-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ToZi8GAi/J1zovxWkRGufwZNJH5Xw0VrOlCv7hgpMBw/iT7Anpfsfa6hweFEpZ11 k/NF5kTnriTm5HpF7bWNEg== 0001012410-97-000036.txt : 19970828 0001012410-97-000036.hdr.sgml : 19970828 ACCESSION NUMBER: 0001012410-97-000036 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 DATE AS OF CHANGE: 19970827 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERCER INTERNATIONAL INC CENTRAL INDEX KEY: 0000075659 STANDARD INDUSTRIAL CLASSIFICATION: 2621 IRS NUMBER: 916087550 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09409 FILM NUMBER: 97664512 BUSINESS ADDRESS: STREET 1: BRNDSCHENKE STR 64 CITY: ZURICH SWITZERLAND C STATE: V6 BUSINESS PHONE: 4112017710 10-Q 1 MERCER INTERNATIONAL INC. 2ND QTR 1997 FORM 10-Q 1 ============================================================================= UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission File No.: 000-09409 MERCER INTERNATIONAL INC. (Exact name of Registrant as specified in its charter)
Washington 91-6087550 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) Brandschenke Str. 64, Zurich, Switzerland CH 8002 (Address of principal executive offices) (Zip Code)
41(1) 201 7710 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- The Registrant had 14,908,369 shares of beneficial interest outstanding as at August 11, 1997. ============================================================================= 2 FORWARD-LOOKING STATEMENTS Statements in this report, to the extent they are not based on historical events, constitute forward-looking statements. Forward-looking statements include, without limitation, statements regarding the outlook for future operations, forecasts of future costs and expenditures, evaluation of market conditions, the outcome of legal proceedings, the adequacy of reserves, or other business plans. Investors are cautioned that forward-looking statements are subject to an inherent risk that actual results may vary materially from those described herein. Factors that may result in such variance, in addition to those accompanying the forward-looking statements, include changes in interest rates, commodity prices, and other economic conditions; actions by competitors; changing weather conditions and other natural phenomena; actions by government authorities; uncertainties associated with legal proceedings; technological development; future decisions by management in response to changing conditions; and misjudgments in the course of preparing forward-looking statements. PART I. FINANCIAL INFORMATION --------------------- ITEM 1. FINANCIAL STATEMENTS MERCER INTERNATIONAL INC. CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1997 (Unaudited) FORM 10-Q QUARTERLY REPORT - PAGE 2 3 MERCER INTERNATIONAL INC. CONSOLIDATED BALANCE SHEETS As at June 30, 1997 and December 31, 1996 (Unaudited) (dollars in thousands)
June 30, December 31, 1997 1996 ------------ ------------ ASSETS Current Assets Cash and cash equivalents $ 5,709 $ 9,967 Investments 65,413 83,359 Receivables 14,346 18,366 Inventories 16,748 20,668 Other 105 291 ------------ ----------- 102,321 132,651 Long-Term Assets Investments 4,068 3,759 Properties 121,184 125,116 Deferred income tax assets 16,261 18,313 ------------ ----------- 141,513 147,188 ------------ ----------- $ 243,834 $ 279,839 ============ ===========
The accompanying notes are an integral part of these financial statements. FORM 10-Q QUARTERLY REPORT - PAGE 3 4 MERCER INTERNATIONAL INC. CONSOLIDATED BALANCE SHEETS As at June 30, 1997 and December 31, 1996 (Unaudited) (dollars in thousands)
June 30, December 31, 1997 1996 ------------ ------------ LIABILITIES Current Liabilities Accounts payable and accrued expenses $ 35,041 $ 45,324 Notes payable 2,720 6,017 Current portion of long-term debt 10,041 2,647 ------------ ----------- 47,802 53,988 Long-Term Liabilities Debt 13,891 28,610 Due to spun-off operations 289 368 Other 2,061 2,334 ------------ ----------- 16,241 31,312 ------------ ----------- Total Liabilities 64,043 85,300 SHAREHOLDERS' EQUITY Shares of beneficial interest 87,522 85,965 Cumulative translation adjustment (35,704) (12,014) Net unrealized loss on investments valuation (1,710) (2,250) Retained earnings 129,683 122,838 ------------ ----------- 179,791 194,539 ------------ ----------- $ 243,834 $ 279,839 ============ ===========
The accompanying notes are an integral part of these financial statements. FORM 10-Q QUARTERLY REPORT - PAGE 4 5 MERCER INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS For Six Months Ended June 30, 1997 and 1996 (Unaudited) (dollars in thousands, except for earnings per share)
1997 1996 ------------ ------------ Revenues Sales $ 84,719 $ 92,313 Investments 5,375 7,237 ------------ ------------ 90,094 99,550 Expenses Cost of sales 69,259 75,994 General and administrative 12,109 12,788 Interest expense 1,403 1,954 ------------ ------------ 82,771 90,736 ------------ ------------ Income from continuing operations before income taxes 7,323 8,814 Income taxes 28 81 ------------ ------------ Income from continuing operations 7,295 8,733 Income from spun-off operations - 466 ------------ ------------ Net income 7,295 9,199 Retained earnings, beginning of period 122,838 160,956 Dividend (450) (54,143) ------------ ------------ Retained earnings, end of period $ 129,683 $ 116,012 ============ ============ Earnings per share Income from continuing operations $ 0.49 $ 0.65 Income from spun-off operations - 0.03 ------------ ------------ $ 0.49 $ 0.68 ============ ============
The accompanying notes are an integral part of these financial statements. FORM 10-Q QUARTERLY REPORT - PAGE 5 6 MERCER INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS For Three Months Ended June 30, 1997 and 1996 (Unaudited) (dollars in thousands, except for earnings per share)
1997 1996 ------------ ------------ Revenues Sales $ 42,587 $ 44,228 Investments 3,153 5,449 ------------ ------------ 45,740 49,677 Expenses Cost of sales 34,791 39,379 General and administrative 6,305 6,519 Interest expense 519 895 ------------ ------------ 41,615 46,793 ------------ ------------ Income from continuing operations before income taxes 4,125 2,884 Income taxes 14 11 ------------ ------------ Income from continuing operations 4,111 2,873 Income from spun-off operations - 436 ------------ ------------ Net income 4,111 3,309 Retained earnings, beginning of period 126,022 166,846 Dividend (450) (54,143) ------------ ------------ Retained earnings, end of period $ 129,683 $ 116,012 ============ ============ Earnings per share Income from continuing operations $ 0.27 $ 0.21 Income from spun-off operations - 0.03 ------------ ------------ $ 0.27 $ 0.24 ============ ============
The accompanying notes are an integral part of these financial statements. FORM 10-Q QUARTERLY REPORT - PAGE 6 7 MERCER INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For Six Months Ended June 30, 1997 and 1996 (Unaudited) (dollars in thousands)
1997 1996 ------------ ------------ Cash Flows from Continuing Operating Activities: Net income from continuing operations $ 7,295 $ 8,733 Adjustments to reconcile net income from continuing operations to cash from continuing operating activities Depreciation and amortization (4,015) (4,337) Gain on investments (3,984) (3,975) ------------ ------------ (704) 421 Changes in current assets and liabilities Inventories 3,968 6,266 Receivables (1,497) (3,283) Accounts payable and accrued expenses (5,030) 6,986 Other 170 (237) ------------ ------------ (3,093) 10,153 Proceeds from the sales of trading securities 20,403 24,821 Purchase of trading securities (7,851) (38,792) ------------ ------------ Net cash provided by (used in) operating activities of continuing operations 9,459 (3,818) Cash Flows from Investing Activities of Continuing Operations: Purchase of fixed assets (6,036) (12,844) Other 16 25 ------------ ------------ Net cash used in investing activities of continuing operations $ (6,020) $ (12,819)
