THIS AGREEMENT, is made this 4th 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
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).
(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’s Base Salary and annual bonus (referred to in Section 5(b), above) paid to Executive each calendar year. In lieu of any deferred plan participation or payment to which Executive otherwise may be entitled by reason of his employment by the Corporation in 2006, the Executive shall be entitled to a contribution in respect of 2006 on the foregoing basis (including his 5% elective deferral), but based on the Base Salary paid in 2006 and the 2006 bonus paid in January of 2007, all of which shall be credited as nonqualified deferred compensation under the Retirement Savings Plan as of January 1, 2007. The Executive shall be vested in this benefit upon the third anniversary of the Effective Date, and shall be entitled to a lump sum payment of a pro rata portion of this benefit in the event prior to the third anniversary of the Effective Date of an involuntary termination without Cause or a termination by the Executive for Good Reason, other than with respect to the 4.5% portion of the Corporation contribution (i.e., 21.95% of the total Corporation contribution) that shall remain subject in all events to three-year vesting.
(f) Benefit Plans. The Corporation shall make contributions on the Executive’s behalf to the various benefit plans and programs of the Corporation in which the Executive is eligible to participate in accordance with the provisions thereof as in effect from time to time.
(g) Vacations. The Executive shall be entitled to five weeks of annual paid vacation, and otherwise in keeping with the Corporation’s policy as in effect from time to time.
(h) Expenses. The Corporation shall reimburse the Executive for all reasonable expenses properly incurred, and appropriately documented, by the Executive in connection with the business of the Corporation.
(i) Perquisites. The Corporation shall make available to the Executive all perquisites to which he is entitled by virtue of his position.
(j) Legal Expenses. The Executive shall be entitled to reimbursement of reasonable legal fees and expenses incurred in the negotiation and documentation of this Agreement promptly upon execution hereof up to a maximum amount of $30,000.
(k) Relocation. The Executive shall be entitled to full relocation benefits in accordance with the Corporation’s relocation program for its senior executives.
6. Nondisclosure. During and after the term of the Executive’s employment, the Executive shall not without the written consent of the Board, except in the discharge of his duties hereunder and in furtherance of the business of the Corporation or any of its subsidiaries and affiliates, disclose or use directly or indirectly, any of the trade secrets or other confidential information or proprietary data of the Corporation or its subsidiaries or affiliates; provided, however, that confidential information shall not include any information known generally to the public (other than as a result of unauthorized disclosure by the Executive) or any information of a type not otherwise considered confidential by persons engaged in the same or similar businesses.
7. Noncompetition. (a) Executive represents and warrants that he is not subject to and will not bring any material that is subject to any
non-competition, non-disclosure, discoveries and works or other agreements that would prevent or restrict him from rendering services to the Corporation pursuant to this Agreement. Executive further represents and warrants that his employment and use of any material he brings will not violate the rights of any third party, including without limitation, pursuant to any non-competition or non-solicitation agreement.
(b) During the term of the Executive’s employment and for a period of two (2) years after the date the Executive’s employment terminates (the “Covenant Period”), the Executive shall not, without the prior approval of the Board in the same or a similar capacity engage in or invest in, or aid or assist anyone else in the conduct of any business (other than the businesses of the Corporation and its subsidiaries and affiliates) which directly competes with the business of the Corporation and its subsidiaries and affiliates as conducted during the term hereof. During the Covenant Period, the Executive shall not, without the prior approval of the Board in the same or a similar capacity engage in or invest in, or aid or assist anyone else in any manner to solicit from any Corporation customer or vendor business of the type performed by the Corporation for the customer or by the vendor for the Corporation, as the case may be, or to persuade any customer or vendor to cease to do business or to reduce the amount of business which any such customer or vendor has customarily done or is reasonably expected to do with the Corporation, whether or not the relationship between the Corporation and such customer or vendor was originally established in whole or in part through the Executive’s efforts. If any court of competent jurisdiction shall determine that any of the provisions of this Section 7 shall not be enforceable because of the duration or scope thereof, the parties hereto agree that said court shall have the power to reduce the duration and scope of such provision to the extent necessary to make it enforceable and this Agreement in its reduced form shall be valid and enforceable to the extent permitted by law. The Executive acknowledges that the Corporation’s remedy at law for a breach by the Executive of the provisions of this Section 7 will be inadequate. Accordingly, in the event of the breach or threatened breach by the
Executive of this Section 7, the Corporation shall be entitled to injunctive relief in addition to any other remedy it may have without the obligation of posting any bond in order to enforce its rights hereunder.
