Article 12 hereof, the period
during which an Equity Participation Right granted under the Plan may be
exercised shall be the period, expiring not later than the tenth anniversary of
the Grant Date of the award, as may be determined by the Committee.
6
<PAGE> 8
6. AWARDS.
(a) Types. Awards under the Plan shall consist of Equity Participation
Rights.
(b) Performance Goals. The Committee may, but need not, establish
performance goals to be achieved within such performance periods as may be
selected by it in its sole discretion, using such measures of the performance of
the Corporation and/or its Subsidiaries as it may select.
(c) Guidelines. From time to time, the Committee may adopt written
policies implementing the Plan. Such policies may include, but need not be
limited to, the type, size and terms of awards to be made to employees and the
conditions for payment of such awards. Grantees of Equity Participation Rights
must accept such awards by execution of a written agreement with the Corporation
in such form as the Committee determines not more than sixty (60) days following
the Grant Date or such rights shall expire.
(d) Maximum Awards. A Grantee may be granted multiple awards under the
Plan.
7. EQUITY PARTICIPATION RIGHTS.
(a) An Equity Participation Right shall not be exercisable after the
expiration of the exercise period set forth in its related Equity Participation
Right Agreement. The Committee may provide in such Agreement for the lapse of
the Equity Participation Right prior to expiration of the exercise period upon
the occurrence of any event specified by the Committee.
(b) The Common Stock price referenced in an Equity Participation Right
granted under the Plan shall not be less than the Fair Market Value per share of
Common Stock on the Grant Date.
(c) Upon exercise of an Equity Participation Right, the Grantee shall
be entitled to receive, subject to the provisions of the Plan and such rules and
regulations as may be established by the Committee, a cash payment equal to the
product of (A) the excess of (i) the Fair Market Value of one share of Common
Stock at the time of such exercise over (ii) the reference price per share
specified in the related Equity Participation Rights Agreement, times (B) the
number of shares specified in such Equity Participation Rights Agreement or the
portion thereof being exercised. Except as provided in Article 10, an Equity
Participation Right held by a Grantee shall not be exercisable during the first
six months from the Grant Date of the Equity Participation Right.
7
<PAGE> 9
8. EXERCISES.
(a) Each Equity Participation Right granted shall be exercisable in
whole or in part at any time, or from time to time, during the period as the
Committee may determine and specify in the agreement pursuant to which such
Equity Participation Right is granted, provided that the election to exercise an
Equity Participation Right shall be made in accordance with applicable laws and
regulations.
(b) No right may at any time be exercised with respect to a fractional
share or exercised in part with respect to fewer than one hundred shares.
9. WITHHOLDING TAXES FOR AWARDS.
The Corporation shall withhold from amounts otherwise payable hereunder
the amount, if any, required to be withheld under applicable income tax laws.
10. CHANGE IN CONTROL.
Upon the occurrence of a Change in Control, all Equity Participation
Rights shall become immediately exercisable and shall be deemed exercised in
full for cash for the difference between the Acceleration Price and the
reference price per share, which amount shall be paid by the Corporation within
a period of thirty days following a Change in Control.
11. TRANSFER OF AWARDS.
Awards granted under the Plan may not be transferred except by will or
the laws of descent and distribution, and, during the Grantee's lifetime, may be
exercised only by said Grantee or by said Grantee's guardian or legal
representative.
12. DEATH, DISABILITY, RETIREMENT AND TERMINATION OF EMPLOYMENT.
(a) If a Grantee's employment with the Company and all of its
Subsidiaries terminates:
(i) If such employment terminates involuntarily and for good
cause (as determined by the Company), all Equity Participation Rights held by
the Grantee will expire immediately.
(ii) If such employment terminates involuntarily without cause
or voluntarily for any reason, except in the case of the Grantee's Disability,
Retirement or death, (A) all unexercisable Equity Participation Rights held by
the Grantee will expire immediately; and (B) all exercisable Equity
Participation Rights held by the Grantee will expire three months after
termination (unless their expiration date is earlier).
