<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
BOWATER INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
----------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
(BOWATER LOGO)
Bowater Incorporated
55 East Camperdown Way
Post Office Box 1028
Greenville, SC 29602
March 22, 2000
Dear Shareholders:
We cordially invite you to attend the Annual Meeting of Shareholders of
Bowater Incorporated, which will be held at The Gunter Theatre, 300 South Main
Street, Greenville, South Carolina, on Wednesday, May 10, 2000, at 11:00 a.m.
Time will be set aside for discussion of each item of business described in the
accompanying Notice of Annual Meeting and Proxy Statement.
During the meeting, I will review highlights of the past year and report on
Bowater's business operations. Afterwards, you will have an opportunity to ask
questions and to confer informally with a number of our directors and officers.
We hope that you will attend the Annual Meeting. Whether or not you plan to
attend, please sign, date and return your proxy (or voting instruction card)
promptly in the envelope provided in order to make certain that your shares will
be represented at the Annual Meeting.
Bowater's Annual Report for 1999 is included in this package, and we urge
you to read it carefully.
Sincerely yours,
/s/ Arnold M. Nemirow
ARNOLD M. NEMIROW
Chairman, President and
Chief Executive Officer
<PAGE> 3
BOWATER INCORPORATED
------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 10, 2000
- --------------------------------------------------------------------------------
The 2000 Annual Meeting of Shareholders of BOWATER INCORPORATED will be
held at The Gunter Theatre, 300 South Main Street, Greenville, South Carolina,
on Wednesday, May 10, 2000, at 11:00 a.m. for the following purposes:
(1) To elect three directors, each for a term of three years;
(2) To vote on the proposal to approve the Bowater Incorporated 2000
Stock Option Plan; and
(3) To transact any other business that may properly come before the
Annual Meeting and any adjournment.
Holders of common stock and special voting stock of record at the close of
business on March 17, 2000, are entitled to notice of and to vote at the Annual
Meeting.
By order of the Board of Directors,
/s/ WENDY C. SHIBA
WENDY C. SHIBA
Vice President, Secretary and
Assistant General Counsel
Greenville, South Carolina
March 22, 2000
SHAREHOLDERS ARE URGED TO EXECUTE AND RETURN THE PROXY OR VOTING INSTRUCTION
CARD PROMPTLY IN THE ENVELOPE PROVIDED.
<PAGE> 4
BOWATER INCORPORATED
55 EAST CAMPERDOWN WAY
POST OFFICE BOX 1028
GREENVILLE, SC 29602
-------------------------------
PROXY STATEMENT
DATED MARCH 22, 2000
-------------------------------
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AT 11:00 A.M. ON MAY 10, 2000
THE GUNTER THEATRE
300 SOUTH MAIN STREET
GREENVILLE, SC 29601
The only securities of Bowater Incorporated eligible to vote at the Annual
Meeting are the shares of its Common Stock, par value $1 per share, and a share
of special voting stock (issued in connection with Bowater's 1998 acquisition of
Avenor Inc.), which Bowater has issued to Montreal Trust Company of Canada, the
Trustee under a Voting and Exchange Trust Agreement. Under the Voting and
Exchange Trust Agreement, each holder of Exchangeable Shares (an "Exchangeable
Shareholder") issued by Bowater's subsidiary, Bowater Canada Inc., is entitled
to instruct the Trustee how the Trustee is to vote at a meeting of the holders
of Bowater's Common Stock (the "Common Shareholders"). The Trustee will cast
votes equal to the number of outstanding Exchangeable Shares not owned by
Bowater or its affiliates and only as to which the Trustee has timely received
voting instructions from the Exchangeable Shareholders.
The Common Shareholders and the Trustee acting for the Exchangeable
Shareholders will vote together as a single class on all matters. Proxy cards
are enclosed for Common Shareholders and voting instruction cards are enclosed
for Exchangeable Shareholders. Execution of the enclosed proxy or voting
instruction card will not affect a shareholder's right to attend the Annual
Meeting.
Only holders of record at the close of business on March 17, 2000, will be
eligible to vote at the Annual Meeting. On that date, 51,909,055 shares of
Common Stock and 2,106,009 Exchangeable Shares entitled to give voting
instructions were outstanding. Each share of Common Stock outstanding on the
record date will be entitled to one vote at the Annual Meeting. An Exchangeable
Shareholder (other than Bowater or its affiliates) is entitled to give
instructions for votes equal to the number of Exchangeable Shares held by him or
her. The holders of shares representing one-third of the voting power entitled
to vote at the Annual Meeting, present in person or by proxy, are necessary to
constitute a quorum. The enclosed form of proxy is solicited on behalf of
Bowater and has been approved by the Board of Directors. The approximate date of
mailing of this Proxy Statement and the accompanying Notice of Annual Meeting
and proxy card or voting instruction card is March 31, 2000.
Shares of Common Stock represented by proxies in the accompanying form will
be voted in accordance with the holder's instructions. If no contrary
instruction is indicated, shares represented by the proxies will be voted (1)
FOR the election of the three nominees named below to serve as directors for the
three-year term indicated; (2) FOR the proposal to approve the Bowater
Incorporated 2000 Stock Option Plan; and (3) in the discretion of the proxy
holders on any other business that may properly come before the meeting and any
adjournment. Should any nominee named for the office of director become unable
or unwilling to accept nomination or election, it is intended that the persons
acting under the proxy will vote for the election of another person recommended
by the Nominating and Governance Committee of the Board and nominated by the
Board of Directors. Bowater has no reason to believe that any of the three
nominees will be unable or unwilling to serve if elected to office.
Aside from the election of three directors and the proposal to approve the
2000 Stock Option Plan, Bowater does not know of any other matters that will be
presented at the Annual Meeting; however, if any other matters properly come
before the Annual Meeting, or any adjournment thereof, the person or persons
voting the proxies will vote them in accordance with their best judgment.
Any Bowater shareholder giving a proxy has the right to revoke it by giving
written notice of revocation to Bowater's Secretary at any time before the proxy
is voted, or by executing and delivering to Bowater a later-dated proxy at any
time before the earlier proxy is voted, or by attending the Annual Meeting and
voting his or her shares
1
<PAGE> 5
in person (although attendance at the Annual Meeting will not, in and of itself,
constitute revocation of a proxy). No notice of revocation or later-dated proxy,
however, will be effective until received by Bowater's Secretary at or prior to
the Annual Meeting.
Directors are elected by a plurality of votes of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting. The
affirmative vote of the holders of a majority of the voting power present in
person or represented by proxy and entitled to vote at the Annual Meeting is
required to approve the proposal to approve the 2000 Stock Option Plan and to
act on any other business properly brought before the Annual Meeting and any
adjournment. In the election of directors, votes may be cast for or votes may be
withheld from each nominee. Abstentions may not be specified with respect to the
election of directors. As to the other matters submitted for shareholder vote,
abstentions have the same effect as a vote against the matter. Broker non-votes
(which occur when a broker or other nominee holding shares for a beneficial
owner reports those shares as present for quorum purposes but does not vote on a
proposal) will have no effect upon the vote on any matter submitted for
shareholder vote.
ITEM NO. 1
ELECTION OF DIRECTORS
INFORMATION ON NOMINEES AND DIRECTORS
The Board of Directors is divided into three classes: Class I, Class II and
Class III. Each class consists as nearly as possible of one-third of the total
number of directors, and one class is elected each year for a three-year term.
The term of the Class I directors expires this year, and the successors are to
be elected at the Annual Meeting for a three-year term expiring in 2003. The
terms of the Class II and Class III directors expire in 2001 and 2002,
respectively.
The following information is provided for the three nominees who are the
Class I directors, and also for the Class II and Class III directors.
NOMINEES FOR DIRECTORS TO BE ELECTED AT THE 2000 ANNUAL MEETING OF SHAREHOLDERS
(CLASS I)
<TABLE>
<S> <C>
RICHARD BARTH RETIRED CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
Age: 68 CIBA-GEIGY CORPORATION -- Mr. Barth became Chairman of
Director since 1991 Ciba-Geigy Corporation, a diversified chemical products
company, in 1990 and served in that capacity until its
merger into Novartis Corporation in 1996. Mr. Barth was
President and Chief Executive Officer of Ciba-Geigy
Corporation from 1986 to 1996, Chief Financial Officer from
1979 to 1986, Secretary from 1974 to 1986, and General
Counsel from 1970 to 1986. Mr. Barth also is a director of
The Bank of New York, Novartis Corporation (USA) and Imclone
Systems, Inc.
JAMES L. PATE CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF PENNZOIL-QUAKER
Age: 64 STATE COMPANY -- Mr. Pate has been Chairman of the Board and
Director since 1996 Chief Executive Officer of Pennzoil-Quaker State Company, a
consumer products company, since December 1998. He has
served as Chairman of the Board of PennzEnergy Company
(formerly Pennzoil Company), an oil exploration and
production company, since 1994, was Chief Executive Officer
from 1990 to 1998 and President from 1990 to 1997. Mr. Pate
has served as a director of PennzEnergy Company since 1989.
Mr. Pate also is Chairman of Devon Energy Corporation and a
director of Crown Cork & Seal Company, Inc.
CHARLES J. HOWARD CHAIRMAN OF HOWARD, BARCLAY & ASSOCIATES LTD. -- Mr. Howard
Age: 57 has been Chairman of Howard, Barclay & Associates Ltd., an
Director since 1997 investment counseling firm, since 1994. He also has been
President, Chief Executive Officer, a director and the
largest shareholder of Ausnoram Holdings Limited, an
investment holding company with mining, oil and gas
interests, since 1989. Mr. Howard also is a director of
Anderson Exploration Limited, Petromet Resources Limited,
Southern Africa Minerals Corporation and Unicorp Energy
Corporation.
</TABLE>
2
<PAGE> 6
DIRECTORS WHOSE TERMS END AT THE 2001 ANNUAL MEETING OF SHAREHOLDERS
(CLASS II)
<TABLE>
<S> <C>
H. DAVID AYCOCK CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT OF NUCOR
Age: 69 CORPORATION -- Mr. Aycock has been Chairman of Nucor
Director since 1987 Corporation, a steel and steel products company, since
January 1999 and Chief Executive Officer and President since
June 1999. He served as President and Chief Operating
Officer of Nucor Corporation from 1984 to 1991. He
previously held various management positions, including that
of General Manager, at Nucor Corporation operating units.
ARNOLD M. NEMIROW CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
Age: 56 BOWATER -- Mr. Nemirow became Chief Executive Officer of
Director since 1994 Bowater in 1995 and became Chairman in 1996. He has served
as President of Bowater since September 1994 and served as
Chief Operating Officer of Bowater from September 1994
through February 1995. Mr. Nemirow was President, Chief
Executive Officer and a director of Wausau Paper Mills
Company, a pulp and paper company, from 1990 through 1994,
Chairman, President, Chief Executive Officer and a director
of Nekoosa Papers, Inc., the business papers division of
Great Northern Nekoosa Corporation, from 1988 to 1990, and
Vice President of Great Northern Nekoosa Corporation from
1984 to 1990. Mr. Nemirow also is a director of Alliant
Energy Corporation (formerly Interstate Energy Corporation).
ARTHUR R. SAWCHUK CHAIRMAN OF THE MANUFACTURERS LIFE INSURANCE COMPANY -- Mr.
Age: 64 Sawchuk has been Chairman of The Manufacturers Life
Director since 1998 Insurance Company, an insurance and financial services
company, since April 1998. He served as acting President and
Chief Executive Officer of Avenor Inc., a forest products
company, from November 1997 until its acquisition by Bowater
in July 1998. Previously he held various positions with
DuPont Canada Inc., a chemical and plastics company, serving
as Executive Chairman from September 1997 until his
retirement in December 1997, Chairman of the Board from 1995
to 1997, and President, Chief Executive Officer and a
director from 1992 to 1997. Mr. Sawchuk also is a director
of Manitoba Telecom Services Inc., OntarioPower Generation
Inc. and Trimac Corporation.
</TABLE>
DIRECTORS WHOSE TERMS END AT THE 2002 ANNUAL MEETING OF SHAREHOLDERS
(CLASS III)
<TABLE>
<S> <C>
FRANCIS J. AGUILAR PROFESSOR EMERITUS OF HARVARD UNIVERSITY GRADUATE SCHOOL OF
Age: 67 BUSINESS -- Dr. Aguilar was a faculty member at the Harvard
Director since 1984 University Graduate School of Business from 1965 to 1995.
Since 1994, he has served as Executive Director of the
Management Education Alliance, a nonprofit educational
corporation. Dr. Aguilar also is a director of Dynamics
Research Corporation and Burr-Brown Corporation and also
acts as an independent business consultant.
JOHN A. ROLLS PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THERMION SYSTEMS
Age: 58 INTERNATIONAL -- Mr. Rolls has served as President and Chief
Director since 1990 Executive Officer of Thermion Systems International, an
aerospace and industrial heating systems company, since
1996. He was President and Chief Executive Officer of
Deutsche Bank North America, an international banking
company, from 1992 to 1996. Mr. Rolls was Executive Vice
President and Chief Financial Officer of United Technologies
Corporation, a diversified aerospace and industrial products
company, from 1986 to 1992. Prior to that he was Senior Vice
President and Chief Financial Officer of RCA Corporation.
Mr. Rolls also is a director of MBIA Inc., Thermion Systems
International and FuelCell Energy, Inc.
