UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities
Exchange Act of 1934 (Amendment No. )
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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Hecla Mining Company
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Charter)
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if other than the Registrant)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Date Filed:
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NOTICE OF 2017 ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the 2017 Annual
Meeting of Shareholders (“Annual Meeting”) of Hecla Mining Company (“we,” “our,” “us,”
“Hecla,” or the “Company”) will be held at the _____________________, located at _______________________,
on Thursday, May 25, 2017, at 10:00 a.m., Pacific Daylight Time, for the following purposes:
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Elect two nominees to the Board of Directors, to serve for a three-year term or until their respective successors are elected;
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Ratify the Audit Committee’s appointment of BDO USA, LLP as our independent registered public accounting firm for 2017;
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Approve, on an advisory basis, the compensation of our named executive officers;
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Approve, on an advisory basis, the frequency of our executive compensation approval vote;
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Approve our Amended and Restated Hecla Mining Company Stock Plan for Nonemployee Directors, including to increase to 3,000,000, the number of shares of common stock available for issuance under such Plan;
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Approve an amendment to our Certificate of Incorporation increasing the number of authorized shares of our common stock from 500,000,000 to 750,000,000;
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Approve amendments to the Company’s Certificate of Incorporation and Bylaws to remove certain 80% supermajority voting provisions;
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Approve amendments to the Company’s Certificate of Incorporation and Bylaws to permit shareholders to call special meetings of shareholders under certain circumstances; and
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Transact such other business as may properly come before the meeting.
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The Board of Directors (“Board”)
has fixed the close of business on March 27, 2017 as the record date for the determination of shareholders entitled to notice of,
and to vote at, the Annual Meeting and at any adjournment or postponement thereof (“Record Date”).
On or about April 10, 2017, we began mailing
to our shareholders of record as of the Record Date, either a Notice of Internet Availability of Proxy Materials (“Notice”)
containing instructions on how to access this Proxy Statement and our 2016 Annual Report (“Proxy Materials”) online,
or a printed copy of these Proxy Materials.
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By Order of the Board of Directors
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Michael B. White
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Corporate Secretary
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April 10, 2017
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NOTICE OF INTERNET AVAILABILITY OF PROXY
MATERIALS
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting to be held on May 25, 2017.
This Proxy Statement and our 2016 Annual
Report are available at http://www.hecla-mining.com
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A Message from our Independent Chairman
Dear Fellow Shareholder:
It is the responsibility of the Board to maintain
sound corporate governance practices and to oversee the Company’s strategic and operational activities in a manner that protects
and creates long-term shareholder value. Your Board is committed to fulfilling these duties and to keeping the interests of our
shareholders and employees at the center of our priorities.
Corporate Strategy
Hecla’s Board operates under the premise
that we are elected by you, the shareholders, to oversee the long-term success of our Company. We are the ultimate decision-making
body of the Company, except for those matters reserved to or shared with our shareholders, and we play a critical role in strategic
planning. Management is responsible for the day-to-day operations and management of the Company.
We oversee and evaluate a very capable management
team that is focused on the growth of the Company. Over the years, we have had to weather the financial markets and lower metal
prices, but we believe the Company made significant progress during those difficult times, which has allowed us to prosper as the
environment for mining companies improved in 2016. In both good times and bad times, Hecla remains committed to the strategic approach
to creating shareholder value - consistent, long-lived production that increases and improves over time. This means we need long-life
assets to profit from higher metals prices, strong geological understanding to increase reserves, and operating expertise to reduce
costs and lower risks.
Governance
The Board, directly and through its Corporate Governance
and Directors Nominating Committee (“Governance Committee”), seeks to maintain corporate governance practices that are aligned with our strategic, financial and operational goals.
We do this by conducting processes at least annually to evaluate, optimize and update governance and practice guidelines.
Your Board is committed to keeping up with
good corporate governance practices. In February 2017, the Board approved an amendment to its Corporate Governance Guidelines to
include a director resignation policy. The policy provides that any director who is not elected by a majority of votes cast shall
tender his or her resignation to the Governance Committee, which will then recommend to the Board whether to accept or reject the
resignation offer, and
the Board will act on the Governance Committee’s
recommendation within ninety (90) days following certification of the election results. Any director who tenders his or her resignation
pursuant to this provision will not participate in the proceedings of either the Governance Committee or the Board with respect
to his or her own resignation offer.
Shareholder Outreach
One of our priorities is listening to the views
of our shareholders and considering them as we make decisions in the boardroom. We accomplish this through ongoing outreach and
engagement with our shareholders. Through management, we engage with shareholders on a variety of topics. Based on this engagement,
we have made significant enhancements to the Company’s governance and compensation programs over the last several years.
Board Composition and Refreshment
Shareholders continue to express a genuine
and legitimate interest in finding effective ways to ensure that boards of directors are comprised of the right people, with the
right skills and qualifications, to effectively represent their interests. The issue of Board composition and refreshment is a
priority of our shareholders, and we agree that refreshing the Board with new perspectives and new ideas is critical to a forward-looking
and strategic Board. At the same time, it is also important to benefit from the valuable experience and familiarity that longer-serving
directors bring to the boardroom. The Board is also very conscious of the benefits of diversity on the Board. Ensuring diverse
perspectives, including a mix of skills, experience and backgrounds, is key to effectively representing the long-term interests
of shareholders. Doing so is a top priority of the Board. In just the last year and a half, three new directors have been appointed
to our Board. As a result, the average tenure for our directors has been reduced and our Board now includes a woman director.
We remain committed to ensuring your Board
is composed of a highly capable and diverse group of directors, well-equipped to oversee the success of the business and effectively
represent the interests of our shareholders. We will continue to seek qualified candidates that will further enhance our Board’s
diversity.
Your participation and your votes are important
to the future of our Company. We encourage you to vote your shares in accordance with the Board’s recommendations. Details
of the items to be voted upon are provided throughout this Proxy Statement.
Ted Crumley
Chairman
A Message from our President and Chief Executive
Officer
Dear Fellow Shareholder:
On behalf of your entire Board and the management
team, I deeply appreciate your support and faith in our Company. I also want to express my gratitude to our Board for its guidance
and support as we execute our strategy, which we expect to yield long-term shareholder value as it has throughout 2016 and into
2017. To all our employees, please accept my appreciation for your readiness to adapt, your responsiveness, creativity and willingness
to work together towards attaining that success.
Our Responsibility
At Hecla, our Integrated Corporate Responsibility
Policy begins with the belief that a safe mine is a productive mine – each day, each shift, home safely. We will strive to
guard the health and safety of our employees and the community. Second, we will be responsible environmental stewards and strive
to minimize environmental effects during exploration, development and operations and then reclaim our projects to productive post
mining land uses. Third, we believe that by being responsive to community needs, the Company builds trust and relationships that
foster our social license to operate. This encompasses taking a mutually-beneficial approach to issues affecting the community,
treating others with respect, and engaging in open and honest communication. Each of these aspects is integrated into our business
planning as they are considered key to our core business strategy and continued profitability.
Our Strategy and 2016 Accomplishments
Our simple strategy is to explore, develop
and operate properties that have consistent, long-lived production that grows and whose margins improve over time.
At the heart of our strategy is long-lived,
low-cost mines: both our existing mines and acquiring assets with the ability to be long-lived, making smart investments to further
extend the mine life, which in turn enables us to work toward lowering both operating and capital costs and to take advantage of
the metals’ price cycle.
Building around the core of long-lived, low-cost
mines are the four elements necessary to be successful. The first is metals that we mine. While our focus is primarily on silver
and gold, we continue to produce a substantial amount of lead and zinc as by-products. The recent acquisitions of Rock Creek and
Montanore in northwestern Montana gives us two of the largest undeveloped silver and copper deposits in North America. The advantages
of this diversity include multiple revenue streams, which lowers our risk profile and provides a natural hedge with more stability
and predictability of revenues, enabling us to better run our business.
Second is our committed and talented employees,
many of whom have been with the Company for decades, who are working together making our mines more safe, efficient and productive.
Third is financial discipline. During my tenure
as president and CEO we have issued a significant amount of equity only three times: 2003, 2008-2009, and 2013 – the latter
two were to acquire new assets (Greens Creek and Casa Berardi). Over the past several years we have seen our production and reserves
per share grow more than an average of our peers. Combined with low-cost growth, this disciplined approach has also created shareholder
value.
Finally, our North American focused asset portfolio
takes advantage of low-risk, mining-friendly jurisdictions where, by being responsive to community needs, we’ve built trust
and relationships that foster our social license to operate.
In 2016, some of our key achievements included
the following:
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silver equivalent production of 46.1 million ounces, the highest in the Company’s history;
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a 48% increase in silver production to 17.2 million ounces, a record, with cost of sales of $298.7 million, and cash cost after by-product credits, per silver ounce of $3.10;
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1
2016 silver equivalent calculation is based on the
following prices: $17.10 for silver, $1,248 for gold, $0.85 for lead, and $0.95 for zinc.
2
Cash cost, after by-product credits,
per silver and gold ounce represents a non-GAAP measurement, a reconciliation of which to cost of sales and other direct production
costs and depreciation, depletion and amortization, the most comparable GAAP measure, can be found in Appendix F under
Reconciliation
of Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) to Cost of Sales and Other Direct Production
Costs and Depreciation, Depletion and Amortization (GAAP)
. It is an important operating statistic that management utilizes
to measure each mine’s operating performance. It also allows the benchmarking of performance of each mine versus those of
our competitors. As a primary silver mining company, management also uses the statistic on an aggregate basis – aggregating
the Greens Creek, Lucky Friday and San Sebastian mines – to compare performance with that of other primary silver mining
companies. With regard to Casa Berardi, management uses cash cost, after by-product credits, per gold ounce to compare its performance
with other gold mines. The statistic is also useful in identifying acquisition and investment opportunities as it provides a common
tool for measuring the financial
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a 24% increase in gold production to 233,929 ounces Company-wide, with 145,975 ounces produced at Casa Berardi; with cost of sales and other direct production costs and depreciation, depletion and amortization of $155.7 million and cash cost, after by-product credits, per gold ounce of $764;
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cash provided by operating activities of $225.3 million, a 112% increase compared to 2015;
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net income of $69 million and Adjusted EBITDA of $264.6 million, a 179% and 127% increase compared to 2015;
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achieved the above milestones while ending the year with a cash, cash equivalents and short-term investments balance of $198.9 million as of December 31, 2016, an increase of $43.7 million during the year;
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commenced development of the East Mine Crown Pillar (“EMCP”) open pit project at Casa Berardi, with processing of ore from EMCP that began in July 2016;
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completed the #4 Shaft at Lucky Friday, the largest capital project in our history, which started in 2008;
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acquisition of Mines Management, Inc., giving us ownership of the Montanore project, a very large silver/copper project undergoing permitting in northwestern Montana; and
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the first hardrock mining company to receive independent certification under CORESafety.
4
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In 2016, Hecla celebrated its 125
th
anniversary. We believe our strategy and accomplishments provided Hecla’s shareholders with substantial share value.
performance of other mines with varying geologic,
metallurgical and operating characteristics. In addition, the Company may use it when formulating performance goals and targets
under our incentive program.
3
Adjusted EBITDA is a non-GAAP
measurement, a reconciliation of which to net income (loss), the most comparable GAAP measure, can be found in Appendix F under
Reconciliation of Adjusted EBITDA (non-GAAP) to Net Income (Loss) (GAAP)
. Adjusted EBITDA is a measure used by management
to evaluate the Company’s operating performance but should not be considered an alternative to net income (loss), or cash
provided by operating activities as those terms are defined by GAAP, and does not necessarily indicate whether cash flows will
be sufficient to fund cash needs. In addition, the Company may use it when formulating performance goals and targets under our
incentive program.
4
CORESafety
is a partnership led by the members of the National Mining Association. It is an approach to mining safety and health to prevent
accidents before they happen using a management system that involves leadership, management and assurance. Its objective is to
have zero fatalities and a 50 percent reduction in mining’s injury rate within five years (0:50:5).
We sincerely hope you will be able to attend
and participate in our Annual Meeting. We welcome the opportunity to meet with many of you and give you a firsthand report on our
progress, as well as express our appreciation for your confidence and support.
Phillips S. Baker, Jr.
President and Chief Executive Officer
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 25, 2017
TABLE OF CONTENTS
PROXY STATEMENT SUMMARY
This summary highlights information
contained elsewhere in this Proxy Statement. This summary does not contain all the information you should consider and you should
read the entire Proxy Statement before voting. For more complete information regarding the Company’s 2016 performance, please
review our Annual Report on Form 10-K.
ADMISSION TO ANNUAL MEETING
Only record or beneficial
owners of Hecla’s common stock as of the Record Date, or a valid proxy or representative of such shareholder, or an invited
guest of management, may attend the Annual Meeting in person. Any shareholder, proxy or representative who wishes to attend the
Annual Meeting must present the documentation described under “General Information about the Meeting – Rules for Attending
the Annual Meeting” on page _____.
PROXY PROPOSALS
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Proposals
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Board Vote
Recommendation
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Page Reference
For More Information
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Proposal 1 –
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Election of Two Class I Directors
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FOR
each Director Nominee
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Proposal 2 –
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Ratification of BDO USA, LLP as the Company’s Independent Registered Public Accounting Firm for 2017
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FOR
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Proposal 3 –
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Advisory Vote on Executive Compensation
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FOR
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Proposal 4 –
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Advisory Vote on Frequency of Vote on Executive Compensation
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ANNUAL
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Proposal 5 –
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Approval of Amended and Restated Hecla Mining Company Stock Plan for Nonemployee Directors, including to Increase to 3,000,000 the Number of Shares of Common Stock Available for Issuance under the Hecla Mining Company Stock Plan for Nonemployee Directors
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FOR
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Proposal 6 –
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Amendment to the Company’s Certificate of Incorporation to Increase the Number of Authorized Shares
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FOR
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Proposal 7 –
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Approval of Amendments to the Company’s Certificate of Incorporation and Bylaws to Remove Certain 80% Supermajority Voting Provisions
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FOR
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Proposal 8 –
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Approval of Amendments to the Company’s Certificate of Incorporation and Bylaws to Permit Shareholders to Call Special Meetings of Shareholders Under Certain Circumstances
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FOR
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CLASS I DIRECTOR NOMINEES TO SERVE UNTIL
THE 2020 ANNUAL MEETING
Our Board is composed of nine members divided
into three classes, with each class serving a term of three years. Our director, Dr. Anthony P. Taylor, has reached the mandatory
retirement age of 75 and will not be standing for re-election at the Annual Meeting. The size of the Board will be reduced to eight
at the Annual Meeting.
The Board and the Governance Committee
believe the two director nominees (Baker and Johnson) possess the necessary qualifications to provide effective oversight of our
business and quality advice and counsel to the Company’s management.
The following table summarizes important
information about each director nominee standing for re-election to the Board for a three-year term expiring in 2020.
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Class I Director Nominees
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Experience and Qualifications
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Phillips S. Baker, Jr.
(age 57)
Director since 2001
Chairman of the Executive Committee
Serves on one other public company board
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·
Public
company board service
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CEO/administration
and operations
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Finance
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Industry
and mining experience
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Reputation
in the industry
·
Legal
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George R. Johnson
(age 68)
Independent Director since 2016
Retired mining executive
Serves on one other public company board
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·
Public
company board service
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Industry
and mining experience
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International
business
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Leadership/executive
officer experience
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Reputation
in the industry
·
Mining
engineering
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CORPORATE GOVERNANCE HIGHLIGHTS
We are committed to good corporate governance
practices and believe that Proposals 7 and 8 are in the best interests of our shareholders. We believe that if passed they would
enhance Board and management accountability and help build public trust in the Company. In addition to Proposals 7 and 8 described
beginning on pages ___ and ____, respectively, the
Corporate Governance and Related Matters
section beginning on page ____
further describes our current governance framework, which includes the following highlights:
SHAREHOLDER RIGHTS
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Director Resignation Policy
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Directors who receive more “Against” votes than “For” votes must tender their resignation to the Board for consideration.
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No Poison Pill
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We do not have a shareholder rights plan (commonly referred to as a “poison pill”).
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Majority Voting for Director Elections
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Directors are elected by a majority of votes cast, which increases Board accountability to shareholders.
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BOARD STRUCTURE
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Governance Policies
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Our Corporate Governance Guidelines provide shareholders with information regarding the best practice principles of our corporate governance program and Board framework.
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Board Refreshment and Tenure
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We added two new directors in 2016 and one new director in 2017, thereby reducing the average tenure of the Board from 11 years to approximately 9 years.
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90% Independent
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Eight of nine directors are independent, including the Audit, Compensation, and Governance Committee members.
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Independent Chairman of the Board
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The positions of CEO and Chairman of the Board are held by separate persons. The Board believes this structure is optimal for the Company because it allows the CEO to focus on leading the Company’s business and operations, and the Chairman to focus on broader strategies and leading the activities of the Board.
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Regular Executive Sessions of Independent Directors
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Executive sessions of non-management directors are included on the agenda for every regularly scheduled Board meeting.
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Committee Governance
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Our Board committees have written charters that clearly establish their respective roles and responsibilities, and are comprised exclusively of independent directors. Committee composition and charters are reviewed annually by our Board.
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Mandatory Retirement
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We have a mandatory director retirement age of 75, which helps ensure regular refreshment of our Board.
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Annual Performance Evaluations
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Our Governance Committee oversees an annual performance evaluation of our Board, while the Committees perform their own self-evaluations on an annual basis.
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Access to Management and Experts
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Our Board and Committees have complete access to all levels of management and can engage advisors at our expense, giving them access to employees with direct responsibility for managing our Company and experts to help them fulfill their oversight responsibilities on behalf of our shareholders.
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Succession Planning
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Our Board’s Compensation Committee and/or our full Board reviews potential CEO and other senior executive successors annually to develop our future leaders and ensure we can sustain business continuity, if any of these key employees were to leave our Company.
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EXECUTIVE COMPENSATION
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Stock Ownership Guidelines
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We have rigorous share ownership guidelines for our Section 16(b) officers and our directors.
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Annual Say-on-Pay Vote
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Shareholders have the opportunity annually to cast an advisory vote on our executive compensation. In Proposal 4 of this Proxy Statement, the Board is recommending that the shareholders continue to have the opportunity to cast an annual advisory vote on our executive compensation.
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At-Risk, Performance-Based Compensation
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84%
of CEO and 74% of NEO pay is at-risk
5
. Over 68% of total compensation
for the CEO is performance-based and 54% of total compensation for the other NEOs is performance-based.
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Stock Awards
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We grant restricted stock units to retain our senior executives and align their interests with long-term interests of our shareholders. The restricted stock units vest in equal amounts with annual vesting dates over a three-year period.
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5
Pay
at-risk refers to the portion of an employee’s compensation that is variable, and therefore “at-risk” of
not being paid out. This “at-risk pay” is typically performance-based, and is in contrast to the fixed pay (salary)
that the NEO receives as a condition of employment.
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Change in Control Agreements
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Our change in control agreements are double-trigger and contain no excise tax gross-up provision.
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Insider Trading Policy
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Our Insider Trading Policy prohibits all directors, executive officers and certain other employees from purchasing or selling any Company securities three weeks before through two days after the public release of any of our periodic results, or at any other time during the year while in possession of material non-pubic information about the Company.
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Anti-hedging and Anti-pledging policies
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Our Insider Trading Policy provides that directors and officers are prohibited from hedging or pledging any securities of the Company.
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Clawback Policy
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Each of the Company’s incentive plans (Annual Incentive Plan, Long-term Incentive Plan, Key Employee Deferred Compensation Plan, and 2010 Stock Incentive Plan) have clawback provisions.
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SHAREHOLDER OUTREACH
Over the last several years we have undertaken
significant shareholder outreach efforts in order to elicit and understand the concerns of our shareholders. After implementing
certain changes in 2014 and 2015 to our executive compensation program, our 2016 say-on-pay vote received 81% support. The Compensation
Committee believes the changes made in 2014 and 2015 impacted the vote because they were responsive to the feedback from investors
and proxy advisory firms, and enhanced the performance orientation of our executive compensation program. The current frequency
of shareholder advisory votes on executive compensation is every year.
Once again, in advance of our 2017 Annual
Meeting, we engaged with our shareholders and others to seek their feedback. We held one-on-one discussions with shareholders holding
over 50,000,000 shares of our common stock, as well as a face-to-face discussion with one of the proxy advisory firms. The response
was overwhelmingly supportive to the changes we made to our executive compensation program in 2014 and 2015. The results of this
engagement, and the Compensation Committee’s ongoing efforts to ensure a strong alignment between executive pay and Company
performance, led the committee to make no substantive changes to its executive compensation program in 2016. However, in December
2015, due to budget reductions for 2016, our Chief Executive Officer’s (“CEO”) base salary was reduced by 20%,
and all base salaries for other named executive officers (“NEOs”) were reduced by 10%, effective through all of calendar year 2016. In addition,
our Board’s annual cash payments were reduced by 10% through calendar year 2016.
In addition to seeking input on our compensation
practices, our shareholder outreach program seeks to identify corporate governance matters that are of concern primarily to our
shareholders, but also to the major proxy advisory firms.
During our shareholder outreach in 2015
and 2016, three corporate governance issues were discussed with our shareholders: (i) the ability of shareholders to call special
meetings, (ii) the 80% supermajority voting requirement to amend provisions in our Certificate of Incorporation and Bylaws impacting
special meetings, and (iii) the absence of a director resignation policy.
At our 2014 Annual Meeting, we asked
shareholders to vote on a proposal to amend our Certificate of Incorporation and Bylaws to permit shareholders to call
special meetings under certain circumstances. Under our Certificate of Incorporation, this change required the
approval by holders of 80% of our outstanding shares of common stock, yet we only received approval from 41%. We again
submitted this proposal at last year’s Annual Meeting and only received approval from 47%. In addition, last year we
added another proposal to amend our Certificate of Incorporation and Bylaws to change the required approval of certain
amendments to those documents relating to the ability to call a special meeting from 80% to a two-thirds voting standard.
This change also required the approval by holders of 80% of our outstanding shares of common stock, and we only received
approval from 46%. In a continued effort to show our support of shareholder feedback, we are again adding these two proposals
to the ballot for shareholders to approve at the 2017 Annual Shareholder Meeting.
In February 2017, the Board approved amendments
to our Corporate Governance Guidelines, which included a director resignation policy. Any director who is not elected by a majority
of the votes cast, shall tender his or her resignation to the Governance Committee which will then recommend to the Board whether
to accept or reject the resignation offer, and the Board will act on the Governance Committee’s recommendation within ninety
(90) days following certification of the election results. Any director who tenders his or her resignation pursuant to this provision
will not participate in the proceedings of either the Governance Committee or the Board with respect to his or her own resignation
offer.
KEY COMPENSATION ACTIONS TAKEN IN 2016
Below is a brief summary of actions taken
by the Compensation Committee in 2016. The compensation of our NEOs for 2016 is more fully
described in the
Compensation Discussion and Analysis
section of this Proxy Statement, starting on page ____ and in the
compensation tables starting on page _____.
Reduction in Annual Cash Compensation
for our Board.
Effective January 1, 2016, the Compensation Committee recommended and the Board approved a 10% reduction in
our Board’s annual cash compensation in 2016.
Reduction in Base Salaries for the CEO
and other NEOs
. Effective January 1, 2016, the Compensation Committee approved base salary reductions for our NEOs. Our
CEO’s base salary was reduced by 20%, and all other NEOs’ base salaries were reduced by 10%.
Annual Incentive Plan (“AIP”)
.
2016 was the strongest year in Hecla’s history, from a silver and silver equivalent production perspective, a result driven
by the tremendously successful San Sebastian mine, as well as production at our other mines that exceeded our expectations. Silver
production increased by 48%, which drove our excellent financial performance, generating cash provided by operating activities
of $225.3 million, $264.6 million in adjusted EBITDA, and adding $44 million cash and short-term investments to the balance sheet,
while reducing the net debt/EBITDA ratio by 60%. The life of our San
Sebastian mine was increased by more than
a year and it provided cash, provided by operating activities of $93.9 and $92.4 million in free cash flow in 2016.
6
These strong results were recognized by the market, and our share price increased by 177% in 2016, significantly outpacing most
of our peers.
For 2016, Company performance for quantitative
AIP purposes was determined by the Compensation Committee to be 150% of target. This result was comprised of 85% for quantitative
measures (listed below); 40% for qualitative factors; and 25% was discretionary.
2016 AIP Quantitative Measure
Results
|
Target
|
Actual
|
Performance
Value
|
Production
Silver equivalent ounces
|
42.0 mm ozs.
|
46.5 mm ozs.
|
30%
|
|
Adjusted EBITDA
|
$255 mm
|
$264.6 mm
|
17.5%
|
|
Cash
|
$100 mm
|
$198.9 mm
|
30%
|
|
Work-related injury reduction
|
15%
|
25%
|
7.5%
|
|
Total Quantitative
|
85%
|
The Compensation Committee approved payout of the AIP awards to be 75% cash and 25% in Hecla common stock issued under the 2010 Stock Incentive Plan. The AIP (qualitative and discretionary
factors) is more fully described in the
Compensation Discussion and Analysis
section of this Proxy Statement, starting on
page _____.
2014-2016 Long-term Incentive Plan (“LTIP”)
.
The 2014-2016 LTIP had a maximum potential unit value of $375. The Compensation Committee assessed performance under the 2014-2016
LTIP as follows:
|
Performance Measure
|
Target
|
Actual
Performance
|
% of Target
|
Value
Earned
Per Unit
|
|
Silver Reserve Growth
|
30.0 silver oz. added (millions)
|
Silver oz. decreased by 2.7 mm oz.
|
-9
|
No Payout
|
|
Production Growth
|
70.5 silver oz. (millions)
|
76.5 silver oz. (millions)
|
108
|
$50.00
|
|
Cash Flow
|
$628.75 Cash Flow (millions)
|
$829.36 Cash Flow (millions)
|
132
|
$75.00
|
|
Total Shareholder Return
|
60% Hecla ranking vs. peers
|
92.9%
Hecla ranking vs. peers
|
155
|
$82.25
|
|
#4 Shaft Completion
|
Shaft Completed by 5/1/16
|
1/20/17 completion date
|
0
|
No Payout
|
|
Total Earned Per Unit
|
|
|
|
$207.25
|
6
Free cash flow is a non-GAAP
measurement used by management to analyze cash flows generated from operations. It is calculated as cash provided by operating
activities (GAAP) less additions to properties, plants, equipment and mineral interests (GAAP). The Company believes free cash
flow is also useful as one of the bases for comparing the Company’s performance with its competitors. Although free cash flow
and similar measures are frequently used as measures of cash flows generated from operations by other companies, the Company’s
calculation of free cash flow is not necessarily comparable to such other similarly titled captions of other companies.
During this three-year period, performance
in production exceeded the maximum threshold, and cash flow generation and TSR components fell between target and the maximum threshold.
The #4 Shaft completion and silver reserve growth were each below the threshold. As a result, with a range in potential value per
unit of $0 to $375, in February 2017, the Compensation Committee determined that the total 2014-2016 LTIP payout was $207.25 per
unit. The Compensation Committee further approved payout of the LTIP awards to be 75% in cash and 25% in Hecla common stock issued
under the 2010 Stock Incentive Plan. The 2014-2016 LTIP is more fully described in the
Compensation Discussion and Analysis
section of this Proxy Statement, starting on page _____.
CEO PAY MIX FOR 2016
|
Ø
2016
Base Salary
- $484,000 (20% reduction in 2016).
Ø
Annual
Incentive Plan Payout
- $907,500 (150% of target). Paid 75% in cash and 25% in common stock.
Ø
Long-term
Incentive Plan Payout
- $1,968,875. In June 2014, our CEO was awarded 9,500 units under our 2014-2016 Long-term Incentive Plan.
For 2016, the plan paid out $207.25 per unit. Paid 75% in cash and 25% in common stock.
Ø
Restricted
Stock Units
– In June 2016, our CEO was awarded 113,636 restricted stock units with a grant date fair value of $500,000
($4.40 per share), subject to a three-year vesting schedule (one-third in June 2017, one-third in June 2018, and one-third in June
2019).
Ø
Performance-based
Shares
: In June 2016, our CEO was awarded 113,636 performance-based shares with a grant date fair value of $500,000 ($4.40
per share), the ultimate value of which is based on our three-year TSR ranking in a peer group (payable in 2019).
|
2016 SUMMARY COMPENSATION AND REALIZED COMPENSATION
Set
forth on the following page is the 2016 compensation for each NEO as determined under Securities and Exchange Commission (“SEC”)
rules. Total compensation, as reported in the
Summary Compensation Table for 2016
and calculated under SEC rules, includes several
items that are driven by accounting and actuarial assumptions. Accordingly, it is not necessarily reflective of the compensation
our NEOs actually realized in 2016. To supplement that disclosure, we have added the “W-2/T4 Realized Comp.” column
to the right of the table below to compare our NEOs’ 2016 compensation as determined under SEC rules with W-2/T4 income for
2016, which is the federally taxable (under the U.S. and Canada) compensation our NEOs received in 2016 inclusive of vested stock
and exercised stock options, if any.
This
supplemental table is not designed to replace the
Summary Compensation Table
for 2016
found on page _____, but rather
to provide additional, supplemental compensation disclosure.
The
differences between this supplemental table and the
Summary Compensation Table for 2016
are (i) the supplemental table includes compensation
related to stock awards that became fully vested in 2016, whereas the
Summary Compensation Table for 2016
includes compensation for
stock awards as it is expensed for financial accounting purposes; (ii) the supplemental table does not reflect the FASB ASC Topic
718 expense associated with equity awards; (iii) the supplemental table includes compensation related to incentive compensation
that was paid in 2016, whereas the
Summary Compensation Table for 2016
includes incentive compensation as it is expensed for financial
accounting purposes; and (iv) the supplemental table does not include the change in pension value and the Company matching contribution
for individual 401(k) deferral. For more information on total compensation as calculated under SEC rules, see the narrative and
footnotes accompanying the
Summary Compensation Table for 2016
on page _____.
2016 Summary Compensation
and Realized Compensation
|
2016 Summary Compensation
|
|
Realized
Compensation
|
|
Name and Principal
Position
|
|
Salary
($)
|
|
|
Stock
Awards
($)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Change in
Pension Value
and Non-
Qualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation
($)
|
|
|
SEC
Total
($)
|
|
|
SEC Total
Without
Change in
Pension
Value
($)
|
|
|
W-2/T4
Realized
Comp.
1
($)
|
|
Phillips S. Baker, Jr.
President and CEO
|
|
|
484,000
|
|
|
|
2,074,935
|
|
|
|
2,876,475
|
|
|
|
924,335
|
|
|
|
15,900
|
|
|
|
6,375,645
|
|
|
|
5,451,310
|
|
|
|
1,897,266
2
|
|
Lindsay A. Hall*
Senior Vice President and CFO
|
|
|
156,750
|
|
|
|
344,999
|
|
|
|
326,027
|
|
|
|
13,146
|
|
|
|
9,200
|
|
|
|
850,122
|
|
|
|
836,976
|
|
|
|
204,622
3
|
|
Lawrence P. Radford
Senior Vice President – Operations
|
|
|
342,000
|
|
|
|
789,999
|
|
|
|
1,388,650
|
|
|
|
125,898
|
|
|
|
15,900
|
|
|
|
2,662,447
|
|
|
|
2,536,549
|
|
|
|
1,902,528
|
|
Dr. Dean W. A. McDonald
Senior Vice President – Exploration
|
|
|
247,500
|
|
|
|
589,999
|
|
|
|
882,600
|
|
|
|
196,766
|
|
|
|
15,900
|
|
|
|
1,932,765
|
|
|
|
1,735,999
|
|
|
|
1,777,226
3
|
|
David C. Sienko
Vice President – General Counsel
|
|
|
225,000
|
|
|
|
352,500
|
|
|
|
723,775
|
|
|
|
82,310
|
|
|
|
15,900
|
|
|
|
1,399,485
|
|
|
|
1,317,175
|
|
|
|
853,950
|
|
James A. Sabala*
Former Senior Vice President and CFO
|
|
|
168,588
|
|
|
|
411,001
|
|
|
|
786,399
|
|
|
|
203,085
|
|
|
|
15,900
|
|
|
|
1,584,973
|
|
|
|
1,381,888
|
|
|
|
1,526,103
|
|
*Mr. Hall started with the Company in
July 2016, and Mr. Sabala retired in June 2016. Their compensation was prorated accordingly for base salary and non-equity
incentive plan compensation.
|
|
1.
|
The amounts reported in this column include 2016 salary, vested stock received in 2016, equity and cash portion of 2015 Annual
Incentive, and equity and cash portion of 2013-2015 Long-term Incentive, which were paid in March 2016. Also includes performance-based
shares that vested in 2016 for Mr. Baker.
|
|
|
2.
|
Mr. Baker deferred all vested equity received in 2016, except for performnace-vested based shares received. See
Option Excercises and Stock Vested for 2016
on page ___.
|
|
|
3.
|
Dr. McDonald and Mr. Hall’s realized compensation is reflected
in Canadian dollars as reported on their T4.
|
PROXY STATEMENT
BOARD OF DIRECTORS SELECTION PROCESS
Our Bylaws require the Board to have not
less than five nor more than nine members. The size of the Board may be increased or decreased within that range from time-to-time
by resolution approved by the affirmative vote of a majority of the Board. In December 2016, the Board increased the size of the
Board from eight members to nine members and appointed one new director, effective as of January 1, 2017.
Identifying and Evaluating Nominees
for Directors
The Governance Committee uses a variety
of methods for identifying and evaluating nominees for director. The committee is responsible for ensuring that the composition
of the Board accurately addresses the needs of our business. In the event vacancies are anticipated, or arise, the committee considers
various potential candidates for director. Candidates may come to the attention of the committee through current Board members,
professional search firms, shareholders or other persons. Consideration of new director nominee candidates typically involves a
series of internal discussions, review of information concerning candidates and interviews with selected candidates. The committee
then determines the best qualified candidates based on the established criteria and recommends those candidates to the Board for
election.
We hold the view that the continuing service
of qualified incumbents promotes stability and continuity in the boardroom, contributing to the Board’s ability to work as
a collective body, while giving us the benefit of familiarity and insight into our affairs that our directors have accumulated
during their tenure. Recent additions to the Board may provide new perspectives, while directors who have served for a number of
years bring experience, continuity, institutional knowledge, and insight into the Company’s business and industry. Directors
with relevant business and leadership experience can provide the Board a useful perspective on business strategy and significant
risks and an understanding of the challenges facing the business. Accordingly, the process for identifying nominees reflects our
practice of re-nominating incumbent directors who (i) continue to satisfy the committee’s criteria for membership on the
Board, (ii) the committee believes continue to make important contributions to the Board, and (iii) consent to continue their service
on the Board.
The committee reviews annually with the
Board the composition of the Board as a whole and recommends, if necessary, measures to be taken so that the Board reflects the
appropriate balance of knowledge, experience, skills, expertise and diversity required for the Board as a whole and contains at
least the minimum number of independent directors required by applicable laws and regulations. Board members should possess such
attributes and experience as are necessary for the Board as a whole and contain a broad range of personal characteristics, including
diversity of backgrounds, management skills, mining, accounting, finance and business experience. Directors should be able to commit
the
requisite time for preparation and attendance
at regularly scheduled Board and committee meetings, as well as be able to participate in other matters necessary to ensure good
corporate governance is practiced.
In general, and as more fully outlined
in our Bylaws and Corporate Governance Guidelines, in evaluating director candidates for election to our Board, the committee will:
(i) consider if the candidate satisfies the minimum qualifications for director candidates as set forth in the Corporate Governance
Guidelines; (ii) consider factors that are in the best interests of the Company and its shareholders, including the knowledge,
experience, integrity and judgment of each candidate; (iii) consider the contribution of each candidate to the diversity of backgrounds,
experience and competencies which the Board desires to have represented, with such diversity being considered among the other desirable
attributes of the Board; (iv) assess the performance of an incumbent director during the preceding term; (v) consider each candidate’s
ability to devote sufficient time and effort to his or her duties as a director; (vi) consider a candidate’s independence
and willingness to consider all strategic proposals; (vii) consider any other criteria established by the Board and any core competencies
or technical expertise necessary to manage and direct the affairs and business of the Company, including, when applicable, to enhance
the ability of committees of the Board to fulfill their duties; and (viii) determine whether there exists any special, countervailing
considerations against nomination of the candidate.
Shareholder Nominees
The committee will consider persons recommended
by shareholders as nominees for election as directors. Our Bylaws provide any shareholder who is entitled to vote for the election
of directors at a meeting called for such purpose may nominate persons for election to the Board by following the procedures set
forth on page ______. Shareholders who wish to submit a proposed nominee to the committee should send written notice to the Corporate
Governance and Directors Nominating Committee Chairman, c/o Corporate Secretary, Hecla Mining Company, 6500 N. Mineral Drive, Suite
200, Coeur d’Alene, Idaho 83815-9408, within the time period set forth on page _____. The notification should set forth all
information relating to the nominee that is required to be disclosed in solicitations of proxies for elections of directors pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as amended (“Exchange Act”), including the nominee’s
written consent to being named in the Proxy Statement as a nominee and to serving as a director if elected; the name and address
of the shareholder or beneficial owner making the nomination or on whose behalf the nomination is being made; and the class and
number of shares of stock of the Company owned beneficially and of record by such shareholder or beneficial owner. The committee
will consider shareholder nominees on the same terms as nominees selected by the committee.
Regardless of how a candidate is brought
to the committee, qualified candidates are subjected to one or more interviews with appropriate members of the Board. Chosen candidates
are extended invitations to join the Board. If a candidate accepts, he or she is formally nominated.
Director Qualifications, Evaluation,
and Nomination
The committee believes nominees for election
to the Board should also possess certain minimum qualifications and attributes. The nominee must: (i) exhibit strong personal integrity,
character and ethics, and a commitment to ethical business and accounting practices; (ii) not be involved in ongoing litigation
with the Company or be employed by an entity engaged in such litigation; and (iii) not be the subject of any ongoing criminal investigations
in the jurisdiction of the United States or any state thereof, including investigations for fraud or financial misconduct. In December
2016, the Board amended our Bylaws and Corporate Governance Guidelines to provide that directors will not be nominated for re-election
after their 75
th
birthday (previously the age limit was 72).
In connection with the director nominees
who are up for re-election at the Annual Meeting, the committee also considered the nominees’ roles in: (i) overseeing the
Company’s efforts in complying with its SEC disclosure requirements; (ii) assisting in improving the Company’s internal
controls and disclosure controls; (iii) assisting with the development of the strategic plan of the Company; and (iv) working with
management to implement the strategic plan and mission statement. Directors are expected to exemplify high standards of personal
and professional integrity and to constructively challenge management through their active participation and questioning.
In addition to fulfilling the above criteria,
each nominee for election to the Board at the upcoming Annual Meeting brings a strong and unique background and set of skills to
the Board, giving the Board as a whole competence and experience in a wide variety of areas, including corporate governance, executive
management, legal, accounting, finance, mining, and board service. The committee has reviewed the nominees’ overall service
to the Company during their terms, including the number of meetings attended, level of participation and quality of performance.
Selection of New Directors in 2016 and
2017
On March 1, 2016, the Governance Committee
recommended and the Board approved the appointment of two new directors to our Board (Messrs. Ralbovsky and Johnson). Effective
January 1, 2017, upon the recommendation of the Governance Committee, the Board also appointed Catherine “Cassie” J.
Boggs as a new director to our Board.
Mr. Stephen F. Ralbovsky was appointed
as a Class II director (standing for election in 2018). Mr. Ralbovsky is a certified public accountant and was a partner with PricewaterhouseCoopers,
LLP from February 1987 until his retirement in June 2014. He has over 37 years’ experience in taxation, auditing and accounting,
where he specialized in the mining industry. The Governance Committee and Board determined that Mr. Ralbovsky was independent under
the New York Stock Exchange listing standards. The Board appointed Mr. Ralbovsky to serve on the Audit Committee and Governance
Committee.
Mr. George R. Johnson was appointed as
a Class I director (standing for election in 2017). Mr. Johnson is a mining engineer and formerly served as Senior Vice President
of Operations at B2Gold Corporation from August 2009 until his retirement in May 2015. Mr. Johnson also held many positions with
Hecla in the early 1980’s through 1999 and is very familiar with the Company’s operations. He has over 45 years of
foreign and domestic experience in underground and open-pit mine construction and operations management. The Governance Committee
and Board determined that Mr. Johnson was independent under the New York Stock Exchange listing standards. The Board appointed
Mr. Johnson to serve on the Audit Committee and the Health, Safety, Environmental and Technical Committee.
Ms. Catherine “Cassie” J. Boggs
was appointed as a Class II director (standing for election in 2018). Ms. Boggs is an attorney and has served as General Counsel
at Resource Capital Funds since January 2011. She has over 35 years’ experience as a mining and natural resources lawyer
with experience in domestic and international mining projects. The Governance Committee and Board determined that Ms. Boggs was
independent under the New York Stock Exchange listing standards. The Board appointed Ms. Boggs to serve on the Audit Committee
and Governance Committee.
PROPOSAL 1 – ELECTION OF DIRECTORS
In accordance with our Certificate of Incorporation,
the Board is divided into three classes. The terms of office of the directors in each class expire at different times. There are
three directors whose terms will expire at the 2017 Annual Meeting: Phillips S. Baker, Jr., George R. Johnson and Anthony P. Taylor.
As of the 2017 Annual Meeting, Dr. Taylor
will have attained the mandatory retirement age of 75 and will not stand for re-election. Dr. Taylor was elected to the Board by
preferred shareholders in May 2002. He has over 52 years’ experience in the mining industry in all levels of exploration
from a field geologist to senior management. The Board recognizes and commends, with great appreciation, Dr. Taylor’s 15
years of invaluable and devoted service to Hecla, and for his substantial contributions as a director of the Company, as chairman
of the Governance Committee and as a member of the Health, Safety, Environmental and Technical Committee and Compensation Committee
of the Board.
