Document:

EX-10.1

 

EXHIBIT 10.1

MODIFICATION OF EMPLOYMENT AGREEMENT

          THIS AGREEMENT is made and entered into as of this 31st day of May, 2004,
by and between Bowater Incorporated, a Delaware corporation having a mailing
address of 55 East Camperdown Way, P. O. Box 1028, Greenville, South Carolina
29602 (the “Corporation”), and E. Patrick Duffy, of 6418 Glynmoor Lakes Drive,
Charlotte, NC 28277 (the “Executive”).

          WHEREAS, the Corporation now employs the Executive pursuant to an
Employment Agreement dated as of April 1, 1995 (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 will be terminated as
of January 31, 2005, unless a letter of intent or a definitive agreement
providing for a Change in Control (as defined in the Change in Control
Agreement) is signed prior to such date. In that event, the Change in
Control Agreement will continue until the earlier of: (i) the consummation
of the transaction described in the letter of intent or definitive
agreement, (ii) the cancellation of such transaction, or (iii) January
31, 2007.

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
January 31, 2007,
unless sooner terminated by the Executive’s death, disability or
retirement, except that Sections 6, 10, 11, 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 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 31, 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-complete obligations described in Section 6.02(b) of the SERP.”
	 
	 	(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 $428,000, in substantially equal monthly
installments of $35,666.67, on the Corporation’s regular
pay dates, through January 31, 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 be
entitled, upon taking leave of absence status, to a severance bonus
equal to 25/12 times the amount of the annual incentive award paid to
the Executive in 2003 for calendar year 2002 (total $421,313). 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 or may have been eligible under
the Corporation’s 2005, 2006 or 2007 Annual Incentive Plans. The
Executive will be eligible to receive an award, if any are paid, under
the 2003-2005 Mid-Term Incentive Plan based upon thirty-six (36) months
of participation and under the 2004-2006 Plan Cycle based on thirteen
(13) months of participation. 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 31, 2005, through
January 31, 2007 (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 (subject
to Sections 3, 4, 9 and 10 in the Modification of Employment Agreement
dated May 31, 2004 (“Modification”)), provided all required
employee contributions are paid.

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	 	 	 	From and after January 31, 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 applicable
deductions) as soon as practicable after such termination.
	 
	 	(d)	 	Vacation. The Executive will be entitled to be paid on January
31, 2005 for all vacation accrued as of January 31, 2005, but will no
longer accrue vacation from and after February 1, 2005.
	 
	 	(e)	 	Perquisites. The Executive will no longer be entitled to executive
perquisites as of January 31, 2005. All charitable contributions made by
the Executive through January 31, 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 31, 2005.”

	 	(d)	 	Severance Pay. Section 8 of the Employment Agreement is amended in
its entirety to read as follows:
	 
	 	 	 	“8. Leave of Absence. The Executive will be on a paid leave of
absence from February 1, 2005, through January 31, 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, and savings (but not 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
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

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	 	 	 	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 and in the Qualified Plan and
Equalization Plan.
	 
	 	(b)	 	As of January 31, 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.

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, 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
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.
	 
	 	(b)	 	From and after the date the Executive’s retirement is announced, 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
Insider Trading 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.

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5.       Nondisclosure and Confidentiality Obligations.

	 	(a)(i)	 	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.
	 
	 	(ii)	 	The officers of the Corporation agree not to make any statements to any
third parties that are intended to reflect negatively on the Executive,
except as may be required by law or regulation.
	 
