SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
OM GROUP, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
OM GROUP, INC.
TOWER CITY
3500 TERMINAL TOWER
50 PUBLIC SQUARE
CLEVELAND, OHIO 44113-2204
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 6, 2003
Notice is hereby given that the 2003 Annual Meeting of Stockholders of OM
Group, Inc. will be held at National City Bank, 1900 East Ninth Street,
Auditorium, 4th Floor Annex, Cleveland, Ohio 44114, on Tuesday, May 6, 2003, at
10:00 a.m., for the following purposes:
1. To elect two directors;
2. To ratify the appointment of Ernst & Young LLP as independent
auditors; and
3. To transact such other business as properly may come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on March 14, 2003 are
entitled to notice of and to vote at the meeting. A stockholder who executes and
returns the accompanying proxy may revoke such proxy at any time before it is
voted at the meeting by following the procedures set forth in the attached Proxy
Statement.
MICHAEL J. SCOTT, Secretary
Cleveland, Ohio
April 4, 2003
OM GROUP, INC.
TOWER CITY
3500 TERMINAL TOWER
50 PUBLIC SQUARE
CLEVELAND, OHIO 44113-2204
PROXY STATEMENT
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of OM Group,
Inc. (the "Company") and will be voted in accordance with the instructions given
in the proxy if it is returned duly executed and is not revoked. A stockholder
may revoke a proxy at any time before it is voted by giving notice to the
Company in writing or at the meeting. Attendance at the meeting will not in and
of itself revoke a proxy.
This Proxy Statement and the accompanying proxy were first mailed to
stockholders on or about April 4, 2003. The record date for determination of
stockholders entitled to vote at the meeting was the close of business on March
14, 2003. On that date, the outstanding voting securities of the Company were
28,452,163 shares of Common Stock, par value $.01 per share. Each share of
Common Stock is entitled to one vote. Abstentions will be counted for the
purpose of determining whether a quorum is present at the meeting, but will not
be counted as voting on the matters to which the abstention applies.
The Company is not aware of any matters other than those stated in the
notice that will be presented to the meeting for action by the stockholders. If
any other matters are properly brought before the meeting, it is the intention
of the persons named in the accompanying proxy to vote the shares represented by
the proxy in their best judgment.
The cost of soliciting proxies will be borne by the Company. The Company
will, upon request, reimburse brokerage houses, custodians, nominees and others
for their out-of-pocket and reasonable clerical expenses incurred in connection
with the solicitation. For purposes of obtaining broad stockholder
representation at the meeting, Proxy Express has been retained by the Company
for distribution services, at an anticipated cost of approximately $5,000 plus
postage costs. In addition, directors, officers and employees of the Company,
without being additionally compensated, may make additional requests by letter,
telephone or in person for the return of proxies.
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY)
The authorized number of directors of the Company is presently fixed at
eight, divided into three classes, with two classes having three members and one
class having two members. Directors are elected to serve three-year terms, so
that the term of office of one class of directors expires at each annual
meeting.
For election as directors at the Annual Meeting of Stockholders to be held
on May 6, 2003, the Board of Directors has recommended the election of John E.
Mooney and Markku Toivanen to serve as directors for three-year terms expiring
in 2006. If either of the nominees becomes unavailable for election, the
accompanying proxy may be voted for a substitute, or in favor of holding a
vacancy to be filled by the directors. The Company has no reason to believe that
either nominee will be unavailable. The nominees receiving the largest number of
votes will be elected to the director positions to be filled.
The following information is provided regarding each nominee for election
as a director and each of the other directors who will continue in office after
the meeting.
NOMINEES FOR ELECTION
JOHN E. MOONEY, age 52, has been a director of the
Company since 1995. For the past 15 years, Mr. Mooney has
been Chief Executive Officer of Sachem, Inc., a specialty
chemicals manufacturer. Mr. Mooney received a B.A. in
Economics from the University of Toronto. Mr. Mooney is
James P. Mooney's brother. If elected, Mr. Mooney's term
will expire in 2006.
MARKKU TOIVANEN, age 61, has been a director of the
Company since 1991 and currently is a consultant in the
base metals industry. He is also Director of Weda Bay
Minerals Inc., a public Canadian mining company. During
2000 and until October 2001, Mr. Toivanen served as
Senior Vice President of New Business Ventures of
Outokumpu Oyj of Espoo, Finland. From 1996 to 2000, Mr.
Toivanen served as Senior Vice President Corporate
Strategic Development of Outokumpu Oyj. From 1993 to
1996, Mr. Toivanen served as President and Chief
Executive Officer of Outokumpu Metals & Resources Oy, the
global base metal mining and smelting business of
Outokumpu. If elected, Mr. Toivanen's term will expire in
2006.
