<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
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)
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
3500 TERMINAL TOWER
50 PUBLIC SQUARE
CLEVELAND, OHIO 44113-2204
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 4, 1999
Notice is hereby given that the 1999 Annual Meeting of Stockholders of OM
Group, Inc. will be held at The Forum Conference Center, 1375 East 9th Street,
Cleveland, Ohio 44114, on Tuesday, May 4, 1999, at 11:00 a.m., for the following
purposes:
1. To elect three 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 19, 1999 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 2, 1999
<PAGE> 3
OM GROUP, INC.
TOWER CITY
3500 TERMINAL TOWER
50 PUBLIC SQUARE
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 2, 1999. The record date for determination of
stockholders entitled to vote at the meeting was the close of business on March
19, 1999. On that date, the outstanding voting securities of the Company were
23,703,215 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, 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, Proxy Express has been retained by the Company for distribution
services, and if necessary, to assist in solicitation of proxies, at an
anticipated cost of approximately $2,500.00 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 2001, 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 4, 1999, the Board of Directors has recommended the election of Lee R.
Brodeur, Thomas R. Miklich, and James P. Mooney to serve as Class III directors
for three-year terms expiring in 2002. 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>
Brodeur Photo LEE R. BRODEUR, age 70, 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.
</TABLE>
<TABLE>
<S> <C>
THOMAS R. MIKLICH, age 51, has been a director of the
Miklich Photo 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.
</TABLE>
<TABLE>
<S> <C>
JAMES P. MOONEY, age 51, is Chairman of the Board and has
JP Mooney Photo 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 is John E. Mooney's brother.
</TABLE>
2
<PAGE> 5
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE MEETING
<TABLE>
<S> <C>
EUGENE BAK, age 65, has been President and Chief Operating
Bak Photo 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. Mr. Bak's term expires in 2001.
</TABLE>
<TABLE>
<S> <C>
FRANK E. BUTLER, age 63, was appointed as a director of the
Butler Photo 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. Mr. Butler's term
expires in 2001.
</TABLE>
<TABLE>
<S> <C>
JOHN E. MOONEY, age 48, was appointed as a director of the
JE Mooney Photo 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.
</TABLE>
<TABLE>
<S> <C>
MARKKU TOIVANEN, age 58, has been a director of the Company
Toivanen Photo 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, 1999, 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 4.4% and all executive officers and directors as a group own
approximately 6.0% 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 2,099 121,699 127,248
Lee R. Brodeur....................... 5,750 -0- 13,235 18,985
Frank E. Butler...................... 200 -0- 7,131 7,331
Thomas E. Fleming.................... 1,418 -0- 75,441 76,859
James M. Materna..................... 1,050 2,062 118,149 121,261
Thomas R. Miklich.................... 3,450 -0- 12,839 16,289
James P. Mooney...................... 533,716 41,370 457,225 1,032,311
John E. Mooney....................... 9,951 -0- 4,388 14,339
Markku Toivanen...................... -0- -0- 16,243 16,243
All Directors and Officers as a Group
(consisting of 9 persons).......... 558,985 45,531 826,350 1,430,866
</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, 1999.
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>
Capital Guardian Trust Company
11100 Santa Monica Boulevard
Los Angeles, CA 90025 1,257,350(1) 5.3%
Baron Capital Group, Inc.
767 Fifth Avenue
New York, N Y 10153 2,575,650(2) 10.9%
Citigroup, Inc.
153 East 53rd Street
New York, NY 10043 1,862,223(3) 7.9%
</TABLE>
- ---------------
(1) Information regarding share ownership was obtained form Amendment No. 1 to a
Schedule 13G filed on February 8, 1999 by Capital Guardian Trust Company.
Capital Guardian Trust Company has sole dispositive power with respect to
1,257,350 of the shares listed herein, and sole voting power with respect to
1,141,350 of the shares listed herein.
(2) Information regarding share ownership was obtained from Amendment No. 2 to a
Schedule 13G filed on December 23, 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. Barron 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., and Ronald Baron each have shared voting and
dispositive power with respect to 2,575,650 of the shares listed herein.
