EXHIBIT 10.2
MODIFICATION OF EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 1st day of July,
2002, by and between Bowater Incorporated, a Delaware corporation having a
mailing address of 00 Xxxx Xxxxxxxxxx Xxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
(the "Corporation"), and Xxxxxxx X. Xxxxxx, of 0000 Xxxxxx Xxx, Xxxxxxxxxx, XX
00000 (the "Executive").
WHEREAS, the Corporation now employs the Executive pursuant to an
Employment Agreement dated as of April 1, 1996, (the "Employment Agreement")
and a Change in Control Agreement dated as of February 26, 1999 (the "Change in
Control Agreement") as amended; and
WHEREAS, the Executive and the Corporation wish to continue the
Executive's employment until a specified and agreed upon date, whereupon the
Executive will terminate his employment with the Corporation and be entitled to
receive certain benefits under the Supplemental Benefit Plan for Designated
Employees of Bowater Incorporated and Affiliated Companies as Amended and
Restated Effective November 1, 1995 (the "SERP") as further described below;
NOW, THEREFORE, the parties hereto agree to the following:
1. Change in Control. The Change in Control Agreement is hereby
terminated as of the date hereof.
2. Employment Agreement. The Employment Agreement is hereby modified as
follows:
(a) Term. Section 2 of the Employment Agreement is amended in its
entirety to read as follows:
"2. Term. The term of this Agreement will end on June
30, 2004, unless sooner terminated by the
Executive's death, except that Sections 6, 7, 9, 10,
11, 13, 14 and 15 shall continue in accordance with
their terms."
(b) Position and Duties. Section 3 of the Employment Agreement is
amended by adding the following at the end thereof:
"Throughout the term hereof, the Executive will have
the employment status of an exempt employee. The
Executive is relieved, as of June 30, 2002, of the
obligation to devote his full working time to the
performance of duties under this Agreement, but
shall, during the remaining term hereof, be an
employee of the Corporation notwithstanding
Executive's leave-of-absence status. During the term
of this Agreement, the Executive shall be available
to provide advisory, consultative and similar
services with respect to the Corporation's Legal
Department, and such additional services as are
described in Sections 6.02(a) and 6.02(c) of the
SERP. In order to provide such services, the
Executive shall maintain his license to practice law
under Rule 405 of the South Carolina Bar Association
through June 30, 2004. The Corporation shall pay all
applicable license fees and mandatory continuing
legal education fees, up to $500 per year for 2003
and 2004, subject to the Corporation's receipt of
appropriate substantiation of such expenses."
(c) Compensation and Benefits. Section 5 of the Employment
Agreement is amended in its entirety to read as follows:
"5. Compensation and Benefits.
(a) Base Salary. The Corporation will pay to the
Executive a base salary at his annual rate as fixed
from time to time until June 30, 2002, and
thereafter at the annual rate of $335,000 , in
substantially equal monthly installments of
$27,916.67 on the Corporation's regular pay dates,
through June 30, 2004. All applicable taxes and
other authorized deductions will be deducted from
each paycheck. If the Executive should die prior to
June 30, 2004, any base salary amounts remaining
unpaid for such period will be paid to the
Executive's estate.
(b) Bonus Plan. In addition to base salary, the
Executive will be entitled, upon taking leave of
absence status as provided in Section 3, to a
severance bonus equivalent payment of $431,732.50,
which is equal to 30/12 times the bonus amount paid
for calendar year 2001, to be paid on or about
August 31, 2002, and subject to all applicable
withholding requirements. This bonus is in lieu of
any bonus for which the Executive may be or may have
been eligible under the Corporation's 2002, 2003 or
2004 Annual Incentive Plans. The Executive will be
eligible to receive a prorated (i.e., 5/6) mandatory
and/or discretionary award, if any are paid, under
the 2000-2002 Long Term Incentive Plan based upon
thirty (30) months' of participation. Such award, if
any is due, will be paid at the time other plan
participants are paid. The Executive will not be
eligible to receive an award under any long term
incentive plan applicable to any period of time
after June 30, 2002.
(c) Benefit Plans. From and after June 30, 2002, through
June 30, 2004, the Executive shall not be entitled
to coverage under the Corporation's disability or
business travel accident benefit plans
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but will be eligible to continue to participate in
the Corporation's various other benefit plans and
programs (subject to Section 3 below as to pension
benefits). The Executive will continue to be
responsible for all required employee contributions.
From and after July 1, 2004, the Executive will be
eligible to continue certain benefit coverages as
provided under the Consolidated Omnibus Budget
Reconciliation Act (COBRA). The value of the
Executive's "Bank Account" (as that term is defined
in the Corporation's Compensatory Benefits Plan) as
of June 30, 2004, shall be paid to the Executive in
a lump sum (subject to applicable deductions) on or
about July 31, 2004.