8. Severance Pay. (a) If the Executive’s employment hereunder is involuntarily terminated for any reason other than those set forth in Section 2(c) hereof or if Executive terminates his employment hereunder for “Good Reason,” then, unless the Corporation shall have terminated the Executive for “Cause,” the Corporation shall pay the Executive severance pay in an amount equal to twenty-four (24) months of the Executive’s Base Salary on the effective date of the termination, plus 1/12 of the amount of the last annual bonus paid to the Executive under the Corporation’s bonus plan applicable to the Executive for each month in the period beginning on January 1 of the year in which the date of the termination occurs and ending on the date of the termination and for each month’s Base Salary to which the Executive is entitled under this Section 8. Such payment shall be made in a lump sum within ten (10) business days following the effective date of the termination. The severance pay shall be in lieu of all other compensation or payments of any kind relating to the termination of the Executive’s employment hereunder; provided that the Executive’s entitlement to compensation or payments under the Corporation’s welfare benefit plans, retirement plans, stock option or incentive plans, savings plans or bonus plans attributable to service rendered prior to the effective date of the termination shall not be affected by this clause and shall continue to be governed by the applicable provisions of such plans; and further provided that in lieu hereof, at his election, the Executive shall be entitled to the benefits of the Change in Control Agreement if a termination of his employment occurs in a manner and at a time when such Change in Control Agreement is applicable.
(b) For purposes of this Agreement, the term for “Cause” shall mean: (i) because of gross negligence or willful misconduct by the Executive either in the course of his employment hereunder or which has a material adverse effect on the Corporation or the Executive’s ability to perform adequately and effectively his duties hereunder, or (ii) conviction of (or pleads guilty or nolo contendere) to a felony.
(c) For purposes of this Agreement, the term for “Good Reason” shall mean: (i) a reduction by the Corporation in the Executive’s Base Salary, Target Bonus or Maximum Bonus percentages unless such reduction is effected pursuant to across-the-board salary or bonus reductions similarly affecting all management personnel of the Corporation, (ii) a material diminution in the Executive’s titles, duties or responsibilities, (iii) a change in Executive’s reporting lines such that he no longer reports to the Board, (iv) an unconsented relocation of Executive’s principal place of work to a location more than thirty (30) miles from the initial location referred to in Section 4, or (v) the failure of a successor to expressly assume
this Agreement; provided, that for a termination for Good Reason under clause (i), (ii) or (iii), the Executive shall have provided the Corporation with written notice, and the Corporation shall fail to cure the basis for Cause within twenty (20) days of such notice.
(d) The Executive shall not be obligated to seek mitigation of any severance payment payable hereunder. The Corporation shall not be entitled to offset or seek reimbursement of any amount payable or paid to the Executive hereunder in satisfaction of any other amount owed by the Executive to the Corporation, except that the Corporation shall be entitled to seek reimbursement of any severance payment made hereunder in the event of a breach of Executive’s post-termination obligations in Sections 6 and 7.
9. Notices. Any notices required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered or, if mailed by registered or certified mail, return receipt requested, within three business days after such mailing, to the address set forth above or the Executive’s home address as recorded in the Corporation’s records, or to such other address as any party hereto shall designate to the other party in writing pursuant to the terms of this Section 9.
10. Severability. The provisions of this Agreement are severable, and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of any other provision.