BAMCO Inc. has shared voting and dispositive power with respect to 2,133,000
of the shares listed herein. Baron Capital Management Inc. has shared voting
and dispositive power with respect to 442,650 of the shares listed herein.
Baron Asset Fund has shared voting and dispositive power with respect to
1,991,800 of the shares listed herein.
(3) Information regarding share ownership was obtained form a Schedule 13G filed
jointly on February 10, 1999 by Salomon Smith Barney Holdings Inc. ("SSB
Holdings") and Citigroup Inc. ("Citigroup"). Citigroup is the sole
shareholder of SSB Holdings. Citigroup and SSB Holdings are reporting on
behalf of subsidiaries whose individual percentages of beneficial ownership
do not exceed 5%. SSB Holdings has shared voting and dispositive power with
respect to 1,672,161 of the shares listed herein. Citigroup has shared
voting and dispositive power with respect to 1,862,223 of the shares listed
herein.
5
<PAGE> 8
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors held four regularly scheduled meetings
during 1998. The Board has a standing Audit and Finance Committee and a standing
Compensation Committee. During 1998, 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 1998, the Audit and Finance
Committee met 6 times.
The Compensation Committee, currently composed of Messrs. Lee R. Brodeur
and Frank E. Butler, held 5 meetings during 1998. 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 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 $25,000 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 $2,500 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.
6
<PAGE> 9
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 three most highly compensated executive
officers (collectively, the "Named Officers"), for services rendered in
capacities to the Company during 1996, 1997 and 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
--------------
SECURITIES AND PAYOUTS
UNDERLYING ---------
ANNUAL COMPENSATION STOCK LTIP
NAME AND -------------------- OPTIONS PAYOUTS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(2) (SHARES)(3) $ COMPENSATION(1)
------------------ ---- ------- -------- -------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
James P. Mooney 1996 405,000 405,000 56,400 128,044
Chairman and CEO 1997 445,000 500,000 55,000 132,277
1998 500,000 570,000 83,000 150,015
Eugene Bak 1996 265,000 225,000 29,000 66,711
President and COO 1997 300,000 281,250 35,000 1,307,319 89,338
1998 375,000 295,500 53,000 760,752 98,453
Thomas E. Fleming 1996 200,000 120,000 14,100 47,772
Corporate V.P. and 1997 245,000 162,000 20,000 656,513 45,987
CMO 1998 270,000 177,000 35,000 372,413 64,826
James M. Materna 1996 190,000 144,000 14,850 47,946
CFO 1997 200,000 173,000 25,000 75,026
1998 230,000 221,000 35,000 510,806 63,465
</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.
(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.
Options 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 1998 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 ($35.38) for a term of 10 years expiring November 8, 2008. The stock
options vest at December 31, 1999.
OPTIONS GRANT TABLE
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES OF
OPTIONS STOCK APPRECIATION FOR
NUMBER OF SECURITIES GRANTED TO OPTION TERM
UNDERLYING OPTIONS EMPLOYEES IN --------------------------
NAME GRANTED 1998 5% 10%
---- -------------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
James P. Mooney....................... 83,000 26% 1,846,750 4,680,370
Eugene Bak............................ 53,000 17% 1,179,250 2,988,670
Thomas E. Fleming..................... 35,000 11% 778,750 1,973,650
James F. Materna...................... 35,000 11% 778,750 1,973,650
</TABLE>
7
<PAGE> 10
AGGREGATED OPTION EXERCISES AND
FISCAL YEAR-END OPTION VALUE
The following table sets forth information concerning unexercised options
to purchase Common Stock held by the Named officers at December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS MONEY OPTIONS AT
HELD AT 12/31/98 12/31/98(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James P. Mooney............................ 457,226 83,000 9,748,408 92,960
Eugene Bak................................. 121,700 53,000 1,428,951 59,360
Thomas E. Fleming.......................... 100,441 35,000 1,813,766 39,200
James M. Materna........................... 118,159 35,000 2,176,611 39,200
</TABLE>
- ---------------
(1) Based on fair market value at December 31, 1998 of $36.50.
