-----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, L3eddLSINy/o+O8frM+gYtP+8puL5IH69oscL2JS2mz3Ufm+Be7J5QhrVn6ieKVm Nb6J6XKw9q2UvOR1sxc0Bw== 0000927356-98-000647.txt : 19980430 0000927356-98-000647.hdr.sgml : 19980430 ACCESSION NUMBER: 0000927356-98-000647 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980429 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: STILLWATER MINING CO /DE/ CENTRAL INDEX KEY: 0000931948 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS METAL ORES [1090] IRS NUMBER: 810480654 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13053 FILM NUMBER: 98603865 BUSINESS ADDRESS: STREET 1: 536 E PIKE AVENUE STREET 2: P O BOX 1330 CITY: COLUMBUS STATE: MT ZIP: 59019 BUSINESS PHONE: 3039782525 MAIL ADDRESS: STREET 1: 536 E PIKE AVENUE STREET 2: P O BOX 1330 CITY: COLUMBUS STATE: MT ZIP: 59019 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998. OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______ COMMISSION FILE NUMBER 0-25090 ------- STILLWATER MINING COMPANY ------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 81-0480654 ___________________________________ ____________________________________ (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 717 17TH STREET, SUITE 1480 DENVER, COLORADO 80202 ________________________________________ ____________________________ (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (303) 978-2525 ____________________________________________________ (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS: YES X NO __ - AT APRIL 21, 1998, 20,485,050 SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, WERE ISSUED AND OUTSTANDING. STILLWATER MINING COMPANY FORM 10-Q QUARTER ENDED MARCH 31, 1998 INDEX PART I - FINANCIAL INFORMATION PAGE ---- ITEM 1......... FINANCIAL STATEMENTS......................... 3 ITEM 2......... MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 PART II - OTHER INFORMATION ITEM 1......... LEGAL PROCEEDINGS............................ 12 ITEM 2......... CHANGES IN SECURITIES........................ 12 ITEM 3......... DEFAULTS UPON SENIOR SECURITIES.............. 12 ITEM 4......... SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................................... 12 ITEM 5......... OTHER INFORMATION............................ 12 ITEM 6......... EXHIBITS AND REPORTS ON FORM 8-K............. 12 SIGNATURES ............................................. 13 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STILLWATER MINING COMPANY CONSOLIDATED BALANCE SHEET (in thousands, except share and per share amounts) (Unaudited) MARCH 31, December 31, 1998 1997 ------------- ------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 4,260 $ 4,191 Short-term investments 11,769 13,468 Inventories 7,355 7,380 Accounts receivable 9,204 6,926 Other current assets 1,607 1,349 Deferred income taxes 1,989 1,989 ------------- ------------- Total current assets 36,184 35,303 ------------- ------------- PROPERTY, PLANT AND EQUIPMENT, NET 194,737 191,254 OTHER NONCURRENT ASSETS 2,566 2,662 ------------- ------------- Total assets $ 233,487 $ 229,219 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt and capital lease obligations $ 2,120 $ 1,982 Accounts payable 3,281 2,709 Accrued payroll and benefits 2,062 1,972 Property, production and franchise taxes payable 4,156 3,682 Other current liabilities 2,615 1,904 ------------- ------------- Total current liabilities 14,234 12,249 ------------- ------------- LONG-TERM LIABILITIES Long-term debt and capital lease obligations 60,920 61,513 Other noncurrent liabilities 3,042 2,283 Deferred income taxes 12,398 11,782 ------------- ------------- Total liabilities 90,594 87,827 ------------- ------------- SHAREHOLDERS' EQUITY Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued -- -- Common stock, $.01 par value, 50,000,000 shares authorized, 20,425,513 and 20,377,623 issued and outstanding 204 204 Paid-in capital 141,710 141,193 Accumulated earnings (deficit) 979 (5) ------------- ------------- Total shareholders' equity 142,893 141,392 ------------- ------------- Total liabilities and shareholders' equity $ 233,487 $ 229,219 ============= ============= See notes to consolidated financial statements. 3 STILLWATER MINING COMPANY CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (in thousands, except per share amounts) THREE MONTHS ENDED MARCH 31, --------------------------------- 1998 1997 ------------- ------------- REVENUES $ 21,513 $ 16,003 COSTS AND EXPENSES Cost of metals sold 15,604 16,191 Depreciation and amortization 2,814 2,780 ------------- ------------- Total cost of sales 18,418 18,971 General and administrative expense 723 333 ------------- ------------- Total costs and expenses 19,141 19,304 ------------- ------------- OPERATING INCOME (LOSS) 2,372 (3,301) Other income (expense) Interest income 256 250 Interest expense, net of capitalized interest of $222 and $742 (1,028) (509) ------------- ------------- INCOME (LOSS) BEFORE INCOME TAXES 1,600 (3,560) INCOME TAX (PROVISION) BENEFIT (616) 1,370 ------------- ------------- NET INCOME (LOSS) $ 984 $ (2,190) ============= ============= NET INCOME (LOSS) PER SHARE Basic and diluted earnings per share $ 0.05 $ (0.11) ============= ============= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic 20,383 20,171 Diluted 20,672 20,171 See notes to consolidated financial statements. 