8
<PAGE> 10
(iii) If such employment terminates because of Disability or
Retirement, the Grantee will be treated under all awards as if employment with
the Company or Subsidiary continued for five years.
(iv) If a Grantee dies while employed or during the five-year
period described in paragraph (iii), all Equity Participation Rights held by the
Grantee will become exercisable (and remain exercisable for two years unless
their expiration date is earlier).
(b) The Committee may provide (i) that an award will not terminate or
be forfeited as a result of the termination of the Grantee's employment; and
(ii) for additional opportunities for the exercise of an Equity Participation
Right after a Grantee's termination of employment, in addition to (a), above.
(c) For all purposes of the Plan, the employment of a Grantee will not
be considered to be terminated if the Grantee is receiving periodic severance
payments from the Company or a Subsidiary. Leaves of absence for periods and
purposes conforming to the policy of the Company shall not be deemed
terminations or interruptions of employment.
13. CHANGES IN COMMON STOCK.
In the event of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, or other changes in corporate
structure or capitalization affecting the Common Stock, such appropriate
adjustment shall be made in the number, kind, exercise price, etc., of shares
subject to Equity Participation Rights granted under the Plan, as may be
determined by the Committee.
14. NO RIGHT TO EMPLOYMENT.
Nothing in the Plan or any instrument executed pursuant hereto shall
confer upon any employee any right to continue in the employ of the Corporation
nor shall anything in the Plan affect the right of the Corporation to terminate
the employment of any employee, with or without cause.
15. LEGAL RESTRICTIONS.
The Corporation will not be obligated to make any payment if counsel to
the Corporation determines that such issuance or payment would violate any law
or regulation of any governmental authority or any agreement between the
Corporation and any national securities exchange upon which the Common Stock is
listed. The Corporation shall in no event be obliged to take any action in order
to cause the exercise of any award under the Plan.
9
<PAGE> 11
16. NO RIGHTS AS SHAREHOLDERS.
No Grantee, and no beneficiary or other person claiming through a
Grantee, shall have any interest in any shares of Common Stock allocated for the
purposes of the Plan or subject to any award. Furthermore, the existence of
awards under the Plan shall not affect the right or power of the Corporation or
its stockholders to make adjustments, recapitalizations, reorganizations or
other changes in the Corporation's capital structure; the dissolution or
liquidation of the Corporation, or the sale or transfer of any part of its
assets or business; or any other corporate act, whether of a similar character
or otherwise. No shares of Common Stock may be delivered or purchased under the
Plan.
17. CHOICE OF LAW.
The validity, interpretation and administration of the Plan and of any
rules, regulations, determinations or decisions made thereunder, and the rights
of any and all persons having or claiming to have any interest therein or
thereunder, shall be determined exclusively in accordance with the laws of the
State of Delaware and without without giving effect to the choice of law
provisions thereof.
18. AMENDMENT AND DISCONTINUANCE.
The Committee may alter, suspend, or discontinue the Plan, but may not
materially and adversely affect any outstanding award without the consent of the
holder thereof.
IN WITNESS WHEREOF, this Plan has been amended and restated and
executed on behalf of the Corporation by its duly authorized officer as of the
26th day of February, 1999.
BOWATER INCORPORATED
By: /s/ Wendy C. Shiba
-----------------------------------
Name: Wendy C. Shiba
Title: Vice President, Secretary
and Assistant General Counsel
Date Signed: August 10, 1999
10
<PAGE> 1
EXHIBIT 10.10
THIRD AMENDMENT
TO THE
BOWATER INCORPORATED
1988 STOCK INCENTIVE PLAN
WHEREAS, Bowater Incorporated, a Delaware corporation (the
"Corporation"), established the Bowater Incorporated 1988 Stock Incentive Plan
(the "Plan"); and
WHEREAS, the Corporation desires to amend the Plan, to change a part of
the definition of "Change in Control" thereunder;
NOW, THEREFORE, the Plan is hereby amended, effective February 26,
1999, as follows:
Section 16(c)(4) is amended to read:
"(4) the date on which less than 50% of the total membership of the
Board consists of Continuing Directors."