(d) Vacations. The Executive will be entitled to be paid
on July 31, 2002 for all unused vacation earned or
accrued as of June 30, 2002 (6 1/2 weeks), but will
no longer accrue vacation from and after June 30,
2002.
(e) Perquisites. The Executive will no longer be
entitled to executive perquisites as of June 30,
2002, except for reimbursement for tax preparation
or financial planning services for calendar years
2001 and 2002, up to the maximum amounts allowed
under the Corporation's reimbursement policy. All
charitable contributions made by the Executive
through June 30, 2002, shall qualify under the
Corporation's Matching Gifts to Education or
Cultural Organizations. The Executive's charitable
contributions shall not qualify for such programs
after June 30, 2002.
(d) Severance Pay. Section 8 of the Employment Agreement is
amended in its entirety to read as follows:
"8. Terminal Leave of Absence. The Executive will be on
a terminal paid leave of absence from July 1, 2002,
through June 30, 2004. This terminal paid leave of
absence is in lieu of any severance pay the
Executive would otherwise be entitled to. The
Executive's entitlement to benefits, or payments
under the Corporation's health, life insurance,
retirement, stock option, equity participation
rights, and savings (but not disability or business
travel accident insurance) plans, policies or
arrangements shall not, except as otherwise required
in the Modification of Employment Agreement dated as
of July 1, 2002, between the Executive and the
Corporation or by law or regulation, be affected by
the Executive's leave of absence status and shall
continue to be governed by the applicable provisions
of such plans as though the Executive had continued
to render services in the active employment of the
Corporation to the end of the term of this
Agreement."
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(e) Ratification. In all other respects, except as herein
provided, the Employment Agreement (specifically, without
limitation, Sections 6, 7, 9, 10, 11, 13, 14 and 15), is
hereby ratified and confirmed.
3. Pension Benefits.
(a) The period of the terminal leave of absence is intended to be
included within the definition of "Years of Service" in the
SERP and of "Benefit Service" in the Bowater Incorporated
Retirement Plan (the "Qualified Plan") and the Bowater
Incorporated Benefit Equalization Plan (the "Equalization
Plan") and compensation paid under Section 5(a) of the
Employment Agreement as amended hereunder during the terminal
leave of absence is intended to be included within the
definition of "Compensation" in the SERP and in the Qualified
Plan and Equalization Plan.
(b) As of June 30, 2004, and assuming the Executive survives
until such date, and subject to the Executive signing and not
later revoking a Waiver and Release Agreement as further
described in Section 10, (i) the Executive shall be entitled
to receive credit under the SERP for an additional five (5)
"Years of Service" and (ii) his benefits under the SERP and
the Equalization Plan shall be payable as a deferred vested
benefit as of the first day of the month following his 64th
birthday. In accordance with the terms of such plans and
assuming a proper election is made, he shall be entitled to a
lump sum payment of his SERP and Equalization Plan benefits
as of such date, calculated using a seven (7) percent
interest rate and the mortality table defined in Internal
Revenue Code Section 417(e)(3)(A)(ii)(I). The Executive's
retirement benefits under the Qualified Plan shall be payable
as a deferred vested benefit as of the Executive's Normal
Retirement Date, as defined in such plan.
(c) Nothing contained in this section is intended to nor shall
alter any rights of the Executive's spouse under applicable
laws.
4. Stock Options and EPRs. From and after June 30, 2002, the Executive
will not be eligible to receive any stock option or equity participation right
awards. A list of the Executive's stock option and equity participation right
awards is attached as Exhibit I. The terminal leave of absence will not
interrupt or terminate employment for purposes of determining the Executive's
continued eligibility to become vested in, and to exercise, options awarded
pursuant to the Corporation's stock option and equity participation rights
plans In accordance with the applicable stock option and equity participation
right plans, the expiration date for the Executive's stock option and equity
rights participation awards shall be September 30, 2004, except for the
Executive's equity participation right award granted on April 1, 1996 (the
"1996 EPR Award"), which shall have an expiration date of June 30, 2004. In the
event of the Executive's death prior to such dates, different
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expiration dates shall apply in accordance with the terms of the applicable
plans; i.e., two years from the date of death for all awards except for the
1996 EPR Award, and one year from the date of death for the 1996 EPR Award.
5. Nondisclosure and Confidentiality Obligations.
(a) The Executive agrees not to take any actions or make any
statements to the public, future employers, business
associates, clients, customers, the media, current, former or
future employees, or any other third party whatsoever that
reflect negatively on the Corporation, its officers,
directors or employees, and not to express any opinions
concerning the Corporation, its affiliates, officers,
directors, shareholders, employees and/or its operations that
shall reflect negatively upon same. Further, the Executive
confirms his agreement to comply with the provisions of
Section 6 of the Employment Agreement and Section 6.02(d) of
the SERP indefinitely.