Law. This Agreement shall be governed by and interpreted in accordance with the
substantive laws of the State of
12. Supersedure. This Agreement shall cancel and supersede all prior agreements relating to employment between the Executive and the Corporation. In the event of any inconsistency between (a) this Agreement and the Change in Control Agreement and (b) any other plan, program, practice or agreement of the Corporation in which the Executive participates or is a party, this Agreement and the Change in Control Agreement, as the case may be, shall control unless the parties specifically agree, by reference to this Section 12, that such other plan, program, practice or agreement controls.
13. Waiver of Breach. The waiver by a party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach by any of the parties hereto.
14. Binding Effect. The terms of this Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Corporation and the heirs, executors, administrators and successors of the Executive, but this Agreement may
not be assigned by the Executive. The Corporation shall assign its rights and obligations hereunder to a successor to all or substantially all of the assets or business of the Corporation, provided, that such successor expressly assumes the Corporation’s obligations hereunder.
15. Code Section 409A. It is intended that any amounts payable under this Agreement and the Corporation’s and the Executive’s exercise of authority or discretion hereunder shall comply with the provisions of Internal Revenue Code Section 409A and the Treasury Regulations relating thereto so as not to subject the Executive to the payment of Interest and tax penalty which may be imposed under Code Section 409A. In furtherance of this interest, to the extent that any regulations or other guidance issued under Code Section 409A after the date of this Agreement would result in the Executive being subject to payment of interest and tax penalty under Code Section 409A, the parties agree to amend this Agreement to the minimum possible extent in order to bring this Agreement into compliance with Code Section 409A while preserving the agreements and purposes otherwise expressed in this Agreement and the Change in Control Agreement.
16. Public Announcement. The Corporation shall give the Executive a reasonable opportunity to review and comment on any public announcement (including all filings with governmental agencies and stock exchanges) relating to this Agreement or the Executive’s employment by the Company.
IN WITNESS WHEREOF, the Corporation and the Executive have executed this Agreement as of the day and year first above written.
/s/ Togo D. West, Jr.
By: Togo D. West, Jr.
Title: Chairman, Human Resources and Compensation Committee
/s/ David J. Paterson
Name: David J. Paterson
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, made as of the 10th day of May, 2006, by and between Bowater
"Corporation"), and David J.
WHEREAS, the Corporation considers it essential to the best interests of
its stockholders to foster the continued employment of key management personnel;
WHEREAS, the uncertainty attendant to a change in control of the
Corporation may result in the departure or distraction of management personnel
to the detriment of the Corporation and its stockholders; and
WHEREAS, the Board of Directors of the Corporation (the "Board") has
determined that appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of the Corporations' management,
including Executive, to their assigned duties in the event of a change in
control of the Corporation.
NOW THEREFORE, it is hereby agreed as follows:
The following terms shall have the meanings assigned to them below:
(a) "Accrued Compensation" shall mean all amounts earned or accrued
through the Termination Date but not paid as of the Termination Date
including (i) the Base Amount, (ii) reimbursement for reasonable and
necessary expenses incurred by the Executive on behalf of the
Corporation during the period ending on the Termination Date, (iii)
vacation pay, and (iv) any bonus award with respect to the
Corporation's fiscal year ended prior to the Termination Date.
(b) "Acquiring Person" shall mean the Beneficial Owner, directly or
indirectly, of securities representing 20% or more of the combined
voting power of the Corporation's then outstanding securities, not
including (except as provided in clause (i) of the next sentence)
securities of such Beneficial Owner acquired pursuant to an agreement
allowing the acquisition of up to and including 50% of such voting
power approved by two-thirds of the members of the Board who are Board
members before the Person becomes Beneficial Owner, directly or
indirectly, of securities representing 5% or more of the combined
voting power of the Corporation's then outstanding securities.
