-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RBIKBh3hMmV4wii47t+q9pixwlqhFA8DNvUbtzZ7VlF+B20VGE499ROcMKosd3bU MvQ++LcMbqhzyuYJ/mkh3A== 0000950152-96-001187.txt : 19960328 0000950152-96-001187.hdr.sgml : 19960328 ACCESSION NUMBER: 0000950152-96-001187 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960327 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OGLEBAY NORTON CO CENTRAL INDEX KEY: 0000073918 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 340158970 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-00663 FILM NUMBER: 96539193 BUSINESS ADDRESS: STREET 1: 1100 SUPERIOR AVE CITY: CLEVELAND STATE: OH ZIP: 44114-2598 BUSINESS PHONE: 2168613300 MAIL ADDRESS: STREET 1: 1100 SUPERIOR AVENUE CITY: CLEVELAND STATE: OH ZIP: 44114-2598 10-K405 1 OGLEBAY NORTON COMPANY 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 Commission file number 0-663 ----------------- ----- OGLEBAY NORTON COMPANY (Exact name of Registrant as specified in its charter) Delaware 34-0158970 - ------------------------------- ----------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1100 Superior Avenue, Cleveland, Ohio 44114-2598 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including Area Code (216) 861-3300 Securities registered pursuant to Section 12(g) of the Act: Common Stock Rights to Purchase $1 Par Value Preferred Stock ------------ --------------- Shares of Common Stock with associated Rights to Purchase Preferred Stock outstanding at March 12, 1996: 2,447,432. The aggregate market value of voting stock held by non-affiliates of the Registrant at March 12, 1996 (based upon excluding the total number of shares reported under Item 12 hereof) was $67,342,560.00. Portions of the following documents are incorporated by reference: Proxy Statement for 1996 Annual Meeting of Stockholders (Part III) The Exhibit Index is located herein beginning at sequential page 50. 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No -------- -------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] 2 PART I ITEM 1. BUSINESS -------- A. General - Industry Segments --------------------------- The Registrant, which was incorporated in Delaware in 1931, its wholly owned subsidiaries and its predecessor organizations have been engaged in the transportation, mining and sale of industrial minerals and iron ore since 1854. The principal offices of the Registrant are located at 1100 Superior Avenue, Cleveland, Ohio 44114-2598. The information regarding the approximate amounts of consolidated sales and revenues (including sales commissions, royalties and management fees), consolidated profit from operations and consolidated identifiable assets for the three years ended December 31, 1995, attributable to each of the Registrant's industry segments, appears in Note I of the Consolidated Financial Statement on pages 40 through 43 of this Annual Report on Form 10-K. B. Principal Products and Services ------------------------------- 1. Marine Transportation --------------------- The Registrant operates U.S. flag self-unloading vessels engaged in the transportation of iron ore, coal, limestone and other dry bulk cargo on the Great Lakes. The self-unloader fleet consists of twelve (12) vessels. Nine (9) of the vessels are owned by the Registrant and three (3) are leased as described below. The vessels' cargo capacities range in size from 13,500 tons to 60,000 tons. The newest vessel was commissioned in 1981 and the oldest in 1925. The relatively long life of Great Lakes vessels is due to a scheduled program of regular winter maintenance, periodic renovation and the lack of corrosion because of freshwater operations. One of the owned vessels, the M/V Columbia Star, a 1,000-foot Great Lakes self-unloading bulk carrier, has been financed through the use of bonds issued pursuant to Title XI of the Merchant Marine Act of 1936, as amended. See Note G of the Notes to Consolidated Financial Statements for disclosure of financial data with respect to these bonds. One vessel, the M/V Wolverine, is leased and operated by the Registrant under a bareboat charter agreement which expires in 1999 and is renewable thereafter for up to ten years. The agreement provides an option to purchase 2 3 the equity position in the vessel on the semiannual charter hire payment dates in each year and an option to purchase the vessel at the end of the charter period. The two other leased vessels, the M/V David Z. Norton and the M/V Earl W. Oglebay, formerly known as the M/V William R. Roesch and the M/V Paul Thayer, respectively, are leased under bareboat subcharter and charter agreements, respectively, which expire in 1998 and provide options to purchase the vessels at the end of their respective terms. The Registrant's Marine Transportation business is seasonal. An ordinary annual Great Lakes vessel season of navigation is approximately 259 days. However, the season is affected by weather conditions and customers' demand for service which causes the actual days of operation to vary from year to year. In 1995 the number of sailing days was 3,469 as compared to 3,241 sailing days in 1994. The increase in the number of sailing days in 1995 as compared to 1994 was adversely affected by unusually bad weather during the fourth quarter which resulted in a negative impact on operating revenues. In 1994 and 1995, the Registrant operated twelve (12) vessels during each season. The Registrant's fleet carried approximately 21.5 million tons and 21.6 million tons in 1995 and 1994, respectively. The Registrant sold two vessels in 1995; the S/S J. Burton Ayers was sold on August 1, 1995 and the S/S Crispin Oglebay on June 29, 1995 for pretax gains totaling $2,324,000. The S/S J. Burton Ayers was sold to Black Creek Shipping Company Ltd. and the S/S Crispin Oglebay was sold to Upper Lakes Shipping Ltd.; both purchasers are Canadian companies. Neither vessel had sailed in the last four years. 2. Iron Ore -------- The Registrant held iron ore mining rights located near Eveleth, Minnesota, which were assigned in exchange for an overriding royalty to Eveleth Taconite Company ("Taconite Company") and Eveleth Expansion Company ("Expansion Company"), in which the Registrant and its wholly owned subsidiary, ONCO Eveleth Company, hold 15% and 20.5% interests, respectively ("Eveleth Mines"). The Registrant received an overriding royalty in 1995 of approximately $2,324,000 as compared to approximately $2,323,000, in 1994. Net management fees received by the Registrant from Eveleth Mines in 1995 were $1,164,000 compared to $864,000 in 1994. The Eveleth Mines reserves are sufficient to support the normal level of operations for approximately 40 years. In addition to the mine, the Eveleth facility consists of a concentrating and pellet production plant, located approximately eight miles south of the mine. In 1995, the Registrant produced approximately 750,000 long tons of Eveleth pellets and sold them under contracts or on the 3 4 open market. The Registrant also sold 44,000 tons of pellets acquired from others. In 1996, the other Eveleth owners are claiming their full share of Eveleth Mines pellet production. The Registrant's share of pellet production is currently limited to its contractual allotment of 775,000 tons. Eveleth Mines is a cost-sharing operation. The basic agreements, entered into as of January 1, 1974, govern the operation for the life of the mine. Under the basic agreements, Eveleth Mines is required to operate at full capacity, with participants sharing fixed and variable costs in proportion to their respective equity interests. These agreements were modified, effective as of January 1, 1991, ("1991 Amendment"), to permit the participants greater production flexibility and to alter the cost-sharing arrangements through December 31, 1996. Under the modified agreements, each of the participants pays fixed costs in proportion to its adjusted equity interest and variable costs in proportion to the amount of iron ore nominated by it. Unless modified again, the basic agreements will govern operations in 1997 and beyond. The Registrant, in addition to its ownership in Eveleth Mines, has a contract to serve, on a fee basis, as manager and employer of the Eveleth Mines operations. The Registrant has notified the owners of Eveleth Mines of its decision not to extend this contract beyond its current expiration date of December 31, 1996. After 1996 the agreements governing Eveleth Mines' operation may be terminated by the owners on eleven-months notice, or the owners may choose to share costs pro rata, or on the basis of arrangements that were used prior to 1981 ("rollback"). These arrangements are different than the cost sharing arrangements followed under the 1991 Amendment. In 1996, one of the other Eveleth owners gave notice of rollback, which the Registrant is contesting. The owners continue to discuss what the potential cost sharing structure, operation and ownership of Eveleth Mines could be after 1996. However, no agreements have been reached regarding modification of the basic agreements or potential restructuring of the ownership of Eveleth Mines. Until an agreement has been reached, it is not possible to predict how these events may affect the Registrant. 4 5 3. Refractories & Minerals ----------------------- Oglebay Norton Refractories & Minerals, Inc. and Canadian Ferro Hot Metal Specialties Limited, the Registrant's Canadian manufacturing subsidiary, continue to design, manufacture and market continuous casting refractories and ingot hot top products used in molten steel processing and to design, produce and market metallurgical treatment products used in the refining of molten steel. The Brownsville Plant exited the fluorspar business in 1994. Management has entered into a conditional agreement for the termination of its lease with the Brownsville Navigation District and another conditional agreement for the sale of its equipment. The loss of this business will not have a material adverse impact upon the financial condition of the Registrant. The following is a list of Oglebay Norton Refractories & Minerals, Inc.'s and Canadian Ferro Hot Metal Specialties Ltd.'s plants: Name and Location Active/Inactive - ----------------- --------------- Brownsville, Texas Active Cleveland, Ohio Active Dunkirk, Indiana Active Tuscarawas, Ohio Closed as of November 1, 1995 Warren, Ohio Active Stoney Creek, Ontario Active Canadian Ferro Hot Metal Specialties Limited and Oglebay Norton Refractories & Minerals, Inc. own the plants and the properties on which the plants are located except for the Brownsville Plant, which is held under a lease that expires July 31, 1999. The Tuscarawas Plant was closed as of November 1, 1995, in order to achieve greater operating efficiencies. The building and property, which are not material to the Registrant's consolidated assets, will be sold. 4. Industrial Sands ---------------- Oglebay Norton Industrial Sands, Inc., a wholly owned subsidiary of the Registrant, mines and processes industrial sands for the glass, ceramic and oil well service industries. 5 6 The following is a list of the plants of Oglebay Norton Industrial Sands, Inc.:
Minimum Name and Current Capacity Years of Location Markets (tons in 1000's) Reserves(1) -------- ------- ---------------- -------- Orange County Construction, 550 15.6 Plant Golf Course and Stucco Sand Riverside Plant Pulverized Sand 50 N/A Glass Rock Plant Glass, Foundry 500 24.4 and Pulverized Sand Millwood Plant Glass, Foundry 250 49.0 and Pulverized Sand Brady Plant Fracture and 1,500 61.0 Pulverized Sand
(1) Based on full production at current rated annual capacity. The Registrant's silica sand operations produced approximately 1,562,000 tons of sand in 1995. The processed sand sold by the Registrant's industrial sand business move by truck and rail to consumers. 5. Other ----- The Registrant sold the capital stock of its wholly owned subsidiary, National Perlite Products Company, on February 8, 1996. National Perlite Products Company was inactive for two years prior to the sale of its capital stock. The sale price was $1,900,000.00 resulting in a $625,000 pretax gain. C. Competition ----------- The Registrant experiences intense competition in all of its business segments from both foreign and domestic companies with which it competes in supplying products and services or which offer alternative choices as to modes of transportation. Vessel rates are an important factor as to the ability of the Registrant's Great Lakes fleet to compete with other independent and captive fleets, railroads and other providers of surface transportation. The Registrant believes that product quality, differentiation and customer 6 7 service are significant competitive considerations for all of its business segments. D. Environmental, Health and Safety Considerations ----------------------------------------------- The Registrant is subject to various environmental laws and regulations imposed by federal, state and local governments. The Registrant cannot reasonably estimate future costs, if any, related to compliance with these laws and regulations. However, costs incurred to comply with environmental regulations have not been other than in the ordinary course of business. Although it is possible that the Registrant's future operating results could be affected by future costs of environmental compliance, it is management's belief that such costs will not have a material adverse effect on the Registrant's consolidated financial position. The Registrant is unable to predict the effects of future environmental laws and regulations upon its business. E. Principal Customers ------------------- More than 10% of the Registrant's 1995 sales and revenues was attributable to each of AK Steel Corporation and LTV Steel Company, Inc. A long-term vessel transportation contract and a contract for the sale of iron ore pellets were the primary sources of revenues from AK Steel Corporation. In the case of LTV Steel Company, Inc., revenues were largely attributable to vessel transportation services and refractory and metallurgical treatment products sold in 1995. F. Employees --------- At December 31, 1995, the Registrant and its subsidiaries employed 1,417 persons. ITEM 2. PROPERTIES ---------- The Registrant's principal operating properties are described in response to Item 1. The Registrant's executive offices are located at 1100 Superior Avenue, Cleveland, Ohio, under a sublease expiring on March 31, 2003. The total area involved is approximately 55,000 square feet. ITEM 3. LEGAL PROCEEDINGS ----------------- (1) The Registrant's subsidiary, Laxare, Inc., has been named as a Defendant in two lawsuits now consolidated in the Circuit Court of Kanawha County, West Virginia. Plaintiffs Mary Catherine Marks and Josephine W. Luther ("Plaintiffs") allege that they owned an interest in property 7 8 ("Subject Property") upon which Laxare engaged in coal mining and other activity pursuant to a 1968 lease ("Subject Lease"), allegedly invalid as against Plaintiffs. Plaintiffs make identical allegations against Cannelton Industries, Inc., to which Laxare subleased its interest under the Subject Lease. Plaintiffs seek compensatory and punitive damages in an unspecified amount against Laxare and Cannelton. Plaintiffs also instituted since-settled claims against the individuals ("Lessors") who leased Laxare its interest under the Subject Lease. Laxare denied the material allegations, asserted various defenses and a counterclaim against Plaintiffs, and cross claimed against the Lessors. Cannelton has cross claimed against the Lessors and Laxare. The Circuit Court denied Laxare's Motion for Summary Judgment, finding that the Plaintiffs have an interest in the Subject Property, unencumbered by the Subject Lease. Laxare has moved for reconsideration of the Circuit Court's ruling. The Court dismissed Laxare's cross claim against the Lessors. Laxare and Cannelton filed motions to dismiss Plaintiffs' claims on the basis of various affirmative defenses, and Plaintiffs have moved for judgment in their favor on all issues, except amount of damages. On August 31, 1995 Laxare, Inc. sought protection under Chapter 11 of the Bankruptcy Code. Laxare, Inc. is unable to predict, at this time, the result of the Bankruptcy proceedings. The Registrant believes that the Bankruptcy proceeding is unlikely to have a material adverse effect on the Registrant's consolidated financial position. (2) The Registrant; its wholly owned subsidiary, Oglebay Norton Taconite Company; Eveleth Taconite Company; Eveleth Expansion Company; and The United Steel Workers of America, Local 6860, have been named Defendants in a Complaint filed on August 16, 1988, in Federal District Court, 5th District of Minnesota, by Lois E. Jenson and Patricia S. Kosmach, in their own behalf and on behalf of all others similarly situated. The Complaint alleges both sexual harassment and sexual discrimination under Title VII of the Civil Rights Act of 1964 (the Act), Title 42, United States Code, 2000e et seq., and under the provision of the Minnesota Human Rights Act, Minnesota Statutes, Section 363.01 et seq. The Registrant does not believe that an adverse out come will have a materially affect upon it. (3) On November 22, 1988, Kathleen O'Brien Anderson, a former employee of Eveleth Mines, filed a Notice of Charge of Discrimination with the Equal Employment Opportunity Commission, alleging sexual harassment and sexual discrimination. Ms. Anderson was issued a Notice of Right to Sue by the Equal Employment Opportunity Commission, which has been consolidated with the preceding Federal Court proceeding. 8 9 These proceedings have been certified as a class action. This matter was tried in December 1992 and February 1993. On May 14, 1993, the Court issued its decision, dismissing seven of Plaintiffs' nine claims of discrimination and harassment against Defendants, Oglebay Norton Taconite Company and the Registrant. In addition, it was determined that Eveleth Taconite Company, Eveleth Expansion Company and Eveleth Expansion Financing Corporation were not "employers", as defined under the Act, and they were dismissed as parties defendant. This dismissal, however, does not relieve them of their contractual obligations to the Registrant and Oglebay Norton Taconite Company. The Registrant and Oglebay Norton Taconite Company received unfavorable decisions on the remaining two claims, one involving discrimination in the promotion of hourly employees to step-up foreman and the other harassment. Proceedings continue with regard to the two remaining counts against the Registrant and its subsidiary. As final orders have not been issued, the opportunity for appeal is not yet available. Trial of the claims of the named Plaintiffs and sixteen individual class members began on January 17, 1995, before a United States Magistrate Judge sitting as a special master. To date the special master has not issued his report and recommendation. The Registrant does not believe that an adverse ruling will have a material adverse affect upon it. (4) On February 26, 1993, a Complaint was filed by Lois E. Jenson and Kathleen O'Brien Anderson in the United States District Court, District of Minnesota, Fifth Division, naming the Registrant; its wholly owned subsidiary, Oglebay Norton Taconite Company; Eveleth Taconite Company; Eveleth Expansion Company; and The United Steel Workers of America, Local 6860, Defendants. The Complaint alleges violations of Title VII of the Civil Rights Act of 1964, Title 42, United States Code, Section 2000e et seq., as amended by the Civil Rights Act of 1991, and the Minnesota Human Rights Act, Minnesota Statutes, Section 363.01 et seq. The Plaintiffs seek injunctive relief, back pay, with triple damages, and compensatory and punitive damages in unspecified amounts. This suit is considered by counsel to be superfluous and barred by the doctrine of res judicata due to the fact that these same Plaintiffs filed a related suit in 1988, which was tried in December 1992 and February 1993 and for which a ruling was rendered on May 14, 1993. An answer has been filed to this Complaint. The Registrant does not believe that a decision in favor of plaintiffs would have a material adverse affect upon it. (5) The Registrant and certain of its subsidiaries are involved in various other claims and ordinary routine litigation incidental to their businesses, including claims 9 10 relating to the exposure of persons to asbestos and silica. The full impact of these claims and proceedings in the aggregate continues to be unknown. The Registrant continues to monitor this situation. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- No matter was submitted to a vote of the Registrant's security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year covered by this report. EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------ (Included pursuant to Instruction 3 to paragraph (b) of Item 401 of Regulation S - K) The executive officers of the Registrant as of March 12, 1996, unless otherwise indicated, were as follows. Name Executive Officers Age - -------------------- ---------------------------------- --- R. Thomas Green, Jr. Chairman of the Board, President and Chief Executive Officer (since 1992); Executive Vice President (1990-1992); Vice President-Iron Ore Operations (1984-1990); and Director 58 Edward G. Jaicks Vice President-Marketing (since 1992) 39 Mark P. Juszli Vice President-Industrial Sands (since April 26, 1995); General Manager- Industrial Sands (1994-1995) 44 Richard J. Kessler Vice President-Finance (since 1981), and Development (since February 23, 1994); Treasurer (1974-1994) 59 H. William Ruf Vice President-Administrative and Legal Affairs (since February 23, 1994); Vice President-Human Resources (1993-1994); Vice President-Employee Relations (1992-1993); Vice President- Personnel and Industrial Relations (1978-1992) 61 10 11 John L. Selis Vice President-Iron Ore (since February 23, 1994); Vice President- Iron Ore Operations (1992 to February 23, 1994); Vice President- Administration (1981-1992) and Law (1986-1992) 59 Stuart H. Theis Vice President-Marine Transportation (since January 1, 1994); Assistant to the President (December 28, 1992- December 31, 1993) 53 Timothy J. Vice President-Refractories and Minerals Wojciechowski (since July 26, 1995) 40 Except as noted above, all executive officers of the Registrant have served in the capacities indicated, respectively, during the past five years. All executive officers serve at the pleasure of the Board of Directors, with no fixed term of office. 11 12 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND ---------------------------------------- RELATED STOCKHOLDER MATTERS --------------------------- The Company's Common Stock, par value $1 per share, as reported by NASDAQ is traded on the Over-The-Counter Market. The following is a summary of the market ranges and dividends declared for each quarterly period in 1995 and 1994 for the Common Stock.
