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 Section 240.14a-11(c) or Section 240.14a-12
Bowater Incorporated
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
(Bowater logo)
Bowater Incorporated
55 East Camperdown Way
Post Office Box 1028
Greenville, SC 29602
March 31, 1997
To All Shareholders:
You are cordially invited to attend the Annual Meeting of
Shareholders of Bowater Incorporated (the "Company"), which will be
held at The Westin Hotel, 222 East Third Street, Charlotte, North
Carolina, on Wednesday, May 21, 1997, at ten-thirty 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. A current
report on the business operations of the Company will be presented at
the Annual Meeting, and shareholders will have an opportunity to ask
questions.
Upon adjournment of the Annual Meeting, a number of the directors
and officers will be available to confer informally with shareholders.
We hope that you will attend the Annual Meeting. Whether or not
you plan to attend, please sign, date and return your proxy promptly
in the envelope provided in order to make certain that your shares
will be represented at the Annual Meeting.
The Company's Annual Report for 1996 is included in this package,
and we urge you to read it carefully.
Sincerely yours,
/s/ Arnold M. Nemirow
ARNOLD M. NEMIROW
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BOWATER INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 21, 1997
The 1997 Annual Meeting of Shareholders of BOWATER
INCORPORATED (the "Company") will be held at The Westin Hotel,
222 East Third Street, Charlotte, North Carolina, on Wednesday,
May 21, 1997, at ten-thirty a.m. for the following purposes:
(1) To elect three directors, each for a term of three
years;
(2) To vote upon the proposal to approve the Bowater
Incorporated 1997-1999 Long-Term Incentive Plan;
(3) To vote upon the proposal to approve the Bowater
Incorporated 1997 Stock Option Plan; and
(4) To transact such other business as may properly
come before the Annual Meeting or any adjournment thereof.
Holders of Common Stock of record at the close of business
on March 24, 1997, 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
SECRETARY
Greenville, South Carolina
March 31, 1997
SHAREHOLDERS ARE URGED TO EXECUTE AND RETURN THE PROXY PROMPTLY IN THE
ENVELOPE PROVIDED.
BOWATER INCORPORATED
55 EAST CAMPERDOWN WAY
P.O. BOX 1028
GREENVILLE, SOUTH CAROLINA 29602
PROXY STATEMENT
DATED MARCH 31, 1997
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AT 10:30 A.M. ON MAY 21, 1997
THE WESTIN HOTEL
222 EAST THIRD STREET
CHARLOTTE, NORTH CAROLINA
The only securities of Bowater Incorporated (the "Company") eligible to
vote at the Annual Meeting are the shares of its common stock, par value $1 per
share (the "Common Stock"). 39,837,573 shares of Common Stock were outstanding
on March 24, 1997, the record date for the Annual Meeting. Each share of Common
Stock outstanding on the record date will be entitled to one vote at the Annual
Meeting. Only holders of record at the close of business on March 24, 1997, will
be eligible to vote at the Annual Meeting. One-third of the outstanding shares
of stock entitled to vote at the Annual Meeting will constitute a quorum. The
enclosed form of proxy is solicited on behalf of the Company 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 is
March 31, 1997.
Shares represented by proxies in the accompanying form will be voted in
accordance with instructions indicated thereon. If no contrary instruction is
indicated, shares represented by the proxies will be voted (1) FOR the election
of the three nominees named below to serve as directors for the three-year term
indicated; (2) FOR the proposal to approve the Bowater Incorporated 1997-1999
Long-Term Incentive Plan, as amended and restated (the "1997-1999 LTIP"); (3)
FOR the proposal to approve the Bowater Incorporated 1997 Stock Option Plan, as
amended and restated (the "1997 Stock Option Plan"); and (4) in the discretion
of the proxy holders on such other matters as may properly come before the
meeting or any adjournments thereof. Should any nominee named herein for the
office of director become unable or unwilling to accept nomination or election,
and if the size of the Board of Directors is not thereupon reduced, 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. The Company 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, the proposal to approve the
1997-1999 LTIP and the proposal to approve the 1997 Stock Option Plan, the
Company does not know of any other matters that will be presented at the Annual
Meeting. However, if any other matters properly come before the Annual Meeting,
or any adjournment thereof, the person or persons voting the proxies will vote
them in accordance with their best judgment on those matters.
Execution of the enclosed proxy will not affect a shareholder's right to
attend the Annual Meeting and vote in person. Any shareholder giving a proxy has
the right to revoke it by giving written notice of revocation to the Secretary
of the Company at any time before the proxy is voted, or by executing and
delivering to the Company 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 such notice of revocation or later-dated
proxy, however, will be effective until received by the Secretary of the Company
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 shares that are present in
person or represented by proxy and entitled to vote at the Annual Meeting is
required to approve the proposals to approve the 1997-1999 LTIP and 1997 Stock
Option Plan and to act on any other matters properly brought before the Annual
Meeting or any adjournment thereof. In the election of directors, votes may be
cast for or votes may be withheld from each nominee. Abstentions may not be
specified with respect to the election of directors. As to the other matters
submitted for shareholder vote, abstentions have
1
the same effect as a vote against the matter. In the case of broker non-votes
(which occur when a broker or other nominee holding shares for a beneficial
owner does not vote on a proposal but votes on another proposal), the broker
non-vote will have no effect upon the vote on any of the matters submitted for
shareholder approval.
ITEM NO. 1
ELECTION OF DIRECTORS
INFORMATION ON NOMINEES AND DIRECTORS
The Board of Directors of the Company is divided into three classes: Class
I, Class II and Class III. Each class consists as nearly as possible of
one-third of the total number of directors, and one class is elected each year
for a three-year term. The term of the Class I directors expires this year, and
the successors are to be elected at the Annual Meeting for a three-year term
expiring in 2000. The terms of the Class II and Class III directors do not
expire until 1998 and 1999, respectively.
The following information is provided for the three nominees who are the
Class I directors, and also for the Class II and Class III directors.
NOMINEES FOR DIRECTORS TO BE ELECTED AT THE 1997 ANNUAL MEETING OF SHAREHOLDERS
(CLASS I)
RICHARD BARTH RETIRED CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF CIBA-GEIGY CORPORATION -- Mr.
Age: 65 Barth became Chairman of Ciba-Geigy Corporation, a diversified chemical products company, in
Director since 1991 July 1990 and served in that capacity until its merger into Novartis Corporation in December
1996. Mr. Barth was President and Chief Executive Officer of Ciba-Geigy Corporation from
1986 to April 1, 1996, Chief Financial Officer from 1979 to 1986, Secretary from 1974 to
1986, and General Counsel from 1970 to 1986. Mr. Barth is also a director of The Bank of New
York, Novartis Corporation (USA) and Imclone Systems, Inc.
JAMES L. PATE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF PENNZOIL COMPANY -- Mr. Pate became
Age: 61 Chairman of Pennzoil Company in 1994 and has served as President and Chief Executive Officer
Director since 1996 since 1990. Pennzoil Company is a producer, refiner and marketer of petroleum and petroleum
products.
CHARLES J. HOWARD CHAIRMAN, HOWARD, BARCLAY & ASSOCIATES -- Mr. Howard has been Chairman of Howard, Barclay &
Age: 54 Associates, an investment counseling firm, since 1994. He also has been President, Chief
Director effective Executive Officer, a director and the largest shareholder of Ausnoram Holdings Limited, an
April 1, 1997 investment holding company with mining, oil and gas interests, since 1989. Mr. Howard is
also a director of Anderson Exploration Limited, Compas Electronics Inc., Petromet Resources
Limited, Southern Africa Minerals Corporation and Unicorp Energy Corporation.
DIRECTORS WHOSE TERMS END AT THE 1998 ANNUAL MEETING OF SHAREHOLDERS
(CLASS II)
DONALD R. MELVILLE RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF NORTON COMPANY -- Mr. Melville was Chief
Age: 70 Executive Officer of Norton Company, a diversified manufacturing company, from 1980 until
Director since 1984 his retirement at the end of 1987. He was Chairman from 1985 to 1987, President from 1979 to
1986, and Executive Vice President from 1971 to 1979. He is also a director of The
Perkin-Elmer Corporation.
H. DAVID AYCOCK RETIRED PRESIDENT AND CHIEF OPERATING OFFICER OF NUCOR CORPORATION -- Mr. Aycock was
Age: 66 President and Chief Operating Officer of Nucor Corporation, a steel and steel products
Director since 1987 company, from 1984 to 1991. He previously held various management positions, including that
of General Manager, at Nucor Corporation operating units. Mr. Aycock serves as a director of
Nucor Corporation. Since retiring from Nucor Corporation, Mr. Aycock has been engaged in
managing family investments in various entrepreneurial activities.
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ARNOLD M. NEMIROW CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE COMPANY -- Mr. Nemirow
Age: 54 became Chief Executive Officer of the Company in 1995 and became Chairman of the Board in
Director since 1994 1996. He has served as President of the Company since September 1994 and served as Chief
Operating Officer of the Company 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 July 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 is also a director of WPL Holdings, Inc.
DIRECTORS WHOSE TERMS END AT THE 1999 ANNUAL MEETING OF SHAREHOLDERS
(CLASS III)
FRANCIS J. AGUILAR PROFESSOR EMERITUS, HARVARD UNIVERSITY GRADUATE SCHOOL OF BUSINESS -- Dr. Aguilar was a
Age: 64 faculty member at the Harvard University Graduate School of Business from 1967 to 1995. He
Director since 1984 also has served as Executive Director of the Management Education Alliance, a non-profit
educational corporation, since 1994. Dr. Aguilar is a director of Dynamics Research
Corporation and Burr-Brown Corporation and also acts as an independent business consultant.
JOHN A. ROLLS PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THERMION SYSTEMS INTERNATIONAL -- Mr. Rolls has
Age: 55 served as President and Chief Executive Officer of Thermion Systems International, an
Director since 1990 aerospace and industrial heating systems company, since March 1996. He was President and
Chief Executive Officer of Deutsche Bank North America, an international banking company,
from 1992 to March 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 is also a director of MBIA Inc., Conceptronic, Inc. and Thermion
Systems International.
KENNETH M. CURTIS SENIOR MEMBER, CURTIS THAXTER STEVENS BRODER & MICOLEAU, LIMITED LIABILITY COMPANY,
Age: 66 P.A. -- Mr. Curtis was a partner in the Portland, Maine, law firm of Curtis Thaxter Stevens
Director since 1993 Broder & Micoleau from 1975 to 1979 and from 1981 to January 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 formerly 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 is a director of Key Corp.
BOARD AND COMMITTEE MEETINGS
The Board of Directors met nine times during 1996. The Board has an Audit
Committee consisting of Messrs. Curtis, Barth and Pate, a Nominating and
Governance Committee consisting of Messrs. Aguilar, Curtis and Rolls, a Human
Resources and Compensation Committee consisting of Messrs. Melville, Aguilar and
Aycock, a Finance Committee consisting of Messrs. Barth, H. Gordon MacNeill and
Rolls, and an Executive Committee consisting of Messrs. Nemirow, Aycock and
MacNeill. Mr. MacNeill's term as a director will expire at the Annual Meeting.
The Audit Committee, which met three times in 1996, reviews the scope and
results of the annual audit of the Company, approves the non-audit services
rendered by the independent auditors to the Company 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 the accounting policies of
the Company and the Company's systems of internal controls and internal auditing
procedures.
The Nominating and Governance Committee, which met three times in 1996,
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 1998 Annual Meeting
should comply with the procedure described under "Proposals by Shareholders".
The Committee also serves in an oversight capacity with respect to the Company's
compliance with environmental, health and safety regulations.
The Human Resources and Compensation Committee, which met five times in
1996, approves the adoption, amendment and termination of all employee pension
and savings benefit plans, administers executive bonus plans and awards and
stock option plans and grants thereunder, reviews programs followed by
management in developing executive resources for current and future operations
and reviews and approves the compensation of officers of the Company.
3
The Finance Committee, which met four times in 1996, reviews and oversees
the financial affairs of the Company. The Committee also provides financial
oversight and direction of the Company's pension and savings plans, including
approving the selection of trustees and the amount of contributions to be made
by the Company 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 once during 1996, meets from time to
time to make decisions between meetings of the Board pursuant to authority
delegated by the Board of Directors.
All directors attended at least 75% of the aggregate of the meetings of the
Board of Directors and of Board committees on which they served in 1996.
DIRECTOR COMPENSATION
Each director who was not an employee of the Company (an "Outside
Director") received in 1996 an annual retainer of $24,000, a fee of $1,000 per
day for each Board meeting attended and a fee of $800 for each Board committee
meeting attended. Each director was reimbursed for reasonable expenses,
including but not limited to transportation and lodging, incurred in attending
meetings. In addition, Outside Directors are eligible to receive awards under
the 1997 Stock Option Plan and in February 1997 each Outside Director was
granted options with respect to 1,000 shares of Common Stock.
DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS
As amended and restated as of January 1, 1997, 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 Company
Common Stock account or both accounts, in increments of ten percent, as elected
by the director. On the date on which compensation to be deferred would have
been payable, a participating director who has elected to allocate all or part
of his deferred compensation to his Deferred Plan stock account will be credited
with the number of shares of Common Stock, including fractional shares, having a
value (with a 5% discount) equivalent to the amount of deferred compensation
that he allocated to his stock account. Deferred compensation that is allocated
to a cash account will be credited on the date on which such compensation would
have been payable. Whenever dividends are paid on shares of Common Stock, each
participant's stock account will be credited with additional shares having an
undiscounted value equal to the amount of the dividend paid on a single share of
such stock, multiplied by the number of shares of Common Stock, including
fractional shares, credited to the participant's account on the dividend record
date. Amounts credited to a Deferred Plan cash account will accrue interest on
the average monthly balance of that account at a rate equal to the rate for the
Fixed Income Fund maintained for the Company's Salaried Employees' Savings Plan.
Directors can elect to transfer balances between the cash and stock accounts
subject to certain conditions set forth in the Deferred Plan. A participant in
the Deferred Plan may elect at the time of deferral to have his Deferred Plan
account(s) distributed in either Common Stock or cash to him as soon as possible
or in a stated number of years after he ceases to be an Outside Director. All of
the Company's Outside Directors except for Mr. Curtis have accounts under the
Deferred Plan.
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
The Company adopted a Retirement Plan for Outside Directors during 1988
(the "Outside Directors' Retirement Plan"). All of the Company'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 the
Company 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 in certain cases. Participants who elect early
commencement of benefit payments after retirement receive a reduced benefit.
The Outside Directors' Retirement Plan is not a qualified plan that must be
funded under the Employee Retirement Income Security Act of 1974, as amended.
The plan provides that a participant who was an Outside Director immediately
prior to a change in control of the Company and who is removed from or not
renominated to his directorship following such change in control is entitled to
the full retirement benefits provided by the plan regardless of age or years of
service.
4
CERTAIN INFORMATION CONCERNING STOCK OWNERSHIP
The Company knows of no person who, or group that, owns beneficially more
than 5% of the outstanding shares of Common Stock of the Company as of March 24,
1997, except as set forth below:
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFINCIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS
The Capital Group Companies, Inc.(1) 3,531,700(1) 8.9%
333 South Hope Street
Los Angeles, California 90071
Franklin Resources, Inc.(2) 2,406,740(2) 6.0%
777 Mariners Island Boulevard
San Mateo, California 94404
MacKay-Shields Financial Corporation(3) 2,076,250(3) 5.2%
9 West 57th Street
New York, New York 10019
Tiger Management L.L.C.(4) 3,034,300(4) 7.6%
Tiger Performance L.L.C.
Panther Partners, L.P.
Panther Management Company, L.P.
101 Park Avenue
New York, New York 10178
Wellington Management Company, LLP 3,951,880(5) 9.9%
(including shares held by
Vanguard/Windsor Funds, Inc.)(5)
75 State Street
Boston, Massachusetts 02109
(1) The Capital Group Companies, Inc. ("CGC") reported in an amendment to
Schedule 13G dated February 14, 1997, that it is the parent company of a
group of investment management companies that hold investment power and in
some cases voting power over the shares included in the table above. It
reported that its subsidiary, Capital Research and Management Company, a
registered investment adviser with the same address as CGC, has sole
dispositive power with respect to 3,317,700 of the shares shown in the table
as a result of acting as investment adviser to various investment companies.
The Schedule 13G reported that the remaining shares reported as being
beneficially owned by CGC are beneficially owned by its other subsidiaries,
Capital International Limited and Capital International S.A. By virtue of
such ownership, CGC reported that it has sole voting power with respect to
214,000 of the shares shown and sole dispositive power with respect to all
of the shares shown in the table above.
(2) In an amendment to Schedule 13G dated February 12, 1997, Franklin Resources,
Inc. ("FRI") reported that the securities shown in the table above are
beneficially owned by one or more investment companies or other managed
accounts that are advised by direct or indirect investment advisory
subsidiaries of FRI. The investment advisory subsidiaries have voting and
investment power over the securities owned by their investment advisory
clients. Accordingly, such subsidiaries may be deemed to be, for purposes of
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended, the beneficial owner 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 own in excess of
10% of the outstanding common stock of FRI and may be deemed to be the
beneficial owners of securities held by persons and entities advised by FRI
or its subsidiaries. The Schedule 13G reported that one of the investment
adviser subsidiaries, Templeton Global Advisors Limited (whose business
address is Lyford Cay, P.O. Box N-7759, Nassau, Bahamas), has sole voting
and dispositive power with respect to 2,156,848 of the shares shown. The
remaining shares shown in the table above are deemed to be beneficially
owned by other investment advisory subsidiaries of FRI by virtue of their
voting and investment power over such securities. 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.