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C>
KENNETH M. CURTIS SENIOR MEMBER OF CURTIS THAXTER STEVENS BRODER & MICOLEAU,
Age: 69 LIMITED LIABILITY COMPANY, P.A. -- Mr. Curtis was a partner
Director since 1993 in the Portland, Maine, law firm of Curtis Thaxter Stevens
Broder & Micoleau from 1975 to 1979 and from 1981 to 1995,
when the firm became a limited liability company, of which
he currently is a member. Mr. Curtis also served as
President of Maine Maritime Academy from 1986 to 1994. He
was Secretary of State of Maine from 1965 to 1966, Governor
of Maine from 1967 to 1975 and U.S. Ambassador to Canada
from 1979 to 1981. Mr. Curtis also is a director of Key
Corp.
</TABLE>
BOARD AND COMMITTEE MEETINGS
The Board has an Audit Committee consisting of Messrs. Howard, Aguilar and
Barth, a Nominating and Governance Committee consisting of Messrs. Barth,
Curtis, Rolls and Sawchuk, a Human Resources and Compensation Committee
consisting of Messrs. Aycock, Aguilar and Pate, a Finance Committee consisting
of Messrs. Rolls, Barth and Pate, and an Executive Committee consisting of
Messrs. Nemirow, Aguilar and Aycock.
The Audit Committee, which met three times in 1999, reviews the scope and
results of Bowater's annual audit, approves the non-audit services rendered by
Bowater's independent auditors and considers the effect of such services on the
independence of such auditors, recommends to the Board independent auditors for
the ensuing year and reviews Bowater's accounting policies and systems of
internal controls and internal auditing procedures.
The Nominating and Governance Committee, which met two times in 1999,
recommends nominees for election to the Board and addresses issues of corporate
governance for Board consideration. Recommendations for director nominees from
shareholders will be considered by the Nominating and Governance Committee.
Shareholders desiring to make a recommendation to the Nominating and Governance
Committee of a director nominee proposed for election at the 2001 Annual Meeting
should comply with the procedure described under "Proposals by Shareholders."
The Committee also serves in an oversight capacity with respect to Bowater's
compliance with environmental, health and safety regulations.
The Human Resources and Compensation Committee, which met five times in
1999, approves the adoption, amendment and termination of all employee pension
and savings benefit plans, administers executive bonus plans and awards and
stock option plans and grants thereunder, reviews programs followed by
management in developing executive resources for current and future operations
and reviews and approves the compensation of Bowater's officers.
The Finance Committee, which met four times in 1999, reviews and oversees
Bowater's financial affairs. The Committee also provides financial oversight and
direction of Bowater's pension and savings plans, including approving the
selection of trustees and the amount of contributions to be made by Bowater
under these plans. In addition, the Committee reviews and approves the adoption
of actuarial and accounting methods and assumptions under these plans and
reviews the action of management in establishing investment policy and
administering the plans.
The Executive Committee, which met one time during 1999, meets from time to
time to make decisions between meetings of the Board pursuant to authority
delegated by the Board of Directors.
The Board of Directors met six times during 1999.
DIRECTOR COMPENSATION
Each director who is not an employee of Bowater (an "Outside Director")
receives an annual retainer of $35,000, a fee of $1,500 per day for each Board
meeting attended and a fee of $1,000 per day for each Board committee meeting
attended. Each director is also reimbursed for reasonable expenses incurred in
attending meetings. In addition, Outside Directors are eligible to receive
awards under the 2000 Stock Option Plan. In January 2000 each Outside Director
was granted options with respect to 2,000 shares of Common Stock, subject to
shareholder approval of the 2000 Stock Option Plan. In the event that a change
of control (as defined in the 2000 Stock Option Plan) occurs prior to
shareholder approval, each Outside Director may be entitled to payment as
described below under "Approval of Bowater's 2000 Stock Option Plan -- Change in
Control."
4
<PAGE> 8
Deferred Compensation Plan for Outside Directors
The Deferred Compensation Plan for Outside Directors of Bowater
Incorporated (the "Deferred Plan") permits Outside Directors to elect
irrevocably to defer receipt of all or a part of their annual retainer and
meeting fees. Compensation that a director has elected to defer under the
Deferred Plan can be allocated to a cash account, a Bowater Common Stock account
or both accounts, in increments of ten percent, as elected by the director. On
the date on which compensation to be deferred would have been payable, a
participating director who has elected to allocate all or part of his deferred
compensation to his Deferred Plan stock account will be credited with the number
of shares of Common Stock, including fractional shares, having a value (with a
5% discount) equivalent to the amount of deferred compensation that he allocated
to his stock account. Deferred compensation that is allocated to a cash account
will be credited on the date on which such compensation would have been payable.
Whenever dividends are paid on shares of Common Stock, each participant's stock
account will be credited with additional shares having an undiscounted value
equal to the amount of the dividend paid on a single share of such stock,
multiplied by the number of shares of Common Stock, including fractional shares,
credited to the participant's account on the dividend record date. Amounts
credited to a Deferred Plan cash account will accrue interest on the average
monthly balance of that account at a rate equal to the rate for the Fixed Income
Fund maintained for Bowater's Salaried Employees' Savings Plan. Directors can
elect to transfer balances between the cash and stock accounts subject to
certain conditions set forth in the Deferred Plan. A participant in the Deferred
Plan may elect at the time of deferral to have his Deferred Plan account(s)
distributed to him in (a) either Common Stock or cash as soon as possible or in
a stated number of years after he ceases to be an Outside Director or (b) cash
in either five or ten installments. All of Bowater's Outside Directors except
Messrs. Curtis and Howard have accounts under the Deferred Plan.
Retirement Plan for Outside Directors
Bowater also has a Retirement Plan for Outside Directors (the "Outside
Directors' Retirement Plan"). All of Bowater's current Outside Directors
participate in the Outside Directors' Retirement Plan. The Outside Directors'
Retirement Plan provides for normal retirement benefits equal to ten percent of
the participant's annualized retainer at the termination of service multiplied
by the participant's years of service as an Outside Director of Bowater up to a
maximum of ten years. Normal retirement benefits may begin at age 65 after the
completion of five or more years of service, although early retirement is
permitted (with Bowater's consent) upon attainment of age 55 and the completion
of five years of service. Participants who elect early commencement of benefit
payments after retirement receive a reduced benefit.
The Outside Directors' Retirement Plan provides that a participant who was
an Outside Director immediately prior to a change in control of Bowater and who
is removed from or not renominated to his directorship by reason of the change
in control is entitled to the early retirement benefits provided by the plan
regardless of whether the plan requirements for early retirement have been
satisfied.
5
<PAGE> 9
CERTAIN INFORMATION CONCERNING STOCK OWNERSHIP
Bowater knows of no person who, or group that, owns beneficially more than
5% of the outstanding voting power as of March 17, 2000, except as follows:
<TABLE>
<CAPTION>
PERCENT OF OUTSTANDING
COMMON STOCK AND
EXCHANGEABLE SHARES
NAME AND ADDRESS OF AMOUNT AND NATURE OF ENTITLED TO GIVE
BENEFICIAL OWNER BENEFICIAL OWNERSHIP VOTING INSTRUCTIONS(1)
------------------- -------------------- ----------------------
<S> <C> <C>
FMR Corp.(2) 7,514,960(2) 13.91%
82 Devonshire Street
Boston, MA 02109
Franklin Resources, Inc.(3) 4,123,370(3) 7.63%
777 Mariners Island Boulevard
San Mateo, CA 94403
Massachusetts Financial 3,473,813(4) 6.43%
Services Company(4)
500 Boylston Street
Boston, MA 02116
Tiger Management L.L.C. 3,373,400(5) 6.25%
Tiger Performance L.L.C.
Julian H. Robertson, Jr.(5)
101 Park Avenue
New York, NY 10178
Capital Research and Management 2,730,000(6) 5.05%
Company(6)
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
- ---------------
(1) On all matters submitted for shareholder vote, the shares of Common Stock
vote together with the special voting stock held by the Trustee. Under the
Voting and Exchange Trust Agreement, the Trustee is entitled to cast a
number of votes equal to the number of outstanding Exchangeable Shares not
owned by Bowater or its affiliates and as to which the Trustee has timely
received voting instructions from the Exchangeable Shareholders.
Accordingly, percentages have been calculated based upon the total number of
shares of Common Stock and non-affiliated Exchangeable Shares outstanding as
of March 17, 2000.
(2) In an amendment dated February 14, 2000, to Schedule 13G, FMR Corp. ("FMR")
reported that it has sole voting power with respect to 490,050 of the shares
of Common Stock shown in the table and sole dispositive power with respect
to all of the shares shown. The Schedule 13G reported that (a) FMR's
wholly-owned subsidiary, Fidelity Management & Research Company
("Fidelity"), which has the same business address as FMR, acts as an
investment adviser to various investment companies and, as a result, is the
beneficial owner of 6,762,510 shares of Common Stock shown in the table;
Fidelity has sole power to dispose of the 6,762,510 shares owned by the
investment companies; (b) Fidelity Management Trust Company ("Fidelity
Management"), a wholly-owned subsidiary of FMR with the same business
address as FMR, beneficially owns 591,850 shares of Common Stock shown in
the table as a result of its serving as investment manager of institutional
accounts, has sole dispositive power over 591,850 shares of Common Stock,
sole power to vote or to direct the voting of 352,250 shares of Common Stock
and no power to vote or to direct the voting of 239,600 shares of Common
Stock owned by the institutional accounts; and (c) Fidelity International
Limited, Pembroke Hall, 42 Crowlane, Hamilton, Bermuda, has sole dispositive
power with respect to 160,600 shares of Common Stock shown in the table,
sole power to vote or direct the voting of 137,800 shares and no power to
vote or direct the voting of 22,800 shares of Common Stock by virtue of
providing investment advisory and management services to a number of
non-U.S. investment companies and institutional investors.
6
<PAGE> 10
(3) In a Schedule 13G dated January 13, 2000, Franklin Resources, Inc. ("FRI")
reported that the securities shown in the table above are beneficially owned
by one or more investment companies or other managed accounts that are
advised by direct and indirect investment advisory subsidiaries of FRI. The
investment advisory subsidiaries have investment and/or voting power over
the securities owned by their investment advisory clients. Accordingly, such
subsidiaries may be deemed to be the beneficial owners of the securities
shown in the table. Charles B. Johnson and Rupert H. Johnson, Jr. (the "FRI
Principal Shareholders") (each of whom has the same business address as FRI)
each owns in excess of 10% of the outstanding common stock of FRI. FRI and
the FRI Principal Shareholders may be deemed to be the beneficial owners of
securities held by persons and entities advised by FRI subsidiaries. The
Schedule 13G reported that one of the investment adviser subsidiaries,
Templeton Global Advisors Limited (whose business address is Lyford Cay,
P.O. Box N-7759, Nassau, Bahamas), has sole voting power with respect to
3,992,700 of the shares shown and sole dispositive power with respect to
3,993,000 of the shares shown. Each of FRI, the FRI Principal Shareholders
and the investment advisory subsidiaries disclaims any economic interest or
beneficial ownership in the shares shown in the table above and are of the
view that they are not acting as a "group" for purposes of the Securities
Exchange Act of 1934, as amended, and that they are not otherwise required
to attribute to each other the beneficial ownership of securities held by
any of them or by any persons or entities advised by FRI subsidiaries.
(4) In a Schedule 13G dated February 11, 2000, Massachusetts Financial Services
Company ("MFS") reported that it has sole voting power with respect to
3,462,213 of the shares of Common Stock shown in the table and sole
dispositive power with respect to all of the shares shown. The shares of
Common Stock are also beneficially owned by certain other non-reporting
entities as well as MFS.
(5) Tiger Management L.L.C. ("TM") reported in an amendment to Schedule 13G
dated February 14, 2000, that it has shared voting and dispositive power
with respect to 1,668,800 of the shares of Common Stock shown in the table,
that Tiger Performance L.L.C. ("TP") has shared voting and dispositive power
with respect to 1,677,600 of the shares of Common Stock shown, and that
Julian H. Robertson, Jr., as the ultimate controlling person of TM and TP,
has sole voting and dispositive power with respect to 27,000 of the shares
of Common Stock shown and shared voting and dispositive power with respect
to all of the shares shown. The Schedule 13G reported that TM and TP are
investment advisers.
(6) In an amendment dated February 10, 2000, to Schedule 13G, Capital Research
and Management Company ("CRMC") reported that it has sole dispositive power
with respect to all of the shares of Common Stock shown in the table. The
Schedule 13G reported that CRMC serves as an investment advisor to various
registered investment companies.
7
<PAGE> 11
As of March 17, 2000, ownership of Common Stock and Exchangeable Shares by
each of the directors and nominees for director, by each of the executive
officers named in the Summary Compensation Table, and by all directors and
executive officers of Bowater, as a group, was as follows:
<TABLE>
<CAPTION>
PERCENT OF
OUTSTANDING
COMMON STOCK AND
EXCHANGEABLE SHARES
NAME OF AMOUNT AND NATURE OF ENTITLED TO GIVE
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) VOTING INSTRUCTIONS(2)
---------------- ----------------------- ----------------------
<S> <C> <C>
Arnold M. Nemirow 453,096(3) *
Arthur D. Fuller 113,597(4) *
E. Patrick Duffy 107,517(5) *
David G. Maffucci 91,112(6) *
Anthony H. Barash 57,694(7) *
Francis J. Aguilar 25,405(8) *
H. David Aycock 16,875(9) *
Richard Barth 14,136(10) *
Kenneth M. Curtis 3,750(11) *
Charles J. Howard 8,500(12) *
James L. Pate 7,584(13) *
John A. Rolls 15,322(14) *
Arthur R. Sawchuk 3,642(15) *
Directors and executive officers 1,274,169(16) 2.31%
as a group (24 persons)
</TABLE>
- ---------------
* Represents holdings of less than 1% of the outstanding shares of Common
Stock or Exchangeable Shares.
