EXHIBIT 99.1
MODIFICATION OF EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 21st day of January,
2005, by and between Bowater Incorporated, a Delaware corporation having a
mailing address of 55 East Camperdown Way, P. O. Xxx 0000, Xxxxxxxxxx, Xxxxx
Xxxxxxxx 00000 (the "Corporation"), and Xxxxxx X. Xxxxxx, 000 Xxxxx Xxxxx Xxxxx,
Xxxxxxxxxx, XX 00000 (the "Executive").
WHEREAS, the Corporation now employs the Executive pursuant to an
Employment Agreement dated as of August 1, 1997 (the "Employment Agreement") and
a Change in Control Agreement dated as of June 9, 2000 (the "Change in Control
Agreement"); 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 February 26, 1999 (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 terminated as of
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January 21, 2005.
2. Employment Agreement. The Employment Agreement is hereby modified as follows:
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(a) Term. Section 2 of the Employment Agreement is amended in its entirety
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to read as follows:
"2. Term. The term of this Agreement will end on January 21, 2007,
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unless sooner terminated by the Executive's death,
disability or retirement, except that Sections 6, 9, 10, 11, 13
and 14 shall continue in accordance with their terms."
(b) Position and Duties. Section 3 of the Employment Agreement is amended
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by adding the following at the end thereof:
"Throughout the term of the leave of absence described in Section
8 ("leave of absence"), the Executive will have the employment
status of an exempt employee. The Executive is relieved, as of
January 21, 2005, of the obligation to devote his full working
time to the performance of duties under this Agreement, but
shall, during the leave of absence, be an employee of the
Corporation notwithstanding the Executive's leave of absence
status. During the term of this Agreement and for a period of
five (5) years after the Executive's retirement, the Executive
shall be available to provide advisory, consultative and similar
services with respect to the Corporation's business, and such
additional services as are described in Sections 6.02(a) and
6.02(c) of the SERP. In addition, during the term of this
Agreement and such additional five-year period, the Executive
shall be subject to the non-compete obligations described in
Section 6.02(b) of the SERP."
(c) Compensation and Benefits. Section 5 of the Employment Agreement is
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amended in its entirety to read as follows:
"5. Compensation and Benefits.
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(a) Base Salary. The Corporation will pay to the Executive a base
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salary at the annual rate of $483,000, in substantially equal
monthly installments on the Corporation's regular pay dates,
through January 21, 2007. However, if the Executive elects to
retire prior to February 1, 2007, the monthly installments will
be terminated as of such earlier retirement date. All applicable
taxes and other authorized deductions will be deducted from each
paycheck.
(b) Incentive Plans. In addition to base salary, the Executive will
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be entitled to a bonus equal to 25/12ths of the amount of the
annual incentive award paid to the Executive in 2003 for calendar
year 2002 ($272,596 times 25/12ths). Such amount shall be paid in
May 2005, subject to all applicable withholding requirements. The
bonus payment is in lieu of any incentive awards for which the
Executive may be eligible under the Corporation's 2005, 2006 or
2007 Annual Incentive Plans. The Executive will be eligible to
receive awards, if any are paid, under the 2003-2005 and
2004-2006 Mid-Term Incentive Plans based upon thirty-six (36)
months and thirteen (13) months of participation, respectively.
Such awards, if any are due, will be paid at the time other plan
participants are paid. The Executive will not be eligible to
receive an award under any mid-term incentive plan applicable to
any period of time after December 31, 2004, other than as set
forth above.
(c) Benefit Plans. From and after January 21, 2005, through January
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31, 2007 (or any earlier termination date), the Executive shall
not be entitled to coverage under the Corporation's vacation,
disability or business travel accident benefit plans but may
continue to participate in the Corporation's various other
benefit plans and programs (subject to Sections 3, 4, 9 and 10 in
the Modification of Employment Agreement dated as of January 21,
2005 ("Modification")), provided all required employee
contributions are paid. From and after January 21, 2007 (or any
earlier termination date), the Executive and his dependents will
be eligible to continue certain benefit coverages as provided
under the Consolidated Omnibus Budget Reconciliation Act (COBRA).
The value of the Executive's "Book Account" (as that term is
defined in the Corporation's Compensatory Benefits Plan) as of
the termination of the Executive's leave of absence shall be paid
to the Executive in a lump sum (subject to the plan provisions
and applicable deductions) as soon as practicable after such
termination.
(d) Vacation. The Executive shall be entitled to be paid for all
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vacation accrued as of January 21, 2005 as soon as practicable.
The Executive shall not accrue vacation from and after January
21, 2005.
(e) Perquisites. The Executive shall no longer be entitled to
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executive perquisites as of January 21, 2005. All charitable
contributions made by the Executive through January 21, 2005,
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 January
21, 2005."
(d) Severance Pay. Section 8 of the Employment Agreement is amended in its
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entirety to read as follows:
"8. Leave of Absence. The Executive shall be on a paid leave of
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absence from January 21, 2005, through January 21, 2007 (or any
earlier retirement date). This paid leave of absence is in lieu of any
severance pay and/or bonus 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, pension and savings (but not vacation, mid-term
incentive, annual incentive, disability or business travel accident
insurance) plans, policies or arrangements shall not, except as
otherwise required in this Modification, 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."