At the May 2017, Annual Meeting, the size
of the Board is expected to be reduced from nine persons to eight persons.
At a meeting held by the Governance Committee
in February 2017, the committee determined that the two remaining directors whose terms are expiring - Messrs. Baker and Johnson
- were qualified candidates to stand for re-election at the Annual Meeting, and the Board designated Messrs. Baker and Johnson
as nominees for re-election as directors of the Company, each for a three-year term expiring in 2020. Each nominee has accepted
the nomination and agreed to serve as a director if elected by the Company’s shareholders.
It is intended that the proxies solicited
hereby from our shareholders that do not provide voting instructions will be voted
FOR
the election of Phillips S. Baker,
Jr. and George R. Johnson. The Board knows of no reason why the nominees will be unable or unwilling to accept election. However,
if any nominee becomes unable or is unwilling to accept election, the Board will either reduce the number of directors to be elected
or select substitute nominees submitted by the Governance Committee. If substitute nominees are selected, proxies that do not provide
voting instructions will be voted in favor of such nominees.
Summary of Director Qualifications and Experience
|
Director Qualifications
and Experience
|
Baker
|
Boggs
|
Crumley
|
Johnson
|
Nethercutt
|
Ralbovsky
|
Rogers
|
Stanley
|
Taylor
|
|
Audit Committee Financial Expert
|
|
|
|
|
|
l
|
l
|
l
|
|
|
Board Service on Public Companies
|
l
|
|
|
l
|
|
|
l
|
l
|
|
|
CEO/Administration and Operations
|
l
|
|
l
|
l
|
|
|
l
|
l
|
l
|
|
Corporate Governance
|
|
l
|
|
|
l
|
l
|
|
l
|
l
|
|
Finance
|
l
|
l
|
l
|
l
|
|
l
|
l
|
l
|
|
|
Geology, Mining and Engineering
|
|
|
|
l
|
|
|
l
|
l
|
l
|
|
Industry and Mining
|
l
|
l
|
|
l
|
l
|
l
|
l
|
l
|
l
|
|
Industry Association Participation
|
l
|
l
|
|
l
|
|
l
|
l
|
l
|
l
|
|
International Business
|
|
l
|
|
l
|
l
|
|
l
|
l
|
l
|
|
Leadership
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
|
Legal and Compliance
|
l
|
l
|
|
|
l
|
l
|
|
|
|
|
Reputation in the Industry
|
l
|
l
|
|
l
|
|
|
l
|
l
|
l
|
|
Risk Management
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
l
|
Biographical Information
Set forth below is biographical information
for each of the director nominees, including the key qualifications, experience, attributes, and skills that led our Board to the
conclusion that each of the director nominees should serve as a director. There are no family relationships among any of our directors
or executive officers.
Our Board includes individuals with strong
backgrounds in executive leadership and management, legal, accounting and finance, and Company and industry knowledge, and we believe
that, as a group, they work effectively together in overseeing our business.
Current Nominees for Election to the
Board – Term Ending at the 2017 Annual Meeting
If elected, the nominees will each serve
for a three-year term ending in 2020. The nominees are as follows:
|
PHILLIPS S. BAKER, JR.
|
|
Director since 2001
President and Chief Executive
Officer
Age 57
|
Other Directorships:
QEP Resources, Inc.
Hecla Committees:
·
Executive
(Chairman)
|
|
|
|
|
|
Mr. Baker has been our CEO since May 2003
and has served as our President since November 2001. He has served as a Director of QEP Resources, Inc., an independent natural
gas and oil exploration and production company, since May 2010, as well as serving as a Director for Questar Corporation, a Western
U.S. natural gas-focused exploration and production, interstate pipeline and local distribution company, from February 2004 through
June 2010. Mr. Baker has served as Vice Chairman of the Board for the National Mining Association, a U.S. mining advocate and national
trade organization that represents the interests of mining businesses, since October 2015, and has been a Board member since September
2010. He has also served as a Board member of the National Mining Hall of Fame and Museum, a federally-chartered non-profit national
mining museum, since February 2012.
Board Qualification and Skills:
High Level of Financial Experience:
Substantial financial experience gained in his roles of President, CEO, and previously as Chief Financial Officer of the Company
and other companies.
Extensive Senior Leadership/Executive
Officer Experience:
Serving as Hecla’s President and CEO for 13 years Has 22 years’ of executive and management
experience in the mining industry.
Significant Public Company Board Experience:
In addition to serving on the Board of Hecla, has served on the board of QEP Resources for 7 years, and prior to that served
on the board of Questar Corporation for 6 years. He serves as chair of the audit committee and as a member of the governance committee
for QEP Resources, Inc.
Extensive Knowledge of the Company’s
Business and Industry:
Over 30 years’ experience in the mining industry.
Designations
: Mr. Baker received
a Bachelor of Business Administration in Accounting from Texas A&M University in 1981, and a law degree and Master of Business
Administration from the University of Houston in 1985. He became a member of the State Bar of Texas in 1985, and received his Certified
Public Accountant designation in 1986 from the Texas State Board of Public Accounting.
|
|
GEORGE R. JOHNSON
|
|
Director since 2016
Former Senior Vice President of
Operations with B2Gold
Corporation
Age 68
|
Other Directorships:
B2Gold Corporation
Hecla Committees:
·
Health,
Safety, Environmental and Technical
·
Audit
|
|
|
|
|
|
Mr. Johnson served as Senior Vice President
of Operations of B2Gold Corporation, a Canadian-based gold producing company, from August 2009 until his retirement in April 2015.
He is a former Senior Vice President of Russian Operations of Kinross Gold Corporation, a senior gold mining company, from March
2007 to August 2009, and Senior Vice President of Operations of Bema Gold Corporation, a gold producing company, from October 1999
to March 2007. He has served on the Board of Directors of B2Gold Corporation since March 2016.
Board Qualification and Skills:
Extensive Knowledge of the Company’s
Business and Industry:
Over 45 years of foreign and domestic experience in underground and open-pit mine construction and operations
management. Served in a variety of positions culminating as Vice President – Metal Mining for Hecla from 1983 to 1999.
Senior Leadership/Executive Officer
Experience:
Has extensive experience in management in the mining industry
Designations
: Mr. Johnson received
a Bachelor of Science with a major in Mining Engineering from the University of Washington in 1972.
|
The Board recommends that shareholders
vote “FOR” the election of Phillips S. Baker, Jr. and George R. Johnson
Our directors whose terms are not expiring
this year follow. They will continue to serve as directors for the remainder of their terms or until their respective successors
are appointed or elected.
Continuing Members of the Board –
Term Ending at the 2018 Annual Meeting
|
GEORGE R. NETHERCUTT, JR.
|
|
Director since 2005
Chairman of The George Nethercutt
Foundation and Of Counsel for Lee
& Hayes PLLC
Age 72
|
Other Directorships:
Washington Policy Center
ARCADIS Corporation
Juvenile Diabetes Research Foundation
International (Board of Chancellors)
Hecla Committees:
·
Compensation (Chairman)
·
Corporate
Governance and Directors Nominating
|
|
|
|
|
|
Mr. Nethercutt has served as Chairman of
The George Nethercutt Foundation, a non-profit student leadership and civics education charity, since 2005, and was appointed Of
Counsel at Lee & Hayes PLLC, a law firm, in September 2010. He has been a board member of Washington Policy Center, a public
policy organization providing analysis on issues relating to the free market and government regulation, since January 2005; board
member of ARCADIS Corporation, an international company providing consultancy, engineering and management services, since May 2005;
and Board of Chancellors, Juvenile Diabetes Research Foundation International, a charity and advocate of juvenile diabetes research
worldwide, since June 2011. He was a Principal of Nethercutt Consulting LLC, a strategic planning and consulting firm, from January
2007 to January 2012, and served as a member on the board of IP Street, a software company, from May 2011 to January 2015.
Board
Qualification and Skills:
Extensive Knowledge of the Company’s
Business and Industry:
Served as a U.S. Congressman and focused on natural resource policies, mining legislation and environmental
policies on public lands.
Extensive Government Leadership Experience:
Has extensive political background, including working as a staff member in the U.S. Senate in Washington, D.C., where he focused
on issues relating to oil and gas, natural resources, mining and commerce. Served as chief of staff to a U.S. Senator from Alaska,
working on such issues as agriculture, fisheries, timber and mining. He had his own consulting business which consisted of representing
clients with mining and natural resource issues.
S
ignificant Public Company Board Experience:
Over 11 years of service on Hecla’s Board.
Designations
: Mr. Nethercutt received
his Bachelor of Arts in English from Washington State University in 1967, and a law degree from Gonzaga University Law School in
1971. He has been a member of the Washington State Bar Association since 1972.
|
|
STEPHEN F. RALBOVSKY
|
|
Director since 2016
Founder and Principal of Wolf Sky
Consulting LLC
Age 63
|
Other Directorships:
None
Hecla Committees:
·
Audit
·
Corporate
Governance and Directors Nominating
|
|
|
|
|
|
Mr. Ralbovsky has been the Founder and
Principal of Wolf Sky Consulting LLC, a tax consulting firm, since June 2014. Prior to that, he was a partner with PricewaterhouseCoopers
LLP, an accounting firm, from February 1987 until his retirement in June 2014, where he concentrated his practice on public companies
operating in the mining industry. He is an adjunct faculty member at the University of Arizona. He previously served as an Advisory
Board member of Diocese of Phoenix Catholic Cemeteries and Mortuaries, a non-profit organization, from July 2009 to July 2012.
Mr. Ralbovsky is also a member of several organizations, including: AICPA, Arizona Society of CPAs, National Mining Association,
and Society for Mining, Metallurgy and Exploration.
Board Qualification and Skills
:
High Level of Financial Experience
:
Over 37 years’ experience in taxation, auditing and accounting.
Extensive Knowledge of the Company’s
Business and Industry
: Over 37 years’ experience in accounting, where he was heavily involved in the mining industry
with emphasis in global mining tax and royalty policy.
Extensive Senior Leadership Experience
:
Has extensive experience in leadership in the accounting industry. Served in numerous senior leadership positions, including US
Mining Leader, US Mining Tax Leader, Global Mining Tax Leader and Tax Partner for PricewaterhouseCoopers LLP.
Designations
: Mr. Ralbovsky received
a Bachelor of Business Administration with a major in Accounting from Siena College in 1975. He also received a law degree from
Albany Law School in 1978. He is licensed in D.C. and Arizona as a Certified Public Accountant.
|
|
CATHERINE “CASSIE” J. BOGGS
|
|
Director since 2017
General Counsel at
Resource Capital Funds
Age 62
|
Other Directorships:
Funzeleo
Hecla Committees:
·
Audit
·
Corporate
Governance and Directors Nominating
|
|
|
|
|
|
Ms. Boggs has been the General Counsel
at Resource Capital Funds, a mining-focused private equity firm, since January 2011. Prior to that, she served as Senior Vice President,
Corporate Development at Barrick Gold Corporation, a gold mining company, from January 2009 to December 2010, and Vice President
from July 2005 to 2008. Ms. Boggs was also an international partner at Baker & McKenzie, a law firm, from July 2001 to July
2005. She has been a board member of Funzeleo, a non-profit organization that inspires and prepares youth for high-demand science
and math-based careers, since January 2016, as well as serving as a Board member and President of the Rocky Mountain Mineral Law
Foundation, a non-profit organization dedicated to the study of laws and regulations relating to mining, oil and gas, energy, public
lands, water, environmental and international law, from July 2011 to July 2015.
Board Qualification and Skills
:
High Level of Legal Experience
:
Over 35 years’ experience as an attorney, having practiced law in several U.S. and overseas jurisdictions.
Extensive Knowledge of the Company’s
Business and Industry
: Over 35 years’ experience as a mining and natural resources lawyer with experience in domestic
and international mining projects.
Extensive Knowledge of Risk Assessment
:
In addition to managing all legal affairs of Resource Capital Funds, she is responsible for legal due diligence, country and political
risk assessments, and participates in the structuring and implementation of risk mitigation strategies.
Extensive Senior Leadership Experience
:
Has extensive experience in leadership in the mining industry, having worked for Barrick Gold Company, serving in a variety of
leadership roles, including serving as the CEO of Tethyan Copper Company, a gold and copper development project in Pakistan, interim
President of the African Business Unit, and as interim General Counsel of African Barrick Gold (now known as Acacia Mining) in
its formation and initial public offering.
Designations
: Ms. Boggs received
a Bachelor of Arts with a major in Economics from University of Denver in May 1976. She received a Master of Science in Resource
Development from Michigan State University in December 1977, and a law degree from the University of Denver College of Law in 1981.
|
Continuing Members of the Board –
Term Ending at the 2019 Annual Meeting
|
TED CRUMLEY
|
|
Director since 1995
Board Chairman since 2006
Former Executive Vice
President and Chief Financial
Officer
OfficeMax Incorporated
Age 72
|
Other Directorships:
None
Hecla Committees:
·
Executive
·
Compensation
|
|
|
|
|
|
Mr. Crumley served as Executive Vice President
and Chief Financial Officer of OfficeMax Incorporated, a distributor of office products, from January 2005 until his retirement
in December 2005. He was also Senior Vice President of OfficeMax Incorporated from November 2004 to January 2005, and Senior Vice
President and Chief Financial Officer of Boise Cascade Corporation, a manufacturer of paper and forest products, from 1994 to 2004.
Board Qualification and Skills:
High Level of Financial Experience:
Substantial financial experience gained from a long career with OfficeMax Incorporated and Boise Cascade Corporation.
Senior Leadership/Executive Officer
Experience:
Has over 30 years’ experience in management, finance and accounting in the natural resources industry. Served
in numerous senior leadership positions, including Executive Vice President and Chief Financial Officer of OfficeMax Incorporated
and Senior Vice President and Chief Financial Officer of Boise Cascade Corporation.
Significant Public Company Board Experience:
Over 21 years of service on Hecla’s Board, including as Chairman since 2006.
Extensive Knowledge of the Company’s
Business and Industry:
With over 21 years of service on Hecla’s Board, Mr. Crumley understands all aspects of our business,
including the mining elements.
Designations:
Mr. Crumley received
his Bachelor of Business Administration with a major in Accounting from Idaho State University College of Business in 1969.
|
|
TERRY
V. ROGERS,
c
.
d
ir.,
h.r.c.c.c.
|
|
Director since 2007
Former Senior Vice President and
Chief Operating Officer
Cameco Corporation
Age 70
|
Other Directorships:
Centerra Gold Inc.
Hecla Committees:
·
Health,
Safety, Environmental and Technical (Chairman)
·
Compensation
·
Audit
·
Executive
|
|
|
|
|
|
Mr. Rogers served as Senior Vice President
and Chief Operating Officer of Cameco Corporation, a uranium producer, from February 2003 until his retirement in June 2007. He
is a former President of Kumtor Operating Company, a gold producing company and a subsidiary of Cameco Corporation, where he served
from 1999 to 2003 and has served on the Board of Directors of Centerra Gold Inc., a gold mining company, since February 2003.
Board Qualification and Skills:
High Level of Financial Experience:
Financial experience gained from his senior leadership/executive officer experience with Cameco Corporation and Kumtor Operating
Company.
Senior Leadership/Executive Officer
Experience:
Has experience in management in the mining industry. Served in numerous senior leadership positions, including
Senior Vice President and Chief Operating Officer of Cameco Corporation, and former President of Kumtor Operating Company (a subsidiary
of Cameco Corporation).
Significant Public Company Board Experience:
In addition to serving on the Board of Hecla, has over 13 years of service on the Board of Centerra Gold Inc., including as
lead independent director, chairman of the human resources and compensation committee, and a member of the audit committee.
Extensive Knowledge of the Company’s
Business and Industry:
Over 30 years’ experience in the mining industry, including, open-cast, open-pit and underground
operations in coal, gold, and uranium mines around the world.
Designations:
Mr. Rogers received
an Associate degree in Applied Science from the Superior Technical Institute in Wisconsin in 1972. He also obtained a Chartered
Director (C. Dir.) designation from The Directors College in 2011, as well as a Human Resources and Compensation Committee Certified
(H.R.C.C.C.) designation from The Directors College in 2013.
|
|
CHARLES B. STANLEY
|
|
Director since 2007
Chief Executive Officer, President
and Chairman of the Board
QEP Resources, Inc.
Age 58
|
Other Directorships:
QEP Resources, Inc.
Hecla Committees:
·
Audit (Chairman)
·
Health,
Safety, Environmental and Technical
·
Corporate
Governance and Directors Nominating
|
|
|
|
|
|
Mr. Stanley has been Chief Executive Officer
and President of QEP Resources, Inc., an independent natural gas and oil exploration and production company, since May 2010. He
was appointed Chairman of the Board of QEP Resources, Inc. in May 2012. He also served as Chairman, Chief Executive Officer, President
and Director of QEP Midstream Partners, LP, a master limited partnership that owns, operates, acquires and develops midstream energy
assets, from May 2013 to December 2014. He served as Chief Operating Officer of Questar Corporation, a Western U.S. natural gas-focused
exploration and production, interstate pipeline and local distribution company, from March 2008 to June 2010; and Executive Vice
President and Director of Questar Corporation from February 2002 to June 2010.
Board Qualification and Skills:
High Level of Financial Experience:
Substantial financial experience gained from a long career with QEP Resources, Inc. and Questar Corporation.
Extensive Senior Leadership/Executive
Officer Experience:
In addition to his current position as Chief Executive Officer and President of QEP Resources, Mr. Stanley
served in numerous other senior leadership positions, including Chief Executive Officer and President of QEP Midstream Partners,
LP, and Chief Operating Officer of Questar Corporation.
Significant Public Company Board Experience:
In addition to serving on the Board of Hecla, has served on the board of QEP Resources, Inc. the past 6 years and as Chairman
of the Board since 2012. Prior to serving on QEP’s board, Mr. Stanley served on the board of Questar Corporation. He has
served on the boards of various natural gas industry trade organizations, including the American Exploration and Production Council
and America’s Natural Gas Alliance.
Extensive Knowledge of the Company’s
Business and Industry:
Over 33 years’ experience in the international and domestic upstream and midstream oil and gas
industry. He is a geologist with an extensive background in natural resources.
Designations
: Mr. Stanley received
a Bachelor of Science degree in Geology in 1981, as well as a Master of Science degree in Geology in 1983 from Virginia Tech.
|
CORPORATE GOVERNANCE AND RELATED MATTERS
We believe that good corporate governance
practices reflect our values and support our strong strategic and financial objectives and performance. Our corporate governance
practices are generally reflected in our Bylaws, Corporate Governance Guidelines, and committee charters, which can be found at
http://www.hecla-mining.com. The charters of each committee spell out the committees’ roles and responsibilities assigned
to each by the Board. In addition, the Board has established policies and procedures that address matters such as chief executive
officer succession planning, transactions with related persons, risk oversight, communications with the Board by shareholders and
other interested parties, as well as the independence and qualifications of our directors. This corporate governance section provides
insights into how the Board has implemented these policies and procedures to benefit Hecla and our shareholders.
The Board’s Role and Activities in
2016
Hecla’s Board acts as the ultimate
decision-making body of the Company on certain fundamental matters and advises and oversees management, who is responsible for
the day-to-day operations and management of the Company. In carrying out its responsibilities, the Board reviews and assesses Hecla’s
long-term strategy. During 2016, there were five meetings of the Board. Directors are expected to make every effort to attend the
Annual Meeting, all Board meetings and the meetings of the committees on which they serve. All members of the Board attended last
year’s Annual Meeting of Shareholders, which was held in May 2016. In 2016, each director attended over 95% of the meetings
of the Board and the committees of which they are a member.
Role of Board in Risk Oversight
Our management is responsible for identifying
and reviewing risks facing the Company, including, without limitation, strategic, operational, financial, compensation and regulatory
risks, and meets regularly as part of such responsibility to review and discuss the Company’s risk exposure. The Board does
not have a standing risk management committee, but rather administers this oversight function directly through the Board as well
as through various standing committees of the Board that address risks inherent in their respective areas of oversight. In particular,
the Board is responsible for monitoring and assessing strategic, operational and reputational risk exposure. The Board and its
committees periodically receive risk management updates through business reports from management provided at meetings of the Board
or its committees throughout the year. Following consideration of the information provided by management, the Board provides feedback
and makes recommendations, as needed, to help minimize the Company’s risk exposure. We also believe that our leadership structure
and the use of executive sessions aids the Board in risk oversight.
The Audit Committee is responsible for
considering and discussing major financial risk exposures (including financial statements, financial systems, the financial reporting
process, compliance and auditing) and the
steps management has taken to monitor and control these exposures The committee regularly reviews and monitors compliance with
securities and financial regulations, in addition to overseeing the audit work performed on behalf of the Company in the area of
internal audit for compliance with the Sarbanes-Oxley Act. The committee meets at least quarterly to review the major financial
risk exposures in connection with various matters, including the filing of quarterly reports with the SEC.
The Governance Committee monitors the effectiveness
of the Company’s Corporate Governance Guidelines and other corporate governance matters.
The Compensation Committee assesses and
monitors whether any of the Company’s executive compensation policies and programs have the potential to encourage excessive
risk-taking. In 2016, with the assistance of Mercer (US) Inc. (“Mercer”), (a compensation consulting firm engaged by
the committee, which is a wholly owned subsidiary of Marsh & McLennan Companies, Inc.), the committee assessed the Company’s
compensation arrangements to determine if their provisions and operation create undesired or unintentional risks of a material
nature. The committee found that our compensation policies and practices do not create inappropriate or unintended significant
risk to the Company as a whole.
The Health, Safety, Environmental and Technical
Committee oversees the operational, reserve, and other technical risks, environment, health and safety compliance of the Company,
as well as risks relating to public policy initiatives.
To the extent any risks identified by each
standing committee of the Board are material or otherwise merit discussion by the whole Board, the respective committee chair will
raise such risks at the next scheduled meeting of the Board, or sooner if merited.
For the foregoing reasons, we have determined
that our risk oversight is appropriate in the context of our specific circumstances, risk management efforts, and the Board’s
administration of its oversight function.
Director Independence
Our Corporate Governance Guidelines provide,
among other things, that the Board will have a majority of directors who meet the criteria for independence required by the New
York Stock Exchange (“NYSE”). In determining independence each year, the Governance Committee affirmatively determines
whether directors have any “material relationship” with the Company. When assessing the “materiality” of
a director’s relationship with the Company, the committee considers all relevant facts and circumstances, not merely from
the director’s standpoint, but from that of the persons or organizations with which the director has an affiliation. The
committee also reviews the frequency or regularity of services or transactions between the Company and directors, whether the services
or transactions are being carried out at arm’s length in the ordinary course of business and whether the services or transactions
are being provided
substantially on the same terms to the
Company as those prevailing at the time from unrelated parties for comparable services or transactions. Material relationships
can include commercial, banking, industrial, consulting, legal, accounting, charitable and familial relationships. To guide its
determination of whether a director is independent, the Board has adopted the following NYSE listing standards:
A director will not be independent if:
|
|
·
|
the
director is, or has been,
within the last three years,
our employee, or an immediate
family member
7
is,
or has been within the
last three years, an executive
officer;
8
|
|
|
·
|
the director or an
immediate family member has received, during any twelve-month period within the last three years, more than $120,000 in direct
compensation from us, other than director and committee fees and pension and other forms of deferred compensation for prior service
(provided such compensation is not contingent in any way on continued service);
|
|
|
·
|
the director is:
(i) a current partner or employee of a firm that is our internal or external auditor; (ii) the director has an immediate family
member who is a current partner of a firm that is our internal or external auditor and who personally works on the Company’s
audit; (iii) the director has an immediate family member who is a current employee of a firm that is our internal or external auditor
and who personally works on the Company’s audit; or (iv) the director or an immediate family member was within the last three
years a partner or employee of a firm that is our internal or external auditor and personally worked on our audit within that time;
|
|
|
·
|
the director or an
immediate family member is, or has been within the last three years, employed as an executive officer of another company where
any of our present executive officers at the same time serves or served on that company’s compensation committee; or
|
|
|
·
|
the director is a
current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received
payments from, us for property or services in an amount which, in any of the last three calendar years, exceeds the greater of
$1 million or 2% of such other company’s consolidated gross revenues.
|
7
An “immediate family
member” includes a person’s spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law,
brothers- and sisters-in-law, and anyone (other than domestic employees) who shares such person’s home.
8
The term “executive
officer” has the same meaning specified for the term “officer” in Rule 16a-1(f) under the Exchange Act, or any
successor rule.
Pursuant to our Corporate Governance Guidelines,
the committee undertook its annual review of director independence in February 2017. During this review, the committee considered
transactions and relationships between each director or any member of his immediate family and Hecla and our subsidiaries and affiliates,
including relationships described below and any reported on page ______ under
Certain Relationships and Related Transactions
.
The committee also examined transactions and relationships between directors or their affiliates and members of our senior management
or their affiliates. As provided in the Corporate Governance Guidelines, the purpose of this review was to determine whether any
such relationships or transactions were inconsistent with a determination that the director is independent.
Based upon an assessment of all facts and
circumstances known to the committee, including, among other things, a review of questionnaires submitted by our directors, the
committee and the Board affirmatively determined that the following directors are independent of the Company and its management
under the standards set forth by the NYSE:
|
Ted Crumley
|
|
Stephen F. Ralbovsky
|
|
Catherine J. Boggs
|
|
Terry V. Rogers
|
|
George R. Johnson
|
|
Charles B. Stanley
|
|
George R. Nethercutt, Jr.
|
|
Dr. Anthony P. Taylor
|
Messrs. Stanley and Baker both serve as
members of the board of directors of QEP Resources, Inc., of which Mr. Stanley is also the chief executive officer. The committee
reviewed this relationship with the Board, and the Board made the affirmative decision that this relationship did not disqualify
Mr. Stanley from being independent. Neither Mr. Baker nor Mr. Stanley serves on the Compensation Committee of either Hecla or QEP
Resources, Inc.
Mr. Baker is our President and CEO.
As such, he cannot be deemed independent under the NYSE listing standards.
Directors are expected to immediately inform
the Board of any material change in their circumstances or relationships that may impact their independence.
Retirement Age
The Company has no current retirement plan
for non-management directors. In December 2016, the Governance Committee recommended, and the Board approved, amending our Bylaws
and Corporate Governance Guidelines to provide that directors will not be nominated for re-election after their 75
th
birthday. Prior to this amendment, the age was 72.
As of December 31, 2016, the average age
of members of our Board was approximately 67 and the average tenure of our Board was approximately 10 years. With the addition
of one new member to the Board in January 2017, and the retirement of Dr. Taylor in May
2017, the average age of members of our
Board will be approximately 65 and the average tenure of our Board will be approximately 8 years.
Family Relationships
There are currently no family relationships between the directors
or executive officers of Hecla.
Board Leadership and Executive Sessions
Currently, the positions of CEO and Chairman
of the Board (“Chairman”) are held by separate persons. The Board believes this structure is optimal for the Company
at this time because it allows the CEO to focus on leading the Company’s business and operations, and the Chairman to serve
as a sounding board and advisor to the CEO, and to lead the activities of the Board. The Board has also determined that having
a non-management director serve as Chairman is in the best interest of shareholders. This structure ensures a greater role for
the independent directors in the oversight of the Company and it enhances the Board’s independence and, we believe, senior
management’s accountability to the Board.
If the individual elected as Chairman is
the CEO, the independent directors will elect an Independent Lead Director for a one-year term. This would
help ensure continued robust independent leadership of the Board.
Currently, our Chairman, Mr. Ted Crumley,
chairs meetings of the Board, as well as the executive sessions with independent members of the Board. His duties include chairing
annual meetings of shareholders, overseeing the preparation of agendas for Board meetings, preparing for executive sessions of
the Board and providing feedback to the CEO, staying current on developments to determine when it may be appropriate to alert the
Board to significant pending developments, serving as a liaison between independent directors and the CEO with respect to sensitive
issues, and other matters. Executive sessions of non-management directors are included on the agenda for every regularly scheduled
Board meeting and during 2016, executive sessions were held at each regularly scheduled Board meeting. The executive sessions are
chaired by the Chairman. Our non-management directors meet in executive sessions without management present, unless the non-management
directors request their attendance.
For the foregoing reasons, we have determined
that our leadership structure is appropriate in the context of our specific circumstances.
Board Self-Evaluation
Each year, the Board conducts a self-evaluation
of its performance and effectiveness. As part of this process, each director completes an evaluation form on specific aspects of
the Board’s role, organization and meetings. The collective comments are then presented by the chair of the Governance Committee
to the whole Board. As part of the evaluation,
the Board assesses the progress in the
areas targeted for improvement a year earlier, and develops actions to take to enhance the Board’s effectiveness over the
next year. Additionally, each committee conducts an annual self-evaluation of its performance through a similar process.
Committees of the Board and Committee Assignments
The Board has five standing committees:
Audit; Compensation; Corporate Governance and Directors Nominating; Health, Safety, Environmental and Technical; and Executive.
Information regarding these committees is provided below. Except for the Executive Committee, all committees are composed entirely
of independent directors. The charters of each (other than Executive) committee are available on the Company’s website at
http://www.hecla-mining.com under “Investors” by selecting “Corporate Governance.” You may also obtain
copies of these charters by contacting the Company’s Investor Relations Department. The members of the Board on the date
of this Proxy Statement, and the committees of the Board on which they serve, are identified below, along with the number of meetings
held in 2016.
|
Executive Committee Members
|
Functions of the Committee
|
Meetings
in 2016
|
|
Phillips S. Baker, Jr., Chair
Ted Crumley
Terry V. Rogers
|
·
empowered with the same authority as the Board in the management of our business, except for certain matters enumerated in our Bylaws and Delaware law, which are specifically reserved to the whole Board
|
None*
|
|
Audit Committee Members
1, 2, 3
|
Functions of the Committee
|
Meetings
in 2016
|
|
Charles B. Stanley, Chair
Terry V. Rogers
George R. Johnson
Stephen F. Ralbovsky
Catherine J. Boggs
4
|
·
assist
the Board in fulfilling its oversight responsibilities
·
review
the integrity of our financial statements
·
review
the independent auditor’s qualifications and independence
·
review
the performance of our internal auditor and the independent auditor
·
review
our compliance with laws and regulations, including disclosure controls and procedures
·
please
refer to “Audit Committee Report” on page _____
|
6
|
Compensation Committee
Members
2
|
Functions of the Committee
|
Meetings
in 2016
|
|
George R. Nethercutt, Jr., Chair
Ted Crumley
Terry V. Rogers
Dr. Anthony P. Taylor
|
·
approve
compensation levels and programs for the executive officers, including the CEO
·
administer
our stock-based plans
·
please
refer to the “Compensation Discussion and Analysis” on page ______
|
5
|
Corporate Governance and
Directors Nominating Committee
Members
2
|
Functions of the Committee
|
Meetings
in 2016
|
|
Dr. Anthony P. Taylor, Chair
George R. Nethercutt, Jr.
Charles B. Stanley
Stephen F. Ralbovsky
Catherine J. Boggs
4
|
·
consider
matters of corporate governance
·
periodically
review our Corporate Governance Guidelines, Code of Business Conduct and Ethics, and other corporate procedures to ensure compliance
with laws and regulations
·
review
any director candidates, including those nominated or recommended by shareholders
·
identify
individuals qualified to become directors consistent with criteria approved by the Board
·
recommend
to the Board the director nominees for the next annual meeting of shareholders, any special meeting of shareholders, or to fill
any vacancy on the Board
·
review
the appropriateness of the size of the Board relative to its various responsibilities
·
recommend
committee assignments and committee chairpersons for the standing committees for consideration by the Board
|
4
|
|
|
Health, Safety, Environmental and
Technical Committee Members
|
Functions of the Committee
|
Meetings
in 2016
|
|
Terry V. Rogers, Chair
Charles B. Stanley
Dr. Anthony P. Taylor
George R. Johnson
|
·
review
the operational and exploration performance
·
review
the operational, reserve and other technical risks
·
review
and monitor health, safety and environmental policies
·
review
the implementation and effectiveness of compliance systems
·
review
the effectiveness of health, safety and environmental policies, systems and monitoring processes
·
review
audit results and updates from management with respect to health, safety and environmental performance
·
review
emerging health, safety and environmental trends in legislation and proposed regulations affecting the Company
·
review
the technical activities of the Company
·
make
recommendations to the Board concerning the advisability of proceeding with the exploration, development, acquisition or divestiture
of mineral properties and/or operations
|
4
|
*The Executive Committee did act by Unanimous
Consent In lieu of Meeting once in 2016.
|
|
1.
|
The Board has determined that each of the members of the Audit Committee is
financially literate and Messrs. Stanley, Rogers and Ralbovsky each qualify as an audit committee “financial expert”
as defined by SEC rules.
|
|
|
2.
|
Each member of the Audit, Compensation, and Corporate Governance and Directors
Nominating Committee satisfies the definition of “independent director” as established in the NYSE listing standards
and SEC rules.
|
|
|
3.
|
No members on the audit committee serve on the audit committee of any other
public companies.
|
|
|
4.
|
Ms. Boggs was appointed to these Committees effective January 1, 2017.
|
Diversity Policy
While the Board has not adopted a formal
policy on diversity, the Company’s Corporate Governance Guidelines provide that, as a whole, the Board should include individuals
with a diverse range of experience to give the Board depth and breadth in the mix of skills represented. The Board seeks to include
an array of skills and experience in its overall composition rather than requiring every director to possess the same skills, perspective,
and interests. This guideline is implemented by seeking to identify candidates who bring diverse skill sets, backgrounds, and experiences,
including ethnic and gender diversity, to the Board when director candidates are needed.
Director Communications
Shareholders or other
interested parties wishing to communicate with the Chairman or with the independent directors as a group may do so by delivering
or mailing the communication in writing to: Chairman of the Board, c/o Corporate Secretary, Hecla Mining Company, 6500 N. Mineral
Drive, Suite 200, Coeur d’Alene, Idaho 83815-9408. Concerns relating to accounting, internal controls or auditing matters
are immediately brought to the attention of our internal auditor and handled in accordance with procedures established by the Audit
Committee with respect to such matters. From time to time, the Board may change the process by which shareholders may communicate
with the Board or its members. Please refer to our website at http://www.hecla-mining.com under the tab entitled “Investors”
and then select the tab entitled “Corporate Governance” for any changes in this process.
Succession Planning
Considering the critical
importance of executive leadership to the Company’s success, the Compensation Committee is charged with the responsibility
of developing a process for identifying and evaluating candidates to succeed our CEO and to report annually to the Board on the
status of the succession plan. As part of the annual report, the Committee may also address issues related to the preparedness
for the possibility of an emergency situation involving senior management and an assessment of the long-term growth and development
of the senior management team.
The CEO and
Director of Human Resources make a formal succession planning presentation to the Compensation Committee annually. The
Compensation Committee reviews recommended candidates for senior management positions as part of the process to identify and
gauge the availability of qualified candidates for those positions and receives reports concerning development plans that are
utilized to strengthen the skills and qualifications of the candidates. The criteria used when assessing the qualifications
of potential CEO successors include, among others, strategic vision and leadership, operational
excellence, financial
management, executive officer leadership development, ability to motivate employees, and an ability to develop an effective working
relationship with the Board.
In 2016, the Compensation
Committee conducted a full executive talent review of all NEOs, with an emphasis on CEO succession. In connection with that review,
the Compensation Committee identified potential successors to the CEO.
In conjunction with the succession review,
management also reviewed potential successors for the top management roles across Hecla. In connection with that review, we concluded
that “ready now” potential successors exist for approximately one-third of those roles, which represents an increase
in the level of readiness of our talent compared to previous years. We created development plans for the potential successors who
were identified as being ready in one to two years or three to five years. In 2016, those potential successors were sent to specific
leadership classes and seminars for further training.
Our Corporate Governance
Guidelines also provide that in the event of the death, resignation, removal or incapacitation of the President and CEO, the Chairman
will act as the President and CEO until a successor is duly elected. In addition, our Corporate Governance Guidelines and Bylaws
provide that in the event of the death, resignation, removal or incapacitation of our current Chairman, the President and CEO will
act as Chairman until his successor is duly elected.
Electronic Access to Corporate Governance Documents
Our corporate governance
documents are available by accessing our website at http://www.hecla-mining.com under the tab entitled “Investors”
and then selecting the tab entitled “Corporate Governance.” These include:
|
|
·
|
Corporate Governance Guidelines;
|
|
|
·
|
Charters of the Audit, Compensation, Corporate Governance and Directors Nominating
and Health, Safety, Environmental and Technical Committees of the Board;
|
|
|
·
|
Code of Ethics for our Chief Executive Officer and Senior Financial Officers;
and
|
|
|
·
|
Code of Business Conduct and Ethics for Directors, Officers and Employees.
|
The information on our
website is not incorporated by reference into this Proxy Statement.
Shareholders may also
request a free copy of these documents from: Investor Relations, Hecla Mining Company, 6500 N. Mineral Drive, Suite 200, Coeur
d’Alene, Idaho 83815-9408; (208) 769-4100.
Corporate Governance Guidelines
The Corporate Governance Guidelines were
adopted by the Board to ensure that the Board is independent from management, that the Board adequately performs its function as
the overseer of management, and to help ensure that the interests of the Board and management align with the interests of our shareholders.
In December 2016, the Governance Committee and the Board amended the Corporate Governance Guidelines to improve its clarity and
functionality, including with respect to the Company’s evolving practices and policies, and to amend the director’s
retirement age from 72 years to 75 years.
In February 2017, the Governance Committee
recommended and Board approved further amendments to the Corporate Governance Guidelines to include a director resignation policy.
The policy provides that any director who is not elected by a majority of votes cast, shall tender his or her resignation to the
Governance Committee. The Governance Committee will recommend to the Board whether to accept or reject the resignation offer, or
whether other action should be taken. In determining whether to recommend that the Board accept any resignation offer, the committee
will be entitled to consider all factors believed relevant by the Governance Committee’s members. The Board will act on the Governance Committee’s recommendation
within ninety (90) days following certification of the election results. In deciding whether to accept the resignation offer, the
Board will consider the factors considered by the Governance Committee and any additional information and factors that the Board
believes to be relevant. If the Board accepts a director’s resignation offer pursuant to this process, the Governance Committee
will recommend to the Board and the Board will thereafter determine whether to fill such vacancy or reduce the size of the Board.
Any director who tenders his or her resignation pursuant to this provision will not participate in the proceedings of either the
Governance Committee or the Board with respect to his or her own resignation offer. If a director’s resignation is not accepted
by the Board, the director shall continue to serve until the next annual meeting of shareholders or until his or her successor
is duly elected and qualified, or his or her earlier resignation or removal. If a director’s resignation is accepted by the
Board, then the Board, in its sole discretion, shall fill any resulting vacancy or decrease the size of the Board.
Code of Business Conduct and Ethics
We believe that operating with honesty
and integrity has earned trust from our shareholders, credibility within our community, and dedication from our employees. Our
directors, officers and employees are required
to abide by our Code of Business Conduct and Ethics to promote the conduct of our business in a consistently legal and ethical
manner. Our Code of Business Conduct and Ethics covers many topics, including conflicts of interest, confidentiality, fair dealing,
proper use of the Company’s assets, and compliance with laws, rules and regulations. In addition to the Code of Business
Conduct and Ethics for directors, officers and employees, our CEO, Chief Financial Officer and Controller are also bound by a Code
of Ethics for the Chief Executive Officer and Senior Financial Officers.
The Governance Committee has adopted procedures
to receive, retain, and react to complaints received regarding possible violations of the Code of Business Conduct and Ethics,
and to allow for the confidential and anonymous submission by employees of concerns regarding possible violations of the Code of
Business Conduct and Ethics. Our employees may submit any concerns regarding apparent violations of the Code of Business Conduct
and Ethics to their supervisor, our General Counsel, the Chair of the Governance Committee, or through an anonymous telephone hotline.
In February 2017, the Governance Committee
recommended and the Board approved certain amendments to the Code of Business Conduct and Ethics.
Whistleblower Policy
We have a Whistleblower Policy adopted
by our Audit Committee that encourages our employees to report to appropriate Company representatives, without fear of retaliation,
certain accounting information relating to possible fraud. Our employees may submit any concerns regarding financial statement
disclosures, accounting, internal accounting controls or auditing matters to the Audit Committee, our General Counsel, or through
an anonymous telephone hotline. The goal of this policy is to discourage illegal activity and business conduct that damages Hecla’s
reputation, business interests, and our relationship with shareholders.
Certain Relationships and Related Transactions
We review all relationships and transactions
with related persons to determine whether such persons have a direct or indirect material interest. Transactions with related persons
are those that involve our directors, executive officers, director nominees, greater than 5% shareholders, immediate family members
of these persons, or entities in which one of these persons has a direct or indirect material interest. Transactions that are reviewed
as related party transactions by us are transactions that involve amounts that would exceed $120,000 (the current threshold required
to be disclosed in the Proxy Statement under SEC regulations) and certain other transactions. Pursuant to our Code of Business
Conduct and Ethics, employees and directors have a duty to report any potential conflicts of interest to the appropriate level
of management or to the Governance Committee. We evaluate these reports along with responses to our annual director and officer
questionnaires for any indication of possible related party transactions. Our legal staff is primarily responsible for the development
and implementation of processes and controls
to obtain information from the directors
and executive officers with respect to related party transactions. If a transaction is deemed by us to be a related party transaction,
the information regarding the transaction is discussed with the Board. As required under the SEC rules, transactions that are determined
to be directly or indirectly material to Hecla or a related party are disclosed in our Proxy Statement.
In December 2007, we created the Hecla
Charitable Foundation (the “Foundation”). We have made and intend to continue to make charitable contributions to the
Foundation, which in turn has provided and intends to continue to provide grants to other organizations for charitable and educational
purposes. Mr. James A. Sabala (our former Senior Vice President and Chief Financial Officer) served as a director of the Foundation
until his retirement in June 2016. Mr. Phillips S. Baker, Jr. and Dr. Dean W.A. McDonald (our Chief Executive Officer and our Senior Vice President – Exploration, respectively) serve as directors of the
Foundation, and Luther J. Russell (our Vice President – External Affairs) serves as President and as a director of the Foundation.