4 STILLWATER MINING COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (in thousands) THREE MONTHS ENDED MARCH 31, --------------------------------- 1998 1997 ------------- ------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (NOTE 6) $ 4,605 $ (8,221) ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures, including capitalized interest (6,297) (7,431) Purchase of short-term investments (2,129) -- Proceeds from maturity of short-term 3,828 6,403 investments Proceeds from sale of assets -- 60 ------------- ------------- NET CASH USED IN INVESTING ACTIVITIES (4,598) (968) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of common stock 517 791 Payments on long-term debt and capital lease obligations (455) (303) Proceeds from capital lease -- 855 ------------- ------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 62 1,343 ------------- ------------- CASH AND CASH EQUIVALENTS Net increase (decrease) 69 (7,846) Balance at beginning of period 4,191 16,389 ------------- ------------- BALANCE AT END OF PERIOD $ 4,260 $ 8,543 ============= ============= See notes to consolidated financial statements. 5 STILLWATER MINING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - GENERAL The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial condition and results of operations have been included. Operating results for the three-month period ended March 31, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Stillwater Mining Company (the "Company") Form 10-K for the year ended December 31, 1997. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RECLASSIFICATIONS Certain amounts in the accompanying consolidated financial statements for 1997 have been reclassified to conform to the classifications used in 1998. COMPREHENSIVE INCOME Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income. This Statement establishes standards for reporting and display of comprehensive income and its components. The effect of adopting SFAS No. 130 was not material for any of the periods presented. NOTE 3 - INVENTORIES Inventories consisted of the following (in thousands):
(Unaudited) MARCH 31, December 31, 1998 1997 ------------------ ----------------- Raw ore $ 315 $ 460 Concentrate and in-process 3,586 3,604 ------------------ ----------------- Metals inventory 3,901 4,064 Materials and supplies 3,454 3,316 ------------------ ----------------- $ 7,355 $ 7,380 ================== =================
6 STILLWATER MINING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 4 - PRECIOUS METALS HEDGING CONTRACTS Precious metals hedging contracts at March 31, 1998, consist of spot deferred forward sales contracts, which require the future delivery of metals at a specific price. The realization of revenue pursuant to these contracts is dependent upon the counterparties' performance in accordance with the terms of the contracts. The Company anticipates all counterparties will meet their obligations under the contracts. At March 31, 1998, the Company's outstanding hedge contracts were as follows: 1998 ----------------------------------------- Hedged Average Price per Ounces Ounce ------------------------------------------ PALLADIUM 157,120 $138 PLATINUM 3,855 $369 The Company has credit agreements with its major trading partners that provide for margin deposits in the event that forward prices for palladium and platinum exceed the Company's hedge contract prices and their credit lines. NOTE 5 - EARNINGS PER SHARE In 1997, the Company adopted SFAS No. 128, Earnings per Share. All prior period earnings per share data presented have been restated to conform to the provisions of this Statement. Outstanding options to purchase 856,849 and 0 shares of common stock were included in the computation of diluted earnings per share for the three-month period ended March 31, 1998 and 1997, respectively. Outstanding options to purchase 446,575 and 1,127,975 shares of common stock were excluded from the computation of diluted earnings per share for the three-month period ended March 31, 1998 and 1997, respectively, because to do so would have been antidilutive using the treasury stock method. In addition, 1.9 million shares of common stock issuable under the terms of the Company's Convertible Subordinated Notes were excluded from the computation of diluted earnings per share for the three-month period ended March 31, 1998 and 1997, because to do so would have been antidilutive. 