(1) Beneficial ownership consists of shares owned directly or indirectly as
well as shares underlying options, warrants or other rights to acquire the
shares that are currently exercisable or that will be exercisable on or
before May 16, 2000. Units in one or more Common Stock funds of the Bowater
Incorporated Salaried Employees' Savings Plan (the "Savings Plan") are
allocated to the accounts of Bowater's officers. These funds hold Common
Stock and relatively small amounts of short-term investments. The number of
shares of Common Stock shown in the table is an approximation (rounded to
the nearest whole number) provided by the Savings Plan administrator in a
statement for the period ending December 31, 1999, based on the market
value of the applicable units. This table also includes shares of Common
Stock (rounded to the nearest whole number) allocated under Bowater's
Compensatory Benefits Plan (the "Compensatory Plan") based on a statement
for the period ending December 31, 1999. Additional shares of Common Stock
may have been allocated to the accounts of participants in the Savings Plan
or Compensatory Plan since the date of the last statements from the plan
administrators. Participants in the Compensatory Plan have no voting power
with respect to share allocations but receive cash payouts based on the
number of shares allocated to their accounts under the plan upon their
retirement from Bowater, death, disability or other termination of
employment (if they have three years of service), and do not have
investment power over share allocations prior to that time. The number of
shares allocated under each of the Savings Plan and the Compensatory Plan
is subject to revision in order to comply with requirements respecting
nondiscrimination standards and limitations on contributions under the
Internal Revenue Code of 1986, as amended (the "Code").
(2) On all matters submitted for shareholder vote, the shares of Common Stock
vote together with the special voting stock held by the Trustee. Under the
Voting and Exchange Trust Agreement, the Trustee is entitled to cast a
number of votes equal to the number of outstanding Exchangeable Shares not
owned by Bowater or its affiliates and as to which the Trustee has timely
received voting instructions from the Exchangeable Shareholders.
Accordingly, percentages of total beneficial ownership have been calculated
based upon the total number of shares of Common Stock and non-affiliated
Exchangeable Shares outstanding as of March 17, 2000. In addition, under
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended, percentages have been computed on the assumption that shares of
Common Stock that can be acquired within 60 days of March 17, 2000, upon
the exercise of options by a given person are outstanding, but no other
shares similarly subject to acquisition by other persons are outstanding.
8
<PAGE> 12
(3) Represents 31,000 shares of Common Stock owned directly, 760 shares of
Common Stock owned in the Savings Plan, 2,336 shares of Common Stock
allocated under the Compensatory Plan and 419,000 shares of Common Stock
that may be acquired under options currently exercisable.
(4) Represents 10,000 shares of Common Stock owned directly, 2,345 shares of
Common Stock owned in the Savings Plan, 1,252 shares of Common Stock
allocated under the Compensatory Plan and 100,000 shares of Common Stock
that may be acquired under options currently exercisable.
(5) Represents 6,000 shares of Common Stock owned directly, 533 shares owned in
the Savings Plan, 984 shares of Common Stock allocated under the
Compensatory Plan and 100,000 shares of Common Stock that may be acquired
under options currently exercisable.
(6) Represents 4,557 shares of Common Stock owned directly, 3,388 shares of
Common Stock owned in the Savings Plan, 717 shares of Common Stock
allocated under the Compensatory Plan and 82,450 shares of Common Stock
that may be acquired under options currently exercisable.
(7) Represents 1,500 shares of Common Stock owned directly, 500 shares of
Common Stock held in the Seyfarth, Shaw, Fairweather & Geraldson Retirement
Plan for Partners, 2,686 shares of Common Stock owned in the Savings Plan,
508 shares of Common Stock allocated under the Compensatory Plan and 52,500
shares of Common Stock that may be acquired under options currently
exercisable.
(8) Represents 13,487 shares of Common Stock owned directly, 9,168 shares of
Common Stock allocated under the Deferred Plan and 2,750 shares of Common
Stock that may be acquired under options currently exercisable.
(9) Represents 500 shares of Common Stock owned directly, 13,625 shares of
Common Stock allocated under the Deferred Plan and 2,750 shares of Common
Stock that may be acquired under options currently exercisable.
(10) Represents 11,386 shares of Common Stock allocated under the Deferred Plan
and 2,750 shares of Common Stock that may be acquired under options
currently exercisable.
(11) Represents 1,000 shares of Common Stock owned directly and 2,750 shares of
Common Stock that may be acquired under options currently exercisable.
(12) Represents 1,000 shares of Common Stock owned directly, 5,000 shares of
Common Stock owned by Ausnoram Holdings Limited, of which Mr. Howard is the
President, Chief Executive Officer and largest shareholder and 2,500 shares
of Common Stock that may be acquired under options currently exercisable.
(13) Represents 1,000 shares of Common Stock owned directly, 3,834 shares of
Common Stock allocated under the Deferred Plan and 2,750 shares of Common
Stock that may be acquired under options currently exercisable.
(14) Represents 12,572 shares of Common Stock allocated under the Deferred Plan
and 2,750 shares of Common Stock that may be acquired under options
currently exercisable.
(15) Represents 1,577 Exchangeable Shares owned directly, 1,315 shares of Common
Stock allocated under the Deferred Plan and 750 shares of Common Stock that
may be acquired under options currently exercisable.
(16) This total represents 80,995 shares of Common Stock and 2,255 Exchangeable
Shares owned directly, 31,718 shares of Common Stock allocated under the
Savings Plan, 8,602 shares of Common Stock allocated under the Compensatory
Plan, 51,899 shares of Common Stock allocated under the Deferred Plan and
1,098,700 shares of Common Stock subject to options currently exercisable.
The number of shares allocated to the accounts of certain executive
officers under each of the Savings Plan and Compensatory Plan is subject to
revision in order to comply with requirements respecting nondiscrimination
standards and limitations on contributions under the Code. The beneficial
ownership stated above represents sole voting and investment power, except
as indicated above.
9
<PAGE> 13
HUMAN RESOURCES AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Human Resources and Compensation Committee (the "Committee") develops
and administers the compensation programs for Bowater's executive officers. The
Committee's goal is to develop and monitor executive compensation programs that
are consistent with strategic business objectives and shareholder interests.
The Committee is composed entirely of independent, nonemployee directors
who have not served as officers of Bowater and have no interlocking
relationships, as defined by the Securities and Exchange Commission.
KEY ELEMENTS AND POLICIES FOR COMPENSATION OF EXECUTIVE OFFICERS
Bowater's basic policy for executive officers is that compensation should
vary depending on Bowater's success in the following areas:
- Performance versus Bowater's financial and strategic objectives, and
- Creation of shareholder value.
The key elements of Bowater's 1999 executive compensation program were base
salary, the Annual Incentive Plan, the 1997-1999 Long-Term Incentive Plan (the
"LTIP Plan") and stock options.
- To determine appropriate compensation levels within each pay component,
the Committee considered all elements of the executive compensation
program. Base salaries and targeted annual incentive payouts for
executive officers generally were set above the median of comparable
executives in the paper and forest products industry and in selected
high-performing industrial companies (the "Comparable Group"). Executive
officers had the opportunity to earn above-median levels of compensation
through the Annual Incentive Plan if Bowater attained above-median
performance. Actual total compensation depended on Bowater's performance.
- Competitive market data were provided by an independent compensation
consultant. Bowater reviewed the pay practices of Comparable Group
companies. The Committee believed this criterion provided reasonable pay
comparisons, enabling Bowater to assure that executives were being paid
fairly while assuring shareholders and Bowater that executive pay levels
were reasonable.
- The Comparable Group includes many of Bowater's peer companies included
in the Dow Jones Paper Products Group listed in the Total Shareholder
Return chart below. The Comparable Group also includes other paper and
forest products companies and selected high-performing industrial
companies. This decision was based on the Committee's belief that the
recruitment of executive talent should not necessarily be limited to the
companies used in the Dow Jones group.
BASE SALARY
Executive officers' salaries are generally set to place them above median
levels of executive compensation at comparable companies as described above,
considering the scope of the individual's responsibilities relative to the
responsibilities of executives at comparable companies.
- Competitive market considerations form the primary basis for setting base
salary levels, since performance plays such a large role in determining
annual and long-term incentives. However, in setting base salary levels,
the Committee also considers the officer's performance against individual
objectives during the preceding year, the profits of the individual's
business unit relative to plan during the preceding year for business
unit executives, and Bowater's profits during the preceding year for
officers with corporate-wide responsibilities.
ANNUAL INCENTIVE PLAN
The Annual Incentive Plan for 1999 used five performance measures: return
on net assets ("RONA"), return on capital spending, operating unit performance,
sales performance, and quantified merger synergies. Each executive's bonus
payout was based on at least three of these measures, each weighted from 15% to
50%, depending on the executive's responsibility and function.
10
<PAGE> 14
- RONA was measured at the divisional and corporate levels, with awards
based on performance relative to goals established at the beginning of
the year. The capital-intensive nature of Bowater's business means that
it is critical to evaluate earnings in the context of the resources
required to generate them. In addition, there has been a strong
historical relationship between RONA and market valuation for companies
in the paper and forest products industry.
- Return on capital spending targets were set at the divisional level to
reflect Bowater's priority to spend capital dollars on the highest return
capital projects. Consolidated results were used for corporate employees.
- Operating unit performance goals were established to reflect Bowater's
desire to improve performance in one or more of the areas of safety,
productivity, quality, cost reduction and operating income. These goals
mirror the performance criteria established for Bowater's gainsharing
programs, which generally apply to employees not in the Annual Incentive
Plan.
- Sales performance goals were established to reflect Bowater's focus on
improving operating efficiencies through optimizing product mix and
reducing sales and distribution costs for both Bowater and its customers.
- Cost and operating synergy objectives for the 1998 merger with Avenor
were established to speed the integration process.
Bowater's performance during 1999 resulted in bonus payouts ranging from
approximately 95% to 145% of target levels.
LONG-TERM INCENTIVE PLAN
The LTIP Plan, which was approved by Bowater's shareholders in 1997, is
designed to link rewards paid to key executives with Bowater's performance. The
LTIP Plan is a three-year plan covering the years 1997, 1998 and 1999. At the
beginning of the plan, units were assigned to each participant based on the
participant's position rank. Payouts under the LTIP Plan will depend upon
Bowater's average RONA as compared to the RONA of a group of designated peer
companies as well as upon the average daily closing price of the Common Stock
for each year covered by the plan. No payout will be made under the LTIP Plan
unless Bowater's average RONA exceeds the average RONA of the peer group
companies. All executive officers participate in the LTIP Plan. Payouts, if any,
can be calculated only after financial data through December 31, 1999, is
available for all companies in the designated peer group, anticipated to be
during the second quarter of 2000.
STOCK OPTIONS
Stock options continue to play an important role in linking executives'
compensation to Bowater's Common Stock performance, and thus to the interests of
shareholders. The number of options granted to each executive officer is based
on the executive's position rank. In 1999 stock options were granted with an
exercise price equal to the fair market value of the Common Stock on the date of
grant. Accordingly, the options have value to the option holder only if the
stock price appreciates.
The Committee believes this design focuses executives on the creation of
shareholder wealth over the long term.
POLICY WITH RESPECT TO CORPORATE TAX DEDUCTION LIMIT
In order to maintain flexibility to attract and retain qualified
executives, the Committee may allow for compensation that is not deductible
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). Bowater paid certain non-deductible compensation to Mr. Nemirow in
1999, the impact of which was not material to Bowater.
11
<PAGE> 15
COMPENSATION OF THE CEO DURING 1999
The Committee annually reviews Mr. Nemirow's salary level and considers
such factors as individual performance and contribution to Bowater's success
when contemplating future salary adjustments. Mr. Nemirow's 1999 salary was
determined on the same basis as the base salaries for all executive officers, as
described above. Mr. Nemirow's 1999 payout under the Annual Incentive Plan was
based on the measures described above, weighted as follows: RONA -- 50%, Return
on Capital Spending -- 10%, Operating Unit Performance -- 25% and Synergies --
15%. In addition, stock options for 100,000 shares of Common Stock were granted
to Mr. Nemirow in 1999. These options have terms identical to, and were
determined on the same basis as, those of all executive officers as described
above.
All members of the Human Resources and Compensation Committee concur in
this report.
H. David Aycock (Chairman)
Francis J. Aguilar
James L. Pate
TOTAL SHAREHOLDER RETURN
THE COMPANY VS. DOW JONES PAPER PRODUCTS GROUP* AND S&P 500
1994-1999
The table below compares the cumulative shareholder return of the Common
Stock for the last five years with the cumulative total return of the Dow Jones
Paper Products Group and the S&P 500, assuming a $100 investment on December 31,
1994.
(GRAPH)
<TABLE>
<CAPTION>
DOW JONES PAPER PRODUCTS
BOWATER INCORPORATED S&P 500 GROUP
-------------------- ------- ------------------------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 135.34 137.55 109.38
1996 146.52 169.11 115.53
1997 176.16 225.52 124.68
1998 167.29 289.96 130.65
1999 222.96 350.96 174.66
</TABLE>
* Companies include: Boise Cascade Corporation, Bowater
Incorporated, Champion International Corporation, Consolidated
Papers, Inc., International Paper Company, The Mead Corporation
and Westvaco Corporation.
