<PAGE> 1
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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
OM GROUP, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction 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): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
OM GROUP, INC.
TOWER CITY
3800 TERMINAL TOWER
CLEVELAND, OHIO 44113-2204
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 6, 1997
Notice is hereby given that the 1997 Annual Meeting of Stockholders of OM
Group, Inc. will be held at The Forum, One Cleveland Center, 1375 East Ninth
Street, Cleveland, Ohio 44114, on Tuesday, May 6, 1997, at 11:00 a.m., for the
following purposes:
1. To elect two Directors;
2. To confirm the appointment of Ernst & Young LLP as independent
auditors; and
3. To transact such other business as properly may come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on March 21, 1997, are
entitled to notice of and to vote at the meeting. A stockholder who executes and
returns the accompanying proxy may revoke such proxy at any time before it is
voted at the meeting by following the procedures set forth in the attached Proxy
Statement.
Michael J. Scott, Secretary
Cleveland, Ohio
April 4, 1997
<PAGE> 3
OM GROUP, INC.
TOWER CITY
3800 TERMINAL TOWER
CLEVELAND, OHIO 44113-2204
PROXY STATEMENT
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of OM Group,
Inc. (the "Company") and will be voted in accordance with the instructions given
in the proxy if it is returned duly executed and is not revoked. A stockholder
may revoke a proxy at any time before it is voted by giving notice to the
Company in writing or in open meeting. Attendance at the meeting will not in and
of itself revoke a proxy.
This Proxy Statement and the accompanying proxy were first mailed to
stockholders on or about April 4, 1997. The record date for determination of
stockholders entitled to vote at the meeting was the close of business on March
21, 1997. On that date, the outstanding voting securities of the Company were
18,617,914 shares of Common Stock, par value $.01 per share ("Common Stock").
Each share of Common Stock is entitled to one vote. Provided a quorum is
present, the affirmative vote of a majority of the shares present in person or
by proxy at the meeting will be sufficient to elect directors, and to ratify
Ernst & Young LLP as auditors of the Company. Abstentions will be deemed to be
present for the purpose of determining a quorum for the meeting, but will be
deemed not voting on the issues or matters as to which the abstention is
applicable.
So far as the Company is aware, no matters other than those stated in the
notice will be presented to the meeting for action on the part of the
stockholders. If any other matters are properly brought before the meeting, it
is the intention of the persons named in the accompanying proxy to vote thereon
the shares to which the proxy relates, in accordance with their best judgment.
The cost of soliciting proxies will be borne by the Company. The Company
will, upon request, reimburse brokerage houses, custodians, nominees and others
for their out-of-pocket and reasonable clerical expenses incurred in connection
with such solicitation. For purposes of obtaining broad representation at the
meeting, Corporate Investor Communications, Inc. has been retained by the
Company for distribution services, and if necessary, to assist in solicitation
of proxies, at an anticipated cost of approximately $2,000 plus postage costs.
In addition, directors, officers and employees of the Company, acting on its
behalf and without being additionally compensated, may make additional requests
by letter, telephone or in person for the return of proxies.
<PAGE> 4
ELECTION OF DIRECTORS
The authorized number of directors of the Company is presently fixed at
seven, divided into three classes each designed to serve three-year terms. Two
classes have two members and one class has three members. The term of the Class
I directors expires at the annual stockholders meeting for election of directors
in 1997, the term of the Class II directors expires at the annual stockholders
meeting for election of directors in 1998, and the term of the Class III
directors expires at the annual stockholders meeting for the election of
directors in 1999.
For election as directors at the Annual Meeting of Stockholders to be held
on May 6, 1997, the Board of Directors has recommended the election of John E.
Mooney and Markku Toivanen to serve as Class I directors for three-year terms
expiring in 2000. If any of the nominees becomes unavailable for election, the
accompanying proxy may be voted for a substitute, or will be voted in favor of
holding a vacancy to be filled by the directors. The Company has no reason to
believe that any nominee will be unavailable. The nominees receiving the largest
number of votes will be elected to the director positions to be filled.