7 STILLWATER MINING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 6 - CASH FLOW INFORMATION Reconciliation of net income (loss) to net cash provided (used in) operating activities is as follows (in thousands): Three months ended March 31, 1998 1997 - -------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 984 $(2,190) ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Depreciation and amortization 2,814 2,780 Deferred income taxes 616 (1,370) Other -- (30) CHANGES IN OPERATING ASSETS AND LIABILITIES: Decrease in inventories 25 1,594 Increase in accounts receivable (2,278) (5,285) Decrease (increase) in other current assets (258) 37 Decrease in other noncurrent assets 96 96 Increase (decrease) in accounts payable 572 (1,830) Increase (decrease) in other current liabilities 1,275 (2,742) Increase in noncurrent liabilities 759 719 - -------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 4,605 $(8,221) - -------------------------------------------------------------------------------- 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS STILLWATER MINING COMPANY KEY FACTORS (Unaudited) THREE MONTHS ENDED MARCH 31, ------------------------------ 1998 1997 --------- --------- OUNCES PRODUCED Palladium (000) 77 61 Platinum (000) 24 19 --------- --------- Total Production 101 80 TONS MINED (000) 165 121 TONS MILLED (000) 165 122 AVERAGE MILL GRADE (OPT) 0.68 0.74 MILL RECOVERY (%) 91 87 CASH COSTS PER TON MILLED (1) $ 94 $ 121 CASH COSTS PER OUNCE PRODUCED (1) $ 153 $ 184 Depreciation and Amortization 28 35 --------- --------- Total Costs per Ounce Produced (1) $ 181 $ 219 OUNCES SOLD Palladium (000) 74 62 Platinum (000) 23 20 --------- --------- Total Ounces Sold 97 82 AVERAGE REALIZED PRICE PER OUNCE (2) Palladium $ 167 $ 136 Platinum $ 404 $ 381 Combined $ 223 $ 195 AVERAGE MARKET PRICE PER OUNCE (2) Palladium $ 241 $ 136 Platinum $ 387 $ 368 Combined $ 276 $ 191 (1) Cash costs of production include cash costs of mining, processing and general and administrative expenses at the mine site (including overhead, taxes other than income, royalties, and credits for metals produced other than palladium and platinum). Total costs of production include cash costs plus depreciation and amortization. Income taxes and interest income and expense are not included in either total or cash costs per ounce produced. (2) Stillwater Mining reports a combined average realized price of palladium and platinum at the same ratio as ounces are produced from the Base Metals Refinery, i.e. 3.2:1. The same ratio is applied to the average market price. 9 This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include comments regarding anticipated capital expenditures and sources of financing for capital expenditures. In addition to factors discussed below, the factors that could cause actual results to differ materially include, but are not limited to, the following: supply and demand of palladium and platinum, unexpected events during expansion, fluctuations in ore grade, tons mined, crushed or milled, variations in smelter of refinery operation, amounts and prices of the Company's forward metals sales and geological, technical, permitting, mining or processing issues. For a more detailed description of risks attendant to the business and operations of Stillwater and to the mining industry in general, please see the Company's other SEC filings, in particular the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. RESULTS OF OPERATIONS Revenues -------- Revenues for the first quarter of 1998 increased $5.5 million, or 34%, to $21.5 million compared to $16.0 million in the first quarter of 1997. The increase in revenue was due to an 18% increase in the quantity of metal sold combined with a 14% increase in the average realized price per ounce of palladium and platinum. During the first quarter of 1998, the Company sold 74,000 ounces of palladium and 23,000 ounces of platinum, respectively, at average realized prices of $167 and $404, respectively, compared with sales of 62,000 ounces of palladium and 20,000 ounces of platinum, respectively, at average realized prices of $136 and $381 in the prior year's comparable period. During the first quarter of 1998, the average market prices of palladium and platinum were $241 and $387, respectively. As a result of hedge contracts that were entered into in 1997, the Company realized $5.1 million less revenue in the first quarter of 1998 than would have been realized if metal had been delivered at prevailing market prices. During the first quarter of 1998, the Company increased production 26% to 77,000 ounces of palladium and 24,000 ounces of platinum compared with production of 61,000 ounces of palladium and 19,000 ounces of platinum in the first quarter of 1997. Costs ----- Cost of metals sold decreased by $0.6 million, or 4%, from $16.2 million in the first quarter of 1997 to $15.6 million in the first quarter of 1998. The cash cost per ounce produced