Notwithstanding the foregoing, (i) securities acquired pursuant to an
agreement described in the preceding sentence will be included in
determining whether a Beneficial Owner is an Acquiring Person if,
subsequent to the approved acquisition, the Beneficial Owner acquires
5% or more of such voting power other than pursuant to such an
agreement so approved; and (ii) a Person shall not be an Acquiring
Person if such Person is eligible to and files a Schedule 13G under
the Exchange Act with respect to such Person's status as a Beneficial
Owner of all securities of the Corporation of which the Person is a
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date hereof.
(d) "Base Amount" shall mean the greater of (i) the Executive's annual
base salary at the rate in effect immediately prior to the Change in
Control and (ii) the Executive's annual base salary at the rate in
effect on the Termination Date.
(e) "Beneficial Owner" of securities shall mean (i) a Person who
beneficially owns such securities, directly or indirectly, or (ii) a
Person who has the right to acquire such securities (whether such
right is exercisable immediately or only with the passage of time)
pursuant to any agreement, arrangement or understanding (whether or
not in writing) or upon the exercise of conversion rights, exchange
rights, warrants, options or otherwise.
(f) "Bonus Amount" shall mean an amount equal to the Executive's target
amount (100% times salary grade bonus percentage times base salary)
under the Corporation's annual or other short term cash incentive
plans in effect immediately prior to the Change in Control for the
fiscal year in which the Change in Control occurred or, if higher, the
target amount under such plans in effect at the Termination Date based
on the Executive's then base salary and position.
(g) "Cause" shall mean and be limited to the Executive's gross negligence,
willful misconduct or conviction of a felony, which has a demonstrable
and material adverse effect upon the Corporation; provided that if
Cause exists by virtue of the Executive's gross negligence or willful
misconduct that is capable of being cured, the Corporation shall give
the Executive written notice of the alleged negligence or misconduct
and if the Executive cures the negligence or misconduct within thirty
(30) days after receipt of the notice, such Cause shall cease to exist
and the Corporation shall not terminate the Executive's employment
therefor. The Executive shall be deemed to have been terminated for
Cause as of the effective date stated in a Notice of Termination
delivered by the Corporation to the Executive, which shall not be
delivered before the end of the thirty (30) day period described in
the preceding sentence, if applicable. The Notice of Termination must
be accompanied by a certified copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the
membership of the Board after reasonable notice to the Executive and
an opportunity for the Executive, with the Executive's counsel
present, to be heard before the Board, finding that, in the good faith
opinion of the Board, the Executive was guilty of conduct constituting
Cause hereunder and setting forth in reasonable detail the facts and
circumstances claimed to provide the basis for the Executive's
(h) "Change in Control" shall be deemed to have occurred upon:
(i) the date that any Person is or becomes an Acquiring Person;
(ii) the date that the Corporation's stockholders approve a merger,
consolidation or reorganization of the Corporation with another
corporation or other Person, unless, immediately following such
merger, consolidation or reorganization, (A) at least 50% of the
combined voting power of the outstanding securities of the
resulting entity would be held in the aggregate by the
stockholders of the Corporation as of the record date for such
approval (provided that securities held by any individual or
entity that is an Acquiring Person, or who would be an Acquiring
Person if 5% were substituted for 20% in the definition of such
term, shall not be counted as securities held by the stockholders
of the Corporation, but shall be counted as outstanding
securities for purposes of this determination), or (B) at least
50% of the board of directors or similar body of the resulting
entity are Continuing Directors;
(iii) the date the Corporation sells or otherwise transfers all or
substantially all of the Corporation's assets to another
corporation or other Person, unless, immediately following such
sale or transfer, (A) at least 50% of the combined voting power
of the outstanding securities of the acquiring entity would be
held in the aggregate by the stockholders of the Corporation as
of the record date for such approval (provided that securities
held by any individual or entity that is an Acquiring Person, or
who would be an Acquiring Person if 5% were substituted for 20%
in the definition of such term, shall not be counted as
securities held by the stockholders of the Corporation, but shall
be counted as outstanding securities for purposes of this
determination), or (B) at least 50% of the board of directors or
similar body of the acquiring entity are Continuing Directors; or
(iv) the date on which less than 50% of the total membership of the
Board consists of Continuing Directors.