The accompanying notes are an integral part of these financial statements. FORM 10-Q QUARTERLY REPORT - PAGE 7 8 MERCER INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) For Six Months Ended June 30, 1997 and 1996 (Unaudited) (dollars in thousands)
1997 1996 ------------ ------------- Cash Flows from Financing Activities of Continuing Operations: Increase in bank indebtedness $ 1,782 $ 3,776 Decrease in bank indebtedness (8,975) (150) Net proceeds on issuance (cost to repurchase) of shares of beneficial interest 487 (1,391) Payment of dividend (450) - ------------ ------------ Net cash (used in) provided by financing activities of continuing operations (7,156) 2,235 Effect of exchange rate changes on cash and cash equivalents (541) (965) ------------ ------------ Net cash used in continuing operations (4,258) (15,367) Net cash used in spun-off operations - (1,691) ------------ ------------ Net decrease in cash and cash equivalents (4,258) (17,058) Cash and cash equivalents, beginning of period 9,967 29,230 ------------ ------------ Cash and cash equivalents, end of period $ 5,709 $ 12,172 ============ ============
The accompanying notes are an integral part of these financial statements. FORM 10-Q QUARTERLY REPORT - PAGE 8 9 MERCER INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR SIX MONTHS ENDED JUNE 30, 1997 (Unaudited) Note 1. Basis of Presentation --------------------- The consolidated financial statements include the accounts of Mercer International Inc. and its subsidiaries (the "Company"). The interim period consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. These interim period statements should be read together with the audited financial statements and the accompanying notes included in the Company's latest annual report on Form 10- K. In the opinion of the Company, its unaudited interim consolidated financial statements contain all adjustments necessary in order to present a fair statement of the results of the interim periods presented. Previously reported financial statements for all periods and certain amounts in the Company's financial statements and related notes have been restated to conform to the current presentation. The Company's interest in the operating results and net assets of MFC Bancorp Ltd. ("MFC") are classified separately within these financial statements as "spun-off operations" and are excluded from amounts for "continuing operations" (see "Note 2. Spun-Off Operations"). In addition, the Company's cash flow statements exclude the activities of MFC. Intercompany transactions with MFC, which were eliminated in previous consolidated financial statements, are now reflected in these financial statements. Note 2. Spun-Off Operations ------------------- Effective June 3, 1996, the Company completed the spin-off of its financial services segment by distributing a stock dividend (the "Distribution") of shares of MFC as announced on December 28, 1995. The Distribution was recorded as a stock dividend from shareholders' equity at the carrying amount of the net assets of the spun-off operations. As a result, the Company's total assets and shareholders' equity were each reduced by approximately $50.7 million after the Distribution. FORM 10-Q QUARTERLY REPORT - PAGE 9 10 The operations of MFC have been classified separately within the Company's financial statements as "spun-off operations" and are excluded from the amounts of revenues and expenses of the Company's continuing operations. Note 3. Earnings Per Share ------------------ Earnings per share is computed on the weighted average number of shares outstanding during the period after considering convertible securities, warrants and options. The weighted average number of shares was 14,961,243 and 13,480,550 for the six months ended June 30, 1997 and 1996, respectively, and 14,991,237 and 13,455,810 for the three months ended June 30, 1997 and 1996, respectively. FORM 10-Q QUARTERLY REPORT - PAGE 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Mercer International Inc. is a pulp and paper company headquartered in Zurich, Switzerland and its operations are primarily located in Germany. In this document: (i) unless the context otherwise requires, the "Company" refers to Mercer International Inc. and its subsidiaries; and (ii) a "tonne" is one metric ton or 2,204.6 pounds. In June 1996, the Company completed the spin-off of its financial services segment, which has been classified separately within the Company's financial statements as "spun-off operations" and is excluded from the amounts of revenues and expenses of the Company's continuing operations. The following discussion and analysis of the results of operations and the financial condition of the Company for the six months and quarter ended June 30, 1997 should be read in conjunction with the consolidated financial statements and related notes included elsewhere herein. RESULTS OF OPERATIONS - Six Months Ended June 30, 1997 ------------------------------ In the first half of 1997, revenues decreased to $90.1 million from $99.6 million in the same period in 1996, primarily as a result of lower pulp and paper prices. As the Company's products are principally sold in deutschmarks, the depreciation of the deutschmark against the U.S. dollar by approximately 9.4% in the first half of 1997 also contributed to lower revenues. See "Foreign Currency". Pulp and paper costs decreased to $69.3 million in the first half of 1997 from $76.0 million in the same period in 1996, primarily as a result of decreased fibre costs (raw materials). General and administrative expenses decreased to $12.1 million for the six months ended June 30, 1997 from $12.8 million in the same period in 1996. Interest expense decreased to $1.4 million for the six months ended June 30, 1997 from $2.0 million for the comparative period of 1996 as a result of reduced indebtedness. For the six months ended June 30, 1997, net earnings from continuing operations were $7.3 million or $0.49 per share, compared to $8.7 million or $0.65 per share for the six months ended June 30, 1996. FORM 10-Q QUARTERLY REPORT - PAGE 11 12 The distribution of the Company's sales by product class, geographic area and volume is set out in the following table for the periods indicated:
Six Months Ended Six Months Ended June 30, 1997 June 30, 1996 ---------------- ---------------- (dollars in thousands) SALES BY PRODUCT CLASS Packaging papers $ 15,014 $ 16,664 Specialty papers 14,330 15,510 Printing papers 17,867 19,447 Pulp 35,782 37,660 Other 1,726 3,032 ----------- ---------- Total(1) $ 84,719 $ 92,313 =========== ========== SALES BY GEOGRAPHIC AREA Germany $ 48,061 $ 52,781 European Union(2) 30,133 23,568 Other 6,525 15,964 ----------- ---------- Total $ 84,719 $ 92,313 =========== ========== SALES BY VOLUME (tonnes) Packaging papers 55,600 53,630 Specialty papers 17,732 14,191 Printing papers 26,548 23,310 Pulp 81,968 64,985 ----------- ---------- Total 181,848 156,116 =========== ========== - - ------------------------------- (1) Excluding intercompany sales. (2) Not including Germany.