(e) Ratification. In all other respects, except as herein provided, the
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Employment Agreement is hereby ratified and confirmed.
3. Pension Benefits.
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(a) The period of the 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 Benefits Equalization Plan (the
"Equalization Plan") and compensation paid under Section 5(a) and (b)
of the Employment Agreement as amended hereunder (not including any
awards paid under the Mid-Term Incentive Plan) during the leave of
absence is intended to be included within the definition of
"Compensation" in the SERP, the Qualified Plan and the Equalization
Plan.
(b) As of February 1, 2007 (or any earlier retirement date), and assuming
the Executive survives until such date and is not disabled and
further, subject to the Executive signing and not later revoking a
Waiver and Release Agreement as further described in Section 10, and
assuming a proper election is made, the Executive may retire and shall
then be entitled to a lump sum payment of his SERP and Equalization
Plan benefits as provided under the provisions of the Plans,
calculated using the applicable interest rate and the mortality table
set in accordance with the provisions of the Plans. Such payments will
be made to the Executive as soon as practicable after his retirement
date.
4. Stock Options and EPRs; Stock Ownership and Trading Restrictions.
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(a) From and after December 31, 2004, the Executive will not be eligible
to receive any stock option, restricted stock or equity participation
rights ("EPR") awards. The 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,
EPRs or restricted stock awards granted pursuant to the Corporation's
stock option and equity participation rights plans. In accordance with
the applicable stock option and equity participation rights plans and
assuming the Executive elects retirement, the expiration date for the
Executive's stock option and equity participation rights awards shall
be the earlier of (i) five years after his retirement date, or (ii)
the original expiration date of the applicable stock option or EPR
Award. In the event of the Executive's death or disability prior to
such dates or if the Executive does not elect to retire, different
expiration dates shall apply in accordance with the terms of the
applicable plan or award agreement.
(b) From and after January 21, 2005, the Executive shall no longer be
subject to the Corporation's stock ownership guidelines. Further,
after the release of the 2005 second quarter earnings, the Executive
shall no longer be subject to the pre-clearance requirements of the
Bowater Incorporated Xxxxxxx Xxxxxxx Policy. However, the Executive
will be subject indefinitely to the general requirement that the
Executive may not trade in Bowater securities (including stock and
publicly traded debt of Bowater and any of its subsidiaries) when the
Executive possesses non-public material information concerning the
Company. Transactions that are prohibited in such circumstances would
include (1) benefit plan transactions (including through the savings
plans), (2) stock option exercises coupled with sales of the acquired
shares, (3) equity participation rights (EPR) exercises, and (4)
open-market purchases or sales.
5. Nondisclosure and Confidentiality Obligations.
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(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, products 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) Upon service on the Executive, 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
or SERP, the Executive shall immediately inform the Corporation of
such service and the nature of any testimony or information sought to
be provided pursuant to such order or process.
6. Office Equipment and Property of the Corporation. All property of the
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Corporation such as documents, files, portable computers, portable telephones
and credit cards, must be returned to the Corporation, and all outstanding
credit card balances repaid, by February 28, 2005. The Executive shall submit
all business expense reimbursement requests no later than March 15, 2005.
7. Resignations. The Executive shall resign from all offices or positions in
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which he presently serves on behalf of the Corporation immediately.
8. Availability in Certain Circumstances. The Executive agrees to make himself
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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.
9. Death or Disability. If the Executive dies or becomes disabled after January
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21, 2005, and assuming the Executive has executed an effective Waiver and
Release Agreement and the seven-day revocation period has passed, any unpaid
compensation due the Executive for base pay and the bonus payment shall be paid
to the Executive's estate (in the event of death) or to the Executive (in the
event of disability). If the Executive dies at any time prior to the date his
lump sum SERP and Equalization Plan payments become due and payable, his estate
shall not have the right to the lump-sum payments, but instead his surviving
spouse and/or dependents shall be entitled to the benefits described in Section
4.01 of the SERP. If the Executive becomes disabled (as defined under the
Corporation's Qualified Plan) after January 21, 2005, the Executive shall be
entitled to receive the disability benefits provided under the Qualified Plan.
Further, in the event of disability, the payment of the Executive's lump sum
SERP and Equalization Plan benefits shall be deferred until the earlier of (i)
age 65 or (ii) the Executive's recovery from disability.
10. Effectiveness Contingent Upon Release. This Modification shall not be
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effective unless and until the Executive has executed a certain Waiver and
Release Agreement (the "Release Agreement") on or after January 21, 2005, in the
form attached as Exhibit I, 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,
the SERP or the Employment Agreement (specifically, without limitation, Section
6 of the SERP) 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 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).
11. Governing Law. This Modification shall be governed by the substantive laws
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of the State of Delaware.
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/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxx
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Title: Chairman and Chief Executive Officer Date signed: April 1, 2005
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Date signed: April 5, 2005
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