Quarterly Dividends Period High Low Declared --------- ---- --- --------- 1995 4th $38-3/4 $34-3/4 $.30 3rd 36-1/2 33-1/4 .30 2nd 34-1/4 32 .30 1st 34 30 .30 1994 4th $31-3/4 $29-1/4 $.30 3rd 31 24-3/4 .30 2nd 26-1/2 24-1/4 .20 1st 26-1/4 21-3/4 .20
December 31 ------------------ 1995 1994 ---- ---- Market price per share $37-1/4 $30-1/2 Stockholders of record 503 531
-12- 13 ITEM 6. SELECTED FINANCIAL DATA ----------------------- OGLEBAY NORTON COMPANY AND SUBSIDIARIES (Dollars and Shares in Thousands, Except Per Share Amounts)
YEAR ENDED 1995 1994 ------------------------------- OPERATIONS Net sales and operating revenues $189,376 $202,755 Sales commissions, royalties and management fees 4,221 4,597 -------- -------- Total revenues $193,597 $207,352 ======== ======== Income (loss) from continuing operations before taxes $ 20,510 $ 20,122 Income taxes (benefit) 5,149 5,231 -------- -------- Income (loss) from continuing operations 15,361 14,891 Discontinued operation(1) -------- -------- Income (loss) before extraordinary provision and cumulative effects of changes in accounting 15,361 14,891 Extraordinary provision(2) Cumulative effects of changes in accounting(3) -------- -------- Net income (loss)(4) $ 15,361 $ 14,891 ======== ======== Depreciation and amortization $ 14,438 $ 13,603 Expenditures for properties and equipment 6,906 8,813 PER SHARE DATA Continuing operations $ 6.21 $ 5.98 Discontinued operation(1) -------- -------- Income (loss) before extraordinary provision and cumulative effects of changes in accounting 6.21 5.98 Extraordinary provision(2) Cumulative effects of changes in accounting(3) -------- -------- Net income (loss)(4) $ 6.21 $ 5.98 ======== ======== Dividends $ 1.20 $ 1.00 ======== ======== OTHER STATISTICS Total assets $254,256 $260,813 Long-term debt 43,641 57,118 Other long-term liabilities 71,811 74,243 Dividends paid 2,968 2,491 Average shares of Common Stock outstanding 2,474 2,491 Shares of Common Stock outstanding at year-end 2,466 2,483
1 The Company's wholly owned subsidiary, Saginaw Mining Company, ceased operation of its Ohio coal mine in 1992. Permanent closure of the mine was funded by a public utility customer, as required by long-term contract. 2 Extraordinary provision (net of income taxes of $5,140,000) relates to the Coal Industry Retiree Health Benefit Act of 1992. -13- 14 DECEMBER 31
1993 1992 1991 - ---------------------------------------------------------------------------------------------- $159,736 $148,690 $144,249 3,710 5,321 4,594 -------- -------- -------- $163,446 $154,011 $148,843 ======== ======== ======== $ 9,554 $(49,761) $ 3,839 2,292 (17,612) 528 -------- -------- -------- 7,262 (32,149) 3,311 2,440 1,816 -------- -------- -------- 7,262 (29,709) 5,127 ( 9,978) (17,006) -------- -------- -------- $ 7,262 $(56,693) $ 5,127 ======== ======== ======== $ 13,432 $ 16,165 $ 15,878 2,921 8,727 3,506 $ 2.89 $( 12.79) $ 1.32 .97 .72 -------- -------- -------- 2.89 ( 11.82) 2.04 ( 3.97) ( 6.77) -------- -------- -------- $ 2.89 $( 22.56) $ 2.04 ======== ======== ======== $ .80 $ 1.40 $ 1.60 ======== ======== ======== $259,717 $263,974 $291,133 69,344 80,534 87,937 80,642 85,838 52,209 2,009 3,518 4,022 2,512 2,513 2,514 2,504 2,513 2,513
3 Cumulative effects of changes in accounting (net of income taxes of $8,762,000) are for postretirement benefits other than pensions and vessel inspection costs. 4 The 1992 net loss includes the effects of asset impairments ($29,444,000) and a loss on the disposal of a business ($2,178,000). -14- 15 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- FINANCIAL CONDITION The Company's operating activities provided cash flow of $25,940,000 in 1995 which improved by over 30% compared to $19,589,000 in 1994. Cash flow from operations was $5,357,000 in 1993. The Company generated income from operations of $20,988,000 in 1995 compared to $18,301,000 in 1994 and $12,364,000 in 1993. The improvement was primarily from operating profit contributions made by the Company's Marine Transportation and Industrial Sands business segments. Accounts receivable declined in 1995 by $4,354,000 on lower fourth quarter revenues. The Company was limited to its annual contractual allotment of iron ore pellets, while additional pellet tonnage was available for sale in 1994. Harsh weather conditions on the Great Lakes and rivers at the end of 1995 had a significant adverse impact on the Company's Marine Transportation fourth quarter operating results. Accounts receivable in 1994 increased by $3,744,000, compared to 1993, as a result of an extended Marine Transportation sailing season, strong Iron Ore sales to the steel industry and improved fourth quarter sales for Industrial Sands. Accounts payable increased in 1995 by $1,977,000 primarily as a result of pellet tonnage purchased at the end of the year by the Company's Iron Ore business segment and resold on the spot market. Operating results of the Company's business segments are discussed in more detail under "RESULTS OF OPERATIONS". Expenditures for property and equipment amounted to $6,906,000 in 1995 compared to $8,813,000 and $2,921,000 in 1994 and 1993, respectively. Capital expenditures include vessel inspection costs of $2,037,000 in 1995, $1,326,000 in 1994 and $364,000 in 1993. Also included in 1994 is $3,204,000 of property and equipment purchased as a part of an $8,000,000 Industrial Sands asset acquisition. Capital expenditures for 1996 are currently expected to be $2,000,000 less than 1995 expenditures, as no vessel inspections are required in 1996. In December 1994 the Company amended and restated its loan agreement with various banks to extend its term loan through 2001 and reduce semiannual payments. Under the new loan agreement, term loan balances were consolidated and the Company's revolving credit facility was increased to $40,000,000, of which $15,000,000 is available only for acquisitions. The new agreement will result in cumulative savings of approximately $6,000,000 over the term of the loan. In 1995, the Company elected to pay $5,000,000 at the end of the year on its term loan, in addition to scheduled payments. The Company did not utilize its revolving credit facility throughout 1995. In 1994, the Company repaid $10,000,000 in the second quarter, borrowed on the facility in the prior year, reducing the balance to zero for the remainder of the year. In 1993, the Company had $10,000,000 outstanding on its revolving credit throughout the year, except for a one-month period during the fourth quarter when the balance was reduced to zero. In December 1993 the Company refinanced its Title XI Bonds reducing the fixed interest rate from 9.65% to 5.3%. Long-term debt is further described in Note G to the consolidated financial statements. The Company made Iron Ore investment advances of $2,812,600 in 1995, 1994 and 1993 to fund its proportionate share of Eveleth Mines debt. Eveleth's debt was fully paid in 1995. -15- 16 The Company declared and paid dividends on a quarterly basis totaling $1.20 per share in 1995, $1.00 per share in 1994 and $.80 per share in 1993. Dividends paid were $2,968,000 in 1995 compared to $2,491,000 and $2,009,000 in 1994 and 1993, respectively. In the third quarter of 1994 the Company's Board of Directors approved a $.10 per share increase of the quarterly dividend to $.30 per share of Common Stock. The Company purchased 18,250 shares of its Common Stock on the open market for $615,000 in 1995, 20,800 shares for $536,000 in 1994 and 9,000 shares for $189,000 in 1993 and placed these shares in treasury. In 1995, the Company sold two Marine Transportation vessels no longer in service and current marketable securities resulting in pretax gains of $2,324,000 and $1,630,000, respectively. The Company also realized a $520,000 pretax gain on the sale of undeveloped clay properties in Tennessee in 1995. In 1994, the Company sold its Ceredo coal dock business and current marketable securities resulting in pretax gains of $6,518,000 and $1,315,000, respectively. In 1993, the Company sold certain assets of its Licking River Terminal coal dock, generating a $1,326,000 pretax gain, and its unsecured bankruptcy claim against LTV Steel Company, Inc., resulting in a $2,653,000 pretax gain after the retirement of $4,412,000 of long-term receivables. Total proceeds from the sale of these assets were $6,553,000 in 1995, $11,850,000 in 1994 and $8,656,000 in 1993. Anticipated cash flows from operations and current financial resources are expected to meet the Company's needs during 1996. All financing alternatives are under constant review to determine their ability to provide sufficient funding at the least possible cost. RESULTS OF OPERATIONS Net sales, operating revenues, sales commissions, royalties and management fees totaled $193,597,000 in 1995 as compared to $207,352,000 and $163,446,000 in 1994 and 1993, respectively. Income from operations of $20,988,000 in 1995 improved by 15% over the $18,301,000 level achieved in 1994. Income from operations in 1994 was 48% greater than income from operations of $12,364,000 in 1993. Income before taxes was $20,510,000 in 1995, compared to $20,122,000 in 1994 and $9,554,000 in 1993. In 1995, net income was $15,361,000 or $6.21 per share, compared to net income of $14,891,000 or $5.98 per share in 1994 and $7,262,000 or $2.89 per share in 1993. Net income, excluding gains and charges, was $12,272,000 or $4.96 per share in 1995, compared to $9,549,000 or $3.83 per share in 1994 and $6,097,000 or $2.43 per share in 1993. In 1995, income before taxes includes gains totaling $4,681,000, primarily from the sale of inactive Marine Transportation vessels and current marketable securities. Income before taxes in 1994 included gains totaling $8,094,000 essentially from the sale of the Company's Ceredo coal dock business and current marketable securities. In 1993, income before taxes included gains totaling $4,117,000 from the sale of assets, a $1,700,000 reserve against doubtful coal customer accounts receivable and a $652,000 charge related to refinancing the Company's Title XI Bonds. In 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the impairment of Long-Lived Assets to be Disposed Of". This statement, which must be adopted by the Company in 1996, is not expected to have a material effect on the Company's consolidated financial statements. In 1993, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities". The Company adopted the provisions of the new standard, effective January 1, 1994, and increased stockholders' equity by $2,972,000. The effect of these statements are further described in Notes A and B to the consolidated financial statements. -16- 17 In 1995, the Company reevaluated assumptions used in determining postretirement pension and health care benefits. The weighted-average discount rates were adjusted from 8% to 7.5% to better reflect market rates. In 1996, the assumed health care cost trend rate will decline by 1% and the ultimate trend rate will decrease by .5% for all retirees. The change in assumptions did not affect 1995 net income and will not have a significant effect on net income in 1996. The weighted-average discount rate, used in determining health care benefits provided under the Coal Industry Retiree Health Benefit Act, was adjusted from 7.75% to 7% and did not have a significant impact on 1995 net income. Postretirement benefits are further described in Note E to the consolidated financial statements. The operating results of the Company's business segments for the three years ended December 31, 1995 are discussed below. It is the policy of the Company to allocate a portion of corporate general and administrative expenses to its business segments. MARINE TRANSPORTATION - Operating revenues of $85,657,000 in 1995 were 4% greater than revenues of $82,153,000 in 1994 and 17% greater than revenues of $73,143,000 in 1993. Operating profit was $12,246,000 in 1995, a 2% decline compared to $12,467,000 in 1994 and a 13% improvement over the 1993 level of $10,791,000. Income before taxes was $11,149,000 in 1995 compared to $8,270,000 and $5,492,000 in 1994 and 1993, respectively. In 1995, the Company sold two inactive vessels resulting in pretax gains totaling $2,324,000. Interest expense declined to $3,422,000 in 1995, compared to $4,283,000 in 1994 and $5,309,000 in 1993, as a result of reductions in outstanding debt and lower interest rates on the Company's long-term debt. Operating revenues improved in 1995 for the Company's Great Lakes vessel fleet on a 4% increase in revenue per ton of capacity and a 7% increase in operating days over 1994 levels. Higher revenues in 1994, compared to 1993, resulted from a 20% increase in vessel operating days on an extended sailing season after a delayed start due to severe ice conditions on the Great Lakes. Revenue per ton of capacity in 1994 was comparable to 1993. The 21,486,000 tons hauled by the Company's vessel fleet fell by less than 1% compared to the 21,619,000 record tonnage carried in 1994. The fleet experienced a 14% increase in tonnage carried in 1994 compared to the 1993 level of 19,001,000 tons. Iron ore shipments declined by 4% in 1995, as the Company did not participate in the winter shuttle of iron ore on the Cuyahoga River. In 1995, coal shipments increased by 6%, while limestone shipments declined 2%, compared to 1994. Northern limestone quarries closed earlier than usual due to harsh weather conditions at the end of 1995. Transportation of iron ore in 1994 was comparable to 1993, while coal and limestone shipments increased by 25%. The Company operated twelve vessels throughout the 1995 sailing season. In 1994, eleven vessels operated for the whole sailing season and a twelfth vessel sailed at the end of the second quarter for the remainder of the season. Ten vessels sailed for the full sailing season in 1993, while one vessel operated for part of the season. Presently, it appears that the 1996 sailing season will be comparable to 1995 and 1994 operating levels, as the Company's customers continue to project high levels of demand for the transportation of iron ore, coal and limestone. -17- 18 High winds and unusually heavy ice conditions on the Great Lakes and rivers at the end of 1995 caused substantial delays and hampered operations resulting in a 2% decline in operating profit compared to 1994. In 1995, delays increased by 68% or 200 operating days, compared to 1994, resulting in an approximate $2,500,000 reduction in operating profit. Operating profit improved in 1994, compared to 1993, due to better business conditions for the Company's customers, favorable weather conditions once the sailing season commenced and lower operating costs. Expenditures for properties and equipment and depreciation and amortization expense increased to $3,125,000 and $8,658,000, respectively, in 1995 as three vessels required their five-year inspections prior to sailing and major improvements were made to one of the Company's vessels. Expenditures for properties and equipment and depreciation expense amounted to $1,397,000 and $8,359,000, respectively, in 1994 as three vessels required their five-year inspections, compared to only one vessel in 1993. Expenditures for properties and equipment and depreciation expense was $364,000 and $8,157,000, respectively, in 1993. None of the Company's vessels are scheduled for a five-year inspection in 1996. INDUSTRIAL SANDS - Net sales of $40,552,000 in 1995 increased by 41% compared to $28,818,000 in 1994. Net sales in 1994 were 8% greater than the 1993 level of $26,606,000. Operating profit of $7,175,000 in 1995, compared to $2,834,000 in 1994 and $1,827,000 in 1993. Income before taxes in 1995 was $6,808,000, compared to $2,893,000 in 1994 and $1,846,000 in 1993. Interest expense was $524,000 in 1995 and related to the acquisition of additional sand assets at the end of 1994. The substantial improvement shown in net sales and operating profit in 1995 was due to economic vigor in most of the segment's markets and advantages resulting from the $8,000,000 acquisition of additional sand assets near the segment's Texas facility in the fourth quarter of 1994. A record 1,565,000 tons were shipped in 1995 achieving a 20% increase over the 1994 level of 1,308,000 tons. The average selling price of principal products improved by 9% in 1995 compared to 1994. This improvement was a result of very favorable product mix as well as price increases in most markets served. Operating results of the segment's California and Ohio operations improved significantly over 1994 results as demand for construction related products increased. In addition, the benefits of streamlining management at the end of 1994, as described below, were more fully realized in 1995. Net sales and operating profit improved in 1994 on a 3% increase in tonnage shipped and a 5% increase in average sales price per ton compared to 1993 levels. The largest tonnage gains were in frac sand sold in the oil and gas service markets and specialty bulk and strip sand sold in the construction materials and recreational markets. Frac sand sales were especially strong in the fourth quarter of 1994 with the acquisition described above. Glass and pulverized sand sales in 1994 were comparable to 1993, while foundry sand sales improved during the second half of 1994. Customers in the glass sand market operated at reduced production capacities throughout most of 1994. Reduced operating costs and a higher utilization of production capacity in the fourth quarter also added to 1994 operating profit. Steps to streamline the segment's management processes were implemented during the fourth quarter of 1994 which reduced overhead costs and accelerated productivity gains. Certain overlapping support functions were consolidated in Cleveland, Ohio, while responsibility for operating decisions was moved to the production sites. -18- 19 Expenditures for property and equipment of $2,360,000 in 1995 compared to $4,622,000 in 1993 and $2,055,000 in 1993. In 1994, $3,204,000 of the expenditures relate to property and equipment included in the acquisition of assets described above. Depreciation and amortization expense of $2,550,000 in 1995, which reflects a full year of the acquisition at the end of 1994, compared to $2,149,000 in 1994 and $2,055,000 in 1993. IRON ORE - Net sales, royalties and management fees totaled $30,445,000 in 1995, compared to $54,656,000 and $23,634,000 in 1994 and 1993, respectively. Operating profit was $5,829,000 in 1995, compared to $6,866,000 in 1994 and $4,031,000 in 1993. Income before taxes was $5,814,000 in 1995, compared to $6,524,000 in 1994 and $3,405,000 in 1993. The Company's proportionate share of Eveleth Mines interest expense declined to $55,000 in 1995, compared to $360,000 in 1994 and $630,000 in 1993, as a result of reductions in Eveleth's debt which was fully paid in the second quarter of 1995. The Eveleth Mines Agreements ("Agreements") require Eveleth to operate at full capacity with the owners sharing fixed and variable costs, as defined, in proportion to their respective interest. Under the Agreements, the Company has a life-of-mine take-or-pay annual obligation for approximately 1,100,000 tons of iron ore pellet production. The Agreements were amended effective January 1, 1991 through December 31, 1996 ("1991 Amendment") to provide, among other things, that Eveleth may be operated at less than full capacity, allow each owner to take iron ore pellet production at more or less than its ownership interest and require each owner to fund its adjusted ownership share of firm contractual cash commitments ("fixed costs") and variable costs based on pellet tonnage taken. The Company's share of Eveleth's annual pellet production is 775,000 tons through 1996. However, the Company is obligated under the take-or-pay provisions of the Agreements to fund its share of fixed costs whether or not it takes its full share of production. The Company cannot predict if the Agreements will be modified again. Unlike the other owners of Eveleth, who are in the business of producing steel, the Company must sell its share of pellets. The Company sells approximately half of its pellets to other Eveleth owners under long-term sales agreements, while the remainder must be sold on the spot market. In 1992, based on Eveleth's high costs, depressed pellet sale prices and the Company's inability to sell any pellets on the spot market in 1992 and 1991, a $14,000,000 take-or-pay liability was recorded for the Company's share of Eveleth's fixed costs under the take-or-pay provisions of the Agreements. This action anticipated that there would be no gain or loss on the sale of the pellets. The take-or-pay liability was intended to be credited to cost of sales ratably over the period of 1993 through 1996. This liability has been credited to cost of sales as follows: $3,500,000 in 1995, $2,300,000 in 1994 and $3,500,000 in 1993. The Company expects to credit the remaining $4,700,000 liability to cost of sales in 1996. Eveleth Mines produced nearly 5,300,000 tons of iron ore pellets in 1995, compared to 5,000,000 tons in 1994 and 3,100,000 tons in 1993. In 1995, the Company sold just above its full contractual allotment of 775,000 tons of iron ore pellets in a market motivated by strong demand from the steel industry. The decline in sales volume in 1995 was partially offset by an 18% increase in the average selling price per ton. Selling prices increased in 1995 for both long-term contract and spot market customers. The Company's iron ore pellet sales and related cost of sales and tons sold are further described in Note F to the consolidated financial statements. -19- 20 Revenues and operating profit increased in 1994, compared to 1993, with strong sales to the steel industry. In 1994, one of Eveleth's owner's elected not to take its full take-or-pay share of Eveleth's iron ore pellets and instead paid its share of fixed costs. The Company elected to take and sell approximately 1,139,000 of this owner's tons for which the Company had to pay only variable costs. This additional tonnage increased gross profit on pellet sales by approximately $4,000,000 in 1994. Due to the unusual availability of low cost pellets in 1994, the planned $3,500,000 take-or-pay credit was reduced to $2,300,000 in 1994. The improvement in 1994 was partially offset by a 10% decline in the average selling price per ton. Spot market selling prices increased in 1994, while prices declined for long-term contract customers. Increased production, resulting in higher royalties, and reduced costs also contributed to the improvements in 1994. Under separate agreements with the Eveleth owners, the Company was paid management fees for its role as Eveleth Mines manager. Net management fees were $1,164,000 in 1995, $864,000 in 1994 and $1,150,000 in 1993. Depreciation and amortization expense was $1,005,000 in 1995, compared to $886,000 and $1,086,000 in 1994 and 1993, respectively. There were no expenditures for properties and equipment in 1995 or 1993. Capital expenditures in 1994 related to equipment purchased and leased back to Eveleth Mines for use in the mining process. The Company notified the other owners of Eveleth Mines at the end of 1995 of its decision not to renew its contract as manager and employer of Eveleth Mines beyond the current expiration date of December 31, 1996. In recent years, the interests of the other owners have differed and have made it increasingly difficult for the Company to adequately represent all owners as manager. The Company presently intends to continue as an owner of Eveleth and to receive its contractual allotment of iron ore pellets for resale. All owners have presently claimed their share of Eveleth production for 1996. Therefore, the Company's 1996 sales volume for its Iron Ore segment is anticipated to be comparable to the 1995 level. After 1996 the Agreements may be terminated by the owners on eleven months notice; or the owners may choose to share costs pro rata or on the basis of temporary arrangements that were used following expansion of the Eveleth facilities prior to 1981 ("rollback"). These arrangements are different than the cost sharing arrangements followed under the 1991 Amendment. In 1996, one of the other Eveleth owners gave notice of rollback, which is being contested by the Company. The owners continue to discuss what the potential cost sharing structure, operation and ownership of Eveleth Mines could be after 1996. However, no agreements have been reached regarding modification of the Agreements or potential restructuring of the ownership of Eveleth Mines. Until an agreement has been reached, it is not possible to predict how these events may affect the Company. REFRACTORIES & MINERALS - Net sales of $36,844,000 in 1995 were 7% less than 1994 sales of $39,502,000. Net sales in 1994 were 10% greater than sales of $35,756,000 in 1993. Operating profit was $24,000 in 1995, compared to $1,074,000 and $2,809,000 in 1994 and 1993, respectively. Operating profit in 1995 includes a $613,000 loss on the shutdown and consolidation of manufacturing facilities for the segment's hot top product line. A loss before taxes of $189,000 in 1995 compared to income before taxes of $952,000 and $2,608,000 in 1994 and 1993, respectively. Interest expense of $213,000 in 1995 compared to $195,000 in 1994 and $201,000 in 1993. In the third quarter of 1995 the Company made a change in the management of this business segment. As a result of this change, all product lines are under review to determine if they can meet the established strategic goals of this segment and the Company. Net sales and operating profit for this business segment, which did not meet management's expectations in 1995, are discussed by product line in the paragraphs that follow. -20- 21 Although sales of metallurgical treatment products declined by 5% in 1995, operating profit, prior to selling, general and administrative expenses, improved by more than 80% compared to 1994. Stronger cost controls and diversification of this product line contributed to the improvement in 1995. Strong demand for this product line and escalation in the price of aluminum, a key component in several products, resulted in a 24% increase in 1994 metallurgical treatment sales, compared to 1993. Operating profit, prior to selling, general and administrative expenses, declined by 20% compared to 1993. The Company's Warren, Ohio facility, which manufactures metallurgical treatment products, incurred