12
<PAGE> 16
EXECUTIVE COMPENSATION
The following table sets forth information concerning all compensation paid
by Bowater and its subsidiaries during the last three fiscal years ended
December 31, 1999, to the Chief Executive Officer and to each of the four
executive officers other than the Chief Executive Officer with the highest
salaries and bonuses during fiscal year 1999 (these officers are referred to
collectively as the "Named Executive Officers") for services rendered in all
capacities to Bowater and its subsidiaries during these fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
ANNUAL COMPENSATION ------------
------------------------------------ SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
DURING 1999 YEAR ($) ($) ($)(1) (#) ($)
------------------ ---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Arnold M. Nemirow 1999 800,000 559,232 -- 101,000 31,633(2)
Chairman, President and 1998 700,000 461,160 -- 50,000 42,114
Chief Executive Officer 1997 650,000 466,869 -- 50,000 35,647
Arthur D. Fuller 1999 427,345(3) 354,551 -- 36,000 17,292(4)
Executive Vice President and 1998 388,765(5) 224,404 -- 25,000 21,568
President - Newsprint Division 1997 333,333 182,248 -- 20,000 18,533
E. Patrick Duffy 1999 376,535(6) 260,665 -- 26,000 14,713(7)
Senior Vice President and 1998 345,960(8) 181,152 -- 20,000 18,641
President - Coated Paper Division 1997 310,000 157,220 -- 20,000 15,568
David G. Maffucci 1999 356,055(9) 209,900 -- 26,000 14,633(10)
Senior Vice President and 1998 320,285(11) 153,348 -- 20,000 18,159
Chief Financial Officer 1997 275,000 131,681 -- 20,000 14,448
Anthony H. Barash 1999 310,000 179,340 -- 26,000 13,287(12)
Senior Vice President - 1998 295,000 144,564 -- 20,000 17,850
Corporate Affairs and 1997 280,000 134,075 -- 20,000 14,806
General Counsel
</TABLE>
- ---------------
(1) Perquisites and other personal benefits did not exceed the lesser of
$50,000 or 10% of the total salary and bonus of any Named Executive Officer
for the years shown.
(2) Amounts included under "All Other Compensation" for Mr. Nemirow for 1999
consist of Bowater contributions of $7,873 under the Savings Plan and
$23,760 under the Compensatory Plan.
(3) Amounts included under "Salary" for Mr. Fuller for 1999 include $7,345 from
the sale of earned vacation days back to Bowater.
(4) Amounts included under "All Other Compensation" for Mr. Fuller for 1999
consist of Bowater contributions of $4,400 under the Savings Plan and
$12,892 under the Compensatory Plan.
(5) Amounts included under "Salary" for Mr. Fuller for 1998 include $6,765 from
the sale of earned vacation days back to Bowater.
(6) Amounts included under "Salary" for Mr. Duffy for 1999 include $6,535 from
the sale of earned vacation days back to Bowater.
(7) Amounts included under "All Other Compensation" for Mr. Duffy for 1999
consist of Bowater contributions of $4,400 under the Savings Plan and
$10,313 under the Compensatory Plan.
(8) Amounts included under "Salary" for Mr. Duffy for 1998 include $5,960 from
the sale of earned vacation days back to Bowater.
(9) Amounts included under "Salary" for Mr. Maffucci for 1999 include $6,055
from the sale of earned vacation days back to Bowater.
13
<PAGE> 17
(10) Amounts included under "All Other Compensation" for Mr. Maffucci for 1999
consist of Bowater contributions of $4,400 under the Savings Plan and
$10,233 under the Compensatory Plan.
(11) Amounts included under "Salary" for Mr. Maffucci for 1998 include $5,285
from the sale of earned vacation days back to Bowater.
(12) Amounts included under "All Other Compensation" for Mr. Barash for 1999
consist of Bowater contributions of $7,800 under the Savings Plan and
$5,487 under the Compensatory Plan.
STOCK OPTIONS
The following table sets forth information regarding options and SARs
granted with respect to Common Stock made by Bowater to the Named Executive
Officers during 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS(1)
UNDERLYING GRANTED TO GRANT DATE
OPTIONS/SARS(1) EMPLOYEES EXERCISE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED(#) IN 1999 ($/SH) DATE(2) ($)(3)
---- --------------- ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Arnold M. Nemirow 100,000(4) 11.32% 41.03 1/26/2009 1,234,000
1,000(5) 0.11% 39.78 2/22/2009 12,340
Arthur D. Fuller 35,000(4) 3.96% 41.03 1/26/2009 431,900
1,000(5) 0.11% 39.78 2/22/2009 12,340
E. Patrick Duffy 25,000(4) 2.83% 41.03 1/26/2009 308,500
1,000(5) 0.11% 39.78 2/22/2009 12,340
David G. Maffucci 25,000(4) 2.83% 41.03 1/26/2009 308,500
1,000(5) 0.11% 39.78 2/22/2009 12,340
Anthony H. Barash 25,000(4) 2.83% 41.03 1/26/2009 308,500
1,000(5) 0.11% 39.78 2/22/2009 12,340
</TABLE>
- ---------------
(1) SARs consist of equity participation rights ("EPRs") under Bowater's Equity
Participation Rights Plan.
(2) The plans under which the options were granted and the option agreements set
forth certain earlier expiration dates.
(3) The present values of these options were calculated using the Black-Scholes
option pricing model and assuming volatility of 29.97%, a risk free return
rate of 4.75%, dividends at the rate of $.80 per share and an average
expected option life of 5.65 years. The ultimate values of the options will
depend on the future market price of the Common Stock. The actual value, if
any, an optionee will realize upon exercise of an option will depend on the
excess of the market value of the Common Stock over the exercise price on
the date the option is exercised.
(4) Options and/or EPRs with respect to 50% of the covered shares of Common
Stock became exercisable on January 26, 2000, and options and/or EPRs with
respect to the remaining 50% of the shares of Common Stock will become
exercisable on January 26, 2001, if certain conditions are met. In addition,
the stock option plan under which the options were granted provides that the
exercisability date is accelerated and Bowater is required to repurchase
outstanding options at a defined acceleration price upon the occurrence of a
change in control event as defined in the stock option plan. The plan under
which the EPRs were granted provides that the exercisability date is
accelerated and Bowater is required to pay a defined acceleration price upon
the occurrence of a change in control event as defined in the plan.
(5) EPRs with respect to 50% of the covered shares of Common Stock were
immediately exercisable on the date of grant, February 22, 1999, and EPRs
with respect to the remaining 50% of the shares of Common Stock became
exercisable on February 22, 2000. For a description of the consequences of a
change in control, see footnote 4 above.
14
<PAGE> 18
OPTION EXERCISES
The following table sets forth information concerning options exercised by
Named Executive Officers and the value at the end of 1999 of SARs and
unexercised options held by the Named Executive Officers to purchase Bowater's
Common Stock.
AGGREGATED OPTION EXERCISES IN 1999
AND 1999 YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED VALUE 12/31/1999(#) 12/31/1999($)(1)
ON EXERCISE REALIZED ------------------------- -------------------------
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Arnold M. Nemirow 6,000 171,844 349,500/125,500 7,793,114/1,468,979
Arthur D. Fuller 0 0 70,500/48,000 1,131,843/538,904
E. Patrick Duffy 0 0 78,000/35,500 1,287,234/392,733
David G. Maffucci 1,500 41,484 61,500/35,500 1,002,316/392,733
Anthony H. Barash 0 0 60,500/35,500 825,078/392,733
</TABLE>
- ---------------
(1) Based on the difference between the option exercise price and the closing
price of Bowater's Common Stock on the New York Stock Exchange on December
31, 1999, of $54.31.
STOCK RETENTION PROGRAM
Bowater has established stock ownership guidelines for directors and senior
executives as a way to better align their financial interests with those of
shareholders. These individuals are expected to make continuing progress toward
compliance with the guidelines and to comply fully by the later of February 1,
2002, or three years after the executive's employment with Bowater or the
director's election to the Board. Executives subject to the guidelines are
required, as a condition of eligibility for future bonus payments, to own stock
with a value equal to a specified multiple of their base salaries. Under these
guidelines, the requisite multiples are three for the chief executive officer,
two for executive and senior vice presidents and certain vice presidents and
one-half to one for certain corporate vice presidents, divisional vice
presidents and others, depending on their respective position ranks. In
addition, directors are expected to own stock as determined under the guidelines
with a value equal to three times their annual retainers. Up to one-half of the
ownership requirement must be satisfied through Common Stock or Exchangeable
Shares owned outright or through Bowater benefit plans; the remainder may be met
through vested stock options or vested equity participation rights.
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
Each Named Executive Officer (collectively, the "Executives") is party to
an employment agreement (collectively, the "Agreements"). Each Agreement
continues until death, disability, retirement or written notice of termination
by either Bowater or the Executive. In the event of a Change in Control, as
defined in the CIC Agreements described below, the term of the Agreements
continues for not less than three years thereafter unless the Executive
terminates his employment for other than Good Reason (also as defined in the CIC
Agreements). The Agreements provide for payment to each Executive of an annual
base salary and for the Executive's participation in Bowater's various bonus and
benefit plans as in effect from time to time while the Agreements are in effect.
In the event the Executive's employment is involuntarily terminated for reasons
other than death, disability, retirement or Cause (defined in the Agreements as
gross negligence or willful misconduct by the Executive either in the course of
his employment or that has a material adverse effect on Bowater or on the
Executive's ability to perform his duties adequately and effectively), the
Agreements provide for payments equal to two years of annual base salaries and
bonuses, plus a pro rata share of the Executive's bonus for the year of
termination.
With respect to employee benefit plans, Mr. Nemirow's Agreement provides
that, for purposes of determining the benefits due under Bowater's benefits
plans, he shall receive credit for continuous employment at an accelerated rate
and entitles him to receive certain minimum annual benefits upon his retirement
from Bowater; Mr. Duffy's Agreement provides that he is entitled to immediate
vesting under Bowater's Supplemental Benefits Plan; and
15
<PAGE> 19
Mr. Barash's Agreement provides him with an additional five years of credited
service under Bowater's retirement plans upon his early or normal retirement.
Each Executive also is a party to a change in control agreement with
Bowater (collectively, the "CIC Agreements"). The CIC Agreements have a
three-year term that is automatically extended at the end of each year for an
additional one year. The CIC Agreements generally provide that, in the event of
a Change in Control (as defined below), the CIC Agreements shall continue in
effect until they expire in accordance with the above-described extensions, but
in any event for a period of not less than three years from the date of the
Change in Control. Following a Change in Control of Bowater, if an Executive's
employment is terminated by Bowater (except for a termination due to death,
disability, or retirement, or for Cause (defined as gross negligence that has
not been cured, willful misconduct that has not been cured, or conviction of a
felony, which action has a demonstrable and material adverse effect upon
Bowater)) or if the Executive elects to terminate his employment for Good Reason
as defined below, the Executive shall receive his full base salary and all
benefits and awards under Bowater's benefit plans and policies (in which he was
a participant prior to the Change in Control) to which he is entitled through
his date of termination and may elect to receive, in lieu of any severance
payments provided in his employment agreement described above, an amount equal
to: (a) three times the Executive's annual base salary in effect when the
Executive is terminated or, if higher, the Executive's annual base salary in
effect immediately prior to the Change in Control; plus (b) three times the
largest annual bonus awarded to the Executive during the five fiscal years
immediately preceding the year in which the Change in Control occurred or, if
higher, the annual bonus the Executive would have been awarded under the bonus
plan had he continued in Bowater's employ on the same basis as immediately
before the Change in Control; plus (c) three times the largest annual
contribution made by Bowater to the Savings Plan on the Executive's behalf
during the five fiscal years immediately preceding the Change in Control or, if
higher, the contribution Bowater would have made to the Savings Plan on the
Executive's behalf for the fiscal year in which the Change in Control occurred
had he continued in Bowater's employ at the same base salary and with the same
contribution level as immediately prior to the Change in Control; plus (d)
thirty percent of the Executive's annual base salary in effect when the
Executive is terminated, or, if higher, the Executive's annual base salary in
effect immediately prior to the Change in Control (as compensation for medical,
life insurance and other benefits lost as a result of the termination of
employment). In addition, each of the CIC Agreements provides that the Executive
will be entitled to a pro rata portion of the annual bonus calculated in the
manner specified in (b) above for the year in which the termination occurred.
The CIC Agreements provide that the foregoing payments shall be reduced by
1/36th for each month by which the date that is three years from the effective
date of the Executive's termination extends beyond the Executive's normal
retirement date.
The CIC Agreements define a Change in Control as occurring if: (a) any
person becomes beneficial owner of an amount of Bowater stock representing 20%
or more of the combined voting power of Bowater's then outstanding voting
securities, unless the Board has approved the acquisition of up to 50% of such
securities or such person has filed a Schedule 13G indicating such person's
intent to hold such securities for investment; (b) less than 50% of the total
membership of the Board shall be continuing directors (as defined in the CIC
Agreements); or (c) Bowater's shareholders approve a merger or consolidation of
Bowater, or reorganization of Bowater or an agreement for the sale or other
disposition of substantially all of Bowater's assets unless at least 50% of the
voting power of the resulting entity is still owned by previous Bowater
shareholders or at least 50% of the board of directors of the resulting entity
are previous Bowater directors.
The CIC Agreements define Good Reason as: (a) an adverse change in the
Executive's status, duties or responsibilities as in effect immediately prior to
the Change in Control after the Executive has given notice of the adverse change
and Bowater has failed to cure; or (b) failure of Bowater to pay or provide the
Executive the salary or benefits to which he is entitled; or (c) the reduction
of the Executive's salary as in effect on the date of the Change in Control; or
(d) the taking of any action by Bowater that would substantially diminish the
value of the Executive's awards or benefits under Bowater's benefit plans in
which the Executive was participating at the time of the Change in Control; or
(e) Bowater's failure to obtain from any successor assent to the CIC Agreement;
or (f) the relocation of the Executive's principal office to a location more
than 35 miles from its location immediately prior to the Change in Control; or
(g) a substantial increase in the Executive's travel obligations subsequent to
the Change in Control.
