def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT
NO. )
Filed by the
Registrant þ
Filed by a party other than the
Registrant o
Check the appropriate box:
o Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to §240.14a-12
MERCER INTERNATIONAL INC.
(Name of Registrant as Specified in
its Charter)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(4)
and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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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.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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MERCER
INTERNATIONAL INC.
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD ON JUNE 1,
2010
TO The Shareholders of Mercer International Inc.
NOTICE IS HEREBY GIVEN that the Annual General Meeting of
Shareholders of Mercer International Inc. (the
Company) will be held on June 1, 2010 at the
Terminal City Club, 837 West Hastings Street, Vancouver,
British Columbia, Canada at 10:00 a.m. (Vancouver time) for
the following purposes:
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1.
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To elect the directors for the ensuing year;
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To ratify the selection of PricewaterhouseCoopers LLP as the
independent auditors;
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To approve the adoption of a 2010 Stock Incentive Plan; and
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To transact such other business as may properly come before the
meeting or any adjournment, postponement or rescheduling thereof.
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The board of directors of the Company has fixed the close of
business on April 13, 2010 as the record date for the
determination of shareholders entitled to vote at the meeting or
any adjournment, postponement or rescheduling thereof.
For information on how to vote, please refer to the instructions
on the accompanying proxy card, or review the section titled
Commonly Asked Questions and Answers beginning on
page 2 of the accompanying proxy statement.
BY ORDER OF THE BOARD OF DIRECTORS
Jimmy S.H. Lee
Chairman of the Board
April 16, 2010
Important Notice Regarding the Availability of Proxy
Materials for the Annual Meeting of Shareholders to be held on
June 1, 2010: Our proxy statement and our 2009 Annual
Report to Shareholders, which includes our Annual Report on
Form 10-K,
are available at www.mercerint.com by clicking on 2010
Annual General Meeting Materials.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, WE URGE YOU TO COMPLETE, SIGN, DATE AND
RETURN IN THE ENCLOSED ENVELOPE THE PROXY CARD THAT ACCOMPANIES
THIS NOTICE OF ANNUAL MEETING OF SHAREHOLDERS, OR VOTE USING THE
INTERNET OR TELEPHONE, AS PROMPTLY AS POSSIBLE, IN ORDER TO
ENSURE THE PRESENCE OF A QUORUM. A PROXY MAY BE REVOKED IN THE
MANNER DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT.
PROXY
STATEMENT
TABLE OF
CONTENTS
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MERCER
INTERNATIONAL INC.
PROXY STATEMENT
GENERAL
INFORMATION
This proxy statement (Proxy Statement) is furnished
in connection with the solicitation by management of Mercer
International Inc. of proxies for use at the annual general
meeting of our shareholders (Shareholders) to be
held at the Terminal City Club, 837 West Hastings Street,
Vancouver, British Columbia, Canada at 10:00 a.m.
(Vancouver time) on June 1, 2010 (the Meeting),
or any adjournment, postponement or rescheduling thereof.
References to we, our, us,
the Company or Mercer in this Proxy
Statement mean Mercer International Inc. and its subsidiaries
unless the context clearly suggests otherwise.
If a proxy in the accompanying form (Proxy) is
properly executed and received by us prior to the Meeting or any
adjournment, postponement or rescheduling thereof, our shares of
common stock, $1.00 par value (Shares)
represented by such Proxy will be voted in the manner directed.
In the absence of voting instructions, the Shares will be voted
for the proposals set out in the accompanying notice of annual
general meeting of Shareholders. Please see the Proxy for voting
instructions.
A 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 Companys registrar and transfer agent at BNY
Mellon Shareowner Services, P.O. Box 3550, South
Hackensack, NJ
07606-9250.
A Proxy may also be revoked by submitting another Proxy with a
later date over the internet, by telephone, to our registrar and
transfer agent or by voting in person at the Meeting. Attending
the Meeting will not, in and of itself, constitute revocation of
a Proxy.
The holders of one-third of the outstanding Shares entitled to
vote at the Meeting, present in person or represented by Proxy,
constitutes a quorum for the Meeting. Under applicable
Washington State law, abstentions and broker non-votes will be
counted for the purposes of establishing a quorum for the
Meeting.
Proxies for the Meeting will be solicited by the Company
primarily by mail. Proxies may also be solicited personally by
our directors, officers or regular employees without additional
compensation. We may reimburse banks, broker-dealers or other
nominees for their reasonable expenses in forwarding the proxy
materials for the Meeting to beneficial owners of Shares. The
costs of this solicitation will be borne by the Company.
This Proxy Statement, accompanying Proxy and our annual report
for 2009, which includes our annual report on
Form 10-K
for the fiscal year ended December 31, 2009, (the
2009 Annual Report) will be mailed to Shareholders
commencing on or about April 23, 2010. Our board of
directors (the Board) has set the close of business
on April 13, 2010 as the record date (the Record
Date) for the determination of Shareholders entitled to
notice of and to vote at the Meeting or any adjournment,
postponement or rescheduling thereof.
COMMONLY
ASKED QUESTIONS AND ANSWERS
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Why am I receiving this Proxy Statement and Proxy? |
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This Proxy Statement describes the proposals upon which you, as
a Shareholder, will vote. It also gives you information on the
proposals, as well as other information so that you can make an
informed decision. |
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What is the Proxy? |
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The Proxy enables you to appoint Jimmy S.H. Lee and David M.
Gandossi as your representatives at the Meeting. By completing
and returning the Proxy, you are authorizing Mr. Lee and
Mr. Gandossi to vote your Shares at the Meeting as you have
instructed them on the Proxy. This way your Shares will be voted
whether or not you attend the Meeting. Even if you plan to
attend the Meeting, it is a good idea to complete and return
your Proxy before the date of the Meeting just in case your
plans change. |
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Who can vote at the Meeting? |
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Registered Shareholders who own our Shares on the Record Date
may attend and vote at the Meeting. Each Share is entitled to
one vote. There were 36,483,204 Shares outstanding on the
Record Date. If you own your Shares through a brokerage account
or in another nominee form, you must provide instructions to the
broker or nominee as to how your Shares should be voted. Your
broker or nominee will generally provide you with the
appropriate forms at the time you receive this Proxy Statement.
If you own your Shares through a brokerage account or nominee,
you cannot vote in person at the Meeting unless you receive a
Proxy from the broker or the nominee. |
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What am I voting on? |
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We are asking you to: (i) vote for the election of the
Companys directors for the ensuing year; (ii) ratify
the selection of PricewaterhouseCoopers LLP as our independent
auditors; and (iii) approve the adoption by our board of
directors of a 2010 Stock Incentive Plan. |
OUR BOARD
OF DIRECTORS RECOMMENDS A VOTE IN FAVOR
OF EACH OF THESE PROPOSALS.
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How do I vote? |
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Registered Shareholders may vote in person at the Meeting, by
mail, by phone or on the Internet. |
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Voting by Mail. Complete, date, sign
and mail the Proxy in the enclosed postage pre-paid envelope. If
you mark your voting instructions on the Proxy, your Shares will
be voted as you instruct. Please see the Proxy for voting
instructions. |
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Voting in Person. If you attend the
Meeting, you may vote as instructed at the Meeting. However, if
you hold your Shares in street name (that is, through a
broker/dealer or other nominee), you will need to bring to the
Meeting a Proxy delivered to you by such nominee reflecting your
Share ownership as of the Record Date. |
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Voting on the Internet. Go to
www.proxyvoting.com/merc and follow the instructions. You
should have your Proxy in hand when you access the website. |
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Voting by Telephone. Call the toll-free
number listed on the Proxy from any touch-tone telephone and
follow the instructions. You should have your Proxy in hand when
you call. |
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If you own your Shares through a brokerage account or in other
nominee form, you should follow the instructions you receive
from the record holder to see which voting methods are available. |
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What does it mean if I receive more than one Proxy? |
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It means that you hold Shares in multiple accounts. Please
complete and return all Proxies to ensure that all your Shares
are voted in accordance with your instructions. |
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What if I change my mind after returning my Proxy? |
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If you are a registered Shareholder, you may revoke your Proxy
and change your vote at any time before it is voted at the
Meeting. You may do this by: |
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sending a signed notice of revocation of
proxy to our registrar and transfer agent at the address set out
above stating that the Proxy is revoked; or
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submitting another Proxy with a later
date over the internet, by telephone or to our registrar and
transfer agent at the address set out above; or
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voting at the Meeting.
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Your Proxy will not be revoked if you attend the Meeting but do
not vote. |
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If you own your Shares through a broker or other nominee and
wish to change your vote, you must send those instructions to
your broker or nominee. |
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Will my Shares be voted if I do not sign and return my
Proxy? |
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If your Shares are registered in your name, they will not be
voted unless you submit your Proxy or vote in person at the
Meeting. If your Shares are held in street name, your
broker/dealer or other nominee will not have the authority to
vote your Shares unless you provide instructions. |
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Who will count the votes? |
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Agents of the Company will tabulate the Proxies. Additionally,
votes cast by Shareholders voting in person at the Meeting are
tabulated by a person who is appointed by our management before
the Meeting. |
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How many Shares must be present to hold the Meeting? |
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To hold the Meeting and conduct business, at least one-third of
the outstanding Shares entitled to vote at the Meeting must be
present at the Meeting. This is called a quorum. |
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Votes are counted as present at the Meeting if a Shareholder
either: |
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is present and votes in person at the
Meeting; or
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has properly submitted a Proxy.
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Abstentions and broker non-votes (Shares held by a broker/dealer
or other nominee that are not voted because the broker/dealer or
other nominee does not have the authority to vote on a
particular matter) will be counted for the purposes of a quorum. |
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How many votes are required to elect directors? |
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The affirmative vote of a majority of the Shares voted at the
Meeting is required to elect our directors. However, our
corporate governance guidelines, referred to as the
Governance Guidelines, provide that in uncontested
directors elections any nominee for director who receives
a greater number of votes Withheld for his or her
election than votes For such election (a
Majority Withheld Vote) will promptly tender his or
her resignation as a director to our Governance and Nominating
Committee which will, without participation of any director so
tendering his or her resignation, consider the resignation offer
and recommend to the Board whether to accept it. The Board,
without participation by any director so tendering his or her
resignation, will act on the Governance and Nominating
Committees recommendation within 90 days following
certification of the Shareholder vote. We will promptly issue a
press release disclosing the Boards decision and, if the
Board rejects the resignation offer, its reasons for such
decision. We will also promptly disclose this information in a
Securities and Exchange Commission (SEC) filing. |
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How many votes are required to adopt the other proposals? |
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The ratification of the appointment of PricewaterhouseCoopers
LLP and the approval of the 2010 Stock Incentive Plan will both
require the affirmative vote of a majority of the Shares
represented at the Meeting and entitled to vote thereon. |
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What is the effect of withholding votes or
abstaining? |
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You can withhold your vote for any nominee in the election of
directors. Withheld votes will be excluded entirely from the
vote and will have no effect on the outcome (other than
potentially triggering the director resignation requirements set
forth in our Governance Guidelines and as described above). On
other proposals, you can Abstain. If you abstain,
your Shares will be counted as present at the Meeting for
purposes of that proposal and your abstention will have the
effect of a vote against the proposal. |
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How are votes counted? |
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You may vote For or Withhold your vote
on the proposal to elect directors. You may vote For
or Against or Abstain on the proposal to
ratify the selection of our independent auditors and on the
proposal to approve the 2010 Stock Incentive Plan. If you
withhold or abstain from voting on a proposal, it will have the
practical effect of voting against the proposal. |
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If you sign and return your Proxy without voting instructions,
your Shares will be counted as a For vote in favor
of each proposal. |
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Could other matters be discussed at the Meeting? |
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We do not know of any other matters to be brought before the
Meeting other than those referred to in this Proxy Statement. If
other matters are properly presented at the Meeting for
consideration, the persons named in the Proxy will have the
discretion to vote on those matters on your behalf. |
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Where and when will I be able to find the voting results? |
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You can find the official results of voting at the Meeting in a
current report on
Form 8-K
filed with the SEC within four business days of the Meeting. |
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Do you have plans to implement the new rules that allow
companies to direct their shareholders to an on-line copy of the
proxy materials, rather than sending them paper copies? |
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New SEC rules now allow companies to mail their shareholders a
notice that their proxy materials can be accessed over the
internet, instead of sending a paper copy of the proxy statement
and annual report. We have decided not to adopt this new
delivery method for the Meeting. We are considering how to
realize the cost savings opportunity and environmental benefits
of this new rule while still maintaining a meaningful and
convenient proxy process for our Shareholders. |
PROPOSAL 1
ELECTION OF DIRECTORS
In accordance with our articles of incorporation and bylaws, as
amended, our Board is authorized to fix the number of the
Companys directors at not less than three (3) and not
more than thirteen (13) and has fixed the current number of
directors at seven (7). Directors are elected at each annual
meeting of Shareholders to hold office until the next annual
meeting. The persons identified below are nominated to be
elected at the Meeting for the ensuing year. All of the nominees
are currently directors of the Company. Despite the expiration
of a directors term, the director shall continue to serve
until the directors successor is elected and qualified or
until there is a decrease in the number of directors. If for any
unforeseen reason any of the nominees for director declines or
is unable to serve, Proxies will be voted for the election of
such other person or persons as shall be designated by the
directors. Proxies received which do not specify a choice for
the election of the nominees will be voted FOR each
of the nominees.
OUR BOARD
RECOMMENDS A VOTE FOR EACH OF THE NOMINEES
LISTED BELOW.
Our Governance and Nominating Committee believes that the
current members of the Board represent a desirable mix of
backgrounds, skills and experiences. Additionally, the
Governance and Nominating Committee believes that the specific
leadership skills and other experiences of its Board members
described below, particularly in the areas of financial
accounting/reporting, auditing, banking, finance and natural
resources, provide the Company with the perspectives and
judgment necessary to guide the Companys strategies and
monitor their execution.
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Nominees
for Election as Directors
Jimmy S.H. Lee, age 53, has been a director since
May 1985 and President and Chief Executive Officer since 1992.
Previously, during the period that MFC Bancorp Ltd. was our
affiliate, he served as a director from 1986 and President from
1988 to December 1996 when it was spun out. Mr. Lee was
also a director of Quinsam Capital Corp. from March 2004 to
November 2007 and Fortress Paper Ltd. from August 2006 to April
2008. During Mr. Lees tenure with Mercer, we acquired
our Rosenthal mill and converted it to the production of kraft
pulp, constructed and commenced operations at our Stendal mill
and acquired our Celgar mill.
Due to a variety of professional and other experiences,
Mr. Lee possess particular knowledge and experience in a
variety of areas, including finance and banking, credit markets,
derivative risk management, and international pulp markets.
Additionally, as our Chief Executive Officer since 1992,
Mr. Lee has guided the Companys operations and
development for the last 18 years.
Kenneth A. Shields, age 61, has been a director
since August 2003. Mr. Shields is the Chairman and Chief
Executive Officer of Conifex Inc., a private Canadian company
operating in the forestry and sawmilling sector.
Mr. Shields currently serves as a member of the board of
directors of Raymond James Financial, Inc. and retired as Chief
Executive Officer of its Canadian subsidiary, Raymond James
Ltd., in February 2006. Mr. Shields has served as past
Chairman of the Investment Dealers Association of Canada and
Pacifica Papers Inc., and is a former director of each of Slocan
Forest Products Ltd., TimberWest Forest Corp. and the Investment
Dealers Association of Canada.
Through his tenure as Chief Executive Officer of Raymond James
Ltd., Mr. Shields has accumulated extensive executive
experience in banking and finance, including corporate finance
and investment banking. Mr. Shields current tenure as
chief executive officer of Conifex also provides him with
significant executive experience in the forestry and sawmilling
sector. He also has a strong regulatory background as the former
Chair of the Investment Dealers Association of Canada, and
substantial outside board experience, particularly in the
forestry sector.
William D. McCartney, age 54, has been a director
since January 2003. Mr. McCartney has been President and
Chief Executive Officer of Pemcorp Management Inc., a business
consulting services firm primarily engaged in corporate finance
and management consulting services, since 1990.
Mr. McCartney is also currently Chief Executive Officer of
Terrace Resources and a director of Sunward Resources Ltd.,
Petra Petroleum and New World Resources, all currently listed on
the TSX Venture Exchange. Mr. McCartney was also a former
director of Woodbridge Energy, Exeter Resource Corp.,
Southwestern Resources Corp., Bowram Energy, Newstrike Capital
and Aurora Platinum. Mr. McCartney is a member of the
Canadian Institute of Chartered Accountants and was the founding
partner of Davidson & Company Chartered Accountants.
As a Chartered Accountant, Mr. McCartney brings substantial
knowledge relating to the financial accounting and auditing
processes. He also has executive experience as the current Chief
Executive Officer of Pemcorp Management Inc., as well as
significant outside board experience, particularly in the
natural resource sector. Mr. McCartney has also been
involved with numerous capital restructuring events involving
several public companies.
Graeme A. Witts, age 71, has been a director since
January 2003. Mr. Witts organized Sanne Trust Company
Limited, a trust company located in the Channel Islands, in 1988
and was managing director from 1988 to 2000, when he retired. He
is a director and was formerly the Chairman of Azure Property
Group, SA, a European hotel group. Mr. Witts is also a
fellow of the Institute of Chartered Accountants of England and
Wales and has previous executive experience with the
Procter & Gamble Company, as well as with Clarks
shoes. Mr. Witts also has experience in government auditing.
Mr. Witts brings to the Board extensive experience in
government auditing, as well as international executive
experience from his tenures with Protector and Gamble and Clark
shoes. Additionally, as a fellow of the Institute of Chartered
Accountants of England and Wales, Mr. Witts brings a
significant financial accounting knowledge from a global
perspective.
Guy W. Adams, age 59, has been a director since
August 2003. Mr. Adams is the managing member of GWA
Advisors, LLC, GWA Investments, LLC and GWA Capital Partners,
LLC, where he has served since 2002. GWA
5
Investments is an investment fund investing in publicly traded
securities managed by GWA Capital Partners, LLC, a registered
investment advisor. Prior to 2002, Mr. Adams was the
President of GWA Capital, which he founded in 1996 to invest his
own capital in public and private equity transactions, and a
business consultant to entities seeking refinancing or
recapitalization. Mr. Adams was a director of Vitesse
Semiconductor Corp. from October 2007 to October 2009 and a
director of Exar Corporation from October 2005 to September 2007.
Mr. Adams brings to the Board extensive finance and
investment experience, including both private and public equity
transactions. He has also been involved in numerous refinancing
and recapitalization transactions and has accumulated
significant corporate governance experience after having
previously served on the boards of three publicly traded
companies. Mr. Adams has often been a speaker at
conferences on matters of corporate governance. Additionally,
prior to his current position as an investment manager,
Mr. Adams spent eight years as an international operations
manager in the oil industry.
Eric Lauritzen, age 72, has been a director since
June 2004. Mr. Lauritzen was President and Chief Executive
Officer of Harmac Pacific, Inc., a North American producer of
softwood kraft pulp previously listed on the Toronto Stock
Exchange and acquired by Pope & Talbot Inc. in 1998,
from May 1994 to July 1998, when he retired. Mr. Lauritzen
was Vice President, Pulp and Paper Marketing of MacMillan
Bloedel Limited, a North American pulp and paper company
previously listed on the Toronto Stock Exchange and acquired by
Weyerhaeuser Company Limited in 1999, from July 1981 to April
1994.
As the former President and Chief Executive Officer of Harmac
Pacific, Inc., and as the former Vice President of Pulp and
Paper Marketing for MacMillan Bloedel Limited,
Mr. Lauritzen has accumulated extensive executive,
production and marketing experience in the pulp and paper
industry, particularly in the softwood kraft pulp sector.
George Malpass, age 70, has been a director since
November 2006. Mr. Malpass was formerly the Chief Executive
Officer and a director of Primex Forest Products Ltd. and is
also a former director of both International Forest Products
Ltd. and Riverside Forest Products Ltd.
Through his tenure as Chief Executive Officer and director of
Primex Forest Products Ltd., Mr. Malpass brings leadership
and executive experience in the forestry sector. He also has
significant outside director experience in the forestry sector
as a former director of both International Forest Products Ltd.
and Riverside Forest Products Ltd. and as the former Chairman of
the Council of Forest Industries of British Columbia.
Majority
Withheld Policy in Uncontested Director Elections
In order to provide Shareholders with a meaningful role in the
outcome of director elections, our Board has adopted a provision
on voting for directors in uncontested elections as part of our
Governance Guidelines. In general, this provision provides that
any nominee in an uncontested election who receives more votes
Withheld for his or her election than votes
For his or her election must promptly tender an
offer of resignation following certification of the Shareholder
vote to our Governance and Nominating Committee which will,
without the participation of any director so tendering his or
her resignation, consider the resignation and recommend to the
Board whether to accept the resignation offer. The Board,
without the participation of any director so tendering his or
her resignation, will act on the Governance and Nominating
Committees recommendation within 90 days following
certification of the Shareholder vote. Any such tendered
resignation will be evaluated in the best overall interests of
the Company and its Shareholders. Our Boards decision will
be disclosed in a
Form 8-K
furnished by the Company to the SEC within four business days of
the decision. If our Board decides to turn down the tendered
resignation, or to pursue any additional action (as described
above or otherwise), then the
Form 8-K
will disclose the Boards reasons for doing so. If each
member of the Governance and Nominating Committee receives a
Majority Withheld Vote at the same election, then the
independent directors who did not receive a Majority Withheld
Vote will act as a committee to consider the resignation offers
and recommend to the Board whether to accept them. Any director
who offers to resign pursuant to this provision will not
participate in any actions by either the Governance and
Nominating Committee or the Board with respect to accepting or
turning down his or her own resignation offer. The complete
terms of this provision are included in our Governance
Guidelines which can be found at the Governance link
on our website at www.mercerint.com.
6
CORPORATE
GOVERNANCE AND BOARD MATTERS
Governance
Guidelines
Our Governance Guidelines are intended to provide a set of
guidelines to assist the Board in ensuring that the Company
adheres to proper standards of good governance, and are reviewed
regularly and revised as necessary or appropriate in response to
changing regulatory requirements and evolving best practices.
Our Governance Guidelines are available on our website at
www.mercerint.com under Governance.
Board
Meetings and Attendance
Our Governance Guidelines provide for: (i) the duties and
responsibilities of the Board, its committees and the officers
of the Company; and (ii) practices with respect to the
holding of regular quarterly and strategic meetings of the Board
including separate meetings of non-employee directors.
Each current member of the Board attended at least 75% of all
meetings of our Board and of the committees of the Board on
which they served in 2009. Although we do not have a formal
policy with respect to attendance of directors at our annual
meetings, all directors are encouraged and expected to attend
such meetings if possible. All of our directors attended the
annual meeting held in June 2009.
Current committee membership and the number of meetings of our
full Board and committees held in 2009 are shown in the table
below:
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Compensation
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and Human
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Governance and
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Environmental,
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Audit
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Resources
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Nominating
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Health and Safety
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Board
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Committee
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Committee
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Committee
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Committee
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Jimmy S.H. Lee
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Member
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Member
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Kenneth A. Shields
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Lead Director
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Chair
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William D. McCartney
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Member
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Chair
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Member
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Guy W. Adams
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Member
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Member
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Eric Lauritzen
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Member
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Member
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Chair
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Chair
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Graeme A. Witts
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Member
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Member
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Member
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George Malpass
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Member
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Member
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Member
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Number of 2009 Meetings
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14
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5
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4
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4
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4
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Our committee meetings are open to all directors, who often
voluntarily attend all Board committee meetings.
Director
Independence
The NASDAQ listing standards require that a majority of the
members of a listed companys board of directors be
independent. Based upon the NASDAQ rules, our Board has
determined that each current member other than our Chief
Executive Officer, Mr. Lee, is independent.
Executive
Sessions and Lead Director
Executive sessions of non-employee directors without the
presence of management are held regularly, generally before
Board meetings, to review, among other things, the criteria upon
which the performance of senior officers is based, the
Companys governance practices, the reports of our
independent registered chartered accountants and any other
relevant matters. The lead director of our Board (the Lead
Director), with input from our other non-employee
directors, develops the agenda for and presides over these
meetings. Meetings are also held formally and informally from
time to time with our Chief Executive Officer for general
discussions of relevant subjects. All of our non-employee
directors are independent under applicable laws and regulations
and the listing standards of NASDAQ. In 2009, the independent
Board members met 5 times.
Mr. Shields, the Chair of our Governance and Nominating
Committee, currently serves as Lead Director.
7
Board
Leadership Structure
The Governance and Nominating Committee, which is made up
entirely of independent directors, is responsible for the
continuing review of the governance structure of the Board, and
for recommending to the Board governance structures and
practices best suited to the Companys particular
situation. The Governance and Nominating Committee determines
what leadership structure it deems appropriate, based on factors
such as experience of the applicable individuals and the current
business environment.