(3) In a Schedule 13G dated February 7, 1997, MacKay-Shields Financial
Corporation ("MSFC") reported that it has shared voting power and shared
dispositive power with respect to all of the shares shown. The Schedule 13G
reported that MSFC serves as investment manager to a number of clients who
have the right to receive and the ultimate power to direct the receipt of
dividends from, or the proceeds of the sale of, the shares shown in the
table above. The Schedule 13G reported that none of such clients has an
interest with respect to more than 5% of the outstanding shares of Common
Stock.
5
(4) Tiger Management L.L.C. ("TML") reported in an amendment to Schedule 13G
dated February 12, 1997, that it has shared voting and dispositive power
with respect to 1,868,900 of these shares, that Tiger Performance L.L.C.
("TPL") has shared voting and dispositive power with respect to 1,005,700 of
the shares shown, that each of Panther Partners, L.P. ("PPL") and Panther
Management Company, L.P. ("PMCL") has shared voting and dispositive power
with respect to 132,700 of the indicated shares, and that Julian H.
Robertson, Jr. is the ultimate controlling person of TML, TPL and PMCL and
therefore has shared voting and dispositive power with respect to all of the
shares shown. The Schedule 13G reported that PPL is an investment company
and that TML, TPL, and PMCL are investment advisers, and that The Jaguar
Fund, N.V., a Netherlands Antilles corporation, has an interest with respect
to more than 5% of the outstanding shares of Common Stock.
(5) In a Schedule 13G dated January 24, 1997, Wellington Management Company, LLP
("WMC") reported that it has shared voting power with respect to 14,000 of
the shares shown and shared dispositive power with respect to all of the
shares shown. The Schedule 13G reported that WMC serves as investment
adviser to a number of clients and that one of those clients,
Vanguard/Windsor Funds, Inc., has an interest with respect to more than 5%
of the outstanding shares of Common Stock. In a Schedule 13G dated February
7, 1997, Vanguard/Windsor Funds, Inc. reported that it has sole voting power
and shared dispositive power with respect to 3,500,000 shares of Common
Stock.
No officer or director owns any of the Company's LIBOR Preferred Stock,
Series A, or Series C Cumulative Preferred Stock. As of March 24, 1997,
ownership of Common Stock 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 the Company, as a group, was as follows:
AMOUNT AND NATURE
NAME OF OF BENEFICIAL
BENEFICIAL OWNER OWNERSHIP(1) PERCENT OF CLASS(2)
Arnold M. Nemirow 275,636.98 (3) *
E. Patrick Duffy 30,254.87 (4) *
Arthur D. Fuller 30,681.87 (5) *
David G. Maffucci 28,471.75 (6) *
Robert J. Pascal 89,002.27 (7) *
Francis J. Aguilar 20,149.45 (8) *
H. David Aycock 10,979.36 (9) *
Richard Barth 8,001.74 (10) *
Kenneth M. Curtis 1,000.00 *
Charles J. Howard 6,000.00 (11) *
H. Gordon MacNeill 6,081.65 *
Donald R. Melville 4,483.21 (12) *
James L. Pate 1,873.50 (13) *
John A. Rolls 9,173.96 (14) *
Directors and Executive Officers
as a Group (23 persons) 728,852.70 (15) 1.8%
* Represents holdings of less than 1% of the outstanding shares of Common Stock.
(1) Units in one or more Common Stock funds of the Bowater Incorporated
Salaried Employees' Savings Plan (the "Savings Plan") are allocated to the
account of officers of the Company. 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 provided by the Savings
Plan administrator in a statement for the period ending December 31, 1996,
based on the market value of the applicable units. This table also includes
shares allocated under the Company's Compensatory Benefits Plan based on a
statement for the period ending December 31, 1996. Additional shares of
Common Stock may have been allocated to the account of participants in the
Savings Plan or Compensatory Benefits Plan since the date of the last
statement from the plan administrator. Participants in the Compensatory
Benefits 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 the Company, death,
disability or other termination of employment, 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 Benefits 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").
6
(2) Pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended, percentages of total outstanding shares have been
computed on the assumption that shares of Common Stock that can be acquired
within 60 days 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) Includes 237.98 shares owned in the Savings Plan, 265,000 shares that may
be acquired under options currently exercisable and 399 shares allocated
under the Compensatory Benefits Plan.
(4) Includes 188.87 shares owned in the Savings Plan, 20,000 shares that may be
acquired under options currently exercisable, 10,000 shares subject to
options exercisable within 60 days of March 24, 1997, and 66 shares
allocated under the Compensatory Benefits Plan.
(5) Includes 491.87 shares owned in the Savings Plan, 30,000 shares that may be
acquired under options currently exercisable and 190 shares allocated under
the Compensatory Benefits Plan.
(6) Includes 493.75 shares owned in the Savings Plan, 26,500 shares that may be
acquired under options currently exercisable and 78 shares allocated under
the Compensatory Benefits Plan.
(7) Includes 2,142.27 shares owned in the Savings Plan, 80,900 shares that may
be acquired under options currently exercisable and 1,660 shares allocated
under the Compensatory Benefits Plan.
(8) Includes 7,488.67 shares allocated under the Deferred Plan.
(9) Includes 10,479.36 shares allocated under the Deferred Plan.
(10) These shares are allocated under the Deferred Plan.
(11) Includes 5,000 shares owned by Ausnoram Holdings Limited, of which Mr.
Howard is the President, Chief Executive Officer and largest shareholder.
(12) Includes 3,983.21 shares allocated under the Deferred Plan.
(13) Includes 873.50 shares allocated under the Deferred Plan.
(14) These shares are allocated under the Deferred Plan.
(15) This total includes 11,154.18 shares allocated under the Savings Plan,
2,897 shares allocated under the Compensatory Benefits Plan, 40,000.44
shares allocated under the Deferred Plan, 623,100 shares subject to options
currently exercisable, 10,000 shares subject to options exercisable within
60 days of March 24, 1997, and 1,153 shares held by the spouse of an
executive officer. The number of shares allocated to the accounts of
certain executive officers under each of the Savings Plan and Compensatory
Benefits 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.
7
EXECUTIVE COMPENSATION
The following table sets forth information concerning all compensation paid
by the Company and its subsidiaries during the last three fiscal years ended
December 31, 1996, to the Chief Executive Officer and to each of the four most
highly compensated executive officers other than the Chief Executive Officer
(such officers are referred to collectively as the "Named Executive Officers")
for services rendered in all capacities to the Company and its subsidiaries
during these fiscal years.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION
OTHER AWARDS PAYOUTS ALL
ANNUAL SECURITIES LTIP OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION UNDERLYING PAYOUTS COMPENSATION
DURING 1996 YEAR ($)(1) ($)(1) ($) OPTIONS (#) ($)(2) ($)
Arnold M. Nemirow: 1996 600,000 267,120 (3) 50,000 2,440,401 25,320(4)
Chairman, President and 1995 491,667 573,000 (3) 250,000 0 1,860
Chief Executive Officer 1994(5) 150,000(5) 200,000 (3) 0 0 186,250
E. Patrick Duffy: 1996 290,000 92,104 (3) 27,500 592,065 9,222 (6)
Senior Vice President and 1995(7) 187,500(7) 144,750 (3) 20,000 0 0
President -- Coated Paper &
Pulp Division
Arthur D. Fuller: 1996 290,000 110,200 (3) 27,500 676,645 12,649(8)
Senior Vice President and 1995(9) 242,629(9) 198,000 (3) 20,000 0 0
President -- Newsprint
Division
David G. Maffucci: 1996 234,900 71,766 (3) 27,500 682,035 10,909(10)
Senior Vice President and 1995 157,647 94,721 (3) 8,000 0 6,399
Chief Financial Officer 1994 145,710 47,395 (3) 6,000 0 0
Robert J. Pascal: 1996 270,000 80,136 (3) 27,500 1,014,968 12,705(11)
Senior Vice President and 1995 240,000 181,440 (3) 17,000 0 12,289
President -- Communication 1994 227,859 100,042 31,906 0 68,004
Papers Division
(1) The totals shown in this column include amounts that have been deferred
pursuant to the Company's Deferred Compensation Plan.
(2) The totals shown in this column include amounts paid or deferred through
the date hereof based on estimated results under the Company's Long-Term
Cash Incentive Plan for the performance period of January 1, 1994, to
December 31, 1996. Additional amounts may be paid in April 1997 pursuant to
the plan if the Company meets anticipated target performance levels
relative to its peer group. The Company expects to pay the additional
amounts of $610,100, $148,016, $169,162, $170,509 and $253,742 to Messrs.
Nemirow, Duffy, Fuller, Maffucci and Pascal, respectively, in April 1997.
(3) Perquisites and other personal benefits did not exceed the lesser of
$50,000 or 10% of the total salary and bonus of the Named Executive Officer
for the years shown.
(4) Amounts included under "All Other Compensation" for Mr. Nemirow for 1996
consist of Company contributions of $8,970 under the Savings Plan, $14,400
under the Compensatory Benefits Plan and $1,950, which is the amount that a
third party would charge to provide Mr. Nemirow with life insurance
coverage in excess of that otherwise available under the Company's standard
group insurance plan. The Company is self-insured with respect to its group
life insurance for any excess amounts.
(5) Mr. Nemirow joined the Company in September 1994.
(6) Amounts included under "All Other Compensation" for Mr. Duffy for 1996
consist of Company contributions of $6,000 under the Savings Plan and
$3,222 under the Compensatory Benefits Plan.
(7) Mr. Duffy joined the Company in April 1995.
(8) Amounts included under "All Other Compensation" for Mr. Fuller for 1996
consist of Company contributions of $6,000 under the Savings Plan and
$6,649 under the Compensatory Benefits Plan.
8
(9) Mr. Fuller joined the Company in January 1995.
(10) Amounts included under "All Other Compensation" for Mr. Maffucci for 1996
consist of Company contributions of $8,018 under the Savings Plan and
$2,891 under the Compensatory Benefits Plan.
(11) Amounts included under "All Other Compensation" for Mr. Pascal for 1996
consist of Company contributions of $6,000 under the Savings Plan and
$6,705 under the Compensatory Benefits Plan.
STOCK OPTIONS
The following table sets forth information regarding option grants with
respect to Common Stock made by the Company to the Named Executive Officers
during 1996.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
NUMBER OF % OF TOTAL GRANT
SECURITIES OPTIONS/SARS DATE
UNDERLYING GRANTED TO EXERCISE PRESENT
OPTIONS EMPLOYEES PRICE EXPIRATION VALUE
NAME GRANTED (#) IN 1996 ($/SH) DATE(1) ($)(2)
Arnold M. Nemirow 50,000(3) 8.08 34.8750 01/17/06 533,500
E. Patrick Duffy 20,000(3) 3.23 34.8750 01/17/06 213,400
7,500(4) 1.21 34.8750 01/17/06 80,025
Arthur D. Fuller 20,000(3) 3.23 34.8750 01/17/06 213,400
7,500(4) 1.21 34.8750 01/17/06 80,025
David G. Maffucci 20,000(3) 3.23 34.8750 01/17/06 213,400
7,500(4) 1.21 34.8750 01/17/06 80,025
Robert J. Pascal 20,000(3) 3.23 34.8750 01/17/06 213,400
7,500(4) 1.21 34.8750 01/17/06 80,025
(1) The plan pursuant to which the options were granted and the option agreement
set forth certain earlier expiration dates.
(2) The present value of these options was calculated using the Black-Scholes
option pricing model and assuming volatility of 30.9%, a risk free return
rate of 5.4%, dividends at the rate of $.80 per share and an average
expected option life of 5.6 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.
(3) Options with respect to 50% of the shares of Common Stock covered thereby
became exercisable on January 17, 1997, and options with respect to the
remaining 50% of the shares of Common Stock will become exercisable on
January 17, 1998, if certain conditions are met. In addition, the stock
option plan pursuant to which the options were granted provides that the
exercisability date is accelerated and the Company 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.
(4) These options have the following conditions to exercisability: (i) the
officer must remain in the continuous employ of the Company or one of its
subsidiaries for one year following the grant date of January 17, 1996, and
(ii) specific individual and/or financial goals must be achieved to the
satisfaction of the Chief Executive Officer of the Company within one year
of the grant date. The goals were as follows: in the case of Messrs. Duffy
and Fuller, reduction of mill stores' inventories by specified levels; in
the case of Mr. Maffucci, the achievement of specified staffing levels; and
in the case of Mr. Pascal, the achievement of specified measures with
respect to tons produced per employee, indirect manufacturing costs per ton
and reduction in manpower with respect to Mr. Pascal's area of
responsibility. In addition, the stock option plan pursuant to which the
options were granted provides that the exercisability date is accelerated
and the Company 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.
OPTION EXERCISES
The following table sets forth information concerning the value at the end
of 1996 of unexercised options held by the Named Executive Officers to purchase
the Company's Common Stock. None of the Named Executive Officers exercised stock
options during 1996.
9
AGGREGATED OPTION EXERCISES IN 1996 YEAR
AND 1996 YEAR-END OPTION VALUES
NUMBER OF
SHARES SECURITIES
ACQUIRED UNDERLYING VALUE OF UNEXERCISED
ON VALUE UNEXERCISED IN-THE-MONEY
EXERCISE REALIZED OPTIONS AT OPTIONS AT
NAME (#) ($) 12/31/1996 (#) 12/31/1996 ($)(1)
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
Arnold M. Nemirow 0 n/a 250,000/50,000 2,527,350.00/125,000.00
E. Patrick Duffy 0 n/a 10,000/37,500 52,250.00/121,000.00
Arthur D. Fuller 0 n/a 10,000/37,500 105,125.00/173,875.00
David G. Maffucci 0 n/a 13,900/31,500 135,212.50/105,900.00
Robert J. Pascal 0 n/a 58,900/36,000 658,468.75/147,693.75
(1) Based on the difference between the option exercise price and the average of
the highest and lowest prices per share of the Company's Common Stock on the
New York Stock Exchange on December 31, 1996, of $37.375. No value was
calculated for options whose exercise price exceeded the closing price of
the Common Stock on December 31, 1996.
STOCK RETENTION PROGRAM
The Company has established stock ownership guidelines for executive
officers as a way to help better align the financial interests of its officers
with those of shareholders. These officers are expected to make continuing
progress towards compliance with these guidelines and to comply fully with the
guidelines by the later of January 1999 or three years after the officer's
employment with the Company. Officers 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 salary. Stock owned directly or through
qualified Company stock plans and vested stock options count toward meeting this
goal. Under these guidelines, the requisite multiples are three for the chief
executive officer, two for senior vice presidents and one to one-half for
corporate vice presidents, divisional vice presidents and others, depending on
their respective salary grade levels.
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 the Company or the Executive or, in the case of Mr. Pascal, until
September 30, 1997. In the event of a Change in Control, as defined in the CIC
Agreements described below, the term of the Agreements (except for Mr. Pascal's,
which ends on September 30, 1997) continues for not less than three years
thereafter unless the Executive terminates his employment for other than Good
Reason (also as defined in the CIC Agreements). The Agreements provide for
payment to each Executive of an annual base salary and for the Executive's
participation in the Company'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 which has
a material adverse effect on the Company or the Executive's ability to perform
his duties adequately and effectively), the Agreements provide for payments
equal to two years of annual base salaries and bonuses, plus a pro rata share of
their bonuses for the year of termination in the cases of Messrs. Nemirow,
Duffy, Fuller and Maffucci. Mr. Pascal's Agreement provides that in the event
his employment is terminated prior to his anticipated retirement date of
September 30, 1997, for reasons other than death, disability, retirement, Good
Reason or Cause (each such term as defined in the CIC Agreements described
below), then Mr. Pascal is entitled to receive full salary and bonus (calculated
with respect to salary and bonus in effect immediately prior to the date of
termination) from the date of termination (in the case of salary) and from
January 1 of the year in which the termination occurred (in the case of bonuses)
through September 30, 1997. In addition Mr. Pascal's Agreement accelerates the
exercisability of stock options and equivalent benefits held by him to make such
options and equivalent rights exercisable immediately prior to his anticipated
retirement date of September 30, 1997, in exchange for the execution of a
release agreement as of his retirement date.
With respect to employee benefit plans, Mr. Nemirow's Agreement provides
that, for purposes of determining the benefits due under the Company's benefits
plans, he shall receive credit for continuous employment at an accelerated rate
and entitles him to receive certain minimum annual benefits upon his retirement
from the Company if certain conditions are met,
10
Mr. Duffy's Agreement provides that he shall be entitled to receive certain
specified benefits under the Company's Supplemental Benefits Plan, and Mr.
Pascal's Agreement provides that he shall be credited with five additional years
of service under the Company's Supplemental Benefits Plan.
