<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998.
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______
COMMISSION FILE NUMBER 0-25090
-------
STILLWATER MINING COMPANY
-------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 81-0480654
___________________________________ ____________________________________
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
717 17TH STREET, SUITE 1480
DENVER, COLORADO 80202
________________________________________ ____________________________
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(303) 978-2525
____________________________________________________
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS: YES X NO __
-
AT APRIL 21, 1998, 20,485,050 SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE,
WERE ISSUED AND OUTSTANDING.
<PAGE>
STILLWATER MINING COMPANY
FORM 10-Q
QUARTER ENDED MARCH 31, 1998
INDEX
PART I - FINANCIAL INFORMATION
PAGE
----
ITEM 1......... FINANCIAL STATEMENTS......................... 3
ITEM 2......... MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION
ITEM 1......... LEGAL PROCEEDINGS............................ 12
ITEM 2......... CHANGES IN SECURITIES........................ 12
ITEM 3......... DEFAULTS UPON SENIOR SECURITIES.............. 12
ITEM 4......... SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS...................................... 12
ITEM 5......... OTHER INFORMATION............................ 12
ITEM 6......... EXHIBITS AND REPORTS ON FORM 8-K............. 12
SIGNATURES ............................................. 13
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STILLWATER MINING COMPANY
CONSOLIDATED BALANCE SHEET
(in thousands, except share and per share amounts)
(Unaudited)
MARCH 31, December 31,
1998 1997
------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,260 $ 4,191
Short-term investments 11,769 13,468
Inventories 7,355 7,380
Accounts receivable 9,204 6,926
Other current assets 1,607 1,349
Deferred income taxes 1,989 1,989
------------- -------------
Total current assets 36,184 35,303
------------- -------------
PROPERTY, PLANT AND EQUIPMENT, NET 194,737 191,254
OTHER NONCURRENT ASSETS 2,566 2,662
------------- -------------
Total assets $ 233,487 $ 229,219
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt
and capital lease obligations $ 2,120 $ 1,982
Accounts payable 3,281 2,709
Accrued payroll and benefits 2,062 1,972
Property, production and franchise
taxes payable 4,156 3,682
Other current liabilities 2,615 1,904
------------- -------------
Total current liabilities 14,234 12,249
------------- -------------
LONG-TERM LIABILITIES
Long-term debt and capital lease
obligations 60,920 61,513
Other noncurrent liabilities 3,042 2,283
Deferred income taxes 12,398 11,782
------------- -------------
Total liabilities 90,594 87,827
------------- -------------
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value,
1,000,000 shares authorized,
none issued -- --
Common stock, $.01 par value,
50,000,000 shares authorized,
20,425,513 and 20,377,623
issued and outstanding 204 204
Paid-in capital 141,710 141,193
Accumulated earnings (deficit) 979 (5)
------------- -------------
Total shareholders' equity 142,893 141,392
------------- -------------
Total liabilities and shareholders' equity $ 233,487 $ 229,219
============= =============
See notes to consolidated financial statements.
3
<PAGE>
STILLWATER MINING COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
THREE MONTHS ENDED
MARCH 31,
---------------------------------
1998 1997
------------- -------------
REVENUES $ 21,513 $ 16,003
COSTS AND EXPENSES
Cost of metals sold 15,604 16,191
Depreciation and amortization 2,814 2,780
------------- -------------
Total cost of sales 18,418 18,971
General and administrative expense 723 333
------------- -------------
Total costs and expenses 19,141 19,304
------------- -------------
OPERATING INCOME (LOSS) 2,372 (3,301)
Other income (expense)
Interest income 256 250
Interest expense, net of capitalized
interest of $222 and $742 (1,028) (509)
------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES 1,600 (3,560)
INCOME TAX (PROVISION) BENEFIT (616) 1,370
------------- -------------
NET INCOME (LOSS) $ 984 $ (2,190)
============= =============
NET INCOME (LOSS) PER SHARE
Basic and diluted earnings per share $ 0.05 $ (0.11)
============= =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 20,383 20,171
Diluted 20,672 20,171
See notes to consolidated financial statements.
