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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 1O-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
COMMISSION FILE NUMBER 0-22572
OM GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C>
DELAWARE 52-1736882
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
50 PUBLIC SQUARE
3500 TERMINAL TOWER
CLEVELAND, OHIO 44113-2204
(Address of principal executive offices) (Zip Code)
</TABLE>
216-781-0083
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
Common Stock, par value $0.01 per share New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12 (g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] [ ] No
The aggregate market value of Common Stock, par value $.01 per share, held
by non-affiliates (based upon the closing sale price on the NYSE) on March 11,
1999 was approximately $736,281,116.
As of March 11, 1999, there were 23,703,215 shares of Common Stock, par
value $.01 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual meeting of stockholders to be
held on May 4, 1999 are incorporated by reference.
<PAGE> 2
TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business.................................................... 2
Item 2. Properties.................................................. 4
Item 3. Legal Proceedings........................................... 5
Item 4. Submission of Matters to a Vote of Security Holders......... 5
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 6
Item 6. Selected Financial Data..................................... 6
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 6
Item 7a. Quantitative and Qualitative Disclosures about Market
Risk........................................................ 11
Item 8. Financial Statements and Supplementary Data
Report of Independent Auditors.............................. 12
Consolidated Balance Sheets as of December 31, 1998 and
1997........................................................ 13
Statements of Consolidated Income for the years ended
December 31, 1998, 1997 and 1996............................ 14
Statements of Consolidated Stockholders' Equity for the
years ended
December 31, 1998, 1997 and 1996............................ 15
Statements of Consolidated Cash Flows for the years ended
December 31, 1998, 1997 and 1996............................ 16
Notes to Consolidated Financial Statements.................. 17
PART III
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 28
Item 10. Directors and Executive Officers of the Registrant.......... 28
Item 11. Executive Compensation...................................... 28
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 28
Item 13. Certain Relationships and Related Transactions.............. 28
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 29
Signatures.................................................. 32
</TABLE>
1
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PART I
ITEM 1. BUSINESS
GENERAL
OM Group, Inc. (the Company) is a leading international producer and marketer of
value-added metal-based specialty chemicals and powders. The Company supplies
more than 400 different product offerings -- principally categorized as metal
carboxylates, inorganic metal salts, and metal powders for diverse applications
to more than 25 industries. Metal carboxylates are essential components in
numerous complex chemical and industrial processes, and are used in many end
markets, such as coatings, custom catalysts, liquid detergents, lubricants and
fuel additives, plastic stabilizers, polyester promoters and adhesion promoters
for rubber tires. Metal salts are used in a wide variety of end products
including catalysts, colorants, rechargeable batteries, petroleum additives,
magnetic media and metal finishing agents. High specification metal powders have
several important characteristics that make them essential components in
cemented carbides for mining and machine tools, diamond tools used in
construction, rechargeable batteries, and alloyed materials for automotive,
electronics, transportation and catalyst applications. Typically, the Company's
products represent a small portion of the customer's total cost of manufacturing
or processing, but are critical to the customer's product performance.
The Company operates in a single business segment with product lines comprised
of metal-based specialty chemicals.
COMPETITION
The Company's businesses are very competitive. Several of the Company's
competitors are divisions or subsidiaries of companies that are substantially
larger and have greater financial resources than the Company. However, the
Company believes it is the only producer that manufactures and markets three
categories of metal-based specialty chemicals -- carboxylates, inorganic salts
and powders. The Company believes it is the world's leading producer of cobalt
carboxylates, cobalt and nickel specialty inorganic salts and copper powders.
The Company also believes that it is the world's second largest producer of
cobalt extra-fine powders.
The Company believes that its focus on metal-based specialty chemicals as a core
business is an important competitive advantage. Competition in the metal-based
specialty chemicals market is based primarily on product quality, supply
reliability, price, service and technical support capabilities.
Generally, the Company is able to pass through to its customers increases and
decreases in raw material prices by increasing or decreasing, respectively, the
prices of its products. The degree of profitability of the Company depends, in
part, on the Company's ability to maintain the differential between its product
prices and raw material prices. The timing and amount of such adjustments in its
product prices depends upon the type of product sold and the inventories and
market share positions of the Company and its competitors.
The Company's flexibility with respect to the timing of its price adjustments is
greater with respect to carboxylates than with inorganic salts and powders.
Inorganic salt and powder prices respond almost immediately to changes in the
raw material base metal prices.
CUSTOMERS
The Company serves over 1,500 customers with no single customer accounting for
10% or more of the Company's net sales. During 1998, approximately 52% of the
Company's net sales were to customers in the Americas, 32% were to customers in
Europe and 16% were to customers in Asia-Pacific.
While customer demand for the Company's products is generally non-seasonal,
supply/demand and price perception dynamics of key raw materials do periodically
cause customers to either accelerate or delay purchases of the Company's
products, generating short-term results that may not be indicative of
longer-term trends.
RAW MATERIALS
The primary raw materials used by the Company in manufacturing its products are
cobalt, nickel and copper. The cost of raw materials fluctuates due to actual or
perceived changes in supply and demand and changes in availability from
suppliers. The Company's supply of cobalt has historically been sourced
primarily from the
2
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Democratic Republic of Congo (DRC), Australia, Finland and Zambia. Although the
Company has never experienced a material shortage of cobalt, production problems
and political and civil instability in certain supplier countries may in the
future affect the supply and market prices of cobalt. The Company attempts to
mitigate changes in prices and availability by entering into long-term supply
contracts with a variety of producers. The Company does not anticipate any
substantial interruption in its raw materials supply that would have a material
adverse effect on the Company's operations.
Raw material cost increases and/or contractual commitments can result in higher
working capital needs. The Company has had sufficient cash availability and
borrowing capacity to finance higher working capital as needed.
RESEARCH AND DEVELOPMENT
The Company's research and new product development program is an integral part
of its business. Research and development focuses on adapting proprietary
technologies to develop new products and working with customers to meet their
specific requirements. New products include new chemical formulations,
concentrations of various components, product forms and packaging methods.
Research and development expenses were approximately $10.4 million, $6.7
million, and $3.8 million for 1998, 1997, and 1996, respectively. In connection
with the acquisition of Auric Corporation (Fidelity), research and development
expenses increased in 1998 and are anticipated to increase at a rate of
approximately 5% per annum.
The Company's research staff of 83 full time persons conducts carboxylate, metal
salts and powders research and development at the Company's laboratories located
in Westlake, Ohio; Research Triangle Park, North Carolina; Newark, New Jersey;
and Kokkola, Finland. The Company's Finnish facility also maintains a research
agreement with Outokumpu Research Oy.
PATENTS AND TRADEMARKS
The Company holds approximately 170 patents related to the manufacturing,
processing and use of metallo-organic and metal-based compounds. In addition,
the Company has the right to use, and in certain instances license and sell,
technology covered by 16 patents in the areas of hydrometallurgical processes,
solvent extraction, agitators and metal powders. The Company does not consider
any single patent to be material to its business as a whole.
ENVIRONMENTAL MATTERS
Since 1970, a wide variety of environmental laws and regulations have been
adopted by the United States and by foreign, state and local governments which
continue to be amended and supplemented. The Company is subject to these laws
and regulations as a result of its operations and use of certain substances that
are, or have been, used, produced or discharged by the Company's plants. In
addition, soil and/or groundwater contamination presently exists and may in the
future be discovered at levels which require remediation under environmental
laws at properties now or previously owned, operated or used by the Company.
Annual environmental compliance costs were approximately $3.2 million in 1998.
Such ongoing expenses include costs relating to waste water analysis and
disposal, hazardous and non-hazardous solid waste analysis and disposal, sea
water control, air emissions control, soil and groundwater clean-up and
monitoring and related staff costs. The Company anticipates that it will
continue to incur costs and make expenditures at moderately increasing levels
for the foreseeable future in light of the fact that environmental laws and
regulations are becoming increasingly stringent, including the likely lowering
of permissible discharge limits.
The Company has also incurred capital expenditures of approximately $1.1 million
in 1998 in connection with environmental compliance. The Company anticipates
that capital expenditure levels for such purposes will increase to approximately
$3.1 million in 1999, as it continues to modify on an ongoing, regular basis,
certain of its processes which may have an environmental impact.
Due to the ongoing development and understanding of facts and remedial options
and due to the possibility of unanticipated regulatory developments, the amount
and timing of future environmental expenditures could vary significantly from
those currently anticipated. Although it is difficult to quantify the potential
impact of compliance with or liability under environmental protection laws,
based on presently available information, the
3
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Company believes that the ultimate aggregate cost to the Company of
environmental remediation as well as other legal proceedings arising in the
normal course of business, will not result in a material adverse effect upon its
financial condition or results of operations.
EMPLOYEES
At December 31, 1998, the Company had 988 full-time employees of which 626 were
located in the United States, 29 in Canada, 254 in Finland, 36 in Western Europe
and 43 in Asia-Pacific. Employees at the Company's facilities in Newark, New
Jersey; Research Triangle Park, North Carolina; Franklin, Pennsylvania; St.
George, Utah; Kuching, Malaysia; and Ezanville, France are non-unionized.
Employees at the Company's facilities in Kokkola, Finland are members of several
national workers' unions under various union agreements. Generally, such union
agreements have two-year terms. Employees at the Johnstown, Pennsylvania
facility are members of the United Steelworkers of America Union. The Johnstown
union agreement has a term of 5 years expiring in June of 2003. Employees at the
Belleville, Canada facility are members of the Communications, Energy and
Paperworkers Union of Canada. The Belleville union agreement has a term of five
years expiring in May, 2003. The Company believes relations with its employees
are good.
INTERNATIONAL OPERATIONS
Financial information related to international operations is contained in Note I
on page 26 of this report.
The Company's products are manufactured at facilities located in Belleville,
Canada; Kokkola, Finland; Ezanville, France; Kuching, Malaysia; Newark, New
Jersey; Research Triangle Park, North Carolina; Franklin, Pennsylvania;
Johnstown, Pennsylvania; and St. George, Utah. The Company conducts its
marketing and sales primarily from its offices in Dusseldorf, Germany; Research
Triangle Park, North Carolina; Westlake, Ohio; Newark, New Jersey; and Taipei,
Taiwan.
Although most of the Company's raw material purchases and product sales are
transacted in U.S. Dollars, liabilities for non-U.S. operating expenses and
income taxes are denominated in local currencies. Accordingly, fluctuations in
currency prices may affect the Company's operating results and net income.
Specifically, when the Finnish Markka has weakened against the U. S. Dollar,
there has been a net favorable effect on the Company due to lower operating
expenses and lower net balance sheet liabilities when translated into U. S.
Dollars. The reverse has been true when the Finnish Markka strengthened against
the U. S. Dollar. During 1998, in order to partially hedge the balance sheet
exposure to fluctuating rates, the Company entered into forward contracts to
purchase Finnish Markka. With the conversion of the Finnish Markka to the euro
as of January 1, 1999, the Company now enters into forward contracts to purchase
euro.
ITEM 2. PROPERTIES
The Company believes that its plants and facilities, which are of varying ages
and of different construction types, have been satisfactorily maintained, are in
good condition, are suitable for the Company's operations and generally provide
sufficient capacity to meet the Company's production requirements. The land on
which the Kokkola plant is located is leased with a remaining term of 92 years.
The land on which the St. George, Utah plant is located is leased with a
remaining term, including options, of 46 years. Otherwise, the real properties
comprising the Company's manufacturing facilities are owned by the Company.
The Company's Kokkola, Finland production facility (KCO) is situated on property
owned by Outokumpu Zinc Oy. KCO and Outokumpu Zinc Oy share certain physical
facilities, services and utilities under agreements with varying expiration
dates. Utilities and raw material purchase assistance contracts provide that KCO
jointly purchase with, or pay a fee to, affiliates of Outokumpu Oy for
assistance in negotiating contracts and securing bulk quantity discounts.
4
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Certain information regarding the Company's primary offices, research and
product development and manufacturing facilities is set forth below:
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APPROXIMATE LEASED/
LOCATION FACILITY FUNCTION SQUARE FEET OWNED
-------- ----------------- ----------- -------
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AMERICAS:
Newark, New Jersey Manufactures salts 21,000 owned
Marketing and administration offices 6,000 owned
Research and development facility 5,000 owned
Research Triangle Park, Manufactures powders 83,500 owned
North Carolina Marketing and administration offices 15,500 owned
Research and development facility 27,900 owned
Cleveland, Ohio Corporate headquarters 14,700 leased
Pilot plant facility 11,400 leased
Westlake, Ohio Research and development facility 27,500 owned
Marketing and administration offices 10,000 owned
Belleville, Ontario Manufactures carboxylates 33,000 owned
Franklin, Pennsylvania Manufactures carboxylates and salts 230,000 owned
Johnstown, Pennsylvania Manufactures powders 156,400 owned
St. George, Utah Manufactures salts 76,000 owned
EUROPE:
Kokkola, Finland Manufactures carboxylates, salts and 470,000 owned
powders
Ezanville, France Manufactures carboxylates 50,000 owned
Dusseldorf, Germany Marketing and administration offices 4,800 leased
ASIA-PACIFIC:
Kuching, Malaysia Manufactures salts 20,000 owned
Marketing and administration office 5,000 owned
Taipei, Taiwan Marketing and administration office 4,000 leased
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
Manufacturers of specialty chemical products, including the Company, are subject
to various legal and administrative proceedings incidental to such business. In
the opinion of the Company, disposition of all suits and claims should not in
the aggregate have a material adverse effect on the Company's business or
financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the Company's 1998 fiscal year.
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EXECUTIVE OFFICERS OF THE REGISTRANT
There is set forth below the name, age, positions and offices held by each of
the Company's executive officers as of March 19, 1999, as well as their business
experience during the past five years. Years indicate the year the individual
was named to the indicated position.
James P. Mooney -- 51
- - Chairman and Chief Executive Officer, 1994
Eugene Bak -- 65
- - President and Chief Operating Officer, 1994
James M. Materna -- 53
- - Chief Financial Officer, 1992
Thomas E. Fleming -- 53
- - Corporate Vice President, Chief Marketing Officer, 1997
- - President, OMG Americas, Inc., 1994 (chemical manufacturer, subsidiary of
registrant)
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information relating to the recent price and dividend history of the
Company's Common Stock is contained in Note J on page 27 of this report. The
Company's Common Stock is traded on the New York Stock Exchange. As of March 11,
1999, the Company had approximately 16,000 shareholders.
ITEM 6. SELECTED FINANCIAL DATA
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YEAR ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996 1995 1994
(IN MILLIONS, EXCEPT PER SHARE DATA) ------ ------ ------ ------ ------
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INCOME STATEMENT DATA:
Net sales...................................... $521.2 $487.3 $388.0 $361.0 $251.3
Gross profit................................... 145.0 117.4 84.0 74.6 60.6
Selling, general and administrative expenses... 58.1 46.8 32.6 30.6 25.4
Income from operations......................... 86.9 70.6 51.4 44.0 35.2
Other expense -- net........................... (15.6) (12.6) (7.0) (5.5) (4.1)
Net income..................................... $ 48.4 $ 38.4 $ 30.0 $ 25.9 $ 20.7
Net income per common share.................... $ 2.11 $ 1.84 $ 1.61 $ 1.39 $ 1.11
Net income per common share -- assuming
dilution..................................... $ 2.05 $ 1.78 $ 1.56 $ 1.36 $ 1.09
Dividends declared and paid per common share... $ 0.36 $ 0.32 $ 0.28 $ 0.24 $ 0.19
BALANCE SHEET DATA:
Total assets................................... $870.7 $601.1 $443.5 $358.0 $278.0
Long-term debt (excluding current portion)..... 310.0 170.3 109.3 89.8 46.6
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following management's discussion and analysis of financial condition and
results of operations should be read in conjunction with the financial
statements of the Company and the notes thereto appearing elsewhere in this
Annual Report.
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Set forth below is summary consolidated information of the Company:
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<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
(THOUSANDS OF DOLLARS) -------- -------- --------
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INCOME STATEMENT DATA:
Net sales.......................................... $521,226 $487,296 $387,999
Gross profit....................................... 144,952 117,363 83,974
Selling, general and administrative expenses....... 58,028 46,791 32,553
-------- -------- --------
Income from operations............................. 86,924 70,572 51,421
Other expense -- net............................... (15,600) (12,595) (7,018)
Income taxes....................................... (22,966) (19,534) (14,356)
-------- -------- --------
Net income......................................... $ 48,358 $ 38,443 $ 30,047
======== ======== ========
PRODUCTS SOLD (millions of pounds):
Carboxylates....................................... 60.5 50.3 43.1
Salts.............................................. 89.3 61.0 50.7
Powders............................................ 40.4 38.6 2.9
-------- -------- --------
Total.............................................. 190.2 149.9 96.7
======== ======== ========
</TABLE>
RESULTS OF OPERATIONS
1998 Compared to 1997
Net sales for 1998 were $521.2 million, an increase of 7.0% compared to 1997.
The increase in sales resulted principally from the acquisition of Auric
Corporation (Fidelity) and an increase in physical volume of products sold,
which offset a decline in the Company's product prices resulting from decreasing
cobalt, nickel and copper market prices.
The following table summarizes market price fluctuations on the primary raw
materials used by the Company in manufacturing its products:
<TABLE>
<CAPTION>
MARKET PRICE RANGES PER POUND
YEAR ENDED DECEMBER 31,
------------------------------------
1998 1997
---------------- ----------------
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Cobalt -- 99.3% Grade.................... $ 8.85 TO $21.18 $17.50 to $22.23
Nickel................................... $ 1.71 TO $ 2.69 $ 2.66 to $ 3.66
Copper................................... $ 0.65 TO $ 0.85 $ 0.77 to $ 1.20
</TABLE>
The Company generally passes through to its customers increases and decreases in
raw material prices by increasing and decreasing, respectively, the prices of
its products. Cobalt 99.3% market prices (per pound) dropped from approximately
$18 at September 30, 1998, to $8.85 by December 31, 1998, and have since
rebounded to approximately $17 during the first quarter of 1999. When raw
material prices decrease precipitously, the Company's LIFO inventory value may
exceed the value at which the inventory can be sold (i.e., LIFO inventory costs
may exceed market). Consequently, the Company evaluates its inventory carrying
value to state it at the lower of cost or market. At December 31, 1998, no
adjustment to carrying value was needed, as the market value of the inventory
exceeded LIFO cost.
Pounds of product sold by the Company were 190.2 million pounds during 1998
compared to 149.9 million pounds in 1997. The increase in carboxylate products
sold was primarily the result of the acquisition of Dussek Campbell Limited
(Dussek) and increases in sales of cobalt carboxylates and PVC additives. In the
salts category, the increase was due to the acquisition of Fidelity as overall
nickel salt volumes, excluding Fidelity, declined due primarily to a decrease in
the sales of lower margin nickel sulfate products. The increase in physical
volume of powder products reflects the introduction of tungsten powders during
1998 and overall growth in cobalt extra fine powders, which offset a decrease in
copper powder volumes related to slowness in the aerospace and agricultural
equipment business areas.
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Gross profit increased to $145.0 million in 1998, a 23.5% increase from 1997.
The improvement in gross profit was primarily the result of the acquisitions of
Fidelity and Dussek, an increased contribution from higher value-added products,
and higher physical volume excluding the decrease in lower margin nickel sulfate
products. Cost of products sold decreased to 72.2% of net sales for the year
ended 1998 from 75.9% of net sales in 1997 primarily because of lower cobalt,
nickel and copper market prices, which declined more rapidly than selling
prices, improved product mix and the acquisitions of Fidelity and Dussek.
Selling, general and administrative expenses increased to 11.1% of net sales in
1998 from 9.6% of net sales in 1997, due to the acquisition of Fidelity and its
relatively higher selling, administrative, and research expenses per dollar of
sales, and to the decline in net sales resulting from lower cobalt, nickel and
copper prices.
Other expense-net was $15.6 million in 1998 compared to $12.6 million in 1997
due primarily to increased interest expense on higher outstanding borrowings,
primarily as a result of the acquisitions of Fidelity and Dussek.
Income taxes as a percentage of income before income taxes decreased to 32.2% in
1998 from 33.7% in 1997. The lower effective tax rate was due primarily to
higher income earned in the relatively low statutory tax countries of Finland
and Malaysia, offsetting the impact of non-tax deductible goodwill related to
the acquisitions of Fidelity and Dussek.
Net income for 1998 was $48.4 million, an increase of $9.9 million from 1997,
primarily due to the aforementioned factors.
1997 Compared to 1996
Net sales for 1997 were $487.3 million, an increase of 25.6% compared to 1996.
The increase in sales resulted principally from the January, 1997 acquisition of
SCM Metal Products, Inc. (SCM) and an increase in physical volume of products
sold, which offset a decline in the Company's product prices resulting from
decreasing cobalt market prices.
The following table summarizes market price fluctuations on the primary raw
materials used by the Company in manufacturing its products:
<TABLE>
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MARKET PRICE RANGES PER POUND
YEAR ENDED DECEMBER 31,
------------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
Cobalt -- 99.3% Grade.................... $17.50 to $22.23 $18.40 to $28.58
Nickel................................... $ 2.66 to $ 3.66 $ 2.92 to $ 3.78
Copper................................... $ 0.77 to $ 1.20 $ .84 to $ 1.29
</TABLE>
Pounds of product sold by the Company were 149.9 million pounds during 1997
compared to 96.7 million pounds in 1996. The increase in carboxylate products
sold resulted from higher sales in all market regions. The increase in physical
volume of salt and powder products sold primarily reflects the addition of
copper salt and powder products sold, as a result of the SCM acquisition.
Gross profit increased to $117.4 million in 1997, a 39.8% increase from 1996.
The improvement in gross profit was primarily the result of the acquisition of
SCM, higher physical volume of products sold, and changes in product mix. Cost
of products sold decreased to 75.9% of net sales for the year ended 1997 from
78.4% of net sales in 1996 primarily because of lower cobalt market prices and
the acquisition of SCM.
Selling, general and administrative expenses increased to 9.6% of net sales in
1997 from 8.4% of net sales in 1996, primarily as a result of the acquisition of
SCM.
Other expense-net was $12.6 million in 1997 compared to $7.0 million in 1996 due
primarily to increased interest expense on higher outstanding borrowings
associated with the acquisition of SCM, offset by gains on foreign exchange.
Income taxes as a percentage of income before income taxes increased to 33.7% in
1997 from 32.3% in 1996 due primarily to the non-tax deductible goodwill related
to the acquisition of SCM.
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Net income for 1997 was $38.4 million, an increase of $8.4 million from 1996,
primarily due to the aforementioned factors.