(b) Furthermore, the terms of the Employment Agreement and this
Modification are confidential and the Executive and the
Corporation agree not to disclose them to any entity,
organization or person, including any employee or former
employee of the Corporation, except that (i) the Executive
may disclose them to his spouse and her attorney or
accountant, his attorney or accountant, or as necessary to
enforce his rights hereunder, or as required by law, and (ii)
the Corporation may disclose them to the employees of the
Corporation or its advisors who have a need to know such
terms in order to implement the Modification Agreement or
make any necessary regulatory filings.
(c) Upon service on either party, or any one acting in his
behalf, of an order or other legal process requiring him to
divulge information prohibited from disclosure hereunder or
under the Employment Agreement, such party shall immediately
inform the other party of such service and the nature of any
testimony or information sought to be provided pursuant to
such order or process.
6. Relocation. If the Executive relocates his primary residence prior to
June 30, 2003, he shall be entitled to the benefits provided under the
Corporation's relocation policy as in effect on the date of such relocation.
7. Office Equipment and Property of the Corporation. The Executive shall
be entitled to keep his Palm Pilot and laptop computer; provided however, that
all the Corporation's proprietary or confidential information shall be removed
by June 30, 2002, and all software licensed to the Corporation, shall be
removed by December 31, 2002 and, if the Corporation so requests, the Executive
will make said devices available to the Corporation's technical staff to effect
or to confirm such removal. All other property of the Corporation such as
documents, files, portable telephones and credit cards, must be
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returned to the Corporation, and all outstanding credit card balances repaid,
by June 30, 2002. Except as otherwise provided in this Agreement, the Executive
shall submit all business expense reimbursement requests no later than July 31,
2002.
8. Resignations. The Executive shall resign from all offices or positions
in which he presently serves on behalf of the Corporation by no later than June
30, 2002.
9. Availability in Certain Circumstances. The Executive agrees to make
himself reasonably available to the Corporation in connection with any pending
or future governmental or regulatory investigation, civil or administrative
proceeding or arbitration, subject to any privileges the Executive may have and
to his other personal and business commitments. The Corporation will reimburse
the Executive for all reasonable costs and expenses incurred by him in
connection with any such investigation, proceeding or arbitration.
10. Effectiveness Contingent Upon Release. This Modification shall not be
effective unless and until the Executive has executed a certain Waiver and
Release Agreement (the "Release Agreement") in the form attached as Exhibit II,
and the seven-day revocation period provided for therein has expired. If the
Corporation shall believe in good faith that the Executive has breached the
terms of the Release Agreement, this Modification or the Employment Agreement
(specifically Sections 6, 7 and 15) and the Executive fails to cure such breach
within thirty (30) days after notice of such breach is given to the Executive,
then, upon written notice from the Corporation, this Modification Agreement
shall immediately become null and void, and be deemed canceled and the
Corporation shall be entitled to recover from the Executive all amounts
previously paid to him hereunder (except $500). The Executive shall also be
required to sign and not later revoke a Release Agreement on June 30, 2004,
substantially in the form attached hereto as Exhibit II, in order for him to be
entitled to (i) the additional five (5) "Years of Service" credit under the
SERP, and (ii) the early payment of his SERP and Equalization benefits. If the
Executive shall fail to sign the Release Agreement or shall sign but later
revoke the Release Agreement, the Executive shall not be entitled to the
additional five (5) "Years of Service" and shall only be entitled to the
payment of his SERP and Equalization benefits as of his Normal Retirement Date.
11. HRCC Approval. The effectiveness of this Modification is contingent
upon the approval of the Human Resources and Compensation Committee ("HRCC") of
the Corporation's Board of Directors. The HRCC's next meeting is currently
scheduled for July 31, 2002. If such approval is not obtained, this
Modification and the Release Agreement (assuming it has been signed and not
later revoked by the Executive) shall be deemed null and void and the
Employment Agreement shall continue in full force and effect in accordance with
its terms.
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IN WITNESS WHEREOF, the Corporation and the Executive have executed
this Agreement as of the day and year first above written.
BOWATER INCORPORATED
By: /s/ Xxxxxx X. Xxxxxxx /s/ Xxxxxxx X. Xxxxxx
------------------------------------- -------------------------------
Name: Xxxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxx
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Title: Chairman, President and Date signed: June 21, 2002
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Chief Executive Officer
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Date signed: June 21, 2002
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