4
<PAGE>
STILLWATER MINING COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(in thousands)
THREE MONTHS ENDED
MARCH 31,
---------------------------------
1998 1997
------------- -------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (NOTE 6) $ 4,605 $ (8,221)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, including capitalized
interest (6,297) (7,431)
Purchase of short-term investments (2,129) --
Proceeds from maturity of short-term 3,828 6,403
investments
Proceeds from sale of assets -- 60
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (4,598) (968)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 517 791
Payments on long-term debt and capital
lease obligations (455) (303)
Proceeds from capital lease -- 855
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 62 1,343
------------- -------------
CASH AND CASH EQUIVALENTS
Net increase (decrease) 69 (7,846)
Balance at beginning of period 4,191 16,389
------------- -------------
BALANCE AT END OF PERIOD $ 4,260 $ 8,543
============= =============
See notes to consolidated financial statements.
5
<PAGE>
STILLWATER MINING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - GENERAL
The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with the instructions for Form 10-Q. In the opinion
of management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation of the financial condition and
results of operations have been included. Operating results for the three-month
period ended March 31, 1998 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1998. These interim
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Stillwater
Mining Company (the "Company") Form 10-K for the year ended December 31, 1997.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RECLASSIFICATIONS
Certain amounts in the accompanying consolidated financial statements for
1997 have been reclassified to conform to the classifications used in 1998.
COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income. This
Statement establishes standards for reporting and display of comprehensive
income and its components. The effect of adopting SFAS No. 130 was not material
for any of the periods presented.
NOTE 3 - INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
(Unaudited)
MARCH 31, December 31,
1998 1997
------------------ -----------------
<S> <C> <C>
Raw ore $ 315 $ 460
Concentrate and in-process 3,586 3,604
------------------ -----------------
Metals inventory 3,901 4,064
Materials and supplies 3,454 3,316
------------------ -----------------
$ 7,355 $ 7,380
================== =================
</TABLE>
6
<PAGE>
STILLWATER MINING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - PRECIOUS METALS HEDGING CONTRACTS
Precious metals hedging contracts at March 31, 1998, consist of spot deferred
forward sales contracts, which require the future delivery of metals at a
specific price. The realization of revenue pursuant to these contracts is
dependent upon the counterparties' performance in accordance with the terms of
the contracts. The Company anticipates all counterparties will meet their
obligations under the contracts.
At March 31, 1998, the Company's outstanding hedge contracts were as follows:
1998
-----------------------------------------
Hedged Average Price per
Ounces Ounce
------------------------------------------
PALLADIUM 157,120 $138
PLATINUM 3,855 $369
The Company has credit agreements with its major trading partners that provide
for margin deposits in the event that forward prices for palladium and platinum
exceed the Company's hedge contract prices and their credit lines.
NOTE 5 - EARNINGS PER SHARE
In 1997, the Company adopted SFAS No. 128, Earnings per Share. All prior
period earnings per share data presented have been restated to conform to the
provisions of this Statement.
Outstanding options to purchase 856,849 and 0 shares of common stock were
included in the computation of diluted earnings per share for the three-month
period ended March 31, 1998 and 1997, respectively. Outstanding options to
purchase 446,575 and 1,127,975 shares of common stock were excluded from the
computation of diluted earnings per share for the three-month period ended March
31, 1998 and 1997, respectively, because to do so would have been antidilutive
using the treasury stock method.
In addition, 1.9 million shares of common stock issuable under the
terms of the Company's Convertible Subordinated Notes were excluded from the
computation of diluted earnings per share for the three-month period ended March
31, 1998 and 1997, because to do so would have been antidilutive.