The following information is provided regarding each nominee for election
as a director and each of the other directors who will continue in office after
the meeting:
NOMINEES FOR ELECTION
<TABLE>
<S> <C>
JOHN E. MOONEY, age 46, was appointed as a director of the Company in
Mooney Photo 1995 to fill a vacancy. For the past 11 years, Mr. Mooney has been
President of Sachem, Inc., a specialty chemical manufacturer. Mr.
Mooney received a B.A. in Economics from the University of Toronto.
Mr. Mooney is James P. Mooney's brother.
MARKKU TOIVANEN, age 56, has been a director of OM Group, Inc. since
Toivanen Photo 1991. Since 1996, Mr. Toivanen has served as Senior Vice President,
Strategic Development of Outokumpu Oy. From 1993 to 1996, Mr. Toivanen
served as President and Chief Executive Officer of Outokumpu Metals &
Resources Oy ("OMR"). From 1992 to 1993, Mr. Toivanen served as OMR's
Executive Vice President and Chief Operating Officer. From 1991 to
1992, Mr. Toivanen served as Chairman and Chief Executive Officer of
Outokumpu Mines Ltd. (Canada), a wholly owned subsidiary of Outokumpu
Oy. Mr. Toivanen and Antti Aaltonen, Vice President of Operations for
Kokkola Chemicals Oy, are brothers-in-law.
</TABLE>
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE MEETING
<TABLE>
<S> <C>
EUGENE BAK, age 63, has been President and Chief Operating Officer of
Bak Photo OM Group, Inc. since 1994. From 1992 to 1994, Mr. Bak was President of
Mooney Chemicals, Inc. From 1970 to 1992, Mr. Bak held various
management positions at Mooney Chemicals, Inc., including Vice
President of Operations and Manager of the Company's Franklin,
Pennsylvania, facility. Mr. Bak received a B.S. in chemical
engineering from Ohio State University and an M.B.A. from Seton Hall
University. Mr. Bak's term as a director expires in 1998.
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C>
LEE R. BRODEUR, age 68, has been a director of the Company since 1991
Brodeur Photo and a director of Mooney Chemicals, Inc. since 1987. Mr. Brodeur was
employed by the Firestone Tire & Rubber Company, Akron, Ohio from 1951
until his retirement as President and Chief Operating Officer of that
company in 1986. Mr. Brodeur's term expires in 1999.
FRANK E. BUTLER, age 61, was appointed as a director of the Company in
Butler Photo 1996 to fill a vacancy. Since 1992, Mr. Butler has been President and
General Manager of the Coatings Division of The Sherwin-Williams
Company, a manufacturer, distributor and retailer of coatings and
related products. From 1957 to 1992, Mr. Butler progressed through
engineering positions in the Chemical Division of Sherwin- Williams,
while completing a masters degree in chemistry at Iowa State
University. Mr. Butler's term as a director expires in 1998.
THOMAS R. MIKLICH, age 49, has been a director of the Company since
Miklich Photo 1993. Mr. Miklich has been employed by Invacare Corporation as Chief
Financial Officer since 1993. Prior to joining Invacare, Mr. Miklich
was Executive Vice President, Chief Financial Officer and a Director
of Van Dorn Company. For 22 years prior to that, Mr. Miklich was
employed with The Sherwin Williams Company where he held several
financial positions, culminating as their Senior Vice President and
Chief Financial Officer. Mr. Miklich's term expires in 1999.
JAMES P. MOONEY, age 49, is Chairman of the Board and has been a
Mooney Photo director and Chief Executive Officer of OM Group, Inc. since 1991.
