UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported): February 21, 2006
Hecla Mining Company
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
1-8491 82-0126240
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(Commission File Number) (IRS Employer Identification No.)
6500 North Mineral Drive, Suite 200
Coeur d'Alene, Idaho 83815-9408
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(Address of Principal Executive Offices) (Zip Code)
(208) 769-4100
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(Registrant's Telephone Number, Including Area Code
N/A
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (SEE General Instruction A.2. below):
[_] Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14-d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
A. Employment Agreement and Indemnification Agreement with Vice President
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and General Counsel
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On February 17, 2006, Hecla Mining Company (the "Company") announced
the appointment of Philip C. Wolf as Vice President and General Counsel. The
Company's Board of Directors (the "Board") approved a Change-in-Control
Agreement ("Employment Agreement") and Indemnification Agreement with Mr. Wolf
effective February 16, 2006. Mr. Wolf's Employment Agreement and Indemnification
Agreement are substantially identical to prior employment agreements and
indemnification agreements entered into with other executive officers of the
Company. As part of Mr. Wolf's employment, he will receive a base salary of
$200,000 and is eligible for an annual bonus with a target for his position of
40% of base salary, with the opportunity to receive an additional bonus amount
depending on the Company's performance. Mr. Wolf will also be eligible to
participate in the Company's Long-Term Incentive Plan, on terms approved by the
Board, and the Company's other employee benefits.
The material terms of the Employment Agreement are set forth in Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q, filed with the Securities
and Exchange Commission (the "SEC") for the period ended June 30, 2003, and
which are incorporated by reference as Exhibit 10.1. The material terms of the
Indemnification Agreement are set forth in Exhibit 10.4 to the Company's Annual
Report on Form 10-K, filed with the SEC for the period ended December 31, 2004,
and which are incorporated herein by reference as Exhibit 10.2.
In connection with his appointment, Mr. Wolf will receive 20,000 shares
of restricted common stock under the terms of the Company's Key Employee
Deferred Compensation Plan. 10,000 shares of the restricted stock will vest on
February 15, 2007 and the other 10,000 shares of the restricted stock will vest
on February 15, 2008. However, should Mr. Wolf be terminated by the Company for
any reason other than cause before February 1, 2007, the restricted stock shares
will vest immediately. Mr. Wolf will also receive nonqualified stock options to
purchase up to 40,000 shares of the Company's common stock at an exercise price
of $5.04, which was determined by taking the mean between the highest and lowest
reported sales prices of the Company's common stock on the New York Stock
Exchange on February 15, 2006. 20,000 nonqualified stock options will vest on
August 15, 2006 and the other 20,000 nonqualified stock options will vest on
February 15, 2007.
The Company will also reimburse Mr. Wolf for all reasonable relocation
expenses, including reimbursement of any real estate sales commission and normal
seller related closing costs on his home up to the amount of $95,000.
B. Long-Term Performance Payment Plan
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The Company utilizes a Long-Term Performance Payment Plan for senior
executives and other key employees of the Company. Under the plan, a new
performance period begins each calendar year and runs for three years. For
example, the first performance period ran from January 1, 2003 through December
31, 2005. The next three-year performance period would include January 1, 2004
through December 31, 2006. The payout for this period, if earned, would be made
approximately the first quarter 2007.
Under the 2003 - 2005 plan period, performance against minimum hurdle
rates for both the resource growth and cash flow targets had to be met before a
payout could be earned. Neither of these targets were met and no payout was
earned for the 2003 - 2005 plan period.
On February 16, 2006, the Board approved goals for the Hecla Mining
Company Executive Senior Management Long-Term Performance Payment Plan for the
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2006 - 2008 plan period (in the case of Mr. Baker, the independent members of
the Board approve his award) as follows:
2006 - 2008 Plan Period
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Performance Targets - In general, there should be a continued focus on resource
growth and cash contribution generation for the 2006 - 2008 plan period. More
emphasis will be placed on resource growth for the plan period by weighting
resource growth 75% and cash contribution 25% in determining the value of the
incentive award at the conclusion of the 2006 - 2008 plan period. Performance
targets have been established for resource growth (i.e. gold, silver and gold
equivalent resources) and cash contribution generation from the Company's
resources. The goal is to incentivize management to focus on resource growth,
production and cost management.