Each Executive also is a party to a change in control agreement with the
Company (collectively, the "CIC Agreements"). The CIC Agreements have a
three-year term that is automatically extended at the end of each year for an
additional one year. The CIC Agreements generally provide that, in the event of
a Change in Control (as defined below), the CIC Agreements shall continue in
effect until they expire in accordance with the above-described extensions, but
in any event for a period of not less than three years from the date of the
Change in Control. Following a Change in Control of the Company, if an
Executive's employment is terminated by the Company (except for a termination
due to death, disability, or retirement, or for Cause (defined as gross
negligence that has not been cured, willful misconduct that has not been cured,
or conviction of a felony, which action has a demonstrable and material adverse
effect upon the Company)) or if the Executive elects to terminate his employment
for Good Reason as defined below, the Executive shall receive his full base
salary and all benefits and awards under the Company's benefit plans and
policies (in which he was a participant prior to the Change in Control) to which
he is entitled through his date of termination and may elect to receive, in lieu
of any severance payments provided in his employment agreement described above,
an amount equal to: (i) three times the Executive's annual base salary in effect
when the Executive is terminated or, if higher, the Executive's annual base
salary in effect immediately prior to the Change in Control; plus (ii) three
times the largest annual bonus awarded to the Executive during the five fiscal
years immediately preceding the year in which the Change in Control occurred or,
if higher, the annual bonus the Executive would have been awarded under the
bonus plan had he continued in the Company's employ on the same basis as
immediately before the Change in Control; plus (iii) three times the largest
annual contribution made by the Company to the Savings Plan on the Executive's
behalf during the five fiscal years immediately preceding the Change in Control
or, if higher, the contribution the Company would have made to the Savings Plan
on the Executive's behalf for the fiscal year in which the Change in Control
occurred had he continued in the Company's employ at the same base salary and
with the same contribution level as immediately prior to the Change in Control;
plus (iv) thirty percent of the Executive's annual base salary in effect when
the Executive is terminated, or, if higher, the Executive's annual base salary
in effect immediately prior to the Change in Control (as compensation for
medical, life insurance and other benefits lost as a result of the termination
of employment). In addition, each of the CIC Agreements provides that the
Executive will be entitled to a pro rata portion of the annual bonus calculated
in the manner specified in (ii) above for the year in which the termination
occurred. The CIC Agreements provide that the foregoing payments shall be
reduced by 1/36th for each month by which the date that is three years from the
effective date of the Executive's termination extends beyond the Executive's
normal retirement date.
The CIC Agreements define a Change in Control as occurring if: (i) any
person becomes a beneficial owner of securities of the Company representing 20%
or more of the Company's outstanding voting securities (unless that person has
filed a Schedule 13G indicating such person's intent to hold such securities for
investment); (ii) less than two-thirds of the total membership of the Board
shall be continuing directors (as defined in the CIC Agreements); or (iii) the
shareholders of the Company approve a merger, consolidation, complete
liquidation or sale of all or substantially all of the Company's assets. The CIC
Agreements define Good Reason as an adverse change in the Executive's status,
duties or responsibilities as in effect immediately prior to the Change in
Control after the Executive has given notice of the adverse change and the
Company has failed to cure; or failure of the Company to pay or provide the
Executive the salary or benefits to which he is entitled; or the reduction of
the Executive's salary as in effect on the date of the Change in Control; or the
taking of any action by the Company that would substantially diminish the value
of the Executive's awards or benefits under the Company's benefit plans in which
the Executive was participating at the time of the Change in Control; or the
Company's failure to obtain from any successor assent to the CIC Agreement; or
the relocation of the Executive's principal office to a location more than
thirty-five miles from its location immediately prior to the Change in Control;
or a substantial increase in the Executive's travel obligations subsequent to
the Change in Control.
The CIC Agreements also generally provide a terminated Executive with
outplacement assistance, a grossed up reimbursement of certain excise taxes that
may be levied on "excess parachute payments" and reimbursement for all costs
incurred in connection with enforcing the terms of the CIC Agreement. In
addition, the CIC Agreements generally provide that the Company will pay or
provide the Executives, their surviving spouses or children the amounts and
benefits that they would have received, assuming certain conditions, under the
Company's Retirement Plan and Supplemental Benefit Plan in effect immediately
prior to the Change in Control if the Executive had continued to be employed
until the third anniversary of the effective date of the termination of the
Executive's employment or until the Executive's normal retirement date,
whichever is earlier.
11
RETIREMENT BENEFITS
The following table shows the total estimated annual pension benefits
payable for the Named Executive Officers under the Company's qualified,
nonqualified benefits restoration and nonqualified supplemental retirement plans
upon retirement at age 65, calculated on a straight life annuity basis. Benefits
to Named Executive Officers are not reduced by any offset for Social Security
benefits.
COMBINED RETIREMENT PLANS TABLE OF ESTIMATED BENEFITS
30 OR
FINAL MORE
AVERAGE 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS YEARS
EARNINGS* SERVICE SERVICE SERVICE SERVICE SERVICE SERVICE
$100,000 $12,500 $25,000 $37,500 $50,000 $55,000 $60,000
125,000 15,625 31,250 46,875 62,500 68,750 75,000
150,000 18,750 37,500 56,250 75,000 82,500 90,000
175,000 21,875 43,750 65,625 87,500 96,250 105,000
200,000 25,000 50,000 75,000 100,000 110,000 120,000
225,000 28,125 56,250 84,375 112,500 123,750 135,000
250,000 31,250 62,500 93,750 125,000 137,500 150,000
300,000 37,500 75,000 112,500 150,000 165,000 180,000
350,000 43,750 87,500 131,250 175,000 192,500 210,000
400,000 50,000 100,000 150,000 200,000 220,000 240,000
450,000 56,250 112,500 168,750 225,000 247,500 270,000
500,000 62,500 125,000 187,500 250,000 275,000 300,000
600,000 75,000 150,000 225,000 300,000 330,000 360,000
700,000 87,500 175,000 262,500 350,000 385,000 420,000
800,000 100,000 200,000 300,000 400,000 440,000 480,000
900,000 112,500 225,000 337,500 450,000 495,000 540,000
* 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 two other plans described
above provide that in the event of a change in control, each participant in such
plans will become 100% vested in his accrued benefits. This table assumes
retirement in 1996. At such time, the individuals listed in the Summary
Compensation Table above had the following final average earnings (as defined
above) and credited number of years of service (determined by actual years of
service or, in the case of Mr. Pascal, pursuant to his employment agreement):
Mr. Nemirow, $863,429, 2 years; Mr. Duffy, $355,571, 1 year; Mr. Fuller,
$381,198, 1 year; Mr. Maffucci, $195,272, 19 years; and Mr. Pascal, $339,780, 15
years.
HUMAN RESOURCES AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
TO OUR SHAREHOLDERS
The Human Resources and Compensation Committee (the "Committee") develops
and administers the compensation programs for the Company's executive officers.
The Committee's goal is to develop executive compensation programs that are
consistent with strategic business objectives.
12
The Committee is composed entirely of independent, nonemployee directors
who have not served as officers of the Company and have no interlocking
relationships, as defined by the Securities and Exchange Commission.
KEY ELEMENTS AND POLICIES FOR COMPENSATION OF EXECUTIVE OFFICERS
The Company's basic policy for executive officers is that compensation
should vary depending on the Company's success in the following areas:
(Bullet) Performance versus the Company's financial and strategic
objectives, and
(Bullet) Creation of shareholder value.
The key elements of the Company's 1996 executive compensation program were
base salary, the Annual Bonus Plan, stock options and the Long-Term Cash
Incentive Plan covering the 1994-1996 performance period ("LTIP").
(Bullet) To determine appropriate compensation levels within each pay
component, the Committee considered all elements of the executive
compensation program. Base salaries and targeted annual bonus
payouts for executive officers generally were set near the median
of comparable executives in the paper and forest products
industry. Executive officers had the opportunity to earn
above-median levels of compensation through stock options and
through the LTIP if the Company attained above-median performance
relative to its peer group. Actual total compensation depended on
the Company's performance.
(Bullet) Competitive market data were provided by an independent
compensation consultant. The Company reviewed the pay practices of
companies in the paper and forest products industry, as well as
other general industry companies with annual revenues similar to
the Company's. The Committee believed this criterion provided
reasonable pay comparisons, enabling the Company to assure that
executives were being paid fairly, while assuring shareholders and
the Company that executive pay levels were reasonable.
(Bullet) The group of companies used for independent compensation
comparisons included many of the Company's peer companies included
in the Dow Jones Paper Products Group listed in the Total
Shareholder Return chart below. The list was expanded, however, to
include other paper and forest products companies and
similar-sized general industry companies that are not a part of
the Dow Jones Paper Products Group. This decision was based on the
Committee's belief that the recruitment of executive talent should
not necessarily be limited to the companies used in the Dow Jones
group.
(Bullet) The cyclical nature of the paper and forest products industry,
combined with the major new strategic initiatives undertaken by
the Company in recent years, argued for a heavy weighting of
performance measured over more than a one-year period, as compared
to certain peer companies. As a result, the executive officers'
target and maximum compensation opportunities under the two
long-term incentive programs (stock option plans and LTIP)
combined were greater than their annual incentive opportunities.
BASE SALARY
Executive officers' salaries are generally set to place them near 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.
(Bullet) 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 the profits of the Company during the preceding
year for officers with corporate-wide responsibilities.
ANNUAL BONUS PLAN
The Annual Bonus Plan for 1996 used three performance measures: Return on
Net Assets ("RONA") (weighted 50%), Return on Capital Spending (weighted 25%)
and Cost Reduction (weighted 25%):
(Bullet) RONA was measured at the division and corporate levels (50%
consolidated RONA for corporate employees; 25% consolidated RONA
and 25% division RONA for divisional employees), with awards based
on performance relative to goals established at the beginning of
the year. The capital intensive nature of the Company's business
means that it
13
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.
(Bullet) Return on Capital Spending targets were set at the division level
to reflect the Company's priority to spend capital dollars on the
highest return capital projects. Consolidated results were used
for corporate employees.
(Bullet) Specific cost reduction and productivity goals were established at
division levels, and actual results were compared to these goals
when determining final awards. The inclusion of this measure
reflects the strategic importance the Company has placed on
managing costs and increasing productivity. Consolidated results
were used for corporate employees.
The Company's performance in certain of these areas during 1996 was
slightly below budgeted levels, resulting in bonus payouts that were below
targeted levels.
LONG-TERM CASH INCENTIVE PLAN
The LTIP measures performance over three-year periods. The most recent
cycle covered performance from 1994 through 1996 and used Return on Capital
Employed ("ROCE") as the primary performance measure. The Company's performance
was measured relative to a peer group of companies.
Payouts were based on the Company's ranking within the comparison group in
1996, with an improvement in ranking required over the three-year period for any
payout to occur. The Company realized a significant improvement in ranking, thus
generating above-target payouts to plan participants. Based upon anticipated
performance results, payments were made in January 1997 in amounts equal to 80%
of the estimated total payout. Final results will be verified in April 1997,
after which the remaining 20% will be paid if earned.
To increase the linkage between executive compensation and shareholder
value, payouts for the 1994-1996 performance cycle also were influenced by the
Company's stock price performance:
(Bullet) Each participant was awarded "units" at the beginning of the
cycle. The number of units was equal to three times the quotient
obtained by dividing (i) the product of (a) the individual's
annual target bonus award percentage times (b) the individual's
salary grade midpoint by (ii) the daily average price of the
Company's Common Stock in December 1993 ($22.75).
(Bullet) At the end of the performance period, the award to the participant
was equal to the product obtained by multiplying (i) the number of
units awarded, times (ii) the Company's average daily Common Stock
price during December 1996 ($37.315), times (iii) a multiplier
determined by the Company's final ROCE performance versus peers.
The peer comparison group included the companies in the Dow Jones Paper
Products Group used in the Total Shareholder Return graph, with the exception of
The Mead Corporation, and the addition of Abitibi-Price Inc., Chesapeake
Corporation, P.H. Glatfelter Company and Stone Container Corporation.
STOCK OPTIONS
Stock options continue to play an important role in linking executives'
compensation to the Company's Common Stock performance, and thus to the
interests of shareholders. During 1996, stock options were granted with an
exercise price equal to the fair market value (as defined by the plan) of the
Common Stock on the date of grant. Accordingly, the options have value to the
executive only if the stock price appreciates. The Committee believes this
design will focus executives on the creation of shareholder wealth over the long
term.
Stock option awards are based on competitive practice. The Committee's
objective is to deliver a competitive award opportunity based on the dollar
value of the award granted. As a result, the number of shares underlying the
stock option grant is dependent on stock price as well as competitive practice
and may change from year to year.
The Company has implemented stock ownership guidelines for its senior
executives that require them to hold stock or vested stock options with a value
equal to a multiple of the executive's base salary ranging from one-half to
three. Compliance is required by the later of January 1999 and three years after
the executive's date of employment with the Company.
14
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
The Committee generally intends to administer the executive pay program so
that the corporate tax deduction for compensation to executives is maximized
under Section 162(m) of the Internal Revenue Code of 1986, as amended, without
limiting the Committee's flexibility to attract and retain qualified executives
to manage the Company.
The Committee generally intends to submit plans for shareholder approval
and to make incentive compensation awards based on performance criteria. If, in
the Committee's judgment, however, the Company's compensation objectives could
be better met through compensation that does not meet the criteria for
deductibility, it may allow for non-deductible compensation.
COMPENSATION OF THE CEO DURING 1996
The Committee annually reviews Mr. Nemirow's salary level and considers
such factors as tenure, individual performance and contribution to the Company's
success when contemplating future salary adjustments. Mr. Nemirow's 1996 salary,
his payout under the Annual Bonus Plan for 1996 and his payout under the LTIP
were determined on the same basis as the base salaries and payouts under these
two plans for all executive officers, as described above, but a substantial
portion of his LTIP payment did not qualify for the corporate tax deduction. Mr.
Nemirow also received a grant of 50,000 stock options in 1996. These options
have terms identical to, and were awarded on the same basis as, all options
granted during 1996 as described above.
All members of the Human Resources and Compensation Committee concur in
this report.
D. R. Melville (Chairman)
F. J. Aguilar
H. D. Aycock
15
TOTAL SHAREHOLDER RETURN
THE COMPANY VS. DOW JONES PAPER PRODUCTS GROUP* AND S&P 500
1991-1996
The table below compares the cumulative shareholder returns 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,
1991.
(Total Shareholder Return chart appears here. Plot points are below.)
12/91 12/92 12/93 12/94 12/95 12/96
Bowater Incorporated....................... 100.00 116.43 114.24 135.43 183.30 198.43
Dow Jones Paper Products Group............. 100.00 101.06 110.32 122.19 133.66 141.17
S&P 500.................................... 100.00 107.61 118.41 120.01 164.95 202.73
* Companies include: Boise Cascade Corporation, Champion International
Corporation, Consolidated Papers, Inc., International Paper Company, The
Mead Corporation, Union Camp Corporation, and Westvaco Corporation.
ITEM NO. 2
APPROVAL OF THE COMPANY'S 1997-1999 LONG-TERM INCENTIVE PLAN
The 1997-1999 LTIP is a long-term compensation plan under which the Company
has granted and will grant units to employees of the Company and its
subsidiaries whose 1997 salary grade levels have base salary ranges beginning at
$142,375 (such employees are referred to as "Participants"). As described below,
a Participant's entitlement to a payout with respect to such units will be
determined over a three-year plan cycle consisting of fiscal years 1997, 1998
and 1999.
The Board of Directors believes that the continued success of the Company
depends on its ability to attract, retain and motivate key employees.
Accordingly, the Human Resources and Compensation Committee of the Board of
Directors (the "Committee") and the Board of Directors have reviewed the
1997-1999 LTIP and recommend to shareholders that the 1997-1999 LTIP be
approved. The 1997-1999 LTIP is designed to link rewards paid to key personnel
with the Company's performance.
The 1997-1999 LTIP has been designed to comply with the provisions of
Section 162(m) of the Code, which imposes limits on the ability of a public
company to claim tax deductions for compensation paid to certain highly
compensated executives. Section 162(m) of the Code generally denies a corporate
tax deduction for annual compensation in excess of $1,000,000 paid to the chief
executive officer and the four other most highly compensated officers of a
public company (who, in each proxy statement, will be the Named Executive
Officers for such year). Certain types of compensation, including
performance-based compensation, are generally excluded from this deduction
limit. In an effort to ensure that most of the
16
compensation awards under the 1999-1997 LTIP will qualify as performance-based
compensation, which is generally deductible, the 1997-1999 LTIP is being
submitted to shareholders for approval at the Annual Meeting. The Company
believes compensation payable pursuant to the 1997-1999 LTIP will be deductible
for federal income tax purposes under most circumstances. However, under certain
circumstances such as death or disability and change in control (both as defined
in the 1997-1999 LTIP), compensation not deductible by the Company pursuant to
Section 162(m) of the Code may be payable. By approving the 1997-1999 LTIP,
shareholders will be approving, among other things, the performance measures,
eligibility requirements and limits on various compensation awards contained
therein. The affirmative vote of a majority of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote thereon is
required to approve the 1997-1999 LTIP pursuant to Section 162(m) of the Code.
The principal features of the 1997-1999 LTIP are described below.
ADMINISTRATION. The 1997-1999 LTIP vests power in the Committee to
administer and interpret the 1997-1999 LTIP. The Committee has delegated to the
Vice President -- Human Resources of the Company, and other appropriate officers
and employees of the Company, responsibility for administering the 1997-1999
LTIP, other than certain duties and authority with respect to the Named
Executive Officers for each year (described below). The Committee's powers
include authority to correct any defect or omission or reconcile any
inconsistency in the 1997-1999 LTIP or in any award granted thereunder and to
make all other necessary determinations and take all other actions necessary or
advisable for the implementation and administration of the 1997-1999 LTIP.