Currently, the Governance and Nominating Committee has
determined that having our President and Chief Executive Officer
also serve as Chairman of the Board is in the best interests of
shareholders. Given the current regulatory and market
environment, both the Governance and Nominating Committee and
the Board as a whole believe that having one leader serving as
both Chairman and Chief Executive Officer provides the most
decisive and effective leadership. Additionally, since
Mr. Lee has served as our Chief Executive Officer for the
past 18 years and was instrumental in the Companys
development, the Board believes that this current leadership
structure is optimal for the Company because it provides the
Company with strong, consistent leadership.
In considering its leadership structure, the Board has taken a
number of factors into account. In particular, the Governance
and Nominating Committee has sought to ensure that independent
backgrounds and opinions dominate both the Board and the
Boards committees. Consequently, the Board, which consists
of a substantial majority of independent directors who are
highly qualified and experienced, exercises a strong,
independent oversight function. This oversight function is
enhanced by the fact that all of the chairs of our Board
committees are independent directors, and the Audit Committee,
Compensation and Human Resources Committee and Governance and
Nominating Committee are composed entirely of independent
directors. Further, as described above, our independent
directors also meet separately to discuss a variety of matters
affecting the Company.
As specified in our Governance Guidelines, the Board has also
designated one of its independent members as Lead Director. The
role of the Lead Director is to provide leadership to
non-employee directors on the Board and to ensure that the Board
can operate independently of management and that directors have
an independent leadership contact. Specifically, the Lead
Director, who also serves as deputy chairman of the Board, has
significant responsibilities, including:
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ensuring that the Board has adequate resources to support its
decision-making process and is appropriately approving strategy
and supervising management;
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establishing procedures to govern the Boards work;
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developing agendas and timetables for Board and committee
meetings;
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annually reviewing the effectiveness of the Board and committees;
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leading and assisting the Board in the discharge of its duties
and responsibilities;
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ensuring that independent directors have adequate opportunities
to meet and discuss without management present;
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chairing meetings of the Board when the Chairman is not in
attendance;
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ensuring delegated committee functions are carried out and
reported to the Board;
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serving as a liaison between the Chief Executive Officer and the
independent directors;
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being the senior spokesman for the Board on governance matters
and executive management compensation matters; and
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ensuring that the Board receives adequate and regular updates
from the Chief Executive Officer on all issues important to the
welfare and future of the Company.
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Most significantly, the position of Lead Director comes with a
clear mandate and significant authority. While the Lead Director
is elected annually, in order to provide consistency and
continuity, it is generally expected that he or she will serve
for more than one year. The Board appointed Kenneth Shields as
its Lead Director in September 2003 and as its Deputy Chairman
in 2006.
8
The Board believes that this leadership structure is appropriate
for the Company at this time.
Committees
of the Board
Our Board currently has four standing committees: the Audit
Committee, the Compensation and Human Resources Committee, the
Environmental, Health and Safety Committee and the Governance
and Nominating Committee. Each committee operates under a
written charter which is part of our Governance Guidelines and
available on our website at www.mercerint.com under
Governance.
Audit
Committee
The NASDAQ rules require our Audit Committee to be comprised
only of independent directors. The Audit Committee currently
consists of three directors and our Board has determined that
all three current members meet the independence requirements of
the NASDAQ rules. The current members of the Audit Committee are
Messrs. McCartney, Witts and Lauritzen. Our Board has also
determined that each of Messrs. McCartney and
Mr. Witts qualifies as an audit committee financial
expert as defined in applicable SEC rules and applicable
NASDAQ listing standards.
Our Audit Committee oversees, on behalf of the Board, our
corporate accounting, financial reporting process and systems of
internal accounting and financial controls. For this purpose,
the primary responsibilities of our Audit Committee are to:
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Review the financial statements to be included in our annual
reports on
Form 10-K
and quarterly reports on
Form 10-Q;
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Meet with and review the results of the annual audit performed
by the independent public accountants and the results of their
review of our quarterly financial statements;
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Recommend the selection of independent public
accountants; and
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Review and approve the terms of all related party transactions.
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Our Audit Committee is also responsible for establishing and
maintaining procedures for receiving, reviewing and responding
to complaints regarding accounting, internal accounting controls
or auditing matters.
Compensation
and Human Resources Committee
The Compensation and Human Resources Committee currently
consists of three directors, all of whom our Board has
determined to be independent directors under NASDAQ rules. The
current members of the Compensation and Human Resources
Committee are Messrs. Lauritzen, Malpass and Adams.
The primary responsibilities of our Compensation and Human
Resources Committee are to:
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Review and approve the strategy and design of the Companys
compensation, equity-based and benefits programs;
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Analyze executive compensation data, including base salaries,
annual bonuses, long-term incentives and pay, as well as
executive compensation principles, strategies, trends,
regulatory requirements and current programs;
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Review and approve all compensation awarded to the
Companys executive officers;
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Periodically review and make recommendations to our Board with
respect to director compensation, including compensation for
members of committees of the Board;
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Administer the Companys equity incentive plan, including
reviewing and approving equity grants to executive officers;
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Review annual goals and objectives of our key executive officers;
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9
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Review annual performance objectives and actual performance
against previous years goals to evaluate individual
performance and, in turn, compensation levels;
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Review and approve succession plans for our key executive
officers; and
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Review individual specific training and development requirements
for our key executive officers.
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Governance
and Nominating Committee
The Governance and Nominating Committee currently consists of
three directors, all of whom our Board has determined to be
independent directors under NASDAQ rules. The current members of
the Compensation and Human Resources Committee are
Messrs. Shields, Witts and McCartney.
The primary responsibilities of our Governance and Nominating
Committee are to:
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Manage the corporate governance system of the Board;
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Assist the Board in fulfilling its duties to meet applicable
legal and regulatory and self-regulatory business principles and
codes of best practice;
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Assist in the creation of a corporate culture and environment of
integrity and accountability;
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In conjunction with the Lead Director, monitor the quality of
the relationship between the Board and management;
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Review management succession plans;
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Recommend to the Board nominees for appointment to the Board;
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Lead the Boards annual review of the Chief Executive
Officers performance; and
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Set the Boards forward meeting agenda.
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Environmental,
Health and Safety Committee
The Environmental, Health and Safety Committee currently
consists of three directors and our Board has determined that
all current members, other than Mr. Lee, are independent
directors under NASDAQ rules. The current members of the
Environmental, Health and Safety Committee are
Messrs. Lauritzen, Malpass and Lee.
The primary responsibilities of our Environmental, Health and
Safety Committee are to:
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Review, approve and, if necessary, revise the environmental,
health and safety policies and environmental compliance programs
of the Company;
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Monitor the Companys environmental, health and safety
management systems including internal and external audit results
and reporting; and
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Provide direction to management on the frequency and focus of
external independent environmental, health and safety audits.
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Our
Director Nominations Process
Our Board is responsible for approving candidates for Board
membership. The Board has delegated the screening and
recruitment process to our Governance and Nominating Committee
in consultation with our Chairman and Chief Executive Officer.
The Governance and Nominating Committee will recommend to the
Board a nominee to fill a vacancy on the Board and will also
annually evaluate and recommend to the Board nominees for
election as directors at annual meetings of Shareholders.
Our Governance and Nominating Committee believes that certain
criteria should be met by director nominees to ensure effective
corporate governance, support the Companys strategies and
businesses, account for individual director attributes and the
effect of the overall mix of those attributes on the
Boards effectiveness, and support the successful
recruitment of qualified candidates for the Board. Qualified
candidates are those who, in the judgment of
10
the Governance and Nominating Committee, possess certain
personal attributes and a sufficient mix of experience and
related attributes to assure effective service on the Board. The
personal attributes of director nominees that the Governance and
Nominating Committee considers include leadership, judgment,
integrity, independence and high personal and professional
ethics. Nominees considered by the Governance and Nominating
Committee are those that also possess a mix of experience and
related attributes, including general business experience,
industry knowledge, financial acumen, special business
experience and expertise. While our Board has not established a
formal policy regarding diversity, our Governance and Nominating
Committee carefully considers diversity when selecting directors
and believes that diversity of backgrounds and viewpoints is a
key consideration when determining the composition of our Board.
Our Governance and Nominating Committee may seek recommendations
or receive recommendations for Board candidates from various
sources, including the Companys directors, management and
Shareholders. The Governance and Nominating Committee may also
engage a professional search firm.
Our Governance and Nominating Committee will consider nominees
recommended by Shareholders as candidates for Board membership.
A Shareholder wishing to nominate a candidate for Board
membership should provide written notice to the Governance and
Nominating Committee in the care of the Secretary, Mercer
International Inc.,
c/o Suite 2840,
650 West Georgia Street, Vancouver, B.C. V6B 4N8, Canada.
To nominate a candidate for election to the Board at an annual
meeting, the notice must be received not less than 120 days
before the first anniversary of the date of the Companys
Proxy Statement released to Shareholders in connection with the
annual meeting held in the prior year. The notice should contain
information about both the nominee and the Shareholder making
the nomination, including such information regarding each
nominee required to be included in a Proxy Statement filed
pursuant to SEC rules and regulations and such other information
sufficient to allow the Governance and Nominating Committee to
determine if the candidate meets the criteria for Board
membership described above. The Governance and Nominating
Committee may require that the proposed nominee furnish
additional information to determine that persons
eligibility to serve as a director. All recommendations will be
brought to the attention of the Governance and Nominating
Committee.
Shareholder
Communications with Board
Shareholders who wish to communicate with the Board (other than
with respect to a complaint or concern regarding accounting,
internal accounting controls or auditing matters which must be
directed to the Audit Committee as described below) should send
written correspondence to the Board in the care of the
Secretary, Mercer International Inc.,
c/o Suite 2840,
650 West Georgia Street, Vancouver, B.C., V6B 4N8, Canada.
The correspondence should indicate that the person sending the
correspondence is a Shareholder and set out the purpose of such
communication. The secretary will: (i) forward the
correspondence to the director to whom it is addressed or, in
the case of correspondence addressed to the Board generally, to
the Lead Director; (ii) attempt to handle the inquiry
directly where it is a request for information about the
Company; or (iii) not forward the correspondence if it is
primarily commercial in nature or if it relates to an improper
topic. All such correspondence will be summarized for the Board
periodically and each such correspondence will be made available
to any director upon request.
Complaint
Procedure
The Audit Committee has established procedures for: (i) the
receipt, retention and treatment of complaints received by the
Company regarding accounting, internal accounting controls or
auditing matters; and (ii) the confidential and anonymous
submission by the Companys employees and others of
concerns regarding questionable accounting or auditing matters.
A person wishing to notify the Company of such a complaint or
concern should send a written notice thereof, marked
Private & Confidential, to the chairman of
the Audit Committee, Mercer International Inc.,
c/o Suite 2840,
650 West Georgia Street, Vancouver, B.C., V6B 4N8, Canada.
Code of
Business Conduct and Ethics
Our Board has adopted a Code of Business Conduct and Ethics that
applies to our directors and all of our executive officers,
including our Chief Executive Officer, Chief Financial Officer
and Controller, or persons
11
performing similar functions. The Code of Business Conduct and
Ethics is available on our website at www.mercerint.com
under Governance.
Shareholding
Guideline for Non-Employee Directors
Since 2006 we have had a target shareholding guideline in place
for our non-employee directors. Pursuant to such guideline, each
non-employee director should, within three years of becoming a
director, own a minimum number of Shares which is equal in value
to three times the amount of their annual cash retainer. As of
the Record Date, five of our six non-employee directors,
including our Lead Director, met the guideline amount.
Review
and Approval of Related Party Transactions
Pursuant to the terms of its Charter, the Audit Committee is
responsible for reviewing and approving the terms and conditions
of all proposed transactions between us, any of our officers,
directors or shareholders who beneficially own more than 5% of
our outstanding Shares, or relatives or affiliates of any such
officers, directors or shareholders, to ensure that such related
party transactions are fair and are in our overall best interest
and that of our shareholders. In the case of transactions with
employees, a portion of the review authority is delegated to
supervising employees pursuant to the terms of our Code of
Business Conduct and Ethics.
The Audit Committee has not adopted any specific procedures for
the conduct of reviews and considers each transaction in light
of the facts and circumstances. In the course of its review and
approval of a transaction, the Audit Committee considers, among
other factors it deems appropriate:
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Whether the transaction is fair and reasonable to us;
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The business reasons for the transaction;
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Whether the transaction would impair the independence of one of
our non-employee directors; and
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Whether the transaction is material, taking into account the
significance of the transaction.
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Any member of the Audit Committee who is a related person with
respect to a transaction under review may not participate in the
deliberations or vote respecting approval or ratification of the
transaction, provided, however, that such director may be
counted in determining the presence of a quorum at a meeting of
the committee that considers the transaction.
Risk
Oversight
Our executive officers are responsible for assessing and
managing the Companys various exposures to risk on a
day-to-day
basis, including the creation and implementation of appropriate
risk management policies and programs. Specifically, the
Governance Guidelines require our management to implement
appropriate procedures and systems to attempt to identify the
principal risks to the Companys business.
The Board is responsible for overseeing our executive officers
in the execution of these responsibilities and for assessing the
Companys overall approach to risk management.
Additionally, while oversight of our risk management process is
a full Board responsibility, the responsibility for monitoring
financial risks has been delegated to the Audit Committee. In
accordance with the requirements of our Governance Guidelines,
the Audit Committee meets periodically with management to review
the Companys major financial risk exposures and the steps
our management has taken to monitor and control such exposures.
Further, the Boards other committees, including the
Compensation and Human Resources Committee, the Governance and
Nominating Committee and the Environmental, Health and Safety
Committee, oversee risks associated with their respective areas
of responsibility. For example, the Compensation and Human
Resources Committee considers the risks associated with our
compensation policies and practices, while the Environmental,
Health and Safety Committee considers the principal areas of
environmental, health and safety risk facing the Company and
whether sufficient resources have been allocated to address such
risks. The Board is kept abreast of its committees risk
oversight and other activities via reports of the committee
chairmen to the full Board. These
12
reports are presented at every regular Board meeting and include
discussions of committee agenda topics, including matters
involving risk oversight.
Succession
Planning and Management Development
We engage in a succession planning process whereby our
Compensation and Human Resources Committee, together with our
Chief Executive Officer, reviews our executive succession
planning procedures, including management development
activities, annually. We strive to appoint our most senior
executives from within the Company. To this end, individuals who
are identified as having potential for senior executive
positions are evaluated by the Compensation and Human Resources
Committee. The careers of such persons are monitored to ensure
that over time they have appropriate exposure to our Board and
interact with the Board in various ways, including through
participation in certain Board meetings and other Board-related
activities and meetings with individual directors, both in
connection with director visits to our mills and otherwise.
EXECUTIVE
OFFICERS
The following provides certain background information about each
of our executive officers other than Jimmy S. H. Lee, whose
information appears above under Nominees for Election as
Directors:
David M. Gandossi, age 52, has been Secretary,
Executive Vice-President and Chief Financial Officer since
August 15, 2003. Mr. Gandossi was formerly the Chief
Financial Officer and Executive Vice-President of Formation
Forest Products (a closely held corporation) from June 2002 to
August 2003. Mr. Gandossi previously served as Chief
Financial Officer, Vice-President, Finance and Secretary of
Pacifica Papers Inc., a North American specialty pulp and paper
manufacturing company previously listed on the Toronto Stock
Exchange, from December 1999 to August 2001 and Controller and
Treasurer from June 1998 to December 1999. From June 1998 to
August 31, 1998, he also served as Secretary to Pacifica
Papers Inc. From March 1998 to June 1998, Mr. Gandossi
served as Controller, Treasurer and Secretary of MB Paper Ltd.
From April 1994 to March 1998, Mr. Gandossi held the
position of Controller and Treasurer with Harmac Pacific Inc., a
Canadian pulp manufacturing company previously listed on the
Toronto Stock Exchange. Mr. Gandossi participated in the
Pulp and Paper Advisory Committee of the British Columbia
Competition Council and was a member of the British Columbia
Working Roundtable on Forestry. From February 2007 to present,
he has chaired the B.C. Pulp and Paper Task Force, a government
industry and labor effort that is mandated to identify measures
to improve the competitiveness of the British Columbia pulp and
paper industry. Mr. Gandossi is a member of the Institute
of Chartered Accountants in Canada.
Claes-Inge Isacson, age 64, has been our Chief
Operating Officer since November 2006 and is based in our Berlin
office. Mr. Isacson brings over 24 years of senior
level pulp and paper management to our senior management team,
with a focus on kraft pulp. Mr. Isacson held the positions
of President Norske Skog Europe, and then Senior Vice President
Production for Norske Skogindustrier ASA between 1989 and 2004.
His most recent position was President, AF Process, a consulting
and engineering company working worldwide. He holds a Masters of
Science, Mechanical Engineering.
Leonhard Nossol, age 52, has been our Group
Controller for Europe since August 2005. He has also been a
managing director of Rosenthal since 1997 and the sole managing
director of Rosenthal since September 2005. Mr. Nossol had
a significant involvement in the conversion of Rosenthal to the
production of kraft pulp in 1999 and increases in the
mills annual production capacity to 330,000 ADMTs, as well
as the reduction in production costs at the mill.
Niklaus Grünenfelder, age 52, became the
Managing Director of Stendal in January 2009. Previously, from
1989 until 2006, Mr. Grünenfelder held a variety of
positions in Switzerland, China, Germany, and Pakistan with
Swiss chemicals manufacturer Ciba Specialty Chemicals Holding
Inc. (formerly Ciba-Geigy AG). In 2006, Huntsman Corporation, a
global chemical and chemical products company, acquired the
textile effects business from Ciba and
Mr. Grünenfelder was the Managing Director and Head of
Technical Operations at Huntsmans Langweid am Lech site in
Germany from 2006 until 2008. Mr. Grünenfelder holds a
PhD in Technical Science and an MBA.
13
Wolfram Ridder, age 48, was appointed Vice President
of Business Development in August 2005, prior to which he was a
managing director of Stendal. Mr. Ridder was the principal
assistant to our Chief Executive Officer from November 1995
until September 2002.
David Ure, age 43, has been our Vice President,
Controller, since October 16, 2006. Mr. Ure was
formerly the Controller of Catalyst Paper Corporation from 2001
to 2006 and Controller of Pacifica Papers Inc. from 2000 to
2001. He also served as U.S. Controller of Crown Packaging
Ltd. in 1999 and the Chief Financial Officer and Secretary of
Finlay Forest Industries Inc. from 1997 to 1998. He is on the
Board of Trustees of the Pulp and Paper Industry Pension Plan
and has over fifteen years experience in the forest products
industry. Mr. Ure is a member of the Certified General
Accountants Association of Canada.
David M. Cooper, age 56, has been Vice President of
Sales and Marketing for Europe since June 2005. Mr. Cooper
previously held a variety of senior positions around the world
with Sappi Ltd., a large global forest products group, from 1982
to 2005, including the sales and marketing of various pulp and
paper grades and the management of a manufacturing facility. He
has more than 25 years of diversified experience in the
international pulp and paper industry.
Eric X. Heine, age 46, has been Vice President of
Sales and Marketing for North America and Asia since June 2005.
Mr. Heine was previously Vice President Pulp and
International Paper Sales and Marketing for Domtar Inc., a
global pulp and paper corporation, from 1999 to 2005. He has
over 18 years of experience in the pulp and paper industry,
including developing strategic sales channels and market
partners to build corporate brands.
Genevieve Stannus, age 40, has been our Treasurer
since July 2005, prior to which she was a Senior Financial
Analyst with Mercer from August 2003. Prior to joining Mercer,
Ms. Stannus held Senior Treasury Analyst positions with
Catalyst Paper Corporation and Pacifica Papers Inc. She has over
ten years experience in the forest products industry.
Ms. Stannus is a member of the Certified General
Accountants Association of Canada.
Brian Merwin, age 35, has been our Vice President of
Strategic Initiatives since February 2009, prior to which he was
our Director of Strategic and Business Initiatives since August
2007 and Business Analyst since May 2005. Brian has an MBA from
the Richard Ivey School of Business at the University of Western
Ontario.
14
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There were 36,483,204 Shares issued and outstanding on the
Record Date. Each Share is entitled to one vote on each matter
at the Meeting.
Share
Ownership of Certain Beneficial Owners
The following table sets forth information regarding the
beneficial ownership of our Shares as of April 15, 2010 by each
Shareholder known by us to own more than five percent (5%) of
our outstanding Shares other than as set forth under Share
Ownership of Directors and Executive Officers below. Such
information is based solely upon statements made in filings with
the SEC or other information we believe to be reliable.
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Percent of
|
Name and Address of Owner
|
|
Shares Owned
|
|
Outstanding Shares
|
|
Peter R. Kellogg(1)
|
|
|
12,283,344
|
(2)
|
|
|
21.7
|
%(9)
|
120 Broadway, 6th Floor
|
|
|
|
|
|
|
|
|
New York, NY 10271
|
|
|
|
|
|
|
|
|
Platinum Investment Management Ltd.(3)
|
|
|
6,045,847
|
|
|
|
16.6
|
%(8)
|
Level 4, 55 Harrington Street
|
|
|
|
|
|
|
|
|
Sydney, NSW 2000, Australia
|
|
|
|
|
|
|
|
|
Harbinger Capital Partners Master Fund I, Ltd.(4)
|
|
|
4,201,527
|
(4)
|
|
|
7.4
|
%(9)
|
International Fund Services (Ireland) Limited
|
|
|
|
|
|
|
|
|
Cayman Islands
|
|
|
|
|
|
|
|
|
Third Floor, Bishops Square
|
|
|
|
|
|
|
|
|
Redmonds Hill
|
|
|
|
|
|
|
|
|
Dublin, Ireland
|
|
|
|
|
|
|
|
|
Bank of America Corporation(5)
|
|
|
2,756,401
|
|
|
|
7.6
|
%(8)
|
100 North Tryon Street, Floor 25
|
|
|
|
|
|
|
|
|
Bank of America Corporate Center
|
|
|
|
|
|
|
|
|
Charlotte, NC 28255
|
|
|
|
|
|
|
|
|
Pine River Capital Management L.P.(6)
|
|
|
1,969,697
|
|
|
|
5.4
|
%(8)
|
601 Carlson Parkway, Suite 330
|
|
|
|
|
|
|
|
|
Minnetonka, MN 55305
|
|
|
|
|
|
|
|
|
William R. Huff(7)
|
|
|
1,841,701
|
|
|
|
5.1
|
%(8)
|
67 Park Place
|
|
|
|
|
|
|
|
|
Morristown, NJ 07960
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Based on Schedule 13D filed on March 25, 2010 jointly
with IAT Reinsurance Co Ltd., in which Peter Kellogg had sole
voting and dispositive power over 12,183,344 Shares and
shared voting power over 100,000 Shares and IAT Reinsurance
Co. Ltd. had sole voting and dispositive power over
12,025,782 Shares. |
|
(2) |
|
The number of Shares owned includes 5,227,272 Shares
issuable upon conversion of convertible senior subordinated
notes due 2012. |
|
(3) |
|
Based on Schedule 13G filed on February 10, 2010. |
|
(4) |
|
Based on a Schedule 13G/A filed on February 16, 2010
jointly with Harbinger Capital Partners LLC, Harbinger Capital
Partners II GP LLC, Credit Distressed Blue Line Master
Fund Ltd., Harbinger Holdings LLC and Philip Falcone, in
which Harbinger Capital Master Fund I, Ltd., Harbinger
Capital Partners LLC and Harbinger Holdings LLC had shared
voting and dispositive power over 2,228,194 Shares and
Credit Distressed Blue Line Master Fund Ltd., Harbinger
Capital Partners II LP, Harbinger Capital Partners II
GP LLC had beneficial ownership of 1,973,333 Shares
issuable upon conversion of convertible senior subordinated
notes due 2012, and Philip Falcone had shared voting and
dispositive power over 4,201,527 Shares. The number of
Shares owned includes 1,973,333 issuable upon conversion of
convertible senior subordinated notes due 2012. |
|
(5) |
|
Based on a Schedule 13G filed on January 29, 2010
jointly with Merrill Lynch, Pierce, Fenner & Smith
Inc., in which Bank of America Corporation had shared voting and
dispositive power over 2,756,401 Shares and Merrill Lynch,
Pierce, Fenner & Smith, Inc. had sole voting and
dispositive power over 2,756,401 Shares. |
15
|
|
|
(6) |
|
Based on Schedule 13G filed on March 15, 2010 jointly
with Brian Taylor and Nisswa Convertibles Master Fund Ltd.,
in which Pine River Capital Management L.P. had shared voting
and dispositive power with Brian Taylor and Nisswa Convertibles
Master Fund Ltd. over 1,969,697 Shares. |
|
(7) |
|
Based on Schedule 13G filed on December 19, 2008. |
|
(8) |
|
The percentage of outstanding Shares is calculated out of a
total of 36,483,204 Shares issued and outstanding on the
Record Date. |
|
(9) |
|
The percentage of outstanding Shares is calculated out of a
total of 56,695,165 Shares, which number gives pro forma
effect, as of the Record Date, to the 20,211,961 Shares
issuable upon conversion of the remaining outstanding
convertible senior subordinated notes. |
Share
Ownership of Directors and Executive Officers
The following table sets forth information regarding the
ownership of our Shares as of April 15, 2010 by (i) each of
our directors; (ii) our Chief Executive Officer, Chief
Financial Officer and three other most highly compensated
executive officers (collectively referred to as the Named
Executive Officers or NEOs); and
(iii) all of our directors and executive officers as a
group. Unless otherwise indicated, each person has sole voting
and dispositive power with respect to the Shares set forth
opposite his name. Each person has indicated that he or she will
vote all Shares owned by him in favor of each of the proposals
to be considered at the Meeting.