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE MEETING
LEE R. BRODEUR, age 75, has been a director of the
Company since 1991 and a director of Mooney Chemicals,
Inc. since 1987. Mr. Brodeur was employed by the
Firestone Tire & Rubber Company, Akron, Ohio from 1951
until his retirement as Vice Chairman in 1986. Mr.
Brodeur's term will expire in 2005.
FRANK E. BUTLER, age 66, has been a director of the
Company since 1996. From 1992 until his retirement in
1997, Mr. Butler was President and General Manager of the
Coatings Division of The Sherwin-Williams Company, a
manufacturer, distributor and retailer of coatings and
related products. From 1957 to 1992, Mr. Butler held
various engineering positions in the Chemical Division of
Sherwin-Williams. Mr. Butler received a masters degree in
chemistry from Iowa State University. Mr. Butler's term
will expire in 2004.
EDWARD W. KISSEL, age 61, has been a director of the
Company since 1999. Mr. Kissel was President and Chief
Operating Officer of the Company from June 1999 until
December 2002. Since 1993, he has been Chief Executive
Officer of Kissel Group, Ltd., a holding company with
interests in agriculture, strategic consulting and
specialty manufacturing. Between 1990 and 1993, he was
President of the Passenger and Light Truck Division of
Continental-General
2
Tire, Inc. From 1987 to 1990, he was Vice President of
manufacturing and engineering for Engelhard Corp. and
previously spent 24 years with the Goodyear Tire & Rubber
Co. Mr. Kissel is a director of Myers Industries, Inc.
Mr. Kissel's term will expire in 2004.
JAMES P. MOONEY, age 55, is Chairman of the Board and has
been a director and Chief Executive Officer of the
Company since 1991. From 1991 to 1994, Mr. Mooney also
was President of the Company. From 1979 to 1991, Mr.
Mooney was President and Chief Executive Officer of
Mooney Chemicals, Inc. Mr. Mooney is a member of the
Board of Trustees of The Cleveland Clinic Foundation. Mr.
Mooney received a B.A. degree in history from Quincy
University. Mr. Mooney is John E. Mooney's brother. Mr.
Mooney's term will expire in 2005.
KATHARINE L. PLOURDE, age 51, became a director of the
Company in February 2002. Ms. Plourde was a Principal and
analyst at the investment banking firm of Donaldson,
Lufkin & Jenrette, Inc., New York, New York, until
November 1997. Since that time she has engaged in private
investing. Ms. Plourde is a director of Pall Corporation
and serves as a director of several not-for-profit
organizations. Ms. Plourde received a B.A. degree in
English Literature from Barnard College at Columbia
University and an M.B.A. in Finance from Fordham
University. Ms. Plourde's term will expire in 2004.
WILLIAM J. REIDY, age 62, became a director of the
Company in June 2002. Mr. Reidy, a CPA, was the managing
partner of the Northeast Ohio practice of Pricewaterhouse
Coopers LLP. He retired from Pricewaterhouse Coopers in
1999 after a 35-year career with the firm. In 1980-1981,
Mr. Reidy left the firm for two years to serve as the
first director of finance for Cleveland's newly elected
Mayor George V. Voinovich. Mr. Reidy is a graduate of
Leadership Cleveland, and he currently serves on the
boards of several nonprofit organizations including
Cleveland Clinic Western Region, Cleveland Initiative for
Education and Citizens League Research Institute. Mr.
Reidy's term will expire in 2005.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors held eight meetings during 2002. The Board
has a standing Audit and Finance Committee, Compensation Committee and
Nominating Committee. During 2002, each director attended at least 75% of the
meetings of the Board of Directors and those committees on which he or she
served.
The Audit and Finance Committee is responsible for appointing the Company's
independent auditors and for assisting the Board of Directors with oversight of
the Company's financial statement reporting processes, as well as providing
oversight for the performance of the Company's internal audit and risk
management functions and review of any problems identified by the Company's
independent auditors. The Committee is not, however, responsible for conducting
audits, preparing financial statements or reviewing or assuring the accuracy of
any financial statements or filings, all of which remain the responsibility of
management or the independent auditors. A copy of the Audit and Finance
Committee's current charter was attached as an exhibit to the Proxy Statement
for the 2001 Annual Meeting of Stockholders. The members of the Audit and
Finance Committee are Messrs. Brodeur, Butler and Reidy, with Mr. Reidy serving
as the Committee Chairman. Each member of the Committee is "independent" under
the current requirements of the New York Stock Exchange. The Committee met four
times in 2002.
