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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:
[ ] 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
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:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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(BOWATER LOGO)
Bowater Incorporated
55 East Camperdown Way
Post Office Box 1028
Greenville, SC 29602
March 20, 2001
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 9, 2001, 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 2000 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
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BOWATER INCORPORATED
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 9, 2001
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The 2001 Annual Meeting of Shareholders of Bowater Incorporated will be
held at The Gunter Theatre, 300 South Main Street, Greenville, South Carolina,
on Wednesday, May 9, 2001, at 11:00 a.m. for the following purposes:
(1) To elect three directors, each for a term of three years; and
(2) 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 15, 2001, 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 20, 2001
SHAREHOLDERS ARE URGED TO EXECUTE AND RETURN THE PROXY
OR VOTING INSTRUCTION CARD PROMPTLY IN THE ENVELOPE PROVIDED.
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BOWATER INCORPORATED
55 EAST CAMPERDOWN WAY
POST OFFICE BOX 1028
GREENVILLE, SC 29602
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PROXY STATEMENT
DATED MARCH 20, 2001
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FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AT 11:00 A.M. ON MAY 9, 2001
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 15, 2001, will be
eligible to vote at the Annual Meeting. On that date, 50,361,846 shares of
Common Stock and 1,228,150 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 30, 2001.
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; and (2) 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, 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 and any adjournment, 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 in person (although attendance at the Annual Meeting
will not, in and of itself, constitute revocation of a proxy). No
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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 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 any 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 II directors expires this year, and the successors are to
be elected at the Annual Meeting for a three-year term expiring in 2004. The
terms of the Class III and Class I directors expire in 2002 and 2003,
respectively.
The following information is provided for the three nominees who are the
Class II directors, and also for the Class III and Class I directors.
NOMINEES FOR DIRECTORS TO BE ELECTED AT THE 2001 ANNUAL MEETING OF SHAREHOLDERS
(CLASS II)
ARNOLD M. NEMIROW CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
Age: 57 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 MANULIFE FINANCIAL CORPORATION -- Mr. Sawchuk
Age: 65 has been Chairman of Manulife Financial Corporation, a
Director since 1998 financial services company (prior to demutualization in late
1999, The Manufacturers Life Insurance 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. and OntarioPower Generation Inc.
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CINDA A. HALLMAN SENIOR VICE PRESIDENT, GLOBAL SYSTEMS & PROCESSES OF E.I. DU
Age: 56 PONT DE NEMOURS AND COMPANY -- Ms. Hallman has served as
Director since November 2000 Senior Vice President, Global Systems & Processes of E.I. du
Pont de Nemours and Company ("DuPont"), a science and
technology company, since March 1998. She served as DuPont's
Senior Vice President of Functioning Effectiveness and
Global Services from 1997 to 1998, and Vice President of
Global Information Systems and Chief Information Officer
from 1992 to 1997. Previously, Ms. Hallman was employed by
Conoco Inc. ("Conoco"), which was acquired by DuPont in
1981. In 1988, she assumed responsibility for consolidating
computer applications for DuPont and Conoco. Ms. Hallman
also is a director of Spherion Corporation.
DIRECTORS WHOSE TERMS END AT THE 2002 ANNUAL MEETING OF SHAREHOLDERS
(CLASS III)
FRANCIS J. AGUILAR PROFESSOR EMERITUS OF HARVARD UNIVERSITY GRADUATE SCHOOL OF
Age: 68 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 also acts as an independent
business consultant.
JOHN A. ROLLS PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THERMION SYSTEMS
Age: 59 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.
KENNETH M. CURTIS SENIOR MEMBER OF CURTIS THAXTER STEVENS BRODER & MICOLEAU,
Age: 70 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.
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DIRECTORS WHOSE TERMS END AT THE 2003 ANNUAL MEETING OF SHAREHOLDERS
(CLASS I)
RICHARD BARTH RETIRED CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
Age: 69 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 and Imclone Systems, Inc.
JAMES L. PATE CHAIRMAN OF PENNZOIL-QUAKER STATE COMPANY -- Mr. Pate has
Age: 65 been Chairman of the Board of Pennzoil-Quaker State Company,
Director since 1996 a consumer products company, since December 1998, and served
as Chief Executive Officer from December 1998 to May 2000.
He was Chairman of the Board of Pennzoil Company from 1994
to December 1998, Chief Executive Officer from 1990 to 1998
and President from 1990 to 1997. Mr. Pate also is a director
of Crown Cork & Seal Company, Inc.
CHARLES J. HOWARD CHAIRMAN OF HOWARD, BARCLAY & ASSOCIATES LTD. -- Mr. Howard
Age: 58 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.
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. Aguilar, Pate and Sawchuk, a Finance Committee consisting
of Messrs. Rolls, Howard and Pate, and an Executive Committee consisting of
Messrs. Nemirow and Aguilar and H. David Aycock. Mr. Aycock's term as a director
will expire at the Annual Meeting.
The Audit Committee, which met four times in 2000, 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. For further information
concerning the work of the Audit Committee, see "Report of the Audit Committee
of the Board of Directors" on page 18 and the Audit Committee Charter attached
as Appendix A.
The Nominating and Governance Committee, which met two times in 2000,
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 2002 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 four times in
2000, 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 under the plans, reviews programs followed by
management in developing executive resources for current and future operations
and reviews and approves the compensation of Bowater's executive officers.
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The Finance Committee, which met three times in 2000, 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 2000, meets from time to
time to make decisions between meetings of the Board under authority delegated
by the Board of Directors.