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Percent of
|
|
Name of Owner
|
|
Shares Owned
|
|
|
Outstanding Shares(8)
|
|
|
Jimmy S.H. Lee(1)
|
|
|
1,679,679
|
|
|
|
4.6
|
%
|
Kenneth A. Shields(2)
|
|
|
118,000
|
|
|
|
*
|
|
Guy W. Adams(3)
|
|
|
24,000
|
|
|
|
*
|
|
William D. McCartney(3)
|
|
|
19,000
|
|
|
|
*
|
|
Graeme A. Witts(3)
|
|
|
31,685
|
|
|
|
*
|
|
Eric Lauritzen(3)
|
|
|
40,500
|
|
|
|
*
|
|
George Malpass(3)
|
|
|
39,000
|
|
|
|
*
|
|
David M. Gandossi(4)
|
|
|
220,000
|
|
|
|
*
|
|
Wolfram Ridder(5)
|
|
|
40,000
|
|
|
|
*
|
|
Leonhard Nossol(6)
|
|
|
25,050
|
|
|
|
*
|
|
Claes-Inge Isacson
|
|
|
15,000
|
|
|
|
*
|
|
Directors and Executive Officers as a Group (16 persons)(7)
|
|
|
2,215,004
|
|
|
|
6.1
|
%
|
|
|
|
* |
|
Less than one percent (1%) of our issued and outstanding Shares
on the Record Date. |
|
(1) |
|
Does not include 116,460 performance shares granted pursuant to
the Performance Incentive Supplement (as defined below)
established under our 2004 Stock Incentive Plan (as defined
below) details of which grant are set out on page 30 of
this Proxy Statement, that are subject to forfeiture and
represent Shares that could not be acquired within 60 days
of the date of this table. |
|
(2) |
|
Includes Shares which Mr. Shields holds through a
Registered Retirement Savings Plan. In August 2009,
Mr. Shields was granted 6,000 restricted shares in
connection with his role as our Lead Director. These Shares vest
and become non-forfeitable in August 2010 unless a change in
control of the Company occurs prior thereto. |
|
(3) |
|
In August 2009, 3,000 restricted shares were granted to each
non-employee director (other than our Lead Director) in
connection with his role as a non-employee director of Mercer.
These Shares vest and become non-forfeitable in August 2010
unless a change in control of the Company occurs prior thereto. |
|
(4) |
|
Includes 120,000 Shares and presently exercisable options
to acquire up to 100,000 Shares. |
|
(5) |
|
Includes 20,000 Shares and presently exercisable options to
acquire up to 20,000 Shares. |
|
(6) |
|
Includes 50 Shares and presently exercisable options to
acquire up to 25,000 Shares. |
|
(7) |
|
Includes presently exercisable options to acquire up to
175,000 Shares. |
|
(8) |
|
Based on 36,483,204 Shares outstanding on the Record Date. |
16
INFORMATION
REGARDING EQUITY COMPENSATION PLANS
The following table sets forth information as at
December 31, 2009 regarding our equity compensation plans.
An aggregate of 1,000,000 of our Shares were issuable pursuant
to options, stock appreciation rights and restricted shares
under our 2004 Stock Incentive Plan (the 2004 Stock
Incentive Plan) and as performance shares or performance
units under the 2008 long-term performance incentive supplement
created under the 2004 Stock Incentive Plan (the
Performance Incentive Supplement). Our Amended and
Restated 1992 Non-Qualified Stock Option Plan expired in 2008
and we no longer grant any options under this plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
to be Issued Upon
|
|
Weighted-average
|
|
Number of Shares
|
|
|
Exercise of
|
|
Exercise Price of
|
|
Available for Future
|
|
|
Outstanding Options
|
|
Outstanding Options
|
|
Issuance Under Plan
|
|
2004 Stock Incentive Plan
|
|
|
30,000
|
|
|
$
|
7.30
|
|
|
|
151,149
|
(1)(2)
|
Amended and Restated 1992 Non-Qualified Stock Option Plan
|
|
|
890,000
|
(3)
|
|
$
|
6.40
|
|
|
|
|
(3)
|
|
|
|
(1) |
|
As at December 31, 2009, an aggregate of 253,685 restricted
shares had been issued under the 2004 Stock Incentive Plan and
grants for up to 565,165 Shares had been made under the
Performance Incentive Supplement established under the 2004
Stock Incentive Plan which will vest and become issuable only
upon the attainment of designated performance objectives. |
|
(2) |
|
In February 2010, grants for up to 13,000 additional Shares were
made under the Performance Incentive Supplement, bringing the
total number of Shares issuable under the Performance Incentive
Supplement to 578,165 as at the Record Date. |
|
(3) |
|
Our 1992 Amended and Restated Stock Option Plan expired in 2008
but an aggregate of 890,000 unexercised options that were
previously granted under this plan remained outstanding as of
December 31, 2009. Subsequently, in January 2010, 730,000
of such options expired leaving 160,000 unexercised options that
remained outstanding as at the Record Date. |
The terms of our 2004 Stock Incentive Plan permit us to grant
awards under other plans, programs or agreements which may be
settled in Shares under the 2004 Stock Incentive Plan. Pursuant
to such terms we created the Performance Incentive Supplement
under the 2004 Stock Incentive Plan in February 2008. The
function of the Performance Incentive Supplement, in accordance
with the purposes of the 2004 Stock Incentive Plan, is to
promote the long-term success of the Company and the creation of
Shareholder value by aligning the interests of our employees,
including senior management, with those of our Shareholders. Any
grants made under the Performance Incentive Supplement are
settled in the form of Shares issued under the 2004 Stock
Incentive Plan and any Shares issued pursuant to the Performance
Incentive Supplement reduce the number of Shares available under
the 2004 Stock Incentive Plan.
The Performance Incentive Supplement is administered by our
Compensation and Human Resources Committee and provides for the
grant of restricted stock, restricted stock units and
performance awards comprised of performance shares and
performance units to salaried employees of the Company and its
affiliates.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the Exchange Act) requires that our
officers and directors and persons who own more than 10% of our
Shares file reports of ownership and changes in ownership with
the SEC and furnish us with copies of all such reports that they
file. Based solely upon a review of the copies of these reports
received by us, and upon written representations by our
directors and officers regarding their compliance with the
applicable reporting requirements under Section 16(a) of
the Exchange Act, we believe that all of our directors and
officers filed all required reports under Section 16(a) in
a timely manner for the year ended December 31, 2009.
17
REPORT OF
THE AUDIT COMMITTEE
Our Audit Committee monitors and oversees the Companys
financial reporting process on behalf of our Board. Management
has primary responsibility for the Companys financial
statements and the financial reporting process, including the
Companys system of internal controls.
The Audit Committee has met and held discussions with management
and the Companys independent registered chartered
accountants, PricewaterhouseCoopers LLP, regarding the fair and
complete presentation of the Companys results and the
assessment of the Companys internal control over financial
reporting. The Audit Committee has discussed significant
accounting policies applied by the Company in its financial
statements, as well as alternative treatments. Management
represented to the Audit Committee that the Companys
consolidated financial statements were prepared in accordance
with accounting principles generally accepted in the United
States, and the Audit Committee has reviewed and discussed the
consolidated financial statements with management and
PricewaterhouseCoopers LLP. The Audit Committee discussed with
PricewaterhouseCoopers LLP the matters required to be discussed
by Statement on Auditing Standards No. 61, as amended
(AICPA, Professional Standards, Vol. 1 AU
Section 380), as adopted by the Public Company Accounting
Oversight Board in Rule 3200T.
In addition, the Audit Committee has discussed with
PricewaterhouseCoopers LLP the auditors independence from
the Company and its management, including the matters in the
written disclosures required by Independence Standards Board
Standard No. 1. The Audit Committee also has considered
whether the PricewaterhouseCoopers LLPs provision of
non-audit services to the Company is compatible with the
auditors independence. The Audit Committee has concluded
that PricewaterhouseCoopers LLP are independent from the Company
and its management.
The Audit Committee discussed with PricewaterhouseCoopers LLP
the overall scope and plans for their respective audits. The
Audit Committee met with PricewaterhouseCoopers LLP, with and
without management present, to discuss the results of their
examinations, the evaluations of the Companys internal
controls, and the overall quality of the Companys
financial reporting.
In reliance on the reviews and discussions referred to above,
the Audit Committee recommended to the Board, and the Board has
approved, that the audited financial statements be included in
our annual report on
Form 10-K
for the fiscal year ended December 31, 2009, for filing
with the SEC.
The Audit Committee has selected and appointed, and the Board
has ratified, PricewaterhouseCoopers LLP as the Companys
independent registered chartered accountants.
Submitted by the members of the Audit Committee.
William D. McCartney, Chairman
Graeme A. Witts
Eric Lauritzen
The report of the Audit Committee does not constitute
soliciting material and shall not be deemed to be filed or
incorporated by reference into any other Company filing under
the Securities Act of 1933, as amended, or the Exchange Act
except to the extent that the Company specifically incorporates
the report by reference therein.
DIRECTORS
COMPENSATION
Directors
Compensation
During the 2009 fiscal year, our non-employee directors, other
than our Lead Director, received a $30,000 annual retainer for
their services and a $1,000 attendance fee for each Board or
Committee meeting that they attended in person or $500 for each
such meeting that they attended by teleconference. Our Lead
Director, Mr. Shields, received a $60,000 annual retainer
for his services. We also reimbursed our directors for expenses
incurred in connection with their duties as our directors. The
chairman of the Audit Committee received $20,000
18
annually, the chairman of each of the Compensation and Human
Resources Committee and the Governance and Nominating
Committee received $10,000 annually and the chairman of the
Environmental, Health and Safety Committee received $5,000
annually for his services.
Effective January 1, 2010, the annual retainer for
non-employee directors, other than the Lead Director, was
increased to $40,000. Additionally, the annual retainer for the
Lead Director was increased to $80,000, and the amount received
annually by the chairman of the Compensation and Human Resources
Committee increased to $15,000. All other cash compensation
levels for directors remained the same.
In addition to cash compensation, our directors also receive
equity-based compensation under our 2004 Stock Incentive Plan.
Immediately after the annual meeting of Shareholders held during
the 2009 fiscal year, each of our non-employee directors who was
not elected to the Board for the first time at such annual
meeting and who continued to serve as a member of the Board
after the meeting, received 3,000 restricted shares for his
services, provided that each such director had served on the
Board for at least six months. Similarly, following our last
annual meeting of Shareholders, our Lead Director received 6,000
restricted shares for his services. In 2009,
Messrs. McCartney, Witts, Lauritzen, Adams and Malpass each
received 3,000 restricted shares for their services as directors
and Mr. Shields, as Lead Director, received 6,000
restricted shares.
Effective January 1, 2010, immediately after each annual
meeting of Shareholders, each non-employee director who was not
elected to the Board for the first time at such annual meeting
and who will continue to serve as a member of the Board after
the meeting, will now receive 8,000 restricted shares for his
services, provided that each such director has served on the
Board for at least six months. Similarly, following each annual
meeting of Shareholders, our Lead Director now receives 16,000
restricted shares for his or her services.
The Compensation and Human Resources Committee is responsible
for reviewing our director compensation practices in relation to
peer group companies. Any changes to be made to director
compensation practices must be recommended by the Compensation
and Human Resources Committee for approval by the full Board.
Directors
Compensation Table
The following table sets forth information regarding
compensation paid to our non-employee directors in their
capacity as directors during the fiscal year ended
December 31, 2009. Mr. Lee, as our Chief Executive
Officer, does not receive any additional compensation for his
services as a director.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
or Paid in
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
|
|
Cash(1)
|
|
|
Awards(2)(3)
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
William D. McCartney
|
|
|
65,500
|
|
|
|
2,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,780
|
|
Kenneth A. Shields
|
|
|
83,500
|
|
|
|
4,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88,060
|
|
Guy W. Adams
|
|
|
43,500
|
|
|
|
2,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,780
|
|
Eric Lauritzen
|
|
|
67,000
|
|
|
|
2,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,280
|
|
Graeme A. Witts
|
|
|
47,500
|
|
|
|
2,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,780
|
|
George Malpass
|
|
|
47,500
|
|
|
|
2,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,780
|
|
|
|
|
(1) |
|
Fees earned or paid in cash include $30,000 which was paid to
each of our directors, other than our Lead Director, in 2009
plus $1,000 for each meeting of directors that they attend in
person or $500 for each such meeting that they attend by
teleconference. Our Lead Director received $60,000 for his
services in 2009. The chairman of each of the Compensation and
Human Resources Committee and the Governance and Nominating
Committee received $10,000 in 2009, the chairman of the Audit
Committee received $20,000 in 2009 and the chairman of the
Environmental, Health and Safety Committee received $5,000 in
2009 for their services in that regard. |
|
(2) |
|
Stock awards granted to non-employee directors consist of
restricted shares. The amounts shown represent the aggregate
grant date fair value for restricted shares, as determined under
the Financial Accounting Standards |
19
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|
|
|
Board Accounting Standards Codification Topic 718 (ASC
718), excluding any forfeiture adjustments. For a
discussion of the valuation assumptions, see Note 11 to our
consolidated financial statements included in our annual report
on Form 10-K
for the fiscal year ended December 31, 2009. |
|
(3) |
|
The grant date fair value is based on a Share value of $0.76 per
Share, being the trading price at the time of grant, multiplied
by stock awards of 3,000 restricted shares which were granted to
each of our non-employee directors or 6,000 restricted shares to
our Lead Director, after our annual meeting of Shareholders held
in 2009, provided that such non-employee director was not
elected to the Board for the first time at such annual meeting,
and who will continue to serve as a member of the Board after
the meeting, and has been a director for at least six months. |
COMPENSATION
AND HUMAN RESOURCES COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The Compensation and Human Resources Committee currently
consists of Messrs. Lauritzen, Malpass and Adams. No member
of the Compensation and Human Resources Committee is a current
or former employee of the Company. There are no Compensation and
Human Resources Committee interlocks between the Company and any
other entities involving any of the executive officers or
directors of such entities. No interlocking relationship exists
between any member of our Board or our Compensation and Human
Resources Committee and any member of the Board or Compensation
and Human Resources Committee of any other company and no such
interlocking relationship has existed in the past.
REPORT OF
THE COMPENSATION AND HUMAN RESOURCES COMMITTEE
The Compensation and Human Resources Committee has reviewed and
discussed with management the following Compensation Discussion
and Analysis. Based on such review and discussions, the
Compensation and Human Resources Committee recommended to the
Board that the Compensation Discussion and Analysis be included
in this Proxy Statement and be incorporated by reference into
our annual report on
Form 10-K
for the fiscal year ended December 31, 2009.
Submitted by the members of the Compensation and Human Resources
Committee.
Eric Lauritzen, Chairman
George Malpass
Guy W. Adams
COMPENSATION
DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis discusses
considerations and reasons driving the Compensation and Human
Resources Committees decisions on compensation for our
Named Executive Officers in 2009, as well as the key objectives,
policies, elements and designs of our compensation program.
Fiscal
2009 Compensation Decisions
Fiscal 2009 was a very challenging year for the Company. We were
confronted with an extraordinary macro-economic environment that
started in the last quarter of 2008 and continued through most
of 2009. During this period, the global economic crisis had
material adverse effects on our revenues, operating margins and
results of operations. Selling prices for pulp declined
materially in the latter part of 2008 and remained low through
most of fiscal 2009. Additionally, the global economic crisis
presented unprecedented difficulties in accessing capital for
ongoing operations, as well as new initiatives such as the
green energy project at our Celgar mill.
In making decisions on performance-based compensation in fiscal
2009, the Compensation and Human Resources Committee weighed and
considered the Companys performance against one of the
worst national and global economic downturns in the post-war
era. It took into consideration not only the Companys
ability to weather
20
and work through this severe downturn but to make changes and
introduce initiatives critical to better position the Company
over the long term.
A number of the factors that impacted our financial performance
were largely beyond the control of the Company, such as global
demand and prices for pulp and foreign exchange rates. The
decline in value of the U.S. dollar during fiscal 2009
versus the Euro and Canadian dollar negatively impacted our
operating margins and financial performance.
These global economic challenges created significant demands
upon our Named Executive Officers. In a cyclical business, such
as the pulp industry, the demands and challenges on the Named
Executive Officers are often the greatest during down cycles.
During such cycles, executives are often called on to perform at
very high levels but such performance and contribution is often
not reflected in the Companys financial performance
because of cyclical factors beyond their control.
In addition to recognizing the performance and contribution of
our Named Executive Officers during an extremely challenging
down cycle, our Committee also believes that it is appropriate
for certain components of compensation to decline during such
periods of economic stress, reduced earnings and significantly
lower share prices.
The Compensation and Human Resources Committees decisions
for fiscal 2009 reflected a balancing of these two features.
The Compensation and Human Resources Committee does not rely
upon any predetermined formulas or limited set of criteria when
it evaluates the performance of our Named Executive Officers but
rather focuses on individual objectives and their effects in
respect of the Companys overall goals. To this end, no
fixed or specific weighting is applied to any element of
performance.
Base Salaries. Based on the criteria
underlying our base salary compensation and a review of market
compensation for fiscal 2009, we made only incremental
cost of living adjustments to the base salaries of
our NEOs effective 2010. Such adjustments represented a less
than 5% increase from the 2009 levels, which were frozen at 2008
levels.
Bonuses. In making its compensation decisions
regarding bonuses for our Named Executive Officers in respect of
their fiscal 2009 performance, the Compensation and Human
Resources Committee reviewed the Companys financial
performance and each NEOs achievement of his annual
performance objectives for 2009.
Chief Executive Officer Performance. The
Compensation and Human Resources Committee evaluated
Mr. Lees achievement of his 2009 performance
objectives and his role and guidance in, among other things:
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continued strong production, safety and environmental
performance at our three mills;
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continued focus on cost reductions and working capital
management;
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enhancing our short-term liquidity by completing exchange
agreements with certain holders of our 8.5% convertible notes
due 2010 and implementing an exchange offer, which together
resulted in the exchange of $65.0 million in aggregate
principal amount of such notes for $65.8 million in
aggregate principal amount of our newly issued convertible notes
due 2012;
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applying for, and being allocated, a total of
C$57.7 million in grants from the Canadian government under
the Green Transformation Program and subsequently entering into
a non-repayable contribution agreement whereby a government
agency agreed to provide approximately C$40.0 million in
financial assistance towards the completion of our Celgar Energy
Project;
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working with our lenders to refinance our Rosenthal mills
revolving credit facility and to amend our Celgar mills
revolving credit facility, whereby we established a new
25.0 million revolving working capital facility and a
new investment loan agreement for our Rosenthal mill and
extended the maturity of the Celgar revolving credit facility to
May 2013; and
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successfully restructuring the project loan facility for our
majority-owned subsidiary Stendal, which operates the Stendal
mill.
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21
Other NEO Performance. In determining the
bonus compensation for our other Named Executive Officers, the
Compensation and Human Resources Committee weighed the
Companys overall financial performance, evaluated each
NEOs contributions to the Companys accomplishments
set out above and reviewed each NEOs individual
performance and achievement of 2009 performance objectives.
The Compensation and Human Resources Committees cash bonus
awards to our Named Executive Officers are set forth in the
following table:
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Name
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Cash Bonus
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Jimmy S.H. Lee
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$
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237,819
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David M. Gandossi
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$
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111,695
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Claes-Inge Isacson
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$
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60,334
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Wolfram Ridder
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$
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50,720
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Leonhard Nossol
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$
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45,425
|
|
Incentive Equity Grants or Awards. For fiscal
2009, the Compensation and Human Resources Committee did not
grant any performance awards under the Performance Incentive
Supplement or other equity awards under our 2004 Stock Incentive
Plan.
Compensation
Framework
Our compensation philosophy for our Named Executive Officers is
principally performance-based to support the Companys
overall business objectives and increase long-term Shareholder
value. We also believe that it is appropriate for certain
components of compensation to decline during periods of economic
stress, reduced earnings and significantly lower share prices.
Overall, the principal objectives of the compensation program
for our Named Executive Officers are to:
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Attract, retain and motivate our NEOs, whose efforts and
judgments are vital to our continued success;
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Create an environment in which our NEOs are motivated to achieve
and maintain superior performance levels and goals consistent
with our overall business strategy;
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Reward and compensate our NEOs for their contribution to our
overall success and for their individual performance during the
relevant fiscal year; and
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Align the interests of our NEOs with the long-term interests of
our Shareholders.
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To achieve our objectives, we use the following principles in
the design and administration of the compensation program for
our Named Executive Officers:
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Market Competitiveness. Our Named Executive
Officers total compensation levels should be competitive
and at market median with other comparable companies operating
within the forest products industry and other companies with
which the Company competes for executive talent.
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At Risk Incentive Pay. A greater percentage of
compensation for senior management should be tied to performance
against measurable objectives, the majority of which are
directly tied to Company performance, to achieve payouts.
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Pay-for-Performance. Compensation
should be linked to individual and Company performance.
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Shareholder Alignment. Rewards should be
linked to the creation of long-term Shareholder value through
the use of equity-based awards as a portion of our Named
Executive Officers compensation.
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Flexible Short-Term and Long-Term
Incentives. Fixed and variable and short and
long-term compensation programs should be balanced to reinforce
a performance-based culture.
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Employee Understanding. Overall compensation
simplicity should be maintained to ensure broad employee
understanding and acceptance.
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22
Administration,
Procedure and Role of the Compensation and Human Resources
Committee
The Compensation and Human Resources Committee determines our
compensation objectives, philosophy and forms of compensation
and benefits for executive officers. The Compensation and Human
Resources Committee submits several key compensation elements
for our executive officers to the independent members of the
full Board for their review and approval.
The Compensation and Human Resources Committee, which is
comprised entirely of independent directors, continually reviews
and considers best practices in executive compensation,
shareholder expectations and compensation practices of
peer group companies in making its decisions
regarding appropriate compensation levels.
In making compensation decisions, the Compensation and Human
Resources Committee considers a number of other sources,
including:
Individual Officer Performance
Evaluations. The Compensation and Human Resources
Committee annually evaluates the performance and individual
accomplishments of our Chief Executive Officer and our other
NEOs. Such evaluation is a subjective analysis conducted, in
part, with reference to the performance measures discussed
below. Further, as part of the evaluation, the Compensation and
Human Resources Committee meets and reviews with our Chief
Executive Officer his evaluation of the performance of each of
the other NEOs.
Information Provided by our Executive
Officers. Among the information considered by the
Compensation and Human Resources Committee in making its
compensation decisions are projections for financial performance
provided by our Chief Financial Officer including revenues,
total mill production and sales, mill margins, commission and
selling expenses, Operating EBITDA (which we define as operating
income from continuing operations plus depreciation and
amortization) and net earnings. In addition, our Chief Operating
Officer provides certain mill performance information relating
to our operations and those of some of our competitors.
Independent Consultants. The Compensation and
Human Resources Committee has the authority to engage
independent compensation consultants. It has in the past and may
in the future engage an outside consultant to assist the
Committee in assessing the Companys executive compensation
programs.
Neither our Compensation and Human Resources Committee nor
management used any compensation consultants in making its
compensation decisions for 2009.
Geographic Considerations. As our operations
are located in Europe and North America, we also consider local
market demands, availability of qualified management and the
local cost of living.