IN WITNESS WHEREOF, Bowater Incorporated has caused this Third
Amendment to be executed by its duly authorized officer this 4th day of August,
1999.
BOWATER INCORPORATED
By: /s/ Anthony H. Barash
----------------------------------------
Anthony H. Barash
Title: Sr. Vice President, Corporate Affairs
and General Counsel
<PAGE> 1
EXHIBIT 10.11
FIRST AMENDMENT
TO THE
AMENDED AND RESTATED
BOWATER INCORPORATED
BENEFIT PLAN GRANTOR TRUST
WHEREAS, Bowater Incorporated, a Delaware corporation (the
"Corporation"), established the Amended and Restated Bowater Incorporated
Benefit Plan Grantor Trust (the "Trust"); and
WHEREAS, the Corporation desires to amend the Trust, to change a part
of the definition of "Change in Control" thereunder;
NOW, THEREFORE, the Trust is hereby amended, effective February 26,
1999, as follows:
Section 1.2(h)(d) is amended to read:
"(d) the date on which less than 50% of the total membership of the
Board consists of Continuing Directors."
IN WITNESS WHEREOF, Bowater Incorporated has caused this First
Amendment to be executed by its duly authorized officer this 4th day of August,
1999.
BOWATER INCORPORATED
By: /s/ Anthony H. Barash
----------------------------------------
Anthony H. Barash
Title: Sr. Vice President, Corporate Affairs
and General Counsel
<PAGE> 1
EXHIBIT 10.12
FIRST AMENDMENT
TO THE
AMENDED AND RESTATED
BOWATER INCORPORATED
EXECUTIVE SEVERANCE GRANTOR TRUST
WHEREAS, Bowater Incorporated, a Delaware corporation (the
"Corporation"), established the Amended and Restated Bowater Incorporated
Executive Severance Grantor Trust (the "Trust"); and
WHEREAS, the Corporation desires to amend the Trust, to change a part
of the definition of "Change in Control" thereunder;
NOW, THEREFORE, the Trust is hereby amended, effective February 26,
1999, as follows:
Section 1.2(h)(d) is amended to read:
"(d) the date on which less than 50% of the total membership of the
Board consists of Continuing Directors."
IN WITNESS WHEREOF, Bowater Incorporated has caused this First
Amendment to be executed by its duly authorized officer this 4th day of August,
1999.
BOWATER INCORPORATED
By: /s/ Anthony H. Barash
----------------------------------------
Anthony H. Barash
Title: Sr. Vice President, Corporate Affairs
and General Counsel
<PAGE> 1
EXHIBIT 10.13
FIRST AMENDMENT
TO THE
AMENDED AND RESTATED
BOWATER INCORPORATED
OUTSIDE DIRECTORS BENEFIT PLAN GRANTOR TRUST
WHEREAS, Bowater Incorporated, a Delaware corporation (the
"Corporation"), established the Amended and Restated Bowater Incorporated
Outside Directors Benefit Plan Grantor Trust (the "Trust"); and
WHEREAS, the Corporation desires to amend the Trust to change a part of
the definition of "Change in Control" thereunder;
NOW, THEREFORE, the Trust is hereby amended, effective February 26,
1999, as follows:
Section 1.2(h)(d) is amended to read:
"(d) the date on which less than 50% of the total membership of the
Board consists of Continuing Directors."
IN WITNESS WHEREOF, Bowater Incorporated has caused this First
Amendment to be executed by its duly authorized officer this 4th day of August,
1999.