higher production, maintenance and nonrecurring inventory costs in 1994 as it operated near full capacity. As anticipated, ingot hot top product sales declined by 7% in 1995, compared to 1994. Operating profit, prior to selling, general and administrative expenses and the loss on consolidation of facilities described above, declined by 20% in 1995. The Company is one of the few remaining ingot product suppliers in a declining market, as steel producers continue to shift to the continuous casting process. In addition to the decline in volume, raw material cost increases also affected profitability of this product line in 1995. Manufacturing efficiencies will continue to be evaluated in 1996 to determine if further action is warranted or if the segment's hot top facilities can be utilized to manufacture other products. Sales of ingot hot top products increased 2% in 1994, while operating profit, prior to selling, general and administrative expenses, declined by 11% compared to 1993. Refractory shapes and tundish coatings product sales declined by 6% in 1995, compared to 1994. Operating profit, prior to selling, general and administrative expenses, also declined to a break-even level in 1995. The Company continued to encounter stiff market competition in both product lines. Uncertainties in Mexico also impacted tundish coating sales and significant variable cost increases were incurred in the manufacture of refractory shape products in 1995. In 1994, refractory shapes and tundish coatings product sales increased by 3%, compared to 1993. Operating profit for both product lines, prior to selling, general and administrative expenses, was comparable to 1993. Intense competition prevented the Company from making anticipated market entry into the tundish coatings and refractory shapes sector of the steel industry in 1994. Fluorspar net sales and operating profit declined by over $900,000 and $166,000, respectively, in 1994, compared to 1993, as the Company exited the fluorspar business. Selling, general and administrative expenses and research and development costs declined by 3% in 1995, compared to 1994. These similar costs increased by almost 10% in 1994, compared to 1993, with the Company's effort to increase market share, customer base and product diversification. Expenditures for property and equipment were $938,000 in 1995, compared to $1,225,000 in 1994 and $1,202,000 in 1993. Depreciation and amortization expense was $2,004,000 in 1995, compared to $1,913,000 in 1994 and $1,657,000 in 1993. The increase in depreciation in 1995 and 1994, compared to 1993, relates to equipment placed in service for the application of tundish coatings at the beginning of 1994. -21- 22 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------- REPORT OF INDEPENDENT AUDITORS Board of Directors Oglebay Norton Company We have audited the accompanying consolidated balance sheet of Oglebay Norton Company and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Oglebay Norton Company and subsidiaries at December 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Cleveland, Ohio February 29, 1996 -22- 23 RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS Management is responsible for the financial and operating information contained in the Annual Report, including the consolidated financial staements covered by the Report of Independent Auditors. These statements were prepared in conformity with generally accepted accounting principles and include amounts based on estimates and judgments of management. The Company seeks to assure the integrity and objectivity of the data in the financial statements through a system of internal controls. These controls are designed to provide reasonable assurance that assets are safeguarded and transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements. Independent auditors, Ernst & Young LLP, are engaged to render an independent opinion on the Company's financial statements. Their opinion, which appears herein, is based on an audit of the Company's consolidated financial statements in accordance with generally accepted auditing standards which includes a review of internal controls to the extent Ernst & Young LLP deems necessary. The Company's Board of Directors, through its Audit Committee which is composed of four outside directors, reviews the Company's financial reports and accounting and auditing practices. It meets periodically with the independent auditors and management in this connection. -23- 24 CONSOLIDATED BALANCE SHEET OGLEBAY NORTON COMPANY AND SUBSIDIARIES
December 31 1995 1994 -------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 22,660,436 $ 17,720,419 Marketable securities 3,555,550 5,772,650 Accounts receivable, less reserves for doubtful accounts of $511,000 in 1995 and $440,000 in 1994 27,681,413 32,035,408 Inventories Raw materials and finished products 3,456,857 3,846,094 Operating supplies 2,311,529 2,261,747 ------------ ------------ 5,768,386 6,107,841 Deferred income taxes 3,033,075 2,213,246 Prepaid insurance and other expenses 1,775,417 2,237,793 ------------ ------------ TOTAL CURRENT ASSETS 64,474,277 66,087,357 INVESTMENTS 10,519,241 10,563,835 PROPERTIES AND EQUIPMENT Marine Transportation 222,613,738 234,867,117 Iron Ore 1,305,258 1,305,258 Refractories & Minerals 18,224,745 17,330,863 Industrial Sands 53,801,897 52,467,527 Other 8,883,339 8,872,597 ------------ ------------ 304,828,977 314,843,362 Less allowances for depreciation and amortization 153,235,099 156,886,610 ------------ ------------ 151,593,878 157,956,752 PREPAID PENSION COSTS AND OTHER ASSETS 27,668,477 26,205,459 ------------ ------------ TOTAL ASSETS $254,255,873 $260,813,403 ============ ============
-24- 25
December 31 1995 1994 -------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 8,476,450 $ 8,476,450 Accounts payable 6,546,012 4,569,067 Payrolls and other accrued compensation 7,283,660 7,057,615 Accrued expenses 14,219,918 16,013,208 Income taxes 1,311,849 2,270,951 Iron Ore impairment obligations 4,699,996 6,312,600 ------------ ------------ TOTAL CURRENT LIABILITIES 42,537,885 44,699,891 LONG-TERM DEBT, less current portion 43,641,125 57,117,575 POSTRETIREMENT BENEFITS OBLIGATION 31,559,405 31,071,022 OTHER LONG-TERM LIABILITIES 19,922,291 24,019,063 DEFERRED INCOME TAXES 20,329,760 19,152,931 STOCKHOLDERS' EQUITY Preferred Stock, without par value - authorized 5,000,000 shares; none issued -0- -0- Common Stock, par value $1.00 per share - authorized 10,000,000 shares; issued 3,626,666 shares 3,626,666 3,626,666 Additional capital 9,078,611 9,035,841 Unrealized gains 1,468,476 2,278,273 Retained earnings 113,566,048 101,173,484 ------------ ------------ 127,739,801 116,114,264 Treasury Stock, at cost - 1,160,790 and 1,143,540 shares at respective dates (29,806,819) (29,217,318) Unallocated Employee Stock Ownership Plan shares ( 1,667,575) ( 2,144,025) ------------ ------------ 96,265,407 84,752,921 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $254,255,873 $260,813,403 ============ ============
See notes to consolidated financial statements. -25- 26 CONSOLIDATED STATEMENT OF OPERATIONS OGLEBAY NORTON COMPANY AND SUBSIDIARIES
Year Ended December 31 1995 1994 1993 ------------------------------------------------------------------- REVENUES Net sales and operating revenues $189,375,595 $202,754,512 $159,736,471 Sales commissions, royalties and management fees 4,221,272 4,597,517 3,709,687 ------------ ------------ ------------ 193,596,867 207,352,029 163,446,158 COSTS AND EXPENSES Cost of goods sold and operating expenses 155,726,578 172,453,991 133,335,772 General, administrative and selling expenses 15,949,541 16,295,454 15,854,049 Reserve for doubtful accounts 320,305 301,652 1,892,419 Loss on shutdown and consolidation of facilities 612,656 ------------ ------------ ------------ 172,609,080 189,051,097 151,082,240 ------------ ------------ ------------ INCOME FROM OPERATIONS 20,987,787 18,300,932 12,363,918 Gain on sale of assets 4,681,213 8,093,805 4,116,906 Interest, dividends and other income 2,281,115 1,387,443 1,184,208 Interest expense (4,359,804) (5,992,018) (7,554,878) Other expense (3,080,321) (1,668,327) ( 556,119) ------------ ------------ ------------ INCOME BEFORE TAXES 20,509,990 20,121,835 9,554,035 INCOME TAXES Current 4,376,000 4,825,000 233,000 Deferred 773,000 406,000 2,059,000 ------------ ------------ ------------ 5,149,000 5,231,000 2,292,000 ------------ ------------ ------------ NET INCOME $ 15,360,990 $ 14,890,835 $ 7,262,035 ============ ============ ============ NET INCOME PER SHARE $ 6.21 $ 5.98 $ 2.89 ============ ============ ============
See notes to consolidated financial statements. -26- 27 CONSOLIDATED STATEMENT OF CASH FLOWS OGLEBAY NORTON COMPANY AND SUBSIDIARIES
Year Ended December 31 1995 1994 1993 ------------------------------------------------------------------- OPERATING ACTIVITIES Net income $15,360,990 $ 14,890,835 $ 7,262,035 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,437,878 13,603,183 13,431,957 Deferred income taxes 773,000 170,517 447,200 Gain on sale of assets ( 4,681,213) ( 8,094,005) ( 4,116,906) Loss on shutdown and consolidation of facilities 612,656 Prepaid pension costs and other assets ( 2,450,918) ( 1,919,098) ( 2,147,271) Decrease (increase) in accounts receivable 4,353,995 ( 3,744,102) ( 8,981,222) Decrease (increase) in inventories 339,455 396,592 ( 902,301) Increase (decrease) in accounts payable 1,976,945 533,938 ( 492,806) Other operating activities ( 4,783,180) 3,751,390 856,188 ----------- ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 25,939,608 19,589,250 5,356,874 INVESTING ACTIVITIES Purchase of properties and equipment ( 6,905,775) ( 5,609,103) ( 2,921,175) Proceeds from sale of assets 6,552,562 11,849,592 8,656,012 Iron Ore and other investments ( 3,086,411) ( 2,885,830) ( 2,829,389) Acquisition of assets ( 8,000,000) ----------- ------------ ------------ NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES ( 3,439,624) ( 4,645,341) 2,905,448 FINANCING ACTIVITIES Payments on long-term debt (13,976,450) (24,189,664) (18,152,879) Additional long-term debt 8,750,000 10,000,000 Payments of dividends ( 2,968,426) ( 2,491,266) ( 2,009,481) Purchase of Treasury Stock ( 615,091) ( 535,624) ( 189,240) ----------- ------------ ------------ NET CASH USED FOR FINANCING ACTIVITIES (17,559,967) (18,466,554) (10,351,600) ----------- ------------ ------------ Increase (decrease) in cash and cash equivalents 4,940,017 ( 3,522,645) ( 2,089,278) Cash and cash equivalents, January 1 17,720,419 21,243,064 23,332,342 ----------- ------------ ------------ CASH AND CASH EQUIVALENTS, DECEMBER 31 $22,660,436 $ 17,720,419 $ 21,243,064 =========== ============ ============
See notes to consolidated financial statements. -27- 28 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY OGLEBAY NORTON COMPANY AND SUBSIDIARIES
COMMON COMMON ADDITIONAL UNREALIZED RETAINED STOCK IN STOCK CAPITAL GAINS EARNINGS TREASURY --------- ----------- ------------ -------- -------- Balance, January 1, 1993 3,626,666 8,946,541 83,521,361 (28,492,454) Net Income 7,262,035 Dividends $.80 per share ( 2,009,481) Tax benefit of unallocated shares in ESOP 41,502 Purchase of Treasury Stock ( 189,240) Allocated ESOP shares ---------- ---------- ------------ ------------ Balance, December 31, 1993 3,626,666 8,988,043 88,773,915 (28,681,694) Adjustment for change in accounting $2,971,792 Net Income 14,890,835 Dividends $1.00 per share ( 2,491,266) Change in unrealized gains (693,519) Tax benefit of unallocated shares in ESOP 47,798 Purchase of Treasury Stock ( 535,624) Allocated ESOP shares ---------- ---------- ---------- ------------ ------------ Balance, December 31, 1994 3,626,666 9,035,841 2,278,273 101,173,484 (29,217,318) Net Income 15,360,990 Dividends $1.20 per share ( 2,968,426) Change in unrealized gains (809,797) Tax benefit of unallocated shares in ESOP 35,360 Issuance of Treasury Stock for director stock plan 7,410 25,590 Purchase of Treasury Stock ( 615,091) Allocated ESOP shares ---------- ---------- ---------- ------------ ------------ Balance, December 31, 1995 $3,626,666 $9,078,611 $1,468,476 $113,566,048 $(29,806,819) ========== ========== ========== ============ ============ UNALLOCATED EMPLOYEE STOCK TOTAL OWNERSHIP STOCKHOLDERS' PLAN SHARES EQUITY -------------------------------- Balance, January 1, 1993 (3,736,568) 63,865,546 Net Income 7,262,035 Dividends $.80 per share ( 2,009,481) Tax benefit of unallocated shares in ESOP 41,502 Purchase of Treasury Stock ( 189,240) Allocated ESOP shares 902,878 902,878 ----------- ------------ Balance, December 31, 1993 (2,833,690) 69,873,240 Adjustment for change in accounting 2,971,792 Net Income 14,890,835 Dividends $1.00 per share ( 2,491,266) Change in unrealized gains ( 693,519) Tax benefit of unallocated shares in ESOP 47,798 Purchase of Treasury Stock ( 535,624) Allocated ESOP shares 689,665 689,665 ----------- ------------ Balance, December 31, 1994 (2,144,025) 84,752,921 Net Income 15,360,990 Dividends $1.20 per share ( 2,968,426) Change in unrealized gains ( 809,797) Tax benefit of unallocated shares in ESOP 35,360 Issuance of Treasury Stock for director stock plan 33,000 Purchase of Treasury Stock ( 615,091) Allocated ESOP shares 476,450 476,450 ----------- ------------ Balance, December 31, 1995 $(1,667,575) $ 96,265,407 =========== ============
See notes to consolidated financial statements. -28- 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OGLEBAY NORTON COMPANY AND SUBSIDIARIES December 31, 1995, 1994 and 1993 NOTE A - ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. Intercompany transactions and accounts have been eliminated upon consolidation. CASH EQUIVALENTS: The Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents. Cash equivalents are stated at cost which approximates market value. INVENTORIES: Inventories are stated at the lower of average cost (first-in, first-out method) or market. MARKETABLE SECURITIES: Available-for-sale securities are carried at fair value, based on quoted market prices, and are reported as a current asset in the consolidated balance sheet. Realized gains and losses on the sale of such securities are based on average cost. INVESTMENTS: The Company holds a long-term investment in Eveleth Mines ("Eveleth") through a 15 percent interest in Eveleth Taconite Company and a 20.5 percent interest in Eveleth Expansion Company. PROPERTIES AND EQUIPMENT: Properties and equipment are carried at cost. DEPRECIATION AND AMORTIZATION: The Company provides depreciation on the straight-line method over the assets estimated useful lives which range from 3 to 50 years. The amortization of advances to Eveleth equivalent to the Company's share of depreciation of the underlying plant is computed on the units-of-production method adjusted for levels of operation. Such adjustment provides for a minimum of 75% of depreciation calculated on a straight-line basis. -29- 30 NOTE A - ACCOUNTING POLICIES - (CONTINUED) NET INCOME PER SHARE: Net income per share of Common Stock is based on the average number of shares outstanding. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the Company's consolidated financial statements and accompanying notes. Actual results could differ from those estimates and assumptions. ACCOUNTING CHANGES: In 1993, the Financial Accounting Standards Board issued Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities". The Company adopted the provisions of the standard, effective January 1, 1994, and increased stockholders' equity by $2,971,792 (net of income taxes of $1,531,000) to reflect unrealized gains on available-for-sale securities. In 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed Of". The new standard requires that, under certain circumstances, long-lived assets be reviewed for impairment and any applicable loss be recognized. This statement, which must be adopted by the Company in 1996, is not expected to have a material effect on the consolidated financial statements. Certain amounts in prior years have been reclassified to conform with the 1995 consolidated financial statement presentation. NOTE B - MARKETABLE SECURITIES The fair value of current available-for-sale securities is $3,555,550 at December 31, 1995 and includes unrealized gains of $2,225,476 based on a cost of $1,330,074. The Company realized gains of $1,630,000 from proceeds of $2,621,000 on the sale of such securities for the year ended December 31, 1995. The fair value of current available-for-sale securities was $5,772,650 at December 31, 1994 and included unrealized gains of $3,451,273 based on a cost of $2,321,377. The Company realized gains of $1,315,000 from proceeds of $2,166,000 on the sale of such securities for the year ended December 31, 1994. -30- 31 NOTE C - STOCKHOLDERS' EQUITY The Company's Preferred Stock is issuable in series and the Board of Directors is authorized to fix the number of shares and designate the terms of each issue. Certain shares of Series C $10.00 Preferred Stock and Common Stock have been reserved for issuance upon exercise of Rights under a Stockholders' Rights Plan. The Rights should not interfere with any merger or other business combination approved by the Board of Directors, because the Board, at its option, may redeem the Rights at their redemption price. The Company has a noncontributory Employee Stock Ownership Plan (ESOP) and Trust for the benefit of certain salaried employees. In prior years, the Trust financed the purchase of 250,000 shares of the Company's Common Stock. The Company has guaranteed the financing and is obligated to make annual contributions to enable the Trust to repay the loan, including interest. The Company, as guarantor, has recorded the loan as long-term debt and a like amount as a reduction of stockholders' equity. NOTE D - INCOME TAXES Total income tax expense differs from the tax computed by applying the U.S. federal corporate income tax statutory rate for the following reasons (in thousands):
1995 1994 1993 ------------------------------------------------ Computed income tax expense at statutory rate $ 7,179 $ 6,854 $ 3,248 Tax differences due to: Percentage depletion (1,479) (1,270) (751) State and local income taxes 53 40 ( 22) Other ( 614) ( 393) (183) -------- -------- -------- Total income tax expense $ 5,139 $ 5,231 $ 2,292 ======= ======= =======
The Company made income tax payments of $6,270,000, $3,103,000 and $40,000 during 1995, 1994 and 1993, respectively. The Company received income tax refunds of $32,000, $1,652,000 and $222,000 during those same periods. -31- 32 NOTE D - INCOME TAXES - (CONTINUED) Significant components of the Company's deferred tax liabilities and assets are as follows (in thousands):
December 31 1995 1994 ------------------------------------ Deferred tax liabilities: Tax in excess of book depreciation $(42,039) $(42,204) Pension benefits ( 5,501) ( 4,837) Other ( 4,130) ( 5,134) -------- -------- Total deferred tax liabilities (51,670) (52,175) Deferred tax assets: Asset impairments 10,759 13,582 Postretirement health care and life insurance 10,366 9,993 Coal Act liability 4,726 4,664 Other 8,522 6,996 --------- --------- Total deferred tax assets 34,373 35,235 -------- -------- Net deferred tax liabilities $(17,297) $(16,940) ======== ========
-32- 33 NOTE E - POSTRETIREMENT BENEFITS The Company has a number of noncontributory defined benefit pension plans covering certain employees. The plans provide benefits based on the participants' years of service and compensation or stated amounts for each year of service. The Company's funding policy is to contribute amounts to the plans sufficient to meet the minimum funding required by applicable regulations. A summary of the components of the net periodic pension credit for defined benefit plans follows (in thousands):
1995 1994 1993 ------------------------------------------------------------- Service cost-benefits earned during the period $ 1,373 $ 1,417 $ 1,261 Interest cost on projected benefit obligation 4,823 4,550 4,644 Actual return on plan assets (18,288) 531 (7,558) Net amortization and deferral 10,949 (8,417) ( 575) -------- -------- -------- Net pension credit $(1,143) $(1,919) $(2,228) ======= ======= =======
Assumptions used in the accounting for defined benefit plans were:
1995 1994 1993 ------------------------------------------------- Weighted-average discount rate 7.5% 8% 7.25% Rate of increase in compensation levels 4% 4% 4% Expected long-term rate of return on assets 9% 9% 9.5%
-33- 34 NOTE E - POSTRETIREMENT BENEFITS - (CONTINUED) The following table sets forth the funded status and amounts recognized in the consolidated balance sheet for the Company's defined benefit pension plans (in thousands):
December 31 1995 1994 -------------------------------------------------- Actuarial present value of benefit obligations Vested benefit obligation $(59,589) $(55,736) ======== ======== Accumulated benefit obligation $(63,348) $(59,930) ======== ======== Projected benefit obligation $(68,069) $(63,854) Plan assets at fair value 94,730 80,215 --------- --------- Plan assets in excess of projected benefit obligation 26,661 16,361 Unrecognized net (gain) loss ( 8,125) 1,306 Unrecognized prior service cost 3,895 4,156 Unrecognized initial net assets ( 5,114) ( 6,005) --------- ---------- Prepaid pension costs recognized $ 17,317 $ 15,818 ======== ========
Plan assets consist primarily of debt and equity securities. Defined contribution plans are maintained for certain employees and Company contributions are based on specified percentages of employee contributions, except for the ESOP. The expense for these plans was $932,000, $1,160,000 and $1,434,000 for 1995, 1994 and 1993, respectively. The Company also pays into certain defined benefit multi-employer plans under various union agreements which provide pension and other benefits for various classes of employees. Payments are based upon negotiated contract rates and related expenses totaled $1,827,000, $1,703,000 and $1,348,000 for 1995, 1994 and 1993, respectively. In addition to providing pension benefits, the Company provides health care and life insurance benefits for certain retired employees. Substantially, all of the Company's employees are eligible for these benefits when they reach normal retirement age. The Company's policy is to fund these postretirement benefit costs principally on a cash basis as claims are incurred. -34- 35 NOTE E - POSTRETIREMENT BENEFITS - (CONTINUED) Components of the Company's net periodic postretirement benefits cost are as follows (in thousands):
1995 1994 1993 ------------------------------------------------------------- Service cost $ 519 $ 599 $ 826 Interest cost 1,635 1,730 2,228 Actual return on plan assets (2) -0- -0- Net amortization (621) (552) (13) ------- ------ ------ Net periodic postretirement benefits cost $1,531 $1,777 $3,041 ======= ====== ======
Components of the Company's postretirement benefits obligation are as follows (in thousands):
December 31 1995 1994 -------------------------------------------- Actuarial present value of benefit obligations Retirees $(13,634) $(14,019) Fully eligible active plan participants ( 2,780) ( 2,261) Other active plan participants ( 6,186) ( 7,535) -------- -------- Accumulated postretirement benefits obligation (22,600) (23,815) Plan assets at fair value 137 -0- -------- -------- Accumulated postretirement benefits obligation in excess of plan assets (22,463) (23,815) Unrecognized prior service credit ( 1,927) ( 2,120) Unrecognized net gain ( 7,169) ( 5,136) -------- --------- Postretirement benefits obligation recognized $(31,559) $(31,071) ======== ========
The weighted-average discount rate used in determining the accumulated postretirement benefits obligation was 7.5% and 8% at December 31, 1995 and 1994, respectively. The weighted-average annual assumed rate of increase in the health care cost trend rate for 1996 is 7.25% (8.25% in 1995) for retirees age 65 and over and 9.75% (10.75% in 1995) for retirees under age 65, and both are assumed to decrease gradually to 5.25% in 2000 and 2005, respectively (5.75% in 1995) and remain at that level thereafter. The health care cost -35- 36 NOTE E - POSTRETIREMENT BENEFITS - (CONTINUED) trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed health care cost trend rate by 1% in each year would increase the accumulated postretirement benefits obligation as of December 31, 1995 by approximately $3,157,000 and the aggregate of the service and interest cost components of the net periodic postretirement benefits cost for 1995 by approximately $350,000. In 1992, the Coal Industry Retiree Health Benefit Act was enacted. This legislation requires companies that mine coal or previously mined coal to assume certain health care benefit obligations for retired coal miners and their dependents. Some of these coal miners never worked for the companies or have had no relationship with the companies for decades. Components of the Company's net periodic postretirement benefits cost under the Coal Act, are as follows (in thousands):
1995 1994 1993 --------- -------- ------- Interest cost $1,033 $1,006 $1,270 Actuarial net gain (82) (727) (1,689) ------- ------- ------- Net periodic postretirement benefit cost (credit) $ 951 $ 279 $ (419) ======= ====== ======