LIQUIDITY AND CAPITAL RESOURCES
During 1998, the Company's net working capital increased by approximately $78
million. This increase was primarily the result of provisional payments made on
Zambia Consolidated Copper Mines Limited cobalt-copper concentrate, purchased in
the fourth quarter, 1998 (see Note H) and approximately $25 million in
acquisition working capital. Capital expenditures increased in 1998, primarily
due to expansion at various plant facilities and the smelter construction
project in Lumbumbashi, Democratic Republic of Congo. These increased cash needs
were funded through additional borrowings under the Company's revolving credit
facility, an equity offering and cash generated by operations.
In July, 1998, the Company sold 1,750,000 shares of common stock in a public
offering. A portion of the net proceeds of the offering, in the amount of $68.7
million, was used to pay down a portion of the debt incurred in connection with
the 1998 acquisitions.
In January, 1999, the Company's revolving credit facility was revised to
increase available credit to $325 million to finance the purchase of
cobalt-copper concentrate, and to expand its sources of capital by adding three
new institutions. Subject to several limitations in its credit facilities, the
Company may incur additional borrowings under this facility to finance working
capital and certain capital expenditures, including, without limitation, the
purchase of additional raw materials.
The Company believes that it will have sufficient cash generated by operations
and through its credit facility to provide for its future working capital and
capital expenditure requirements and to pay quarterly dividends on its common
stock, subject to the Board's discretion. In February, 1999, the Board of
Directors authorized an increase in quarterly dividends to $.10 per share.
The Company has ongoing capital expenditure programs to improve its processing
technology and plant and equipment, and to expand capacity to accommodate future
growth. The Company anticipates that capital spending, exclusive of acquisitions
or joint ventures, will approximate $35 million for 1999.
Although most of the Company's raw material purchases and product sales are
transacted in U.S. Dollars, liabilities for non-U.S. operating expenses and
income taxes are denominated in local currencies. Accordingly, fluctuations in
currency prices will affect the Company's operating results and net income (see
page 4 -- International Operations).
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company, as a result of its global operating and financial activities, is
exposed to changes in commodity prices, interest rates and foreign currency
exchange rates which may adversely affect its results of operations and
financial position. In seeking to minimize the risks and/or costs associated
with such activities, the Company manages exposures to changes in commodity
prices, interest rates and foreign currency exchange rates through its regular
operating and financing activities.
The primary raw materials used by the Company in manufacturing its products are
cobalt, nickel and copper. While nickel and copper are worldwide commodities and
generally available, cobalt availability can be more uncertain. The Company's
supply of cobalt has historically been sourced primarily from the Democratic
Republic of Congo, Australia, Finland and Zambia. Although the Company has never
experienced a material shortage of cobalt, production problems and political and
civil instability in certain supplier countries may affect the supply and market
price of cobalt. If a substantial interruption should occur in supply from a
primary source, there is no assurance that the Company would be able to obtain
as much cobalt from other sources as would be necessary to satisfy the Company's
requirements at prices comparable to its current arrangements. The Company
attempts to mitigate changes in prices and availability by maintaining adequate
inventories and long-term supply relationships with a variety of producers. The
cost of raw materials fluctuates due to both actual and perceived changes in
supply and demand. Generally, the Company is able to pass through to its
customers increases and decreases in raw material prices by increasing or
decreasing, respectively, the prices of its products. The degree of
profitability of the Company principally depends on the Company's ability to
maintain the differential between its product prices and product costs.
Substantial, sustained reductions in the price of raw materials, particularly
9
<PAGE> 11
cobalt, could also result in the Company's inventory being written down to
market value (see Results of Operations, 1998 Compared to 1997).
The Company is exposed to interest rate risk primarily through its borrowing
activities. The Company predominantly utilizes U.S. Dollar denominated
borrowings to fund its working capital and investment needs. The majority of the
Company's borrowings are in variable rate instruments. The Company enters into
interest rate swap agreements to convert a portion of the variable rate
instruments to fixed rate contracts over typically a three year period. There is
an inherent roll-over risk for borrowings as they mature and are renewed at
current market rates. The extent of this risk is not quantifiable or predictable
because of the variability of future interest rates and business financing
requirements (see Note D). The following table presents principal cash flows and
related weighted-average interest rates by expected maturity dates of the
Company's long term-debt.
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
--------------------------------------------------------------------------
DECEMBER 31, 1998
------------------------------------ FAIR
1999 2000 2001 2002 2003 THEREAFTER TOTAL VALUE
(THOUSANDS OF DOLLARS) ---- ---- ---- ---- ---- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-term debt, including
current portion
Fixed rate................... $ 20 $ 20 $ 20 $ 20 $ 60,124 $ 60,204 $ 60,204
Average interest rate........ 4.0% 4.0% 4.0% 4.0% 7.1%
Variable rate................ $141 $249,760 $249,901 $249,901
Average interest rate........ 1.0% 6.1%
</TABLE>
In addition to the United States, the Company has manufacturing and other
facilities in Canada, Europe and Asia-Pacific, and markets its products
worldwide. Although most of the Company's raw material purchases and product
sales are transacted in U.S. Dollars, liabilities for non-U.S. operating
expenses and income taxes are denominated in local currencies. Accordingly,
fluctuations in currency prices may affect the Company's operating results and
net income (see page 4 -- International Operations).
YEAR 2000
Based on ongoing reviews of the Company's systems, the Company presently
believes that with modifications to existing computer software and conversions
to new software, the Year 2000 Issue will not pose significant operational
problems to its normal business activities.
The Company's plan to resolve the Year 2000 Issue involves the following four
phases: assessment, remediation, testing and implementation. The following table
summarizes the Company's progress on these Year 2000 phases, with respect to: 1)
the nature and potential effects of the Year 2000 on information (IT) and non-IT
systems; 2) the status of the Company's progress in becoming Year 2000 ready for
both IT and non-IT systems, including estimated timetable for completion of each
phase; and 3) third parties and their exposure to the Year 2000.
<TABLE>
<CAPTION>
RESOLUTION PHASES
-------------------------------------------------------
EXPOSURE TYPE ASSESSMENT REMEDIATION TESTING IMPLEMENTATION
------------- ---------- ----------- -------- --------------
<S> <C> <C> <C> <C>
INFORMATION SYSTEMS
% Complete at 12/31/98.............. 85% 75% 75% 75%
Expected Completion Date............ Apr 1999 Jun 1999 Jul 1999 Sep 1999
NON-INFORMATION SYSTEMS
Production and Manufacturing Systems
% Complete at 12/31/98.............. 100% 85% 75% 70%
Expected Completion Date............ Sep 1998 Jun 1999 Jul 1999 Sep 1999
Products
% Complete at 12/31/98.............. 100% N/A N/A N/A
Expected Completion Date............ Sep 1998
THIRD PARTIES
System Interface
% Complete at 12/31/98.............. 95% N/A N/A N/A
Expected Completion Date............ Apr 1999
Other Material Exposures
% Complete at 12/31/98.............. 100% N/A N/A N/A
Expected Completion Date............ Sep 1998
</TABLE>
10
<PAGE> 12
This project will be completed using a combination of existing internal and
external resources. The total cost of the Year 2000 project is estimated at $2.5
million and is being funded through operating cash flows. As of December 31,
1998, approximately $1.1 million had been incurred. Of the total project cost,
approximately $.8 million is attributable to a new software purchase, which has
been capitalized. The remaining $1.7 million, which is being expensed as
incurred, is not expected to have a material effect on the results of operations
of the Company.
Management of the Company believes it has an effective program in place to
resolve the Year 2000 issue in a timely manner. As noted above, the Company has
not yet completed all necessary phases of the Year 2000 program. Disruptions in
the economy generally resulting from Year 2000 issues could also materially
adversely affect the Company. The amount of potential liability and lost revenue
cannot be reasonably estimated at this time.
The Company currently has no contingency plans in place in the event it does not
complete all phases of the Year 2000 program, but does not believe that lack of
completion would materially disrupt its operations. The Company plans to
evaluate the status of completion in April 1999 and determine whether such a
plan is necessary.
EURO CONVERSION
The Company has converted and/or installed the necessary software modifications
and is successfully operating in the post-euro conversion European economy since
the introduction of the euro currency on January 1, 1999.
CAUTIONARY STATEMENT FOR "SAFE HARBOR" PURPOSES UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
The Company is making this statement in order to satisfy the "safe harbor"
provisions contained in the Private Securities Litigation Reform Act of 1995.
The foregoing discussion includes forward-looking statements relating to the
business of the Company. Such forward-looking statements are subject to
uncertainties and factors relating to the Company's operations and business
environment, all of which are difficult to predict and many of which are beyond
the control of the Company, that could cause actual results of the Company to
differ materially from those matters expressed in or implied by such
forward-looking statements. The Company believes that the following factors,
among others, could affect its future performance and cause actual results of
the Company to differ materially from those expressed in or implied by
forward-looking statements made by or on behalf of the Company: (a) the price
and supply of raw materials, particularly cobalt, copper and nickel; (b) demand
for metal-based specialty chemicals in the mature markets in the United States
and Europe; (c) demand for metal-based specialty chemicals in Asia-Pacific and
other less mature markets; (d) the effect of non-currency risks of investing in
and conducting operations in foreign countries, together with fluctuations in
currency exchange rates upon the Company's international operations, including
those relating to political, social, economic and regulatory factors; and (e)
the Company's ability and its customers' and suppliers' ability to replace,
modify or upgrade computer programs in ways that adequately address the Year
2000 Issue.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The disclosures required under this item are included in Management's Discussion
and Analysis of Financial Condition and Results of Operations, on pages 9 and 10
of this report.
11
<PAGE> 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
OM Group, Inc.
We have audited the accompanying consolidated balance sheets of OM Group, Inc.
as of December 31, 1998 and 1997, and the related statements of consolidated
income, stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of OM Group, Inc. at
December 31, 1998 and 1997, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Cleveland, Ohio
February 12, 1999
12
<PAGE> 14
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
(THOUSANDS OF DOLLARS, EXCEPT SHARE DATA) -------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 7,750 $ 13,193
Accounts receivable, less allowance of $1,390 in 1998 and
$680 in 1997........................................... 80,906 80,602
Inventories............................................... 283,264 219,201
Refundable taxes.......................................... 15,673
Other current assets...................................... 32,648 9,913
-------- --------
TOTAL CURRENT ASSETS........................................ 420,241 322,909
Property, plant and equipment:
Land...................................................... 4,241 2,867
Buildings and improvements................................ 80,148 53,468
Machinery and equipment................................... 242,137 162,938
Furniture and fixtures.................................... 12,242 10,455
-------- --------
338,768 229,728
Less accumulated depreciation............................. 93,423 74,112
-------- --------
245,345 155,616
Other assets:
Goodwill and other intangible assets, less accumulated
amortization of $13,510 in 1998 and $8,296 in 1997..... 188,486 116,751
Other assets.............................................. 16,647 5,787
-------- --------
TOTAL ASSETS................................................ $870,719 $601,063
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 141 $ 219
Short-term debt........................................... 2,000
Accounts payable.......................................... 76,412 67,521
Accrued income taxes...................................... 9,532
Deferred income taxes..................................... 20,271 8,628
Other accrued expenses.................................... 20,743 14,782
-------- --------
TOTAL CURRENT LIABILITIES................................... 119,567 100,682
Long-term debt.............................................. 309,964 170,334
Deferred income taxes....................................... 29,950 20,555
Other long-term liabilities................................. 7,095 8,251
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized 2,000,000 shares; no shares issued or
outstanding
Common stock, $.01 par value:
Authorized 60,000,000 shares; issued 23,959,346 shares
in 1998 and 22,209,346 shares in 1997.................. 240 222
Capital in excess of par value............................ 258,085 189,281
Retained earnings......................................... 155,691 117,465
Treasury stock (234,847 shares in 1998 and 142,720 shares
in 1997, at cost)...................................... (8,494) (4,829)
Accumulated other comprehensive income.................... (1,379) (898)
-------- --------
TOTAL STOCKHOLDERS' EQUITY.................................. 404,143 301,241
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $870,719 $601,063
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE> 15
STATEMENTS OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) -------- -------- --------
<S> <C> <C> <C>
Net sales................................................. $521,226 $487,296 $387,999
Cost of products sold..................................... 376,274 369,933 304,025
-------- -------- --------
144,952 117,363 83,974
Selling, general and administrative expenses.............. 58,028 46,791 32,553
-------- -------- --------
Income from operations.................................... 86,924 70,572 51,421
Other income (expense)
Interest expense.......................................... (15,560) (13,410) (7,485)
Interest income........................................... 223 100 244
Foreign exchange (loss) gain.............................. (263) 715 223
-------- -------- --------
(15,600) (12,595) (7,018)
-------- -------- --------
Income before income taxes................................ 71,324 57,977 44,403
Income taxes.............................................. 22,966 19,534 14,356
-------- -------- --------
NET INCOME................................................ $ 48,358 $ 38,443 $ 30,047
======== ======== ========
NET INCOME PER COMMON SHARE............................... $ 2.11 $ 1.84 $ 1.61
======== ======== ========
NET INCOME PER COMMON SHARE -- ASSUMING DILUTION.......... $ 2.05 $ 1.78 $ 1.56
======== ======== ========
CASH DIVIDENDS PAID PER COMMON SHARE...................... $ .36 $ .32 $ .28
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
14
<PAGE> 16
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
CAPITAL OTHER
COMMON IN EXCESS RETAINED TREASURY COMPREHENSIVE
STOCK OF PAR VALUE EARNINGS STOCK INCOME TOTAL
(THOUSANDS OF DOLLARS) ------ ------------ -------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1996....... $125 $102,088 $ 61,370 $(2,119) $ (36) $161,428
Net income....................... 30,047 30,047
Translation adjustment........... (205) (205)
--------
Total comprehensive income....... 29,842
Non-employee directors'
compensation................... 100 100
Dividends paid................... (5,465) (5,465)
Treasury stock purchased......... (742) (742)
Issuance of shares under benefit
plans, including tax benefit... (81) 240 159
Three-for-two stock split........ 63 (63)
---- -------- -------- ------- ------- --------
BALANCE AT DECEMBER 31, 1996..... 188 102,125 85,871 (2,621) (241) 185,322
Net income....................... 38,443 38,443
Translation adjustment........... (657) (657)
--------
Total comprehensive income....... 37,786
Non-employee directors'
compensation................... 198 198
Dividends paid................... (6,792) (6,792)
Treasury stock purchased......... (4,173) (4,173)
Issuance of shares under benefit
plans, including tax benefit... (57) 1,965 1,908
Sale of common stock............. 34 86,958 86,992
---- -------- -------- ------- ------- --------
BALANCE AT DECEMBER 31, 1997..... 222 189,281 117,465 (4,829) (898) 301,241
Net income....................... 48,358 48,358
Translation adjustment........... (481) (481)
--------
Total comprehensive income....... 47,877
Non-employee directors'
compensation................... 133 133
Dividends paid................... (8,246) (8,246)
Treasury stock purchased......... (7,070) (7,070)
Issuance of shares under benefit
plans, including tax benefit... (1,886) 3,405 1,519
Sale of common stock............. 18 68,671 68,689
---- -------- -------- ------- ------- --------
BALANCE AT DECEMBER 31, 1998..... $240 $258,085 $155,691 $(8,494) $(1,379) $404,143
==== ======== ======== ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements
15
<PAGE> 17
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1998 1997 1996
(THOUSANDS OF DOLLARS) --------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................................. $ 48,358 $ 38,443 $ 30,047
Items not affecting cash:
Depreciation and amortization......................... 25,435 21,225 15,814
Foreign exchange loss (gain).......................... 263 (715) (223)
Deferred income taxes................................. 17,309 5,108 7,841
Changes in operating assets and liabilities:
Accounts receivable................................... 5,139 (9,435) 11,905
Inventories........................................... (75,976) 15,520 (83,482)
Accounts payable and other accruals................... (11,387) (40,837) 34,765
Other................................................. (10,283) 637 1,699
--------- --------- ---------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES..... (1,142) 29,946 18,366
INVESTING ACTIVITIES
Expenditures for property, plant and equipment -- net... (91,942) (34,785) (30,679)
Acquisitions of businesses.............................. (103,253) (123,718) (395)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES................... (195,195) (158,503) (31,074)
FINANCING ACTIVITIES
Dividend payments....................................... (8,246) (6,792) (5,465)
Short-term borrowings................................... 2,000
Long-term borrowings.................................... 197,773 172,315 33,364
Payments of long-term debt.............................. (63,569) (114,643) (15,591)
Purchase of treasury stock.............................. (7,070) (4,173) (742)
Proceeds from exercise of stock options................. 719 708 159
Issuance of common stock................................ 68,689 86,992
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES............... 190,296 134,407 11,725
Effect of exchange rate changes on cash and cash
equivalents........................................... 598 (475) (297)
--------- --------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ (5,443) 5,375 (1,280)
Cash and cash equivalents at beginning of year.......... 13,193 7,818 9,098
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR................ $ 7,750 $ 13,193 $ 7,818
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of dollars, except per share amounts)
A. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements include the
accounts of OM Group, Inc. (the Company) and its majority-owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated in
consolidation. Investments in joint ventures are accounted for under the equity
method.
Inventories -- Inventories are principally stated at the lower of cost or market
and valued using the last-in, first-out (LIFO) method.
Property, Plant and Equipment -- Property, plant and equipment is recorded at
historical cost less accumulated depreciation. Depreciation of plant and
equipment is provided by the straight-line method over the useful lives ranging
from three to forty years, based on the various classes of assets. Long-lived
assets are assessed for impairment when operating profits for the related
business indicate that the carrying value may not be recoverable.
Research and Development -- Selling, general and administrative expenses include
research and development costs of $10,367, $6,687, and $3,756 in 1998, 1997 and
1996, respectively.
Income Taxes -- Deferred income taxes are provided to recognize the effect of
temporary differences between financial and tax reporting arising principally
from different depreciation methods and inventory reserves. Deferred income
taxes are not provided for undistributed earnings of foreign consolidated
subsidiaries, to the extent such earnings are reinvested for an indefinite
period of time.
Foreign Currency Translation -- The functional currency for the Company's
Finnish subsidiary is the U.S. Dollar since a majority of its purchases and
sales are denominated in U.S. Dollars and it holds a significant intercompany
note payable denominated in U.S. Dollars. Accordingly, foreign exchange gains
and losses related to assets, liabilities and transactions which are denominated
in other currencies (principally the Finnish Markka) are included in results of
operations. The Company enters into forward contracts to partially hedge its
balance sheet exposure to the Finnish Markka, and accordingly, gains or losses
related to the forward contracts are also included in results of operations.
The functional currency for the Company's other subsidiaries outside of the
United States is the applicable local currency. For those operations, financial
statements are translated into U.S. Dollars at year-end exchange rates as to
assets and liabilities and weighted average exchange rates as to revenues and
expenses. The resulting translation adjustments are recorded as a component of
stockholders' equity.
Goodwill and Other Intangibles -- Goodwill represents the excess of the purchase
price of businesses acquired over the estimated fair market value of the net
assets acquired. Other intangibles represent principally patents, trademarks and
technology acquired. Goodwill, other intangible assets and capitalized software
are being amortized on a straight-line basis over their respective useful lives
(five to forty years). Goodwill is assessed for impairment when operating
profits for the related business indicate that the carrying value may not be
recoverable.
Cash Equivalents -- For purposes of the statements of consolidated cash flows,
all highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents.
Stock Options and Compensation Plans -- The Company grants stock options for a
fixed number of shares to certain employees with an exercise price equal to the
fair value of the shares at the date of grant and accounts for stock options
using the intrinsic value method. Accordingly, compensation expense is not
recognized for the stock option grants.
Non-employee members of the Board of Directors are eligible to receive their
annual retainer in the form of cash, stock options, or restricted stock. If
stock options or restricted stock are elected, the acquisition price is 75% of
the fair market value and directors' cash compensation is utilized to acquire
the options or restricted stock. Also, directors electing to receive restricted
stock receive additional restricted stock equal to 5% of their applied cash
17
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
compensation. Accordingly, compensation expense is recognized for stock option
and restricted share grants elected by eligible directors.
Revenue Recognition -- Revenues are recognized when products are shipped to
unaffiliated customers.
Use of Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions in certain circumstances that affect the amounts reported in the
accompanying consolidated financial statements and notes. Actual results could
differ from these estimates.
Financial Presentation Changes -- Certain amounts for prior years have been
reclassified to conform to the current year presentation.
Recently Issued Accounting Pronouncements -- In June, 1998, SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" was issued. SFAS
No. 133 provides a comprehensive and consistent standard for the recognition and
measurement of derivatives and hedging activities. The Company must adopt SFAS
No. 133 no later than the first quarter of fiscal year 2000; adoption of this
Statement is not expected to have a material effect on earnings or the financial
position of the Company.
B. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
Raw materials and supplies.............................. $ 99,471 $110,477
Finished goods.......................................... 123,651 107,989
-------- --------
223,122 218,466
LIFO reserve............................................ 60,142 735
-------- --------
Total inventories............................. $283,264 $219,201
======== ========
</TABLE>
C. ACQUISITIONS AND SALE OF COMMON STOCK
The Company acquired Auric Corporation (Fidelity) and Dussek Campbell Limited
(Dussek) in January and February, 1998, respectively, for an aggregate amount of
approximately $95,000. These acquisitions, which had combined fiscal 1997 sales
and net income aggregating approximately $60,000 and $8,200 respectively, have
been recorded using the purchase method of accounting. Accordingly, the
Company's results of operations reflect the impact of Fidelity and Dussek from
their respective dates of acquisition.
In April, 1998, the Company acquired the rapid carbothermal reduction technology
and related assets of Dow Chemical Company for approximately $13,000, plus a
conditional amount up to $20,000 based upon the achievement of certain
performance targets, which would be paid at the end of five years.
The acquisitions were initially financed through bank borrowings. In July, 1998,
the Company sold 1,750,000 shares of common stock in a public offering; the
majority of the net proceeds of $68,700 were used to pay down a portion of the
debt incurred in connection with the aforementioned acquisitions.
Goodwill associated with the aforementioned acquisitions of approximately
$74,000 is being amortized on a straight-line basis over a forty-year period.
18
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
D. FINANCIAL INSTRUMENTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
Notes payable to banks.................................. $249,760 $110,000
Notes payable to insurance companies.................... 60,000 60,000
Other................................................... 345 553
-------- --------
310,105 170,553
Less: Current portion................................... 141 219
-------- --------
Total long-term debt.......................... $309,964 $170,334
======== ========
</TABLE>
At December 31, 1998, the Company had a $250,000 revolving credit facility with
a group of banks, including a $10,000 sublimit for issuance of letters of
credit, with variable interest rates based upon either the agent bank's base
lending rate or LIBOR plus a .40% to .80% margin, at the Company's option. The
Company's revolving credit facility was further expanded to $325,000 in January,
1999, including $10,000 for the issuance of letters of credit. The five year
credit facility, expiring in January, 2004, has variable interest rates based
upon either the agent bank's base lending rate or LIBOR plus a .40% to 1.50%
margin at the Company's option. Under this credit agreement, the Company must
meet certain funded debt ratios, and there are also covenants which restrict
capital expenditure, dividend paying and borrowing capability of the Company.