The CIC Agreements also generally provide a terminated Executive with
outplacement assistance, a grossed up reimbursement of certain excise taxes that
may be levied on "excess parachute payments" and reimbursement for all costs
incurred in connection with enforcing the terms of the CIC Agreement. In
addition, the CIC Agreements generally provide that Bowater will pay or provide
the Executives, their surviving spouses or children the amounts and benefits
that they would have received, assuming certain conditions, under Bowater's
Retirement Plan and
16
<PAGE> 20
Supplemental Benefit Plan in effect immediately prior to the Change in Control
if the Executive had continued to be employed until the third anniversary of the
effective date of the termination of the Executive's employment or until the
Executive's normal retirement date, whichever is earlier.
RETIREMENT BENEFITS
The following table shows the total estimated annual pension benefits
payable to the Named Executive Officers under Bowater's qualified, nonqualified
benefits restoration and nonqualified supplemental retirement plans upon
retirement at age 65, calculated on a straight life annuity basis. Benefits to
Named Executive Officers are not reduced by any offset for Social Security
benefits.
COMBINED RETIREMENT PLANS TABLE OF ESTIMATED BENEFITS
<TABLE>
<CAPTION>
FINAL
AVERAGE 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 OR MORE
EARNINGS* SERVICE SERVICE SERVICE SERVICE SERVICE YEARS SERVICE
- --------- -------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 400,000 $ 50,000 $100,000 $150,000 $200,000 $220,000 $240,000
450,000 56,250 112,500 168,750 225,000 247,500 270,000
500,000 62,500 125,000 187,500 250,000 275,000 300,000
550,000 68,750 137,500 206,250 275,000 302,500 330,000
600,000 75,000 150,000 225,000 300,000 330,000 360,000
1,000,000 125,000 250,000 375,000 500,000 550,000 600,000
1,100,000 137,500 275,000 412,500 550,000 605,000 660,000
1,200,000 150,000 300,000 450,000 600,000 660,000 720,000
</TABLE>
- ---------------
* Average annual earnings for best 36 consecutive months in the 60 months
preceding retirement.
Retirement benefits are payable under one or more of the following plans: a
qualified plan covering all salaried employees, which provides pension benefits
based on earnings; a nonqualified benefits restoration plan, which provides a
make-up of qualified plan benefits limited by the imposition of statutory Code
limitations; and a nonqualified supplemental plan covering designated senior
executives including the Named Executive Officers (the "Supplemental Plan"),
which provides benefits in addition to those under the two preceding plans. The
definition of compensation under the Supplemental Plan includes those categories
of compensation under the salary and bonus headings in the Summary Compensation
Table and does not include compensation in any of the other headings of the
Summary Compensation Table. The Supplemental Plan provides for vesting of
accrued benefits in the event of a change in control followed by termination of
employment of a covered employee not for cause. The Supplemental Plan also
provides that benefits payable to a participant who retires before age 60 are
subject to a reduction of .5% for each full month of retirement before age 60.
The two other plans described above provide that in the event of a change in
control, each participant in the plans will become 100% vested in his accrued
benefits. This table assumes retirement in 1999 with payments beginning at age
65. At such time, the individuals listed in the Summary Compensation Table above
had the following final average earnings (as defined above) and credited number
of years of service: Mr. Nemirow, $1,115,050, 10.7 years (Mr. Nemirow received
additional years of service after his fifth year employment anniversary under
the terms of his employment agreement); Mr. Fuller, $563,177, 4.9 years; Mr.
Duffy, $485,670, 4.8 years; Mr. Maffucci, $444,283, 22.5 years; and Mr. Barash,
$413,838, 3.8 years.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of Forms 3, 4 and 5 and amendments to these forms
furnished to Bowater during and with respect to its most recent fiscal year, and
written representations that no Form 5 was required, Bowater believes that
except as disclosed below all of its executive officers, directors and persons
who may have been deemed to be greater than 10% shareholders during the year
have made all filings required to be made under Section 16(a) of the Securities
Exchange Act of 1934, as amended. Francis J. Aguilar, a director of Bowater,
included in his Form 5 for 1999 his holding of shares that he acquired through
pre-1991 accumulation in his dividend reinvestment account, which at the time
was exempt from transaction reporting.
17
<PAGE> 21
ITEM NO. 2
APPROVAL OF BOWATER'S 2000 STOCK OPTION PLAN
The 2000 Stock Option Plan has been established by Bowater to secure for
Bowater and its shareholders the benefits arising from (a) providing long-term
incentive compensation opportunities to those key employees and officers of
Bowater and its subsidiaries who are and will be responsible for its future
growth and continued success, and (b) aligning the interests of the members of
the Board of Directors with Bowater's stockholders. The Plan provides a means
whereby these key employees, officers and nonemployee directors may (x) be
awarded restricted or nonrestricted stock awards, (y) acquire shares of Common
Stock pursuant to stock options, and (z) be awarded stock appreciation rights
("SARs"). The Plan is being adopted because no shares are currently available to
be granted under Bowater's 1997 Stock Option Plan.
Key features of the Plan include:
- a prohibition against the repricing of stock options;
- a prohibition against granting options with an exercise price less than
the fair market value of Common Stock on the date of grant;
- authorization of 1,800,000 shares subject to the plan (3.33% of Common
Stock outstanding plus Exchangeable Shares entitled to give voting
instructions, and 3.47% of Common Stock outstanding, all as of the record
date for the Annual Meeting);
- limits on the number of awards (generally 200,000 shares) that may be
granted to any individual under the plan each year; and
- limits on the percentage of shares (5%) subject to the plan that may be
granted in the form of restricted or nonrestricted stock.
The Plan has been designed to the extent possible to comply with the
provisions of Section 162(m) of the Code. In an effort to ensure that options,
SARs and restricted stock awarded under the Plan will qualify as performance-
based compensation, which is generally deductible, the Plan is being submitted
to shareholders for approval at the Annual Meeting. Bowater believes
compensation payable under the Plan, except for nonrestricted stock awards, if
any, will be deductible for federal income tax purposes under most
circumstances. However, under certain circumstances such as death, disability
and a change in control (as defined in the Plan), compensation not qualified
under Section 162(m) of the Code may be payable. By approving the Plan,
shareholders will be approving, among other things, the performance measures,
eligibility requirements and limits on various stock awards contained in the
Plan. The affirmative vote of a majority of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote is required to
approve the Plan.
Administration. The Plan will be administered by Human Resources and
Compensation Committee of the Board (the "Committee"). However, in the case of
awards made to nonemployee directors, the Board will act as the Committee. Among
other things, the Committee will have the authority, subject to the terms of
Plan, to select officers, employees and nonemployee directors to whom awards may
be granted, to determine the type of award as well as the number of shares of
Bowater Common Stock to be covered by each award and to determine the terms and
conditions of each award. The Committee also will have the authority to adopt,
alter and repeal rules, guidelines and practices governing the Plan as it deems
advisable, to interpret the terms and provisions of the Plan and any awards
issued and to otherwise supervise the administration of the Plan. All decisions
made by the Committee or the Board under the Plan will be final and binding.
Eligibility. Key employees and officers of Bowater and its subsidiaries
designated by the Committee and all nonemployee directors are eligible to be
granted awards under the Plan. Accordingly, it is not possible to estimate at
this time the number of persons who will be eligible to participate in the Plan.
Because each of Bowater's executive officers and nonemployee directors is
eligible to receive a grant under the Plan, each may be deemed to have an
interest in the approval of the Plan.
Performance Goals. The Committee may, but is not required to, establish
performance-related goals to be used in connection with conditions, restrictions
and limitations for each grant under the Plan (except for nonrestricted stock
awards) within ninety days of the date of grant. The goals will be selected from
among the following factors, or any combination of them, as the Committee deems
appropriate: total shareholder return; growth in revenues, sales, net income,
stock price and/or earnings per share; return on assets, net assets and/or
capital; return on shareholders'
18
<PAGE> 22
equity; debt/equity ratio; working capital; safety; quality; Bowater's financial
performance versus peers; cost reduction; productivity; market mix; and economic
value added. The Committee may select among the goals specified from award to
award, and the Committee need not select the same, or any, goals for each
grantee. The Committee must certify that the performance goals for each grant,
if any, have been met before the grant will become vested or exercisable (as the
case may be).
Plan Features. The Plan authorizes the issuance of up to 1,800,000 shares
of Bowater Common Stock through the grant or exercise of stock options
(including incentive stock options ("ISOs") to key employees and officers), SARs
and restricted and nonrestricted stock awards, but not more than 5% of the
shares subject to the Plan may be issued as a restricted or nonrestricted stock
award. No single participant may be granted awards under the Plan covering in
excess of 200,000 shares of Common Stock in any one calendar year, and no ISO
may be granted if the award would result in the participant's owning more than
10% of the outstanding stock of Bowater calculated in accordance with the
attribution rules of Section 424 of the Code. In the event of any change in the
outstanding shares of Common Stock by reason of any share dividend, stock split,
recapitalization, merger, consolidation, combination, exchange of shares or
other similar corporate change, the number of shares subject to the plan and
outstanding awards will be proportionately adjusted. If any awards expire or
terminate, the shares subject to those awards will again be available for grant
under the Plan.
Subject to the foregoing limits, the shares available under the Plan may be
allocated among the various types of awards and among the participants as the
Committee deems appropriate. Awards may be granted on such terms as the
Committee may determine, except that the exercise price for stock options and
the base price for SARs must be no less than the fair market value of Bowater
Common Stock on the date of grant, and ISOs may not be exercisable beyond the
tenth anniversary of the date of grant.
As indicated above, several types of stock-related grants can be made under
the Plan. A summary of these grants is set forth below.
Stock Options. The Plan authorizes the Committee to grant options to
purchase Common Stock at an exercise price equal to or above the fair market
value of Bowater Common Stock on the date of grant. An option that satisfies the
requirements of Section 422 of the Code may be designated by the Committee as an
ISO. The principal difference between ISOs and nonqualified options is their tax
treatment. See "Federal Income Tax Consequences." Also, ISOs may not be granted
to nonemployee directors. The aggregate fair market value, determined on the
date of grant, of the shares with respect to which ISOs granted to a grantee
under all plans of Bowater and its subsidiaries that may become exercisable
during a calendar year may not exceed $100,000. To the extent that any such
options exceed this limitation, the excess options will be deemed to be
nonqualified options. The Plan permits grantees to pay the exercise price of
options in cash, stock (valued at its fair market value on the date preceding
notice to the Committee) or a combination of cash and stock. The Plan prohibits
the repricing of options. ISOs and nonqualified options will become immediately
exercisable in full in the event of a change in control of Bowater (as defined
in the Plan). A grantee may exercise an ISO or a nonqualified option, as the
case may be, to the extent such option has become exercisable, by complying with
Bowater's notification procedures.
Stock Appreciation Rights. The Committee may grant tandem SARs or
non-tandem SARs, each as defined in the Plan. The principal difference between a
tandem SAR and a non-tandem SAR is that the exercisability of a tandem SAR is
related to an option and the exercisability of a non-tandem SAR is not so
related. The base price of a non-tandem SAR must be set by the Committee at or
above the fair market value of a share as of the date of the award. The base
price of a tandem SAR must equal the exercise price of the related option. A
grantee who is awarded a SAR will be entitled to receive from Bowater, at the
time the SAR is exercised, that number of shares of Common Stock having an
aggregate fair market value (as defined in the Plan) as of the date of exercise
equal to the product of (a) the number of shares as to which the grantee is
exercising the SAR, and (b) the excess of the fair market value (at the date of
exercise) of a share over the base price of the SAR. The Committee, in its sole
discretion, may elect to settle all or a portion of Bowater's obligation arising
out of the exercise of a SAR by the payment of cash in an amount equal to the
fair market value as of the date of SAR exercise of the shares that it would
otherwise be obligated to deliver. A tandem SAR will be exercisable only to the
extent that the related option is exercisable. A tandem SAR will be canceled to
the extent that the related option is exercised, and the option will be canceled
to the extent that the related tandem SAR is exercised. Non-tandem SARs will be
exercisable as determined by the Committee at the date of grant. The Plan
prohibits the repricing of SARs. A SAR will become immediately exercisable in
full in the event of a change in control of Bowater (as defined in the Plan). A
grantee may exercise a SAR to the extent it has become exercisable by complying
with Bowater's notification procedures.
19
<PAGE> 23
Restricted and Nonrestricted Stock. The Committee may grant restricted or
nonrestricted stock awards under the Plan. Shares awarded will be transferred in
consideration of the services of the grantee with or without other payment
therefor as determined by the Committee and will be issued in the grantee's
name. The grantee will have all of the rights of ownership of such shares,
subject to the terms, conditions, restrictions and limitations established by
the Committee and the Plan, except that if a restricted stock award is granted
subject to a risk of forfeiture that will lapse solely based on whether the
grantee remains in the employment of Bowater or a subsidiary, or as a
nonemployee director for a minimum period, the vesting period selected by the
Committee may not be less than one year. Any condition providing for forfeiture
of a restricted stock award upon the occurrence or non-occurrence of a specified
event or events will immediately lapse in the event of a change in control of
Bowater (as defined in the Plan).
Federal Income Tax Consequences. The following discussion is intended only
as a brief summary of the federal income tax rules relevant to stock options,
SARs and restricted and nonrestricted stock awards. The laws governing the tax
aspects of awards are highly technical and are subject to change.