(i) "Code" shall mean the United States Internal Revenue Code of 1986,
(j) "Continuing Directors" shall mean any member of the Board who (i) was
a member of the Board immediately prior to the date of the event that
would constitute a Change in Control, and any successor of a
Continuing Director while such successor is a member of the Board,
(ii) who is not an Acquiring Person or an Affiliate or Associate of an
Acquiring Person and (iii) is recommended or elected to succeed the
Continuing Director by a majority of the Continuing Directors.
(k) "Corporation" shall mean Bowater Incorporated; provided that, if the
Executive is employed by a subsidiary of the Corporation,
"Corporation" shall mean such subsidiary of the Corporation for
purposes of references to the Executive's compensation and benefits,
and the plans, programs and arrangements pursuant to which
compensation and benefits are provided.
(l) "Disability" shall mean a physical or mental condition that is defined
as a disability in the Corporation's long term disability insurance
plan covering the Executive immediately prior to the Change in
(m) "Employer Match" shall mean an amount equal to the maximum matching
contribution the Corporation could have made (regardless of actual
circumstances) on the Executive's behalf to the Corporation's
Statutory and non-Statutory defined contribution or savings plans for
the fiscal year in which the Change in Control occurred, or, if
higher, the maximum matching contribution the Corporation could have
made for the fiscal year in which the Executive's employment
(n) "Exchange Act" shall mean the United States Securities Exchange Act of
1934, as amended.
(o) "Good Reason" shall mean:
(i) a change in the Executive's status, title, position or
responsibilities (including in reporting line relationships)
that, in the Executive's reasonable judgment, represents a
substantial adverse change from the Executive's status, title,
position or responsibilities as in effect at any time within 180
days preceding the date of a Change in Control or at any time
thereafter; the assignment to the Executive of any duties or
responsibilities that, in the Executive's reasonable judgment,
are inconsistent with the Executive's status, title, position or
responsibilities as in effect at any time within 180 days
preceding the date of a Change in Control or any time thereafter;
or any removal of the Executive from or failure to reappoint or
reelect the Executive to any office or position held prior to the
Change in Control, except in connection with the termination of
the Executive's employment for Disability, Cause, as a result of
the Executive's death or by the Executive other than for Good
(ii) the failure by the Corporation to provide the Executive with
compensation and benefits, in the aggregate, at least equal (in
terms of benefit levels and/or reward opportunities which
opportunities will be evaluated in light of the performance
requirements therefor) to those provided for under the employee
compensation and benefit plans, programs and practices in which
the Executive was participating at any time within one-hundred
eighty (180) days preceding the date of a Change in Control or at
any time thereafter;
(iii) the reduction of the Executive's salary as in effect on the date
of the Change in Control or any time thereafter;
(iv) a failure by the Corporation to obtain from any Successor its
assent to this Agreement contemplated by Section 11 hereof; or
(v) the relocation of the principal office at which the Executive is
to perform services on behalf of the Corporation to a location
more than thirty-five (35) miles from its location immediately
prior to the Change in Control or a substantial increase in the
Executive's business travel obligations subsequent to the Change
(p) "Notice of Termination" shall mean a notice sent by either the
Executive or the Corporation to the other party terminating the
Executive's employment as of a certain date and setting forth the
(q) "Person" shall mean any individual, corporation, partnership, group,
association or other "person" as such term is used in Sections 13(d)
and 14(d) of the Exchange Act.
(r) "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount
multiplied by a fraction, the numerator of which is the number of
months and partial months through the Termination Date and the
denominator of which is twelve (12).
(s) "Statutory Plan" shall mean a retirement plan that is intended to be
purposes of Canadian tax law), as the case may be.