The Compensation Committee, currently composed of Messrs. Lee R. Brodeur
and Frank E. Butler, held three meetings during 2002. Mr. Brodeur is the
Committee Chairman. The primary functions of the
3
Compensation Committee are to review and recommend candidates for election as
officers of the Company; to review and authorize rates of compensation for
officers; to designate those employees who will receive grants of stock options
and other stock awards under the Company's Long-Term Incentive Compensation Plan
and 2002 Stock Incentive Plan, together with the type and size of such grants;
and to determine the bonus levels for key executives and middle management
employees under the Company's bonus program.
The Nominating Committee was formed in February, 2002 and met one time
during 2002. The members of the Nominating Committee are Ms. Plourde and Messrs.
Butler and Reidy, with Ms. Plourde serving as the Committee Chair. The Committee
is responsible for making recommendations to the Board of Directors as to
criteria and qualifications for new Board members and for nominees for
appointment or election as directors. The Committee will consider
recommendations from stockholders for director nominations. Stockholder
recommendations must be submitted in writing to the Secretary of the Company and
must comply with requirements set forth in the Company's Amended and Restated
Bylaws.
COMPENSATION OF DIRECTORS
Directors who also are executive officers of the Company receive no
additional compensation for serving as directors. Outside directors receive an
annual director's fee of $50,000 and an annual fee of $5,000 per committee for
service on the Audit and Finance Committee, Compensation Committee and
Nominating Committee. Committee chairs also receive an additional $5,000 per
annum. In addition, each outside director receives a fee of $1,500 for each
Board meeting attended. Directors may elect to receive their compensation in the
form of cash, stock options or restricted stock under the Company's Non-Employee
Directors' Equity Compensation Plan. Under this plan, directors may purchase
stock options for a price equal to the difference between the exercise price
(75% of fair market value on date of grant) and the fair market value per share.
Restricted shares may be purchased at a price equal to the fair market value per
share. Directors are reimbursed for their travel and other out-of-pocket
expenses incurred in attending Board and committee meetings.
4
SECURITY OWNERSHIP OF DIRECTORS,
OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of January 31, 2003, information
concerning the number of shares of Common Stock of the Company beneficially
owned by each director, each executive officer named in the Summary Compensation
Table, and by all directors and executive officers of the Company as a group. No
director or executive officer other than James P. Mooney owns more than 1% of
the outstanding shares of Common Stock of the Company. As of January 31, 2003,
Mr. Mooney owned approximately 2.0% and all directors and executive officers as
a group owned approximately 3.9% of such shares. The totals shown below for each
person and for the group include shares held personally, shares held under the
Company's Profit-Sharing Plan, and shares acquirable within 60 days of the above
date by the exercise of stock options granted under the Company's Long-Term
Incentive Compensation Plan.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (1)
NAME OF DIRECT OR INDIRECT EXERCISABLE
BENEFICIAL OWNER OWNERSHIP(2) PROFIT-SHARING PLAN OPTIONS(3) TOTAL
---------------- ------------------ ------------------- ----------- ---------
Lee R. Brodeur......................... 5,183 - 26,248 31,431
Frank E. Butler........................ - - 18,510 18,510
Edward W. Kissel....................... 30,700 - 155,000 185,700
James M. Materna....................... 1,050 2,942 167,000 170,992
Thomas R. Miklich...................... 35,450 -- 4,633 40,083
James P. Mooney........................ 38,883 835 532,554 572,272
John E. Mooney......................... 11,682 - 8,987 20,669
Katharine L. Plourde................... 1,000 - 2,700 3,700
William J. Reidy....................... - - 1,000 1,000
Michael J. Scott....................... 5,000 4,030 63,117 72,147
Markku Toivanen........................ - - 5,918 5,918
All Directors and Executive Officers as
a Group (consisting of 11 persons)... 128,948 7,807 985,667 1,122,422
---------------
(1) Each person has sole voting and investment power with respect to all shares
shown, except as indicated below.
(2) James P. Mooney's shares include 7,630 shares held in a private foundation,
of which Mr. Mooney is president. Mr. Mooney has shared voting and
investment power with respect to these shares.
(3) Represents shares subject to stock options that were exercisable at January
31, 2003 or within 60 days of that date. For James P. Mooney, the number of
shares subject to exercisable options includes 392,554 shares covered by
options transferred to a limited partnership in accordance with the terms of
the Company's Long-Term Incentive Compensation Plan. Mr. Mooney is the
general partner of the limited partnership to which the options have been
transferred.
5
The following table sets forth, as of December 31, 2002, information
concerning each person known by the Company to be the beneficial owner of more
than 5% of its outstanding Common Stock, except the information with respect to
Ardsley Advisory Partners is provided as of February 10, 2003.
