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Exhibit 10.1
BOWATER INCORPORATED
2000-2002 LONG-TERM INCENTIVE PLAN
(Effective as of January 1, 2000)
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TABLE OF CONTENTS
Page No.
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Section 1. Establishment of Plan........................................1
Section 2. Definitions..................................................1
Section 3. Administration...............................................5
Section 4. Eligibility and Participation................................5
Section 5. Award Determination..........................................6
Section 6. Termination of Employment....................................7
Section 7. Change in Control............................................8
Section 8. Amendment and Modification...................................8
Section 9. Miscellaneous................................................8
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SECTION 1. ESTABLISHMENT OF PLAN
Effective January 1, 2000, Bowater Incorporated, a Delaware corporation
(the "Company"), hereby establishes an incentive compensation plan to be known
as the "Bowater Incorporated 2000-2002 Long-Term Incentive Plan" (the "Plan") as
set forth in this document.
SECTION 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings
indicated:
"Acquiring Person" shall mean 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 under the Exchange Act 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.
"Active Employee" means an Employee who is providing services to the
Company or a subsidiary and does not include an individual who is receiving
periodic severance payments. Notwithstanding any provision herein, or in any
policy or plan of the Company, to the contrary, an individual will not be an
Active Employee for any period that such individual is on an authorized or
unauthorized leave of absence from the Company, except to the extent otherwise
required by law.
"Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act, as in effect on the Effective Date.
"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.
"Board" means the Board of Directors of the Company.
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"Cash" means a check or cash equivalent (such as a deposit directly
into a payee's bank account).
"Cash from Operations" is defined in Section 5.1.
"Change in Control" shall be deemed to have occurred upon:
(i) the date that any Person is or becomes an Acquiring Person;
(ii) the date that the Company's shareholders approve a merger,
consolidation or reorganization of the Company with another
Company 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 the record date for such
approval (provided that securities held by any individual or
entity that is an Acquiring Person, or who would be an
Acquiring Person if 5% were substituted for 20% in the
definition of such term, shall not be counted as securities
held by the shareholders of the Company, 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 Company 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
immediately prior to such transaction (provided that
securities held by any individual or entity that is an
Acquiring Person, or who would be an Acquiring Person if 5%
were substituted for 20% in the definition of such term, shall
not be counted as securities held by the shareholders of the
Company, but shall be counted as outstanding securities for
purposes of this determination), or (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 50% of the total membership of the
Board consists of Continuing Directors.
"Committee" means the Human Resources and Compensation Committee of the
Board, or such other committee appointed by the Board to administer the Plan.
"Company" means Bowater Incorporated, a Delaware corporation, and any
successor thereto.
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"Company Rank" is defined in Section 5.2.
"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 an
Affiliate or Associate of an Acquiring Person, and (iii) is recommended or
elected to succeed the Continuing Director by a majority of the Continuing
Directors.
"Disability" shall have the meaning contained in the Company's
long-term disability plan.
"Discretionary Award" means the amount for each Participant calculated
pursuant to Section 5.3.
"Effective Date" means January 1, 2000.
"Employee" means a full-time, salaried employee of the Company or a
subsidiary that, directly or indirectly, is at least 50% owned by the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Net Cash from Operating Activities" is defined in Section 5.1.
"Normal Retirement Date" means the date defined as the "Normal
Retirement Date" in the qualified (or registered, if a Canadian plan) pension
plan applicable to the particular Participant in question.
"Participant" means an Active Employee who is eligible to participate
in the Plan.
"Payout Percentage" is defined in Section 5.2.
"Peer Companies" means certain companies in the paper and wood products
industry. There will be two sets of Peer Companies:
- Newsprint Companies - Donohue Inc., Fletcher Challenge Canada Limited
and Abitibi-Consolidated Inc.
- Index Companies - those companies listed in the same Standard and
Poor's index category as the Company (currently the Mid Cap Forest
Products Index) during the Plan Cycle, excluding the Company.