BOWATER INCORPORATED
By: /s/ Anthony H. Barash
----------------------------------------
Anthony H. Barash
Title: Sr. Vice President, Corporate Affairs
and General Counsel
<PAGE> 1
EXHIBIT 10.14
BOWATER INCORPORATED
BENEFITS EQUALIZATION PLAN
AMENDED AND RESTATED AS OF FEBRUARY 26, 1999
<PAGE> 2
TABLE OF CONTENTS
1. Purpose of the Plan..................................................1
2. Definitions..........................................................1
3. Eligibility and Participation........................................1
4. Benefits.............................................................1
5. Payment of Benefits..................................................1
6. Vesting..............................................................2
7. Administration.......................................................4
8. Claims and Review....................................................4
9. Amendment of Discontinuance..........................................5
10. Plan Unfunded........................................................5
11. No Contract of Employment............................................6
12. Inalienability of Benefits...........................................6
13. Governing Law........................................................6
14. Effective Date.......................................................6
i
<PAGE> 3
BOWATER INCORPORATED
BENEFITS EQUALIZATION PLAN
AMENDED AND RESTATED AS OF FEBRUARY 26, 1999
1. PURPOSE OF THE PLAN. The purpose of the Bowater Incorporated
Benefits Equalization Plan (the "Plan") is to provide benefits payable out of
the general assets of Bowater Incorporated (the "Company") to a select group of
management or highly compensated employees participating in the Bowater
Incorporated Employees' Retirement Plan and/or the Pension Plan for Certain
Employees of Bowater Incorporated (the two plans are hereinafter sometimes
referred to collectively as the "Funded Plans") whose benefits under one or both
of the Funded Plans are limited by the application of Section 415 and/or Section
401(a)(17) of the Internal Revenue Code of 1986. The Plan was first adopted as
of August 22, 1990. The Plan is now being restated as of February 26, 1999, to
incorporate all amendments that have been made as of such date.
2. DEFINITIONS. Except as otherwise specified herein, all capitalized
terms and phrases used herein shall have the same meanings ascribed to such
terms and phrases in the Funded Plans. Except as specifically provided herein,
all conditions and provisions of the Funded Plans shall be deemed equally
applicable to the Plan.
3. ELIGIBILITY AND PARTICIPATION. All Participants (as such term is
defined in each respective Funded Plan) in either of the Funded Plans ("Eligible
Employees") shall be eligible to participate in the Plan.
4. BENEFITS. The benefits payable to an Eligible Employee or to his
Spouse or Beneficiary under the Plan shall be equal to (A) less (B), where:
(A) equals the benefits that would have been payable to the
Eligible Employee, his Spouse or Beneficiary under the Funded Plans without
regard to:
(i) the dollar limitation on compensation in the Funded
Plans,
(i) the dollar limitation on annual retirement benefits
in the Funded Plans, or
(i) the combined plan limitations in the Funded Plans;
and
(B) equals the benefits actually payable to the Eligible
Employee, his Spouse or Beneficiary under the Funded Plans.
5. PAYMENT OF BENEFITS. The benefits payable under the Plan shall be
payable at the same time and in the same manner as such benefits would have been
paid under the Funded Plans (but for the limitations set forth in Section
4(A)(i), (ii) and (iii) above), and any election of benefits made under the
Funded Plans shall be deemed an election of benefits made hereunder.
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<PAGE> 4
The same actuarial assumptions used in calculating benefits payable under the
Funded Plans shall be used in calculating the benefits hereunder.
6. VESTING. Subject to the right of the Company to amend or discontinue
the Plan as provided in Section 9 hereof, an Eligible Employee shall have a
non-forfeitable interest in benefits payable under the Plan to the extent that
such benefits would have been vested had they been payable under the Funded
Plans.
Anything in this Plan to the contrary notwithstanding, upon and
following a Change in Control, an Eligible Employee shall have a non-forfeitable
interest in benefits payable under the Plan. The following definitions apply for
purposes of this Section 6:
(i) "Acquiring Person" means, the Beneficial Owner, directly or
indirectly, of Common Stock representing 20% or more of the
combined voting power of the Company's then outstanding
securities, not including (except as provided in clause (A) 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 Company's then outstanding
securities. Notwithstanding the foregoing, (A) 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 (B) 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 Company of which the Person is a
Beneficial Owner.