From 1991 to 1994, Mr. Mooney was President of OM Group, Inc. From
1979 to 1991, Mr. Mooney was President and Chief Executive Officer of
Mooney Chemicals, Inc. Mr. Mooney received a B.A. degree in history
from Quincy University, where he is a member of the Board of Trustees.
Mr. Mooney, who is John E. Mooney's brother, is a director of Brush
Wellman Inc., a leading supplier of high performance engineered
materials. Mr. Mooney's term expires in 1999.
</TABLE>
3
<PAGE> 6
SECURITY OWNERSHIP OF DIRECTORS,
OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of January 31, 1997, information
concerning the number of shares of Common Stock of the Company beneficially
owned by each director, nominee and executive officer named in the Summary
Compensation Table individually and by all executive officers and directors of
the Company as a group. No executive officer or director other than Mr. Mooney
owns more than 1% of the outstanding shares of Common Stock of the Company. Mr.
Mooney owns 5.2% and all executive officers and directors as a group own
approximately 9.0% of such shares. The totals shown below for each person and
for the group include shares held personally, shares held by family members,
shares held under the Profit-Sharing Plan, and shares acquirable within sixty
days of the above date by the exercise of stock options granted under the
Company's stock option plan.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
<TABLE>
<CAPTION>
NAME OF DIRECTLY PROFIT-SHARING EXERCISABLE
BENEFICIAL OWNER OWNED(2) PLAN(3) OPTIONS(4) TOTAL
------------------------------------- -------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
Eugene Bak........................... 3,450 28,693 126,280 158,423
Lee R. Brodeur....................... 6,000 -0- 7,367 13,367
Frank E. Butler...................... 200 -0- -0- 200
Thomas E. Fleming.................... -0- 10,591 96,341 106,932
James M. Materna..................... 1,050 1,731 93,299 96,080
Thomas R. Miklich.................... 16,500 -0- 5,584 22,084
James P. Mooney...................... 636,816 40,977 345,826 1,023,619
John E. Mooney....................... 9,163 -0- 1,386 10,549
Kari Muuraiskangas................... -0- -0- 88,039 88,039
Markku Toivanen...................... -0- -0- 9,112 9,112
All Directors and Officers as a Group
(consisting of 16 persons)......... 676,529 108,204 977,074 1,751,216
</TABLE>
- - ---------------
(1) Each person has sole voting and investment power with respect to all shares
shown except as indicated below.
(2) Includes shares owned by or jointly with family members.
(3) The persons indicated have limited investment power with respect to the
shares held in the Profit-Sharing Plan.
(4) Represents shares subject to stock options that are exercisable currently or
within 60 days of January 31, 1997.
4
<PAGE> 7
The following table sets forth information concerning each person known by
the Company to be the beneficial owner of more than 5% of its outstanding Common
Stock or stock convertible into Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENTAGE
BENEFICIAL OWNER OWNERSHIP OF CLASS
- - ------------------------------------- ----------------- ----------
<S> <C> <C>
The Capital Group Companies, Inc. 1,450,000(1) 7.8%
333 South Hope Street
Los Angeles, California 90071
Stein Roe & Farnham Incorporated 1,414,950(2) 7.6%
One South Wacker Drive
Chicago, Illinois 60606
Bamco, Inc. 1,008,000(3) 5.4%
767 Fifth Avenue
New York, New York 10153
James P. Mooney 1,023,619(4) 5.2%
2410 Pebblebrook
Westlake, Ohio 44145
</TABLE>
- - ---------------
(1) Information regarding share ownership was obtained from a Schedule 13G filed
on February 12, 1997, by The Capital Group Companies, Inc., a holding
company parent of a group of investment management companies. The Capital
Group Companies, Inc. has sole dispositive power with respect to 1,450,000
shares of the shares listed herein and sole voting power with respect to
673,000 of these shares.