decreased 17% from $184 in the first quarter of 1997 to $153 in 1998. The decrease in costs is the result of operating efficiencies that have occurred as a result of completion of an expansion at the Stillwater Mine. During 1997, the facility increased production capacity from 1,200 tons per day to 2,000 tons per day. In addition, materials handling and processing efficiencies were realized upon commissioning of the production shaft in June 1997 and upgrades to the grinding and flotation circuits in the concentrator. Operating Income ---------------- As a result of the increase in revenues and the decrease in operating costs discussed above, operating income in the first quarter of 1998 increased by $5.7 million to $2.4 million compared with an operating loss of $3.3 million in the comparable period of 1997. 10 Other Income (Expense) ---------------------- During the first quarter of 1998, interest expense increased by $0.5 million to $1.0 million compared with $0.5 million in the first quarter of 1997. The increase in interest expense is due to the fact that capitalized interest expense decreased from $0.7 million in the first quarter of 1997 to $0.2 million in the first quarter of 1998, since the expansion of the Stillwater Mine was substantially completed in the first half of 1997. Net Income ---------- The Company's income before income taxes amounted to $1.6 million in the first quarter of 1998 compared to a loss before income taxes of $3.6 million in the first quarter of 1997. In the first quarter of 1998, the Company provided for $0.6 million of income taxes compared to a recorded benefit of $1.4 million in the first quarter of 1997. The Company has provided for deferred income taxes at the statutory rate of 38.5%; however, as a result of approximately $46.6 million of operating loss carryforwards the Company will not be required to fund any income tax liability until future years. As a result, the Company reports net income of $1.0 million, or $0.05 per basic and diluted share in the first quarter of 1998, compared to a net loss of $2.2 million, or $0.11 per basic and diluted share in the first quarter of 1997. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital at March 31, 1998 was $22.0 million compared to $23.1 million at December 31, 1997. The ratio of current assets to current liabilities was 2.54 to 1 at March 31, 1998, compared to 2.88 at December 31, 1997. Net cash provided by operating activities in the first quarter of 1998 was $4.6 million compared to net cash used in operating activities of $8.2 million in the first quarter of 1997. The increase in operating cash flow of $12.8 million in 1998 is primarily attributable to an increase in the Company's net income of $3.2 million, an increase in the provision for deferred taxes of $2.0 million and a change in the net operating assets and liabilities of $7.6 million. In the first quarter of 1998 the Company used $4.6 million in investing activities compared to $1.0 million used in investing activities in the first quarter of 1997. The increase is primarily due to a decrease in the net proceeds from maturing short-term investments of $4.7 million in the first quarter of 1998 compared to the first quarter of 1997. During the first quarter of 1998, financing activities provided $0.1 million of net cash compared to $1.3 million in the first quarter of 1997. The decrease is primarily attributable to $0.9 million of capital leases completed in the first quarter of 1997. As a result of the above, cash and cash equivalents increased by $0.1 million in the first quarter of 1998 compared with a decrease of $7.8 million in the comparable period of 1997. During the remainder of 1998, the Company expects to invest approximately $35.6 million in various capital investment programs which may be funded by operating cash flow, the Company's existing working capital and, if required, lease financing or short-term borrowings. The Company is evaluating various plans to expand production at the facility. Dependent on the outcome of such studies, the level of capital expenditures may vary in future periods. The Company has established an unsecured working capital line of credit with NM Rothschild and Sons, Ltd., with a maximum borrowing capacity of $15 million, which expires on April 30, 1999. As of March 31, 1998, there were no borrowings against this credit line, and the Company could borrow up to $11.1 million based upon quarterly borrowing calculations under the terms of the agreement. 