The Board of Directors met seven times during 2000.
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 2001, each Outside Director
except Ms. Hallman was granted options with respect to 2,000 shares of Common
Stock. Ms. Hallman, who became a director on November 1, 2000, was granted
options with respect to 2,333 shares of Common Stock.
Deferred Compensation Plan for Outside Directors
The Deferred Compensation Plan for Outside Directors of Bowater
Incorporated (the "Deferred Plan") permits Outside Directors to elect
irrevocably to defer receipt of all or a part of their annual retainer and
meeting fees. Compensation that a director has elected to defer under the
Deferred Plan can be allocated to a cash account, a 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,
participating directors who have elected to allocate all or part of their
deferred compensation to their Deferred Plan stock accounts 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 they allocated to their stock accounts. 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. Outside Directors can elect to transfer balances
between the cash and stock accounts subject to certain conditions set forth in
the Deferred Plan. Participants in the Deferred Plan may elect at the time of
deferral to have their Deferred Plan accounts distributed to them in (a) either
Common Stock or cash as soon as possible or in a stated number of years after
they cease to be Outside Directors or (b) cash in either five or ten
installments. All of Bowater's Outside Directors except Messrs. Curtis and
Howard and Ms. Hallman 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 attaining age 55 and completing five
years of service. Participants who elect early commencement 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 or her directorship by reason of the
change in control is entitled to the early retirement benefits provided by the
plan regardless of whether
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the plan requirements for early retirement have been satisfied. The calculation
of these benefits will include fees paid for attending Board and committee
meetings for the year preceding the change in control.
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 15, 2001, except as follows:
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)
------------------- -------------------- ----------------------
FMR Corp.(2) 6,738,987(2) 13.1%
82 Devonshire Street
Boston, MA 02109
Lord, Abbett & Co.(3) 3,198,947(3) 6.2%
90 Hudson Street
Jersey City, NJ 07302
Franklin Resources, Inc.(4) 3,148,665(4) 6.1%
777 Mariners Island Boulevard
San Mateo, CA 94404
Capital Research and Management
Company(5) 2,580,000(5) 5.0%
333 South Hope Street
Los Angeles, CA 90071
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(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 15, 2001.
(2) In an amendment dated February 14, 2001, to Schedule 13G, FMR Corp. ("FMR")
reported that it has sole voting power with respect to 758,190 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) Edward C.
Johnson 3d, the chairman of FMR, shares with FMR dispositive power over all
of the shares shown; (b) 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 5,880,197 shares of Common Stock shown in
the table and shares with FMR and Edward C. Johnson 3d the power to dispose
of the 5,880,197 shares owned by the investment companies; (c) Fidelity
Management Trust Company ("Fidelity Management"), a wholly-owned subsidiary
of FMR with the same business address as FMR, beneficially owns 665,300
shares of Common Stock shown in the table as a result of its serving as
investment manager of institutional accounts; Fidelity Management shares
dispositive power over those shares with FMR and Edward C. Johnson 3d, has
sole power to vote or to direct the voting of 564,700 shares of Common Stock
and has no power to vote or to direct the voting of 100,600 shares of Common
Stock owned by the institutional accounts; and (d) Fidelity International
Limited, Pembroke Hall, 42 Crowlane, Hamilton, Bermuda, has sole dispositive
power with respect to 193,490 shares of Common Stock shown in the table, and
has sole power to vote or direct the voting of and to dispose of all of
those shares by virtue of providing investment advisory and management
services to a number of non-U.S. investment companies and institutional
investors.
(3) Lord, Abbett & Co. reported in a Schedule 13G dated January 19, 2001, that
it has sole voting and dispositive power with respect to all of the shares
shown in the table.
(4) In a Schedule 13G dated January 26, 2001, 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
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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 (for which the business
address is Lyford Cay, P.O. Box N-7759, Nassau, Bahamas), has sole voting
power and sole dispositive power with respect to 2,956,700 of the shares
shown; Franklin Advisers, Inc. (which has the same address as FRI) has sole
voting power and sole dispositive power with respect to 165,700 of the
shares shown; and Templeton/Franklin Investment Services, Inc. (which has
the same address as FRI) has sole voting power and sole dispositive power
with respect to 26,265 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 subsidiaries of
FRI.
(5) In an amendment dated February 9, 2001, 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.
As of March 15, 2001, 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:
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)
---------------- ------------------------ ----------------------
Arnold M. Nemirow 489,107(3) *
Arthur D. Fuller 149,330(4) *
E. Patrick Duffy 136,513(5) *
David G. Maffucci 107,093(6) *
David J. Steuart 63,380(7) *
Francis J. Aguilar 27,915(8) *
H. David Aycock 18,846(9) *
Richard Barth 15,139(10) *
Kenneth M. Curtis 5,500(11) *
Cinda A. Hallman 0 *
Charles J. Howard 12,250(12) *
James L. Pate 9,396(13) *
John A. Rolls 18,355(14) *
Arthur R. Sawchuk 5,413(15) *
Directors and executive officers as a
group (24 persons) 1,504,929(16) 2.8%
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* 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 14, 2001. 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 who participate in the
Savings Plan. 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, 2000, based on the market value of the applicable units. This
table also includes shares of Common Stock (rounded
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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, 2000. 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 15, 2001. In addition, under
Rule 13d-3 of 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 15, 2001, upon the exercise of options
by a given person are outstanding, but no other shares similarly subject to
acquisition by other persons are outstanding.