The Company's accumulated postretirement benefits obligation, related to retirees and their dependents under the Coal Act, recognized was $13,901,000 and $13,718,000 at December 31, 1995 and 1994, respectively. Other long-term liabilities include $12,951,000 and $13,046,000 in 1995 and 1994, respectively, related to the Company's obligation under the Coal Act. The weighted-average discount rate used in determining the accumulated postretirement benefits obligation was 7% and 7.75% at December 31, 1995 and 1994, respectively. The weighted-average annual assumed rate of increase in the health care cost trend rate for 1996 and 1995 is 6%. Increasing the assumed health care cost trend rate by 1% in each year would increase the accumulated postretirement benefits obligation at December 31, 1995 by approximately $1,881,000 and the interest cost component of the net periodic postretirement benefits cost by approximately $132,000. -36- 37 NOTE F - COMMITMENTS AND CONTINGENCIES The Company leases buildings, equipment and certain vessels in its Marine Transportation fleet. In general, these operating leases are renewable or contain purchase options at the end of the lease term. The purchase price or renewal lease payment is based on the fair market value of the asset at the date of purchase or renewal. Rental expense was $5,139,000, $5,067,000 and $5,162,000 in 1995, 1994 and 1993, respectively. Future minimum payments at December 31, 1995, under noncancelable operating leases, primarily vessel charters, are $4,453,000 in 1996, $4,323,000 in 1997, $4,231,000 in 1998, $1,931,000 in 1999, $666,000 in 2000 and $1,342,000 thereafter. The Eveleth Mines Agreements ("Agreements") require Eveleth to operate at full capacity with the owners sharing fixed and variable costs, as defined, in proportion to their respective interest. Under the Agreements, the Company has a life-of-mine take-or-pay annual obligation for approximately 1,100,000 tons of iron ore pellet production. The Agreements were amended effective January 1, 1991 through December 31, 1996 ("1991 Amendment") to provide that Eveleth may be operated at less than full capacity, allow each owner to take iron ore pellet production at more or less than its ownership interest and require each owner to fund its adjusted ownership share of firm contractual cash commitments ("fixed costs") and variable costs based on pellet tonnage taken. The Company's share of Eveleth's annual pellet production is 775,000 tons through 1996. However, the Company is obligated under the take-or-pay provisions of the Agreements to fund its share of fixed costs whether or not it takes its full share of production. The Company cannot predict if the Agreements will be modified again. The Company sells approximately half of its pellets to other Eveleth owners under long-term sales agreements, while the remainder must be sold on the spot market. In 1992, based on Eveleth's high costs, depressed pellet sales prices and the Company's inability to sell any pellets on the spot market in 1992 and 1991, a $14,000,000 take-or-pay liability was recorded for the Company's share of Eveleth's fixed costs under the take-or-pay provisions of the Agreements. This action anticipated that there would be no gain or loss on the sale of the pellets. The take-or-pay liability was intended to be credited to cost of sales ratably over the period of 1993 through 1996. This liability has been credited to cost of sales as follows: $3,500,000 in 1995, $2,300,000 in 1994 and $3,500,000 in 1993. The Company expects to credit the remaining $4,700,000 to cost of sales in 1996. -37- 38 NOTE F - COMMITMENTS AND CONTINGENCIES - (CONTINUED) The Company's iron ore pellet sales and related cost of sales and tons sold were as follows (in thousands):
1995 1994 1993 ----- ----- ----- Iron ore pellet sales $ 24,892 $ 50,624 $ 20,477 Cost of sales: Cost of sales 26,303 49,266 22,583 Credit through reduction of take-or-pay liability (3,500) (2,300) (3,500) -------- -------- -------- Adjusted cost of sales 22,803 46,966 19,083 ------- ------- ------- Gross profit on pellet sales $ 2,089 $ 3,658 $ 1,394 ======== ======== ======== Tons sold 800 1,918 700
In 1994, one of Eveleth's owner's elected not to take its full take-or-pay share of Eveleth's pellets and instead paid its share of defined fixed costs. The Company elected to take and sell approximately 1,139,000 of this owner's tons for which the Company had to pay only variable costs. This additional tonnage increased gross profit on pellet sales by approximately $4,000,000 in 1994. Due to the unusual availability of low cost pellets in 1994, the planned $3,500,000 take-or-pay credit was reduced to $2,300,000 in 1994. Under separate agreements with the Eveleth owners, the Company was paid management fees for its role as Eveleth Mines manager. Net management fees were $1,164,000 in 1995, $864,000 in 1994 and $1,150,000 in 1993. Accrued expenses include $4,939,000 and $5,897,000 payable in 1995 and 1994, respectively, for Eveleth's working capital requirements. The Company is subject to various environmental laws and regulations imposed by federal, state and local governments. Also, in the normal course of business, the Company is involved in various pending or threatened legal actions. The Company cannot reasonably estimate future costs, if any, related to these matters. However, costs incurred to comply with environmental regulations and to settle litigation have not been significant in 1995 and prior years. Although it is possible that the Company's future operating results could be affected by future costs of environmental compliance or litigation, it is management's belief that such costs will not have a material adverse effect on the Company's consolidated financial position. -38- 39 NOTE G - LONG-TERM DEBT Long-term debt is as follows (in thousands):
December 31 1995 1994 ----------------------------------------- Title XI Ship Financing Bonds Fixed rate, 5.3% $13,700 $16,200 Term Loan, Variable rate, 6.31% 36,750 47,250 Guaranteed ESOP Loans Variable rate, 5.40%, and 617 794 Fixed rate, 8.88%, due in equal quarterly installments through May 31, 1999 1,050 1,350 ------- ------ 52,117 65,594 Less current portion 8,476 8,476 ------- ------ $43,461 $57,118 ======= =======
The Title XI Ship Financing Bonds relate to a first preferred ship mortgage on the M/V Columbia Star and are guaranteed by the U.S. Government under the Federal Ship Financing Program. The Bonds require semiannual sinking fund payments of $1,250,000 through 2000, with a final payment of $1,200,000 in 2001. The Title XI Bonds and a vessel charter agreement may require the Company, under certain conditions, to make deposits to a reserve fund, maintain specified levels of stockholders' equity or obtain prior written consent from the U.S. Department of Transportation for certain designated financial transactions. No approval was required through 1995 and the Company does not anticipate any such consent will be required in the future. Under an amended and restated loan agreement with various banks the Company has mandatory semiannual payments on the Term Loan of $2,750,000 through June 30, 2001, with a final payment of $6,500,000 on December 31, 2001. The Company elected to pay an additional $5,000,000 on the Term Loan at the end of 1995. The Company has a $40,000,000 Revolving Credit facility available under the loan agreement, of which $15,000,000 is only available for acquisitions. The variable interest rate premium on both the Revolving Credit and Term Loan fluctuates based upon the Company's funded debt to total capital and interest coverage ratios. The Revolving Credit terminates on December 31, 1997, subject to annual renewals under certain conditions to December 31, 2001. The Company did not use the Revolving Credit facility in 1995 or 1994 and has $40,000,000 of borrowing available at December 31, 1995. -39- 40 NOTE G - LONG-TERM DEBT - (CONTINUED) The Title XI Ship Financing Bonds and the Term Loan are secured by first preferred ship mortgages on five of the Company's vessels with a net book value of $103,000,000. The fair value of long-term debt approximates the total liability recorded at December 31, 1995. The Company's debt agreements, as amended, contain various covenants with the most restrictive covenant requiring the Company to maintain specified levels of tangible net worth during each year. The Company's tangible net worth was $89,246,000 at December 31, 1995, compared to a minimum specified level of $72,126,000. Long-term debt maturities are $8,476,000 in 1996 through 1998, $8,238,000 in 1999, $8,000,000 in 2000 and $10,450,000 in 2001. The Company made interest payments of $4,399,000, $5,345,000 and $7,973,000 during 1995, 1994 and 1993, respectively. NOTE H - DISPOSITIONS In 1995, the Company sold two Marine Transportation vessels no longer in service and undeveloped clay properties in Tennessee resulting in pretax gains of $2,324,000 and $520,000, respectively. Also included in 1995 is a $613,000 pretax loss on the shutdown and consolidation of certain facilities of the Company's Refractories & Minerals business segment. In 1994, the Company sold its Ceredo coal dock business resulting in a $6,518,000 pretax gain. The Company sold certain assets of its Licking River Terminal coal dock in 1993, which resulted in a $1,326,000 pretax gain. Also in 1993, the Company sold for cash its unsecured bankruptcy claim against LTV Steel Company, Inc. resulting in a $2,653,000 pretax gain after the retirement of $4,412,000 of long-term receivables. NOTE I - INDUSTRY SEGMENTS AND MAJOR CUSTOMERS Oglebay Norton Company is a Cleveland-based firm serving the steel, ceramic, chemical, glass, electric utility, construction, and oil and gas well service industries. The Company provides Great Lakes marine transportation, industrial minerals, refractory and metallurgical treatment products used in steel making and related industries. The Company's operations are organized in four business units: OGLEBAY NORTON MARINE TRANSPORTATION The Marine Transportation unit operates a fleet of twelve self-unloading vessels shipping bulk commodities, primarily iron ore, coal and limestone, on the Great Lakes. -40- 41 NOTE I - INDUSTRY SEGMENTS AND MAJOR CUSTOMERS - (CONTINUED) OGLEBAY NORTON INDUSTRIAL SANDS, INC. This unit consists of five operations, providing silica sands to a wide range of markets. Two facilities in Ohio supply the glass, paint, ceramic, recreation and foundry industries. Facilities in Brady, Texas, and Riverside, California, primarily serve the oil and gas well, filtration and construction sectors. A facility located near San Juan Capistrano, California, serves principally the construction and recreation industries. OGLEBAY NORTON IRON ORE Oglebay Norton Company is an equity partner in the iron ore mining and pelletizing operations of Eveleth Mines, located near Eveleth, Minnesota, on the Mesabi Range. The Company is contractually entitled to an allotment of pellet production, which is sold to steelmakers. The Company is presently the contractual employer and manager of Eveleth. This relationship will terminate at the end of 1996. OGLEBAY NORTON REFRACTORIES & MINERALS, INC. The Refractories & Minerals units produces precast refractory shapes, tundish coatings, ingot hot tops and metallurgical treatment products for the casting and refining of molten steel. Accounts receivable of $17,665,912 at December 31, 1995 are due from companies in steel related industries. Credit is extended based on an evaluation of a customer's financial condition, and generally collateral is not required. Credit losses have, historically, been insignificant. Sales to two major steel producers exceeded 10% of consolidated net sales and operating revenues and are summarized as follows (in thousands):
Marine Iron Refractories & Customer Transportation Ore Minerals Other Total - -------- ---------------- ------- -------------- ------- ------ 1995 A $19,280 $ 8,158 $ 440 $ -0- $27,878 B 17,041 -0- 6,456 -0- 23,497 ------- ------- ------- --------- -------- $36,321 $ 8,158 $ 6,896 $ -0- $51,375 ======= ======= ======= ======== ======= 1994 A $16,868 $ 6,948 $ 555 $ 20 $24,391 B 17,207 -0- 7,122 700 25,029 ------- ------- ------- -------- -------- $34,075 $ 6,948 $ 7,677 $ 720 $49,420 ======= ======= ======= ======= ======= 1993 A $14,523 $ 8,935 $ 752 $ 68 $24,278 B 19,384 -0- 6,698 1,513 27,595 ------- ------- ------- -------- -------- $33,907 $ 8,935 $ 7,450 $ 1,581 $51,873 ======= ======= ======= ======= =======
-41- 42 INDUSTRY SEGMENT DATA OGLEBAY NORTON COMPANY AND SUBSIDIARIES (In Thousands)
Marine Iron Transportation Ore -------------- ---- 1995 Identifiable assets $ 132,455 $ 16,667 Depreciation and amortization expense 8,658 1,005 Expenditures for properties and equipment 3,125 Total revenues $ 85,657 $ 30,445 Operating profit (loss) $ 12,246 $ 5,829 Gain on sale of assets 2,325 40 Company's proportionate share of Eveleth Mines interest expense (55) Interest expense (3,422) --------- -------- Income (loss) before taxes $ 11,149 $ 5,814 ======== ======= 1994 Identifiable assets $ 140,661 $ 19,354 Depreciation and amortization expense 8,359 886 Expenditures for properties and equipment 1,397 1,192 Total revenues $ 82,153 $ 54,656 Operating profit (loss) $ 12,467 $ 6,866 Gain on sale of assets 86 18 Company's proportionate share of Eveleth Mines interest expense (360) Interest expense (4,283) --------- -------- Income before taxes $ 8,270 $ 6,524 ========= ======= 1993 Identifiable assets $ 146,918 $ 16,022 Depreciation and amortization expense 8,157 1,086 Expenditures for properties and equipment 364 Total revenues $ 73,143 $ 23,634 Operating profit (loss) $ 10,791 $ 4,031 Gain on sale of assets 10 4 Company's proportionate share of Eveleth Mines interest expense (630) Interest expense (5,309) ---------- -------- Income (loss) before taxes $ 5,492 $ 3,405 ========== ========
- --------------- [FN] 1 Consists primarily of cash and cash equivalents, marketable securities and prepaid pension costs. -42- 43
Refractories Industrial Total Corporate & Minerals Sands Segments and Other Consolidated - ------------ --------- -------- --------- ------------ $ 18,934 $ 33,964 $202,020 $52,236 (1) $254,256 2,004 2,550 14,217 221 14,438 938 2,360 6,423 483 6,906 $ 36,844 $ 40,552 $193,498 $99 $193,597 $ 24(3) $ 7,175 $ 25,274 $(5,030)(2) $ 20,244 157 2,522 2,159 4,681 ( 55) ( 55) ( 213) (524) (4,159) ( 201) (4,360) -------- --------- -------- ------- -------- $( 189) $ 6,808 $ 23,582 $(3,072) $ 20,510 ======== ========= ======== ======= ======== $ 20,256 $ 34,048 $214,319 $ 46,494(1) $260,813 1,913 2,149 13,307 296 13,603 1,225 4,622 8,436 377 8,813 $ 39,502 $ 28,818 $205,129 $ 2,223 $207,352 $ 1,074 $ 2,834 $ 23,241 $ (4,861)(2) $ 18,380 73 59 236 7,858 8,094 ( 360) ( 360) ( 195) (4,478) (1,514) (5,992) -------- --------- -------- -------- -------- $ 952 $ 2,893 $ 18,639 $ 1,483 $ 20,122 ======== ========= ======== ======== ======== $ 21,807 $ 25,682 $210,429 $ 49,288(1) $259,717 1,657 2,055 12,955 477 13,432 1,202 943 2,509 412 2,921 $ 35,756 $ 26,606 $159,139 $ 4,307 $163,446 $ 2,809 $ 1,827 $ 19,458 $ (5,836)(2) $ 13,622 19 33 4,084 4,117 ( 630) ( 630) ( 201) ( 5,510) (2,045) (7,555) -------- --------- -------- -------- -------- $ 2,608 $ 1,846 $ 13,351 $ (3,797) $ 9,554 ======== ========= ======== ========= ========
2 Includes other operations, certain corporate expenses, net of dividends, interest and other income, and in 1993 a $1,700,000 reserve against doubtful coal customer accounts receivable and $652,000 of debt refinancing costs. 3 Includes a $613,000 loss on shutdown and consolidation of facilities. -43- 44 NOTE J - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) Unaudited quarterly results of operations for the years ended December 31, 1995 and 1994 are summarized as follows (in thousands, except per share amounts):
Net Net Sales and Income Three Months Operating Gross Net Income (Loss) Ended Revenues Profit (Loss) Per Share - -------------- ---------- ------- ------------- --------- 1995 December 31 $51,622 $8,830 $4,039 $1.64 September 30 56,236 10,407 6,810 2.75 June 30 56,433 10,142 4,375 1.77 March 31 25,085 4,270 137 .06 1994 December 31 $61,352 $8,828 $4,119 $1.65 September 30 57,499 9,701 4,077 1.64 June 30 53,487 7,525 6,838 2.75 March 31 30,417 4,247 (143) (.06)
Per share amounts are based on the average number of shares outstanding during each quarter. The sum of 1995 net income (loss) per share amounts for the four quarters does not equal the annual per share amount as a result of Common Stock purchases for treasury by the Company. First quarter net income for 1995 increased $343,000 ($.14 per share) related to the sale of undeveloped clay properties in Tennessee. Third quarter net income for 1995 increased $1,534,000 ($.62 per share) related to the sale of two of the Company's vessels no longer in service. Fourth quarter net income for 1995 increased $557,000 ($.23 per share) due to the sale of securities and other assets. The fourth quarter of 1995 also included a $405,000 ($.16 per share) reduction of net income related to a loss on the shutdown and consolidation of certain facilities of the Company's Refractories & Minerals business segment. The 1995 gains on sale of assets and shutdown loss are disclosed in Notes B and H. Second quarter net income for 1994 increased $4,302,000 ($1.73 per share) related to the sale of the Company's Ceredo coal dock business, as disclosed in Note H. Fourth quarter net income for 1994 decreased $594,000 ($.24 per share) related to a reduction of the Iron Ore take-or-pay credit, as disclosed in Note F, and $403,000 ($.16 per share) on the write-off of unamortized financing costs associated with the Company's former loan agreement. -44- 45 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ------------------------------------------------ ACCOUNTING AND FINANCIAL DISCLOSURE ----------------------------------- None PART III Information in this Part III required by Item 10 ("Directors and Officers of the Registrant"), Items 11 and 13 ("Executive Compensation" and "Certain Relationships and Related Transactions") and Item 12 ("Security Ownership of Certain Beneficial Owners and Management") is incorporated herein by reference to the information contained in the Registrant's definitive Proxy Statement for its 1996 Annual Meeting of Stockholders under the captions "Nominees for Board of Directors" on page 4, "Ownership of Voting Securities" on pages 5 through 7 and "Compensation of Executive Officers" on pages 7 through 10, respectively. A definitive Proxy Statement will be filed with the Securities and Exchange Commission on or before March 27, 1996. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND ------------------------------------------- REPORTS ON FORM 8-K ------------------- (a)(1) LIST OF FINANCIAL STATEMENTS: The response to this portion of Item 14 is submitted as a separate section of this Annual Report on Form 10-K. (a)(2) LIST OF FINANCIAL STATEMENT SCHEDULES: The response to this portion of Item 14 is submitted as a separate section of this Annual Report on Form 10-K. (a)(3) LIST OF EXHIBITS: See the Exhibit Index beginning at sequential page 50 of this Annual Report on Form 10-K. (b) REPORTS ON FORM 8-K: The Registrant did not file any reports on Form 8-K in 1995. (c) EXHIBITS: The response to this portion of Item 14 is submitted as a separate section of this Annual Report on Form 10-K beginning at sequential page 50. (d) FINANCIAL STATEMENT SCHEDULES: None -45- 46 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned thereunto duly authorized. OGLEBAY NORTON COMPANY /S/ Richard J. Kessler ---------------------------- Richard J. Kessler Vice President-Finance and Development March 27, 1996 47 Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the Principal Executive Officer, the Principal Financial Officer, the Principal Accounting Officer and a majority of the Directors of the Registrant on March 27, 1996. Chairman of the Board, President /S/ R. Thomas Green, Jr. and Chief Executive Officer ----------------------- Officer and Director; Principal R. Thomas Green, Jr. Executive Officer /S/ Richard J. Kessler Vice President-Finance and - ------------------------ Development; Principal Financial Richard J. Kessler and Accounting Officer /S/ Brent D. Baird - ------------------------ Brent D. Baird Director /S/ Malvin E. Bank - ------------------------ Malvin E. Bank Director /S/ William G. Bares - ------------------------ William G. Bares Director /S/ Albert C. Bersticker - ------------------------ Albert C. Bersticker Director /S/ John J. Dwyer - ------------------------ John J. Dwyer Director /S/ Ralph D. Ketchum - ------------------------ Ralph D. Ketchum Director /S/ Renold D. Thompson Vice Chairman of the Board and - ------------------------ Renold D. Thompson Director /S/ John D. Weil - ------------------------ John D. Weil Director On December 10, 1995, Mr. Fred R. White, Jr., Vice Chairman Emeritus and Director of the Board of Directors died. 48 ANNUAL REPORT ON FORM 10-K ITEM 14(a) (1) AND (2), AND 14(c) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES CERTAIN EXHIBITS YEAR ENDED DECEMBER 31, 1995 OGLEBAY NORTON COMPANY AND SUBSIDIARIES CLEVELAND, OHIO 49 FORM 10-K ITEM 14(a) (1) AND (2) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES OGLEBAY NORTON COMPANY AND SUBSIDIARIES The following consolidated financial statements of the Registrant and its subsidiaries are included in Item 8: Consolidated Balance Sheet - December 31, 1995 and 1994 Consolidated Statement of Operations - Years Ended December 31, 1995, 1994 and 1993 Consolidated Statement of Cash Flows - Years Ended December 31, 1995, 1994 and 1993 Consolidated Statement of Stockholders' Equity - Years Ended December 31, 1995, 1994 and 1993 Notes to Consolidated Financial Statements All schedules for which provision is made in the applicable regulation of the Securities and Exchange Commission have been omitted for the reason that they are not required or are not applicable, or the required information is shown in the consolidated financial statements or notes thereto. 50 Item 14 (a) 3 EXHIBIT INDEX
SEC Location or Exhibit No. Description Sequential Page ----------- ----------- --------------- 3 (a) Restated Certificate of Incorporated by reference in Incorporation Exhibit 3(a) in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 (b) By-Laws 54 4 (a) The Registrant is a party to instruments, copies of which will be furnished to the Securities and Exchange Commission upon request, defining the rights of holders of its long-term debt identified in Note G to the Consolidated Financial Statements
51 (b) Form of Rights Agreement Incorporated by reference in Exhibit 4(b) in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 10 (a) Form of Incorporated by reference in Supplemental Exhibit 10(a) in the Pension Agreements with Registrant's Annual Report on selected Form 10-K for the year ended former officers December 31, 1993 (b) Agreement with Brent D. Incorporated by reference in Baird Exhibit 10(b) in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 (c) Trust Incorporated by reference in Agreement for Exhibit 10(c) in the Oglebay Norton Company Registrant's Annual Report on Incentive Savings Plan and Form 10-K for the year ended Trust (January 1, 1991 December 31, 1993 Restatement) (d) Form of Change-in-Control Incorporated by reference in Agreements with seven Exhibit 10(d) in the Executive Officers Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 (d)(1) Amendment to form of Incorporated by reference in Change-in-Control Agreements Exhibit 10(d)(1) in the Regis- with four Executive Officers trant's Annual Report on Form 10-K for the year ended December 31, 1994
52 (d)(2) Form of Change-in- Incorporated by reference in Control Agreements with three Exhibit 10(d)(2) in the Executive Officers Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 (e) Form of Right of First Incorporated by reference in Refusal Agreements with seven Exhibit 10(e) in the Directors Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 (f) Agreement with John D. Incorporated by reference in Weil Exhibit 10(f) in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 (g) Employment Agreement with Chairman, President and Chief Executive Officer 73 (h) Oglebay Norton Company 90 Long-Term Incentive Plan 11 Statement re: Not Applicable Computation of Per Share Earnings 12 Statement re: Not Applicable Computations of Ratios
53 13 1995 Annual Report to Not Applicable Stockholders 18 Letter re: Change in Not Applicable Accounting Principles 21 Subsidiaries of the Registrant 114 22 Published Report Regarding Not Applicable Matters Submitted to Vote of Security Holders 23 Consent of 115 Independent Auditors 24 Power of Attorney Not Applicable 27 Financial Data 116 Schedule 28 Information from reports Not Applicable furnished to state insurance regulatory authorities
EX-3.B 2 EXHIBIT 3(B) 1 Exhibit 3.B BY-LAWS OF OGLEBAY NORTON COMPANY As of April 26, 1995 2
TABLE OF CONTENTS Section Page Number Subject Number - -------------------------------------------------------------------------- OFFICES 1. Offices ................................................... 1 SEAL 2. Seal ...................................................... 1 STOCKHOLDERS' MEETINGS 3. Place of meetings ......................................... 1 4. Annual meeting ............................................ 2 5. Quorum .................................................... 2 6. Voting .................................................... 2 7. Notice of annual meeting .................................. 3 8. Stockholders' list ........................................ 3 9. Special meetings .......................................... 3 10. Business transacted at special meetings ................... 3 11. Notice of special meetings ................................ 3 DIRECTORS 12. Number; election; qualifications; term of office .......... 4 13. Powers and authorities .................................... 4 VACANCIES 14. Vacancies ................................................. 4 MEETINGS OF THE BOARD 15. Regular meetings .......................................... 5 16. Special meetings .......................................... 5 17. Quorum .................................................... 5
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Section Page Number Subject Number - -------------------------------------------------------------------------- ACTION WITHOUT A MEETING 18. Action by directors without a meeting ................... 5 COMMITTEES 19. Executive Committee ..................................... 5 20. Other committees ........................................ 6 COMPENSATION OF DIRECTORS AND COMMITTEE MEMBERS 21. Compensation of directors ............................... 6 22. Compensation of committee members ....................... 6 OFFICERS 23. Election and designation of officers; compensation; term of office; vacancies ......................... 7 CHAIRMAN OF THE BOARD 24. Chairman of the Board .................................. 7 VICE CHAIRMAN OF THE BOARD 24a. Vice Chairman of the Board ............................. 7 PRESIDENT 25. President .............................................. 7 EXECUTIVE VICE PRESIDENTS 26. Executive Vice Presidents .............................. 8