(t) "Successor" shall mean the direct or indirect successor by purchase,
merger, consolidation or otherwise, to all or substantially all of the
business and/or assets of the Corporation.
(u) "Termination Date" shall mean (i) in the case of the Executive's
death, the date of death, (ii) in the case of a termination by the
Executive in accordance with Section 3, the last day of employment as
set forth in the Notice of Termination given by the Executive, (iii)
in the case of a termination by the Corporation for Cause, a date not
less than thirty (30) days after receipt of the Notice of Termination
by the Executive, (iv) in the case of a termination by the Corporation
due to the Executive's Disability, the date not less than thirty (30)
days after receipt of the Notice of Termination by the Executive,
provided that the Executive shall not have returned to the full-time
performance of duties within thirty (30) days after such receipt, and
(v) in all other cases, the date specified in the Notice of
Termination or if no Notice of Termination is sent, the last day of
the Executive's employment (an Executive receiving periodic severance
pay is not considered employed for the purposes of this Agreement).
2. TERM OF AGREEMENT
This Agreement shall commence as of the date hereof and shall continue in
effect until the date the Executive's employment is terminated (an
Executive being paid periodic severance benefits is no longer considered
employed for these purposes); provided, however, that if the Executive's
employment is terminated following, or in anticipation of, a Change in
Control, the term shall continue in effect until all payments and benefits
have been made or provided to the Executive hereunder.
3. EXECUTIVE'S RIGHT OF TERMINATION
After a Change in Control and for thirty-six (36) months thereafter, the
Executive shall have the right to terminate employment for Good Reason by
sending a Notice of Termination to the Corporation setting forth in
reasonable detail the facts and circumstances claimed to constitute Good
Reason. If the Executive's employment is terminated in accordance with the
provisions of this Section 3, the Executive shall be entitled to the
compensation and benefits described in Section 4(b) below.
4. COMPENSATION UPON CHANGE IN CONTROL FOLLOWED BY CERTAIN TERMINATIONS
If the Executive's employment with the Corporation shall be terminated
within thirty-six (36) months following a Change in Control, the Executive
shall be entitled to the following compensation and benefits:
(a) If the Executive's employment is terminated (i) by the Corporation
for Cause or Disability, (ii) by reason of the Executive's death or (iii)
by the Executive other than in accordance with Section 3, the Corporation
shall pay to the Executive the Accrued Compensation and, if such
termination is other than by the Corporation for Cause, the Pro Rata Bonus,
computed as of the applicable Termination Date.
(b) If the Executive's employment with the Corporation shall be
terminated (x) by the Corporation for any reason other than for Cause or
Disability, (y) other than by reason of the Executive's death, or (z) by
the Executive pursuant to the provisions of Section 3, the Executive shall
be entitled to the following as of the applicable Termination Date:
(i) the Accrued Compensation and the Pro-Rata Bonus;
(ii) an amount equal to three (3) times the Base Amount;
(iii) an amount equal to three (3) times the Bonus Amount;
(iv) an amount equal to three (3) times the Employer Match;
(v) An amount equal to 30% of the Base Amount for certain
(vi) An amount equal to the present value of the additional retirement
benefits the Executive would have earned under the Corporation's
defined contribution or savings plans (excluding the Employer
Match) for the three (3) years following the Termination Date,
computed assuming the following:
(A) the Executive's salary continues at the Base Amount with a
bonus equal to the Bonus Amount; and
(B) vesting requirements are waived;
(vii) As of the Executive's Termination Date, or, if later, when the
Executive attains age fifty (50), the Executive (and the
Executive's spouse or surviving spouse and dependents) will be
provided the retiree health care and life insurance coverage
provided by the Corporation to executive retirees as of the date
of the Change in Control. If and to the extent that the benefits
described in this paragraph cannot be provided under the
Corporation's plans or programs without the benefits provided
thereunder being taxable to the Executive, the Corporation shall
procure an insurance policy or policies on substantially similar
terms and conditions for the Executive and the Executive's spouse
or surviving spouse and dependents, or if such policy or policies
cannot be obtained, shall provide a lump sum payment equal to the
value of the lost benefits, provided that if any of the foregoing
benefits or payment is determined to be deferred compensation
subject to Code Section 409A, benefits shall be provided or
payment shall be made in accordance with Code Section 409A or any
guidance issued thereunder; and
(viii) The Corporation shall pay for or provide the Executive
individual out-placement assistance as offered by a member firm
of the Association of Out-Placement Consulting Firms.