(2) Information regarding share ownership was obtained from a Schedule 13G filed
on February 12, 1997, by Stein Roe & Farnham Incorporated, jointly on its
own behalf and on behalf of Stein Roe Special Fund, a series portfolio of
the Stein Roe Investment Trust, a Massachusetts business trust, which is a
registered open-end investment company of which Stein Roe & Farnham
Incorporated is investment advisor. Stein Roe & Farnham Incorporated has
sole dispositive power with respect to 1,414,950 of the shares listed
herein, and Stein Roe Special Fund has sole voting power with respect to
1,009,500 of these shares.
(3) Information regarding share ownership was obtained from a Schedule 13G filed
on February 7, 1997, by Bamco, Inc. jointly on its behalf and on behalf of
Baron Capital Management, Inc. Bamco, Inc. has sole voting power and sole
dispositive power for 1,008,000 shares. Baron Capital Management, Inc. has
sole voting power and sole dispositive power for 74,250 shares.
(4) Mr. Mooney's shares include 40,977 shares held in the Company's profit
sharing plan over which Mr. Mooney has limited investment power and 345,826
shares subject to stock options that are exercisable currently or within 60
days of the date hereof.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors held four regularly scheduled meetings
during 1996. The Board has a standing Audit and Finance Committee and a standing
Compensation Committee. During 1996, each director attended at least 75% of the
meetings of the Board and those committees on which he served.
The Audit and Finance Committee, currently composed of Messrs. Lee R.
Brodeur, Thomas R. Miklich and Markku Toivanen, engages in the functions usual
to an audit committee of a publicly held corporation, including recommendations
as to the engagement of independent accountants; review with the independent
accountants of the proposed scope of and plans for annual audits and review of
audit results; and review of the adequacy of internal financial controls and
review of any problems identified by the auditors. During 1996, the Audit and
Finance Committee met six times.
The Compensation Committee, currently composed of Messrs. Lee R. Brodeur
and Frank E. Butler, held five meetings during 1996. The functions of the
Compensation Committee are to review, consider and recommend candidates for
election as officers of the Company; to review and authorize rates of
compensation for officers; to designate those employees who will receive grants
of stock options and other stock awards under
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<PAGE> 8
the Company's stock option plan and the type and size of such grants; and to
determine the bonus levels for key executives and middle management employees
under the Company's bonus program.
COMPENSATION OF DIRECTORS
Directors who are officers of the Company receive no additional
compensation for serving as directors. The Company has a compensation policy for
its outside directors which includes a director's fee of $20,000 per annum and
an annual fee of $2,500 per committee for service on the Audit Committee or
Compensation Committee. Committee chairmen also receive $500 per annum per
committee chaired. In addition, each outside director receives a fee of $1,000
for each Board and committee meeting attended. Directors may elect to receive
their compensation in the form of cash, stock options or restricted stock under
the Company's Non-Employee Directors' Equity Compensation Plan. Under this plan,
directors may purchase stock options for a price equal to the difference between
the exercise price (75% of fair market value on date of grant) and the fair
market value per share. Restricted shares may be purchased at a price equal to
fair market value per share. Also, directors electing to receive restricted
stock receive additional restricted stock equal to 5% of new applied cash
compensation. Directors are reimbursed for their travel and other expenses
incurred in attending Board and committee meetings.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth all compensation
awarded to, earned by or paid to (i) the Company's Chief Executive Officer and
(ii) the Company's next four most highly compensated executive officers
(collectively, the "Named Officers"), for services rendered in all capacities to
the Company during 1994, 1995 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
--------------
SECURITIES AND
UNDERLYING
ANNUAL COMPENSATION STOCK
NAME AND ------------------- OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(2) (SHARES)(3) COMPENSATION(1)
--------------------------- ---- -------- -------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
James P. Mooney 1994 $340,000 $352,500 56,154 $ 22,500
Chairman and CEO of the 1995 365,000 365,000 57,000 168,353
Company 1996 405,000 405,000 56,400 128,044
Eugene Bak 1994 210,000 157,500 27,000 26,150
President and COO of the 1995 230,000 172,500 30,000 87,858
Company 1996 265,000 225,000 29,700 66,711
Thomas E. Fleming 1994 160,667 96,450 14,250 21,465
President of OMG 1995 180,000 108,000 14,250 22,500
Americas, Inc. 1996 200,000 120,000 14,100 47,772
Kari Muuraiskangas 1994 175,000 105,000 14,288 -0-
President of OMG Europe 1995 185,000 111,000 14,288 -0-
GmbH 1996 200,000 120,000 14,130 -0-
James M. Materna 1994 168,000 100,800 13,715 22,500
Chief Financial Officer of 1995 180,000 108,000 14,250 59,189
the Company 1996 190,000 144,000 14,850 47,946
</TABLE>
- - ---------------
(1) This amount represents amounts contributed for the Named Officer under the
Company's qualified Profit-Sharing Plan and amounts accrued under the OM
Group, Inc. Benefit Restoration Plan.