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Section Page Number Subject Number - -------------------------------------------------------------------------- SENIOR VICE PRESIDENTS 27. Senior Vice Presidents ................................. 8 VICE PRESIDENTS 28. Vice Presidents ........................................ 8 SECRETARY 29. Secretary .............................................. 8 TREASURER 30. Treasurer .............................................. 8 OTHER OFFICERS 31. Other officers ......................................... 9 EXECUTION OF DOCUMENTS 32. Execution of documents ................................. 9 AUTHORITY TO VOTE SECURITIES 33. Authority to vote securities ........................... 9 DELEGATION OF AUTHORITY AND DUTIES 34. Delegation of authority and duties of officers ......... 9
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Section Page Number Subject Number - -------------------------------------------------------------------------- STOCK CERTIFICATES 35. Stock certificates ..................................... 9 TRANSFERS OF STOCK 36. Transfers of stock ...................................... 10 LOST, STOLEN OR DESTROYED CERTIFICATES 37. Lost, stolen or destroyed certificates .................. 10 TRANSFER AGENT AND REGISTRAR 38. Transfer agent and registrar ............................ 10 RECORD DATES 39. Record dates ............................................ 11 REGISTERED STOCKHOLDERS 40. Right of corporation to recognize only record stockholders ...................................... 11 INSPECTION OF BOOKS 41. Inspection of books ..................................... 11 FISCAL YEAR 42. Fiscal year ............................................. 12
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Section Page Number Subject Number - -------------------------------------------------------------------------- DIVIDENDS 43. Dividends ............................................... 12 DIRECTORS' ANNUAL STATEMENT 44. Directors' annual statement ............................. 12 NOTICES 45. Notices ................................................. 12 AMENDMENTS 46. Amendments .............................................. 13
7 BY-LAWS OF OGLEBAY NORTON COMPANY (Revised as of April 26, 1995) OFFICES 1. The principal office shall be in the City of Wilmington, County of New Castle, State of Delaware, and the name of the resident agent in charge thereof is The Corporation Trust Company. The corporation shall also have an office in the City of Cleveland, Ohio, and it may also have such other offices at such other places, either within or without the State of Delaware, as the Board of Directors may from time to time designate or the business of the corporation may require. The books of the corporation, other than the duplicate stock ledger, which shall at all times be kept at the principal office of the corporation in Delaware, shall be kept at such one or more of the offices of the corporation or at such other place or places, either within or without the State of Delaware, as the directors may from time to time determine. SEAL 2. The corporate seal shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Delaware". Said seal may be used by causing it, or a facsimile thereof, to be impressed or affixed or reproduced or otherwise. STOCKHOLDERS' MEETINGS 3. The annual meeting of the stockholders shall be held in the office of the corporation in the City of Cleveland, Ohio. All other meetings of the stockholders may be held at such place within or without the State of Delaware as shall be designated in the call for such meeting. 8 4. The annual meeting of the stockholders shall be held on the last Wednesday in April in each year at such time and place as shall be designated in the call for such meeting and at such meeting the stockholders shall elect, by ballot, a Board of Directors and transact such other business as may properly be brought before the meeting. 5. The holders of a majority of the capital stock of the corporation present in person or represented by proxy shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by law, by the Certificate of Incorporation, or by these By-Laws; provided, however, that no action required by law, by the Certificate of Incorporation, or by these By-Laws to be authorized or taken by a designated proportion of the capital stock of the corporation may be authorized or taken by a lesser proportion; and provided, further, that, if a quorum shall not be present or represented at any meeting of the stockholders, the holders of a majority of the voting shares present or represented thereat shall have power to adjourn the meeting, from time to time, without notice other than announcement at the meeting, until the requisite amount of voting stock shall be present or represented. At such adjourned meeting, at which the requisite amount of voting stock shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. 6. At each meeting of the stockholders, every stockholder having the right to vote shall be entitled to vote in person or by proxy appointed by an instrument in writing subscribed by such stockholder, and bearing a date not more than three years prior to said meeting, unless said instrument provides for a longer period. On all matters, except the election of directors, each stockholder shall have one vote for each share of stock having voting power registered in his name on the books of the corporation. At all elections of directors, each stockholder shall be entitled to as many votes as shall equal the number of his shares of stock multiplied by the number of directors to be elected, and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or any two or more of them, as he may see fit. In the event that no record date shall be fixed for the determination of stockholders entitled to vote at any election of directors, in accordance with the provisions of Section 39 of these By-Laws, no share of stock shall be voted at such election which shall have been transferred on the books of the corporation within twenty (20) days next preceding such election. The vote for directors and, on the demand of any - 2 - 9 stockholder, the vote upon any question before the meeting shall be by ballot. All elections shall be had and all questions decided by a plurality vote, except as otherwise required by law or by these By-Laws. 7. Written notice of the annual meeting, stating the time, place and object thereof, shall be mailed to each stockholder entitled to vote thereat at such address as appears on the stock book of the corporation at least ten (10) days prior to the meeting. 8. A complete list of the stockholders entitled to vote at the ensuing election of directors, arranged in alphabetical order and showing the address of each and the number of shares registered in the name of each, shall be prepared by the Secretary and open to the examination of any stockholder during ordinary business hours for a period of at least ten (10) days before every such election, either at a place within the city, town, or village where the election is to be held and which place shall be specified in the notice of the meeting, or , if not so specified, at the place where said meeting is to be held, and the list shall be produced and kept at the time and place of election during the whole time thereof, and subject to the inspection of any stockholder who may be present. 9. Special meetings of the stockholders for any purpose or purposes, unless otherwise prescribed by law, may be called by the Chairman of the Board or by the President, and shall be called by the President or Secretary at the request, in writing, of a majority of the Board of Directors, or at the request, in writing, of stockholders owning not less than one-third in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. 10. Business transacted at all special meetings shall be confined to the objects stated in the call. 11. Written notice of any special meeting of the stockholders stating the time, place and object thereof, shall be mailed, postage prepaid, at least ten (10) days before such meeting, to each stockholder entitled to vote thereat, at such address as appears on the books of the corporation. - 3 - 10 DIRECTORS 12. The property and business of this corporation shall be managed by its Board of Directors, consisting of such number of members, not less, however, than three, as the stockholders may determine at any annual or special meeting called for the purpose of electing directors at which a quorum is present, by the affirmative vote of a majority of the capital stock which is represented at the meeting and entitled to vote on such proposal. Unless so determined by the stockholders, the number shall be ten, of which three shall be directors of the class whose term expires in 1996 and every three years thereafter, four shall be directors of the class whose term expires in 1997 and every three years thereafter, and three shall be directors of the class whose term expires in 1998 and every three years thereafter. Whenever the stockholders shall have so determined the number, such number shall be deemed the authorized number of directors until the same shall be changed by vote of the stockholders as aforesaid or by amendment of these By-Laws. Directors need not be stockholders. They shall be elected at the annual meeting of the stockholders, and each director shall be elected to serve until his successor shall be elected and shall qualify. 13. In addition to the powers and authorities by these By-Laws expressly conferred upon them, the directors may exercise all such powers of the corporation and do all such lawful acts and things as are not by law, by the Certificate of Incorporation, or by these By-Laws directed or required to be exercised or done by the stockholders. VACANCIES 14. If the office of any director or directors becomes vacant by reason of death, resignation, retirement, disqualification, removal from office or otherwise, the remaining directors, though less than a quorum, shall choose a successor or successors who shall hold office until the next annual meeting of stockholders at which the class or classes of directors in which the vacancy or vacancies occur shall be elected and until a successor or successors shall have been duly elected and qualified, unless sooner displaced. - 4 - 11 MEETINGS OF THE BOARD 15. Regular meetings of the Board shall be held on the last Wednesday of February, April, June, August, October and December at such hour and place and upon such notice, if any, as the Board shall determine. In the event the last Wednesday is a holiday or for any reason is deemed by the Board to be inappropriate, then the meeting shall be held on such alternate date as may be determined by the Board. 16. Special meetings of the Board may be called by the Chairman of the Board or by the President on one (1) day's notice to each director, either personally or by mail, telegram, or cablegram. Special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of two (2) directors. 17. At all meetings of the Board, a majority of the directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by law, by the Certificate of Incorporation, or by these By-Laws. ACTION WITHOUT A MEETING 18. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if, prior to such action, a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee. COMMITTEES 19. The Board of Directors shall by resolution appoint an Executive Committee consisting of not less than four or more than eight directors of the corporation, as the Board shall determine, together with such alternates as the Board may deem advisable. The Executive Committee shall meet on the last Wednesday of each calendar month in which the Board of Directors does not meet at such place or places as they may from time to time determine, and shall have and may exercise all of the powers of the Board of - 5 - 12 Directors when the Board is not in session. Unless otherwise ordered by the Board of Directors, the Executive Committee may prescribe its own rules for calling and holding meetings and for its own procedures and may act at a meeting by a majority of its members or without a meeting by written consent of all of its members. The Executive Committee shall cause the Secretary to keep full and complete records of all meetings and actions, which shall be open to inspection by any director. Each member of the Executive Committee and each alternate shall hold office during the pleasure of the Board of Directors. 20. The Board of Directors may by resolution appoint one or more additional committees, each committee to consist of two or more directors of the corporation and to have such authority and to perform such duties as may from time to time be determined by the Board of Directors. COMPENSATION OF DIRECTORS AND COMMITTEE MEMBERS 21. Each member of the Board of this Company, with the exception of salaried officers or employees of the Company or its subsidiaries, shall be paid a quarterly retainer of $3,000 for each quarter in which such director serves, payable in February, May, August and November, covering the quarter commencing with the month in which such payment is payable and, in addition, shall receive 100 shares of the common stock of the Company on the date upon which the Board of Directors holds its meeting next succeeding the annual meeting of the Company's stockholders. In addition, each member of the Board of Directors and each "honorary" member of the Board of Directors, with the exception of salaried officers or employees of the Company or its subsidiaries, shall receive for such member's attendance at each meeting of the Board of Directors a fee of $750, plus travel expenses incurred by such member in attending any meeting or in pursuance of any activity on behalf of the Company or its subsidiaries. 22. Each member of the Executive Committee, the Compensation and Organization Committee, the Audit Committee and such other committee as may from time to time be appointed by the Board of Directors, with the exception of salaried officers or employees of the Company or its subsidiaries, shall receive for his attendance at each such committee meeting a fee of $750, plus travel expenses incurred by him in attending any meeting or in pursuance of any activity on behalf of the Company or its subsidiaries. - 6 - 13 OFFICERS 23. The Board of Directors shall elect a Chairman of the Board, a President, one or more Vice Presidents, any one or more of whom may be designated Executive Vice Presidents and any one or more of whom may be designated Senior Vice Presidents, a Treasurer and a Secretary. The Board of Directors may elect such other officers as in its discretion it deems necessary. The Chairman of the Board, the Vice Chairman of the Board, and the President shall be directors, but no other one of the officers need be a director. Any two, but not more than two, of such offices may be held by the same person. The compensation of all of the officers of the corporation shall be fixed by the Board of Directors. Officers elected by the Board of Directors shall hold office until their successors are chosen and qualified in their stead. Any officer elected by the Board of Directors shall hold office during the pleasure of the Board. If the office of any officer or officers becomes vacant, the vacancy may be filled by the Board of Directors. CHAIRMAN OF THE BOARD 24. The Chairman of the Board shall preside at all meetings of the Board of Directors and shall have such other authority and perform such other duties as may be determined by the Board of Directors. VICE CHAIRMAN OF THE BOARD 24a. The Vice Chairman of the Board shall have such authority as may be determined by the Board of Directors and perform such duties as may be assigned to him by the Chairman of the Board. PRESIDENT 25. The President shall preside at all meetings of the stockholders. Subject to directions of the Board of Directors, he shall have general executive authority and responsibility with respect to the business and affairs of the corporation, and shall have such other authority and perform such other duties as may be determined by the Board of Directors. - 7 - 14 EXECUTIVE VICE PRESIDENTS 26. The Executive Vice Presidents shall exercise all of the authority and perform all of the duties of the President in case of the absence or disability of the latter or when circumstances prevent the latter from acting, and shall have such other authority and perform such other duties as may be determined by the Board of Directors. SENIOR VICE PRESIDENTS 27. The Senior Vice Presidents shall exercise all of the authority and perform all of the duties of the President in case of the absence or disability of both the President and the Executive Vice Presidents or when circumstances prevent both the President and the Executive Vice Presidents from acting, and shall have such other authority and perform such other duties as may be determined by the Board of Directors. VICE PRESIDENTS 28. The Vice Presidents severally shall have such authority and perform such duties as may be determined by the Board of Directors or by the President. SECRETARY 29. The Secretary shall record all of the proceedings of the meetings of the stockholders, the Board of Directors, and the Executive Committee. He shall keep such other books as may be required by the Board of Directors, shall give notices of meetings of the stockholders, the Board, and the Executive Committee required by law, by these By-Laws, or otherwise, shall attest, on behalf of the corporation, all documents requiring the attestation of the Secretary, and shall have such authority and perform such other duties as may be determined by the Board of Directors. TREASURER 30. The Treasurer shall receive and have in charge all money, bills, notes, bonds, stocks in other corporations, and similar property belonging to the corporation, and shall hold and dispose of the - 8 - 15 same as may be ordered by the Board of Directors. He shall keep accurate financial accounts and hold the same open for the inspection and examination of the directors and shall have such authority and perform such other duties as may be determined by the Board of Directors. OTHER OFFICERS 31. The Assistant Secretaries and the Assistant Treasurers, if any, and any other officers whom the Board of Directors may elect shall, respectively, have such authority and perform such duties as may be determined by the Board of Directors. EXECUTION OF DOCUMENTS 32. Except as otherwise provided in these By-Laws, or by resolutions of the Board, all documents evidencing conveyances by or contracts or other obligations of the corporation shall be signed by the President, the Executive Vice President, a Senior Vice President, or a Vice President, and attested by the Secretary or an Assistant Secretary. AUTHORITY TO VOTE SECURITIES 33. The Chairman of the Board, the President, the Executive Vice President, and the Senior Vice Presidents are each authorized to vote, appoint proxies, and execute consents, waivers, and releases with respect to securities of other corporations owned by the corporation. DELEGATION OF AUTHORITY AND DUTIES 34. The Board of Directors is authorized to delegate the authority and duties of any officer to any other officer and generally to control the action of the officers and to require the performance of duties in addition to those mentioned in these By-Laws. STOCK CERTIFICATES 35. Every holder of stock in the corporation shall be entitled to one or more certificates, signed by the Chairman of the Board, the President, the Executive Vice President, or a Senior Vice - 9 - 16 President and by the Secretary, the Treasurer, an Assistant Secretary, or an Assistant Treasurer, certifying the number of shares owned by him in the corporation. When such a certificate is countersigned by an incorporated transfer agent or registrar, the signature of any of said officers of the corporation may be facsimile, engraved, stamped, or printed. Although any officer of the corporation whose manual or facsimile signature is affixed to such a certificate ceases to be such officer before the certificate is delivered, such certificate nevertheless shall be effective in all respects when delivered. TRANSFERS OF STOCK 36. Stock of the corporation shall be transferable upon the books of the corporation by the holders thereof, in person, or by a duly authorized attorney, and new certificates shall be issued upon surrender and cancellation of certificates for a like number of shares, with duly executed assignment or power of transfer endorsed thereon or attached thereto, and with such proof of the authenticity of the signatures to such assignment or power of transfer as the corporation or its agents may reasonably require. LOST, STOLEN OR DESTROYED CERTIFICATES 37. The corporation may issue a new stock certificate in the place of any certificate alleged to have been lost, stolen or destroyed. The Board of Directors may require the owner, or his legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against it on account of the issuance of such new certificate. A new certificate may be issued without requiring any bond when, in the judgment of the directors, it is proper to do so. TRANSFER AGENT AND REGISTRAR 38. The Board of Directors may, from time to time, appoint, or revoke the appointment of, transfer agents and registrars and may require all stock certificates to bear the signatures of such transfer agents and registrars or any of them. - 10 - 17 RECORD DATES 39. The Board of Directors may fix in advance a date, not exceeding fifty (50) days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining the consent of stockholders for any purpose, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, or to give such consent, and in such case only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books of the corporation after any such record date fixed as aforesaid. REGISTERED STOCKHOLDERS 40. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and, accordingly, shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of Delaware. INSPECTION OF BOOKS 41. The directors shall determine, from time to time, whether and if allowed, when and under what conditions and regulations, the accounts and books of the corporation (except such as may by statute be specifically open to inspection), or any of them, shall be open to the inspection of the stockholders, and the stockholders' rights in this respect are and shall be restricted and limited accordingly. - 11 - 18 FISCAL YEAR 42. The fiscal year shall begin on the first day of January in each year. DIVIDENDS 43. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of the capital stock. Before payment of any dividend, there may be set aside, out of any funds of the corporation available for dividends, such sum or sums as the directors, from time to time, in their absolute discretion, think proper, as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation; and the directors may abolish any such reserve in the manner in which it was created. DIRECTORS' ANNUAL STATEMENT 44. The Board of Directors shall present at each annual meeting, and when called for by vote of the stockholders, at any special meeting of the stockholders, a full and clear statement of the business and condition of the corporation. NOTICES 45. Whenever, under the provisions of these By-Laws, notice is required to be given to any director, officer or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, by depositing the same in the post office or letter box in a postpaid, sealed wrapper, addressed to such stockholder, officer or director at such address as appears on the books of the corporation; and such notice shall be deemed to be given at the time when the same shall be thus mailed. Any stockholder, director or officer may waive any notice required to be given by law, by the Certificate of Incorporation, or by - 12 - 19 these By-Laws and shall be deemed to have waived notice of any meeting which he shall attend without protesting, prior to or at the commencement of such meeting, the lack, of proper notice thereof. AMENDMENTS 46. The By-Laws of the corporation may be amended, or new By-Laws may be adopted, by the Board of Directors by the affirmative vote of a majority of the directors present at any meeting of the Board at which there is a quorum present and acting; or they may be amended, or new By-Laws may be adopted, by the stockholders, at any regular or special meeting thereof, by the affirmative vote of a majority of the stock issued and outstanding and entitled to vote thereat, if notice of the proposed amendment be contained in the notice of the meeting, or without a meeting by the written consent of a majority of the stock issued and outstanding. No amendment of these By-Laws with respect to the time or place for the election of directors shall be made within sixty (60) days next before the day on which such election is to be held. In case of any amendment of these By-Laws with respect to such time or place, notice thereof shall be given to each stockholder, in the manner provided in Section 45 of these By-Laws, at least twenty (20) days before the first election following such amendment is held. - 13 - EX-10.G 3 EXHIBIT 10(G) 1 Exhibit 10.G EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT is entered into this 28th day of June, 1995, to be effective as of the 1st day of April, 1995, by and between OGLEBAY NORTON COMPANY, a Delaware corporation (the "Company"), and R. THOMAS GREEN, JR., ("Employee"). W I T N E S S E T H: WHEREAS, Employee has for many years served the Company in many different capacities, each with increasing responsibility and increasing importance to the Company, and has fully, ably, and responsibly discharged the duties of his various positions with the Company; and WHEREAS, the Board of Directors of the Company (the "Board") has determined that it would be in the best interests of the Company and its shareholders to have the Company enter into this Employment Agreement with Employee to secure his services as Chairman of the Board, President and Chief Executive Officer of the Company; NOW, THEREFORE, the Company and Employee agree as follows; 1. EMPLOYMENT, CONTRACT PERIOD. ---------------------------- (a) During the period specified in Paragraph 1(b), the Company shall employ Employee, and Employee shall serve the Company, as Chairman of the Board, President and Chief Executive Officer of the Company on the terms and subject to the conditions set forth herein. 2 (b) The term of Employee's employment hereunder shall commence on April 1, 1995 (the "Effective Date") and, subject to prior termination as provided in Paragraph 6 hereof, shall continue for three years until March 31, 1998. The term of Employee's employment hereunder is sometimes hereinafter referred to as the "Contract Period". 