The Committee shall review the companies included in each category on an annual
basis and revise each category as appropriate to reflect changed circumstances.
If a company is added or
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deleted, its participation will be counted only on a prorated basis toward the
calculation of the Peer Group Average described below.
"Peer Group Average" means the arithmetic mean of the Total Shareholder
Return between each set of Peer Companies as of the end of the Plan Cycle. The
Total Shareholder Return for each set of Peer Companies will be computed based
on the Total Shareholder Return for each individual Peer Company, and the
average for each set of Peer Companies will be computed on a market
capitalization weighted basis. If a Peer Company is eliminated either through
acquisition or dissolution, or because of any other reason, then (i) if prior to
July 1, 2000, that Peer Company will be disregarded entirely, or (ii) if after
June 30, 2000, the Total Shareholder Return for the affected Peer Company will
be included in the calculation of Peer Group Average only through the date of
elimination, on a prorated basis. If two or more Peer Companies are combined,
either through merger, consolidation, purchase and sale of assets, or because of
any other reason, then (i) for periods before they are combined, the calculation
of Peer Group Average shall be based on the Total Shareholder Return of the
individual Peer Companies, and (ii) for periods after they are combined, the
calculation of Peer Group Average shall include the Total Shareholder Return of
the combined entity, on a prorated basis.
"Performance Award" means the amount for each Participant calculated
pursuant to Section 5.2.
"Person" means any individual, firm, company, partnership, trust or
other entity.
"Plan" means the Bowater Incorporated 2000-2002 Long-Term Incentive
Plan.
"Plan Cycle" means the period over which the Company's performance will
be measured for purposes of determining Participants' awards under Sections 5.2
and 5.3. The Plan Cycle will commence on January 1, 2000, and will end December
31, 2002.
"Plan Year" means each calendar year during the Plan Cycle.
"Price" on a particular date means the publicly reported closing price
per share for that date.
"Prorated" under Sections 4.2 and 6.1 shall mean the number of months a
Participant participates in the Plan, rounded to the nearest month, divided by
thirty-six, multiplied by the awards under Sections 5.2 and 5.3, if any, or
Section 7, if applicable.
"Retirement" means a Participant's termination of employment in a
retirement status entitling him to the immediate payment of benefits under the
qualified (or registered, if a Canadian plan) pension plan of the Participant's
employer in which he is participating.
"Section" means the indicated provision of the Plan.
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"Total Dividends Paid" is defined in Section 5.1.
"Total Shareholder Return" or "TSR" is equal to (A) the difference in
common stock (or common stock equivalent) price as of January 1, 2000, and the
average common stock (or common stock equivalent) price for the month of
December 2002, plus (B) all dividends paid per share during the Plan Cycle,
divided by (C) the common stock (or common stock equivalent) price as of January
1, 2000. The formula shall be adjusted as appropriate to reflect stock splits or
stock dividends. For a Peer Company that is eliminated after June 30, 2000, or
combines with another Peer Company during the Plan Cycle, the formula shall be
the same except that the average common stock (or common stock equivalent) price
for the thirty-day period preceding the date of the announcement of the
elimination or combination shall be used instead of the month of December 2002.
Dividends shall be counted only through the date of elimination or combination
for the Peer Company that is eliminated or combined.
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.
SECTION 3. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee has
delegated to the Vice President Human Resources of the Company and other
appropriate officers and employees of the Company responsibility for
administering the Plan.
The Committee shall: (i) correct any defect or omission or reconcile
any inconsistency in this Plan or in any award granted hereunder, (ii) make all
other necessary determinations, (iii) make any adjustments that are necessary or
desirable in light of previously unforeseen circumstances, and (iv) take all
other actions necessary or advisable for the implementation and administration
of the Plan. The Committee's determinations shall be conclusive and binding upon
all parties.