In December 2007, our Board approved a contribution of 550,000 shares of our common stock to the Foundation. Since 2007, the Foundation
has sold 279,860 shares of our common stock. Cash contributions totaling $2.0 million and $1.5 million were made by the Company
to the Foundation during 2011 and 2010, respectively. The funds from the sale of the shares and the additional cash were put into
various investment accounts. The Foundation is currently operating in a self-sufficient manner. The Company gave no additional
funds to the Foundation during 2016. The Foundation holds 270,140 shares of our common stock as of December 31, 2016. The value
of those shares based on the closing price of our common stock on the NYSE on December 30, 2016 ($5.24), was $1,415,534. In
2016, the Foundation gave $433,530 in donations.
In 2016, we did not make any contribution
to any charitable organization, of which a director served as an executive officer, which exceeded the greater of $1 million
or 2% of the charitable organization’s consolidated gross revenues.
COMPENSATION OF NON-MANAGEMENT DIRECTORS
The Compensation Committee of the Board
is responsible for recommending to the independent members of the Board the form and amount of compensation for our non-management
directors. The independent members of the Board consider the committee’s recommendation and make final determination of non-management
director compensation.
Compensation for non-management directors
is designed to reflect current market trends and developments with respect to compensation of board members, and aligns with its
philosophy toward executive compensation – with a higher proportion of compensation in equity. It consists of a combination
of cash retainers and equity awards.
Peer Group Benchmarking
The committee periodically engages its
independent compensation consultant to benchmark director compensation against the Company-selected peer group, which is the same
group of companies the committee uses to benchmark executive compensation (see page ___ for a list of these companies). When considering
non-management director compensation for calendar year 2016, the committee reviewed and considered the results of a benchmarking
report prepared by the committee’s independent compensation consultant. The report reviewed the Company’s calendar
year annual cash retainers, fees for Board and committee chairmanships, and the annualized present value of equity compensation
for the Company-selected peer group (primarily based on reported calendar year 2015 compensation or calendar year 2016 compensation,
if disclosed). The following discussion of compensation applies only to our non-management directors, and does not apply to Mr.
Baker who, as an employee of the Company, is compensated as an executive officer and does not receive additional compensation for
his service as a director.
2016 Compensation Changes for Non-Management
Directors
Due to the low prices of metals in 2015,
effective January 1, 2016, the Compensation Committee recommended and the Board approved a 10% reduction in the annual cash compensation
paid to non-management directors in 2016.
In June 2016, the Compensation Committee
recommended, and the Board approved an increase in the annual cash retainer for each non-management member of the Health, Safety,
Environmental and Technical Committee from $8,000 to $12,000 annually. In addition, the annual cash retainer for the committee
chair of the Health, Safety, Environmental and Technical Committee was increased from $8,000 to $12,000. The increase was due to
the Committee’s recent increased responsibilities in monitoring (i) health, safety and environmental policies, (ii) compliance
systems, (iii) safety audit results, and (iv) emerging health, safety and environmental trends in legislation and proposed regulations
affecting the Company.
Components of Non-Management Director
Compensation
|
Compensation Element
|
Value
1
|
|
Annual Board Retainer
|
$66,000
|
|
Annual Board Chairman Retainer
|
$90,000
|
|
Annual Committee Retainer for:
·
Health,
Safety, Environmental & Technical Committee
·
Audit
Committee
·
Compensation
Committee
|
$12,000
|
|
Annual Committee Chairman Retainer for:
·
Health,
Safety, Environmental & Technical Committee
·
Audit
Committee
·
Compensation
Committee
|
$12,000
|
|
Annual Committee Retainer for:
·
Corporate
Governance and Directors Nominating Committee
·
Executive
Committee
|
$8,000
|
|
Annual Committee Chairman Retainer for:
·
Corporate
Governance and Directors Nominating Committee
|
$8,000
|
|
Annual Equity
|
$100,000
|
|
|
|
|
|
|
1.
|
The value of the cash retainers listed does not reflect the 10% reduction taken in 2016 by the non-management
directors. See the table entitled
Non-Management Director Compensation for 2016
for the amounts received in 2016, which
reflect the 10% reduction.
|
Annual cash retainers are paid in quarterly
installments. No other attendance fees are paid to the non-management directors. The non-management directors do not receive stock
options, non-equity incentive plan compensation, or any other compensation, except as described herein.
Equity Compensation
In March 1995, we adopted the Hecla
Mining Company Stock Plan for Nonemployee Directors, which became effective following shareholder approval on
May 5, 1995. The plan was amended July 18, 2002, February 25, 2004, May 6, 2005, December 10, 2007, and
May 24, 2012. The plan is currently scheduled to terminate July 17, 2017, and is subject to termination by the
Board at any time (see Proposal 5, beginning on page ____ for a description of the proposal to amend and restate the plan).
Pursuant to the current plan, on May 30 of each year, each non-management director is credited with a number of shares
determined by dividing $24,000 by the average closing price for Hecla’s common stock on the New York Stock Exchange
(“NYSE”) for the prior calendar year. Non-management directors joining the Board after May 30 of any year are
credited with a pro rata number of shares based upon the date they join the Board. These shares are held in a grantor trust,
the assets of which are subject to the claims of our creditors, until delivered under the terms of the plan. Delivery of the
shares from the trust occurs upon the earliest of: (i) death or disability; (ii) retirement from the Board; (iii) a
cessation of the director’s service for any other reason; (iv) a change in control of the Company (as defined in the
plan); or (v) at the election of the director at any time, provided, however, that shares must be held in the trust for at
least two years prior to delivery. Subject to certain restrictions, directors may elect delivery of the shares on such
date or in annual installments thereafter over 5, 10 or 15 years. The maximum number of shares of common stock which may be
credited pursuant to the plan is 1,000,000. As of December 31, 2016, there were 438,459 shares remaining available for
issuance under the plan.
In February 2010, we adopted the 2010 Stock
Incentive Plan for executive officers, employees, directors, and certain consultants, which was approved by shareholders in June
2010, and became effective on August 25, 2010. Pursuant to the 2010 Stock Incentive Plan, directors may be awarded grants of stock
options, restricted stock units,
restricted stock, or stock. The Board receives
an additional award of $76,000 in common stock under the 2010 Stock Incentive Plan as part of their compensation. In 2016, the
Compensation Committee recommended and the Board approved the award of 17,273 shares of common stock under the 2010 Stock Incentive
Plan to each non-management director.
As described more fully above, the following
chart summarizes the annual cash and equity compensation for our non-management directors during 2016.
Non-Management Director Compensation
for 2016
|
|
|
Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
Annual
Retainer
($)
|
|
Committee
Meeting
Fees
($)
|
|
Committee
Chairman
Fees
($)
|
|
Totals Fees
Paid in
Cash
($)
|
|
Stock
Awards
1
($)
|
|
All Other
Compensation
2
($)
|
|
Total
($)
|
|
Ted Crumley, Chairman
|
|
140,400
|
|
|
20,700
|
|
|
0
|
|
|
161,100
|
|
|
37,376
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,001
4
|
|
|
0
|
|
|
274,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George R. Johnson
|
|
49,500
|
|
|
16,800
|
|
|
0
|
|
|
66,300
|
|
|
37,376
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,001
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,427
5
|
|
|
7,500
|
|
|
185,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George R. Nethercutt, Jr.
|
|
59,400
|
|
|
18,000
|
|
|
10,800
|
|
|
88,200
|
|
|
37,376
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,001
4
|
|
|
0
|
|
|
201,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen F. Ralbovsky
|
|
49,500
|
|
|
15,000
|
|
|
0
|
|
|
64,500
|
|
|
37,376
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,001
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,427
5
|
|
|
0
|
|
|
183,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry V. Rogers
|
|
59,400
|
|
|
36,900
|
|
|
9,000
|
|
|
105,300
|
|
|
37,376
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,001
4
|
|
|
3,750
|
|
|
218,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles B. Stanley
|
|
59,400
|
|
|
27,000
|
|
|
10,800
|
|
|
97,200
|
|
|
37,376
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,001
4
|
|
|
0
|
|
|
210,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Anthony P. Taylor
|
|
59,400
|
|
|
27,000
|
|
|
7,200
|
|
|
93,600
|
|
|
37,376
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,001
4
|
|
|
0
|
|
|
206,977
|
|
|
|
1.
|
The amounts shown in this column represent the aggregate grant date fair
value computed in accordance with FASB ASC Topic 718. For a description of the assumptions used in valuing the awards please see
Note 9 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31,
2016.
|
|
|
2.
|
Amounts in this column reflect matching contributions under the Company’s
charitable matching gift program.
|
|
|
3.
|
On May 31, 2016, each non-management director received 9,206 shares of our
common stock under the terms of the Stock Plan for Nonemployee Directors. Based on our closing stock price on the NYSE on May 31,
2016 ($4.06), the grant date fair value for each grant of 9,206 shares credited to Messrs. Crumley, Johnson, Nethercutt, Ralbovsky,
Rogers, Stanley and Taylor on May 31, 2016, was $37,376. (The amounts do not reflect the actual amounts that may be realized by
the directors.)
|
|
|
4.
|
On June 7, 2016, each non-management director received 17,273 shares of
our common stock under the terms of the 2010 Stock Incentive Plan. Based on our closing stock price on the NYSE on June 7, 2016
($4.40), the grant date fair value for each grant of 17,273 shares credited to Messrs. Crumley, Johnson, Nethercutt, Ralbovsky,
Rogers, Stanley and Taylor on June 7, 2016, was $76,001. (The amounts do not reflect the actual amounts that may be realized by
the directors.)
|
|
|
5.
|
On March 3, 2016, Messrs. Johnson and Ralbovsky were awarded 2,010 prorated
shares of our common stock under the terms of the Stock Plan for Nonemployee Directors. Based on our closing stock price on the
NYSE on March 3, 2016 ($2.70), the grant date fair value for each grant of 2,010 shares credited to Messrs. Johnson and Ralbovsky
on March 3, 2016, was $5,427. (The amounts do not reflect the actual amounts that may be realized by the directors.)
|
2017 Compensation Changes for Non-Management
Directors
Effective January 1, 2017, the Compensation
Committee recommended and the Board approved the reinstatement of the annual cash compensation paid to non-management directors
to its full value as described under “Components of Non-Management Director Compensation” on page ______.
At the Annual Meeting, we are asking our
shareholders to approve an amendment and restatement of the Hecla Mining Company Stock Plan for Nonemployee Directors (“Director
Stock Plan”). If approved by shareholders, this will eliminate nonemployee director participation in the 2010 Stock Incentive
Plan, and all stock awards will be solely awarded under the Director Stock Plan, beginning in 2017. See page _____ for a full description
of the Director Stock Plan.
Other
The Company covers directors under its
overall director and officer liability insurance policies, as well as reimbursing them for travel, lodging, and meal expenses incurred
in connection with their attendance at Board and committee meetings, meetings of shareholders, and for traveling to visit our operations.
Directors are eligible, on the same basis as Company employees, to participate in the Company’s matching gift program, pursuant
to which the Hecla Charitable Foundation matches contributions made to qualifying nonprofit organizations. The aggregate annual limit per participant
is $5,000. Beyond these items, no other cash compensation was paid to any non-management director.
PROPOSAL 2 – RATIFICATION OF THE APPOINTMENT OF BDO
USA, LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2017
The Audit Committee is directly responsible
for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit
our financial statements. The committee appointed BDO USA, LLP (“BDO”) as the independent registered public accounting
firm for Hecla for the calendar year ending December 31, 2017. BDO has been retained in that capacity since 2001. The committee
is aware that a long-tenured auditor may be believed by some to pose an independence risk. To address these concerns, our committee:
|
|
·
|
reviews all non-audit services and engagements provided by BDO, specifically
with regard to the impact on the firm’s independence;
|
|
|
·
|
conducts a quarterly assessment of BDO’s service quality, and its working
relationship with our management;
|
|
|
·
|
conducts regular private meetings separately with each of BDO and our management;
|
|
|
·
|
interviews, and approves the selection of BDO’s new lead engagement
partner with each rotation; and
|
|
|
·
|
at least annually obtains and reviews a report from BDO describing all relationships
between the independent auditor and Hecla.
|
The members of the committee believe that
the continued retention of BDO to serve as our independent registered public accounting firm is in the best interests of Hecla
and its shareholders.
Although ratification is not required,
the Board is submitting the appointment of BDO to our shareholders for ratification because we value our shareholders’ views
on the Company’s independent registered public accounting firm, and as a matter of good governance practice. In the event
that our shareholders fail to ratify the appointment, it will be considered as a direction to the Board and to the committee to
consider the appointment of a different firm. Even if the appointment is ratified, the committee in its discretion may select a
different independent registered public accounting firm at any time during the year if it determines that such change would be
in the best interest of the Company and our shareholders.
Representatives of BDO are expected to
be present at the Annual Meeting with the opportunity to make statements and respond to appropriate questions from shareholders
present at the meeting.
The Audit Committee and Board recommend
that shareholders vote “FOR” the ratification of the appointment of BDO USA, LLP as our independent registered public
accounting firm for 2017.
Report of the Audit Committee
The committee’s principal functions
are to assist the Board in fulfilling its oversight responsibilities, and to specifically review: (i) the integrity of our financial
statements; (ii) the independent auditor’s qualifications and independence; (iii) the performance of our internal auditor
and the independent auditor; and (iv) our compliance with laws and regulations, including disclosure controls and procedures. During
2016, the committee worked with management, our internal auditor and our independent auditor to address
Sarbanes-Oxley Section 404 internal control
requirements. The committee met six times in 2016.
The committee acts under a written charter
as amended on December 4, 2016. You may obtain a copy of the charter in the “Investors” section of http://www.hecla-mining.com
under “Corporate Governance.”
In performing its functions, the Audit
Committee:
|
|
·
|
met with our internal auditor and independent registered public accounting
firm, with and without management present, to discuss the overall scope and plans for their respective audits, the results of their
examinations and their evaluations of Hecla’s internal controls;
|
|
|
·
|
reviewed and discussed with management the audited financial statements included
in our Annual Report;
|
|
|
·
|
discussed with our independent registered public accounting firm the matters
required to be discussed by the applicable Public Company Accounting Oversight Board (“PCAOB”) standards; and
|
|
|
·
|
received the written disclosures and the letter from our independent registered
public accounting firm required by applicable requirements of the PCAOB regarding the independent registered accountant’s
communication with the Audit Committee concerning independence, and discussed with them matters relating to their independence.
|
Based on the review and discussions described
in this report, and subject to the limitations on the role and responsibilities of the Audit Committee referred to above and in
the Audit Committee Charter, the committee recommended to the Board that the audited financial statements be included in our Annual
Report on Form 10-K for the calendar year ended December 31, 2016, for filing with the SEC.
|
|
Respectfully submitted by
|
|
|
The Audit Committee of the
|
|
|
Board of Directors
|
|
|
|
|
|
Charles B. Stanley, Chairman
|
|
|
Terry V. Rogers
|
|
|
Stephen F. Ralbovsky
|
|
|
George R. Johnson
|
|
|
Catherine J. Boggs
|
Audit and Non-Audit Fees
The following table represents fees for
professional audit services rendered by BDO for the audit of our annual financial statements for the years ended December 31,
2015 and December 31, 2016, and fees for other services rendered by BDO during those periods.
|
|
|
2016
|
|
|
2015
|
|
|
Audit Fees
1
|
|
|
$762,425
|
|
|
|
$698,500
|
|
|
Audit Related Fees
2
|
|
|
87,000
|
|
|
|
87,000
|
|
|
Tax Fees
3
|
|
|
—
|
|
|
|
3,600
|
|
|
All Other Fees
|
|
|
—
|
|
|
|
—
|
|
|
Total
|
|
|
$849,425
|
|
|
|
$789,100
|
|
|
|
1.
|
Relates to services rendered in connection
with the annual audit of our consolidated financial statements, quarterly reviews of financial statements included in our quarterly
report on Form 10-Q, and fees related to the registration of securities with the SEC.
|
|
|
|
2.
|
Consisted principally of fees for audits
of financial statements of employee benefit plans.
|
|
|
|
3.
|
Consisted of fees for tax consultation
and tax compliance services, tax planning and miscellaneous tax research.
|
|
The
committee’s current practice requires pre-approval of all audit services and permissible non-audit services to be provided
by the independent registered public accounting firm. The committee reviews each non-audit service to be provided and assesses
the impact of the service on the firm’s independence. On a periodic basis, management reports to the committee regarding
the actual spending for projects and services compared to the approved amounts. In addition, the committee has delegated authority
to grant certain pre-approvals to the committee chair. Pre-approvals granted by the committee chair are reported to the full committee
at its next regularly scheduled meeting.
COMPENSATION
DISCUSSION AND ANALYSIS
Our
Compensation Committee strives to design a fair and competitive compensation program for executive officers that will attract,
motivate and retain highly qualified and experienced executives, reward performance and provide incentives based on our performance,
with an overall emphasis to maximize our long-term shareholder value. Our executive compensation program consists of several components,
including base salary, annual and long-term performance awards (paid in cash or equity), equity awards, a deferred compensation
plan and retirement benefits. This
Compensation Discussion and Analysis
(“CD&A”) provides information regarding
our compensation objectives, the relationship between the components of our compensation program and our objectives and factors
considered by the committee in establishing compensation levels for our NEOs. The NEOs who are discussed throughout this CD&A
and in the compensation tables are:
|
Name
|
|
Age
|
|
Principal Position
|
|
Phillips S. Baker, Jr.
|
|
57
|
|
President and CEO
|
|
Lindsay A. Hall
|
|
61
|
|
Senior Vice President and Chief Financial Officer
|
|
Lawrence P. Radford
|
|
56
|
|
Senior Vice President – Operations
|
|
Dr. Dean W.A. McDonald
|
|
60
|
|
Senior Vice President – Exploration
|
|
David C. Sienko
|
|
48
|
|
Vice President – General Counsel
|
|
James A. Sabala*
|
|
62
|
|
Former Senior Vice President and Chief Financial Officer
|
*Mr.
Sabala retired in June 2016.
Executive
Summary
Hecla is a leading primary low-cost silver
producer with operating silver mines in Alaska (Greens Creek), Idaho (Lucky Friday), and Mexico (San Sebastian) and is a gold producer
with an operating mine in Quebec, Canada (Casa Berardi). We also produce lead and zinc. In addition to our diversified silver and
gold operating cash-flow mines, we have a number of exploration properties and pre-development projects in seven silver and gold
mining districts in North America. With an active exploration and pre-development program, we have generally grown our reserve
base for future production.
Our
success in 2016 was the result of decisions taken over the past several years to invest in our business. The past three years have
witnessed extraordinary volatility in the mining industry and for silver-focused companies in particular. Through the down-cycle
we continued to build up our production capacity with the successful startup of the very profitable San Sebastian mine, the development
of the open pit at Casa Berardi, and the construction of the #4 Shaft at Lucky Friday, which is now operational. We generated organic
growth at a time when most of our peers were cutting their business and selling assets. While
Hecla’s stock price is highly correlated with silver prices and not immune to industry trends, Hecla increased its value
in 2016. Hecla’s Total Shareholder Return (“TSR”) significantly outperformed silver and key silver company indices and ended 2016 in the top quartile of our
silver competitors. We believe this share price performance was a result of the operational
and strategic improvements realized during the year as summarized in the following sections.
Our
philosophy is to operate mines safely by promoting a deeply-rooted value-based culture, leveraging mining skills developed over
the Company’s long history and by innovating new practices. We are proud to be the first hardrock mine to be certified under
the National Mining Association’s CORESafety system. We believe very strongly that the future of mining lies in productivity
increases, and one of the best ways to increase productivity and safety is by automating the mining tasks allowing the miners to
move away from the mining face, and in some cases, operate the machinery from surface, or have machinery that operates by itself.
High speed wireless data transfer is being used to
improve
communication, monitoring and data collection. This information helps management make better decisions, and enables both tele-remote
and autonomous equipment operation. We have begun introducing automated drilling, tele-remote mucking, automated hauling trucks
and battery powered equipment in some of our operations. Although mostly on a trial basis, we can see the benefits that this innovation
brings and are excited for the potential transformation they will enable in the future. In addition, we have invested in mill improvements
and other innovations that we expect will yield significant returns over the long-term for relatively modest investments.
Key
Operating and Financial Results
Throughout 2016 we aggressively reduced
costs while continuing to focus on safety and sustainability. During the year, we delivered on our production targets, improved
operational efficiencies and kept all key projects on target and on budget. We finished 2016 strongly, setting record silver and
silver equivalent production for the year with the robust performance at all our mines, driving record sales and more than doubling
EBITDA over the last year.
The mining business requires long-term
planning and implementation of operating strategies over several years to deliver successful operating and financial results. Accordingly,
in the table below and summary that follows, we set forth our key operating and financial results for years 2016, 2015 and 2014.
|
|
|
As of and for the Year Ended December 31,
|
|
|
Key Results
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
Silver (ounces) produced
|
|
|
17,177,317
|
|
|
|
11,591,603
|
|
|
|
11,090,506
|
|
|
Gold (ounces) produced
|
|
|
233,929
|
|
|
|
189,327
|
|
|
|
186,997
|
|
|
Lead (tons) produced
|
|
|
42,472
|
|
|
|
39,965
|
|
|
|
40,255
|
|
|
Zinc (tons) produced
|
|
|
68,516
|
|
|
|
70,073
|
|
|
|
67,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products
|
|
$
|
645,957
|
|
|
$
|
443,567
|
|
|
$
|
500,781
|
|
|
Net income (loss)
|
|
$
|
69,547
|
|
|
$
|
(86,968
|
)
|
|
$
|
17,824
|
|
|
Basic income (loss) per common share
|
|
$
|
0.18
|
|
|
$
|
(0.23
|
)
|
|
$
|
0.05
|
|
|
EBITDA
9
|
|
$
|
236,184
|
|
|
$
|
107,316
|
|
|
$
|
151,532
|
|
|
Cash from operating activities (in millions)
|
|
$
|
225.3
|
|
|
$
|
106.4
|
|
|
$
|
83.1
|
|
|
Cash, cash equivalents and short-term investments (in millions)
|
|
$
|
198.9
|
|
|
$
|
155.2
|
|
|
$
|
209.7
|
|
Our overall operating and financial results
are more fully described in
Management’s Discussion and Analysis of Financial Condition and Results of Operations
in our Annual Report on Form 10-K filed with the SEC on February 23, 2017. Our 2016 results were strong relative to our 2015 results.
In 2016, we achieved the following:
9
Earnings before interest,
taxes, depreciation, and amortization (“EBITDA”) is a measurement that is not in accordance with GAAP. EBITDA is used
by management, and we believe is useful to investors, for evaluating our operational performance. A reconciliation of this non-GAAP
measure to net income (loss), the most comparable GAAP measure, can be found in Appendix F under
Reconciliation of Earnings
Before Interest, Taxes, Depreciation, and Amortization (non-GAAP) to Net Income (GAAP).
|
|
n
|
reported sales of $646.0 million, which was a new record and 29% higher than our previous record
in 2014 despite lower average prices for all metals we produce compared to that year;
|
|
|
n
|
silver
equivalent production of 46.1 million ounces, the highest in the Company’s history;
10
|
|
|
n
|
a
48% increase in silver production to 17.2 million ounces, a record, with cost of sales
and other direct production costs and depreciation, depletion and amortization of $298.7
million, and cash cost after by-product credits per silver ounce of $3.10;
11
|
|
|
n
|
a 24% increase in gold production to 233,929 ounces Company-wide, with 145,975 ounces produced
at Casa Berardi with cost of sales and other direct production costs and depreciation, depletion and amortization of $155.7 million
and cash cost, after by-product credits, per gold ounce of $764;
11
|
|
|
n
|
net
income of $69 million and Adjusted EBITDA of $264.6 million, a 179% and 127% increase
compared to 2015;
12
|
|
|
n
|
achieved the above milestones while ending the year with a cash, cash equivalents and short-term
investments balance of $198.9 million as of December 31, 2016, an increase of $43.7 million during the year;
|
10
2016 silver equivalent calculation is based on
the following prices: $17.10 for silver, $1,248 for gold, $0.85 for lead, and $0.95 for zinc.
11
Cash cost, after by-product
credits, per silver and gold ounce represents a non-GAAP measurement, a reconciliation of which to cost of sales and other direct
production costs and depreciation, depletion and amortization, the most comparable GAAP measure, can be found in Appendix F under
Reconciliation of Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) to Cost of Sales
and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP).
It is an important operating statistic
that management utilizes to measure each mine’s operating performance. It also allows the benchmarking of performance of
each mine versus those of our competitors. As a primary silver mining company, management also uses the statistic on an aggregate
basis – aggregating the Greens Creek, Lucky Friday and San Sebastian mines – to compare performance with that of other
primary silver mining companies. With regard to Casa Berardi, management uses cash cost, after by-product credits, per gold ounce
to compare its performance with other gold mines. The statistic is also useful in identifying acquisition and investment opportunities
as it provides a common tool for measuring the financial performance of other mines with varying geologic, metallurgical and operating
characteristics. In addition, the Company may use it when formulating performance goals and targets under our incentive program.
12
Adjusted EBITDA is a non-GAAP
measurement, a reconciliation of which to net income (loss), the most comparable GAAP measure, can be found in Appendix F under
Reconciliation of Adjusted EBITDA (non-GAAP) to Net Income (loss) (GAAP)
. Adjusted EBITDA is a measure used by management
to evaluate the Company’s operating performance but should not be considered an alternative to net income (loss), or cash
provided by operating activities as those terms are defined by GAAP, and does not necessarily indicate whether cash flows will
be sufficient to fund cash needs. In addition, the Company may use it when formulating performance goals and targets under our
incentive program.
|
|
n
|
completed the #4 Shaft at Lucky Friday, the largest capital project in our history, which started
in 2008;
|
|
|
n
|
commenced development of the East Mine Crown Pillar (“EMCP”) open pit project at Casa
Berardi, with processing of ore from EMCP that began in July 2016;
|
|
|
n
|
acquisition of Mines Management, Inc., giving us ownership of the Montanore project, a very large
silver/copper project undergoing permitting in northwestern Montana;
|
|
|
n
|
the
first hardrock mining company to receive independent certification under CORESafety;
13
and
|
|
|
n
|
our stock price rose 177% in 2016.
|
The charts below show the change in our
share price in 2016 and in 2015 compared to each of the companies in our peer group.
2016 Stock Price
13
CORESafety is a partnership led by the members
of the National Mining association. It is an approach to mining safety and health to prevent accidence before they happen using
a management system that involves leadership, management and assurance. Its objective is to have zero fatalities and a 50 percent
reduction in mining’s injury rate within five years (0:50:5).
2015 Stock Price
Shareholder Outreach and 2016 Advisory Vote on Executive
Compensation
Over
the last several years we have undertaken significant shareholder outreach efforts in an effort to elicit and understand the concerns
of our shareholders. In response to shareholder concerns gleaned from our shareholder outreach, we made changes to our executive
compensation program in 2014 and 2015, and we believe as a result of those changes, last year’s say-on-pay vote achieved
81% support. We believe that open dialogue with our shareholders and reflecting their feedback in our compensation decisions was
critical to our success in achieving such a high percentage of support.
In
2016, and in advance of our upcoming 2017 Annual Meeting, we continued to reach out to our shareholders. The purpose of these meetings was to gain feedback on the changes we made to our executive compensation in 2014 and 2015
and to discuss any further concerns. We held one-on-one discussions with shareholders holding over 50,000,000 shares of our common
stock, and held a face-to-face discussion with one of the two major proxy advisory firms. During our discussions, all of the changes made to our compensation program in 2014 and 2015 were well-received. A common
issue raised during our conversations was to see more pay-for-performance disclosure in our Proxy Statement under the terms of
our Annual Incentive Plan (“AIP”). We are consistently trying to improve our compensation disclosures including with
respect to pay-for-performance.
Oversight and Determination of the Executive Compensation
Program
Role
of the Compensation Committee
. The committee, consisting entirely of independent members (Nethercutt, Crumley, Rogers and Taylor),
has primary responsibility for executive compensation decisions. The committee carries out its responsibilities under a charter
approved by the Board. In 2014, the committee and the Board amended the committee’s charter to provide that the committee
has the authority to approve all executive compensation, including our CEO’s (but not that of our independent directors,
which remains decided by the full Board). The committee receives assistance from its
independent executive compensation consultant,
Mercer, and uses this information in making
decisions and conducting its annual review of the Company’s executive compensation program.
Role of Independent Compensation Consultant.
Mercer performs executive compensation services solely on behalf of the committee, is engaged by and reports directly to the committee,
meets separately with the committee with no members of management present, and consults with the committee chair between meetings.
The committee has assessed Mercer’s
independence in light of SEC rules and NYSE listing standards, and has determined that Mercer’s work does not raise any conflicts
of interest or independence concerns. The Mercer consultants who worked with the committee, are both principals of Mercer, and
include Tracy Bean, project manager and Raphael Katsman.
Pursuant to a written agreement dated February
8, 2016, between Mercer and the Compensation Committee, below are the material aspects of the services the committee asked Mercer
to perform with respect to executive compensation and related matters in 2016:
|
|
·
|
evaluate the competitiveness of the total direct compensation package provided to Hecla’s
executive officers; and specifically, to compare Hecla’s current executive officer compensation with compensation provided
to executives in similar roles in comparable organizations;
|
|
|
·
|
review updated information regarding Hecla’s executive compensation program and the positions
to be benchmarked, including organization charts, position descriptions, current total compensation and other relevant data;
|
|
|
·
|
review last year’s peer group to determine if the included companies continue to be appropriate
and if any additional companies should be considered for inclusion;
|
|
|
·
|
collect and analyze compensation data form the most recent proxy filings of the peer group and
from the survey sources and summarize the market pay data by the 25
th
, 50
th
and 75
th
percentile
levels and compare Hecla’s executive compensation levels to the proxy and survey data separately;
|
|
|
·
|
analyze the year-over-year change in compensation levels for Hecla compared to each market data
source;
|
|
|
·
|
analyze Hecla’s long-term incentive and equity practices compared to peers;
|
|
|
·
|
prepare a report to the Compensation Committee summarizing their methodology, findings and overall
recommendations;
|
|
|
·
|
assist the committee in meeting its obligation to issue a Compensation Committee Report recommending
inclusion of the CD&A in the proxy statement; and
|
|
|
·
|
provide ongoing advice and consultation throughout the year to assist the committee, including
attendance at committee meetings, if needed.
|
In addition to providing
technical support and input on market practices, the committee’s goal in using a compensation and benefits consultant is
to provide external benchmark information for assessing compensation relative to our compensation philosophy. As described on page
_____ under
Benchmarking Using Compensation Peer Groups
, Mercer assisted the committee in identifying the appropriate companies
to be included in our peer group for executive and director compensation and pay practices, and in benchmarking our executive and
director pay against the peer group.
In June 2016, Mercer performed a competitive
analysis and presented its findings and recommendations to the committee. The competitive analysis provided detailed comparative
data for each executive officer position and assessed each component of pay, including base salary, short- and long-term incentives
and total target compensation, as well as the mix of compensation among these pay elements. We compared this information to our
executives’ compensation by similarity of position. The committee also reviewed our performance and carefully evaluated each
executive’s performance during the year against established goals, leadership qualities, operational performance, business
responsibilities, career with Hecla, current compensation arrangements and long-term potential.
The committee has established procedures
that it considers adequate to ensure that Mercer’s advice to the committee remains objective and is not influenced by Company
management. These procedures include: a direct reporting relationship between the Mercer consultant and the committee; a provision
in the committee’s engagement letter with Mercer specifying the information and recommendations that can and cannot be shared
with management; an annual update to the committee on Mercer’s financial relationship with Hecla, including a summary of
the work performed for Hecla during the preceding 12 months; and written assurances from Mercer that within the Mercer organization,
the Mercer consultants who perform services for Hecla have a reporting relationship determined separately from Mercer’s other
lines of business and from its other work for Hecla.
The total amount of fees for executive
compensation consulting services Mercer provided to the committee in 2016 was $70,359.
During 2016, management hired Mercer or
its affiliates to provide consulting services on our benefit plans, including support under the Affordable Care Act. The total
amount of fees for these additional consulting services in 2016 was $146,028. The decision to engage Mercer or its affiliates for
these additional consulting services was made by management, and neither the committee nor the Board approved these other services.
Role of Management.
The committee
considers input from the CEO in making determinations regarding our executive compensation program and the individual compensation
of each named executive officer (other than the CEO). As part of our annual review process, the CEO reviews the performance of
each named executive officer (other than the CEO), and their contribution to the overall performance of the Company. Approximately
mid-year, the CEO presents recommendations to the committee regarding base salary adjustments, target annual incentive awards,
stock-based grants, and long-term performance unit grants, based on a thorough analysis of relevant market compensation data comparing
Hecla with an applicable peer group within the mining industry. The CEO and senior management also make recommendations to the
committee regarding our annual quantitative and qualitative goals, and annual long-term goals for the named executive officers
(other than the CEO), as well as recommendations regarding the participation in our stock-based compensation plans and amendments
to the plans, as necessary.
Benchmarking Using Compensation Peer
Groups.
To attract and retain key executives, our goal is to provide competitive compensation. We generally align our NEO total
compensation to the 75
th
percentile of our peer companies and survey composite data. However, we allow total compensation
to exceed the 75
th
percentile when our Company performance and individual experience, responsibilities and performance
warrant.
Central to the pay review process is the
selection of a relevant peer group. Because we operate in a global business that is dominated by Canadian companies, our peer group
reflects this with only five U.S. companies among our peer group. The committee reviews and determines the composition of our peer
group on an annual basis, based on recommendations from Mercer. In 2016, the committee made no changes to the peer group, apart
from removing AuRico Gold due to the merger of AuRico Gold with and into Alamos Gold.
In 2016, Hecla’s peer group was made
up of the following 16 companies, whose aggregate profile was comparable to Hecla in terms of size, industry and competition for
executive talent.
|
Company
|
|
Annual
Revenue
1
($millions US)
|
|
Market
Cap
1
($millions US)
|
|
Total Assets
1
($millions US)
|
|
Corporate
Location
|
|
IAMGOLD Corporation
|
|
917
|
|
559
|
|
3,251
|
|
Canada
|
|
Centerra Gold Inc.
|
|
624
|
|
1,124
|
|
1,661
|
|
Canada
|
|
Pan American Silver Corporation
|
|
675
|
|
986
|
|
1,715
|
|
Canada
|
|
New Gold Inc.
|
|
713
|
|
1,181
|
|
3,676
|
|
Canada
|
|
Coeur Mining Inc.
|
|
646
|
|
375
|
|
1,332
|
|
United States
|
|
Stillwater Mining Company
|
|
726
|
|
1,037
|
|
1,282
|
|
United States
|
|
B2Gold Corp.
|
|
554
|
|
946
|
|
2,024
|
|
Canada
|
|
Alamos Gold Inc.
|
|
355
|
|
844
|
|
2,462
|
|
Canada
|
|
Detour Gold Corporation
|
|
563
|
|
1,780
|
|
2,443
|
|
Canada
|
|
Tahoe Resources Inc.
|
|
520
|
|
1,969
|
|
2,002
|
|
United States
|
|
Primero Mining
|
|
291
|
|
374
|
|
925
|
|
Canada
|
|
Silver Standard Resources Inc.
|
|
375
|
|
419
|
|
872
|
|
Canada
|
|
Thompson Creek Metals Company
2
|
|
494
|
|
45
|
|
2,376
|
|
United States
|
|
Royal Gold, Inc.
|
|
278
|
|
2,394
|
|
2,917
|
|
United States
|
|
Endeavour Silver Corp.
|
|
184
|
|
145
|
|
114
|
|
Canada
|
|
First Majestic Silver Corp.
|
|
219
|
|
509
|
|
790
|
|
Canada
|
|
Median
|
|
537
|
|
895
|
|
1,859
|
|
|
|
Hecla Mining Company
|
|
444
|
|
715
|
|
2,222
|
|
United States
|
|
|
1.
|
In $US millions as of year-end 2015.
|
|
|
2.
|
Thompson Creek Metals Company was acquired
by Centerra Gold in 2016.
|
The
peer group is composed entirely of publicly held companies, most of which are engaged in the business of mining precious metals
with revenue, market capitalization and total assets within a reasonable range of Hecla’s. We believe these peer companies
are appropriate because they are in the same industry, compete with us for executive talent, have executives in positions similar
to ours, and are considered by the committee to be in an acceptable range of revenue, market capitalization and/or total assets
compared to Hecla.
During our shareholder outreach, many of
our largest shareholders have informed us that they consider our peer group to be the most relevant and appropriate for compensation
and performance benchmarking purposes. The peer group selected last year by Glass-Lewis included 14 of our 17 selected peers. The
peer group selected by Institutional Shareholder Services (“ISS”) included only 4 of our 17 selected peers. The rest
of the peer group selected by ISS contained U.S. based companies in the agricultural product, forest products, industrial and specialty
chemicals, metal powders, coatings, paper and other industries – companies and industries whose market fundamentals are different
from the precious metals mining industry. We understand that ISS’s internal policies prohibit its selection of Canadian companies
(which account for twelve of our peers), and require that Hecla be compared to companies having only similar revenue instead of
similar market capitalization or total assets. We believe that a fair compensation peer group, in terms of both industry profile
and size, cannot be selected for Hecla without including Canadian companies.
In
making compensation decisions the committee also reviews survey data provided by Mercer from the following mining and general industry
survey sources:
|
|
·
|
Mercer US Mining Industry Compensation Survey
|
|
|
·
|
Mercer Canadian Mining Industry Compensation Survey
|
|
|
·
|
Mercer U.S. Premium Executive Remuneration Suite (general industry)
|
Base
salaries are targeted between the 25
th
percentile and median (50
th
percentile), with incentive opportunities
that can provide above-median total compensation based on performance. Compensation for NEOs within this group may be positioned
higher or lower than the 75
th
percentile where the committee believes appropriate, considering each executive’s
roles and responsibilities and experience in their position within Hecla.
Mercer
provided the committee with a report summarizing executive compensation levels at the 25
th
, 50
th
and 75
th
percentiles of the peer group and the survey data for positions
comparable
to those held by each of our NEOs. The committee also received an analysis from Mercer comparing the target total cash compensation
(base salary plus target annual incentive) and target total direct compensation (base salary plus target annual incentive plus
the value of long-term target incentives) for each of the NEOs against these benchmarks. For retention and competitive considerations,
in comparison to the peer group data or survey data applicable to each NEO’s position, we target each NEO’s total cash
compensation at the median level and the total target direct compensation at or above the median level, and deliver compensation
above or below these levels when warranted by performance.
In
2016, target total direct compensation (base salary, short- and long-term incentives) for our NEOs was between the median and the
75
th
percentile of both the peer group and survey data.
In
2016, the committee also approved a separate peer group to be used specifically with regard to TSR
. The TSR peer group is
as follows:
|
IAMGOLD Corporation
|
First Majestic Silver Corp.
|
|
Silver Standard Resources Inc.
|
Centerra Gold
|
|
Detour Gold Corporation
|
New Gold Inc.
|
|
Pan American Silver Corporation
|
Coeur Mining Inc.
|
|
B2Gold Corp.
|
Alamos Gold Inc.
|
|
Primero Mining
|
Endeavour Silver Corp.
|
|
Tahoe Resources Inc.
|
|
Compensation Philosophy and Objectives
We operate in a competitive and challenging
industry. Over the past decade, a worldwide mining boom has significantly increased the demand for executives with mining-related
skills and experience. In addition, the supply of mining executives is very limited, particularly in the United States. As a result,
having a viable compensation strategy is critical to our success.
Our compensation philosophy is to pay our
NEOs competitive levels of compensation that best reflect their individual responsibilities and contributions to the Company, while
providing incentives to achieve our business and financial objectives. While comparisons to compensation levels at companies in
our peer group are helpful in assessing the overall competitiveness of our compensation program, we believe that our executive
compensation program also must be internally consistent and equitable in order for the Company to achieve our corporate objectives.
The pay-for-performance philosophy of our
executive compensation programs described in this Proxy Statement plays a significant role in our ability to produce strong operating,
exploration, strategic, and financial results. It enables us to attract and retain a highly experienced and successful team to
manage our business. Our compensation programs strongly support our business objectives and are aligned with the value provided
to our
shareholders. Further, as an executive’s
level of responsibility within our organization increases, so does the percentage of total compensation that we link to performance
– through the annual incentive and long-term incentive programs, as well as share performance.
In setting policies and practices regarding
compensation, the guiding philosophy of the committee is to:
|
|
n
|
have compensation that is primarily at-risk and based on strategic objectives and tactical activities;
and
|
|
|
n
|
acquire, retain and motivate talented executives.
|
The committee believes that a mix of both
cash and equity incentives is appropriate, as cash incentives reward executives for achieving both short- and long-term quantitative
and qualitative goals, while equity incentives align the interests of executives with those of other shareholders. In determining
the amount of the cash and equity incentives, the committee considers each officer’s total compensation on both a short-
and long-term basis to assess the retention and incentive value of his or her overall compensation.
The committee conducts its annual review
process near the end of each calendar year in order to align each executive’s compensation awards with the Company’s
operational, financial and strategic results for the calendar year.