(3) Represents 31,000 shares of Common Stock owned directly, 949 shares of
Common Stock owned in the Savings Plan, 3,158 shares of Common Stock
allocated under the Compensatory Plan and 454,000 shares of Common Stock
that may be acquired under options currently exercisable.
(4) Represents 10,000 shares of Common Stock owned directly, 2,748 shares of
Common Stock owned in the Savings Plan, 1,582 shares of Common Stock
allocated under the Compensatory Plan and 135,000 shares of Common Stock
that may be acquired under options currently exercisable.
(5) Represents 7,000 shares of Common Stock owned directly, 762 shares owned in
the Savings Plan, 1,251 shares of Common Stock allocated under the
Compensatory Plan and 127,500 shares of Common Stock that may be acquired
under options currently exercisable.
(6) Represents 4,669 shares of Common Stock owned directly, 3,573 shares of
Common Stock owned in the Savings Plan, 951 shares of Common Stock
allocated under the Compensatory Plan and 97,900 shares of Common Stock
that may be acquired under options currently exercisable.
(7) Represents 880 Exchangeable Shares owned directly and 62,500 shares of
Common Stock that may be acquired under options currently exercisable.
(8) Represents 13,497 shares of Common Stock owned directly, 9,918 shares of
Common Stock allocated under the Deferred Plan and 4,500 shares of Common
Stock that may be acquired under options currently exercisable.
(9) Represents 500 shares of Common Stock owned directly, 13,846 shares of
Common Stock allocated under the Deferred Plan and 4,500 shares of Common
Stock that may be acquired under options currently exercisable.
(10) Represents 10,639 shares of Common Stock allocated under the Deferred Plan
and 4,500 shares of Common Stock that may be acquired under options
currently exercisable.
(11) Represents 1,000 shares of Common Stock owned directly and 4,500 shares of
Common Stock that may be acquired under options currently exercisable.
(12) Represents 1,000 shares of Common Stock owned directly, 7,000 shares of
Common Stock owned by Ausnoram Holdings Limited, of which Mr. Howard is the
President, Chief Executive Officer and largest shareholder and 4,250 shares
of Common Stock that may be acquired under options currently exercisable.
(13) Represents 1,000 shares of Common Stock owned directly, 3,896 shares of
Common Stock allocated under the Deferred Plan and 4,500 shares of Common
Stock that may be acquired under options currently exercisable.
(14) Represents 13,855 shares of Common Stock allocated under the Deferred Plan
and 4,500 shares of Common Stock that may be acquired under options
currently exercisable.
(15) Represents 1,577 Exchangeable Shares owned directly, 1,336 shares of Common
Stock allocated under the Deferred Plan and 2,500 shares of Common Stock
that may be acquired under options currently exercisable.
(16) This total represents 83,118 shares of Common Stock and 2,535 Exchangeable
Shares owned directly, 34,049 shares of Common Stock allocated under the
Savings Plan, 11,086 shares of Common Stock allocated under the
Compensatory Plan, 53,491 shares of Common Stock allocated under the
Deferred Plan and 1,320,650 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.
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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 2000 executive compensation program were base
salary, the Annual Incentive Plan, the 2000-2002 Long-Term Incentive Plan and
stock-based incentive compensation.
- 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 employed by a number of other companies in the paper and
forest products industry (the "Comparable Group"). 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 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, as well as other paper and forest
products 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.
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 used four performance measures in 2000: return on
net assets ("RONA"), return on capital spending, operating unit performance, and
sales performance. Each executive's annual incentive award was based on at least
three of these measures, each weighted from 20% to 55%, depending on the
executive's responsibility and function.
- 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.
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- 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.
Bowater's performance during 2000 resulted in annual incentive awards
ranging from 128% to 163% of target levels.
LONG-TERM INCENTIVE PLAN ("LTIP")
The 1997-1999 LTIP was designed to link rewards paid to key executives with
Bowater's performance during the 1997-1999 period. All executive officers
participated in the 1997-1999 LTIP. Payouts under the 1997-1999 LTIP depended
upon Bowater's average RONA as compared to the RONA of a group of designated
peer companies and upon the average daily closing price of the Common Stock for
each year covered by the plan. No payout could be made under the 1997-1999 LTIP
unless Bowater's average RONA exceeded the average RONA of the peer group
companies. No payments were made under the terms of the 1997-1999 LTIP due
primarily to the operating results of Great Northern Paper, Inc., which Bowater
sold in August 1999.
In November 1999, the Board of Directors approved a new 2000-2002 LTIP
designed to link rewards of key executives with Bowater's Common Stock
performance. The three-year plan rewards executives based on total shareholder
return for the period from January 1, 2000, through December 31, 2002, relative
to a peer group. It also permits an additional payment to be made at the
discretion of the Board of Directors based on its evaluation of Bowater's
strategic progress. The maximum total payment from both portions is 250 percent
of a participant's salary on December 31, 2002. All executive officers
participate in the 2000-2002 LTIP.
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 2000 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.
EQUITY PARTICIPATION RIGHTS
In May 2000, the independent directors determined that strategic
accomplishments made by Bowater, combined with the substantial increase in value
to Bowater's shareholders relative to its peer group and the S&P 500, merited an
award of additional compensation to provide continuing incentive to Bowater's
senior management. Equity Participation Rights were chosen because they provide
the recipient incentive compensation tied to the performance of Bowater's Common
Stock, thereby aligning the interest of the recipient with Bowater's
shareholders. Equity Participation Rights were awarded to members of senior
management, including all executive officers, in amounts based on their relative
position rank. The reference price for the Equity Participation Right grants was
set at the fair market value of the Common Stock on the date of grant so that
the grants would have value only if the stock price appreciates.