Performance Unit Awards - The Board assigns performance units at the beginning
of each three-year plan period. On February 16, 2006, the Board approved
Long-Term Performance Payment Plan unit awards (these units could be revised
later in 2006 as part of a review of execution compensation) to the following
executive officers (in the case of Mr. Baker, the independent members of the
Board approved his award) of the Company:
Units
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Phillips S. Baker, Jr., President & CEO 3,970
Philip C. Wolf, V.P. & General Counsel 1,320
Ronald W. Clayton, V.P. - N.A. Operations 1,320
Lewis E. Walde, V.P. & CFO 1,320
Michael H. Callahan, V.P. - Corp. Develop. 1,320
Vicki Veltkamp, V.P. - Investor Relations 1,320
Performance Award Value - As in previous years, performance unit possible
valuation can range from $0 to $200 per unit, depending on performance. For the
2006 - 2008 plan, the Company will use the same performance ranges and payout
values as the previous two plans. Assuming both targets are met at the 100%
level, performance unit terminal value would be $100/unit. On February 16, 2006,
the Board approved a payout arrangement where resource growth and cash
contribution are addressed separately. For example, assuming both resource
growth and cash flow targets are met, the performance award valuation would be
as follows:
1. Resource growth goal @ 100% = $75/performance unit
2. Cash flow goal @ 100% = $25/performance unit
3. Total performance award terminal value = $100
4. Multiplied by number of units awarded an individual
participant
5. Equals total individual participant award
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The Board also approved the same payout arrangement for the 2004 - 2006
plan period as well as the 2005 - 2007 plan period.
The Long-Term Performance Payment Plan is set forth in the Company's
Quarterly Report on Form 10-Q/A, portions of which are incorporated herein by
reference as Exhibit 10.3.
C. 2006 Short-Term Performance Plan
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On February 16, 2006, the Board, based on recommendations of the
Company's senior management and the Compensation Committee, established targeted
quantitative and non-quantitative goals for corporate performance (in the case
of Mr. Baker, the independent members of the Board approved his 2006 goals). For
2006, corporate performance quantitative goals include total gold and silver
production, production costs per ounce for silver and gold, cost containment,
environmental costs, capital expenditures and resource development goals.
Corporate non-quantitative goals include, among other goals, an acquisition,
reducing the Company's Venezuelan risk profile, and resolving certain legal
issues.
The Chief Executive Officer's performance payment for 2006 will be
based solely on corporate performance. The other executive officers' performance
payments will be based 60% upon corporate performance with 40% based upon
individual performance.
The Company's Performance Pay Compensation Plan is set forth in the
Company's Form 10-K, portions of which are incorporated herein by reference as
Exhibit 10.4.
ITEM 5.02 DEPARTURE, ELECTION, OR APPOINTMENT OF DIRECTORS OR OFFICERS
A. Appointment of New Vice President and General Counsel
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On February 16, 2006, the Board appointed Philip C. Wolf as the
Company's Vice President and General Counsel. Mr. Wolf was appointed based on
his extensive legal experience, including securities work, natural resources,
financing, corporate, litigation management, corporate governance, contracts and
acquisitions. Prior to his appointment, Mr. Wolf was Senior Vice President,
General Counsel and Secretary of Compressus Inc. (a small software technology
company) from 2001 to 2004. Mr. Wolf also served as Senior Vice President,
General Counsel and Secretary of Cyprus Amax Minerals Company (a public, Fortune
500, international company) from 1993 to 1999. Prior to that, Mr. Wolf held
other various positions with Cyprus Minerals Company.
See Item 1.01 above, incorporated herein by reference, for a description of Mr.
Wolf's employment arrangements with the Company.
