<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>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] 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)
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 5, 1998
Notice is hereby given that the 1998 Annual Meeting of Stockholders of OM
Group, Inc. will be held at the Ritz Carlton -- Cleveland, 1515 West Third
Street, Cleveland, Ohio 44113, on Tuesday, May 5, 1998, at 11:00 a.m., for the
following purposes:
1. To elect two Directors;
2. To amend the Amended and Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock, par value
$.01 per share, from 30,000,000 to 60,000,000;
3. To approve the 1998 Long-Term Incentive Compensation Plan, effectively
amending the 1992 Long-Term Incentive Compensation Plan;
4. To confirm the appointment of Ernst & Young LLP as independent
auditors; and
5. 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 20, 1998 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 3, 1998
<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 3, 1998. The record date for determination of
stockholders entitled to vote at the meeting was the close of business on March
20, 1998. On that date, the outstanding voting securities of the Company were
22,066,626 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, to amend the
Amended and Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock, to approve the 1998 Long-Term Incentive
Compensation Plan 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 board 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 2000, 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 5, 1998, the Board of Directors has recommended the election of Eugene
Bak and Frank E. Butler to serve as Class II directors for three-year terms
expiring in 2001. 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>
[PHOTO] EUGENE BAK, age 64, has been President and Chief Operating
Officer of 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 The
Ohio State University and an M.B.A. from Seton Hall
University.
[PHOTO] FRANK E. BUTLER, age 62, was appointed as a director of the
Company in 1996 to fill a vacancy. From 1992 until his
retirement in 1997, Mr. Butler was 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
held various engineering positions in the Chemical Division
of Sherwin-Williams. Mr. Butler received a masters degree in
chemistry from Iowa State University.
</TABLE>
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE MEETING
<TABLE>
<S> <C>
[PHOTO] LEE R. BRODEUR, age 69, has been a director of the Company
since 1991 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 Vice Chairman of that company in 1986. Mr. Brodeur's term
expires in 1999.
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C>
[PHOTO] THOMAS R. MIKLICH, age 50, has been a director of the
Company since 1993. Mr. Miklich has been employed by
Invacare Corporation as Chief Financial Officer and General
Counsel 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.
[PHOTO] JAMES P. MOONEY, age 50, is Chairman of the Board and has
been a 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 retired as a director of Brush Wellman
Inc., a leading supplier of high performance engineered
materials, in 1997. Mr. Mooney is John E. Mooney's brother.
Mr. Mooney's term expires in 1999.
[PHOTO] JOHN E. MOONEY, AGE 47, was appointed as a director of the
Company in 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. Mr. Mooney's term as director
expires in 2000.
[PHOTO] MARKKU TOIVANEN, age 57, has been a director of OM Group,
Inc. since 1991. Since 1996, Mr. Toivanen has served as
Senior Vice President of 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. Mr. Toivanen's term as director
expires in 2000.
</TABLE>
3
<PAGE> 6
SECURITY OWNERSHIP OF DIRECTORS,
OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of January 31, 1998, 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 4.8% and all executive officers and directors as a group own
approximately 8.1% 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 15,301 111,190 129,941
Lee R. Brodeur....................... 5,750 -0- 10,885 16,635
Frank E. Butler...................... 200 -0- 4,275 4,475
Thomas E. Fleming.................... -0- -0- 70,441 70,441
James M. Materna..................... 1,050 1,903 108,149 111,102
Thomas R. Miklich.................... 16,500 -0- 9,933 26,433
James P. Mooney...................... 613,716 41,335 402,225 1,057,276
John E. Mooney....................... 9,636 -0- 3,186 12,822
Kari Muuraiskangas................... -0- -0- 102,168 102,168
Markku Toivanen...................... -0- -0- 13,387 13,387
All Directors and Officers as a Group
(consisting of 16 persons)......... 655,252 85,267 1,048,487 1,789,006
</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, 1998.
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.
333 South Hope Street
Los Angeles, California 90071 2,211,150(l) 10.0%
Baron Capital Group, Inc.
767 Fifth Avenue
New York, New York 10153 1,378,750(2) 6.2%
Jurika & Voyles, L.P.
1999 Harrison Street, Suite 700
Oakland, California 94612 1,284,798(3) 5.8%
</TABLE>
- ---------------
(1) Information regarding share ownership was obtained from a Schedule 13G filed
on February 10, 1998 by The Capital Group Companies, Inc., a parent holding
company of a group of investment management companies. The Capital Group
Companies, Inc. has sole dispositive power with respect to 2,211,150 shares
of the shares listed herein and sole voting power with respect to 1,101,150
of these shares. Capital Guardian Trust Company, a wholly owned subsidiary
of The Capital Group Companies, Inc., is the beneficial owner of 1,161,150
shares of the shares listed herein or 5.3% of the Company's outstanding
Common Stock. Neither The Capital Group Companies, Inc., nor any of its
affiliates owns any shares of the Company for its own account. Rather, the
shares reported in the table are owned by accounts under the discretionary
investment management of one or more of the investment management companies.
(2) Information regarding share ownership was obtained from a Schedule 13G filed
on February 17, 1998 by Baron Capital Group, Inc., a parent holding company
of a group of investment management companies. Bamco, Inc. and Baron Capital
Management, Inc. are subsidiaries of Baron Capital Group, Inc. Baron Asset
Fund is an investment advisory client of Bamco, Inc. Ronald Baron owns a
controlling interest in Baron Capital Group, Inc. Baron Capital Group, Inc.
has sole dispositive power and sole voting power for 1,378,750 shares.