SECTION 4. ELIGIBILITY AND PARTICIPATION
4.1 General. Active Employees who are in United States salary grades 31
(or its equivalent at locations other than the United States) and above at any
time during the Plan Cycle shall be Participants in the Plan, subject to the
limitations of Sections 4.2, 6.1 and 6.2 herein. An Active Employee who is
eligible to participate in the Plan shall be so notified in writing and apprised
of the manner of determining awards.
4.2 Partial Plan Cycle Participation. In the event that an Active
Employee becomes eligible to participate in the Plan subsequent to the
commencement of the Plan Cycle, such Participant's awards under Sections 5.2 and
5.3, if any, shall be prorated.
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4.3 No Right to Participate. Except as specifically provided in
Sections 4.1 and 4.2, no Employee shall at any time have a right to be selected
for participation in the Plan despite having previously participated in an
incentive plan of the Company.
SECTION 5. AWARD DETERMINATION
5.1 Threshold Determination. No awards shall be made under the Plan
unless the Company generates sufficient "Cash from Operations" cumulatively over
the Plan Cycle to fund the dividends paid during the Plan Cycle ("Total
Dividends Paid") on the Company's common and exchangeable stock. "Cash from
Operations" is defined as "Net Cash from Operating Activities" as set forth on
the Company's annual audited "Consolidated Statement of Cash Flows". Awards paid
under the Plan shall not exceed the excess of Cash from Operations over Total
Dividends Paid. If the excess of Cash from Operations over Total Dividends Paid
is not sufficient to fund the payout of awards under the Plan, then the awards
shall be limited to such excess amount and reduced proportionately.
5.2 Performance Awards. Subject to the conditions described in Sections
5.1 and 6.2, at the end of the Plan Cycle, Performance Awards will be determined
for all Participants by multiplying each Participant's annual base salary rate
as of December 31, 2002, by a payout percentage determined based on a ranking of
the Company's TSR as compared with the Peer Group Average. The same payout
percentage will be used for all Participants. No Performance Awards shall be
granted if the Company's TSR is below the Peer Group Average. The payout
percentage shall equal 50% if the Company's TSR is equal to the Peer Group
Average. If the Company's TSR is above the Peer Group Average, then the
calculation of the payout percentage is as follows:
First, the Company's Rank is determined by the following formula:
Company Rank = (Company TSR -Peer Group Average)
Divided by
[(Highest Peer Company TSR - Peer Group Average)/50]
Plus 50
Then, Company Rank is used to determine the payout percentage according
to the chart below.
Company Rank Payout Percentage
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50 through 69.999 50% + [2.5 X (Company Rank - 50)]%
70 through 89.999 100% + [3.75 X (Company Rank - 70)]%
90 through 100 175%
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Company Rank
[COMPANY RANK GRAPH]
- The Peer Group Average is equal to a Company Rank of 50
- The Peer Company with the highest TSR is equal to a Company Rank of 100
- A 100% payout percentage is equal to a Company Rank of 70
- A 175% payout percentage is equal to a Company Rank of 90
The Performance Awards shall be paid to Participants in cash as soon as
practicable after the determination of the amount of such awards.
5.3 Discretionary Awards. In addition to any amounts payable pursuant
to Section 5.2, the Committee may award all Participants an additional
Discretionary Award computed by multiplying such percentage between 0% and 75%
as is determined by the Committee in its discretion, times each Participant's
annual base salary rate as of December 31, 2002. The same percentage shall be
used for all Participants.
Any Discretionary Awards shall be paid at the same time and in the same
manner as the Performance Awards.
SECTION 6. TERMINATION OF EMPLOYMENT
6.1 Termination of Employment Due to Death, Disability, Retirement or
Sale of Business Unit. In the event a Participant's employment is terminated by
reason of death, Disability, Retirement, or sale by the Company of the
subsidiary or unit employing the Participant (unless such sale is a Change in
Control, in which case Section 7 shall supersede the provisions of this
Section), awards determined in accordance with Sections 5.2 and 5.3 or Section 7
herein shall be (i) prorated based upon the portion of the Plan Cycle occurring
prior to termination during which the Participant was an Active Employee and
(ii) based upon the Participant's annual base salary rate as of the date of
termination.