7
<PAGE>
STILLWATER MINING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 - CASH FLOW INFORMATION
Reconciliation of net income (loss) to net cash provided (used in) operating
activities is as follows (in thousands):
Three months ended March 31, 1998 1997
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 984 $(2,190)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS)
TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Depreciation and amortization 2,814 2,780
Deferred income taxes 616 (1,370)
Other -- (30)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Decrease in inventories 25 1,594
Increase in accounts receivable (2,278) (5,285)
Decrease (increase) in other current assets (258) 37
Decrease in other noncurrent assets 96 96
Increase (decrease) in accounts payable 572 (1,830)
Increase (decrease) in other current liabilities 1,275 (2,742)
Increase in noncurrent liabilities 759 719
- --------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 4,605 $(8,221)
- --------------------------------------------------------------------------------
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
STILLWATER MINING COMPANY
KEY FACTORS
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
------------------------------
1998 1997
--------- ---------
OUNCES PRODUCED
Palladium (000) 77 61
Platinum (000) 24 19
--------- ---------
Total Production 101 80
TONS MINED (000) 165 121
TONS MILLED (000) 165 122
AVERAGE MILL GRADE (OPT) 0.68 0.74
MILL RECOVERY (%) 91 87
CASH COSTS PER TON MILLED (1) $ 94 $ 121
CASH COSTS PER OUNCE PRODUCED (1) $ 153 $ 184
Depreciation and Amortization 28 35
--------- ---------
Total Costs per Ounce Produced (1) $ 181 $ 219
OUNCES SOLD
Palladium (000) 74 62
Platinum (000) 23 20
--------- ---------
Total Ounces Sold 97 82
AVERAGE REALIZED PRICE PER OUNCE (2)
Palladium $ 167 $ 136
Platinum $ 404 $ 381
Combined $ 223 $ 195
AVERAGE MARKET PRICE PER OUNCE (2)
Palladium $ 241 $ 136
Platinum $ 387 $ 368
Combined $ 276 $ 191
(1) Cash costs of production include cash costs of mining, processing and
general and administrative expenses at the mine site (including overhead,
taxes other than income, royalties, and credits for metals produced other
than palladium and platinum). Total costs of production include cash costs
plus depreciation and amortization. Income taxes and interest income and
expense are not included in either total or cash costs per ounce produced.
(2) Stillwater Mining reports a combined average realized price of palladium and
platinum at the same ratio as ounces are produced from the Base Metals
Refinery, i.e. 3.2:1. The same ratio is applied to the average market
price.
9
<PAGE>
This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements include comments
regarding anticipated capital expenditures and sources of financing for capital
expenditures. In addition to factors discussed below, the factors that could
cause actual results to differ materially include, but are not limited to, the
following: supply and demand of palladium and platinum, unexpected events
during expansion, fluctuations in ore grade, tons mined, crushed or milled,
variations in smelter of refinery operation, amounts and prices of the Company's
forward metals sales and geological, technical, permitting, mining or processing
issues. For a more detailed description of risks attendant to the business and
operations of Stillwater and to the mining industry in general, please see the
Company's other SEC filings, in particular the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997.
RESULTS OF OPERATIONS
Revenues
--------
Revenues for the first quarter of 1998 increased $5.5 million, or 34%, to
$21.5 million compared to $16.0 million in the first quarter of 1997. The
increase in revenue was due to an 18% increase in the quantity of metal sold
combined with a 14% increase in the average realized price per ounce of
palladium and platinum.
During the first quarter of 1998, the Company sold 74,000 ounces of palladium
and 23,000 ounces of platinum, respectively, at average realized prices of $167
and $404, respectively, compared with sales of 62,000 ounces of palladium and
20,000 ounces of platinum, respectively, at average realized prices of $136 and
$381 in the prior year's comparable period. During the first quarter of 1998,
the average market prices of palladium and platinum were $241 and $387,
respectively. As a result of hedge contracts that were entered into in 1997, the
Company realized $5.1 million less revenue in the first quarter of 1998 than
would have been realized if metal had been delivered at prevailing market
prices. During the first quarter of 1998, the Company increased production 26%
to 77,000 ounces of palladium and 24,000 ounces of platinum compared with
production of 61,000 ounces of palladium and 19,000 ounces of platinum in the
first quarter of 1997.