We also maintain (or avoid) the following
pay practices that we believe enhance our pay-for-performance philosophy and further align our NEOs’ interests with those
of shareholders:
|
We DO NOT Have these Practices
|
|
X Repricing
of stock options
X Perquisites
X Excise tax gross-ups
|
|
We DO Have these Practices
|
|
ü
Incentive award
metrics that are objective and tied to Company performance
ü
84% of CEO
and 74% of NEO pay is at-risk
ü
Over 68% of
total compensation for the CEO is performance-based
ü
54% of total
compensation for NEOs other than the CEO is performance-based
ü
100% of the
CEO’s annual incentive compensation is tied solely to Company performance
ü
Rigorous stock
ownership requirements for our NEOs and directors
ü
Compensation
recoupment “clawback” policy
ü
Double-trigger
change in control severance for NEOs
ü
Equity awards
that vest over a three-year period to promote retention
ü
Anti-hedging
and anti-pledging policies
|
Elements of Total Compensation
We have a multifaceted
compensation program. For the year ended December 31, 2016, our executive compensation program consisted of the following
elements:
|
BASE SALARY
|
|
Objective:
Provide a fixed level of
cash compensation for performing day-to-day responsibilities generally at less than median of peers.
Key Features:
Base salary reviews are
performed in the middle of each year for the 12-month period from July 1 to June 30.
Terms:
Paid semi-monthly.
|
|
INCENTIVE PAY
|
|
Annual Incentive Plan
Objective:
Focus executives on achieving
Company’s short-term goals, and the performance steps necessary to achieve longer-term objectives.
Key Features:
Based on achievement of
the Company goals and individual performance. Some goals are quantitative, such as EBITDA, production, and cash position, while
others are qualitative. Weighting is 50% quantitative corporate performance goals, 25% qualitative/other goals, and 25% discretionary
factor as determined by the committee.
Terms:
Determined by the committee and
paid in a single payment following the performance year. Awarded in the first half of each year. Designed to be awarded in cash,
but may be paid in equity (in full or part).
Long-term Incentive Plan
Objective
: Focus executives on longer-term
value creation as determined by the specific targets of the plan.
Key Features:
Based on corporate goals
achieved over a three-year performance period. A new three-year performance period begins each calendar year and performance units
are granted in the first half of each year. Each three-year plan identifies key long-term objectives that are expected to create
long-term value for shareholders such as operating performance, increasing production and resources, increasing shareholder return,
and developing significant capital programs.
Terms:
Determined by the committee and
paid in a single payment following the three-year performance period. Awarded in the first quarter of each year. Designed to be
awarded in cash, but may be paid in equity (in full or part).
|
|
Restricted Stock Units
Objectives:
Align management’s
interests with those of shareholders and provide incentive for NEOs to remain with the Company for the long term.
Key Features:
Restricted stock unit
awards are denominated in shares and delivered in stock with a vesting schedule of three years for NEOs.
Terms:
Restricted
stock units are granted between May and August of each year. In recent years, only restricted stock unit awards have been made.
Performance-based Shares
Objectives:
Provide incentive for CEO
to remain with the Company for the long term and to align CEO’s interests with those of shareholders.
Key Features:
Performance-based shares
realize more value the higher the TSR ranks within the selected peer group and have no value if the share performance doesn’t
exceed 50%.
Terms:
Performance-based shares are
granted to the CEO in the second quarter of each year and are based on a three-year TSR.
|
|
KEY EMPLOYEE DEFERRED COMPENSATION PLAN
|
|
Objective:
Increased exposure to the
Company to the extent deferred compensation is tied to the value of Hecla stock, while also providing a tax deferral opportunity
and encouraging financial planning.
Key Features:
Allows for the voluntary
deferral of base salary, annual incentive pay, long-term incentive pay and restricted stock unit payouts.
Terms:
Generally, employee must make
election in the previous year to defer in the coming year.
|
|
BENEFITS
|
|
Objectives:
Attract and retain highly
qualified executives.
Key Features:
Participation in retirement
plans, partial company-paid health, dental and vision insurance, life insurance, and accidental death and dismemberment insurance.
Terms:
Same terms for all U.S. permanent
full-time salaried employees.
|
Total Compensation Mix
Our executive compensation program –
composed primarily of base salary, short- and long-term incentives, and equity awards – is intended to align the interests
of our NEOs with the long-term interests of our shareholders. The program is designed to accomplish this by rewarding performance
that results in an increase in the value of our shareholders’ investment in Hecla. We believe that the proportion of at-risk,
performance-based compensation should comprise a significant portion of executive pay.
The mix of compensation for our CEO and
other NEOs, which we believe is similar to our peer group, is shown below.
2016
Target Compensation Structure.
The following table lists total 2016 target compensation for the NEOs (including the reduction
in base salaries for calendar year 2016). Even though base salaries were reduced, it did not affect the annual incentive target
award, which was based on base salaries without the reductions.
|
NEO
|
|
Base
Salary
1
($)
|
|
Annual
Incentive
Target Award
2
($)
|
|
Long-term
Incentive
Plan Target
Award
($)
|
|
Equity
($)
|
|
Total
($)
|
|
Baker
|
|
484,000
|
|
605,000
|
|
|
950,000
|
|
|
1,000,000
|
3
|
|
3,039,000
|
|
|
Hall
|
|
342,000
|
|
380,000
|
4
|
|
420,000
|
5
|
|
345,000
|
|
|
1,487,000
|
|
|
Radford
|
|
342,000
|
|
380,000
|
|
|
340,000
|
|
|
345,000
|
|
|
1,407,000
|
|
|
McDonald
|
|
247,500
|
|
275,000
|
|
|
260,000
|
|
|
300,000
|
|
|
1,082,500
|
|
|
Sienko
|
|
225,000
|
|
175,000
|
|
|
190,000
|
|
|
154,000
|
|
|
744,000
|
|
|
Sabala
|
|
342,000
|
|
380,000
|
4
|
|
340,000
|
5
|
|
0
|
|
|
1,062,000
|
|
|
|
1.
|
Base
salaries (with reductions) for calendar year 2016.
|
|
|
2.
|
Annual Incentive Target Award was not
affected by the base salary reductions in 2016. It is based on pre-reduction base salary amounts.
|
|
|
3.
|
Consists of $500,000 in restricted stock
units and $500,000 in performance-based shares.
|
|
|
4.
|
Messrs. Hall and Sabala’s 2016
Annual Incentive Target Awards were prorated due to Mr. Sabala’s retirement in June 2016, and Mr. Hall joining the Company
in July 2016. See the footnotes accompanying the
Summary Compensation Table for 2016
on page _____.
|
|
|
5.
|
Messrs. Hall and Sabala’s 2014-2016
Long-term Incentive Target Awards were prorated due to Mr. Sabala’s retirement in June 2016, and Mr. Hall joining the Company
in July 2016. See the footnotes accompanying the
Summary Compensation Table for 2016
on page ____.
|
Individual
base salaries and annual incentive targets for the NEOs are based on the scope of each NEO’s responsibilities, individual
performance and market data. At the beginning of each year, we also define the key strategic objectives each NEO is expected to
achieve during that year, which are evaluated and approved by the committee.
Overview of our Compensation
Decisions and Results for 2016
Base Salary
Design
.
Pursuant to our market positioning policy, the committee targets base salaries between the 25
th
percentile and median
of Hecla’s peer group for our NEOs. An individual NEO’s base salary may be set above or below this market range for
that particular position, depending on the committee’s subjective assessment of the individual NEO’s experience, recent
performance and expected future contribution, retention concerns, and the recommendation of our CEO (other than for himself). The
committee does not use any type of quantitative formula to determine the base salary level of any of the NEOs. The committee reviews
NEO salaries at least annually as part of its overall competitive market assessment, as described above. Typically, the committee
makes annual salary adjustments in the middle of each year for the 12-month period from July 1 to June 30.
Analysis
and Decision
. In June 2016, the committee reviewed a market analysis prepared by Mercer. The base salaries of our NEOs have
remained unchanged since July 1, 2014. However, in December 2015, due to cost savings measures, the Compensation Committee reduced
our NEO’s salaries by 10% for calendar year 2016, and our CEO’s salary was reduced by 20% for calendar year 2016.
The
following table shows base salaries for all NEO’s from July 1, 2014 through December 31, 2016:
Base
Salary for NEOs July 1, 2014 through December 31, 2016
|
NEO
|
|
7/1/14 to
12/31/15
Salary
($)
|
|
1/1/16 to
12/31/16
Salary
($)
|
|
Percentage
Decrease
(%)
|
|
Phillips S. Baker, Jr.
|
|
605,000
|
|
484,000
|
|
(20
|
)
|
|
Lindsay A. Hall
|
|
0
|
|
342,000
1
|
|
(10
|
)
|
|
Lawrence P. Radford
|
|
380,000
|
|
342,000
|
|
(10
|
)
|
|
Dr. Dean W.A. McDonald
|
|
275,000
|
|
247,500
|
|
(10
|
)
|
|
David C. Sienko
|
|
250,000
|
|
225,000
|
|
(10
|
)
|
|
James A. Sabala
|
|
380,000
|
|
342,000
|
|
(10
|
)
|
|
|
1.
|
Mr. Hall’s salary was set at $380,000 in July 2016 when he joined the Company, but with the understanding that he would
take a 10% reduction for the remainder of calendar year 2016.
|
Incentive
Plans
Company
Performance and Relationship to NEO Compensation.
Our incentive compensation plans
include the Hecla Mining Company Annual Incentive Plan and the Hecla Mining Company Executive and Senior Management Long-Term Performance
Payment Plan. The plans include performance measures of the most important factors we believe contribute to Hecla’s sustained
long-term success that can lead to improved stock price performance.
Hecla Mining Company Annual Incentive
Plan (“AIP”).
Consistent with Hecla’s pay-for-performance philosophy, substantially all salaried employees,
including our NEOs, are eligible to participate in the AIP. Late in the prior year, or early in the current year, the committee
approves a company-wide, short-term incentive pool that is available for payment to salaried employees, including the NEOs, the
amount of which is based on Company performance during the prior year.
AIP
Components
. In 2014, the AIP was amended to use a more formulaic approach to awards, with less committee discretion. The AIP
includes the following components and relative weights:
|
|
·
|
quantitative corporate performance factors comprising 50%
of the targeted award;
|
|
|
·
|
qualitative/other goals, normally comprising 25% of the targeted award; and
|
|
|
·
|
a discretionary factor as determined by the committee, normally
comprising 25% of the targeted award.
|
Each
component can achieve two times the target (200%) with respect to the component, with the maximum total payout limited to two times
the target award level (200%).
For
2016, the quantitative corporate performance factors were divided into four factors (including weighting): production (15%), adjusted
EBITDA (15%), cash (15%), and work-related injury rate reduction (5%).
The production factor converts gold, lead
and zinc to silver equivalent at a ratio of 78 oz. silver to 1 oz. gold, 19.0 lb. lead to 1 oz. silver, and 20.7 lb. zinc to 1
oz. silver. Our production target required that we achieve 42 million silver equivalent ounces. Maximum payout is attained if production
achieves 44 million ounces. The minimum payout required 40 million ounces. To achieve targeted payout a 9% increase over 2015 silver
equivalent production levels was necessary, while the maximum payout required a 15% increase.
PRODUCTION GOAL METRICS
2016 Production in Silver Equivalent Ounces
|
2016 Production Metrics
|
|
|
|
% Performance Value
|
|
44.0 mm
|
|
Maximum
|
|
30%
|
|
43.0 mm
|
|
|
|
20%
|
|
42.0 mm
|
|
Target
|
|
15%
|
|
40.0 mm
|
|
|
|
10%
|
|
<39.0mm
|
|
|
|
0%
|
The
adjusted EBITDA target was $255 million. Maximum payout is achieved if adjusted EDITDA was $300 million. There is no payout if
adjusted EBITDA was less than $148 million.
|
ADJUSTED EBITDA GOAL METRICS
|
|
2016 Adjusted
EBITDA Metrics
|
|
|
|
% Performance Value
|
|
$300 mm
|
|
Maximum
|
|
30%
|
|
$275 mm
|
|
|
|
20%
|
|
$255 mm
|
|
Target
|
|
15%
|
|
$200 mm
|
|
|
|
10%
|
|
< $148mm
|
|
|
|
0%
|
|
|
|
|
|
|
|
The
cash position target is $100 million. Maximum payout is achieved if our cash position at year-end is at or above $200 million.
The threshold payout level is $85 million, below which no payout is earned.
CASH
GOAL METRICS
|
|
2016 Cash Metrics
|
|
|
|
Factor Value
|
|
|
$200 mm
|
|
Maximum
|
|
30%
|
|
|
$150 mm
|
|
|
|
20%
|
|
|
$100 mm
|
|
Target
|
|
15%
|
|
|
$85 mm
|
|
|
|
10%
|
|
|
< $75 mm
|
|
|
|
0%
|
The
work-related injury rate reduction target is 15% at year-end. Maximum payout is achieved if our work-related injury rate is met
at 35%. The threshold payout level is 5% reduction, below which no payout is earned.
WORK-RELATED
INJURY RATE REDUCTION
|
|
2016 AIFR Results
|
|
|
|
Factor Value
|
|
|
35%
|
|
Maximum
|
|
10%
|
|
|
25%
|
|
|
|
7.5%
|
|
|
15%
|
|
Target
|
|
5%
|
|
|
5%
|
|
|
|
2.5%
|
|
|
< 5%
|
|
|
|
0%
|
Target Opportunities
. Each NEO has
a target award opportunity expressed as a percentage of base salary, along with minimum and maximum award levels. The target award
opportunities are determined based on the following: market assessments and the committee’s market positioning policy; the
individual NEO’s organization level, scope of responsibility and ability to impact Hecla’s overall performance; and
internal equity among the NEOs. Actual awards are paid after the end of each annual performance period and can range from 0% to
200% of the target awards, based on the committee’s assessment of our actual performance and the achievement of an individual
NEO’s goals. Having a limit on our maximum award reduces the likelihood of windfalls to executives and encourages financial
discipline. It is also competitive with typical peer group practice.
For 2016, target AIP award opportunities for the NEOs were as
follows:
|
NEO
|
|
Target Annual Incentive
(% of base salary)
|
|
Phillips S. Baker, Jr.
|
|
100%
|
|
Lindsay A. Hall*
|
|
100%
|
|
Lawrence P. Radford
|
|
100%
|
|
Dr. Dean W.A. McDonald
|
|
100%
|
|
David C. Sienko
|
|
70%
|
|
James A. Sabala*
|
|
80%
|
|
*
|
Messrs. Hall and Sabala’s AIP awards were prorated for 2016, due to Mr. Sabala
retiring in June 2016, and Mr. Hall joining the Company in July 2016.
|
The market analysis prepared by Mercer
in June 2016 indicated that annual incentives were generally at the median of peers.
Performance Measures.
Our management
develops proposed targets for each Company performance measure based on a variety of factors, including historical corporate performance,
internal budgets, forecasts and growth targets, market expectations and strategic objectives. The committee reviews the targets
and adjusts them, as it deems appropriate. The committee believes that linking annual incentive awards to pre-established goals
creates a performance-based compensation strategy consistent with
shareholder interests.
The committee also believes that incentive compensation targets should be established to drive real and sustainable improvements
in operating performance and the strategic position of the Company.
2016 AIP – Analysis and Decisions
.
The committee reviewed the performance versus the AIP goals on a quarterly basis. For 2016, based on the assessment by the committee
of the Company’s overall performance on both quantitative and qualitative measures as well as relevant discretionary factors
under the AIP, the committee determined Company performance to be at 150% of target (out of a possible range of 0-200%).
For 2016, Company performance for AIP was
150%, which was comprised of 85% related to the quantitative factors (30% for Production, 17.5% for Adjusted EBITDA, 30% for Cash,
and 7.5% for Work-related injury reduction); 40% for qualitative factors; and 25% for discretionary.
2016 AIP Quantitative
Measure Results
|
Maximum
|
Target
|
Minimum
|
Actual
|
Performance
Value
|
|
Production
Silver equivalent
ounces
|
44.0 mm
ozs.
|
42.0 mm
ozs.
|
40 mm
ozs.
|
46.5 mm
ozs.
|
30.0%
|
|
Adjusted EBITDA
|
$300 mm
|
$255 mm
|
$200 mm
|
$264.6 mm
|
17.5%
|
|
Cash
|
$200 mm
|
$100 mm
|
$85 mm
|
$198.9 mm
|
30.0%
|
|
Work-related injury reduction
|
35%
|
15%
|
5%
|
25%
|
7.5%
|
|
Total Quantitative
|
85.0%
|
As reflected in the table above, production
and cash generation each achieved the maximum level, while Adjusted EBITDA and work-related injury reduction goals exceeded target
levels.
In addition to quantitative corporate performance
factors, our AIP has a component that is based on qualitative and other goals relating not only to Hecla as a whole, but also to
each NEO. This component is targeted to account for 25% of the total AIP target award, but can account for 0 to 50% of the target
award.
For our 2016 AIP, qualitative objectives
for NEOs included those related to (i) strategy, (ii) succession planning, (iii) safety, health and environment, (iv) process improvement
and innovation, (v) operations, (vi) financial condition, (vii) human capital development, (viii) acquisitions, (ix) mine life
extension exploration and reserve growth, (x) investor relations, (xi) government and community relations, and (xii) legal. While
most of the goals are subjective in nature, to the extent possible, objective and quantifiable targets are set in order to improve
accountability for results.
For 2016, the committee assessed performance
under this component at 40% of the target award. The committee based its assessment on the following factors:
|
|
ü
|
acquired Mines Management, Inc., giving us ownership of the Montanore project in northwestern Montana;
|
|
|
ü
|
acquired 50% interest in the Casa Berardi Joint Venture from Tahoe Resources, whereby the Company
now holds a 100% interest in the land surrounding the mining lease at Casa Berardi;
|
|
|
ü
|
extended milling access at San Sebastian through the end of 2018;
|
|
|
ü
|
added three new directors;
|
|
|
ü
|
provided leadership training for 10 key employees;
|
|
|
ü
|
reduced the number of significant and substantial citations issued by the Mine Safety and Health
Administration from 2015 levels;
|
|
|
ü
|
continued the investor outreach program and met with one proxy advisory firm;
|
|
|
ü
|
received successful decisions in all three civil lawsuits related to the 2011 incidents at one
of the operations;
|
|
|
ü
|
received dismissals in all three putative class action claims filed in connection with the Mines
Management acquisition;
|
|
|
ü
|
successfully transitioned executive positions at corporate for Vice President – Corporate
Development and Senior Vice President - Chief Financial Officer, as well as the Vice President and General Manager position at
our Greens Creek mine and Vice President and General Manager position at our San Sebastian operation;
|
|
|
ü
|
sponsored multiple events celebrating Hecla’s 125
th
anniversary, gaining more
recognition for the Company; and
|
|
|
ü
|
added two new analysts for Hecla coverage.
|
The final component of our AIP is at the
discretion of the committee and it is targeted to account for 25% of the total AIP target award, but can account for 0 to 50% of
the target award. For 2016, the committee determined the discretionary factor performance value to be at 25% of the target award.
The committee based its assessment primarily on the following significant performance results by Hecla in 2016:
|
|
ü
|
Hecla stock performed well in 2016 relative to peers;
|
|
|
ü
|
hosted an Investor Day in Toronto and New York to increase understanding of the quality of our
assets, which we believe was successful in that our shares outperformed our peers over the following two months;
|
|
|
ü
|
our Greens Creek mine became the first hard rock mine to receive independent certification under
CORESafety;
|
|
|
ü
|
EMCP pit at Casa Berardi became fully operational, increasing mill throughput and gold production;
|
|
|
ü
|
successfully resolved three environmental matters;
|
|
|
ü
|
#4 Shaft at Lucky Friday was completed by year-end;
|
|
|
ü
|
reduced operating costs by $22 million from our approved 2016 budget;
|
|
|
ü
|
higher production and metals prices resulted in cash provided by operating activities of $225.3
million;
|
|
|
ü
|
achieved a new production record for the third year in a row;
|
|
|
ü
|
extended mine life at San Sebastian and Greens Creek;
|
|
|
ü
|
production at San Sebastian exceeded expectations throughout the year; and
|
|
|
ü
|
continued implementing new technologies at all our mines.
|
In addition to the strong performance realized
by our NEOs within their functional area and as part of the executive team, each NEO made significant contributions to Hecla’s
2016 performance.
Mr. Baker’s performance is based
100% on corporate performance. The Company had an outstanding year under Mr. Baker’s guidance, including strong share performance,
increased metals production, and cash flow growth. As Mr. Baker’s performance is based on corporate performance, the committee
assessed Mr. Baker’s AIP to be 150% of target.
Mr. Radford’s leadership was also
instrumental in developing the organization, including acquiring the work force needed to operate the San Sebastian mine at full
production throughout the year, achieving higher metal recoveries at Greens Creek, reducing geotechnical risk in the underground
operations, advancing the EMCP open-pit project at Casa Berardi and the combined operations achieving higher production than the
prior year. The committee assessed Mr. Radford’s AIP to be at 180% of target.
Dr. McDonald oversees the exploration program
for the Company and was instrumental in developing the resource model that will extend Greens Creek’s life of mine to 2027,
as
well as having a successful drilling program
at Casa Berardi, that has shown the potential for another open-pit mine. The committee assessed Mr. McDonald’s AIP to be
at 125% of target.
Mr. Sabala and his successor, Mr. Hall,
were both instrumental in managing Hecla’s cash position in 2016, effectively managing working capital, negotiating credit
agreements and improving capital market relationships. Mr. Sabala retired in June 2016, and Mr. Hall joined the Company in July
2016. The committee felt that there was a smooth transition between Messrs. Sabala and Hall, and the committee assessed AIP for
Mr. Sabala to be at 115% of target, and 120% at target for Mr. Hall, both of which were prorated.
Mr. Sienko was successful in resolving
several significant regulatory and legal matters involving environmental, health and safety, and other civil litigation issues,
while also supporting the acquisition of Mines Management, and the funding of our pension plans. The committee assessed Mr. Sienko’s
AIP to be at 189% of target.
Set forth in the table below is each NEO’s
target award and actual award, which was paid 75% in cash and 25% in Hecla common stock issued under the 2010 Stock Incentive Plan.
|
Name
|
Base Salary
1
($)
|
Base
Salary
Factor
(%)
|
Target
Annual
Incentive
($)
|
% to Target
2
(%)
|
Actual Award
3
($)
|
Cash
Received
($)
|
Equity Received
4
(#)
|
|
Phillips S. Baker, Jr.
|
605,000
|
100
|
605,000
|
150
|
907,500
|
680,625
|
34,323
|
|
Lindsay A. Hall
|
380,000
|
100
|
380,000
|
120
|
205,200
5
|
153,900
|
7,761
|
|
Lawrence P. Radford
|
380,000
|
100
|
380,000
|
180
|
684,000
|
513,000
|
25,870
|
|
Dr. Dean W.A. McDonald
|
275,000
|
100
|
275,000
|
125
|
343,750
|
257,813
|
13,001
|
|
David C. Sienko
|
250,000
|
70
|
175,000
|
189
|
330,000
5
|
247,500
|
12,481
|
|
James A. Sabala
|
380,000
|
80
|
304,000
|
115
|
209,000
|
156,750
|
7,905
|
|
|
1.
|
AIP targets are based on unreduced
base salaries.
|
|
|
2.
|
The percentages listed for each of
the NEOs includes corporate achievement of goals and individual performance.
|
|
|
3.
|
The amount reported in this column
was paid in cash and equity to the NEO and is also reported in the
Summary Compensation Table for 2016
on page ____ under “Non-Equity
Incentive Plan Compensation.”
|
|
|
4.
|
The equity portion of the 2016 AIP
award was determined by subtracting the cash portion from the total award to determine the equity value, then dividing that by
the closing price of the Company’s common stock on the NYSE on February 21, 2017 ($6.61).
|
|
|
5.
|
Messrs. Hall and Sabala’s AIP
awards were prorated for 2016, due to Mr. Sabala retiring in June 2016, and Mr. Hall joining the Company in July 2016.
|
Hecla Mining Company Executive and Senior Management Long-Term Performance Payment Plan (“LTIP”)
. We use the
LTIP to focus executives on meeting long-term (three-year) corporate performance goals. The LTIP is also designed to attract and
retain
executives in a highly competitive talent
market. The committee considers mining and general industry market practices, as well as the objectives of the LTIP, when determining
the terms and conditions of long-term incentive goals, such as resource additions and cash flow generation.
Under the LTIP, a new performance period
begins each calendar year and runs for three years. The three-year performance period recognizes that some value-creating activities
require a significant period of time to be implemented and for measurable results to accrue. Starting a new performance period
each year also gives the committee flexibility to adjust for new business conditions, circumstances or priorities in setting the
performance metrics and goals for each three-year cycle. Performance units are assigned to each NEO at the beginning of each three-year
period, and provide the basis for the amount of awards made to each NEO under the LTIP. Performance units are designed to encourage
management to deliver long-term value. Performance units reinforce Hecla’s business strategy by clearly establishing our
key performance elements (e.g., reserve growth, production growth, cash flow, #4 Shaft completion, and relative TSR) and the associated
long-term performance objectives that must be met for us to be successful and create value for shareholders.
The 2014-2016 LTIP units have a maximum
potential value of $375. Performance units are paid out as soon as practicable after the end of each performance period, upon approval
by the committee. At the discretion of the committee, the payouts may be in the form of cash, common stock, restricted stock units,
or a combination of these forms.
2014-2016
LTIP
.
The tables below summarize the performance unit valuation ranges for reserve growth, production growth, cash contribution,
#4 Shaft completion, and TSR for the 2014-2016 plan period – the five performance goals approved by the committee in February
2014. These are important goals for the following reasons:
|
|
·
|
Silver equivalent reserve growth
. Silver equivalent reserve
growth remains a fundamental value creator. We need to replace and add reserves to extend mine lives and grow production. This
is critical to the achievement of our long-term success. In this context, reserves include the silver equivalent of gold and base
metals.
|
|
|
·
|
Cash flow
. The design of the cash flow goal is identical
to that contained in prior years since silver cost per ounce and production are key elements in creating shareholder value. When
used in the context of our LTIP, “cash flow” is measured by comparing (i) the actual cash cost, after by-product credits
multiplied by actual silver/gold production versus (ii) budgeted cash cost, after by-product credits multiplied by the budgeted
silver/gold production over a three-year period. “Cash cost, after by-product credits,” a non-GAAP measure, includes
all direct and indirect operating cash costs related directly to the physical activities of producing the primary metal, including
mining, processing and other plant costs, third-party refining expense, on-site general and administrative costs,
|
royalties
and mining production taxes, and offsets that amount by the production value of all metals other than the primary metal produced
at each unit.
|
|
·
|
Silver production growth
. One of the most important components
of value is demonstrable production growth.
|
|
|
·
|
TSR
. TSR provides a performance metric relative to our
peers. This objective differs from the other objectives which are focused on activities that in an absolute sense should be value
drivers: reserves, production (enhanced by #4 Shaft completion), and cash contribution. TSR measures the price appreciation of
our stock, including dividends paid during the performance period, and thereby simulates the actual investment performance of Hecla
stock. Any payout is based on how Hecla’s TSR performance compares to the TSR of the common stock of a group of our peer
companies.
|
|
|
·
|
#4 Shaft completion
. To achieve production growth at the
Lucky Friday, it was important that the #4 Shaft be completed on schedule.
|
2014
-
2016
Performance Unit Valuation
|
Silver Equivalent Reserve Growth
|
|
Silver Equivalent Production Growth
|
Ounce Target
(millions)
|
Total
Additional
Reserve
(millions)
(replacement
in situ)
|
Unit Value
|
Target
(in mm ozs.)
|
Average
Annual
Target
(in mm
ozs.)
|
Unit Value
|
|
400
|
103 (191)
|
$100.00
|
75.0
|
25.0
|
$50.00
|
|
337
|
40 (128)
|
$50.00
|
72.0
|
24.0
|
$40.00
|
|
327
|
30 (118)
|
$25.00
|
70.5
|
23.5
|
$25.00
|
|
307
|
10 (98)
|
$5.00
|
68.0
|
22.6
|
$10.00
|
|
Cash Flow
|
|
Total Shareholder Return
|
% of Target
|
Unit Value
|
|
%ile rank within
Peer Group
Companies
|
Unit Value
|
|
115%
|
$75.00
|
|
100%
|
$100.00
|
|
110%
|
$50.00
|
|
90%
|
$75.00
|
|
105%
|
$35.00
|
|
80%
|
$50.00
|
|
100%
|
$25.00
|
|
70%
|
$35.00
|
|
95%
|
$22.50
|
|
60%
|
$25.00
|
|
90%
|
$20.00
|
|
50%
|
$15.00
|
|
85%
|
$17.50
|
|
<50%
|
$ 0.00
|
|
80%
|
$15.00
|
|
|
|
|
#4 Shaft Completion
|
100%
Completion
Date
|
Unit Value
|
|
12/31/15
|
$50.00
|
|
5/1/16
|
$25.00
|
|
After 8/1/16
|
$ 0.00
|
2014-2016 LTIP – Analysis and Decisions
. The committee
assessed performance under the 2014-2016 LTIP as follows:
|
Performance Measure
|
Target
|
Actual
Performance
|
% of Target
|
Value Earned
Per Unit
|
|
Silver Reserve Growth
|
30.0 silver oz. added (millions)
|
Silver oz. decreased by 2.7 mm oz.
|
-9
|
No Payout
|
|
Production Growth
|
70.5 silver oz. (millions)
|
76.5 silver oz. (millions)
|
108
|
$50.00
|
|
Cash Flow
|
$628.75 cash flow (millions)
|
$829.36 cash flow (millions)
|
132
|
$75.00
|
|
Total Shareholder Return
|
60% Hecla ranking vs. peers
|
92.9% Hecla ranking vs. peers
|
1556
|
$82.25
|
|
#4 Shaft Completion
|
Shaft Completed by 5/1/16
|
1/20/17 completion date
|
N/A
|
No Payout
|
|
Total Earned Per Unit
|
|
|
|
$207.25
|
During this three-year period, performance
in production exceeded the maximum threshold, and cash flow generation and TSR components fell between target and the maximum threshold.
The #4 Shaft completion and silver reserve growth were each below the threshold. As a result, with a range in potential value per
unit of $0 to $375, in February 2017, the committee determined that the total 2014-2016 LTIP payout was $207.25 per unit. The committee
and the Board further approved payout of the LTIP awards to be 75% in cash and 25% in Hecla common stock issued under the 2010
Stock Incentive Plan.
The following chart shows the number of
performance units awarded in 2014 to each NEO, the unit value achieved, the total amount of the award (number of units x $207.25
= amount received), and the amount of cash and number of shares received.
|
Name
|
|
2014-2016
Performance
Units
(#)
|
|
Unit Value
($)
|
|
Total
Amount of
Award
1
($)
|
|
Cash
Received
($)
|
|
Equity
Received
2
(#)
|
|
Phillips S. Baker, Jr.
|
9,500
|
207.25
|
1,968,875
|
1,476,656
|
74,466
|
|
Lindsay A. Hall
|
|
583
3
|
|
207.25
|
|
120,827
|
|
90,620
|
|
4,570
|
|
Lawrence P. Radford
|
|
3,400
|
|
207.25
|
|
704,650
|
|
528,488
|
|
26,651
|
|
Dr. Dean W.A. McDonald
|
|
2,600
|
|
207.25
|
|
538,850
|
|
404,138
|
|
20,380
|
|
David C. Sienko
|
|
1,900
|
|
207.25
|
|
393,775
|
|
295,331
|
|
14,893
|
|
James A. Sabala
|
|
2,786
3
|
|
207.25
|
|
577,399
|
|
433,049
|
|
21,838
|
|
|
1.
|
The amount reported in this column
was paid in cash and equity to the NEO and is also reported in the
Summary Compensation Table for 2016
on page ____ under “Non-Equity
Incentive Plan Compensation.”
|
|
|
2.
|
The equity portion of the 2014-2016
LTIP award was determined by subtracting the cash portion from the total award to determine the equity value, then dividing that
by the closing price of the Company’s common stock on the NYSE on February 21, 2017 ($6.61).
|
|
|
3.
|
Messrs. Hall and Sabala’s 2014-2016
LTIP units were prorated due to Mr. Sabala retiring in June 2016 and Mr. Hall joining the Company in July 2016.
|
Restricted
Stock Units.
Restricted stock units (“RSUs”) are granted to the NEOs under the Key Employee Deferred Compensation
Plan and/or the 2010 Stock Incentive Plan. RSUs are used to retain our NEOs and align their interests with the long-term interests
of our shareholders. The committee
awarded each NEO RSUs in June 2016. The RSUs vest in three
equal amounts with vesting dates of June 21, 2017, June 21, 2018, and June 21, 2019. See
Grants of Plan-Based Awards for
2016
on page ______.
In December 2014, the committee amended
the 2010 Stock Incentive Plan and Key Employee Deferred Compensation Plan so that any RSUs vesting after 2014 would no longer be
credited with dividend equivalents.
In 2016, we granted RSUs to 89 employees,
including all NEOs, under the 2010 Stock Incentive Plan.
Performance-based Shares
.
In
June 2016, the committee and the independent Board members granted 113,636 performance-based shares to our CEO, with a grant date
value of $500,000, comprising one-half of his total equity awards in 2016. The value of these performance-based shares will be
based on the TSR of our common stock for the three-year period from January 1, 2016 through December 31, 2018, based on the following
percentile rank within a group of peer companies:
Company TSR Rank
Among Peers
|
|
TSR Performance
Multiplier
|
|
50
th
percentile
|
|
Threshold award at 50% of target
|
|
60
th
percentile
|
|
Target award at grant value
|
|
100
th
percentile
|
|
Maximum award at 200% of target
|
If Hecla’s performance is below the
50
th
percentile, the award is zero. If Hecla’s performance is between the 50
th
and 100
th
percentile, the award is prorated. For any
award, the number of shares issued in 2018
at the conclusion of the three-year performance period will be based on the grant date share price (June 7, 2016) of $4.40.
Hecla’s TSR performance versus that of
our peer group will be based on the average closing share price over the last sixty (60) calendar days prior to January 1, 2016,
as the base price and average closing share price over the last sixty (60) calendar days of the three-year performance period to
determine relative share value performance and ranking among peers.
For 2016, the industry peer group used for
purposes of the TSR performance-based award is listed on page _____.
2014 – 2016 Performance-based
Shares – Analysis and Decision
. On June 25, 2014, the committee and independent members of the Board of Directors granted
151,515 performance-based shares of Hecla’s common stock
To determine the relative
share performance, Hecla’s TSR performance versus that of peer group companies was based on the average closing share price
over the last sixty (60) calendar days prior to January 1, 2014, as the base price, compared with the average closing share price
over the last sixty (60) calendar days of the three-year performance period (ending December 31, 2016).
The following table shows the calculation of
the performance-based share results at the end of the three-year performance period on December 31, 2016. Hecla’s TSR ranked
2
nd
among the 13 companies in the peer group based on TSR from 2014 through 2016, including dividends paid during that
period. Ranking 2
nd
places Hecla at 92.9% among the peer companies, which equates to an award value of $911,250 or 276,136
shares at the $3.30 closing price of Hecla’s common stock on June 25, 2014.
|
TOTAL SHAREHOLDER RETURN – January 1, 2014 through December 31, 2016
|
|
Peer
Name
|
|
Average
Stock
Price over 60-
day period
leading up to
1/1/2014
($)
|
|
Average Stock
Price over 60-
day period
leading up to
12/31/16
($)
|
|
Dividends
Paid (1/1/14
thru
12/31/16)
($)
|
|
TSR
thru
12/31/16
(%)
|
Rank
(#)
|
|
Payout
($)
|
|
Detour Gold
|
|
4.76
|
|
17.77
|
|
—
|
|
273.32
|
1
|
|
1,000,000
|
|
Hecla
|
|
2.91
|
|
6.00
|
|
0.03
|
|
107.22
|
2
|
|
911,250
|
|
Centerra Gold
|
|
3.58
|
|
6.65
|
|
0.44
|
|
98.04
|
3
|
|
821,250
|
|
Pan American Silver
|
|
10.77
|
|
16.15
|
|
0.83
|
|
57.61
|
4
|
|
732,500
|
|
Silver Standard
|
|
6.20
|
|
9.70
|
|
—
|
|
56.45
|
5
|
|
642,500
|
|
Royal Gold
|
|
45.99
|
|
68.14
|
|
2.42
|
|
53.42
|
6
|
|
533,750
|
|
TARGET PAYOUT
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
Endeavour Silver
|
|
3.88
|
|
5.17
|
|
—
|
|
33.25
|
7
|
|
463,750
|
|
First Majestic Silver
|
|
10.35
|
|
11.26
|
|
—
|
|
8.79
|
8
|
|
375,000
|
|
THRESHOLD PAYOUT
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
IAMGOLD
|
|
4.05
|
|
3.75
|
|
—
|
|
-7.41
|
9
|
|
—
|
|
Coeur d’Alene Mines
|
|
10.80
|
|
9.87
|
|
—
|
|
-8.61
|
10
|
|
—
|
|
New Gold
|
|
5.45
|
|
4.94
|
|
—
|
|
-9.36
|
11
|
|
—
|
|
Stillwater Mining
|
|
51.82
|
|
42.20
|
|
—
|
|
-18.56
|
12
|
|
—
|
|
Tahoe Resources
|
|
17.40
|
|
9.75
|
|
0.14
|
|
-43.16
|
13
|
|
—
|
|
Alamos Gold
|
|
12.50
|
|
6.57
|
|
0.08
|
|
-46.80
|
14
|
|
—
|
|
Allied Nevada*
|
|
—
|
|
—
|
|
—
|
|
-100.00
|
15
|
|
—
|
*Allied Nevada filed for Chapter 11 bankruptcy and was delisted
in 2015.
Stock Options
. In the past six years, we have not issued
any stock options to our NEOs (or any other employee). Any stock options granted under the 2010 Stock Incentive Plan will be issued
with an exercise price based on the fair market value (the closing sales price of our common stock on the NYSE on the date of grant).
Other
Nonqualified Deferred Compensation Plan.
We maintain the Key Employee Deferred Compensation Plan (the “KEDCP”), a nonqualified deferred compensation plan,
under which participants may defer all or a portion of their annual base salary, performance-based compensation awarded under our
AIP and LTIP, and RSUs granted under the 2010 Stock Incentive Plan. Participants may elect to have their deferred base salary and
AIP or LTIP awards valued based on Hecla common stock and credited to a stock account. Deferred RSUs are credited to a stock account.
The KEDCP provides for discretionary matching contributions on base salary, AIP and LTIP amounts deferred to a stock account and
discretionary company contributions that are credited to a participant’s stock account. The deferral features promote alignment
of the interests of participants with those of our shareholders. Investment accounts are credited monthly with an amount based
on the prime rate for corporate borrowers. Participants receive distributions from their accounts only upon separation from service
with us, a fixed date or schedule selected by the participant, death, disability, an unforeseeable emergency or a change in control,
as these events are defined under Section 409A of the Internal Revenue Code. The amounts deferred are unfunded and unsecured obligations
of Hecla, receive no preferential standing, and are subject to the same risks as any of our other general obligations. Additional
details about the KEDCP are described in the narrative accompanying the
Nonqualified Deferred Compensation
for 2016
table on page _______.
Benefits.
We
provide our employees with a benefits package that is designed to attract and retain the talent needed to manage Hecla. As part
of that, all U.S. salaried employees, including the NEOs, are eligible to participate in the Hecla Mining Company Retirement Plan
(the “Retirement Plan”), the Capital Accumulation Plan (a 401(k) plan, which includes matching contributions by Hecla
up to 6%), health, vision, dental
coverage, and paid time off, including vacations
and holidays. All Canadian salaried employees, including NEOs, are eligible to participate in a similar benefits package. NEOs
are eligible to receive certain additional benefits, as described below. The committee intends for the type and value of such benefits
offered to be competitive with general market practices.
Other Qualified and Nonqualified Benefit
Plans
. Under the Retirement Plan, upon normal retirement, each participant is eligible to receive a monthly benefit equal to
a certain percentage of final average annual earnings for each year of credited service. Additional details about the Retirement
Plan are in the narrative accompanying the
Pension Benefits
table on page ______. Under Hecla’s unfunded Supplemental
Excess Retirement Plan, the amount of any benefits not payable under the Retirement Plan because of the limitations imposed by
the Internal Revenue Code and/or the Employee Retirement Income Security Act, and the reduction of benefits, if any, due to a deferral
of salary made under our KEDCP, will be paid out of our general funds to any employee who may be adversely affected. The Retirement
Plan and Supplemental Excess Retirement Plan define earnings for purposes of the plans to include base salary plus any other cash
incentives up until July 1, 2013, after which only base salary plus one-half of AIP compensation is included (no LTIP compensation
is included).
Personal Benefits
.
We do not provide company-paid cars, country club memberships, or other similar perquisites to our executives. The only material
personal benefit provided by Hecla is a relocation benefit, which is offered as needed to meet spe
cific
recruitment needs.
Clawback Policy
At its February 2013 meeting, the
Compensation Committee adopted a clawback policy with respect to incentive awards to executive officers. The policy provides that
in the event of a restatement of our financial results as a result of a material non-compliance with financial reporting requirements,
the Board will review incentive compensation that was paid to our current and former executive officers under the Company’s
AIP and LTIP (or any successor plans) based solely on the achievement of specific corporate financial goals (“Incentive Award”)
during the period of the restatement. If any Incentive Award would have been lower had it been calculated based on the Company’s
restated financial results, the Board will, as and to the extent it deems appropriate, including with respect to intent or level
of culpability of the relevant individual(s), seek to recover from any executive officer, any portion of an Incentive Award paid
in excess of what would have been paid based on the restated financial results. The policy does not apply in any situation where
a restatement is not the result of material non-compliance with financial reporting requirements, such as any restatement due to
a change in applicable accounting rules, standards or interpretations, a change in segment designations or the discontinuance of
an operation.
In December 2015, the Compensation
Committee amended each of our incentive plans (AIP, LTIP, KEDCP, and 2010 Stock Incentive Plan) to include a clawback provision
consistent with the clawback policy described above.
Insider Trading Policy
Our insider trading policy prohibits all directors,
executive officers (as defined under Section 16 of the Exchange Act) and certain other employees designated as insiders from purchasing
or selling any Company securities three weeks before through two days after the public release of any of our periodic results (including
the filing of any Form 10-Q or Form 10-K), or at any other time during the year while in possession of material non-public information
about the Company. In addition, directors and officers are prohibited from short-term trading, short sales, options trading, trading
on margin, hedging or pledging any securities of the Company.