Capital expenditures are restricted to $75,000 in 1999, while annual dividends
are limited to $12,000 or 25% of consolidated net income, whichever is greater.
The Company has entered into several interest rate swap agreements to convert
the variable interest rates on an aggregate contract amount of $60,000 to an
average fixed rate of 5.65% plus .40% to .80% for a three year period ending
February 9, 2001. During the three year period ended December 20, 1997, the
Company had an interest rate swap agreement to convert the variable interest
rates on an aggregate contract amount of $30,000 to a fixed rate of 7.28% plus
.35% to .75%. At December 31, 1998, the combined effective rate of the Company's
bank borrowings and the related swap agreements was 6.33%. The net interest paid
or received on interest rate swaps is included in interest expense. The
counterparties to the interest rate swaps are international commercial banks.
During 1995 the Company borrowed $30,000 from a group of insurance companies
through a private placement. The borrowings bear interest at 7.38% and are due
August 30, 2005. During 1997, in order to convert to a fixed rate and extend the
term on a portion of its borrowings, the Company borrowed an additional $30,000
in a private placement with a group of insurance companies and used the proceeds
to reduce borrowings under its revolving credit facility with its banks.
Borrowings amounting to $15,000 bear interest at 6.82% and are due October 24,
2007. The balance of the borrowings bears interest at 6.99% and is due October
24, 2009. Under the terms of these note purchase agreements, the Company must
meet certain interest coverage and funded debt ratios. There are also covenants
which restrict the dividend paying and borrowing capability of the Company.
Aggregate annual maturities of long-term debt for the five years following
December 31, 1998 are as follows: 1999 -- $141; 2000 -- $20; 2001 -- $20;
2002 -- $20 and 2003 -- $20. Interest paid, net of capitalized amounts, was
$15,660, $14,771 and $7,056 for the years ended December 31, 1998, 1997 and
1996, respectively. Interest capitalized as part of construction of major fixed
assets was $1,605 in 1998 and $0 in 1997 and 1996. At December 31, 1998, the
carrying value of the Company's debt approximated its fair value.
At December 31, 1998, the Company had short-term borrowings of $2,000 from a
commercial bank, with a variable interest rate based upon the bank's base
lending rate of 7.75%.
The Company enters into forward contracts to purchase Finnish Markka to
partially hedge its balance sheet exposure to rate fluctuations between the
Finnish Markka and the U.S. Dollar. At December 31, 1998, the notional value of
these forward contracts approximated $7,850. The fair value of the forward
contracts, based on
19
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
the current settlement price at December 31, 1998, approximated $225 payable,
which was recorded in results of operations.
E. INCOME TAXES
Income before income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
United States................................... $17,998 $ 7,794 $ 1,384
Outside the United States....................... 53,326 50,183 43,019
------- ------- -------
$71,324 $57,977 $44,403
======= ======= =======
</TABLE>
Income taxes are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Current:
United States:
Federal.................................... $ 1,634 $ 1,267 $ 923
State and local............................ 860 1,166 258
Outside the United States..................... 3,163 11,993 5,334
------- ------- -------
5,657 14,426 6,515
Deferred:
United States................................. 5,426 1,209 644
Outside the United States..................... 11,883 3,899 7,197
------- ------- -------
17,309 5,108 7,841
------- ------- -------
$22,966 $19,534 $14,356
======= ======= =======
</TABLE>
Significant components of the Company's deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
Current asset -- operating accruals...................... $ 2,614 $ 3,372
Current liability -- inventories......................... (20,271) (8,628)
Long-term asset -- employee benefits..................... 3,255 2,580
Long-term liability -- accelerated depreciation.......... (29,950) (20,555)
-------- --------
$(44,352) $(23,231)
======== ========
</TABLE>
20
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
A reconciliation of income taxes computed at the United States statutory rate to
the effective income tax rate follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Income taxes at the United States statutory rate......... 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit........... .8 1.3 .4
Effective tax rate differential of earnings outside of
the United States...................................... (6.0) (2.7) (5.7)
Adjustment of worldwide tax liabilities.................. .1 (2.0) 2.2
Non-deductible goodwill.................................. 2.0 1.6 .4
Other--net............................................... .3 .5
---- ---- ----
32.2% 33.7% 32.3%
==== ==== ====
</TABLE>
The Company has not provided additional United States income taxes on
approximately $152,000 of undistributed earnings of consolidated foreign
subsidiaries included in stockholders' equity. Such earnings could become
taxable upon the sale or liquidation of these foreign subsidiaries or upon
dividend repatriation. The Company's intent is for such earnings to be
reinvested by the subsidiaries or to be repatriated only when it would be tax
effective through the utilization of foreign tax credits. It is not practicable
to estimate the amount of unrecognized withholding taxes and deferred tax
liability on such earnings.
The Company conducts business in Malaysia, which attracts industry by granting a
"holiday" from income taxes. This agreement, which expires in March, 2002,
reduced tax expense in 1998 by $1,051, or $.04 per common share-assuming
dilution. Income tax payments were $24,611, $12,551, and $14,129 during the
years ended December 31, 1998, 1997 and 1996, respectively.
F. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
The Company sponsors several defined contribution plans covering certain
employees. Company contributions are determined by the Board of Directors based
upon participant compensation. The Company also sponsors a non-contributory,
non-qualified supplemental executive retirement plan for certain employees,
providing benefits beyond those covered in the defined contribution plans; the
Company also maintains a 401(k) plan for certain non-union employees in the
United States. Aggregate defined contribution plan expenses were $4,784, $2,295
and $1,727 in 1998, 1997 and 1996, respectively.
The 1998 increase in aggregate defined contribution plan expenses was due to
additional participants resulting from businesses acquired in 1998 and 1997 (see
Note C).
21
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
The Company has non-contributory defined benefit pension plans and other
postretirement benefit plans, primarily health care and life insurance.
Components of plan obligations and assets, and the recorded asset (liability) at
December 31 are as follows:
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Benefit obligation at beginning of year............ $(15,827) $(14,368) $(6,041) $(4,353)
Service cost....................................... (158) (513) (474) (202)
Interest cost...................................... (991) (1,056) (443) (332)
Plan amendments.................................... (1,361) (1,468)
Actuarial (loss) gain.............................. (1,747) (483) (1,281) 236
Benefits paid...................................... 741 593 231 78
Curtailment gain................................... 2,664
-------- -------- ------- -------
Benefit obligation at end of year.................. $(15,318) $(15,827) $(9,369) $(6,041)
-------- -------- ------- -------
Fair value of plan assets at beginning of year..... $ 13,746 $ 11,737 $ 0 $ 0
Actual return on plan assets....................... 1,367 1,696
Employer contributions............................. 395 906 231 78
Benefits paid...................................... (741) (593) (231) (78)
-------- -------- ------- -------
Fair value of plan assets at end of year........... $ 14,767 $ 13,746 $ 0 $ 0
-------- -------- ------- -------
Plan assets less than benefit obligations.......... $ (551) $ (2,081) $(9,369) $(6,041)
Unamortized:
Net loss (gain).................................. 1,412 (148) 1,245 (44)
Prior service cost............................... 2,694 1,468
-------- -------- ------- -------
Recorded asset (liability)......................... $ 861 $ (2,229) $(5,430) $(4,617)
======== ======== ======= =======
</TABLE>
The projected benefit obligation, accumulated benefit obligation and fair value
of plan assets for pension plans with accumulated benefit obligations in excess
of plan assets were $3,063, $3,063 and $2,278 respectively, as of December 31,
1998 and $2,865, $2,865, and $2,007, respectively, as of December 31, 1997.
The components of net periodic benefit cost (income) for the years ended
December 31 are as follows:
<TABLE>
<CAPTION>
PENSION BENEFITS
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Service cost..................................... $ 158 $ 513 $ --
Interest cost.................................... 991 1,056 --
Expected return on plan assets................... (1,182) (1,071) --
------- ------- -------
(33) 498 --
Curtailment gain................................. (2,664) --
------- ------- -------
$(2,697) $ 498 $ --
======= ======= =======
</TABLE>
22
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT BENEFITS
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Service cost..................................... $ 474 $ 202 $ 27
Interest cost.................................... 443 332 84
Net amortization................................. 90
------- ------- -------
$ 1,007 $ 534 $ 111
======= ======= =======
</TABLE>
Prior to 1997, the Company did not maintain any defined benefit pension plans.
During 1998, the Company froze its salaried pension plan, resulting in a
curtailment gain.
Actuarial assumptions used in the calculation of the recorded amounts are as
follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Discount rate............................................... 6.75% 7.50%
Return on pension plan assets............................... 9.00% 9.00%
Projected health care cost trend rate....................... 9.50% 9.50%
Ultimate health care trend rate............................. 5.50% 5.50%
Year ultimate health care trend rate is achieved............ 2006 2006
</TABLE>
Assumed health care cost trend rates have a significant effect on the amounts
reported for other postretirement benefits. A one-percentage-point change in the
assumed health care cost trend rate would have the following effect:
<TABLE>
<CAPTION>
1% INCREASE 1% DECREASE
----------- -----------
<S> <C> <C>
1998 benefit cost..................................... $ 276 $ 200
Recorded liability at December 31, 1998............... $2,564 $1,882
</TABLE>
G. STOCKHOLDERS' EQUITY
In November, 1996, the Board of Directors declared a dividend distribution of
one Right for each outstanding share of common stock. Each Right entitles the
shareholder to purchase one one-hundredth share of Series A Participating
Preferred Stock at a purchase price of $160 per share, subject to adjustment.
The Rights become exercisable if a person or group (Acquiring Person) acquires
or attempts to acquire 15% or more of the outstanding shares of common stock. In
the event that the Rights become exercisable, each Right (except for Rights
beneficially owned by the Acquiring Person, which become null and void) would
entitle the holder to purchase for the exercise price then in effect, shares of
the Company's common stock having a value of twice the exercise price. The
Rights may be redeemed by the Board of Directors in whole, but not in part, at a
price of $0.01 per Right. The Rights have no voting or dividend privileges and
are attached to, and do not trade separately from, the common stock. The Rights
expire on November 14, 2006.
23
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
The following table sets forth the computation of net income per common share
and net income per common share -- assuming dilution (shares in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net income...................................... $48,358 $38,443 $30,047
======= ======= =======
Weighted average shares outstanding............. 22,874 20,929 18,624
Dilutive effect of stock options................ 672 725 642
------- ------- -------
Weighted average shares outstanding -- assuming
dilution...................................... 23,546 21,654 19,266
======= ======= =======
Net income per common share..................... $ 2.11 $ 1.84 $ 1.61
======= ======= =======
Net income per common share -- assuming
dilution...................................... $ 2.05 $ 1.78 $ 1.56
======= ======= =======
</TABLE>
The Company's 1998 Long-Term Incentive Compensation Plan authorizes the annual
grant of options to management personnel of up to one and one-half percent of
the total number of issued and outstanding shares of common stock of the
Company. The Company's 1995 Non-Employee Directors' Equity Compensation Plan has
also authorized the grant of options to non-employee members of the Board of
Directors for up to 250,000 shares of the Company's common stock. All options
granted to employees have 10 year terms and vest and become fully exercisable at
the end of the next fiscal year following the year of grant.
Pro forma information regarding net income and earnings per share is required by
FASB Statement No. 123, "Accounting for Stock Based Compensation", and has been
determined as if the Company had accounted for its employee and non-employee
stock options under the fair value method of that Statement. The fair value of
these options was estimated at the date of grant using the Black-Scholes options
pricing model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Risk-free interest rate................................ 5.5% 6.0% 6.5%
Dividend yield......................................... 1.2% 1.2% 1.2%
Volatility factor of Company common stock.............. .25 .19 .20
Weighted-average expected option life (years).......... 5 5 5
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net income............................................ $46,718 $37,352 $29,285
Net income per common share........................... $ 2.04 $ 1.78 $ 1.57
Net income per common share -- assuming dilution...... $ 1.98 $ 1.72 $ 1.52
</TABLE>
24
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
A summary of the Company's stock option activity and related information
follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1....... 1,367,773 $17.89 1,243,079 $12.55 1,061,656 $ 9.94
Granted...................... 341,513 34.60 239,603 39.94 202,860 25.96
Exercised.................... (102,752) 7.00 (114,909) 6.15 (17,355) 9.19
Forfeited.................... (4,082) 12.25
--------- ------ --------- ------ --------- ------
Outstanding at December 31..... 1,606,534 $22.01 1,367,773 $17.89 1,243,079 $12.55
Exercisable at end of year..... 1,288,534 1,138,773 1,055,579
Weighted-average fair value of
options granted during the
year......................... $10.05 $10.28 $ 7.37
</TABLE>
The weighted-average remaining contractual life of options outstanding is 7.0
years.
The following table summarizes information about stock options outstanding and
exercisable at December 31, 1998:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
------------------------------------ ---------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
OF SHARES LIFE PRICE OF SHARES PRICE
--------- ----------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Range of exercise prices:
$ 5.04-$13.00................ 650,763 4.4 $ 8.39 650,763 $ 8.39
$17.31-$39.94................ 955,771 8.8 $31.29 637,771 $29.25
</TABLE>
H. COMMITMENTS AND CONTINGENCIES
In April, 1997, the Company entered into a supply agreement with La Generale des
Carriers et des Mines (Gecamines) to purchase all of the concentrate produced by
the Luiswishi mine in Shaba, Democratic Republic of Congo through 1999. Annual
production from this facility is estimated to contain approximately 3,000 metric
tons of cobalt and 6,000 metric tons of copper. The cost of the cobalt and
copper obtained will be based upon the prevailing market price as material is
processed.
In June, 1997, the Company signed contracts as a partner to build a smelter in
Lubumbashi, Democratic Republic of Congo. The Company's approximately $40
million share of the $80 million project will be funded over the two year
construction period through cash generated by operations and the Company's
credit facility. As of December 31, 1998, approximately $32 million has been
expended on the project.
In October, 1998, the Company entered into a supply agreement to procure
approximately 4,000 metric tons of cobalt and 9,000 tons of copper, contained in
cobalt-copper concentrate produced by Zambia Consolidated Copper Mines Limited.
This material has been delivered to the Company's Kokkola, Finland production
facility. Provisional payments have been made, with the final cost of the cobalt
and copper obtained to be based upon the prevailing market price as material is
processed.
The Company is a party to various legal proceedings incidental to its business
and is subject to a variety of environmental and pollution control laws and
regulations in the jurisdictions in which it operates. As is the case with other
companies in similar industries, the Company faces exposure from actual or
potential claims and legal proceedings involving environmental matters. Although
it is difficult to quantify the potential impact of compliance with or liability
under environmental protection laws, management believes that the ultimate
25
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
aggregate cost to the Company of environmental remediation, as well as other
legal proceedings arising out of operations in the normal course of business,
will not result in a material adverse effect upon its financial condition or
results of operations.
I. REPORTABLE SEGMENT AND GEOGRAPHIC INFORMATION
The Company and its operating subsidiaries manufacture and sell metal
carboxylates, salts, and powders that are primarily derived from cobalt, copper
and nickel. Metal carboxylates are essential components in numerous complex
chemical and industrial processes, and are used in many end markets, such as
coatings, custom catalysts, liquid detergents, lubricant and fuel additives,
plastic stabilizers, polyester promoters and adhesion promoters for rubber
tires. Metal salts are used in a wide variety of end products, including
catalysts, colorants, rechargeable batteries, petroleum additives, magnetic
media and metal finishing agents. High specification metal powders have several
important characteristics that make them essential components in cemented
carbides for mining and machine tools, diamond tools used in construction,
rechargeable batteries, and alloyed materials for automotive, electronics,
transportation and catalyst applications. The Company operates in a single
business segment serving numerous customers and industries.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
INFORMATION ABOUT PRODUCTS
Net sales
Carboxylates..................................... $115,895 $126,697 $100,880
Salts............................................ 247,896 214,410 205,639
Powders.......................................... 157,435 146,189 81,480
-------- -------- --------
$521,226 $487,296 $387,999
======== ======== ========
GEOGRAPHIC INFORMATION
Net sales (1)
United States.................................... $295,791 $274,200 $160,507
Finland.......................................... 201,059 207,122 219,754
Other............................................ 24,376 5,974 7,738
-------- -------- --------
$521,226 $487,296 $387,999
======== ======== ========
Long-lived assets
United States.................................... $114,441 $ 78,570 $ 43,757
Finland.......................................... 95,755 72,120 65,344
Other............................................ 35,149 4,926 1,520
-------- -------- --------
$245,345 $155,616 $110,621
======== ======== ========
Net sales (2)
United States.................................... $239,563 $213,541 $135,326
Outside the United States........................ 281,663 273,755 252,673
-------- -------- --------
$521,226 $487,296 $387,999
======== ======== ========
</TABLE>
- ---------------
(1) Net sales are attributed to the geographic area based on the location of the
manufacturing facility.
(2) Net sales are attributed to the geographic area based on the location of the
customer.
No single customer accounts for 10% or more of the Company's net sales.
26
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
J. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C>
1998
Net sales.................... $138,098 $139,154 $124,683 $119,291
Gross profit................. 34,630 35,909 36,161 38,252
Income from operations....... 20,533 21,650 22,143 22,598
Net income................... 11,169 11,536 12,724 12,929
Net income per common
share...................... $.51 $.52 $.54 $.54
Net income per common
share -- assuming
dilution................... $.49 $.51 $.53 $.53
Market price: high-low....... 46-35 5/16 45 7/8-38 3/4 40 5/8-26 7/8 36 15/16-26 1/4
Dividends paid per share..... $.09 $.09 $.09 $.09
1997
Net sales.................... $110,055 $124,334 $126,317 $126,590
Gross profit................. 26,578 29,483 29,949 31,353
Income from operations....... 15,696 17,869 18,320 18,687
Net income................... 8,216 9,579 10,215 10,433
Net income per common
share...................... $.44 $.46 $.46 $.48
Net income per common
share -- assuming
dilution................... $.43 $.44 $.45 $.46
Market price: high-low....... 31 3/8-26 1/2 33 1/4-25 3/4 39 15/16-33 3/16 41 1/4-35 1/16
Dividends paid per share..... $.08 $.08 $.08 $.08
</TABLE>
27
<PAGE> 29
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There are no such changes or disagreements.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information relating to directors of the Company contained under the heading
"Election of Directors" on pages 2 and 3 of the Company's Proxy Statement dated
April 2, 1999, is incorporated herein by reference. For information with respect
to the executive officers of the Company, see "Executive Officers of the
Company" in Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information relating to executive compensation contained under the headings
"Committees and Meetings of the Board of Directors" on page 6 and "Executive
Compensation" on pages 7 through 10, inclusive, of the Company's Proxy Statement
dated April 2, 1999, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information relating to security ownership set forth under the heading
"Security Ownership of Directors and Officers, and Certain Beneficial Owners" on
pages 4 and 5 of the Company's Proxy Statement dated April 2, 1999, is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information relating to the related transactions set forth under the heading
"Related Party Transactions" on page 11 of the Company's Proxy Statement dated
April 2, 1999, is incorporated herein by reference.
28
<PAGE> 30
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following consolidated financial statements of the Company are included
in Part II Item 8:
(1) The following Consolidated Financial Statements of OM Group, Inc.
are filed as a separate section of this report:
Consolidated Balance Sheets at December 31, 1998 and 1997 -- page
13.
Statements of Consolidated Income for the years ended December 31,
1998, 1997, and 1996 -- page 14.
Statements of Consolidated Stockholders' Equity for the years
ended December 31, 1998, 1997, and 1996 -- page 15.
Statements of Consolidated Cash Flows for the years ended December
31, 1998, 1997 and 1996 -- page 16.
Notes to Consolidated Financial Statements -- pages 17 through 27.
(2) All schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission
are either not required under the related instructions or are
inapplicable and, therefore, have been omitted.
(3) Exhibits
The following exhibits are included in this Annual Report on Form
10-K:
(3) Articles of Incorporation and by-laws
<TABLE>
<C> <S> <C>
3.1 Amended and Restated Certificate of Incorporation of the **
Company
3.2 Amended and Restated Bylaws of the Company **
</TABLE>
(4) Instruments defining rights of security holders, including
indentures
<TABLE>
<C> <S> <C>
4.1 Form of Common Stock Certificate of the Company **
4.2 Second Amended and Restated Credit Agreement dated as of
January 21, 1997 among National City Bank as Agent and ABN
Amro Bank N.V., Key Bank National Association and Mellon
Bank N.A. and OM Group, Inc., as Borrower.
4.3 Amendment No. 1 to Amended and Restated Credit Agreement
dated as of January 13, 1999 among National City Bank as
Agent and Letter of Credit Bank and ABN Amro Bank N.V. as
Co-Agent and Keybank National Association, Mellon Bank N.A.,
Harris Trust and Savings Bank, NBD Bank, The Chase Manhattan
Bank, PNC Bank, NA and Comerica Bank and OM Group, Inc., as
Borrower.
4.4 Note Purchase Agreement among OM Group, Inc. as Seller and
The Mutual Life Insurance Company of New York, Nationwide
Life Mutual Life Insurance Company of New York, Nationwide
Life Insurance Company and Great-West Life & Annuity
Insurance Company, as Purchaser, dated August 30, 1995
(filed as Exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995 and
incorporated herein by reference).
4.5 Stockholder Rights Agreement dated as of November 5, 1996
between OM Group, Inc. and National City Bank (filed as
Exhibit 1 to the Company's Current Report on Form 8-K filed
on December 5, 1996 which exhibit is incorporated herein by
reference).
4.6 Certificate of Designation, Preferences and Rights of Series
A Participatory Preferred Stock (filed as Exhibit to Current
Report on Form 8-K filed November 27, 1996 and incorporated
herein by reference).
</TABLE>
29
<PAGE> 31
<TABLE>
<C> <S> <C>
4.7 Note Purchase Agreement among OM Group, Inc. as Seller and
Nationwide Life Insurance Company and Great-West Life &
Annuity Insurance Company as Purchaser, dated October 24,
1997.
</TABLE>
(10) Material Contracts
<TABLE>
<C> <S> <C>
10.1 Technology Agreement among Outokumpu Oy, Outokumpu **
Engineering Contractors Oy, Outokumpu Research Oy, Outokumpu
Harjavalta Metals Oy and Kokkola Chemicals Oy dated March
24, 1993.