Pulp and paper markets were generally weak in the first half of 1997 and product prices were lower than in the same period in 1996. Sales volumes were 16% higher in the first half of 1997 compared to the same period in 1996 but only partially compensated for the price weakness. See "Cyclical Nature of Business; Competitive Position". Demand for market pulp improved during the current period and pulp sales by volume in the first half of 1997 increased by 26% compared to the same period in 1996. In the first half of 1997, list prices for pulp were, on average, down approximately 25% from the same period in 1996. Pulp prices stabilized during the second quarter of 1997 and some pulp producers have announced price increases for the third quarter of 1997, although there can be no assurances that such price increases will be achieved. FORM 10-Q QUARTERLY REPORT - PAGE 12 13 The average net selling price for the Company's paper products decreased, on average, by approximately 17% in the first half of 1997 from the comparative period in 1996. Paper sales by volume in the first half of 1997 increased by 9.6%, compared to the same period in 1996. On average, the Company's fibre (wood chips and pulpwood) costs for pulp operations decreased by approximately 17% in the first half of 1997, compared to the comparative period in 1996. Overall, reduced fibre prices were reflected in lower pulp prices. Recycled fibre (wastepaper) costs for paper operations decreased by approximately 37% in the first half of 1997 compared to the same period in 1996. Fibre costs remained relatively low in the first half of 1997, but there can be no assurance that they will not escalate in the future. During the second quarter of 1997, there were signs of upward pressure for wastepaper and pulpwood. The date by which the Company's pulp mill (the "Pulp mill") must reduce its levels of AOX (adsorbable organic halogen) discharge from 0.6 kilograms per tonne to 0.4 kilograms per tonne has been deferred from January 1, 1998 to January 1, 1999. In addition, the Company's requirement to reduce its levels of COD (chemical oxygen demand) discharge at the Pulp mill to 50 kilograms per tonne has also been postponed from July 1, 1997 to January 1, 1999. The Company has and will continue to modify its wastewater and bleaching facilities at its Pulp mill to meet or exceed these prescribed regulations. Such modifications are expected to improve the operational efficiency of the Pulp mill and are part of the Company's overall capital investment program for the mill. In July 1997, the Company entered into new long-term five year labour agreements with its unionized pulp workers which provide for, among other things, pay increases of 1.5% in September 1997, 2.0% in January 1998, 1.5% in August 1998, and 2.5% in January 1999 and 2000; a profit sharing plan; and the Company to maintain current employment levels. The agreements establish a wage rate that will be approximately 90% of the union wage rate for pulp workers in western Germany in the year 2000 and will be at par to such rate by the year 2002. In the first half of 1997, the Company provided a 3% pay increase to its unionized paper workers, and subsequently entered into a new labour agreement pursuant to which the Company will maintain current employment levels until the end of this year and provide pay increases of 3% in September 1997 and 2.5% in December 1997. Since acquisition, the Company has been implementing operational changes to its operations to improve efficiency, increase export sales and upgrade its product mix. These changes have continued in 1997 and resulted in the further elimination of employee positions. Due to the weak margins for paper products and competitive pressures resulting from the small size of the Company's packaging-grade paper machines, the Company is considering various potential alternatives for its paper operations which may result in the reorganization of its paper division. Such reorganization may, among other things, involve changes to the Company's product mix, staffing levels and operations, and divestiture of certain paper mills. FORM 10-Q QUARTERLY REPORT - PAGE 13 14 RESULTS OF OPERATIONS - Quarter Ended June 30, 1997 --------------------------- Revenues in the second quarter of 1997 decreased to $45.7 million from $49.7 million in the comparative quarter of 1996. The decrease in revenues reflects lower pulp and paper prices. The devaluation of the deutschmark against the U.S. dollar in the second quarter of 1997 compared to the second quarter of 1996 also contributed to lower revenues. On average, the deutschmark decreased by approximately 12% in the current period of 1997 from the comparative period of 1996. Pulp and paper costs and expenses decreased to $34.8 million in the current quarter from $39.4 million in the same period in 1996, primarily as a result of lower fibre costs. General and administrative expenses decreased to $6.3 million in the current quarter from $6.5 million in the same quarter of 1996. Interest expense decreased to $0.5 million in the three months ended June 30, 1997 from $0.9 million in the comparative quarter in 1996 as a result of reduced indebtedness. Net earnings from continuing operations in the quarter ending June 30, 1997 increased to $4.1 million or $0.27 per share from $2.9 million or $0.21 per share in the same quarter in 1996. The distribution of the Company's sales by product class, geographic area and volume is set out in the following table for the periods indicated:
Quarter Ended Quarter Ended June 30, 1997 June 30, 1996(1) ------------- -------------- (dollars in thousands) SALES BY PRODUCT CLASS Packaging papers $ 8,003 $ 6,949 Specialty papers 7,414 7,496 Printing papers 8,966 9,136 Pulp 17,381 19,236 Other 823 1,411 ------------ ------------ Total(1) $ 42,587 $ 44,228 ============ ============ SALES BY GEOGRAPHIC AREA Germany $ 22,796 $ 23,617 European Union(2) 17,353 12,324 Other 2,438 8,287 ------------ ------------ Total $ 42,587 $ 44,228 ============ ============
FORM 10-Q QUARTERLY REPORT - PAGE 14 15
Quarter Ended Quarter Ended June 30, 1997 June 30, 1996 ------------- ------------- (tonnes) SALES BY VOLUME Packaging papers 29,011 24,948 Specialty papers 9,273 7,147 Printing papers 13,697 12,120 Pulp 40,523 38,851 ------------- ------------- Total 92,504 83,066 ============= ============= - - ------------------------------- (1) Excluding intercompany sales. (2) Not including Germany.