Change in Control Agreements
We have entered into change in control agreements
(“CIC Agreements”) with each of our NEOs. Under the terms of our CIC Agreements, the CEO and the other NEOs are entitled
to payments and benefits upon the occurrence of specified events, including termination of employment (with or without cause) following
a change in control of the Company. The specific terms of these arrangements, as well as an estimate of the compensation that would
have been payable had they been triggered as of fiscal year-end, are described in detail in the section entitled
Change in Control
and Termination
on page _____.
The termination of employment provisions of
the CIC Agreements were entered into to address competitive concerns when the NEOs were recruited to Hecla by providing these individuals
with a fixed amount of compensation that would offset the risk of leaving their prior employer or foregoing other opportunities
to join the Company. At the time of entering into these arrangements, the committee considered the aggregate potential obligations
of the Company in the context of the desirability of hiring the individual and the expected compensation upon joining Hecla.
The committee believes that these CIC Agreements
are important for a number of reasons, including providing reasonable compensation opportunities in the unique circumstances of
a change in control that are not provided by other elements of our compensation program. Further, change in control benefits, if
structured appropriately, serve to minimize the distraction caused by a potential transaction and reduce the risk that key executives
will leave Hecla before a transaction closes. The committee also believes that these agreements motivate the executives to make
decisions that are in the best interests of our shareholders in the event of a pending change in control. These agreements provide
executives with the necessary job stability and financial security during a change in control transaction and the subsequent period
of uncertainty to help them stay focused on managing Hecla rather than on their own personal employment situation. The committee
believes that all of these objectives serve our shareholders’
interests. The committee also believes that
change in control provisions are an essential component of the executive compensation program and are necessary to attract and
retain senior talent in the highly competitive talent market in which we compete.
The change in control provisions were developed
by the Company and the committee based on market and industry competitive practices. The Company and the committee periodically
review the benefits provided under the CIC Agreements to ensure that they serve our interests in retaining our key executives,
are consistent with market and industry practice, and are reasonable. For example, recently the agreements were amended to eliminate
“double trigger” and excise tax gross-up provisions, replacing them with single trigger and “best net after tax
payment” provisions instead.
Tax and Accounting Considerations
Our compensation programs are affected by each
of the following:
Accounting for Stock-Based Compensation
.
We take into account certain requirements of GAAP in determining changes to policies and practices for our stock-based compensation
programs.
Section 162(m)
of the Internal Revenue Code
.
Section 162(m) of the Internal Revenue Code of 1986, as amended (“Code Section 162(m)”)
provides generally that compensation in excess of $1 million paid to the CEO or to any other NEO (other than the chief financial
officer) of a public company will not be deductible for federal income tax purposes unless such compensation is paid pursuant to
one of the enumerated exceptions set forth in Code Section 162(m).
Our primary objective in designing and administering
our compensation policies is to support and encourage the achievement of our strategic goals and to enhance long-term shareholder
value. We also believe that it is important to preserve flexibility in administering compensation programs. For these and other
reasons, the committee has determined that it will not necessarily seek to limit executive compensation to the amount that would
be fully deductible under Code Section 162(m). Further, although we received shareholder approval for our 2010 Stock Incentive
Plan at our 2010 Annual Meeting, there is no assurance that such approval satisfied or continues to satisfy the shareholder approval
requirements under Code Section 162(m) necessary for amounts awarded under that plan to be fully deductible by Hecla. As a result
of the foregoing, amounts awarded or paid under any of our compensation programs, including salaries, annual incentive awards,
performance awards, stock options and RSUs, may not qualify as performance-based compensation that is excluded from the limitation
on deductibility.
The committee will continue to monitor developments
and assess alternatives for preserving the deductibility of compensation payments and benefits to the extent reasonably practicable,
as determined by the committee to be consistent with our compensation policies and in the best interests of the Company and our
shareholders.
In 2016, Mr. Baker, our President and CEO,
and Mr. Radford, our Senior Vice President – Operations, earned amounts subject to Section 162(m) in excess of $1 million,
therefore a portion of each of those officer’s total compensation is not deductible by Hecla.
Section 409A of the Internal Revenue Code
.
Section 409A imposes additional significant taxes in the event that an executive officer or director receives “deferred compensation”
that does not satisfy the requirements of Section 409A. We believe that we have designed and operated our plans appropriately to
comply with Section 409A.
FUTURE COMPENSATION ACTIONS
Base Salaries for 2017
Due to cost savings measures,
in December 2015, the Compensation Committee approved salary reductions for calendar year 2016. Our CEO’s base salary was
reduced by 20%, and other NEO’s base salary was reduced by 10%. Effective January 1, 2017, base salary reductions ceased
and are in effect through or about June 30, 2017. Base salaries are reviewed mid-year.
|
NEO
|
|
1/1/17 to 6/30/17
Salary
($)
|
|
Phillips S. Baker, Jr.
|
|
605,000
|
|
Lindsay A. Hall
|
|
380,000
|
|
Lawrence P. Radford
|
|
380,000
|
|
Dr. Dean W.A. McDonald
|
|
275,000
|
|
David C. Sienko
|
|
250,000
|
2017 AIP
In February 2017, the committee approved
the 2017 AIP goals. The AIP factors were divided into the following components, which may be modified by the committee from
time to time, including with respect to the relative weights:
|
|
·
|
quantitative
corporate performance factors comprising 50% of the targeted award;
|
|
|
|
|
|
|
·
|
qualitative/other
goals, comprising 25% of the targeted award; and
|
|
|
|
|
|
|
·
|
a
discretionary factor as determined by the committee, comprising 25% of the targeted award.
|
Each component can achieve
two times the target with respect to the component, with the maximum total payout limited to two times the target award level (200%).
Quantitative Goals
The 2017 AIP is like the 2016 AIP except one
quantitative goal was eliminated, cash, and the Adjusted EBITDA goal have been changed by including a capital component in the
measure. For the 2017 AIP, the quantitative corporate performance factors are divided into three factors (including weighting):
production (20%), EBITDA less capital (20%), and all injury frequency rate reduction (10%).
The production factor converts gold, lead and
zinc to silver equivalent at a ratio of 71 oz. silver to 1 oz. gold, 16.4 lb. lead, and 13.3 lb. zinc. Our production target requires
that we achieve 46.5 million silver equivalent ounces. Maximum payout is attained if production achieves 48.5 million ounces. The
minimum payout is achieved if production is greater than 43.5 million ounces.
PRODUCTION GOAL METRICS
2017 Production in Silver Equivalent Ounces
(includes all metals)
|
2017 Production Metrics
|
|
|
|
% Performance Value
|
|
48.5mm
|
|
Maximum
|
|
40%
|
|
47.5mm
|
|
|
|
30%
|
|
46.5mm
|
|
Target
|
|
20%
|
|
44.5mm
|
|
|
|
10%
|
|
<43.5mm
|
|
|
|
0%
|
The minimum threshold for the EBITDA less capital
goal is $60 million. The maximum threshold is $135 million.
|
EBITDA LESS CAPITAL GOAL METRICS
|
|
|
2017
EBITDA Less Capital
Metrics
|
|
|
|
% Performance Value
|
|
$135mm
|
|
Maximum
|
|
40%
|
|
$115mm
|
|
|
|
30%
|
|
$100mm
|
|
Target
|
|
20%
|
|
$60mm
|
|
|
|
10%
|
|
< $60mm
|
|
|
|
0%
|
|
|
|
|
|
|
|
The All Injury Frequency Rate (“AIFR”)
reduction target is 15% at year-end, which achieves the long-term goal. The 2016 AIFR was 3.42. A 15% reduction results in a rate
of 2.91 as the target. A 35% reduction results in a rate of 2.22, which is as the maximum threshold. A reduction of less than 5%,
or a 2017 AIFR rate of 3.25, would result in no payout.
ALL INJURY FREQUENCY RATE REDUCTION
|
2017 AIFR Metrics
|
|
|
|
% Performance Value
|
|
35%
|
|
Maximum
|
|
20%
|
|
25%
|
|
|
|
15%
|
|
15%
|
|
Target
|
|
10%
|
|
5%
|
|
|
|
5%
|
|
<5%
|
|
|
|
0%
|
Qualitative Goals
The qualitative/other goals are recommended
by management, approved by the committee, and cover the areas of safety and health, environmental, technology and innovation, continuous
improvement, operations, financial and cost controls, employee development, benefit plans, acquisitions, mine life extension, exploration
and reserve growth, investor relations, government and community affairs, legal, and internal affairs.
Outstanding LTIP Periods
Below we provide the current
three-year LTIP periods that are outstanding.
2015-2017 LTIP
In March 2015, the committee
approved the 2015-2017 LTIP, which has a target unit value of $100. The 2015-2017 LTIP has the same factors as the 2014-2016 LTIP,
except for the #4 Shaft completion metric, which was removed as the project neared completion. The only other factor that is different
from the 2014-2016 LTIP is as follows:
|
|
·
|
silver equivalent reserve and resource growth includes gold converted to silver equivalent at 71
to 1.
|
The 2015-2017 LTIP has a
maximum potential payout of $375 per unit, the same as the 2014-2016 LTIP.
2015
-
2017 Performance Unit Valuation
|
Silver Equivalent (includes Gold)
Reserve Growth
|
|
Silver Equivalent (includes Gold)
Production Growth
|
|
Ounce
Target
(millions)
|
Additional
Reserve
(millions)
(replacement
in situ)
|
Unit Value
|
|
Target
(in mm ozs.)
|
Average
Annual
Target
(in mm
ozs.)
|
Unit Value
|
|
420
|
100 (175)
|
$100.00
|
82.5
|
27.5
|
$75.00
|
|
360
|
40 (115)
|
$ 50.00
|
78.5
|
26.2
|
$50.00
|
|
350
|
30 (105)
|
$ 25.00
|
77.0
|
25.7
|
$25.00
|
|
320
|
0 (75)
|
$ 5.00
|
|
74.5
|
24.8
|
$10.00
|
|
Cash Flow
|
|
Total Shareholder Return
|
|
% of Target
|
Unit Value
|
|
%ile rank within
Peer Group
Companies
|
Unit Value
|
|
115%
|
$100.00
|
|
100%
|
$100.00
|
|
110%
|
$ 50.00
|
|
90%
|
$ 75.00
|
|
105%
|
$ 35.00
|
|
80%
|
$ 50.00
|
|
100%
|
$ 25.00
|
|
70%
|
$ 35.00
|
|
95%
|
$ 22.50
|
|
60%
|
$ 25.00
|
|
90%
|
$ 20.00
|
|
50%
|
$ 15.00
|
|
85%
|
$ 17.50
|
|
< 50%
|
$ 0.00
|
|
80%
|
$ 15.00
|
|
|
2016-2018 LTIP
In February 2016, the committee
approved the 2016-2018 LTIP, which has a target unit value of $100. The 2016-2018 LTIP has the same factors as the 2015-2017 LTIP,
with a maximum potential payout of $375 per unit.
2016
-
2018 Performance Unit Valuation
|
Silver Equivalent (includes Gold)
Reserve Growth
|
|
Silver Equivalent (includes Gold)
Production Growth
|
|
Ounce
Target
(millions)
|
Additional
Reserve
(millions)
(replacement
in situ)
|
Unit Value
|
|
Target
(in mm ozs.)
|
Average
Annual
Target
(in mm
ozs.)
|
Unit Value
|
|
423
|
100 (184)
|
$100.00
|
|
93.0
|
31.0
|
$75.00
|
|
363
|
40 (124)
|
$ 50.00
|
|
89.5
|
29.5
|
$50.00
|
|
353
|
30 (114)
|
$ 25.00
|
|
87.0
|
29.0
|
$25.00
|
|
323
|
0 (84)
|
$ 5.00
|
|
84.0
|
28.0
|
$10.00
|
|
Cash Flow
|
|
Total Shareholder Return
|
|
% of Target
|
Unit Value
|
|
%ile rank within
Peer Group
Companies
|
Unit Value
|
|
115%
|
$100.00
|
|
100%
|
$100.00
|
|
110%
|
$ 50.00
|
|
90%
|
$ 75.00
|
|
105%
|
$ 35.00
|
|
80%
|
$ 50.00
|
|
100%
|
$ 25.00
|
|
70%
|
$ 35.00
|
|
90%
|
$ 15.00
|
|
60%
|
$ 25.00
|
|
|
|
|
50%
|
$ 15.00
|
|
|
|
|
< 50%
|
$ 0.00
|
2017-2019 LTIP
In February 2017, the committee
approved the 2017-2019 LTIP, which has a target unit value of $100. The 2017-2019 LTIP has four factors, three of which are repeat
factors from the 2016-2018 LTIP, with a maximum potential payout of $375 per unit. The three factors include: silver equivalent
reserve growth (gold is converted into silver equivalent at a ratio of 71 to 1), silver equivalent production growth (includes
silver and gold, but not base metals), and total shareholder return. The fourth factor is mine site operating cash flow less capital,
which replaces the cash flow goal from previous plans.
2017
-
2019 Performance Unit Valuation
|
Silver Equivalent (includes Gold)
Reserve Growth
|
|
Silver Equivalent (includes Gold)
Production Growth
|
Ounce
Target
(millions)
|
Additional
Reserve
(millions)
(replacement
in situ)
|
Unit
Value
|
|
Target
(in mm ozs.)
|
Average
Annual
Target
(in mm
ozs.)
|
Unit
Value
|
|
405.6
|
90 (175)
|
$ 75.00
|
|
100.0
|
33.3
|
$100.00
|
|
375.6
|
60 (145)
|
$ 50.00
|
|
96.0
|
32.0
|
$75.00
|
|
345.6
|
30 (115)
|
$ 25.00
|
|
93.0
|
31.0
|
$50.00
|
|
315.6
|
0 (85)
|
$ 5.00
|
|
90.0
|
30.0
|
$25.00
|
|
|
|
|
|
85.0
|
28.3
|
$10.00
|
Mine Site Operating Cash
Flow Less Capital
|
|
Total Shareholder Return
|
Cash
Target
(millions)
|
Unit Value
|
|
%ile rank within
Peer Group
Companies
|
Unit Value
|
|
$375
|
$100.00
|
|
100%
|
$100.00
|
|
$350
|
$ 50.00
|
|
90%
|
$ 90.00
|
|
$300
|
$ 25.00
|
|
80%
|
$ 75.00
|
|
$250
|
$ 5.00
|
|
70%
|
$ 50.00
|
|
|
|
|
60%
|
$ 30.00
|
|
|
|
|
50%
|
$ 25.00
|
|
|
|
|
< 50%
|
$ 0.00
|
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Compensation Committee are
set forth in the
Compensation Committee Report
. There are no members of the Compensation Committee who were officers or
employees of Hecla or any of our subsidiaries during the fiscal year, formerly were officers of Hecla or any of our subsidiaries,
or had any relationship otherwise requiring disclosure under the proxy rules promulgated by the SEC or the NYSE.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and
discussed the
Compensation Discussion and Analysis
with Hecla’s management and its independent compensation consultant.
Based on its review and discussions, the committee recommended to the Board, and the Board has approved, the
Compensation Discussion
and Analysis
included in this Proxy Statement and incorporated by reference in Hecla’s Annual Report on Form 10-K for
the year ended December 31, 2016.
Respectfully submitted by
The Compensation Committee of the
Board of Directors
George R. Nethercutt, Jr., Chair
Ted Crumley
Terry V. Rogers
Dr. Anthony P.
Taylor
COMPENSATION OF NAMED EXECUTIVE OFFICERS
Summary Compensation Table for 2016
The following compensation tables provide information
regarding the compensation of our CEO, CFO, and four other NEOs who were the most highly compensated in the calendar year ended
December 31, 2016.
Name and Principal
Position
|
|
Year
|
|
Salary
1
($)
|
|
Bonus
2
($)
|
|
Stock
Awards
3
($)
|
|
Option
Awards
3
($)
|
|
Non-Equity
Incentive Plan
Compensation
4
($)
|
|
Change in
Pension Value
and Non-
Qualified
Deferred
Compensation
Earnings
5
($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
|
Phillips S. Baker, Jr.
|
|
2016
|
|
|
484,000
|
|
|
|
—
|
|
|
|
2,074,935
|
6
|
|
|
—
|
|
|
|
2,876,375
|
|
|
|
924,335
|
|
|
|
15,900
|
7
|
|
|
6,375,545
|
|
|
President and CEO
|
|
2015
|
|
|
605,000
|
|
|
|
—
|
|
|
|
1,727,174
|
|
|
|
—
|
|
|
|
1,768,250
|
|
|
|
599,477
|
|
|
|
15,900
|
|
|
|
4,715,801
|
|
|
|
|
2014
|
|
|
605,000
|
|
|
|
—
|
|
|
|
1,438,288
|
|
|
|
—
|
|
|
|
2,303,538
|
|
|
|
164,099
|
|
|
|
15,600
|
|
|
|
4,526,525
|
|
|
Lindsay A. Hall
9
|
|
2016
|
|
|
156,750
|
|
|
|
—
|
|
|
|
344,999
|
|
|
|
—
|
|
|
|
326,027
|
|
|
|
13,146
|
|
|
|
9,200
|
8
|
|
|
850,122
|
|
|
Senior Vice President
|
|
2015
|
|
|
0
|
|
|
|
—
|
|
|
|
0
|
|
|
|
—
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
and CFO
|
|
2014
|
|
|
0
|
|
|
|
—
|
|
|
|
0
|
|
|
|
—
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Lawrence P. Radford
|
|
2016
|
|
|
342,000
|
|
|
|
—
|
|
|
|
789,999
|
|
|
|
—
|
|
|
|
1,388,650
|
|
|
|
125,898
|
|
|
|
15,900
|
7
|
|
|
2,662,447
|
|
|
Senior Vice President –
|
|
2015
|
|
|
380,000
|
|
|
|
—
|
|
|
|
556,694
|
|
|
|
—
|
|
|
|
890,000
|
|
|
|
105,114
|
|
|
|
15,900
|
|
|
|
1,947,708
|
|
|
Operations
|
|
2014
|
|
|
366,458
|
|
|
|
—
|
|
|
|
709,326
|
|
|
|
—
|
|
|
|
886,775
|
|
|
|
98,277
|
|
|
|
15,600
|
|
|
|
2,076,436
|
|
|
Dr. Dean W. A. McDonald
9
|
|
2016
|
|
|
247,500
|
|
|
|
—
|
|
|
|
589,999
|
|
|
|
—
|
|
|
|
882,600
|
|
|
|
196,766
|
|
|
|
15,900
|
8
|
|
|
1,932,765
|
|
|
Senior Vice President -
|
|
2015
|
|
|
275,000
|
|
|
|
—
|
|
|
|
480,468
|
|
|
|
—
|
|
|
|
580,000
|
|
|
|
110,743
|
|
|
|
15,900
|
|
|
|
1,462,111
|
|
|
Exploration
|
|
2014
|
|
|
275,000
|
|
|
|
—
|
|
|
|
562,276
|
|
|
|
—
|
|
|
|
721,875
|
|
|
|
214,384
|
|
|
|
15,600
|
|
|
|
1,789,135
|
|
|
David C. Sienko
|
|
2016
|
|
|
225,000
|
|
|
|
—
|
|
|
|
352,500
|
|
|
|
—
|
|
|
|
723,775
|
|
|
|
82,310
|
|
|
|
15,900
|
7
|
|
|
1,399,485
|
|
|
Vice President and General
|
|
2015
|
|
|
250,000
|
|
|
|
—
|
|
|
|
289,933
|
|
|
|
—
|
|
|
|
397,000
|
|
|
|
36,365
|
|
|
|
15,900
|
|
|
|
989,198
|
|
|
Counsel
|
|
2014
|
|
|
250,000
|
|
|
|
—
|
|
|
|
376,900
|
|
|
|
—
|
|
|
|
543,725
|
|
|
|
78,318
|
|
|
|
15,600
|
|
|
|
1,265,543
|
|
|
James A. Sabala
|
|
2016
|
|
|
168,588
|
|
|
|
—
|
|
|
|
411,001
|
|
|
|
—
|
|
|
|
786,399
|
|
|
|
203,085
|
|
|
|
15,900
|
7
|
|
|
1,584,973
|
|
|
Former Senior Vice
|
|
2015
|
|
|
380,000
|
|
|
|
—
|
|
|
|
583,700
|
|
|
|
—
|
|
|
|
822,000
|
|
|
|
174,075
|
|
|
|
15,900
|
|
|
|
1,975,675
|
|
|
President and CFO
|
|
2014
|
|
|
366,458
|
|
|
|
—
|
|
|
|
887,623
|
|
|
|
—
|
|
|
|
954,800
|
|
|
|
279,690
|
|
|
|
15,600
|
|
|
|
2,504,171
|
|
|
|
1.
|
Salary amounts include both base salary earned and paid in cash during the fiscal year listed.
|
|
|
|
|
|
|
|
|
2.
|
In accordance with SEC rules, the “Bonus” column will only disclose discretionary cash bonus awards. In each of 2014, 2015 and 2016, there were no discretionary cash bonuses awarded to any NEO.
|
|
|
|
|
|
|
|
|
3.
|
The
amounts shown in the “Stock Awards” column and the “Option Awards” column represent the aggregate grant
date fair value computed in accordance with FASB ASC Topic 718. For a description of the assumptions used in valuing the awards,
please see
|
|
|
|
|
Note 9 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Please see the
Grants of Plan-Based Awards for 2016
table on page _____ for more information about the awards granted in 2016.
|
|
|
|
|
|
|
|
|
4.
|
This column represents the cash performance payments awarded and earned by the NEOs for the calendar years 2014, 2015 and 2016 under our AIP and for the LTIP plan periods 2012-2014, 2013-2015 and 2014-2016. The 2014 AIP and 2012-2014 LTIP awards were paid 75% in cash and 25% in common stock. The 2015 AIP and 2013-2015 LTIP awards were paid 50% in cash and 50% in common stock. The 2016 AIP and 2014-2016 LTIP awards were paid 75% in cash and 25% in common stock. The awards for each of the plan years are as follows:
|
|
|
Name
|
|
Year
|
|
AIP
Award
($)
|
|
LTIP Plan
Period
|
|
LTIP
Units
(#)
|
|
Unit
Value
($)
|
|
LTIP
Award
($)
|
|
Total AIP
and LTIP
($)
|
|
Total AIP
and LTIP
Paid in
Cash
($)
|
|
Total AIP
and LTIP
Paid in
Shares
(#)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Baker
|
|
|
2016
|
|
|
|
907,500
|
|
|
|
2014-2016
|
|
|
|
9,500
|
|
|
|
207.25
|
|
|
|
1,968,875
|
|
|
|
2,876,375
|
|
|
|
2,157,281
|
|
|
|
108,789
|
*
|
|
|
|
|
2015
|
|
|
|
695,750
|
|
|
|
2013-2015
|
|
|
|
8,250
|
|
|
|
130.00
|
|
|
|
1,072,500
|
|
|
|
1,768,250
|
|
|
|
884,125
|
|
|
|
374,629
|
|
|
|
|
|
2014
|
|
|
|
919,600
|
|
|
|
2012-2014
|
|
|
|
8,250
|
|
|
|
167.75
|
|
|
|
1,383,938
|
|
|
|
2,303,538
|
|
|
|
1,727,653
|
|
|
|
173,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hall
|
|
|
2016
|
|
|
|
205,200
|
|
|
|
2014-2016
|
|
|
|
583
|
(i)
|
|
|
207.25
|
|
|
|
120,827
|
|
|
|
326,027
|
|
|
|
244,520
|
|
|
|
12,331
|
*
|
|
|
|
|
2015
|
|
|
|
0
|
|
|
|
2013-2015
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
2014
|
|
|
|
0
|
|
|
|
2012-2014
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radford
|
|
|
2016
|
|
|
|
684,000
|
|
|
|
2014-2016
|
|
|
|
3,400
|
|
|
|
207.25
|
|
|
|
704,650
|
|
|
|
1,388,650
|
|
|
|
1,041,486
|
|
|
|
52,521
|
*
|
|
|
|
|
2015
|
|
|
|
500,000
|
|
|
|
2013-2015
|
|
|
|
3,000
|
|
|
|
130.00
|
|
|
|
390,000
|
|
|
|
890,000
|
|
|
|
445,000
|
|
|
|
188,559
|
|
|
|
|
|
2014
|
|
|
|
467,400
|
|
|
|
2012-2014
|
|
|
|
2,500
|
|
|
|
167.75
|
|
|
|
419,375
|
|
|
|
886,775
|
|
|
|
665,081
|
|
|
|
66,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
McDonald
|
|
|
2016
|
|
|
|
343,750
|
|
|
|
2014-2016
|
|
|
|
2,600
|
|
|
|
207.25
|
|
|
|
538,850
|
|
|
|
882,600
|
|
|
|
661,950
|
|
|
|
33,381
|
*
|
|
|
|
|
2015
|
|
|
|
242,000
|
|
|
|
2013-2015
|
|
|
|
2,600
|
|
|
|
130.00
|
|
|
|
338,000
|
|
|
|
580,000
|
|
|
|
290,000
|
|
|
|
122,881
|
|
|
|
|
|
2014
|
|
|
|
302,500
|
|
|
|
2012-2014
|
|
|
|
2,500
|
|
|
|
167.75
|
|
|
|
419,375
|
|
|
|
721,875
|
|
|
|
541,406
|
|
|
|
54,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sienko
|
|
|
2016
|
|
|
|
330,000
|
|
|
|
2014-2016
|
|
|
|
1,900
|
|
|
|
207.25
|
|
|
|
393,775
|
|
|
|
723,775
|
|
|
|
542,831
|
|
|
|
27,374
|
*
|
|
|
|
|
2015
|
|
|
|
150,000
|
|
|
|
2013-2015
|
|
|
|
1,900
|
|
|
|
130.00
|
|
|
|
247,000
|
|
|
|
397,000
|
|
|
|
198,500
|
|
|
|
84,110
|
|
|
|
|
|
2014
|
|
|
|
225,000
|
|
|
|
2012-2014
|
|
|
|
1,900
|
|
|
|
167.75
|
|
|
|
318,725
|
|
|
|
543,725
|
|
|
|
407,794
|
|
|
|
41,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sabala
|
|
|
2016
|
|
|
|
209,000
|
|
|
|
2014-2016
|
|
|
|
2,786
|
(i)
|
|
|
207.25
|
|
|
|
577,399
|
|
|
|
786,399
|
|
|
|
589,799
|
|
|
|
29,743
|
*
|
|
|
|
|
2015
|
|
|
|
380.000
|
|
|
|
2013-2015
|
|
|
|
3,400
|
|
|
|
130.00
|
|
|
|
442,000
|
|
|
|
822,000
|
|
|
|
411,000
|
|
|
|
174,153
|
|
|
|
|
|
2014
|
|
|
|
418,000
|
|
|
|
2012-2014
|
|
|
|
3,200
|
|
|
|
167.75
|
|
|
|
536,800
|
|
|
|
954,800
|
|
|
|
716,100
|
|
|
|
72,115
|
|
|
|
*
|
The number of shares was determined based on the closing price of Hecla’s common stock on the NYSE on February 21, 2017 ($6.61).
|
|
|
|
|
|
|
|
|
(i)
|
Messrs. Hall and Sabala’s 2014-2016 LTIP units were prorated due to Mr. Sabala retiring in June 2016, and Mr. Hall joining the Company in July 2016.
|
|
|
|
5.
|
The amounts reported in this column for 2016 are changes between December 31, 2015 and December 31, 2016 in the actuarial present value of the accumulated pension benefits. None of the amounts reported in this column are above-market nonqualified deferred compensation earnings.
|
|
|
|
|
|
|
|
|
6.
|
Includes: (i) restricted stock units (113,636) granted to Mr. Baker on June 7, 2016; and (ii) performance-based shares (113,636) awarded to Mr. Baker on June 7, 2016. See
Performance-based Shares
on page _____ for a description of the performance-based shares.
|
|
|
|
|
|
|
|
|
7.
|
These amounts are Hecla’s matching contributions for the NEOs made under Hecla’s Capital Accumulation Plan.
|
|
|
|
|
|
|
|
|
8.
|
These amounts are for retirement contributions
made on behalf of Dr. McDonald and Mr. Hall. Canadian employees are excluded from participation in the Hecla Capital Accumulation
Plan. Dr. McDonald and Mr. Hall are paid in Canadian funds. The amounts
|
|
|
|
|
reported are in U.S. dollars based on the applicable exchange rates as reported in
The Wall Street Journal
from time-to-time.
|
|
|
|
|
|
|
|
|
9.
|
Dr. McDonald and Mr. Hall receive their compensation in Canadian funds. The amounts reported for Dr. McDonald and Mr. Hall are in U.S. dollars based on the applicable exchange rates as reported in
The Wall Street Journal
from time-to-time during this time period.
|
|
The following table shows all plan-based awards granted to the NEOs
during 2016.
Grants
of Plan-Based Awards for 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
|
|
Estimated Future Payouts Under
Equity Incentive Plan Awards
|
|
|
|
|
|
|
|
Name
|
|
Grant Date
|
|
Long-Term
Performance
Plan Units
(#)
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum
(#)
|
|
Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
|
|
Closing
Market
Price on
Date of
Grant
($)
|
|
Grant Date
Fair Value
of Stock
and Option
Awards
1
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillips S. Baker, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares
2
|
|
2/19/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
374,629
|
|
|
|
2.36
|
|
|
|
884,124
|
|
|
Restricted Stock
3
|
|
6/7/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113,636
|
|
|
|
4.40
|
|
|
|
499,998
|
|
|
Performance Shares
|
|
6/7/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,818
|
5
|
|
|
113,636
|
5
|
|
|
227,272
|
5
|
|
|
|
|
|
|
4.40
|
|
|
|
690,813
|
|
|
LTIP
6
|
|
|
|
|
9,500
|
|
|
|
0
|
|
|
|
1,187,500
|
|
|
|
3,562,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIP
7
|
|
|
|
|
|
|
|
|
0
|
|
|
|
605,000
|
|
|
|
1,210,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lindsay A. Hall
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
4
|
|
7/18/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,377
|
|
|
|
6.23
|
|
|
|
344,999
|
|
|
LTIP
6
|
|
|
|
|
4,200
|
|
|
|
0
|
|
|
|
525,000
|
|
|
|
1,575,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIP
7
|
|
|
|
|
|
|
|
|
0
|
|
|
|
380,000
|
|
|
|
760,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lawrence P. Radford
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares
2
|
|
2/19/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
188,559
|
|
|
|
2.36
|
|
|
|
444,999
|
|
|
Restricted Stock
3
|
|
6/7/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,409
|
|
|
|
4.40
|
|
|
|
345,000
|
|
|
LTIP
6
|
|
|
|
|
4,200
|
|
|
|
0
|
|
|
|
525,000
|
|
|
|
1,575,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIP
7
|
|
|
|
|
|
|
|
|
0
|
|
|
|
380,000
|
|
|
|
760,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Dean W.A. McDonald
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares
2
|
|
2/19/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
122,881
|
|
|
|
2.36
|
|
|
|
289,999
|
|
|
Restricted Stock
3
|
|
6/7/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,182
|
|
|
|
4.40
|
|
|
|
300,000
|
|
|
LTIP
6
|
|
|
|
|
3,000
|
|
|
|
0
|
|
|
|
375,000
|
|
|
|
1,125,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIP
7
|
|
|
|
|
|
|
|
|
0
|
|
|
|
275,000
|
|
|
|
550,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David C. Sienko
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares
2
|
|
2/19/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,110
|
|
|
|
2.36
|
|
|
|
198,500
|
|
|
Restricted Stock
3
|
|
6/7/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
4.40
|
|
|
|
154,000
|
|
|
LTIP
6
|
|
|
|
|
2,400
|
|
|
|
0
|
|
|
|
300,000
|
|
|
|
900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIP
7
|
|
|
|
|
|
|
|
|
0
|
|
|
|
175,000
|
|
|
|
350,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James A. Sabala
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares
2
|
|
2/19/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
174,153
|
|
|
|
2.36
|
|
|
|
411,001
|
|
|
AIP
7
|
|
|
|
|
|
|
|
|
0
|
|
|
|
380,000
|
|
|
|
760,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
We account for equity-based awards in accordance with the requirements of FASB ASC Topic 718, pursuant to which we recognize compensation expense of performance-based share awards to an employee based on the fair value of the award on the grant date. Compensation expense of restricted stock and RSU awards to an employee is based on the stock price at grant date. The compensation expense for restricted stock and RSUs is recognized over the vesting period.
|
|
|
|
2.
|
Represents the number of shares common stock awarded on February 19, 2016 to each of the NEOs under the terms of the 2010 Stock Incentive Plan. These shares were awarded as part of the 2015 AIP and 2013-2015 LTIP awards, of which 50% was paid in equity.
|
|
|
|
|
|
|
|
|
3.
|
Represents the number of RSUs granted on June 7, 2016, to the NEOs (except for Mr. Hall) under the terms of the 2010 Stock Incentive Plan. The restrictions lapse for one-third of the RSUs on June 21, 2017, one-third on June 21, 2018, and one-third on June 21, 2019, at which time the units are converted into shares of our common stock. The grant date fair value of the RSUs is the number of RSUs multiplied by the closing price of the Company common stock on the grant date of June 7, 2016 ($4.40).
|
|
|
|
|
|
|
|
|
4.
|
Represents the number of RSUs granted to Mr. Hall on July 18, 2016, under the terms of the 2010 Stock Incentive Plan. The restrictions lapse for one-third of the RSUs on June 21, 2017, one-third on June 21, 2018, and one-third on June 21, 2019, at which time the units are converted into shares of our common stock. The grant date fair value of the RSUs is the number of RSUs multiplied by the closing price of the Company common stock on the grant date of July 18, 2016 ($6.23).
|
|
|
|
|
|
|
|
|
5.
|
Represents the number of performance-based shares of Hecla common stock, having a target value of $500,000 with the potential of up to 200% of this target value (subject to specific performance terms and conditions established for these shares) awarded to Mr. Baker under the 2010 Stock Incentive Plan. Determination of the actual number of these performance-based shares to be received by Mr. Baker will be based on the TSR of Hecla common stock for the three-year period from January 1, 2016 through December 31, 2018, based on the following percentile rank within peer group companies:
|
|
|
|
·
|
100
th
percentile rank = maximum award at 200% of target;
|
|
|
|
·
|
60
th
percentile rank = target award at grant value;
|
|
|
|
·
|
50
th
percentile rank = threshold award at 50% of target.
|
|
|
|
|
|
|
|
|
|
Hecla’s TSR performance
versus that of peer group companies will be based on a comparison of the average share price over the last 60 calendar days prior
to January 1, 2016, as the base price, and the average share price the last 60 calendar days of the three-year performance period,
plus dividends, to determine relative share value performance and ranking among peers.
|
|
|
|
6.
|
Represents the potential value of the payout for each NEO under the 2016-2018 LTIP period if the threshold, target or maximum goals are satisfied for all performance measures. The potential payouts are performance-driven and therefore completely at risk. The business measurements and performance goals for determining the payout are described in the
Compensation Discussion and Analysis
beginning on page _____. Dollar amounts shown are valued as follows on a per unit basis: Threshold, $0; Target, $125; and Maximum, $375.
|
|
|
|
|
|
|
|
|
7.
|
Represents the potential value of the payout for each NEO under the 2016 AIP described on page _____. The total payout to each NEO under the 2016 AIP is described in footnote 4 to the
Summary Compensation Table for 2016
on page _____. Awards were paid 75% in cash and 25% in Hecla’s common stock issued under the 2010 Stock Incentive Plan.
|
|
The following table provides information on
the current holdings of stock awards by the NEOs. This table includes unvested RSUs, and performance-based shares. There were no
unexercised stock options held by any NEO at year-end.
Outstanding Equity Awards at Calendar Year-End
for 2016
|
|
Option Awards
|
Stock Awards
|
|
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option
Grant
Date
|
Option
Expiration
Date
|
Number of
Shares or
Units of
Stock
That
Have
Not
Vested
1
(#)
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested as
of
12/30/16
2
($)
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights that
have Not
Vested
(#)
|
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
3
($)
|
|
Phillips S. Baker, Jr.
|
—
|
|
|
|
|
300,753
|
1,575,946
|
|
|
|
|
|
|
|
|
|
|
|
204,918
4
|
1,073,770
|
|
|
|
|
|
|
|
|
|
113,636
5
|
595,453
|
|
Lindsay A. Hall
|
—
|
|
|
|
|
55,377
|
290,175
|
|
|
|
Lawrence P. Radford
|
—
|
|
|
|
|
203,777
|
1,067,791
|
|
|
|
Dr. Dean W. A. McDonald
|
—
|
|
|
|
|
180,451
|
945,563
|
|
|
|
David C. Sienko
|
—
|
|
|
|
|
92,632
|
485,392
|
|
|
|
James A. Sabala*
|
—
|
|
|
|
|
0
|
0
|
|
|
|
|
*
|
Mr. Sabala retired in June 2016. All outstanding RSUs with vesting dates after June 2016, were forfeited.
|
|
|
|
1.
|
The following table shows the dates on which the restricted stock units in the outstanding equity awards table vest and the corresponding number of shares, subject to continued employment through the vest date.
|
|
|
|
Number
of Unvested Restricted Stock Units
|
Vesting
Date
|
Baker
|
Hall
|
Radford
|
McDonald
|
Sienko
|
|
6/21/17
|
106,184
|
18,459
|
71,902
|
63,711
|
32,704
|
|
6/25/17
|
50,505
|
—
|
33,838
|
30,303
|
15,556
|
|
6/21/18
|
106,185
|
18,459
|
71,901
|
63,710
|
32,705
|
|
6/21/19
|
37,879
|
18,459
|
26,136
|
22,727
|
11,667
|
|
Total
|
300,753
|
55,377
|
203,777
|
180,451
|
92,632
|
|
|
2.
|
The market value of the RSUs is based on the closing market price of our common stock on the NYSE as of December 30, 2016, which was $5.24.
|
|
|
|
|
|
|
|
|
3.
|
The market value of the performance-based shares is based on the closing market price of our common stock on the NYSE as of December 30, 2016, which was $5.24.
|
|
|
|
|
|
|
|
|
4.
|
Award of performance-based shares, the value of which will be determined based on the TSR of Hecla common stock for the three-year period from January 1, 2015 through December 31, 2017.
|
|
|
|
|
|
|
|
|
5.
|
Award of performance-based shares, the value of which will be determined based on the TSR of Hecla common stock for the three-year period from January 1, 2016 through December 31, 2018.
|
|
The
following table shows information concerning the exercise of stock options and the number of stock awards that vested during calendar
year 2016 for each of the NEOs, and the value realized on the exercise of options and vesting of stock awards during calendar year
2016.
Option Exercises and Stock Vested for 2016
|
|
|
Option Awards
1
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Value Realized on
|
|
Number of Shares
|
|
Value Realized
|
|
|
|
Acquired on Exercise
|
|
Exercise
|
|
Acquired on Vesting
|
|
on Vesting
|
|
Name
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
|
Phillips S. Baker, Jr.
|
|
—
|
|
—
|
|
|
374,629
|
2,3
|
|
|
—
|
|
|
|
|
|
|
|
|
|
236,177
|
4
|
|
|
691,999
|
|
|
|
|
|
|
|
|
|
56,883
|
5,3
|
|
|
—
|
|
|
|
|
|
|
|
|
|
68,306
|
6,3
|
|
|
—
|
|
|
|
|
|
|
|
|
|
50,505
|
7,3
|
|
|
—
|
|
|
Lindsay A. Hall
|
|
—
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
Lawrence P. Radford
|
|
—
|
|
—
|
|
|
188,559
|
2
|
|
|
444,999
|
|
|
|
|
|
|
|
|
|
34,130
|
5
|
|
|
156,657
|
|
|
|
|
|
|
|
|
|
45,765
|
6
|
|
|
210,061
|
|
|
|
|
|
|
|
|
|
33,838
|
7
|
|
|
159,715
|
|
|
|
|
|
|
|
|
|
26,000
|
8
|
|
|
169,000
|
|
|
Dr. Dean W.A. McDonald
|
|
—
|
|
—
|
|
|
122,881
|
2
|
|
|
289,999
|
|
|
|
|
|
|
|
|
|
34,130
|
5
|
|
|
156,657
|
|
|
|
|
|
|
|
|
|
40,984
|
6
|
|
|
188,117
|
|
|
|
|
|
|
|
|
|
30,303
|
7
|
|
|
143,030
|
|
|
David C. Sienko
|
|
—
|
|
—
|
|
|
84,110
|
2
|
|
|
198,500
|
|
|
|
|
|
|
|
|
|
17,520
|
5
|
|
|
80,417
|
|
|
|
|
|
|
|
|
|
21,039
|
6
|
|
|
96,569
|
|
|
|
|
|
|
|
|
|
15,556
|
7
|
|
|
73,424
|
|
|
James A. Sabala
|
|
—
|
|
—
|
|
|
174,153
|
2
|
|
|
411,001
|
|
|
|
|
|
|
|
|
|
39,249
|
5
|
|
|
180,153
|
|
|
|
|
|
|
|
|
|
47,131
|
6
|
|
|
216,331
|
|
|
|
|
|
|
|
|
|
34,848
|
7
|
|
|
164,483
|
|
|
|
1.
|
There were no stock options exercised in 2016. All remaining stock options expired in May 2015.
|
|
|
|
|
|
|
|
|
2.
|
The NEOs were awarded common stock on February 19, 2016, as part of their 2015 AIP and 2013-2015 LTIP being paid 50% in common stock. The shares were awarded at the price of $2.36, which was the closing sales price of our common stock on the NYSE on February 19, 2016.
|
|
|
|
|
|
|
|
|
3.
|
Mr. Baker deferred the shares into his stock account under the terms of the KEDCP. He may not receive the shares until a “Distributable Event,” as defined under the KEDCP, and will not realize value until the shares are distributed to him. The shares are included in the
Nonqualified Deferred Compensation for 2016
table on page ____.
|
|
|
|
|
|
|
|
|
4.
|
Performance-based shares received in March 2016 based on the TSR of Hecla common stock for the three-year period from January 1, 2013 through December 31, 2015. The share price was determined by using the closing price of Hecla’s common stock on the NYSE on June 21, 2013 ($2.93), the date of grant of the performance-based shares.
|
|
|
|
5.
|
The NEOs were granted these RSUs on June 21, 2013. On June 21, 2016, the restrictions lapsed and each NEO received his units in the form of shares of our common stock. The shares vested at the price of $4.59, which was the closing sales price of our common stock on the NYSE on June 21, 2016.
|
|
|
|
|
|
|
|
|
6.
|
The NEOs were granted these RSUs on July 1, 2015. On June 21, 2016, the restrictions lapsed and each NEO received his units in the form of shares of our common stock. The shares vested at the price of $4.59, which was the closing sales price of our common stock on the NYSE on June 21, 2016.
|
|
|
|
|
|
|
|
|
7.
|
The NEOs were granted these RSUs on June 25, 2014. On June 25, 2016, the restrictions lapsed and each NEO received his units in the form of shares of our common stock. The shares vested at the price of $4.72, which was the closing sales price of our common stock on the NYSE on June 25, 2016.
|
|
|
|
|
|
|
|
|
8.
|
Mr. Radford was granted 26,000 RSUs on October 19, 2011. On August 5, 2016, the restrictions lapsed and Mr. Radford received his units in the form of shares of our common stock. The shares vested at a price of $6.50, which was the closing sales price of our common stock on the NYSE on August 5, 2016.
|
|
The
table below provides information on the nonqualified deferred compensation of the NEOs in 2016.