ELIGIBILITY. Active employees of the Company and its subsidiaries whose
1997 salary grade levels have base salary ranges beginning at $142,375 are
eligible to be granted units under the 1997-1999 LTIP. Because each of the
Company's executive officers is eligible to receive an award under the 1997-1999
LTIP, each may be deemed to have an interest in the approval of the 1997-1999
LTIP. Grants made to employees eligible as of January 1, 1997, are reflected in
the table below. Such grants are conditioned upon shareholder approval of the
1997-1999 LTIP at the Annual Meeting, and such grants shall be null and void,
and no payouts shall be made under the 1997-1999 LTIP, unless such approval is
obtained (except in the event of a payout under the change in control provisions
described below). The group of Participants currently includes approximately 28
people, including the Company's Chief Executive Officer and other highly
compensated officers of the Company. Because the number of employees in the
requisite salary grades may change, it is impossible to determine the exact
number of persons who will be eligible for awards under the 1997-1999 LTIP
during its term. Appropriate adjustments are provided in the 1997-1999 LTIP if
an employee is promoted within or into salary grades eligible for the 1997-1999
LTIP, and discretion is given to the Committee to make adjustments in the event
of a demotion.
UNITS AND FINAL AWARDS. At the beginning of the 1997-1999 LTIP cycle, each
Participant received the number of units assigned to his or her salary grade.
The units assigned to each salary grade are equal to (i) the product of (A) the
bonus percentage assigned for the 1997 fiscal year of the Company to that salary
grade, times (B) the midpoint of that salary grade for the 1997 fiscal year,
divided by (ii) the average daily closing price of the Company's Common Stock
for the 1996 calendar year. Each year during the 1997-1999 LTIP cycle (fiscal
years 1997, 1998 and 1999), the Committee will determine a unit value for each
Participant by multiplying each Participant's units by the average daily closing
price of the Common Stock for each such year. In the event of any change in the
outstanding shares of Common Stock by reason of any share dividend, stock split,
recapitalization, merger, consolidation, combination, exchange of shares or
other similar corporate change, each Participant's units shall be
proportionately adjusted.
At the end of the 1997-1999 LTIP cycle, the Committee will determine the
final award for each Participant by multiplying the sum of each Participant's
unit values for all fiscal years in the 1997-1999 LTIP cycle by a percentage
determined based upon the Company's financial performance relative to designated
peer companies. In making this calculation, the Company's average return on net
assets ("RONA") for the 1997-1999 LTIP cycle (the "Company Average") will be
compared to the average RONA for the 1997-1999 LTIP cycle for a group of
selected peer companies (the "Peer Group Average"). No payout will be made under
the 1997-1999 LTIP unless the Company Average exceeds the Peer Group Average. If
the Company Average exceeds the Peer Group Average, payouts will be made based
on the Company Average as a multiple of the Peer Group Average, with a maximum
payout of 250% of the accumulated unit values if the Company Average is at least
1.5 times the Peer Group Average. For multiples from 1 through 1.5 of the Peer
Group Average, the percentage of accumulated unit values paid out will have the
same proportionate location within the range of 0% through 250% (rounded to the
nearest 10th of a percent) as the multiple has within the range of 1 through
1.5. Under this formula, for example, if the Company Average is 1.2 times the
Peer Group Average (which is the 40th percentile in the range of 1 through 1.5),
the payout will equal 100% of the accumulated unit values (which is the 40th
percentile in the range of 0% through 250%). The Committee must certify that any
applicable performance goals have been met before an award becomes final. The
maximum
17
final award that may be paid to any person who is a Named Executive Officer at
the time the payout under the 1997-1999 LTIP would be deductible by the Company
is $6,000,000. There is no limit on compensation for Participants who are not
Named Executive Officers. Based on the payment formula adopted by the Committee,
the maximum amount of compensation that could be paid to any Participant is 250%
of his or her aggregate unit values.
FORM AND TIMING OF PAYMENT. Subject to certain limitations contained in the
1997-1999 LTIP, following the end of the 1997-1999 LTIP cycle, the Company shall
pay to each Participant (i) a number of shares of Common Stock of the Company
equal to one-half of the Participant's final award under the 1997-1999 LTIP
divided by the fair market value of one share of Common Stock on the date that
the Committee approves such final award, and (ii) cash equal to one-half of such
final award. The Committee, in its sole discretion, may change the proportion of
cash and Common Stock in which the payouts are made (except with respect to the
Named Executive Officers). In the event that the payment of Common Stock under
the 1997-1999 LTIP would cause the number of shares of Common Stock issued
pursuant thereto to exceed 991,878, then the number of shares of Common Stock
distributable to each Participant under the 1997-1999 LTIP shall be
proportionately reduced so that such limit is not exceeded and cash shall be
paid in lieu of such excess stock to each Participant.
ASSIGNMENT. No award under the 1997-1999 LTIP shall be assignable or
transferrable.
DEATH, DISABILITY, RETIREMENT OR SALE OF BUSINESS UNIT. In the event of the
termination of a Participant's employment with the Company because of death,
disability, retirement or sale by the Company of the subsidiary or unit
employing the Participant, payouts shall be made at the end of the 1997-1999
LTIP cycle in proportion to the eligible service of the Participant during such
period based upon unit values accumulated during the fiscal years employed.
OTHER TERMINATION. If any Participant shall cease to be employed by the
Company for any reason other than death, disability, retirement or sale by the
Company of the subsidiary or unit employing the Participant, prior to the
payment of any final award under the 1997-1999 LTIP, all of the Participant's
rights to a final award shall be forfeited. The Committee, however, may in its
sole discretion make a payout to the Participant under such circumstances.
CHANGE IN CONTROL. If a change in control of the Company (as defined in the
1997-1999 LTIP) shall have occurred and, prior to payment of any final award
under the 1997-1999 LTIP, a Participant's employment is terminated for any
reason other than his or her death, disability, retirement, by the Company for
cause (as defined in the 1997-1999 LTIP), or by the Participant without good
reason (as defined in the 1997-1999 LTIP), the Company shall pay the Participant
a final award equal to the Participant's units multiplied by (i) three times the
maximum payout percentage adopted by the Committee in connection with the
performance goals adopted by the Committee, and (ii) the Acceleration Price (as
defined below). All final awards payable as a result of a change in control
shall be paid entirely in cash within thirty days of termination of employment.
For purposes of the 1997-1999 LTIP, the term "Acceleration Price" means the
highest of: the highest reported sales price of the Common Stock within the
sixty days preceding the date of the change in control as reported by any
securities exchange upon which the Common Stock is listed, the highest price of
the Common Stock as reported in a Schedule 13D or an amendment thereto that is
paid within the sixty days preceding the date of the change in control, the
highest tender offer price paid for the Common Stock, and any cash merger or
similar price. Compensation paid pursuant to a change in control generally
cannot be deducted by the Company to the extent that compensation exceeds the
$1,000,000 cap of Section 162(m).
AMENDMENT AND MODIFICATION. The Committee, in its sole discretion, with
notice to Participants, at any time and from time to time, may modify or amend,
in whole or in part, any or all provisions of the 1997-1999 LTIP, or suspend or
terminate it entirely; provided, however, that in the event of such action, any
Participant who is an active employee (as defined in the 1997-1999 LTIP) on the
effective date of such action shall be entitled to no less of a payment or
distribution under the 1997-1999 LTIP than he or she would have otherwise
received, based upon his or her units, aggregate unit value and the applicable
percentage determined based on the Company's relative financial performance, all
computed as of the end of the fiscal year prior to or following such action,
whichever is greater. No such modification, amendment, suspension or termination
shall affect a Participant's rights under the change in control provisions of
the 1997-1999 LTIP described above. Shareholder approval is not required for any
such modification, amendment, suspension or termination.
FEDERAL TAX CONSEQUENCES. Under the Code as presently in effect, a grant of
units under the 1997-1999 LTIP will have no federal income tax consequence. The
payment of final awards, whether paid in cash or a combination of Common Stock
and cash, is taxable to a Participant as ordinary income. All amounts taxable to
employees under the 1997-1999 LTIP in respect of units generally are deductible
by the Company as compensation, subject to the limits described above. Upon a
sale of Common Stock acquired under the 1997-1999 LTIP, the Participants realize
long- or short-term gain or loss, and the Company receives no further deduction.
18
VOTE REQUIRED. Approval of the 1997-1999 LTIP requires the affirmative vote
of a majority of the shares present in person or represented by proxy at the
Annual Meeting and eligible to vote thereon. Abstentions are counted as a vote
against this proposal. Broker non-votes have no effect upon the approval of the
1997-1999 LTIP.
NEW PLAN BENEFITS. Set forth below is information concerning unit grants
made under the 1997-1999 LTIP to date (subject to shareholder approval). Except
as to the Named Executive Officers who will be subject to the $6,000,000 cap
described above, the maximum benefit to be received under these awards cannot be
determined at this time because the future performance of the Company's stock is
unknown. Additional employees may become eligible for unit awards during the
1997-1999 LTIP cycle.
19
NEW PLAN BENEFITS
BOWATER INCORPORATED 1997-1999 LONG-TERM INCENTIVE PLAN
DOLLAR NUMBER
NAME AND POSITION VALUE ($) OF UNITS
Arnold M. Nemirow (1) 10,524
Chairman, President and
Chief Executive Officer
E. Patrick Duffy (1) 3,488
Senior Vice President and
President -- Coated Paper &
Pulp Division
Arthur D. Fuller (1) 3,488
Senior Vice President
and President -- Newsprint Division
David G. Maffucci (1) 3,488
Senior Vice President and
Chief Financial Officer
Robert J. Pascal (1) 3,488
Senior Vice President
Current Executive Officers as a Group (1) 46,303
Non-Executive Director Group (2) n/a 0
All Employees, Excluding
Executive Officers, as a Group (1) 20,930
(1) As described on page 17, the dollar value of units under the 1997-1999 LTIP
ultimately will depend on (1) the average daily closing price of the
Company's Common Stock during each of 1997, 1998 and 1999, and (2) the
Company's relative performance based on a comparison of the Company Average
to the Peer Group Average. The peer group companies are Abitibi-Price Inc.,
Avenor Inc., Champion International Corporation, Donohue Inc., Fletcher
Challenge Canada Limited, International Paper Company, The Mead Corporation,
Stone-Consolidated Corporation, Westvaco Corporation and Weyerhauser
Company. The following table illustrates the range of values per 1,000 units
(as depicted in the table above) of a final award at the end of the
three-year plan cycle, depending on the two variables of stock price and
performance relative to peer group as described above.
AWARD VALUE PER 1,000 UNITS
COMPANY AVERAGE RONA AS A MULTIPLE OF PEER GROUP AVERAGE RONA
AVERAGE
STOCK 1 OR
PRICE LESS 1.1 1.2 1.3 1.4 1.5
$20 $ 0 $30,000 $60,000 $90,000 $120,000 $150,000
$25 $ 0 $37,500 $75,000 $112,500 $150,000 $187,500
$30 $ 0 $45,000 $90,000 $135,000 $180,000 $225,000
$35 $ 0 $52,500 $105,000 $157,500 $210,000 $262,500
$40 $ 0 $60,000 $120,000 $180,000 $240,000 $300,000
$45 $ 0 $67,500 $135,000 $202,500 $270,000 $337,500
$50 $ 0 $75,000 $150,000 $225,000 $300,000 $375,000
$55 $ 0 $82,500 $165,000 $247,500 $330,000 $412,500
$60 $ 0 $90,000 $180,000 $270,000 $360,000 $450,000
$65 $ 0 $97,500 $195,000 $292,500 $390,000 $487,500
$70 $ 0 $105,000 $210,000 $315,000 $420,000 $525,000
$75 $ 0 $112,500 $225,000 $337,500 $450,000 $562,500
$80 $ 0 $120,000 $240,000 $360,000 $480,000 $600,000
(2) Directors who are not also employees of the Company are not eligible to
participate in the 1997-1999 LTIP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL
OF THE 1997-1999 LONG-TERM INCENTIVE PLAN.
20
ITEM NO. 3
APPROVAL OF THE COMPANY'S 1997 STOCK OPTION PLAN
The 1997 Stock Option Plan has been established by the Company to secure
for the Company and its shareholders the benefits arising from providing
long-term incentive compensation opportunities to those key employees and
officers of the Company and its subsidiaries who are and will be responsible for
its future growth and continued success, and from reinforcing the common
interests of shareholders and nonemployee directors of the Company. The 1997
Stock Option Plan provides a means whereby such key employees, officers and
nonemployee directors (i) may be awarded restricted or nonrestricted stock
awards, (ii) may acquire shares of Common Stock pursuant to stock options, and
(iii) may be awarded stock appreciation rights ("SARs"). No shares are currently
available to be granted under the Company's 1992 stock option plan.
Key features of the 1997 Stock Option Plan include:
(Bullet) a prohibition against the repricing of stock options;
(Bullet) a prohibition against granting options with an exercise
price less than the fair market value of Common Stock on
the date of grant;
(Bullet) authorization of 1,000,000 shares subject to the plan
(2.5% of Common Stock outstanding on the record date for
the Annual Meeting);
(Bullet) limits on the number of awards (generally 200,000
shares) that may be granted to any individual under the
plan each year; and
(Bullet) limits on the percentage of shares (5%) subject to the
plan that may be granted in the form of restricted or
nonrestricted stock.
The 1997 Stock Option Plan has been designed to the extent possible to
comply with the provisions of Section 162(m) of the Code. In an effort to ensure
that options, SARs and restricted stock awarded under the 1997 Stock Option Plan
will qualify as performance-based compensation, which is generally deductible,
the 1997 Stock Option Plan is being submitted to shareholders for approval at
the Annual Meeting. The Company believes compensation payable pursuant to the
1997 Stock Option Plan, except for nonrestricted stock awards, if any, will be
deductible for federal income tax purposes under most circumstances. However,
under certain circumstances such as death, disability and a change in control
(as defined in the 1997 Stock Option Plan), compensation not qualified under
Section 162(m) of the Code may be payable. By approving the 1997 Stock Option
Plan, shareholders will be approving, among other things, the performance
measures, eligibility requirements and limits on various stock awards contained
therein. The affirmative vote of a majority of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote thereon is
required to approve the 1997 Stock Option Plan.
ADMINISTRATION. The 1997 Stock Option Plan will be administered by the
Committee. Among other things, the Committee (or, in the case of awards to
nonemployee directors, the Board) will have the authority, subject to the terms
of 1997 Stock Option Plan, to select officers, employees and nonemployee
directors to whom awards may be granted, to determine the type of award as well
as the number of shares of Company Common Stock to be covered by each award and
to determine the terms and conditions of any such awards. The Committee also
will have the authority to adopt, alter and repeal such rules, guidelines and
practices governing the 1997 Stock Option Plan as it shall deem advisable, to
interpret the terms and provisions of the 1997 Stock Option Plan and any awards
issued thereunder and to otherwise supervise the administration of the 1997
Stock Option Plan. All decisions made by the Committee or the Board pursuant to
the 1997 Stock Option Plan will be final and binding.
ELIGIBILITY. Key employees and officers of the Company and its subsidiaries
designated by the Committee and nonemployee directors are eligible to be granted
awards under the 1997 Stock Option Plan. Accordingly, it is not possible to
estimate at this time the number of persons who will be eligible to participate
in the 1997 Stock Option Plan. Because each of the Company's executive officers
and nonemployee directors is eligible to receive a grant under the 1997 Stock
Option Plan, each may be deemed to have an interest in the approval of the 1997
Stock Option Plan.
PERFORMANCE GOALS. The Committee may, but is not required to, establish
performance-related goals to be used in connection with conditions, restrictions
and limitations for each grant under the 1997 Stock Option Plan (except for
nonrestricted stock awards) within ninety days of the date of grant. If the
Committee chooses to establish performance-related goals for a particular grant
or award, it shall choose such goals from among the following factors, or any
combination thereof, as it deems appropriate: total shareholder return; growth
in revenues, sales, net income, stock price and/or earnings per share; return on
assets, net assets and/or capital; return on shareholders' equity; debt/equity
ratio; working capital; safety; quality;
21
the Company's financial performance versus peers; cost reduction; productivity;
market mix; and economic value added. The Committee may select among the goals
specified from award to award, and the Committee need not select the same, or
any, goals for each grantee. The Committee must certify that the performance
goals for each grant, if any, have been met before the grant will become vested
or exercisable (as the case may be).
PLAN FEATURES. The 1997 Stock Option Plan authorizes the issuance of up to
1,000,000 shares of Company Common Stock pursuant to the grant or exercise of
stock options (including incentive stock options ("ISOs") to key employees and
officers), SARs and restricted and nonrestricted stock awards, but not more than
5% of the shares subject to the 1997 Stock Option Plan may be issued as a
restricted or nonrestricted stock award. No single participant may be granted
awards pursuant to the 1997 Stock Option Plan covering in excess of 200,000
shares of Common Stock in any one calendar year or if such award would result in
the participant's owning more than 10% of the outstanding stock of the Company
calculated in accordance with the attribution rules of Section 424 of the Code.
In the event of any change in the outstanding shares of Common Stock by reason
of any share dividend, stock split, recapitalization, merger, consolidation,
combination, exchange of shares or other similar corporate change, the number of
shares subject to the plan and outstanding awards shall be proportionately
adjusted.
Subject to the foregoing limits, the shares available under the 1997 Stock
Option Plan may be allocated among the various types of awards and among the
participants as the Committee deems appropriate. Awards may be granted on such
terms as the Committee may determine, except that the exercise price for stock
options and the base price for SARs must be no less than the fair market value
of Company Common Stock on the date of grant, and ISOs may not be exercisable
beyond the tenth anniversary of the date of grant.
As indicated above, several types of stock-related grants can be made under
the 1997 Stock Option Plan. A summary of these grants is set forth below.