While pulp and paper prices in the second quarter of 1997 were lower than the comparative period of 1996, sales by volume increased by approximately 11%. During the second quarter of 1997, pulp and paper prices stabilized and there was some improvement over the first quarter of 1997. Improvements in demand also resulted in some pulp producers announcing a price increase for the third quarter of 1997, although there can be no assurance that such an increase will be successfully implemented. In the second quarter of 1997, list prices for pulp were, on average, down approximately 13% from the same period in 1996. On average, the Company's fibre costs for pulp operations were down approximately 11% in the current quarter, compared to the same period in 1996. Pulp sales by volume in the second quarter of 1997 increased by 4.3%, compared to the same period in 1996. Dissolving pulp sales were lower during the current period as a result of weakness in the textile sector and the cessation of operations by one of the Company's major buyers. The average net selling price for the Company's paper products decreased, on average, by approximately 12% in the second quarter of 1997 from the comparative period in 1996. Although recycled fibre (wastepaper) costs for paper operations decreased by approximately 28% in the second quarter of 1997 from the same period in 1996, they increased by approximately 11% in the current quarter of 1997, compared to the first quarter of 1997. While paper prices appear to be improving, margins will continue to be under pressure as a result of expected increases in fibre costs and the time lag in price increases to the end purchaser. Paper sales by volume in the second quarter of 1997 increased by 17.6%, compared to the same period in 1996. FORM 10-Q QUARTERLY REPORT - PAGE 15 16 LIQUIDITY AND CAPITAL RESOURCES The following table is a summary of selected financial information concerning the Company for the periods indicated:
As at As at June 30, 1997 December 31, 1996 ------------- ----------------- (in thousands) FINANCIAL POSITION Working capital $ 54,519 $ 78,663 Total assets 243,834 279,839 Long-term government debt 8,150 9,184 Long-term debt - other 5,741 19,426
At June 30, 1997, the Company's cash and cash equivalents decreased to $5.7 million from $12.2 million at June 30, 1996 and from $10.0 million at December 31, 1996. At June 30, 1997, the Company had short-term trading securities totalling $65.4 million, compared to $80.5 million at June 30, 1996 and $83.4 million as at December 31, 1996. Operating Activities - - -------------------- Cash used in operating activities before net purchases of trading securities was $3.1 million in the six months ended June 30, 1997, compared to cash provided of $10.2 million in the same period in 1996. Cash flow from operations provided cash of $9.5 million in the first half of 1997, compared to using cash of $3.8 million for the same period in 1996. During the current period, the reduction of accounts payable and accrued expenses used cash of $5.0 million, and net sales of trading securities provided cash of $12.6 million. In the comparative period of 1996, an increase in accounts payable and accrued expenses provided cash of $7.0 million, and net sales of trading securities used cash of $14.0 million. A reduction in inventories provided cash of $4.0 million in the six months ended June 30, 1997, compared to $6.3 million in the six months ended June 30, 1996. The Company expects to generate sufficient cash flow from operations to meet its working capital requirements. Investing Activities - - -------------------- Investing activities in the first half of 1997 used cash of $6.0 million, consisting primarily of capital expenditures for upgrades to the manufacturing plants, compared to $12.8 million in the same period in 1996. The Company expects capital investments in 1997 to total approximately $10.7 million. Approximately $6.3 million was expended in the first half of 1997, compared to $13.9 million in the same period in 1996. These investments are being partially financed through non-refundable grants FORM 10-Q QUARTERLY REPORT - PAGE 16 17 made available by German federal and state governments to qualifying businesses operating in Germany. These non-refundable grants are not recorded in the income of the Company, but instead reduce the cost base of the assets purchased with the proceeds thereof. Loan guarantees are also available from state governments in Germany for up to 80% of the cost of qualified investments. Such guarantees permit businesses to obtain term loans at below market interest rates. The Company has not yet utilized any such state guarantees. The Company is proceeding with its plan to convert the production of the Pulp mill from sulphite pulp to sulphate (kraft) pulp. The conversion is expected to increase its annual production capacity from 160,000 tonnes to 280,000 tonnes, substantially reduce effluent and sulphur dioxide emissions and reduce energy costs. The estimated cost for the conversion is approximately $300 million, which will be financed through a combination of non-refundable governmental grants, governmental assistance and guarantees for long-term project financing and cash flow from operations. In mid-1997, the Company completed its engineering and related studies and submitted its formal application for project approval and operating permits. In addition, the State of Thuringia pledged grants and subsidies totalling approximately $96 million in support of the project and provided commitments for the additional fibre required by the mill after conversion. The overall financing package, including bank financing, for the conversion is being negotiated. Although the Company's conversion project has and continues to receive favourable support from all applicable governmental agencies, there can be no assurance that current governmental assistance programs will not be amended in the future or that financial assistance will be provided to the Company on terms satisfactory to it, or that all necessary environmental and operating permits will be received on satisfactory terms, or in time to permit the Company to proceed with and complete the project as currently planned. A final decision to proceed with the conversion will be made upon receipt of all necessary environmental and operating permits and approvals, which are expected to be received at the end of 1997 and result in construction commencing in 1998. The Company estimates that its costs in respect of the project in 1997 will be approximately $3.3 million. In addition, the Company is continuing discussions with a strategic investor to acquire a minority participation in the project. In July 1997, the Company purchased a $3.3 million senior secured convertible debenture from Concert Industries Ltd. ("Concert"), a Canadian manufacturer of air-laid, non-woven paper products. The debenture is due on July 2000, and is convertible into common shares of Concert at a price of $1.65 per share. The Company also entered into an agreement with Concert to acquire, subject to conditions, 3,300,000 units of Concert, each unit consisting