EXHIBIT 99.1
MODIFICATION OF EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 15th day of November,
2004, 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 Xxxxxxx X. Xxxxxxxx, 000 Xxxxxxxxxxx
Xxxx, XX, Xxxxxxxxx, 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 and of
no further force or effect as of November 15, 2004.
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 December 31, 2006,
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
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 December 31, 2004, 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 as they pertain to Abitibi-Consolidated
Inc. it successors and assigns."
(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 the annual rate of $361,000, in
substantially equal monthly installments on the
Corporation's regular pay dates, through December 31,
2006. However, if the Executive elects to retire prior
to January 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 be entitled, upon taking leave of
absence status, to a severance bonus equal to two times
the amount of the annual incentive award paid to the
Executive in 2003 for calendar year 2002 ($202,676).
Such amount shall be paid in February 2006, 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 2004 Annual Incentive Plan, and the
2003-2005 and 2004-2006 Mid-Term Incentive Plans based
upon twenty-four (24) months and twelve (12) 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 December 31, 2004,
through December 31, 2006 (or any earlier termination
date), the Executive shall not be entitled to coverage
under the Corporation's disability or business travel
accident benefit plans but may continue to participate
in the Corporation's various other benefit plans and
programs, if eligible (subject to Sections 3, 4, 9 and
10 in this Modification of Employment Agreement dated
as of November 15, 2004 ("Modification")), provided all
required employee contributions are paid. From and
after December 31, 2006 (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
applicable deductions) as soon as practicable after
such termination.
(d) Vacation. The Executive shall be entitled to be paid on
December 31, 2004 for all vacation accrued as of
December 31, 2004. The Executive shall not accrue
vacation from and after January 1, 2005.
(e) Perquisites. The Executive shall no longer be entitled
to executive perquisites as of December 31, 2004. All
charitable contributions made by the Executive through
December 31, 2004, 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 December 31,
2004."
(f) Lump Sum. The Executive shall be paid $25,000 on
February 28, 2005, in lieu of outplacement assistance.
Such amount shall be subject to all applicable
withholding taxes.
(d) Noncompetition. Section 7 of the Employment Agreement
shall no longer apply except as it pertains to
Abitibi-Consolidated Inc., its successors and assigns.
(e) Severance Pay. Section 8 of the Employment Agreement is
amended in its entirety to read as follows:
"8. Leave of Absence. The Executive shall be on a paid
leave of absence from January 1, 2005, through December
31, 2006 (or any earlier retirement date). This paid
leave of absence is in lieu of any severance pay and/or
severance 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, and savings (but not disability
or business travel accident insurance) programs,
policies or arrangements shall not, except as otherwise
required in this Modification, or by law, regulation or
the eligibility terms of the applicable program, be
affected by the Executive's leave of absence status and
shall continue to be governed by the applicable
provisions of such programs 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."
(f) Ratification. In all other respects, except as herein
provided, the Employment Agreement is hereby ratified
and confirmed.
3. Pension Benefits.
(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 Sections 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 January 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 of such date, 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.
(c) The Corporation hereby waives the provisions of Section 6.02(b) of the
SERP except as they apply to Abitibi Consolidated Inc., its successors
and assigns.
4. Stock Options and EPRs; Stock Ownership and Trading Restrictions.
(a) From and after December 31, 2004, the Executive will not be eligible
to receive any stock option, restricted stock or equity participation
right ("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, or 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 right 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, different expiration dates shall apply in accordance with
the terms of the applicable plan or award agreement.
(b) From and after January 1, 2005, the Executive shall no longer be
subject to the Corporation's stock ownership guidelines. The Executive
shall still be subject to all applicable insider-trading restrictions
(both legal and administrative). Specifically, without limitation, the
Executive shall be subject to the Bowater Incorporated Xxxxxxx Xxxxxxx
Policy Statement, including the quarterly blackout provisions and
trade pre-clearance obligations, so long as he is an officer of the
Corporation. The general prohibition against trading the Corporation's
securities if the Executive is in possession of material information
not known to the public, as described in the policy statement, shall
continue indefinitely.
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, 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
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 December 31, 2004. The Executive shall submit
all business expense reimbursement requests no later than January 31, 2005.
7. Resignations. The Executive shall resign from all offices or positions
in which he presently serves on behalf of the Corporation by no later than
December 31, 2004, or earlier if requested by the Corporation.
8. 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. 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 within
the meaning of the Corporation's Long-Term Disability Plan prior to December 31,
2004, this Modification shall become null and void and be of no further force or
effect. Specifically, if such an event occurs the Executive shall not be
entitled to any compensation (including base salary and incentive awards)
relating to any period after the date of death or disability. If the Executive
dies or becomes disabled after January 1, 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 severance bonus equivalent 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 1, 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
effective unless and until the Executive has executed a certain Waiver and
Release Agreement (the "Release Agreement") on or after December 31, 2004, 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) 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 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/ Xxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxxxx
-------------------------- -----------------------------
Name: Xxxxx X. Xxxxxx Xxxxxxx X. Xxxxxxxx
Title: Sr. Vice President-Human Resources Date signed: November 12, 2004
Date signed: November 16, 2004