Unless otherwise required in the next paragraph, amounts payable pursuant
to subsections (b)(i) - (vi) shall be made in a lump sum as soon as
administratively feasible following the Executive's Termination Date, but
in no event shall payment be made later than March 15 following the
calendar year of the Executive's Termination Date, unless otherwise
required by Internal Revenue Code Section 409A or any guidance issued
Any amounts payable under this Agreement that are determined to be vested
deferred compensation under Code Section 409A shall be paid in a lump sum
as of the first day of the seventh month following the Executive's
5. EXCISE TAX GROSS-UP
If any payment or benefit made available to the Executive in connection
with a Change in Control (including, without limitation, any payment made
pursuant to any long-term incentive plans, stock option or equity
participation right plans) or termination of the Executive's employment
following a Change in Control (in either category, a "Change in Control
Payment") is subject to the Excise Tax (as hereinafter defined), the
Corporation shall pay to the Executive additional amounts (the "Gross Up
Amounts") such that the total amount of all Change in Control Payments net
of the Excise Tax shall equal the total amount of all Change in Control
Payments to which the Executive would have been entitled if the Excise Tax
had not been imposed. For purposes of this Section 5, the term "Excise Tax"
shall mean the tax imposed by Section 4999 of the Code and any similar tax
that may hereafter be imposed.
The Gross Up Amounts due to the Executive under this Section 5 shall be
estimated by a nationally recognized firm of certified public accountants
(other than the firm that audited the financial statements of the
Corporation for the most recently preceding fiscal year) selected by the
individual holding the position of Chief Financial Officer immediately
before the Change in Control or such officer's designee, at any time that
the Executive is to receive a Change in Control Payment. The Gross Up
Amounts will be based upon the following assumptions:
(a) all Change in Control Payments shall be deemed to be "parachute
payments" within the meaning of Section 280(G)(b)(2) of the Code, and all
"excess parachute payments" shall be deemed to be subject to the Excise Tax
except to the extent that, in the opinion of the certified public
accountants charged with estimating the Gross Up Amounts for the Executive
under this Section 5, such Change in Control Payments are not subject to
the Excise Tax; and
(b) the Executive shall be deemed to pay federal, state and local
taxes at the highest marginal rate of taxation for the applicable calendar
The estimated Gross Up Amount due the Executive with respect to any Change
in Control Payment pursuant to this Section 5 shall be paid to the
Executive in a lump sum not later than thirty (30) business days after such
Change in Control Payment is provided to the Executive. In the event that
the Gross Up Amount is less than the amount actually due to the Executive
under this Section 5, the amount of any such shortfall shall be paid to the
Executive within ten (10) days after the existence of the shortfall is
discovered. In the event the Gross Up Amount is more than the amount
actually due the Executive under this Section 5, the Executive shall repay
the amount of such overpayment to the Corporation within a reasonable time
after the overpayment is discovered.
7. NO MITIGATION REQUIRED
The Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement, nor shall any payment or benefit provided
for in this Agreement be offset by any compensation earned by the Executive
as the result of employment by another employer, by retirement benefits, or
be offset against any amount claimed to be owed by the Executive to the
Corporation, or otherwise.
If any payment to the Executive required by this Agreement is not made
within the time for such payment specified herein, the Corporation shall
pay to the Executive interest on such payment at the legal rate payable
from time to time upon
judgments in the State of
such payment is payable under the terms hereof until paid.