(3) Information regarding share ownership was obtained from a Schedule 13G filed
on February 6, 1998 by Jurika & Voyles, L.P., an investment adviser. Jurika
& Voyles, L.P. has sole dispositive power with respect to 1,284,798 shares
of the shares listed herein and sole voting power with respect to 1,237,577
of these shares.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors held four regularly scheduled meetings and
one special meeting during 1997. The Board has a standing Audit and Finance
Committee and a standing Compensation Committee. During 1997, each director
attended at least 80% 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; review of the adequacy of internal financial controls; and review
of any problems identified by the auditors. During 1997, 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 1997. The functions of the
Compensation Committee are to review, consider and
5
<PAGE> 8
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 the Company's
Long-Term Incentive Compensation 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 and Finance
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
newly 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 1995, 1996 and 1997.
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),(4) COMPENSATION(1)
------------------ ---- ------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
James P. Mooney 1995 365,000 365,000 57,000 168,353
Chairman and CEO of the 1996 405,000 405,000 56,400 128,044
Company 1997 445,000 500,000 55,000 132,277
Eugene Bak 1995 230,000 172,500 30,000 87,858
President and COO of the 1996 265,000 225,000 29,700 66,711
Company 1997 300,000 281,250 35,000 1,396,657
Thomas E. Fleming 1995 180,000 108,000 14,250 22,500
Corporate Vice President and 1996 200,000 120,000 14,100 47,772
Chief Marketing Officer 1997 245,000 162,000 20,000 702,500
Kari Muuraiskangas 1995 185,000 111,000 14,288 -0-
President of OMG Europe 1996 200,000 120,000 14,130 -0-
GmbH 1997 220,000 132,000 10,000 -0-
James M. Materna 1995 180,000 108,000 14,250 59,189
Chief Financial Officer of 1996 190,000 144,000 14,850 47,946
the Company 1997 200,000 173,000 25,000 75,026
</TABLE>
6
<PAGE> 9
- ---------------
(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.
(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.
(4) H. Burnham Tinker and John Holtzhauser exercised certain stock options in
1997 receiving $689,200 and $255,086, respectively. These compensation
amounts numerically placed Mr. Tinker and Mr. Holtzhauser among the
Company's four most highly compensated executive officers, but Mr. Tinker
and Mr. Holtzhauser have not been included in the Summary Compensation Table
because the amounts received on exercise of the stock options represent an
amount of compensation that is not part of a recurring arrangement.
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 1997 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 ($39.94) for a term of 10 years expiring October 27, 2007. The stock
options vest at December 31, 1998.
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 IN 1997 5% 10%
---- -------------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
James P. Mooney................ 55,000 24% $1,381,600 $3,500,750
Eugene Bak..................... 35,000 15% 879,200 2,227,750
Thomas E. Fleming.............. 20,000 9% 502,400 1,273,000
Kari Muuraiskangas............. 10,000 4% 251,200 636,500
James M. Materna............... 25,000 11% 628,000 1,591,250
</TABLE>
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, 1997:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-MONEY
HELD AT 12/31/97 OPTIONS AT 12/31/97(1)
------------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James P. Mooney................ 402,225 55,000 $9,800,669 0
Eugene Bak..................... 111,190 35,000 2,037,300 0
Thomas E. Fleming.............. 70,441 20,000 2,140,123 0
Kari Muuraiskangas............. 102,168 10,000 2,354,221 0
James M. Materna............... 108,149 25,000 2,662,244 0
</TABLE>
- ---------------
(1) Based on fair market value at December 31, 1997 @ $36.63.
7
<PAGE> 10
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.
In carrying out its responsibilities in 1997, 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 1992
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.
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
8
<PAGE> 11
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 94% of their annual base salaries in
1997.
1992 Long-Term Incentive Compensation Plan. Executive officers and other
key employees also received compensation pursuant to the Company's 1992
Long-Term Incentive Compensation 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 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. If approved by the stockholders, the 1998 Long-Term
Incentive Compensation Plan will replace 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 1997 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 1997, 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 $445,000 in 1997, reflecting a 10%
increase in his 1996 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 1997 performance against the predetermined consolidated operating
profit goal for 1997. Based upon the Company's level of attainment of this goal,
Mr. Mooney's annual bonus for 1997 was $500,000, constituting a bonus greater in
amount than his base compensation.
On October 27, 1997, the Committee approved a grant of 55,000 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 1997.
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
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COMPARISON OF 50 MONTH CUMULATIVE TOTAL RETURN*
AMONG OM GROUP, INC., THE S & P 500 INDEX
AND THE S & P CHEMICALS (SPECIALTY) INDEX
[Graph]
RELATED PARTY TRANSACTIONS
Relationship with Outokumpu Oy and Affiliates. Mr. Markku Toivanen, a
Director of the Company, is Senior Vice President of Strategic Development of
Outokumpu Oy, the Company's former majority stockholder. 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 $47,370,000 in 1997.
Kokkola's production facility also purchases certain utilities including
electricity through OMR affiliates in order to secure bulk quantity discounts
with such payments totaling approximately $5,547,000 in 1997. 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 1997 pursuant to these other arrangements amounted to approximately
$3,410,000.
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.
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PROPOSAL TO AMEND THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
Article FOURTH of the Company's Amended and Restated Certificate of
Incorporation currently fixes the authorized number of shares of the Company's
Common Stock at 30,000,000 and the authorized number of shares of Preferred
Stock at 2,000,000. For the reasons discussed below, the Board of Directors has
approved and recommends for stockholder approval an amendment to increase the
number of authorized shares of Common Stock by 30,000,000 (the "Additional
Shares") to 60,000,000. No change is being proposed in the authorized number of
shares of Preferred Stock.
Of the 30,000,000 currently authorized shares of Common Stock, at December
31, 1996 there were 18,759,346 shares issued. This left approximately 11,240,654
authorized but unissued shares available for future use. An additional 3,450,000
shares were issued in April 1997 as a result of the Company's public offering.