STOCK OPTIONS. The 1997 Stock Option Plan authorizes the Committee to grant
options to purchase Common Stock at an exercise price equal to or above the fair
market value of Company Common Stock on the date of grant. An option that
satisfies the requirements of Section 422 of the Code may be designated by the
Committee as an ISO. The principal difference between ISOs and nonqualified
options is their tax treatment. See "FEDERAL INCOME TAX CONSEQUENCES." Also,
ISOs may not be granted to nonemployee directors. The aggregate fair market
value, determined on the date of grant, of the shares with respect to which ISOs
granted to a grantee under all plans of the Company and its subsidiaries that
may become exercisable during a calendar year may not exceed $100,000. To the
extent that any such options exceed the foregoing limitation, the excess options
shall be deemed to be nonqualified options. The 1997 Stock Option Plan permits
grantees, with the approval of the Committee, to pay the exercise price of
options in cash, stock (valued at its fair market value on the date preceding
notice to the Committee) or a combination thereof, or in any other consideration
acceptable to the Committee. The 1997 Stock Option Plan prohibits the repricing
of options. ISOs and nonqualified options shall become immediately exercisable
in full in the event of a change in control of the Company (as defined in the
1997 Stock Option Plan). A grantee may exercise an ISO or a nonqualified option,
as the case may be, to the extent such option has become exercisable, by
complying with the Company's notification procedures.
STOCK APPRECIATION RIGHTS. The Committee may grant tandem SARs or
non-tandem SARs, each as defined in the 1997 Stock Option Plan. The principal
difference between a tandem SAR and a non-tandem SAR is that the exercisability
of a tandem SAR is related to an option and the exercisability of a non-tandem
SAR is not so related. The base price of a non-tandem SAR must be set by the
Committee at or above the fair market value of a share as of the date of the
award. The base price of a tandem SAR must equal the exercise price of the
related option. A grantee who is awarded an SAR shall be entitled to receive
from the Company, at the time the SAR is exercised, that number of shares of
Common Stock having an aggregate fair market value (as defined in the 1997 Stock
Option Plan) as of the date of exercise equal to the product of (i) the number
of shares as to which the grantee is exercising the SAR, and (ii) the excess of
the fair market value (at the date of exercise) of a share over the base price
of the SAR. The Committee, in its sole discretion, may elect to settle all or a
portion of the Company's obligation arising out of the exercise of an SAR by the
payment of cash in an amount equal to the fair market value as of the date of
SAR exercise of the shares that it would otherwise be obligated to deliver. A
tandem SAR shall be exercisable only to the extent that the related option is
exercisable. A tandem SAR shall be canceled to the extent that the related
option is exercised, and the option shall be canceled to the extent that the
related tandem SAR is exercised. Non-tandem SARs shall be exercisable as
determined by the Committee at the date of grant. The 1997 Stock Option Plan
prohibits the repricing of SARs. An SAR shall become immediately exercisable in
full in the event of a change in control of the Company (as defined in the 1997
Stock Option Plan). A grantee may exercise an SAR to the extent it has become
exercisable by complying with the Company's notification procedures.
22
RESTRICTED AND NONRESTRICTED STOCK. The Committee may grant restricted or
nonrestricted stock awards under the 1997 Stock Option Plan. Shares awarded
shall be transferred in consideration of the services of the grantee with or
without other payment therefor as determined by the Committee and shall be
issued in the grantee's name. The grantee will have all of the rights of
ownership of such shares, subject to the terms, conditions, restrictions and
limitations established by the Committee and the 1997 Stock Option Plan, except
that if a restricted stock award is granted subject to a risk of forfeiture that
will lapse solely based on whether the grantee remains in the employment of the
Company or a subsidiary, or as a nonemployee director for a minimum period, the
vesting period selected by the Committee may not be less than one year. Any
condition providing for forfeiture of a restricted stock award upon the
occurrence or non-occurrence of a specified event or events shall immediately
lapse in the event of a change in control of the Company (as defined in the 1997
Stock Option Plan).
FEDERAL INCOME TAX CONSEQUENCES. The following discussion is intended only
as a brief summary of the federal income tax rules relevant to stock options,
SARs and restricted and nonrestricted stock awards. The laws governing the tax
aspects of awards are highly technical and such laws are subject to change.
-Nonqualified Options and SARs. Upon the grant of a nonqualified
option (with or without an SAR), the grantee will not recognize any taxable
income, and the Company will not be entitled to a deduction. Upon the
exercise of such an option or an SAR, the excess of the fair market value
of the shares acquired on the exercise of the option over the option price
(the "spread"), or the consideration paid to the grantee upon exercise of
the SAR, will constitute compensation taxable to the grantee as ordinary
income. In determining the amount of the spread or the amount of
consideration paid to the grantee, the fair market value of the stock on
the date of exercise is used. The Company, in computing its federal income
tax, will generally be entitled to a deduction in an amount equal to the
compensation taxable to the grantee.
-ISOs. A grantee will not recognize taxable income on the grant or
exercise of an ISO. However, the spread at exercise will constitute a tax
preference item includable in an alternative minimum tax computation, and
thereby may subject the grantee to the alternative minimum tax.
Upon the disposition of shares of stock acquired pursuant to the
exercise of an ISO after (i) two years from the date of grant of the ISO
and (ii) one year from the date of transfer of the shares to the grantee
(the "ISO Holding Period"), the grantee will recognize long-term capital
gain or loss, as the case may be, measured by the difference between the
stock's selling price and the exercise price. The Company is not entitled
to any tax deduction by reason of the grant or exercise of an ISO or by
reason of a disposition of stock received upon exercise of an ISO if the
ISO Holding Period is satisfied. If the grantee disposes of the shares of
stock acquired pursuant to the exercise of an ISO before the ISO Holding
Period expires, the grantee recognizes ordinary income in the taxable year
of the disposition equal to the excess of (a) the lower of the fair market
value at date of exercise or such value at the time of disposition over (b)
the exercise price, and the Company receives a deduction in an equal
amount.
-Restricted Stock. A grantee who receives restricted stock may make an
election under Section 83(b) of the Code (a "Section 83(b) Election") to
have the grant taxed as compensation income at the date of receipt, with
the result that any future appreciation (or depreciation) in the value of
the shares of stock granted shall be taxed as capital gain (or loss) upon a
subsequent sale of the shares. However, if the grantee does not make a
Section 83(b) Election, then the grant will be taxed as compensation income
at the full fair market value (less any amount paid therefor by the
grantee) on the date that the restrictions imposed on the shares expire.
Unless a grantee makes a Section 83(b) Election, any dividends paid on
stock subject to the restrictions are compensation income to the grantee
and compensation expense to the Company. The Company is generally entitled
to an income tax deduction for any compensation income taxed to the
grantee, subject to the limitations of Section 162(m) of the Code.
-Nonrestricted Stock. A grant of nonrestricted stock will be taxed as
compensation income at the date of receipt, with the result that any future
appreciation (or depreciation) in the value of the shares of stock shall be
taxed as capital gain (or loss) upon a subsequent sale of the shares. The
Company is generally entitled to an income tax deduction for any
compensation income taxed to the grantee; however, the deductibility of
nonrestricted stock awards is subject to the $1,000,000 cap of Section
162(m), and such awards are not eligible for the exemptions therefrom.
WITHHOLDING. The 1997 Stock Option Plan provides that when a grantee
recognizes income with respect to an award, the grantee shall pay all federal,
state and local income or other taxes due, and the Company shall have the right
to withhold funds from amounts payable to the grantee to satisfy all federal,
state and local payroll tax withholding requirements. Alternatively, the grantee
may elect to have shares withheld by the Company from the shares otherwise to be
delivered to the grantee, or to tender to the Company shares previously acquired
by the grantee. Such shares withheld or tendered shall have an aggregate fair
market value equal to the amount of funds to be withheld, and such value shall
be measured as of the later
23
of the date the Committee approves the grantee's election or the date as of
which income is recognized by the grantee with respect to such shares.
TRANSFERABILITY. Except to the extent specifically provided by the
Committee, an award made under the 1997 Stock Option Plan shall not be sold,
assigned, pledged or otherwise transferred, voluntarily or involuntarily, by the
grantee. ISOs granted under the 1997 Stock Option Plan are not transferable
except by will or by the laws of descent and distribution or, to the extent not
inconsistent with the applicable provisions of the Code, pursuant to a qualified
domestic relations order.
AMENDMENT AND TERMINATION. Subject to any approval of the Company's
shareholders required (or, in the opinion of the Committee, appropriate) under
law (including Section 422 of the Code and the regulations thereunder) or the
rules of any applicable securities exchange, the Company may at any time amend,
suspend or terminate the 1997 Stock Option Plan, but no amendment, suspension or
termination may be made that would materially alter or impair any award
previously granted under such plan without the consent of the holder thereof.
CHANGE IN CONTROL. The 1997 Stock Option Plan provides that upon the
occurrence of a change in control (as defined in the 1997 Stock Option Plan),
all outstanding options and SARs and all outstanding restricted stock awards as
to which any conditions respecting forfeiture have not previously lapsed, shall
automatically be purchased by the Company at the Acceleration Price (as defined
below), with payment to be made within thirty days of such change in control,
irrespective of whether the shareholders have approved the 1997 Stock Option
Plan. For purposes of the 1997 Stock Option Plan, the term "Acceleration Price"
means the highest of: the highest reported sales price of the Common Stock
within the sixty days preceding the date of the change in control as reported by
any securities exchange upon which the Common Stock is listed, the highest price
of the Common Stock as reported in a Schedule 13D or an amendment thereto that
is paid within the sixty days preceding the date of the change in control, the
highest tender offer price paid for the Common Stock and any cash merger or
similar price. Any change in control payments under the 1997 Stock Option Plan
would be considered non-performance based compensation and would not be
deductible by the Company to the extent that total compensation for any covered
officer exceeded the $1,000,000 cap of Section 162(m).
TERMINATION OF EMPLOYMENT OR SERVICE ON THE BOARD. Under the 1997 Stock
Option Plan, if a grantee is involuntarily terminated for cause, all of the
grantee's options and SARs will expire and the grantee's unvested restricted
stock awards will be forfeited, as of the date of termination. If a grantee is
involuntarily terminated without cause or voluntarily leaves, all of the
grantee's unexercisable options and SARs will expire immediately; any
exercisable options and SARs will expire three months after termination (unless
their expiration date is earlier) and unvested restricted stock awards will be
forfeited. If a grantee terminates employment due to disability or retirement,
the grantee will be treated under all awards as if employment continued for five
years. If a grantee dies while employed or during the above-described five-year
period, all options and SARs will become exercisable (and remain exercisable for
two years unless their expiration date is earlier), and unvested restricted
stock awards will vest. In the case of a nonemployee director, these provisions
will be applied with respect to the individual's termination of service on the
Board.
VOTE REQUIRED. Approval of the 1997 Stock Option Plan requires the
affirmative vote of a majority of the shares present in person or represented by
proxy and entitled to vote thereon at the Annual Meeting. Abstentions are
counted as a vote against this proposal. Broker non-votes have no effect upon
the approval of the 1997 Stock Option Plan. The 1997 Stock Option Plan must be
approved by shareholders on or prior to the first anniversary of its adoption by
the Committee. If approval is not obtained by that date, the 1997 Stock Option
Plan will terminate and awards made thereunder will expire unless an earlier
buy-back of those awards under the change in control provisions has occurred.
NEW PLAN BENEFITS. Set forth below is information concerning stock options
grants made by the Committee (without performance-related conditions) under the
1997 Stock Option Plan to date. The maximum benefit received by such grantees
pursuant to these grants cannot be determined at this time because the future
performance of the Company's stock is unknown. The Committee may make additional
grants in 1997 that could be on materially different terms from those of the
grants set forth below. It is not possible to determine the maximum benefits
(other than pursuant to limits on the number of shares that may be granted in
the aggregate or to any employee) that will be granted to any person in 1997
under the 1997 Stock Option Plan or what benefits or amounts would have been
received by or allocated to any person or group of persons in 1996 if the 1997
Stock Option Plan had been in effect.
24
NEW PLAN BENEFITS
BOWATER INCORPORATED 1997 STOCK OPTION PLAN
NUMBER OF
SHARES
SUBJECT TO
NAME AND POSITION OPTIONS
Arnold M. Nemirow
Chairman, President and
Chief Executive Officer 50,000
E. Patrick Duffy
Senior Vice President and
President -- Coated Paper &
Pulp Division 20,000
Arthur D. Fuller
Senior Vice President
and President -- Newsprint Division 20,000
David G. Maffucci
Senior Vice President and
Chief Financial Officer 20,000
Robert J. Pascal
Senior Vice President 20,000
Current Executive Officers as a Group 255,000
Non-Executive Director Group 8,000
All Employees, Excluding Executive Officers, as a Group 140,000
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL
OF THE 1997 STOCK OPTION PLAN.
APPOINTMENT OF INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee of the Board of Directors, the
Board of Directors has appointed KPMG Peat Marwick LLP as independent auditors
for the Company to audit its consolidated financial statements for the year
ended December 31, 1997. KPMG Peat Marwick LLP currently serves the Company and
its subsidiaries as independent auditors and from time to time advises the
Company on tax and other matters. Representatives of KPMG Peat Marwick 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.
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 1998
should submit his or her proposal to the Secretary of the Company, 55 East
Camperdown Way, Post Office Box 1028, Greenville, South Carolina 29602. Any
proposal must be received on or before the earlier of November 25, 1997, or the
date specified in the Company's Bylaws as described below and the proponent must
comply with the proxy rules under the Securities Exchange Act of 1934, as
amended, as well as the Bylaw requirements described below.
The Bylaws of the Company 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 the Company's Secretary (at the address indicated above).
The notice must be given, either by personal delivery or by United States mail,
postage prepaid, to the Secretary of the Company no later than (i) 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 (ii)
with respect to an election to be held at a special meeting of shareholders for
the election of directors, the close of business on the seventh day following
the date on which notice of such meeting shall first be given to shareholders.
In the case of other proposals by shareholders at an annual meeting, the Bylaws
require that advance written notice be delivered to the Company's Secretary (at
the address indicated above). The notice must be received by the Secretary of
the Company by the earlier of (i) 120 days prior to the anniversary date of the
immediately preceding annual meeting or (ii) 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 of the Secretary
of the Company at the address indicated above.
25
EXPENSES OF SOLICITATION
The Company will bear the cost of soliciting proxies. In addition to
soliciting proxies by mail, it is expected that some of the Company's officers
and regular employees may solicit, without additional compensation, proxies by
telephone, telegraph or oral communication. The Company has requested that
brokerage houses and other custodians, nominees and fiduciaries forward
soliciting materials to their principals, the beneficial owners of Common Stock
of the Company, and will reimburse them for their reasonable out-of-pocket
expenses in so doing. The firm of Morrow & Co., Inc. has been retained to assist
in the soliciting of proxies for a fee of $5,500, plus expenses.
FINANCIAL INFORMATION
THE COMPANY'S 1996 ANNUAL REPORT IS ENCLOSED HEREWITH. THE COMPANY WILL
PROVIDE WITHOUT CHARGE TO ANY SHAREHOLDER OF RECORD AS OF MARCH 24, 1997, WHO SO
REQUESTS IN WRITING, A COPY OF THE 1996 ANNUAL REPORT OR THE COMPANY'S 1996
ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS) FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. ANY SUCH REQUEST SHOULD BE DIRECTED TO THE COMPANY, 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
SECRETARY
March 31, 1997
26
NOTICE OF
ANNUAL MEETING
AND
PROXY STATEMENT
(Bowater logo)
DATE AND TIME
WEDNESDAY, MAY 21, 1997
AT 10:30 A.M.
PLACE
THE WESTIN HOTEL
222 EAST THIRD STREET
CHARLOTTE, NORTH CAROLINA
PLEASE SIGN YOUR PROXY AND RETURN IT IN THE
ENCLOSED POSTAGE-PAID ENVELOPE SO THAT YOU MAY
BE REPRESENTED AT THE MEETING IF YOU DO NOT PLAN
TO ATTEND PERSONALLY.
*******************************************************************************
APPENDIX 1
BOWATER INCORPORATED
P PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R
O OF THE COMPANY FOR ANNUAL MEETING MAY 21, 1997
X
Y The undersigned hereby 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, as designated below, all the shares of common stock of
Bowater Incorporated held of record by the undersigned on March 24, 1997, at
the annual meeting of shareholders to be held May 21, 1997, and any
adjournment thereof and, in their discretion, to vote upon any other matters
which may properly come before the meeting
and any postponement or adjournment thereof.
COMMENTS (change of address) [ ]
(If you have written in the above
space, mark the corresponding box on
the reverse side of this card.)
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. The Proxy Committee cannot vote your shares unless you
sign and return this card.
SEE REVERSE
SIDE
*
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL
BE VOTED FOR PROPOSALS 1, 2 AND 3, AND PROXYHOLDERS WILL VOTE, IN THEIR
DISCRETION, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING AND ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
1. ELECTION OF DIRECTORS FOR ALL NOMINEES [ ] WITHHOLD AUTHORITY [ ]
LISTED BELOW (to vote for all nominees below)
EXCEPTIONS* [ ] (as indicated
to the contrary below)
Richard Barth, James L. Pate, and Charles J. Howard
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE MARK THE
"EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
*Exceptions
2. Proposal to approve the Bowater Incorporated 1997-1999 Long-Term Incentive
Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to approve the Bowater Incorporated 1997 Stock Option Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. At their discretion upon such other matters as may properly come before the
annual meeting and any postponement or adjournment thereof.