Costs
-----
Cost of metals sold decreased by $0.6 million, or 4%, from $16.2 million in
the first quarter of 1997 to $15.6 million in the first quarter of 1998. The
cash cost per ounce produced decreased 17% from $184 in the first quarter of
1997 to $153 in 1998. The decrease in costs is the result of operating
efficiencies that have occurred as a result of completion of an expansion at the
Stillwater Mine. During 1997, the facility increased production capacity from
1,200 tons per day to 2,000 tons per day. In addition, materials handling and
processing efficiencies were realized upon commissioning of the production shaft
in June 1997 and upgrades to the grinding and flotation circuits in the
concentrator.
Operating Income
----------------
As a result of the increase in revenues and the decrease in operating costs
discussed above, operating income in the first quarter of 1998 increased by $5.7
million to $2.4 million compared with an operating loss of $3.3 million in the
comparable period of 1997.
10
<PAGE>
Other Income (Expense)
----------------------
During the first quarter of 1998, interest expense increased by $0.5 million
to $1.0 million compared with $0.5 million in the first quarter of 1997. The
increase in interest expense is due to the fact that capitalized interest
expense decreased from $0.7 million in the first quarter of 1997 to $0.2 million
in the first quarter of 1998, since the expansion of the Stillwater Mine was
substantially completed in the first half of 1997.
Net Income
----------
The Company's income before income taxes amounted to $1.6 million in the first
quarter of 1998 compared to a loss before income taxes of $3.6 million in the
first quarter of 1997. In the first quarter of 1998, the Company provided for
$0.6 million of income taxes compared to a recorded benefit of $1.4 million in
the first quarter of 1997. The Company has provided for deferred income taxes at
the statutory rate of 38.5%; however, as a result of approximately $46.6 million
of operating loss carryforwards the Company will not be required to fund any
income tax liability until future years. As a result, the Company reports net
income of $1.0 million, or $0.05 per basic and diluted share in the first
quarter of 1998, compared to a net loss of $2.2 million, or $0.11 per basic and
diluted share in the first quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at March 31, 1998 was $22.0 million compared to
$23.1 million at December 31, 1997. The ratio of current assets to current
liabilities was 2.54 to 1 at March 31, 1998, compared to 2.88 at December 31,
1997.
Net cash provided by operating activities in the first quarter of 1998 was
$4.6 million compared to net cash used in operating activities of $8.2 million
in the first quarter of 1997. The increase in operating cash flow of $12.8
million in 1998 is primarily attributable to an increase in the Company's net
income of $3.2 million, an increase in the provision for deferred taxes of $2.0
million and a change in the net operating assets and liabilities of $7.6
million.
In the first quarter of 1998 the Company used $4.6 million in investing
activities compared to $1.0 million used in investing activities in the first
quarter of 1997. The increase is primarily due to a decrease in the net
proceeds from maturing short-term investments of $4.7 million in the first
quarter of 1998 compared to the first quarter of 1997. During the first quarter
of 1998, financing activities provided $0.1 million of net cash compared to $1.3
million in the first quarter of 1997. The decrease is primarily attributable to
$0.9 million of capital leases completed in the first quarter of 1997. As a
result of the above, cash and cash equivalents increased by $0.1 million in the
first quarter of 1998 compared with a decrease of $7.8 million in the comparable
period of 1997.
During the remainder of 1998, the Company expects to invest approximately
$35.6 million in various capital investment programs which may be funded by
operating cash flow, the Company's existing working capital and, if required,
lease financing or short-term borrowings. The Company is evaluating various
plans to expand production at the facility. Dependent on the outcome of such
studies, the level of capital expenditures may vary in future periods.
The Company has established an unsecured working capital line of credit with
NM Rothschild and Sons, Ltd., with a maximum borrowing capacity of $15 million,
which expires on April 30, 1999. As of March 31, 1998, there were no borrowings
against this credit line, and the Company could borrow up to $11.1 million based
upon quarterly borrowing calculations under the terms of the agreement.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
During the period covered by this report, there were no legal
proceedings instituted that are reportable.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
10.17 Employment agreement between James A. Sabala and the Company
dated April 1, 1998.