Nonqualified Deferred Compensation for
2016
1
|
Name
|
|
Executive Stock
Contributions in
Last FYE
2
(#)
|
|
Registrant
Contributions in
Last FYE
($)
|
|
Aggregate
Earnings in
Last FYE
($)
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
Aggregate
Balance of Stock at
Last FYE
(#)
|
|
Phillips S. Baker, Jr.
|
|
550,323
|
|
39,098
|
|
—
|
|
—
|
|
888,909
|
|
Lindsay A. Hall
3
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Lawrence P. Radford
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Dr. Dean W. A. McDonald
3
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
David C. Sienko
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
James A. Sabala
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
1.
|
No cash compensation was deferred by NEOs in 2016.
|
|
|
|
|
|
|
|
|
2.
|
Vested stock deferred into the KEDCP in 2016.
|
|
|
|
|
|
|
|
|
3.
|
Canadian employees are not eligible to participate in our deferred compensation plan.
|
|
Pursuant to the Company’s KEDCP, executives
and key employees, including the NEOs, may defer all or a portion of their base salary, awards earned under the LTIP and AIP (including
common stock), and any RSUs granted under the 2010 Stock Incentive Plan (our CEO may also defer any performance-based awards under
the KEDCP). Deferral elections are made by the individual generally in the year prior to the beginning of the plan year for amounts
to be earned or granted in the following year. Base salary, AIP and LTIP amounts deferred under the KEDCP are credited to either
an investment account or a stock account at the participant’s election. Amounts credited to an investment account are valued
in cash, credited with deemed interest, and distributed with deemed interest in cash upon a distributable event. RSUs and other
common stock awarded (performance-based shares) under the 2010 Stock Incentive Plan and deferred by a participant are
credited
to a stock account. Amounts credited to the stock account of a participant are valued based upon our common stock and are delivered
to the participant in shares of our common stock upon a distributable event.
The KEDCP also provides for corporate matching
amounts where the participants elect to have their base salary, AIP or LTIP awards credited to a stock account. Matching contributions
are also valued based on our common stock and distributed upon a distributable event in stock. The ability to defer compensation
into a company stock account promotes alignment of the interests of participants with those of our common shareholders. It also
provides for corporate discretionary allocations of amounts valued based upon our common stock and credited to a stock account.
As of the end of the last day of each calendar
month, an additional amount is credited to the investment account of the participant equal to the product of (i) the average daily
balance of the investment account for the month, multiplied by (ii) the annual prime rate for corporate borrowers quoted at the
beginning of the quarter by
The Wall Street Journal
(or such other comparable interest rate as the Compensation Committee
may designate from time to time).
The amounts credited to the investment or stock
account of a participant under the KEDCP are distributable or payable within 75 days of the earliest to occur of the following
distribution events: (i) the date on which the participant separates from service with us, with the distribution delayed for six
months for certain “specified employees”; (ii) “disability” as defined in Section 409A of the Internal
Revenue Code; (iii) the participant’s death; (iv) a fixed date or fixed schedule selected by the participant at the time
the deferral election was made; (v) an “unforeseeable emergency,” as defined in Section 409A of the Internal Revenue
Code; (vi) a “change in control” of the Company, as defined in regulations issued by the Internal Revenue Service;
and (vii) termination of the KEDCP.
The
KEDCP is at all times considered to be entirely unfunded both for tax purposes and for purposes of Title I of the Employee Retirement
Income Security Act of 1974, as amended, and no provision will at any time be made with respect to segregating our assets for the
payment of any amounts under the KEDCP. Any funds that may be invested for purposes of fulfilling our promises under the KEDCP
are for all purposes to be part of our general assets and available to general creditors in the event of a bankruptcy or insolvency
of the Company. Nothing contained in the KEDCP will constitute a guarantee by us that any funds or assets will be sufficient to
pay any benefit under the KEDCP.
Change
in Control and Termination
We
have a change in control agreement (“CIC Agreement”) with our NEOs (Messrs. Baker, Hall, McDonald, Radford and Sienko).
Mr. Sabala’s CIC Agreement terminated at the time of his retirement in June 2016.
The
CIC Agreements provide that each of the NEOs shall serve in such executive position as the Board may direct. The CIC Agreements
become effective only upon a change in control of the Company (the date of such change in control is referred to as the “Effective
Date”). The term of employment under the CIC Agreements is three years from the Effective Date (except for Messrs. Radford
and Hall who each have a term of two years from the Effective Date). Any CIC Agreements entered into with newly hired executives
will contain an employment term of two years from the Effective Date. The CIC Agreements automatically extend for an additional
year on each anniversary date of the agreements unless we give notice of nonrenewal 60 days prior to the anniversary date. Under
the CIC Agreements, a change in control is, with certain limitations, deemed to occur if: (i) an individual or entity (including
a “group” under Section 13(d)(3) of the Exchange Act) becomes the beneficial owner of 20% or more of either the then
outstanding shares of common stock of the Company or the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors; (ii) as the result of a tender offer, merger, proxy fight or similar
transaction, the persons who were previously directors of the Company cease to constitute a majority of the Board; (iii) consummation
of the sale of all, or substantially all, of the assets of the Company (with certain limitations) occurs; or (iv) the approval
of a plan of dissolution or liquidation.
The
CIC Agreements are intended to ensure, among other things that, in the event of a change in control, each NEO will continue to
focus on adding shareholder value. We seek to accomplish this by assuring that each NEO continues to receive payments and other
benefits equivalent to those he was receiving at the time of a change in control for the duration of the employment term under
of the CIC Agreement. The CIC Agreements also provide that should an NEO’s employment be terminated either (i) by the NEO
for good reason, or (ii) by the Company (other than for cause or disability) after the Effective Date of the CIC Agreement, he
would receive from us a lump-sum defined amount generally equivalent to three times the aggregate of his then annual base salary
rate and his highest annual incentive prior to the Effective Date. For Messrs. Radford and Hall, and any other CIC Agreements entered
into hereafter, the lump-sum defined amount is generally equivalent to two times.
The
NEOs would also be entitled to lump-sum payments representing the difference in pension and supplemental retirement benefits to
which they would be entitled on (i) the date of actual termination, and (ii) the end of the three-year (or two-year where applicable)
employment period under the CIC Agreements. We would also maintain such NEO’s participation in all benefit plans and programs
(or provide equivalent benefits if such continued participation was not possible under the terms of such plans and programs).
An
NEO whose employment has terminated would not be required to seek other employment in order to receive the defined benefits.
The
table starting on page _____ reflects the amount of compensation payable to each of the NEOs in the event of termination of such
NEO’s employment under the terms of the NEO’s CIC Agreement. That table also shows the amount of compensation payable
to
each NEO upon voluntary termination;
involuntary not for cause termination; for cause termination; termination following a change in control; and in the event of disability
or death of the NEO. The amounts shown assume that such termination was effective as of December 31, 2016, and thus include amounts
earned through such time, and are estimates of the amounts which would be paid out to the NEOs upon their termination. The actual
amounts to be paid out can only be determined at the time of such NEO’s separation from Hecla.
Payments
Made Upon Termination
.
For voluntary and involuntary not for cause terminations, NEOs
may receive: (i) a prorated portion of short-term performance compensation; (ii) any amounts due under matured long-term performance
compensation plans; (iii) one month of health and welfare benefits; and (iv) any earned, but unused vacation. Neither of these
terminations would impact their vested retirement plans and the 401(k) match would be deposited in their accounts.
Payments
Made Upon Retirement
. The NEOs could receive a prorated portion of any short-term performance compensation and a prorated portion
of any long-term compensation in effect at the time of their retirement. They would also receive one month of health and welfare
benefits and any earned but unused vacation, and the 401(k) match would be deposited in their accounts. As of December 31, 2016,
Mr. Baker was the only NEO that qualified for early or regular retirement from the qualified Hecla Mining Company Retirement Plan.
Payments
Made Upon Death or Disability
. Upon death or disability, the NEOs would receive a prorated portion of any short-term performance
compensation, as well as a prorated portion of any long-term compensation plans in which the NEO was a participant. In both cases,
retirement payments would be reduced in accordance with the terms of the plans and, in the case of death, the surviving spouse
or other beneficiary would receive the payments. They would also receive one month of health and welfare benefits and any accrued,
but unused vacation and the 401(k) match would be deposited in their accounts.
Payments
Made Upon a Change in Control
. If a change in control occurs as defined in the NEOs’ CIC Agreements, they would be eligible
for a prorated portion of any short-term performance compensation and a prorated portion of any long-term performance compensation
as though they had been employed for an additional three years. They would also receive three years of health and welfare benefits
and disability and life insurance premiums would be paid for such three-year period. In addition to any earned, but unused vacation,
they would be eligible for up to $20,000 in outplacement assistance and the 401(k) match would be deposited in their accounts.
Payment would be as if the NEO had been employed for an additional two years under the CIC Agreement with Messrs. Radford and Hall
and any other CIC Agreements entered into hereafter.
The CIC Agreements provide for specified payments
and other benefits if the NEO’s employment is terminated either (i) by the NEO for good reason, or (ii) by Hecla or its successor
other than for cause, death or disability, within the three years (two years for Messrs. Radford and Hall) following a change in
control, or prior to a change in control if
it can be demonstrated that the termination
was related to a potential change in control.
These payments and benefits include the following:
|
·
|
all accrued obligations;
|
|
|
|
|
·
|
a lump-sum payment equal to three times the sum of the NEO’s then annual base salary and the NEO’s highest annual and long-term incentive payment for the three years prior to the change in control, with multiples of two years under the CIC Agreement with Messrs. Radford and Hall and any other CIC Agreement entered into hereafter;
|
|
|
|
|
·
|
a lump-sum payment equal to the difference in the Retirement Plan and Supplemental Plan benefits to which the NEO would be entitled on (i) the date of actual termination, and (ii) three years later (two years later under the CIC Agreement with Messrs. Radford and Hall and any other CIC Agreement entered into hereafter); and
|
|
|
|
|
·
|
for Messrs. Baker, McDonald and Sienko, the continued participation for three years in all of Hecla’s benefit plans and programs to which the NEO would be entitled on the date of the change in control (or provision of equivalent benefits if such continued participation was not possible under the terms of such plans and programs), or two years in the case of Messrs. Radford and Hall and any other CIC Agreement entered into hereafter.
|
In addition, the CIC Agreements, in conjunction
with our equity compensation plans, provide for immediate vesting of all stock options and restricted stock awards in the event
that, following a change in control, the NEO is terminated without cause or leaves for good reason (i.e., a “double trigger”).
In such a situation, the LTIP would also pay out a prorated award based on target performance, regardless of actual performance.
However, this payment directly offsets the cash severance payment by the same amount. These plan provisions are intended to recognize
the value of the NEO’s long-term contribution to Hecla and to permit management decisions to be made without undo concern
about possible termination following a change in control.
Potential Payments Upon Termination or Change
in Control
Executive
Benefits and
Payments Upon Termination
|
|
Voluntary
Termination
on
12/31/16
($)
|
|
Involuntary
Not For
Cause
Termination
on
12/31/16
($)
|
|
For
Cause
Termination
on
12/31/16
($)
|
|
Termination
Following a
Change in
Control
on
12/31/16
($)
|
|
Disability
on 12/31/16
($)
|
|
Death
on
12/31/16
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillips S. Baker, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Performance Compensation
|
|
907,500
|
|
907,500
|
|
—
|
|
2,722,500
|
1
|
907,500
|
|
907,500
|
|
|
Stock Options
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Restricted Stock
|
|
—
|
|
—
|
|
—
|
|
1,669,223
|
|
—
|
|
—
|
|
|
Long-term Performance Compensation
|
|
1,968,875
|
|
1,968,875
|
|
1,968,875
|
|
5,906,625
|
2
|
2,918,875
|
|
2,918,875
|
|
|
Benefits & Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
3
|
|
5,055,776
|
|
5,055,776
|
|
5,055,776
|
|
8,046,663
|
|
7,399,889
|
|
4,997,208
|
|
|
Deferred Compensation
4
|
|
4,657,883
|
|
4,657,883
|
|
4,657,883
|
|
4,657,883
|
|
4,657,883
|
|
4,657,883
|
|
|
Health and Welfare Benefits
5
|
|
1,470
|
|
1,470
|
|
1,470
|
|
52,920
|
|
1,470
|
|
1,470
|
|
|
Disability Income
6
|
|
—
|
|
—
|
|
—
|
|
—
|
|
925,246
|
|
—
|
|
|
Life Insurance Benefits
7
|
|
—
|
|
—
|
|
—
|
|
11,103
|
|
—
|
|
325,000
|
|
|
Change in Control Payment
8
|
|
—
|
|
—
|
|
—
|
|
1,452,000
|
|
—
|
|
—
|
|
|
Earned Vacation Pay
9
|
|
37,230
|
|
37,230
|
|
37,230
|
|
37,230
|
|
37,230
|
|
37,230
|
|
|
Outplacement
|
|
—
|
|
—
|
|
—
|
|
20,000
|
|
—
|
|
—
|
|
|
Total
|
|
12,628,734
|
|
12,628,734
|
|
11,721,234
|
|
24,576,147
|
|
16,848,093
|
|
13,845,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lindsay A. Hall
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Performance Compensation
|
|
205,200
|
|
205,200
|
|
—
|
|
410,400
|
1
|
205,200
|
|
205,200
|
|
|
Stock Options
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Restricted Stock
|
|
—
|
|
—
|
|
—
|
|
290,175
|
|
—
|
|
—
|
|
|
Long-term Performance Compensation
|
|
120,827
|
|
120,827
|
|
120,827
|
|
241,654
|
2
|
365,789
|
|
365,789
|
|
|
Benefits & Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
3
|
|
13,146
|
|
13,146
|
|
13,146
|
|
75,857
|
|
13,186
|
|
9,384
|
|
|
Health and Welfare Benefits
5
|
|
388
|
|
388
|
|
388
|
|
9,312
|
|
388
|
|
388
|
|
|
Disability Income
6
|
|
—
|
|
—
|
|
—
|
|
—
|
|
323,958
|
|
—
|
|
|
Life Insurance Benefits
7
|
|
—
|
|
—
|
|
—
|
|
5,904
|
|
—
|
|
250,000
|
|
|
Change in Control Payment
8
|
|
—
|
|
—
|
|
—
|
|
684,000
|
|
—
|
|
—
|
|
|
Earned Vacation Pay
9
|
|
26,307
|
|
26,307
|
|
26,307
|
|
26,307
|
|
26,307
|
|
26,307
|
|
|
Outplacement
|
|
—
|
|
—
|
|
—
|
|
20,000
|
|
—
|
|
—
|
|
|
Total
|
|
365,868
|
|
365,868
|
|
160,668
|
|
1,763,609
|
|
934,828
|
|
857,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lawrence P. Radford
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Performance Compensation
|
|
684,000
|
|
684,000
|
|
—
|
|
1,368,000
|
1
|
684,000
|
|
684,000
|
|
|
Stock Options
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Restricted Stock
|
|
—
|
|
—
|
|
—
|
|
1,067,791
|
|
—
|
|
—
|
|
|
Long-term Performance Compensation
|
|
704,650
|
|
704,650
|
|
704,650
|
|
1,409,300
|
2
|
1,071,314
|
|
1,071,314
|
|
|
Benefits & Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
3
|
|
462,126
|
|
462,126
|
|
462,126
|
|
639,723
|
|
676,244
|
|
451,377
|
|
|
Health and Welfare Benefits
5
|
|
1,022
|
|
1,022
|
|
1,022
|
|
24,528
|
|
1,022
|
|
1,022
|
|
|
Disability Income
6
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,016,965
|
|
—
|
|
|
Life Insurance Benefits
7
|
|
—
|
|
—
|
|
—
|
|
7,402
|
|
—
|
|
325,000
|
|
|
Change in Control Payment
8
|
|
—
|
|
—
|
|
—
|
|
684,000
|
|
—
|
|
—
|
|
|
Earned Vacation Pay
9
|
|
19,731
|
|
19,731
|
|
19,731
|
|
19,731
|
|
19,731
|
|
19,731
|
|
|
Outplacement
|
|
—
|
|
—
|
|
—
|
|
20,000
|
|
—
|
|
—
|
|
|
Total
|
|
1,871,529
|
|
1,871,529
|
|
1,187,529
|
|
5,240,475
|
|
3,469,276
|
|
2,552,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and
Payments Upon Termination
|
|
Voluntary
Termination
on
12/31/16
($)
|
|
Involuntary
Not For
Cause
Termination
on
12/31/16
($)
|
|
For Cause
Termination
on
12/31/16
($)
|
|
Termination
Following a
Change in
Control
on
12/31/16
($)
|
|
Disability
on 12/31/16
($)
|
|
Death
on
12/31/16
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Dean W.A. McDonald
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Performance Compensation
|
|
343,750
|
|
343,750
|
|
—
|
|
1,031,250
|
1
|
343,750
|
|
343,750
|
|
|
Stock Options
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Restricted Stock
|
|
—
|
|
—
|
|
—
|
|
945,563
|
|
—
|
|
—
|
|
|
Long-term Performance Compensation
|
|
538,850
|
|
538,850
|
|
538,850
|
|
1,616,550
|
2
|
812,182
|
|
812,182
|
|
|
Benefits & Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
3
|
|
1,187,037
|
|
1,187,037
|
|
1,187,037
|
|
1,928,675
|
|
1,306,470
|
|
916,590
|
|
|
Health and Welfare Benefits
5
|
|
388
|
|
388
|
|
388
|
|
13,968
|
|
388
|
|
388
|
|
|
Disability Income
6
|
|
—
|
|
—
|
|
—
|
|
—
|
|
395,718
|
|
—
|
|
|
Life Insurance Benefits
7
|
|
—
|
|
—
|
|
—
|
|
7,538
|
|
—
|
|
189,000
|
|
|
Change in Control Payment
8
|
|
—
|
|
—
|
|
—
|
|
742,200
|
|
—
|
|
—
|
|
|
Earned Vacation Pay
9
|
|
19,038
|
|
19,038
|
|
19,038
|
|
19,038
|
|
19,038
|
|
19,038
|
|
|
Outplacement
|
|
—
|
|
—
|
|
—
|
|
20,000
|
|
—
|
|
—
|
|
|
Total
|
|
2,089,063
|
|
2,089,063
|
|
1,745,313
|
|
6,324,782
|
|
2,877,546
|
|
2,280,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David C. Sienko
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Performance Compensation
|
|
330,000
|
|
330,000
|
|
—
|
|
990,000
|
1
|
330,000
|
|
330,000
|
|
|
Stock Options
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Restricted Stock
|
|
—
|
|
—
|
|
—
|
|
485,392
|
|
—
|
|
—
|
|
|
Long-term Performance Compensation
|
|
393, 775
|
|
393,775
|
|
393,775
|
|
1,181,325
|
2
|
600,440
|
|
600,440
|
|
|
Benefits & Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
3
|
|
335,108
|
|
335,108
|
|
335,108
|
|
478,254
|
|
834,347
|
|
511,298
|
|
|
Health and Welfare Benefits
5
|
|
438
|
|
438
|
|
438
|
|
15,768
|
|
438
|
|
438
|
|
|
Disability Income
6
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,417,481
|
|
—
|
|
|
Life Insurance Benefits
7
|
|
—
|
|
—
|
|
—
|
|
8,559
|
|
—
|
|
225,000
|
|
|
Change in Control Payment
8
|
|
—
|
|
—
|
|
—
|
|
675,000
|
|
—
|
|
—
|
|
|
Earned Vacation Pay
9
|
|
12,981
|
|
12,981
|
|
12,981
|
|
12,981
|
|
12,981
|
|
12,981
|
|
|
Outplacement
|
|
—
|
|
—
|
|
—
|
|
20,000
|
|
—
|
|
—
|
|
|
Total
|
|
1,072,302
|
|
1,072,302
|
|
742,302
|
|
3,867,279
|
|
3,195,687
|
|
1,680,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
A. Sabala*
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
*Mr. Sabala retired in June 2016, at which time his Change in Control
Agreement terminated.
|
1.
|
Represents three times the highest annual incentive payment paid in the last three years for Messrs. Baker, McDonald and Sienko. Represents two times the highest annual incentive payment paid in the last three years for Messrs. Radford and Hall.
|
|
|
|
|
2.
|
Represents three times the highest long-term incentive payment paid in the last three years for Messrs. Baker, McDonald and Sienko. Represents two times the highest long-term incentive payment paid in the last three years for Messrs. Radford and Hall.
|
|
|
|
|
3.
|
Reflects the estimated lump-sum present value of qualified and nonqualified retirement plans to which the NEO would be entitled. Mr. Baker is the only NEO that qualified for early or regular retirement on December 31, 2016, under our retirement plan.
|
|
|
|
|
4.
|
Reflects the lump-sum present value of shares held in Mr. Baker’s stock account under our KEDCP, based on the Company’s closing stock price on the NYSE on December 30, 2016 ($5.24).
|
|
|
|
|
5.
|
Reflects the estimated lump-sum value of all future premiums, which will continue to be paid by the Company on behalf of Messrs. Baker, McDonald and Sienko under our health
|
|
|
and welfare benefit plans for three years upon a termination following a change in control and for one month otherwise. Reflects the estimated lump-sum value of all future premiums, which will continue to be paid by the Company on behalf of Messrs. Radford and Hall under our health and welfare benefit plans for two years upon a termination following a change in control and for one month otherwise.
|
|
|
|
|
6.
|
Reflects the estimated lump-sum present value of all future payments which the NEO would be entitled to receive under our disability program.
|
|
|
|
|
7.
|
Reflects the estimated lump-sum value of the cost of coverage for life insurance provided by us to the NEO; provided, however, that the amount reflected under the heading “Death” reflects the estimated present value of the proceeds payable to the NEO’s beneficiaries upon his death.
|
|
|
|
|
8.
|
Represents three times annual base salary for Messrs. Baker, McDonald and Sienko. Represents two times annual base salary for Messrs. Radford and Hall.
|
|
|
|
|
9.
|
Represents lump-sum payment of earned vacation time accrued.
|
EQUITY COMPENSATION PLAN INFORMATION
As of December 31, 2016,
the Company has three equity incentive compensation plans that have been approved by the shareholders under which shares of the
Company’s common stock have been authorized for issuance to directors, officers, employees, and consultants. All outstanding
awards relate to our Common Stock.
|
|
|
Number of Securities To
Be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
|
|
Weighted-Average
Exercise Price
of Outstanding Options,
Warrants and Rights
|
|
Number of Securities
Remaining Available For
Future Issuance Under
Equity Compensation Plans
|
|
Equity Compensation Plans Approved by Security Holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Stock Incentive Plan
|
|
—
|
|
N/A
|
|
8,302,326
|
|
|
Stock Plan for Nonemployee Directors
|
|
—
|
|
N/A
|
|
438,459
|
|
|
Key Employee Deferred Compensation Plan
|
|
—
|
|
N/A
|
|
511,303
|
|
|
Equity Compensation Plans Not Approved by Security Holders
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
—
|
|
—
|
|
9,252,088
|
|
OTHER BENEFITS
Retirement Plan
Our NEOs participate in the Hecla Mining Company
Qualified Retirement Plan (the “Retirement Plan”), which covers substantially all our employees, except for certain
hourly employees who are covered by separate plans. Contributions to the Retirement Plan, and the related expense or income, are
based on general actuarial calculations and, accordingly, no portion of our contributions, and related expenses or income, is specifically
attributable to our officers. We also have an unfunded Supplemental Excess Retirement Plan adopted in November 1985 (the “SERP”)
under which the amount of any benefits not payable under the Retirement Plan by reason of the limitations imposed by the Internal
Revenue Code
and/or the Employee Retirement Income Security
Act, as amended (the “Acts”), and the loss, if any, due to a deferral of salary made under our KEDCP and/or our 401(k)
Plan will be paid out of our general funds to any employee who may be adversely affected. Under the Acts, the current maximum annual
pension benefit payable by the Retirement Plan to any employee is $210,000, subject to specified adjustments, and is calculated
using earnings not in excess of $265,000. Upon reaching the normal retirement age of 65, each participant is eligible to receive
annual retirement benefits in monthly installments for life equal to, for each year of credited service, 1% of final average annual
earnings (defined as the highest average earnings of such employee for any 36 consecutive calendar months during the final
120 calendar months of service) up to the applicable covered compensation level (which level is based on the Social Security
maximum taxable wage base) and 1.75% of the difference, if any, between final average annual earnings and the applicable covered
compensation level. The Retirement Plan and SERP define earnings for purposes of the plans to be “a wage or salary for services
of employees inclusive of any bonus or special pay including gain-sharing programs, contract miners’ bonus pay and the equivalent,”
except that on or after July 1, 2013, earnings are defined as “base salary or wages for personal services and elective deferrals
plus (i) elective deferrals not includable in the gross income of the Employee under Code Sections 125, 132(f)(4), 402(e)(3), 402(h),
403(b) and 457, (ii) one-half (1/2) of any performance based or annual incentive bonus, (iii) one-half (1/2) of any safety incentive
award, (iv) paid time off, other than pay while on disability leave, (v) any post-employment payment for services performed during
the course of employment that would have been paid to the Employee prior to the severance from employment if the Employee had continued
in employment with an Employer, and (vi) compensation for overtime at the Employee’s regular rate of pay.”
The following table shows estimated aggregate
annual benefits under our Retirement Plan and the SERP payable upon retirement to a participant who retires in 2016 at age 65 having
the years of service and final average annual earnings as specified. The table assumes Social Security covered compensation levels
as in effect on January 1, 2016.
Estimated Annual Retirement Benefits
Final Average
Annual Earnings
|
|
|
|
|
Years of Credited Service
|
|
|
|
|
|
|
|
|
|
5
|
|
10
|
|
15
|
|
20
|
|
25
|
|
30
|
|
35
|
|
|
$100,000
|
|
|
$
|
5,839
|
|
|
$
|
11,677
|
|
|
$
|
17,516
|
|
|
$
|
23,354
|
|
|
$
|
29,193
|
|
|
$
|
35,031
|
|
|
$
|
40,870
|
|
|
|
150,000
|
|
|
|
10,214
|
|
|
|
20,427
|
|
|
|
30,641
|
|
|
|
40,854
|
|
|
|
51,068
|
|
|
|
61,281
|
|
|
|
71,495
|
|
|
|
200,000
|
|
|
|
14,589
|
|
|
|
29,177
|
|
|
|
43,766
|
|
|
|
58,354
|
|
|
|
72,943
|
|
|
|
87,531
|
|
|
|
102,120
|
|
|
|
250,000
|
|
|
|
18,964
|
|
|
|
37,927
|
|
|
|
56,891
|
|
|
|
75,854
|
|
|
|
94,818
|
|
|
|
113,781
|
|
|
|
132,745
|
|
|
|
300,000
|
|
|
|
23,339
|
|
|
|
46,667
|
|
|
|
70,016
|
|
|
|
93,354
|
|
|
|
116,693
|
|
|
|
140,031
|
|
|
|
163,370
|
|
|
|
350,000
|
|
|
|
27,714
|
|
|
|
55,427
|
|
|
|
83,141
|
|
|
|
110,854
|
|
|
|
138,568
|
|
|
|
166,281
|
|
|
|
193,995
|
|
|
|
400,000
|
|
|
|
32,089
|
|
|
|
64,177
|
|
|
|
86,266
|
|
|
|
128,354
|
|
|
|
160,443
|
|
|
|
192,531
|
|
|
|
224,620
|
|
|
|
450,000
|
|
|
|
36,464
|
|
|
|
72,927
|
|
|
|
109,391
|
|
|
|
145,854
|
|
|
|
182,318
|
|
|
|
218,781
|
|
|
|
255,245
|
|
|
|
500,000
|
|
|
|
40,839
|
|
|
|
81,677
|
|
|
|
122,516
|
|
|
|
163,354
|
|
|
|
204,193
|
|
|
|
245,031
|
|
|
|
285,870
|
|
|
|
550,000
|
|
|
|
45,214
|
|
|
|
90,427
|
|
|
|
135,641
|
|
|
|
180,854
|
|
|
|
226,068
|
|
|
|
271,281
|
|
|
|
316,495
|
|
|
|
600,000
|
|
|
|
49,589
|
|
|
|
99,177
|
|
|
|
148,766
|
|
|
|
198,354
|
|
|
|
247,943
|
|
|
|
297,531
|
|
|
|
347,120
|
|
|
|
650,000
|
|
|
|
53,964
|
|
|
|
107,927
|
|
|
|
161,891
|
|
|
|
215,854
|
|
|
|
269,818
|
|
|
|
323,781
|
|
|
|
377,745
|
|
|
|
700,000
|
|
|
|
58,339
|
|
|
|
116,677
|
|
|
|
175,016
|
|
|
|
233,354
|
|
|
|
291,693
|
|
|
|
350,031
|
|
|
|
408,370
|
|
|
|
750,000
|
|
|
|
62,714
|
|
|
|
125,427
|
|
|
|
188,141
|
|
|
|
250,854
|
|
|
|
313,568
|
|
|
|
376,281
|
|
|
|
438,995
|
|
|
|
800,000
|
|
|
|
67,089
|
|
|
|
134,177
|
|
|
|
201,266
|
|
|
|
268,354
|
|
|
|
335,443
|
|
|
|
402,531
|
|
|
|
469,620
|
|
|
|
850,000
|
|
|
|
71,464
|
|
|
|
142,927
|
|
|
|
214,391
|
|
|
|
285,854
|
|
|
|
357,318
|
|
|
|
428,781
|
|
|
|
500,245
|
|
|
|
900,000
|
|
|
|
75,839
|
|
|
|
151,677
|
|
|
|
227,516
|
|
|
|
303,354
|
|
|
|
379,193
|
|
|
|
455,031
|
|
|
|
530,870
|
|
|
|
950,000
|
|
|
|
80,214
|
|
|
|
160,427
|
|
|
|
240,641
|
|
|
|
320,854
|
|
|
|
401,068
|
|
|
|
481,281
|
|
|
|
561,495
|
|
|
|
1,000,000
|
|
|
|
84,589
|
|
|
|
169,177
|
|
|
|
253,766
|
|
|
|
338,354
|
|
|
|
422,943
|
|
|
|
507,531
|
|
|
|
592,120
|
|
Benefits listed in the pension table are not
subject to any deduction for Social Security or other offset amounts. As of December 31, 2016, the following executive
officers have completed the indicated number of full years of credited service: P. Baker, 15 years; Sabala, 8 years;
L. Radford, 5 years; D. McDonald, 10 years; D. Sienko, 6 years; and L. Hall, 0 years.
Pension Benefits
The following
table shows pension information under the Hecla Mining Company Retirement Plan and the SERP for the NEOs as of December 31, 2016.
The terms and conditions for participation in, and payments from, these plans are described above under “Retirement Plan.”
The actuarial present value of accumulated benefit is determined using the same assumptions used for financial reporting purposes
except that retirement age is assumed to be the normal retirement age of 65, or the current age if eligible for early retirement.
These assumptions are described in the pension footnotes to our financial statements included in our Annual Report on Form 10-K.
|
Name
|
|
Plan Name
|
|
Number of Years
Credited Service
(#)
|
|
Present Value of
Accumulated
Benefit
($)
|
|
Payments
During Last
Calendar Year
($)
|
|
|
|
|
|
|
|
|
|
|
|
Phillips S. Baker, Jr.
|
|
Hecla Mining Company Retirement Plan
|
|
15
|
|
516,073
|
|
—
|
|
|
|
Hecla Mining Company Supplemental Excess Retirement Plan
|
|
|
|
4,539,703
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Lindsay A. Hall
|
|
Hecla Mining Company Retirement Plan
|
|
0
|
|
13,146
|
|
—
|
|
|
|
Hecla Mining Company Supplemental Excess Retirement Plan
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Lawrence P. Radford
|
|
Hecla Mining Company Retirement Plan
|
|
5
|
|
174,594
|
|
—
|
|
|
|
Hecla Mining Company Supplemental Excess Retirement Plan
|
|
|
|
287,532
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Dean W.A. McDonald
|
|
Hecla Mining Company Retirement Plan
|
|
10
|
|
414,981
|
|
—
|
|
|
|
Hecla Mining Company Supplemental Excess Retirement Plan
|
|
|
|
772,056
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
David C. Sienko
|
|
Hecla Mining Company Retirement Plan
|
|
6
|
|
163,127
|
|
—
|
|
|
|
Hecla Mining Company Supplemental Excess Retirement Plan
|
|
|
|
171,981
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
James A. Sabala
|
|
Hecla Mining Company Retirement Plan
|
|
8
|
|
368,125
|
|
—
|
|
|
|
Hecla Mining Company Supplemental Excess Retirement Plan
|
|
|
|
1,082,979
|
|
—
|
PROPOSAL 3 – APPROVAL OF NAMED EXECUTIVE
OFFICER COMPENSATION
Our Board, pursuant to Section 14A of the Securities
Exchange Act of 1934, seeks your vote to approve, on an advisory basis, the compensation of our NEOs as set forth under the heading
Compensation Discussion and Analysis
beginning on page ___ and in the accompanying compensation tables beginning on page
_____, and related material. The Board believes strongly that the Company’s current executive compensation program is right
for the Company and our shareholders at the current time. The Company’s executive compensation program is designed to attract,
retain, and motivate talented individuals who possess the executive experience and the leadership skills needed by the Company
in order to maintain and increase shareholder value. The Company seeks to provide executive compensation that is competitive with
that provided by companies in our peer group within the mining industry. The Company also seeks to provide both near-term and long-term
financial incentives to our executives that reward them for good performance and achieving financial results and strategic objectives
that are expected to contribute to increased long-term shareholder value.
Underlying these incentives is a strong philosophy
of “pay-for-performance” that forms the foundation of decisions regarding the compensation of our NEOs. This compensation
philosophy, which has been consistent over many years, is designed to align the interests of our NEOs with the interests of our
shareholders and is central to our ability to attract, retain and motivate executive leaders to guide the Company through market
challenges over the long-term.
The Company has demonstrated consistent strong
financial performance both in the short-term and in the long-term. The Company believes that our NEOs have contributed significantly
to these achievements. Their tenure with the Company ranges from approximately one year to 15 years, providing the Company with
consistent, steady and experienced leadership that has been able to guide the Company to consistent strong financial performance
over multi-year periods.
The Board strongly believes in the effectiveness
and appropriateness of our executive compensation program. We believe this confidence is shared by our shareholders, as evidenced
by the favorable vote of 81% of our shareholders on the proposal to approve NEO compensation presented at last year’s annual
meeting. Our compensation practices did not substantially change from calendar year 2016 to calendar year 2017 and the Board hopes
our shareholders will continue to believe in the effectiveness and appropriateness of our executive compensation program, and will
express that belief through a favorable vote on this proposal at this Annual Meeting.
The vote is advisory and therefore not binding
on the Company, the Compensation Committee or the Board. However, the Board and the Compensation Committee value the opinions of
our shareholders and to the extent there is any significant vote against the NEO compensation as disclosed in this Proxy Statement,
the Compensation Committee will carefully review and consider the voting results when evaluating our executive compensation program.
We are asking shareholders to approve the following
resolution at the 2017 Annual Meeting:
“RESOLVED, that
the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, described
in the Compensation Discussion and Analysis, Summary Compensation Table for 2016, and the related compensation tables and narrative
in the Proxy Statement for the Company’s 2017 Annual Shareholders’ Meeting, is hereby APPROVED.”
The Board recommends that you vote “FOR”
approval of the compensation of our NEOs.
PROPOSAL 4 – ADVISORY VOTE ON THE
FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
The Company is providing shareholders with
the opportunity to vote, on a non-binding, advisory basis, for their preference as to how frequently to cast future advisory votes
on the compensation of our NEOs (commonly referred to as “Say-on-Pay”). Shareholders may indicate whether they would
prefer that the Company conduct future advisory votes on executive compensation once every one, two or three years (commonly referred
to as “Say-on-Frequency”).
At our 2011 annual meeting, shareholders voted
for annual say-on-pay advisory votes on NEO compensation. The Company has held advisory say-on-pay votes on the compensation of
our NEOs at every subsequent annual meeting. We are required to hold a Say-on-Frequency vote every six years.
The Board has determined that an advisory vote
on executive compensation that occurs every year is the most appropriate alternative for the Company and recommends shareholders
vote for a one-year interval for the advisory vote on executive compensation.
The Board recommends an annual advisory vote
on executive compensation allows for frequent input from our shareholders on our compensation philosophy, policies and practices.
Similarly, any shareholder concerns about our executive compensation program can be expressed through a vote without having to
wait two or three years. In addition, the Board considered survey data on our institutional shareholders’ preferences, which
reflected an annual advisory vote to approve the NEOs’ compensation.
The vote on the frequency of the advisory vote
on executive compensation is advisory and not binding on the Company, the Board, or the Compensation Committee. The Company recognizes
shareholders may have different views as to the best approach for the Company. The Board and the Compensation Committee will consider
the outcome of the vote; however, when considering the frequency of future advisory votes on executive compensation, the Board
may decide it is in the best interests of our shareholders and the
Company to hold an advisory vote on executive
compensation more or less frequently than the frequency receiving the most votes cast by our shareholders. Also, in accordance
with applicable law, shareholders will have the opportunity to recommend the frequency of future advisory votes on executive compensation
at least once every six years.
Shareholders may cast a vote on the preferred
voting frequency by selecting the option of one year, two years, or three years (or abstain) when voting in response to the following
resolution:
“RESOLVED, that
the shareholders determine, on an advisory basis, whether the preferred frequency of an advisory vote on the executive compensation
of the Company’s NEOs should be every one year, every two years, or every three years.”
The frequency option – one year, two
years, or three years – that receives the most votes “FOR” of all votes cast on the proposal will be the frequency
option approved by the shareholders.
The Board recommends an advisory vote on
executive compensation be held every one year.
PROPOSAL 5 – APPROVAL OF AMENDMENT
AND RESTATEMENT OF STOCK PLAN FOR NONEMPLOYEE DIRECTORS
Overview
The Hecla Mining Company Stock Plan for Nonemployee
Directors (the “Director Stock Plan”) originally became effective following shareholder approval on May 5, 1995. The
Director Stock Plan was subsequently amended, in each instance with the approval of our shareholders, on July 18, 2002, February
25, 2004, May 6, 2005, December 10, 2007, and May 24, 2012.
We are now asking our shareholders to approve
an amendment and restatement of the Director Stock Plan, which amendment and restatement was approved by the Board on February
21, 2017 (subject to shareholder approval), and which would, among other things:
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extend the expiration date of the plan to May 15, 2027;
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eliminate nonemployee director participation in the 2010 Stock Incentive Plan (and have nonemployee directors receive stock awards solely under the Director Stock Plan);
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limit the events that constitute a “Change in Control” (as defined below) under the plan;
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increase the maximum number of shares available for issuance under the plan
by 2,000,000, from 1,000,000 currently (of which 434,776 remain available) to 3,000,000 (corresponding with the termination of
the nonemployee directors participation in the 2010 Stock Incentive Plan);
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limit the amount of compensation that may be paid to a nonemployee director in a calendar year, under the plan and all other Company director compensation arrangements; and
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place the powers and authorities related to administration of the plan with the Board.
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The Director Stock Plan is intended to help
us attract and retain qualified persons to serve as nonemployee directors of the Company and to solidify the common interests of
those directors and our shareholders in enhancing the value of our common stock. We believe that the Director Stock Plan is an
important tool in attracting and maintaining qualified persons to serve on the Board and that it effectively aligns the interests
of Board members with those of our shareholders.
As of February 21, 2017, 434,776
shares of common stock remained reserved for issuance to nonemployee directors under the Director Stock Plan. On February 21,
2017, the Board approved, subject to shareholder approval, an amendment of the Director Stock Plan that would make available
3,000,000 shares of common stock be issued under the Director Stock Plan and affect the other
changes described above.
If our shareholders approve the amended and
restated Director Stock Plan, it will remain in effect until May 15, 2027, unless it is terminated earlier by the Board. If our
shareholders do not approve the amended and restated Director Stock Plan, it will expire on July 17, 2017.