2. POSITION, DUTIES, RESPONSIBILITIES. At all times during the Contract Period, Employee shall: (a) Hold the position and have the duties and responsibilities of Chairman of the Board, President and Chief Executive Officer of the Company as those duties and responsibilities have been understood by the executive officers of the Company and by its Board through the Effective Date and as those duties and responsibilities may be defined and extended, from time to time after the Effective Date, by the Board with Employee's consent; (b) Adhere to and implement the policies and directives promulgated, from time to time, by the Board; (c) Observe all company policies applicable to executive officers of the Company; (d) Devote his business time, energy, and talent to the business of and to the furtherance of the purposes and objectives of the Company to generally the same extent as he has so devoted his business time, energy, and talent as an officer of the Company before the Effective Date, and neither directly 2 3 nor indirectly render any business, commercial, or professional services to any other person, firm, or organization for compensation without the prior approval of the Board; and (e) Serve as a Director of the Company and as a member of any Board committees determined by the Board, upon the same terms and conditions as any other employee of the Company who also serves as a Director. Nothing in this Agreement shall preclude Employee from devoting reasonable periods of time to charitable and community activities, to serve as a director on the boards of other companies, with the concurrence of the Compensation and Organization Committee of the Board of Directors, or the management of his investment assets provided such activities do not materially interfere with the performance by Employee of his duties hereunder. 3. COMPENSATION. For services actually rendered by Employee on behalf of the Company during the Contract Period as contemplated by this Agreement the Company shall pay to Employee: (a) a base salary at the rate of $276,600 per year or such greater amount as the Board, upon recommendation of the Compensation and Organization Committee, may determine; and, (b) the variable pay portion of Employee's compensation under the Company's Pay for Performance Plan ("PMP"), or such substitute plan or arrangement as the Company may adopt during the Contract Period. The base salary shall be paid to Employee in the same increments and on the same schedule each month as in effect for Employee's base salary as an officer of the Company 3 4 on the Effective Date. Employee shall not be entitled to any base salary during any period when he is receiving long-term disability benefits under the Disability Benefit Arrangement provided to Employee by the Company. 4. VACATION. Employee will be entitled to such periods of vacation and sick leave allowance each year as are determined by the Company's vacation and sick leave policy for executive officers as in effect on the Effective Date or as may be increased from time to time thereafter. Neither vacation time nor sick leave allowance will be accumulated from year to year. 5. OTHER COMPANY PLANS, BENEFITS, AND PERQUISITES. ----------------------------------------------- (a) Employee shall be entitled to participate in the Company's Pension Plan for Salaried Employees; the unfunded excess benefit plan maintained in conjunction with the Salaried Plan; the Salary Continuation Arrangement; the Disability Benefit Arrangement; his Executive Life Program Agreement with the Company; the post-retirement Death Benefit Arrangement; the Incentive Savings Plan; the 1983 Stock Equivalent Plan; and every other employee benefit plan not specifically referred to in this Agreement that is generally available to executive officers of the Company at any time during the Contract Period. Employee's participation in and benefits under any such plan shall be on the terms and subject to the conditions specified in the governing document of the particular plan which terms and conditions shall not be 4 5 amended during the Contract Period unless the benefits to Employee are at least as great under the plan as amended (or under a substitute plan or arrangement) as were the benefits under the plan as in effect on the Effective Date. The Company will also provide Employee with such perquisites as the Company has customarily provided to its top executive officers. (b) The Company shall maintain a membership in The Pepper Pike Club for Employee. Employee shall solely use the membership for business purposes of the Company, including such use as is consistent with the customary duties and responsibilities of persons holding the office of Chairman of the Board, President and Chief Executive Officer of a publicly traded corporation. 6. TERMINATION. ----------- (a) Employee's employment hereunder will terminate without further notice upon the death of Employee. (b) The Company may terminate Employee's employment hereunder effective immediately upon giving notice of such termination; (i) For "cause," (A) If Employee commits an act of fraud, embezzlement, theft, or other similar criminal act constituting a felony and involving the Company's business or (B) if Employee breaches his agreement with respect to the time to be devoted to the business of the Company set forth in Paragraph 2(d) hereof and fails to cure such breach within 30 days of receipt of written notice of such breach from the Board; or 5 6 (ii) Upon disability, if Employee is prevented from performing his duties hereunder by reason of physical or mental incapacity for a period of 180 consecutive days. (c) Employee may terminate his employment hereunder effective immediately upon giving of notice of such termination: (i) Without cause at any time; or (ii) For "good reason," which, for purposes of this Agreement shall mean the occurrence of any of the following: (A) Any reduction in aggregate direct remuneration, position, responsibilities, or duties contemplated for Employee under this Agreement or any material reduction in the aggregate of employee benefits, perquisites, or fringe benefits contemplated for Employee under this Agreement; or (B) Any good faith determination by Employee that, as a result of fundamental differences of opinion between Employee and the Board as to the goals of the Company, Employee is unable to carry out the responsibilities and duties contemplated for Employee under this Agreement. 6 7 7. SEVERANCE COMPENSATION. ---------------------- (a) If Employee's employment is terminated before March 31, 1998 by the Company without cause or by Employee for good reason, then, except as provided in Paragraph 7(b), 7(c), 7(d), or 7(e), the Company shall pay and provide to Employee the following compensation and benefits through March 31, 1998: (i) Base salary at the highest monthly rate payable to Employee during the Contract Period, to be paid at the times provided in Paragraph 3 hereof; (ii) Coverage under the Company's medical insurance plan, short-term disability plan, and long-term disability plan, Salary Continuation Arrangement, Disability Benefit Arrangement, Executive Life Program Agreement, and post-retirement Death Benefit Arrangement, each as in effect on the Effective Date (or, if terminated and replaced by a successor plan or benefit arrangement, as so provided in such successor plan or benefit arrangement or, if subsequently amended to increase benefits to Employee or his dependents, as so amended) and each as if Employee's employment had continued through March 31, 1998; and (iii) Coverage under the Company's unfunded excess benefit plan as if Employee's employment had continued through March 31, 1998. 7 8 If any of the benefits to be provided under one or more of the plans, agreements, or arrangements specified above cannot be provided through that plan, agreement, or arrangement to Employee following termination of his employment, the Company shall directly provide the full equivalent of such benefits to Employee. (b) If Employee becomes entitled to compensation and benefits pursuant to Paragraph 7(a) he shall use reasonable efforts to seek other employment, provided, however, that he shall not be required to accept a position of less importance and dignity or of substantially different character than that of Chairman of the Board, President and Chief Executive Officer of the Company or a position that would require Employee to engage in activity in violation of Employee's agreement with respect to noncompetition set forth in Paragraph 9 hereof nor shall he be required to accept a position outside the Greater Cleveland area. The Company's obligations under items (i) and (ii) of Paragraph 7(a) will be offset by payments and benefits received by Employee from another employer to the following extent: (i) The Company's obligation to pay any particular installment of base salary following Employee's termination will be offset, on a dollar for dollar basis, by any cash compensation received by Employee from another employer before the date on which the installment of base salary is payable by the Company. 8 9 (ii) To the extent that Employee is provided medical, dental, short-term or long-term disability income protection, or life insurance benefits by another employer during any period, the Company will be relieved to such extent of its obligation to provide such benefits to Employee. For example, if a new employer provides Employee with a medical benefits plan that pays $500.00 for a specific claim made by Employee and the Company's medical insurance plan would have paid $750.00 for that claim, then the Company will be obligated to pay Employee $250.00 with respect to that claim. Other than as provided in this Paragraph 7(b) Employee shall have no duty to mitigate the amount of any payment or benefit provided for in this Agreement. (c) If during any period in which Employee is entitled to payments or benefits from the Company under Paragraph 7(a); (i) Employee materially and willfully breaches his agreement with respect to confidential information set forth in Paragraph 8 hereof and such breach directly causes the Company substantial and demonstrable damage; or (ii) Employee materially and willfully breaches his agreement with respect to non-competition set forth in Paragraph 9 hereof and such breach directly causes the Company substantial and demonstrable damage; 9 10 then the Company will be relieved of its obligations under Paragraph 7(a) hereof as of the first day of the month immediately following the date of such material breach. (d) If Employee dies during any period in which he is entitled to payments or benefits from the Company under Paragraph 7(a), the Company will be relieved of its obligations under item (i) of Paragraph 7(a) and the Company will provide to Employee's beneficiaries and dependents death benefits and continuing medical and dental benefits to the same extent as if Employee's death had occurred while Employee was in the active employ of the Company. (e) If at any time Employee becomes entitled to payments or benefits from the Company both under Paragraph 7(a) of this Agreement and under any provision of the "Change-in-Control Agreement" (defined and amended by Paragraph 10, below), Employee shall be entitled to receive, with respect to each category of payments and benefits, all of the payments and benefits provided for under that agreement (either this Agreement or the Change-in-Control Agreement) that is most favorable to Employee but Employee shall not be entitled to a double payment with respect to any calendar period. 8. CONFIDENTIAL INFORMATION. Employee agrees that he will not, during the term of the Agreement or at any time thereafter, either directly or indirectly, disclose or make known to any other person, firm, or corporation any confidential information, trade secret, or proprietary information of the Company that Employee may 10 11 acquire in the performance of Employee's duties hereunder. Upon the termination of Employee's employment with the Company, Employee agrees to deliver forthwith to the Company any and all literature, documents, correspondence, and other materials and records furnished to or acquired by Employee during the course of such employment. 9. NONCOMPETITION. During any period in which Employee is receiving base salary under this Agreement (whether during the Contract Period pursuant to Paragraph 3 or following termination pursuant to Paragraph 7(a)) and for a period of one year after Employee last receives base salary under this Agreement, Employee shall not act as a proprietor, investor, director, officer, employee, substantial stockholder, consultant, or partner in any business engaged to a material extent in direct competition with the Company in any market in any line of business engaged in by the Company during the Contract Period. 10. CHANGE-IN-CONTROL AGREEMENT. The Company and Employee are parties to another employment agreement (intended to become effective upon a change of control of the Company) entered into in 1987 by and between the Company and Employee (as amended to date, as amended in the remainder of this Paragraph 10, and as may be amended from time to time by the Company and Employee, the "Change-in-Control Agreement"). The Change-in-Control Agreement is hereby amended by substituting for the original Paragraph 20 thereof (captioned "Limitation on Contingent Payments") a new Paragraph 20 to read in its entirety, with its caption, as follows: 11 12 "20. EXCISE TAX. As to the Company's obligation if any of the payments or benefits to be paid and provided to Employee by the Company under any provision of this Agreement or any portion of any such payment or benefits would constitute "excess parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or any successor provision, see Paragraph 12 of the Employment Agreement between Employee and the Company pursuant to which Employee is employed as Chairman of the Board, President and Chief Executive Officer effective April 1, 1995." Except for the prohibition of double payments contained in Paragraph 7(e), above, nothing in this Agreement shall limit Employee's rights under the Change-in-Control Agreement. 11. COSTS OF ENFORCEMENT. The Company shall pay and be solely responsible for any and all costs and expenses (including attorneys's fees) incurred by Employee in seeking to enforce the Company's obligations under this Agreement unless and to the extent a court of competent jurisdiction determines that the Company was relieved of those obligations because (a) the Company terminated Employee for cause (as determined under Paragraph 6(b)(i) hereof), (b) Employee voluntarily terminated his employment other than for good reason (as determined under Paragraph 6(c)(ii) hereof), or (c) Employee materially and willfully breached his agreement not to compete with the Company or his agreement with respect to confidential information and such breach 12 13 directly caused substantial and demonstrable damage to the Company. The Company shall forthwith pay directly or reimburse Employee for any and all such costs and expenses upon presentation by Employee or by counsel selected from time to time by Employee of a statement or statements prepared by Employee or by such counsel of the amount of such costs and expenses. If and to the extent a court of competent jurisdiction renders a final binding judgment determining that the Company was relieved of its obligations for any of the reasons set forth in (a), (b), or (c) above, Employee shall repay the amount of such payments or reimbursements to the Company. In addition to the payment and reimbursement of expenses of enforcement provided for in this Paragraph 11, the Company shall pay to Employee in cash, as and when the Company makes any payment on behalf of, or reimbursement to, Employee, an additional amount sufficient to pay all federal, state, and local taxes (whether income taxes or other taxes) incurred by Employee as a result of (x) payment of the expense or receipt of the reimbursement, and (y) receipt of the additional cash payment. The Company shall also pay to Employee interest (calculated at the Base Rate from time to time in effect at National City Bank, Cleveland, Ohio, compounded monthly) on any payments or benefits that are paid or provided to Employee later than the date on which due under the terms of this Agreement. 12. EXCISE TAX. If any of the payments or benefits to be paid and provided to Employee by the Company under any provision of this Agreement, under any provision of the Change-in-Control Agreement, or under any provision of any other 13 14 agreement, plan, or arrangement, or any portion of any such payment or benefits would constitute "excess parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or any successor provision, the Company shall make additional cash payments to Employee at the same times as any such payment or benefit constituting an excess parachute payment is paid or provided and in such amounts as are necessary to put Employee in the same position after payment of all federal, state, and local taxes (whether income taxes, excise taxes under Section 4999 of the Code or otherwise, or other taxes) as he would have been in after payment of all federal, state, and local income taxes if the payments or benefits had been subject only to federal, state, and local income taxes generally applicable to compensation income. For example, if a $100,000 payment to Employee constituted an excess parachute payment subject to a 20% excise tax under Section 4999 of the Code, as well as federal income tax at a 28% effective rate, state income tax at a 10% marginal rate, and local income tax at a 2% marginal rate and no other taxes, and the state and local taxes were deductible for federal income tax purposes, the Company would be required to pay to Employee an additional $46,748 with respect to the $100,000 excess parachute payment. The net amount available to Employee after all taxes, including the excise tax on both the $100,000 and the $46,748, would be $63,630, the same amount that would be available to Employee had the $100,000 payment been subject only to federal, state, and local income taxes. 14 15 13. NOTICES. For purposes of this Agreement, all communications provided for herein shall be in writing and shall be deemed to have been duly given when delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the Company (Attention: Secretary) at its principal executive office and to Employee at his principal residence, or to such other address as either party may have furnished to the other in writing and in accordance herewith, except that notices of change of address shall be effective only upon receipt. 14. ASSIGNMENT, BINDING EFFECT. --------------------------- (a) This Agreement shall be binding upon and shall inure to the benefit of the Company and the Company's successors and assigns. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. (b) This Agreement shall be binding upon Employee and this Agreement and all rights of Employee hereunder shall inure to the benefit of, and be enforceable by, Employee and his personal or legal representatives, executors, or administrators. No right, benefit, or interest of Employee hereunder shall be subject to assignment, anticipation, alienation, sale, encumbrance, charge, pledge, hypothecation, or to execution, attachment, levy, or similar process; except that Employee may assign any 15 16 right, benefit, or interest hereunder if such assignment is permitted under the terms of any plan or policy of insurance or annuity contract governing such right, benefit, or interest. 15. INVALID PROVISIONS. ------------------- (a) Any provision of this Agreement that is prohibited or unenforceable shall be ineffective to the extent, but only to the extent, of such prohibition or unenforceability without invalidating the remaining portions hereof and such remaining portions of this Agreement shall continue to be in full force and effect. (b) In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable, the parties will negotiate in good faith to replace such provision with another provision that will be valid or enforceable and that is as close as practicable to the provision held invalid or unenforceable. 16. ENTIRE AGREEMENT, MODIFICATION. Except for the Change-in-Control Agreement, this Agreement contains the entire agreement between the parties with respect to the employment of Employee by the Company and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties. No modification, amendment, or waiver of any of the provisions of the Agreement shall be effective unless in writing, specifically referring hereto, and signed by both parties. 17. WAIVER OF BREACH. The failure at any time to enforce any of the provisions of this Agreement or to require performance by the other party of any of the provisions of this Agreement shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement or any part of this Agreement 16 17 or the right of either party thereafter to enforce each and every provision of this Agreement in accordance with the terms hereof. 18. GOVERNING LAW. This Agreement has been made in and shall be governed and construed in accordance with the laws of the State of Ohio. IN WITNESS WHEREOF, the Company and Employee have executed this Agreement as of the day and year first above written. Attest: OGLEBAY NORTON COMPANY ____________________________ By:______________________________ DAVID G. SLEZAK H. WILLIAM RUF Secretary Vice President-Administrative and Legal Affairs ________________________________ R. THOMAS GREEN, JR. EX-10.H 4 EXHIBIT 10(H) 1 Exhibit 10.H OGLEBAY NORTON COMPANY LONG-TERM INCENTIVE PLAN 2 OGLEBAY NORTON COMPANY LONG-TERM INCENTIVE PLAN
Table of Contents ----------------- Page ---- ARTICLE I - PURPOSE AND DEFINITIONS Section 1.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.2 Definitions and Usage . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II - STOCK SUBJECT TO THE PLAN Section 2.1 Stock Subject to Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 2.2 Annual Per-Participant Limitations . . . . . . . . . . . . . . . . . . . . 5 Section 2.3 Computation of Stock Available for the Plan . . . . . . . . . . . . . . . . 5 Section 2.4 Unused, Forfeited and Reacquired Shares . . . . . . . . . . . . . . . . . . 5 Section 2.5 Other Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE III - ELIGIBILITY Section 3.1 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE IV - ANNUAL INCENTIVE DEFERRAL PROGRAM Section 4.1 Election to Defer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 4.2 Investment of Deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 4.3 Matching Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 4.4 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 4.5 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 4.6 In-Service Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE V - LONG-TERM INCENTIVE PROGRAM Section 5.1 Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 5.2 Stock Appreciation Rights . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5.3 Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5.4 Performance Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE VI - ADMINISTRATION, GENERAL PROVISIONS Section 6.1 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 6.2 Authority of the Committee . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 6.3 Amendments and Termination . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 6.4 Unfunded Status of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 6.5 Change-of-Control Provisions . . . . . . . . . . . . . . . . . . . . . . . 20 Section 6.6 General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 6.7 Effective Date of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 6.8 Term of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 6.9 Proceeds and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 6.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 6.11 Assignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 6.12 Awards in Substitution for Awards Granted by Other Companies . . . . . . . 22