	 	(b)	 	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 or SERP, 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.
      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 retuned to the Corporation, and all outstanding
credit card balances repaid, by January 31, 2005. The Executive shall submit all
business expense reimbursement requests no later than February 28, 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
January 31, 2005, 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 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 within
the meaning of the Corporation’s Long-Term Disability Plan prior to January
31, 2005, 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

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becomes disabled after
February 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 February 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
January 31, 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) 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:	 		 	
	 	 	
 	 	
 
	Name:	 	James T. Wright	 	E. Patrick Duffy
	 	 	
 	 	 	 	 
	Title:	 	Sr. Vice President – Human Resources	 	Date signed:	 	6/1/04
	 	 	
 	 	 	 	
 
	Date signed:	 	 	 	 	 	 
	 
	 	 	 	
 	 	 	 	 

6EX-10.2

 

EXHIBIT 10.2

BOWATER INCORPORATED

2004 NON-EMPLOYEE DIRECTOR STOCK UNIT PLAN

1. Purpose. The purpose of the 2004 Non-Employee Director Stock Unit Plan (the
“Plan”) is to include equity-based compensation as a component of the
compensation of non-employee members of the Board of Directors (the “Board”) of
Bowater Incorporated (the “Company”).

2. Effective Date and Term of Plan. The Plan shall be effective as of May 1,
2004 and shall remain in effect until the earlier of (a) the date the Plan is
terminated by the Board; or (b) April 30, 2007.

3. Eligibility. Any person who is a non-employee member of the Board shall be
eligible to receive an award under the Plan.

4. Administration. The Human Resources and Compensation Committee of the Board
(the Committee”) shall administer the Plan except to the extent that the Board
elects to exercise the authority of the Committee. Subject to the express
provisions of the Plan, the Committee shall have the authority to do all things
that it may deem necessary or desirable in connection with the administration
of the Plan, including without limitation (a) to establish, modify and revoke
rules relating to the Plan; (b) to interpret the terms of the Plan, any rules
under the Plan and the terms and conditions of any award under the Plan; (c) to
approve the form and content of any documentation relating to awards under the
Plan or Plan administration; and (d) consistent with the express provisions of
the Plan, to approve, establish and amend (subject to the award recipient’s
consent except for amendments pursuant to Section 8) the terms governing an
award under the Plan. All determinations, interpretations and decisions made by
the Committee under or with respect to the Plan shall be final, conclusive and
binding on the Company, all Plan participants and any beneficiary of an award.
No member of the Committee shall be liable for any action taken in good faith
with respect to the Plan.

5. Stock Units Subject to Plan. Up to 60,000 Stock Units may be granted under
the Plan. “Stock Unit” shall mean the right to receive payment in cash in an
amount equal to the Fair Market Value, as of the vesting date, of one share of
the Company’s common stock. “Fair Market Value” shall be defined as set forth
in the Company’s 2002 Stock Option Plan.

6. Awards. The Committee shall determine which eligible individuals will
receive awards under the Plan, the number of Stock Units granted to each award
recipient and the terms and conditions of each award, including but not limited
to any vesting or forfeiture conditions. All outstanding awards shall become
due and payable upon a Change in Control (as defined in the Company’s 2002
Stock Option Plan).

7. No Dividends or Shareholder Rights. An award of Stock Units shall not
entitle a recipient to receive any dividends or any equivalent amounts. An
award recipient shall not have any rights as a shareholder on account of
receiving an award of Stock Units.

8. Adjustments. In the event of any stock split, combination or
exchange of shares, merger, consolidation, spin-off or other distribution
(other than normal cash dividends) of Company assets to shareholders or any
other change affecting the common stock of the Company, the Committee may make
such adjustments to the amount payable with respect to a Stock Unit that the
Committee, in its sole discretion, may deem appropriate to reflect such change.

9. Transferability. Awards under the Plan may not be sold, assigned, pledged,
alienated or otherwise transferred or encumbered except by will, the laws of
descent and distribution or pursuant to a domestic relations order entered by a
court of competent jurisdiction.

10. Amendment; Termination. The Committee may amend or terminate the Plan at
any time, provided that no such amendment or termination shall affect the terms
of any award previously granted under the Plan without the award recipient’s
consent.

 

 

11. Successors and Assigns. The Plan shall be binding on all successors and
permitted assigns of an award recipient or eligible individual, including
without limitation any such person’s executor, personal representative, estate,
trustee, receiver or trustee in bankruptcy or creditor representative.

12. Unfunded Plan. Unless otherwise determined by the Committee, the Plan shall
be unfunded and shall not create (or be construed to create) a trust or a
separate fund or funds. Unless otherwise determined by the Committee, the
rights of any award recipient shall be no greater than the rights of an
unsecured creditor of the Company.

