SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. _)
Filed by the Registrant X
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
X Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Mercer International Inc.
(Names of Registrant as Specified in Its Charter)
(Names of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check appropriate box):
|_| Fee computed on table below per Exchange Act rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computes
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PROXY
MERCER INTERNATIONAL INC.
Brandschenke Strasse 64
8002 Zurich
Switzerland
This Proxy is solicited on behalf of the Trustees of Mercer
International Inc.
The undersigned hereby appoints Jimmy S.H. Lee and Maarten Reidel and
each of them, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote as designated below, all the shares of
beneficial interest of Mercer International Inc. held of record by the
undersigned on April 29, 1997, at the annual meeting of shareholders to be held
on June 27, 1997, or any adjournment thereof.
1. ELECTION OF TRUSTEES
FOR the nominees listed WITHHOLD AUTHORITY to vote
below (except as marked for the nominees listed
to the contrary below) |_| below |_|
(Instruction: To withhold authority to vote for a nominee, strike a line
through the nominee's name in the list below.)
Michel Arnulphy
2. Amendment of the Company's Non-qualified Stock Option Plan to
increase the number of shares available for issuance from 1,100,000 shares to
2,000,000 shares.
3. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this Proxy will
be voted FOR Proposals 1 and 2.
Please sign exactly as name appears on your share certificates. When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
DATED: _________________________________, 1997
____________________________________
Signature
____________________________________
Signature, if jointly held
Please mark, sign, date and return this Proxy promptly using the enclosed
envelope.
<PAGE>
MERCER INTERNATIONAL INC.
Brandschenke Strasse 64
8002 Zurich
Switzerland
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of
Mercer International Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of
Mercer International Inc., a Massachusetts trust organized under the laws of the
State of Washington (the "Company"), will be held at the Company's offices at
Brandschenke Strasse 64, 8002 Zurich, Switzerland at 9:00 a.m., Central Europe
Time, June 27, 1997, for the following purposes:
1. To elect one (1) Trustee of the Company.
2. To amend the Company's Non-Qualified Stock Option Plan to
increase the number of shares available for issuance from
1,100,000 shares to 2,000,000 shares.
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Trustees have fixed the close of business on April 29, 1997, as the
record date for the determination of Shareholders entitled to notice of and to
vote at the Annual Meeting.
By Order of the Trustees
Jimmy S.H. Lee
President
May ___, 1997
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE REQUESTED TO COMPLETE,
SIGN, DATE AND RETURN THE PROXY IN THE ENCLOSED ENVELOPE. INSTRUCTIONS FOR THE
PROPER EXECUTION OF PROXIES ARE SET FORTH IN THE PROXY STATEMENT.
<PAGE>
MERCER INTERNATIONAL INC.
PROXY STATEMENT
This statement is furnished in connection with the solicitation by the
management of Mercer International Inc. (the "Company") of proxies for use at
the Annual Meeting of Shareholders to be held at Brandschenke Strasse 64, 8002
Zurich, Switzerland on June 27, 1997, and any adjournments thereof. If the Proxy
is properly executed and received by the Company prior to the meeting or any
adjournment thereof, the Shares represented by your Proxy will be voted in the
manner directed. In the absence of voting instructions, the shares will be voted
for each of the proposals. The Proxy may be revoked at any time prior to its use
by filing a written notice of revocation of Proxy or a later dated Proxy with
the Secretary of the Company, Mr. Maarten Reidel, Brandschenke Strasse 64, 8002
Zurich, Switzerland, bearing a date later than the date of the Proxy or by
giving oral notice of revocation at the meeting. You may also revoke your Proxy
in person at the meeting. If you attend the meeting and have submitted a Proxy,
you need not revoke your Proxy and vote in person unless you elect to do so. The
Proxy Statement and form of Proxy are being mailed to Shareholders commencing on
or about May ___, 1997.
The affirmative vote of at least a majority of the shares of beneficial
interest ("Shares") represented in person or by proxy at the Annual Meeting is
required to approve each proposal. The holders of one-third of the outstanding
Shares and entitled to vote at the Annual Meeting, present in person or
represented by proxy, constitute a quorum. Under applicable Washington law,
abstentions and broker non-votes will be counted for purposes of establishing a
quorum, but will have no effect on the vote on either of the proposals.