- Nonqualified Options and SARs. Upon the grant of a nonqualified option
(with or without a SAR), the grantee will not recognize any taxable
income, and Bowater will not be entitled to a deduction. Upon the
exercise of such an option or a SAR, the excess of the fair market value
of the shares acquired on the exercise of the option over the option
price (the "spread"), or the consideration paid to the grantee upon
exercise of the SAR, will constitute compensation taxable to the grantee
as ordinary income. In determining the amount of the spread or the amount
of consideration paid to the grantee, the fair market value of the stock
on the date of exercise is used. Bowater, in computing its federal income
tax, will generally be entitled to a deduction in an amount equal to the
compensation taxable to the grantee.
- ISOs. A grantee will not recognize taxable income on the grant or
exercise of an ISO. However, the spread at exercise will constitute a tax
preference item includable in an alternative minimum tax computation, and
thereby may subject the grantee to the alternative minimum tax.
Upon the disposition of shares of stock acquired through the
exercise of an ISO after (a) two years from the date of grant of the ISO
and (b) one year from the date of transfer of the shares to the grantee
(the "ISO Holding Period"), the grantee will recognize long-term capital
gain or loss, as the case may be, measured by the difference between the
stock's selling price and the exercise price. Bowater is not entitled to
any tax deduction by reason of the grant or exercise of an ISO or by
reason of a disposition of stock received upon exercise of an ISO if the
ISO Holding Period is satisfied. If the grantee disposes of the shares of
stock acquired pursuant to the exercise of an ISO before the ISO Holding
Period expires, the grantee recognizes ordinary income in the taxable
year of the disposition equal to the excess of (y) the lower of the fair
market value at date of exercise or such value at the time of disposition
over (z) the exercise price, and Bowater receives a deduction in an equal
amount.
- Restricted Stock. A grantee who receives restricted stock may make an
election under Section 83(b) of the Code (a "Section 83(b) Election") to
have the grant taxed as compensation income at the date of receipt, with
the result that any future appreciation (or depreciation) in the value of
the shares of stock granted will be taxed as capital gain (or loss) upon
a subsequent sale of the shares. However, if the grantee does not make a
Section 83(b) Election, then the grant will be taxed as compensation
income at the full fair market value (less any amount paid therefor by
the grantee) on the date that the restrictions imposed on the shares
expire. Unless a grantee makes a Section 83(b) Election, any dividends
paid on stock subject to the restrictions are compensation income to the
grantee and compensation expense to Bowater. Bowater is generally
entitled to an income tax deduction for any compensation income taxed to
the grantee, subject to the limitations of Section 162(m) of the Code.
- Nonrestricted Stock. A grant of nonrestricted stock will be taxed as
compensation income at the date of receipt, with the result that any
future appreciation (or depreciation) in the value of the shares of stock
will be taxed as capital gain (or loss) upon a subsequent sale of the
shares. Bowater is generally entitled to an income tax deduction for any
compensation income taxed to the grantee; however, the deductibility of
nonrestricted stock awards is subject to the $1,000,000 cap of Section
162(m), and these awards are not eligible for the exemptions from this
cap.
Withholding. The Plan provides that when a grantee recognizes income with
respect to an award, the grantee must pay all federal, state and local income or
other taxes due, and Bowater will have the right to withhold funds from amounts
payable to the grantee to satisfy all federal, state and local payroll tax
withholding requirements.
20
<PAGE> 24
Alternatively, the grantee may elect to have shares withheld by Bowater from the
shares otherwise to be delivered to the grantee, or to tender to Bowater shares
previously acquired by the grantee. Any shares withheld or tendered will have an
aggregate fair market value equal to the amount of funds to be withheld, and
this value will be measured as of the date as of which income is recognized by
the grantee with respect to such shares.
Transferability. Except to the extent specifically provided by the
Committee, an award made under the Plan may not be sold, assigned, pledged or
otherwise transferred, voluntarily or involuntarily, by the grantee. ISOs
granted under the Plan are not transferable except by will or by the laws of
descent and distribution or, to the extent not inconsistent with the applicable
provisions of the Code, under a qualified domestic relations order.
Amendment and Termination. Subject to any approval of Bowater's
shareholders required (or, in the opinion of the Committee, appropriate) under
law (including Section 422 of the Code and the regulations thereunder) or the
rules of any applicable securities exchange, Bowater may at any time amend,
suspend or terminate the Plan, but no amendment, suspension or termination may
be made that would materially alter or impair any award previously granted under
the Plan without the consent of the award holder.
Change in Control. The Plan provides that upon the occurrence of a change
in control (as defined in the Plan), all outstanding options and SARs and all
outstanding restricted stock awards as to which any conditions respecting
forfeiture have not previously lapsed will automatically be purchased by Bowater
at the Acceleration Price (as described below), with payment to be made within
thirty days of the change in control, irrespective of whether the shareholders
have approved the Plan. This payment would be considered non-performance based
compensation and would not be deductible by Bowater to the extent that total
compensation for any covered officer exceeded the $1,000,000 cap of Section
162(m) of the Code.
For restricted stock, the Acceleration Price is the highest of: (1) the
highest reported sales price of the Common Stock within the sixty days preceding
the date of the change in control as reported by any securities exchange upon
which the Common Stock is listed, (2) the highest price of the Common Stock as
reported in a Schedule 13D or an amendment thereto that is paid within the sixty
days preceding the date of the change in control, (3) the highest tender offer
price paid for the Common Stock and (4) any cash merger or similar price. For
options and SARs, the Acceleration Price is the highest of these four prices,
net of the option's exercise price or the SAR's base price.
Termination of Employment or Service on the Board. Under the Plan, if a
grantee is involuntarily terminated for cause, all of the grantee's options and
SARs will expire and the grantee's unvested restricted stock awards will be
forfeited, as of the date of termination. If a grantee is involuntarily
terminated without cause or voluntarily leaves, all of the grantee's
unexercisable options and SARs will expire immediately; any exercisable options
and SARs will expire three months after termination (unless their expiration
date is earlier) and unvested restricted stock awards will be forfeited. If a
grantee terminates employment due to disability or retirement, the grantee will
be treated under all awards as if employment continued for five years. If a
grantee dies while employed or during the above-described five-year period, all
options and SARs will become exercisable (and remain exercisable for two years
unless their expiration date is earlier), and unvested restricted stock awards
will vest. In the case of a nonemployee director, these provisions will be
applied with respect to the individual's termination of service on the Board.
Vote Required. Approval of the Plan requires the affirmative vote of a
majority of the shares present in person or represented by proxy and entitled to
vote at the Annual Meeting. Abstentions are counted as a vote against this
proposal. Broker non-votes have no effect upon the approval of the Plan. The
Plan must be approved by shareholders on or before the first anniversary of its
adoption by the Committee. If approval is not obtained by that date, the Plan
will terminate and awards made under the Plan will expire unless an earlier
buy-back of those awards under the change in control provisions has occurred.
New Plan Benefits. Set forth below is information concerning stock option
grants made by the Committee (without performance-related conditions) under the
Plan to date. The maximum benefit received by the grantees from these grants
cannot be determined at this time because the future performance of Bowater's
stock is unknown. The Committee may make additional grants in 2000 that could be
on materially different terms from those of the grants set forth below. It is
not possible to determine the maximum benefits (other than based on limits on
the number of shares that may be granted in the aggregate or to any employee)
that will be granted to any person in 2000 under the Plan or what benefits or
amounts would have been received by or allocated to any person or group of
persons in 1999 if the Plan had been in effect. On March 17, 2000, the fair
market value of the Common Stock was $46.31.
21
<PAGE> 25
NEW PLAN BENEFITS
BOWATER INCORPORATED 2000 STOCK OPTION PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND POSITION SUBJECT TO OPTIONS
----------------- ------------------
<S> <C>
Arnold M. Nemirow 100,000
Chairman, President and Chief Executive Officer
Arthur D. Fuller 35,000
Executive Vice President and
President - Newsprint Division
E. Patrick Duffy 30,000
Senior Vice President and
President - Coated Paper Division
David G. Maffucci 30,000
Senior Vice President and Chief Financial Officer
Anthony H. Barash 25,000
Senior Vice President -
Corporate Affairs and General Counsel
Current executive officers as a group 390,000
Non-executive director group 16,000
All employees, excluding executive officers, as a group 210,000
</TABLE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE 2000 STOCK OPTION PLAN.
RELATED PARTY TRANSACTIONS
Fidelity Management Trust Company ("Fidelity Management"), under a trust
agreement dated July 1, 1994 (the "Fidelity Agreement"), by and between Bowater
and Fidelity Management, provides trustee services to qualified retirement plans
maintained by Bowater and its subsidiaries. In addition, Fidelity Institutional
Retirement Services Company ("FIRSCO"), a company affiliated with Fidelity
Management, provides administrative recordkeeping services to the plans also in
accordance with the terms of the Fidelity Agreement. Fidelity Management and
FIRSCO are subsidiaries of FMR Corp. During 1999, these entities received
approximately $485,000 as a result of the relationship with Bowater. Bowater
expects that similar amounts will be received in the future. FMR Corp. has
reported in a Schedule 13G that it had sole dispositive power with respect to
7,514,960 shares of Common Stock at December 31, 1999, and sole voting power
with respect to 490,050 of these shares and that Fidelity Management
beneficially owned 591,850 of these shares of Common Stock as a result of its
serving as an investment manager of institutional accounts. Bowater believes
that its arrangements with these entities are on terms as favorable as could be
obtained from a non-shareholder.
APPOINTMENT OF INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee of the Board of Directors, the
Board of Directors has appointed KPMG LLP as independent auditors for Bowater to
audit its consolidated financial statements for the year ended December 31,
2000. KPMG LLP currently serves Bowater and its subsidiaries as independent
auditors and from time to time advises Bowater on tax and other matters.
Representatives of KPMG LLP will be present at the Annual Meeting with the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions from shareholders.
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<PAGE> 26
PROPOSALS BY SHAREHOLDERS
A shareholder who wishes to present a proposal for inclusion in the proxy
materials relating to the Annual Meeting of Shareholders to be held in 2001
should submit his or her proposal on or before December 1, 2000, to Bowater's
Secretary, 55 East Camperdown Way, Post Office Box 1028, Greenville, South
Carolina 29602. With respect to a shareholder proposal for the 2001 Annual
Meeting that is not intended to be included in the proxy materials relating to
the meeting, Bowater must receive the proposal by the earlier of January 10,
2001, or 10 days after notice or public disclosure of the annual meeting is made
or given to shareholders. After that date, the proposal will not be considered
timely. Shareholders submitting proposals for inclusion in the proxy statement
and form of proxy must comply with the proxy rules under the Securities Exchange
Act of 1934, as amended, and all shareholders submitting proposals must comply
with the Bylaw requirements described below.
Bowater's Bylaws require timely advance written notice of shareholder
nominations of director candidates and of any other proposals to be presented at
an annual meeting of shareholders. In the case of director nominations by
shareholders, the Bylaws require that 120 days advance written notice be
delivered to Bowater's Secretary (at the address indicated above). The notice
must be given, either by personal delivery or by United States mail, postage
prepaid, to Bowater's Secretary no later than: (a) with respect to an election
to be held at an annual meeting of shareholders, 120 days prior to the
anniversary date of the immediately preceding annual meeting; and (b) with
respect to an election to be held at a special meeting of shareholders for the
election of directors, the close of business on the seventh day following the
date on which notice of such meeting shall first be given to shareholders. In
the case of other proposals by shareholders at an annual meeting, the Bylaws
require that advance written notice be delivered to Bowater's Secretary (at the
address indicated above). The notice must be received by Bowater's Secretary by
the earlier of: (y) 120 days prior to the anniversary date of the immediately
preceding annual meeting; or (z) 10 days after notice or public disclosure of
the date of the annual meeting was given or made to shareholders. The Bylaws
contain specific requirements with respect to the contents of each of these
notices. A copy of the Bylaws is available upon request to Bowater's Secretary
at the address indicated above.
EXPENSES OF SOLICITATION
Bowater will bear the cost of soliciting proxies. In addition to soliciting
proxies by mail, it is expected that some of Bowater's officers and regular
employees may solicit, without additional compensation, proxies by telephone,
telegraph or oral communication. The firm of Morrow & Co., Inc. has been
retained to assist in the soliciting of proxies for a fee of $7,000, plus
expenses. Bowater has requested that brokerage houses and other custodians,
nominees and fiduciaries forward soliciting materials to their principals, the
beneficial owners of Bowater Common Stock and Exchangeable Shares, and will
reimburse them for their reasonable out-of-pocket expenses in so doing.
FINANCIAL INFORMATION
BOWATER'S 1999 ANNUAL REPORT IS ENCLOSED. BOWATER WILL PROVIDE WITHOUT
CHARGE TO ANY SHAREHOLDER OF RECORD AS OF MARCH 17, 2000, WHO SO REQUESTS IN
WRITING, A COPY OF THE 1999 ANNUAL REPORT OR BOWATER'S 1999 ANNUAL REPORT ON
FORM 10-K (WITHOUT EXHIBITS) FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
ANY SUCH REQUEST SHOULD BE DIRECTED TO BOWATER, 55 EAST CAMPERDOWN WAY, POST
OFFICE BOX 1028, GREENVILLE, SOUTH CAROLINA 29602, ATTENTION: INVESTOR RELATIONS
DEPARTMENT.
By order of the Board of Directors,
/s/ WENDY C. SHIBA
WENDY C. SHIBA
Vice President, Secretary and
Assistant General Counsel
March 22, 2000
23
<PAGE> 27
NOTICE OF
ANNUAL MEETING
AND
PROXY STATEMENT
(BOWATER LOGO)
DATE AND TIME
WEDNESDAY, MAY 10, 2000
AT 11:00 A.M.