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
2000, the impact of which was not material to Bowater.
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COMPENSATION OF THE CEO DURING 2000
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 2000 salary was
determined on the same basis as the base salaries for all executive officers, as
described above. Mr. Nemirow's 2000 payout under the Annual Incentive Plan was
based on the measures described above, weighted as follows: RONA -- 50%, Return
on Capital Spending -- 25%, and Operating Unit Performance -- 25%. In addition,
stock options for 100,000 shares of Common Stock were granted to Mr. Nemirow in
2000, as well as Equity Participation Rights relating to 117,000 shares of
Common Stock. These options and Equity Participation Rights 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.
Francis J. Aguilar (Chairman)
James L. Pate
Arthur R. Sawchuk
TOTAL SHAREHOLDER RETURN
BOWATER VS. DOW JONES PAPER PRODUCTS GROUP* AND S&P 500
1995-2000
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,
1995.
[PERFORMANCE GRAPH]
DOW JONES PAPER PRODUCTS
BOWATER INCORPORATED S&P 500 GROUP*
-------------------- ------- ------------------------
12/95 $100.00 $100.00 $100.00
12/96 $108.26 $122.95 $105.62
12/97 $130.16 $163.96 $113.99
12/98 $123.60 $210.81 $119.45
12/99 $164.74 $255.16 $159.68
12/00 $173.77 $231.93 $125.80
* Companies include: Boise Cascade Corporation, Bowater
Incorporated, Caraustar Industries, Inc., International Paper
Company, The Mead Corporation, Pope & Talbot, Inc.,
Wausau-Mosinee Paper Corporation, and Westvaco Corporation.
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EXECUTIVE COMPENSATION
The following table sets forth information concerning all compensation paid
by Bowater and its subsidiaries during the last three fiscal years ended
December 31, 2000, to the Chief Executive Officer and to each of the four
executive officers other than the Chief Executive Officer with the highest
salaries and bonuses during fiscal year 2000 (these officers are referred to
collectively as the "Named Executive Officers") for services rendered in all
capacities to Bowater and its subsidiaries during these fiscal years.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
AWARDS
ANNUAL COMPENSATION ------------
------------------------------------- SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
DURING 2000 YEAR ($) ($) ($)(1) (#) ($)
------------------ ---- --------- ------- ------------ ------------ ------------
Arnold M. Nemirow 2000 860,000 750,298 -- 217,000 43,982(2)
Chairman, President and 1999 800,000 559,232 -- 101,000 33,720
Chief Executive Officer 1998 700,000 461,160 -- 50,000 42,114
Arthur D. Fuller 2000 450,000 350,834 -- 89,100 25,489(3)
Executive Vice President and 1999 427,345(3) 354,551 -- 36,000 18,356
President - Newsprint Division 1998 388,765(3) 224,404 -- 25,000 21,568
E. Patrick Duffy 2000 407,115(4) 311,000 -- 68,800 22,726(4)
Senior Vice President and 1999 376,535(4) 260,665 -- 26,000 16,680
President - Coated Paper Division 1998 345,960(4) 181,152 -- 20,000 18,641
David G. Maffucci 2000 375,000 240,563 -- 68,800 21,631(5)
Senior Vice President and 1999 356,055(5) 209,900 -- 26,000 16,550
Chief Financial Officer 1998 320,285(5) 153,348 -- 20,000 18,159
David J. Steuart(6) 2000 315,662(6) 256,203 -- 43,700 16,769(6)
Vice President and 1999 290,197(6) 139,315 -- 26,000 3,217
President - Pulp Division 1998 100,699(6) 50,709 -- 25,000 0
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(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 2000
consist of Bowater contributions of $2,800 under the Savings Plan and
$41,182 under the Compensatory Plan.
(3) Amounts included under "All Other Compensation" for Mr. Fuller for 2000
consist of Bowater contributions of $2,800 under the Savings Plan and
$22,689 under the Compensatory Plan. Amounts included under "Salary" for
1999 include $7,345 from the sale of earned vacation days back to Bowater.
Amounts included under "Salary" for 1998 include $6,765 from the sale of
earned vacation days back to Bowater.
(4) Amounts included under "Salary" for Mr. Duffy for 2000 include $7,115 from
the sale of earned vacation days back to Bowater. Amounts included under
"All Other Compensation" for 2000 consist of Bowater contributions of $2,800
under the Savings Plan and $19,926 under the Compensatory Plan. Amounts
included under "Salary" for 1999 include $6,535 from the sale of earned
vacation days back to Bowater. Amounts included under "Salary" for 1998
include $5,960 from the sale of earned vacation days back to Bowater.
(5) Amounts included under "All Other Compensation" for Mr. Maffucci for 2000
consist of Bowater contributions of $2,800 under the Savings Plan and
$18,831 under the Compensatory Plan. Amounts included under "Salary" for
1999 include $6,055 from the sale of earned vacation days back to Bowater.
Amounts included under "Salary" for 1998 include $5,285 from the sale of
earned vacation days back to Bowater.
(6) All amounts listed for Mr. Steuart other than bonus amounts have been
converted from Canadian dollars to U.S. dollars using an average of the
daily Canadian dollar to U.S. dollar exchange rate published by the Bank of
Canada for the relevant year. Bonus amounts for Mr. Steuart have been
converted from Canadian dollars to U.S.