(b) Reports on Form 8-K:
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf of the undersigned
thereunto duly authorized.
STILLWATER MINING COMPANY
(Registrant)
Date: April 29, 1998 By: /s/ William E. Nettles
____________________________________
William E. Nettles
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: April 29, 1998 By: /s/ James A. Sabala
____________________________________
James A. Sabala
Vice President and Chief Financial Officer
(Principal Financial Officer)
13
<PAGE>
EXHIBIT 10.17
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of April 1, 1998, is by and between STILLWATER
MINING COMPANY, a corporation duly organized and existing under the laws of the
State of Delaware (the "Company"), and James A. Sabala ("Employee").
WHEREAS, the Company desires to employ Employee and Employee desires to be
employed by the Company pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
ARTICLE 1
EMPLOYMENT
The Company hereby employs Employee, and Employee agrees to serve as Vice
President and Chief Financial Officer for the Company.
ARTICLE 2
TERM
The term of this Agreement shall be for a period of one (1) year commencing
April 1, 1998, unless sooner terminated as hereinafter provided. The Agreement
shall thereafter continue in effect from year to year unless altered or
terminated as hereinafter provided. The period of Employee's employment
hereunder, including any extension or extensions pursuant to the forgoing
sentence, from the date of commencement until the date of expiration of
termination of this Agreement, is referred to hereinafter as the "Employment
Term."
ARTICLE 3
DUTIES AND AUTHORITY
Employee agrees, unless otherwise specifically authorized by the Company,
to devote substantially all of his business time and effort to his duties for
the profit, benefit and advantage of the business of the Company, except that
Employee may serve on the boards of directors of other business corporations
that have no business relationship with the Company and which do not compete
with the Company. In performing his duties hereunder, Employee shall have the
authorities customarily held by others holding positions similar to those
assigned to Employee in similar businesses, subject to the general and customary
supervision of the Company's Board of Directors and Chief Executive Officer.
<PAGE>
ARTICLE 4
COMPENSATION
4.1 Base Salary. The Company agrees to pay Employee a base salary of
-----------
$170,000 per year, payable at the usual times for the payment of the Company's
executive employees, subject to adjustment as provided herein. Employee's base
salary shall be reviewed at least annually and may be increased, but not
decreased, consistent with the general salary increases for the Company's
executive employees or as appropriate in light of the performance of Employee
and the Company. Notwithstanding anything herein to the contrary, Employee's
base salary may be reduced in the event of an across-the board salary reduction
for all executive officers; provided, however, that the percentage reduction of
Employee's base salary shall not exceed the highest percentage reduction in base
salary of any other executive officer.
4.2 Incentive Compensation. Employee shall participate in the
----------------------
Company's incentive compensation plans for executive officers of the Company, as
in effect from time to time during the Employment Term. The Company shall adopt
an annual incentive program for executive officers of the Company that will
provide for a performance based cash bonus of an amount to be determined by the
Board of Directors of the Company (the target of which shall be 35% of the
Employee's base salary and the maximum of which shall not exceed 70% of
Employee's base salary).
4.3 Employee Benefits. Employee shall be eligible to participate in
-----------------
such other of the Company's employee benefit plans and to receive such benefits
for which his level of employment makes him eligible, in accordance with the
Company's policies as in effect from time to time during the Employment Term;
provided, however, that Employee shall be entitled to four weeks of vacation
during the initial term of this Agreement and during the term of each extension
hereof.