PLACE
THE GUNTER THEATRE
300 SOUTH MAIN STREET
GREENVILLE, SC 29601
------------------------------------------------------------------
PLEASE SIGN YOUR PROXY OR VOTING INSTRUCTION CARD
AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
------------------------------------------------------------------
<PAGE> 28
APPENDIX A
PROXY
BOWATER INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR ANNUAL MEETING MAY 10, 2000
The undersigned appoints David G. Maffucci and Wendy C. Shiba, or any one of
them, each with full power of substitution, as proxies for the undersigned, to
vote all of the shares of common stock of Bowater Incorporated held of record by
the undersigned on March 17, 2000, at the annual meeting of shareholders to be
held May 10, 2000, and any adjournment and, in their discretion, to vote upon
any other business that may properly come before the annual meeting and any
adjournment.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2, AND PROXYHOLDERS WILL VOTE, IN THEIR DISCRETION, UPON ANY
OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY
ADJOURNMENT.
You are encouraged to specify your choices by marking the appropriate boxes (SEE
REVERSE SIDE) but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations.
SEE REVERSE SIDE
<PAGE> 29
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
1. ELECTION OF DIRECTORS
FOR /X/ WITHHOLD /X/ EXCEPTIONS* /X/
ALL NOMINEES AUTHORITY (To vote (As indicated to the
LISTED BELOW for all nominees contrary below)
listed below)
Richard Barth, James L. Pate, Charles J. Howard
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
*EXCEPTIONS ....................................................................
................................................................................
2. Proposal to approve the Bowater Incorporated 2000 Stock Option Plan.
FOR /X/ AGAINST /X/ ABSTAIN /X/
3. At their discretion upon such other business that may properly come before
the annual meeting and any adjournment.
DATED: __________________________________ , 2000
(PLEASE BE SURE TO INSERT DATE)
________________________________________________
(SIGNATURE)
________________________________________________
(SIGNATURE IF HELD JOINTLY)
(Signature should conform exactly to name shown
on this proxy card. Executors, administrators,
guardians, trustees, attorneys and officers
signing for corporations should give full
title.)
VOTE MUST BE INDICATED BY
"X" IN BLACK OR BLUE INK. /X/
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE> 30
APPENDIX B
BOWATER INCORPORATED
2000 STOCK OPTION PLAN
EFFECTIVE AS OF JANUARY 1, 2000
<PAGE> 31
TABLE OF CONTENTS
Page No.
--------
1. Definitions..........................................................1
2. Purpose..............................................................5
3. Administration.......................................................6
4. Participation........................................................6
5. Shares Subject to the Plan...........................................7
6. Restricted or Nonrestricted Stock Awards.............................7
7. Stock Options........................................................8
8. Stock Appreciation Rights............................................8
9. Special Provisions Under Code Section 162(m).........................9
10. Exercise of Options and SARs........................................10
11. Death, Retirement, and Termination of Employment....................10
12. Compliance with Applicable Laws.....................................11
13. Transferability.....................................................11
14. Employment, Stockholder and Board Status............................12
15. Adjustments to Number of Shares and Terms...........................12
16. Change in Control ..................................................12
17. Withholding.........................................................12
18. Term of Plan........................................................13
19. Amendment and Termination of Plan...................................13
20. Applicable Law......................................................13
<PAGE> 32
BOWATER INCORPORATED
2000 STOCK OPTION PLAN
1. DEFINITIONS.
For purposes of this Plan, the following terms shall have the
meanings indicated, unless the context clearly indicates otherwise:
(a) "Acceleration Price" means (i) in the case of a Restricted
Stock Award, the highest of (A) through (D); and (ii) in the case of an Option
or SAR, the excess over the exercise or base price thereof 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.
(b) "Act" means the Securities Exchange Act of 1934, as
amended.
(c) "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 (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 Company'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 Company of which the
Person is a Beneficial Owner.
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(d) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Act, as in effect on the date hereof.
(e) "Award" means a Restricted or Non-Restricted Stock Award,
Option or SAR granted to a Grantee pursuant to the Plan.
(f) "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.
(g) "Board" means the Board of Directors of the Company.
(h) "Change in Control" shall be deemed to occur upon:
(i) the date that any Person is or becomes an
Acquiring Person;
(ii) 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, (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 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 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 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, (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
Company's shareholders as determined
2
<PAGE> 34
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 (B) at
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 fifty percent
(50%) of the total membership of the Board
consists of Continuing Directors.
(i) "Code" means the Internal Revenue Code of 1986, as
amended. Reference to a section of the Code shall also include a reference to
any Temporary or Final Regulation promulgated under such Section, and to any
successor to such Section or Regulation.
(j) "Committee" means a committee consisting of two (2) or
more members of the Board; provided that, (i) with respect to any Grantee of an
Award that constitutes an "equity security" under the Act who is subject to
Section 16 of the Act, (A) the members of the Committee shall all be
"non-employees" as defined in Section 240.16b-3 of the General Rules and
Regulations promulgated under the Act, or (B) the full Board shall act in lieu
of the Committee hereunder and (ii) with respect to any Grantee of an Award that
is intended by the Committee to constitute "qualified performance-based
compensation," within the contemplation of Treasury Regulation Section
1.162-27(e)(2), who is a "covered employee," within the contemplation of
Treasury Regulation Section 1.162-27(c)(2), the members of the Committee shall
all be "outside directors" as defined in Treasury Regulation Section
1.162-27(e)(3) to the extent required by Section 162 of the Code.
Notwithstanding the foregoing, in the case of an Award granted to a member of
the Board who is not also a key employee or officer of the Company or a
Subsidiary, "Committee" means the Board.
(k) "Common Stock" means the common stock of the Company, par
value $1.00 per share.
(l) "Company" means Bowater Incorporated, a Delaware
corporation, and any successor thereto by merger or other acquisition.
(m) "Continuing Director" means 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
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.
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<PAGE> 35
(n) "Date of Grant" means the date an Award is granted to a
Grantee under the Plan.
(o) "Disability" shall have the meaning contained in the
Company?s long-term disability plan, except that, in the case of an ISO, it
shall mean total and permanent disability within the contemplation of Section
22(e)(3) of the Code.
(p) "Effective Date" means January 1, 2000.
(q) "Fair Market Value" for a particular date means the simple
arithmetic mean between the highest and lowest prices per share at which the
Common Stock is traded as reported for 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, the simple arithmetic mean between the closing
bid-and-asked prices thereof as reported for such Exchange on that date, rounded
to the nearest number within two decimal places.
(r) "Grantee" means a key employee or officer of the Company
or a Subsidiary, or a member of the Board, to whom an Award has been granted;
provided that a member of the Board who is not also such a key employee or
officer may not become a Grantee of an ISO.
(s) "ISO" means an incentive stock option within the
contemplation of Section 422 of the Code.
(t) "Non-Tandem SAR" means an SAR granted to a Grantee that is
not a Tandem SAR.
(u) "Nonrestricted Stock Award" means a Stock Award granted
without any risk of forfeiture.
(v) "NQO" means an Option that is not an ISO.
(w) "Option" means an option to purchase Shares granted to a
Grantee pursuant to Section 7 of the Plan, which may be an ISO or an NQO.
(x) "Person" means any individual, firm, corporation,
partnership, trust or other entity.
(y) "Plan" means the Bowater Incorporated 2000 Stock Option
Plan as provided herein and as it may be amended from time to time.
4
<PAGE> 36
(z) "Restricted Stock Award" means a Stock Award granted
subject to a risk or risks of forfeiture.
(aa) "Retirement" means (i) with respect to a key employee or
officer of the Company or a Subsidiary, 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 or (ii) with respect to a member of the
Board not described in clause (i), the status of having terminated service on
the Board and being immediately eligible for the payment of retirement benefits
under the Company?s retirement plan for the Directors.
(bb) "SAR" means a Stock Appreciation Right granted to a
Grantee pursuant to Section 8 of the Plan, which may be a Tandem SAR or a
Non-Tandem SAR.
(cc) "Share" means a share of Common Stock.
(dd) "Stock Award" means a Share awarded to a Grantee pursuant
to Section 6 of the Plan, which may be a Restricted or Nonrestricted Stock
Award.
(ee) "Subsidiary" means each entity with respect to which the
Company owns directly or indirectly interests embodying more than 50% of the
voting power, provided that for purposes of an ISO, such term shall have the
meaning given in Section 424 of the Code.
(ff) "Tandem SAR" means an SAR granted in connection with an
Option either at the Date of Grant of the Option or at a later date.
Except where otherwise indicated by the context, any masculine
term used herein also shall include the feminine, the plural shall include the
singular, and the singular shall include the plural.
2. PURPOSE. The Plan has been established by the Company to secure for
the Company and its stockholders the benefits arising from (i) providing
long-term incentive compensation opportunities to those key employees and
officers of the Company and its Subsidiaries who are and will be responsible for
its future growth and continued success and (ii) aligning the interests of
Company stockholders and members of the Board. The Plan provides a means whereby
such individuals: (a) may be awarded Restricted or Nonrestricted Stock Awards;
(b) may acquire Shares pursuant to Options; or (c) may be awarded SARs; provided
that a member of the Board who is not also a key employee or officer of the
Company or a Subsidiary may not be awarded an ISO.
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<PAGE> 37
3. ADMINISTRATION. The authority to manage and control the operation
and administration of the Plan shall be vested in the Committee. 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 Company, its stockholders, any Grantees and any other employee of
the Company or any of its subsidiaries (including their beneficiaries,
transferees and other successors in interest). No member of the Committee shall
be liable for any action or determination made with respect to the Plan.
4. PARTICIPATION.
(a) Subject to the terms and conditions of the Plan, the
Committee shall determine and designate from time to time the Grantees to whom
Awards are to be granted and the type, size and terms, conditions, restrictions
and limitations applicable to each Award; provided, however that the Committee
shall not have the power to reduce the exercise price of an outstanding Option
or the base price of an outstanding SAR, other than as provided in Section 15.
Such terms, conditions, restrictions and limitations may include, but are not
limited to terms, conditions, restrictions and limitations related to: (i) the
exercisability of an Award (subject to Sections 7(c), 8(b) and 11, and provided
that the Committee shall at all times have the authority to accelerate such
exercisability), (ii) the forfeiture of an Award (and/or the Shares subject
thereto) and the lapse of the forfeiture condition (subject to Sections 6(b) and
11, and provided that the Committee shall at all times have the authority to
declare such forfeiture condition to be lapsed), (iii) the transferability of an
Award and/or such Shares, (iv) the form of payments (if any) in respect of an
Award, (v) the consequences of a Grantee's termination of employment with the
Company and its Subsidiaries or termination of service on the Board (as provided
in Section 11(b)), (vi) restrictions on the sale, resale or other disposition of
the Award and/or such Shares, (vii) restrictions related to the payment of
dividends with respect to such Shares, (viii) restrictions with respect to the
right to vote such Shares, (ix) put or call rights with respect to such Shares,
(x) provisions to comply with federal and/or state securities laws, and (xi)
such other matters not inconsistent with the specific provisions of the Plan as
deemed appropriate by the Committee. Notwithstanding the foregoing, (I) the
maximum number of Shares with respect to which Awards may be granted during any
calendar year to any Grantee is 200,000 Shares; and (II) no Grantee may be
granted an ISO Award if immediately after such grant, were it made, he would be
the owner or would be deemed in accordance with Section 424 of the Code to be
the owner of more than 10% of the total combined voting power of all classes of
stock of the Company or any of its Subsidiaries.
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<PAGE> 38
(b) The terms, conditions, restrictions and limitations
related to each Award shall be reflected in an Agreement between the Company and
the Grantee. Each Award under the Plan shall be made subject to the condition
that the Grantee execute and return such Agreement within sixty (60) days of the
date he receives the Agreement from the Company. An Agreement may only be
modified by a writing signed by both the Company and the Grantee. Each Agreement
shall be subject to all of the terms of the Plan.
5. SHARES SUBJECT TO THE PLAN. Subject to the provisions of Section 15,
the aggregate number of Shares for which Stock Awards, Options and SARs may be
granted under the Plan shall not exceed 1,800,000 Shares, and no more than 5% of
such Shares may be used for Restricted and Nonrestricted Stock Awards. If any
Option or SAR granted pursuant to the Plan shall expire or terminate for any
reason (including without limitation its settlement in cash in lieu of exercise
of the Option) or any Restricted Stock Award shall be forfeited pursuant to
conditions or restrictions applicable thereto, the number of Shares then subject
to the Option, SAR or Restricted Stock Award shall again be available for grant
under the Plan unless the Plan shall have terminated.
6. RESTRICTED OR NONRESTRICTED STOCK AWARDS.
(a) The Committee may grant Restricted or Nonrestricted Stock
Awards under the Plan. Shares awarded under this Section 6 shall be transferred
in consideration of the services of the Grantee with or without other payment
therefor as determined by the Committee and shall be issued in the Grantee's
name. The Grantee will have all of the rights of ownership of such shares,
subject to the terms, conditions, restrictions and limitations established
pursuant to Section 4(a). Notwithstanding any provision of Section 4(a), if a
Restricted Stock Award is granted subject to a risk of forfeiture that will
lapse solely based on whether the Grantee remains in employment with the Company
or a Subsidiary, or as a member of the Board, for a minimum period, the period
selected by the Committee may not be less than one year.
(b) Any condition providing for the forfeiture of a Restricted
Stock Award upon the occurrence or non-occurrence of a specified event or events
shall immediately lapse in the event of a Change in Control of the Company.