(ii) "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.
(iii) A "Beneficial Owner" of Common Stock shall mean (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) "Board" shall mean the Board of Directors of the Company.
(v) "Change in Control" shall be deemed to have occurred upon:
(A) the date that any Person is or becomes an Acquiring
Person;
2
<PAGE> 5
(B) the date that the Company's shareholders approve a
merger, consolidation or reorganization of the
Company 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 Company as
of such 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 Company,
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 Company 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 Company'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 Company,
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; or
(D) the date on which less than 50% of the total
membership of the Board consists of Continuing
Directors.
(vi) "Continuing Director" shall mean 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.
(vii) "Person" shall mean any individual, firm, corporation,
partnership, trust or other entity.
3
<PAGE> 6
The provisions of this Section 6 related to a Change in Control shall
not be amended upon or following a Change in Control in any manner that
might have the effect of reducing the non-forfeitable interest of an
Eligible Employee in benefits payable under the Plan. Nothing in this
Section 6 shall be construed to prohibit, prior to Change in Control,
any amendment to the Plan, including this Section 6, or any termination
of the Plan pursuant to its terms.
7. ADMINISTRATION
(a) The Company shall be the "named fiduciary" and the Human
Resources and Compensation Committee of the Board of Directors
of the Company shall be the Plan Administrator with authority
to control and manage the operation and administration of the
Plan, including the appointment of other fiduciaries.
(b) The Plan Administrator shall have such powers as may be
necessary to discharge its duties under the Plan, including
the power:
(i) To interpret the Plan and to make all determinations
as to the right of any person to a benefit under the
Plan and to cause the Company to pay such benefits
accordingly;
(ii) To appoint or employ individuals to assist in the
Administration of the Plan and any other agents it
deems advisable, including legal and actuarial
counsel; and
(iii) To delegate to others any administrative procedures
which are necessary for the administration of the
Plan.
(c) Decisions of the Plan Administrator with respect to the Plan
shall be conclusive and binding on all persons.
8. CLAIMS AND REVIEW. All inquiries and claims respecting the Plan
shall be submitted in writing and directed to the Plan Administrator or a person
designated by the Plan Administrator for this purpose.
(a) In the case of a claim respecting a benefit, a written
determination allowing or denying the claim shall be furnished
to the claimant promptly upon receipt of the claim. A denial
or partial denial of a claim shall be dated (the
"Determination Date") and signed by the Plan Administrator and
shall clearly set forth the following information:
(i) the specific reason or reasons for the denial;
(ii) a specific reference to pertinent Plan provisions on
which the denial is based;
4
<PAGE> 7
(iii) a description of any additional material or
information necessary for the claimant to perfect the
claim and an explanation of why such material or
information is necessary; and
(iv) an explanation of the claim review procedures.
If no written determination is furnished to the claimant
within thirty (30) days after receipt of the claim, then the
claim shall be deemed denied and the 30th day after such
receipt shall be the Determination Date.
(b) A claimant may obtain review of an adverse determination by
filing a written notice of appeal with the Plan Administrator
within sixty (60) days after the Determination Date or, if
later, within sixty (60) days after the receipt of a written
notice denying the claim. The Plan Administrator shall then
appoint one or more persons, whether or not connected with the
Company, who shall conduct a full and fair review. As part of
such review, the claimant shall have the right:
(i) to be represented by a spokesman;
(ii) to present a written statement of facts and of the
claimant's interpretation of any pertinent document,
statute or regulation; and
(iii) to receive a prompt written decision clearly setting
forth findings of fact and the specific reasons for
the decision written in a manner calculated to be
understood by the claimant and containing specific
reference to pertinent Plan provisions on which the
decision is based.
A decision shall be rendered no more than thirty (30) days
after the request for review, except that such period may be
extended for an additional thirty (30) days if the person or
persons reviewing the claim determine that special
circumstances, including the advisability of a hearing,
require such extension. All applicable governmental
regulations regarding claims and review shall be observed by
the Plan Administrator in connection with its administration
of the Plan.