ARTICLE 5
TERMINATION
5.1 Termination by the Company Without Cause; Termination by Employee
-----------------------------------------------------------------
for Good Reason. The Company shall have the right to terminate this Agreement
- ---------------
without Cause (as defined below) upon ninety (90) days' notice to Employee. If
Employee's employment hereunder is terminated by the Company without Cause or by
Employee for "Good Reason" (as defined below), the Company shall pay Employee at
the time of such termination in a lump sum a cash amount equal to his annual
base salary in effect immediately preceding such termination, plus 30% of
Employee's base salary. For purposes of this Agreement, "Good Reason" shall
mean:
(a) A material reduction in Employee's responsibilities, authorities
or duties;
<PAGE>
(b) Employee's job is eliminated other than by reason of promotion or
termination for Cause;
(c) The Company fails to pay Employee any amount otherwise vested and
due hereunder or under any plan or policy of the Company, which failure is
not cured within five (5) business days of receipt by the Company of
written notice from Employee which describes in reasonable detail the
amount which is due;
(d) A material reduction in Employee's base salary except in the event
of an across- the- board salary reduction for all executive officers;
(e) A material reduction in Employee's aggregate level of benefits
under the Company's pension, life insurance, medical, health and accident,
disability, deferred compensation or savings or similar plans, except in
the event of an across-the-board reduction in such benefits for all
executive officers;
(f) A material reduction in Employee's reasonable opportunity to earn
incentive compensation under ant plan in which Employee is a participant;
(g) Employee's office is relocated outside of a 50 mile radius of
Denver, Colorado without his written consent;
(h) The Company and its successor(s) (as described in paragraph (i)
below) shall discontinue the business of the Company; or
(i) The failure of the company to obtain an agreement to expressly
assume this Agreement from any successor to the Company (whether such
succession direct or indirect by purchase, merger, consolidation or
otherwise, to substantially all of the business and/or assets of the
Company or a controlling portion of the Company's stock).
5.2 Termination by the Company for Cause; Voluntary Termination by
--------------------------------------------------------------
Employee. Employee's employment hereunder may be terminated by the Company for
- --------
"Cause". For purposes of this Agreement, "Cause" shall mean (i) Employee's
willful and continued failure substantially to perform his duties hereunder for
a period of fifteen (15) days after written notice to Employee by the Company of
each such failure, (ii) Employee's dishonesty in the performance of his duties
hereunder, or (iii) Employee's conviction of a felony under the laws of the
United states or any state thereof. Employee shall have the right to
voluntarily terminate this Agreement upon ninety (90) days' notice to the
Company. If Employee is terminated for Cause, or if Employee voluntarily
terminates employment hereunder other than for Good Reason, he shall be
entitled to receive his base salary through the date of termination. All other
benefits, if any, payable to Employee following such termination of Employee's
employment shall be determined in accordance with the plans, policies and
practices of the Company.
<PAGE>
5.3 Termination by Death or Disability. Upon termination of Employee's
----------------------------------
employment due to death of Employee, Employee shall be entitled to his base
salary at the rate in effect at the time of Employee's death through the end of
the month in which his death occurs. Employee's Employment hereunder may be
terminated by the Company if Employee becomes physically or mentally
incapacitated and is therefore unable for a period of one hundred eighty (180)
consecutive days to perform his duties (such incapacity is hereinafter referred
to as "Disability"). Upon any such termination for Disability, Employee shall
be entitled to receive payment of disability benefits in lieu of salary under
the Company's Employee benefit plans as then in effect.
ARTICLE 6
INSURANCE
Employee agrees that the Company may, from time to time, apply for and take
out in its own name and at its own expense, life, health, accident, or other
insurance upon Employee that the Company may deem necessary or advisable to
protect its interests hereunder; and Employee agrees to submit to any medical or
other examination necessary for such purposes and to assist and cooperate with
the Company in preparing such insurance; and Employee agrees that he shall have
no right, title, or interest in or to such insurance.
ARTICLE 7
FACILITIES AND EXPENSES
The Company shall make available to Employee such office space, secretarial
services, office equipment and furnishings as are suitable and appropriate to
employee's title and duties. The Company shall promptly reimburse employee for
all reasonable expenses incurred in the performance of his duties hereunder,
including without limitation, expenses for entertainment, travel, management
seminars and use of the telephone, subject to the Company's reasonable
requirements with respect to the reporting and documentation of such expenses.