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------- -------------------- ----------------
Ardsley Advisory Partners, et al........................... 4,124,200 14.50%
262 Harbor Drive
Stamford, CT 06902 (1)
Wellington Management Company, LLP......................... 1,920,000 6.81%
75 State Street
Boston, MA 02109 (2)
OppenheimerFunds, Inc...................................... 1,524,900 5.41%
498 Seventh Avenue
New York, NY 10018 (3)
---------------
(1) Information regarding share ownership was obtained from the Schedule 13G
filed on December 4, 2002 and the Form 4 filed on February 12, 2003, both
filed jointly by Ardsley Advisory Partners, Ardsley Offshore Fund Ltd.,
Ardsley Partners Fund II, L.P., Ardsley Partners Institutional Fund, L.P.,
Augusta Partners L.P., Ardsley Partners I, Philip J. Hempleman, the Carter
Hempleman Trust, the Spencer Hempleman Trust, the Hempleman Family Trust,
and Marion Lynton. The Form 4 reports the following beneficial ownership of
shares by the joint filers: Ardsley Offshore Fund -- 1,175,000 shares;
Ardsley Partners Fund II -- 1,025,000 shares; Ardsley Partners Institutional
Fund -- 535,000 shares; Augusta Partners -- 515,000 shares; Philip J.
Hempleman, the managing partner of Ardsley Advisory Partners and Ardsley
Partners I -- 540,000 shares; the Carter Hempleman Trust -- 92,000 shares;
the Spencer Hempleman Trust -- 92,000 shares; the Hempleman Family
Trust -- 100,000 shares; and Marion Lynton -- 50,000 shares. The Schedule
13G reports that Ardsley Advisory Partners, Ardsley Partners I and Phillip
J. Hempleman have shared voting and dispositive power over all of the shares
reported on the Schedule 13G and that each of Ardsley Offshore Fund, Ardsley
Partners Fund II, Ardsley Partners Institutional Fund, Augusta Partners,
Philip J. Hempleman, the Carter Hempleman Trust, the Spencer Hempleman
Trust, the Hempleman Family Trust and Marion Lynton has shared voting and
dispositive power over the shares it holds directly. Ardsley Advisory
Partners and Ardsley Partners I each disclaim any beneficial ownership of
any of the shares to which the Schedule 13G or Form 4 relate for purposes of
Section 16 of the Securities Exchange Act of 1934, except as to such shares
in which each such person may be deemed to have an indirect pecuniary
interest pursuant to Rule 16a-1(a)(2) under such Act.
(2) Information regarding share ownership was obtained from the Schedule 13G
filed on February 12, 2003 by Wellington Management Company, LLP. Wellington
Trust Company, NA, a wholly-owned subsidiary of Wellington Management
Company, LLP, acquired such shares being reported by its parent holding
company. Wellington Management Company, LLP has shared voting power with
respect to 1,090,000 of the shares listed above and has sole dispositive
power with respect to all 1,920,000 shares.
(3) Information regarding share ownership was obtained from the Schedule 13G
filed on February 12, 2003 by OppenheimerFunds, Inc., which has sole
dispositive power with respect to all 1,524,900 shares. OppenheimerFunds,
Inc. has disclaimed beneficial ownership of these shares pursuant to Rule
13d-4 of the Securities Exchange Act of 1934.
6
EXECUTIVE COMPENSATION
The following table sets forth all compensation earned and awarded to the
Company's Chief Executive Officer and the Company's next most highly compensated
executive officers for services rendered during 2002, 2001 and 2000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------- ---------------------------------
AWARDS PAYOUTS
----------------------- -------
SECURITIES
UNDERLYING
RESTRICTED STOCK
NAME AND PRINCIPAL OTHER ANNUAL STOCK OPTIONS LTIP ALL OTHER
POSITION YEAR SALARY BONUS(1) COMPENSATION(2) AWARDS(3) (SHARES) PAYOUTS COMPENSATION(4)
------------------ ---- ---------- ---------- --------------- ---------- ---------- ------- ---------------
James P. Mooney........... 2002 $1,140,000 $ -0- $ 68,323 $ -0- 30,000 $-0- $ 12,600
Chairman & CEO 2001 785,500 1,140,000 -0- 1,776,000 10,000 -0- 274,200
2000 640,500 1,123,000 -0- -0- 100,000 -0- 178,500
Thomas R. Miklich......... 2002 316,667 156,000 106,254 1,860,600 21,000 -0- 107,840
CFO (5)
Michael J. Scott.......... 2002 380,000 95,000 -0- -0- -0- -0- 2,100
Vice President, General
Counsel & Secretary (5)
Edward W. Kissel.......... 2002 750,000 -0- -0- -0- -0- -0- 25,359
Former President & COO 2001 540,500 563,000 -0- 1,184,000 20,000 -0- 168,750
2000 485,500 665,000 -0- -0- 65,000 -0- 92,929
James M. Materna.......... 2002 360,000 -0- -0- -0- -0- -0- 12,328
Former CFO 2001 339,500 288,000 -0- 592,000 20,000 -0- 92,850
2000 296,500 360,000 -0- -0- 50,000 -0- 68,940
---------------
(1) No discretionary bonus was paid to any named executive officer for 2002. Mr.