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<PAGE> 9
(2) Amounts awarded to the Named Officer under the Company's Bonus Program for
Key Executives and Middle Management.
(3) Adjusted to give effect to the 3-for-2 stock split on December 2, 1996.
Option Grants Table. The following table sets forth additional information
concerning individual grants of stock options pursuant to the Company's
Long-Term Incentive Compensation Plan made by the Company during 1996 to the
Named Officers, which options are included in the Summary Compensation Table
above. In each case, the options were granted at fair market value on the date
of grant ($26.67) for a term of 10 years expiring November 4, 2006. The stock
options vest at December 31, 1997.
OPTION GRANTS TABLE
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES OF
% OF TOTAL STOCK APPRECIATION FOR
NUMBER OF SECURITIES OPTIONS GRANTED OPTION TERM
UNDERLYING OPTIONS TO EMPLOYEES -----------------------
NAME GRANTED(1) IN 1996 5% 10%
- - ------------------------- -------------------- --------------- -------- ----------
<S> <C> <C> <C> <C>
James P. Mooney.......... 56,400 30% $945,828 $2,397,000
Eugene Bak............... 29,700 16% 498,069 1,262,250
Thomas E. Fleming........ 14,100 8% 236,457 599,250
Kari Muuraiskangas....... 14,130 8% 236,960 600,525
James M. Materna......... 14,850 8% 249,035 631,125
</TABLE>
- - ---------------
(1) Options granted November 5, 1996 adjusted to give effect to the 3-for-2
stock split on December 2, 1996.
AGGREGATED OPTION EXERCISES AND
FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth information concerning unexercised options
to purchase Common Stock held by the Named Officers at December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY
HELD AT 12/31/96 OPTIONS AT 12/31/96(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James P. Mooney.......... 345,826 56,400 $ 5,908,630 $ 18,612
Eugene Bak............... 126,280 29,700 1,940,290 9,801
Thomas E. Fleming........ 96,341 14,100 1,703,712 4,653
Kari Muuraiskangas....... 88,039 14,130 1,506,415 4,663
James M. Materna......... 93,299 14,850 1,615,873 4,901
</TABLE>
- - ---------------
(1) Based on fair market value at December 31, 1996.
REPORT OF THE COMPENSATION COMMITTEE
Executive Compensation Policy. The Compensation Committee of the Board of
Directors (the "Committee"), comprised solely of outside directors of the
Company, is responsible for setting the policies and approving the practices of
the Company in its compensation to executive officers of the Company and its
subsidiaries, including those executive officers named in the compensation
tables in this Proxy Statement. The Committee's general policy on executive
compensation is to provide a significant incentive to management to achieve
annual profit goals and to increase the value of the Company's stock. The policy
is intended to cause a significant portion of total executive compensation to be
contingent upon Company performance and in the form of annual and longer-term
incentives.