of one common share and one share purchase warrant of Concert, for an aggregate purchase price of $5.1 million. Financing Activities - - -------------------- Cash used by financing activities was $7.2 million in the first half of 1997, compared to cash provided of $2.2 million in the same period in 1996. The Company decreased its bank indebtedness by $7.2 million in the first half of 1997, compared to a net increase of $3.6 million in the FORM 10-Q QUARTERLY REPORT - PAGE 17 18 comparative period in 1996. During the first half of 1997, the Company received proceeds on the issuance of shares of $0.5 million, compared to expending $1.4 million on repurchases of the Company's shares in the same period in 1996. During the six months ended June 30, 1997, the Company used $0.5 million to pay a cash dividend to its shareholders. The depreciation of the deutschmark against the U.S. dollar in the first half of 1997 resulted in an unrealized foreign exchange translation loss of $0.5 million on cash and cash equivalents, which is included as shareholders' equity in the Company's balance sheet and does not affect the Company's net earnings. See "Foreign Currency". The Company is continuing discussions with third parties to divest certain redundant assets and has entered into lease arrangements with respect to some of the assets whereby the Company has the right to "put" the assets to the tenant at a prearranged price. The Company's pulp and paper operations had net operating tax losses of approximately $242.0 million at December 31, 1996, which under German tax laws may be carried forward indefinitely. Such tax losses may result in a substantial deferred tax benefit being recognized, which under FASB Statement No. 109, may be reflected as an increase to earnings. The German government has proposed amendments to its tax laws which would limit the amount of tax losses that may be utilized in any one year. Until such amendments are finalized and proclaimed effective, the Company cannot determine with certainty the impact of these proposed changes under FASB Statement No. 109. The Company is currently in discussions with Bundesanstalt fur Vereignigungsbedingte Sonderaufgaben ("BVS"), the German privatization agency, with respect to certain matters arising from the purchase agreement for the Company's paper operations, including the reversal of accruals established at the time of acquisition by the paper operation for remediation costs and potential reimbursement therefor to BVS. The Company does not believe it is responsible for any such reimbursement obligation under the purchase agreement but can give no assurance that BVS will not seek to make a claim for the same. In the event that BVS were to proceed with and successfully enforce such a claim before the courts, the same could have an adverse effect on the Company's paper operations. The Company anticipates that there will be additional acquisitions of businesses or commitments to projects during the second half of 1997. To achieve its long-term goal of expanding its asset and earnings base through mergers and acquisitions, the Company will require substantial capital resources. The necessary resources will be generated from cash flow from operations, cash on hand, borrowing against its assets and/or the sale of assets. Foreign Currency - - ---------------- Substantially all of the Company's operations are conducted in international markets and, therefore, its consolidated financial results are subject to foreign currency exchange rate fluctuations. As FORM 10-Q QUARTERLY REPORT - PAGE 18 PAGE> 19 primarily all of the Company's revenues are received in deutschmarks, the financial position of the Company for any given period, when reported in U.S. dollars, can be significantly affected by the exchange rate for deutschmarks prevailing during that period. In the six months ended June 30, 1997, approximately 99% of the Company's revenues were recorded in deutschmarks. The Company translates foreign assets and liabilities into U.S. dollars at the rate of exchange on the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the period. Unrealized gains or losses from these translations are recorded as shareholders' equity on the balance sheet and do not affect the net earnings of the Company. At December 31, 1996, the cumulative foreign exchange translation resulted in a loss of $12.0 million. In the six months ended June 30, 1997, the overall depreciation of the deutschmark against the U.S. dollar resulted in a net $23.7 million foreign exchange translation loss, and as a result, the cumulative foreign exchange translation loss was increased from $12.0 million at December 31, 1996 to $35.7 million at June 30, 1997. As both the Company's principal sources of revenues and expenses are in deutschmarks, the Company does not currently enter into any currency hedging arrangements for exchange rate fluctuations. The period average and period ending exchange rates for the deutschmark to the U.S. dollar for the periods indicated are as follows
Period From Quarter Ended Quarter Ended June 30 to August 8, 1997 June 30, 1997 June 30, 1996 Period End Period Average Period End Period Average Period End Period Average ---------- -------------- ---------- -------------- ---------- -------------- RATE OF EXCHANGE Deutschmark 1.8466 1.7902 1.7438 1.7079 1.5218 1.5262
20 PART II. OTHER INFORMATION ----------------- ITEM 1. LEGAL PROCEEDINGS The Company is subject to routine litigation incidental to its business. The Company does not believe that the outcome of such litigation will have a material adverse effect on its business or financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its Annual Meeting of Shareholders on June 27, 1997 (the "Meeting"). At the Meeting, the following matters were voted upon: 1. Michel Arnulphy was elected a Class III trustee of the Company for a three year term, as follows:
Abstentions and Votes FOR Votes WITHHELD Broker Non-Votes --------- -------------- ---------------- Michel Arnulphy 5,836,077 27,970 -
2. An amendment to the Company's Non-Qualified Stock Option Plan to increase the number of shares available for issuance thereunder from 1,100,000 to 2,000,000 shares was approved as follows:
Abstentions and Votes FOR Votes AGAINST Broker Non-Votes --------- ------------- ---------------- Amend Non-Qualified Stock Option Plan 5,131,466 732,581 -
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Number Description ------- ----------- 10.1 Amended and Restated Non-Qualified Stock Option Plan. 27 Article 5 - Financial Data Schedule for 2nd Quarter 1997 - Form 10-Q. FORM 10-Q QUARTERLY REPORT - PAGE 20 21 (b) Reports on Form 8-K None. FORM 10-Q QUARTERLY REPORT - PAGE 21 22 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: August 12, 1997 MERCER INTERNATIONAL INC. By: /s/ Maarten Reidel ------------------------------------- Maarten Reidel Secretary and Chief Financial Officer FORM 10-Q QUARTERLY REPORT - PAGE 22 23 EXHIBIT INDEX
Exhibit Number Description - - ------- ----------- 10.1 Amended and Restated Non-Qualified Stock Option Plan 27 Article 5 - Financial Data Schedule for 2nd Quarter 1997 - Form 10-Q.