PROXY DEPARTMENT
P.O. Box 11380
NEW YORK, N.Y. 10203-0380 Address Change
Mark Here [ ]
Change of address comments on reverse
side.
(Signature should conform exactly to
name shown on this proxy. Executors,
administrators, guardians, trustees,
attorneys and officers signing for
corporations should give full title.)
Dated , 1997
(Please be sure to insert date)
Signed
Votes MUST be indicated
(x) in Black or Blue ink. [ ]
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
*******************************************************************************
APPENDIX 2
AMENDED AND RESTATED
BOWATER INCORPORATED
1997-1999 LONG-TERM INCENTIVE PLAN
(Effective January 1, 1997)
TABLE OF CONTENTS
Page No.
Section 1. Establishment of Plan..................................1
Section 2. Definitions............................................1
Section 3. Administration.........................................6
Section 4. Eligibility and Participation..........................6
Section 5. Award Determination....................................7
Section 6. Payment of Final Awards................................8
Section 7. Termination of Employment..............................9
Section 8. Covered Officers.......................................9
Section 9. Change in Control.....................................10
Section 10. Amendment and Modification...........................10
Section 11. Miscellaneous........................................10
SECTION 1. ESTABLISHMENT OF PLAN
Effective January 1, 1997, Bowater Incorporated, a Delaware corporation
(the "Company"), hereby establishes an incentive compensation plan to be known
as the "Bowater Incorporated 1997-1999 Long-Term Incentive Plan" (the "Plan"),
as set forth in this document. Effective January 1, 1997, the Plan is hereby
amended and restated, as set forth in this document. This amended and restated
Plan document shall supersede the Plan document as originally adopted.
SECTION 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings
indicated:
"Acquiring Person" means any Person who is or becomes a "beneficial
owner" (as defined in Rule 13d-3 of the General Rules and Regulations under the
Exchange Act of securities of the Company representing twenty percent (20%) or
more of the combined voting power of the Company's then outstanding voting
securities, unless such Person has filed Schedule 13G and all required
amendments thereto with respect to its holdings and holds and continues to hold
such securities for investment in a manner qualifying such Person to utilize
Schedule 13G for reporting of ownership.
"Acceleration Price" means the highest of:
(A) The highest reported sales price of the Common Stock
within the sixty (60) days preceding the date of the
Change in Control, as reported on any securities
exchange upon which the Common Stock is listed,
(B) The highest price of the Common Stock as reported in
a Schedule 13D or an amendment thereto that is paid
within the sixty (60) days preceding the date of the
Change in Control,
(C) The highest tender offer price paid for the Common
Stock, and
(D) Any cash merger or similar price.
"Active Employee" means an Employee who is providing services to the
Company or a subsidiary and does not include an individual who is receiving
periodic severance payments.
"Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act, as in effect on the Effective Date.
"Aggregate Unit Value" means the sum of the Unit Values for the Fiscal
Years in the Plan Cycle. For a Participant described in Section 4.2 or 7,
Aggregate Unit Value will only include the Unit Values for the portion of the
Plan Cycle during which the Participant participated hereunder (with the Unit
Value for any partial Fiscal Years of participation calculated only on the basis
of the portion during which participation occurred).
- 2 -
"Average RONA" means the quotient of (i) the sum of Operating Earnings
for Fiscal Years 1997-1999, divided by (ii) the quotient of (A) the sum of Net
Assets as of the end of Fiscal Years 1996, 1997, 1998 and 1999 divided by (B)
four (4).
"Board" means the Board of Directors of the Company.
"Cause" means the Participant's gross negligence, willful misconduct or
conviction of a felony, which negligence, misconduct or conviction has a
demonstrable and material adverse effect upon the Company, provided that the
Company shall have given the Participant written notice of the alleged
negligence or misconduct and the Participant shall have failed to cure such
negligence or misconduct within thirty (30) days after his receipt of such
notice. The Participant shall be deemed to have been terminated for Cause
effective upon the effective date stated in a written notice of such termination
delivered by the Company to the Participant and accompanied by a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board (after reasonable
notice to the Participant and an opportunity for the Participant, with his
counsel present, to be heard before the Board) finding that, in the good faith
opinion of the Board, the Participant was guilty of conduct constituting Cause
hereunder and setting forth in reasonable detail the facts and circumstances
claimed to provide the basis for the Participant's termination, provided that
the effective date shall not be less than thirty (30) days from the date such
notice is given.
"Change in Control" means that:
(i) any Person is or becomes an Acquiring Person;
(ii) less than two-thirds (2/3) of the total membership
of the Board shall be Continuing Directors; or
(iii) the stockholders of the Company shall
approve a merger or consolidation of the
Company or a plan of complete liquidation of
the Company or an agreement for the sale or
disposition by the Company of all or
substantially all of the Company's assets.
"Code" means the Internal Revenue Code of 1986, as amended. References
to a Section of the Code shall include references to any Temporary or Final
Regulations related to such Section, and to any successor to such Section or
Regulations.
"Committee" means the Human Resources and Compensation Committee of the
Board, or such other committee of two (2) or more "outside directors" within the
meaning of section 162(m) of the Code, who are appointed by the Board to
administer the Plan.
"Common Stock" means the common stock of the Company, par value $1.00
per share.
- 3 -
"Company" means Bowater Incorporated, a Delaware corporation, and any
successor thereto.
"Continuing Director" means any member of the Board who was a member of
the Board as of the Effective Date, and any successor of a Continuing Director,
while such successor is a member of the Board, who is not an Acquiring Person or
an Affiliate or Associate of an Acquiring Person or of any such Affiliate or
Associate and is recommended or elected to succeed the Continuing Director by a
majority of the Continuing Directors.
"Covered Officer" means any individual designated by the Committee as
such, because, in the Committee's judgment, he is or may become a "covered
employee" within the meaning of section 162(m) of the Code. Notwithstanding the
foregoing, if at the time of payment of a Final Award to a Participant, the
Committee has concluded that such Participant is not a covered employee for the
year in which the Final Award would be deductible by the Company for tax
purposes, then such Participant shall not be a Covered Officer.
"Disability" shall have the meaning contained in the Company's
long-term disability plan.
"Effective Date" means January 1, 1997.
"Employee" means a full-time, salaried employee of the Company or a
subsidiary that, directly or indirectly, is at least 50% owned by the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the closing price per share of the Common
Stock as reported for the New York Stock Exchange Composite Transactions in the
Wall Street Journal for that date.
"Final Award" means the amount for each Participant calculated pursuant
to Section 5.3.
"Fiscal Year" means (i) for the Company, the referenced year ended
December 31; and (ii) for any Peer Company, its fiscal year ending with or
within such Fiscal Year of the Company.
"Good Reason" means:
(i) an adverse change in the Participant's status, duties
or responsibilities as an executive of the Company as
in effect immediately prior to the Change in Control;
- 4 -
(ii) failure of the Company to pay or provide the
Participant in a timely fashion the salary or
benefits to which he is entitled under any Employment
Agreement between the Company and the Participant in
effect on the date of the Change in Control, or under
any benefit plans or policies in which the
Participant was participating at the time of the
Change in Control (including, without limitation, any
incentive, bonus, stock option, restricted stock,
health, accident, disability, life insurance, thrift,
vacation pay, deferred compensation and retirement
plans or policies);
(iii) the reduction of the Participant's salary as in
effect on the date of the Change in Control;
(iv) the taking of any action by the Company (including
the elimination of a plan without providing
substitutes therefor, the reduction of the
Participant's awards thereunder or failure to
continue the Participant's participation therein)
that would substantially diminish the aggregate
projected value of the Participant's awards or
benefits under the Company's benefit plans or
policies in which the Participant was participating
at the time of the Change in Control;
(v) a failure by the Company to obtain from any successor
the assent to the Participant's Change in Control
Agreement contemplated by Section 5 thereof; or
(vi) the relocation of the principal office at which the
Participant is to perform his services on behalf of
the Company to a location more than thirty-five (35)
miles from its location immediately prior to the
Change in Control or a substantial increase in the
Participant's business travel obligations subsequent
to the Change in Control.
Any circumstance described above shall constitute Good Reason even if
such circumstance would not constitute a breach by the Company of the terms of
the Employment Agreement between the Company and the Participant in effect on
the date of the Change in Control. The Participant shall be deemed to have
terminated his employment for Good Reason effective upon the effective date
stated in a written notice of such termination given by him to the Company
setting forth in reasonable detail the facts and circumstances claimed to
provide the basis for termination, provided that the effective date may not
precede, nor be more than sixty (60) days from, the date such notice is given.
The Participant's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstances constituting Good Reason
hereunder.
- 5 -
"Net Assets" means total assets less nonfinancial current liabilities
as recorded on the Company's or a Peer Company's balance sheet.
"Normal Retirement Date" shall have the meaning given to such term in
the Company's basic qualified pension plan in which the Participant is a
participant as in effect on the Effective Date or any successor or substitute
plan adopted prior to a Change in Control.
"Operating Earnings" means operating income, after depreciation, but
before interest and taxes, as recorded on the Company's or on a Peer Company's
statement of operations for the applicable Fiscal Year.
"Participant" means an Active Employee who is eligible to participate
in the Plan.
"Peer Companies" mean the following companies in the paper and wood
products industry designated by the Committee:
Abitibi-Price Inc. Avenor Inc.
Champion International Corporation Donohue Inc.
Fletcher Challenge Canada Limited International Paper Company
The Mead Corporation Stone-Consolidated Corporation
Westvaco Corporation Weyerhaeuser Company
"Peer Group Average" means the arithmetic mean of the Average RONAs of
the Peer Companies for the Plan Cycle. If one or more of the Peer Companies is
eliminated during the Plan Cycle either through acquisition or dissolution, or
because of any other reason, then the Peer Group Average shall be based on the
Average RONAs of the remaining Peer Companies. If one or more Peer Companies are
combined during the Plan Cycle, either through merger, consolidation, purchase
and sale of assets, or because of any other reason, then (i) for periods before
they are combined, "Peer Group Average" shall be based on the Average RONAs of
all such Peer Companies; and (ii) for periods after they are combined, "Peer
Group Average" shall include the Average RONA of the combined entity.
"Performance Goal Formula" means the formula established by the
Committee and described in Section 5.3 to be used to determine the percentage,
if any, of a Participant's Aggregate Unit Value that becomes a Final Award.
"Person" means any individual, corporation, partnership, group,
association or other "person" as such term is used in sections 13(d) and 14(d)
of the Exchange Act.
"Plan" means the Bowater Incorporated 1997-1999 Long-Term Incentive
Plan.
- 6 -
"Plan Cycle" means the period over which performance will be measured
for purposes of determining the amount, if any, of a Participant's Aggregate
Unit Values that will be paid as a Final Award. The Plan Cycle will commence on
January 1, 1997, and will end December 31, 1999.
"Retirement" means a Participant's termination of employment in a
retirement status under the qualified pension plan of the Participant's employer
in which he is participating.
"Section" means the indicated provision of the Plan.
"Unit" refers to units granted to Participants pursuant to the Plan,
each of which corresponds to one share of the Company's common stock.
"Unit Value" refers to the dollar value of a Participant's Units as
determined for each Fiscal Year of the Plan Cycle pursuant to Section 5.2.
Except where otherwise indicated by the context, any masculine term
used herein also shall include the feminine, the plural shall include the
singular, and the singular shall include the plural.
SECTION 3. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee has
delegated to the Vice President -- Human Resources of the Company, and other
appropriate officers and employees of the Company, responsibility for
administering the Plan, other than the Committee's powers with respect to
Covered Officers under Section 8.
Subject to the limitations of the Plan, the Committee shall: (i)
correct any defect or omission or reconcile any inconsistency in this Plan or in
any award granted hereunder, and (ii) make all other necessary determinations
and take all other actions necessary or advisable for the implementation and
administration of the Plan. The Committee's determinations on matters within its
authority shall be conclusive and binding upon all parties; provided that the
Committee may not exercise discretion with respect to a Covered Officer in a
manner that is inconsistent with Treasury Regulation Section
1.162-27(e)(2)(iii).
SECTION 4. ELIGIBILITY AND PARTICIPATION
4.1 GENERAL. Active Employees who are in salary grades 31 and above
shall be Participants in the Plan for the Plan Cycle, subject to the limitations
of Section 7 herein. An Employee who is eligible to participate in the Plan
shall be so notified in writing, and shall be apprised of his Units, the manner
of determining Unit Values and the Performance Goal Formula for the Plan Cycle
within the first 90 days of the Plan Cycle.
- 7 -
4.2 PARTIAL PLAN CYCLE PARTICIPATION. In the event that an Employee
becomes eligible to participate in the Plan subsequent to the commencement of
the Plan Cycle, such Employee shall be granted the number of Units he would have
received if he had entered the Plan at the beginning of the Plan Cycle based on
his salary grade and shall be notified of his Units, the manner of determining
Unit Values and the Performance Goal Formula for the Plan Cycle as soon as
practicable and in any event before the earlier of (i) the ninetieth day after
the Employee becomes eligible to participate or (ii) the day as of which 25% of
the portion of the Plan Cycle during which such Employee participates has
lapsed. The Participant's Aggregate Unit Values will include only Unit Values
for the portion of the Plan Cycle during which the Participant participates.
4.3 CHANGE IN SALARY GRADE. Subject to the last sentence of Section
8.3, if a Participant is promoted to a higher salary grade during the Plan
Cycle, his Units shall be increased to a number of Units applicable to the new
salary grade for the Fiscal Year. The Unit Value for the Fiscal Year the change
occurs will equal (i) the sum of the Units he was first granted under Section
5.1 times the number of days he was in that salary grade for that Fiscal Year,
plus the number of Units he received under the new salary grade times the number
of days he was in the new salary grade for that Fiscal Year, divided by (ii) the
total number of days he participated in the Plan for that year. Any subsequent
promotions will be factored in by making additional computations in the same
manner to take account of the new salary grade for the remainder of any Fiscal
Year. If a Participant is demoted during the Plan Cycle, such demotion will have
no effect on the Participant's participation hereunder; provided that the
Committee may elect to reduce or eliminate his Final Award in any fashion it
deems appropriate on account of such demotion.
4.4 NO RIGHT TO PARTICIPATE. Except as specifically provided in
Sections 4.1 and 4.2, no Participant or other Employee shall at any time have a
right to be selected for participation in the Plan, despite having previously
participated in an incentive plan of the Company.
SECTION 5. AWARD DETERMINATION
5.1 INITIAL UNITS. As of the beginning of the Plan Cycle, each
Participant shall receive the number of Units assigned to his salary grade. The
Units assigned to each salary grade are equal to (i) the product of (A) the
bonus percentage assigned for the 1997 Fiscal Year of the Company to that salary
grade, times (B) the midpoint of that salary grade for the 1997 Fiscal Year,
divided by (ii) the average daily closing price of the Company's Common Stock
for the 1996 calendar year.
1997 1997
Salary Grade Salary Grade
Units for each Bonus Percentage X Midpoint
---------------------------------------------
Salary Grade = Company's 1996 Average Common Stock Price
- 8 -
5.2 UNIT VALUES. Except as may be provided in Sections 4.2 and 4.3 or
Section 7, for each Fiscal Year of the Company during the Plan Cycle, the
Committee will determine a Unit Value for each Participant by multiplying each
Participant's Units by the average daily closing price of the Common Stock for
such Year. If a Participant is only entitled to a pro rated Award for a Fiscal
Year pursuant to Sections 4.2 or 7, then the Unit Value for such Participant
shall be multiplied by a fraction equal to the number of days the Participant
participated in the Plan divided by 365.
5.3 PERFORMANCE GOAL FORMULA AND FINAL AWARDS. At the end of the Plan
Cycle, the Committee will determine the Final Award for each Participant by
multiplying the Aggregate Unit Value for such Participant by a percentage
determined based on the Company's Average RONA as a multiple of the Peer Group
Average. Such percentage shall equal zero if the Company's Average RONA is not
more than one (1) times the Peer Group Average. If the Company's Average RONA is
more than one (1) times the Peer Group Average, such percentage shall equal the
product of (i) 250% times (ii) a fraction, the numerator of which is the lesser
of (A) the Company's Average RONA divided by the Peer Group Average, minus 1,
or (B) .5, and the denominator of which is .5.
5.4 ADJUSTMENTS. In the event of any change in the outstanding shares
of Common Stock by reason of any share dividend, split recapitalization, merger,
consolidation, combination, exchange of shares or other similar corporate
change, each Participant's Units shall be proportionately adjusted so that the
value of the Units shall not thereby be changed.
SECTION 6. PAYMENT OF FINAL AWARDS
6.1 FORM AND TIMING OF PAYMENT. (a) Except as may be otherwise provided
in Section 6.2 or Section 9, the Company shall pay to each Participant (i) a
number of shares of Common Stock equal to one-half of the Participant's Final
Award divided by the Stock Price, and (ii) cash equal to one-half of the Final
Award. The Stock Price shall be the Fair Market Value of one share of Common
Stock as of the date on which the Committee approves the Final Award. Except in
the case of a Participant who is a Covered Officer, the Board may change the
allocation between stock and cash in its discretion.
(b) Shares and cash described in paragraph (a) shall be
distributed as soon as practicable after the amounts thereof have been
determined. Notwithstanding the foregoing, except in the case of a Covered
Officer, the Committee may authorize the payment of part or all of an estimated
Final Award for a Participant prior to the determination thereof pursuant to
Section 5.3, subject to such conditions and limitations deemed appropriate by
the Committee.