3 OGLEBAY NORTON COMPANY LONG-TERM INCENTIVE PLAN ARTICLE I PURPOSE AND DEFINITIONS SECTION 1.1 PURPOSE. The name of this plan is the Oglebay Norton Company Long-Term Incentive Plan (the "Plan"). The purpose of the Plan is to promote ownership and holding of Oglebay Norton Company stock by key employees, thereby reinforcing a mutuality of interest with other stockholders, and to enable the Company to attract, retain and motivate key employees by sharing in the growth of the value of the Company. This Plan is an integrated compensation and incentive program composed of five (5) operative long-term incentive compensation features. These separate incentive compensation programs are designed to accomplish distinct purposes under uniform administration and with a common goal of maximizing stockholder value. SECTION 1.2 DEFINITIONS AND USAGE. For the purposes of the Plan, the following terms, when used with initial capital letters, shall have the meanings as set forth below: "ACCOUNT" means the bookkeeping account established by the Company for a Participant who elects to defer a portion of his Annual Incentive Award pursuant to Article IV which will reflect the deferrals, matching contributions and dividends allocable to him pursuant to Article IV. "AFFILIATE" means (a) a corporation which, for purposes of Section 422 of the Code, is a parent or subsidiary of the Company, and (b) any other entity in which the Company has a substantial equity investment, as designated by the Committee. "ANNUAL INCENTIVE AWARD" means the amount payable to a Participant under the Oglebay Norton Company Annual Incentive Plan. "ANNUAL INCENTIVE AWARD DEFERRALS" means the portion of the Annual Incentive Award that a Participant elects to defer pursuant to Section 4.1. "BASE AMOUNT" means the amount of the Annual Incentive Award that the Participant elects to receive immediately upon payment. "BOARD" means the Board of Directors of the Company. "CAUSE" means, in connection with an involuntary termination by the Company of a Participant's employment, (a) the willful and continued failure by the Participant to perform substantially the duties of the Participant's position or (b) the willful engaging by 4 the Participant in conduct which is demonstrably injurious to the Company, monetarily or otherwise. "CHANGE OF CONTROL" means (a) a report is filed with the Securities and Exchange Commission (the "SEC") on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Exchange Act, disclosing that any "person" (as the term "person" is defined in Section 13(d) or Section 14(d)(2) of the Exchange Act) is or has become a beneficial owner, directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding securities; (b) the Company files a report or proxy statement with the SEC pursuant to the Exchange Act disclosing in response to Item 1 of Form 8-K thereunder or Item 6(e) of Schedule 14A thereunder that a Change in Control of the Company has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; (c) the Company is merged or consolidated with another corporation and, as a result thereof, securities representing less than fifty percent (50%) of the combined voting power of the surviving or resulting corporation's securities (or of the securities of a parent corporation in case of a merger in which the surviving or resulting corporation becomes a wholly-owned subsidiary of the parent corporation) are owned in the aggregate by holders of the Company's securities immediately prior to such merger or consolidation; (d) all or substantially all of the assets of the Company are sold in a single transaction or a series of related transactions to a single purchaser or a group of affiliated purchasers; or (e) during any period of twenty-four (24) consecutive months, individuals who were Directors of the Company at the beginning of such period cease to constitute at least a majority of the Company's Board unless the election, or nomination for election by the Company's shareholders, of more than one-half of any new Directors of the Company was approved by a vote of at least two-thirds of the Directors of the Company then still in office who were Directors of the Company at the beginning of such twenty-four (24) month period. "CODE" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. "COMMITTEE" means the Compensation and Organization Committee of the Board or any subcommittee thereof established by the Board. "COMPANY" means the Oglebay Norton Company, a corporation organized under the laws of the State of Delaware, or any successor organization. "DISABILITY" means a disability covered under the Oglebay Norton Company Long-Term Disability Insurance Plan. "DISINTERESTED PERSON" shall have the meaning set forth in Rule 16b-3(c)(2) of the Rules. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. 2 5 "FAIR MARKET VALUE" means, with respect to a share of Stock as of any given day, the last reported closing price for a share of Stock on the National Association of Securities Dealers Automated Quotations System ("NASDAQ") for the day as of which such determination is being made or, if there was no sale of Stock so reported for such day, on the most recently preceding day on which there was such a sale; or if the Stock is not listed or admitted to trading on NASDAQ on the day as of which the determination is being made, the amount determined by the Committee to be the fair market value of a share of Stock on such day. "INCENTIVE STOCK OPTION" means any Stock Option intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Code. "INSIDER" means a Participant who is subject to the requirements of the Rules. "MATCHING CONTRIBUTIONS" means the Company contribution made on behalf of Participants who elect to defer a portion of their Annual Incentive Award as provided in Section 4.3. "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an Incentive Stock Option. "OUTSIDE DIRECTOR" shall have the meaning set forth in Treasury Regulation Section 1.162-27(e)(3). "PARTICIPANT" means an employee to whom an award is granted pursuant to the Plan or who is eligible to defer and elects to defer a portion of his Annual Incentive Award under Article IV. "PERFORMANCE AWARD" means an award made pursuant to Section 5.4 that is payable in cash and/or Stock (including Restricted Stock) in accordance with the terms of the grant, based on Company, business unit and/or individual performance goals over a period of time. "PLAN" means the Oglebay Norton Company Long-Term Incentive Plan, as hereinafter amended from time to time. "RESTRICTED STOCK" means an award of shares of Stock that is subject to restrictions pursuant to Section 5.3. "RETIREMENT" means a Participant's retirement from active employment with the Company and each of its Affiliates pursuant to which the Participant is entitled to receive a normal, early, disability or shutdown retirement pension under the Oglebay Norton Company Pension Plan for Salaried Employees. "RULES" means Section 16 of the Exchange Act and the regulations promulgated thereunder. 3 6 "STOCK" means the common stock, one dollar ($1.00) par value per share, of the Company. "STOCK APPRECIATION RIGHT" means the rights granted pursuant to an award under Section 5.2. "STOCK OPTION" or "OPTION" means any option to purchase shares of Stock (including Restricted Stock, if the Committee so determines) granted pursuant to Section 5.1. Except where otherwise indicated by the context, any masculine terminology used herein also shall include the feminine and vice versa, and the definition of any term herein in the singular also shall include the plural and vice versa. References herein to Articles, Sections and Subsections are references to provisions in this Plan. 4 7 ARTICLE II STOCK SUBJECT TO THE PLAN SECTION 2.1 STOCK SUBJECT TO PLAN. The Stock to be subject or related to awards under the Plan may be either authorized and unissued or held in the treasury of the Company. The maximum number of shares of Stock authorized with respect to the deferrals or grant of awards under the Plan, subject to adjustment in accordance with Section 2.52.4 below, shall be one hundred thousand (100,000). SECTION 2.2 ANNUAL PER-PARTICIPANT LIMITATIONS. The maximum number of shares of Stock covered by deferrals or awards under the Plan provided to any Participant for any year shall not exceed ten thousand (10,000), subject to adjustment in accordance with Section 2.5 below. In addition, for awards settled in cash (in whole or in part), the maximum cash amount payable with respect deferrals or awards under the Plan to any Participant for any year shall not exceed the greater of the Fair Market Value of the number of shares of Stock set forth in the preceding sentence at the date of grant or the date of settlement of the award. SECTION 2.3 COMPUTATION OF STOCK AVAILABLE FOR THE PLAN. For the purpose of computing the total number of shares of Stock generally available under the Plan, under Article IV and Sections 5.1, 5.2, 5.3 and 5.4, respectively, for award at any time during which the Plan is in effect, there shall be debited against the total number of shares of Stock determined to be available under this Article II, the maximum number of shares of Stock subject to issuance upon exercise of options or other stock based awards made under the Plan. SECTION 2.4 UNUSED, FORFEITED AND REACQUIRED SHARES. The shares related to the unexercised or undistributed portion of any terminated, expired or forfeited award under the Plan shall be made available in connection with future awards under the Plan in addition to the shares determined available pursuant to Sections 2.1, 2.2 and 2.3. SECTION 2.5 OTHER ADJUSTMENT. In the event of any merger, reorganization, consolidation, recapitalization, Stock dividend, Stock split or other change in corporate structure affecting the Stock, the Committee shall take any action which in its discretion it deems necessary to preserve benefits to Participants in this Plan, including, without limitation, substitution or adjustment in the aggregate number of shares reserved for issuance under the Plan, in the number and option price of shares subject to outstanding Options granted under the Plan and in the number and price of shares subject to other awards made under the Plan, or substitution of property or other securities for Stock, Stock Options or Restricted Stock covered by any awards under this Plan. 5 8 ARTICLE III ELIGIBILITY SECTION 3.1 ELIGIBILITY. Officers and other key employees of the Company or an Affiliate (but excluding members of the Committee and any person who serves only as a director) who are responsible for or contribute to the management, growth and/or profitability of the business of the Company and/or its Affiliates are eligible, upon selection by the Committee, to elect to defer a portion of their Annual Incentive Award and/or to be granted awards under the Plan. 6 9 ARTICLE IV ANNUAL INCENTIVE DEFERRAL PROGRAM SECTION 4.1 ELECTION TO DEFER. A Participant may elect to defer the receipt of all or a portion of his Annual Incentive Award for any year by selecting the applicable percentage of his Annual Incentive Award (in ten percent (10%) increments) to be deferred for that year. In the alternative, a Participant may elect to defer the portion of his Annual Incentive Award for a year that exceeds a Base Amount set by the Participant. No election to defer under this Section shall be effective unless the Participant completes a deferral election agreement provided by the Committee (indicating the amount of deferrals and the form of distribution of amounts held in his Account) for that year and files the properly completed and executed agreement with the Committee on or before such date as is necessary to defer an award for Federal income tax purposes. Once a Participant has made an effective Annual Incentive Award Deferral election for a year, he may not thereafter change that election for that year. SECTION 4.2 INVESTMENT OF DEFERRALS. Annual Incentive Award Deferrals under this Article will be converted into share units based on the Fair Market Value of the Stock on the date that the deferred Annual Incentive Award otherwise would have been paid to the Participant. Dividends equal to the actual Stock dividends paid shall be credited to the share units in the Participant's Account, and shall in turn be converted into share units based on the Fair Market Value of the Stock on the date such dividends are paid. If shareholder approval is not obtained as provided in Section 6.7, share units will be settled in cash at the time of distribution under this Article based on the Fair Market Value of those units at the time of distribution. SECTION 4.3 MATCHING CONTRIBUTION. Each year, the Company will make a Matching Contribution to a Participant's Account equal to fifty percent (50%) of the Participant's Annual Incentive Award Deferral made for that year. Such Matching Contribution shall be made at the same time the Annual Incentive Award Deferral is made to the Participant's Account. In addition, prior to the time for making deferral elections for that year, the Committee, in its sole discretion, may determine to award an additional Matching Contribution of up to fifty percent (50%) on a Participant's Annual Incentive Award Deferral; provided, however, that a Participant's entitlement to such additional Matching Contribution may be conditioned on such factors as the Committee may establish at the time the additional Matching Contribution is granted, including, without limitation, satisfaction of certain performance measures, additional vesting requirements or other limitations or restrictions set by the Committee. Matching Contributions will be invested in the same manner as provided for Annual Incentive Award Deferrals pursuant to Section 4.2. SECTION 4.4 VESTING. All Annual Incentive Award Deferrals pursuant to Section 4.1 (and dividends generated from those deferrals) will be one hundred percent (100%) vested at all times. Matching Contributions pursuant to Section 4.3 (and dividends generated from those amounts) will become one hundred percent (100%) vested on the fifth anniversary of the date those Matching Contributions are allocated to a Participant's Account, provided that the Participant has been in continuous service with the Company or an Affiliate for that entire five (5) year period. 7 10 Notwithstanding the foregoing, Matching Contributions made within the most recent five (5) year period will become one hundred percent (100%) vested (a) upon the Participant's early, normal, disability or shutdown retirement (as those terms are defined in the Oglebay Norton Company Pension Plan for Salaried Employees); (b) upon a Change of Control; (c) upon a sale or other disposition of an Affiliate, provided that this Subsection shall apply only to a Participant who is employed at such Affiliate at the time of such sale or disposition and who is not provided a comparable position with the Company or another Affiliate after such sale or disposition; or (d) upon any other event as the Committee shall deem appropriate in its sole discretion. Upon a Participant's in-service withdrawal of Annual Incentive Award Deferrals pursuant to Section 4.6, all Matching Contributions attributable to those deferrals will be immediately forfeited. SECTION 4.5 DISTRIBUTIONS. (a) Upon a Participant's retirement (under the terms of the Oglebay Norton Company Pension Plan for Salaried Employees), death, other termination of employment from the Company and all Affiliates, upon a Change or Control, or upon any other event as the Committee shall deem appropriate in its sole discretion, all of a Participant's Annual Incentive Award Deferrals (and dividends generated from those deferrals) and the vested portion of a Participant's Matching Contributions (and dividends generated from those amounts) allocated to the Participant's Account shall be distributed. Such distributions shall be made or commence as soon as administratively feasible following the event that entitles the Participant to a distribution. (b) Distributions under this Article will be made either in a lump sum or in equal annual installments of up to ten (10) years, as elected by the Participant on the most recent deferral election agreement filed by that Participant with the Committee; provided, however, that no deferral election agreement completed within twenty-four (24) months of the Participant's entitlement to a distribution under this Section will be effective with respect to the form of distribution and, instead, the immediately prior deferral election agreement of the Participant shall be used to determine the form of distribution. Notwithstanding the Participant's election as to the form of distribution, any vested Matching Contributions (and dividends generated from those amounts), made within the most recent five (5) years before entitlement to a distribution will automatically be paid in five (5) annual installments. (c) All distributions under this Article shall be made in shares of Stock; provided, however, that if shareholder approval is not obtained as provided in Section 6.7, share units will be settled in cash at the time of distribution under this Section based on the Fair Market Value of those units at the time of distribution. (d) Notwithstanding the foregoing, any Annual Incentive Award Deferral and the vested portion of any Matching Contribution which are actually made in the year after a Participant has received or commenced to receive his distribution shall be paid in the following manner: (i) if the Participant has already received a lump sum distribution, the additional Annual Incentive Award Deferral will be paid in a lump sum as soon as administratively feasible following its deferral; (ii) if the Participant is receiving installment payments, the additional Annual Incentive Award Deferral will be added to the deferral amounts not yet paid and distributed, pro rata, for the remainder of 8 11 the existing installment term; and (iii) if the Participant is entitled to vested Matching Contributions, those additional vested Matching Contributions will be subject to the five (5) year installment requirement of Subsection (b), will be added to the Matching Contributions not yet paid under that five (5) year schedule and will be distributed pro rata for the remainder of the existing five (5) year term. SECTION 4.6 IN-SERVICE WITHDRAWALS. While employed by the Company or an Affiliate, a Participant may elect to withdraw all or a portion of his Annual Incentive Award Deferrals (and dividends generated from those deferrals), provided that the Annual Incentive Award Deferrals withdrawn must have been allocated to the Participant's Account for at least five (5) years prior to the time of the withdrawal. Withdrawals shall be made by completing a withdrawal election form provided by the Committee and filing that form with the Committee. Upon taking an in- service withdrawal, all Matching Contributions associated with the amount of Annual Incentive Award Deferrals withdrawn will be immediately forfeited by the Participant. 9 12 ARTICLE V LONG-TERM INCENTIVE PROGRAM SECTION 5.1 STOCK OPTIONS. Stock Options may be granted alone, in addition to or in tandem with other awards granted under the Plan. Any Stock Option granted under the Plan shall be in such form as the Committee may from time to time approve. The Committee shall have the authority to grant any optionee Incentive Stock Options, Non-Qualified Stock Options or both types of Stock Options (in each case with or without Stock Appreciation Rights). To the extent that any Stock Option does not qualify as an Incentive Stock Option, it shall constitute a separate Non-Qualified Stock Option. Anything in the Plan to the contrary notwithstanding, no term of this Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of the optionee(s) affected, to disqualify any Incentive Stock Option under such Section 422 of the Code. Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem appropriate: (a) OPTION PRICE. The option price per share of Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant but shall be not less than one hundred percent (100%) of the Fair Market Value of the Stock at the time of grant. Notwithstanding the preceding, the Committee, in its discretion, may determine a Stock Option price of less than the Fair Market Value of the Stock at the time of grant, if such Stock Option is granted as a substitute for a stock option granted by an entity which has been merged with or acquired by the Company or an Affiliate and such substitute grant is made in connection with such merger or acquisition. Any Incentive Stock Option granted to any optionee who, at the time the option is granted, owns more than ten percent (10%) of the voting power of all classes of stock of the Company or of an Affiliate shall have an exercise price no less than one hundred and ten percent (110%) of Fair Market Value per share on date of the grant. (b) OPTION TERM. The term of each Stock Option shall be fixed by the Committee, but no Stock Option shall be exercisable more than ten (10) years after the date the Option is granted. However, any Incentive Stock Option granted to any optionee who, at the time the option is granted owns more than ten percent (10%) of the voting power of all classes of stock of the Company or of an Affiliate may not have a term of more than five (5) years. No Option may be exercised by any person after expiration of the term of the Option. (c) EXERCISABILITY. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at or after grant; provided, however, that, except as provided in Section 5.1(d) and Section 6.5, and unless otherwise determined by the Committee at or after grant, no Stock Option shall be exercisable during the six 10 13 (6) months following the date of the granting of the Option. If the Committee provides, in its discretion, that any Stock Option is exercisable only in installments, the Committee may waive such installment exercise provisions at any time at or after grant in whole or in part, based on such factors as the Committee shall determine, in its sole discretion. (d) TERMINATION BY REASON OF DEATH, DISABILITY OR RETIREMENT. If an optionee's employment by the Company and any Affiliate terminates by reason of death, Disability or Retirement, any Stock Option held by such optionee will immediately vest and may thereafter be exercised by the optionee or by the legal representative of the estate or by the legatee of the optionee under the will of the optionee, for a period of two (2) years (or such shorter period as the Committee may specify at grant) from the date of such termination or until the expiration of the stated term of such Stock Option, whichever period is the shorter. In the event of termination of employment by reason of Disability or Retirement, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option. (e) OTHER TERMINATION. Unless otherwise provided in this Plan, or otherwise determined by the Committee at or after grant, if an optionee's employment by the Company terminates for any reason other than death, Disability or Retirement, the Stock Option shall thereupon terminate, except that such Stock Option may be exercised (to the extent exercisable upon the optionee's termination) for the lesser of three (3) months or the balance of such Stock Option's term if the optionee is involuntarily terminated by the Company without Cause. (f) INCENTIVE STOCK OPTION LIMITATIONS. To the extent required for "incentive stock option" status under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the stock with respect to which Incentive Stock Options are exercisable for the first time by the optionee during any calendar year under the Plan and/or any other stock option plan of the Company (within the meaning of Section 424 of the Code) shall not exceed one hundred thousand dollars ($100,000). (g) EXERCISE OF STOCK OPTIONS. An optionee may exercise a Stock Option in whole or in part at any time and from time to time during the period within which a Stock Option may be exercised. To exercise a Stock Option, an optionee shall give written notice of exercise to the secretary of the Company specifying the number of shares of Stock to be purchased; and provide payment of the Option price for such shares of Stock by cash or check payable to the order of the Company, by Stock owned by the optionee or by sale of shares of Stock acquired in the exercise of a Stock Option (to the extent such cashless exercise is permitted under rules promulgated by the Committee and under the Rules) or any combination of Stock and cash or check. If payment of the Option exercise price of a Non-Qualified Stock Option is made in whole or in part in the form of unrestricted Stock already owned by the Participant, the Company may require that the Stock be owned by the Participant for a period of six (6) months or longer. An optionee shall be treated for all purposes as the owner of record of the number of shares of Stock purchased pursuant to exercise of the Stock Option (in whole or in part) as of the date the conditions set forth in preceding paragraph are satisfied. Notwithstanding the foregoing, no 11 14 exercise of a Stock Option shall be effective until the shares of Stock subject to this Plan have been registered or qualified for sale under applicable Federal and state securities laws, and no Stock Option shall be deemed granted until this Plan is approved by the holders of Company stock having a majority of the voting power of all stock represented at a meeting duly held in accordance with Delaware law within twelve (12) months after this Plan is adopted by the Board. Upon the effective exercise of a Stock Option (in whole or in part) in accordance with Subsection (h), the Committee shall deliver to the optionee the number of shares of Stock for which the Stock Option is exercised, adjusted for any shares of Stock sold or withheld in connection with such exercise. (h) CASH-OUT OF OPTION; SETTLEMENT OF SPREAD VALUE IN RESTRICTED STOCK. On receipt of written notice to exercise, the Committee may, in its sole discretion, elect to cash out all or part of the portion of the Option(s) to be exercised by paying the optionee an amount, in cash or Stock, equal to the excess of the Fair Market Value of the Stock over the option price (the "Spread Value") on the effective date of such cash-out. In addition, if the option agreement so provides at grant or is amended after grant and prior to exercise to so provide (with the optionee's consent), the Committee may require that all or part of the shares to be issued with respect to the Spread Value of an exercised option take the form of Restricted Stock, which shall be valued on the date of exercise on the basis of the Fair Market Value of such Restricted Stock determined without regard to the forfeiture restrictions involved. SECTION 5.2 STOCK APPRECIATION RIGHTS. Both Tandem Stock Appreciation Rights and Non-Tandem Stock Appreciation Rights, as described below, may be granted to Participants in the Plan. (a) TANDEM STOCK APPRECIATION RIGHTS. A Tandem Stock Appreciation Right is the right, granted under this Subsection, to surrender to the Company all (or a portion) of a Stock Option or other award under this Plan in exchange for an amount equal to the Spread Value, as defined in Section 5.1(h), of the Stock (or portion of the Stock) covered by the associated Stock Option. Tandem Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option or other award granted under the Plan. In the case of an Incentive Stock Option, such rights may be granted only at the time of the grant of such Stock Option. A Stock Appreciation Right or applicable portion thereof granted with respect to a given Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Option, except that, unless otherwise determined by the Committee, in its sole discretion, at the time of grant, a Stock Appreciation Right granted with respect to less than the full number of shares covered by a related Stock Option shall not be reduced until the number of shares covered by an exercise or termination of the related Stock Option exceeds the number of shares not covered by the Stock Appreciation Right. A Stock Appreciation Right may be exercised by an optionee, in accordance with this Subsection, by surrendering the applicable portion of the related Stock Option. Upon such exercise and 12 15 surrender, the optionee shall be entitled to receive an amount determined in the manner prescribed in this Subsection. Stock Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the related Stock Appreciation Rights have been exercised. Tandem Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee. (b) NON-TANDEM STOCK