Miklich's employment agreement with the Company provides for a guaranteed
bonus of $156,000 for the fiscal year 2002, and Mr. Scott's employment
agreement with the Company provides for a guaranteed bonus of not less than
25% of his salary.
(2) This column includes $63,358 for Mr. Mooney's personal use of the Company's
aircraft and reflects a tax gross-up paid to Mr. Miklich related to an
inducement payment made to him in connection with entering into his
employment agreement.
(3) Pursuant to Mr. Miklich's employment agreement with the Company, the Company
awarded him 28,000 shares of restricted stock in connection with the
commencement of his employment in 2002. The dollar amount shown for Mr.
Miklich equals the 28,000 shares granted multiplied by the stock price on
the grant date ($66.45). Mr. Miklich's restricted stock will vest in equal
increments over a seven-year period on each of May 1, 2003, 2004, 2005,
2006, 2007, 2008 and 2009. Dollar amounts shown in this column for 2001
equal the number of shares of restricted stock granted (30,000 shares to Mr.
Mooney; 20,000 shares to Mr. Kissel and 10,000 shares to Mr. Materna)
multiplied by the stock price on the grant date ($59.20). One-third of the
restricted stock awards granted in 2001 to Mr. Mooney vested on December 31,
2002, and the remaining shares will vest in equal increments on each of
December 31, 2003 and 2004. Of the restricted stock awards granted in 2001
to Mr. Kissel and Mr. Materna, all of Mr. Kissel's shares and one-third of
Mr. Materna's shares ceased to be restricted as a result of their separation
of employment from the Company prior to the end of 2002. The valuations
shown do not take into account the diminution in value attributable to the
restriction applicable to the shares. Dividends have been paid, and will be
paid in the future to the extent declared, on all restricted stock shown
above. As of December 31, 2002, Mr. Mooney held 20,000 shares of restricted
stock with a value of $137,600, Mr. Miklich held 28,000 shares of restricted
stock with a value of $192,640 and Mr. Scott held 3,333 shares of restricted
stock with a value of $22,931.
7
(4) For 2002, this column reflects amounts paid as dividends on shares of
restricted stock, as follows: Mr. Mooney -- $12,600; Mr. Miklich -- $7,840;
Mr. Scott -- $2,100; Mr. Kissel -- $25,359; and Mr. Materna -- $4,200. For
Mr. Miklich, this column includes $100,000 paid to him as an inducement
payment in connection with his entering into his employment agreement with
the Company. For Mr. Materna, this column includes amounts reflecting the
continuation of certain benefits paid by the Company following his cessation
of employment and after the period during which such benefits were provided
under his employment agreement, as follows: $5,212 for car lease payments;
$2,706 for health insurance premiums and $210 for term life insurance
premiums.
(5) Mr. Miklich joined the Company as an executive officer as of May 1, 2002.
Mr. Scott became an executive officer of the Company on February 11, 2002.
The following table sets forth additional information concerning grants of
stock options made during 2002 to the named executive officers pursuant to the
Company's Long-Term Incentive Compensation Plan. Mr. Mooney's stock options have
a 10-year term and became fully exercisable at December 31, 2002. Mr. Miklich's
stock options have a 10-year term and become exercisable in equal annual
increments over the first three years following the grant. The option price for
these stock options is the closing sale price of the Company's Common Stock on
the date of grant. No stock appreciation rights were granted in 2002.
OPTION GRANTS IN 2002
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
PERCENTAGE ASSUMED ANNUAL RATES OF
NUMBER OF OF TOTAL STOCK APPRECIATION
SECURITIES OPTIONS FOR OPTION TERM
UNDERLYING GRANTED TO -----------------------------
OPTIONS EMPLOYEES EXERCISE OR EXPIRATION
NAME GRANTED IN 2002 BASE PRICE DATE 5% 10%
---- ---------- ---------- ----------- ---------- ------------- -------------
James P. Mooney.......... 30,000 59% $62.20 2/11/2012 $1,173,517 $2,973,923
Thomas Miklich........... 21,000 41% 66.45 5/1/2012 877,591 2,223,988
Michael J. Scott......... - - - - - -
Edward W. Kissel......... - - - - - -
James M. Materna......... - - - - - -
AGGREGATED OPTION EXERCISES DURING 2002 AND
FISCAL YEAR-END OPTION VALUE
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT 12/31/02 12/31/02(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
James P. Mooney....... 55,511 $ 979,214 532,554(3) - - -
Thomas Miklich........ - - 4,633(4) 21,000 - -
Michael J. Scott...... - - 63,117 - - -
Edward W. Kissel...... - - 155,000 - - -
James M. Materna...... 44,100 1,868,283 167,000 - - -
---------------
(1) Market value of shares at date of exercise less exercise price.