*10.2 OM Group, Inc. Long-Term Incentive Compensation Plan **
*10.3 Amendment to OM Group, Inc. Long-Term Incentive Compensation ***
Plan
*10.4 Amendment to OM Group, Inc. Long-Term Incentive Compensation
Plan (filed as Exhibit 99 to the OM Group, Inc. Form S-8
Registration Statement filed on July 3, 1996, and
incorporated herein by reference).
*10.5 Mooney Chemicals, Inc. Welfare Benefit Plan. **
*10.6 Mooney Chemicals, Inc. Profit Sharing Plan. **
*10.7 Amendment to Mooney Chemicals, Inc. Profit Sharing Plan. **
*10.8 OMG/Mooney Chemicals, Inc. Employee Profit Sharing Plan
(January 1, 1994 restatement) (filed as Exhibit to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 and incorporated herein by
reference).
*10.9 OM Group, Inc. Benefit Restoration Plan, effective January
1, 1995 (filed as Exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 and
incorporated herein by reference).
*10.10 Trust under OM Group, Inc. Benefit Restoration Plan,
effective January 1, 1995 (filed as Exhibit to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 and incorporated herein by reference).
*10.11 Amendment to OMG Americas, Inc. Profit-Sharing Plan (filed
as Exhibit 99 to the OM Group, Inc. Form S-8 Registration
Statement filed on July 3, 1996, and incorporated herein by
reference).
10.12 OM Group, Inc. Non-employee Directors' Equity Compensation
Plan dated May 9, 1995, the date of the Annual Shareholder
Meeting formally adopting the plan (filed as Exhibit to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 and incorporated herein by
reference).
*10.13 OM Group, Inc. Bonus Program for Key Executives and Middle **
Management.
*10.14 Employment Agreement between Mooney Acquisition Corporation **
and James P. Mooney dated September 30, 1991.
*10.15 Amendment to Employment Agreement between OM Group, Inc. and **
James P. Mooney dated August 19, 1992.
*10.16 Employment Agreement between OM Group, Inc. and James M. **
Materna dated January 1, 1993.
*10.17 Employment Agreement between Mooney Chemicals, Inc. and **
Eugene Bak dated August 19, 1991.
*10.18 Amendment to Employment Agreement between Mooney Chemicals, **
Inc. and Eugene Bak dated September 1, 1992.
*10.19 Employment Agreement between OM Group, Inc. and Thomas E. **
Fleming dated August 19, 1992.
*10.20 Employment Agreement between OM Group, Inc. and Thomas E. **
Fleming dated August 19, 1991.
*10.21 Amendment to Employment Agreement between OM Group, Inc. and **
Thomas E. Fleming dated August 19, 1991.
</TABLE>
30
<PAGE> 32
<TABLE>
<C> <S> <C>
*10.22 Employment Agreement between OM Group, Inc. and Michael J. Scott (filed as Exhibit to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994
and incorporated herein by reference).
10.23 Agreement and Plan of Merger between Auric Corporation and OM Group, Inc. dated
December 19, 1997 (filed as Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 and incorporated herein by reference).
+10.24 Joint Venture Agreement among OMG B.V., Groupe George Forrest S.A., La Generale Des
Carrieres Et Des Mines and OM Group, Inc. to partially or totally process the slag
located in the site of Lumbumbashi, Democratic Republic of the Congo (filed as Exhibit
to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997
and incorporated herein by reference).
+10.25 Agreement for Sale of concentrate production between Kokkola Chemicals Oy and La
Generale Des Carrieres Et Des Mines dated April 21, 1997 (filed as Exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and
incorporated herein by reference).
+10.26 Long Term Slag Sales Agreement between La Generale Des Carrieres Et Des Mines and J.V.
Groupement Pour Le Treatment Du Terrill De Lubumbashi (filed as an annex to Exhibit
10.33 of the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997).
+10.27 Long Term Cobalt Alloy Sales Agreement between J.V. Groupement Pour Le Treatment Du
Terril De Lumbumbashi and OMG Kokkola Chemicals Oy (filed as an annex to Exhibit 10.33
of the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997).
+10.28 Tolling Agreement between Groupement Pour Le Treatment Du Terril De Lumbumbashi and
Societe De Treatment Due Terril De Lumbumbashi (filed as an annex to Exhibit 10.33 of
the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997).
+10.29 Agreement for sale of cobalt concentrates between OM Group, Inc. and Metal Resources
Group Limited, dated September 24, 1998.
+10.30 Agreement for sale of cobalt concentrates between OM Group, Inc. and Metal Resources
Group Limited, dated October 20, 1998.
*10.31 OM Group, Inc. 1998 Long-Term Incentive Compensation Plan.
*10.32 Amendment of Benefits Agreement and Split Dollar Agreement, Eugene Bak, dated October
1, 1998.
+ Portions of Exhibit have been omitted and filed separately with the Securities and
Exchange Commission in reliance on Rule 24b-2 and the Company's request for
confidential treatment.
* Indicate a management contract, executive compensation plan or arrangement.
** These documents were filed as exhibits to the Company's Form S-1 Registration Statement
(Registration No. 33-60444) which became effective on October 12, 1993, and are
incorporated herein by reference.
*** Filed as Exhibit 99(b) to the OM Group, Inc. Form S-8 Registration Statement filed on
February 1, 1994, and incorporated herein by reference.
</TABLE>
(21) List of Subsidiaries
(23) Consent of Ernst & Young LLP
(24) Power of Attorney
(27) Financial Data Schedule
(b) There were no reports filed on Form 8-K during the last quarter of 1998.
31
<PAGE> 33
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this Annual Report on Form 10-K be signed
on its behalf by the undersigned, thereunto duly authorized.
OM GROUP, INC.
By: /s/ James P. Mooney
------------------------------------
James P. Mooney
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report on Form 10-K has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ James P. Mooney* Chairman and Chief Executive Officer March 22, 1999
- ------------------------------------------
James P. Mooney
/s/ Eugene Bak* President and Chief Operating Officer March 22, 1999
- ------------------------------------------
Eugene Bak
/s/ Markku Toivanen* Director March 22, 1999
- ------------------------------------------
Markku Toivanen
/s/ Lee R. Brodeur* Director March 22, 1999
- ------------------------------------------
Lee R. Brodeur
/s/ Thomas R. Miklich* Director March 22, 1999
- ------------------------------------------
Thomas R. Miklich
/s/ John E. Mooney* Director March 22, 1999
- ------------------------------------------
John E. Mooney
/s/ Frank Butler* Director March 22, 1999
- ------------------------------------------
Frank Butler
/s/ James M. Materna Chief Financial Officer (Principal March 22, 1999
- ------------------------------------------ Financial and Accounting Officer)
James M. Materna
/s/ James P. Mooney
- ------------------------------------------
James P. Mooney
Attorney-in-Fact
March 22, 1999
</TABLE>
* James P. Mooney, by signing his name hereto signs this document on behalf of
each of the persons so indicated above pursuant to powers of attorney duly
executed by such persons and filed with the Securities and Exchange
Commission.
32
<PAGE> 34
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
4.2 Amendment No. 1 to Amended and Restated Credit Agreement
dated as of January 13, 1999 among National City Bank as
Agent and Letter of Credit Bank and ABN Amro Bank, N.V. as
Co-Agent and Keybank National Association, Mellon Bank, N.A.,
Harris Trust and Savings Bank, NBD Bank, The Chase Manhattan
Bank, PNC Bank, NA and Comerica Bank and OM Group, Inc., as
Borrower.
10.29 Agreement for sale of cobalt concentrates between OM Group,
Inc. and Metal Resources Group Limited dated September 24,
1998.
10.30 Agreement for sale of cobalt concentrates between OM Group,
Inc. and Metal Resources Group Limited, dated October 20,
1998.
10.31 OM Group, Inc. 1998 Long-Term Incentive Compensation Plan.
10.32 Amendment of Benefits Agreement and Split Dollar Agreement,
Eugene Bak, dated October 1, 1998.
21 List of Subsidiaries
23 Consent of Ernst & Young LLP
24 Power of Attorney
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 4.2
AMENDMENT NO. 1
TO
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDMENT NO. 1 TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment"), made as of this 13th day of January, 1999, among OM GROUP, INC.
("Borrower"), certain financial institutions listed on the signature pages
hereto (the "Banks"), NATIONAL CITY BANK, as the Letter of Credit Bank (the
"Letter of Credit Bank"), NATIONAL CITY BANK, as the Agent for the Banks and the
Letter of Credit Bank (the "Agent") and ABN AMRO BANK N.V. as Co-Agent for the
Banks and the Letter of Credit Banks (the "Co-Agent"),
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks, the Letter of Credit Bank and the
Agent and Co-Agent have entered into that certain Amended and Restated Credit
Agreement, dated as of January 30, 1998 (the "Credit Agreement"), pursuant to
which the Banks and the Letter of Credit Bank have made certain loans and other
financial accommodations available to Borrower;
WHEREAS, the Borrower, the Banks, the Letter of Credit Bank and the
Agent and Co-Agent desire to amend the Credit Agreement as hereinafter set
forth;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Borrower, the Banks, the Letter
of Credit Bank and the Agent and Co-Agent do hereby agree as follows:
1. DEFINED TERMS.
Each defined term used herein and not otherwise defined herein shall
have the meaning ascribed to such term in the Credit Agreement.
2. AMENDMENT TO THE CREDIT AGREEMENT.
2.1 AMENDMENT TO ANNEX I. Annex I to the Credit Agreement is amended in
its entirety to read as Annex I attached hereto.
2.2 AMENDMENT TO SECTION 1.1. Section 1.1 of the Credit Agreement is
amended by deleting the definitions of "Applicable Commitment Fee Percentage,"
"Applicable LIBOR Margin," "Applicable Risk Participation Percentage,"
"Consolidated Total Funded Debt to EBITDA Ratio," "Net Proceeds" and "Revolving
Credit Termination Date," and replacing such definitions with the following new
definitions:
"APPLICABLE LIBOR MARGIN" means: (i) from the Closing Date
until the June 30, 1999 financial statements required by Section 5.1(a)
of this Agreement are furnished to the Agent, 1.25% per annum with
respect to any LIBOR Rate Advance and (ii) with
<PAGE> 2
respect to any Margin Adjustment Date, the percentage applicable to a
LIBOR Rate Loan corresponding to the Consolidated Total Funded Debt to
EBITDA Ratio set forth below (determined on the basis of the
Consolidated Total Funded Debt to EBITDA Ratio for the Cumulative Four
Quarter Period ending on the Determination Date applicable to such
Margin Adjustment Date and calculated in accordance with Section
2.10(b) of this Agreement):
<TABLE>
<CAPTION>
=========================================================
Consolidated Total Funded LIBOR Rate
Debt to EBITDA Ratio Margin
=========================================================
<S> <C>
> 3.25 to 1.0 but 1.50%
-
< 3.5 to 1.0
----------------------------------------------------------
> 3.0 to 1.0 but 1.25%
-
< 3.25 to 1.0
----------------------------------------------------------
> 2.5 to 1.0 but 1.00%
-
< 3.0 to 1.0
----------------------------------------------------------
> 2.0 to 1.0 but 0.75%
-
< 2.5 to 1.0
----------------------------------------------------------
> 1.50 to 1.0 but 0.55%
-
< 2.0 to 1.0
----------------------------------------------------------
< 1.5 to 1.0 0.40%
==========================================================
</TABLE>
"APPLICABLE RISK PARTICIPATION PERCENTAGE"; "APPLICABLE
COMMITMENT FEE PERCENTAGE" means: (i) from the Closing Date until the
June 30, 1999 financial statements required by Section 5.1(a) of this
Agreement are furnished to the Agent, 1.25% per annum with respect to
the risk participation fee applicable to Standby Letters of Credit
required by Section 2.9(d) of this Agreement and .375% per annum with
respect to the commitment fee required by Section 2.9(a) of this
Agreement and (ii) with respect to the risk participation fee
applicable to Standby Letters of Credit required by Section 2.9(d) of
this Agreement and the commitment fee required by Section 2.9(a) of
this Agreement, as the case may be, the percentage set forth in the
column below which is applicable to such risk participation fee or
commitment fee, as the case may be, and which corresponds to the
Consolidated Total Funded Debt to EBITDA Ratio set forth below (in each
case determined on the basis of the Consolidated EBITDA for the
Cumulative Four Quarter Period ending on the Determination Date
applicable to such risk participation fee or commitment fee, as the
case may be, and calculated in accordance with Section 2.9 of this
Agreement):
2
<PAGE> 3
<TABLE>
<CAPTION>
===========================================================================
Consolidated Total Risk Commitment
Funded Debt to Participation Fee Percentage
EBITDA Ratio Margin
===========================================================================
<S> <C> <C>
> 3.25 to 1.0 but 1.50% 0.375%
-
< 3.5 to 1.0
---------------------------------------------------------------------------
> 3.0 to 1.0 but 1.25% 0.375%
-
< 3.25 to 1.0
---------------------------------------------------------------------------
> 2.5 to 1.0 but 1.00% 0.375%
-
< 3.0 to 1.0
---------------------------------------------------------------------------
> 2.0 to 1.0 but 0.75% 0.30%
-
< 2.5 to 1.0
---------------------------------------------------------------------------
> 1.50 to 1.0 but 0.55% 0.25%
-
< 2.0 to 1.0
---------------------------------------------------------------------------
< 1.5 to 1.0 0.40% 0.20%
===========================================================================
</TABLE>
"CONSOLIDATED TOTAL FUNDED DEBT TO EBITDA RATIO" means, as at
the end of any Fiscal Quarter, the ratio of: (a) the aggregate
principal amount of the Consolidated Total Funded Debt outstanding as
of the end of such Fiscal Quarter to (b) the Consolidated EBITDA for
the Cumulative Four Quarter Period then ended.
"NET PROCEEDS" means (i) the cash proceeds (including cash
proceeds subsequently received in respect of non-cash consideration
initially received) from any sale, transfer or other disposition (other
than: (a) any sale of Inventory in the ordinary course, (b) disposition
in the ordinary course of Borrower's business of assets that are
obsolete, worn out or no longer used or useful in the Borrower's or its
Subsidiaries' business and (c) disposition of capital assets the
proceeds of which are reinvested within a reasonable period of time in
capital assets of the Borrower or its Subsidiaries) of any asset or
assets of the Borrower or any of its Subsidiaries to any Person (other
than the Borrower or any other Subsidiary of the Borrower) to the
extent of the excess of such proceeds of all such sales, transfers or
other dispositions over Five Million Dollars ($5,000,000) in any
calendar year net of (x) selling expenses, including without limitation
any reasonable broker's fees or commissions, costs of discontinuing
operations associated with such assets and sales, transfer and similar
taxes, and (y) the repayment of any Indebtedness secured by a purchase
money Lien on such assets that is permitted under this Agreement and
only to the extent of such excess; (ii) the cash proceeds from the
issuance and/or sale of pari passu debt securities of the Borrower
pursuant to any public offering, private placement, net of transaction
costs and net of expenses including, without limitation, underwriters'
or placement agents' discounts and commissions and transfer and similar
taxes, (iii) the cash proceeds from the issuance and/or sale of equity
3
<PAGE> 4
securities of the Borrower pursuant to any public offering, private
placement, net of transaction costs and net of expenses including,
without limitation, underwriters' or placement agents' discounts and
commissions and transfer and similar taxes and (iv) the cash proceeds
from any additional Indebtedness permitted hereunder to the extent of
the excess of such proceeds, when aggregated for the purposes of this
clause (iv) with the debt securities referred to in clause (ii) hereof,
over Twenty Million Dollars ($20,000,000) and only to the extent of
such excess.
"REVOLVING CREDIT TERMINATION DATE" means the earlier of: (i)
January 13, 2004, as extended pursuant to Section 2.6(f) of this
Agreement or (ii) the earlier date of the termination of the Revolving
Credit Commitments pursuant to Section 2.6(d) or Section 6 of this
Agreement.
2.3 AMENDMENT TO SECTION 1.1. Section 1.1 of the Credit Agreement is
amended by adding thereto the following definitions, "Capital Expenditures",
"Consolidated Capital Expenditures", "Employee Benefit Plan" and "Letter of
Commitment" as follows:
"CAPITAL EXPENDITURES" means any and all amounts invested,
expended or incurred (including Indebtedness under Capitalized Leases)
by a Person in respect of the purchase, acquisition, improvement,
renovation or expansion of any land and depreciable or amortizable
property of such Person (including, without limitation, expenditures
required to be capitalized in accordance with GAAP and, in the case of
the Borrower, including as a Capital Expenditure, even if not required
by GAAP, the amount of any investment by the Borrower or its
Subsidiaries in the Congo smelter project referred to in Section 5.3(b)
of this Agreement), each as determined on a consolidated basis in
accordance with GAAP except as otherwise specified in this definition.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, all
Capital Expenditures of the Borrower and its Subsidiaries during such
period, as determined on a consolidated basis in accordance with GAAP.
"EMPLOYEE BENEFIT PLAN" means an "employee benefit plan" as
defined in Section 3(3) of ERISA of the Borrower or any of its ERISA
Affiliates or any "multiemployer plan" as defined in Section 4001(a)(3)
of ERISA.
"LETTER OF COMMITMENT" means that certain letter of
commitment, dated as of December 15, 1998, addressed by National City
Bank to the Borrower and accepted by the Borrower.
2.4 AMENDMENT TO SECTION 2.1(B). The proviso to Section 2.1(b) of the
Credit Agreement is amended in its entirety to read as follows:
. . . ;provided, however, that the Borrower shall not be entitled to
request any Revolving Credit Borrowing which, together with all
outstanding Revolving Credit Borrowings, would result in the Borrower's
having an aggregate of more than ten (10) Borrowings (treating
outstanding Alternate Base Rate Loans as a single Borrowing for
purposes of determining outstanding Borrowings) outstanding at any one
time.
4
<PAGE> 5
2.5 AMENDMENT TO SECTION 2.6(c). Section 2.6(c) of the Credit Agreement
is amended in its entirety to read as follows:
(c) MANDATORY REDUCTION OF COMMITMENT; MANDATORY
PREPAYMENT. The Borrower shall apply all Net Proceeds acquired in
connection with transactions permitted by this Agreement promptly upon
receipt thereof to prepay the Revolving Credit Loans outstanding at the
time of such receipt and to permanently reduce the Revolving Credit
Commitments (rounded down to the nearest One Hundred Thousand Dollars
($100,000) amounts in excess of such rounded amount shall be applied to
the outstanding Revolving Credit Loans only); provided, however, that:
(i) the Borrower shall not be permitted at any time to reduce the
Revolving Credit Commitments to an amount less than the aggregate LC
Exposure of the Banks outstanding at such time, (ii) in the case of the
Net Proceeds from the issuance or sale of equity securities of the
Borrower referred to in clause (iii) of the definition of "Net
Proceeds," the Borrower shall not be required to apply such Net
Proceeds to reduce permanently the Revolving Credit Commitments but
shall (x) only be required to apply fifty percent (50%) of such Net
Proceeds to prepay the Revolving Credit Loans outstanding at such time
without permanent reduction of the Revolving Credit Commitment and (y)
if no Event of Default shall have occurred which has not been waived in
writing by the Required Banks and the making of such prepayment of
Revolving Credit Loans would result in an obligation on the part of the
Borrower to make a breakage payment in respect thereof under Section
10.4 of this Agreement (unless waived by the Required Banks), the
Borrower may upon notice to the Agent postpone making such prepayment
for a period of up to 30 days or such shorter period as will result in
no such breakage payment being payable and (iii) in the case of Net
Proceeds from the issuance or sale of equity securities of the Borrower
referred to in clause (iii) of the definition of "Net Proceeds" and Net
Proceeds from the incurrence of additional Indebtedness referred to in
clause (iv) of such definition, the Borrower shall not be required to
apply such Net Proceeds to reduce permanently the Revolving Credit
Commitment and\or to prepay Revolving Credit Loans, as the case may be,
as of or after March 31, 2000 so long as the Borrower's Consolidated
Total Funded Debt to EBITDA Ratio as at the end of any Fiscal Quarter
ending as of and after March 31, 2000 does not exceed 3.00 to 1.00 for
the Cumulative Four Quarter Period then ending.
In the event that the reduction in the Revolving Credit
Commitments required by this Section 2.6(c) would cause the remaining
Revolving Credit Commitments to be less than the LC Exposure of the
Banks after giving effect to such reduction, the Agent shall hold such
excess funds in a non-interest bearing account until such time that the
requirements of the immediately preceding sentence shall not be
violated. Each reduction in the aggregate Revolving Credit Commitments
hereunder shall be made among the Banks ratably in accordance with
their Revolving Credit Commitments. On the date of each reduction, the
Borrower shall pay to the Agent for the account of the Banks (x) the
commitment fees and interest accrued through the date of such reduction
in respect of the aggregate Revolving Credit Commitments and (y) any
amounts required pursuant to the provisions of Section 10.4 of this
Agreement. Any reduction in the Revolving Credit Commitments shall be a
permanent reduction and no amount in excess of such reduced commitment
may be borrowed or reborrowed.
5
<PAGE> 6
2.6 AMENDMENT TO SECTION 2.9(c). Section 2.9(c) of the Credit Agreement
is amended to read as follows:
(c) ANNUAL AGENT'S FEE. The Borrower agrees to pay the Agent
for its sole account an annual agent fee as set forth in the Letter of
Commitment.
2.7 AMENDMENT TO SECTION 2.9(f). The proviso in Section 2.9(f) of the
Credit Agreement is amended to read as follows:
. . . ; except, however, that, if an Event of Default shall
have occurred which has not been waived in writing by all of the Banks,
or if the Borrower shall not have delivered as of such Margin
Adjustment Date the financial statements in accordance with Sections
3.1(l), 5.1(a) and 5.1(b) of this Agreement, the Applicable Risk
Participation Fee Percentage shall, subject to the election of the
Bank's pursuant to Section 2.10(c) of this Agreement, be 1.50% per
annum and the Applicable Commitment Fee Percentage shall be .375% per
annum.
2.8 AMENDMENT TO SECTION 2.10(c). Clause (ii) of Section 2.10(c) of the
Credit Agreement is amended to read as follows:
. . . (ii) the Applicable Risk Participation Fee Percentage shall be
two percent (2%) in excess of the Applicable Risk Participation Fee
Percentage otherwise applicable pursuant to the proviso to Section
2.9(f) of this Agreement.
2.9 AMENDMENT TO SECTION 4.11. The first sentence of Section 4.11 of
the Credit Agreement is amended in its entirety to read as follows:
The Supplemental Schedule sets forth all of the Employee Benefit Plans
(which constitute either a "single employer plan" within the meaning of
Section 4001(a)(15) of ERISA or a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA) of the Borrower and its
Subsidiaries as of the Closing Date.