Peer Group Comparisons. In addition to
periodically seeking advice from independent consultants, the
Compensation and Human Resources Committee considers and
evaluates executive compensation levels and programs through
comparisons on an annual basis based on available information
for certain peer group companies principally
comprised of mid-cap North American forest products
companies. We review compensation paid at these companies
because their business and size make them most comparable to us
and to ensure that our compensation levels are within the range
of comparative norms. In 2009, using public filings, the
Compensation and Human Resources Committee considered the
executive compensation levels, including benefits and
perquisites, of a number of such companies, including
Weyerhaeuser Inc., TimberWest Forest Corp., Catalyst Paper
Corporation, Norbord Inc., SFK Pulp Income Fund, West Fraser
Timber Co. Ltd., Canfor Pulp Income Fund and Canfor Corp.
The Compensation and Human Resources Committee considers the
total direct compensation for our Named Executive Officers,
long-term incentives and program costs in the context of the
performance of the Company relative to the peer group companies.
We target salaries, bonuses and incentive compensation towards a
median level or 50th percentile range on a size and geographic
adjusted basis relative to peer companies for similar
experienced executives performing similar duties. Generally,
awards are made within this range, although our program is
flexible enough to allow our Compensation and Human Resources
Committee to provide compensation above or below the 50th
percentile in cases of exceptional individual performance or
other individual factors relating to a Named Executive
Officers performance. We benchmark against median
compensation because it allows us to attract and retain
executives, provides an incentive for executives to strive for
better than average
23
performance to earn better than average compensation and helps
us to manage the overall cost of our compensation program.
While we believe it is important to periodically review
benchmarking data to determine how our executive compensation
program compares to the programs used by our peer group
companies, such reference points are only one element used in
structuring our executive compensation program.
Total Compensation. The Compensation and Human
Resources Committee reviews total compensation levels for our
Named Executive Officers at least annually, including each
element of compensation provided to an individual Named
Executive Officer and the proportion of his total compensation
represented by each such element. In determining the appropriate
target total compensation for each NEO, the Compensation and
Human Resources Committee reviews each individual separately and
considers a variety of factors in establishing his target
compensation. These factors may include the Named Executive
Officers time in position, unique contribution or value to
the Company, recent performance, and whether there is a
particular need to strengthen the retention aspects of the
NEOs compensation.
In its review, the Compensation and Human Resources Committee
also considers benchmarking information with respect to our peer
companies with the goal of targeting overall compensation for
our Named Executive Officers within the median range. The
Compensation and Human Resources Committee has no predetermined
specific policies on the percentage of total compensation that
should be cash versus equity or
short-term versus long-term. The
Compensation and Human Resources Committees practice is to
consider peer company data and these relationships in the
context of our compensation philosophy to determine the overall
balance and reasonableness of our NEOs total compensation
packages.
Participation of Executive Officers. With the
exception of our Chief Executive Officer, our Named Executive
Officers typically do not play a role in evaluating or
determining executive compensation programs or levels. For
fiscal 2009, our Chief Executive Officer submitted for
consideration to our Compensation and Human Resources Committee
performance evaluations for our other Named Executive Officers
and recommendations as to their compensation levels, including
bonuses. These recommendations were both subjective
determinations and objective recommendations based upon
performance against performance goals. Such recommendations were
consistent with our compensation objectives and took into
account the current economic crisis and its effect on the
Company.
Compensation
Elements
We use four principal components in the overall compensation of
our Named Executive Officers.
Base Salaries. Base salaries for our Named
Executive Officers provide base compensation for
day-to-day
performance and are based primarily upon job responsibilities,
level of experience and skill as well as performance compared
with annually established financial or individual objectives. In
addition, the impact a Named Executive Officer is expected to
make to our business in the future is considered. We also
consider our base salaries in the context of the markets in
which we operate. The Compensation and Human Resources Committee
normally considers salary adjustments for executive officers
annually in the first quarter of the year.
Bonuses. We generally provide annual incentive
opportunities in the form of cash bonuses to our Named Executive
Officers to motivate their performance in meeting our current
years business goals and encourage superior performance.
These bonuses are awarded based on the expectations of the
directors and management for our financial and operating
performance in a particular period and the contribution of a
Named Executive Officer in achieving the Companys goals as
well as the individual goals which are established for each NEO
based upon such NEO position and responsibility. Each year, the
Company establishes a business plan for the forthcoming year.
Based on this business plan, the Compensation and Human
Resources Committee considers the financial, strategic and other
goals for the Company outlined by our NEOs. The Compensation and
Human Resources Committee uses this business plan as one
benchmark to measure our NEOs performance in achieving the
Companys goals. The Compensation and Human Resources
Committee also considers the contribution of a Named Executive
Officer to our business and operations generally. The
Compensation and Human Resources Committee awards bonuses on a
discretionary basis without a predetermined formula
or specific weighting for any particular factor. Also, in
24
determining the bonuses to be paid to our NEOs other than our
Chief Executive Officer and Chief Financial Officer, the
Compensation and Human Resources Committee considers
recommendations by our Chief Executive Officer.
Incentive Equity Grants or Awards. Our NEOs
may be granted long-term equity incentives in the form of
options, restricted shares
and/or share
appreciation rights under our 2004 Stock Incentive Plan.
Additionally, NEOs may be awarded performance shares and
performance units under the 2004 Stock Incentive Plans
Performance Incentive Supplement. Awards under the 2004 Stock
Incentive Plan are generally granted based upon the long-term
financial and operating expectations of our directors and
management and the contribution an executive officer is expected
to make in the future in achieving those targets. Performance
for awards outstanding under the Performance Incentive
Supplement is measured over a three-year period commencing from
January 1 of the year an award was granted. The performance
criteria used by the Compensation and Human Resources Committee
to determine the achievement of performance objectives by a NEO
is based 40% on the Companys Operating EBITDA per tonne of
pulp, 40% on the Companys Share price performance to a
chosen peer group and 20% based upon strategic leadership,
direction and overall performance by an individual NEO. See
Narrative Disclosure to Grant of Plan-Based Awards
Table.
Awards under the 2004 Stock Incentive Plan generally produce
value to our NEOs if the price of our Shares appreciates,
thereby aligning the interests of our Named Executive Officers
with those of Shareholders through increased Share ownership.
Equity-based compensation and ownership is used to ensure NEOs
have a continuing stake in the long-term success of the Company
and for retention purposes.
In accordance with the 2004 Stock Incentive Plan and our
standard practice, all equity awards thereunder are granted at
fair market value as of the date of grant. We define fair
market value as the closing price of our Shares quoted on
NASDAQ on the business day immediately preceding the date of
grant.
The Compensation and Human Resources Committee reviews incentive
grants on an annual basis as part of its analysis of total
compensation and the balance between the different elements
thereof.
Benefits. In addition to the components of the
compensation discussed above, we provide a number of other
benefits to our Named Executive Officers for the purpose of
providing security for current and future needs of executives
which are structured to be within a reasonably competitive range
relative to peer companies. These benefits are set forth in
Footnote 11 to the Summary Compensation table on page 27 of
this Proxy Statement and consist primarily of automobile, health
and retirement programs. Automobile benefits include the lease
of a vehicle along with the fuel and maintenance costs thereon.
Health benefits may include periodic physical consultations,
dental and pharmaceutical benefits. Under our retirement
programs contributions are made to a defined contribution
pension arrangement to the extent permissible by law on a tax
deferred basis. Depending on the retirement program, amounts in
excess of those allowed by tax authorities are recorded in
unfunded accounts or remitted to an investment account with a
third party fund until retirement or termination.
Pursuant to the terms of his employment agreement with us, our
Chief Executive Officer receives, in lieu of other benefits such
as automobile, medical and retirement programs, a lump sum
living allowance of 75,000 in recognition of his
significant travel schedule. No specific allocation is made in
connection with the living allowance for any particular
perquisite.
Change of
Control and Severance Agreements
A number of the employment agreements we have entered into with
our Named Executive Officers provide for specified payments and
other benefits in the event of a change of control. Such change
of control provisions are described in greater detail under
Employment Agreements with our Named Executive
Officers beginning on page 29 and under
Potential Payments upon Termination or Change in
Control beginning on page 33 of this Proxy Statement.
The purpose of the change of control agreements is to encourage
key management personnel to remain with the Company and to help
avoid distractions and conflicts of interest in the event of a
potential or actual change of control of the Company so that the
executives will focus on a fair and impartial review of any
proposal on the maximization of value. We believe that we have
structured agreements to be reasonable and to provide a
temporary level of protection to the Named Executive Officer in
the event of employment loss due to a change of control. In
addition, our 2004 Stock Incentive Plan provides for accelerated
vesting and exercisability of options and restricted
25
share awards upon a change of control. Additionally, certain of
the award agreements relating to grants of performance shares
and performance units under the Performance Incentive Supplement
also provide for accelerated vesting. The accelerated vesting
and exercisability in the event of a change of control is
intended to allow executives to recognize the value of their
contributions to the Company and not affect management decisions
following terminations.
The employment agreements of our NEOs provide for severance
payments in certain circumstances. The specific amounts that a
particular Named Executive Officer would receive as a severance
payment are described under Potential Payments Upon
Termination of Change of Control beginning on page 33
of this Proxy Statement.
Post-Retirement
Compensation
We provide retirement benefits to our Named Executive Officers
through our North American and European retirement programs.
The North American program is a defined contribution type
structure whereby a contribution of 10% of base salary, along
with 5% of any cash bonus paid, is remitted to an investment
account held in the name of the employee on a tax deferred
basis. To the extent that the contributions exceed limits
established by tax statute, the amount that exceeds the limit is
credited to an unfunded account. Our Chief Financial Officer is
the only Named Executive Officer participating in the North
American program.
The European program is a defined contribution type structure
whereby a contribution of 10% of base salary along with 5% of
any cash bonus paid is remitted to an investment account held in
the name of the employee on a tax deferred basis. To the extent
that the contributions exceed limits established by tax statute,
the amount that exceeds the limit is paid to a fund managed by a
third party where it is held on the employees behalf.
Messrs. Isacson, Ridder and Nossol are the Named Executive
Officers participating in the European program.
Performance
Measures
As part of the annual performance evaluations it conducts for
our NEOs, the Compensation and Human Resources Committee, among
other things, considers the following performance measures:
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Operating EBITDA We consider Operating EBITDA to be
a meaningful supplement to operating income as a performance
measure primarily because depreciation expense and non-recurring
capital asset management changes are not an actual cost, and
depreciation expense varies widely from company to company in a
manner we consider largely independent of the underlying cost
efficiency of their operating facilities;
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Operating EBITDA per tonne of NBSK pulp as compared to our peer
group;
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Our financial and operating targets for a period and the
contributions of our Named Executive Officers in achieving these
targets;
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Contributions of our NEOs to our business and operations
generally;
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Our NEOs progress on meeting approved individual goals for
the year;
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The Companys Share performance relative to our peer
group; and
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Contributions of our NEOs to the successful completion of major
transactions such as material acquisitions or financing related
transactions.
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The above performance measures are evaluated based on the
overall judgment of the Compensation and Human Resources
Committee without giving fixed of specific weighting to any
particular measure.
Deductibility
of Compensation
Section 162(m) of the Internal Revenue Code limits to
$1,000,000 per person the amount the Company may deduct for
compensation paid to any of its most highly compensated
executives in any year. The levels of salary and bonus generally
paid by us do not exceed this limit. Upon the exercise of
non-qualified stock options, the excess of the current market
price over the option price (the spread) is treated
as compensation and therefore it may be
26
possible for option exercises by an executive in any year to
cause the executives total compensation to exceed
$1,000,000. Under U.S. income tax regulations, the spread
compensation from options that meets certain requirements will
not be subject to the $1,000,000 cap on deductibility and it is
the Companys current policy generally to grant options
that meet these requirements. To this end, the 2004 Stock
Incentive Plan has been approved by our Shareholders. However,
in the future, the Compensation and Human Resources Committee
may elect to exceed the tax deductible limits if it determines
it is necessary to meet competitive market pressures and to
ensure that it is able to attract and retain top talent to
successfully lead the Company.
Summary
We believe that our executive compensation program has been
appropriately designed to attract, retain and motivate our Named
Executive Officers, drive financial performance, encourage
teamwork throughout our Company and align the interests of our
NEOs with the long-term interests or our Shareholders.
We believe that our 2009 compensation levels fairly reflect our
performance and the impact of the extraordinary macroeconomic
and industry challenges we began to face in the latter part of
2008 and through 2009 on our revenues and earnings from
operations. We also believe that our 2009 compensation levels
are appropriate relative to our peer companies. We monitor our
programs in the marketplaces in which we compete for talent and
changing trends in compensation practices in an effort to
maintain an executive compensation program that is competitive,
performance driven, consistent with shareholder interests and
fair and reasonable overall.
EXECUTIVE
COMPENSATION TABLES
Summary
Compensation Table
The following table sets forth information regarding the
compensation awarded to, earned by, or paid to our Named
Executive Officers. All of our NEOs are paid in currencies other
than United States dollars. Mr. Gandossi is paid in
Canadian dollars and the remaining NEOs are paid in Euros. In
this Proxy Statement, unless otherwise noted, such amounts have
been converted into United States dollars using the relevant
average exchange rate for the year based on the noon buying
rates as certified for customs purposes by the Federal Reserve
Bank of New York and posted by the Federal Reserve Board of
Governors:
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Change in
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Pension Value
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and Non-
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qualified
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Deferred
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Stock
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Non-Equity
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Compensation
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All Other
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Name and Principal
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Salary(2)
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Bonus
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Awards(8)
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Option
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Incentive Plan
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Earnings(10)
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Compensation(11)
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Total
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Position
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Year(1)
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($)
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($)
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($)
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Awards ($)
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Compensation ($)
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($)
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($)
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($)
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Jimmy S. H. Lee(3)
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2009
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487,690
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237,819
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|
|
104,505
|
|
|
|
830,014
|
|
Chief Executive Officer
|
|
|
2008
|
|
|
|
514,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110,288
|
|
|
|
624,963
|
|
|
|
|
2007
|
|
|
|
476,389
|
|
|
|
311,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102,818
|
|
|
|
891,087
|
|
David M. Gandossi(4)
|
|
|
2009
|
|
|
|
297,854
|
|
|
|
111,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,335
|
|
|
|
32,105
|
|
|
|
461,989
|
|
Secretary, Executive Vice President and
|
|
|
2008
|
|
|
|
318,680
|
|
|
|
79,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,489
|
|
|
|
32,037
|
|
|
|
455,876
|
|
Chief Financial Officer
|
|
|
2007
|
|
|
|
314,963
|
|
|
|
158,257
|
|
|
|
27,340(9
|
)
|
|
|
|
|
|
|
|
|
|
|
27,362
|
|
|
|
29,679
|
|
|
|
557,601
|
|
Claes-Inge Isacson(5)
|
|
|
2009
|
|
|
|
452,855
|
|
|
|
60,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,336
|
|
|
|
542,525
|
|
Chief Operating Officer
|
|
|
2008
|
|
|
|
477,913
|
|
|
|
67,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,128
|
|
|
|
576,684
|
|
|
|
|
2007
|
|
|
|
445,543
|
|
|
|
63,061
|
|
|
|
64,869(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,168
|
|
|
|
619,641
|
|
Wolfram Ridder(6)
|
|
|
2009
|
|
|
|
357,825
|
|
|
|
50,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,401
|
|
|
|
459,946
|
|
Vice President of
|
|
|
2008
|
|
|
|
377,624
|
|
|
|
62,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,263
|
|
|
|
493,824
|
|
Business Development
|
|
|
2007
|
|
|
|
349,854
|
|
|
|
52,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,504
|
|
|
|
451,138
|
|
Leonhard Nossol(7)
|
|
|
2009
|
|
|
|
310,597
|
|
|
|
45,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,649
|
|
|
|
405,671
|
|
Group Controller, Europe and
|
|
|
2008
|
|
|
|
336,133
|
|
|
|
56,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,997
|
|
|
|
444,450
|
|
Managing Director of Rosenthal
|
|
|
2007
|
|
|
|
304,148
|
|
|
|
48,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,601
|
|
|
|
400,142
|
|
|
|
|
(1) |
|
Year to year changes reflect both increases in compensation and
foreign exchange fluctuations. Based upon the exchange rate as
at December 31, 2009, the U.S. dollar had decreased by
approximately 3% in value against the Euro and approximately 17%
against the Canadian dollar since December 31, 2008. Where |
27
|
|
|
|
|
amounts shown were paid in Euros or Canadian dollars, such
amounts were converted using the applicable average Federal
Reserve Bank of New York noon spot rate for 2009. |
|
(2) |
|
The amount reported in this column for each Named Executive
officer reflects the dollar amount of base salary paid,
including salary increases. |
|
(3) |
|
The terms of Mr. Lees employment agreement, entitle
him to housing and other perquisites not to exceed in aggregate
75,000 annually and other compensation as determined by
the Compensation and Human Resources Committee which amount is
reflected in the column All Other Compensation. |
|
(4) |
|
In 2009, we contributed $33,509 to Mr. Gandossis
retirement plan under our North American retirement program
which amount is reflected in the columns Change in Pension
Value and Non-Qualified Deferred Compensation Earnings and
All Other Compensation. Details of our North
American and European retirement programs are set out beginning
on page 26 of this Proxy Statement. |
|
(5) |
|
In 2009, we contributed $29,159 to Mr. Isacsons
retirement plan under our European retirement program which
amount is reflected in the column All Other
Compensation. |
|
(6) |
|
In 2009, we contributed $40,315 to Mr. Ridders
retirement plan under our European retirement program which
amount is reflected in the column All Other
Compensation. |
|
(7) |
|
In 2009, we contributed $34,688 to Mr. Nossols
retirement plan under our European retirement program which
amount is reflected in the column All Other
Compensation. |
|
(8) |
|
Stock awards granted to Named Executive Officers consist
primarily of performance shares and units. The amounts shown
represent the aggregate grant date fair value during the
indicated fiscal year of the awards granted to our Named
Executive Officers in 2009 and prior fiscal years as determined
in accordance with ASC 718. The fair value is disclosed as
$nil for the 2009 fiscal year because, pursuant to ASC 718,
the performance shares previously awarded to Named Executive
Officers will not be granted until December 31, 2010 due to
the fact that the underlying performance conditions are based on
performance targets which are not determinable until
December 31, 2010. The performance shares were awarded on
February 19, 2008. As at the date hereof, the closing daily
share price since the performance shares and units were awarded
ranged from a high of $8.40 to a low of $0.27. Details on the
stock awards can be found in the Grant of Plan-Based Awards
Table and the Outstanding Equity Awards at Fiscal Year End Table
on pages 30 and 31 of this Proxy Statement. |
|
(9) |
|
The amount shown here reflects the vested portion of restricted
stock granted in prior years. |
|
(10) |
|
The amount set forth in this column for Mr. Gandossi
reflects the annual change in the value, including interest, of
his unfunded account which account records those retirement plan
contributions in excess of the applicable statutory limit. |
|
(11) |
|
Included in All Other Compensation for the fiscal
years ended December 31, 2009, 2008 and 2007 are benefits
and perquisites which consist of the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plan
|
|
|
Name
|
|
Year
|
|
Auto ($)
|
|
Contributions ($)
|
|
Other ($)
|
|
Jimmy S. H. Lee
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
$104,505 (living allowance)
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
$110,288 (living allowance)
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
$102,818 (living allowance)
|
David M. Gandossi
|
|
|
2009
|
|
|
|
11,836
|
|
|
|
18,397
|
|
|
$1,872(life insurance and special medical)
|
|
|
|
2008
|
|
|
|
11,334
|
|
|
|
18,746
|
|
|
$1,957(life insurance and special medical)
|
|
|
|
2007
|
|
|
|
10,579
|
|
|
|
17,222
|
|
|
$1,878(life insurance and special medical)
|
Claes-Inge Isacson
|
|
|
2009
|
|
|
|
177
|
|
|
|
29,159
|
|
|
|
|
|
|
2008
|
|
|
|
444
|
|
|
|
30,684
|
|
|
|
|
|
|
2007
|
|
|
|
1,614
|
|
|
|
44,554
|
|
|
|
Wolfram Ridder
|
|
|
2009
|
|
|
|
11,086
|
|
|
|
40,315
|
|
|
|
|
|
|
2008
|
|
|
|
11,099
|
|
|
|
42,164
|
|
|
|
|
|
|
2007
|
|
|
|
10,348
|
|
|
|
38,156
|
|
|
|
Leonhard Nossol
|
|
|
2009
|
|
|
|
14,961
|
|
|
|
34,688
|
|
|
|
|
|
|
2008
|
|
|
|
15,789
|
|
|
|
36,208
|
|
|
|
|
|
|
2007
|
|
|
|
14,719
|
|
|
|
32,882
|
|
|
|
28
Narrative
Disclosure to Summary Compensation Table
Employment
Agreements with our Named Executive Officers
We have entered into employment agreements with each of our
NEOs. The following summary of certain material terms of such
agreements is not complete and is qualified by reference to the
full text of each agreement on file with the SEC.
Mr. Lee is a party to an amended and restated employment
agreement with us dated effective April 28, 2004 which
provides for an annual base salary of 325,000 (which
number is reviewed by the Board or the Compensation and Human
Resources Committee annually), housing and other perquisites not
to exceed in aggregate 75,000 annually and other
compensation as determined by the Board or the Compensation and
Human Resources Committee as applicable. The agreement continues
in effect until Mr. Lees employment with us is
terminated. Mr. Lee may terminate his employment with us at
any time for good reason within 180 days after the
occurrence of any good reason event and we may terminate his
employment with cause.
Mr. Gandossi is a party to an employment agreement with us
dated effective August 7, 2003 which provides for an annual
base salary of CDN$320,000 (which number is reviewed by the
Board or the Compensation and Human Resources Committee
annually), participation in our bonus program and North American
retirement program as well as certain other benefits and
perquisites. The agreement provides for the continued employment
of Mr. Gandossi as Chief Financial Officer, Executive
Vice-President and Secretary for a period of 36 months,
with an automatic 12 month renewal if the Company does not
provide written notice of its intention not to renew the
agreement at least 12 months before the original term
expires. Thereafter, the agreement provides for successive
12 month renewals unless the Company provides written
notice of its intention not to renew 360 days in advance of
the expiry of the then term thereof. Mr. Gandossi may
terminate his employment with us at any time for good reason
within 180 days after the occurrence of any good reason
event and we may terminate his employment with cause.
Mr. Isacson is a party to an employment agreement with us
dated effective November 6, 2006 which provides for an
annual base salary of 325,000 (which number is reviewed by
the Board or the Compensation and Human Resources Committee
annually), an annual bonus based on two months salary and the
achievement of specific objectives with an opportunity to exceed
same in the event of exceptional performance. Mr. Isacson
is also entitled to certain other benefits and perquisites
including participation in our European retirement program.
Mr. Ridder is a party to an employment agreement with our
wholly owned subsidiary Stendal Pulp Holding GmbH dated
effective October 2, 2006 which provides for an annual base
salary of 247,200 (which number is reviewed by the Board
or the Compensation and Human Resources Committee annually) and
a yearly bonus of up to 25% of the annual gross salary depending
upon targets mutually agreed upon between Mr. Ridder and
our Chief Executive Officer. Mr. Ridder is also entitled to
certain other benefits and perquisites including participation
in our European retirement program. The agreement may be
terminated by either party at June 30 or December 31 of each
year by giving six months notice and in any event will
terminate at the time Mr. Ridder reaches the age of 65. In
the event of a direct or indirect change in majority ownership
of the Company, the notice period increases to twelve months.
Mr. Nossol is a party to an employment agreement with our
wholly-owned subsidiary ZPR GmbH (formerly ZPR
Geschäftsführungs GmbH) dated effective
August 18, 2005 which provides for an annual base salary of
200,000 (which number is reviewed by the Board or the
Compensation and Human Resources Committee annually), an annual
bonus based on two months salary and certain benefits and
perquisites including participation in our European retirement
program. The agreement may be terminated by either party by
giving six months notice and in any event will terminate
at the time Mr. Nossol reaches the age of 65.