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings ----------------- During the period covered by this report, there were no legal proceedings instituted that are reportable. Item 2. Changes in Securities --------------------- None Item 3. Defaults Upon Senior Securities ------------------------------- None Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- None Item 5. Other Information ----------------- None Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: 10.17 Employment agreement between James A. Sabala and the Company dated April 1, 1998. (b) Reports on Form 8-K: None 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned thereunto duly authorized. STILLWATER MINING COMPANY (Registrant) Date: April 29, 1998 By: /s/ William E. Nettles ____________________________________ William E. Nettles Chairman and Chief Executive Officer (Principal Executive Officer) Date: April 29, 1998 By: /s/ James A. Sabala ____________________________________ James A. Sabala Vice President and Chief Financial Officer (Principal Financial Officer) 13 EX-10.17 2 EMPLOYMENT AGREEMENT EXHIBIT 10.17 EMPLOYMENT AGREEMENT THIS AGREEMENT, dated as of April 1, 1998, is by and between STILLWATER MINING COMPANY, a corporation duly organized and existing under the laws of the State of Delaware (the "Company"), and James A. Sabala ("Employee"). WHEREAS, the Company desires to employ Employee and Employee desires to be employed by the Company pursuant to the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the parties agree as follows: ARTICLE 1 EMPLOYMENT The Company hereby employs Employee, and Employee agrees to serve as Vice President and Chief Financial Officer for the Company. ARTICLE 2 TERM The term of this Agreement shall be for a period of one (1) year commencing April 1, 1998, unless sooner terminated as hereinafter provided. The Agreement shall thereafter continue in effect from year to year unless altered or terminated as hereinafter provided. The period of Employee's employment hereunder, including any extension or extensions pursuant to the forgoing sentence, from the date of commencement until the date of expiration of termination of this Agreement, is referred to hereinafter as the "Employment Term." ARTICLE 3 DUTIES AND AUTHORITY Employee agrees, unless otherwise specifically authorized by the Company, to devote substantially all of his business time and effort to his duties for the profit, benefit and advantage of the business of the Company, except that Employee may serve on the boards of directors of other business corporations that have no business relationship with the Company and which do not compete with the Company. In performing his duties hereunder, Employee shall have the authorities customarily held by others holding positions similar to those assigned to Employee in similar businesses, subject to the general and customary supervision of the Company's Board of Directors and Chief Executive Officer. ARTICLE 4 COMPENSATION 4.1 Base Salary. The Company agrees to pay Employee a base salary of ----------- $170,000 per year, payable at the usual times for the payment of the Company's executive employees, subject to adjustment as provided herein. Employee's base salary shall be reviewed at least annually and may be increased, but not decreased, consistent with the general salary increases for the Company's executive employees or as appropriate in light of the performance of Employee and the Company. Notwithstanding anything herein to the contrary, Employee's base salary may be reduced in the event of an across-the board salary reduction for all executive officers; provided, however, that the percentage reduction of Employee's base salary shall not exceed the highest percentage reduction in base salary of any other executive officer. 4.2 Incentive Compensation. Employee shall participate in the ---------------------- Company's incentive compensation plans for executive officers of the Company, as in effect from time to time during the Employment Term. The Company shall adopt an annual incentive program for executive officers of the Company that will provide for a performance based cash bonus of an amount to be determined by the Board of Directors of the Company (the target of which shall be 35% of the Employee's base salary and the maximum of which shall not exceed 70% of Employee's base salary). 4.3 Employee Benefits. Employee shall be eligible to participate in ----------------- such other of the Company's employee benefit plans and to receive such benefits for which his level of employment makes him eligible, in accordance with the Company's policies as in effect from time to time during the Employment Term; provided, however, that Employee shall be entitled to four weeks of vacation during the initial term of this Agreement and during the term of each extension hereof. ARTICLE 5 TERMINATION 5.1 Termination by the Company Without Cause; Termination by Employee ----------------------------------------------------------------- for Good Reason. The Company shall have the right to terminate this Agreement - --------------- without Cause (as defined below) upon ninety (90) days' notice to Employee. If Employee's employment hereunder is terminated by the Company without Cause or by Employee for "Good Reason" (as defined below), the Company shall