Proxies will be solicited primarily by mail and may also be solicited
personally and by telephone by Trustees and regular employees of the Company
without additional remuneration therefor. The Company may also reimburse banks,
brokers, custodians, nominees and fiduciaries for their reasonable charges and
expenses in forwarding Proxies and Proxy materials to the beneficial owners of
the Shares. All costs of solicitation of Proxies will be borne by the Company.
The Company does not presently intend to employ any other party to assist in the
solicitation process.
The close of business on April 29, 1997, has been fixed as the record
date (the "Record Date") for the determination of Shareholders entitled to
notice of and to vote at the Annual Meeting.
Voting Securities and Principal Shareholders
The holders of record of 14,917,369 Shares of the Company issued and
outstanding on the Record Date will be entitled to one vote per Share at the
meeting. Under the Company's Declaration of Trust, cumulative voting in the
election of Trustees is not permitted. Trustees will be elected by the majority
of votes cast at the meeting.
The following table sets forth certain information regarding the
beneficial ownership of the Company's Shares as of the Record Date by each
shareholder who is known by the
<PAGE>
Company to own more than five percent of the outstanding Shares. The following
is based solely on statements on filings with the Securities and Exchange
Commission or other reliable information.
<TABLE>
<CAPTION>
Name and Address Number Percent of
of Beneficial Owner of Shares Outstanding Shares
<S> <C> <C>
Fidelity Management 1,733,000 11.62%
82 Devonshire Street
Boston, MA 02109
Neumeier Investment 1,165,000 7.81%
26435 Carmel Rancho Blvd.
Carmel, CA 93923
Kennedy Capital Management Inc. 951,620 6.38%
425 N. New Ballas Road, No. 181
St. Louis, MO 63141
Merrill Lynch Asset Management 748,800 5.02%
800 Scudders Mill Road
Plainsboro, N.Y. 08536
</TABLE>
PROPOSAL 1
ELECTION OF TRUSTEES
Pursuant to resolutions of the Trustees under authority granted by the
Company's Declaration of Trust, the number of Trustees of the Company is
established at five. The votes of a majority of the Shares present in person or
by Proxy at the Annual Meeting are required to elect the Trustees.
The Board of Trustees is divided into three classes. Initially, Class I
Trustees were elected for one year, Class II Trustees were elected for two years
and Class III Trustees were elected for three years. Successors to the class of
Trustees whose term expires at any annual meeting shall be elected for three
year terms. The nominee for Trustee, Mr. Arnulphy, is a member of Class III, and
is to be elected to the Board of Trustees for a three-year term to serve until
the annual meeting of shareholders in 2000, or until his successor is elected
and qualified. Mr. Arnulphy currently serves as a Trustee.
The nominee has indicated that he is willing and able to serve as a
Trustee. If Mr. Arnulphy is unable or unwilling to serve, the accompanying proxy
may be voted for the election of such other person as shall be designated by the
Trustees. Proxies received by the Trustees on which no designation is made will
be voted FOR the nominee.
2
<PAGE>
Trustees
The following table sets forth information regarding each nominee for
election as a Trustee and each Trustee whose term of office will continue after
the Annual Meeting.
<TABLE>
<CAPTION>
Expiration of
Name Current Position with the Company Age Term as a Trustee
<S> <C> <C> <C>
Jimmy S. H. Lee Chairman, President and Trustee 40 1999
C. S. Moon Trustee 50 1998
Maarten Reidel Secretary and Chief Financial Officer
and Trustee 33 1998
Michel Arnulphy Trustee 63 1997
</TABLE>
Jimmy S.H. Lee has been a Trustee since May, 1985, and Chief Executive
Officer of the Company since 1992. Mr. Lee is a director of Drummond Financial
Corporation.
C. S. Moon has been a Trustee since June 1994. Mr. Moon is Executive
Director of Shin Ho Group of Korea, an international paper manufacturer
headquartered in Korea. Mr. Moon joined Shin Ho is 1990 and previously served in
managerial positions with Moo Kim Paper Manufacturing Co., Ltd. and Sam Yung
Pulp Co., Ltd., both in Korea.