EX-10 2 EXHIBIT 10.1 - AMENDED AND RESTATED STOCK OPTION PLAN 1 AMENDED AND RESTATED MERCER INTERNATIONAL INC. 1992 NON-QUALIFIED STOCK OPTION PLAN This Amended and Restated 1992 Non-Qualified Stock Option Plan (the "Plan") provides for the grant of options to acquire shares of beneficial interest ("Shares"), $1.00 par value per share, of Mercer International Inc. (the "Company"). The non-qualified stock options to acquire Shares granted pursuant to this Plan are hereinafter referred to as "Options" and any party to whom an Option is granted under this Plan shall be referred to hereinafter as an "Optionee". 1. PURPOSE. The purpose of the Plan is to attract and retain the services of people with training, experience and ability and to provide additional incentive to such persons by granting them an opportunity to participate in the ownership of the Company. 2. SHARES SUBJECT TO THE PLAN. The Shares subject to this Plan shall be the Company's shares of beneficial interest, presently authorized but unissued or reacquired by the Company. Subject to adjustment as provided in Section 8 hereof, the aggregate amount of Shares to be delivered upon the exercise of all Options granted under this Plan shall not exceed Two Million (2,000,000) Shares, as such Shares were constituted on the effective date of this Plan, allocated as follows: (i) to those non-employee Trustees eligible to receive Options only under the formula established in Section 5.1 hereof, the number of Shares covered by Options granted hereunder shall not exceed a total of One Hundred Thousand (100,000) Shares, and (ii) to all other persons eligible to receive Options under Section 5.2 hereof, the number of Shares covered by Options granted hereunder shall not exceed a total of One Million Nine Hundred Thousand (1,900,000) Shares. If any Option granted under this Plan shall expire, be surrendered, exchanged for another Option, cancelled or terminated for any reason without having been exercised in full, the unpurchased Shares subject thereto shall thereupon again be available for purposes of this Plan, including for replacement Options which may be granted in exchange for such surrendered, cancelled or terminated Options. 3. EFFECTIVENESS OF THE PLAN. The Plan was originally adopted by the Company's Board of Trustees on April 15,1992, and approved by its shareholders at its annual meeting held on July 17,1992. The Plan was amended by the Board of Trustees in October 1994 and subsequently approved by the shareholders at the following annual meeting of 2 shareholders of the Company. The Plan was further amended by the Board of Trustees on May 29, 1997 and approved by the shareholders at the annual meeting of shareholders held on June 27, 1997. Such amendments to the Plan are included in this Amended and Restated Plan. 4. ADMINISTRATION 4.1 Appointment of Committee. The authority to award options under the Plan shall be vested in the Board of Trustees of the Company (the "Board"). Notwithstanding the foregoing, an independent committee consisting of two or more non-employed Trustees (the "Committee"), each of whom shall be a Disinterested Trustee (as defined below) shall make any and all decisions to award options under the Plan to officers of the Company who are subject to the reporting requirements under Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The members of the Committee shall be appointed by the Board for such term as the Board may determine. The Board may from time to time remove members from, or add members to, the Committee, and vacancies on the Committee, however caused, may be filled by the Board; provided, however, that all members of the Committee shall at all times be Disinterested Trustees. When acting in its capacity authorized hereunder, the Board or the Committee are referred to herein as the "Plan Administrator". For purposes hereof, a Disinterested Trustee is a member of the Board who meets the definition of "disinterested person" as set forth in the rules and regulations promulgated under Section 16(b) of the Exchange Act, as amended from time to time. Currently, a Disinterested Trustee is a non- employee member of the Board who is not, during the one (1) year prior to service as an administrator of the Plan, or during such service, granted or awarded equity securities of the Company pursuant to this Plan (other than pursuant to Section 5.1 hereof) or any other plan of the Company or any of its affiliates. 4.2 Power and Authority. The Plan Administrator shall have the authority, in its discretion, to determine all matters relating to the Options to be granted under Section 5.2 of this Plan, including selection of the persons to be granted Options, the number of Shares to be subject to each Option, the exercise price, the vesting schedule, and all other terms and conditions of the Options. Grants under Section 5.2 of the Plan need not to be identical in any respect, even when made simultaneously. The Plan Administrator may also interpret the Plan; prescribe, amend and rescind rules and regulations relating to the Plan; amend the Plan from time to time (subject to the limitations set forth in Section 10); and make all other determinations necessary or advisable for the administration of the Plan. The interpretation and construction by the Plan Administrator of any terms or provisions of this Plan or any Option issued under Section 5.2 hereof, or of any rule or regulation promulgated in connection herewith, shall be conclusive and binding on all interested parties. Notwithstanding anything in this Plan to the contrary, the Plan Administrator shall exercise no discretion with respect to the terms or conditions of Options granted under Section 5.1 hereof. 3 5. GRANTS OF OPTIONS 5.1 Grants to Committee Members. (a) Eligibility. Options shall be granted under this Section 5.1 of the Plan to each non-employee Trustee on the last day of each of the Company's fiscal years ("Eligibility Date"), commencing December 31, 1992, while this Plan is in effect; provided, however, that only non-employee Trustees who have served on the Board at least three months prior to the last day of the applicable fiscal year shall be eligible to receive a grant of Options under this Section 5.1. (b) Number of Shares; Exercise Price. Subject to the overall limit on Shares covered by Options to be granted to non- employee Trustees set forth in Section 2(i), on each Eligibility Date, each non-employee Trustee shall be granted Options to acquire Six-Thousand (6,000) Shares. The exercise price ("Exercise Price") of such Options shall be the last sale price of the Company's Shares on the Eligibility Date on the NASDAQ National Market System or on such other national exchange or association which at the date of grant is the primary market for trading of the Company's Shares. If the Eligibility Date is a day when the primary market for trading of the Company's Shares is not open, the Eligibility Date shall be the nearest previous day of trading in the Company's Shares. (c) Duration of Options. Except as provided in Section 7 below, each Option granted under this Section 5.1 shall continue in effect for a period of fifteen (15) years following the date of grant. (d) Limits on Amendments. The provisions of this Section 5.1 shall not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code of 1986, as amended, the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. 