(2) An option is considered in-the-money when the fair market value of the
shares is greater than the exercise price of the option. No options granted
by the Company to named executive officers were in-the-money at December 31,
2002.
(3) Includes 392,554 shares subject to stock options that were transferred in
accordance with the terms of the Company's Long-Term Incentive Compensation
Plan to a limited partnership in which Mr. Mooney is the general partner.
8
(4) Represents shares subject to options granted under the Company's
Non-Employee Directors' Equity Compensation Plan during the period Mr.
Miklich was a non-employee director of the Company.
REPORT OF THE COMPENSATION COMMITTEE
Executive Compensation Policy. The Compensation Committee of the Board of
Directors, comprised solely of outside directors of the Company, is responsible
for setting the policies and approving the practices of the Company in its
compensation to officers of the Company and its subsidiaries, including those
executive officers named in the compensation tables in this Proxy Statement. The
Committee's general policy on executive compensation is to provide a significant
incentive to management to achieve annual profit goals and to increase the value
of the Company's stock. The policy is intended to cause a significant portion of
total executive compensation to be contingent upon Company performance and in
the form of annual and longer-term incentives.
In carrying out its responsibilities in 2002, the Committee considered the
following:
1. the Company's financial performance;
2. the Company's general policies and practices for compensation of
employees;
3. the recommendations of the Company's management concerning compensation
of individual key employees; and
4. advice from independent compensation consultants concerning the
Company's compensation policies, including how its policies and
practices compare to the policies and practices of other comparable
companies.
The three major components of the Company's executive officer compensation
program are (1) base compensation and annual adjustments paid pursuant to
employment contracts with named executive officers, (2) annual bonuses paid
pursuant to the Bonus Program for Key Executives and Middle Management, and (3)
stock options issued at fair market value pursuant to the Company's 1998
Long-Term Incentive Compensation Plan and 2002 Stock Incentive Plan.
Employment Contracts with Current Named Executive Officers. The Company
has entered into employment contracts with each of its named executive officers.
The employment contracts establish the position of each named executive officer
and provide that the named executive officer will devote his full professional
attention to the Company, and that the Company will not materially decrease his
level of responsibility. Each contract provides for automatic yearly renewals
unless the contract is terminated by either party upon six months' prior notice,
and the contracts for Messrs. Mooney and Miklich will have a remaining term of
36 months following each renewal.
Each contract provides for base compensation that may be increased
annually, but not decreased. In considering annual adjustments to a named
executive officer's base compensation, the Committee considers both Company and
individual performance. In addition, executive officers' base salaries are
targeted between the median and 75th percentile of comparably sized companies in
the chemical and non-durable goods manufacturing industries. Each contract also
provides that annual bonuses may be paid pursuant to the Company's bonus
programs in effect from time to time, and Mr. Scott's contract provides for an
annual bonus of not less than 25% of his then current base compensation.
The Company may terminate each contract at any time with or without cause.
If terminated for cause, a named executive officer is entitled to compensation
accrued up to the time of termination. If terminated without cause, Messrs.
Mooney and Miklich are entitled to receive base compensation, a bonus not less
than 75% of the base compensation and fringe benefits due under the contract
until the expiration of the current contract term. Mr. Scott is entitled to
receive base compensation, bonus and fringe benefits in accordance with his
employment contract for one year if his employment is terminated without cause.
If Messrs. Mooney or Scott resign for any reason, they are entitled to accrued
compensation and to receive all base compensation for three months following the
effective date of termination of their employment. If Mr. Miklich resigns for
9
any reason after November 30, 2004, he is entitled to receive for 12 months the
amounts he would receive if terminated without cause.
In addition, Messrs. Materna and Kissel had employment contracts with the
Company that provided for certain types of payments to them in connection with
their cessation of employment. Payments made to Mr. Materna in that regard are
reflected as appropriate in the summary compensation table in this Proxy
Statement, and the Company and Mr. Kissel are in discussions with respect to
payments to be made under his employment contract in connection with his
separation from the Company.
Bonus Program for Key Executives and Middle Management. Under this bonus
program, the Committee may award bonuses in its discretion, considering
performance by individual employees and the Company's performance. For 2002, the
Committee reviewed the Company's performance against a predetermined
consolidated operating profit goal approved by the Board of Directors. This
operating profit goal was not attained and no discretionary bonuses were paid.