Maarten Reidel has been a Trustee since December 1996, a Managing Director
of Zellstoff-und Papierfabrik Rosenthal GmbH ("ZPR") since November 1994 and the
Chairman of the Management Board of Dresden Papier AG from 1992 to 1994, a
member of the German government agency responsible for the privatization of
government owned companies from 1992 to 1994, and an accountant with Arthur
Andersen & Co. from 1987 to 1992.
Michel Arnulphy has been a Trustee since June 1995. From 1975 to the
present, Mr. Arnulphy has been Managing Director, of J. Mortenson & Co., Ltd. in
Hong Kong. J. Mortenson & Co., Ltd. manufactures water treatment equipment.
During the fiscal year ended December 31, 1996, the Trustees held one board
meeting and acted by consent resolution on 12 occasions. Under the Declaration
of Trust of the Company, resolutions may be adopted by written consent signed by
a majority of the Trustees. Each Trustee attended at least 75% of the board
meetings.
Committees of the Board
The Company has established an audit committee. The function of the Audit
Committee is to meet with and review the results of the audit of the Company's
financial statements performed by the independent public accountants and to
recommend the selection of independent public accountants. The members of the
audit committee are Mr. Michael Arnulphy and Mr. C. S. Moon. The audit committee
did not meet during 1996.
3
<PAGE>
The Company has also established a Compensation Committee. The members
of the Compensation Committee are Mr. C. S. Moon and Mr. Michel Arnulphy. The
primary duty of the Compensation Committee is to grant stock options under the
Company's 1992 Non- Qualified Stock Option Plan and to award bonuses to
employees and consultants under the Company's Incentive Bonus Plan. The
Compensation Committee did not meet during 1996, but acted by written consent on
two occasions.
The Company does not have a Nominating Committee.
Security Ownership of Management
The following table sets forth information regarding ownership of the
Company's Shares on the Record Date by (i) each Trustee, nominee for Trustee and
Named Executive Officer (as defined below); and (ii) all Trustees and executive
officers of the Company as a group. Unless otherwise indicated, each Named
Executive Officer and Trustee has sole voting and disposition power with respect
to the Shares set forth opposite his name. Each such person has indicated that
he will vote all Shares owned by him in favor of the nominees for Trustee and in
favor of each of the other proposals.
<TABLE>
<CAPTION>
Shares
Beneficially Percent
Name of Owner Owned of Ownership
<S> <C> <C>
Jimmy S.H. Lee(1) 89,000 *
Michael J. Smith(2) 128,500 *
C.S. Moon(3) 12,000 *
Michel Arnulphy(3) 6,000 *
Maarten Reidel(3) 55,000 *
Ron Aurell(3) 10,000 *
Trustees and
Officers as a Group
(6 persons)(4) 300,500 2.01%
* Less than 1%.
(1) Includes presently exercisable stock options to acquire 75,000 shares.
(2) Mr. Smith resigned as a trustee and executive officer in December 1996.
(3) Represents presently exercisable stock options.
(4) Includes presently exercisable stock options to acquire 158,000 shares.
</TABLE>
4
<PAGE>
Executive Compensation
The following table sets forth information on the annual compensation
for each of the Company's last three fiscal years of the chief executive officer
( the "CEO") and each of the Company's four most highly compensated executive
officers other than the CEO who received aggregate annual remuneration from the
Company in excess of $100,000 during the fiscal year ended December 31, 1996
(collectively, with the CEO, the "Named Executive Officers").
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Securities
Other Annual Underlying All Other
Name and Principal Compensation Options/ Compensa-
Position Year Salary($) Bonus($) ($) SARs(#) tion($)
---------- ---- --------- -------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Jimmy S.H. Lee 1996 293,220 128,855 0 75,000 0
Chief Executive 1995 130,000 250,000 0 0 0
Officer 1994 98,600 151,579 0 0 0
Michael J. Smith(1) 1996 0 128,855 0 64,510 0
Executive Vice 1995 112,733 200,000 0 0 0
President and Chief 1994 55,480 151,579 0 0 0
Financial Officer
Maarten Reidel (2) 1996 179,104 71,586 0 0
Co-Managing 1995 80,000 238,000 0 0
Director 1994 77,900 84,211 0 110,000 0
Pulp and Paper
Operations
Dr. Ron Aurell (3) 1996 79,601 *(4) 0 0
Co-Managing 1995 152,329 921,188(5) 0 0 0
Director 1994 218,295 311,761 0 10,000 0
Zellstoff-und
Papierfabrik GmbH
(1) Mr. Smith resigned from the Company in December 1996. He
did not exercise the granted options within 90 days of his
resignation and accordingly all of these options were cancelled.