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A copy of the press release dated February 17, 2006, announcing the appointment
of Mr. Wolf is attached hereto as Exhibit 99.1 and incorporated herein by
reference.
B. Directors Not Standing for Re-Election at the 2006 Annual Shareholders
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Meeting
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At the February 16, 2006, Board of Directors meeting, Mr. Arthur Brown
announced that he would not be standing for re-election at the 2006 Annual
Shareholders Meeting to be held on May 5, 2006. Mr. Brown announced that he had
no disagreements with management or the Company; but after serving 19 years as
Chairman of the Board, he was ready to pursue other interests. Mr. Brown had
also served as the Company's Chief Executive Officer from May 1987 to May 2003
and as President from May 1986 to November 2001. Mr. Brown also serves on as
Chairman of the Executive Committee and is a member of the Technical Committee.
In addition to Mr. Brown not standing for re-election, Mr. John E.
Clute also announced that he would not be standing for re-election at the 2006
Annual Shareholders Meeting to be held on May 5, 2006. Mr. Clute announced that
he had no disagreements with management or the Company, but after serving 24
years as a member of the Board of Directors, he was ready to pursue other
interests. Mr. Clute also serves as Chairman of the Corporate Governance and
Directors Nominating Committee and is a member of the Executive Committee and
Compensation Committee.
As a result of only two directors being nominated for election to the
Board at the 2006 Annual Shareholders Meeting, the Board determined to reduce
the size of the Board from nine to eight at the 2006 Annual Shareholders
Meeting.
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BY-LAWS
On, and effective as of February 16, 2006, the Board approved an
amendment to the Company's By-Laws to amend Section 4 of Article III to change
the retirement age of directors. Section 4 of Article III has been amended in
its entirety to read as follows:
Section 4. Qualifications. Directors need not be shareholders of the
Corporation. No person shall be eligible for election or reelection as
a Director, or for appointment to fill a newly created directorship or
a vacancy on the Board, who has attained the age of 72 at the time of
such election or appointment.
The full text of the By-Laws, as amended, will be filed as an Exhibit
to the Company's Form 10-K to be filed in March 2006.
The Board also approved an amendment to the Company's Corporate
Governance Guidelines under Section A. 5. to conform with the amendment to the
Company's By-Laws. Section A. 5. of the Company's Corporate Governance
Guidelines will be amended in its entirety to read as follows:
5. Retirement Age. No director shall be eligible for election or
reelection as a Director, or for appointment to fill a newly created
directorship or a vacancy on the Board of Directors, who has attained
the age of 72 at the time of such election or appointment.
A copy of the Company's By-Laws, as amended on February 16, 2006, is
attached hereto as Exhibit 3.2 and incorporated herein by reference.
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ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
3.2 By-Laws of the Registrant as amended to date.
10.1 Employment Agreement dated February 16, 2006 between Hecla
Mining Company and Philip C. Wolf, incorporated by reference
herein to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2003. (1)
10.2 Indemnification Agreement dated February 16, 2006 between
Hecla Mining Company and Philip C. Wolf incorporated by
reference herein to Exhibit 10.4 to the Company's Annual
Report on Form 10-K for the period ended December 31,
2004. (1)
10.3 Hecla Mining Company Executive and Senior Management Long-Term
Performance Payment Plan incorporated by reference herein to
Exhibit 10.7(b) to the Company's Amendment No. 1 on Form
10-Q/A for the quarter ended June 30, 2003, filed on March 15,
2005. (1)
10.4 Hecla Mining Company Performance Pay Compensation Plan
incorporated by reference herein to Exhibit 10.5(a) to the
Company's Form 10-K for the period ended December 31, 2004,
filed on March 16, 2005. (1)
99.1 News Release announcing appointment of Vice President and
General Counsel
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HECLA MINING COMPANY
By: /s/ Michael B. White
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Name: Michael B. White
Title: Corporate Secretary
Dated: February 21, 2006
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EXHIBIT INDEX
Exhibit No. Title
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3.2 By-Laws of the Registrant as amended to date
99.1 Hecla Mining Company News Release dated February 17, 2006
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