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<PAGE> 10
In carrying out its responsibilities in 1996, the Committee considered the
following:
1. The Company's financial performance;
2. The Company's general policies and practices for compensation of
employees;
3. The recommendations of the Company's management concerning compensation
of individual key employees; and
4. Advice from independent compensation consultants concerning all aspects
of the Company's compensation policies, including how its policies and
practices compare to the policies and practices of other comparable
companies.
The three major components of the Company's executive officer compensation
program are (1) base compensation and annual adjustments thereto paid pursuant
to employment contracts with executive officers, (2) annual bonuses paid
pursuant to the Bonus Program for Key Executives and Middle Management, and (3)
stock options issued at fair market value pursuant to the Company's Long-Term
Incentive Compensation Plan.
Employment Contracts with Executive Officers. The Company has entered into
employment contracts with each of its executive officers. The employment
contracts establish the position of each executive officer and provide that the
executive officer will devote his full professional attention to the Company and
that the Company will not materially decrease his level of responsibility. Each
contract provides for automatic yearly renewals unless the contract is
terminated by either party upon six months' prior notice. The initial form of
Mr. Bak's contract expires August 30, 1997 and provides for automatic yearly
renewals thereafter.
Each contract provides for base compensation which may be increased
annually, but not decreased. In considering annual adjustments to an executive
officer's base compensation, the Committee considers both Company and individual
performance. In addition, executive officers' base salaries are targeted between
the median and 75th percentile of comparably-sized companies in the chemical and
non-durable goods manufacturing industries. Each contract also provides for
annual bonuses paid pursuant to the Company's Bonus Program for Key Executives
and Middle Management described below.
The Company may terminate each contract at any time with or without cause.
If terminated for cause, an officer is entitled to compensation accrued up to
the time of termination. If terminated without cause, the officer is entitled to
accrued compensation and to receive all base compensation, incentive bonuses and
fringe benefits due under his contract for the later of the expiration of the
current contract term or one year after delivery of notice of termination with
respect to Eugene Bak and Thomas E. Fleming and two years after delivery of
notice of termination with respect to James P. Mooney, Kari Muuraiskangas and
James M. Materna. If the officer resigns for any reason, he is entitled to
accrued compensation and to receive all base compensation for three months
following the effective date of termination of his employment.
Bonus Program for Key Executives and Middle Management. The Company pays
annual bonuses to certain employees, including executive officers, based
primarily on the Company's operating profit. In deciding annual bonus amounts,
the Committee reviews the Company's performance against a predetermined
consolidated operating profit goal, approved annually by the Board of Directors
as part of the Company's financial budgeting process. Annual bonuses are then
paid pursuant to a schedule approved by the Board of Directors which sets forth
specified percentages of base compensation payable as annual bonuses based upon
the level of attainment of the predetermined operating profit goal. Based on
this performance, executive officers, other than the CEO, received annual
bonuses ranging from 60% to 85% of their annual base salaries in 1996.
Long-Term Incentive Compensation Plan. Executive officers and other key
employees may also receive compensation pursuant to the Company's 1992 Long-Term
Incentive Plan (the "Incentive Plan"). The Incentive Plan is designed to promote
the Company's growth and profitability by providing, through Common Stock
ownership, incentives to attract and retain highly talented persons to provide
managerial and administrative services to the Company and to motivate such
persons to use their best efforts on the
8
<PAGE> 11
Company's behalf. The Incentive Plan provides for the granting of stock options,
stock appreciation rights, restricted stock awards and phantom stock
(collectively, "Awards"). An aggregate of 1,523,438 shares of Common Stock are
reserved for issuance pursuant to the Incentive Plan.
The Incentive Plan is administered by the Committee. Subject to the
provisions of the Incentive Plan, the Committee is authorized to determine who
may participate in the Incentive Plan, the Awards made to each participant and
the terms and conditions applicable to each Award. The number of stock options
granted to executive officers and key employees during 1996 depended principally
upon the individual's level of responsibility within the Company and the
Committee's assessment of individual performance and contribution.