13. No Right to Continued Service. Neither the Plan nor any award under the
Plan shall be construed to grant any individual any right to continued service
with the Company in any capacity.

14. Governing Law. The validity, interpretation and effect of the Plan, any
instrument or document created in connection with the Plan and any actions
taken with respect or relating to the Plan shall be determined in accordance
with the laws of the State of Delaware, without the application of choice of
law principles, and applicable U.S. federal law.

     Executed on behalf of the Company as of May 1, 2004 on this 25th day of June, 2004.

	 	 	 	 	 
	 

	 	BOWATER INCORPORATED
	 
	 	 	 	 
	

	 	By:
	 	/s/ James T. Wright
	

	 	 	 	
 
	

	 	 	 	James T. Wright
	

	 	 	 	Vice President – Human Resources

 

 

BOWATER INCORPORATED

2004 NON-EMPLOYEE DIRECTOR STOCK UNIT PLAN

AWARD AGREEMENT

     This Agreement is made by and between Bowater Incorporated (the “Company”)
and ____________________ (the “Participant”) effective as of the Date
of Grant set forth below.

     Subject to the terms of the Bowater Incorporated 2004 Non-Employee
Director Stock Unit Plan (the “Plan”), which is incorporated herein by
reference as part of this Agreement, the Company hereby awards as of the Date
of Grant to Participant an award of Stock Units (the “Award”), as described
below. Capitalized terms used and not defined or described herein shall have
the meanings set forth in the Plan.

     A. Date
of Grant:     ____________

     B. Stock
Units:         ____________

     C. Payment Date: Participant shall be vested and entitled to payment in
cash of the value of the Stock Units upon Participant’s termination of service
as a member of the Board of Directors of the Company for any reason, provided
that Participant may make an irrevocable election instead to be vested and
receive payment with respect to fifty percent (50%) of the Stock Units awarded
on April 30, 2005 and the remaining fifty percent (50%) on April 30, 2006 if
Participant so indicates below and returns an executed copy of this Agreement
to the Company not later than July 31, 2004. Termination of a Participant’s
service on the Board shall not affect the Participant’s right to payment under
the dual installment payment option.

     o I hereby irrevocably elect to be vested and receive payment with respect
to all of the Stock Units awarded hereby, or in the future, upon termination of
my service as a member of the Board of Directors of the Company. This election
with respect to future awards may be cancelled by written notice of revocation
provided by me to the Company, provided that such revocation shall only be
effective with respect to awards granted after Company’s receipt of such
notice.

     o I hereby irrevocably elect to be vested and receive payment with respect
to fifty percent (50%) of the Stock Units awarded on April 30, 2005 and the
remaining fifty percent (50%) on April 30, 2006. With respect to any future
awards under the Plan that I may receive, I hereby elect to be vested and
receive payment with respect to fifty percent (50%) of the award on the April
30th of the calendar year following the calendar year in which the award is
granted and the remaining fifty percent (50%) on the April 30th of the second
calendar year following the calendar year in which the award is granted. This
election with respect to future awards may be cancelled by written notice of
revocation provided by me to the Company, provided that such revocation shall
only be effective with respect to awards granted after Company’s receipt of
such notice.

     The Participant shall forfeit this award and shall not be entitled to any
payment hereunder if the Participant materially breaches the Participant’s
duties as a Director of the Company or engages in a material violation of
applicable securities or corporate law, as determined in good faith in their
sole discretion by the other members of the Board of Directors of the Company
who are not involved in such breach or violation.

     Executed as of the Date of Grant, set forth above.

	 	 	 	 	 	 	 
	BOWATER INCORPORATED
	 	PARTICIPANT
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	

	 	
 
	 	
 
	Name:

	 	 	 	Name:	 	 
	

	 	
 
	 	 	 	
 
	Title:
	 	 	 	 	 	 
	

	 	
 	 	 	 	 

Please return to the Senior Vice President-Human Resources as soon as possible
in the enclosed envelope.

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