29
Grant of
Plan-Based Awards Table
The following table sets forth information regarding awards
granted pursuant to our 2004 Stock Incentive Plan during 2009 to
our Named Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
Option
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Awards:
|
|
|
|
|
|
Date Fair
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Number of
|
|
|
Exercise
|
|
|
Value of
|
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
|
Estimate Future Payouts Under
|
|
|
Number of
|
|
|
Securities
|
|
|
or Base
|
|
|
Stock and
|
|
|
|
|
|
|
Plan Awards
|
|
|
Equity Incentive Plan Awards(2)
|
|
|
Shares of
|
|
|
Underlying
|
|
|
Price of
|
|
|
Option
|
|
|
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Stock or
|
|
|
Options
|
|
|
Option
|
|
|
Awards(3)
|
|
Name
|
|
Grant Date(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
Units (#)
|
|
|
(#)
|
|
|
Awards ($)
|
|
|
($)
|
|
|
Jimmy S.H. Lee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87,345
|
|
|
|
116,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Gandossi
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,721
|
|
|
|
62,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claes-Inge Isacson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,938
|
|
|
|
58,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wolfram Ridder
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,574
|
|
|
|
44,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leonhard Nossol
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,919
|
|
|
|
39,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Compensation and Human Resources Committee did not grant
performance awards to any of our NEOs in 2009 under our
Performance Incentive Supplement. The last of the performance
awards granted to our Named Executive Officers were made in
February 2008. Please see the narrative disclosure below for a
description of the material terms of such performance awards. |
|
(2) |
|
The Threshold amount reported reflects the fact
that, if threshold performance is not satisfied, a NEOs
rights with respect to the award are forfeited. The
Target amount reported represents vesting of a
minimum percentage of the performance award if the minimum
acceptable objective is achieved (as determined by the
Compensation and Human Resources Committee) and the
Maximum amount reported represents vesting of 100%
of the performance award if the maximum realistic objective is
achieved (as determined by the Compensation and Human Resources
Committee). |
|
(3) |
|
Stock awards granted to Named Executive Officers under the 2004
Stock Incentive Plan consist of performance shares and units.
The amounts shown represent the aggregate grant date fair value
of stock awards computed in accordance with ASC 718. The
fair value for the 2009 fiscal year is disclosed as $nil
because, pursuant to ASC 718, the performance shares will
not be granted until December 31, 2010 due to the fact that
the underlying performance conditions are based on performance
targets which are not determinable until December 31, 2010.
The performance shares were awarded on February 19, 2008.
As at the date hereof, the closing daily Share price since the
performance shares and units were awarded ranged from a high of
$8.40 to a low of $0.27. |
Narrative
Disclosure to Grant of Plan-Based Awards Table
Performance
Incentive Supplement
In 2009, the Compensation and Human Resources Committee did not
grant any performance awards to any of our NEOs under the
Performance Incentive Supplement. Performance shares are subject
to certain restrictions and are required to be deposited with
the Company until vesting and the lapse of such restrictions.
The lapse of the restrictions on the performance shares and the
vesting of such performance shares are contingent upon the
achievement of certain specified performance objectives
including Company performance, Share price performance and
individual performance. Similarly, the vesting of the
performance units is also contingent upon the achievement of
such performance objectives.
Performance is measured over a three year-period which commenced
on January 1 in the year where the award was granted.
Determinations as to the achievement of the performance
objectives by a Named Executive Officer and the number of Shares
that ultimately vest and are awarded are made by the
Compensation and Human Resources Committee at the end of the
three-year period with reference to the following performance
criteria:
|
|
|
|
|
40% is based upon the Companys Operating
EBITDA (as measured by the Company at the beginning of the
performance cycle) per tonne of northern bleached softwood
kraft, or NBSK, pulp as compared to a chosen peer
group;
|
|
|
|
40% is based upon the Companys Share price performance
relative to a chosen peer group; and
|
30
|
|
|
|
|
20% is based upon the strategic leadership, direction and other
overall performance by the Named Executive Officer, all subject
to adjustment by the Compensation and Human Resources Committee
in its sole discretion to remove the effect of charges for
restructurings, discontinued operations, acquisitions,
divestitures, extraordinary items and all items of gain, loss or
expense determined to be extraordinary or unusual in nature or
infrequent occurrence, related to the disposal or a segment or a
business, or related to a change in accounting principle or
otherwise.
|
In the event that the threshold performance stipulated for each
Named Executive Officer is not satisfied, the NEOs rights
with respect to the performance award will be forfeited. The
Compensation and Human Resources Committee also has discretion
to decrease the amount of Shares issued pursuant to the
performance awards, if, in the Compensation and Human Resources
Committees view, the financial performance of the Company
as a whole during the performance cycle justifies such
adjustment, regardless of the extent to which the performance
objectives were achieved.
Outstanding
Equity Awards at Fiscal Year-End Table
The following table sets forth information regarding outstanding
equity awards for our Named Executive Officers at
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
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Equity
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Equity
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Equity
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Incentive
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Incentive
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Incentive
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Plan Awards:
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Plan Awards:
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Market
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Plan Awards:
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Market or
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Number of
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Number of
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Number of
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Number of
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Value of
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Number of
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Payout Value of
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Securities
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Securities
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Securities
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Shares or
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Shares or
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Unearned Shares,
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Unearned Shares,
|
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Underlying
|
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Underlying
|
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Underlying
|
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Units of
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Units of
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Units or Other
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Units or Other
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Unexercised
|
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Unexercised
|
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Unexercised
|
|
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Option
|
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|
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Stock That
|
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Stock That
|
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Rights That
|
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Rights That
|
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Options
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Options
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Unearned
|
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|
Exercise
|
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|
Option
|
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Have Not
|
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Have Not
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Have Not
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Have Not
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Exercisable
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Unexercisable
|
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Options
|
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Price
|
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Expiration
|
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Vested
|
|
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Vested
|
|
|
Vested(1)
|
|
|
Vested(2)
|
|
Name
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Jimmy S. H. Lee
|
|
|
700,000
|
(3)
|
|
|
|
|
|
|
|
|
|
|
6.375
|
|
|
January 19, 2010
|
|
|
|
|
|
|
|
|
|
|
116,460
|
|
|
|
361,026
|
|
David M. Gandossi
|
|
|
100,000
|
(4)
|
|
|
|
|
|
|
|
|
|
|
5.65
|
|
|
September 10, 2013
|
|
|
|
|
|
|
|
|
|
|
62,271
|
|
|
|
193,040
|
|
Claes-Inge Isacson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,230
|
|
|
|
180,513
|
|
Wolfram Ridder
|
|
|
20,000
|
(5)
|
|
|
|
|
|
|
|
|
|
|
7.92
|
|
|
September 10, 2015
|
|
|
|
|
|
|
|
|
|
|
44,291
|
|
|
|
137,302
|
|
Leonhard Nossol
|
|
|
30,000
|
(6)
|
|
|
|
|
|
|
|
|
|
|
6.375
|
|
|
January 19, 2010
|
|
|
|
|
|
|
|
|
|
|
39,865
|
|
|
|
123,582
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
7.92
|
|
|
September 10, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reflects performance awards granted to our Named Executive
Officers in February 2008. The vesting of such awards is
contingent upon the achievement of specified performance
objectives at the end of a three-year performance cycle. |
|
(2) |
|
Based on the closing Share price of $3.10 per Share on the
NASDAQ Global Market as at December 31, 2009. |
|
(3) |
|
Mr. Lees options to acquire up to
700,000 Shares, which vested in 2003, expired on
January 19, 2010. As of the date hereof, Mr. Lee does
not hold any options. |
|
(4) |
|
Mr. Gandossis options to acquire up to
100,000 Shares became fully vested on September 10,
2006. |
|
(5) |
|
Mr. Ridders options to acquire up to
20,000 Shares became fully vested on September 9, 2007. |
|
(6) |
|
Mr. Nossols options to acquire up to
30,000 Shares became fully vested on January 19, 2003
and expired on January 19, 2010 and his options to acquire
up to 25,000 Shares became fully vested on
September 9, 2007 and remain outstanding as at the Record
Date. |
31
Option
Exercises and Stock Vested
The following table discloses the amounts received by our Named
Executive Officers upon exercise of options or similar
instruments or the vesting of stock or similar instruments
during 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized Upon
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
Name
|
|
Acquired on Exercise (#)
|
|
|
Exercise or Vesting ($)
|
|
|
Acquired on Vesting (#)
|
|
|
Vesting ($)
|
|
|
Jimmy S.H. Lee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David M. Gandossi
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claes-Inge Isacson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wolfram Ridder
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leonhard Nossol
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Qualified
Deferred Compensation
We maintain two separate retirement programs for our North
American and European executive officers.
Under the terms of our North American program, we make a
contribution to a registered retirement savings plan
(RRSP) account with a financial institution in the
name of the executive officer in an amount equal to 10% of a
combined total of 100% of gross salary and 50% of cash bonus
payments up to the annual maximum RRSP limit (CDN$21,000 in
2009). Amounts in excess of the annual maximum RRSP limit, are
credited to an unfunded account and earn interest based on a
notional growth rate of 5.5%. While the value of the unfunded
account grows on a tax-free basis while retained in the Company,
the executive officer will be subject to full taxation on the
balance at the time the funds are withdrawn (upon retirement or
termination of employment).
Our Chief Financial Officer, is our only NEO participating in
our North American program. In 2009, we contributed or accrued
$33,509 on Mr. Gandossis behalf under the terms of
the program.
Similarly, under the terms of our European program, we make a
contribution to a German government regulated pension plan in an
amount equal to 10% of a combined total of 100% gross salary and
50% cash bonus payments. In addition, to the extent that such
statutory pension is limited by an annual cap (5,433 in
2009), contributions in excess of this amount are remitted to a
third party fund and held in an account in the executive
officers name. While the value of such account grows on a
tax free basis while retained with the third party fund, the
executive officer will be subject to full taxation of the
balance at the time the funds are withdrawn (upon retirement or
termination of employment).
The NEOs participating in our European program are
Messrs. Isacson, Ridder and Nossol, for whom, in 2009, we
contributed on their behalf under the terms of the program,
$29,159, $40,315 and $34,688, respectively.
The following table sets forth information regarding
contributions, earnings and account balances described above for
our Named Executive Officers under our retirement programs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Contributions in
|
|
|
Aggregate Earning
|
|
|
Aggregate
|
|
|
Aggregate Balance
|
|
|
|
Contributions in
|
|
|
Last Fiscal
|
|
|
in Last Fiscal
|
|
|
Withdrawals/
|
|
|
at Last Fiscal Year
|
|
|
|
Last Fiscal Year
|
|
|
Year(1)
|
|
|
Year(2)
|
|
|
Distributions
|
|
|
End(3)
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Jimmy S.H. Lee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David M. Gandossi
|
|
|
|
|
|
|
15,112
|
|
|
|
5,223
|
|
|
|
|
|
|
|
108,128
|
|
Claes-Inge Isacson
|
|
|
|
|
|
|
21,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wolfram Ridder
|
|
|
|
|
|
|
32,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leonhard Nossol
|
|
|
|
|
|
|
27,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts in this column reflect our contributions to each of our
Named Executive Officers respective retirement plan which
are in excess of the amount permitted by applicable tax statute.
We also account for these amounts in the Summary Compensation
Table on page 27 of this Proxy Statement, under the
Change in |
32
|
|
|
|
|
Pension Value and Non-Qualified Deferred Compensation
Earnings column for Mr. Gandossi and under the
All Other Compensation column for all of our other
NEOs. |
|
(2) |
|
The amount in this column reflects interest accrued based on a
notional growth rate of 5.4%. |
|
(3) |
|
No amounts are shown in this column for the Named Executive
Officers participating in our European retirement program, as
contributions in excess of statutory limits are remitted to a
third party fund and the Company no longer has any obligation in
respect thereof. |
Potential
Payments upon Termination or Change of Control
Termination
We have agreed to provide certain benefits to our Named
Executive Officers in the event of the termination of their
employment with us. The following table shows the estimated
severance benefits that would have been payable to our NEOs if
their employment was terminated without cause on
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
|
|
|
|
|
|
|
Cash Severance
|
|
|
Insurance
|
|
|
Stock Option
|
|
|
Restricted Stock
|
|
|
Awards
|
|
|
|
|
|
|
Benefit
|
|
|
Continuation
|
|
|
Acceleration
|
|
|
Acceleration
|
|
|
Acceleration
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Jimmy S. H. Lee
|
|
|
2,926,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,926,140
|
|
David M. Gandossi
|
|
|
595,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
595,707
|
|
Claes-Inge Isacson
|
|
|
754,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
754,758
|
|
Wolfram Ridder
|
|
|
234,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
234,410
|
|
Leonhard Nossol
|
|
|
214,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
214,195
|
|
Change
in Control
We have agreed to provide certain benefits to our Named
Executive Officers if their employment is terminated within a
specified time after a change of control of the
Company. The following table shows the estimated change in
control benefits that would have been payable to our NEOs if a
change of control had occurred on December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
|
|
|
|
|
|
|
Cash Severance
|
|
|
Insurance
|
|
|
Stock Option
|
|
|
Restricted Stock
|
|
|
Awards
|
|
|
|
|
|
|
Benefit
|
|
|
Continuation
|
|
|
Acceleration(1)
|
|
|
Acceleration
|
|
|
Acceleration(2)
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Jimmy S. H. Lee
|
|
|
2,926,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,926,140
|
|
David M. Gandossi
|
|
|
1,787,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,787,122
|
|
Claes-Inge Isacson
|
|
|
754,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
754,758
|
|
Wolfram Ridder
|
|
|
468,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
468,821
|
|
Leonhard Nossol
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
None of the stock options exercisable upon a change of control
had intrinsic value as at December 31, 2009, as the
exercise price of such stock options was in all cases greater
than the closing Share price on December 31, 2009. |
|
(2) |
|
The terms of Messrs. Lee and Gandossis performance
awards provide for 100% vesting of the award in case of a change
of control. For our other Named Executive Officers, the extent
to which their performance awards become vested in the event of
a change of control is at the discretion of the Compensation and
Human Resources Committee. For the purposes of this table, we
have assumed a vesting of 85% of the performance award for each
such NEO. |
The terms of his employment agreement provide that, if
Mr. Lee is terminated without cause or resigns for good
reason, he will be entitled to a severance payment equal to
three times the sum of his then annual salary plus the higher of
(i) his current annual bonus, and (ii) the highest
variable pay and incentive bonus received during the three years
last ending prior to his termination. This amount is payable in
substantially equal installments over a twelve-month period,
unless (i) a change of control occurs following such
termination, in which case the unpaid
33
portion of such severance amount is payable in full in a lump
sum cash payment immediately following such change of control,
or (ii) if such termination occurs in contemplation of, at
the time of, or within three years after a change of control,
this amount is payable in a lump sum cash payment immediately
following such termination. In addition, all unvested rights in
any stock options and any other equity awards will vest in full
and become immediately exercisable. Mr. Lee will also be
entitled to any accrued benefits. If Mr. Lees
employment with us is terminated for cause, he is not entitled
to any additional payments or benefits under the agreement,
other than accrued benefits (including, but not limited to, any
then vested stock options and other equity grants) and a
prorated bonus, which is payable immediately upon such
termination. Mr. Lees employment agreement defines a
change of control as the occurrence of any of
certain specified events including: (1) a person, directly
or indirectly: (a) becoming the beneficial owner of the
greater of 15% or more of our Shares then outstanding and the
Shares issuable upon conversion of our convertible notes due
2010 or 20% of our then outstanding Shares; (b) having sole
and/or
shared voting or dispositive power over the greater of 15% or
more of our Shares then outstanding and the Shares issuable upon
conversion of our convertible notes due 2010 or 20% of our then
outstanding Shares; (2) a change in the composition of the
Board occurring within a two-year period prior to such change as
a result of which fewer than a majority of the Board members are
incumbent Board members; (3) the solicitation of a
dissident proxy, the result of which is to change the
composition of the Board so that fewer than a majority of the
Board are incumbent members; (4) the consummation of a
merger, amalgamation or consolidation of the Company with or
into another entity if more than 50% of the combined voting
power of the continuing entitys securities outstanding
immediately after such event are owned by persons who were not
stockholders prior to such event; (5) the sale of all or
substantially all of our assets; or (6) the approval by our
Shareholders of a plan of complete liquidation or dissolution.
Pursuant to terms of his employment agreement with us, if
Mr. Gandossi is terminated without cause or resigns for
good reason other than in connection with the change in control,
he shall be entitled to a severance payment equal to the sum of
his base salary for the remaining term of the agreement plus the
annual bonuses payable for the years (or portions thereof)
remaining in the term of the agreement, calculated as set forth
in the agreement. The agreement also provides that, if in
connection with or within eighteen months of a change in
control, Mr. Gandossi voluntarily terminates his employment
for good reason or is involuntarily discharged, he shall be
entitled to a severance payment of three times the sum of his
then current annual base salary plus the highest of (i) his
then-current annual bonus, (ii) his highest variable pay
and annual incentive bonus for the last three years and
(iii) 50% of his current annual base salary.
Mr. Gandossis employment agreement defines a
change of control as the occurrence of any of
certain specified events including: (1) notification by us
that a person has become the beneficial owner of or has sole
and/or
shared voting or dispositive power over more than 20% of our
Shares; (2) a change in the composition of the Board
occurring within a two-year period prior to such change as a
result of which fewer than a majority of the Board members are
incumbent Board members; (3) the solicitation of a
dissident proxy, the result of which is to change the
composition of the Board so that fewer than a majority of the
Board are incumbent members; (4) the consummation of a
merger, amalgamation or consolidation of the Company with or
into another entity if more than 50% of the combined voting
power of the continuing entitys securities outstanding
immediately after such event are owned by persons who were not
stockholders prior to such event; (5) the commencement by a
person of a tender offer for more than 20% of our shares;
(6) the sale of all or substantially all of our assets;
(7) the commencement by or against us of a bankruptcy
proceeding; or (8) the approval by our Shareholders of a
plan of complete liquidation or dissolution. In addition, all
unvested rights in any stock option or other benefit plans will
vest in full.
The terms of Mr. Isacsons employment agreement
obligate us to provide, in the event of dismissal without cause
or a change of control, a specified severance entitlement equal
to eighteen months base salary plus the target bonus. The
agreement defines a change of control as the
completion of a merger, amalgamation or consolidation of the
Company with or into another entity if more than 50% of the
voting equity of the new entity is held by persons who were not
stockholders prior to the transaction.
The terms of Mr. Ridders employment agreement provide
for a six month notice period in case of termination and
12 months in the event of a change of control which is
defined as a direct or indirect change in majority ownership of
the Company.
The terms of Mr. Nossols employment agreement provide
for a six month notice period in case of termination. The
agreement does not contain a change of control provision.
34
In addition to the terms provided for in the individual
employment agreements, our 2004 Stock Incentive Plan, including
the Performance Incentive Supplement created thereunder,
contains provisions for accelerated vesting and exercisability
of options, restricted shares and performance awards upon a
change of control including, in the case of our 2004 Stock
Incentive Plan, the Compensation and Human Resources
Committees discretion to determine, at the time of
granting restricted shares or performance awards or thereafter,
whether all or part of such restricted shares or performance
awards shall become vested in the event a change in control
occurs with respect to the Company.
PROPOSAL 2
INDEPENDENT ACCOUNTANTS AND AUDITORS
Ratification
of Independent Auditors
The Board requests that Shareholders ratify the selection of
PricewaterhouseCoopers LLP as our independent auditors as a
matter of good corporate practice.
We appointed PricewaterhouseCoopers LLP as our independent
auditors in place of Deloitte & Touche LLP effective
May 10, 2007 and received shareholder ratification of such
appointment at our annual meeting held in June 2007. The
appointment of PricewaterhouseCoopers LLP was approved by the
Audit Committee and by the Board.
Representatives of PricewaterhouseCoopers LLP are not expected
to be present at the Meeting.
The selection of PricewaterhouseCoopers LLP must be ratified by
a majority of the votes cast at the Meeting, in person or by
Proxy, in favor of such ratification.
OUR BOARD
RECOMMENDS A VOTE FOR THE RATIFICATION OF
PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT
AUDITORS.
In the event PricewaterhouseCoopers LLP are not ratified as our
auditors at the Meeting, the Audit Committee will consider
whether to retain PricewaterhouseCoopers LLP or select another
firm. The Audit Committee may select another firm as our
auditors without the approval of Shareholders, even if
Shareholders ratify the selection of PricewaterhouseCoopers LLP
at the Meeting.
Accountants
Fees
The following table sets forth the fees for services provided by
PricewaterhouseCoopers LLP in 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Audit Fees(1)
|
|
$
|
1,212,101
|
|
|
$
|
1,370,464
|
|
Audit-Related Fees(2)
|
|
$
|
75,461
|
|
|
$
|
46,753
|
|
Tax Fees(3)
|
|
$
|
91,015
|
|
|
$
|
40,516
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,378,577
|
|
|
$
|
1,457,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents fees for services rendered for the integrated audit
of our annual financial statements and review of our quarterly
financial statements. |
|
(2) |
|
Represents fees for services rendered for assurance and related
services reasonably related to the performance of the audit or
review of our financial statements but not reported under
Audit Fees, including fees relating to an internal
control study conducted pursuant to the Sarbanes-Oxley Act of
2002. |
|
(3) |
|
Represents fees for services rendered for tax compliance, tax
advice and tax planning. |
Consistent with the SECs requirements regarding auditor
independence, our Audit Committee has adopted a policy to
pre-approve all audit and permissible non-audit services
provided by our independent auditor and the fees for such
non-audit services. Under the policy, the Audit Committee must
pre-approve services prior to the commencement of the specified
service. All services provided by our former auditor,
Deloitte & Touche LLP, and PricewaterhouseCoopers LLP
subsequent to July 14, 2003 have been pre-approved by the
Audit Committee.
35
PROPOSAL 3
APPROVAL OF THE MERCER INTERNATIONAL INC.
2010 STOCK INCENTIVE PLAN
OUR BOARD
RECOMMENDS A VOTE FOR THE APPROVAL
OF THE 2010 STOCK INCENTIVE PLAN.
The Company grants long-term incentives in the form of stock
options, restricted shares, performance shares, performance
units and stock appreciation rights (SARs) to
employees, officers and directors who are not employees or
officers of the Company under the 2004 Stock Incentive Plan and
the corresponding Performance Incentive Supplement to the 2004
Stock Incentive Plan to motivate them to achieve and maintain
superior performance levels. However, as of the Record Date, an
aggregate of only 138,149 Shares were available for
issuance under the 2004 Stock Incentive Plan, which represents
only approximately 0.38% of our outstanding Shares as at such
date or approximately 0.24% of Shares outstanding after giving
effect to the conversion of our outstanding convertible notes.
The Board believes that this number of Shares is likely to be
insufficient in light of the potential continued growth in the
Companys operations. For this and other related reasons,
the Board determined that it is in the best interests of the
Company and its Shareholders to adopt a new stock incentive plan.
On April 14, 2010, the Board adopted the 2010 Stock
Incentive Plan (the Plan) and directed that the Plan
be submitted to Shareholders for their approval at the Meeting.
The Plan will be effective upon approval by Shareholders at the
Meeting. The purpose of the Plan is to promote the long-term
success of the Company and the creation of Shareholder value by
encouraging the attraction and retention of employees and
non-employee directors with exceptional qualifications,
encouraging them to focus on the critical long-range objectives
of the Company and linking their interests directly to
Shareholder interests through increased Share ownership. The
Plan seeks to achieve this purpose by providing for awards to
participants in the form of restricted shares, restricted stock
units, performance shares, performance share units, options
and/or SARs.
The Company believes it is important to have flexibility to
grant various types of equity awards to its employees so that it
can react appropriately to the changing environment. The
following summary of the Plan is qualified in its entirety by
reference to the full text of the Plan, a copy of which is
attached as Appendix A hereto.
General
The Plan will be administered by Mercers Compensation and
Human Resources Committee (the Committee).
Determinations, interpretations, or other such actions made or
taken by the Committee in good faith pursuant to the provisions
of the Plan shall be final, binding and conclusive. The
Committee has the sole discretion to determine: who is entitled
to receive awards under the Plan; the types of awards; the times
when awards shall be granted; the number of awards; the purchase
price or exercise price, if any; the period(s) during which such
awards shall be exercisable; the restrictions applicable to
awards; the form of each award agreement; the other terms and
provisions of any award; and the schedule for lapse of
forfeiture restrictions or restrictions in exercisability of an
award and accelerations or waivers thereof.
The Committee shall have the authority to modify existing
awards, subject to provision of the Plan. Notwithstanding the
foregoing, the Committee will not have the authority to
accelerate the vesting or waive the forfeiture of any
performance-based awards other than as provided in an award
agreement or to reprice any previously granted option.
The Committee must be composed of at least two directors and
each member of the Committee must be a non-employee director who
meets the independence standards established by the
U.S. Internal Revenue Code (the Code) and
the NASDAQ Global Market.
Eligibility
Awards granted under the Plan may be made only to those persons
who are employees, officers, consultants to and non-employee
directors of Mercer on the grant date of the award. Presently,
Mercer estimates that approximately 26 persons are
currently eligible each year to receive awards under the Plan.
36
Stock
Subject to the Plan
Subject to adjustment for changes in capitalization, the total
number of Shares subject to all awards under the Plan is
2,000,000 plus the number of Shares remaining available for
grant under the 2004 Stock Incentive Plan. In addition, the
maximum number of Shares which may be issued as incentive stock
options under the Plan, is limited to 500,000.
Further, the maximum number of Shares that may be granted to any
one participant in the Plan, who is a Covered Employee (as
defined in the Plan) during the fiscal year where such
participants employment commences, shall be 300,000 and
250,000 for all other fiscal years.