pay Employee at the time of such termination in a lump sum a cash amount equal to his annual base salary in effect immediately preceding such termination, plus 30% of Employee's base salary. For purposes of this Agreement, "Good Reason" shall mean: (a) A material reduction in Employee's responsibilities, authorities or duties; (b) Employee's job is eliminated other than by reason of promotion or termination for Cause; (c) The Company fails to pay Employee any amount otherwise vested and due hereunder or under any plan or policy of the Company, which failure is not cured within five (5) business days of receipt by the Company of written notice from Employee which describes in reasonable detail the amount which is due; (d) A material reduction in Employee's base salary except in the event of an across- the- board salary reduction for all executive officers; (e) A material reduction in Employee's aggregate level of benefits under the Company's pension, life insurance, medical, health and accident, disability, deferred compensation or savings or similar plans, except in the event of an across-the-board reduction in such benefits for all executive officers; (f) A material reduction in Employee's reasonable opportunity to earn incentive compensation under ant plan in which Employee is a participant; (g) Employee's office is relocated outside of a 50 mile radius of Denver, Colorado without his written consent; (h) The Company and its successor(s) (as described in paragraph (i) below) shall discontinue the business of the Company; or (i) The failure of the company to obtain an agreement to expressly assume this Agreement from any successor to the Company (whether such succession direct or indirect by purchase, merger, consolidation or otherwise, to substantially all of the business and/or assets of the Company or a controlling portion of the Company's stock). 5.2 Termination by the Company for Cause; Voluntary Termination by -------------------------------------------------------------- Employee. Employee's employment hereunder may be terminated by the Company for - -------- "Cause". For purposes of this Agreement, "Cause" shall mean (i) Employee's willful and continued failure substantially to perform his duties hereunder for a period of fifteen (15) days after written notice to Employee by the Company of each such failure, (ii) Employee's dishonesty in the performance of his duties hereunder, or (iii) Employee's conviction of a felony under the laws of the United states or any state thereof. Employee shall have the right to voluntarily terminate this Agreement upon ninety (90) days' notice to the Company. If Employee is terminated for Cause, or if Employee voluntarily terminates employment hereunder other than for Good Reason, he shall be entitled to receive his base salary through the date of termination. All other benefits, if any, payable to Employee following such termination of Employee's employment shall be determined in accordance with the plans, policies and practices of the Company. 5.3 Termination by Death or Disability. Upon termination of Employee's ---------------------------------- employment due to death of Employee, Employee shall be entitled to his base salary at the rate in effect at the time of Employee's death through the end of the month in which his death occurs. Employee's Employment hereunder may be terminated by the Company if Employee becomes physically or mentally incapacitated and is therefore unable for a period of one hundred eighty (180) consecutive days to perform his duties (such incapacity is hereinafter referred to as "Disability"). Upon any such termination for Disability, Employee shall be entitled to receive payment of disability benefits in lieu of salary under the Company's Employee benefit plans as then in effect. ARTICLE 6 INSURANCE Employee agrees that the Company may, from time to time, apply for and take out in its own name and at its own expense, life, health, accident, or other insurance upon Employee that the Company may deem necessary or advisable to protect its interests hereunder; and Employee agrees to submit to any medical or other examination necessary for such purposes and to assist and cooperate with the Company in preparing such insurance; and Employee agrees that he shall have no right, title, or interest in or to such insurance. ARTICLE 7 FACILITIES AND EXPENSES The Company shall make available to Employee such office space, secretarial services, office equipment and furnishings as are suitable and appropriate to employee's title and duties. The Company shall promptly reimburse employee for all reasonable expenses incurred in the performance of his duties hereunder, including without limitation, expenses for entertainment, travel, management seminars and use of the telephone, subject to the Company's reasonable requirements with respect to the reporting and documentation of such expenses. ARTICLE 