Description of Amended and Restated Director Stock Plan
The following is a summary of the principal
features of the Director Stock Plan, as amended and restated. This summary, however, does not purport to be a complete description
of all the provisions of the Director Stock Plan. A copy of the Director Stock Plan is attached to this Proxy Statement as Appendix
A.
Credit of Shares
The Director Stock Plan provides that each
nonemployee director of the Company will be credited a stock retainer on September 30 of each year in addition to any annual cash
retainer paid to the director. Currently, we have eight nonemployee directors on the Board. Nonemployee directors are members of
the Board who are not full-time employees of the Company or any subsidiary. Under the Director Stock Plan, beginning in 2017, on
September 30 of each year, each nonemployee director will be credited a number of shares of our common stock determined by dividing
the annual retainer
payable to the director for service on
the Board for that year, by the average closing price of our common stock on the NYSE for the prior calendar year. The Director
Stock Plan does not permit our nonemployee directors to receive awards under any other equity compensation plan of the Company
or any affiliate while participating in the Director Stock Plan.
Contributions to the Trust
A minimum of 25% of the annual stock retainer
under the Director Stock Plan will be contributed to a grantor trust established by the Company. Each director may elect, prior
to the first day of the applicable year, to have a greater percentage contributed to the grantor trust for that year. The remaining
portion of the stock retainer will be transferred to the nonemployee director as soon as practicable after the applicable September
30. The trust shares will be held together with any dividends and distributions with respect thereto, until they are delivered
in accordance with the terms of the Director Stock Plan. The assets of the trust will remain subject to the claims of our creditors.
Nonemployee directors who join the Board
after September 30 of any year will be credited with a pro rata grant of shares when they join the Board. A minimum of 25% of their
stock retainers for that year will be contributed to the trust. Each director may elect, within 30 days after becoming a participant
in the Director Stock Plan, to have a greater percentage contributed to the grantor trust for that year. The remaining portion
will be transferred to these directors as soon as practicable after they become members of the Board.
Delivery of Trust Shares
Under the Director Stock Plan, the shares
held in the trust will be delivered to the nonemployee director on (or beginning on) the earliest to occur of: (1) death; (2) disability;
(3) retirement from the Board; (4) a cessation of the nonemployee director’s Board service for any other reason; (5) a change
in control of the Company; or (6) a specified date elected by the director that is at least two years after the stock retainer
is credited to the director.
Subject to certain restrictions, nonemployee
directors may elect delivery of their trust shares under the Director Stock Plan in annual installments over 5, 10 or 15 years
if the delivery event is death, disability or retirement. If the delivery event is normal cessation from Board service, a change
in control of the Company or a specified date, all trust shares will be delivered in one lump sum. Upon delivery, a nonemployee
director will receive the trust shares plus (1) any dividends and distributions that the nonemployee director would have received
with respect to the trust shares if such shares had been delivered at the time they were credited and (2) interest at a rate equal
to our cost of funds on all such distributions from the date they would have been received through the date of delivery.
Change in Control
Under the Director Stock Plan, a change
in control occurs if (1) a person or entity acquires 50% or more of either the fair market value of the outstanding common stock
of the Company or the combined voting power of the outstanding voting securities entitled to vote in an election of directors (subject
to certain exclusions); (2) a person or entity acquires 30% or more of the combined voting power of the Company during a 12-month
period (subject to certain exclusions); (3) a majority of the incumbent directors are replaced during any 12-month period by directors
whose appointment is not endorsed by a majority of the incumbent directors; or (4) a person acquires assets of the Company during
a 12-month period that have a total gross fair market value of at least 40% of the gross fair market value of all of the assets
of the Company (subject to certain exclusions). If an amount or benefit under the Director Stock Plan is considered “deferred
compensation” under Internal Revenue Code Section 409A and would be affected by a change in control, the amount or benefit
is subject to the change in control also constituting a “change in control event” under Section 409A.
Number of Authorized Shares
If the amended and restated Director Stock
Plan is approved by our shareholders, the maximum number of shares of our common stock that may be issued under the plan will be
3,000,000. In the event of any change in the common stock by reason of any stock dividend, split, split-up, split-off, spin-off,
combination of shares, exchange of shares, an offering of warrants or rights to purchase common stock at a price below its fair
market value, reclassification, recapitalization, reorganization, reincorporation, merger, consolidation or other change in capitalization,
appropriate adjustment will be made by the Board in the number and kind of shares subject to the Director Stock Plan.
Annual Director Compensation Limit
Under the Director Stock Plan, the maximum
value of stock retainers credited during any calendar year to any nonemployee director, taken together with any cash fees and the
value of any awards granted pursuant to any other equity compensation plan of the Company or an affiliate, may not exceed (i) $900,000
for the Chair of the Board and (ii) $675,000 for each nonemployee director other than the Chair of the Board.
Administration
The Director Stock Plan will be administered
by the Board. The Board will have the full power and authority to take all actions and make all determinations required or provided
for under the Director Stock Plan and to take all other actions that the Board may deem necessary or appropriate for the administration
of the plan. All actions by the Board under the Director Stock Plan will be in the Board’s sole discretion and will be final,
binding and conclusive. The Board may delegate its responsibilities and authority under the Director Stock Plan to the Compensation
Committee or such other committee as it deems appropriate.
Term, Amendment and Termination
If the amended and restated Director Stock
Plan is approved by our shareholders, it will remain in effect until May 15, 2027, unless it is terminated earlier by the Board.
If the amended and restated Director Stock Plan is not so approved it will expire July 17, 2017. The Board may from time to time
amend or suspend the Director Stock Plan without further approval of our shareholders, unless the Board determines that shareholder
approval is required. In addition, the plan may not be amended without shareholder approval to the extent such approval is otherwise
required by law or agreement for stock exchange rule. The Board may terminate the Director Stock Plan at any time subject to Section
409A. No amendment or suspension of the Director Stock Plan may, without the consent of the affected director, materially impair
the rights or obligations of the director.
Federal Income Tax Consequences
The following is a brief summary of the
U.S. federal income tax consequences of the Director Stock Plan generally applicable to the Company and to participants in the
plan who are subject to U.S. federal taxes. The summary is based on the Internal Revenue Code, applicable Treasury Regulations
and administrative and judicial interpretations thereof, each as in effect on the date of this Proxy Statement, and is, therefore,
subject to future changes in the law, possibly with retroactive effect. The summary is general in nature and does not purport to
be legal or tax advice. Furthermore, the summary does not address issues relating to any U.S. gift or estate tax consequences or
the consequences of any state, local or foreign tax laws.
A nonemployee director generally will recognize
taxable income upon the delivery of shares to the director under the Director Stock Plan. The amount of income generally will equal
the fair market value of the shares delivered, measured on the date the nonemployee director recognizes the compensation income.
Dividends and other distributions that are made with respect to plan awards prior to delivery of shares will also be taxed as compensation
income to the nonemployee directors when received by them, as will any interest paid thereon. The Company, in computing its federal
income tax, will generally be entitled to compensation deductions at the same times and in the same amounts as the nonemployee
directors recognize taxable compensation income.
For more information about the Director
Stock Plan and payments made thereunder, please see “Compensation of Non-Management Directors” beginning on page _____.
New Plan Benefits
The
following table shows the dollar values that the individuals and groups referred to below will receive in 2017 if the Director
Stock Plan is approved by the Company’s shareholders at this Annual Meeting (based on the $100,000 annual retainer payable
to nonemployee directors of the Company as of the Record Date, which annual retainer amount is subject to change). Executive officers,
employee directors and employees of the Company are not eligible to participate in the Director Stock Plan.
New Plan Benefits
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Name and Position
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Dollar Value
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Number of Shares
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Phillips S. Baker, Jr., President and CEO
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$0
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—
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Lindsay A. Hall, Senior Vice President and CFO
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$0
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—
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Lawrence P. Radford, Senior Vice President - Operations
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$0
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—
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Dr. Dean W.A. McDonald, Senior Vice President - Exploration
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$0
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—
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David C. Sienko, Vice President - General Counsel
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$0
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—
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Executive group
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$0
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—
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Non-Executive Director Group
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$100,000
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1
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2
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Non-Executive Officer Group
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$0
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—
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1.
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Represents the amount to be received by each nonemployee director based on
the annual retainer payable as of the Record Date. The aggregate value of annual awards to all nonemployee directors under the
Director Stock Plan will depend on (1) the amount of the annual retainer payable to such directors on September 30 of each year
and (2) the number of such directors in office on September 30 of each year, both of which are subject to change. If the Director
Stock Plan is approved by the Company’s shareholders at the 2017 Annual Meeting, and the amount of the annual retainer payable
to nonemployee directors and the number of such directors remains unchanged from the Record Date, the aggregate value of awards
to all nonemployee directors for 2017 would be $800,000.
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2.
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On September 30, 2017, each nonemployee director will be credited a number
of shares of our common stock determined by dividing the annual retainer payable to nonemployee directors on such date (which annual
retainer currently is $100,000) by the average closing price of our common stock on the NYSE for the prior calendar year.
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The Board recommends shareholders vote
“FOR” the approval of the Amended and Restated Hecla Mining Company Stock Plan for Nonemployee Directors in substantially
the same form as included in Appendix A to this Proxy Statement.
PROPOSAL 6 – APPROVAL OF THE AMENDMENT
TO OUR CERTIFICATE OF INCORPORATION INCREASING THE NUMBER OF AUTHORIZED SHARES OF OUR COMMON STOCK
The Board believes that it is in the Company’s
best interest to approve a proposal to amend our Certificate of Incorporation to increase the number of authorized shares of common
stock from 500,000,000 to 750,000,000. The terms, including the par value, of the common stock will remain unchanged.
As of March 27, 2017, _______ of our 500,000,000
currently authorized shares of common stock were issued and outstanding. Of the remaining authorized shares of common stock, 9,759,530shares
in the aggregate were reserved for issuance in connection with: (i) our stock-based compensation plans; and (ii) conversion of
our outstanding Series B Cumulative Preferred Stock. As of March 27, 2017, 157,816 shares of our 5,000,000 currently authorized
shares of preferred stock were issued and outstanding.
Reasons for the Proposed Increase in
Authorized Capital
The purpose of the proposed amendment is
to allow us to have a sufficient number of shares of authorized and unissued common stock to be used for such corporate purposes
as may, from time to time, be considered advisable by the Board. Having such shares available for issuance in the future will give
Hecla greater flexibility and will allow the shares to be issued as determined by the Board without the expense and delay of a
special meeting of our shareholders to approve the additional authorized capital stock. The corporate purposes for which we may
issue common stock could include, without limitation, acquisitions of other companies or assets, exchange offers for debt or other
equity, new equity offerings to raise capital, stock splits, paying stock dividends, and providing incentives to employees, officers
and directors pursuant to our various stock plans or in connection with the adoption of additional stock-based incentive plans,
such as the amended and restated Stock Plan for Nonemployee Directors (See Proposal 6). The Board will determine the terms of any
issuance of additional shares.
Possible Effects of the Proposed Amendment
The increase in our authorized common stock
will not have any immediate effect on the rights of existing shareholders. To the extent that the additional authorized shares
are issued in the future, such shares will have a dilutive effect on the voting power and percentage equity ownership of our existing
shareholders and, depending on the price at which they are issued, may have a dilutive effect on both the book value and market
value of shares owned by our existing shareholders. The holders of our common stock have no preemptive rights to subscribe for
or purchase any additional shares of our common stock that may be issued in the future.
We have not proposed the increase in the
authorized number of shares with the intention of using the additional shares for anti-takeover purposes, although we could theoretically
use the additional shares to make it more difficult or to discourage an attempt to acquire control of the Company because the issuance
of such additional shares could be used to dilute the stock ownership or voting rights of a person seeking to obtain control of
us.
No further action or authorization by our
shareholders would be necessary prior to the issuance of the additional shares authorized by the proposed amendment to our Certificate
of Incorporation unless required in a particular transaction by applicable provisions of the Certificate of Incorporation, law
or by the regulations of a stock exchange or other regulatory agency. Therefore, there may be instances where we have a
sufficient number of authorized but unissued
shares to engage in a transaction, but we would still need shareholder approval to enter into the transactions.
We do not have any current plans, agreements
or understandings for stock issuances which in the aggregate would involve the use of a number of shares that exceeds the amount
currently authorized but unissued.
On February 21, 2017, the Board unanimously
adopted resolutions setting forth the proposed amendment to our Certificate of Incorporation declaring its advisability and directing
that the proposed amendment be submitted to the shareholders for their approval at the Annual Meeting. If adopted by the shareholders,
the amendment will become effective upon filing of an appropriate amendment to our Certificate of Incorporation with the Delaware
Secretary of State.
The full text of the proposed revised Section
1 of Article IV of our Certificate of Incorporation is set forth as follows:
ARTICLE IV.
Capital Stock
Section 1.
Authorized Capital Stock
.
The Corporation will be authorized to issued two classes of shares of Capital Stock to be designated, respectively, “Preferred
Stock” and “Common Stock”; the total number of shares of Capital Stock which the Corporation shall have authority
to issue is 755,000,000; the total number of shares of Preferred Stock shall be 5,000,000, and each such share shall have a par
value of $0.25; the total of shares of Common Stock shall be 750,000,000, and each such share shall have a par value of $0.25.
The Board recommends shareholders vote
“FOR” the amendment to our Certificate of Incorporation increasing the number of authorized shares of common stock.
PROPOSAL 7 – APPROVAL OF AMENDMENTS
TO THE COMPANY’S CERTIFICATE OF INCORPORATION AND BYLAWS TO REMOVE CERTAIN 80% SUPERMAJORITY VOTING PROVISIONS
Overview
There are certain provisions in our Certificate
of Incorporation (the “Certificate”) and Bylaws that can only be revised through the affirmative vote of the holders
of at least 80% of the voting power of the then outstanding shares of our capital stock entitled to vote generally in the election
of directors. We refer to these shares as “Voting Stock” and to this voting requirement as “80% supermajority”
throughout this Proposal 7 and
Proposal 8. Certain of these provisions
relate to the authority to call special meetings of shareholders, and currently, only our Board has such authority.
We are seeking the approval of our shareholders
to amend our Certificate and Bylaws to remove those 80% supermajority voting requirements that impact who may call special meetings
of shareholders, and replace them with two-thirds voting standards. We refer to this lower voting requirement as “two-thirds
vote” throughout this Proposal 7 and Proposal 8. If approved, this proposal would become effective upon the filing of an
amendment to our Certificate with the Secretary of State of Delaware, which we intend to do promptly after the required shareholder
approval is obtained, at which time the related amendment to our Bylaws would also become effective.
We proposed these same amendments for shareholder
approval at our 2016 Annual Shareholder Meeting. While shareholders owning almost 46% of our Voting Stock voted in favor of these
amendments in 2016, the level of support was not sufficient to approve the amendments. See
Required Vote, Our Board’s
Recommendation and Additional Information
below. Because our Board of Directors continues to believe that these amendments
are appropriate, we are again asking shareholders to vote “For” these proposed amendments.
As described more fully below under Proposal
8, in 2014 and 2016, we sought the approval of our shareholders to amend the Certificate and Bylaws to add a right permitting shareholders
who have held at least a 25% “net long position” in our outstanding common stock for at least 120 days to call special
meetings of shareholders, subject to the conditions set forth in our Bylaws (we refer to this as the “Special Meeting Proposal”).
In order to implement the Special Meeting Proposal, an 80% supermajority vote of our shareholders was required. The 80% supermajority
vote was not obtained in 2014 or 2016, and as a result, we were unable to implement the Special Meeting Proposal.
We are again proposing the Special Meeting
Proposal at our 2017 Annual Meeting of Shareholders. It is described in Proposal 8 below.
We believe that the 80% supermajority vote
requirement is an impediment to implementing the Special Meeting Proposal because of the difficulty in getting the holders of that
many shares to vote at a shareholders meeting. If instead of the 80% supermajority provisions, the required vote to implement the
Special Meeting Proposal was two-thirds of the Voting Stock, we believe the Special Meeting Proposal would have a better chance
to be approved by our shareholders. However, even with the change to the lower two-thirds vote requirement, there is no assurance
that the Special Meeting Proposal will be approved by the required vote of our shareholders. See
Required Vote, Our Board’s
Recommendation and Additional Information
on page ______.
Current Provisions in Certificate and
Bylaws
Currently, the Certificate states that
shareholders can alter, amend or repeal certain Bylaws relating to calling a special meeting of shareholders, only if that action
is approved by at least an 80% supermajority vote (this supermajority voting provision is in Article V of the Certificate). Likewise,
the Certificate currently states that at least an 80% supermajority vote is necessary to alter, amend or repeal Article VII of
the Certificate, which provides that special meetings of shareholders can only be called by our Board. Finally, the Bylaws also
contain a similar provision regarding amending the provision therein concerning calling special meetings of shareholders.
Set forth below are the relevant provisions
of the Certificate and Bylaws:
Certificate
ARTICLE V.
Bylaws
In furtherance and not in limitation
of the powers conferred by law, the Board is expressly authorized to make, repeal, alter, amend and rescind the bylaws of the Corporation
by a majority vote of the entire Board at any regular or special meeting of the Board;
provided, however that, notwithstanding
anything contained in this Certificate of Incorporation or the Bylaws of the Corporation to the contrary, the affirmative vote
of the holders of at least 80% of the voting power of the then outstanding shares of Voting Stock, voting together as a single
class, shall be required to (i) alter, amend or repeal any provision of the Bylaws which is substantially identical to and/or implements
the last sentence of Article IV or Articles VI, VII or VIII, of this Certificate of Incorporation, or (ii) alter, amend or repeal
any provision of this proviso to Article V.
ARTICLE VII.
Actions by Shareholders
Any action required or permitted to
be taken by the shareholders of the Corporation must be effected at a duly called annual or special meeting of shareholders of
the Corporation and may not be effected by any consent in writing by such shareholders.
Special meetings of shareholders
of the Corporation may be called only by the Board pursuant to a resolution approved by a majority of the entire Board. Notwithstanding
anything contained in this Certificate of Incorporation
to the contrary, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of Voting
Stock, voting together as a single class, shall be required to alter, amend or repeal this Article VII.
Bylaws
ARTICLE VI.
Amendments
These Bylaws may be altered or repealed
and Bylaws may be made at any annual meeting of the shareholders or at any special meeting thereof if notice of the proposed alteration
or repeal of Bylaws to be made be contained in the notice of such meeting, by the affirmative vote of the holders of a majority
of the total voting power of all outstanding shares of the voting stock of the Corporation. These Bylaws may also be altered or
repealed and Bylaws may be made by the affirmative vote of a majority of the Board of Directors, at any annual or regular meeting
of the Board of Directors, or at any special meeting of the Board of Directors if notice of the proposed alteration or repeal,
or Bylaws or Bylaws to be made, be contained in the notice of such special meeting.
Notwithstanding anything contained
in these Bylaws to the contrary, the affirmative vote of the holders of at least 80% of the voting power of all of the shares of
the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class,
shall be required to alter, amend or repeal Section 4 or 6 of Article II, or Section 1, 2 or 3 of Article III, of these Bylaws.
Proposed Amendments to Certificate and Bylaws
This Proposal 7 proposes to amend the Certificate
and Bylaws so that future amendments to certain provisions within the Certificate and the Bylaws can be approved by a two-thirds
vote of the outstanding shares rather than an 80% supermajority vote. Specifically, in this Proposal 7, we propose:
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to amend the 80% supermajority voting requirement in Article V of the Certificate
by specifying that the applicable threshold to amend the Bylaw provision relating to special meetings of shareholders is two-thirds.
As a result, any future action by shareholders to alter, amend or repeal the Bylaw relating to calling a special meeting of shareholders
would require approval by the affirmative vote of at least two-thirds of the voting power of the then outstanding Voting Stock,
voting together as a single class;
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to amend the 80% supermajority voting requirement in Article VII of the Certificate
by replacing the reference to “80 percent” with “two-
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thirds”, solely with respect to the provision in Article VII concerning
the ability to call special meetings of shareholders. As a result, any future action by shareholders to alter, amend or repeal
the provisions in the Certificate relating to calling a special meeting of shareholders would require approval by the affirmative
vote of at least two-thirds of the voting power of the then outstanding Voting Stock, voting together as a single class; and
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to amend the 80% supermajority voting requirement in Article VI of the Bylaws
by specifying that with respect to Section 4 of Article II of the Bylaws, the applicable vote threshold is two-thirds to amend.
As a result, any future action by shareholders to alter, amend or repeal the Bylaw relating to calling a special meeting of shareholders
would require approval by the affirmative vote of at least two-thirds of the voting power of the then outstanding Voting Stock,
voting together as a single class.
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Required Vote, Our Board’s Recommendation
and Additional Information
Our Board is committed to good governance
practices and this Proposal 7 is the result of our Board’s ongoing review of our corporate governance principles. As part
of that review, our Board recognizes that the chances of obtaining shareholder approval of the Shareholder Meeting Proposal described
below in Proposal 8 in the future (if it is not approved at the 2017 Annual Meeting) may be improved if the changes to the Certificate
and Bylaws described in this Proposal 7 are approved by our shareholders. Although Proposal 7 and Proposal 8 will each require
the affirmative vote of holders of at least 80% of our outstanding shares of common stock, the approval of one of these proposals
is not conditioned on the other, and if Proposal 7 is passed but Proposal 8 is not, then if in the future we again seek approval
of the Special Meeting Proposal, it would only need to be approved by the lower two-thirds vote rather than the current 80% supermajority
vote.
After receiving shareholder input and the
advice of management and outside advisors, our Board considered the relative weight of the arguments in favor of and opposed to
maintaining the 80% supermajority voting requirements described herein. As a result, and based upon the recommendation of the Governance
Committee, our Board, at its meeting on February 21, 2017, approved and declared advisable and in our shareholders’ best
interests, the amendments to the Certificate and Bylaws described in this Proposal 7.
The above description is a summary, and is
qualified by and subject to the full text of the proposed amendments to our Certificate and Bylaws, which are set forth in
Appendix
B
and
Appendix C
, respectively. Additions of text contained in the appendices are indicated by underlining and deletions
of text are indicated by strikeouts.
According to our current Certificate and
Bylaws, approval of this proposal requires the affirmative vote of holders of at least 80% of our outstanding shares of common
stock.
Our Board recommends that shareholders
vote “FOR” the amendments to the Certificate of Incorporation and Bylaws to remove certain 80% supermajority voting
requirements and replace them with two-thirds voting standards as described above.
PROPOSAL 8 – APPROVAL OF AMENDMENTS
TO THE COMPANY’S CERTIFICATE OF INCORPORATION AND BYLAWS TO PERMIT SHAREHOLDERS TO CALL SPECIAL MEETINGS OF SHAREHOLDERS
UNDER CERTAIN CIRCUMSTANCES
Overview
We are seeking the approval of our shareholders
to amend our Certificate and Bylaws to add a right permitting shareholders who have held at least a 25% “net long position”
in our outstanding common stock for at least 120 days to call special meetings of shareholders, subject to the conditions set forth
in our Bylaws, as described below. Currently, shareholders do not have the right to call special shareholder meetings; only our
Board can call such meetings. If approved, this proposal would become effective upon the filing of an amendment to our Certificate
with the Secretary of State of Delaware, which we intend to do promptly after the required shareholder approval is obtained, at
which time the related amendment to our Bylaws would also become effective.
We proposed these same amendments for shareholder
approval at our 2014 and 2016 Annual Shareholder Meetings. While shareholders owning almost 41% and 47% of our Voting Stock voted
in favor of these amendments in 2014 and 2016, respectively, the level of support was not sufficient to approve the amendments.
See
Required Vote, Our Board’s Recommendation and Additional Information
below. Because our Board continues to believe
that these amendments are appropriate, we are again asking shareholders to vote “For” these proposed amendments. In
addition, under Proposal 7, we are seeking the approval of our shareholders to amend our Certificate and Bylaws to remove all 80%
supermajority voting requirements that impact who may call special meetings of shareholders (other 80% supermajority voting requirements
will be unaffected), and replace them with two-thirds voting standards. If Proposal 7 is passed, we believe it will improve the
chances that an amendment permitting shareholders to call special meetings of shareholders under certain circumstances, if proposed
in the future, would be adopted (if Proposal 8 is not adopted at the 2017 Annual Meeting). However, even if Proposal 7 is approved
by the required vote of our shareholders, there is no assurance that this Proposal 8 will be approved by the required vote of our
shareholders. See
Required Vote, Our Board’s Recommendation and Additional Information
on page ____.
Proposed Amendments to Certificate and
Bylaws
This Proposal 8 proposes to amend the Certificate
and Bylaws to implement the right of shareholders who have held at least a 25% “net long position” in our outstanding
common stock for at least 120 days to call
special meetings of shareholders, subject to compliance with the requirements set forth in our Bylaws, as proposed to be amended.
Our Board believes that establishing an ownership
threshold of at least 25% in order for a shareholder (or group of shareholders) to request a special meeting strikes an appropriate
balance between enhancing shareholder rights and avoiding the situations that could arise if the threshold were set so low that
a small minority of shareholders, including shareholders with special interests, could force the Company to incur the time and
expense of convening a special meeting to consider a matter of little or no interest to other shareholders. Organizing and preparing
for a special meeting involves significant attention of our Board and management, which could divert their attention from performing
their primary functions: to oversee and operate our business in the best interests of our shareholders. In addition, for every
special meeting of shareholders, the Company incurs significant costs. We will continue to maintain our existing governance mechanisms
that afford management and our Board the ability to respond to proposals and concerns of all shareholders, regardless of the level
of share ownership.
Establishing a 25% “net long position”
threshold for the right to call a special meeting would ensure that matters proposed for consideration have significant support
among our shareholders. A shareholder’s “net long position” is generally defined as the amount of common stock
in which the shareholder holds a positive (also known as “long”) economic interest, reduced by the amount of common
stock in which the shareholder holds a negative (also known as “short”) economic interest. In addition, requiring that
shareholders must have held their stock for at least 120 days helps to ensure that their economic interest in the Company’s
affairs is more than transitory. Also during the required 120 day holding period, the Company will continue to make disclosure
through its statutory filings, which may provide shareholders with information that might avoid an unnecessary call for special
meetings of shareholders.
The proposed amendment to our Bylaws contains
procedural and information requirements for shareholders to call a special meeting, including, without limitation, that (i) no
business may be conducted at the special meeting except as set forth in the Company’s notice of meeting, (ii) a special meeting
will not be held if similar business is to be covered at an annual or special meeting called by the Board to be held within 90
days after the special meeting request is received by the Secretary, (iii) no shareholder special meeting request may be made during
the period commencing 90 days prior to the first anniversary of the date of the immediately preceding annual meeting and ending
on the date of the next annual meeting, (iv) a special meeting request cannot cover business substantially similar to what was
covered at an annual or special meeting held not more than 120 days before the special meeting request was received by the Secretary,
(v) any shares beneficially owned or held of record as of the date of the request and sold by the requesting holder prior to the
meeting will be treated as a revocation of the request to the extent of the shares sold, and (vi) the requesting shareholder’s
notice must include information (as specified in the amendment to the Bylaws) as to the business proposed to be conducted, as to
each nominee (if applicable), and as to the shareholder giving notice and the beneficial owner, if any, on whose behalf the proposal
is made.
Required Vote, Our Board’s Recommendation
and Additional Information
Our Board is committed to good governance
practices and this Proposal 8 is the result of our Board’s ongoing review of our corporate governance principles. After receiving
shareholder input and the advice of management and outside advisors, our Board considered the relative weight of the arguments
in favor of and opposed to the ability of shareholders to call special meetings under certain circumstances as described herein.
As a result, and based upon the recommendation of the Governance Committee, our Board, at its meeting on February 21, 2017, approved
and declared advisable and in our shareholders’, best interests the amendments to the Certificate and Bylaws described in
this Proposal 8.
The above description is a summary, and is
qualified by and subject to the full text of the proposed amendments to our Certificate and Bylaws, which are set forth in
Appendix
D
and
Appendix E
, respectively. Additions of text contained in the appendices are indicated by underlining and deletions
of text are indicated by strikeouts.
Our Board has approved this proposal, and
according to our current Certificate and Bylaws, approval of this proposal requires the affirmative vote of holders of at least
80% of our outstanding shares of common stock.
Our Board recommends shareholders vote
“FOR” the amendments to the Certificate of Incorporation and Bylaws to permit shareholders to call special meetings
of shareholders under certain circumstances.
STOCK OWNERSHIP INFORMATION
Guidelines and Timing of Equity Awards
.
We have no program, plan or practice to time the grant of stock-based awards relative to the release of material non-public information
or other corporate events. All equity grants to executive officers are approved by the Compensation Committee at regularly scheduled
meetings or, in limited cases involving key recruits or promotions, by a special meeting or unanimous written consent. The grant
date is the meeting date or a fixed, future date specified at the time of the grant. Under the terms of our 2010 Stock Incentive
Plan, the fair market value of any award is determined by the closing stock price of our common stock on the NYSE on the date
of grant or a fixed, future date specified at the time of grant.
In
addition, the Compensation Committee typically makes equity grants to NEOs in the first half of the year.
Stock Ownership Guidelines
To more closely align the Company’s
non-management directors’ financial interests with those of the shareholders, in June 2012, the Compensation Committee and
Board adopted stock ownership guidelines for our non-management directors. Under these guidelines, each non-management director
is required to own shares of common stock (which includes shares held under the Hecla Mining Company Stock Plan for Nonemployee
Directors and the 2010 Stock Incentive
Plan) valued at three times their annual cash retainer within five years of their appointment to the Board. Any directors appointed
or elected after June 2012 are expected to achieve their expected value requirement within five years of their appointment or election
to the Board.
In the event a non-management director’s
cash retainer increases, he or she will have three years from the date of the increase to acquire any additional shares needed
to meet these guidelines.
Similarly, we believe that it is important
to encourage our executive officers to hold a material amount of our common stock and to link their long-term economic interest
directly to that of our shareholders. To achieve this goal, in June 2012, the Compensation Committee and Board established stock
ownership guidelines for the Company’s senior management. The guidelines for the CEO are six times base salary, and for the
other executive officers, two times base salary. These guidelines shall be achieved by the later of (i) June 2017 or (ii) five
years after the executive officer is hired to such position. Unvested RSUs and shares held directly are considered owned for purposes
of the guidelines. If an executive officer becomes subject to a greater ownership amount due to a promotion or an increase in base
salary, he or she shall meet the higher ownership requirement within three years.
Because of fluctuations in the Company’s
stock price, in February 2016, the Compensation Committee and the Board amended the stock ownership guidelines to provide a valuation
methodology that consists of valuing the shares held by using the average closing price of the Company’s common stock on
the NYSE for the previous calendar year. Because share prices of all companies are subject to market volatility, the Board believes
that it would be unfair to require an executive or Board member to buy more shares simply because Hecla’s stock price drops.
In the event there is a significant decline in Hecla’s stock price that causes an executive’s or Board member’s
holdings to fall below the applicable threshold, the executives or Board members will not be required to purchase additional shares
to meet the threshold, but they generally may not sell or transfer any shares until the threshold has again been achieved.
The following tables summarize the non-management
directors and NEO’s stock ownership guidelines and their status as of December 31, 2016, based on the average closing price
of our common stock on the NYSE for calendar year 2016 ($4.5919). As of December 31, 2016, all NEOs met the guidelines. In the
calculations for our NEOs, we include shares directly held and unvested RSUs. We do not include unexercised stock options or unvested
performance-based shares.
Non-Management Director Stock Ownership
as of December 31, 2016
|
Director
1
|
|
Annual
Retainer
($)
|
|
X
Annual
Retainer
|
|
Total
Value of
Shares to
be Held
($)
|
|
Shares
Held
Directly
(#)
|
|
Shares
Held in
Directors
Trust
2
(#)
|
|
Total
Shares
(#)
|
|
Total Value
of Shares
Held by
Director
($4.5919)
3
($)
|
|
Meets
Guidelines
|
|
Crumley
|
|
|
156,000
|
|
|
|
3x
|
|
|
|
468,000
|
|
|
|
116,536
|
|
|
|
83,555
|
|
|
|
200,091
|
|
|
|
918,798
|
|
|
Yes
|
|
Johnson
4
|
|
|
66,000
|
|
|
|
3x
|
|
|
|
198,000
|
|
|
|
17,273
|
|
|
|
11,216
|
|
|
|
28,489
|
|
|
|
130,819
|
|
|
No
|
|
Nethercutt
|
|
|
66,000
|
|
|
|
3x
|
|
|
|
198,000
|
|
|
|
60,536
|
|
|
|
58,854
|
|
|
|
119,390
|
|
|
|
548,227
|
|
|
Yes
|
|
Ralbovsky
4
|
|
|
66,000
|
|
|
|
3x
|
|
|
|
198,000
|
|
|
|
17,273
|
|
|
|
11,216
|
|
|
|
28,489
|
|
|
|
130,819
|
|
|
No
|
|
Rogers
|
|
|
66,000
|
|
|
|
3x
|
|
|
|
198,000
|
|
|
|
100,536
|
|
|
|
52,602
|
|
|
|
153,138
|
|
|
|
703,194
|
|
|
Yes
|
|
Stanley
|
|
|
66,000
|
|
|
|
3x
|
|
|
|
198,000
|
|
|
|
100,536
|
|
|
|
52,602
|
|
|
|
153,138
|
|
|
|
703,194
|
|
|
Yes
|
|
Taylor
|
|
|
66,000
|
|
|
|
3x
|
|
|
|
198,000
|
|
|
|
30,000
|
|
|
|
77,016
|
|
|
|
107,016
|
|
|
|
491,407
|
|
|
Yes
|
|
|
1.
|
Catherine J. Boggs joined the Board effective as of January 1, 2017, and
thus is not reflect in this table.
|
|
|
2.
|
As of December 31, 2016, the total amount of shares held in trust pursuant
to the terms of the Stock Plan for Nonemployee Directors by each of the above-named directors.
|
|
|
3.
|
The value of shares held is determined by using the average closing price
of the Company’s common stock for the previous calendar year on the NYSE, which for 2016 was $4.5919.
|
|
|
4.
|
Messrs. Johnson and Ralbovsky joined the Board in March 2016 and have until
March 2021 to comply with the guidelines.
|
Executive Stock Ownership as of December
31, 2016
|
NEO
|
|
Annual
Base
Salary
($)
|
|
X
Annual
Base
Salary
|
|
Total Value
of Shares to
be Held
($)
|
|
Shares Held
Directly
(#)
|
|
Unvested
RSUs
(#)
|
|
Total
Shares
(#)
|
|
Total Value
of Shares
Held by NEO
at 12/31/16
($4.5919)
1
($)
|
|
Meets
Guidelines
|
|
Baker
|
|
|
605,000
|
|
|
|
6x
|
|
|
|
3,630,000
|
|
|
|
2,375,476
|
2,3
|
|
|
300,753
|
|
|
|
2,676,229
|
|
|
|
12,288,976
|
|
|
Yes
|
|
Hall
4
|
|
|
380,000
|
|
|
|
2x
|
|
|
|
760,000
|
|
|
|
0
|
|
|
|
55,377
|
|
|
|
55,377
|
|
|
|
254,286
|
|
|
No
|
|
Radford
|
|
|
380,000
|
|
|
|
2x
|
|
|
|
760,000
|
|
|
|
367,113
|
3
|
|
|
203,777
|
|
|
|
570,890
|
|
|
|
2,621,470
|
|
|
Yes
|
|
McDonald
|
|
|
275,000
|
|
|
|
2x
|
|
|
|
550,000
|
|
|
|
295,502
|
|
|
|
180,451
|
|
|
|
475,953
|
|
|
|
2,185,529
|
|
|
Yes
|
|
Sienko
|
|
|
250,000
|
|
|
|
2x
|
|
|
|
500,000
|
|
|
|
251,962
|
3
|
|
|
92,632
|
|
|
|
344,594
|
|
|
|
1,582,341
|
|
|
Yes
|
|
|
1.
|
Average closing price of Hecla’s common stock on the NYSE for calendar
year 2016.
|
|
|
2.
|
Includes 888,909 shares deferred under the KEDCP.
|
|
|
3.
|
Includes Hecla Mining Company common shares held in their 401(k) account
as follows: Baker, 16,971 shares, Radford, 15,172 shares, and Sienko 696 shares.
|
|
|
4.
|
Mr. Hall joined the Company in July 2016. He has five years from the date
of hire to comply with the guidelines.
|
Additional information regarding shares
held by the non-management directors and our NEOs is included in the
Security Ownership of Certain Beneficial Owners and Management
table on the following page.
Security Ownership of Certain Beneficial Owners and Management
The following table shows the number and
percentage of the shares of common stock beneficially owned by each current director and each executive officer of Hecla, and by
all current directors and executive officers as a group, as of March 27, 2017. On that date, all such persons together
beneficially owned an aggregate of less than one percent of the outstanding shares of our common stock. Except as otherwise indicated,
the directors, nominees and officers have sole voting and investment power with respect to the shares listed, including shares
which the individual has the right to acquire by exercising stock options but has not done so.
|
|
|
Shares Beneficially Owned
|
|
|
Name of Beneficial
Owner
|
|
Title of
Class
|
|
Number
|
|
|
Nature
|
|
Percent of
Class
|
|
Phillips S. Baker, Jr.
|
|
|
|
|
1,469,596
|
1
|
|
Direct
2
|
|
|
|
President and CEO
|
|
|
|
|
16,998
|
|
|
401(k) Plan
|
|
|
|
|
|
|
|
|
300,753
|
|
|
RSU
3
|
|
|
|
|
|
|
|
|
1,273,834
|
|
|
Deferred
4
|
|
|
|
|
|
|
|
|
318,554
|
|
|
Performance-based
5
|
|
*
|
|
|
|
Common
|
|
|
3,379,735
|
|
|
|
|
|
|
Robert D. Brown
|
|
|
|
|
33,715
|
|
|
Direct
2
|
|
|
|
Vice President – Corporate
|
|
|
|
|
45,455
|
|
|
RSU
3
|
|
|
|
Development
|
|
Common
|
|
|
79,170
|
|
|
|
|
*
|
|
Lindsay A. Hall
|
|
|
|
|
12,331
|
|
|
Direct
2
|
|
|
|
Senior Vice President and
|
|
|
|
|
55,377
|
|
|
RSU
3
|
|
|
|
Chief Financial Officer
|
|
Common
|
|
|
67,708
|
|
|
|
|
*
|
|
Dr. Dean W.A. McDonald
|
|
|
|
|
312,960
|
|
|
Direct
2
|
|
|
|
Senior Vice President –
|
|
|
|
|
180,451
|
|
|
RSU
3
|
|
|
|
Exploration
|
|
Common
|
|
|
493,411
|
|
|
|
|
*
|
|
Lawrence P. Radford
|
|
|
|
|
385,984
|
6
|
|
Direct
2
|
|
|
|
Senior Vice President –
|
|
|
|
|
15,196
|
|
|
401(k) Plan
|
|
|
|
Operations
|
|
|
|
|
203,777
|
|
|
RSU
3
|
|
*
|
|
|
|
Common
|
|
|
604,957
|
|
|
|
|
|
|
David C. Sienko
|
|
|
|
|
268,508
|
|
|
Direct
2
|
|
|
|
Vice President and General
|
|
|
|
|
1,471
|
|
|
401(k) Plan
|
|
|
|
Counsel
|
|
|
|
|
92,632
|
|
|
RSU
3
|
|
*
|
|
|
|
Common
|
|
|
362,611
|
|
|
|
|
|
|
Catherine J. Boggs
|
|
|
|
|
3,683
|
|
|
Indirect
7
|
|
|
|
Director
|
|
Common
|
|
|
3,683
|
|
|
|
|
*
|
|
Ted Crumley
|
|
|
|
|
116,536
|
|
|
Direct
2
|
|
|
|
Director
|
|
|
|
|
83,555
|
|
|
Indirect
7
|
|
|
|
|
|
Common
|
|
|
200,091
|
|
|
|
|
*
|
|
|
|
Shares Beneficially Owned
|
|
|
Name of Beneficial
Owner
|
|
Title of
Class
|
|
Number
|
|
|
Nature
|
|
Percent of
Class
|
|
George R. Johnson
|
|
|
|
|
17,273
|
|
|
Direct
2
|
|
|
|
Director
|
|
|
|
|
11,216
|
|
|
Indirect
7
|
|
|
|
|
|
Common
|
|
|
28,489
|
|
|
|
|
*
|
|
Stephen F. Ralbovsky
|
|
|
|
|
17,273
|
|
|
Direct
2
|
|
|
|
Director
|
|
|
|
|
11,216
|
|
|
Indirect
7
|
|
|
|
|
|
Common
|
|
|
28,489
|
|
|
|
|
*
|
|
George R. Nethercutt, Jr.
|
|
|
|
|
60,536
|
|
|
Direct
2
|
|
|
|
Director
|
|
|
|
|
58,854
|
|
|
Indirect
7
|
|
|
|
|
|
Common
|
|
|
119,390
|
|
|
|
|
*
|
|
Terry V. Rogers
|
|
|
|
|
100,536
|
|
|
Direct
2
|
|
|
|
Director
|
|
|
|
|
52,602
|
|
|
Indirect
7
|
|
|
|
|
|
Common
|
|
|
153,138
|
|
|
|
|
*
|
|
Charles B. Stanley
|
|
|
|
|
100,536
|
|
|
Direct
2
|
|
|
|
Director
|
|
|
|
|
52,602
|
|
|
Indirect
7
|
|
|
|
|
|
Common
|
|
|
153,138
|
|
|
|
|
*
|
|
Dr. Anthony P. Taylor
|
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30,000
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Direct
2
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Director
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77,016
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Indirect
7
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Common
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107,016
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*
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All current directors, nominee
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directors and officers as a
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group (14 individuals)
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Common
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5,781,026
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1.5%
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*
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Represents beneficial ownership of less than one percent, based upon ________
shares of our common stock issued and outstanding as of March 27, 2017.
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1.
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Includes 223,642 shares held jointly with Mr. Baker’s spouse, as to
which Mr. Baker shares voting and investment power.
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2.