Types of
Awards
The Plan allows Mercer to grant following types awards: Options;
Restricted Stock Rights; Restricted Stock; Performance Shares;
Performance Share Units; and SARs.
Stock
Options
The Committee may grant stock options qualifying as incentive
stock options (ISOs) under the Code and
non-qualified stock options. The Committee determines the
exercise price of such options. However, no options shall be
granted at an exercise price that is less than the Fair Market
Value (defined in the Plan as the last reported sale price of
the Shares quoted on the NASDAQ Global Market) of one Share on
the grant date of the option. The Committee also determines the
time or times at which options may be exercised (within
10 years from the grant date) and the method by which the
exercise price of an option may be paid and the form of payment,
but cannot reprice options previously granted under the Plan.
ISOs will lapse 10 years from the date it is granted,
90 days after the date of a participants termination
of employment for any reason other than death or disability, or
six months after the date of a participants termination of
employment on the account of death or disability.
Additionally, the aggregate Fair Market Value of all Shares with
respect to which ISOs are first exercisable by a participant in
any calendar year may not exceed $400,000 and ISOs cannot be
granted to any individual who, at the grant date, owned Shares
possessing more than 10 percent of the total combined
voting power of all classes of Shares outstanding, unless such
option is granted at a price greater than 110% of Fair Market
Value on the grant date and is exercisable for no more than five
years from such date.
Restricted
Stock Rights
A restricted stock right award gives the participant the right
to receive Shares or a cash payment equal to the Fair Market
Value (determined as of a specified date in the future). Shares
are not issued under the award until specified restrictions
lapse. The restrictions will lapse in accordance with a schedule
or other condition determined by the Committee.
Participants holding restricted stock rights have no voting
rights or rights to dividends with respect to the underlying
Shares prior to the issuance of such Shares pursuant to the
Plan. Payments for any vested restricted stock rights shall be
made in one lump sum payment of Shares, cash or a combination
hereof, equal to the Fair Market Value of a specified number of
Shares.
Restricted
Stock
A restricted stock award gives the participant the right to
receive a specified number of Shares at a purchase price
determined by the Committee. As a general rule, if a participant
terminates employment at a time when the restricted stock rights
are subject to restrictions, the participant forfeits the
unvested restricted stock rights.
Holders of restricted stock awarded under the Plan shall have
the same voting, dividend and other rights as Mercers
other stockholders. The Committee establishes restrictions on
transferability, the consideration for such awards and the type
of vesting. Except as determined by the Committee, restricted
stock previously granted will also be forfeited upon the failure
to satisfy one or more performance criteria by the holder.
37
Performance
Shares and Performance Units
A performance share award gives the participant the right to
receive Shares if the participant achieves the performance goals
established by the Committee during the performance period, as
established by the Committee. Performance share units give
participants the rights to Shares, a cash payment or a
combination of Shares or cash if certain performance goals
established by the Committee are met. All such payments shall be
made in a lump sum.
Stock
Appreciation Rights
A SAR gives the participant the right to share in the
appreciation in value of one Share. The Committee determines the
conditions and restrictions relating to SARs. Upon the exercise
of a SAR, the holder shall be entitled to receive payment in an
amount determined by multiplying (a) the difference, if
any, of the Fair Market Value of a share of Stock on the date of
exercise over the price of the SAR fixed by the Committee at the
grant date, which shall not be less than the Fair Market Value
of a Share at the grant date, by (b) the number of Shares
with respect to which the SAR is exercised.
Performance
Based Awards
The Committee may designate certain awards it grants as
performance based, within the meaning of Section 162(m) of
the Code.
Performance goals, which are defined in the Plan as the goals
established by the Committee based on performance criteria set
by the Committee, can be expressed in terms of overall Company
performance or the performance of a division or an individual
and may be stated in terms of absolute levels or relative to
another company or index. Performance goals must be established
within 90 days of the commencement of a performance period
and their outcome must be substantially uncertain at the time of
establishment. The Committee cannot establish performance goals
for any performance based award after 25% of the performance
period for such award has lapsed. The Committee, in its
discretion, also may adjust or modify the calculation of
performance goals for such performance period in order to
prevent the dilution or enlargement of the rights of
participants to the Plan.
All recipients of performance based awards must be employees of
Mercer.
Automatic
Restricted Stock Awards for Non-Employee Directors
When a person first becomes non-employee director of Mercer,
such person shall be granted a restricted stock award of
5,000 shares of restricted stock. Within five business days
following the conclusion of Mercers Annual General
Meeting, each non-employee director of Mercer who has served on
the Board for at least six months shall receive a restricted
stock award of 8,000 shares of restricted stock or
16,000 shares of restricted stock if such non-employee
director is currently serving as Lead Director of the Board.
Except as otherwise determined by the Committee, the
restrictions on the restricted stock awards shall lapse on the
first anniversary of the grant date.
All shares of restricted stock shall immediately vest upon a
change in control.
Adjustment
to Capitalization
In the event of any change in the outstanding Shares by reason
of a stock dividend or split, recapitalization, merger,
consolidation, combination, reorganization, exchange of Shares,
or other similar corporate change, the aggregate number of
Shares available under the Plan and subject to each outstanding
award, and its stated exercise price or the basis upon which the
award is measured, shall be adjusted appropriately by the
Committee.
Change in
Control Provisions
The Plan contains a double triggered change in
control provision whereby Plan participants who are employees or
officers of, or consultants to, Mercer only receive benefits
when either their employment or service terminates due to their
discharge without cause or resignation with good reason in
connection with a change in control, or at the discretion of the
Committee. Conversely, the trigger for non-employee directors is
a single trigger whereby restricted stock held by
such Plan participants immediately vest upon a change in control.
38
Forfeiture
Provisions
The Committee will specify in an award agreement that a
participants rights, payments and benefits with respect to
an award shall be subject to reduction, cancelation or
forfeiture upon the occurrence of specified events such as
termination of employment for cause, a violation of company
policies, fraud or a breach of a noncompetition or
confidentiality restrictive covenant.
Mercer also has discretion to immediately terminate a
persons right to any further payments, vesting or
exercisability with respect to any award in its entirety, and to
determine whether a participant in the Plan has been terminated
for cause and the date upon which such termination for cause
occurs. All such determinations are final.
Share-Counting
Rules
The Plan provides that the underlying Shares related to any
award granted under the Plan that terminates, expires, lapses or
is paid in cash will again be available for a grant under such
plan. However, the Plan does not permit Shares tendered to pay
the exercise price of an option, or tendered or withheld to
satisfy a tax withholding obligation arising in connection with
an award, to become available for grant or sale under the Plan.
Additionally, the Plan provides that the exercise of a
stock-settled SAR or broker-assisted cashless
exercise of an option will reduce the number of Shares available
for issuance under the Plan by the entire number of Shares
subject to that SAR or option.
Award
Repricing
The Plan explicitly prohibits the repricing of options.
Transferability
According to the Plan, with limited exceptions, no award granted
under the Plan may be sold, transferred, pledged, and assigned
unless otherwise determined by the Committee.
Amendment
Modification and Termination
The Board may at any time terminate, amend or modify the Plan,
provided that such action be subject to approval by Shareholders
when required by law, regulation, any stock exchange rule for
any exchange on which the Shares are listed or the terms of the
Plan. Additionally, no amendment, modification or termination of
the Plan or any award under the Plan shall in any manner
adversely affect any award previously granted without the
consent of the holder thereof.
Specifically, the Plan mandates that neither the Board nor the
Committee may, without the approval of Shareholders,
(a) reduce the purchase price or exercise price of any
outstanding award, including any option or SAR;
(b) increase the number of Shares available under the Plan
(other than any adjustment as a result of a recapitalization);
(c) grant options with an exercise price that is below Fair
Market Value on the grant date; (d) reprice previously
granted options or SARs; or (e) cancel any option or SAR in
exchange for cash or any other award or in exchange for any
option or SAR with an exercise price that is less than the
exercise price of the original option or SAR.
Tax
Withholding
Mercer has the power to withhold or require a participant to
remit to the Company an amount sufficient to satisfy all
withholding tax requirements on any award under the Plan.
U.S.
Income Tax Status
The U.S. federal income tax consequences to the Company and
participants under the Plan are complex and subject to change.
The following discussion is a summary overview of the general
rules applicable to certain awards granted under the Plan to a
participant who performs services within the United States or is
a United States citizen or resident. The tax consequences may be
affected by various income tax treaties. Participants under
the Plan
39
should consult their own tax advisors since a taxpayers
particular situation may be such that some variation of the
rules described below will apply.
Incentive Stock Options. A participant
will not recognize any ordinary income (and the Company will not
be permitted to claim any deduction) upon the grant or timely
exercise of an ISO. If the Shares acquired upon the exercise of
an ISO are held by a participant for at least two years from the
date of the grant of such option and for at least one year after
exercise, any resulting gain is taxed, upon disposition of the
Shares, at long-term capital gains rates, and the Company will
not be entitled to any income tax deduction in connection with
either the exercise of the ISO or the sale of the Shares by the
participant. However, if these holding requirements are not met,
the difference between the Fair Market Value of the Shares at
the time of exercise and the exercise price is taxed at ordinary
rates as compensation to the participant, and the Company is
generally entitled to a deduction for an equivalent amount.
Additionally, the amount by which the Fair Market Value of the
underlying Shares on the exercise date of an ISO exceeds the
exercise price could constitute alternative minimum
taxable income to the participant in the year of exercise.
Non-qualified Options. At the time of
exercise of the non-qualified option, a participant will
recognize ordinary income for income tax purposes in an amount
equal to the excess of the Fair Market Value of the Shares
purchased over the exercise price. The Company will generally be
entitled to claim a tax deduction at such time and in the same
amount that such participant recognizes ordinary income.
Restricted Stock. Subject to
Section 16(m) of the Code, a participant who is awarded
Shares of restricted stock is taxable on the Shares received
when the restricted stock is substantially vested, that is, when
the stock is either not subject to a substantial risk of
forfeiture, or is transferable to a third party free of such
risk. The amount of income recognized is equal to the excess of
the Fair Market Value of the Shares at the time of vesting over
the amount, if any, paid for such Shares. The Company would
generally be entitled to claim a deduction equal to the amount
of income recognized.
A person who is awarded restricted stock may elect to recognize
income at the time that the restricted stock is awarded rather
than at the later date when the stock is substantially vested.
Stock Appreciation Rights. Generally,
the recipient of a SAR will not recognize any taxable income at
the time the SAR is granted, and no deduction is available to
the Company at such time. When a SAR is exercised, ordinary
income is realized by the participant in the amount of cash
and/or Fair Market Value of the Shares received by such
participant and the Company will generally be entitled to a
deduction of equal value.
Section 409A. Section 409A of
the Code generally establishes rules that must be followed with
respect to covered deferred compensation arrangements in order
to avoid the imposition of an additional 20% tax (plus interest)
on the service provider who is entitled to receive the deferred
compensation. Certain awards that may be granted under the Plan
may constitute deferred compensation within the
meaning of and subject to Section 409A of the Code. In any
case, a participant shall be solely responsible and liable for
the satisfaction of all taxes and penalties that may be imposed
on such participant or for such participants account in
connection with an award (including any taxes and penalties
under Section 409A of the Code), and neither the Company
nor any of its affiliates shall have any obligation to indemnify
or otherwise hold such participant harmless from any or all of
such taxes or penalties.
Funding
Mercer is not required to segregate any of its assets to ensure
payment of any award under the Plan.
No
Shareholders Rights
No award gives the participant any of the rights of a
Shareholder unless and until Shares are in fact issued to such
person in connection with such award.
40
Effective
Date
The Plan will be effective as of the date it is approved by
Shareholders. It will terminate on the 10th anniversary of that
date, unless earlier terminated in accordance with its
provisions.
Equity
Compensation Plan Information
Since specific grants under the Plan are discretionary, they may
vary from year to year and participant to participant and are
not yet determinable. The following table provides certain
information as of the Record Date with respect to the
Companys equity compensation plans previously approved by
Shareholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
remaining available
|
|
|
|
|
|
|
for future issuance
|
|
|
|
|
|
|
under equity
|
|
|
|
|
|
|
compensation plans
|
|
|
Number of Shares to be
|
|
Weighted-average
|
|
(excluding
|
|
|
issued upon exercise of
|
|
exercise price of
|
|
securities reflected
|
|
|
outstanding options
|
|
outstanding options
|
|
in column (a))
|
Plan Category
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Equity compensation plans approved by security holders
|
|
|
190,000(1
|
)(2)
|
|
$
|
6.63
|
|
|
|
138,149(3
|
)
|
|
|
|
(1) |
|
Includes 30,000 options granted under the 2004 Stock Incentive
Plan and 160,000 previously issued under the Companys 1992
Non-Qualified Stock Option Plan (the 1992 Plan). |
|
(2) |
|
An aggregate of 253,685 restricted shares, 116,440 performance
shares and 461,705 performance rights have also been issued and
are currently outstanding under the 2004 Stock Incentive Plan as
of the date hereof. |
|
(3) |
|
Includes only Shares issuable under the 2004 Stock Incentive
Plan. The 1992 Plan expired in 2008 and no further awards can be
granted under such plan. |
Under the provisions of the Plan, the Company will have an
additional 2,000,000 Shares available for grant, or
approximately 5.5% of the total Shares outstanding as at the
Record Date, for a total of 2,138,149 Shares available for
grant, representing approximately 5.9% of the total Shares
outstanding at such date. Further, upon the adoption of the
Plan, and including the outstanding grants under the 1992 Plan
and the 2004 Stock Incentive Plan, Mercer will have a total of
2,789,854 Shares either available for grant or related to
grants already outstanding, representing approximately 7.7% of
the total Shares outstanding as at the Record Date.
Other
Information
On April 15, 2010, the closing price of our Shares as
reported by the NASDAQ Global Market was $6.08 per Share.
FUTURE
SHAREHOLDER PROPOSALS
Any proposal which a Shareholder wishes to include in the proxy
statement and proxy relating to the annual meeting of
Shareholders of the Company to be held in 2011 must be received
by the Company on or before December 28, 2010. Upon receipt
of such a proposal, the Company will determine whether or not to
include the proposal in such proxy statement and proxy in
accordance with applicable law. A Shareholder that wishes to
present a proposal at the annual Shareholders meeting to
be held in 2011 must submit such proposal to the Company on or
before April 7, 2011 or management will have discretionary
authority to vote proxies received for such meeting with respect
to any such proposal. Shareholder proposals should be sent to
the Secretary, Mercer International Inc.,
c/o Suite 2840,
650 West Georgia Street, Vancouver, B.C., V6B 4N8, Canada.
41
OTHER
MATTERS
The directors know of no matters other than those set out in
this 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 received for the Meeting
in accordance with their judgment.
Our 2009 Annual Report, will be mailed to Shareholders with
this Proxy Statement. Additionally, this Proxy Statement and the
2009 Annual Report are available at www.mercerint.com. Copies of
our
Form 10-K
for the fiscal year ended December 31, 2009, may be
obtained from Mercer International Inc. Attention: Shareholder
Information,
c/o Suite 2840,
650 West Georgia Street, Vancouver, British Columbia, V6B
4N8, Canada (tel:
(604) 684-1099).
This Proxy Statement and our
Form 10-K
are also available on the SECs website at www.sec.gov and
on our website at www.mercerint.com.
BY ORDER OF THE BOARD OF DIRECTORS
Jimmy S.H. Lee
Chairman of the Board
Date: April 16, 2010
42
APPENDIX
A
MERCER
INTERNATIONAL INC.
2010
Stock Incentive Plan
ARTICLE 1
ESTABLISHMENT,
PURPOSE, EFFECTIVE DATE AND EXPIRATION DATE
1.1 Establishment. Subject to the
approval of the shareholders of Mercer International Inc., a
Washington State corporation (the Company), the
Company has established the Mercer International Inc. 2010 Stock
Incentive Plan (the Plan). The Board intends that
the Plan will replace the Mercer International Inc. 2004 Stock
Incentive Plan and any plans emanating or deriving therefrom
(collectively the Prior Plan); provided, however,
that the Prior Plan will govern prior awards until all awards
granted under the Prior Plan have been exercised, forfeited,
canceled, expired or otherwise terminated in accordance with the
terms thereof. The Plan permits the grant of Options, Restricted
Stock Rights, Restricted Stock, Performance Shares, Performance
Share Units and Stock Appreciation Rights. The Plan also permits
the grant of awards that qualify for the performance-based
compensation exception to the limitations on the deduction
of compensation imposed by Section 162(m) of the Code.
1.2 Purpose. The purpose of the
Plan is to promote the long-term success of the Company and the
creation of stockholder value by (a) encouraging Employees,
officers, Consultants and non-Employee Directors to focus on
critical long-range objectives, (b) encouraging the
attraction and retention of qualified Employees, officers,
Consultants and non-Employee Directors and (c) linking such
person directly to stockholder interests through increased stock
ownership. The Plan is further intended to provide flexibility
to the Company in its ability to attract, retain and motivate
individuals upon whose judgment, interest and special effort the
successful conduct of the Companys operation is largely
dependent.
1.3 Effective Date. The Plan is
effective as of the date it is approved by the Companys
shareholders at its 2010 Annual Shareholders Meeting (the
Meeting) expected to be held on June 1, 2010
(the Effective Date). The Plan shall become
effective upon approval by a simple majority of votes cast at
the Meeting. The Prior Plan will remain in effect until this
Plan document is approved by the shareholders.
1.4 Expiration Date. The Plan will
expire on, and no Award may be granted under the Plan after, the
tenth (10) anniversary of the Effective Date unless the
shareholders of the Company vote to approve an extension of the
Plan prior to such expiration date. Any Awards that are
outstanding on the tenth anniversary of the Effective Date (or
such later expiration date as approved by the Companys
shareholders) shall remain in force according to the terms of
the Plan and the applicable Award Agreement.
ARTICLE 2
DEFINITIONS
2.1 Definitions. When a word or
phrase appears in this Plan document with the initial letter
capitalized, and the word or phrase does not commence a
sentence, the word or phrase will generally be given the meaning
ascribed to it in this Section 2.1 unless a clearly
different meaning is required by the context. The following
words and phrases will have the following meanings:
(a) Affiliate means any entity other
than a Subsidiary, if the Company
and/or one
of more Subsidiaries own not less than 50% of such entity.
(b) Annual Meeting means the regular
annual meeting of the Companys stockholders.
(c) Annual Meeting Date means the dates
established for the annual meetings of the Companys
shareholders pursuant to the Companys Bylaws.
(d) Award means any Option, Restricted
Stock Right, Restricted Stock, Performance Share, Performance
Share Unit or Stock Appreciation Right granted pursuant to the
Plan.
A-1
(e) Award Agreement means any written
agreement or other document evidencing an Award.
(f) Board means the Board of Directors
of the Company, as constituted from time to time.
(g) Cause means a determination by the
Committee that a Participant (i) has been convicted of, or
entered a plea of nolo contendere to, a crime that
constitutes a felony (or equivalent) under federal, state or
provincial law, (ii) has engaged in willful gross
misconduct in the performance of a Participants duties to
the Company or an Affiliate, (iii) has committed a material
breach of any written agreement with the Company or any
Affiliate with respect to confidentiality, noncompetition,
nonsolicitation or similar restrictive covenant, or
(iv) has engaged in any other conduct which would
constitute cause under any applicable laws, provided
that, in the event that a Participant is a party to an
employment agreement with the Company or any Affiliate that
defines a termination on account of Cause (or a term
having similar meaning), such definition shall apply as the
definition of a termination on account of Cause for
such Participant for the purposes hereof.
(h) Chief Executive Officer or
CEO means the Chief Executive Officer of the
Company.
(i) Change in Control means the
occurrence of any of the following events:
(i) Any person (as defined below) who by the
acquisition or aggregation of securities, is or becomes the
beneficial owner (as defined in
Rule 13d-3
under the Exchange Act), directly or indirectly, of securities
of the Company representing 50% or more of the combined voting
power of the Companys then outstanding securities
ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of
directors (the Base Capital Stock); except that any
change in the relative beneficial ownership of the
Companys securities by any person resulting solely from a
reduction in the aggregate number of outstanding shares of Base
Capital Stock, and any decrease thereafter in such persons
ownership of securities, shall be disregarded until such person
increases in any manner, directly or indirectly, such
persons beneficial ownership of any securities of the
Company; or
(ii) The consummation of a merger or consolidation of the
Company with or into another entity or any other corporate
reorganization, if persons who were not stockholders of the
Company immediately prior to such merger, consolidation or other
reorganization own immediately after such merger, consolidation
or other reorganization 50% or more of the voting power of the
outstanding securities of each of (A) the continuing or
surviving entity and (B) any direct or indirect parent
corporation of such continuing or surviving entity; or
(iii) The sale, transfer or other disposition of all or
substantially all of the Companys assets.
For purposes of this subsection (i), the term person
shall have the same meaning as when used in Sections 13(d)
and 14(d) of the Exchange Act but shall exclude: (1) a
trustee or other fiduciary holding securities under an employee
benefit plan maintained by the Company or a Parent or
Subsidiary; and (2) a corporation owned directly or
indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of the Stock.
Any other provision of this Section 2.1(i) notwithstanding,
a transaction shall not constitute a Change in Control if its
sole purpose is to change the state or jurisdiction of the
Companys incorporation. The transfer of stock or assets of
the Company in connection with a bankruptcy filing by or against
the Company under Title 11 of the United States Code will
not be considered to be a Change of Control for purposes of this
Plan.
(j) Code means the Internal Revenue Code
of 1986, as amended. All references to the Code shall be
interpreted to include a reference to any applicable
regulations, rulings or other official guidance promulgated
pursuant to such section of the Code.
(k) Committee means the Companys
Compensation and Human Resources Committee or any such committee
as may be designated by the Board to administer the Plan,
provided that at all times the membership of such committee
shall not be less than two (2) members of the Board and
each Committee member must be: (i) a non-employee
director (as defined in
Rule 16b-3
under the Exchange Act) if required
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to meet the conditions of exemption for the Awards under the
Plan from Section 16(b) of the Exchange Act; (ii) an
outside director as defined in Section 162(m) of the
Code and the regulations issued thereunder; and (iii) an
independent director as defined by the NASDAQ Global
Market (or any successor or replacement thereof) so long as the
Companys Stock is quoted or listed thereon.
(l) Company means Mercer International
Inc., or any successor as provided in Section 19.9.
(m) Constructive Termination means the
Termination of Employment by a Participant within sixty
(60) days following the occurrence of any one or more of
the following events without the Participants written
consent (i) any one or more of a reduction in position,
title (for Vice Presidents or above), overall responsibilities,
level of authority, level of reporting (for Vice Presidents or
above), base compensation, annual incentive compensation
opportunity, aggregate employee benefits or (ii) a
requirement that the Participants location of employment
be relocated by more than fifty (50) miles, provided that,
in the event that a Participant is a party to an employment
agreement with the Company or any Affiliate (or a successor
entity) that defines a termination on account of
Constructive Termination, Good Reason or
Breach of Agreement (or a term having a similar
meaning), such definition shall apply as the definition of
Constructive Termination for purposes of this Plan
in respect of such Participant only. A Constructive Termination
shall be communicated by written notice to the Committee, and
shall be deemed to occur on the date such notice is delivered to
the Committee, unless the circumstances giving rise to the
Constructive Termination are cured within five (5) business
days of such notice.
(n) Consultant means a consultant or
adviser who provides services to the Company or an Affiliate as
an independent contractor and not as an Employee; provided
however that a Consultant may become Participant pursuant to
this Plan only if he or she (i) is a natural person and
(ii) provides bona fide services to the Company or an
Affiliate.
(o) Covered Employee means an Employee
who is, or could be, a covered employee as defined
by Section 162(m) of the Code.
(p) Director means a member of the Board.
(q) Disability means the inability of a
Participant to engage in any substantially gainful activity by
reason of any medically determinable physical or mental
impairment that can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not
less than twelve (12) months. The permanence and degree of
impairment shall be supported by medical evidence.
(r) Effective Date means the date on
which the shareholders of the Company approve the Plan as
described in Section 1.3.
(s) Employee means a common-law employee
of the Company or an Affiliate.
(t) ERISA means the Employee Retirement
Income Security Act of 1974, as amended. All references to a
section of ERISA shall be interpreted to include a reference to
any applicable regulations, rulings or other official guidance
promulgated pursuant to such section of ERISA.
(u) Exchange Act means the Securities
Exchange Act of 1934, as amended.