2.10 AMENDMENT TO SECTION 4.13. The first sentence of Section 4.13 of
the Credit Agreement is amended in its entirety to read as follows:
The audited balance sheets of the Borrower for the Fiscal Year ending
December 31, 1996, and the related statements of income, shareholder's
equity, and cash flows, and, as applicable, changes in financial
position or cash flows for such Fiscal Years, and the notes to such
financial statements, reported upon by Ernst & Young, LLP., certified
public accountants, together with the unaudited internal financial
statements consisting of balance sheet and statements of income,
shareholder's equity and cash flows as of the Fiscal Quarter ending
September 30, 1997, certified by an executive officer of the Borrower:
(a) have been prepared in accordance with GAAP, applied on a consistent
basis with the Borrower's financial statements from prior Fiscal Years
and (b) fairly present in all material respects (subject to routine
year-end audit adjustments in the case of the unaudited financial
statements) the financial condition of the Borrower as of the
respective dates thereof (including a full disclosure of liabilities,
contingent or otherwise, if any) and the results of its operations for
the respective fiscal periods then ending.
6
<PAGE> 7
2.11 AMENDMENT TO SECTION 4. Section 4 of the Credit Agreement is
amended so as to renumber Section 4.17 thereof as Section 4.18 and add new
Section 4.17 to read as follows:
4.17 YEAR 2000 COMPLIANCE. The Borrower has conducted a
comprehensive review and assessment of all areas of the Borrower's and
its Subsidiaries' businesses that could be materially and adversely
affected by the "Year 2000 Problem" (that is, the risk that Technology
is not Year 2000 Compliant). The Borrower reasonably anticipates that
all Technology that is material to its business and the business of its
Subsidiaries will on a timely basis be Year 2000 Compliant. With
respect to each of the "key suppliers, vendors, and customers," the
Borrower reasonably believes that each of them will on a timely basis
be Year 2000 Compliant in all respects which are material to the
business of the Borrower and its Subsidiaries. For the purposes of this
paragraph, (i) "Technology" means computer, manufacturing, electronic
equipment and telecommunications hardware, software and firmware,
whether in computer systems, in embedded microchips or otherwise, which
are material to the Borrower's and its Subsidiaries' businesses and
financial operations, (ii) "Year 2000 Compliant" means, with respect to
the Technology of the Borrower and its Subsidiaries, that such
Technology (x) accurately processes date/time data (including, but not
limited to calculating, comparing and sequencing) from, into and
between the twentieth and twenty-first centuries and the years 1999 and
2000 and (y) accurately performs leap year calculations and (ii) "key
suppliers, vendors and customers" refers to those suppliers, vendors
and customers of the Borrower and\or its Subsidiaries the business
failure of which would, with reasonable probability, result in a
Material Adverse Effect.
2.12 AMENDMENT TO SECTION 5.3(b). Clause (Y) of Section 5.3(b) of the
Credit Agreement is amended in its entirety to read as follows:
. . . (Y) this subsection shall not prohibit any intercompany
loan by the Borrower to, investment by the Borrower in or Guaranty by
the Borrower of the indebtedness of, any joint venture of any
Subsidiary of the Borrower or any of its Subsidiaries with respect to a
Congo smelter project so long as the aggregate amount of any such
loans, investments or guaranties does not exceed Sixty Million Dollars
($60,000,000), . . .
2.13 AMENDMENT TO SECTION 5.3(d). The second reference to clause "(J)"
set forth in Section 5.3(d) is revised to read "(K)" and the text of the
parenthetical in clause (H)(z) of Section 5.3(d) of the Credit Agreement is
amended in its entirety to read as follows:
. . . (when taken together with any secured Indebtedness
permitted to be secured pursuant to clause (K) of this subsection) ...
2.14 AMENDMENT TO SECTION 5.4(a). Section 5.4(a) of the Credit
Agreement is amended in its entirety to read as follows:
(a) CONSOLIDATED TOTAL FUNDED DEBT TO EBITDA RATIO. The
Borrower shall not permit the Consolidated Total Funded Debt to EBITDA
Ratio to exceed: (i) as
7
<PAGE> 8
at the end of each Fiscal Quarter ending during Fiscal Year 1999, 3.50
to 1.00 for the Cumulative Four Quarter Period then ending and (ii) as
at the end of any Fiscal Quarter ending thereafter, 3.00 to 1.00 for
the Cumulative Four Quarter Period then ending.
2.15 AMENDMENT TO SECTION 5.4. Section 5.4 of the Credit Agreement is
amended by adding thereto new Section 5.4(c) to read as follows
(c) MAXIMUM CONSOLIDATED CAPITAL EXPENDITURES. Borrower shall
not permit the Consolidated Capital Expenditures (including any
purchase money Indebtedness permitted under Section 5.3(c) of this
Agreement) of the Borrower and its Subsidiaries to exceed Seventy Five
Million Dollars ($75,000,000) during the Fiscal Year of the Borrower
ending December 31, 1999.
2.16 AMENDMENT TO SECTION 9.1(b). Section 9.1(b) of the Credit
Agreement is amended in its entirety to read as follows:
(b) AGREEMENT; TRANSFER FEE. The transferor: (i) shall remit
to the Agent an administrative fee of Three Thousand Five Hundred
Dollars ($3,500) and (ii) shall cause the transferee to execute and
deliver to the Borrower, the Agent and each Bank (A) an Assignment
Agreement, substantially in the form of Exhibit F attached hereto, and
otherwise in form and substance satisfactory to the Agent and its
counsel (a "Bank Assignment Agreement"), together with the consents and
releases referenced therein and (B) such additional amendments,
assurances and other writings as the Agent may reasonably require to
effect such transfer.
3. REPRESENTATIONS AND WARRANTIES.
Borrower hereby represents and warrants as follows:
3.1 THE AMENDMENT. This Amendment has been duly and validly executed by
an authorized executive officer of Borrower and constitutes the legal, valid and
binding obligation of Borrower enforceable against Borrower in accordance with
its terms, subject to any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law).
3.2 CREDIT AGREEMENT. The Credit Agreement, as previously amended and
as further amended by this Amendment, remains in full force and effect and
remains the valid and binding obligation of Borrower enforceable against
Borrower in accordance with its terms, subject to any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
3.3 NONWAIVER. The execution, delivery, performance and effectiveness
of this Amendment shall not operate nor be deemed to be nor construed as a
waiver (i) of any right, power or remedy of Bank under the Credit Agreement, nor
(ii) of any term, provision, representation, warranty or covenant contained in
the Credit Agreement or any other
8
<PAGE> 9
documentation executed in connection therewith. Further, none of the provisions
of this Amendment shall constitute, be deemed to be or construed as, a waiver of
any Event of Default under the Credit Agreement as amended by this Amendment.
3.4 REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT. Upon the
effectiveness of this Amendment, each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof", "herein", or words of like import shall mean
and be a reference to the Credit Agreement, as amended hereby, and each
reference to the Credit Agreement in any other document, instrument or agreement
executed and/or delivered in connection with the Credit Agreement shall mean and
be a reference to the Credit Agreement, as amended hereby. Each of the Banks
party to the Amended and Restated Credit Agreement hereby acknowledges the
amount of its Revolving Credit Commitment stated in Annex I as amended by this
Amendment.
4. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT NO. 1.
In addition to all of the other conditions and agreements set forth
herein, the effectiveness of this Amendment is subject to the fulfillment of
each of the following conditions precedent:
4.1 AMENDMENT NO. 1 TO CREDIT AGREEMENT. Each Bank shall have received
an original counterpart of this Amendment No. 1 to Credit Agreement, executed
and delivered by a duly authorized officer of Borrower, the Agent, the Co-Agent
and each of the Banks and the Letter of Credit Bank.
4.2 REVOLVING CREDIT NOTES Each Bank shall have received an original
Revolving Credit Note, in the principal amount of that Bank's Revolving Credit
Commitment, each executed and delivered by a duly authorized officer of Borrower
in favor of such Bank.
4.3 BORROWER'S LEGAL OPINION. An opinion of counsel to the Borrower, in
form and substance satisfactory to the Banks.
4.4 CERTIFICATES OF BORROWER. A certificate executed by an authorized
officer of the Borrower certifying: (A) the resolutions of the Board of
Directors of the Borrower authorizing the execution, delivery and performance,
as the case may be, of (I) this Amendment, (II) the performance of the Credit
Agreement, as amended by this Amendment (III) each Revolving Credit Note, (IV)
each other document executed in connection therewith or in connection with any
of the transactions contemplated herein or therein, (B) the names and signatures
of the officers of the Borrower executing or attesting to such documents, (C) as
true and correct the Articles of Incorporation and Regulations of the Borrower,
(D) compliance by the Borrower with all representations, warranties, covenants
and conditions under the Credit Agreement and each of the documents executed in
connection with this Amendment, (E) the absence of any Potential Default or
Event of Default and (F) the absence of any material litigation with respect to
the Credit Agreement and the transactions contemplated hereby.
4.5 CREDIT REQUEST; RATE CONVERSION/CONTINUATION REQUEST; DISBURSEMENT
DIRECTION LETTER. A Credit Request, a Rate Continuation/Conversion Request and a
disbursement direction letter from the Borrower, as the case may be, as may be
necessary :(i) directing the Agent to disburse proceeds of the Loans as is
consistent with the transactions and
9
<PAGE> 10
LIBOR conversions contemplated by this Amendment and that certain Assignment and
Acceptance Agreement of even date herewith, (ii) converting all outstanding
LIBOR Rate Loans into new LIBOR Rate Loans or Alternative Base Rate Loans, as
the Borrower elects and consistent with the terms of this Amendment as of the
effective time of this Amendment and (iii) electing interest periods for LIBOR
Rate Loans to be outstanding on the effective date of the Amendment.
4.6 PAYMENT OF CLOSING FEES; OTHER PAYMENTS. The Borrower shall have
paid (i) to the Agent for its sole account of a Structuring and Arrangement Fee
in the amount specified in the Letter of Commitment, (ii) to the Agent for the
ratable benefit of each existing Bank (including National City Bank) of a
Recommitment Fee to such Bank in an amount equal to .10% of such Bank's
continued commitment, (iii) to the Agent for the ratable benefit of each
existing Bank (including National City Bank) and each new Bank to the Credit
Agreement of a Commitment Fee to such Bank in an amount equal to .20% of such
existing Bank's incremental increase in its commitment and .20% of each new
Bank's commitment, (iv) all accrued but unpaid interest, fees and breakage
compensation (as required by Section 2.7(iv) of the Credit Agreement in respect
of the conversion of all outstanding LIBOR Rate Loans to new LIBOR Rate Loans as
of the effective time of this Amendment) through the close of business on the
day of the effective time of this Amendment on all outstanding Loans and (v) the
out-of-pocket expenses of the Agent as specified in the Letter of Commitment.
4.7 MATERIAL LITIGATION. No material litigation or claims shall exist
with respect to (A) any aspect of financing contemplated by the Credit
Agreement, as amended by this Amendment, and (B) the business, operations,
properties or finances of the Borrower.
4.8 MATERIAL ADVERSE EFFECT. No Material Adverse Effect has occurred.
4.9 CONTINGENT LIABILITIES. No contingencies including, but not limited
to, ERISA or other employee benefit liabilities exist in respect of the Borrower
as of the closing of this Amendment.
4.10 LIQUIDITY/AVAILABILITY. Unused availability under aggregate
Revolving Credit Commitments of the Banks shall be at least Fifty Million
Dollars ($50,000,000) as of the closing date of this Amendment.
4.11 INSURANCE. The Borrower has adequate personal and real property,
liability, business interruption and product liability insurance with Banks or
Agent for the benefit of the Banks listed as loss payee, first mortgagee and
additional insured (as applicable).
4.12 OTHER INFORMATION. Such other information, financial or otherwise,
as the Banks may reasonably request.
5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Amendment has been delivered and accepted at
and shall be deemed to have been made at Cleveland, Ohio. This Amendment shall
be interpreted and the rights and liabilities of the parties hereto determined
in accordance with the laws of the State of Ohio, without regard to principles
of conflict of law, and all other laws of mandatory application.
10
<PAGE> 11
5.2 SEVERABILITY. Each provision of this Amendment shall be interpreted
in such manner as to be valid under applicable law, but if any provision hereof
shall be invalid under applicable law, such provision shall be ineffective to
the extent of such invalidity, without invalidating the remainder of such
provision or the remaining provisions hereof.
5.3 EXPENSES. As provided in the Credit Agreement, but without limiting
any terms or provisions thereof, the Borrower shall pay on demand all reasonable
costs and expenses incurred by the Agent in connection with the preparation,
negotiation and execution of this Amendment, including without limitation the
reasonable costs and expenses of the Agent's legal counsel, regardless of
whether this Amendment becomes effective in accordance with the terms hereof.
5.4 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which, when taken together, shall constitute but one and
the same agreement. Delivery of an executed counterpart hereof by facsimile
shall be effective as manual delivery of such counterpart; PROVIDED, HOWEVER,
that each party hereto will promptly thereafter deliver counterpart originals of
such counterpart facsimiles delivered by or on behalf of such party.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to
Amended and Restated Credit Agreement to be duly executed and delivered by their
respective authorized officer or agent as of the date first above written.
<TABLE>
<CAPTION>
NATIONAL CITY BANK, as Agent and a Bank OM GROUP, INC.
<S> <C>
/s/ Timothy G. Healy /s/ James M Materna
- --------------------------------------- ----------------------------------------------
By: Timothy G. Healy By: James M Materna
Its: Vice President and Senior Lending Its: Chief Financial Officer
Officer
ABN AMRO, BANK N.V. as Co-Agent and a Bank NATIONAL CITY BANK, as a Letter of Credit Bank
/s/ Roy D. Hasbrook /s/ Timothy G. Healy
- ----------------------------------- -----------------------------------
By: Roy D. Hasbrook By: Timothy G. Healy
Its: Group Vice President Its: Vice President and Senior Lending
Officer
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
NBD BANK, as a Bank HARRIS TRUST AND SAVINGS BANK, as a Bank
<S> <C>
/s/ Sylvia F. Morin /s/ William A. McDonnell
- ---------------------------------------- -----------------------------------
By: Sylvia F. Morin By: William A. McDonnell
Its: Senior Vice President Its: Vice President
KEYBANK NATIONAL ASSOCIATION, as a Bank MELLON BANK, N.A., as a Bank
/s/ Brendan Lawlor /s/ William P. McGreehan
- ----------------------------------- ------------------------------------
By: Brendan Lawlor By: William P. McGreehan
Its: Assistant Vice President Its: Vice President
THE CHASE MANHATTAN BANK, as a Bank PNC BANK, NA, as a Bank
/s/ Henry W. Centa /s/ Joseph G. Moran
- ----------------------------------- -----------------------------------
By: Henry W. Centa By: Joseph G. Moran
Its: Vice President Its: Vice President
COMERICA BANK, as a Bank
/s/ Jeffrey J. Judge
- -----------------------------------
By: Jeffrey J. Judge
Its: Vice President
</TABLE>
12
<PAGE> 13
ANNEX I TO AMENDMENT NO. 1
ANNEX I
COMMITMENTS
Credit Agreement among OM Group, Inc., the Agent, the Co-Agent, the
Letter of Credit Bank and the Banks
<TABLE>
<CAPTION>
=============================================================================================
Revolving Commitment
Bank Credit Percentage
Commitment
=============================================================================================
<S> <C> <C>
National City Bank $ 63,750,000 19.62%
=============================================================================================
ABN AMRO Bank N.V. $ 60,000,000 18.46%
=============================================================================================
KeyBank National Association $ 38,125,000 11.73%
=============================================================================================
Mellon Bank, N.A. $ 38,125,000 11.73%
=============================================================================================
Harris Trust and Savings Bank $ 30,000,000 9.23%
=============================================================================================
NBD Bank $ 35,000,000 10.77%
=============================================================================================
The Chase Manhattan Bank $ 20,000,000 6.15%
=============================================================================================
PNC Bank, NA $ 20,000,000 6.15%
=============================================================================================
Comerica Bank $ 20,000,000 6.15%
=============================================================================================
Aggregate Bank Commitments $ 325,000,000 100.00%
=============================================================================================
</TABLE>
13
<PAGE> 14
ACKNOWLEDGMENT OF GUARANTORS
Each of the undersigned being a guarantor of indebtedness of the
Borrower to the Banks, hereby acknowledges and agrees to the terms of the
foregoing Amendment No. 1 to the Amended and Restated Credit Agreement. Each
undersigned represents and warrants to the Banks and the Agent that the
Subsidiary Guaranty, dated as of January 30, 1998, executed by such undersigned
in favor of the Agent for the benefit of the Banks remains the valid and binding
obligation of the undersigned, enforceable against it in accordance with its
terms and each of financial institutions specified in Annex I as amended by the
Amendment No 1 to Amended and Restated Credit Agreement are "Banks" for all
purposes of the Subsidiary Guaranty executed by the undersigned and the
Obligations owing to such Bank under the Amended and Restated Credit Agreement
are guaranteed by such Subsidiary Guaranty.
OMG AMERICAS, INC., as a Guarantor
/s/ James M. Materna
- ------------------------------------
By: James M. Materna
Title: Chief Financial Officer
SCM METAL PRODUCTS INC., as a Guarantor
/s/ James M. Materna
- ------------------------------------
By: James M. Materna
Title: Chief Financial Officer
OMG FIDELITY, INC, (f\k\a Auric Corporation)
as a Guarantor
/s/ James M. Materna
- ------------------------------------
By: James M. Materna
Title: Chief Financial Officer
14
<PAGE> 1
Exhibit 10.29
-------------
(LOGO)
MRG (ZAMBIA) LIMITED
PO BOX N10677, IBM BUILDING, WEST BAY STREET, NASSAU, BAHAMAS
- --------------------------------------------------------------------------------
COBALT CONCENTRATES SALES CONTRACT NO: S-98488
Thursday 24th September 1998
BETWEEN
MRG (ZAMBIA) LIMITED, PO Box N10677, IBM Building, West Bay Street, Nassau,
Bahamas (herein called Seller) and OM Group, Inc. 811 Sharon Drive, Westlake, OH
44145-1522, USA (herein called Buyer)
WHEREAS
Seller has purchased 22,000 WMT of Nchanga grade cobalt concentrates from
Zambian Consolidated Copper Mines Limited (ZCCM) under the terms of a purchase
contract dated 12th September 1998 and has by 18th September 1998 received a
holding certificate from ZCCM for 15,000 wet metric tonnes of concentrates and
Seller wishes to sell these concentrates for treatment over a period of time,
And
Buyer is willing to purchase and pre-pay the cobalt concentrates under the terms
and conditions stipulated as below:
DEFINITIONS
Contract -shall mean this document
Concentrates -shall mean Nchanga cobalt concentrates produced at and
originating from ZCCM Concentrator in Nchanga
DMT -Dry metric tonne
WMT -Wet metric tonne
Pound -shall mean 16 ounces avoirdupois
Metric Tonne -shall mean 2.204.62 Pounds or 1,000 kilograms
Dollar or $ -shall refer to United States Dollars, the lawful currency of the
United States of America
All weights shall be plus/minus 5% in Seller's option
ARTICLE 1: MATERIAL
Concentrates containing an average of
**
ARTICLE 2: QUANTITY:
Approximately 15,000 to Approximately 22,000 WMT of concentrates
in Seller's option.
ARTICLE 3: COUNTRY OF ORIGIN
Republic of Zambia
ARTICLE 4: PACKING
in bulk
** Confidential treatment has been requested with respect to certain
information contained within this document. Confidential portions are omitted
and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities and Exchange Act of 1934.
Page 1 of 6
<PAGE> 2
OM Group, Inc. Thursday 24th September 1998
Sales Contract S 98488 Page 2 of 6
ARTICLE 5: DELIVERY
DDU Durban, South Africa by train. Seller undertakes that a
cumulative minimum of 12,000 WMT shall arrive in Durban by latest
31st October 1998. Any balance outstanding shall arrive in Durban
before 15th December 1998. All delivery dates are subject to the
availability of rail wagons and the performance of the railway
companies responsible for the movement of the concentrates from
Zambia to Durban.
A Load Port Surveyor, appointed by the Seller at the Seller's
cost, shall sample the concentrates, determine the moisture and
carry out a draught weight survey of the material on loading on
the ocean vessel. The Load Port Surveyor to be at Seller's choice
either Alex Stewart International Corporation BV; A H Knight
International Limited or Laboratory Services International B.V.
or by any other mutually agreed third party.
ARTICLE 6: PAYABLE METALS
** of the final assayed cobalt content established as per the
procedures in Article 14 below is payable
** of the final assayed copper content established as per the
procedures in Article 14 below is payable
ARTICLE 7: PRICES
Cobalt Price:
Payable Cobalt price is ** of the base price of Cobalt.
The base price of Cobalt is ** of the 99.3% Low Cobalt
quotation published by London Metal Bulletin over the month of
the quotation period (QP)
Copper Price:
Payable Copper price is ** of the base price of Copper.
The base price of Copper is ** of the LME Copper cash price
published by London Metal Bulletin over the month of the
quotation period (QP)
The minimum revenue due to the Seller under this contract shall
be **.
ARTICLE 8: QUANTITY PER LOT
Buyer commits to finalise the price for the concentrates as
follows:
Lot A: The QP for 1/4 of the total delivered quantity to be
December 1998;
Buyer has the right to amend the quantity, subject to
the minimum quantity of 1/6th of the total delivered
quantity under this contract, latest 5th January 1999;
Lot B: The QP for 1/4 of the total delivered quantity to be
January 1999;
Buyer has the right to amend the quantity, subject to
the minimum quantity of 1/6th of the total delivered
quantity under this contract, latest 5th February 1999;
Lot C: The QP for 1/4 of the total delivered quantity to be
February 1999;
Buyer has the right to amend the quantity, subject to
the minimum quantity of 1/6th of the total delivered
quantity under this contract, latest 5th March 1999;
Lot D: The QP for 1/4 of the total delivered quantity to be
March 1999;
Buyer has the right to amend the quantity, subject to
the minimum quantity of 1/6th of the total delivered
quantity under this contract, latest 5th April 1999;
Lot E: (Depending on whether Buyer has made any quantity
declarations)
** Confidential treatment has been requested with respect to certain
information contained within this document. Confidential portions are omitted
and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities and Exchange Act of 1934.
Page 2 of 6
<PAGE> 3
OM Group, Inc. Thursday 24th September 1998
Sales Contract S 98488
The QP for 1/4 of the total delivered quantity, or for the
remaining quantity, whichever is lower to be April 1999;
Buyer has the right to amend the quantity, subject to the minimum
quantity of 1/6th of the total delivered quantity under this
contract, latest 5th May 1999;
Lot F: (Depending on whether Buyer has made any quantity
declarations)
The QP, for the remaining quantity, to be May 1999;
All declarations under this Article shall be made in writing by
fax.