9. AMENDMENT OF DISCONTINUANCE. The Human Resources and Compensation
Committee of the Board of Directors of the Company reserves the right to amend,
suspend or discontinue the Plan at any time for whatever reasons it may deem
appropriate. No such amendment, suspension or termination, however, may reduce
the benefits payable hereunder to the extent that such benefits are fully vested
and non-forfeitable pursuant to Section 6 hereof on the date of such amendment,
suspension or termination. The Company hereby makes a contractual commitment on
behalf of itself and its successors to pay the benefits accrued under the Plan.
10. PLAN UNFUNDED. The benefits payable under the Plan shall not be
funded, but shall be payable out of the general funds of the Company when and as
benefits become payable.
5
<PAGE> 8
11. NO CONTRACT OF EMPLOYMENT. Nothing contained in the Plan shall be
construed as a contract of employment between the Company and an employee or as
a right of any employee to be continued in the employment of the Company or as a
limitation on the right of the Company to discharge any employee, with or
without cause.
12. INALIENABILITY OF BENEFITS. To the maximum extent permitted by law,
benefits under the Plan may not be assigned or hypothecated, and no such
benefits shall be subject to legal process or attachment for the payment of any
claims against any person entitled to receive the same.
13. GOVERNING LAW. The Plan shall be interpreted and enforced in
accordance with the laws of the State of Maine.
14. EFFECTIVE DATE. The Effective Date of this amended and restated
Plan shall be February 26, 1999.
IN WITNESS WHEREOF, the Company has caused this Plan document to be executed by
its duly authorized officer as of February 26, 1999.
BOWATER INCORPORATED
By: /s/ James T. Wright
-------------------------------------
Name: James T. Wright
Title: Vice President - Human Resources
Date Signed: June 2, 1999
6
<PAGE> 1
EXHIBIT 10.15
SECOND AMENDMENT
TO THE
BOWATER INCORPORATED
1992 STOCK INCENTIVE PLAN
WHEREAS, Bowater Incorporated, a Delaware corporation (the
"Corporation"), established the Bowater Incorporated 1992 Stock Incentive Plan
(the "Plan"); and
WHEREAS, the Corporation desires to amend the Plan, to change a part of
the definition of "Change in Control," thereunder;
NOW, THEREFORE, the Plan is hereby amended, effective February 26,
1999, as follows:
Section 16(c)(4) is amended to read:
"(4) the date on which less than 50% of the total membership of the
Board consists of Continuing Directors."
IN WITNESS WHEREOF, Bowater Incorporated has caused this Second
Amendment to be executed by its duly authorized officer this 11th day of May,
1999.
BOWATER INCORPORATED
By: /s/ James T. Wright
--------------------------------------
James T. Wright
Title: Vice President - Human Resources
----------------------------------
-1-
<PAGE> 1
EXHIBIT 10.16
SECOND AMENDMENT
TO THE
BOWATER INCORPORATED
1997 STOCK OPTION PLAN
AS AMENDED AND RESTATED JANUARY 1, 1997
WHEREAS, Bowater Incorporated, a Delaware corporation (the "Company"),
established the Bowater Incorporated 1997 Stock Option Plan (the "Plan"), and
amended and restated the Plan in its entirety, effective January 1, 1997; and
WHEREAS, the Company desires to amend the Plan, to change a part of the
definition of "Change in Control," thereunder;
NOW, THEREFORE, the Plan is hereby amended, effective February 26,
1999, as follows:
Section 1(h)(iv) of the Plan is amended to read as follows:
"(iv) the date on which less than 50% of the total membership of the
Board consists of Continuing Directors."
IN WITNESS WHEREOF, the Company has caused this Second Amendment to be
executed by its duly authorized officer this 11th day of May, 1999.
BOWATER INCORPORATED
By: /s/ James T. Wright
---------------------------------------
James T. Wright
Title: Vice President - Human Resources
------------------------------------
-1-
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