The amendment would increase the available number of authorized but
unissued shares to approximately 37,790,654 at December 31, 1997. While the
Company does not have any commitment or understanding at this time for the
issuance of the Additional Shares, the Board believes that it is desirable to
have them available for possible stock splits or other stock distributions,
acquisitions, financings, employee benefit plans or other purposes not currently
foreseeable. The amendment would allow the Board to authorize the issuance of
the Additional Shares without further stockholder approval, unless required for
a particular transaction by applicable law, regulation or the rules of any stock
exchange on which the Company's securities are listed.
The authorization of the Additional Shares would not, by itself, have any
effect on the rights of the Company stockholders. The issuance of the Additional
Shares for corporate purposes other than a stock split could have, among other
things, a dilutive effect on earnings per share and on the equity and voting
power of stockholders at the time of the issuance. In addition, the increase in
authorized shares could render more difficult under certain circumstances or
discourage an attempt to obtain control of the Company, whether through a tender
offer or otherwise, by, for example, allowing the issuance of shares that would
dilute the share ownership of a person attempting to obtain control. This
proposal is not, however, being made in response to any effort of which the
Company is aware to accumulate shares or obtain control of the Company.
The amendment requires the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock. If the amendment were approved, Article
FOURTH would be amended to read as follows:
FOURTH: (a) The aggregate number of shares of stock which the
Corporation shall have authority to issue is Sixty-Two Million
(62,000,000) shares, consisting of Two Million (2,000,000) shares of
Preferred Stock with a par value of One Cent ($.01) per share and
Sixty Million (60,000,000) shares of Common Stock with a par value of
One Cent ($.01) per share.
The Board of Directors recommends that the stockholders vote FOR the
amendment.
PROPOSAL TO APPROVE THE 1998 LONG-TERM
INCENTIVE COMPENSATION PLAN, EFFECTIVELY AMENDING
THE 1992 LONG-TERM INCENTIVE COMPENSATION PLAN
At its October 27, 1997 meeting, The Board of Directors adopted, subject to
stockholder approval, the 1998 Long-Term Incentive Compensation Plan (the
"Plan"). The Board believes that the Plan provides a balanced approach to
rewarding key employees linked to total return to stockholders as reflected in
stock price appreciation.
SUMMARY OF CHANGES
The principal change in the Plan, as compared to the 1992 Long-Term
Incentive Compensation Plan as previously in effect, is the modification of the
number of shares available for issuance under the Plan from a
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<PAGE> 14
predetermined numerical figure to a percentage of the total number of issued and
outstanding shares of the Company.
WHY AMEND THE 1992 LONG-TERM INCENTIVE COMPENSATION PLAN?
The amendment to the 1992 Long-Term Incentive Compensation Plan removes the
stipulation regarding issuance of a maximum number of shares in specific time
periods. This change will provide additional flexibility in administering the
Plan and in awarding those shares available under the Plan in order to realize
the full potential benefit of such an incentive program.
SUMMARY OF THE 1998 LONG-TERM INCENTIVE COMPENSATION PLAN
The following is a summary of the material features of the Plan. The full
text of the Plan is attached as Appendix A, and the following summary is
qualified in its entirety by reference to it.
Purpose. The purpose of the Plan is to attract, retain and motivate key
employees of the Company by offering incentive compensation tied to the
performance of the Company and its stock price and, therefore, more closely
aligned with the interests of stockholders.
Administration. The Plan will be administered by the Compensation
Committee, composed of not less than two directors appointed by the Board. Each
member of the Compensation Committee shall, at all times during their service as
such, be a "non-employee director" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934. The Compensation Committee shall have
conclusive authority to construe and interpret the Plan and any Award Agreement
entered into thereunder, and to establish, amend and rescind administrative
policies for the administration of the Plan; and such additional authority as
the Board of Directors may from time to time determine to be necessary or
desirable.
Term. The plan shall become effective as of January 1, 1998 subject to its
approval by Company stockholders.
Eligibility. Those persons eligible to participate in the Plan shall
include officers and other key employees of the Company and its subsidiaries
whose performance, as determined by the Compensation Committee, can have a
significant effect on the growth, profitability and success of the Company.
Shares Subject to the Plan. Subject to adjustment as provided in the Plan,
the total number of shares of Common Stock available under the Plan in each
calendar year shall be one and a half percent (1.5%) of the total number of
issued and outstanding shares of Common Stock of the Company as of December 31st
of the immediately preceding calendar year; provided that no more than two
million (2,000,000) shares of Common Stock shall be available for the award of
incentive stock options under the Plan.
Participation. The Compensation Committee shall select, from time to time,
key employees who, in the opinion of the Compensation Committee, can further the
Plan's purposes and the Compensation Committee shall determine the type or types
of awards to be made to the participant. The terms, conditions and restrictions
of each award shall be set forth in an Award Agreement.
Stock Options. Awards may be granted in the form of non-statutory stock
options and incentive stock options.
Stock Appreciation Rights ("SARs"). Awards may be granted in the form of
SARs. SARs entitle the recipient to receive a payment equal to the appreciation
in market value of a stated number of shares of Common Stock from the price
stated in the Award Agreement to the market value of the shares of Common Stock
on the date of exercise or surrender.
Restricted Stock Awards. Awards may be granted in the form of Restricted
Stock Awards. Restricted Stock Awards are subject to such terms, conditions,
restrictions, or limitations as the Compensation Committee deems appropriate.
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<PAGE> 15
Phantom Stock. Awards may be granted in the form of Phantom Stock Awards.
Phantom Stock Awards entitle the individual to receive the market value or the
appreciation in value of an equivalent number of shares of Common Stock on a
settlement date determined by the Compensation Committee.
Payment of Awards. Payment of awards may be made in cash, stock, a
combination of cash and stock or any other form of property in the Compensation
Committee's discretion. Payment may also be made in lump sums or installments as
determined by the Compensation Committee.