1998 Long-Term Incentive Compensation Plan. Executive officers and other
key employees also received compensation pursuant to the Company's 1998
Long-Term Incentive Compensation Plan. This plan provides for the granting of
stock options, stock appreciation rights, restricted stock awards and phantom
stock. The plan is administered by the Compensation Committee, which is
authorized to determine those participants to receive awards, the type of the
awards made to participants and the terms and conditions applicable to each
award. The total number of shares of Common Stock subject to this plan each year
is 1.5% of the total number of issued and outstanding shares of the Company's
Common Stock as of December 30 of the preceding calendar year.
2002 Stock Incentive Plan. The Company's 2002 Stock Incentive Plan allows
grants of incentive and nonstatutory stock options, as well as restricted stock
awards. Any of the Company's non-employee directors and the Company's or its
subsidiaries' executive officers or other key employees may be selected to
participate in the plan. The plan is administered by the Compensation Committee,
which selects the participants and determines the type and amounts of awards
granted and the terms and conditions applicable to each award.
The maximum number of shares available under the plan is 1,400,000. The
number of shares, whether in the form of stock options or restricted stock,
available for grant in any calendar year to any one person may not exceed
200,000, and the total number of restricted shares granted under the plan may
not exceed 280,000. The option exercise price of options is established by the
Committee but may not be less than the per share fair market value of the Common
Stock on the date of the stock option's grant, subject to specific adjustments.
The term and exercisability of each option is fixed by the Committee, but
options may not be exercised within one year from the date of grant or more than
ten years after the date of grant. All outstanding options become fully
exercisable, and all restrictions on restricted stock awards are deemed
satisfied, upon a change of control of the Company.
CEO Compensation. In setting Mr. James P. Mooney's compensation for 2002,
the Committee considered the Company's financial performance during the previous
four quarters, Mr. Mooney's personal performance and comparative data on the
salaries for chief executive officers of comparably-sized companies in the
chemical and non-durable goods manufacturing industries. The Committee also
considered various factors of corporate performance, including profitability,
market position, productivity, product leadership and the balancing of
short-term and long-term goals.
Mr. Mooney's contract also provides for discretionary bonuses in accordance
with the Bonus Program for Key Executives and Middle Management. The Committee
reviewed the Company's 2002 performance against the predetermined consolidated
operating profit goal for 2002. Based upon the Company's level of attainment of
the operating profit goal and the Company's current financial condition, the
Company did not pay any annual bonus to Mr. Mooney for 2002.
On February 11, 2002, the Committee approved a grant of an option for
30,000 shares to Mr. Mooney under the Long-Term Incentive Compensation Plan. In
determining the size of the award, the Committee
10
considered the size of similar awards to chief executive officers with pay and
responsibility comparable to that of Mr. Mooney and its qualitative assessment
of Mr. Mooney's performance.
Compensation Committee
Lee R. Brodeur, Chairman
Frank E. Butler
PERFORMANCE COMPARISONS
The chart set forth below compares the Company's cumulative total
stockholder return to that of the Standard & Poor's 500 Index and the S&P
Specialty Chemicals Index. In all cases, the information assumes $100 invested
on December 31, 1997 and is presented on a dividends reinvested basis.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
(AMONG OM GROUP, INC., THE S&P 500 INDEX
AND THE S&P SPECIALTY CHEMICALS INDEX)
[PERFORMANCE CHART]
OM GROUP, INC. S&P 500 S&P SPECIALTY CHEMICALS
-------------- ------- -----------------------
12/97 100.00 100.00 100.00
12/98 100.59 128.58 91.03
12/99 95.98 155.64 102.90
12/00 153.81 141.46 85.72
12/01 188.02 124.65 91.66
12/02 19.68 97.10 103.21
12/31/1997 12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/31/2002
------------------------------------------------------------------------------------------------------------
OM Group, Inc. $100.00 $100.59 $ 95.98 $153.81 $188.02 $ 19.68
------------------------------------------------------------------------------------------------------------
S&P 500 Index 100.00 128.58 155.64 141.46 124.65 97.10
------------------------------------------------------------------------------------------------------------
S&P Specialty Chemicals Index 100.00 91.03 102.90 85.72 91.66 103.21
11
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
(ITEM 2 ON THE PROXY)
Ernst & Young LLP ("E&Y") served as the Company's independent auditors for
the year ended December 31, 2002. The Audit and Finance Committee has the
responsibility for the appointment of the Company's independent auditors and has
appointed E&Y as independent auditors for the Company for the year ending
December 31, 2003. Representatives of E&Y will be in attendance at the Annual
Meeting where they will have the opportunity to make a statement, and, if
requested, will be available to respond to questions from the stockholders.
Item 2 on the proxy is a request from the Board of Directors that the
stockholders vote to ratify the appointment of E&Y as independent auditors. The
affirmative vote of a majority of shares present in person or by proxy at the
meeting is required to ratify this appointment.