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dollars using the exchange rate published by the Bank of Canada for January
31 of the year following the year the bonus was made. Amounts included under
"Salary" for 2000 include $4,040 from a "flexible spending allocation" to
additional employment income. Amounts included under "All Other
Compensation" for 2000 consist of Bowater contributions of $16,769 under the
Bowater Canada Employee Savings Plan. Amounts included under "Salary" for
1999 include $4,375 from a "flexible spending allocation" to additional
employment income. Mr. Steuart joined Bowater in July 1998. Amounts included
under "Salary" for 1998 include $1,911 from "flexible spending allocation"
to additional employment income.
STOCK OPTIONS
The following table sets forth information regarding options and stock
appreciation rights ("SARs") granted with respect to Common Stock made by
Bowater to the Named Executive Officers during 2000.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS(1)
UNDERLYING GRANTED TO GRANT DATE
OPTIONS/SARS(1) EMPLOYEES EXERCISE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED(#) IN 2000 ($/SH) DATE(2) ($)(3)
---- --------------- ----------- -------------- ---------- -------------
Arnold M. Nemirow 100,000(4) 6.53 48.00 1/25/2010 1,751,000
117,000(5) 7.64 54.84 5/10/2010 2,379,780
Arthur D. Fuller 35,000(4) 2.29 48.00 1/25/2010 612,850
54,100(5) 3.53 54.84 5/10/2010 1,100,394
E. Patrick Duffy 30,000(4) 1.96 48.00 1/25/2010 525,300
38,800(5) 2.54 54.84 5/10/2010 789,192
David G. Maffucci 30,000(4) 1.96 48.00 1/25/2010 525,300
38,800(5) 2.54 54.84 5/10/2010 789,192
David J. Steuart 25,000(4) 1.63 48.00 1/25/2010 437,750
18,700(5) 1.22 54.84 5/10/2010 380,358
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(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 32%, a risk free return rate
of 6.72%, dividends at the rate of $.80 per share and an average expected
option life of 5.70 years. The ultimate values of the options will depend on
the future market price of the Common Stock. The actual value, if any, an
optionee will realize upon exercise of an option will depend on the excess
of the market value of the Common Stock over the exercise price on the date
the option is exercised.
(4) Options with respect to 50% of the covered shares of Common Stock became
exercisable on January 25, 2001, and options with respect to the remaining
50% of the shares of Common Stock will become exercisable on January 25,
2002, if certain conditions are met. In addition, the stock option plan
under which the options were granted provides that the exercisability date
is accelerated and Bowater is required to repurchase outstanding options at
a defined acceleration price upon the occurrence of a change in control
event as defined in the stock option plan.
(5) EPRs with respect to 50% of the covered shares of Common Stock will become
exercisable on May 10, 2001, and EPRs with respect to the remaining 50% of
the shares of Common Stock will become exercisable on May 10, 2002. The plan
under which the EPRs were granted provides that the exercisability date is
accelerated and Bowater is required to pay a defined acceleration price upon
the occurrence of a change in control event as defined in the plan.
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OPTION EXERCISES
The following table sets forth information concerning options exercised by
Named Executive Officers and the value at December 31, 2000 of SARs and
unexercised options held by the Named Executive Officers to purchase Bowater's
Common Stock.
AGGREGATED OPTION EXERCISES IN 2000
AND 2000 YEAR-END OPTION/SAR VALUES
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED VALUE 12/31/2000(#) 12/31/2000($)(1)
ON EXERCISE REALIZED ------------------------- -------------------------
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------------- --------- ------------------------- -------------------------
Arnold M. Nemirow 70,000 1,831,771 355,000/267,000 7,436,943/1,784,283
Arthur D. Fuller 0 0 101,000/106,600 1,646,642/644,684
E. Patrick Duffy 0 0 101,000/81,300 1,722,267/502,605
David G. Maffucci 11,000 334,800 73,500/81,300 1,076,517/502,605
David J. Steuart 0 0 38,500/56,200 492,767/429,876
- ---------------
(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
29, 2000, of $56.375.
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 a date three to four years after the executive's employment with
Bowater or promotion to a covered position, 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 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
annual incentive awards, plus a prorated annual incentive award for the year of
termination. Mr. Nemirow's Agreement provides that, for purposes of determining
the benefits due under Bowater's benefits plans, he will receive credit for
continuous employment at an accelerated rate.
Mr. Steuart previously served as President of the Pulp Group of Avenor Inc.
When Bowater acquired Avenor, Mr. Steuart executed an agreement with Bowater in
which he agreed to relinquish his rights under various Avenor
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employment and change in control agreements (including the potential right to
receive estimated payments exceeding Can$2 million due to him upon the change in
control of Avenor) and to accept in lieu thereof (a) payment of a lump sum of
Can$2 million plus accrued interest upon termination of his employment with
Bowater, (b) an employment agreement on the same terms contained in the
agreements described above retaining him to serve as President of Bowater's Pulp
Division and (c) a change in control agreement on the same terms as were
available to other Bowater executives.
Each Executive also is a party to a change in control agreement with
Bowater (collectively, the "CIC Agreements"). The CIC Agreements continue until
an Executive's employment is terminated and all obligations thereunder (if any)
have been satisfied. Following a Change in Control of Bowater, if an Executive's
employment is terminated within 36 months (except for a termination due to
death, disability, 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 either (a) for Good Reason
as defined below or (b) during a thirty-day period after the first anniversary
of the Change in Control, the Executive will receive his accrued salary, a
prorated annual incentive award and all benefits under Bowater's benefit plans
and policies to which he is entitled through his date of termination.