Change in Control. In the event of a "change in control" of the Company:
stock options not otherwise exercisable shall become fully exercisable; SARs not
otherwise exercisable shall become exercisable; all restrictions previously
established with respect to Restricted Stock Awards will conclusively be deemed
to have been satisfied; all conditions and restrictions previously established
with respect to Phantom Stock Awards will conclusively be deemed to have been
satisfied and fulfilled and participants shall be entitled to receive shares in
satisfaction of their rights under the Award Agreement; and with respect to
Performance Shares, all previously established performance targets will be
conclusively deemed to have been met.
Tax Matters. Section 162(m) of the Internal Revenue Code prohibits a
publicly held corporation, such as the Company, from claiming a deduction on its
federal income tax return for compensation in excess of $1 million paid for a
given fiscal year to the chief executive officer (or person acting in that
capacity) at the end of the corporation's fiscal year and the four most highly
compensated officers of the corporation, other than the chief executive officer,
at the end of the corporation's fiscal year. The $1 million compensation
deduction limitation does not apply to "performance-based" compensation under
Section 162(m) of the Code.
The final regulations promulgated by the Internal Revenue Service under
Section 162(m) (the "Final Regulations") set forth a number of requirements
which must be satisfied in order for compensation paid under the Plan to qualify
as "performance-based" for purposes of Section 162(m). The Company is seeking
stockholder approval of the Plan in order to qualify certain compensation
awarded under the Plan as "performance-based" for purposes of Section 162(m).
The affirmative vote of the holders of a majority of the shares of the
Company Common Stock present and entitled to vote at the meeting is required to
approve the Plan.
The Board of Directors recommends that the stockholders vote FOR the Plan.
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,
1998, subject to the approval by the stockholders.
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 1999 ANNUAL MEETING
Any stockholder who intends to present a proposal at the 1999 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 4, 1998.
OM GROUP, INC.
Michael J. Scott
Secretary
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<PAGE> 16
APPENDIX A
OM GROUP, INC.
1998 LONG-TERM INCENTIVE COMPENSATION PLAN
1. PURPOSE
The purpose of the Plan is to advance the long-term interests of OM
Group, Inc. by (i) motivating executive personnel by means of long-term
incentive compensation, (ii) furthering the identity of interests of
participants with those of the shareholders of the Corporation through the
ownership and performance of the Common Stock of the Corporation, and (iii)
permitting the Corporation to attract and retain directors and executive
personnel upon whose judgment the successful conduct of the business of the
Corporation largely depends. Toward this objective, the Committee may grant
stock options, stock appreciation rights, restricted stock awards, phantom stock
and/or performance shares to Key Employees of the Corporation and its
Subsidiaries, and shall grant stock options to non-employee directors of the
Corporation, on the terms and subject to the conditions set forth in the Plan.
2. DEFINITIONS
2.1 "Administrative Policies" means the administrative policies and
procedures adopted and amended from time to time by the Committee to administer
the Plan.
2.2 "Award" means any form of stock option, stock appreciation right,
restricted stock award, phantom stock or performance share granted under the
Plan, whether singly, in combination, or in tandem, to a Participant by the
Committee pursuant to such terms, conditions, restrictions and limitations, if
any, as the Committee may establish by the Award Agreement or otherwise.
2.3 "Award Agreement" means a written agreement with respect to an
Award between the Corporation and a Participant establishing the terms,
conditions, restrictions and limitations applicable to an Award. To the extent
an Award Agreement is inconsistent with the terms of the Plan, the Plan shall
govern the rights of the Participant thereunder.
2.4 "Board" means the Board of Directors of the Corporation.
2.5 "Change In Control" means a change in control of the Corporation of
a nature that would be required to be reported (assuming such event has not been
"previously reported") in response to Item 6(e) of schedule 14A of Regulation
14A promulgated under the Exchange Act; provided that, without limitation, a
Change In Control shall be deemed to have occurred at such time after January 1,
1992 as (i) any "person" within the meaning of Section 14(d) of the Exchange
Act, becomes the beneficial owner, directly or indirectly, of securities of the
Corporation representing 50% or more of the combined voting power of the
Corporation's then outstanding securities, or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors cease for any reason to constitute at
<PAGE> 17
least a majority thereof unless the election or the nomination for election by
the Corporation's shareholders, of each new director was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of the period.
2.6 "Change in Control Price" means the higher of (i) the mean of the
high and low trading prices for the Corporation's Common Stock on the Stock
Exchange on the date of determination of the Change in Control or (ii) the
highest price per share actually paid for the Common Stock in connection with
the Change in Control of the Corporation.
2.7 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
2.8 "Committee" means the Compensation Committee of the Board, or such
other committee designated by the Board, authorized to administer the Plan under
Section 3 hereof.
2.9 "Common Stock" means Common Stock, par value $.01, of the
Corporation.
2.10 "Corporation" means OM Group, Inc.
2.11 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.12 "Key Employee" means an employee of the Corporation or a
Subsidiary who holds a position of responsibility in a managerial,
administrative or professional capacity, and whose performance, as determined by
the Committee in the exercise of its sole and absolute discretion, can have a
significant effect on the growth, profitability and success of the Corporation.
2.13 "Participant" means any individual to whom an Award has been
granted by the Committee under this Plan.
2.14 "Plan" means the OM Group, Inc. 1998 Omnibus Long-Term
Compensation Plan.
2.15 "Stock Exchange" means the New York Stock Exchange or, if the
Common Stock is no longer traded on the New York Stock Exchange, such other
market price reporting system on which the Common Stock is traded or quoted
designated by the Committee after it determines that such other exchange is both
reliable and reasonably accessible.
2.16 "Subsidiary" means a corporation or other business entity in which
the Corporation directly or indirectly has an ownership interest of fifty-one
percent or more.