(2) Mr. Reidel became an executive officer of the Company in 1994 through
his positions with Dresden Papier AG ("DPAG") and Zellstoff-und
Papierfabrik GmbH ("ZPR").
(3) Dr. Aurell became an executive officer of the Company in 1994 through
his position with ZPR. The amount shown for his compensation in 1994
includes $181,700 in consulting fees paid to a consulting company for
services rendered by Dr. Aurell prior to his becoming an employee of
ZPR.
(4) At the date hereof, Dr. Aurell's bonus for 1996 had not been determined.
(5) Of Dr. Aurell's bonus for 1995, $690,769 was paid in 1996 and the
balance is payable in 8 equal quarterly installments commencing
January 1, 1997 and bears interest at 8% per annum.
</TABLE>
5
<PAGE>
Employment Agreement
Mr. Lee has entered into an employment agreement with the Company dated
July 1, 1994. The agreement generally provides, subject to certain termination
provisions, for continued employment of Mr. Lee for a period of 36 months with
automatic one month renewals, so that the contract at all times has a remaining
term of 36 months. The agreement provides for a base salary and other
compensation as determined by the board of directors. The agreement contains
change in control provisions pursuant to which, if a change in control (as
defined in the agreement) occurs, Mr. Lee may only be discharged for cause. In
the event Mr. Lee is terminated without cause or resigns for good reason (as
defined in the agreement) within eighteen months of the change in control, he
shall be entitled to a severance payment of three times his annual salary under
the agreement and all unvested rights in any stock option or other benefit plans
shall vest in full. If Mr. Lee is terminated without cause or resigns for good
reason after eighteen months of the change in control, he shall be entitled to a
severance payment of a proportionate amount based on the length of time
remaining in the term of the agreement of three times his annual salary under
the agreement and all unvested rights in any stock option or other benefit plans
shall vest in full. In addition, Mr. Lee will continue to receive equivalent
benefits as were provided at the date of termination for the remaining term of
the agreement.
Stock Options
The following table sets forth information concerning the award of
stock options to the Named Executive Officers during fiscal 1996:
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Potential Realizable
Number of % of Total Value at Assumed
Securities Options/SARs Annual Rates of Stock
Underlying Granted to Price Appreciation for
Options/SARs Employees Fiscal Exercise or Base Expiration Option Term (C)
Name Granted (#)(A) Year (B) Price ($/Sh) Date 5% ($) 10%($)
- ---- -------------- --------------- ---------------- ---------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Jimmy S.H. Lee 75,000 37.6% $18.47 April 2006 $871,176 $2,207,731
Michael J. Smith 64,500 32.3% $18.47 April 2006 $749,211 $1,898,649
</TABLE>
The table below provides information on exercises of options during
1996 by the Named Executive Officers and information with respect to unexercised
options held by the Named Executive Officers at December 31, 1996.
6
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Values
Number of
Securities Value of
Underlying Unexercised in-the-
Unexercised money
Options/SARs at Options/SARs at
Fiscal Year-End (#) Fiscal Year-End ($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
---- --------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Jimmy S.H. Lee 0 0 75,000/0 0/0
Michael J. Smith(1) 0 0 0 0
Maarten Reidel 0 0 55,000/0 0/0
Dr. R. Aurell 0 0 10,000/0 0/0
================================================================================================================================
(1) All of Mr. Smith's options were cancelled following termination of his
employment in December 1996.
</TABLE>
Compensation of Trustees
The Trustees do not receive cash compensation for service as a Trustee.
The Company reimburses the Trustees and officers for their expenses incurred in
connection with their duties as Trustees and officers of the Company.
Non-employee Trustees who are in office at the end of a fiscal year receive
options to acquire 6,000 shares of common stock at an exercise price equal to
the closing price of the Company's shares on The Nasdaq Stock Market's National
Market on the last trading day of the fiscal year.