(v) Fair Market Value means the market
price of one share of Stock, determined by the Committee as
follows:
(i) If the Stock was traded on the NASDAQ Global Market,
then the Fair Market Value shall be equal to the last reported
sale price quoted for such date by the NASDAQ Global Market;
(ii) If the Stock was traded on a United States stock
exchange or the Toronto Stock Exchange on the date in question,
then the Fair Market Value shall be equal to the closing price
reported for such date by the applicable composite-transactions
report;
(iii) If the Stock was traded
over-the-counter
on the date in question but was not traded on the NASDAQ Global
Market, then the Fair Market Value shall be equal to the last
transaction price quoted for such date by the OTC
Bulletin Board or, if not so quoted, shall be equal to the
mean between the last
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reported representative bid and asked prices quoted for such
date by the principal automated inter-dealer quotation system on
which the Stock is quoted or, if the Stock is not quoted on any
such system, by the Pink Sheets published by the
National Quotation Bureau, Inc.; or
(iv) If none of the foregoing provisions is applicable,
then the Fair Market Value shall be determined by the Committee
in good faith on such basis as it deems appropriate.
In all cases, the determination of Fair Market Value by the
Committee shall be conclusive and binding on all persons.
(w) Grant Date means the date the
Committee approves the Award or a date in the future on which
the Committee determines the Award will become effective.
(x) Incentive Stock Option means an
Option that is intended to meet the requirements of Section 422
of the Code or any successor provision thereto.
(y) Lead Director means a non-Employee
Director elected by members of the Board to provide leadership
to non-Employee Directors.
(z) Non-Qualified Stock Option means an
Option that is not intended to be an Incentive Stock Option.
(aa) Option means the right to purchase
Stock at a stated price for a specified period of time. An
Option may either be an Incentive Stock Option or a
Non-Qualified Stock Option.
(bb) Optionee means an individual or
estate which holds an Option or SAR.
(cc) Parent shall mean any corporation
(other than the Company) in an unbroken chain of corporations
ending with the Company, if each of the corporations other than
the Company owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the
other corporations in such chain. A corporation that attains the
status of a Parent on a date after the adoption of the Plan
shall be a Parent commencing as of such date.
(dd) Participant means an individual
who, as an Employee, officer or non-Employee Director of, or
Consultant to, the Company, or any Affiliate, has been granted
an Award under the Plan.
(ee) Performance-Based Award means an
Award granted to select Covered Employees pursuant to
Articles 7, 8 and 9 that is subject to the terms and
conditions set forth in Article 10. All Performance-Based
Awards are intended to qualify as performance-based
compensation exempt from the deduction limitations imposed
by Section 162(m) of the Code.
(ff) Performance Criteria means the
criteria or any combination of criteria, that the Committee
selects for the purposes of establishing, the Performance Goal
or Performance Goals for a Participant during a Performance
Period. The Performance Criteria that will be used to establish
Performance Goals are limited to the following: revenue; revenue
growth; earnings (including earnings before interest, taxes,
depreciation and amortization EBITDA or variations
thereof); EBITDA per tonne of production; operating income;
operating margin; pre- and after-tax income; cash flow; cash
flow per share; net earnings; earnings per share; return on
equity; return on capital (including return on total capital or
return on invested capital); return on investment; return on
assets or net assets; economic value added; share price
performance; total shareholder return; improvement in or
attainment of expense levels; cost containment or reduction;
improvement in or attainment of working capital levels; budget
achievement; production costs; project milestones; operating
efficiency; debt; dividends; improvement in or attainment of
objective corporate governance goals; contract awards; and
attainment of health and safety goals (including environmental
health and safety goals). The Committee shall, within the time
prescribed by Section 162(m) of the Code, define in an
objective fashion the manner of calculating the Performance
Criteria it selects to use for a particular Performance Period
for a particular Participant.
(gg) Performance Goals means the goal or
goals established in writing by the Committee for a Performance
Period based on the Performance Criteria. Depending on the
Performance Criteria used to establish Performance Goals, the
Performance Goals may be expressed in terms of overall Company
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performance, or the performance of a division, Affiliate, or an
individual. The Performance Goals may be stated in terms of
absolute levels or relative to another company or companies or
to an index or indices.
(hh) Performance Period means one or
more periods of time, which may be of varying and overlapping
durations, as the Committee may select, over which the
attainment of one or more Performance Goals will be measured for
the purpose of determining a Participants right to, and
the payment of, a Performance-Based Award.
(ii) Performance Share means a right
granted to a Participant to receive a payment in the form of
Stock, the payment of which is contingent upon achieving certain
Performance Goals established by the Committee.
(jj) Performance Share Unit means a
right granted to a Participant to receive a payment in the form
of Stock, cash, or a combination thereof, the payment of which
is contingent upon achieving certain Performance Goals
established by the Committee.
(kk) Plan means this Mercer
International Inc. 2010 Stock Incentive Plan.
(ll) Restricted Period means the period
during which Restricted Stock, Restricted Stock Rights,
Performance Shares, or Performance Share Units are subject to
restrictions pursuant to the provisions of the Plan or an Award
Agreement.
(mm) Restricted Stock means Stock
granted to a Participant pursuant to Article 7 that is
subject to certain restrictions and to the risk of forfeiture.
(nn) Restricted Stock Agreement means
the agreement between the Company and the recipient of
Restricted Stock which contains the terms, conditions and
restrictions pertaining to such Restricted Stock.
(oo) Restricted Stock Award means an
award of Restricted Stock.
(pp) Restricted Stock Right means the
right granted to a Participant pursuant to Article 7 to
receive cash or Stock in the future, the payment of which is
subject to certain restrictions and to the risk of forfeiture.
(qq) Separation from Service means
either: (i) the termination of a Participants
employment with the Company and all Affiliates due to death,
retirement or other reasons; or (ii) a permanent reduction
in the level of bona fide services the Participant provides to
the Company and all Affiliates to an amount that is 20% or less
of the average level of bona fide services the Participant
provided to the Company and all Affiliates in the immediately
preceding 36 months, with the level of bona fide service
calculated in accordance with Treasury Regulation
Section 1.409A-1(h)(1)(ii).
Solely for purposes of determining whether a Participant has a
Separation from Service, a Participants
employment relationship is treated as continuing while the
Participant is on sick leave, or other bona fide leave of
absence (if the period of such leave does not exceed six months,
or if longer, so long as the Participants right to
reemployment with the Company or an Affiliate is provided either
by statute or contract).
If the Participants period of leave exceeds six months and
the Participants right to reemployment is not provided
either by statute or by contract, the employment relationship is
deemed to terminate on the first day immediately following the
expiration of such six-month period. Whether a Termination of
Employment has occurred will be determined based on all of the
facts and circumstances and in accordance with regulations
issued by the United States Treasury Department pursuant to
Section 409A of the Code.
In the case of a non-Employee Director, Separation from Service
means that such Director has ceased to be a member of the Board.
(rr) Specified Employee means certain
officers and highly compensated Employees of the Company as
defined in Treasury
Regulation Section 1.409A-1(i).
The identification date for determining whether any Employee is
a Specified Employee during any calendar year shall be the
September 1 preceding the commencement of such calendar year.
(ss) Stock means the Common Stock of the
Company.
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(tt) Stock Appreciation Right or
SAR means the right to receive a payment
equal to the excess of the Fair Market Value of one share of
Stock on the date of exercise of the SAR over the grant price of
the SAR as determined pursuant to Article 9 and the
applicable Award Agreement.
(uu) Subsidiary shall mean any
corporation, if the Company
and/or one
or more other Subsidiaries own not less than 50% of the total
combined voting power of all classes of outstanding stock of
such corporation. A corporation that attains the status of a
Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
(vv) Termination of Employment means:
(i) in the context of an Award that is subject to the
requirements of Section 409A of the Code, a
Separation from Service; and (ii) in the case
of any other Award, Termination of Employment will
be given its natural meaning.
(ww) Triggering Event means (i) the
Termination of Employment of a Participant by the Company or an
Affiliate (or any successor thereof) other than on account of
death, Disability or Cause, (ii) the occurrence of a
Constructive Termination or (iii) any failure by the
Company (or a successor entity) to assume, replace, convert or
otherwise continue any Award in connection with the Change in
Control (or another corporate transaction or other change
effecting the shares of Stock) on the same terms and conditions
as applied immediately prior to such transaction, except for
equitable adjustments to reflect changes in Stock pursuant to
Section 5.3 of the Plan.
2.2 Gender and Number. Except when
otherwise indicated by the context, words in the masculine
gender when used in this Plan document will include the feminine
gender, the singular includes the plural, and the plural
includes the singular.
ARTICLE 3
ELIGIBILITY
AND PARTICIPATION
3.1 General Eligibility. Awards may
be made only to those Participants who are Employees, officers,
Consultants to and non-Employee Directors of the Company on the
Grant Date of the Award.
3.2 Actual Participation. Subject
to the provisions of the Plan, the Committee may, from time to
time, select from among all eligible individuals, those to whom
Awards will be granted and will determine the nature and amount
of each Award.
ARTICLE 4
ADMINISTRATION
4.1 Administration by the
Committee. The Committee shall be responsible for
the administration of the Plan. The Committee, by majority
action thereof, is authorized to interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to
the Plan, to provide for conditions and assurances deemed
necessary or advisable to protect the interests of the Company,
and to make all other determinations necessary for the
administration of the Plan, but only to the extent not contrary
to the express provisions of the Plan. Determinations,
interpretations, or other actions made or taken by the Committee
in good faith pursuant to the provisions of the Plan shall be
final, binding and conclusive for all purposes of the Plan.
4.2 Authority of the Committee. The
Committee shall have the authority, in its sole discretion, to
determine the Participants who: (i) are entitled to receive
Awards under the Plan; (ii) the types of Awards;
(iii) the times when Awards shall be granted; (iv) the
number of Awards; (v) the purchase price or exercise price,
if any; (vi) the period(s) during which such Awards shall
be exercisable (whether in whole or in part); (vii) the
restrictions applicable to Awards; (viii) the form of each
Award Agreement, which need not be the same for each
Participant, (ix) the other terms and provisions of any
Award (which need not be identical); and (x) the schedule
for lapse of forfeiture restrictions or restrictions in
exercisability of an Award and accelerations or waivers thereof,
based in each case on such considerations as the Committee in
its sole discretion determines. The Committee shall have the
authority to modify existing Awards, subject to Article 16
of this Plan. Notwithstanding the foregoing, the
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Committee will not have the authority to accelerate the vesting
or waive the forfeiture of any Performance-Based Awards other
than as provided in an Award Agreement or to reprice any
previously granted Option.
4.3 Award Agreement. Each Award
shall be evidenced by an Award Agreement that shall specify the
type of Award granted and such other provisions and restrictions
applicable to such Award as the Committee, in its discretion,
shall determine.
4.4 Decisions Binding. The
Committee shall have the authority to interpret the Plan and
subject to the provisions of the Plan, any Award Agreement, and
all decisions and determinations by the Committee with respect
to the Plan are final, binding and conclusive on all parties. No
member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any
Award granted under the Plan.
ARTICLE 5
STOCK
SUBJECT TO THE PLAN
5.1 Number of Shares. Subject to
adjustment provided in Section 5.3, the total number of
shares of Stock subject to all Awards under the Plan shall be
two million (2,000,000), plus the number of shares of Stock
remaining available for grant pursuant to the Prior Plan as of
the Effective Date. Notwithstanding the above, the maximum
number of shares of Stock that may be issued as Incentive Stock
Options under the Plan shall be five hundred thousand (500,000).
The shares of Stock to be delivered under the Plan may consist,
in whole or in part, of authorized but unissued Stock or shares
purchased on the open market or treasury Stock not reserved for
any other purpose.
5.2 Availability of Stock for
Grant. Subject to the express provisions of the
Plan, if any Award granted under the Plan terminates, expires,
lapses for any reason, or is paid in cash, any Stock subject to
or surrendered for such Award will again be Stock available for
the grant of an Award. The exercise of a stock-settled SAR or
broker-assisted cashless exercise of an Option (or a
portion thereof) will reduce the number of shares of Stock
available for issuance pursuant to Section 5.1 by the
entire number of shares of Stock subject to that SAR or Option
(or applicable portion thereof), even though a smaller number of
shares of Stock will be issued upon such an exercise. Also,
shares of Stock tendered to pay the exercise price of an Option
or tendered or withheld to satisfy a tax withholding obligation
arising in connection with an Award will not become available
for grant or sale under the Plan.
5.3 Adjustment in
Capitalization. In the event of any change in the
outstanding shares of Stock by reason of a Stock dividend (other
than in the ordinary course) or split, recapitalization, merger,
consolidation, combination, reorganization, exchange of shares,
or other similar corporate change, the aggregate number of
shares of Stock available under the Plan and subject to each
outstanding Award, and its stated exercise price or the basis
upon which the Award is measured, shall be adjusted
appropriately by the Committee, whose determination shall be
conclusive; provided, however, that fractional shares shall be
rounded to the nearest whole share. Moreover, in the event of
such transaction or event, the Committee, in its sole
discretion, may provide in substitution for any or all
outstanding Awards under the Plan such alternative consideration
(including cash) as it, in good faith, may determine to be
equitable under the circumstances and may require in connection
therewith the surrender of all Awards so replaced. Any
adjustment to an Incentive Stock Option shall be made consistent
with the requirements of Section 424 of the Code. Further,
with respect to any Option or Stock Appreciation Right that
otherwise satisfies the requirements of the stock rights
exception to Section 409A of the Code, any adjustment
pursuant to this Section 5.3 shall be made consistent with
the requirements of the final regulations promulgated pursuant
to Section 409A of the Code.
5.4 Annual Limitation on Number of Shares of Stock
Subject to Awards. Notwithstanding any provision
in this Plan document to the contrary, and subject to adjustment
upon the occurrence of any of the events indicated in
Section 5.3, the maximum number of shares of Stock that may
be granted to any one Participant, who is a Covered Employee,
during any of the Companys fiscal years with respect to
one or more Awards shall be two hundred fifty thousand (250,000)
except that grants to a Participant in the fiscal year in which
his or her service first commences shall not relate to more than
three hundred thousand (300,000) shares of Stock.
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ARTICLE 6
STOCK OPTIONS
6.1 Grant of Options. Subject to
the provisions of Article 5 and this Article 6, the
Committee, at any time and from time to time, may grant Options
to such Participants and in such amounts as it shall determine.
(a) Exercise Price. No Option shall be
granted at an exercise price that is less than the Fair Market
Value of one share of Stock on the Grant Date.
(b) Time and Conditions of Exercise. The
Committee shall determine the time or times at which an Option
may be exercised in whole or in part provided that the term of
any Option granted under the Plan shall not exceed ten years.
The Committee shall also determine the performance or other
conditions, if any, that must be satisfied before all or part of
an Option may be exercised.
(c) Payment. The Committee shall
determine the methods by which the exercise price of an Option
may be paid, the form of payment, including, without limitation,
cash, promissory note, shares of Stock held for longer than six
months (through actual tender or by attestation), any
net-issuance arrangement or other property acceptable to the
Committee (including broker-assisted cashless
exercise arrangements), and the methods by which shares of
Stock shall be delivered or deemed to be delivered to
Participants.
(d) Evidence of Grant. All Options shall
be evidenced by a written Award Agreement. The Award Agreement
shall reflect the Committees determinations regarding the
exercise price, time and conditions of exercise, and forms of
payment for the Option and such additional provisions as may be
specified by the Committee.
(e) No Repricing of Options. The
Committee shall not reprice any Options previously granted under
the Plan.
6.2 Incentive Stock
Options. Incentive Stock Options shall be granted
only to Participants who are Employees and the terms of any
Incentive Stock Options granted pursuant to the Plan must comply
with the following additional provisions of this
Section 6.2:
(a) Exercise Price. Subject to
Section 6.2(e), the exercise price per share of Stock shall
be set by the Committee, provided that the exercise price for
any Incentive Stock Option may not be less than the Fair Market
Value as of the date of the grant.
(b) Exercise. In no event may any
Incentive Stock Option be exercisable for more than ten years
from the date of its grant.
(c) Lapse of Option. An Incentive Stock
Option shall lapse in the following circumstances:
(i) The Incentive Stock Option shall lapse ten years from
the date it is granted, unless an earlier time is set in the
Award Agreement.
(ii) The Incentive Stock Option shall lapse 90 days
following the effective date of the Participants
Termination of Employment for any reason other than the
Participants death or Disability, unless otherwise
provided in the Award Agreement.
(iii) If the Participant has a Termination of Employment on
account of Disability or death before the Option lapses pursuant
to paragraph (i) or (ii) above, the Incentive Stock
Option shall lapse, unless it is previously exercised, on the
earlier of (a) the scheduled expiration date of the Option;
or (b) 6 months after the date of the
Participants Termination of Employment on account of
Disability or death. Upon the Participants Disability or
death, any Incentive Stock Options exercisable at the
Participants Disability or death may be exercised by the
Participants legal representative or representatives, by
the person or persons entitled to do so pursuant to the
Participants last will and testament, or, if the
Participant fails to make testamentary disposition of such
Incentive Stock Option or dies intestate, by the person or
persons entitled to receive the incentive Stock Option pursuant
to the applicable laws of descent and distribution.
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(d) Individual Dollar Limitation. The
aggregate Fair Market Value (determined as of the time an Award
is made) of all shares of Stock with respect to which Incentive
Stock Options are first exercisable by a Participant in any
calendar year may not exceed $400,000 or such other limitation
as imposed by Section 422(d) of the Code, or any successor
provision. To the extent that Incentive Stock Options are first
exercisable by a Participant in excess of such limitation, the
excess shall be considered Non-Qualified Stock Options.
(e) Ten Percent Owners. An Incentive
Stock Option shall not be granted to any individual who, at the
Grant Date, owns stock possessing more than ten percent of the
total combined voting power of all classes of Stock of the
Company unless such Option is granted at a price that is not
less than 110% of Fair Market Value on the Grant Date and the
Option is exercisable for no more than five years from the Grant
Date.
(f) Right to Exercise. Except as provided
in Section 6.2(c)(iii), during a Participants
lifetime, an Incentive Stock Option may be exercised only by the
Participant.
ARTICLE 7
RESTRICTED
STOCK RIGHTS AND RESTRICTED STOCK
7.1 Grant of Restricted Stock Rights and
Restricted Stock. Subject to the provisions of
Article 5 and this Article 7, the Committee, at any
time and from time to time, may grant Restricted Stock Rights or
Restricted Stock to such Participants and in such amounts as it
shall determine.
7.2 Restricted Stock Rights.
(a) Voting Rights. During the Restricted
Period, Participants holding the Restricted Stock Rights granted
hereunder shall have no voting rights or rights to dividends
with respect to the shares of Stock subject to such Restricted
Stock Rights prior to the issuance of such shares of Stock
pursuant to the Plan.
(b) Form and Timing of Payment. Payment
for any vested Restricted Stock Rights Award issued pursuant to
this Article 7 shall be made in one lump sum payment of
shares of Stock, cash or a combination thereof, equal to the
Fair Market Value (determined as of a specified date) of a
specified number of shares of Stock. As a general rule, the
shares of Stock payable under any Restrict Stock Rights Award
shall be made on or before March 15 of the calendar year
following the calendar year in which the Restricted Stock Rights
vest in accordance with the short-term deferral
exception to Section 409A as set forth in Treasury
Regulation Section 1.409A-1(b)(4).
7.3 Grant of Restricted Stock.
(a) Issuance and Restrictions. Restricted
Stock shall be subject to such restrictions on transferability
and other restrictions as the Committee may impose (including,
without limitation, limitations on the right to vote, and
dividends on, Restricted Stock). These restrictions may lapse
separately or in combination at such times and pursuant to such
circumstances, as the Committee determines at the time of the
grant of the Award or thereafter.
(b) Restricted Stock Agreement. Each
grant of Restricted Stock under the Plan shall be evidenced by a
Restricted Stock Agreement between the recipient and the
Company. Such shares of Restricted Stock shall be subject to all
applicable terms of the Plan and may be subject to any other
terms that are not inconsistent with the Plan. The provisions of
the various Restricted Stock Agreements entered into under the
Plan need not be identical.
(c) Payment for Awards. Subject to the
following sentence, Restricted Stock may be sold or awarded
under the Plan for such consideration as the Committee may
determine, including (without limitation) cash, cash
equivalents, past services and future services. To the extent
that an Award consists of newly issued shares of Restricted
Stock, the Award recipient shall furnish consideration with a
value not less than the par value of such Restricted Stock in
the form of cash, cash equivalents, Stock or past services
rendered to the Company (or a Parent or Subsidiary), as the
Committee may determine.
(d) Vesting. Each Award of Restricted
Stock may or may not be subject to vesting. Vesting shall occur,
in full or in installments, upon satisfaction of the conditions
specified in the Restricted Stock Agreement. A Restricted Stock
Agreement may provide for accelerated vesting in the event of
the Participants death, Disability or
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retirement or other events. The Committee may determine, at the
time of granting shares of Restricted Stock or thereafter, that
all or part of such Restricted Stock shall become vested in the
event of a Change in Control.
(e) Voting and Dividend Rights. Subject
to the terms and restrictions of any Restricted Stock Agreement,
the holders of Restricted Stock awarded under the Plan shall
have the same voting, dividend and other rights as the
Companys other stockholders.
(f) Restrictions on Transfer of Restricted
Stock. Restricted Stock shall be subject to such
rights of repurchase, rights of first refusal or other
restrictions as the Committee may determine. Such restrictions
shall be set forth in the applicable Restricted Stock Agreement
and shall apply in addition to any general restrictions that may
apply to all holders of Restricted Stock.
(g) Forfeiture. Except as otherwise
determined by the Committee at the time of the grant of the
Restricted Stock Award in a Restricted Stock Agreement or
thereafter, upon Termination of Employment or the failure to
satisfy one or more performance criteria during the applicable
Restriction Period, Restricted Stock that is at that time
subject to restrictions shall be forfeited.
(h) Certificates for Restricted
Stock. Restricted Stock granted pursuant to the
Plan may be evidenced in such manner as the Committee shall
determine. If certificates representing shares of Restricted
Stock are registered in the name of the Participant, the
certificates must bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such
Restricted Stock, and the Company may, in its discretion, retain
physical possession of the certificate until such time as all
applicable restrictions lapse.
ARTICLE 8
PERFORMANCE
SHARES AND PERFORMANCE SHARE UNITS
8.1 Grant of Performance Shares or Performance
Share Units. Subject to the provisions of
Article 5 and this Article 8, Performance Shares or
Performance Share Units may be granted to Participants at any
time and from time to time as shall be determined by the
Committee. The Committee shall have complete discretion in
determining the number of Performance Shares or Performance
Share Units granted to each Participant.
8.2 Value of Performance Shares or Performance
Share Units. Each Performance Share and each
Performance Share Unit shall have a value determined by the
Committee at the time of grant. The Committee shall set goals
(including Performance Goals) for a particular period (including
a Performance Period) in its discretion which, depending on the
extent to which the goals are met, will determine the ultimate
value of the Performance Share or Performance Share Units to the
Participant.
8.3 Form and Timing of
Payment. Payment for vested Performance Shares
shall be made in Stock. Payments for vested Performance Share
Units shall be made in cash, Stock or a combination thereof as
determined by the Committee. All payments for Performance Shares
and Performance Share Units shall be made in a lump sum. As a
general rule, payment for Performance Shares or Performance
Share Units shall be made on or before March 15 of the calendar
year following the calendar year in which the right to the
payment of the Performance Shares or Performance Share Units
arises in accordance with the short-term deferral
exception to Section 409A as set forth in Treasury
Regulation Section 1.409A-1(b)(4).
ARTICLE 9
STOCK
APPRECIATION RIGHTS
9.1 Grant of Stock Appreciation
Rights. Subject to the provisions of
Article 5 and this Article 9, Stock Appreciation
Rights (SARs) may be granted to Participants at any
time and from time to time as shall be determined by the
Committee. SARs may be granted in connection with the grant of
an Option, in which case the exercise of SARs will result in the
surrender of the right to purchase the shares under the Option
as to which the SARs were exercised. When SARs are granted in
connection with the grant of an Incentive Stock Option, the SARs
shall have such terms and conditions as shall be required by
Section 422 of the Code. Alternatively, SARs may be granted
independently of Options.
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9.2 Exercisability of SARs. SARs
granted under the Plan shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee
shall in each instance approve, which need not be the same for
all Participants; provided, however, that no SAR shall be
exercisable later than ten (10) years from the Grant Date.
9.3 Exercise of SARs. Upon exercise
of the SAR or at a fixed date after all or part of the SAR
becomes exercisable, the Participant shall be entitled to
receive payment of an amount determined by multiplying
(a) the difference, if any, of the Fair Market Value of a
share of Stock on the date of exercise over the price of the SAR
fixed by the Committee at the Grant Date, which shall not be
less than the Fair Market Value of a share of Stock at the Grant
Date, by (b) the number of shares of Stock with respect to
which the SAR is exercised.