- 9 -
6.2 LIMITATIONS. Notwithstanding the provisions of Section 6.1, if the
form of payment described therein would cause the number of shares of Common
Stock issued hereunder to exceed five percent (5%) of the outstanding shares of
Common Stock on the record date of the 1997 Annual Meeting of Stockholders of
the Company, less 1,000,000 (the number of shares reserved for issuance under
the Bowater Incorporated 1997 Stock Option Plan as of such record date), then
the number of shares distributable to each Participant hereunder shall be
proportionately reduced so that such limit is not exceeded and cash shall be
paid in lieu thereof to each Participant.
SECTION 7. TERMINATION OF EMPLOYMENT
7.1 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, RETIREMENT OR
SALE OF BUSINESS UNIT. In the event a Participant's employment is terminated by
reason of death, Disability, Retirement, or sale by the Company of the
subsidiary or unit employing the Participant, the Final Award determined in
accordance with Section 5.3 herein shall be pro rated based solely upon the
Aggregate Unit Values computed for the portion of the Plan Cycle occurring prior
to termination during which the Participant was an Active Employee. In the case
of a Participant's Disability, the employment termination shall be deemed to
have occurred on the date the disability commences as determined by the
Committee.
Payments under this Section 7.1 shall be made after the end of the Plan
Cycle in accordance with the provisions of Section 6.
7.2 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event a
Participant's employment is terminated prior to the payment of the Final Award
for any reason other than death, Disability, or Retirement, or sale by the
Company of the subsidiary or unit employing the Participant, all of the
Participant's rights to a Final Award for the Plan Cycle shall be forfeited.
However, except as provided under Section 8, the Committee, in its sole
discretion, may pay an award (or a portion of an award) for the portion of the
Plan Cycle that the Participant was a Participant, computed as determined by the
Committee and payable after the end of this Plan Cycle in accordance with the
provisions of Section 6.
SECTION 8. COVERED OFFICERS
8.1 APPLICABILITY OF SECTION 8. The provisions of this Section 8 shall
apply only to Covered Officers. In the event of any inconsistencies between this
Section 8 and the other Plan provisions (other than Section 9), the provisions
of this Section 8 shall control.
8.2 COMMITTEE CERTIFICATION. At the end of the Plan Cycle and prior to
payment, the Committee shall certify (i) the extent to which the performance
goals reflected in the Performance Goal Formula were satisfied, and (ii) the
Final Awards for each Covered Officer as computed in accordance with Sections 5
and 6.
- 10 -
8.3 NON-ADJUSTMENT OF PERFORMANCE GOALS AND MAXIMUM AWARD. Subject to
Sections 4.3, 5.3 and 5.4, once established for a Participant, the number of
Units received by the Participant, the method of computing Aggregate Unit Value
and the Performance Goal Formula shall not be changed during the Plan Cycle.
Notwithstanding any provision herein, the maximum Final Award for each Covered
Officer is $6,000,000.
SECTION 9. CHANGE IN CONTROL
Notwithstanding any other provision of the Plan, if a Change in Control
of the Company shall have occurred and, prior to payment of Final Awards, if
any, under the Plan, a Participant's employment by the Company is terminated
for any reason other than his death, his Disability, his retirement on his
Normal Retirement Date, by the Company for Cause, or by the Participant
without Good Reason, the Company shall pay the Participant a Final Award equal
to three times the Participant's Units multiplied by 250%, times the
Acceleration Price. All Final Awards paid pursuant to this Section 9
shall be paid entirely in cash within thirty (30) days of termination of
employment.
SECTION 10. AMENDMENT AND MODIFICATION
Subject to Section 8.3, the Committee, in its sole discretion, with
notice to all Participants, at any time and from time to time, may modify or
amend, in whole or in part, any or all of the provisions of the Plan, or suspend
or terminate it entirely; provided, however, that no such modification,
amendment, suspension, or termination may affect Participants' rights under
Section 9, and in the event of any such modification, amendment, suspension or
termination, any Participant (or his beneficiary, as the case may be) who is an
Active Employee on the effective date thereof shall be entitled to no less of a
payment or distribution hereunder than the amount he would have otherwise
received, based upon the Participant's Units, the Aggregate Unit Value and the
percentage determined under the Performance Goal Formula, all computed as of the
end of the Fiscal Year prior to or following the date of the change or
termination, whichever is greater.
SECTION 11. MISCELLANEOUS
11.1 GOVERNING LAW. The Plan, and all agreements hereunder, shall be
governed by and construed in accordance with the laws of the State of Delaware.
11.2 WITHHOLDING TAXES. The Company shall have the right to deduct from
all payments under the Plan any Federal, state, or local taxes required by law
to be withheld with respect to such payments.
11.3 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
- 11 -
11.4 COSTS OF THE PLAN. All costs of implementing and administering the
Plan shall be borne by the Company.
11.5 SUCCESSORS. All obligations of the Company under the Plan shall be
binding upon and inure to the benefit of any successor to the Company, whether
the existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
11.6 STOCKHOLDER APPROVAL. This Plan is adopted and all Awards and any
payouts hereunder (other than pursuant to Section 9) are made subject to the
condition that the Plan be approved by the stockholders of the Company at the
1997 Annual Meeting of the Stockholders of the Company. If the Plan is not so
approved, it and such Awards shall be null and void and without effect except to
the extent that payouts have previously been made pursuant to Section 9.
11.7 EMPLOYMENT STATUS. The Plan does not constitute a contract of
employment or continued service, and selection as a Participant will not give
any Employee the right to be retained in the employ of the Company or any
subsidiary.
11.8 UNSECURED GENERAL CREDITOR. Participants and their heirs,
successors and assigns shall have no legal or equitable rights, interest or
claims in any property or assets of the Company by virtue of participation in
the Plan. The Company's obligation under the Plan shall be that of an unfunded
and unsecured promise of the Company to pay money in the future.
11.9 NONASSIGNABILITY. No Participant or any other person shall have
any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in advance of actual receipt
of the amounts, if any, payable hereunder, or any part thereof, which are, and
all rights to which are, expressly declared to be unassignable and
non-transferable. No part of the amounts payable shall, prior to actual payment,
be subject to seizure or sequestration for the payment of any debts, judgment,
alimony or separate maintenance owed by a Participant or any other person, nor
be
-12-
transferable by operation of law in the event of a Participant's or any other
person's bankruptcy or insolvency.
EXECUTED on behalf of the Company as of January 1, 1997, on the 17th
day of March, 1997.
BOWATER INCORPORATED
By: /s/ Richard F. Frisch
Richard F. Frisch
Vice President - Human Resources
As adopted by the Human Resources and Compensation Committee and the Board of
Directors at their January 22, 1997, meetings, and as subsequently amended and
restated by the Human Resources and Compensation Committee at its February 28,
1997, meeting.
*******************************************************************************
APPENDIX 3
AMENDED AND RESTATED
BOWATER INCORPORATED
1997 STOCK OPTION PLAN
EFFECTIVE AS OF JANUARY 1, 1997
TABLE OF CONTENTS
Page No.
1. Definitions.................................................1
2. Purpose. ..................................................4
3. Administration..............................................5
4. Participation...............................................5
5. Shares Subject to the Plan..................................6
6. Restricted or Nonrestricted Stock Awards....................6
7. Stock Options...............................................7
8. Stock Appreciation Rights...................................7
9. Special Provisions Under Code Section 162(m)................8
10. Exercise of Options and SARs................................9
11. Death, Retirement, and Termination of Employment............9
12. Compliance with Applicable Laws. .........................10
13. Transferability............................................10
14. Employment, Stockholder and Board Status. ................11
15. Adjustments to Number of Shares and Terms..................11
16. Change in Control .........................................11
17. Withholding. ..............................................11
18. Term of Plan...............................................12
19. Amendment and Termination of Plan..........................12
20. Applicable Law.............................................12
AMENDED AND RESTATED
BOWATER INCORPORATED
1997 STOCK OPTION PLAN
Effective January 1, 1997, Bowater Incorporated, a Delaware corporation
(the "Company"), established an equity based incentive compensation plan to be
known as the "Bowater Incorporated 1997 Stock Option Plan" (the "Plan").
Effective January 1, 1997, the Plan is hereby amended and restated, as set forth
in this document. This amended and restated Plan document shall supercede the
Plan document as originally adopted.
1. DEFINITIONS.
For purposes of this Plan, the following terms shall have the
meanings indicated, unless the context clearly indicates otherwise:
(a) "Acceleration Price" means (i) in the case of a Restricted
Stock Award, the highest of (A) through (D); and (ii) in the case of an Option
or SAR, the excess over the exercise or base price thereof of the highest of (A)
through (D), on the date of a Change in Control:
(A) The highest reported sales price of the
Common Stock within the sixty (60) days
preceding the date of the Change in Control,
as reported on any securities exchange upon
which the Common Stock is listed,
(B) The highest price of the Common Stock as
reported in a Schedule 13D or an amendment
thereto that is paid within the sixty (60)
days preceding the date of the Change in
Control,
(C) The highest tender offer price paid for the
Common Stock, and
(D) Any cash merger or similar price.
(b) "Act" means the Securities Exchange Act of 1934, as
amended.
(c) "Acquiring Person" means any Person who is or becomes a
"beneficial owner" (as defined in Rule 13d-3 of the Act) of securities of the
Company representing twenty percent (20%) or more of the combined voting power
of the Company's then outstanding voting securities, unless such Person has
filed Schedule 13G and all required amendments thereto with respect to its
holdings and continues to hold such securities for investment in a manner
qualifying such Person to utilize Schedule 13G for reporting of ownership.
2
(d) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Act, as in effect on the date hereof.
(e) "Award" means a Restricted or Non-Restricted Stock Award,
Option or SAR granted to a Grantee pursuant to the Plan.
(f) "Board" means the Board of Directors of the Company.
(g) "Change in Control" shall be deemed to occur if:
(i) any Person is or becomes an Acquiring
Person;
(ii) less than two-thirds (2/3) of the total
membership of the Board shall be Continuing
Directors; or
(iii) the stockholders of the Company shall
approve a merger or consolidation of the
Company or a plan of complete liquidation of
the Company or an agreement for the sale or
disposition by the Company of all or
substantially all of the Company's assets.
(h) "Code" means the Internal Revenue Code of 1986, as
amended. Reference to a section of the Code shall also include a reference to
any Temporary or Final Regulation promulgated under such Section, and to any
successor to such Section or Regulation.
(i) "Committee" means a committee consisting of two (2) or
more members of the Board; provided that, (i) with respect to any Grantee of an
Award that constitutes an "equity security" under the Act who is subject to
Section 16 of the Act, (A) the members of the Committee shall all be
"non-employees" as defined in Section 240.16b-3 of the General Rules and
Regulations promulgated under the Act, or (B) the full Board shall act in lieu
of the Committee hereunder; and (ii) with respect to any Grantee of an Award
that is intended by the Committee to constitute "qualified performance-based
compensation," within the contemplation of Treasury Regulation Section
1.162-27(e)(2), who is a "covered employee," within the contemplation of
Treasury Regulation Section 1.162-27(c)(2), the members of the Committee shall
all be "outside directors" as defined in Treasury Regulation Section
1.162-27(e)(3) to the extent required by Section 162 of the Code.
Notwithstanding the foregoing, in the case of an Award granted to a member of
the Board who is not also a key employee or officer of the Company or a
Subsidiary, "Committee" means the Board.
(j) "Common Stock" means the common stock of the Company,
par value $1.00 per share.
3
(k) "Company" means Bowater Incorporated, a Delaware
corporation, and any successor thereto by merger or other acquisition.
(l) "Continuing Directors" means any member of the Board who
was a member of the Board immediately prior to the Effective Date, and any
successor of a Continuing Director while such successor is a member of the Board
who is not an Acquiring Person or an Affiliate or Associate of an Acquiring
Person or of any such Affiliate or Associate and is recommended or elected to
succeed the Continuing Director by a majority of the Continuing Directors.
(m) "Date of Grant" means the date an Award is granted to a
Grantee under the Plan.
(n) "Disability" shall have the meaning contained in the
Company's long-term disability plan, except that, in the case of an ISO, it
shall mean total and permanent disability within the contemplation of Section
22(e)(3) of the Code.
(o) "Effective Date" means January 1, 1997.
(p) "Fair Market Value" for a particular date means the simple
arithmetic mean between the highest and lowest prices per share at which the
Common Stock is traded as reported for the New York Stock Exchange Composite
Transactions as reported in the Eastern Edition of the Wall Street Journal for
that date, or if not so traded, the simple arithmetic mean between the closing
bid-and-asked prices thereof as reported for such Exchange on that date.
(q) "Grantee" means a key employee or officer of the Company
or a Subsidiary, or a member of the Board, to whom an Award has been granted;
provided that a member of the Board who is not also such a key employee or
officer may not become a Grantee of an ISO.
(r) "ISO" means an incentive stock option within the
contemplation of Section 422 of the Code.
(s) "Non-Tandem SAR" means an SAR granted to a Grantee that is
not a Tandem SAR.
(t) "Nonrestricted Stock Award" means a Stock Award granted
without any risk of forfeiture.
(u) "NQO" means an Option that is not an ISO.
(v) "Option" means an option to purchase Shares granted to a
Grantee pursuant to Section 7 of the Plan, which may be an ISO or an NQO.
4
(w) "Person" means any individual, company, partnership,
group, association or other "person" as such term is used in Section 13(d) and
14(d) of the Act.
(x) "Plan" means the Bowater Incorporated 1997 Stock Option
Plan as provided herein and as it may be amended from time to time.
(y) "Restricted Stock Award" means a Stock Award granted
subject to a risk or risks of forfeiture.
(z) "Retirement" means (i) with respect to a key employee or
officer of the Company or a Subsidiary, the status of having terminated
employment and being immediately eligible for the payment of normal or early
retirement benefits under the qualified pension plan of the Company or
Subsidiary applicable to the Grantee or (ii) with respect to a member of the
Board not described in clause (i), the status of having terminated service on
the Board and being immediately eligible for the payment of retirement benefits
under the Company's retirement plan for the Directors.
(aa) "SAR" means a Stock Appreciation Right granted to a
Grantee pursuant to Section 8 of the Plan, which may be a Tandem SAR or a
Non-Tandem SAR.
(bb) "Share" means a share of Common Stock.
(cc) "Stock Award" means a Share awarded to a Grantee pursuant
to Section 6 of the Plan, which may be a Restricted or Nonrestricted Stock
Award.
(dd) "Subsidiary" means each entity with respect to which the
Company owns directly or indirectly interests embodying more than 50% of the
voting power, provided that for purposes of an ISO, such term shall have the
meaning given in Section 424 of the Code.
(ee) "Tandem SAR" means an SAR granted in connection with an
Option either at the Date of Grant of the Option or at a later date.
Except where otherwise indicated by the context, any masculine
term used herein also shall include the feminine, the plural shall include the
singular, and the singular shall include the plural.
2. PURPOSE. The Plan has been established by the Company to secure for
the Company and its stockholders the benefits arising from (i) providing
long-term incentive compensation opportunities to those key employees and
officers of the Company and its Subsidiaries who are and will be responsible for
its future growth and continued success and (ii) aligning the interests of
Company stockholders and members of the Board. The Plan provides a means whereby
such individuals: (a) may be awarded Restricted or Nonrestricted
5
Stock Awards; (b) may acquire Shares pursuant to Options; or (c) may be awarded
SARs; provided that a member of the Board who is not also a key employee or
officer of the Company or a Subsidiary may not be awarded an ISO.
3. ADMINISTRATION. The authority to manage and control the operation
and administration of the Plan shall be vested in the Committee. The Committee
shall have full power and authority to administer and interpret the Plan and to
adopt such rules, regulations, agreements, guidelines and instruments for the
administration of the Plan and for the conduct of its business as the Committee
deems necessary or advisable. The Committee's interpretation of the Plan and all
actions taken and determinations made by the Committee pursuant to the powers
vested in it hereunder shall be conclusive and binding on all parties concerned,
including the Company, its stockholders, any Grantees and any other employee of
the Company or any of its subsidiaries (including their beneficiaries,
transferees and other successors in interest). No member of the Committee shall
be liable for any action or determination made with respect to the Plan.
4. PARTICIPATION.
(a) Subject to the terms and conditions of the Plan, the
Committee shall determine and designate from time to time the Grantees to whom
Awards are to be granted and the type, size and terms, conditions, restrictions
and limitations applicable to each Award; provided, however that the Committee
shall not have the power to reduce the exercise price of an outstanding Option
or the base price of an outstanding SAR, other than as provided in Section 15.
Such terms, conditions, restrictions and limitations may include, but are not
limited to terms, conditions, restrictions and limitations related to: (i) the
exercisability of an Award (subject to Sections 7(c), 8(b) and 11, and provided
that the Committee shall at all times have the authority to accelerate such
exercisability), (ii) the forfeiture of an Award (and/or the Shares subject
thereto) and the lapse of the forfeiture condition (subject to Sections 6(b) and
11, and provided that the Committee shall at all times have the authority to
declare such forfeiture condition to be lapsed), (iii) the transferability of an
Award and/or such Shares, (iv) the form of payments (if any) in respect of an
Award, (v) the consequences of a Grantee's termination of employment with the
Company and its Subsidiaries or termination of service on the Board (as provided
in Section 11(b)), (vi) restrictions on the sale, resale or other disposition of
the Award and/or such Shares, (vii) restrictions related to the payment of
dividends with respect to such Shares, (viii) restrictions with respect to the
right to vote such Shares, (ix) put or call rights with respect to such Shares,
(x) provisions to comply with federal and/or state securities laws, and (xi)
such other matters not inconsistent with the specific provisions of the Plan as
deemed appropriate by the Committee. Notwithstanding the foregoing, (I) the
maximum number of Shares with respect to which Awards may be granted during any
calendar year to any Grantee is 200,000 Shares; and (II) no Grantee may be
granted an Award if immediately after such grant, were it made, he would be the
owner or would be deemed in accordance with Section 424 of the Code to be the
owner of more than 10% of the total combined voting power of all classes of
stock of the Company or any of its Subsidiaries.