3. ADMINISTRATION
The Plan shall be administered under the supervision of the Committee
composed of not less than two directors each of whom shall be deemed to be "a
Non-Employee Director" under Rule 16b-3 of the Exchange Act or any subsequent
rule or act.
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Members of the Committee shall serve at the pleasure of the Board of
Directors, and may resign by written notice filed with the Chief Executive
Officer or the Secretary of the Corporation. A vacancy in the membership of the
Committee shall be filled by the appointment of a successor member by the Board
of Directors. Until such vacancy is filled, the remaining members shall
constitute a quorum and the action at any meeting of a majority of the entire
Committee, or an action unanimously approved in writing, shall constitute action
of the Committee. Subject to the express provisions of this Plan, the Committee
shall have conclusive authority to construe and interpret the Plan, any Award
Agreement entered into hereunder and to establish, amend and rescind
Administrative Policies for the administration of this Plan and shall have such
additional authority as the Board of Directors may from time to time determine
to be necessary or desirable.
In addition, in order to enable Key Employees who are foreign nationals
or employed outside the United States, or both, to receive Awards under the
Plan, the Committee may adopt such amendments, Administrative Policies, subplans
and the like as are necessary or advisable, in the opinion of the Committee, to
effectuate the purposes of the Plan.
4. ELIGIBILITY
Any Key Employee is eligible to become a Participant in the Plan.
5. SHARES AVAILABLE
(a) Shares of Common Stock available for issuance under the Plan may be
authorized and unissued shares or treasury shares. Subject to the adjustments
provided for in Sections 17 and 18 hereof, the maximum number of shares of
Common Stock available for grant of Awards under the Plan during any calendar
year shall be equal to the sum of:
(i) One and one-half percent of the total number of issued and
outstanding shares of Common Stock of the Corporation as of the
December 31st of the immediately preceding calendar year (the "1 1/2
Limit");
(ii) Any unused portion of the 1 1/2% Limit from prior
calendar years during the term of the Plan; and
(iii) Any shares of Common Stock related to Awards which
terminated during prior calendar years during the term of the Plan by
expiration, forfeiture, cancellation or otherwise without the issuance
of such shares or cash in lieu thereof;
Notwithstanding the foregoing, (I) not more than two million shares of
Common Stock shall be available for the award of incentive stock options under
the Plan; (II) at no time shall the number of shares deemed to be available for
grant in any calendar year exceed two percent of the total number of issued and
outstanding shares of Common Stock of the Corporation; and
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<PAGE> 19
(III) at no time shall the number of shares available for grant in any calendar
year to any one person exceed two hundred thousand.
(b) For purposes of calculating the number of shares of Common Stock
deemed to be granted hereunder during any calendar year, each Award, whether
denominated in stock options, stock appreciation rights, restricted stock or
phantom stock, shall be deemed to be a grant of a number of shares of Common
Stock equal to the number of shares represented by the stock options, shares of
restricted stock, performance shares, shares of phantom stock or stock
appreciation rights set forth in the Award, provided, however, in the case of
any Award as to which the exercise of one right nullifies the exercisability of
another (including, by way of illustration the grant of a stock option with
Tandem SARs (as hereinafter defined)), the number of shares deemed to have been
granted shall be the maximum number of shares (and/or cash equivalents) that
could have been acquired upon the maximum exercise or settlement of the Award.
(c) For purposes of calculating the number of shares available for
regrant in any year, the portion of any Award that has been settled by the
payment of cash or the issuance of shares of Common Stock, or a combination
thereof, shall not be available for re-grant under the Plan, irrespective of the
value of the settlement or the method of its payment. The settlement of an Award
shall not be deemed to be the grant of an Award hereunder.
6. TERM
The Plan shall become effective as of January 1, 1998, subject to
approval of the Plan by the Corporation's stockholders at the 1998 annual
meeting. No Awards shall be exercisable or payable before approval of the Plan
has been obtained from the Corporation's stockholders.
7. PARTICIPATION
The Committee shall select, from time to time, Participants from those
Key Employees who, in the opinion of the Committee, can further the Plan's
purposes and the Committee shall determine the type or types of Awards to be
made to the Participant. The terms, conditions and restrictions of each Award
shall be set forth in an Award Agreement.
8. STOCK OPTIONS
(a) Grants. Awards may be granted in the form of stock options. Stock
options may be incentive stock options within the meaning of Section 422 of the
Code or non-statutory stock options (i.e., stock options which are not incentive
stock options), or a combination of both, or any particular type of tax
advantage option authorized by the Code from time to time.
(b) Terms and Conditions of Options. An option shall be exercisable in
whole or in such installments and at such times as may be determined by the
Committee; provided, however,
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that no stock option shall be exercisable more than ten years after the date of
grant thereof. The option exercise price shall be established by the Committee,
but such price shall not be less than the per share fair market value of the
Common Stock, as determined by the Committee, on the date of the stock option's
grant subject to adjustment as provided in Sections 17 or 18 hereof.
(c) Restrictions Relating to Incentive Stock Options. Stock options
issued in the form of incentive stock options shall, in addition to being
subject to all applicable terms, conditions, restrictions and/or limitations
established by the Committee, comply with Section 422 of the Code. Incentive
Stock Options shall be granted only to full time employees of the Corporation
and its subsidiaries within the meaning of Section 425 of the Code. The
aggregate fair market value (determined as of the date the option is granted) of
shares with respect to which incentive stock options are exercisable for the
first time by an individual during any calendar year (under this Plan or any
other plan of the Corporation or any Subsidiary which provides for the granting
of incentive stock options) may not exceed $100,000 or such other number as may
be applicable under the Code from time to time. Any incentive stock option that
is granted to any employee who is, at the time the option is granted, deemed for
purposes of Section 422 of the Code, or any successor provision, to own shares
of the Corporation possessing more than ten percent of the total combined voting
power of all classes of shares of the Corporation or of a parent or subsidiary
of the Corporation, shall have an option exercise price that is at least one
hundred ten percent of the fair market value of the shares at the date of grant
and shall not be exercisable after the expiration of five years from the date it
is granted.
