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Exhibit 10.2
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, made as of the 15th day of March 1999, by and between
Bowater Incorporated, a Delaware corporation having a mailing address of 00 Xxxx
Xxxxxxxxxx Xxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000 (the "Corporation"), and Xxxxx
X. Xxxxxx of 000 XxXxxx Xxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000 (the
"Executive").
WHEREAS, the Corporation considers it essential to the best interests
of its stockholders to xxxxxx the continued employment of key management
personnel; and
WHEREAS, the uncertainty attendant to a change in control of the
Corporation may result in the departure or distraction of management personnel
to the detriment of the Corporation and its stockholders; and
WHEREAS, the Board of Directors of the Corporation (the "Board") has
determined that appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of the Corporation's management,
including Executive, to their assigned duties in the event of a change in
control of the Corporation.
NOW THEREFORE, it is hereby agreed as follows:
1. DEFINITIONS
The following terms when used herein shall have the meanings assigned
to them below. Whenever applicable throughout this Agreement, the
masculine pronoun shall include the feminine pronoun and the singular
shall include the plural.
(a) "Acquiring Person" means the Beneficial Owner, directly or
indirectly, of Common Stock representing 20% or more of the
combined voting power of the Corporation's then outstanding
securities, not including (except as provided in Clause (i) of
the next sentence) securities of such Beneficial Owner
acquired pursuant to an agreement allowing the acquisition of
up to and including 50% of such voting power approved by
two-thirds of the
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members of the Board who are Board members before the Person
becomes Beneficial Owner, directly or indirectly, of Common
Stock representing 5% or more of the combined voting power of
the Corporation's then outstanding securities. Notwithstanding
the foregoing, (i) securities acquired pursuant to an
agreement described in the preceding sentence will be included
in determining whether a Beneficial Owner is an Acquiring
Person if, subsequent to the approved acquisition, the
Beneficial Owner acquires 5% or more of such voting power
other than pursuant to such an agreement so approved and (ii)
a Person shall not be an Acquiring Person if such Person is
eligible to and files a Schedule 13G with respect to such
Person's status as a Beneficial Owner of all Common Stock of
the Corporation of which the Person is a Beneficial Owner.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934 (the
"Act").
(c) A "Beneficial Owner" of Common Stock means (i) a Person who
beneficially owns such Common Stock, directly or indirectly,
or (ii) a Person who has the right to acquire such Common
Stock (whether such right is exercisable immediately or only
with the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing or
upon the exercise of conversion rights, exchange rights,
warrants, options or otherwise.
(d) "Cause" shall mean and be limited to the Executive's gross
negligence, willful misconduct or conviction of a felony,
which negligence, misconduct or conviction has a demonstrable
and material adverse effect upon the Corporation, provided
that, to the extent that the Corporation contends that Cause
exists by virtue of Executive's gross negligence or willful
misconduct, and such gross negligence or willful misconduct is
capable of being cured, the Corporation shall have given the
Executive written notice of the alleged negligence or
misconduct and the Executive shall have failed to cure such
negligence or misconduct within thirty (30) days after his
receipt of such notice. The Executive 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 Corporation to the Executive (which notice shall not be
delivered before the end of the thirty (30) day period
described in the preceding sentence, if applicable) 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 Executive and an opportunity for the
Executive, with his counsel present, to be heard before the
Board) finding that, in the good faith opinion of the Board,
the Executive was guilty of conduct constituting Cause
hereunder and setting
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forth in reasonable detail the facts and circumstances claimed
to provide
the basis for the Executive's termination, provided that the
effective date shall not be less than thirty (30) days from
the date such notice is given.
(e) "Change in Control" shall be deemed to have occurred upon:
(i) The date that any Person is or becomes an Acquiring
Person.
(ii) The date that the Corporation's shareholders approve
a merger, consolidation or reorganization of the
Corporation with another corporation or other Person,
unless, immediately following such merger,
consolidation or reorganization, (A) at least 50% of
the combined voting power of the outstanding
securities of the resulting entity would be held in
the aggregate by the shareholders of the Corporation
as of the record date for such approval (provided
that securities held by any individual or entity that
is an Acquiring Person, or who would be an Acquiring
Person if 5% were substituted for 20% in the
definition of such term, shall not be counted as
securities held by the shareholders of the
Corporation, but shall be counted as outstanding
securities for purposes of this determination), or
(B) at least 50% of the board of directors or similar
body of the resulting entity are Continuing
Directors.