Report of the Trustees on Executive Compensation
Compensation of the Company's executive officers is determined on an
annual basis by the either the Trustees as a whole or the Compensation Committee
in consultation with management. For 1996, compensation of executive officers
was determined by the Trustees as a whole. The Company's goal to compensate the
Company's executive officers in a manner which is consistent with the Company's
strategic plan and which rewards executive officers in a fair manner for
performance which forwards the strategic plan. To this end, the Company's basic
compensation philosophy is to maintain annual base salaries for executive
officers at relatively low amounts and to award bonuses and long-term incentives
in the form of stock options based on annual performance of the Company and of
the executive.
The Company's strategic plan was to expand its asset and earnings base
through acquisitions of companies and assets that management believes to be
undervalued. As a result of this strategic plan, the Company's business plan has
been transaction oriented. During the last three fiscal years, the Company has
acquired two operating companies which
7
<PAGE>
have transformed the nature of the Company's business. The Company's business
has become and will continue to be less transaction oriented and accordingly,
revenues and earnings from its operating businesses will become the more
important part of the Company's business. As a result, the financial results
from these operating companies have become a major factor in determining levels
of executive compensation.
To this end, the Company adopted an Employee Incentive Plan ("EIP")
during 1994 in which the Company's executive officers and other employees may
participate. Under the EIP, 5% of the Company's Net Income for each fiscal year
is set aside as a bonus pool. During the course of the fiscal year, the Trustees
may grant interests in the bonus pool to employees, officers and trustees of the
Company and its subsidiaries. Bonuses are to be paid within 120 days of the end
of the fiscal year.
In evaluating the performance of the Company's executive officers in
awarding grants under the EIP, the Trustees considered factors such as the
growth in earnings of the Company, the effectiveness of cost reduction and
productivity-enhancement measures in the operating subsidiaries, the growth in
assets, and the performance of the Company's Common Stock. The Trustees also
considered the contribution of the Company's executive officers toward the
accomplishment of those goals.
In determining the compensation of the Company's Chief Executive
Officer, Mr. Lee, for 1996, the Trustees evaluated Mr. Lee based on the criteria
set forth above. Mr. Lee has relocated to Switzerland at the Company's request
during 1996 and his salary was increased at that time to reflect the higher cost
of living. In determining Mr. Lee's salary and his bonus award under the EIP,
the Trustees considered the facts that both DPAG and ZPR operated profitably
during 1996, with better operating results than anticipated by management at the
time of the acquisitions.
Michel Arnulphy Jimmy S. H. Lee C. S. Moon Maarten Reidel
8
<PAGE>
Performance Graph
The following graph compares the cumulative total stockholder return
(stock price appreciation plus dividends) on the Company's Common Stock with the
cumulative total return of NASDAQ Market Index and an additional group of peer
companies which comprise Standard Industrial Classification Code 262--Paper
Mills for comparison over the five years ending December 31, 1996. The companies
which comprise SIC Code 262 are Abitibi Price Inc.; American Israeli Paper;
Badger Paper Mills Inc.; Boise Cascade Corporation; Bowater Inc.; Champion
International; Chesapeake Corporation; Consolidated Paper Inc.; Crown Vintage
Inc.; Domtar Inc.; Fletcher Challenger Forest Products; Fletcher Challenger
Building Products; Fletcher Challenger Paper; Fort Howard Corp.; Glatfelter P.H.
Company; James River Corporation of Virginia; Kimberly-Clark Corporation;
MacMillan Bloedel Ltd.; Mosinee Paper Corporation; Pope & Talbot Inc.; Potlatch
Corporation; Repap Enterprises Corporation; Schuller Corporation; Schweitzer
Mauduit International; Striker Industries Inc.; Union Camp Corporation; Wausau
Paper Mills Company; Westvaco Corporation; Weyerhauser Company; and Willamette
Industries Inc.
<TABLE>
<CAPTION>
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
FISCAL YEAR ENDING
COMPANY 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Mercer International Inc. SBI 100 145.83 313.89 302.78 455.56 227.78
Industry Index 100 110.24 122.50 124.96 164.65 184.29
Broad Market 100 100.98 121.13 127.17 164.96 204.98
</TABLE>
9
<PAGE>
Certain Transactions
At December 21, 1996, Mr. Lee and Mr. Reidel had outstanding amounts
payable to the Company of $261,000 and $105,000, respectively. These amounts are
due on demand and do not bear interest.
