Exhibit 10.12.1
MODIFICATION OF EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 1st day of January,
2003, by and between Bowater Incorporated, a Delaware corporation having a
mailing address of 00 Xxxx Xxxxxxxxxx Xxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000 (the
"Corporation"), and Xxxxxx X. Xxxxx, of 000 Xxxxxxx Xxx, Xxxxxxxxxxxx, XX 00000
(the "Executive").
WHEREAS, the Corporation now employs the Executive pursuant to an
Employment Agreement dated as of November 19, 1991, (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
December 31, 2002.
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 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 hereof, the Executive will have
the employment status of an exempt employee. The
Executive is relieved, as of January 1, 2003, 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 business,
and such additional services as are described in
Sections 6.02(a) and 6.02(c) 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 his annual rate as fixed
from time to time until December 31, 2002, and
thereafter at the annual rate of $275,000, in
substantially equal monthly installments on the
Corporation's regular pay dates, through December 31,
2004. All applicable taxes and other authorized
deductions will be deducted from each paycheck. If
the Executive should die prior to December 31, 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 $382,750, which is equal to
36/12 times the bonus amount paid for calendar year
2001. Such amount shall be paid in three annual
successive installments of $127,586 beginning on
January 31, 2003, and ending on January 31, 2005,
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
mandatory and/or discretionary award, if any are
paid, under the 2000-2002 Long Term Incentive Plan
based upon thirty-six (36) 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 December 31, 2002.
(c) Benefit Plans. From and after December 31, 2002,
through December 31, 2004, the Executive shall not be
entitled to coverage under the Corporation's
disability or business travel accident benefit plans
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.
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The value of the Executive's "Bank Account" (as that
term is defined in the Corporation's Compensatory
Benefits Plan) as of December 31, 2004, shall be paid
to the Executive in a lump sum (subject to applicable
deductions) on or about January 31, 2005.
(d) Vacations. The Executive will be entitled to be paid
on December 31, 2002 for all vacation accrued as of
December 31, 2002 for calendar year 2003 (five
weeks), but will no longer accrue vacation from and
after December 31, 2002.
(e) Perquisites. The Executive will no longer be entitled
to executive perquisites as of December 31, 2002,
except for reimbursement for tax preparation or
financial planning services for calendar year 2002,
up to the maximum amounts allowed under the
Corporation's reimbursement policy. All charitable
contributions made by the Executive through December
31, 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 December 31, 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 January 1, 2003, through
December 31, 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 January 1, 2003, 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."
(e) Governing Law. Section 11 of the Employment Agreement is
amended in its entirety to read as follows:
"11. Governing Law.
This Agreement shall be governed by and interpreted in
accordance with the substantive laws of the State of
Delaware."
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(f) Ratification. In all other respects, except as herein
provided, the Employment Agreement (specifically, without
limitation, Sections 6, 7, 9, 10, 13 and 14), 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) and (b) of the
Employment Agreement as amended hereunder, (not including any
Award paid under the Long Term Incentive Plan or the bonus
equivalent payment to be made on January 31, 2005) 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 December 31, 2004, and assuming the Executive survives
until such date, subject to the Executive signing and not
later revoking a Waiver and Release Agreement as further
described in Section 9, and assuming a proper election is
made, the Executive 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).
4. Stock Options and EPRs. From and after December 31, 2002, the Executive will
not be eligible to receive any stock option or equity participation right
awards. 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 and assuming the Executive
elects retirement commencing January 1, 2005, the expiration date for the
Executive's stock option and equity rights participation awards shall be the
earlier of (i) December 31, 2009, or (ii) the original expiration date of the
applicable stock option or EPR Award. In the event of the Executive's death
prior to such dates, different expiration dates shall be determined in
accordance with the terms of the applicable plans.
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
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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, his attorney or accountant, or as
necessary to enforce his rights hereunder, or as required by
law, and (ii) the Corporation may (A) 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 (B) 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. Office Equipment and Property of the Corporation. All property of
the Corporation such as documents, files, portable computers, palm pilots,
portable telephones and credit cards, must be returned to the Corporation, and
all outstanding credit card balances repaid, by December 31, 2002. Except as
otherwise provided in this Agreement, the Executive shall submit all business
expense reimbursement requests no later than December 31, 2002.
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, 2002.
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.
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9. 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 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 or the Employment Agreement
(specifically 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 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).
10. Governing Law. This Modification of Employment Agreement 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. Xxxxxxxx /s/ Xxxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxxxxx Xxxxxx X. Xxxxx
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Title: Executive Vice President and Date signed: 12/15/2002
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Chief Executive Officer
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Date signed: 12/16/2002
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