8 NONCOMPETITION 8.1 Necessity of Covenant. The Company and Employee acknowledge that: --------------------- (a) The Company's business is highly competitive; (b) The Company maintains confidential information and trade secrets as described in Article 9, all of which are zealously protected and kept secret by the Company; (c) In the course of his employment, Employee will acquire certain of the information described in Article 9 and the Company would be adversely affected if such information subsequently, and in the event of the termination of Employee's employment, is used for the purposes of competing with the Company; (d) The Company transacts business throughout the world; and (e) For these reasons, both the Company and Employee further acknowledge and agree that the restrictions contained herein are reasonable and necessary for the protection of their respective, legitimate interests and that any violation of these restrictions would cause substantial injury to the Company. 8.2 Covenant Not to Compete. Employee agrees that from and after the date ----------------------- hereof during the Employment Term and for a period of one (1) year after the end of the Employment Term, he will not, without the express written permission of the Company, which may be given or withheld in the Company's sole discretion, directly or indirectly own, manage, operate, control, lend money to, endorse the obligations of, or participate or be connected as an officer, director, 5% or more stockholder of a publicly-held company, stock holder of a closely-held company, employee, partner, or otherwise, with any enterprise or individual engaged in a business which is competitive with the Platinum Group Metals business conducted by the Company. It is understood and acknowledged by both parties that, inasmuch as the Company transacts business worldwide, this covenant not to compete shall be enforced throughout the United States and in any other country in which the Company is doing business as of the date of Employee's termination of employment. 8.3 Disclosure of Outside Activities. Employee, during the term of his -------------------------------- employment by the Company, shall at all times keep the Company informed of any outside business activity and employment, and shall not engage in any outside business activity or employment which may be in conflict with the Company's interests. 8.4 Survival. The terms of this Article 8 shall survive the expiration or -------- termination of this Agreement for any reason. ARTICLE 9 CONFIDENTIAL INFORMATION AND TRADE SECRETS 9.1 Nondisclosure of Confidential Information. Employee has acquired and ----------------------------------------- will acquire certain "Confidential Information" of the Company. "Confidential Information" shall mean any information that is not generally known, including trade secrets, outside the Company and that is proprietary to the Company, relating to any phase of the Company's existing or reasonably foreseeable business which is disclosed to Employee by the Company including information conceived, discovered or developed by Employee. Confidential Information includes, but shall not be limited to, business plans, financial statements and projections, operating forms (including contracts) and procedures, payroll and personnel records, marketing materials and plans, proposals, software codes and computer programs, project lists, project files, price information and cost information and any other document or information that is designated by the Company as "Confidential." The term "trade secret" shall be defined as follows: A trade secret may consist of any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. Accordingly, Employee agrees that he shall not, during the Employment Term and three (3) years thereafter, use for his own benefit such Confidential Information or trade secrets acquired during the term of his employment by the Company. Further, during the Employment Term and three (3) years thereafter, Employee shall not, without the written consent of the Board of Directors of the Company or a person duly authorized thereby, which consent may be given or withheld in the Company's sole discretion, disclose to any person, other than an employee of the Company or a person to whim disclosure is reasonable necessary or appropriate in connection with the performance by Employee of his duties, any Confidential Information or trade secrets obtained by him while in the employ of the Company. 9.2 Return of Confidential Information. Upon termination of ---------------------------------- Employment, Employee agrees to deliver to the Company all materials that include Confidential Information or trade secrets, and all other materials of a confidential nature which belong to or relate to the business of the Company. 