Both parties acknowledge that the Seller has the right to
exercise the "Liquidation" of this contract as per Article 11
below which would alter the terms of this Article.
ARTICLE 9: QUOTATION PERIOD (QP)
The quotation period for payable cobalt and copper for:-
Lot A: to be December 1998
Lot B: to be January 1999
Lot C: to be February 1999
Lot D: to be March 1999
Lot E: (if applicable) to be April 1999
Lot F: (if applicable) to be May 1999
Both parties acknowledge that the Seller has the right to
exercise the "Liquidation" of this contract as per Article 11
below which would alter the terms of this Article.
ARTICLE 10: PAYMENT
Up front payment
Buyer will make a provisional payment to a maximum of ** at the
rate of ** for each 1000 WMT (scale pro-rata) of concentrates
delivered DDU Durban, South Africa immediately against
presentation of the following documents and upon arrival of the
concentrates by train in Durban:
a) Either in Seller's option Railway Consignment Note endorsed
to Buyer; or Delivery order;
b) Seller's Provisional Commercial Invoice
c) Seller's Certificate of Provisional Weight and Provisional
Assay (which will be based on figures established either by
ZCCM or by an independent surveyor in Seller's option).
Final Payment
The Seller will issue the final invoice for each Lot when the
weight, analysis and final prices are known. For each Lot a
portion of the up front, provisional payment, will be deducted
from the final invoice calculated using the following formula:
Quantity of Lot being finalised X Total $ amount of Up front
Provisional payment Total quantity of delivered material
ARTICLE 11: LIQUIDATION
Buyer and Seller have agreed that Seller has the sole right, by
giving written notice to Buyer, to price the full quantity
shipped but not yet finally priced, in which case Buyer will pay
the remaining open balance at once based on the terms of this
contract with the exception that:-
a) the quotational period shall be the month of the Seller's
written notice; and
** Confidential treatment has been requested with respect to certain
information contained within this document. Confidential portions are omitted
and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities and Exchange Act of 1934.
Page 3 of 6
<PAGE> 4
OM Group, Inc. Thursday 24th September 1998
Sales Contract S 98488 Page 4 of 6
b) the base prices for cobalt and copper shall be
discounted by **.
ARTICLE 12: PAYMENT TERMS
The Final payments will be made by telegraphic transfer as
follows:
Lot A: for value 15th January 1999;
Lot B: for value 15th February 1999;
Lot C: for value 15th March 1999;
Lot D: for value 15th April 1999;
Lot E: (if applicable) for value 14th May 1999;
Lot F: (if applicable) for value 15th June 1999;
ARTICLE 13: WEIGHING, SAMPLING AND MOISTURE DETERMINATION
Weighing and sampling is to be done for each shipment on arrival
to Kokkola, Finland. Each Shipment is to be divided for such
purposes into 500 WMT lots. Weighing, sampling and moisture
determination to be performed at Buyer's expense. The Seller will
be represented at their own cost by either Alex Stewart
International Corporation BV; A H Knight International Limited or
Laboratory Services International B.V. ("The Independent
Surveyor") in Seller's option.
The weight less the moisture (Net Dry Weight) established during
this operation at Kokkola as certified by he Independent
Surveyor, shall be the final settlement weight
ARTICLE 14: ASSAYS
The pre-shipment Seller's Certificate of Provisional Assay shall
be final for all purposes under this contract except that the
Cobalt and Copper content for calculation of the final invoice
value for settlement purposes shall be determined by the assay
exchange as follows:
The sample shall be split into 4 portions. One for each party,
one for umpire, and one for reserve. The umpire sample and
reserve sample shall be sealed by Buyer and by the Independent
Surveyor and shall be stored at the Independent Surveyor's
laboratory.
The assays shall be made independently by Seller and Buyer and
the results shall be exchanged by crossing mail on the 30th
calendar date after completion of sampling (as evidenced by the
date of the Independent Surveyor's sampling report). Buyer and
Seller may mutually agree on an earlier date for exchange.
Should the difference between Buyer's and Seller's results be not
more than
0 20% for CO
0.20% for CU
the arithmetic mean of the results shall be taken as the agreed
assay for the purposes of final payment. In case of greater
difference, the officially sealed umpire samples may be refereed
to an umpire laboratory at the request of either party. The
umpire laboratory shall be as follows:
a) In the event that Alex Stewart International BV represents
Buyer for weighing, sampling and moisture determination as per
Article 13 above then the Umpire shall be A H Knight
International Limited;
b) In the event that AH Knight represents Buyer for weighing,
sampling and moisture determination as per Article 13 above then
the Umpire shall be Laboratory Services International BV;
** Confidential treatment has been requested with respect to certain
information contained within this document. Confidential portions are omitted
and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities and Exchange Act of 1934.
Page 4 of 6
<PAGE> 5
OM Group, Inc. Thursday 24th September 1998
Sales Contract S 98488 Page 5 of 6
c) In the event that Laboratory Services International BV
represents Buyer for weighing, sampling and moisture
determination as per Article 13 above then the Umpire shall be
Alex Stewart International BV;
In the case of umpire the final assay shall be the average of
the umpire assay and the one being nearest to it.
The cost for the umpire shall be borne by the party whose
result is farthest from he umpire, but should the umpire's
result be the exact mean of the two then the cost shall be borne
equally by the two parties
ARTICLE 15: DELIVERY ADDRESS
Durban, South Africa
ARTICLE 16: FORWARDING AGENT IN DURBAN
Rennies at:
Bluff Mechanical Appliance
PO Box 21273
Bluff 4036
Durban
South Africa.
ARTICLE 17 SHIPPING MARKS
All shipping documents are to show the following marks: 0MG
Kokkola Chemicals, Oy No........
ARTICLE 18 LOSS IN TRANSIT TO DURBAN AND/OR KOKKOLA
Buyer acknowledges that the Seller is delivering material which
is produced in Zambia and is subject to risks of theft, loss or
damage in transit from Zambia to Durban. In the event that
material is stolen, or is lost or damaged in transit Buyer
agrees that Seller shall not have the obligation to provide
substitute material and that such quantities may be deleted from
this contract without penalty. In event that Seller claims for
relief under this Article Seller agrees to provide Buyer with
written evidence of any losses in transit (such as Insurance
Loss Reports).
In the event that material is stolen, or is lost or damaged in
transit from Durban to Kokkola Buyer shall pay to Seller ** of
the Seller's Provisional Invoice value in final settlement.
ARTICLE 19 APPLICABLE LAW
This contract will be governed and construed in accordance with
English laws. This contract constitutes the entire agreement
between the parties pertaining to the subject mailer contained
herein.
** Confidential treatment has been requested with respect to certain
information contained within this document. Confidential portions are omitted
and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities and Exchange Act of 1934.
Page 5 of 6
<PAGE> 6
OM Group, Inc. Thursday 24th September 1998
Sales Contract S 98488 Page 6 of 6
ARTICLE 20 NOTICES
All notices, requests for information, complaint and other
communication which is required or may be given under this
contract shall be in writing delivered personally or sent by
registered mail, or telefax at the following addresses or to
other such address as a party may notify the other party in
writing.
In witness hereof the parties have caused this Contract to be executed by their
duly authorised representatives.
SIGNED:
- -----------------------------------------------
/s/ Rami Y. Weisfisch
- -----------------------------------------------
MRG (ZAMBIA) Limited, Authorised signatory.
SIGNED:
- -----------------------------------------------
/s/ Eugene Bak
- -----------------------------------------------
OM Group, Inc, Authorised signatory
Page 6 of 6
<PAGE> 1
[logo] EXHIBIT 10.30
MRG (ZAMBIA) LIMITED
PO Box N10677, IBM Building, West Bay Street, Nassau, Bahamas
- --------------------------------------------------------------------------------
COBALT CONCENTRATES SALES CONTRACT NO: S-98518
Tuesday, 20 October 1998
BETWEEN
MRG (ZAMBIA) LIMITED, PO Box N10677, IBM Building, West Bay Street, Nassau,
Bahamas (hereinafter called Seller) and OM Group, Inc. 50 Public Square, 3800
Terminal Tower, Cleveland, OH 44113-220, USA (hereinafter called Buyer)
WHEREAS
Seller has purchased Nchanga grade cobalt concentrates from Zambian Consolidated
Copper Mines Limited (ZCCM) and Seller wishes to sell these concentrates for
treatment over a period of time,
And
Buyer is willing to purchase and pre-pay the cobalt concentrates under the terms
and conditions stipulated as below:
DEFINITIONS
Contract -shall mean this document
Concentrates -shall mean Nchanga cobalt concentrates produced at and
originating from ZCCM Concentrator in Nchanga
DMT -Dry metric tonne
WMT -Wet metric tonne
Pound -shall mean 16 ounces avoirdupois
Metric Tonne -shall mean 2,204.62 Pounds or 1,000 kilograms
Dollar or ($) -shall refer to United States Dollars, the lawful currency of
The United States of America
All weights shall be plus/minus 5% in Seller's option
ARTICLE 1: MATERIAL
Concentrates containing an average of
**
ARTICLE 2: QUANTITY:
A minimum quantity of 600 metric tonnes of cobalt contained in
concentrates ["the Minimum Quantity"] in four Lots as follows:
Lot A: 150 metric tonnes of cobalt contained in concentrates
Lot B: 150 metric tonnes of cobalt contained in concentrates
Lot C: 150 metric tonnes of cobalt contained in concentrates
Lot D: 150 metric tonnes of cobalt contained in concentrates
and a maximum quantity of 1350 metric tonnes of cobalt contained in
concentrates in Seller's option.
In the event Seller delivers a quantity of cobalt contained in
concentrates in excess of the Minimum Quantity ("the Excess
Quantity") under this Contract then the Lots will be as follows:
** Confidential treatment has been requested with respect to certain
information contained within this document. Confidential portions are omitted
and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities and Exchange Act of 1934.
Page 1 of 6
<PAGE> 2
OM Group, Inc. Tuesday, 20 October 1998
Sales Contract S-98518 Page 2 of 6
Excess Quantity (metric tonnes of LOT
Cobalt contained in concentrates)
--------------------------------- ---
0 up to 150 E
151 up to 300 F
301 up to 450 G
451 up to 600 H
601 up to 750 I
ARTICLE 3: COUNTRY OF ORIGIN
Republic of Zambia
ARTICLE 4: PACKING
in bulk
ARTICLE 5: DELIVERY
DDU Durban, South Africa by train. Seller undertakes that all the
Concentrates shall arrive in Durban by latest 28th February 1999
(of which a cumulative minimum of 300 metric tonnes of cobalt
contained in concentrates shall arrive by latest 30th November 1998
and a cumulative minimum of 600 metric tonnes shall arrive by
latest 31st January 1999). All delivery dates are subject to the
availability of rail wagons and the performance of the railway
companies responsible for the movement of the concentrates from
Zambia to Durban.
A Load Port Surveyor, appointed by the Seller at Seller's cost,
shall sample the concentrates, determine the moisture and carry out
a draught weight survey of the material on loading on the ocean
vessel. The Load Port Surveyor to be at Seller's choice either Alex
Stewart International Corporation BV; A H Knight International
Limited or Laboratory Services International B.V. or by any other
mutually agreed third party.
ARTICLE 6: PAYABLE METALS
** of the final assayed cobalt content established as per the
procedures in Article 14 below is payable
** of the final assayed copper content established as per the
procedures in Article 14 below is payable
ARTICLE 7: PRICES
Cobalt Price:
Payable Cobalt price is ** of the base price
of Cobalt.
The base price of Cobalt is ** of the 99.3% Low Cobalt
quotation published by London Metal Bulletin over the month of the
quotation period ("QP")
Copper Price:
Payable Copper price is ** of the base price of Copper.
The base price of Copper is ** of the LME Copper cash
price published by London Metal Bulletin over the month of the
quotation period ("QP")
The minimum revenue due to the Seller under this contract shall be:
I) For the minimum Quantity: A total of **; and
II) For the Excess Quantity: an amount calculated in accordance
with the following formula:
** Confidential treatment has been requested with respect to certain
information contained within this document. Confidential portions are omitted
and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities and Exchange Act of 1934.
Page 2 of 6
<PAGE> 3
OM Group, Inc. Tuesday, 20 October 1998
Sales Contract S-98518 Page 3 of 6
Metric tonnes of cobalt contained in concentrates x ** per each
metric tonne of cobalt contained in concentrates = Minimum Revenue
for the Excess Quantity
[Example: If the Excess Quantity = 588.88 metric tonnes, then the
Minimum Revenue for the Excess Quantity shall be 588.88 x **]
ARTICLE 8: QUANTITY PER LOT
Buyer commits to finalise the price for the concentrates as
follows:
<TABLE>
<CAPTION>
LOT Quantity (metric tonnes of Quotation Period ("QP") for
Cobalt contained in concentrates) Copper and for Cobalt
---- --------------------------------- ---------------------
<S> <C> <C>
A 150 December 1998
B 150 January 1999
C 150 February 1999
D 150 March 1999
E For up to 150MT of the Excess Quantity April 1999
F For the next up to 150MT of the Excess Quantity May 1999
G For the next up to 150MT of the Excess Quantity June 1999
H For the next up to 150MT of the Excess Quantity July 1999
I For the next up to 150MT of the Excess Quantity August 1999
</TABLE>
Both parties acknowledge that the Seller has the right to exercise
the "Liquidation" of this contract as per Article 11 below which
would alter the terms of this Article.
ARTICLE 9: QUOTATION PERIOD (QP)
The quotation period for payable cobalt and copper for:
<TABLE>
<CAPTION>
LOT Quantity (metric tonnes of Cobalt Quotation Period ("QP") for
contained in concentrates) Copper and for Cobalt
---- -------------------------- ---------------------
<S> <C> <C>
A 150 December 1998
B 150 January 1999
C 150 February 1999
D 150 March 1999
E For up to 150MT of the Excess Quantity April 1999
F For the next up to 150MT of the Excess Quantity May 1999
G For the next up to 150MT of the Excess Quantity June 1999
H For the next up to 150MT of the Excess Quantity July 1999
I For the next up to 150MT of the Excess Quantity August 1999
</TABLE>
Both parties acknowledge that the Seller has the right to exercise
the "Liquidation" of this contract as per Article 11 below which
would alter the terms of this Article.
ARTICLE 10: PAYMENT
Up front payment
** Confidential treatment has been requested with respect to certain
information contained within this document. Confidential portions are omitted
and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities and Exchange Act of 1934.
Page 3 of 6
<PAGE> 4
OM Group, Inc. Tuesday, 20 October 1998
Sales Contract S-98518 Page 4 of 6
Buyer will make a provisional payment to a maximum of ** at the
rate of ** for each one (1) metric tonne of cobalt contained
(scale pro-rata) in the concentrates delivered DDU Durban, South
Africa immediately against presentation of the following documents
and upon arrival of the concentrates by train in Durban:
(a) In Seller's option either Railway Consignment Note endorsed to
Buyer; or Delivery order;
(b) Seller's Provisional Commercial Invoice
(c) Seller's Certificate of Provisional Weight and Provisional
Assay (which will be based on figures established either by
ZCCM or by an independent surveyor in Seller's option).
FINAL PAYMENT
The Seller will issue the final invoice for each Lot when the
weight, analysis and final prices are known. For each Lot a portion
of the up front, provisional payment, will be deducted from the
final invoice calculated using the following formula:
Quantity of Lot being finalised X Total $ amount of Upfront Provisional payment
- -------------------------------
Total quantity of delivered material
ARTICLE 11: LIQUIDATION
Buyer and Seller have agreed that Seller has the sole right, by
giving written notice to Buyer, to price the full quantity shipped
but not yet finally priced, in which case Buyer will pay the
remaining open balance at once based on the terms of this contract
with the exception that:
a) the quotational period shall be the month of the Seller's
written notice; and
b) the base prices for cobalt and copper shall be discounted
by **.
ARTICLE 12: PAYMENT TERMS
The final payments will be made by telegraphic transfer as follows:
Lot A: for value 15th January 1999;
Lot B: for value 15th February 1999;
Lot C: for value 15th March 1999;
Lot D: for value 15th April 1999;
Lot E: (if applicable) for value 14th May 1999;
Lot F: (if applicable) for value 15th June 1999;
Lot G: (if applicable) for value 15th July 1999;
Lot H: (if applicable) for value 13th August 1999;
Lot I: (if applicable) for value 15th September 1999;
ARTICLE 13: WEIGHING, SAMPLING AND MOISTURE DETERMINATION
Weighing and sampling is to be done for each shipment on arrival to
Kokkola, Finland. Each shipment is to be divided for such purposes
into 500 WMT lots. Weighing, sampling and moisture determination to
be performed at Buyer's expense. The Seller will be represented at
their own cost by either Alex Stewart International Corporation BV;
A H Knight International Limited or Laboratory Services
International B.V. ("The Independent Surveyor") in Seller's option.
The weight less the moisture (Net Dry Weight) established during
this operation at Kokkola, as certified by the Independent
Surveyor, shall be the final settlement weight.
** Confidential treatment has been requested with respect to certain
information contained within this document. Confidential portions are omitted
and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities and Exchange Act of 1934.
Page 4 of 6
<PAGE> 5
OM Group, Inc. Tuesday, 20 October 1998
Sales Contract S-98518 Page 5 of 6
ARTICLE 14: ASSAYS
The pre-shipment Seller's Certificate of Provisional Assay shall be
final for all purposes under this contract except that the Cobalt
and Copper content for calculation of the final invoice value for
settlement purposes shall be determined by assay exchange as
follows:
The sample shall be split into 4 portions. One for each party, one
for umpire, one for reserve. The umpire sample and reserve sample
shall be sealed by Buyer and by the Independent Surveyor and shall
be stored at the Independent Surveyor's laboratory.
The assays shall be made independently by Seller and Buyer and the
results shall be exchanged by crossing mail on 30th calendar date
after completion of sampling (as evidenced by the date of the
Independent Surveyor's sampling report). Buyer and Seller may
mutually agree on an earlier date for exchange.
Should the difference between Buyer's and Seller's results be not
more than
0.20% for CO
0.20% for CU
the arithmetic mean of the results shall be taken as the agreed
assay for the purposes of final payment. In case of greater
difference, the officially sealed umpire samples may be refereed to
an umpire laboratory at the request of either party. The umpire
laboratory shall be as follows:
a) In the event that Alex Stewart International BV represents Buyer
for weighing, sampling and moisture determination as per Article 13
above then the Umpire shall be A H Knight International Limited;
b) In the event that AH Knight represents Buyer for weighing,
sampling and moisture determination as per Article 13 above then
the Umpire shall be Laboratory Services International BV;
c) In the event that Laboratory Services International BV
represents Buyer for weighing, sampling and moisture determination
as per Article 13 above then the Umpire shall be Alex Stewart
International BV;
In the case of umpire the final assay shall be the average of the
umpire assay and the one being nearest to it.
The cost for the umpire shall be borne by the party whose result is
farthest from the umpire, but should the umpire's result be the
exact mean of the two then the cost shall be borne equally by the
two parties.
ARTICLE 15: DELIVERY ADDRESS
Durban, South Africa
ARTICLE 16: FORWARDING AGENT IN DURBAN
Rennies at:
Bluff Mechanical Appliance
PO Box 21273
Bluff 4036
Durban
South Africa.
Page 5 of 6
<PAGE> 6
OM Group, Inc. Tuesday, 20 October 1998
Sales Contract S-98518 Page 6 of 6
ARTICLE 17: SHIPPING MARKS
All shipping documents are to shown the following marks: OMG
Kokkola Chemicals, Oy No.........
ARTICLE 18: LOSS IN TRANSIT TO DURBAN AND/OR KOKKOLA
Buyer acknowledges that the Seller is delivering material which is
produced in Zambia and is subject to risks of theft, loss or damage
in transit from Zambia to Durban. In the event that material is
stolen, or is lost or damaged in transit Buyer agrees that Seller
shall not have the obligation to provide substitute material and
that such quantities may be deleted from this contract without
penalty. In event that Seller claims for relief under this Article
Seller agrees to provide Buyer with written evidence of any losses
in transit (such as Insurance Loss Reports).
In the event that material is stolen, or is lost or damaged in
transit from DDU Durban to Kokkola Buyer shall pay to Seller **
of the Seller's Provisional Invoice value in final settlement.
ARTICLE 19: APPLICABLE LAW
This contract will be governed and construed in accordance with
English laws. This contract constitutes the entire agreement
between the parties pertaining to the subject matter contained
herein.
ARTICLE 20: NOTICES
All notices, requests for information, complaint and other
communication which is required or may be given under this contract
shall be in writing delivered personally or sent by registered
mail, or telefax at the following addresses or to other such
address as a party may notify the other party in writing.
ARTICLE 21: AMENDMENTS
This contract may not be amended verbally. All proposals made by
Buyer or Seller to amend this contract must be in writing, and all
replies to any such proposals must be in writing. Any and all
amendment(s) to this contract, if any, will only become effective,
legally binding and considered part of the entire agreement once
they are signed by authorized representatives of both MRG (ZAMBIA)
Limited and OM Group, Inc.
In witness hereof the parties have caused this Contract to be executed by their
duty authorised representatives
SIGNED:
- -------------------------
/s/ Rami Y. Weisfisch
- ------------------------------------------
MRG(ZAMBIA) Limited, Authorised signatory.
SIGNED:
- -------------------------
/s/ Eugene Bak
- -------------------------
OM Group, Inc, Authorised signatory
** Confidential treatment has been requested with respect to certain
information contained within this document. Confidential portions are omitted
and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities and Exchange Act of 1934.
Page 6 of 6
<PAGE> 7
[logo]
MRG (ZAMBIA) LIMITED
PO Box N10677, IBM Building, West Bay Street, Nassau, Bahamas
- --------------------------------------------------------------------------------
COBALT CONCENTRATES SALES CONTRACT NO: S-98518
Amendment No. 1
Thursday, 22 October 1998
IN ACCORDANCE WITH ARTICLE 21. OF SALES CONTRACT NO. S-98518 THIS AMENDMENT
SHALL ONLY BECOME EFFECTIVE, LEGALLY BINDING AND CONSIDERED PART OF THE ENTIRE
AGREEMENT ONCE IT IS SIGNED BY AUTHORISED REPRESENTATIVES OF BOTH MRG (ZAMBIA)
LIMITED AND OM GROUP, INC.