(iii) The date the Corporation sells or otherwise transfers
all or substantially all of its assets to another
corporation or other Person, unless, immediately
after such sale or transfer, (A) at least 50% of the
combined voting power of the then-outstanding
securities of the resulting entity immediately
following such transaction is held in the aggregate
by the Corporation's shareholders as determined
immediately prior to such transaction (provided that
securities held by any individual or entity that is
an Acquiring Person, or who would be an Acquiring
Person if 5% were substituted for 20% in the
definition of such term, shall not be counted as
securities held by the shareholders of the
Corporation, but shall be counted as outstanding
securities for purposes of this determination), or
(B) at least 50% of the board of directors or similar
body of the resulting entity are Continuing
Directors.
(iv) The date on which less than 50% of the total
membership of the Board consists of Continuing
Directors.
(f) "Commencement Date" shall mean the date of this Agreement,
which shall be the beginning date of the term of this
Agreement.
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(g) "Continuing Directors" shall mean any member of the Board who
(i) was a member of the Board prior to the date of the event
that would constitute a Change in Control, and any successor
of a Continuing Director while such successor is a member of
the Board, (ii) is not an Acquiring Person or an Affiliate or
Associate of an Acquiring Person, and (iii) is recommended or
elected to succeed the Continuing Director by a majority of
the Continuing Directors.
(h) "Disability" shall mean the Executive's total and permanent
disability as defined in the Corporation's long term
disability insurance policy covering the Executive immediately
prior to the Change in Control.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934
as amended.
(j) "Good Reason" shall mean:
(i) an adverse change in the Executive's status, duties
or responsibilities as an executive of the
Corporation as in effect immediately prior to the
Change in Control, provided that the Executive shall
have given the Corporation written notice of the
alleged adverse change and the Corporation shall have
failed to cure such change within thirty (30) days
after its receipt of such notice;
(ii) failure of the Corporation to pay or provide the
Executive in a timely fashion the salary or benefits
to which he is entitled under any Employment
Agreement between the Corporation and the Executive
in effect on the date of the Change in Control, or
under any benefit plans or policies in which the
Executive 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 Executive's salary as in effect
on the date of the Change in Control;
(iv) the taking of any action by the Corporation
(including the elimination of a plan without
providing substitutes therefor, the reduction of the
Executive's awards thereunder or failure to continue
the Executive's participation therein) that would
substantially diminish the aggregate projected value
of the Executive's awards or benefits under the
Corporation's benefit plans or policies described in
Section 1(j)(ii) in which the Executive was
participating at the time of the Change in Control;
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(v) a failure by the Corporation to obtain from any
successor the assent to this Agreement contemplated
by Section 5 hereof; or
(vi) the relocation of the principal office at which the
Executive is to perform his services on behalf of the
Corporation 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
Executive's business travel obligations subsequent to
the Change in Control.
Any circumstance described in this Section 1(j) shall
constitute Good Reason even if such circumstance would not
constitute a breach by the Corporation of the terms of the
Employment Agreement between the Corporation and the Executive
in effect on the date of the Change in Control. The Executive
shall be deemed to have terminated his employment for Good
Reason effective upon the effective date stated in a written
notice of such termination given by him to the Corporation
(which notice shall not be given, in circumstances described
in Section 1(j)(i), before the end of the thirty (30) day
period described therein) setting forth in reasonable detail
the facts and circumstances claimed to provide the basis for
termination, provided that the effective date may not precede,
nor be more than sixty (60) days from, the date such notice is
given. The Executive's continued employment shall not
constitute consent to, or a waiver of rights with respect to,
any circumstances constituting Good Reason hereunder.
(k) "Normal Retirement Date" shall have the meaning given to such
term in the Corporation's basic qualified pension plan in
which the Executive is a participant as in effect on the date
hereof or any successor or substitute plan adopted prior to a
Change in Control.
(l) "Person" means any individual, firm, corporation, partnership,
trust or other entity.