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 1998, 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 1998
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
8
<PAGE> 11
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 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 66% to 96% of their annual base salaries in 1998.
1998 Long-Term Incentive Compensation Plan. Executive officers and other
key employees also received compensation pursuant to the Company's 1998
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").
Under the 1998 Long-Term Incentive Compensation Plan, the total number of shares
of Common Stock subject to the plan each year is 1.5% of the total number of
issued and outstanding shares of Company's Common Stock as of December 30 of the
preceding calendar year.
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 1998 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 1998, 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 $500,000 in 1998, reflecting a 12%
increase in his 1997 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 1998 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 1998 was $570,000, constituting a bonus greater in
amount than his base compensation.
9
<PAGE> 12
On November 8, 1998, the Committee approved a grant of 83,000 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 1998.
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.
COMPARISON OF 60 MONTH CUMULATIVE TOTAL RETURN*
AMONG OM GROUP, INC., THE S & P 500 INDEX
AND THE S & P CHEMICALS (SPECIALTY) INDEX
<TABLE>
<CAPTION>
S&P CHEMICALS
OM GROUP, INC. S&P 500 (SPECIALTY)
-------------- ------- -------------
<S> <C> <C> <C>
'12/93' 100.00 100.00 100.00
'12/94' 118.00 101.00 87.00
'12/95' 165.00 139.00 115.00
'12/96' 204.00 171.00 118.00
'12/97' 280.00 229.00 146.00
'12/98' 281.00 294.00 124.00
</TABLE>
* $100 invested on 12/31/93 in stock or index -- including reinvestment of
dividends. Fiscal year ending December 31.
10
<PAGE> 13
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 $53,000,000 in 1998.
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 $3,000,000 in 1998. 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 1998 pursuant to these other arrangements amounted to approximately
$3,000,000.
The Company had previously entered into a Retirement Benefit Agreement with
Eugene Bak, President of the Company, providing for a yearly retirement benefit
of 60% of his final salary reduced by payments from the Company's Profit Sharing
Plan and its Benefit Restoration Plan. Mr. Bak's Agreement was exchanged for an
arrangement establishing a split-dollar life insurance policy insuring him and
his spouse. The Company will utilize the savings from the obligation to make
yearly retirement benefit payments to pay premiums. The aggregate premiums for
this policy will be $1,180,000 over the joint lives of Mr. Bak and spouse.
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,
1999, 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 2000 ANNUAL MEETING
Any stockholder who intends to present a proposal at the 2000 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 3, 1999.
Any stockholder who intends to present a proposal at the 2000 annual
meeting other than for inclusion in the Company's proxy statement and form of
proxy must deliver the proposal to the Company at its executive offices not
later than March 3, 2000, or such proposal will be untimely. If a stockholder
fails to submit the proposal by March 3, 2000, the Company reserves the right to
exercise discretionary voting authority on the proposal.
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 1999 Annual Meeting of Stockholders of
OM Group, Inc. to be held on May 4, 1999, and at any adjournment thereof
as follows:
THE BOARD OF DIRECTORS RECOMMENDS THAT VOTES BE CAST FOR PROPOSALS 1, 2
AND 3.
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>
Lee R. Brodeur, Thomas R. Miklich and James P. Mooney
(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.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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 AND 3.
Dated:___________________, 1999
--------------------------------
--------------------------------
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 1999 Annual Meeting of Stockholders of said Company
to be held on May 4, 1999, and at any adjournment thereof to vote:
THE BOARD OF DIRECTORS RECOMMENDS THAT VOTES BE CAST FOR PROPOSALS 1, 2
AND 3.
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>
Lee R. Brodeur, Thomas R. Miklich and James P. Mooney
(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 ITEMS
2 AND 3.
Dated:____________________, 1999
--------------------------------
--------------------------------
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.