In addition, the Executive will receive, in lieu of any severance payments
provided in his employment agreement described above, an amount equal to the sum
of: (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; (b) three times the highest
possible annual incentive award that could have been awarded to the Executive
under the annual incentive plan in effect when the Executive is terminated, or,
if higher, during the year of the Change in Control; (c) three times the largest
annual contribution that could have been made by Bowater to its savings plans on
the Executive's behalf for the year in which the Executive is terminated or, if
higher, for the year of the Change in Control; (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 certain other benefits lost as a result
of the termination of employment); (e) an amount equal to the present value of
the additional retirement benefits the Executive would have earned for the three
years following the Executive's termination date; and (f) retiree health care
and life insurance coverage on substantially the same terms as would have been
provided to Executive retirees as of the date of the Change in Control. If an
Executive's employment is terminated within 36 months following a Change in
Control due to death, disability, or for Cause (as defined above), the Executive
will receive his accrued compensation and all benefits to which he is entitled
through the date of termination, and, if the termination is not due to Cause, a
prorated annual incentive award.
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 these
securities or the person has filed a Schedule 13G indicating the person's intent
to hold the securities for investment; (b) less than 50% of the total membership
of the Board are 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, title, position or responsibilities (including a change in
reporting relationships) as in effect within 180 days prior to the Change in
Control or any time thereafter; the assignment to the Executive of any duties or
responsibilities that, in the Executive's reasonable judgment, are inconsistent
with the Executive's status, title, position or responsibilities as in effect at
any time within 180 days preceding the date of a Change in Control or any time
thereafter; or any removal of the Executive from or failure to reappoint or
reelect the Executive to any office or position held prior to the Change in
Control, except in connection with the termination of the Executive's employment
due to death, disability, or for Cause (as defined above), or by the Executive
other than for Good Reason; or (b) failure to pay or provide the Executive the
salary and benefits, in the aggregate, at least comparable to those to which he
was entitled within 180 days preceding the Change in Control; or (c) the
reduction of the Executive's salary as in effect on the date of the Change in
Control or any time thereafter; or (d) Bowater's failure to obtain from any
successor its assumption of the CIC Agreement; or (e) 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 a substantial increase in the
Executive's travel obligations following the Change in Control.
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The CIC Agreements also generally provide a terminated Executive with (a)
either a cash payment of $20,000 or outplacement assistance, (b) a grossed up
reimbursement of certain excise taxes that may be levied on "excess parachute
payments" and (c) the right to receive a lump sum payment equal to the present
value of any non-statutory retirement benefits to which the Executive is
entitled. A terminated Executive will also be entitled to be paid or reimbursed
for all costs incurred (or to be incurred) (x) in connection with confirming the
Executive's rights to and amounts of payments due under the Change in Control
Agreement, (y) to dispute or contest any termination of the Executive's
employment following a Change in Control or to enforce the terms of the Change
in Control Agreement, or (z) in connection with any audit relating to any
payment or benefit provided under the Change in Control Agreement.
RETIREMENT BENEFITS
Named Executive Officers Resident in the United States
The following table shows the total estimated annual pension benefits
payable to the Named Executive Officers residing in the United States under
Bowater's qualified, nonqualified benefits restoration and nonqualified
supplemental U.S. retirement plans upon retirement at age 65, calculated on a
straight life annuity basis. Benefits to the Named Executive Officers are not
reduced by any offset for Social Security benefits.
COMBINED RETIREMENT PLANS TABLE OF ESTIMATED BENEFITS
FINAL
AVERAGE 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 OR MORE
EARNINGS* SERVICE SERVICE SERVICE SERVICE SERVICE YEARS SERVICE
- ---------- -------- -------- -------- -------- -------- -------------
$ 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
650,000 81,250 162,500 243,750 325,000 357,500 390,000
1,200,000 150,000 300,000 450,000 600,000 660,000 720,000
1,300,000 162,500 325,000 487,500 650,000 715,000 780,000
- ---------------
* 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 2000 with payments beginning at age
65. At that 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, $1,282,420, 12.7 years (Mr. Nemirow received
additional years of service after his fifth year employment anniversary under
the terms of his employment agreement); Mr. Fuller, $652,734, 5.9 years; Mr.
Duffy, $569,679, 5.8 years; and Mr. Maffucci, $496,643, 23.5 years.
Named Executive Officer Resident in Canada
Mr. Steuart resides in Canada and will receive retirement benefits from
certain of the Bowater Pulp and Paper Canada Inc. ("BPPCI") retirement plans. He
is covered by the BPPCI Employees' Retirement Plan (1988), which is applicable
to BPPCI salaried employees at specific locations, is registered with the
applicable governmental
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authorities for income tax purposes and provides benefits based on years of
service with BPPCI and earnings. He is also covered by the BPPCI Senior
Executive Retirement Plan (the "SERP").
The SERP provides participants with supplementary retirement benefits
determined as the excess of (a) the amount of pension calculated in accordance
with the provisions of the SERP over (b) the amount of pension payable from the
registered plan in which the executive participates. The SERP benefits are
computed as the sum of the products of two formulas: one applicable to years of
service with BPPCI, and the other applicable to certain years of service with
prior employers recognized under the SERP.
The first formula is 2% per year of service with BPPCI multiplied by final
average pay, which is defined as the average base salary (shown under the salary
heading in the Summary Compensation Table) for the 36 months preceding
retirement plus 50% of the average incentive target. The incentive component
represents 18% of earnings for service before 1999 and 22.67% of earnings for
service after 1998. The second formula is 1.6% per year of recognized service
with prior employers multiplied by final average pay, as defined in the previous
formula.