REPORT OF THE AUDIT AND FINANCE COMMITTEE
The Audit and Finance Committee has reviewed and discussed with management
of the Company and with the Company's independent auditors, E&Y, the
consolidated financial statements of the Company and its subsidiaries to be set
forth in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2002. The Audit and Finance Committee has (a) discussed with E&Y
those matters required to be discussed by Statement on Auditing Standards No.
61, "Communications with Audit Committees," (b) received from E&Y the written
communications required by Independence Standards Board Standard No. 1, and (c)
discussed with E&Y its independence from the Company and management. E&Y has
confirmed to the Company that it is in compliance with all rules, standards and
policies of the Independence Standards Board and the Securities and Exchange
Commission governing auditor independence. Based on these reviews and
discussions, the Audit and Finance Committee recommends to the Board of
Directors of the Company that the audited financial statements be included in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2002 for filing with the Securities and Exchange Commission.
Audit and Finance Committee
William J. Reidy, Chairman
Lee R. Brodeur
Frank E. Butler
AUDIT FEES
The aggregate fees billed by E&Y for the audit of the Company's annual
financial statements and review of the Company's quarterly financial statements
for fiscal year 2002 were $1,598,200.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
E&Y did not render any services relating to financial information systems
design and implementation during 2002.
ALL OTHER FEES
The aggregate fees billed by E&Y for all other services, other than those
stated under the caption Audit Fees, were $2,824,800. The fees consisted of (a)
$872,100 for audit-related services that generally included statutory and
employee benefit plan audits and services in connection with business
acquisitions and registration statements filed with the Securities and Exchange
Commission, and (b) $1,952,700 for tax-related services that generally included
tax and employee benefit plan compliance and tax advisory services.
The Audit and Finance Committee and the Board of Directors considered the
independence of E&Y and determined that the performance of non-audit services
during 2002 did not affect its independence.
12
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires officers,
directors, and persons who own more than 10% of a registered class of equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and greater than 10%
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) reports they file.
Based solely upon a review of Forms 3 and 4 (including amendments to such
forms) furnished to the Company during 2002 and Forms 5 furnished with respect
to 2002, no director, officer or beneficial owner of more than 10% of the
Company's outstanding Common Stock failed to file on a timely basis during 2002
or prior fiscal years any reports required by Section 16(a), except that Mr.
James P. Mooney failed to file a report for his contribution of 7,630 shares in
December 2001 to a private foundation and Mr. Reidy's initial Form 3 report was
filed late.
STOCKHOLDER PROPOSALS
FOR THE 2004 ANNUAL MEETING
Any stockholder who intends to present a proposal at the 2004 annual
meeting and who wishes to have the proposal included in the Company's proxy
statement and form of proxy for that meeting must deliver the proposal to the
Company no later than December 5, 2003.
Any stockholder who intends to present a proposal at the 2004 annual
meeting other than for inclusion in the Company's proxy statement and form of
proxy must deliver the proposal to the Company at its executive offices not
later than April 14, 2004, or such proposal will be untimely. If a stockholder
fails to submit the proposal by April 14, 2004, the Company reserves the right
to exercise discretionary voting authority on the proposal.
OM GROUP, INC.
Michael J. Scott
Secretary
13
DETACH CARD HERE
-------------------------------------------------------------------------------
OM GROUP, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Thomas R. Miklich, James P. Mooney and Michael J.
Scott, or any of them, with full power of substitution, to vote the shares of
the undersigned at the 2003 Annual Meeting of Stockholders of OM Group, Inc. to
be held on May 6, 2003, and at any adjournment thereof as follows:
THE BOARD OF DIRECTORS RECOMMENDS THAT VOTES BE CAST FOR THE ELECTION OF THE
NOMINEES AND IN FAVOR OF ITEM 2.
1. Election of Directors.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as listed to the contrary below). to vote for all nominees listed below.
JOHN E. MOONEY AND MARKKU TOIVANEN
(INSTRUCTIONS: IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE LINE BELOW).
--------------------------------------------------------------------------------
2. Ratification of the Appointment of Ernst & Young LLP as Independent Auditors
of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
DETACH CARD HERE
-------------------------------------------------------------------------------
(Continued from the other side)
IF NO SPECIFICATION IS MADE, AUTHORITY IS GRANTED TO CAST THE VOTE OF THE
UNDERSIGNED FOR ELECTION OF THE NOMINEES ABOVE AND IN FAVOR OF ITEM 2.
Dated: --------------- , 2003
------------------------------
Signature(s)
------------------------------
Please sign exactly as name
appears hereon. Joint owners
should each sign. When signing
as attorney, executor,
administrator, trustee or
guardian, give your full title
as such. In case of a
corporation, a duly authorized
officer should sign on its
behalf.