2. TERM OF AGREEMENT
(a) The term of this Agreement shall initially be for the period
beginning on the Commencement Date and ending on the day
before the third anniversary of the Commencement Date. The
term of this Agreement shall automatically be extended on the
first anniversary of the Commencement Date until the day
before the fourth anniversary of the Commencement Date without
further action by the parties, and shall be automatically
extended by an additional year on each succeeding anniversary
of the Commencement Date, unless either the Corporation or the
Executive shall have served notice upon the other party prior
to such anniversary of its or his intention either that the
term of this Agreement shall not be extended, or that the
Executive's Employment Agreement is terminated, provided,
however, that if a Change in Control of the Corporation shall
occur
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during the term of this Agreement, this Agreement shall
continue in effect until it expires in accordance with the
foregoing, but in any event for a period of not less than
three (3) years from the date of the Change in Control.
(b) Notwithstanding Section 2(a), the term of this Agreement shall
end upon the termination of the Executive's employment if,
prior to a Change in Control of the Corporation, the
Executive's employment with the Corporation shall have
terminated under the provisions of any Employment Agreement
between the Corporation and the Executive then in effect.
3. COMPENSATION UPON CHANGE IN CONTROL FOLLOWED BY A TERMINATION
If a Change in Control of the Corporation shall have occurred and,
thereafter and during the term of this Agreement, the Executive's
employment by the Corporation is terminated for any reason other than
his death, his Disability, his retirement on his Normal Retirement
Date, by the Corporation for Cause, or by the Executive without Good
Reason, the Executive shall be under no further obligation to perform
services for the Corporation and shall be entitled to receive the
following payments:
(a) The Corporation shall pay to the Executive his full base
salary through the effective date of the termination within
five (5) business days thereafter and all benefits and awards
(including both the cash and stock components) to which the
Executive is entitled under any benefit plans or policies in
which the Executive was a participant prior to the Change in
Control (or, if more favorable, at the effective date of
termination), at the time such payments are due pursuant to
the terms of such benefit plans or policies as in effect
immediately prior to the Change in Control (or, if more
favorable, at the effective date of termination).
(b) At the election of the Executive, in addition to the
entitlements set forth in Section 3(a) but in lieu of any
payment to the Executive of any salary or severance payments
or benefits to which the Executive would be entitled under the
provisions of any Employment Agreement between the Corporation
and the Executive then in effect (if any), the Corporation
shall pay to the Executive, in a lump sum not later than ten
(10) business days following the effective date of the
termination:
(i) an amount equal to three (3) times the Executive's
annual base salary on the effective date of the
termination or, if higher, immediately prior to the
Change in Control;
(ii) an amount equal to three (3) times the greater of (x)
the highest amount of the actual bonus awarded to the
Executive in the five (5) fiscal years immediately
preceding the year in which the Change in Control
occurred and (y) an amount equal to the amount the
Executive would have been
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awarded under the Corporation's bonus plan in effect
immediately prior to the Change in Control for the
fiscal year in which the Change in Control occurred
had the Executive continued to render services to the
Corporation at the same level of performance, at the
same level of salary, and in the same position as
immediately prior to the Change in Control;
(iii) an amount equal to three (3) times the greater of (x)
the largest annual contribution made by the
Corporation to the Corporation's Savings Plan on the
Executive's behalf during the five (5) fiscal years
immediately preceding the year in which the Change in
Control occurred and (y) an amount equal to the
contribution the Corporation would have made to said
Plan on the Executive's behalf for the fiscal year in
which the Change in Control occurred had he
participated in said Plan for the entire fiscal year,
received a base salary equal to the salary he was
receiving immediately prior to the Change in Control
and had he elected to contribute to the Plan the same
percentage of his base salary as he was contributing
on said date;
(iv) an amount equal to thirty percent (30%) of the
Executive's annual base salary on the effective date
of the termination or, if higher, immediately prior
to the Change in Control (as compensation for
medical, life insurance and other benefits lost as a
result of termination of the Executive's employment);
and
(v) For each full or partial month in the period
beginning on January 1st of the year in which the
date of the termination occurs and ending on the date
of the termination, one-twelfth of the greater of (x)
the highest amount of the actual bonus awarded to the
Executive in the five (5) fiscal years immediately
preceding the year in which the Change in Control
occurred and (y) an amount equal to the amount the
Executive would have been awarded under the
Corporation's annual bonus plan in effect immediately
prior to the Change in Control for the fiscal year in
which the Change in Control occurred had the
Executive continued to render services to the
Corporation at the same level of performance, at the
same level of salary, and in the same position as
immediately prior to the Change in Control.