The following tables show the estimated annual pension benefits payable to
Mr. Steuart upon retirement at age 65 under the registered plan and the SERP
based on the two SERP formulas. Benefits are payable on a joint and 60% survivor
basis if the executive has an eligible spouse at retirement, and otherwise for
life with a 10-year guarantee. Both tables assume retirement on December 31,
2000, with payments beginning at age 65. The first table shows the benefits
payable for service with BPPCI and the second table shows the benefits payable
for recognized service with prior employers. The benefits will not be reduced by
any offset for government payments.
YEARS OF SERVICE WITH BPPCI
----------------------------
FINAL AVERAGE PAY 5 10 15
(US$) (US$) (US$) (US$)
- ----------------- ------- ------- --------
300,000 30,000 60,000 90,000
350,000 35,000 70,000 105,000
Mr. Steuart earned 7.33 years of service with BPPCI; his final average pay
is $324,577 (Can$486,152) for years of service before 1999, and $337,412
(Can$505,377) for years of service after 1998. Both average pay amounts have
been converted from Canadian dollars to U.S. dollars using the exchange rate
published by the Bank of Canada for January 31, 2001.
YEARS OF RECOGNIZED SERVICE WITH PRIOR
EMPLOYERS
---------------------------------------
FINAL AVERAGE PAY 20 25
(US$) (US$) (US$)
- ----------------- ------------------ ------------------
300,000 96,000 120,000
350,000 112,000 140,000
As of December 31, 2000, Mr. Steuart earned 23.67 years of service with
prior employers for which he receives credit under the SERP. The final average
pay used to compute his benefits attributable to those years of service is
$324,577 (Can$486,152), converted from Canadian dollars to U.S. dollars using
the exchange rate published by the Bank of Canada for January 31, 2001. The SERP
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.
There are no change-in-control provisions in the SERP.
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 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.
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
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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 2000, these entities received approximately $410,000 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 6,738,987 shares of Common Stock at
December 31, 2000, and sole voting power with respect to 758,190 of these shares
and that Fidelity Management beneficially owned 665,300 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.
THE FOLLOWING REPORT DOES NOT CONSTITUTE SOLICITING MATERIAL AND IS NOT
CONSIDERED FILED OR INCORPORATED BY REFERENCE INTO ANY OTHER FILING BY BOWATER
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, UNLESS WE EXPRESSLY STATE OTHERWISE.
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The Board of Directors has adopted a written charter for the Audit
Committee (the "Committee"), a copy of which attached to this proxy statement as
Appendix A. The Committee is comprised of three non-employee directors, all of
whom are independent as defined in Section 303.01(B)(2)(a) and (3) of the New
York Stock Exchange's listing standards.
In carrying out its responsibilities, the Committee has:
- Reviewed and discussed the audited financial statements for the year
ended December 31, 2000, with Bowater's management and the independent
auditors.
- Discussed with the independent auditors the matters required to be
discussed by the Statement on Auditing Standard No. 61, Communication
with Audit Committees.
- Received from the independent auditors written disclosures regarding
auditor independence and the letter required by Independence Standards
Board Standard No. 1, Independence Discussion with Audit Committees, and
discussed with the auditors their independence from Bowater and its
management.
Based on the review and discussions described above, the Committee
recommended to the Board of Directors that the audited financial statements be
included in Bowater's Annual Report on Form 10-K for the year ended December 31,
2000, for filing with the Securities and Exchange Commission.
All members of the Audit Committee concur in this report.
Charles J. Howard (Chairman)
Francis J. Aguilar
Richard Barth
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,
2001. 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.
AUDIT FEES
The aggregate fees billed for professional services rendered for the audit
of Bowater's annual financial statements for the most recent fiscal year and the
reviews of the financial statements included in Bowater's Forms 10-Q for that
fiscal year were $1.0 million.
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FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed for professional services described in Paragraph
(c)(4)(ii) of Rule 2-01 of Regulation S-X rendered by KPMG LLP for the most
recent fiscal year.
ALL OTHER FEES
The aggregate fees billed for all professional services rendered by KPMG
LLP for the most recent fiscal year other than those described in the prior two
paragraphs were approximately $.8 million (principally for tax services,
employee benefit plans and acquisition due diligence services). The Audit
Committee has considered whether the provision of these services is compatible
with maintaining KPMG LLP's independence.
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 2002
should submit his or her proposal on or before November 20, 2001, to Bowater's
Secretary, 55 East Camperdown Way, Post Office Box 1028, Greenville, South
Carolina 29602. With respect to a shareholder proposal for the 2002 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 9,
2002, 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 is first 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. Morrow & Co., Inc. has been retained to assist
in soliciting 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.
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FINANCIAL INFORMATION
BOWATER'S 2000 ANNUAL REPORT IS ENCLOSED. BOWATER WILL PROVIDE WITHOUT
CHARGE TO ANY SHAREHOLDER OF RECORD AS OF MARCH 15, 2001, WHO SO REQUESTS IN
WRITING, A COPY OF THE 2000 ANNUAL REPORT OR BOWATER'S 2000 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 20, 2001
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APPENDIX A
BOWATER INCORPORATED
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
PURPOSE
The Audit Committee and its Chair are appointed by the Board of Directors
to assist the Board in fulfilling its oversight responsibilities. The Audit
Committee's primary duties and responsibilities are to:
- Monitor the integrity of Bowater's financial reporting process and
systems of internal controls.