(d) Additional Tents and Conditions. The Committee may, by way of the
Award Agreement or otherwise, establish such other terms, conditions,
restrictions and/or limitations, if any, on any stock option Award, provided
they are not inconsistent with the Plan.
(e) Payment. Upon exercise, a participant may pay the option exercise
price of a stock option in cash or shares of Common Stock, Stock Appreciation
Rights or a combination of the foregoing, or such other consideration as the
Committee may deem appropriate. The Committee shall establish appropriate
methods for accepting Common Stock and may impose such conditions as it deems
appropriate on the use of such Common Stock to exercise a stock option.
9. STOCK APPRECIATION RIGHTS
(a) Grants. Awards may be granted in the form of stock appreciation
rights ("SARs"). SARs shall entitle the recipient to receive a payment equal to
the appreciation in market value of a stated number of shares of Common Stock
from the price stated in the Award Agreement to the market value of the Common
Stock on the date of exercise or surrender. An SAR may be granted in tandem with
all or a portion of a related stock option under the Plan ("Tandem SARs"), or
may be granted separately ("Freestanding SARs"). A Tandem SAR may be granted
either at the time of the grant of the related stock option or at any time
thereafter during the term of the stock option. An SAR may be exercised no
sooner than six months after it is granted. In the case of SARs granted in
tandem with stock options granted prior to the grant of such SARs, the
appreciation in value shall be appreciation from the option exercise
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<PAGE> 21
price of such related stock option to the market value of the Common Stock on
the date of exercise.
(b) Terms and Conditions of Tandem SARs. Subject to limitations
contained in the preceding paragraph, a Tandem SAR shall be exercisable to the
extent, and only to the extent, that the related stock option is exercisable.
Upon exercise of a Tandem SAR as to some or all of the shares covered by an
Award, the related stock option shall be cancelled automatically to the extent
of the number of SARs exercised, and such shares shall not thereafter be
eligible for grant under Section 5 hereof.
(c) Terms and Conditions of Freestanding SARs. Freestanding SARs shall
be exercisable in whole or in such installments and at such times as may be
determined by the Committee. The base price of a Freestanding SAR shall also be
determined by the Committee; provided, however, that such price shall not be
less that the fair market value of the Common Stock, as determined by the
Committee, on the date of the award of the Freestanding SAR.
(d) Deemed Exercise. The Committee may provide that an SAR shall be
deemed to be exercised at the close of business on the scheduled expiration date
of such SAR, if at such time the SAR by its terms is otherwise exercisable and,
if so exercised, would result in a payment to the participant.
(e) Additional Terms and Conditions. The Committee may, consistent with
the Plan, by way of the Award Agreement or otherwise, determine such other
terms, conditions, restrictions and/or limitations, if any, on any SAR Award,
including but not limited to determining the manner in which payment of the
appreciation in value shall be made.
10. RESTRICTED STOCK AWARDS
(a) Grants. Awards may be granted in the form of Restricted Stock
Awards. Restricted Stock Awards shall be awarded in such numbers and at such
times as the Committee shall determine.
(b) Award Restrictions. Restricted Stock Awards shall be subject to
such terms, conditions, restrictions, or limitations as the Committee deems
appropriate including, by way of illustration but not by way of limitation,
restrictions on transferability, requirements of continued employment or
individual performance or the financial performance of the Corporation. The
Committee may modify, or accelerate the termination of, the restrictions
applicable to a Restricted Stock Award under such circumstances as it deems
appropriate.
(c) Rights as Shareholders. During the period in which any restricted
shares of Common Stock are subject to the restrictions imposed under the
preceding paragraph, the Committee may, in its discretion, grant to the
Participant to whom such restricted shares have been awarded all or any of the
rights of a shareholder with respect to such shares, including, by way of
illustration but not by way of limitation, the right to vote such shares and to
receive dividends.
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(d) Evidence of Award. Any Restricted Stock Award granted under the
Plan may be evidenced in such manner as the Committee deems appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates.
11. PHANTOM STOCK
(a) Grants. Awards may be granted in the form of Phantom Stock Awards.
Phantom Stock Awards shall entitle the Participant to receive the market value
or the appreciation in value of an equivalent number of shares of Common Stock
on a settlement date determined by the Committee.
(b) Additional Terms and Conditions. The Committee may, consistent with
the plan, by way of Award Agreement or otherwise, determine such other terms,
conditions, restrictions or limitations, if any, on any Award of Phantom Stock.
12. PAYMENT OF AWARDS
Except as otherwise provided herein, Award Agreements may provide that,
at the discretion of the Committee, payment of Awards may be made in cash,
Common Stock, a combination of cash and Common Stock, or any other form of
property as the Committee shall determine. Further, the terms of Award
Agreements may provide for payment of Awards in the form of a lump sum or
installments, as determined by the Committee.
13. DIVIDENDS AND DIVIDEND EQUIVALENTS
If an Award is granted in the form of a Restricted Stock Award, Phantom
Stock Award or a Freestanding SAR, the Committee may choose, at the time of the
grant of the Award, to include as part of such Award an entitlement to receive
dividends or dividend equivalents, subject to such terms, conditions,
restrictions or limitations, if any, as the Committee may establish. Dividends
and dividend equivalents shall be paid in such form and manner and at such time
as the Committee shall determine. All dividends or dividend equivalents which
are not paid currently may, at the Committee's discretion, accrue interest or be
reinvested into additional shares of Common Stock.
14. TERMINATION OF EMPLOYMENT
The Committee shall adopt Administrative Policies determining the
entitlement of Participants who cease to be employed by either the Corporation
or Subsidiary whether because of death, disability, resignation, termination or
retirement pursuant to an established retirement plan or policy of the
Corporation or of its applicable Subsidiary.