9.4 Form and Timing of
Payment. Payment for SARs shall be made in Stock
and shall be payable at the time specified in the Award
Agreement for such SARs.
ARTICLE 10
PERFORMANCE-BASED
AWARDS
10.1 Grant of Performance-Based
Awards. Options granted to Covered Employees
pursuant to Article 6 and SARs granted to Covered Employees
pursuant to Article 9 should, by their terms, qualify for
the performance-based compensation exception to the
deduction limitations of Section 162(m) of the Code. The
Committee, in the exercise of its complete discretion, also may
choose to qualify some or all of the Restricted Stock Rights or
Restricted Stock Awards granted to Covered Employees pursuant to
Article 7
and/or some
or all of the Performance Shares or Performance Share Units
granted to Covered Employees pursuant to Article 8 for the
performance-based compensation exception to the
deduction limitations of Section 162(m) of the Code. If the
Committee, in its discretion, decides that a particular Award to
a Covered Employee should qualify as performance-based
compensation, the Committee will grant a Performance-Based
Award to the Covered Employee and the provisions of this
Article 10 shall control over any contrary provision
contained in Articles 7, 8 or 9. If the Committee concludes
that a particular Award to a Covered Employee should not be
qualified as performance-based compensation, the
Committee may grant the Award without satisfying the
requirements of Section 162(m) of the Code and the
provisions of this Article 10 shall not apply.
10.2 Applicability. This
Article 10 shall apply only to Awards to those Covered
Employees selected by the Committee to receive Performance-Based
Awards. The designation of a Covered Employee as a Participant
for any Performance Period shall not in any manner entitle the
Participant to receive a Performance-Based Award for such
Performance Period. Moreover, designation of a Covered Employee
as a Participant for a particular Performance Period shall not
require designation of such Covered Employee as a Participant
for any subsequent Performance Period.
10.3 Committee Discretion with Respect to
Performance-Based Awards. With regard to a
particular Performance Period, the Committee shall have full
discretion to select the length of the Performance Period, the
type of Performance-Based Awards to be issued, the kind
and/or level
of the Performance Goal or Goals and whether the Performance
Goal or Goals apply to the Company, an Affiliate, or any
division or business unit thereof or the Participant or any
group of Participants.
10.4 Establishment of Performance
Goals. The Performance Goals for any
Performance-Based Award granted pursuant to this Article 10
shall be established by the Committee in writing not later than
ninety (90) days after the commencement of the Performance
Period for such Award; provided that (a) the outcome must
be substantially uncertain at the time the Committee establishes
the Performance Goals; and (b) in no event will the
Committee establish the Performance Goals for any
Performance-Based Award after twenty-five percent (25%) of the
Performance Period for such Award has elapsed.
10.5 Performance Evaluation; Adjustment of
Goals. At the time that a Performance-Based Award
is first issued, the Committee, in the Award Agreement or in
another written document, shall specify whether performance will
be evaluated including or excluding the effect of any of the
following events that occur during the Performance Period:
(i) judgments entered or settlements reached in litigation;
(ii) the write down of assets; (iii) the impact of any
reorganization or restructuring; (iv) the impact of changes
in tax laws, accounting principles, regulatory actions
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or other laws affecting reported results; (v) extraordinary
non-recurring items as described in Accounting Principles Board
Opinion No. 30
and/or in
managements discussion and analysis of financial condition
and results of operations appearing in the Companys annual
report to shareholders or Annual Report on
Form 10-K,
as the case may be, for the applicable year; (vi) the
impact of any mergers, acquisitions, spin-offs or other
divestitures; and (vii) foreign exchange gains and losses.
The inclusion or exclusion of the foregoing items shall be
expressed in a form that satisfies the requirements of
Section 162(m) of the Code. The Committee, in its
discretion, also may, within the time prescribed by
Section 162(m) of the Code, adjust or modify the
calculation of Performance Goals for such Performance Period in
order to prevent the dilution or enlargement of the rights of
Participants: (i) in the event of, or in anticipation of,
any unusual or extraordinary corporate item, transaction, event,
or development; or (ii) in recognition of, or in
anticipation of, any other unusual or nonrecurring events
affecting the Company, or the financial statements of the
Company, or in response to, or in anticipation of, changes in
applicable laws, regulations, accounting principles, or business
conditions.
10.6 Adjustment of Performance-Based
Awards. The Committee shall have the sole
discretion to adjust the determinations of the degree of
attainment of the pre-established Performance Goals.
Notwithstanding any provision herein to the contrary, the
Committee may not make any adjustment or take any other action
with respect to any Performance-Based Award that will increase
the amount payable under any such Award. The Committee shall
retain the sole discretion to adjust Performance-Based Awards
downward or to otherwise reduce the amount payable with respect
to any Performance-Based Award.
10.7 Payment of Performance-Based
Awards. Unless otherwise provided in the relevant
Award Agreement, a Participant must be an Employee of the
Company or an Affiliate on the day a Performance-Based Award for
such Performance Period is paid to the Participant. Furthermore,
a Participant shall be eligible to receive payment pursuant to a
Performance-Based Award for a Performance Period only if the
Performance Goals for such Performance Period are achieved.
10.8 Certification by
Committee. Notwithstanding any provisions to the
contrary, the payment of a Performance-Based Award shall not
occur until the Committee certifies, in writing, that the
pre-established Performance Goals and any other material terms
and conditions precedent to such payment have been satisfied.
10.9 Maximum Award Payable. In
accordance with Section 5.4, the maximum Performance-Based
Award payable to any one participant for a Performance Period
shall not exceed the limitation set forth in such section.
ARTICLE 11
AUTOMATIC
RESTRICTED STOCK AWARD FOR NON-EMPLOYEE DIRECTORS
11.1 General. Subject to the
provisions of Article 5 and this Article 11, the
Committee shall grant to each individual who, on or after the
Effective Date, first becomes a non-Employee Director, a
Restricted Stock Award for 5,000 shares of Restricted Stock.
11.2 Annual Restricted Stock
Awards. Within five (5) business days
following the conclusion of each Annual Meeting, commencing with
the Annual Meeting approving the Plan, each non-Employee
Director who was not elected to the Board for the first time at
such meeting and who will continue serving as a member of the
Board thereafter shall receive a Restricted Stock Award of
8,000 shares of Restricted Stock or 16,000 shares of
Restricted Stock for a non-Employee Director serving as Lead
Director (subject to adjustment under Section 5.3),
provided that such non-Employee Director has served on the Board
for at least six months.
11.3 Issuance and Restrictions. The
Restricted Stock granted pursuant to this Article 11 shall
be subject to such restrictions on transferability and other
restrictions as the Committee may impose (including, without
limitation, limitations on the right to vote Restricted Stock).
These restrictions may lapse separately or in combination at
such times and pursuant to such circumstances, as the Committee
determines at the time of the grant.
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11.4 Lapse of Restrictions. Except
as otherwise determined by the Committee, the restrictions on
the Restricted Stock Awards granted under this Article 11
shall lapse on the first anniversary of the Grant Date.
Notwithstanding the foregoing and Article 12, all shares of
Restricted Stock granted under this Section 11.2 shall
immediately vest upon a Change in Control.
11.5 Termination of Service. If a
non-Employee Director ceases to be a director of the Company for
any reason, the number of shares of Stock subject to any
Restricted Stock Award granted under this Article 11, the
restrictions on which have not lapsed, shall expire on the date
the non-Employee Director ceases to be a director of the Company
and shall be returned to the Company without any consideration.
11.6 Certificates for Restricted
Stock. Restricted Stock granted pursuant to this
Article 11 may be evidenced in such manner as the Committee
shall determine. If certificates representing shares of
Restricted Stock are registered in the name of the non-Employee
Director, the certificates must bear an appropriate legend
referring to the terms, conditions, and restrictions applicable
to such Restricted Stock, and the Company may, in its
discretion, retain physical possession of the certificate until
such time as all applicable restrictions lapse.
ARTICLE 12
CHANGE IN
CONTROL
12.1 Effect of Change in
Control. Other than as otherwise expressly
provided in an Award Agreement (in which case the terms of such
Award Agreement will govern) and Article 11,
notwithstanding any other term or provision of this Plan, if a
Triggering Event shall occur within the
12-month
period beginning with a Change in Control, then, effective
immediately prior to such Triggering Event, (i) each
outstanding Option and Stock Appreciation Right, to the extent
that it shall not otherwise have become vested and exercisable,
shall automatically become fully and immediately vested and
exercisable, without regard to any otherwise applicable vesting
requirement, (ii) each share of Restricted Stock or
Restricted Stock Right shall become fully and immediately vested
and all forfeiture and transfer restrictions thereon shall
lapse, and (iii) each outstanding Performance Share or
Performance Share Unit shall become immediately payable.
12.2 Board Discretion. Except as
otherwise provided in an Award Agreement, in this Plan or a
Participants employment or other agreement with the
Company or an Affiliate, the Board has the sole and absolute
discretion to fully or partially vest and make exercisable any
outstanding Award upon the closing of a transaction that results
in a Change in Control.
ARTICLE 13
NON-TRANSFERABILITY
13.1 General. Unless otherwise
determined by the Committee, no Award granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated, other than by will or by the laws of descent
and distribution, until the termination of any Restricted Period
or Performance Period as determined by the Committee.
13.2 Beneficiary
Designation. Notwithstanding Section 13.1, a
Participant may, in the manner determined by the Committee,
designate a beneficiary to exercise the rights of the
Participant and to receive any distribution with respect to any
Award upon the Participants death. A beneficiary, legal
guardian, legal representative, or other person claiming any
rights pursuant to the Plan is subject to all terms and
conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement
otherwise provide, and to any additional restrictions deemed
necessary or appropriate by the Committee. If no beneficiary has
been designated or survives the Participant, payment shall be
made to the person entitled thereto pursuant to the
Participants will or the laws of descent and distribution.
Subject to the foregoing, a beneficiary designation may be
changed or revoked by a Participant at any time provided the
change or revocation is provided to the Committee.
13.3 Stock
Certificates. Notwithstanding anything herein to
the contrary, the Company shall not be required to issue or
deliver any certificates evidencing shares of Stock pursuant to
the exercise of any Award, unless
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and until the Committee has determined, with advice of counsel,
that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental
authorities and, if applicable, the requirements of any exchange
or quotation system on which the shares of Stock are listed,
quoted or traded. All Stock certificates delivered pursuant to
the Plan are subject to any stop-transfer orders and other
restrictions as the Committee deems necessary or advisable to
comply with Federal, state, or foreign jurisdiction, securities
or other laws, rules and regulations and the rules of any
national securities exchange or automated quotation system on
which the Stock is listed, quoted, or traded. The Committee may
place legends on any Stock certificate to reference restrictions
applicable to the Stock. In addition to the terms and conditions
provided herein, the Board may require that a Participant make
such reasonable covenants, agreements, and representations as
the Board, in its discretion, deems advisable in order to comply
with any such laws, regulations, or requirements.
ARTICLE 14
FORFEITURE
14.1 Forfeiture Events. The
Committee will specify in an Award Agreement at the time of the
Award that the Participants rights, payments and benefits
with respect to an Award shall be subject to reduction,
cancellation, forfeiture or recoupment upon the occurrence of
certain specified events, in addition to any otherwise
applicable vesting or performance conditions of an Award. Such
events shall include, but shall not be limited to, Termination
of Employment for Cause, violation of material Company policies,
fraud, breach of noncompetition, confidentiality or other
restrictive covenants that may apply to the Participant or other
conduct by the Participant that is detrimental to the business
or reputation of the Company.
14.2 Termination Events. Unless
otherwise provided by the Committee and set forth in an Award
Agreement, if a Participants employment with the Company
or any Affiliate shall be terminated for Cause, the Committee
may, in its sole discretion, immediately terminate such
Participants right to any further payments, vesting or
exercisability with respect to any Award in its entirety. The
Committee shall have the power to determine whether the
Participant has been terminated for Cause and the date upon
which such termination for Cause occurs. Any such determination
shall be final, conclusive and binding upon the Participant. In
addition, if the Company shall reasonably determine that a
Participant has committed or may have committed any act which
could constitute the basis for a termination of such
Participants employment for Cause, the Committee may
suspend the Participants rights to exercise any option,
receive any payment or vest in any right with respect to any
Award pending a determination by the Committee of whether an act
has been committed which could constitute the basis for the
Termination of Employment for Cause as provided in
this Section 14.2.
ARTICLE 15
SUBSTITUTION
OF AWARDS
15.1 Substitution of Awards. Any
Award may be granted under this Plan in substitution for Awards
held by any individual who is an employee of another corporation
who is about to become an Employee as the result of a merger,
consolidation or reorganization of the corporation with the
Company, or the acquisition by the Company of the assets of the
corporation, or the acquisition by the Company of stock of the
corporation as the result of which such corporation becomes an
Affiliate or a subsidiary of the Company. The terms and
conditions of the Awards so granted may vary from the terms and
conditions set forth in this Plan to such extent as the
Committee at the time of granting the Award may deem appropriate
to conform, in whole or in part, to the provisions of the Award
in substitution for which they are granted. However, in the
event that the Award for which a substitute Award is being
granted is an Incentive Stock Option, no variation shall
adversely affect the status of any substitute Award as an
Incentive Stock Option under the Code. In addition, in the event
that the award for which a substitute Award is being granted is
a Non-Qualified Stock Option or a Stock Appreciation Right that
otherwise satisfies the requirements of the stock rights
exception to Section 409A of the Code, no variation
shall adversely affect the status of any substitute Award under
the stock rights exception to Section 409A of the Code.
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ARTICLE 16
AMENDMENT,
MODIFICATION, AND TERMINATION
16.1 Amendment, Modification and
Termination. The Board may at any time, and from
time to time, terminate, amend or modify the Plan; provided
however, that any such action of the Board shall be subject to
approval of the shareholders to the extent required by law,
regulation, any stock exchange rule for any exchange on which
shares of Stock are listed or Section 16.2. Notwithstanding
the above, to the extent permitted by law, the Board may
delegate to the Committee the authority to approve
non-substantive amendments to the Plan. No amendment,
modification, or termination of the Plan or any Award under the
Plan shall in any manner adversely affect any Award theretofore
granted under the Plan without the consent of the holder thereof
(unless such change is required in order to cause the benefits
under the Plan to qualify as performance-based compensation
within the meaning of Section 162(m) of the Code and
applicable interpretive authority thereunder).
16.2 Shareholder Approval
Requirements. Except as provided in
Section 5.3, neither the Board nor the Committee may,
without the approval of the shareholders, (a) reduce the
purchase price or exercise price of any outstanding Award,
including any Option or SAR; (b) increase the number of
shares of Stock available under the Plan (other than any
adjustment as provided in Section 5.3); (c) grant
Options with an exercise price that is below Fair Market Value
on the Grant Date; (d) reprice previously granted Options
or SARs; or (e) cancel any Option or SAR in exchange for
cash or any other Award or in exchange for any Option or SAR
with an exercise price that is less than the exercise price of
the original Option or SAR.
ARTICLE 17
TAX
WITHHOLDING
17.1 Tax Withholding. The Company
shall have the power to withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy federal,
state, and local withholding tax requirements on any Award under
the Plan. To the extent that alternative methods of withholding
are available under applicable tax laws, the Company shall have
the power to choose among such methods.
17.2 Form of Payment. To the extent
permissible under applicable tax, securities, and other laws,
the Company may, in its sole discretion, permit the Participant
to satisfy a tax withholding requirement by (a) using
already owned shares of Stock that have been held by the
Participant for at least six (6) months; (b) a
broker-assisted cashless transaction;
(c) directing the Company to apply shares of Stock to which
the Participant is entitled pursuant to the Award to satisfy the
required minimum statutory withholding amount; or
(d) personal check or other cash equivalent acceptable to
the Company.
ARTICLE 18
INDEMNIFICATION
18.1 Indemnification. Each person
who is or shall have been a member of the Committee or of the
Board shall be indemnified and held harmless by the Company
against and from any loss, cost, liability, or expense that may
be imposed upon or reasonably incurred by him in connection with
or resulting from any claim, action, suit, or proceeding to
which he may be a party or in which he may be involved by reason
of any action taken or failure to act under the Plan and against
and from any and all amounts paid by him in settlement thereof,
with the Companys approval, or paid by him in satisfaction
of any judgment in any such action, suit, or proceeding against
him, provided he shall give the Company an opportunity, at its
own expense, to handle and defend the same before he undertakes
to handle and defend it on his own behalf. The foregoing right
of indemnification shall not be exclusive of any other rights of
indemnification to which such person may be entitled under the
Companys articles of incorporation, bylaws, resolution or
agreement, as a matter of law, or otherwise, or any power that
the Company may have to indemnify him or hold him harmless.
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ARTICLE 19
GENERAL
PROVISIONS
19.1 No Right to Continued Employment/No
Additional Rights/Participants. Nothing in the
Plan, in the grant of any Award or in any Award Agreement shall
confer upon any Participant any right to continue employment or
a contractual relationship with the Company or any of its
Affiliates, or interfere in any way with the right of the
Company or any of its Affiliates to terminate the
Participants employment or other service relationship for
any reason at any time. The grant of an Award under the Plan
shall not confer any rights upon the Participant holding such
Award other than such terms, and subject to such conditions, as
are specified in the Plan as being applicable to such type of
Award (or to all Awards) or as are expressly set forth in the
Award Agreement.
19.2 No Rights to Awards. No
Participant, Employee, or other person shall have any claim to
be granted any Award pursuant to the Plan, and neither the
Company nor the Committee is obligated to treat Participants,
Employees, and other persons uniformly.
19.3 Funding. The Company shall not
be required to segregate any of its assets to ensure the payment
of any Award under the Plan. Neither the Participant nor any
other persons shall have any interest in any fund or in any
specific asset or assets of the Company or any other entity by
reason of any Award, except to the extent expressly provided
hereunder. The interests of each Participant and former
Participant hereunder are unsecured and shall be subject to the
general creditors of the Company. The Plan is not intended to be
subject to ERISA.
19.4 Requirements of Law. The
granting of Awards and the issuance of shares of Stock under the
Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies
or national securities exchanges as may be required. The
Committee may impose such restrictions
and/or
conditions on any shares of Stock as it may deem advisable. The
Company shall be under no obligation to register pursuant to the
Securities Act of 1933, as amended, any of the shares of Stock
paid pursuant to the Plan. If the shares of Stock paid pursuant
to the Plan may in certain circumstances be exempt from
registration pursuant to the Securities Act of 1933, as amended,
the Company may restrict the transfer of such shares in such
manner as it deems advisable to ensure the availability of any
such exemption. With respect to any Participant who is, on the
relevant date, obligated to file reports pursuant to
Section 16 of the Exchange Act, transactions pursuant to
this Plan are intended to comply with all applicable conditions
of
Rule 16b-3
or its successors pursuant to the Exchange Act. Notwithstanding
any other provision of the Plan, the Committee may impose such
conditions on the exercise of any Award as may be required to
satisfy the requirements of
Rule 16b-3
or its successors pursuant to the Exchange Act. To the extent
any provision of the Plan or action by the Committee fails to so
comply, it shall be void to the extent permitted by law and
voidable as deemed advisable by the Committee.
19.5 Governing Law. The Plan and
all agreements into which the Company and any Participant enter
pursuant to the Plan shall be construed in accordance with and
governed by the laws of the State of Washington.
19.6 No Shareholders Rights. No
Award gives the Participant any of the rights of a shareholder
of the Company unless and until shares of Stock are in fact
issued to such person in connection with such Award.
19.7 Adoption of Other Plans. The
adoption of the Plan shall not preclude the Company from
establishing any other forms of share incentive or other
compensation or benefit program for Employees, officers,
non-Employee Directors and Consultants of the Company or any
Affiliate.
19.8 Titles and Headings. The
titles and headings of the Articles in the Plan are for
convenience of reference only and, in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall
control.
19.9 Successors and Assigns. The
Plan shall be binding upon and inure to the benefit of the
successors and permitted assigns of the Company, including
without limitation, whether by way of merger, consolidation,
operation of law, assignment, purchase, or other acquisition of
substantially all of the assets or business of the Company, and
any and all such successors and assigns shall absolutely and
unconditionally assume all of the Companys obligations
under the Plan.
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19.10 Severability. If any
provision of the Plan or any Award Agreement shall be determined
to be illegal or unenforceable by any court of law in any
jurisdiction, the remaining provisions hereof and thereof shall
be severable and enforceable in accordance with their terms, and
all provisions shall remain enforceable in any other
jurisdiction.
19.11 Survival of Provisions. The
rights, remedies, agreements, obligations and covenants
contained in or made pursuant to this Plan, any agreement and
any notices or agreements made in connection with this Plan
shall survive the execution and delivery of such notices and
agreements and the delivery and receipt of such shares of Stock
if required by Section 13.3, shall remain in full force and
effect.
ARTICLE 20
EXECUTION
20.1 To record the adoption of the Plan by the Board
on April 14, 2010, the Company has caused its authorized
officer
and/or
director to execute the same.
MERCER INTERNATIONAL INC.
Name: Eric Lauritzen
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Title:
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Director and Chairman, Compensation
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and Human Resources Committee
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PROXY
MERCER INTERNATIONAL INC.
Suite 2840,
650 West Georgia Street
Vancouver, British Columbia
Canada V6B 4N8
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF MERCER INTERNATIONAL INC.
The undersigned hereby appoints Jimmy S.H. Lee, or failing him David M. Gandossi, as proxy, with the power of substitution, to represent and to vote
as designated below all
the common shares of Mercer International Inc. held of record by the undersigned on April 13, 2010 at the Annual General Meeting of Share holders to be
held on
June 1, 2010, or any adjournment, postponement or rescheduling thereof.
(Continued on reverse side)
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BNY
MELLON SHAREOWNER SERVICES |
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Address Change/Comments
(Mark the corresponding box on the
reverse side)
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P.O. BOX 3550 SOUTH HACKENSACK, NJ 07606-9250 |
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▲ FOLD AND
DETACH HERE ▲
You
can now access your Mercer International Inc.
account online.
Access your Mercer International Inc. account online via Investor
ServiceDirect®
(ISD).
BNY Mellon Shareowner Services,
the transfer agent for Mercer International Inc., now makes it easy and convenient to get current
information on your shareholder account.
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View certificate history
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Make address changes
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View book-entry information
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Obtain a duplicate 1099 tax form
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Visit us on the web at http://www.bnymellon.com/shareowner/isd
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect®
Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-800-370-1163
Choose MLinkSM for fast, easy and secure 24/7 online access to
your future proxy materials, investment plan statements, tax documents
and more. Simply log on to Investor ServiceDirect® at
www.bnymellon.com/shareowner/isd where step-by-step instructions will
prompt you through enrollment.
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Please mark
your votes as
indicated in
this example
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FOR the nominees
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WITHHOLD
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listed below (except
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AUTHORITY to vote
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as
marked to the
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for the nominees
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contrary below)
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listed below
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*EXCEPTIONS
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FOR
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AGAINST
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ABSTAIN |
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1. Election of Directors
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2. |
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Ratification of the Selection of
PricewaterhouseCoopers LLP as Independent
Auditors |
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Nominees:
01 Jimmy S.H. Lee 02 Kenneth A. Shields 03 William D. McCartney
04 Guy W. Adams
05 Eric Lauritzen
06 Graeme A. Witts 07 George Malpass
(INSTRUCTIONS: To withhold authority to vote for any
individual nominee, mark the Exceptions box and write
that nominees name in the space provided below.)
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FOR
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AGAINST
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ABSTAIN |
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3. |
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Approval of the 2010 Stock Incentive Plan
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4. |
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In his discretion, the proxyholder is authorized to vote upon
such other business as may properly come before the meeting.
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This proxy when properly signed will be voted in the manner directed herein by the undersigned shareholder.
If no direction is made, this proxy will be
voted FOR each of the director nominees listed in Proposal 1, FOR Proposal 2 and FOR Proposal 3 and
such other business as may properly come before the meeting.
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*Exceptions
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Mark Here for Address
Change or Comments
SEE REVERSE
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Please sign exactly as name appears on your share certificate(s). 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.
▲ FOLD AND DETACH HERE ▲
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
WE
ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING.
BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
Internet and telephone voting is available through 11:59 PM Eastern Time
the
day prior to the shareholder
meeting day.
Mercer International Inc.
You can view the 2009 Annual Report, including the Annual Report on
Form 10-K, and the Proxy Statement at: www.mercerint.com
INTERNET
http://www.proxyvoting.com/merc
Use the Internet to vote your proxy. Have
your
proxy card in hand when you access the web
site.
OR
TELEPHONE
1-866-540-5760
Use any touch-tone telephone to vote your
proxy. Have your proxy card in hand when you
call.
If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.
To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid
envelope.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
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