MRG (ZAMBIA) LIMITED, PO Box N10677, IBM Building, West Bay Street, Nassau,
Bahamas (hereinafter called Seller) and OM Group, Inc. 50 Public Square,
3800 Terminal Tower, Cleveland, OH 44113-220, USA (hereinafter called Buyer)
have agreed to amend Articles 2, 5, 7, 8, 9, 10, 12 and 19 of the above
referenced sales contract to read as follows:
ARTICLE 2: QUANTITY:
A minimum quantity of 900 metric tonnes of cobalt contained in
concentrates ["the Minimum Quantity"] in six Lots as follows:
Lot A: 150 metric tonnes of cobalt contained in concentrates
Lot B: 150 metric tonnes of cobalt contained in concentrates
Lot C: 150 metric tonnes of cobalt contained in concentrates
Lot D: 150 metric tonnes of cobalt contained in concentrates
Lot E: 150 metric tonnes of cobalt contained in concentrates
Lot F: 150 metric tonnes of cobalt contained in concentrates
and a maximum quantity of 1800 metric tonnes of cobalt contained in
concentrates in Seller's option.
In the event Seller delivers a quantity of cobalt contained in
concentrates in excess of the Minimum Quantity ("the Excess
Quantity") under this Contract then the Lots will be as follows:
Excess Quantity (metric tonnes of LOTS
Cobalt contained in concentrates)
--------------------------------- -----
0 up to 150 G
151 up to 300 H
301 up to 450 I
451 up to 600 J
601 up to 750 K
751 up to 900 L
ARTICLE 5: DELIVERY
DDU Durban, South Africa by train. Seller undertakes that all the
Concentrates shall arrive in Durban by latest 30th April 1999 (of
which a cumulative minimum of 300 metric tonnes of cobalt contained
in
Page 1 of 4
<PAGE> 8
OM Group, Inc. Thursday, 22 October 1998
Sales Contract S-98518 Page 2 of 4
Amendment No. 1
concentrates shall arrive by latest 30th November 1998, a
cumulative minimum of 600 metric tonnes shall arrive by latest 31st
January 1999 and a cumulative minimum of 900 metric tonnes shall
arrive by latest 28th February 1999). All delivery dates are
subject to the availability or rail wagons and the performance of
the railway companies responsible for the movement of the
concentrates from Zambia to Durban.
A Load Port Surveyor, appointed by the Seller at Seller's cost,
shall sample the concentrates, determine the moisture and carry out
a draught weight survey of the material on loading on the ocean
vessel. The Load Port Surveyor to be at Seller's choice either Alex
Stewart International B.V.; A H Knight International Limited or
Laboratory Services International B.V. or by any other mutually
agreed third party.
ARTICLE 7: PRICES
Cobalt Price:
Payable Cobalt price is ** of the base price of Cobalt.
The base price of Cobalt is ** of the 99.3% Low Cobalt quotation
published by London Metal Bulletin over the month of the quotation
period ("QP")
Copper Price:
Payable Copper price is ** of the base price of Copper.
The base price of Copper is ** of the LME Copper cash
price published by London Metal Bulletin over the month of the
quotation period ("QP")
The minimum revenue due to the Seller under this contract shall be:
I) For the Minimum Quantity: A total of **; and
II) For the Excess Quantity: an amount calculated in accordance
with the following formula:
Metric tonnes of cobalt contained in concentrates x **
per each metric tonne of cobalt contained in
concentrates = Minimum Revenue for the Excess Quantity
[Example: If the Excess Quantity = 588.88 metric tonnes, then
the Minimum Revenue for the Excess Quantity shall be 588.88
x **]
ARTICLE 8: QUANTITY PER LOT
Buyer commits to finalise the price for the concentrates as
follows:
<TABLE>
<CAPTION>
LOT Quantity (metric tonnes of Cobalt Quotation Period ("QP") for
contained in concentrates) Copper and for Cobalt
---- -------------------------- ---------------------
<S> <C> <C>
A 150 December 1998
B 150 January 1999
C 150 February 1999
D 150 March 1999
E 150 April 1999
F 150 May 1999
G For up to 150MT of the Excess Quantity June 1999
H For the next up to 150MT of the Excess Quantity July 1999
I For the next up to 150MT of the Excess Quantity August 1999
J For the next up to 150MT of the Excess Quantity September 1999
K For the next up to 150MT of the Excess Quantity October 1999
</TABLE>
** Confidential treatment has been requested with respect to certain
information contained within this document. Confidential portions are omitted
and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities and Exchange Act of 1934.
Page 2 of 4
<PAGE> 9
OM Group, Inc.
Sales Contract S-98518 Thursday, 22 October 1998
Amendment No.1 Page 3 of 4
L For the next up to 150 MT of the Excess Quantity November 1999
- - ------------------------------------------------ -------------
Both parties acknowledge that the Seller has the right to exercise the
"Liquidation" of this contract as per Article 11 below which would alter
the terms of this Article.
ARTICLE 9: QUOTATION PERIOD (QP)
The quotation period payable cobalt and copper for:
<TABLE>
<CAPTION>
LOT Quantity (metric tonnes of Cobalt contained Quotation Period ("QP") for
- --- in concentrates) Copper and for Cobalt
---------------- ---------------------
<S> <C> <C>
A 150 December 1998
B 150 January 1999
C 150 February 1999
D 150 March 1999
E 150 April 1999
F 150 May 1999
G For up to 150MT of the Excess Quantity June 1999
H For the next up to 150 MT of the Excess Quantity July 1999
I For the next up to 150 MT of the Excess Quantity August 1999
J For the next up to 150 MT of the Excess Quantity September 1999
K For the next up to 150 MT of the Excess Quantity October 1999
L For the next up to 150 MT of the Excess Quantity November 1999
Both parties acknowledge that the Seller has the right to exercise the
"Liquidation" of this contract as per Article 11 below which would alter
the terms of this Article.
</TABLE>
ARTICLE 10 PAYMENT
Up front payment
Buyer will make a provisional payment to a maximum of ** at the rate
of ** for each one (1) metric tonne of cobalt contained (scale
pro-rata) in the concentrates delivered DDU Durban, South Africa
immediately against presentation of the following documents and upon
arrival of the concentrates by train in Durban:
(a) In Seller's option either Railway Consignment Note endorsed to
Buyer; or Delivery order;
(b) Seller's Provisional Commercial Invoice
(c) Seller's Certificate of Provisional Weight and Provisional Assay
(which will be based on figures established either by ZCCM or by an
independent surveyor in Seller's option).
Final payment
The Seller will issue the final invoice for each Lot when the weight,
analysis and final prices are known. For each Lot a portion of the up
front, provisional payment, will be deducted from the final invoice
calculated using the following formula:
Quantity of Lot being finalised X Total $ amount of the Up front Provisional
- ------------------------------- payment
Total quantity of delivered material
** Confidential treatment has been requested with respect to certain
information contained within this document. Confidential portions are omitted
and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities and Exchange Act of 1934.
Page 3 of 4
<PAGE> 10
OM Group, Inc.
Sales Contract S-98518 Thursday, 22 October 1998
Amendment No.1 Page 4 of 4
ARTICLE 12: PAYMENT TERMS
The final payments will be made by telegraphic transfer as follows:
Lot A: for value 15th January 1999;
Lot B: for value 15th February 1999;
Lot C: for value 15th March 1999;
Lot D: for value 15th April 1999;
Lot E: for value 14th May 1999;
Lot F: for value 15th June 1999;
Lot G: (if applicable) for value 15th July 1999;
Lot H: (if applicable) for value 13th August 1999;
Lot I: (if applicable) for value 15th September 1999;
Lot J: (if applicable) for value 15th October 1999;
Lot K: (if applicable) for value 15th November 1999;
Lot L: (if applicable) for value 15th December 1999;
ARTICLE 19 APPLICABLE LAW
This contract will be governed and construed in accordance with
English laws. This contract as amended in Amendment No. 1 dated
22nd October 1998 constitutes the entire agreement between the
parties pertaining to the subject matter contained herein.
1 OTHER ARTICLES IN SALES CONTRACT S-98518 DATED 20th OCTOBER 1998 REMAIN
- - UNCHANGED.
In witness hereof the parties have caused this Amendment No. 1 to be executed by
their duly authorised representatives.
SIGNED:
/s/ Rami Y. Weisfisch
- --------------------------------------
- --------------------------------------
MRG (ZAMBIA) Limited, Authorised signatory.
SIGNED:
/s/ Eugene Bak
- --------------------------------------
- --------------------------------------
OM Group, Inc, Authorised signatory
<PAGE> 11
(LOGO)
MRG (ZAMBIA) LIMITED
PO Box N10677, IBM Building, West Bay Street, Nassau, Bahamas
- --------------------------------------------------------------------------------
COBALT CONCENTRATES SALES CONTRACT NO. S-98518
Amendment No. 2
Friday 6th November 1998
- --------------------------------------------------------------------------------
IN ACCORDANCE WITH ARTICLE 21. OF SALES CONTRACT NO: S-98518 THIS AMENDMENT
SHALL ONLY BECOME EFFECTIVE, LEGALLY BINDING AND CONSIDERED PART OF THE ENTIRE
AGREEMENT ONCE IT IS SIGNED BY AUTHORISED REPRESENTATIVES OF BOTH MRG (ZAMBIA)
LIMITED AND OM GROUP, INC.
- --------------------------------------------------------------------------------
MRG (ZAMBIA) LIMITED, PO Box N10677, IBM Building, West Bay Street, Nassau,
Bahamas (hereinafter called Seller) and OM Group, Inc., 50 Public Square, 3800
Terminal Tower, Cleveland, OH 44113-220, USA (hereinafter called Buyer) have
agreed to amend Articles 2, 5, 7, 8, 9, 10, 12 and 19 of the above referenced
sales contract to read as follows:
ARTICLE 2: QUANTITY:
A minimum quantity of 1500 metric tonnes of cobalt contained in
concentrates ("the Minimum Quantity") in ten Lots as follows:
Lot A: 150 metric tonnes of cobalt contained in concentrates
Lot B: 150 metric tonnes of cobalt contained in concentrates
Lot C: 150 metric tonnes of cobalt contained in concentrates
Lot D: 150 metric tonnes of cobalt contained in concentrates
Lot E: 150 metric tonnes of cobalt contained in concentrates
Lot F: 150 metric tonnes of cobalt contained in concentrates
Lot G: 150 metric tonnes of cobalt contained in concentrates
Lot H: 150 metric tonnes of cobalt contained in concentrates
Lot I: 150 metric tonnes of cobalt contained in concentrates
Lot J: 150 metric tonnes of cobalt contained in concentrates
and a maximum quantity of 2560 metric tonnes of cobalt contained
in concentrates in Seller's option.
In the event Seller delivers a quantity of cobalt contained in
excess of the Minimum Quantity ("the Excess Quantity") under this
Contract then the Lots will be as follows:
Excess Quantity
(metric tonnes of Cobalt contained in concentrates) LOT
-----------------------------------------------------------------
0 up to 150 K
151 up to 300 L
301 up to 490 M
491 up to 680 N
681 up to 870 O
871 up to 1060 P
-----------------------------------------------------------------
ARTICLE 5: DELIVERY
DDU Durban, South Africa by train. Seller undertakes that all the
Concentrates shall arrive in Durban by latest 30th April 1999
(of which a cumulative minimum of 300 metric tonnes of cobalt
contained in
Page 1 of 5
<PAGE> 12
OM Group, Inc.
Sales Contract S-98518 Friday 6th November 1998
Amendment No. 2 Page 2 of 5
concentrates shall arrive by latest 30th November 1998, a cumulative
minimum of 750 metric tonnes shall arrive by latest 31st January 1999 and a
cumulative minimum of 1250 metric tonnes shall arrive by latest 28th
February 1999). All delivery dates are subject to the availability of rail
wagons and the performance of the railway companies responsible for the
movement of the concentrates from Zambia to Durban.
A Load Proter Surveyor, appointed by the Seller at the Seller's cost, shall
sample the concentrates, determine the moisture and carry out a draught
weight survey of the material on loading on the ocean vessel. The Load Port
Surveyor to be at Seller's choice either Alex Stewart International
Corporation BV; A H Knight International Limited or Laboratory Services
International B.V. or by any Other mutually agreed third party.
ARTICLE 7: PRICES
Cobalt Price:
Payable Cobalt price is ** of the base price of Cobalt.
The base price of Cobalt is ** of the 99.3% LMB Cobalt quotation
published by London Metal Bulletin over the month of the
quotation period ("QP")
Copper Price:
Payable Copper price is ** of the base price of Copper.
The base price of Copper is ** of the LMB Copper cash price
published by London Metal Bulletin over the month of the
quotation period ("QP")
The Minimum Revenue due to the Seller under this contract shall
be:-
I) For the Minimum Quantity: A total of **; and
II) For the quantity covered by Lot K and Lot L: an amount
calculated in accordance with the following formula:
Metric tonnes of cobalt contained in concentrates x **
per each metric tonne of cobalt contained in
concentrates = Minimum Revenue for the quantity covered
by Lot K and Lot L.
III) For the quantity covered by Lot M, Lot N, Lot O and Lot P:
an amount calculated in accordance with the following
formula:
Metric Tonnes of cobalt contained in concentrates x **
per each metric tonne of cobalt contained in
concentrates = Minimum Revenue for the quantity covered
by Lot M, Lot N, Lot O and Lot P
(Example: If the Excess Quantity = 588.88 metric tonnes,
then the Minimum Revenue for the Excess Quantity shall be **
calculated as follows:
- quantity I covered for Lot K and Lot L is 300 Mt.
therefore Minimum Revenue for these Lots shall be 300 x
**; and
- quantity covered for Lot M (190 Mt.) and Lot N
(98.88 Mt.) is 288.88 Mt. therefore Minimum revenue for
these Lots shall be 288.88 x **
ARTICLE 8: QUANTITY PER LOT
Buyer commits to finalise the price for the concentrates as
follows:
LOT Quantity (metric tonnes of Cobalt contained Quotation Period
in concentrates) ("QP") for
Copper and Cobalt
- --------------------------------------------------------------------------------
A 150 December 1998
** Confidential treatment has been requested with respect to certain
information contained within this document. Confidential portions are omitted
and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities and Exchange Act of 1934.
Page 2 of 5
<PAGE> 13
<TABLE>
<CAPTION>
OM Group, Inc.
Sales Contract S-98518 Friday 6th November 1998
Amendment No. 2 Page 3 of 6
<S> <C> <C>
B 150 January 1999
C 150 February 1999
D 150 March 1999
E 150 April 1999
F 150 May 1999
G 150 June 1999
H 150 July 1999
I 150 August 1999
J 150 September 1999
K For the next up to 150 MT of the Excess Quantity October 1999
L For the next up to 150 MT of the Excess Quantity November 1999
M For the next up to 150 MT of the Excess Quantity June 1999
N For the next up to 150 MT of the Excess Quantity July 1999
O For the next up to 150 MT of the Excess Quantity August 1999
P For the next up to 150 MT of the Excess Quantity September 1999
- --------------------------------------------------------------------------------
</TABLE>
Both parties acknowledge that the Seller has the right to
exercise the "Liquidation" of this contract as per Article 11
below which would alter the terms of this Article.
Article 9: Quotation Period (QP)
The quotation period for payable cobalt and copper for:-
<TABLE>
<CAPTION>
LOT Quantity (metric tonnes of Cobalt contained Quotation Period ("QP") for
in concentrates) Copper and Cobalt
- ----------------------------------------------------------------------------------------
<S> <C> <C>
A 150 December 1998
B 150 January 1999
C 150 February 1999
D 150 March 1999
E 150 April 1999
F 150 May 1999
G 150 June 1999
H 150 July 1999
I 150 August 1999
J 150 September 1999
K For the next up to 150 MT of the Excess Quantity October 1999
L For the next up to 150 MT of the Excess Quantity November 1999
M For the next up to 150 MT of the Excess Quantity June 1999
N For the next up to 150 MT of the Excess Quantity July 1999
O For the next up to 150 MT of the Excess Quantity August 1999
P For the next up to 150 MT of the Excess Quantity September 1999
- --------------------------------------------------------------------------------
</TABLE>
Both parties acknowledge that the Seller has the right to exercise
the "Liquidation" of this contract as per Article 11 below which would
alter the terms of this Article.
Article 10 Payment
Up front payment
Page 3 of 5
<PAGE> 14
OM Group, Inc.
Sales Contract S-98518 Friday 6th November 1998
Amendment No. 2 Page 4 of 5
Buyer will make a provisional payment immediately against presentation
of the following documents and upon arrival of the concentrates by
train in Durban at the rate of:-
a) For the quantity delivered against Lot A- Lot L (inclusive):
** for each one (1) metric tonne of cobalt contained (scale
pro-rata) in the concentrates delivered DDU Durban, South
Africa:
b) For the quantity delivered against Lot M - Lot P (inclusive):
** for each one (1) metric tonne of cobalt contained (scale
pro-rata) in the concentrates delivered DDU Durban, South
Africa.
Documents to include:
a) In Seller's option either Railway Consignment Note endorsed to
Buyer; or Delivery order;
b) Seller's Provisional Commercial Invoice
c) Seller's Certificate of Provisional Weight and Provisional
Assay (which will be based on figures established either by
ZCCM or by an independent surveyor in Seller's option).
Final Payment
The Seller will issue the final invoice for each Lot when the weight,
analysis and final prices are known. For each Lot a portion of the up
front, provisional payment, will be deducted from the final invoice
calculated using the following formula:
<TABLE>
<CAPTION>
<S> <C>
Quantity of Lot being finalised X Total $ amount of Up front Provisional payment
---------------------------------
Total quantity of delivered material
</TABLE>
ARTICLE 12: PAYMENT TERMS
The final payments will be made by telegraphic transfer as follows:
Lot A: for value 15th January 1999;
Lot B: for value 15th February 1999;
Lot C: for value 15th March 1999;
Lot D: for value 15th April 1999;
Lot E: for value 14th May 1999;
Lot F: for value 15th June 1999;
Lot G: for value 15th July 1999;
Lot H: for value 13th August 1999;
Lot I: for value 15th September 1999;
Lot J: for value 15th October 1999;
Lot K: (if applicable) for value 15th November 1999;
Lot L: (if applicable) for value 15th December 1999;
Lot M: (if applicable) for value 15th July 1999;
Lot N: (if applicable) for value 13th August 1999;
Lot O: (if applicable) for value 15th September 1999;
Lot P: (if applicable) for value 15th October 1999;
** Confidential treatment has been requested with respect to certain
information contained within this document. Confidential portions are omitted
and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities and Exchange Act of 1934.
Page 4 of 5
<PAGE> 15
OM Group, Inc.
Sales Contract S-98518 Friday 6th November 1998
Amendment No. 2 Page 5 of 5
Article 19 Applicable law
This contract will be governed and construed in accordance with
English laws. This contract as amended, Amendment No. 1 dated
22nd October 1998 and Amendment No. 2 dated 4th November 1998,
constitutes the entire agreement between the parties pertaining
to the subject matter contained herein.
ALL OTHER TERMS AND CONDITIONS IN SALES CONTRACT S-98518 DATED 20th OCTOBER 1998
REMAIN UNCHANGED.
I witness hereof the parties have caused this Amendment No. 2 to be executed by
their duly authorised representatives
SIGNED:
- ---------------------------------
/s/ Rami Y. Weisfisch
- ---------------------------------
MRG (ZAMBIA) Limited, Authorised signatory.
SIGNED:
/s/ Eugene Bak
- ---------------------------------
OM Group, Inc., Authorised signatory
Page 5 of 5
<PAGE> 1
Exhibit 10.31
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 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.
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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.
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
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(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 (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, 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
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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 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.
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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.
(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.
(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,
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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.
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
(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
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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;
(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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EXHIBIT 10.32
AMENDMENT OF BENEFITS AGREEMENT
-------------------------------
THIS AGREEMENT, made and entered into as of the 1st day of October,
1998, by and between OMG AMERICAS, INC., an Ohio corporation (hereinafter
referred to as the "Corporation"), and EUGENE BAK (hereinafter referred to as
the "Employee"),
WITNESSETH THAT:
WHEREAS, Employee and the Corporation are the parties to that certain
Retirement Benefit Agreement ("Original Retirement Benefit Agreement") dated
January 1, 1995, under which Employee would have been entitled to receive
certain benefits if he remained employed by the Corporation until attaining the
normal retirement age as described therein;
WHEREAS, the former name of OMG Americas, Inc. was Mooney
Chemicals, Inc.; and
WHEREAS, Employee and the Corporation desire to amend the benefits
package provided to the Employee in the manner provided for hereunder;
NOW, THEREFORE, in consideration of these premises and the mutual
promises set forth herein, the parties hereby agree as follows:
1. BONA FIDE AMENDMENT TO BENEFITS. Based on arm's-length negotiations
between the Corporation and the Employee, the Employee shall not be entitled to
the benefits as described in the Original Retirement Benefit Agreement, and the
Corporation shall not be obligated to provide any of the benefits as described
in the Original Retirement Benefit Agreement, and as an amendment thereof,
contemporaneously herewith, the Corporation, the Employee, the Employee's
spouse, and a trust for the benefit of the Employee's family, shall enter into a
Split- Dollar Agreement under which the Corporation shall provide certain
benefits to the Employee.
2. MISCELLANEOUS. This Agreement may not be amended, altered or
modified, except by a written instrument signed by the parties hereto or their
respective successors. This Agreement shall be binding upon and inure to the
benefit of the Corporation and its successors and assigns, and Employee and his
heirs, executors, administrators and beneficiaries. This Agreement, and the
rights of the parties hereunder, shall be governed by and construed in
accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the day and year first above written.
OMG AMERICAS, INC.
By: /s/ EUGENE BAK By: /s/ THOMAS E. FLEMING
---------------------- ----------------------
Eugene Bak Thomas E. Fleming
President
<PAGE> 2
SPLIT-DOLLAR AGREEMENT
----------------------
THIS AGREEMENT, made and entered into as of the 1st day of October,
1998, by and between OMG Americas Inc., an Ohio corporation (the "corporation"),
Eugene Bak (the "Employee"), and the Eugene and Barbara Bak Irrevocable Demand
Trust, Marcus P. Bak, trustee, U/A dated June 11, 1998 (the "Trust" or the
"Owner"),
WITNESSETH THAT:
WHEREAS, the Employee is employed by the corporation;
WHEREAS, the Employee wishes to provide life insurance protection to
the Trust upon the death of the survivor of the Employee and his spouse, Barbara
Bak (the "Spouse"), under a policy of life insurance insuring their lives
(hereinafter referred to as the "Policy"), which is described in Exhibit A
attached hereto and by this reference made a part hereof, and which is being
issued by the insurer designated in Exhibit A (hereinafter referred to as the
"Insurer");
WHEREAS, the Corporation is willing to pay a portion of the premiums
due on the Policy as an additional employment benefit for the Employee, on the
terms and conditions hereinafter set forth;
WHEREAS, the Trust shall be the owner of the Policy and,
shall possess all incidents of ownership in and to the Policy;
WHEREAS, the Corporation wishes to have the Policy collaterally
assigned to it by the Trust, in order to secure the payment of the amounts which
it will pay toward the premiums on the Policy;
NOW, THEREFORE, in consideration of these premises and of the mutual
promises contained herein, the parties hereto agree as follows:
1. Purchase of Policy. The Trust has or will purchase the Policy in the
total face amount designated in Exhibit A attached hereto. The parties hereto
agree that they will take any further action which may be necessary to cause the
Policy to conform to the provisions of this Agreement. The parties hereto agree
that the Policy shall be subject to the terms and conditions of this Agreement
and of the collateral assignment filed with the Insurer relating to the Policy.
