THIS
AGREEMENT, is made this 4 th day of April, 2006, by and between BOWATER
INCORPORATED, a Delaware corporation having a mailing address
of 55 East Camperdown Way, Greenville, South Carolina 29601 (the
“Corporation”), and David J. Paterson (the
“Executive”).
WHEREAS,
the Corporation desires to employ the Executive as President and
Chief Executive Officer and a member of the board of directors of
the Corporation (the “Board”); and
WHEREAS,
the Executive is desirous of serving the Corporation in such
capacity;
NOW, THEREFORE,
the parties hereto agree as follows:
1.
Employment . The Corporation agrees to employ the Executive,
and the Executive agrees to be employed by the Corporation,
effective the Effective Date, in accordance with and subject to the
provisions of this Agreement.
2.
Term . (a) Subject to the provisions of subparagraphs
(b) and (c) of this Section 2, the term of the
Executive’s employment shall begin on May l, 2006
(“Effective Date”) and shall continue thereafter until
terminated by either party by written notice given to the other
party at least ninety (90) days prior to the effective date of
any such termination. The effective date of the termination shall
be the date stated in such notice, provided that if the Corporation
or Executive specifies an effective date that is more than ninety
(90) days following the date of such notice, the Executive or
the Corporation, as the case may be, may, upon ninety
(90) days’ written notice to the Corporation or the
Executive, as the case may be, accelerate the effective date of
such termination.
(b) The
parties shall enter into a Change in Control Agreement effective
the Effective Date, in the form previously provided to the
Executive (“Change in Control Agreement”).
Notwithstanding Section 2(a), upon the occurrence of a Change
in Control, as defined in the Change in Control Agreement, for
purposes of the Change in Control Agreement, the term of the
Executive’s employment shall continue until terminated, but
in any event, for a period of not less than three (3) years
following the date of the Change in Control, unless such
termination shall be at the Executive’s election for other
than “Good Reason” as that term is defined in the
Change in Control Agreement.
(c) Notwithstanding
Section 2(a), the term of the Executive’s employment
shall end upon:
(i) the
death of the Executive;
(ii) the
inability of the Executive to perform his duties properly, whether
by reason of ill-health, injury or other similar cause, for a
period of one hundred and eighty (180) consecutive days or for
periods totaling one hundred and eighty (180) days occurring
within any twelve (12) consecutive calendar months; or
(iii) the
Executive’s retirement on his early or normal retirement date
in accordance with the Corporation’s tax-qualified retirement
plan in which the Executive participates.
3.
Position and Duties . (a) Throughout the term of the
Executive’s employment, the Executive shall be employed as
President and Chief Executive Officer, with the duties and
responsibilities customarily attendant to that office, provided
that the Executive shall undertake such other and further
assignments and responsibilities of at least comparable status as
the Board may direct. The Executive shall diligently and faithfully
devote his full working time and best efforts to the performance of
the services under this Agreement and to the furtherance of the
best interests of the Corporation. The Executive shall report to
the Board.
(b)
Other Activities . During the term of the Executive’s
employment, the Executive shall not engage in any other business
activities, as an employee, director, consultant or in any other
capacity, whether or not he receives any compensation therefor,
without the prior written consent of the Board; provided that the
Executive may serve on up to two corporate boards (other than the
Board) with the approval of the Board, which approval shall not be
unreasonably withheld. Notwithstanding the foregoing provisions of
this subsection (b), it shall not be a violation of this Agreement
for the Executive to serve on civic or charitable boards or
committees to the extent that such service does not interfere with
his duties under this Agreement.
4. Place
of Employment . The Executive will be employed at the
Corporation’s offices in the City of Greenville, South
Carolina or at such other place as the Corporation shall designate
from time to time, provided, however, that if the Executive is so
transferred to another place of employment, necessitating a change
in his residence, the Executive shall be entitled to financial
assistance in accordance with the terms of the Corporation’s
relocation policy then in effect.
5.
Compensation and Benefits . (a) Base Salary . The
Corporation shall pay to the Executive an annual base salary of
$825,000 (“Base Salary”) payable in substantially equal
periodic installments on the Corporation’s regular payroll
dates. The Base Salary shall be reviewed at least annually and from
time to time may be
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increased (or
reduced, if such reduction is effected pursuant to across-the-board
salary reductions similarly affecting all management personnel of
the Corporation).
(b)
Annual Incentive Plan . In addition to Base Salary, the
Executive shall be eligible to receive an annual bonus under the
Corporation’s annual incentive plan in effect from time to
time determined by Board in the manner, at the time, and within the
criteria set forth by the Board in plan. The Executive shall be
eligible under such plan for a target bonus of not less than 68% of
Base Salary (“Target Bonus”), subject to reduction by
the Board if such reduction is effected pursuant to
across-the-board bonus reductions similarly affecting all
management personnel of the Corporation, with a maximum eligible
payout under such plan of 200% of the Target Bonus (“Maximum
Bonus”). Notwithstanding the foregoing, the Executive will be
paid, with respect to calendar year 2006 (payable in January of
2007), not less than 100% of such Target Bonus, prorated to reflect
the percentage of the year 2006 that the Executive was actually
employed by the Corporation.
(c)
Long Term Incentive . The Executive shall be entitled to
participate in the Corporation’s long term incentive and
stock-based incentive compensation plans beginning in 2007 on a
basis commensurate with his position.
(d)
Initial Equity Grant . The Corporation shall grant Executive
an award of an option to purchase 250,000 shares of the
Corporation’s common stock having an exercise price equal to
the fair market value of the common stock at the close of business
on the Effective Date, a ten (10) year exercise term and vesting as
to 83,333 shares on each of the first and second anniversaries and
as to 83,334 shares on the third anniversary of the Effective Date.
The initial stock option grant will be subject to further terms and
conditions as set forth in the award document effective as of the
Effective Date. The Corporation shall also grant to the Executive
an award of 50,000 shares of restricted stock units (“Stock
Grant”) effective as of May 10, 2006. The Stock Grant
shall provide (i) that the award shall vest in full on the
first anniversary of the grant date, (ii) the right to
dividends on all such shares declared and paid to other
shareholders shall be accrued during the vesting period and paid to
the Executive upon vesting, (iii) upon vesting, the
Corporation shall satisfy the Executive’s tax liability for
the Stock Grant by withholding such number of shares from the Stock
Grant as have an aggregate fair market value (as calculated in the
plan under which the Stock Grant is made), provided, however, that
such shares may be used to satisfy not more than the
Corporation’s minimum statutory withholding obligation (based
on minimum statutory withholding rates for Federal and state tax
purposes, including payroll taxes, that are applicable to such
supplemental taxable income), and shall remit such amount as
withholding tax to the applicable taxing authorities, and
(iv) the Stock Grant shall fully vest upon an involuntary
termination of the Executive’s employment without Cause or a
voluntary termination for Good Reason (each term as defined
below).
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(e)
Deferred Compensation . The Corporation shall enroll the
Executive in its new Retirement Savings Plan effective as of
January 1, 2007, in accordance with the summary of plan terms
previously provided to the Executive. The plan provides for an
annual Corporation contribution of 20.5%, if the Executive
contributes 5%, each as a percentage of the sum of the
Executive’
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