CEO Compensation and Company Performance. In setting Mr. James P. Mooney's
compensation for 1996, the Committee considered the Company's financial
performance during the previous four quarters, Mr. Mooney's personal performance
and comparative data on the salaries for chief executive officers of
comparably-sized companies in the chemical and non-durable goods manufacturing
industries. The Committee also considered various factors of corporate
performance, including profitability, market position, productivity, product
leadership and the balancing of short-term and long-term goals. Based on the
Committee's review of these factors, Mr. Mooney's employment contract, as
amended, provided for base compensation of $405,000 in 1996, reflecting a 11%
increase in his 1995 base compensation.
Mr. Mooney's contract also provides for bonuses in accordance with the
Bonus Program for Key Executives and Middle Management. The Committee reviewed
the Company's 1996 performance against the predetermined consolidated operating
profit goal for 1996. Based upon the Company's level of attainment of this goal,
Mr. Mooney's annual bonus for 1996 was $405,000, constituting a bonus equal in
amount to his base compensation.
On November 4, 1996, the Committee approved a grant of 56,400 option shares
to Mr. Mooney pursuant to the Incentive Plan. The size of the grant was based on
the Committee's consideration of the size of stock option grants to chief
executive officers with pay and responsibility comparable to that of Mr. Mooney
and its qualitative assessment of Mr. Mooney's performance during 1996.
The Compensation Committee
Lee R. Brodeur, Chairman
Frank E. Butler
PERFORMANCE COMPARED TO CERTAIN STANDARDS
The chart set forth below compares the Company's cumulative total
stockholder return to (a) that of the Standard & Poor's 500 Index, and (b) that
of S&P Chemicals (Specialty) Index. In all cases, the information is presented
on a dividend reinvested basis.
9
<PAGE> 12
COMPARISON OF 38 MONTH CUMULATIVE TOTAL RETURN*
AMONG OM GROUP, INC., THE S & P 500 INDEX
AND THE S & P CHEMICALS (SPECIALTY) INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S
(FISCAL YEAR COVERED) OM GROUP, INC. S & P 500 (SPECIALTY)
<S> <C> <C> <C>
10/14/93 100 100 100
12/93 146 102 108
12/94 172 104 95
12/95 241 143 124
12/96 298 175 127
</TABLE>
* $100 invested on 10/14/93 in stock or on 09/30/93 in index -- including
reinvestment of dividends. Fiscal year ending December 31.
RELATED PARTY TRANSACTIONS
Relationship with Outokumpu Oy and Affiliates. Mr. Markku Toivanen, a
Director of the Company, is Vice President of Strategic Planning of Outokumpu
Oy, the Company's former majority shareholder. The Company has certain business
relationships with Outokumpu and its affiliates which are described as follows:
Certain raw materials are procured from or with the assistance of Outokumpu
affiliates including nickel and cobalt. Amounts paid to Outokumpu affiliates
pursuant to these arrangements amounted to approximately $37,948,000 in 1996.
Kokkola's production facility also purchases certain utilities including
electricity through OMR affiliates in order to secure bulk quantity discounts
with such payments totalling approximately $6,295,000 in 1996. The Company has
certain other arrangements with Outokumpu affiliates relating to a service
agreement, a lease, and research and development. The aggregate of the amounts
paid during 1996 pursuant to these other arrangements amounted to approximately
$6,752,000.
The Company has entered into a Retirement Benefit Agreement with Eugene
Bak, President of the Company. This Agreement provides that if Mr. Bak works
until retirement age, he will receive a yearly retirement benefit until his
death of 60% of his salary earned in his last year of employment. The amount of
the retirement benefit will be reduced by benefits received from the Company's
Profit-Sharing Plan and its Benefit Restoration Plan for executive officers. The
Agreement also provides for certain benefits in the event Mr. Bak becomes
disabled prior to retirement or if his death occurs less than five years after
his retirement.