Payments under this Section 6.1 shall be made in cash as soon as
practicable after the end of the Plan Cycle.
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6.2 Continuation of Employment as Condition for Awards. As a condition
to be entitled to any award under this Plan (except pursuant to Section 7), a
Participant must be an Active Employee as of the end of the Plan Cycle unless
the Participant's employment is terminated by reason of death, Disability,
Retirement, or sale by the Company of the subsidiary or unit employing the
Participant. However, the Committee, in its sole discretion, may pay an award
(or a portion of an award) for the portion of the Plan Cycle that the
Participant was a Participant, computed as determined by the Committee and
payable in cash as soon as practicable after the end of the Plan Cycle, even if
the Participant was not an Active Employee as of the end of the Plan Cycle.
SECTION 7. CHANGE IN CONTROL
Notwithstanding any other provision of the Plan, if a Change in Control
of the Company shall have occurred, the Company shall pay each Participant an
award which equals his annual base salary rate as of the date of the Change in
Control times 250%, subject to the applicable proration provisions of Section
6.1 for Participants whose employment terminated before the Change in Control
under the circumstances described in Section 6.1, but not to the proration
provisions of Section 4.2. All awards will be paid in cash within thirty (30)
days of the Change in Control. Once awards under this Section 7 have been paid,
the Plan shall be terminated and the Participants shall have no further rights
under the Plan.
SECTION 8. AMENDMENT AND MODIFICATION
The Committee, in its sole discretion, with notice to Participants, at
any time and from time to time, may modify or amend, in whole or in part, any or
all of the provisions of the Plan, or suspend or terminate it entirely;
provided, however, that no such modification, amendment, suspension, or
termination may adversely affect Participants' rights under Section 7 in the
event of any prior or subsequent Change in Control, and in the event of any
modification, amendment, suspension or termination, any Participant (or his
beneficiary, as the case may be) who is an Active Employee on the effective date
thereof shall be entitled to no less a payment or distribution hereunder than
the amount he would have otherwise received as a Performance Award under Section
5.2, computed as if the Plan Cycle ended as of the end of the Plan Year
following or prior to the date of the change or termination, whichever results
in a higher award.
SECTION 9. MISCELLANEOUS
9.1 Governing Law. The Plan, and all agreements hereunder, shall be
governed by and construed in accordance with the laws of the State of Delaware.
9.2 Withholding Taxes. The Company shall have the right to deduct from
all payments under the Plan any federal, state, or local taxes required by law
to be withheld with respect to such payments.
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9.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
9.4 Costs of the Plan. All costs of implementing and administering the
Plan shall be borne by the Company.
9.5 Successors. All obligations of the Company under the Plan shall be
binding upon and inure to the benefit of any successor to the Company, whether
the existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
9.6 Employment Status. The Plan does not constitute a contract of
employment or continued service, and selection as a Participant will not give
the Participant the right to be retained in the employ of the Company or any
subsidiary.
9.7 Unsecured General Creditor. Participants and their heirs,
successors and assigns shall have no legal or equitable rights, interest or
claims in any property or assets of the Company by virtue of participation in
the Plan. The Company's obligations under the Plan shall be that of an unfunded
and unsecured promise of the Company to pay money in the future.
9.8 Nonassignability. No Participant or any other person shall have any
right to commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in advance of actual
receipt, the amounts, if any, payable hereunder, or any part thereof, which are,
and all rights to which are, expressly declared to be unassignable and
non-transferable. No part of the amounts payable shall, prior to actual payment,
be subject to seizure or sequestration for the payment of any debts, judgment,
alimony or separate maintenance owed by a Participant or any other person, nor
be transferable by operation of law in the event of a Participant's or any other
person's bankruptcy or insolvency.
EXECUTED on behalf of the Company as of January 1, 2000.
BOWATER INCORPORATED
By: /s/James T. Wright
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James T. Wright
Vice President - Human Resources
Date signed: June 6, 2000
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