ARTICLE 8
NONCOMPETITION
8.1 Necessity of Covenant. The Company and Employee acknowledge that:
---------------------
(a) The Company's business is highly competitive;
(b) The Company maintains confidential information and trade secrets
as described in Article 9, all of which are zealously protected
and kept secret by the Company;
(c) In the course of his employment, Employee will acquire certain of
the information described in Article 9 and the Company would be
<PAGE>
adversely affected if such information subsequently, and in the
event of the termination of Employee's employment, is used for
the purposes of competing with the Company;
(d) The Company transacts business throughout the world; and
(e) For these reasons, both the Company and Employee further
acknowledge and agree that the restrictions contained herein are
reasonable and necessary for the protection of their respective,
legitimate interests and that any violation of these restrictions
would cause substantial injury to the Company.
8.2 Covenant Not to Compete. Employee agrees that from and after the date
-----------------------
hereof during the Employment Term and for a period of one (1) year after the end
of the Employment Term, he will not, without the express written permission of
the Company, which may be given or withheld in the Company's sole discretion,
directly or indirectly own, manage, operate, control, lend money to, endorse the
obligations of, or participate or be connected as an officer, director, 5% or
more stockholder of a publicly-held company, stock holder of a closely-held
company, employee, partner, or otherwise, with any enterprise or individual
engaged in a business which is competitive with the Platinum Group Metals
business conducted by the Company. It is understood and acknowledged by both
parties that, inasmuch as the Company transacts business worldwide, this
covenant not to compete shall be enforced throughout the United States and in
any other country in which the Company is doing business as of the date of
Employee's termination of employment.
8.3 Disclosure of Outside Activities. Employee, during the term of his
--------------------------------
employment by the Company, shall at all times keep the Company informed of any
outside business activity and employment, and shall not engage in any outside
business activity or employment which may be in conflict with the Company's
interests.
8.4 Survival. The terms of this Article 8 shall survive the expiration or
--------
termination of this Agreement for any reason.
ARTICLE 9
CONFIDENTIAL INFORMATION AND TRADE SECRETS
9.1 Nondisclosure of Confidential Information. Employee has acquired and
-----------------------------------------
will acquire certain "Confidential Information" of the Company. "Confidential
Information" shall mean any information that is not generally known, including
trade secrets, outside the Company and that is proprietary to the Company,
relating to any phase of the Company's existing or reasonably foreseeable
business which is disclosed to Employee by the Company including information
conceived, discovered or developed by Employee. Confidential Information
includes, but shall not be limited to, business plans, financial statements and
projections, operating forms (including contracts) and procedures, payroll and
personnel records, marketing materials and plans, proposals,
<PAGE>
software codes and computer programs, project lists, project files, price
information and cost information and any other document or information that is
designated by the Company as "Confidential." The term "trade secret" shall be
defined as follows:
A trade secret may consist of any formula, pattern, device or compilation
of information which is used in one's business, and which gives him an
opportunity to obtain an advantage over competitors who do not know or use
it.
Accordingly, Employee agrees that he shall not, during the Employment Term and
three (3) years thereafter, use for his own benefit such Confidential
Information or trade secrets acquired during the term of his employment by the
Company. Further, during the Employment Term and three (3) years thereafter,
Employee shall not, without the written consent of the Board of Directors of the
Company or a person duly authorized thereby, which consent may be given or
withheld in the Company's sole discretion, disclose to any person, other than an
employee of the Company or a person to whim disclosure is reasonable necessary
or appropriate in connection with the performance by Employee of his duties, any
Confidential Information or trade secrets obtained by him while in the employ of
the Company.
9.2 Return of Confidential Information. Upon termination of
----------------------------------
Employment, Employee agrees to deliver to the Company all materials that include
Confidential Information or trade secrets, and all other materials of a
confidential nature which belong to or relate to the business of the Company.