5.2 Grants to Other Persons. (a) Eligibility. Options may be granted under this Section 5.2 only to persons who, at the time the Option is granted, are employees, officers, and trustees or directors who are employees of the Company or any of its subsidiary corporations as determined in the discretion of the Plan Administrator. Options granted hereunder shall be in such amount annually without restriction as determined by the Plan Administrator. (b) Exercise Price. The Exercise Price per Share of each Option granted under this Section 5.2 shall be determined 4 without restriction by the Plan Administrator, and may be greater or less than the fair market value per share of the Company's shares of beneficial interest at the time the Option is granted. (c) Duration of Options. Except as provided in Section 7 below, the term of each Option granted under this Section 5.2 shall be as established by the Plan Administrator, and if not so established, shall be fifteen (15) years. (d) Other Terms. The Plan Administrator in its sole discretion may establish other terms and conditions for the exercise of the granted Options. The terms of the grant of an Option may be set forth in a written stock option agreement between the grantee and the Company. 6. EXERCISE OF OPTION 6.1 Exercise. Each Option granted pursuant to Section 5.1 shall be exercisable in whole or in part immediately upon the grant thereof. Each Option granted pursuant to Section 5.2 shall prescribe the terms and conditions, if any, on which such Option or portions thereof shall become exercisable, as determined by the Plan Administrator. The Plan Administrator, in it absolute discretion, may waive or accelerate any vesting requirement contained in outstanding Options granted pursuant to Section 5.2. Notwithstanding the foregoing, no fewer that one hundred (100) Shares (or the remaining Shares then purchasable under the Option, if less than 100 Shares) may be purchased upon any exercise of any Option rights hereunder and only whole Shares will be issued pursuant to the exercise of any Option. Options shall be exercised by delivery to the Company of written notice from the Optionee, specifying the number of Shares as to which the Optionee desires to exercise the Option, and the date on which the Optionee desires to complete the transaction. In addition, unless in the opinion of counsel for the Company such a representation is not required in order to comply with the Securities Act of 1933, as amended, such notice shall contain a representation that it is the Optionee's intention to acquire the Shares for investment and not with a view to, or in connection with, any distribution thereof. 6.2 Payment of Exercise Price. On or before the date specified for completion of the purchase of Shares pursuant to an Option, the Optionee must have paid the Company therefor the full Exercise Price of said Shares (i) in cash, (ii) in previously acquired Shares of the Company having a fair market value on the date of exercise equal to the Exercise Price, or (iii) a combination of cash and previously acquired Shares; provided, however, that payment in Shares held by an Optionee subject to Section 16(b) of the Exchange Act shall not be made unless the Shares shall have been owned by the Optionee for a period of at 5 least six (6) months. At the election of the Optionee, the exercise of an Option may be made by simultaneous and successive exercise of the Option (referred to as "pyramiding") and in such event, actual delivery and issuance of Shares shall not be required but may be effected through bookkeeping entries in the Company's records and the Optionee shall be issued new certificates for the net Shares obtained. No Shares shall be issued until full payment therefor has been made and an Optionee shall have none of the rights of a shareholder until Shares are issued to such Optionee. 6.3 Withholding Tax Requirements. The Company shall have the right to retain and withhold from any payment of cash or Shares under the Plan the amount of taxes required by any government to be withheld or otherwise deducted and paid with respect to such payment. At its discretion, the Company may require an Optionee receiving Shares to reimburse the Company for any such taxes required to be withheld by the Company and withhold any distribution in whole or in part until the Company is so reimbursed. In lieu thereof, the Company shall have the right to withhold a number of Shares having a market value not less than the amount of such taxes required to be withheld by the Company to reimburse the Company for any such taxes and cancel (in whole or in part) any such Shares so withheld. If required by Section 16(b) of the Exchange Act, the election to pay withholding taxes by delivery of Shares held by any person who at the time of exercise is subject to Section 16(b) of the Exchange Act, shall be made within six (6) months prior to the date the Option exercise becomes taxable or during the quarterly 10-day window period required under Section 16(b) of the Exchange Act for exercises of stock appreciation rights. 6.4 Payment of Taxes by Company. Notwithstanding the provisions of Section 6.3 above, the Plan Administrator may agree to require the Company to pay any issuance or transfer taxes on Shares issued pursuant to the exercise of an Option under this Plan. 6.5 Nonassignability. Options granted under this Plan and the rights and privileges conferred hereby may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other than by the applicable laws of descent and distribution, and shall not be subject to execution, attachment or similar process. Any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any Option under this Plan or of any right or privilege conferred hereby, contrary to the provisions of this Plan, or the sale or levy or any attachment or similar process upon the rights and privileges conferred hereby shall be null and void. Notwithstanding the foregoing, an Optionee may during the Optionee's lifetime, designate a person who may exercise the 6 Option after the Optionee's death by giving written notice of such designation to the Plan Administrator. Such designation may be changed from time to time by the Optionee by giving written notice to the Plan Administrator revoking any earlier designation and making a new designation. 7. TERMINATION OF SERVICE, DISABILITY AND DEATH. 7.1 General. If the employment or service of an Optionee by the Company or its subsidiaries shall terminate by reason of retirement, disability or failure to be re-elected (collectively, "termination"), the Option may be exercised by the Optionee at any time prior to the expiration of ninety (90) days after the date of such termination (unless by its terms the Option sooner terminates or expires), but only if and to the extent the Optionee was entitled to exercise the Option at the date of such termination. For the purposes of this Plan, an Optionee will be considered to be disabled if the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable mental or physical impairment which can be expected to result in death or which has lasted or can be expected to last a continuous period of not less than twelve (12) months. 7.2 Death. In the event of the death of an Optionee while in the employ or service of the Company or a subsidiary, the Option may be exercised at any time prior to the expiration of one (1) year after the date of such death (unless by its terms the Option sooner terminates and expires), but only if and to the extent the Optionee was entitled to exercise the Option at the date of such death and only by the person or persons to whom such Optionee's rights under the Option shall pass by the Optionee's will or by the laws of descent and distribution of the state or country of the Optionee's domicile at the time of death. 