9.3 Exceptions. The restrictions and obligations in Section 9.1 shall not ---------- apply with respect to any Confidential Information which: (i) is or becomes generally available to the public through any means other than a breach by Employee of his obligations under this Agreement; (ii) is disclosed to Employee without obligation of confidentiality by a third party who has the right to make such disclosure; (iii) is developed independently by Employee without use of or benefit from the Confidential Information; (iv) was in possession of Employee without obligations of confidentiality prior to receipt under this Agreement; or (v) is required to be disclosed to enforce rights under this Agreement. 9.4 Survival. The terms of this Article 9 shall survive the expiration or -------- termination of this Agreement for any reason. ARTICLE 10 JUDICIAL CONSTRUCTION Employee believes and acknowledges that the provisions contained in this Agreement, including the covenants contained in Articles 8 and 9 of this Agreement, are fair and reasonable. Nonetheless, it is agreed that if a court finds any of these provisions to be invalid in whole or in part under the laws of any state, such finding shall not invalidate the covenants, nor the Agreement in its entirety, but rather the covenants shall be construed and/or blue-lined, reformed or written by the court as if the most restrictive covenants permissible under applicable law were contained herein. ARTICLE 11 RIGHT TO INJUNCTIVE RELIEF Employee acknowledges that a breach by Employee of any of the terms of Articles 8 or 9 of this Agreement will render irreparable harm to the Company; and that in the event of such breach the Company shall therefore be entitled to any and all equitable relief, including, but not limited to, injunctive relief, and to any other remedy that may be available under any applicable law or agreement between the parties. ARTICLE 12 CESSATION OF CORPORATE BUSINESS This Agreement shall cease and terminate if the Company shall discontinue its business, and all rights and liabilities hereunder shall cease, except as provided in Article 13. ARTICLE 13 ASSIGNMENT 13.1 Permitted Assignment. The Company shall have the right to assign -------------------- this contract to its successors or assigns, and all covenants or agreements hereunder shall inure to the benefit of and be enforceable by or against its successors or assigns. 13.2 Successors and Assigns. The terms "successors" and "assigns" shall ---------------------- mean any person or entity which buys all or substantially all of the Company's assets, or a controlling portion of its stock, or with which it merges or consolidates. ARTICLE 14 FAILURE TO DEMAND, PERFORMANCE AND WAIVER The failure by either party to demand strict performance and compliance with any part of this Agreement during the Employment Term shall not be deemed to be a waiver of the rights of such party under this Agreement or by operation of law. Any waiver by either party of a breach of any provision of this Agreement shall not operate as or be construed as a waiver of any subsequent breach thereof. ARTICLE 15 ENTIRE AGREEMENT The Company and Employee acknowledge that this Agreement contains the full and complete agreement between and among the parties, that there are no oral or implied agreement or other modifications not specifically set forth herein, and that this Agreement supersedes any prior agreements or understandings, if any, between the Company and the Employee, whether written or oral. The parties further agree that no modifications of this Agreement may be made except by means of a written agreement or memorandum signed by the parties. ARTICLE 16 GOVERNING LAW The parties hereby agree that this Agreement shall be construed in accordance with the laws of the State of Colorado, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Colorado or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Colorado. ARTICLE 17 ATTORNEYS' FEES If either party shall commence any action or proceeding against the other that arises out of the provisions hereof, or to recover damages as the result of the alleged breach of any of the provisions hereof, the prevailing party therein shall be entitled to recover all costs incurred in connection therewith, including reasonable attorneys' fees. IN WITNESS WHEREOF, the Company has hereunto signed its name and Employee hereunder has signed his name, all as of the day and year first-above written. STILLWATER MINING COMPANY By - ---------------------------------- -------------------------------- Witness Its ---------------------------- EMPLOYEE - ---------------------------------- ----------------------------------- Witness EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 4,260 11,769 9,204 0 7,355 36,184 251,019 (56,282) 233,487 14,234 60,920 0 0 204 142,689 233,487 21,513 21,513 18,418 19,141 0 0 772 1,600 (616) 984 0 0 0 984 $0.05 $0.05 NET OF INTEREST INCOME OF $256
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