- Monitor the independence and performance of Bowater's independent and
internal auditors. Bowater's independent auditors are ultimately
accountable to the Board of Directors, and the Audit Committee, which
have the authority and responsibility to select, evaluate and, where
appropriate, replace the independent auditors.
- Provide an open avenue of communication among the Board of Directors,
management, independent auditors and internal auditors.
While the Audit Committee has the duties and responsibilities set forth in
this Charter, it is not the duty of the Committee to plan or conduct audits or
to determine that Bowater's financial statements are complete and accurate and
are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditors.
COMPOSITION AND MEETINGS
The Audit Committee is composed of at least three directors, each of whom
is an independent director, free from any relationship that could interfere with
the exercise of his or her independence from management and Bowater, and
satisfies the requirements of the New York Stock Exchange concerning membership.
All members of the Committee have a basic understanding of finance and
accounting and are able to read and understand fundamental financial statements.
At least one member of the Committee has accounting or related financial
management expertise.
The Committee has four regularly scheduled meetings annually and meets more
frequently if circumstances dictate. The Committee maintains minutes of all
meetings and reports, through its Chair, to the Board of Directors on
significant aspects of its activities. The Committee meets at least annually, in
separate executive sessions, with management, the internal auditors and the
independent auditors to discuss any matters that the Committee or any of these
groups believes should be discussed. In addition, the Committee meets with
management and the independent auditors quarterly to review Bowater's financial
statements and significant findings based upon the auditors' limited review
procedures.
DUTIES AND RESPONSIBILITIES
To fulfill its duties and responsibilities, the Committee will:
REVIEW PROCEDURES
- Review and reassess the adequacy of this Charter annually. Submit the
charter to the Board of Directors for approval and have it published in
Bowater's proxy statement as required by the Securities and Exchange
Commission (SEC).
- In consultation with management, independent auditors and internal
auditors, consider the integrity of the Bowater's financial reporting
processes and controls. Discuss significant financial risk exposures, if
any, and the steps management has taken to monitor, control and report
any such exposures. Review significant findings prepared by the
independent auditors and internal auditors, together with management's
responses.
- Review with financial management and the independent auditors Bowater's
quarterly financial statements prior to filing with the SEC. Discuss any
significant changes to Bowater's accounting policies and any items
required
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to be communicated by the independent auditors in accordance with
American Institute of Certified Public Accountants, Statement on Auditing
Standards 61, as amended (SAS 61).
- Review Bowater's annual audited financial statements prior to filing with
the SEC. Discuss with management and the independent auditors any
significant issues regarding accounting policies, practices, judgments
and disclosure.
- Prepare a report to be included in Bowater's annual proxy statement that
discloses the Committee's review of the audited financial statements, the
required discussions (SAS 61) with the independent auditors, whether the
Committee has recommended to the Board of Directors that the financial
statements be included in Bowater's Annual Report on Form 10-K, and any
other matters required by the SEC.
INDEPENDENT AUDITORS
- Review the independence and performance of the auditors and annually
recommend to the Board of Directors the appointment of the independent
auditors or any discharge of auditors when circumstances warrant.
- Approve the fees and other significant compensation to be paid to the
independent auditors.
- Require the independent auditors to submit annually to the Audit
Committee a formal written statement, delineating all relationships
between the independent auditors and Bowater in accordance with
Independence Standards Board (ISB) No. 1. Actively engage in a dialogue
with the independent auditors about any relationships or services that
could impact their objectivity and independence. Recommend that the Board
of Directors take appropriate action in response to the independent
auditors' report to satisfy itself of their independence.
- Review the independent auditors' audit plan and discuss scope, staffing,
locations, reliance upon management and internal audit and general audit
approach.
- Discuss the results of the audit with the independent auditors. Discuss
matters required to be communicated to audit committees in accordance
with SAS 61.
- Consider the independent auditors' judgments about the quality and
appropriateness of the Bowater's accounting policies as applied in its
financial reporting.
INTERNAL AUDIT DEPARTMENT
- Review the budget, plan, changes in the plan, activities, organizational
structure and qualifications of the internal auditors.
- Review the appointment, performance and replacement of the senior
internal audit executive or service provider.
- Review significant observations and recommendations made by the internal
auditors, together with management's response and follow-up to these
reports.
LEGAL COMPLIANCE
- Review, with Bowater's General Counsel, any legal matter that could have
a material impact on Bowater's financial statements.
ADOPTED BY THE BOARD OF DIRECTORS
MAY 12, 2000
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NOTICE OF
ANNUAL MEETING
AND
PROXY STATEMENT
(BOWATER LOGO)
DATE AND TIME
WEDNESDAY, MAY 9, 2001
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.
------------------------------------------------------------------
27
P R O X Y
BOWATER INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR ANNUAL MEETING MAY 9, 2001
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 15, 2001, at the annual meeting of
shareholders to be held May 9, 2001, 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 PROPOSAL 1, AND PROXYHOLDERS WILL VOTE, IN THEIR DISCRETION, UPON ANY OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENT.
SEE REVERSE SIDE
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.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
1. ELECTION OF DIRECTORS 2. At their discretion upon such other business that may properly come
before the annual meeting and any adjournment.
FOR [X] WITHHOLD [X] EXCEPTIONS* [X]
ALL NOMINEES AUTHORITY (To Vote (As Indicated to the
LISTED BELOW for all nominees contrary below)
listed below)
Arnold M. Nemirow, Arthur R. Sawchuk, Cinda A. Hallman
(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 ..............................................................
..........................................................................
DATED: ________________________________________________________________, 2001
(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]
"X" IN BLACK OR BLUE INK.
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.