The Company reimburses a Hong Kong company controlled by the family of Mr.
Lee for the use of office space and general and administrative expenses for
activities of the Company's Hong Kong subsidiary. During 1996, the Company
reimbursed this company a total of $232,000.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") requires that the Company's officers and directors, and persons
who own more than 10% of a registered class of the Company's equity securities,
file reports of ownership and changes of ownership with the Securities and
Exchange Commission (the "SEC"). Officers, directors and greater than 10%
shareholders are required by SEC regulation to furnish the Company with copies
of all such reports they file.
Based solely on the review of the copies of such reports received by the
Company, and on written representations by the Company's officers and Trustees
regarding their compliance with the applicable reporting requirements under
Section 16(a) of the Exchange Act, the Company believes that, with respect to
its fiscal year ended December 31, 1996, all of its officers and Trustees filed
all required reports under Section 16(a) in a timely manner.
PROPOSAL 2: INCREASE IN SHARES AVAILABLE FOR ISSUANCE UNDER STOCK OPTION
PLAN
In 1992, the Board of Directors of the Company adopted the Mercer
International, Inc. 1992 Non-Qualified Stock Option Plan (the "Stock Plan"). A
copy of the Stock Plan may be obtained upon written request to the Company's
secretary. The Stock Plan was approved by shareholders at the annual meeting in
1993. Under the Stock Plan, the Company is authorized to issue 1,000,000 shares
of Mercer common stock upon the exercise of options granted under the Stock
Plan. The shareholders are being requested to approve an amendment to the Stock
Plan which increases the number of shares that may be issued under the Stock
Plan from 1,100,000 to 2,000,000.
The purpose of the Stock Plan is to enable the Company to attract and
retain employees of ability and experience, and to furnish such personnel
significant incentives to improve operations and increase profits of the
Company. Since its inception, options with respect to 630,000 shares have been
exercised and 395,000 options are currently outstanding and exercisable.
Currently, there are less than 74,500 shares available for future option grants.
The Board believes that the number of shares remaining available for issuance
will be insufficient to achieve the purpose of the Stock Plan over the term of
the Plan (which expires, unless earlier terminated, in 2002) unless additional
shares are authorized. The
10
<PAGE>
amount of the proposed increase, 900,000 shares, represents approximately 6.0%
of the Company's outstanding shares.
In general, the Stock Plan currently authorizes Mercer to grant
non-qualified stock options. The purchase price of each share of Mercer common
stock covered by an option may not be less than 100% of the fair market value of
Mercer common stock, on the date of grant of the option.
Approval of an amendment to the Stock Plan as described above requires the
affirmative vote of a majority of the outstanding shares of common stock
eligible to vote as the meeting. THE TRUSTEES RECOMMEND A VOTE FOR ADOPTION OF
THIS PROPOSAL.
INDEPENDENT ACCOUNTANTS AND AUDITORS
Peterson Sullivan P.L.L.C., Certified Public Accountants, has been selected
by the Trustees to examine the consolidated financial statements of the Company
and its subsidiaries for the fiscal year ending December 31, 1997. Peterson
Sullivan P.L.L.C. have examined the consolidated financial statements of the
Company and its subsidiaries each year since 1989. Representatives of Peterson
Sullivan P.L.L.C. are not expected to be present at the Annual Meeting.
FUTURE SHAREHOLDER PROPOSALS
Any proposal which a Shareholder intends to present at the next Annual
Meeting of Shareholders must be received by the Company on or before December
31, 1997.
OTHER MATTERS
The Trustees know of no matter other than those mentioned in the Proxy
Statement to be brought before the meeting. If other matters properly come
before the meeting, it is the intention of the Proxy holders to vote the Proxies
in accordance with their judgment. If there are insufficient votes to approve
any of the proposals contained herein, the Trustees may adjourn the meeting to a
later date and solicit additional Proxies. If a vote is required to approve such
adjournment, the Proxies will be voted in favor of such adjournment.
A copy of the Company's annual report to the Securities and Exchange
Commission will be provided to Shareholders without charge upon written request
directed to the Company.
By order of the Trustees.
DATE: May ___, 1997.
11
<PAGE>