APPRECIATION RIGHTS. A Non-Tandem Stock Appreciation Right is a right granted pursuant to this Subsection to receive an amount equal to the difference between (i) the Fair Market Value, as of the date such Right is exercised, of a number of shares of Stock specified in the grant of such Right, and (ii) the Fair Market Value of such shares of Stock as of the date such Right is granted. Non-Tandem Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee. SECTION 5.3 RESTRICTED STOCK. (a) ADMINISTRATION. Shares of Restricted Stock may be issued either alone or in addition to other awards granted under the Plan. The Committee may condition the vesting of Restricted Stock upon the attainment of specified performance goals or such other factors as the Committee may determine, in its sole discretion; provided, however, that specified performance goals intended to satisfy the requirements of Section 162(m) of the Code shall be preestablished and objective in accordance with Section 162(m) and the regulations thereunder, may vary among Participants and among groups of Participants, and shall be based upon such Company, business unit and/or individual objective performance factors and criteria as the Committee may deem appropriate, including and limited to stock price, market share, sales, earnings per share, return on assets, return on equity, costs, cash flow and any combination thereof. (b) RESTRICTIONS AND CONDITIONS. Each award of Restricted Stock hereunder shall be subject to the following: (i) The prospective recipient of a Restricted Stock award shall not have any rights with respect to such award, unless and until such recipient has executed an agreement evidencing the award and has delivered a fully executed copy thereof to the Company and has otherwise complied with the applicable terms and conditions of such award. (ii) The purchase price for shares of Restricted Stock may be equal to or less than their par value and may be zero, unless otherwise required under applicable state law. (iii) Awards of Restricted Stock must be accepted within a period, to be determined by the Committee at the time of the grant, after the award date, 13 16 by executing a Restricted Stock agreement and paying whatever price (if any) is required under this Section. (iv) Except as otherwise specified by the Committee, each Participant receiving a Restricted Stock award shall be issued a stock certificate in respect of such shares of Restricted Stock. Such certificate shall be registered in the name of such Participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such award, substantially in the following form: The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Oglebay Norton Company Long-Term Incentive Plan and an agreement entered into between the registered owner and the Oglebay Norton Company. Copies of such Plan and agreement are on file in the offices of the Oglebay Norton Company, 1100 Superior Avenue, Cleveland, Ohio 44114. (v) The Committee may require that the stock certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of any Restricted Stock award, the Participant shall have delivered a stock power, endorsed in blank, relating to the Stock covered by such award. (vi) Subject to the provisions of this Plan and the Restricted Stock agreement, during a period set by the Committee commencing with the date of such award (the "Restriction Period"), the Participant shall not be permitted to sell, transfer, pledge, assign or otherwise encumber shares of Restricted Stock awarded under the Plan. Within these limits, the Committee, in its sole discretion, may provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions in whole or in part, based on service, performance and/or such other factors or criteria as the Committee may determine, in its sole discretion; provided, however, that in no event shall any such lapse, acceleration or waiver of restrictions occur with respect to Restricted Stock that is intended to qualify as performance-based compensation under Section 162(m) of the Code (to the extent such lapse, acceleration or waiver would cause such Restricted Stock to fail to so qualify). (vii) Each Restricted Stock award agreement shall provide that the Restricted Stock covered by the agreement shall be subject to a "substantial risk of forfeiture" (within the meaning of Section 83 of the Code) for a period to be determined by the Committee. (viii) Except as provided above, the Participant shall have, with respect to the shares of Restricted Stock, all of the rights of a stockholder of the Company, 14 17 including the right to vote the shares and the right to receive any cash dividends. The Committee, in its sole discretion, as determined at the time of award, may permit or require the payment of cash dividends to be deferred and, if the Committee so determines, reinvested in additional Restricted Stock to the extent shares are available under Article II. (ix) Subject to the applicable provisions of the Restricted Stock agreement and this Section and unless otherwise determined by the Committee, upon termination of a Participant's employment with the Company for any reason during the Restriction Period, all shares still subject to restriction shall be forfeited by the Participant. (x) In the event of hardship or other special circumstances of a Participant whose employment with the Company is involuntarily terminated (other than for Cause), the Committee may, in it sole discretion, waive in whole or in part any or all remaining restrictions with respect to such Participant's shares of Restricted Stock, based on such factors as the Committee may deem appropriate; provided, however, that in no event shall any such waiver of restrictions occur with respect to Restricted Stock that is intended to qualify as performance-based compensation under Section 162(m) of the Code (to the extent such waiver would cause such Restricted Stock to fail to so qualify).. (xi) If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period, the certificates for such shares shall be delivered to the Participant promptly. SECTION 5.4 PERFORMANCE AWARDS. (a) AWARDS AND ADMINISTRATION. Performance Awards may be awarded either alone or in addition to other awards granted under the Plan. The Committee shall determine the nature, length and starting date of the performance period (the "Performance Period") for each Performance Award, which shall be subject to Section 6.5, and shall determine the performance objectives to be used in valuing Performance Awards and determining the extent to which such Performance Awards have been earned. Performance objectives may vary from Participant to Participant and between groups of Participants and shall be based upon such Company, business unit and/or individual performance factors and criteria as the Committee may deem appropriate, including, but not limited to, earnings per share or return on equity; provided, however, that performance objective intended to satisfy the requirements of Section 162(m) of the Code shall be preestablished and objective in accordance with Section 162(m) and the regulations thereunder, and such performance factors and criteria shall be limited to stock price, market share, sales, earnings per share, return on assets, return on equity, costs, cash flow and any combination thereof. Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Awards that are subject to different Performance Periods and/or different performance factors and criteria. 15 18 At the beginning of each Performance Period, the Committee shall determine for each Performance Award subject to such Performance Period the range of dollar values or number of shares of Stock to be awarded to the Participant at the end of the Performance Period if and to the extent that the relevant measure(s) of performance for such Performance Award is (are) met. Such dollar values or number of shares of Stock may be fixed or may vary in accordance with such performance and/or other criteria as may be specified by the Committee, in its sole discretion. (b) ADJUSTMENT OF AWARDS. In the event of special or unusual events or circumstances affecting the application of one or more performance objectives to a Performance Award, the Committee may revise the performance objectives and/or underlying factors and criteria applicable to the Performance Awards affected, to the extent deemed appropriate by the Committee, in its sole discretion, to avoid unintended windfalls or hardship; provided, however, that in no event shall any such revision result in the increase in a Performance Award or waiver of a performance goal if such Award or goal is intended to qualify as performance-based compensation under Section 162(m) of the Code. (c) TERMINATION OF EMPLOYMENT. Subject to Section 6.5 and unless otherwise provided in the applicable award agreement(s), if a Participant terminates employment with the Company during a Performance Period because of death, Disability or Retirement, such Participant may be entitled to payment with respect to each outstanding Performance Award at the end of the applicable Performance Period as follows: (i) to the extent relevant under the terms of the award, based upon the Participant's performance for the portion of such Performance Period ending on the date of termination and the performance of the applicable business unit(s) for the entire Performance Period, and (ii) where deemed appropriate by the Committee, prorated for the portion of the Performance Period during which the Participant was employed by the Company, all as determined by the Committee, in its sole discretion. Notwithstanding the preceding, the Committee may provide for an earlier payment in settlement of such award in such amount and under such terms and conditions as the Committee deems appropriate; provided, however, that in no event shall any such earlier payment occur with respect to Performance Awards that are intended to qualify as performance-based compensation under Section 162(m) of the Code (to the extent such earlier payment would cause such Performance Shares to fail to so qualify). Subject to Section 6.5, if a Participant terminates employment with the Company during a Performance Period for any reason other than death, Disability or Retirement, then such Participant shall not be entitled to any payment with respect to 16 19 the Performance Awards subject to such Performance Period, unless the Committee shall otherwise determine, in its sole discretion. (d) TIMING AND FORM OF PAYMENT. The earned portion of a Performance Award may be paid currently or on a deferred basis with such interest or earnings equivalent as may be determined by the Committee, in its sole discretion; provided, however, that no deferral of a Performance Award intended to qualify as performance-based compensation under Section 162(m) of the Code shall result in the deferred Performance Award earning a rate of interest based on criteria other than a reasonable rate of interest or one or more predetermined actual investments. Payment shall be made in the form of cash or whole shares of Stock, including Restricted Stock, either in a lump sum payment or in installments commencing as soon as practicable after the end of the relevant Performance Period, all as the Committee shall determine at or after grant. (e) EFFECT OF PERFORMANCE AWARDS ON STOCK AVAILABLE UNDER ARTICLES IV AND V. If and to the extent a Performance Award is payable in Stock and the full amount of such value is not paid in Stock, then the shares of Stock representing the portion of the value of the Performance Award not paid in Stock shall again become available for award under this Article and Article IV. 17 20 ARTICLE VI ADMINISTRATION, GENERAL PROVISIONS SECTION 6.1 ADMINISTRATION. The Plan shall be administered by the Committee, which at all times shall be comprised of not less than three (3) persons who are: (a) Disinterested Persons, if required to qualify the Plan for an exemption from Section 16(b) of the Exchange Act that is available under the Rules; and (b) Outside Directors, if required to qualify compensation paid under the Plan as performance-based compensation under Section 162(m) of the Code. Members of the Board who qualify as Disinterested Persons and/or Outside Directors shall perform the functions of the Committee if at any time the Board has not appointed such members to comprise the Committee. SECTION 6.2 AUTHORITY OF THE COMMITTEE. The Committee shall have the authority to: (a) select the officers and other key employees of the Company or an Affiliate who may make deferral elections or to whom awards may from time to time be granted hereunder, and to determine for each such officer and other key employee the levels and other terms and conditions of any stock-ownership requirements; (b) grant to eligible employees, pursuant to the terms of the Plan, Matching Contributions, additional Matching Contributions, Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Awards and/or other permissible awards hereunder, and determine the conditions, restrictions and procedures to be applied to each such award; (c) determine the terms and conditions, not inconsistent with the terms of the Plan, of any deferral made or award granted hereunder, including, but not limited to, the share price and any restriction or limitation or any vesting acceleration or forfeiture waiver regarding any deferral or award and/or the shares of Stock relating thereto, based on such factors as the Committee shall determine, in its sole discretion; (d) take such action as it deems appropriate to comply with the provisions of the Code, the Exchange Act and other applicable laws, including any such action it deems appropriate under Section 162(m) of the Code concerning the Federal income tax deductibility of deferrals or awards granted hereunder (including without limitation, determining preestablished, objective performance goals and the method of computing awards, reviewing award formulas and performance goals and criteria, certifying whether performance goal measures have been satisfied, and establishing a subcommittee consisting of outside, independent directors for this purpose; provided, however, that actions of any such subcommittee shall be subject to ratification by the Committee); (e) determine whether, to what extent and under what circumstances any award under this Plan shall be deferred either automatically or at the election of the Participant; 18 21 (f) amend the terms of any deferral made or award granted hereunder, prospectively or retroactively; provided, however, that any such amendment must be consistent with the provisions of this Plan, and no such amendment shall impair the rights of a Participant with respect to any outstanding deferral or award under the Plan without his consent; (g) interpret the terms and provisions of this Plan and any deferral made or award granted hereunder (and any agreements relating thereto), and otherwise settle all claims and disputes arising under this Plan; (h) delegate responsibility and authority for the operation and administration of the Plan, appoint employees and officers of the Company and Affiliates to act on its behalf, and employ persons to assist in fulfilling its responsibilities under the Plan; and (i) adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable, and otherwise supervise the administration of this Plan. All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Participants. The Committee may make decisions to take action under this Plan only by majority action of all Committee members. The Committee may act without a meeting only by written instrument signed by all members of the Committee. SECTION 6.3 AMENDMENTS AND TERMINATION. The Board may amend, alter or discontinue the Plan at any time and from time to time, but no amendment, alteration or discontinuation shall be made which would impair the rights of an optionee or Participant with respect to any outstanding deferral or award under the Plan without the optionee's or Participant's consent, or which, without the approval of the Company's stockholders, would: (a) except as expressly provided in this Plan, increase the total number of shares reserved for the purpose of the Plan; (b) extend the maximum Option period applicable under the Plan; (c) otherwise cause the Plan to fail to qualify for an exemption it is seeking to rely upon under the Rules; or (d) otherwise cause the Plan to fail to satisfy the requirements of any applicable securities or tax law or the applicable rules and regulations promulgated under NASDAQ. SECTION 6.4 UNFUNDED STATUS OF PLAN. The Plan is intended to constitute an "unfunded" plan for incentive compensation. With respect to any payments not yet made to a Participant or optionee 19 22 by the Company, nothing contained herein shall give any such Participant or optionee any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock or payments in lieu of or with respect to deferrals or awards hereunder; provided, however, that, unless the Committee otherwise determines with the consent of the affected Participant, the existence of such trusts or other arrangements shall be consistent with the "unfunded" status of the Plan. SECTION 6.5 CHANGE-OF-CONTROL PROVISIONS. The Committee, in its discretion, may provide at the time of a grant of any award under Article V that the terms of the award, including, but not limited to, the method of determining Fair Market Value, or the date on which an award vests or becomes exercisable, may be modified in the event of a change-of-control; provided that in no event shall such modification occur with respect to any award that is intended to qualify as performance-based compensation under Section 162(m) of the Code (to the extent such modification would cause the award to fail to so qualify). Except as otherwise provided under this Plan, the Committee may determine at any time at or after the grant of an award under Article V, (a) the criteria used to determine whether a change-of-control has occurred, and (b) whether a change-of-control has in fact occurred. SECTION 6.6 GENERAL PROVISIONS. (a) The Committee may require each person purchasing shares pursuant to a Stock Option under the Plan to represent to and agree with the Company in writing that the optionee or Participant is acquiring the shares without a view to distribution thereof. The certificates for such shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer. All certificates for shares of Stock or other securities delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Exchange Act, any stock exchange upon which the Stock is then listed and any applicable Federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (b) Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. (c) The adoption of the Plan shall not confer upon any employee of the Company or an Affiliate any right to continued employment with the Company or an Affiliate, as the case may be, nor shall it interfere in any way with the right of the Company or an Affiliate to terminate the employment of any of its employees at any time. (d) No later than the date as of which an amount first becomes includible in the gross income of the Participant for applicable income tax purposes with respect to any deferral or award 20 23 under the Plan, the Participant shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any Federal, state or local taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Committee, the minimum required withholding obligations may be settled with Stock, including Stock that is part of the deferral or award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant. (e) At the time of grant under Article V, the Committee may provide in connection with any grant made under this Plan that the shares of Stock received as a result of such grant shall be subject to a right of first refusal, pursuant to which the Participant shall be required to offer to the Company any shares that the Participant wishes to sell, with the price being the then Fair Market Value of the Stock, subject to such other terms and conditions as the Committee shall specify at the time of grant. (f) The reinvestment of dividends in additional Restricted Stock (or in other types of Plan deferrals or awards) at the time of any dividend payment shall only be permissible if sufficient shares of Stock are available under Article II for such reinvestment (taking into account then outstanding Stock Options and other Plan deferrals or awards). (g) The Committee shall establish such procedures as it deems appropriate for a Participant to designate a beneficiary to whom any amounts payable in the event of the Participant's death are to be paid. (h) The Plan and all deferrals or awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Ohio, to the extent not preempted by Federal law. SECTION 6.7 EFFECTIVE DATE OF PLAN. This Plan shall be effective on December 13, 1995; provided, however, that, except as provided in Article IV, the effectiveness of this Plan is conditioned on its approval by an affirmative vote of the holders of Company stock represented at a meeting duly held in accordance with Delaware law within twelve (12) months after the date this Plan is adopted by the Board. All awards under this Plan, other than those provided in Article IV, shall be null and void if the Plan is not approved by such stockholders within such twelve-month period. Notwithstanding the foregoing, Article IV (and the provisions of the Plan necessary for the operation of Article IV) shall continue to be effective without stockholder approval; provided, however, that, if stockholder approval is not obtained, the modifications described in Article IV relating to Stock equivalents and cash distributions shall apply. SECTION 6.8 TERM OF PLAN. No award under Article V shall be granted pursuant to the Plan on or after the tenth anniversary of the earlier of the date of stockholder approval or the date this Plan is adopted by the Board, but awards granted prior to such tenth anniversary may extend beyond that. 21 24 SECTION 6.9 PROCEEDS AND EXPENSES. The proceeds received by the Company from the sale of shares of Stock pursuant to the exercise of Stock Options shall be used for general corporate purposes. The Company shall bear any expenses associated with the administration of this Plan. SECTION 6.10 SEVERABILITY. If any provision of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of this Plan, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been included herein. SECTION 6.11 ASSIGNABILITY. No Option, Stock Appreciation Right or other "derivative security" (as defined for purposes of the Rules) awarded under the Plan may be transferred other than (a) by will or by the laws of descent and distribution, or (b) as otherwise hereafter permitted in accordance with the Rules without jeopardizing or impairing any exemption provided for under the Rules. Any restriction on the transferability of derivative securities required by the Rules in order to qualify for an exemption under the Rules is hereby incorporated in the Plan to the extent necessary to obtain the applicable exemption. SECTION 6.12 AWARDS IN SUBSTITUTION FOR AWARDS GRANTED BY OTHER COMPANIES. To the extent not otherwise provided in the Plan, awards (whether Stock Options, Stock Appreciation Rights, Restricted Stock or Performance Awards) may be granted under the Plan in substitution for awards held by employees of a company who become employees of the Company or an Affiliate as a result of the acquisition, merger or consolidation of the employer company by or with the Company or an Affiliate. The terms, provisions and benefits of the substitute awards so granted may vary from those set forth in or authorized by the Plan to such extent as the Committee at the time of the grant may deem appropriate to conform, in whole or in part, to the terms, provisions and benefits of awards in substitution for which they are granted. The undersigned, pursuant to the approval of the Board on December 13, 1995, does herewith execute the Oglebay Norton Company Long-Term Incentive Plan. /s/ H. William Ruf ---------------------------------- H. William Ruf Vice President, Administration and Legal Affairs 22 EX-21 5 EXHIBIT 21 1 EXHIBIT 21 SUBSIDIARIES OF OGLEBAY NORTON COMPANY -------------------------------------- Jurisdiction Subsidiaries of Incorporation ------------ ---------------- Canadian Ferro Hot Metal Specialties Limited Ontario Laxare, Inc. West Virginia Oglebay Norton Industrial Sands, Inc. California Oglebay Norton Refractories & Minerals, Inc. Ohio Oglebay Norton Taconite Company Minnesota ON Coast Petroleum Company Texas ONCO Eveleth Company Minnesota ONCO WVA, Inc. West Virginia Saginaw Mining Company Ohio EX-23 6 EXHIBIT 23 1 EXHIBIT 23 Consent of Independent Auditors We consent to the incorporation by reference in the following Registration Statements and Post Effective Amendment of our report dated February 29, 1996, with respect to the consolidated financial statements of Oglebay Norton Company included in this Annual Report (Form 10-K) for the year ended December 31, 1995: Registration Statement Number 33-58819 on Form S-8 dated April 26, 1995 pertaining to the Oglebay Norton Company Director Stock Plan; Registration Statement Number 33-37974 on Form S-8 dated November 23, 1990 pertaining to the Oglebay Norton Company Incentive Savings Plan and Trust; Registration Statement Number 33-37975 on Form S-8 dated November 23, 1990 pertaining to the Oglebay Norton Taconite Company Thrift Plan and Trust; Post-Effective Amendment Number 4 to Registration Statement Number 2-80895 on Form S-8 dated February 23, 1990 pertaining to the Oglebay Norton Company Incentive Savings Plan and Trust; Registration Statement Number 33-29046 on Form S-8 dated June 9, 1989 pertaining to the Oglebay Norton Company Employee Stock Ownership Plan and Trust; Registration Statement Number 33-21006 on Form S-8 dated April 21, 1988 pertaining to the Oglebay Norton Company Employee Stock Ownership Plan and Trust. ERNST & YOUNG LLP Cleveland, Ohio March 26, 1996 EX-27 7 EXHIBIT 27
5 1 U.S. DOLLARS YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 22,660,436 3,555,550 27,681,413 511,000 5,768,386 64,474,277 304,828,977 153,235,099 254,255,873 42,537,885 43,641,125 3,626,666 0 0 92,638,741 254,255,873 103,619,664 193,596,867 85,370,525 172,609,080 3,080,321 320,305 4,359,804 20,509,990 5,149,000 15,360,990 0 0 0 15,360,990 6.21 6.21
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