DESIGNATION OF AUDITORS
Upon the recommendation of the Audit and Finance Committee, the Board of
Directors has appointed Ernst & Young LLP, independent auditors, to audit the
financial statements of the Company for the current year ending December 31,
1997, subject to the approval by the stockholders.
10
<PAGE> 13
Representatives of Ernst & Young LLP will be at the Annual Meeting of
Stockholders and will have the opportunity to make a statement if they so desire
and will be available to respond to questions.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Any stockholder who intends to present a proposal at the 1998 annual
meeting and who wishes to have the proposal included in the Company's proxy
statement and form of proxy for that meeting must deliver the proposal to the
Company no later than December 5, 1997.
OM GROUP, INC.
Michael J. Scott
Secretary
11
<PAGE> 14
OM GROUP, INC. PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints James M. Materna, James P. Mooney and Michael J.
Scott, or any of them, with full power of substitution, to vote the
shares of the undersigned at the 1997 Annual Meeting of Stockholders of
OM Group, Inc. to be held on May 6, 1997, and at any adjournment thereof
as follows:
THE BOARD OF DIRECTORS RECOMMENDS THAT VOTES
BE CAST FOR PROPOSALS 1 AND 2.
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote all nominees listed below
</TABLE>
John E. Mooney and Markku Toivanen
(INSTRUCTION: if you wish to withhold authority to vote for any nominee,
write that name on the line below.)
-------------------------------------------------------------------------
2. CONFIRMATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS AUDITORS OF
THE COMPANY.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on reverse side)
(Continued from other side)
3. In their discretion, upon all other matters properly brought before
the meeting or any adjournment.
IF NO SPECIFICATION IS MADE, AUTHORITY IS GRANTED TO CAST THE VOTE OF
THE UNDERSIGNED FOR ELECTION OF THE NOMINEES ABOVE AND IN FAVOR OF ITEM
2.
Dated: , 1997
-------------------
--------------------------------
--------------------------------
Signature(s)
Please sign exactly as name
appears hereon. Joint owners
should each sign. When signing
as attorney, executor,
administrator, trustee or
guardian, give your full title
as such. In case of a
corporation, a duly authorized
officer should sign on its
behalf.
<PAGE> 15
OM GROUP, INC. PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
TO: NATIONAL CITY BANK, CLEVELAND, OHIO
Trustee under the OMG Americas, Inc. Employees' Profit-Sharing Plan
I hereby direct that the voting rights pertaining to shares of stock of
OM Group, Inc. held by you, as Trustee, and allocated to my account shall
be exercised at the 1997 Annual Meeting of Stockholders of said Company
to be held on May 6, 1997, and at any adjournment thereof to vote:
THE BOARD OF DIRECTORS RECOMMENDS THAT VOTES
BE CAST FOR PROPOSALS 1 AND 2.
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote all nominees listed below
</TABLE>
John E. Mooney and Markku Toivanen
(INSTRUCTION: if you wish to withhold authority to vote for any nominee,
write that name on the line below.)
-------------------------------------------------------------------------
2. CONFIRMATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS AUDITORS OF
THE COMPANY.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on reverse side)
(Continued from other side)
3. In its discretion, the Trustee is authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof.
IF NO SPECIFICATION IS MADE, AUTHORITY IS GRANTED TO CAST THE VOTE OF
THE UNDERSIGNED FOR ELECTION OF THE NOMINEES ABOVE AND IN FAVOR OF ITEM
2.
Dated: , 1997
--------------------
--------------------------------
--------------------------------
Signature(s)
Please sign exactly as name
appears hereon. Joint owners
should each sign. When signing
as attorney, executor,
administrator, trustee or
guardian, give your full title
as such. In case of a
corporation, a duly authorized
officer should sign on its
behalf.