7.3 Termination for Cause. If the Optionee's employment or service with the Company is terminated for cause, any Option granted hereunder shall automatically terminate as of the first advice or discussion thereof, and such Optionee shall thereupon have no right to purchase any Shares pursuant to such Option. "Termination for Cause" shall mean dismissal for dishonesty, conviction or confession of a crime punishable by law (except minor violations), intoxication while at work, fraud, misconduct or disclosure of confidential information. 7.4 Waiver or Extension of Time Periods. The Plan Administrator shall have the authority, prior to or within the time periods specified in this Section 7 for the exercise of any Option granted under Section 5.2 hereof, to extend or waive any such time period (but not beyond the expiration of the term of such Option) or to accelerate or remove any vesting conditions. In addition, the Plan Administrator may extend, reduce or 7 eliminate the time periods specified in this Section 7. The foregoing discretionary authority shall not apply to any Option granted under the formula set forth in Section 5.1 hereof. 7.5 Termination of Options. To the extent that the Option of any deceased employee, officer, trustee or director whose employment or service is terminated shall not have been exercised within the limited periods prescribed in this Section 7, all further rights to purchase Shares pursuant to such Option shall cease and terminate at the expiration of such period. 8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. 8.1 Adjustments. The number of Shares subject to options granted under the Plan shall be adjusted as follows: (a) in the event that the outstanding Shares are changed by any stock dividend, stock split or combination of shares, the number of Shares subject to the Plan and to Options granted under the Plan shall be proportionately adjusted; (b) except as provided in subsection (d), in the event of any merger, consolidation or reorganization of the Company with any other corporation or corporations, there may be substituted on an equitable basis as determined by the Plan Administrator, for each Share then subject to the Plan, whether or not at the time subject to outstanding options, the number and kind of shares of stock or other securities or other property (including cash) to which the holders of Shares of the Company will be entitled pursuant to such transaction; (c) in the event of any other relevant change in the capitalization of the Company, the Plan Administrator shall provide for an equitable adjustment in the number of shares then subject to the Plan, whether or not then subject to outstanding options. In the event of any such adjustment, the purchase price per share shall be proportionately adjusted; and (d) notwithstanding the foregoing provisions of this Section 8, upon the dissolution of the Company, or upon any merger or consolidation of the Company: (i) the surviving corporation (whether the Company or otherwise) shall agree to exchange options to purchase its shares of stock for options granted under the Plan, on terms fairly reflecting the terms of the merger or consolidation; or (ii) all vesting schedules, repurchase rights and obligations, and other terms and conditions applicable to Shares granted under this Plan shall be eliminated, and all 8 options granted under the Plan shall terminate and thereupon become null and void; provided, however, that the Optionee shall have the right, immediately prior to such dissolution, merger or consolidation, to exercise any such option without regard to any otherwise applicable restriction as to time of exercise, other than expiration of the Option Period; or (iii) the Plan Administrator shall make such other arrangements, which may include termination of outstanding options against payment therefor, as the Plan Administrator may at the time deem fair and equitable in its discretion. 9. SECURITIES REGULATION. Shares shall not be issued with respect to an Option granted under this Plan unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, any applicable state securities laws, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance, including the availability of an exemption from registration for the issuance and sale of any Shares hereunder. Inability of the Company to obtain from any regulatory body having jurisdiction, the authority deemed by the Company 's counsel to be necessary for the lawful issuance and sale of any Shares hereunder or the unavailability of an exemption from registration for the issuance and sale of any Shares hereunder shall relieve the Company of any liability in respect of the nonissuance or sale of such Shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of an Option, the Company may require the Optionee to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any relevant provision of the aforementioned laws. At the option of the Company, a stop-transfer order against any Shares may be placed on the official stock books and records of the Company, and a legend indicating that the Shares may not be pledged, sold or otherwise transferred unless an opinion of counsel is provided (concurred in by counsel for the Company) stating that such transfer is not in violation of any applicable law or regulation, may be stamped on certificates representing the Shares in order to assure exemption from registration. The Plan Administrator may also require such other action or agreement by the Optionee as may from time to time be necessary to comply with the federal and state securities laws. THIS PROVISION SHALL NOT OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF THE OPTIONS OR SHARES HEREUNDER. 9 10 AMENDMENT AND TERMINATION. 10.1 Board Action. Except as provided in Section 5.1(d), the Board may at any time suspend, amend or terminate this Plan; provided, however, that except as set forth in Section 8, the approval of the holders of a majority of the Company's outstanding Shares is necessary within twelve (12) months before or after the adoption by the Board of any amendment which will: (a) increase the number of Shares which are to be reserved for the issuance of Options under this Plan; (b) permit the granting of Options to a class of persons other than those presently permitted to receive Options under this Plan; or (c) require shareholder approval under applicable law, including Section 16(b) of the Exchange Act. 10.2 Automatic Termination. The Plan shall continue in effect until the earlier of (a) fifteen (15) years from the date of the first grant of Options hereunder or (b) the termination of the Plan by Action of the Board. No Option may be granted after such termination or during any suspension of this Plan. The amendment or termination of this Plan shall not, without the consent of the Option holder, alter or impair any rights or obligations under any Option theretofore granted under this Plan. EX-27 3 ARTICLE 5 FDS FOR 2ND QTR 1997 FORM 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES INCLUDED IN THIS FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 5,709 65,413 15,195 849 16,748 102,321 158,764 37,580 243,834 47,802 13,891 0 0 87,552 92,269 243,834 84,719 90,094 69,259 82,771 0 0 1,403 7,323 28 7,295 0 0 0 7,295 0.49 0.49
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