(c) Certificates for a Nonrestricted Stock Award shall be
issued to the Grantee as soon as practicable after the Grantee satisfies any
applicable tax withholding requirements. Certificates for a Restricted Stock
Award shall be issued in the Grantee's name and shall be held in escrow by the
Company (along with stock powers executed by the Grantee) until all conditions
that may cause a forfeiture of the Shares lapse or such Shares are forfeited as
provided therein. A certificate or certificates representing a Restricted Stock
Award as to which such conditions have lapsed shall be delivered to the Grantee
upon such lapse as soon as practicable after the Grantee has satisfied any
applicable tax withholding requirements.
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<PAGE> 39
7. STOCK OPTIONS.
(a) The Committee may grant Options under the Plan with an
exercise price at or above the Fair Market Value of the Shares as of the Date of
Grant. Any Option that satisfies all of the requirements of Section 422 of the
Code may be designated by the Committee as an ISO. An Option (or portion
thereof) that is not so designated, or that does not satisfy the requirements of
Section 422 of the Code, and any Option that is granted to a member of the Board
who is not also a key employee or officer of the Company or a Subsidiary, shall
not constitute an ISO and shall be an NQO.
(b) An ISO must expire no later than ten years after the Date
of Grant. The aggregate fair market value, determined on the Date of Grant, of
the Shares with respect to which ISOs granted to a Grantee under all plans of
the Company and its Subsidiaries may become exercisable during a calendar year
may not exceed $100,000. To the extent the foregoing limitation is exceeded, the
excess Shares shall be deemed to be subject to NQOs.
(c) An Option shall become immediately exercisable in full in
the event of a Change in Control of the Company.
(d) A Grantee may exercise an Option to the extent it has
become exercisable by complying with the notification procedures provided by the
Company's Human Resources Department at its corporate headquarters.
Contemporaneously with the delivery of notice with respect to exercise of an
Option, the full purchase price of the Shares purchased pursuant to the exercise
of the Option shall be paid in cash, or by tender of Share certificates in
proper form for transfer to the Company valued at the Fair Market Value of the
Shares on the preceding day, or by any combination of the foregoing or with any
other consideration acceptable to the Committee. Payment upon the exercise of
such Option may also be made by means of a properly executed exercise notice
together with irrevocable instructions to a broker (designated by the Company)
to deliver promptly to the Company the portion of the sale or loan proceeds
sufficient to pay such purchase price.
8. STOCK APPRECIATION RIGHTS.
(a) The Committee may grant Tandem SARs or Non-Tandem SARs
under the Plan. The base price of a Non-Tandem SAR must be set by the Committee
at or above the Fair Market Value of a Share as of the Date of Grant. The base
price of a Tandem SAR must equal the exercise price of the related Option. A
Grantee who is awarded an SAR shall be entitled to receive from the Company, at
the time the SAR is exercised, that number of Shares having an aggregate Fair
Market Value as of the date of exercise equal to the product of (i) the number
of Shares as to which the Grantee is exercising the SAR, and (ii) the excess of
the Fair Market Value (at the date of exercise) of a Share over the base price
of the SAR. The Committee, in its sole discretion, may elect to settle all or a
portion of the Company's obligation arising out of the
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<PAGE> 40
exercise of an SAR by the payment of cash in an amount equal to the Fair Market
Value as of the date of exercise of the Shares it would otherwise be obligated
to deliver. Tandem SARs shall be exercisable only to the extent that the related
Option is exercisable. Non-Tandem SARs shall be exercisable as determined by the
Committee at the Date of Grant. A Tandem SAR shall be canceled to the extent
that the related Option is exercised and the Option shall be canceled to the
extent that the related Tandem SAR is exercised.
(b) An SAR shall become immediately exercisable in full in the
event of a Change in Control of the Company.
(c) A Grantee may exercise an SAR to the extent it has become
exercisable by complying with the notification procedures provided by the
Company?s Human Resources Department at its corporate headquarters.
9. SPECIAL PROVISIONS UNDER CODE SECTION 162(m).
(a) The provisions of this Section 9 shall apply only to
persons designated by the Committee as individuals who are or who are likely to
become "covered employees," within the contemplation of Section 162(m) of the
Code; provided that, if an individual is so designated and the Committee
determines that such individual is not a covered employee for the year in which
the Company is entitled to a deduction with respect to income he recognizes for
Federal income tax purposes in connection with an Award, the provisions of this
Section 9 shall not apply to such Award. The provisions of this Section 9 shall
only apply to conditions, restrictions and limitations applicable to Awards that
are related to the performance of the Company and if the provisions of this
Section 9 are necessary so that the Award qualifies as "qualified
performance-based compensation" as defined in Treasury Regulation Section
1.162-27(e)(2). Except as provided in Section 16, in the event of any
inconsistencies between this Section 9 and the other Plan provisions within the
scope of the foregoing, the provisions of this Section 9 shall control with
respect to covered employees.
(b) With respect to each Award described in paragraph (a), as
soon as practicable following the grant of an Award subject to this Section 9
(but in no event more than ninety (90) days after the Date of Grant), the
Committee shall establish the performance-related goals to be used in connection
with conditions, restrictions and limitations applicable to such Award. The
performance-related goals shall be chosen from among the following factors, or
any combination of the following, as the Committee deems appropriate: total
stockholder return; growth in revenues, sales, net income, stock price, and/or
earnings per share; return on assets, net assets, and/or capital; return on
stockholders' equity; debt/equity ratio; working capital; safety; quality; the
Company?s financial performance versus peers; cost reduction; productivity;
market mix; or economic value added. The Committee may select among the goals
specified from Award to Award which need not be the same for each Grantee.
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<PAGE> 41
(c) With respect to each Award described in paragraph (a), the
Committee shall (at the same time it is making the determinations under
paragraph (b)) determine the relationship between the performance-related goals
and the conditions, restrictions and limitations applicable to the Award.
(d) In connection with the Awards described in paragraph (a),
no performance-related goal will be considered to be satisfied until the
Committee has certified the extent to which the performance-related goals and
any other material terms were satisfied.
(e) Once established, performance-related goals shall not be
changed, except to the extent that the Committee has specified adjustments as
part of the determinations made under paragraphs (b) and (c). Except as provided
in the preceding sentence, no performance-related goal applicable to a
condition, restriction or limitation shall be considered to be satisfied if the
minimum performance-related goals applicable thereto are not achieved.
(f) Individual performance shall not be reflected in a
performance-related goal under this Section 9. However, the Committee may retain
the discretion to treat a performance-related goal as not having been satisfied
due to the failure of a Participant to meet individual performance goals.
(g) If, on advice of the Company?s tax counsel, the Committee
determines that Code Section 162(m) and the regulations thereunder will not
adversely affect the deductibility for federal income tax purposes of any amount
paid under the Plan by applying provisions of this Plan (including this Section
9(g)) that conflict with this Section 9 to a covered employee, then the
Committee may, in its sole discretion, apply such Section or Sections to the
covered employee without regard to the exceptions to such Section or Sections
that are contained in this Section 9.
10. EXERCISE OF OPTIONS AND SARS. No Option or SAR may at any time be
exercised with respect to a fractional share or exercised in part with respect
to fewer than 100 shares (unless it is being exercised in full). In the event
that Shares are issued pursuant to the exercise of an SAR, no fractional shares
shall be issued; payment shall be made in cash for any such fractional shares.
Certificates for whole shares shall be delivered as soon as practicable after
the Grantee satisfies any applicable tax withholding requirements.
11. DEATH, 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 Options and SARs held by the Grantee
will expire and the Grantee's Restricted Stock Awards as to which any condition
providing for the forfeiture thereof exists ("Unvested Restricted Stock Awards")
will be forfeited immediately.
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<PAGE> 42
(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 Options and SARs held by the Grantee
will expire immediately; (B) all exercisable options and SARs held by the
Grantee will expire three months after termination (unless their expiration date
is earlier); and (C) Unvested Restricted Stock Awards held by the Grantee will
be forfeited.
(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 Options and SARs held by the Grantee
will become exercisable (and remain exercisable for two years unless their
expiration date is earlier) and all conditions providing for forfeiture of the
Grantee's Unvested Restricted Stock Awards will lapse.
(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 Option or SAR 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.
(d) In the case of a Grantee who is a member of the Board and not an
employee of the Company or a Subsidiary, the provisions of this Section 11 shall
be applied by treating the Grantee's service on the Board as if it were
employment with the Company.
12. COMPLIANCE WITH APPLICABLE LAWS. Notwithstanding any other
provision in the Plan, the Company shall have no liability to issue any Shares
under the Plan unless such issuance would comply with all applicable laws and
applicable requirements of any securities exchange or similar entity. Prior to
the issuance of any Shares under the Plan, the Company may require a written
statement that the recipient is acquiring the Shares for investment and not for
the purpose or with the intention of distributing the Shares.
13. TRANSFERABILITY.
(a) Except to the extent specifically provided by the
Committee, an Award (including the Shares subject to a Restricted Stock Award
until all conditions providing for
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forfeiture have lapsed) shall not be sold, assigned, pledged or otherwise
transferred, voluntarily or involuntarily, by the Grantee.
(b) Incentive Stock Options granted under the Plan are not
transferable except by will or by the laws of descent and distribution or, to
the extent not inconsistent with the applicable provisions of the Code, pursuant
to a qualified domestic relations order (as that term is defined in the Code).
Incentive Stock Options may be exercised during the lifetime of the Grantee only
by the Grantee, and after the death of the Grantee, only as provided in Section
11.
14. EMPLOYMENT, BOARD SERVICE AND STOCKHOLDER STATUS. The Plan does not
constitute a contract of employment or for continued service, and selection as a
Grantee will not give any employee or Grantee the right to be retained in the
employ of the Company or any Subsidiary or as a member of the Board. No person
entitled to exercise any Option or SAR granted under the Plan shall have any of
the rights or privileges of a stockholder of record with respect to any Shares
issuable upon exercise of such Option or SAR until certificates representing
such Shares have been issued and delivered. Certificates representing Shares
issued under the Plan may bear a legend referring to any conditions,
restrictions and limitations deemed appropriate by the Committee.
15. ADJUSTMENTS TO NUMBER OF SHARES AND TERMS. Subject to the following
provisions of this Section 15, in the event of any change in the outstanding
Shares by reason of any share dividend, split, recapitalization, merger,
consolidation, combination, exchange of shares or other similar corporate
change, the aggregate number and kind of Shares reserved for issuance under the
Plan or subject to Awards outstanding or to be granted under the Plan shall be
proportionately adjusted so that the value of each Award shall not be changed,
and the terms of any outstanding Award may be adjusted by the Committee in such
manner as it deems equitable, provided that, in no event shall the Option price
for a Share be adjusted below the par value of such Share, nor shall any
fraction of a Share be issued upon the exercise of an Option or SAR. Shares
subject to a Restricted Stock Award shall be treated in the same manner as other
outstanding Shares; provided that any conditions and restrictions applicable to
a Restricted Stock Award shall continue to apply to any Shares, other security
or other consideration received in connection with the foregoing.
16. CHANGE IN CONTROL. Upon the occurrence of a Change in Control, all
outstanding Options and SARs, and all outstanding Restricted Stock Awards as to
which any conditions providing for forfeiture have not lapsed, shall be
automatically purchased by the Company at the Acceleration Price with payment to
be made within thirty days of such Change in Control, irrespective of whether
the stockholders of the Company have approved the Plan as contemplated by
Section 18.
17. WITHHOLDING. Whenever a Grantee recognizes income with respect to
an Award (and as a condition to the exercise of any Option or SAR or the receipt
of a Stock Award), the
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Grantee will have the obligation to pay all federal, state, and local income or
other taxes due and the Company shall have the right to withhold from amounts
payable to the Grantee in any manner as necessary to satisfy all federal, state
and local payroll tax withholding requirements. Alternatively, the Grantee may
elect to have Shares withheld by the Company from the Shares otherwise to be
delivered to the Grantee or may tender to the Company Shares previously acquired
by the Grantee. The number of Shares so withheld or tendered for payment of tax
withholding shall have an aggregate Fair Market Value as of the date as of which
income is recognized by the Grantee with respect to such Shares sufficient to
satisfy the applicable withholding taxes.
18. TERM OF PLAN. The Plan is effective January 1, 2000, and will be
submitted to the stockholders of the Company for approval on or before the first
anniversary of its adoption by the Committee. Awards may be granted prior to
stockholder approval, with all rights thereunder (other than the right to
receive payment of the Acceleration Price under Section 16) conditioned upon
such approval; provided that, if stockholder approval is not secured by such
anniversary, all such Awards shall expire and the Plan shall terminate. No ISO
may be granted under the Plan after December 31, 2010. No Award may be granted
under the Plan after the date on which the Plan is terminated pursuant to
Section 19.
19. AMENDMENT AND TERMINATION OF PLAN. Subject to any approval of the
stockholders of the Company that may be required (or, in the opinion of the
Committee, appropriate) under law or the rules of any securities exchange on
which the Shares are listed or similar entity, the Committee may at any time
amend, suspend or terminate the Plan. No amendment, suspension or termination of
the Plan shall materially and adversely alter or impair any Award previously
granted under the Plan without the consent of the holder thereof. No amendment
requiring stockholder approval under Treasury Regulation Section 1.162-27 or
Section 422 of the Code shall be valid unless such stockholder approval is
secured as provided therein.
20. APPLICABLE LAW. All questions under the Plan shall be governed by
the internal laws of the State of Delaware, without giving effect to the choice
of law provisions thereof.
Executed on behalf of the Company as of January 1, 2000, on this 21st
day of March, 2000.
BOWATER INCORPORATED
By: /s/ James T. Wright
-----------------------------------------
James T. Wright
Vice President - Human Resources
As adopted by the Board of Directors at its January 19, 2000, meeting.
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