<PAGE> 3
2. Ownership of Policy. The Trust shall be the sole and absolute owner of
the Policy, and may exercise all ownership rights granted to the owner thereof
by the terms of the Policy, except as may otherwise be provided herein.
3. Payment of Premiums.
a. Thirty (30) days prior to the due date of each Policy premium, the
Corporation shall notify the Employee of the exact amount due from the Employee
hereunder, which shall be an amount equal to the annual cost of current life
insurance protection on the life of the Employee, measured by the lower of the
U.S. Life Table 38 rates, or the Insurer's current published premium rate for
annually renewable term insurance for standard risks. Either the Employee, or
the Owner on behalf of the Employee, shall pay such required contribution to the
Corporation prior to the premium due date. If neither the Employee nor the Owner
makes such timely payment, the Corporation, in its sole discretion, may elect to
make the Employee's portion of the premium payment, which payments shall be
recovered by the Corporation as provided herein.
b. On or before the due date of each Policy premium, or within the
grace period provided therein, the Corporation shall pay the full amount of the
premium to the Insurer, and shall, upon request, promptly furnish the Employee
evidence of timely payment of such premium. The Corporation shall annually
furnish the Employee a statement of the amount of income reportable by the
Employee for federal and state income tax purposes, if any, as a result of the
insurance protection provided the Owner as the policy beneficiary.
4. Collateral Assignment. To secure the payment to the Corporation of the
amount of the premiums on the Policy paid by it, the Trust has,
contemporaneously herewith, assigned the Policy to the Corporation as
collateral. The collateral assignment of the Policy to the Corporation hereunder
shall not be terminated, altered or amended by the Trust prior to the
termination of this Agreement, without the express written consent of the
Corporation. The parties hereto agree to take all action necessary to cause such
collateral assignment to conform to the provisions of this Agreement.
5. Limitations on Trust's Rights in Policy.
a. Except as otherwise provided herein or in the Collateral Assignment
document relating to the Policy, the Trust shall not sell, assign, transfer,
borrow against, surrender or cancel the Policy, nor change the beneficiary
designation provision thereof, without in any such case, the express written
consent of the Corporation.
-2-
<PAGE> 4
b. Notwithstanding any provision hereof to the contrary, the Trust
shall have the right to absolutely and irrevocably assign all of its right,
title and interest in and to this Agreement to an assignee. This right shall be
exercisable by the execution and delivery to the Corporation of a written
assignment. Upon receipt of such written assignment executed by the Trust and
duly accepted by the assignee thereof, the Corporation shall consent thereto in
writing, and shall thereafter treat the Trust's assignee as the sole owner of
all of the Trust's right, title and interest in and to this Agreement.
Thereafter, the Trust shall have no right, title or interest in and to this
Agreement, all such rights being vested in and exercisable only by such
assignee.
6. Collection of Death Proceeds.
a. Upon the death of the Employee and his Spouse, the Corporation shall
cooperate with the then acting trustee of the Trust and the beneficiary or
beneficiaries designated by the Trust to take whatever action is necessary to
collect the death benefit provided under the Policy; when such benefit has been
collected and paid as provided herein, this Agreement shall thereupon terminate.
b. Upon the death of the Employee and his Spouse, the Corporation shall
have the unqualified right to receive a portion of such death benefit equal to
the total amount of the premiums on the Policy paid by it, reduced by any
outstanding indebtedness which was incurred by the Corporation and secured by
the Policy, including any interest due on such indebtedness. The balance of the
death benefit provided under the Policy, if any, shall be paid to the
beneficiary or beneficiaries designated by the Trust, in the manner and in the
amount or amounts provided in the beneficiary designation provision of the
Policy. In no event shall the amount payable to the Corporation hereunder exceed
the Policy proceeds payable at the death of the Employee and his Spouse. No
amount shall be paid from such death benefit to the beneficiary or beneficiaries
designated by the Trust until the full amount due the Corporation hereunder has
been paid. The parties hereto agree that the beneficiary designation provision
of the Policy shall conform to the provisions hereof.
c. Notwithstanding any provision hereof to the contrary, in the event
that, for any reason whatsoever, no death benefit is payable under the Policy
upon the death of the Employee and his Spouse and in lieu thereof the Insurer
refunds all or any part of the premiums paid for the Policy, the Corporation and
the Trust's beneficiary or beneficiaries shall have the unqualified right to
share such premiums based on their respective cumulative contributions thereto.
-3-
<PAGE> 5
7. Termination of the Agreement During the Lifetime of the Employee or His
Spouse.
a. This Agreement shall terminate, before the death of the survivor of
the Employee and his Spouse, without notice, on the date that is fifteen (15)
years after the date of this Agreement, provided that the Agreement shall
terminate sooner upon the occurrence of any of the following events: (i) total
cessation of the Corporation's business; or (ii) bankruptcy, receivership or
dissolution of the Corporation.
b. Notwithstanding Section 7a hereof, on the date that is fifteen (15)
years after the date of this Agreement, if (i) this Agreement has not otherwise
terminated earlier, and (ii) the cash surrender value of the policy at such time
is not sufficient to maintain a death benefit under the policy of at least One
Million Three Hundred Thousand Dollars ($1,300,000.00) without the further
payment of premiums on the policy (assuming reasonable growth of the policy and
reasonable mortality costs and other expenses, and such other reasonable
assumptions as may be necessary to make such determination), this Agreement
shall remain in effect until clause (ii) hereof is satisfied (when clause (ii)
hereof is subsequently satisfied, this Agreement shall then terminate).
c. In addition, the Trust may terminate this Agreement at any time, by
written notice to the Corporation. Such termination shall be effective as of the
date of such notice.
8. Disposition of the Policy on Termination of the Agreement During the
Lifetime of the Employee or His Spouse.
a. For sixty (60) days after the date of the termination of this
Agreement during the lifetime of the Employee or his Spouse, the Trust shall
have the assignable option of obtaining the release of the collateral assignment
of the Policy to the Corporation. To obtain such release, the Trust or its
assignee shall pay to the Corporation the total amount of the premium payments
made by the Corporation on the Policy, less any indebtedness secured by the
Policy which was incurred by the Corporation and remains outstanding as of the
date of such termination, including any interest due on such indebtedness. Upon
receipt of such amount, the Corporation shall release the collateral assignment
of the Policy, by the execution and delivery of an appropriate instrument of
release.
b. If the Trust or its assignee fails to exercise such option within
such sixty (60) day period, then, at the request of the Corporation, the Trust
or its assignee shall execute any document or documents required by the Insurer
to transfer the interest of the Trust or its assignee in the Policy to the
Corporation. Alternatively, the Corporation may enforce its right
-4-
<PAGE> 6
to be paid from the cash surrender value of the Policy under the collateral
assignment of the Policy. In the event the Corporation receives an amount in
excess of its premium payments on the Policy, it shall be required to pay such
excess to the Trust.
9. Liquidated Damages if Corporation Fails to Pay Premiums.
Notwithstanding any other provision herein, if the Corporation fails to pay all
or part of a premium which it is required to pay under the terms of this
Agreement, and the Corporation fails to pay such amount within thirty (30) days
after receiving written notice thereof from the Owner, as liquidated damages for
such breach of this Agreement, the Corporation shall not be entitled to be
repaid for its premium payments on the policy in any event (whether upon the
termination of this Agreement, the cancellation of the policy or the death of
the surviving insured), and shall not collect any amounts hereunder or under the
Collateral Assignment or the policy. Any such breach of this Agreement shall not
relive the Corporation of its obligation to pay additional premiums under this
Agreement.
10. Insurer Not a Party. The Insurer shall be fully discharged from its
obligations under the Policy by payment of the Policy death benefit to the
beneficiary or beneficiaries named in the Policy, subject to the terms and
conditions of the Policy. In no event shall the Insurer be considered a party to
this Agreement, or any modification or amendment hereof. No provision of this
Agreement, nor of any modification or amendment hereof, shall in any way be
construed as enlarging, changing, varying, or in any other way affecting the
obligations of the Insurer as expressly provided in the Policy, except insofar
as the provisions hereof are made a part of the Policy by the collateral
assignment executed by the Trust and filed with the Insurer in connection
herewith.
11. Named Fiduciary, Determination of Benefits, Claims Procedure
and Administration.
a. The Corporation is hereby designated as the named fiduciary under
this Agreement. The named fiduciary shall have authority to control and manage
the operation and administration of this Agreement, and it shall be responsible
for establishing and carrying out a funding policy and method consistent with
the objectives of this Agreement.
b. (1) CLAIM.
A person who believes that he or she is being denied a benefit to which
he or she is entitled under this Agreement (hereinafter referred to as a
"Claimant") may file a written request for such benefit with the Corporation,
setting forth his or her claim. The request must be addressed to the Secretary
of
-5-
<PAGE> 7
the Corporation at its then principal place of business.
(2) CLAIM DECISION.
Upon receipt of a claim, the Corporation shall advise the Claimant that
a reply will be forthcoming within ninety (90) days and shall, in fact, deliver
such reply within such period. The Corporation may, however, extend the reply
period for an additional ninety (90) days for reasonable cause.
If the claim is denied in whole or in part, the Corporation shall adopt
a written opinion, using language calculated to be understood by the Claimant,
setting forth: (a) the specific reason or reasons for such denial; (b) the
specific reference to pertinent provisions of this Agreement on which such
denial is based; (c) a description of any additional material or information
necessary for the Claimant to perfect his or her claim and an explanation why
such material or such information is necessary; (d) appropriate information as
to the steps to be taken if the Claimant wishes to submit the claim for review;
and (e) the time limits for requesting a review under subsection (3) and for
review under subsection (4) hereof.
(3) REQUEST FOR REVIEW.
Within sixty (60) days after the receipt by the Claimant of the written
opinion described above, the Claimant may request in writing that the Secretary
of the Corporation review the determination of the Corporation. Such request
must be addressed to the Secretary of the Corporation, at its then principal
place of business. The Claimant or his or her duly authorized representative
may, but need not, review the pertinent documents and submit issues and comments
in writing for consideration by the Secretary. If the Claimant does not request
a review of the Corporation's determination by the Secretary of the Corporation
within such sixty (60) day period, he or she shall be barred and estopped from
challenging the Corporation's determination.
(4) REVIEW OF DECISION.
Within sixty (60) days after the Secretary's receipt of a request for
review, he or she will review the Corporation's determination. After considering
all materials presented by the Claimant, the Secretary will render a written
opinion, written in a manner calculated to be understood by the Claimant,
setting forth the specific reasons for the decision and containing specific
references to the pertinent provisions of this Agreement on which the decision
is based. If special circumstances require that the sixty (60) day time period
be extended, the Secretary will so notify the Claimant and will render the
decision as soon as possible, but no later than one hundred twenty (120) days
after
-6-
<PAGE> 8
receipt of the request for review.
(5) REVIEW BY OTHER CORPORATE OFFICER.
If the Secretary of the Corporation is the Claimant or a member of the
family of the Claimant, the Corporation shall appoint another officer of the
Corporation (who is not a member of the Claimant's family) to make such
determination.
12. Amendment. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their respective
successors or assigns.
13. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Corporation and its successors and assigns, the Employee, his
Spouse and their successors, assigns, heirs, executors, administrators and
beneficiaries, and upon the Trust and its successors and assigns.
14. Notices. Any notice, consent or demand required or permitted to be
given under the provisions of this Agreement shall be in writing, and shall be
signed by the party giving or making the same. If such notice, consent or demand
is mailed to a party hereto, it shall be sent by United States certified mail,
postage prepaid, addressed to such party's last known address as shown on the
records of the Corporation. The date of such mailing shall be deemed the date of
notice, consent or demand.
15. Governing Law. This Agreement, and the rights of the parties
hereunder, shall be governed by and construed in accordance with the laws of the
State of Ohio.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate, as of the day and year first above written.
OMG AMERICAS, INC.
By: /S/ THOMAS E. FLEMING
----------------------------
Thomas E. Fleming
President
"Corporation"
By: /S/ EUGENE BAK
----------------------------
Eugene Bak
"Employee"
Eugene and Barbara Bak Irrevocable
Demand Trust U/A dated June 11, 1998
By: /S/ MARCUS P. BAK, TRUSTEE
----------------------------
Marcus P. Bak, Trustee
-7-
<PAGE> 9
EXHIBIT A
The following life insurance policy is subject to the
attached Split-Dollar Agreement:
Insurer Northwestern Mutual Life
------------------------
Insured Eugene and Barbara Bak
------------------------
Policy Number #14-691-675
------------------------
Face Amount $ 3,032,191
------------------------
Date of Issue September 24, 1998
------------------------
-8-
<PAGE> 1
Exhibit 21
SUBSIDIARIES
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY* JURISDICTION OF ORGANIZATION
- ------------------- ----------------------------
<S> <C>
OMG Fidelity, Inc. Delaware
Fidelity Chemical Products Malaysia SDN.BHD Malaysia
Fidelity Chemical Products (BAH) Limited Bahamas
D&O Incorporated (50%) Japan
OMG Kokkola Chemicals Oy Finland
OMG Americas, Inc. Ohio
OMG Jett, Inc. Ohio
OMG Europe GmbH Germany
OMG Asia-Pacific Co., Ltd. Taiwan
SCM Metal Products, Inc. Delaware
SCM Metal Products Singapore PTE, Ltd. (70%) Singapore
Vasset, S.A. France
OMG Belleville, Limited Canada
OM Group Export, Limited Barbados
OMG BV Netherlands
</TABLE>
* Percentage in parentheses indicates the Company's ownership, if other
than 100%
<PAGE> 1
Exhibit 23
Consent of Ernst & Young LLP
We consent to the incorporation by reference in the following Registration
Statements of OM Group, Inc. of our report dated February 12, 1999, with respect
to the consolidated financial statements of OM Group, Inc. included in the
Annual Report (Form 10-K) for the year ended December 31, 1998:
<TABLE>
<CAPTION>
Registration Number Description Filing Date
- ------------------- ----------- -----------
<S> <C> <C>
33-74674 OM Group, Inc. Long-Term Incentive Compensation
Plan - Form S-8 Registration Statement -
1,015,625 Shares January 27, 1994
333-07529 OMG Americas, Inc. Employees' Profit Sharing Plan
-- Form S-8 Registration Statement - 250,000 Shares July 3, 1996
333-07531 OM Group, Inc. Non-Employee Directors' Equity Plan
-- Form S-8 Registration Statement - 250,000 Shares July 3, 1996
</TABLE>
/s/ Ernst & Young LLP
Cleveland, Ohio
March 22, 1999
<PAGE> 1
Exhibit 24
OM Group, Inc.
Form 10-K
Power of Attorney for Directors
The undersigned, a director of OM Group, Inc., a Delaware corporation (the
"Company"), which anticipates the filing with the Securities and Exchange
Commission (the "Commission") under the provisions of the Securities Exchange
Act of 1934 (the "Act") a Form 10-K (together with any and all subsequent
amendments, the "Form 10-K"), does hereby constitute and appoint James P.
Mooney, James M. Materna or Michael J. Scott and any one of them with full power
of substitution and resubstitution, as attorney or attorneys to execute and file
on behalf of the undersigned, in his capacity as director of the Company, the
Form 10-K and any and all other documents to be filed with the Commission
pertaining to the Form 10-K, with full power and authority to do and perform any
and all acts and things whatsoever required or necessary to be done in the
premises, as fully as to all intents and purposes as he could do if personally
present, hereby ratifying and approving the acts of said attorneys and any of
them and any such substitution.
Executed this 22nd day of March, 1999.
/s/ Eugene Bak
<PAGE> 2
OM Group, Inc.
Form 10-K
Power of Attorney for Directors
The undersigned, a director of OM Group, Inc., a Delaware corporation (the
"Company"), which anticipates the filing with the Securities and Exchange
Commission (the "Commission") under the provisions of the Securities Exchange
Act of 1934 (the "Act") a Form 10-K (together with any and all subsequent
amendments, the "Form 10-K"), does hereby constitute and appoint James P.
Mooney, James M. Materna or Michael J. Scott and any one of them with full power
of substitution and resubstitution, as attorney or attorneys to execute and file
on behalf of the undersigned, in his capacity as director of the Company, the
Form 10-K and any and all other documents to be filed with the Commission
pertaining to the Form 10-K, with full power and authority to do and perform any
and all acts and things whatsoever required or necessary to be done in the
premises, as fully as to all intents and purposes as he could do if personally
present, hereby ratifying and approving the acts of said attorneys and any of
them and any such substitution.
Executed this 22nd day of March, 1999.
/s/ Lee R. Brodeur
<PAGE> 3
OM Group, Inc.
Form 10-K
Power of Attorney for Directors
The undersigned, a director of OM Group, Inc., a Delaware corporation (the
"Company"), which anticipates the filing with the Securities and Exchange
Commission (the "Commission") under the provisions of the Securities Exchange
Act of 1934 (the "Act") a Form 10-K (together with any and all subsequent
amendments, the "Form 10-K"), does hereby constitute and appoint James P.
Mooney, James M. Materna or Michael J. Scott and any one of them with full power
of substitution and resubstitution, as attorney or attorneys to execute and file
on behalf of the undersigned, in his capacity as director of the Company, the
Form 10-K and any and all other documents to be filed with the Commission
pertaining to the Form 10-K, with full power and authority to do and perform any
and all acts and things whatsoever required or necessary to be done in the
premises, as fully as to all intents and purposes as he could do if personally
present, hereby ratifying and approving the acts of said attorneys and any of
them and any such substitution.
Executed this 22nd day of March, 1999.
/s/ Frank Butler
<PAGE> 4
OM Group, Inc.
Form 10-K
Power of Attorney for Directors
The undersigned, a director of OM Group, Inc., a Delaware corporation (the
"Company"), which anticipates the filing with the Securities and Exchange
Commission (the "Commission") under the provisions of the Securities Exchange
Act of 1934 (the "Act") a Form 10-K (together with any and all subsequent
amendments, the "Form 10-K"), does hereby constitute and appoint James P.
Mooney, James M. Materna or Michael J. Scott and any one of them with full power
of substitution and resubstitution, as attorney or attorneys to execute and file
on behalf of the undersigned, in his capacity as director of the Company, the
Form 10-K and any and all other documents to be filed with the Commission
pertaining to the Form 10-K, with full power and authority to do and perform any
and all acts and things whatsoever required or necessary to be done in the
premises, as fully as to all intents and purposes as he could do if personally
present, hereby ratifying and approving the acts of said attorneys and any of
them and any such substitution.
Executed this 22nd day of March, 1999.
/s/ Thomas R. Miklich
<PAGE> 5
OM Group, Inc.
Form 10-K
Power of Attorney for Directors
The undersigned, a director of OM Group, Inc., a Delaware corporation (the
"Company"), which anticipates the filing with the Securities and Exchange
Commission (the "Commission") under the provisions of the Securities Exchange
Act of 1934 (the "Act") a Form 10-K (together with any and all subsequent
amendments, the "Form 10-K"), does hereby constitute and appoint James P.
Mooney, James M. Materna or Michael J. Scott and any one of them with full power
of substitution and resubstitution, as attorney or attorneys to execute and file
on behalf of the undersigned, in his capacity as director of the Company, the
Form 10-K and any and all other documents to be filed with the Commission
pertaining to the Form 10-K, with full power and authority to do and perform any
and all acts and things whatsoever required or necessary to be done in the
premises, as fully as to all intents and purposes as he could do if personally
present, hereby ratifying and approving the acts of said attorneys and any of
them and any such substitution.
Executed this 22nd day of March, 1999.
/s/ John E. Mooney
<PAGE> 6
OM Group, Inc.
Form 10-K
Power of Attorney for Directors
The undersigned, a director of OM Group, Inc., a Delaware corporation (the
"Company"), which anticipates the filing with the Securities and Exchange
Commission (the "Commission") under the provisions of the Securities Exchange
Act of 1934 (the "Act") a Form 10-K (together with any and all subsequent
amendments, the "Form 10-K"), does hereby constitute and appoint James P.
Mooney, James M. Materna or Michael J. Scott and any one of them with full power
of substitution and resubstitution, as attorney or attorneys to execute and file
on behalf of the undersigned, in his capacity as director of the Company, the
Form 10-K and any and all other documents to be filed with the Commission
pertaining to the Form 10-K, with full power and authority to do and perform any
and all acts and things whatsoever required or necessary to be done in the
premises, as fully as to all intents and purposes as he could do if personally
present, hereby ratifying and approving the acts of said attorneys and any of
them and any such substitution.
Executed this 22nd day of March, 1999.
/s/ Markku Toivanen
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE OM
GROUP, INC. CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1998 AND 1997 AND THE OM
GROUP, INC. STATEMENTS OF CONSOLIDATED INCOME FOR THE YEAR ENDED DECEMBER 31,
1998 AND 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 7,750 13,193
<SECURITIES> 0 0
<RECEIVABLES> 82,296 81,282
<ALLOWANCES> 1,390 680
<INVENTORY> 283,264 219,201
<CURRENT-ASSETS> 420,241 322,909
<PP&E> 338,768 229,728
<DEPRECIATION> 93,423 74,112
<TOTAL-ASSETS> 870,719 601,063
<CURRENT-LIABILITIES> 119,567 100,682
<BONDS> 0 0
0 0
0 0
<COMMON> 240 222
<OTHER-SE> 403,903 301,019
<TOTAL-LIABILITY-AND-EQUITY> 870,719 601,063
<SALES> 521,226 487,296
<TOTAL-REVENUES> 521,226 487,296
<CGS> 376,274 369,933
<TOTAL-COSTS> 434,302 416,724
<OTHER-EXPENSES> 40 (815)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 15,560 13,410
<INCOME-PRETAX> 71,324 57,977
<INCOME-TAX> 22,966 19,534
<INCOME-CONTINUING> 48,358 38,443
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 48,358 38,443
<EPS-PRIMARY> 2.11 1.84
<EPS-DILUTED> 2.05 1.78
</TABLE>