9. NON-COMPETE CANCELLATION
If the Executive is entitled to the payments and benefits described in
Section 4(b), then any agreement by the Executive not to compete with the
Corporation or its Affiliates after the Executive's Termination Date shall
be null and void and any such agreement shall be deemed to be amended
10. EXECUTIVE'S EXPENSES
The Corporation shall pay or reimburse the Executive for all costs,
including reasonable attorney's, accountants' and actuary's fees and
expenses, incurred by the Executive (i) to confirm the Executive's rights
to and amounts of payments hereunder, (ii) to contest or dispute any
termination of the Executive's employment following a Change in Control or
seek to obtain or enforce any right or benefit provided by this Agreement
in litigation or arbitration, or (iii) in connection with any audit by a
taxing authority related to any payment or benefit hereunder, or any
subsequent contest or litigation relating to the tax treatment of such
payment or benefit. Upon demand therefor, the Corporation shall advance to
the Executive any amount as to which the Executive reasonably believes he
will be entitled pursuant to this Section 10 for costs that the Executive
has incurred or will incur during the ninety (90) days following such
11. BINDING AGREEMENT
This Agreement shall inure to the benefit of and be enforceable by the
Executive, and the Executive's heirs, executors, administrators, successors
and assigns. This Agreement shall be binding upon the Corporation, its
Successors and assigns. The Corporation shall require any Successor to
assume and agree to perform this Agreement in accordance with its terms.
The Corporation shall obtain such assumption and agreement prior to the
effectiveness of any such succession.
Any notices and all other communications provided for herein shall be in
writing and shall be delivered personally or sent by facsimile transmission
(with written confirmation sent at the same time), prepaid air courier or
prepaid certified or registered mail. Any such notice shall be deemed to
have been given (a) when received, if delivered in person, sent by
facsimile transmission, or sent by prepaid air courier, or (b) three (3)
business days following the mailing thereof, if mailed by prepaid certified
or registered mail, return receipt requested, addressed to the respective
addresses set forth on the first page of this Agreement or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be
effective only upon receipt. All notices to the Corporation shall be
addressed to the attention of the Board with a copy to the General Counsel.
13. SOLE SEVERANCE; OTHER BENEFITS
If the Executive is paid the entitlements due under Section 4(b), such
payments shall be in lieu of any other severance amounts to which the
Executive may be entitled under any other severance arrangement, including
under any employment agreement, severance pay plan, or applicable
legislation entitling the Executive to severance benefits. However, the
parties acknowledge that the benefits paid hereunder are only exclusive as
to other severance payments and that the Executive may be entitled to other
benefits or payments triggered by a Change in Control under certain other
of the Corporation's benefit or compensation arrangements, including,
without limitation, any long term incentive plans or stock option plans.
14. AMENDMENTS; WAIVERS
No provision of this Agreement may be modified, waived or discharged except
in a writing specifically referring to such provision and signed by the
party against which enforcement of such modification, waiver or discharge
is sought. No waiver by either party hereto of the breach of any condition
or provision of this Agreement shall be deemed a waiver of any other
condition or provision at the same or any other time.
15. GOVERNING LAW
The validity, interpretation, construction and performance of this
Agreement shall be governed by the substantive laws of the State of
The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
If the Executive so elects, any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
nearest to the Executive's principal residence that has an office of the
American Arbitration Association, by one arbitrator in accordance with the
rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court having jurisdiction. The
Corporation hereby waives its right to contest the personal jurisdiction or
venue of any court, federal or state, in an action brought to enforce this
Agreement or any award of an arbitrator hereunder which action is brought
in the jurisdiction in which such arbitration was conducted, or, if no
arbitration was elected, in which arbitration could have been conducted
pursuant to this Section 17.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together will constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
By: /s/ Togo D. West, Jr.
Name: Togo D. West, Jr.
Title: Chairman, Human Resources and
/s/ David J. Paterson
Name: David J. Paterson