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15. ASSIGNMENT AND TRANSFER
Unless the Committee otherwise determines, the rights and interests of
a Participant under the Plan may not be assigned, encumbered or transferred
except, in the event of the death of a Participant, by will or the laws of
descent and distribution.
16. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of any change in the outstanding shares of Common Stock by
reason of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares merger, consolidation or any change in the
corporate structure or shares of the Corporation, the maximum aggregate number
and class of shares as to which Awards may be granted under the Plan and the
shares issuable pursuant to then outstanding Awards shall be appropriately
adjusted by the Committee whose determination shall be final.
17. EXTRAORDINARY DISTRIBUTIONS AND PRO-RATA REPURCHASES
In the event the Corporation shall at any time when an Award is
outstanding make an Extraordinary Distribution (as hereinafter defined) in
respect of Common Stock or effect a Pro- Rata Repurchase of Common Stock (as
hereinafter defined), the Committee shall consider the economic impact of the
Extraordinary Distribution or Pro-Rata Repurchase on Participants and make such
adjustments as it deems equitable under the circumstances. The determination of
the Committee shall, subject to revision by the Board of Directors, be final and
binding upon all Participants.
(a) As used herein, the term "Extraordinary Distribution" means any
dividend or other distribution of
(x) cash, where the aggregate amount of such cash dividend or
distribution together with the amount of all cash dividends and
distributions made during the preceding twelve months, when combined
with the aggregate amount of all Pro-Rata Repurchases (for this
purpose, including only that portion of the aggregate purchase price of
such Pro-Rata Repurchases which is in excess of the Fair Market Value
of the Common Stock repurchased during such twelve month period),
exceeds ten percent (10%) of the aggregate Fair Market Value of all
shares of Common Stock outstanding on the record date for determining
the shareholders entitled to receive such Extraordinary Distribution or
(y) any shares of capital stock of the Corporation (other than
shares of Common Stock), other securities of the Corporation, evidences
of indebtedness of the Corporation or any other person or any other
property (including shares of any Subsidiary of the Corporation), or
any combination thereof.
-8-
<PAGE> 24
(b) As used herein "Pro-Rata Repurchase" means any purchase of shares
of Common Stock by the Corporation or any Subsidiary thereof, pursuant to any
tender offer or exchange offer subject to Section 13(e) of the Exchange Act or
any successor provision of law, or pursuant to any other offer available to
substantially all holders of Common Stock; provided, however, that no purchase
of shares of the Corporation or any Subsidiary thereof made in open market
transactions shall be deemed a Pro-Rata Repurchase.
18. WITHHOLDING TAXES
The Corporation or the applicable Subsidiary shall be entitled to
deduct from any payment under the Plan, regardless of the form of such payment,
the amount of all applicable income and employment tax required by law to be
withheld with respect to such payment or may require the Participant to pay to
it such tax prior to and as a condition of the making of such payment. In
accordance with any applicable Administrative Policies it establishes, the
Committee may allow a Participant to pay the amount of taxes required by law to
be withheld from an Award by withholding from any payment of Common Stock due as
a result of such Award, or by permitting the Participant to deliver to the
Corporation shares of Common Stock having a fair market value, as determined by
the Committee, equal to the amount of such required withholding taxes.
19. NONCOMPETITION PROVISION
Unless the Award Agreement specifies otherwise, a Participant shall
forfeit all unexercised unearned Awards if (i) in the opinion of the Committee,
the Participant, without the written consent of the Corporation, engages
directly or indirectly in any manner or capacity as principal, agent, partner,
officer, director, employee, or otherwise, in any business or activity
competitive with the business conducted by the Corporation or any Subsidiary; or
(ii) the Participant performs any act or engages in any activity which in the
opinion of the Committee is detrimental to the best interests of the
Corporation.
20. REGULATORY APPROVALS AND LISTINGS
Notwithstanding anything contained in this Plan to the contrary, the
Corporation shall have no obligation to issue or deliver certificates of Common
Stock evidencing Restricted Stock Awards or any other Award payable in Common
Stock prior to (a) the obtaining of any approval from any governmental agency
which the Corporation shall, in its sole discretion, determine to be necessary
or advisable, (b) the admission of such shares to listing on the Stock Exchange,
and (c) the completion of any registration or other qualification of said shares
under any state or federal law or ruling of any governmental body which the
Corporation shall, in its sole discretion, determine to be necessary or
advisable.
-9-
<PAGE> 25
21. NO RIGHT TO CONTINUED EMPLOYMENT OR GRANTS
Participation in the Plan shall not give any Key Employee any right to
remain in the employ of the Corporation or any Subsidiary. The Corporation or,
in the case of employment with a Subsidiary, the Subsidiary, reserves the right
to terminate the employment of any Key Employee at any time. The adoption of
this Plan shall not be deemed to give any Key Employee or any other individual
any right to be selected as a Participant, to be granted any Awards hereunder or
if granted an Award in any year, to receive Awards in any subsequent year.
22. AMENDMENT
The Committee may suspend or terminate the Plan at any time. In
addition, the Committee may, from time to time, amend the Plan in any manner,
but may not without shareholder approval adopt any amendment which would (a)
materially increase the benefits accruing to Participants under the Plan, (b)
materially increase the number of shares of Common Stock which may be issued
under the Plan (except as specified in Section 17), or (c) materially modify the
requirements as to eligibility for participation in the Plan.
23. GOVERNING LAW
The Plan shall be governed by and construed in accordance with the laws
of the State of Ohio, except as preempted by applicable Federal law.
24. CHANGE IN CONTROL
(a) Stock Options. In the event of a Change in Control options not
otherwise exercisable at the time of a Change in Control shall become fully
exercisable upon such Change in Control.