9.3 Exceptions. The restrictions and obligations in Section 9.1 shall not
----------
apply with respect to any Confidential Information which: (i) is or becomes
generally available to the public through any means other than a breach by
Employee of his obligations under this Agreement; (ii) is disclosed to Employee
without obligation of confidentiality by a third party who has the right to make
such disclosure; (iii) is developed independently by Employee without use of or
benefit from the Confidential Information; (iv) was in possession of Employee
without obligations of confidentiality prior to receipt under this Agreement; or
(v) is required to be disclosed to enforce rights under this Agreement.
9.4 Survival. The terms of this Article 9 shall survive the expiration or
--------
termination of this Agreement for any reason.
ARTICLE 10
JUDICIAL CONSTRUCTION
Employee believes and acknowledges that the provisions contained in this
Agreement, including the covenants contained in Articles 8 and 9 of this
Agreement, are fair and reasonable. Nonetheless, it is agreed that if a court
finds any of these provisions to be invalid in whole or in part under the laws
of any state, such finding shall not invalidate the covenants, nor the Agreement
in its entirety, but rather the covenants shall
<PAGE>
be construed and/or blue-lined, reformed or written by the court as if the most
restrictive covenants permissible under applicable law were contained herein.
ARTICLE 11
RIGHT TO INJUNCTIVE RELIEF
Employee acknowledges that a breach by Employee of any of the terms of
Articles 8 or 9 of this Agreement will render irreparable harm to the Company;
and that in the event of such breach the Company shall therefore be entitled to
any and all equitable relief, including, but not limited to, injunctive relief,
and to any other remedy that may be available under any applicable law or
agreement between the parties.
ARTICLE 12
CESSATION OF CORPORATE BUSINESS
This Agreement shall cease and terminate if the Company shall discontinue
its business, and all rights and liabilities hereunder shall cease, except as
provided in Article 13.
ARTICLE 13
ASSIGNMENT
13.1 Permitted Assignment. The Company shall have the right to assign
--------------------
this contract to its successors or assigns, and all covenants or agreements
hereunder shall inure to the benefit of and be enforceable by or against its
successors or assigns.
13.2 Successors and Assigns. The terms "successors" and "assigns" shall
----------------------
mean any person or entity which buys all or substantially all of the Company's
assets, or a controlling portion of its stock, or with which it merges or
consolidates.
ARTICLE 14
FAILURE TO DEMAND, PERFORMANCE AND WAIVER
The failure by either party to demand strict performance and compliance with
any part of this Agreement during the Employment Term shall not be deemed to be
a waiver of the rights of such party under this Agreement or by operation of
law. Any waiver by either party of a breach of any provision of this Agreement
shall not operate as or be construed as a waiver of any subsequent breach
thereof.
<PAGE>
ARTICLE 15
ENTIRE AGREEMENT
The Company and Employee acknowledge that this Agreement contains the
full and complete agreement between and among the parties, that there are no
oral or implied agreement or other modifications not specifically set forth
herein, and that this Agreement supersedes any prior agreements or
understandings, if any, between the Company and the Employee, whether written or
oral. The parties further agree that no modifications of this Agreement may be
made except by means of a written agreement or memorandum signed by the parties.
ARTICLE 16
GOVERNING LAW
The parties hereby agree that this Agreement shall be construed in
accordance with the laws of the State of Colorado, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
Colorado or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Colorado.
ARTICLE 17
ATTORNEYS' FEES
If either party shall commence any action or proceeding against the
other that arises out of the provisions hereof, or to recover damages as the
result of the alleged breach of any of the provisions hereof, the prevailing
party therein shall be entitled to recover all costs incurred in connection
therewith, including reasonable attorneys' fees.
IN WITNESS WHEREOF, the Company has hereunto signed its name and
Employee hereunder has signed his name, all as of the day and year first-above
written.
STILLWATER MINING COMPANY
By
- ---------------------------------- --------------------------------
Witness Its
----------------------------
EMPLOYEE
- ---------------------------------- -----------------------------------
Witness
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<PAGE>
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<COMMON> 204
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