6
(b) The terms, conditions, restrictions and limitations
related to each Award shall be reflected in an Agreement between the Company and
the Grantee. Each Award under the Plan shall be made subject to the condition
that the Grantee execute and return such Agreement within sixty (60) days of the
date he receives the Agreement from the Company. An Agreement may only be
modified by a writing signed by both the Company and the Grantee.
Each Agreement shall be subject to all of the terms of the Plan.
5. SHARES SUBJECT TO THE PLAN. Subject to the provisions of Section 15,
the aggregate number of Shares for which Stock Awards, Options and SARs may be
granted under the Plan shall not exceed 1,000,000 Shares, and no more than 5% of
such Shares may be used for Restricted and Nonrestricted Stock Awards. If any
Option or SAR granted pursuant to the Plan shall expire or terminate for any
reason (including without limitation its settlement in cash in lieu of exercise
of the Option) or any Restricted Stock Award shall be forfeited pursuant to
conditions or restrictions applicable thereto, the number of Shares then subject
to the Option, SAR or Restricted Stock Award shall again be available for grant
under the Plan unless the Plan shall have terminated.
6. RESTRICTED OR NONRESTRICTED STOCK AWARDS.
(a) The Committee may grant Restricted or Nonrestricted Stock
Awards under the Plan. Shares awarded under this Section 6 shall be transferred
in consideration of the services of the Grantee with or without other payment
therefor as determined by the Committee and shall be issued in the Grantee's
name. The Grantee will have all of the rights of ownership of such shares,
subject to the terms, conditions, restrictions and limitations established
pursuant to Section 4(a). Notwithstanding any provision of Section 4(a), if a
Restricted Stock Award is granted subject to a risk of forfeiture that will
lapse solely based on whether the Grantee remains in employment with the Company
or a Subsidiary, or as a member of the Board, for a minimum period, the period
selected by the Committee may not be less than one year.
(b) Any condition providing for the forfeiture of a Restricted
Stock Award upon the occurrence or non-occurrence of a specified event or events
shall immediately lapse in the event of a Change in Control of the Company.
(c) Certificates for a Nonrestricted Stock Award shall be
issued to the Grantee as soon as practicable after the Grantee satisfies any
applicable tax withholding requirements. Certificates for a Restricted Stock
Award shall be issued in the Grantee's name and shall be held in escrow by the
Company (along with stock powers executed by the Grantee) until all conditions
that may cause a forfeiture of the Shares lapse or such Shares are forfeited as
provided therein. A certificate or certificates representing a Restricted Stock
Award as to which such conditions have lapsed shall be delivered to the Grantee
upon such lapse as soon as practicable after the Grantee has satisfied any
applicable tax withholding requirements.
7
7. STOCK OPTIONS.
(a) The Committee may grant Options under the Plan with an
exercise price at or above the Fair Market Value of the Shares as of the Date of
Grant. Any Option that satisfies all of the requirements of Section 422 of the
Code may be designated by the Committee as an ISO. An Option (or portion
thereof) that is not so designated, or that does not satisfy the requirements of
Section 422 of the Code, and any Option that is granted to a member of the Board
who is not also a key employee or officer of the Company or a Subsidiary, shall
not constitute an ISO and shall be an NQO.
(b) An ISO must expire no later than ten years after the Date
of Grant. The aggregate fair market value, determined on the Date of Grant, of
the Shares with respect to which ISOs granted to a Grantee under all plans of
the Company and its Subsidiaries may become exercisable during a calendar year
may not exceed $100,000. To the extent the foregoing limitation is exceeded, the
excess Shares shall be deemed to be subject to NQOs.
(c) An Option shall become immediately exercisable in full in
the event of a Change in Control of the Company.
(d) A Grantee may exercise an Option to the extent it has
become exercisable by complying with the notification procedures provided by the
Company's Human Resources Department at its corporate headquarters.
Contemporaneously with the delivery of notice with respect to exercise of an
Option, the full purchase price of the Shares purchased pursuant to the exercise
of the Option shall be paid in cash, or, if approved by the Committee, by tender
of Share certificates in proper form for transfer to the Company valued at the
Fair Market Value of the Shares on the preceding day, or by any combination of
the foregoing or with any other consideration acceptable to the Committee.
Payment upon the exercise of such Option may also be made by means of a properly
executed exercise notice together with irrevocable instructions to a broker to
deliver promptly to the Company the portion of the sale or loan proceeds
sufficient to pay such purchase price.
8. STOCK APPRECIATION RIGHTS.
(a) The Committee may grant Tandem SARs or Non-Tandem SARs
under the Plan. The base price of a Non-Tandem SAR must be set by the Committee
at or above the Fair Market Value of a Share as of the Date of Grant. The base
price of a Tandem SAR must equal the exercise price of the related Option. A
Grantee who is awarded an SAR shall be entitled to receive from the Company, at
the time the SAR is exercised, that number of Shares having an aggregate Fair
Market Value as of the date of exercise equal to the product of (i) the number
of Shares as to which the Grantee is exercising the SAR, and (ii) the excess of
the Fair Market Value (at the date of exercise) of a Share over the base price
of the SAR. The Committee, in its sole discretion, may elect to settle all or a
portion of the Company's obligation arising out of the exercise of an SAR by the
payment of cash in an amount equal to the Fair Market Value as of the date of
exercise of the Shares it would otherwise be obligated to deliver. Tandem SARs
shall be exercisable only to the extent that the related Option is exercisable.
Non-Tandem SARs shall be
8
exercisable as determined by the Committee at the Date of Grant. A Tandem SAR
shall be canceled to the extent that the related Option is exercised and the
Option shall be canceled to the extent that the related Tandem SAR is exercised.
(b) An SAR shall become immediately exercisable in full in the
event of a Change in Control of the Company.
(c) A Grantee may exercise an SAR to the extent it has become
exercisable by complying with the notification procedures provided by the
Company's Human Resources Department at its corporate headquarters.
9. SPECIAL PROVISIONS UNDER CODE SECTION 162(M).
(a) The provisions of this Section 9 shall apply only to
persons designated by the Committee as individuals who are or who are likely to
become "covered employees," within the contemplation of Section 162(m) of the
Code; provided that, if an individual is so designated and the Committee
determines that such individual is not a covered employee for the year in which
the Company is entitled to a deduction with respect to income he recognizes for
Federal income tax purposes in connection with an Award, the provisions of this
Section 9 shall not apply to such Award. The provisions of this Section 9 shall
only apply to conditions, restrictions and limitations applicable to Awards that
are related to the performance of the Company and if the provisions of this
Section 9 are necessary so that the Award qualifies as "qualified
performance-based compensation" as defined in Treasury Regulation Section 1.162-
27(e)(2). In the event of any inconsistencies between this Section 9 and the
other Plan provisions within the scope of the foregoing, the provisions of this
Section 9 shall control with respect to covered employees.
(b) With respect to each Award described in paragraph (a),
as soon as practicable following the grant of an Award subject to
this Section 9 (but in no event more than ninety (90) days after the
Date of Grant), the Committee shall establish the performance-related goals to
be used in connection with conditions, restrictions and limitations applicable
to such Award. The performance-related goals shall be chosen from among the
following factors, or any combination of the following, as the Committee deems
appropriate: total stockholder return; growth in revenues, sales, net income,
stock price, and/or earnings per share; return on assets, net assets, and/or
capital; return on stockholders' equity; debt/equity ratio; working capital;
safety; quality; the Company's financial performance versus peers; cost
reduction; productivity; market mix; or economic value added. The Committee may
select among the goals specified from Award to Award which need not be the same
for each Grantee.
(c) With respect to each Award described in paragraph (a), the
Committee shall (at the same time it is making the determinations under
paragraph (b)) determine the relationship between the performance-related goals
and the conditions, restrictions and limitations applicable to the Award.
9
(d) In connection with the Awards described in paragraph (a),
no performance-related goal will be considered to be satisfied until the
Committee has certified the extent to which the performance-related goals and
any other material terms were satisfied.
(e) Once established, performance-related goals shall not be
changed, except to the extent that the Committee has specified adjustments as
part of the determinations made under paragraphs (b) and (c). Except as provided
in the preceding sentence, no performance-related goal applicable to a
condition, restriction or limitation shall be considered to be satisfied if the
minimum performance-related goals applicable thereto are not achieved.
(f) Individual performance shall not be reflected in a
performance-related goal under this Section 9. However, the Committee may retain
the discretion to treat a performance-related goal as not having been satisfied
due to the failure of a Participant to meet individual performance goals.
(g) If, on advice of the Company's tax counsel, the Committee
determines that Code Section 162(m) and the regulations thereunder will not
adversely affect the deductibility for federal income tax purposes of any amount
paid under the Plan by applying provisions of this Plan (including this Section
9(g)) that conflict with this Section 9 to a covered employee, then the
Committee may, in its sole discretion, apply such Section or Sections to the
covered employee without regard to the exceptions to such Section or Sections
that are contained in this Section 9.
10. EXERCISE OF OPTIONS AND SARS. No Option or SAR may at any time be
exercised with respect to a fractional share or exercised in part with respect
to fewer than 100 shares (unless it is being exercised in full). In the event
that Shares are issued pursuant to the exercise of an SAR, no fractional shares
shall be issued; payment shall be made in cash for any such fractional shares.
Certificates for whole shares shall be delivered as soon as practicable after
the Grantee satisfies any applicable tax withholding requirements.
11. DEATH, RETIREMENT, AND TERMINATION OF EMPLOYMENT. (a) If a
Grantee's employment with the Company and all of its Subsidiaries terminates:
(i) If such employment terminates involuntarily and for good
cause (as determined by the Company), all Options and SARs held by the Grantee
will expire and the Grantee's Restricted Stock Awards as to which any condition
providing for the forfeiture thereof exists ("Unvested Restricted Stock Awards")
will be forfeited immediately.
(ii) If such employment terminates involuntarily without cause
or voluntarily for any reason, except in the case of the Grantee's Disability,
Retirement or death, (A) all unexercisable Options and SARs held by the Grantee
will expire immediately; (B) all exercisable options and SARs held by the
Grantee will expire three months after termination (unless their
10
expiration date is earlier); and (C) Unvested Restricted Stock Awards held by
the Grantee will be forfeited.
(iii) If such employment terminates because of Disability or
Retirement, the Grantee will be treated under all Awards as if employment with
the Company or Subsidiary continued for five years.
(iv) If a Grantee dies while employed or during the five-year
period described in paragraph (iii), all Options and SARs held by the Grantee
will become exercisable (and remain exercisable for two years unless their
expiration date is earlier) and all conditions providing for forfeiture of the
Grantee's Unvested Restricted Stock Awards will lapse.
(b) The Committee may provide (i) that an Award will not terminate or
be forfeited as a result of the termination of the Grantee's employment; and
(ii) for additional opportunities for the exercise of an Option or SAR after a
Grantee's termination of employment, in addition to (a), above.
(c) For all purposes of the Plan, the employment of a Grantee will not
be considered to be terminated if the Grantee is receiving periodic severance
payments from the Company or a Subsidiary. Leaves of absence for periods and
purposes conforming to the policy of the Company shall not be deemed
terminations or interruptions of employment.
(d) In the case of a Grantee who is a member of the Board and not an
employee of the Company or a Subsidiary, the provisions of this Section 11 shall
be applied by treating the Grantee's service on the Board as if it were
employment with the Company.
12. COMPLIANCE WITH APPLICABLE LAWS. Notwithstanding any other
provision in the Plan, the Company shall have no liability to issue any Shares
under the Plan unless such issuance would comply with all applicable laws and
applicable requirements of any securities exchange or similar entity. Prior to
the issuance of any Shares under the Plan, the Company may require a written
statement that the recipient is acquiring the Shares for investment and not for
the purpose or with the intention of distributing the Shares.
13. TRANSFERABILITY.
(a) Except to the extent specifically provided by the
Committee, an Award (including the Shares subject to a Restricted Stock Award
until all conditions providing for forfeiture have lapsed) shall not be sold,
assigned, pledged or otherwise transferred, voluntarily or involuntarily, by the
Grantee.
(b) Incentive Stock Options granted under the Plan are not
transferable except by will or by the laws of descent and distribution or, to
the extent not inconsistent with the applicable provisions of the Code, pursuant
to a qualified domestic relations order (as that term
11
is defined in the Code). Incentive Stock Options may be exercised during the
lifetime of the Grantee only by the Grantee, and after the death of the Grantee,
only as provided in Section 11.
14. EMPLOYMENT, STOCKHOLDER AND BOARD STATUS. The Plan does not
constitute a contract of employment or continued service, and selection as a
Grantee will not give any employee or Grantee the right to be retained in the
employ of the Company or any Subsidiary or as a member of the Board. No person
entitled to exercise any Option or SAR granted under the Plan shall have any of
the rights or privileges of a stockholder of record with respect to any Shares
issuable upon exercise of such Option or SAR until certificates representing
such Shares have been issued and delivered. Certificates representing Shares
issued under the Plan may bear a legend referring to any conditions,
restrictions and limitations deemed appropriate by the Committee.
15. ADJUSTMENTS TO NUMBER OF SHARES AND TERMS. Subject to the following
provisions of this Section 15, in the event of any change in the outstanding
Shares by reason of any share dividend, split, recapitalization, merger,
consolidation, combination, exchange of shares or other similar corporate
change, the aggregate number and kind of Shares reserved for issuance under the
Plan or subject to Awards outstanding or to be granted under the Plan shall be
proportionately adjusted so that the value of each Award shall not be changed,
and the terms of any outstanding Award may be adjusted by the Committee in such
manner as it deems equitable, provided that, in no event shall the Option price
for a Share be adjusted below the par value of such Share, nor shall any
fraction of a Share be issued upon the exercise of an Option or SAR. Shares
subject to a Restricted Stock Award shall be treated in the same manner as other
outstanding Shares; provided that any conditions and restrictions applicable to
a Restricted Stock Award shall continue to apply to any Shares, other security
or other consideration received in connection with the foregoing.
16. CHANGE IN CONTROL. Upon the occurrence of a Change in Control, all
outstanding Options and SARs, and all outstanding Restricted Stock Awards as to
which any conditions providing for forfeiture have not lapsed, shall be
automatically purchased by the Company at the Acceleration Price with payment to
be made within thirty days of such Change in Control, irrespective of whether
the stockholders of the Company have approved the Plan as contemplated by
Section 18.
17. WITHHOLDING. Whenever a Grantee recognizes income with respect to
an Award (and as a condition to the exercise of any Option or SAR or the receipt
of a Stock Award), the Grantee will have the obligation to pay all federal,
state, and local income or other taxes due and the Company shall have the right
to withhold from amounts payable to the Grantee in any manner, as necessary to
satisfy all federal, state and local payroll tax withholding requirements.
Alternatively, the Committee may approve the Grantee's election to have Shares
withheld by the Company from the Shares otherwise to be delivered to the Grantee
or the Grantee's election to tender to the Company Shares previously acquired by
the Grantee. The number of Shares so withheld or tendered for payment of tax
withholding shall have an aggregate Fair Market Value as of the later of the
date the Committee approves the foregoing election or the date as of which
12
income is recognized by the Grantee with respect to such Shares sufficient
to satisfy the applicable withholding taxes.
18. TERM OF PLAN. The Plan is effective January 1, 1997, and will be
submitted to the stockholders of the Company for approval on or before the first
anniversary of its adoption by the Committee. Awards may be granted prior to
stockholder approval, with all rights thereunder (other than the right to
receive payment of the Acceleration Price under Section 16) conditioned upon
such approval; provided that, if stockholder approval is not secured by such
anniversary, all such Awards shall expire and the Plan shall terminate. No ISO
may be granted under the Plan after December 31, 2006. No Award may be granted
under the Plan after the date on which the Plan is terminated pursuant to
Section 19.
19. AMENDMENT AND TERMINATION OF PLAN. Subject to any approval of the
stockholders of the Company that may be required (or, in the opinion of the
Committee, appropriate) under law or the rules of any securities exchange on
which the Shares are listed or similar entity, the Committee may at any time
amend, suspend or terminate the Plan. No amendment, suspension or termination of
the Plan shall materially and adversely alter or impair any Award previously
granted under the Plan without the consent of the holder thereof. No amendment
requiring stockholder approval under Treasury Regulation Section 1.162-27 or
Section 422 of the Code shall be valid unless such stockholder approval is
secured as provided therein.
20. APPLICABLE LAW. All questions under the Plan shall be governed by
the internal laws of the State of Delaware, without giving effect to the choice
of law provisions thereof.
Executed on behalf of the Company as of January 1, 1997, on this 17th
day of March, 1997.
BOWATER INCORPORATED
By: /s/ Richard F. Frisch
Richard F. Frisch
Vice President -- Human Resources
As adopted by the Board of Directors at its January 22, 1997, meeting
and as amended and restated by the Board of Directors at its February 28, 1997,
meeting.