(vi) If a payment may be increased by reference to an
alternate calculation which cannot be made by the
time the payment is due, payment of the lesser, known
amount shall be made when due, and if any additional
amount becomes due, such additional amount shall be
paid within ten (10) days after the information upon
which calculation of such payment is dependent first
becomes available.
The amount of all payments due to the Executive
pursuant to this Section 3(b) shall be reduced by
1/36 for each full calendar month by which the date
which is three (3) years from the effective date of
the Executive's
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termination extends beyond the Executive's Normal
Retirement Date.
Upon entering into this Agreement and for a period of
fourteen (14) days following each anniversary of the
date hereof (the "Election Period"), the Executive
may, in writing, direct the Corporation to pay any
amounts to which he is entitled under this Section
3(b) in equal annual installments (not to exceed ten
(10) annual installments), with the first such
installment payable within ten (10) business days of
the effective date of the termination and each
successive installment payable on the anniversary of
the effective date of the termination or the next
following business day if such date is not a business
day (the "Deferred Payment Election"). A Deferred
Payment Election, once made, cannot be revoked except
during an Election Period; provided, however, no
Deferred Payment Election can be made or revoked by
the Executive during an Election Period that occurs
after a Change in Control or at a time when, in the
judgment of the Corporation, a Change in Control may
occur within sixty (60) days of such Election Period.
(c) The Corporation shall pay or provide to the Executive
or his surviving spouse or children, as the case may
be, such amounts and benefits as may be required so
that the pension and other post-retirement benefits
paid or made available to the Executive, his
surviving spouse, and his children are equal to
those, if any, which would have been paid under the
Corporation's Basic and Supplemental Pension
(Benefit) Plans in effect immediately prior to the
Change in Control, assuming the Executive continued
in the employ of the Corporation at the same
compensation until the third anniversary of the
effective date of the termination of the Executive's
employment or until his Normal Retirement Date,
whichever is earlier. Notwithstanding any conflicting
restrictions in the Plans or the fact of the
termination of the Executive's employment, until the
Executive's Normal Retirement Date, the Executive or
his surviving spouse and his children shall maintain
a continuing right to receive the pension and other
benefits under the above Plans with payments to begin
upon retirement and to elect an imputed retirement on
the Executive's 50th birthdate or any of his
birthdates thereafter until his Normal Retirement
Date, such election to be made by so notifying the
Corporation within one (1) year after termination of
his employment.
(d) The Corporation shall pay for or provide the
Executive individual out-placement assistance as
offered by a member firm of the Association of
Out-Placement Consulting Firms.
(e) If any payment or benefit to or for the benefit of
the Executive in connection with a Change in Control
of the Corporation or termination of the Executive's
employment following a Change in Control of the
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Corporation (whether pursuant to the terms of this
Agreement, or any other plan or arrangement or
agreement with the Corporation, any Person whose
actions result in a Change in Control of the
Corporation or any Affiliate or Associate of the
Corporation or any such Person) is subject to the
Excise Tax (as hereinafter defined), the Corporation
shall pay to the Executive an additional amount such
that the total amount of all such payments and
benefits (including payments made pursuant to this
Section 3(e) net of the Excise Tax and all other
applicable federal, state and local taxes) shall
equal the total amount of all such payments and
benefits to which the Executive would have been
entitled, but for this Section 3(e), net of all
applicable federal, state and local taxes except the
Excise Tax. For purposes of this Section 3(e), the
term "Excise Tax" shall mean the tax imposed by
Section 4999 of the Internal Revenue Code of 1986
(the "Code") and any similar tax that may hereafter
be imposed.