(b) Stock Appreciation Rights. In the event of a Change in Control,
Tandem SARs not otherwise exercisable upon a Change In Control shall become
exercisable to the extent that the related Stock Option is exercisable.
Freestanding SARs not otherwise exercisable upon a Change In Control shall also
become fully exercisable upon such Change In Control.
(i) The Corporation shall make payment to Participants with
respect to SARs in cash in an amount equal to the appreciation in the
value of the SAR from the base price specified in the Award Agreement
to the Change In Control Price;
(ii) Such cash payments to Participants shall be due and
payable, and shall be paid by the Corporation, immediately upon the
occurrence of such Change In Control; and
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<PAGE> 26
(iii) After the payment provided for in (ii) above,
Participants shall have no further rights under SARs outstanding at the
time of such Change In Control.
(c) Restricted Stock Awards. In the event of a Change In Control, all
restrictions previously established with respect to Restricted Stock Awards will
conclusively be deemed to have been satisfied. Participants shall be entitled to
have issued to them the shares of Common Stock described in the applicable Award
Agreements, free and clear of any restriction or restrictive legend, except that
if upon the advice of counsel to the Corporation, shares of Common Stock cannot
lawfully be issued without restriction, then the Corporation shall make payment
to Participants in cash in an amount equal to the Change In Control Price of the
Common Stock that otherwise would have been issued.
(i) Such cash payments to Participants shall be due and
payable, and shall be paid by the Corporation, immediately upon the
occurrence of such Change In Control; and
(ii) After the payment provided for in (i) above, Participants
shall have no further rights under Restricted Stock Awards outstanding
at the time of such Change In Control of the Corporation.
(d) Phantom Stock. In the event of a Change In Control,
(i) all restrictions and conditions, if any, previously
established with respect to Phantom Stock Awards will conclusively be
deemed to have been satisfied and fulfilled Participants shall be
entitled to receive Common Stock in satisfaction of their rights under
Phantom Stock Awards in accordance with the amounts otherwise payable
by the Corporation pursuant to the Award Agreement;
(ii) Such Common Stock shall be issued to Participants by the
Corporation immediately upon the occurrence of such Change In Control;
and
(iii) After the payment provided for in (ii) above, the
Participants shall have no further rights under Phantom Stock Awards
outstanding at the time of such change of control of the Corporation.
(e) Directors' Stock Options. Directors' Stock Options not otherwise
exercisable at the time of a Change In Control shall become fully exercisable
upon such Change In Control; provided, however, that options shall not become
exercisable under this provision prior to the expiration of six months from the
date of grant.
(i) The Corporation shall make payment to Directors with
respect to Options in cash in an amount equal to the appreciation in
the value of the Option from the option exercise price specified in the
Award Agreement to the Change In Control Price;
-11-
<PAGE> 27
(ii) Such cash payments to Directors shall be due and payable,
and shall be paid by the Corporation, immediately upon the occurrence
of such Change In Control; and
(iii) After the payment provided for in (i) above,
Participants shall have no further rights under Options outstanding at
the time of such Change In Control.
(f) Miscellaneous. Upon a Change In Control, no action shall be taken
which would adversely affect the rights of any Participant or the operation of
the Plan with respect to any Award to which the Participant may have become
entitled hereunder on or prior to the date of he Change In Control or to which
he may become entitled as a result of such Change In Control.
25. NO RIGHT, TITLE, OR INTEREST IN CORPORATION ASSETS
No Participant shall have any rights as a shareholder as a result of
participation in the Plan until the date of issuance of a stock certificate in
his name except, in the case of Restricted Stock wards, to the extent such
rights are granted to the Participant under Section 10(c) hereof. To the extent
any person acquires a right to receive payments from the Corporation under this
Plan, such rights shall be no greater than the rights of an unsecured creditor
of the Corporation.
26. PAYMENT BY SUBSIDIARIES
Settlement of Awards to employees of Subsidiaries shall be made by and
at the expense of such Subsidiary. Except as prohibited by law, if any portion
of an Award is to be settled in shares of Common Stock, the Corporation shall
sell and transfer to the Subsidiary, and the Subsidiary shall purchase, the
number of shares necessary to settle such portion of the Award.
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<PAGE> 28
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 1998 Annual Meeting of Stockholders of
OM Group, Inc. to be held on May 5, 1998, and at any adjournment thereof
as follows:
THE BOARD OF DIRECTORS RECOMMENDS THAT VOTES BE CAST FOR PROPOSALS 1, 2,
3 AND 4.
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>
Eugene Bak and Frank E. Butler
(INSTRUCTION: if you wish to withhold authority to vote for any nominee,
write that name on the line below.)
-------------------------------------------------------------------------
2. Amendment of the Amended and Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock, par value
$.01 per share, from 30,000,000 to 60,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the 1998 Long-Term Incentive Compensation Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on reverse side)
(Continued from other side)
4. Confirmation of the Appointment of Ernst & Young LLP as Auditors of
the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. 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 ITEMS
2, 3 AND 4.
Dated: , 1998
--------------------------------
--------------------------------
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> 29
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 1998 Annual Meeting of Stockholders of said Company
to be held on May 5, 1998, and at any adjournment thereof to vote:
THE BOARD OF DIRECTORS RECOMMENDS THAT VOTES BE CAST FOR PROPOSALS 1, 2,
3 AND 4.
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>
Eugene Bak and Frank E. Butler
(INSTRUCTION: if you wish to withhold authority to vote for any nominee,
write that name on the line below.)
-------------------------------------------------------------------------
2. Amendment of the Amended and Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock, par value
$.01 per share, from 30,000,000 to 60,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the 1998 Long-Term Incentive Compensation Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on reverse side)
(Continued from other side)
4. Confirmation of the Appointment of Ernst & Young LLP as Auditors of
the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. 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 ITEMS
2, 3 AND 4.
Dated: , 1998
--------------------------------
--------------------------------
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.