The amount of the payment to the Executive under this
Section 3(e) shall be estimated by a nationally
recognized firm of certified public accountants,
which firm may not have provided services to the
Corporation or any Affiliate of the Corporation
within the previous three years and shall not provide
services thereto in the following three years, based
upon the following assumptions:
(i) all payments and benefits to or for the benefit of
the Executive in connection with a Change in Control
of the Corporation or termination of the Executive's
employment following a Change in Control of the
Corporation shall be deemed to be "parachute
payments" within the meaning of Section 280G(b)(2) of
the Code, and all "excess parachute payments" shall
be deemed to be subject to the Excise Tax except to
the extent that, in the opinion of tax counsel
selected by the firm of certified public accountants
charged with estimating the payment to the Executive
under this Section 3(e), such payments or benefits
are not subject to the Excise Tax; and
(ii) the Executive shall be deemed to pay federal, state
and local taxes at the highest marginal rate of
taxation for the applicable calendar year.
The estimated amount of the payment due the Executive pursuant
to this Section 3(e) shall be paid to the Executive in a lump
sum not later than thirty (30) business days following the
effective date of the termination. In the event that the
amount of the estimated payment is less than the amount
actually due to the Executive under this Section 3(e), the
amount of any such shortfall shall be paid to the Executive
within ten (10) days after the existence of the shortfall is
discovered.
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(f) The Executive shall not be required to mitigate the amount
of any payment provided in this Section 3, nor shall any
payment or benefit provided for in this Section 3 be offset by
any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, or by
offset against any amount claimed to be owed by the Executive
to the Corporation, or otherwise.
(g) If any payment to the Executive required by this Section 3
is not made within the time for such payment specified herein,
the Corporation shall pay to the Executive interest on such
payment at the legal rate payable from time to time upon
judgments in the State of Delaware from the date such payment
is payable under terms hereof until paid.
4. EXECUTIVE'S EXPENSES
The Corporation shall pay or reimburse the Executive for all
costs, including reasonable attorney's fees and expenses of
either litigation or arbitration, incurred by the Executive in
contesting or disputing any termination of his employment
following a Change in Control or in seeking to obtain or
enforce any right or benefit provided by this Agreement.
5. BINDING AGREEMENT
This Agreement shall inure to the benefit of and be
enforceable by the Executive, his heirs, executors,
administrators, successors and assigns. This Agreement shall
be binding upon the Corporation, its successors and assigns.
The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the
Corporation expressly to assume and agree to perform this
Agreement in accordance with its terms. The Corporation shall
obtain such assumption and agreement prior to the
effectiveness of any such succession.
6. NOTICE
Any notices and all other communications provided for herein
shall be in writing and shall be deemed to have been duly
given when delivered or mailed, by certified or registered
mail, return receipt requested, postage prepaid addressed to
the respective addresses set forth on the first page of this
Agreement or to such other address as either party may have
furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective
only upon receipt. All notices to the
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Corporation shall be addressed to the attention of the Board
with a copy to each of the General Counsel, the Vice
President-Human Resources and the Secretary of the
Corporation.
7. AMENDMENTS; WAIVERS
No provision of this Agreement may be modified, waived or
discharged except in a writing specifically referring to such
provision and signed by the party against which enforcement of
such modification, waiver or discharge is sought. No waiver by
either party hereto of the breach of any condition or
provision of this Agreement shall be deemed a waiver of any
other condition or provision at the same or any other time.
8. GOVERNING LAW
The validity, interpretation, construction and performance of
this Agreement shall be governed by the substantive laws of
the State of Delaware.
9. VALIDITY
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in
full force and effect.
10. ARBITRATION
If the Executive so elects, any dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in the city nearest to the
Executive's principal residence (or, at the Executive's
election, in the city within the state in which the
Executive's principal residence is located nearest to such
principal residence) which has an office of the American
Arbitration Association by one arbitrator in accordance with
the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction. The Corporation hereby waives
its right to contest the personal jurisdiction or venue of any
court, federal or state, in an action brought to enforce this
Agreement or any award of an arbitrator hereunder which action
is brought in the jurisdiction in which such arbitration was
conducted, or, if no arbitration was elected, in which
arbitration could have been conducted pursuant to this
provision.
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11. COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
BOWATER INCORPORATED
By /s/ Xxxxxx X. Xxxxxxx /s/ Xxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxxx Xxxxx X. Xxxxxx
Its: Chairman, Chief Executive Officer and
President