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“Direct” means shares held of record and any shares beneficially
owned through a trust, broker, financial institution, or other nominee, and with respect to which the officer or director has sole
or shared voting power.
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3.
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“RSU” means restricted stock units awarded under the KEDCP or
2010 Stock Incentive Plan that have not vested. See footnote 1 of the
Outstanding Equity Awards at Calendar Year-End for 2016
on page _____.
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4.
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“Deferred
Shares” means stock that has vested or been awarded, but is deferred until a distributable
event under the terms of the KEDCP.
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5.
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“Performance-based
Shares” means performance-based equity, based on a three-year TSR. See
Performance-based
Shares
on page ______ and
Outstanding Equity Awards at Calendar Year-End for 2016
table on page _____.
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6.
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Includes 385,984 shares held jointly with Mr. Radford’s spouse, as
to which Mr. Radford shares voting and investment power.
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7.
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“Indirect” means shares credited to each independent director,
all of which are held indirectly in trust pursuant to our Stock Plan for Nonemployee Directors. Each director disclaims beneficial ownership of all
shares held in trust under the stock plan. See
Compensation of Non-Management Directors
on page _______.
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To our knowledge, as of March 27, 2017,
the only “beneficial owners” (as such term is defined in Rule 13d-3 under the Exchange Act) of more than 5% of our
common stock entitled to vote at the Annual Meeting are shown in the table below:
Title of
Class
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Name & Address of
Beneficial Owner
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Amount & Nature of
Beneficial Ownership
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Percent of
Class
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Common
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Dimensional Fund Advisors LP
1
Building One
6300 Bee Cave Rd.
Austin, TX 78746
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33,140,890
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___%
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Common
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The Vanguard Group, Inc.
2
100 Vanguard Blvd.
Malvern, PA 19355
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30,385,638
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___%
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Common
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BlackRock, Inc.
3
55 East 52
nd
Street
New York, NY 10055
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24,740,122
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___%
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Common
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Van Eck Associates Corporation
4
666 Third Ave. – 9
th
Floor
New York, NY 10017
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23,577,634
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___%
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1.
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Based solely on a Schedule 13G/A filed on February 8, 2017, with the SEC
by Dimensional Fund Advisors LP. Dimensional Fund Advisors LP has sole voting power with respect to 32,712,893 shares and sole
dispositive power with regard to 33,140,890 shares.
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2.
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Based solely on a Schedule 13G/A filed on February 13, 2017, with the SEC
by The Vanguard Group, Inc. The Vanguard Group, Inc. has sole voting power with respect to 460,380 shares, shared voting power
with respect to 66,071 shares, sole dispositive power with respect to 29,879,375 shares, and shared dispositive power with respect
to 506,263 shares.
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3.
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Based solely on a Schedule 13G/A filed on January 24, 2017, with the SEC
by BlackRock, Inc. BlackRock, Inc. has sole voting power with respect to 23,882,776 shares and sole dispositive power with regard
to 24,740,122 shares.
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4.
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Based solely on a Schedule 13G/A filed on February 13, 2017, with the SEC
by Van Eck Associates Corporation. Van Eck Associates Corporation has sole voting and dispositive power with respect to all shares.
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SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires
our directors, executive officers and holders of more than 10% of our common stock to file with the SEC reports regarding their
ownership and changes in their ownership of our stock. These persons are required by the SEC to furnish us with copies of all Section
16(a) forms they file.
To our knowledge, based solely on our review
of copies of such forms, or written representations from certain reporting persons that no such forms were required, we
believe that during the calendar year ended
December 31, 2016, all filing requirements applicable to our officers, directors and greater than 10% owners of our common stock
were timely satisfied, with the exception of a (i) Form 3 for Robert D. Brown, filed on March 3, 2016, relating to his appointment
on January 4, 2016, which was due to an administrative error, and (ii) Form 4 for George R. Nethercutt, Jr., filed on July 13,
2016, which was due to late notice received regarding a sale of stock on July 1, 2016.
GENERAL INFORMATION ABOUT THE MEETING
Record Date, Shares Outstanding and
Quorum
If you were a holder of Hecla common stock
either as a
“shareholder of record”
or as the
“beneficial owner”
of shares held in street
name as of the Record Date, you may vote your shares at the Annual Meeting. As of the Record Date, ____________ shares of common
stock were outstanding and entitled to vote at the Annual Meeting. Shares of our common stock that are held by us in our treasury
are not counted as shares outstanding and will not be voted. Each shareholder has one vote for each share of common stock held
as of the Record Date.
A quorum must be present in order for business
to be conducted at the Annual Meeting. A quorum consists of the presence at the Annual Meeting, in person or represented by proxy,
of a majority of the outstanding shares of our common stock as of the Record Date. Shares represented by proxies marked “Abstain”
and “broker non-votes” are counted in determining whether a quorum is present for the transaction of business at the
Annual Meeting.
Broker Non-Votes
A “broker non-vote” occurs
when a broker or other nominee who holds shares in street name for a client returns a proxy but provides no instruction as to how
shares should be voted on a particular “non-routine” matter. The Dodd-Frank Act and stock exchange rules prevent brokers
from casting votes on “non-routine” matters.
Votes Required for the Proposals
Under NYSE rules, if our shares are held
in “street name” and you do not indicate how you wish to vote, your broker is only permitted to exercise its discretion
to vote your shares on certain “routine” matters. Only Proposal 2 (Ratification of Appointment of BDO USA, LLP) is
a “routine” matter. Proposal 1 (Election of Directors), Proposal 3 (Approval of Named Executive Officer Compensation),
Proposal 4 (Approval of Say-on-Frequency), Proposal 5 (Approval of Amendment and Restatement of Director Stock Plan), Proposal
6 (Approval of Amendment to the Company’s Certificate of Incorporation to Increase Authorized Shares), Proposal 7 (Approval
of Amendments to the Company’s Certificate of Incorporation and Bylaws to Remove Certain 80% Supermajority Voting Provisions),
and Proposal 8 (Approval of Amendments to the Company’s Certificate of Incorporation and Bylaws to Permit Shareholders to
Call
Special Meetings Under Certain Circumstances), are “non-routine”
matters. Accordingly, if you do not direct your broker how to vote for a director in Proposal 1 or how to vote for Proposals 3,
4, 5, 6, 7 and 8, your broker is not permitted to exercise discretion and is not permitted to vote your shares on such matters.
This is called a “broker non-vote.”
Proposal 1 – Election of Directors
. Pursuant to
our Bylaws, each director will be elected by the affirmative vote of a majority of votes cast at the Annual Meeting, whether in
person or by proxy. Under a majority of votes cast standard, the shares voted “for” a nominee must exceed the number
voted “against” that nominee. Shareholders may vote “for,” “against” or “abstain”
with respect to this proposal. Abstentions and broker non-votes are not counted as votes cast, and thus will have no effect on
the outcome of the vote. A properly executed proxy card marked “AGAINST” with respect to the election of directors
will have an effect on the outcome of the vote. If the votes cast “against” an incumbent director exceeds the number
of votes cast “for” the director, the director will not be elected, will remain on the board as a holdover director
and must stand for election at the next annual meeting of shareholders, absent his or her earlier resignation or removal. See “
Corporate
Governance and Related Matters
” and “
Corporate Governance Guidelines
” on page ____ for a description
of our director resignation policy.
You may vote “FOR,” “AGAINST,” or “ABSTAIN”
on the nominees for election as directors.
Proposal 2 – Ratification of
the Appointment of BDO USA, LLP as Independent Auditors.
Under the Sarbanes-Oxley Act of 2002, the Audit Committee has
the sole authority to appoint the independent registered public accounting firm for the Company. However, the Board feels
that it is important for the shareholders to approve the selection of BDO USA, LLP. This proposal requires the affirmative
vote of a majority of votes cast at the Annual Meeting, whether in person or by proxy. Abstentions and broker non-votes are not counted as votes cast, and thus will have no effect on the outcome of the vote.
Votes marked “against” will have an effect on the outcome of the vote. The appointment of our independent
registered public accounting firm for calendar year 2017 is considered a “routine” matter and brokers that are
not directed how to vote are permitted to vote shares held in street name for their customers on this proposal.
You may vote “FOR,” “AGAINST,” or “ABSTAIN”
on the proposal to ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for 2017.
Proposal 3 – Advisory Vote to Approve Executive Compensation.
For more information on approval of our executive compensation see “Proposal 3 – Advisory Vote to Approve Executive
Compensation” beginning on page ____. The advisory vote on executive compensation will require the affirmative vote of a
majority of votes cast at the Annual Meeting, whether in person or by proxy. Under a majority of votes cast standard, the shares
voted “for” Proposal 3 must exceed the number voted “against” Proposal 3 for the
proposal to be approved. Abstentions
and broker non-votes are not counted as votes cast for this purpose and will have no effect on the outcome of the vote. Votes
marked “against” will have an effect on the outcome of the vote. Even though your vote is advisory and therefore
will not be binding on the Company, the Board’s Compensation Committee will review the voting results and take them
into consideration when making future decisions regarding executive compensation.
You may vote “FOR,” “AGAINST” OR “ABSTAIN”
on the proposal to approve the compensation of our named executive officers.
Proposal 4 – Advisory Vote on Frequency of Executive
Compensation Vote
. The frequency of the advisory vote on executive compensation receiving the greatest number of votes (every
one year, every two years, or every three years) will be considered the frequency recommended by shareholders. Abstentions and
broker non-votes will not affect the outcome of voting on this proposal. Even though your vote is advisory and therefore will not
be binding on the Company, the Board will review the voting results and take them into consideration when making future decisions
regarding the frequency of the advisory vote on executive compensation.
You may vote to have the advisory vote held every “ONE,”
“TWO” or “THREE” years, or you may “ABSTAIN.”
Proposal 5 – Approval of the Amended and Restated Hecla
Mining Company Stock Plan for Nonemployee Directors.
This proposal requires the affirmative vote of a majority of votes cast
at the Annual Meeting, whether in person or by proxy. Under a majority of votes cast standard, the shares voted “for”
Proposal 5 must exceed the number voted “against” Proposal 5 for the proposal to be approved. Abstentions not voted
are not counted as cast for this purpose and will have no effect on the outcome of the vote. Votes marked “against”
will have an effect on the outcome of the vote.
You may vote “FOR,” “AGAINST” OR “ABSTAIN”
on the proposal to approve the Amended and Restated Hecla Mining Company Stock Plan for Nonemployee Directors.
Proposal 6 – Approval of Amendment to our Certificate
of Incorporation to Increase the Number of Authorized Shares of our Common Stock.
Adoption of the proposed amendment to our
Certificate of Incorporation increasing the number of authorized shares of our common stock will require the affirmative vote of
the holders of a majority of outstanding shares of common stock entitled to vote thereon. Abstentions and broker non-votes will
have the effect of a vote against the proposal.
You may vote “FOR,” “AGAINST” OR “ABSTAIN”
on the proposal to approve the amendment to our Certificate of Incorporation to Increase the Number of Authorized Shares of our
Common Stock.
Proposal 7 – Approval of Amendments to the Company’s
Certificate of Incorporation and Bylaws to Remove Certain 80% Supermajority Voting Provisions
. Approval of this
proposal requires the affirmative vote of 80% of our outstanding
shares of common stock. Abstentions and broker non-votes have the effect of a vote against this proposal.
You may vote “FOR,” “AGAINST” OR “ABSTAIN”
on the proposal to approve the amendments to our Certificate of Incorporation and Bylaws to Remove Certain 80% Supermajority Voting
Provisions.
Proposal 8 – Approval of Amendments to the Company’s
Certificate of Incorporation and Bylaws to Permit Shareholders to Call Special Meetings of Shareholders Under Certain Circumstances
.
Approval of this proposal requires the affirmative vote of 80% of our outstanding shares of common stock. Abstentions and broker
non-votes have the effect of a vote against this proposal.
You may vote “FOR,” “AGAINST” OR “ABSTAIN”
on the proposal to approve the amendments to our Certificate of Incorporation and Bylaws to Permit Shareholders to Call Special
Meetings of Shareholders Under Certain Circumstances.
Discretionary voting by proxies on other matters.
Aside
from the: (i) election of two directors; (ii) ratification of the appointment of BDO USA, LLP; (iii) approval of executive compensation;
(iv) advisory vote on Say-on-Frequency; (v) approval of Amended and Restated Hecla Mining Company Stock Plan for Nonemployee Directors;
(vi) approval of amendment to Certificate of Incorporation to increase authorized shares; (vi) (vii) approval of amendments to
our Certificate of Incorporation and Bylaws to remove certain 80% supermajority voting provisions; and (viii) approval of amendments
to our Certificate of Incorporation and Bylaws to permit shareholders to call special meetings of shareholders under certain circumstances,
we do not know of any other proposal that may be presented at the Annual Meeting. However, if any other business is properly presented
at the Annual Meeting, your proxy gives authority to Phillips S. Baker, Jr. and Michael B. White to vote on such matters at their
discretion. No other proposals have been timely submitted in accordance with our Bylaws and we are not aware of any matters other
than those described in this Proxy Statement that will be acted upon at the Annual Meeting.
Proxies
A “proxy” is your legal appointment in a written
document of another person to vote the shares that you own in accordance with your instructions. The persons you appoint to vote
your shares are also called proxies. We have designated Phillips S. Baker, Jr., our President and CEO, and Michael B. White, our
Corporate Secretary, as proxies for the Annual Meeting. When you sign the proxy card, you appoint Phillips S. Baker, Jr. and Michael
B. White as your representatives at the Annual Meeting. As your representatives, they will vote your shares at the Annual Meeting
(including any adjournment or postponement) as you have instructed them on your proxy card.
Proxies Submitted but not Voted
If you properly sign and return your proxy card or complete
your proxy via the telephone or Internet, your shares will be voted as you direct. If you sign and return your proxy but do not
specify how you want your shares voted they will be voted FOR (i) the election of all nominees for Director as set forth under
“Election of Directors;” (ii) ratification of the appointment of the independent registered public accountants; (iii)
the advisory vote on executive compensation; (iv) a frequency vote on executive compensation of “One Year;” (v) the
amended and restated Hecla Mining Company Stock Plan on Nonemployee Directors; (vi) the increase in authorized shares of our outstanding
common stock; (vii) the amendments to the Company’s Certificate of Incorporation and Bylaws to remove certain 80% supermajority
voting provisions;
and (viii)
the amendments to the Company’s Certificate of Incorporation
and Bylaws to permit shareholders to call special meetings of shareholders under certain circumstances.
Methods of Voting
If your shares are held in your name, you have the right to
vote in person at the Annual Meeting. If your shares are held in a brokerage account or by another nominee, you are considered
the beneficial owner of shares held in street name. Since a beneficial owner is not the shareholder of record, you may not vote
these shares in person at the Annual Meeting unless you obtain a “legal proxy” from your broker or nominee that holds
your shares, giving you the right to vote the shares at the Annual Meeting.
Whether you hold shares directly as a shareholder of record
or beneficially in street name, you may vote without attending the Annual Meeting. You may vote by granting a proxy or, for shares
held beneficially in street name, by submitting voting instructions to your broker or nominee. In most cases, you will be able
to do this by using the Internet, by telephone, or by mail if you received a printed set of the Proxy Materials.
To vote by mail
:
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·
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Mark, sign and date your proxy card; and
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Return your proxy card in the enclosed postage-paid envelope.
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To vote by proxy over the
Internet
:
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·
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Have your proxy card or Notice available;
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Log on to the Internet and visit the website noted on your proxy card or Notice (www.proxyvote.com);
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Follow the instructions provided; and
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·
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Do not mail your proxy card.
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To vote by proxy by telephone
:
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·
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Have your proxy card available;
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·
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Call the toll-free number listed on your proxy card (1-800-690-6903);
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·
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Follow the recorded instructions; and
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·
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Do not mail your proxy card.
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To vote in person if you
are a registered shareholder of record
:
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·
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Attend our Annual Meeting;
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·
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Bring a valid photo identification; and
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·
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Deliver your completed proxy card or ballot in person.
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To vote in person if you hold your shares in “street
name” (through a broker, financial institution or other nominee):
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·
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Attend our Annual Meeting;
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·
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Bring a valid photo identification; and
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·
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Obtain from your broker a document that allows you to vote the shares held for your benefit, attach that document to your completed proxy card or ballot and deliver it in person.
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To vote your 401(k) Plan shares:
If you participate in the
Hecla Mining Company Capital Accumulation Plan and hold shares of our common stock in your plan account as of the Record Date,
you will receive a request for voting instructions from the plan trustee (“Vanguard”) with respect to your plan shares.
You are entitled to direct Vanguard how to vote your plan shares. If you do not provide voting instructions to Vanguard by 11:59
p.m., Eastern Daylight Time, on May 24, 2017, the Hecla shares in your plan account will be voted by Vanguard in the same
proportion as the shares held by Vanguard for which voting instructions have been received from other participants in the plan.
Deadline for Voting
The deadline for voting by telephone or electronically is 11:59
p.m., Eastern Time, on May 24, 2017. If you are a registered shareholder and attend the meeting, you may deliver your completed
proxy card in person. “Street name” shareholders who wish to vote at the meeting will need to obtain a proxy form from
the institution that holds their shares.
Revoking a Proxy
If you are a shareholder of
record, you may revoke your proxy and change your vote at any time before your proxy is voted at the Annual Meeting, in any of
the following ways:
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·
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By sending a written notice of revocation to our Corporate Secretary, if such notice is received prior to the vote at the Annual Meeting, at our principal executive offices:
|
Hecla Mining Company
Attn: Corporate Secretary
6500 N. Mineral Drive, Suite
200
Coeur d’Alene, ID 83815-9408
|
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·
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By submitting a later-dated proxy to our Corporate Secretary prior to the vote at the Annual Meeting; or
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·
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By voting in person at the Annual Meeting.
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If you hold your shares in
street name, you should contact your broker for information on how to revoke your voting instructions and provide new voting instructions.
If you hold your shares in
the Hecla Mining Company Capital Accumulation Plan, you may revoke your previously provided voting instructions by filing with
Vanguard either a written notice of revocation or a properly executed proxy bearing a later date prior to the deadline for voting
plan shares. If you hold your Hecla shares outside of the plan, you may vote those shares separately.
Rules for Attending the Annual Meeting
Only a record or beneficial owner of Hecla’s common stock
as of the Record Date, the close of business on March 27, 2017, or a valid proxy or representative of such shareholder, may attend
the Annual Meeting in person, and they must comply with the admission requirements below. Guests of shareholders will not be admitted
to the Annual Meeting.
If you do not comply with the requirements set forth below you will not be admitted to the Annual Meeting
.
All attendees must register at the registration desk and present
appropriate documentation at the registration desk prior to being admitted to the meeting, which includes:
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|
·
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Valid Photo Identification
. Any registered shareholder, beneficial (“street name”) shareholder, or valid proxy or representative of such shareholder, must present a valid, current form of government-issued photo identification, such as a driver’s license or passport, that matches the name on the documentation described below.
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·
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Proof of Ownership
.
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o
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If you hold shares in street name
(such as through a broker or bank), then you must present proof of ownership, such as
a brokerage statement
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or letter from your bank or broker, demonstrating that you held our common stock as of the Record Date.
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o
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If you hold shares in registered form
, your record holder’s ownership as of the Record Date must be verified on the
list of registered shareholders maintained by our transfer agent.
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·
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Proof of Representation
. If you are a representative of a shareholder, then you must present valid legal documentation that demonstrates your authority to represent that shareholder.
We reserve the right to limit the number of representatives who may represent a shareholder at the meeting
.
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·
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Proof of Valid Proxy
.
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o
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If you hold a proxy to vote shares at the Annual Meeting for a shareholder who holds shares in street name
(such as through
a broker or a bank), then you must present:
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■
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Valid photo identification as described above;
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■
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A written legal proxy from the broker or bank holding shares to the street name holder that is assignable
and
signed by
the street name holder; and
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■
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Proof of ownership, such as a brokerage statement or letter from the bank or broker, demonstrating that the street name holder
who appointed you legal proxy held Hecla common stock as of the Record Date.
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o
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If you hold a proxy to vote shares at the Annual Meeting for a shareholder who is a registered shareholder holder,
then
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■
|
You must present valid photo identification as described above;
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■
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You must provide a written legal proxy to you signed by the registered shareholder; and
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■
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The registered shareholder’s ownership as of the Record Date must be verified on the list of registered shareholders maintained
by our transfer agent.
|
For the safety of attendees, all boxes, handbags and briefcases
are subject to inspection upon registration. Cameras (including cell phones with photographic capabilities), audio/video recording
devices and other electronic devices are not permitted at the meeting.
Costs of Solicitation
We will bear all costs and expenses relating to the solicitation
of proxies, including the costs of preparing, assembling, printing, mailing and distributing these Proxy Materials. We have hired
Broadridge to assist us in mailing these Proxy Materials. Additionally, we have retained Morrow & Co., LLC, 470 West Ave.,
Stamford, Connecticut to assist in the solicitation of votes for an estimated fee of $9,000, plus reimbursement of certain out-of-
pocket expenses. Solicitations may be made personally or by
mail, facsimile, telephone, or via the Internet. However, if you choose to access the Proxy Materials over the Internet, you are
responsible for any Internet access charges you may incur. Arrangements will be made with brokerage firms and other custodians,
nominees and fiduciaries for forwarding solicitation materials to the beneficial owners of the shares of common stock held by such
persons, and we will reimburse such brokerage firms, custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection with such activities.
Results of the Annual Meeting
Preliminary voting results
will be announced at the Annual Meeting. We will publish final results in a Current Report on Form 8-K that we expect to file with
the SEC within four business days of the Annual Meeting. After the Form 8-K is filed, you may obtain a copy by visiting the SEC’s
website at www.sec.gov, visiting our website at www.hecla-mining.com or contacting our Investor Relations Department by writing
to Investor Relations Department, Hecla Mining Company, 6500 N. Mineral Dr., Suite 200, Coeur d’Alene, ID 83815-9408 or by
sending an email to hmc-info@hecla-mining.com.
Annual Report
Our Annual Report to Shareholders, consisting
of our Form 10-K for the year ended December 31, 2016, and other information, is being made available to shareholders
with this Proxy Statement. Shareholders may obtain a copy of our Annual Report for the calendar year ended December 31, 2016,
without cost, by written or oral request to:
Hecla Mining Company
Attention: Jeanne
DuPont
6500 N. Mineral
Drive, Suite 200
Coeur d’Alene,
Idaho 83815-9408
Telephone: 208-769-4100
You can also
access our SEC filings, including our Annual Reports on Form 10-K, and all amendments thereto, on the SEC website at
https://www.sec.gov/edgar.shtml or on our website at http://www.hecla-mining.com.
Householding of Proxy Materials
Many brokerage firms, financial
institutions and transfer agents have instituted “householding” procedures for beneficial owners and shareholders of
record. Householding is when a single copy of our Proxy Materials is sent to a household in which two or more shareholders reside
if they appear to be members of the same family. This practice is designed to reduce duplicate mailings and save significant printing
and postage costs, as well as natural resources.
If you are a beneficial owner,
you may have received householding information from your broker, financial institution or other nominee shareholder in the past.
Please contact the shareholder of record directly if you have questions, require additional copies of our Proxy Materials, or wish
to revoke your decision to household and thereby receive multiple copies. You should also contact the shareholder of record if
you wish to institute householding. These options are available to you at any time.
Shareholders of record who share an address and would like to
receive a separate copy of our Proxy Materials for future annual meetings, or have questions regarding the householding process,
may contact our transfer agent, American Stock Transfer & Trust Company, either by written request or by telephone at the address
and telephone number listed below. By contacting American Stock Transfer & Trust Company, shareholders of record
sharing an address can also request delivery of multiple copies of our Proxy Materials in the future.
American Stock Transfer & Trust Company
6201 15
th
Avenue
Brooklyn, New York 11219
Telephone: 1-800-937-5449
Electronic Delivery of Proxy Materials, Annual Reports, News
Releases and Documents Filed with the Securities and Exchange Commission
We want to communicate with you in the way that is most convenient
for you. You may choose to receive either a full set of printed materials – which will include an Annual Report, Proxy Statement,
and proxy card (“Proxy Materials”) – or an email with instructions for how to view the materials and vote online.
If you are a shareholder of record, you may request and consent to electronic delivery of future Proxy Materials by following the
instructions on your proxy card or by visiting our website at http://www.hecla-mining.com under “Investors,” selecting
“Annual Reports,” and then selecting “Electronic Proxy Request.” If your shares are held in street name,
please contact your broker and ask about the availability of electronic delivery. If you select electronic delivery, we will discontinue
mailing the Proxy Materials to you beginning next year and you will be sent an email message notifying you of the Internet address
or addresses where you may access the Proxy Materials. Your consent to electronic delivery will remain in effect until you revoke
it. If you selected electronic delivery last year, we will not mail the Proxy Materials to you this year and you will receive an
email message with the Internet address where you may access the Proxy Materials for the current year. This process is designed
to expedite shareholders’ receipt of Proxy Materials, lower the cost of the Annual Meeting, and help conserve natural resources.
Shareholders may also elect to receive notice of our filings
with the SEC, annual reports and news releases by email. You may sign up for this service by visiting our website at http://www.hecla-mining.com
under “Investors” and selecting “Subscribe for Updates”.
Shareholder List
A list of shareholders eligible to vote at
the meeting will be available for examination by any shareholder for any purpose relevant to the meeting during ordinary business
hours for
at least ten days prior
to May 25, 2017, at Hecla’s corporate offices, located at 6500 N. Mineral Dr., Suite 200, Coeur d’Alene, Idaho.
PROVISIONS OF HECLA’S BYLAWS WITH
RESPECT TO SHAREHOLDER PROPOSALS AND
NOMINATIONS FOR ELECTION AS DIRECTORS
You may submit proposals for
consideration at future annual shareholder meetings, including director nominations, as follows:
Shareholder proposals at the 2018 Annual Meeting of Shareholders
Our Bylaws establish procedures governing the eligibility of
nominees for election to our Board, and the proposal of business to be considered by our shareholders at an Annual Meeting of Shareholders.
For nominations or other business to be properly brought before an Annual Meeting of Shareholders by a shareholder, the shareholder
must have given timely notice thereof in writing to our Corporate Secretary. To be timely, a shareholder’s notice shall be
delivered to our Corporate Secretary at our principal executive offices located at 6500 N. Mineral Drive, Suite 200, Coeur d’Alene,
Idaho 83815-9408, not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s Annual
Meeting of Shareholders;
provided
,
however
, that in the event the date of the Annual Meeting of Shareholders is advanced
by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the shareholder to be timely must be
delivered not earlier than the 120
th
day prior to such Annual Meeting of Shareholders and not later than the close of
business on the later of the 90
th
day prior to such Annual Meeting of Shareholders or the 10
th
day following
the day on which public announcement of the date of such meeting is first made. Adjournment of a meeting shall not commence a new
time period for giving shareholder’s notice as described above. Such shareholder’s notice shall set forth:
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(a)
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As to each person whom the shareholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act and Rule 14a-11 thereunder, including such person’s written consent to being named in our Proxy Statement as a nominee and to serve as a director if elected;
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(b)
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As to any other business that the shareholder proposes to bring before the meeting, if the shareholder has not otherwise complied with the rules and regulations under the Exchange Act for the inclusion of a shareholder proposal in our Proxy Statement, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting,
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and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; and
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(c)
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As to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made:
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(i)
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the name and address of such shareholder, as they appear on the Company’s books, and of such beneficial owner; and
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(ii)
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the class and number of Company shares which are owned beneficially and of record by such shareholder or beneficial owner.
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The applicable time period for timely shareholder submissions
pursuant to the above provisions for the 2018 Annual Meeting of Shareholders is January 26, 2018 (the 120
th
day preceding
the anniversary of the 2017 Annual Meeting) to February 25, 2018 (the 90
th
day preceding such anniversary).
The chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures
set forth in the Bylaws and, if any proposed nomination or business is not in compliance with the Bylaws, to declare that such
defective proposal shall be disregarded. The foregoing time limits also apply in determining whether notice is timely for purposes
of rules adopted by the SEC relating to the exercise of discretionary voting authority.
Shareholder proposals to be included in next year’s
Proxy Statement
In addition to the foregoing section, we will comply with Rule
14a-8 under the Exchange Act with respect to any shareholder proposals that meet that rule’s requirements. We will review
shareholder proposals intended to be included in our Proxy Statement for the 2018 Annual Meeting of Shareholders which are received
by us at our principal executive offices located at 6500 N. Mineral Drive, Suite 200, Coeur d’Alene, Idaho 83815-9408, no
later than December 11, 2017. Such proposals must be submitted in writing and should be sent to the attention of our Corporate
Secretary.
You may contact the Corporate
Secretary at our principal executive offices for a copy of the relevant Bylaw provisions regarding the requirements for making
shareholder proposals and nominating director candidates.
OTHER BUSINESS
As of the date of this Proxy Statement, the
Board is not aware of any matters that will be presented for action at the Annual Meeting other than those described above. However,
should other business properly be brought before the Annual Meeting, the proxies will be voted thereon at the discretion of the
persons acting thereunder.
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By Order of the Board of Directors
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Michael B. White
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Corporate Secretary
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April 10, 2017
APPENDIX A
HECLA MINING COMPANY STOCK PLAN
FOR NONEMPLOYEE DIRECTORS
(as Amended and Restated February 21, 2017)
1.
Name of Plan
.
This plan shall be known as the “Hecla Mining Company Stock Plan for Nonemployee Directors (as Amended and Restated February
21, 2017)” and is hereinafter referred to as the “Plan.”
2.
Purpose of
Plan
. The purpose of the Plan is to enable Hecla Mining Company, a Delaware corporation (the “Corporation”), to
attract and retain qualified persons to serve as members of the Corporation’s Board of Directors (the “Board”)
from time to time (each, a “Director”), to enhance the equity interest of Directors in the Corporation and to solidify
the common interests of Directors and stockholders of the Corporation (“Stockholders”) in enhancing the value of the
Corporation’s common stock, par value $0.25 per share (the “Common Stock”). The Plan seeks to encourage the highest
level of Director performance by providing Directors with a proprietary interest in the Corporation’s performance and progress
by crediting them with shares of Common Stock annually in satisfaction of their annual retainer.
3.
Effective Date
and Term
. The Plan shall be effective as of February 21, 2017 (the “Effective Date”) (the date that it was approved
by the Board), and shall remain in effect until (a) May 15, 2027 if approved by the Stockholders at the 2017 Annual Meeting of
Stockholders or (b) July 17, 2017 if not so approved by the Stockholders.
4.
Eligible Participants
.
Each Director who is not a full-time employee of the Corporation or any of its affiliates (“Nonemployee Director”)
shall be a participant (“Participant”) in the Plan. Each credit of shares of Common Stock pursuant to the Plan shall
be evidenced by a written agreement duly executed and delivered by or on behalf of the Corporation and a Participant, if such an
agreement is required by the Corporation to ensure compliance with applicable laws and regulations. Following the Effective Date,
no Participant shall be eligible to receive awards under any other equity compensation plan of the Corporation or an affiliate
while a Participant in the Plan.
5.
Credit of Shares
.
(a) Commencing as of the Effective Date, in satisfaction of the annual retainer payable to each Participant for service on the
Board (the “Annual Retainer”), each Participant shall be credited with shares of Common Stock subject to applicable
restrictions set forth in Section 6 below with respect to payment. Subject to Section 5(b) below, each Participant shall be credited
each year for service on the Board with a number of shares of Common Stock determined by dividing the amount of the Annual Retainer
for the applicable year by the average closing price for the Common Stock on the New York Stock Exchange (or if not listed on such
exchange on any other national securities exchange on which the shares of Common Stock are listed) for the prior calendar year
(the “Stock Retainer”). The Stock Retainer for each year shall be credited as of September 30 of each year during the
term of the Plan, commencing as of the Effective Date. A minimum of 25% of each Stock Retainer (or a greater percentage
up to 100% if the Participant so elects
prior to the first day of the year in which the applicable Stock Retainer is to be credited) shall be contributed to a grantor
trust established by the Corporation pursuant to Section 6(g) below and subject to its terms (the “Trust Shares”).
The portion of the applicable Stock Retainer that is not contributed to a grantor trust shall be transferred to the Participant
as soon as administratively practicable following the applicable September 30.
(b) Any person who
becomes a Nonemployee Director following September 30 of any year during the term of the Plan, whether by appointment or election
as a Director or by change in status from a full-time employee, shall be credited, on becoming a Nonemployee Director, with a portion
of the compensation to be paid to such Participant until the Corporation’s next Annual Meeting of Stockholders, with a number
of shares of Common Stock equal to the product of the number of shares determined pursuant to Section 5(a) above times a fraction,
the numerator of which is the number of full weeks remaining until September 30 of the following year and the denominator of which
is 52; provided that no fractional shares shall be credited and the number of shares of Common Stock to be credited pursuant to
this Section 5(b) shall be rounded up to the next whole number. A minimum of 25% of any Stock Retainer payable pursuant to this
Section 5(b) (or a greater percentage up to 100% if the Participant so elects within 30 days after becoming a Participant in the
Plan (or such other time period permitted under Section 409A (“Section 409A”) of the Internal Revenue Code of 1986,
as amended)) shall be Trust Shares and any portion the applicable Stock Retainer that is not contributed to a grantor trust shall
be transferred to the Participant as soon as administratively practicable following the time the Participant becomes a Nonemployee
Director.
6.
Delivery of
Trust Shares
. (a) The Trust Shares, together with the “Dividend Equivalent Amount” (as defined in Section 6(c)
below) with respect thereto, shall be delivered to the Participant or the Participant’s estate or legal guardian in shares
of Common Stock on, or beginning on, the Delivery Date (as defined in Section 6(b) below), in accordance with this Section 6.
(b) The “Delivery
Date” means the first date upon which one of the following events occurs:
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(i)
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Death of the Participant;
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(ii)
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Disability of the Participant as defined in Section 6(f) below;
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(iii)
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Retirement of the Participant from service as a Director in accordance with the Corporation’s
By-Laws then in effect;
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(iv)
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Cessation of service as a Director for any reason other than those specified in clauses (i), (ii)
or (iii) immediately above;
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(v)
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Change in Control as defined in Section 8 below; or
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(vi)
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At a specified date at least 24 months after the applicable Stock Retainer is credited pursuant
to an election made by the Participant
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prior to the first day of the
year in which the applicable notional shares of Common Stock are credited to the Participant under Section 5 above.
(c) The “Dividend
Equivalent Amount” with respect to any Trust Shares means (i) the amount of cash, plus the fair market value as determined
by the Board on the date of distribution of any property, other than stock of the Corporation, plus (ii) any shares of stock of
the Corporation, in each case which the Participant would have received as dividends or other distributions with respect to the
Trust Shares, if the Trust Shares had been delivered to the Participant as shares of Common Stock at the time they were credited
to the Participant under this Plan, plus (iii) interest on the amount described in clauses (i) plus (ii) at a rate equal to the
Corporation’s cost of funds, from the date or date(s) such dividends or other distributions would have been received through
the date the Trust Shares are delivered.
(d) If a Participant’s
Delivery Date is described in clause (iv) (normal cessation of service), clause (v) (Change in Control) or clause (vi) (specified
date) of Section 6(b) above, all Trust Shares and all Dividend Equivalent Amounts with respect thereto shall be delivered at one
time, as soon as practicable after the Delivery Date. If a Participant’s Delivery Date is described in clause (i) (death),
clause (ii) (Disability) or clause (iii) (retirement) of Section 6(b) above, the Trust Shares and the Dividend Equivalent Amounts
with respect thereto shall be delivered at one time, as soon as practicable after the Delivery Date, unless the Participant has
in effect a valid Installment Delivery Election pursuant to Section 6(e) below to have the Trust Shares and Dividend Equivalent
Amounts delivered in yearly installments over five, 10 or 15 years (the “Applicable Delivery Period”). If the Participant
does have in effect a valid Installment Delivery Election, then the Trust Shares, together with the Dividend Equivalent Amounts
with respect thereto, shall be delivered in equal yearly installments over the Applicable Delivery Period, with the first such
installment being delivered on the first anniversary of the Delivery Date; provided, that if in order to equalize such installments,
fractional shares would have to be delivered, such installments shall be adjusted by rounding to the nearest whole share. If any
Trust Shares and Dividend Equivalent Amounts of a Participant are to be delivered after the Participant has died or become legally
incompetent, they shall be delivered to the Participant’s estate or legal guardian, as the case may be, in accordance with
the foregoing schedules; provided, that if the Participant dies with a valid Installment Delivery Election in effect, and the legal
representatives of the Participant’s estate so request, the Board may (but shall not be obligated to) deliver all remaining
undelivered Trust Shares and Dividend Equivalent Amounts to the Participant’s estate immediately. References to the Participant
in this Plan shall be deemed to refer to the Participant’s estate or legal guardian, where appropriate.
(e) An “Installment
Delivery Election” means a written election by a Participant, on such form as may be prescribed by the Board, to receive
delivery of Trust Shares and Dividend Equivalent Amounts in installments over a period of five, 10 or 15 years, as more fully described
in Section 6(d) above. Once made, an Installment Delivery Election may be superseded by another Installment Delivery Election.
However, in order for any initial or superseding Installment Delivery Election to be valid,
it must be received by the Corporation
prior to the first day of the year in which the applicable shares of Common Stock are credited to the Participant under Section
5. In the case of multiple Installment Delivery Elections and/or revocations by any Participant, the most recent valid Installment
Delivery Election or revocation in effect as of the Delivery Date shall be controlling. No Delivery Elections once made can be
accelerated and any elections to further defer Delivery Elections must be made in accordance with the following:
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(i)
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Such election will not take effect until 12 months after the election is made;
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(ii)
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Any subsequent election other than under Section 6(b)(i) or Section 6(b)(ii) above must be for
a period of at least 5 years from the date such Delivery Election issuance would otherwise have been made under the Plan; and
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(iii)
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With respect to any Delivery Election issuance to be made at a specified time or pursuant to a
fixed schedule pursuant to an election at the time of such initial deferral, such election must be made at least 12 months prior
to the date of the first scheduled Delivery Election issuance under such initial election.
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(f) “Disability”
shall mean (i) the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not
less than 12 months, (ii) the Participant is, by reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement
benefits for a period of not less than three months under an accident and health plan covering service providers of the Corporation
or (iii) any other definition provided under Section 409A. Unless otherwise provided by the Board, in the event that the timing
of payments under the Plan (that would otherwise be considered “deferred compensation” subject to Section 409A) would
be accelerated upon the occurrence of a Disability, no such acceleration shall be permitted unless the Disability also satisfies
the definition of “disability” pursuant to Section 409A.
(g) The Corporation
has created a grantor trust (the “Trust”) to assist it in accumulating the shares, cash and other property needed to
fulfill its obligations under this Section 6. On each date when a Stock Retainer is credited to a Participant, the Corporation
shall contribute Trust Shares to the Trust. However, Participants shall have no beneficial or other interest in the Trust and the
assets thereof, and their rights under the Plan shall be as general creditors of the Corporation, unaffected by the existence or
nonexistence of the Trust, except that deliveries of Trust Shares and payments of cash and other property to Participants from
the Trust shall, to the extent thereof, be treated as satisfying the Corporation’s obligations under this Section 6.
7.
Share Certificates;
Voting and Other Rights
. The certificates for shares delivered to a Participant or the trustee of the Trust, if any (the “Trustee”),
pursuant to Section 6 above shall be issued in the name of the Participant or the Trustee, as the case may be, and the Participant
or the Trustee, as the case may be, shall be entitled to all rights of a Stockholder with respect to Common Stock for all such
shares issued in his name, including the right to vote the shares; provided, however, that the Participant or the Trustee, as the
case may be, shall not receive dividends and other distributions paid or made with respect to such shares in addition to the Dividend
Equivalent Amounts.
8.
Change in Control
.
A “Change in Control” shall be deemed to have occurred if any of the following events shall have happened:
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(i)
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An acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) (including in connection
with a merger, consolidation, purchase or acquisition of Common Stock, or similar business transaction) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (1) the fair market value of then
outstanding shares of Common Stock of the Corporation (the “Outstanding Corporation Common Stock”) or (2) the combined
voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of Directors
(the “Outstanding Corporation Voting Securities”); excluding, however, the following: (1) any acquisition directly
from the Corporation, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so
converted was itself acquired directly from the Corporation; (2) any acquisition by the Corporation (other than an increase in
the percentage of Common Stock owned by a Person caused as a result of a transaction in which the Corporation acquires its Common
Stock in exchange for property); (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by
the Corporation or any corporation controlled by the Corporation; (4) any acquisition of additional beneficial ownership in Common
Stock by a Person that is already considered to own more than 50% of more of the total fair market value or total voting power
of the Corporation; or (5) any transaction in which the Common Stock of the Corporation does not remain outstanding after the transaction;
or
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(ii)
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An acquisition by any Person (including in connection with a merger, consolidation, purchase or
acquisition of Common Stock, or similar business transaction) of beneficial ownership of 30% or more of the combined voting power
of the Corporation during a 12-month period; excluding, however, the following: (1) any acquisition directly from the Corporation,
other than an acquisition
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by virtue of the exercise of
a conversion privilege unless the security being so converted was itself acquired directly from the Corporation; (2) any acquisition
by the Corporation (other than an increase in the percentage of Common Stock owned by a Person caused as a result of a transaction
in which the Corporation acquires its Common Stock in exchange for property); (3) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation; or (4) any acquisition
of additional beneficial ownership in Common Stock by a Person that is already considered to own more than 30% of more of the total
voting power of the Corporation; or
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(iii)
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A change in the composition of the Board such that a majority of the Directors (such Directors
shall be hereinafter referred to as the “Incumbent Directors”) are replaced during any 12-month period by Directors
whose appointment or election is not endorsed by a majority of the Incumbent Directors before the date of the appointment or election;
or
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(iii)
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An acquisition by any Person of assets from the Corporation, during a 12-month period, that have
a total gross fair market value equal to or more than 40% of the total gross fair market value of all the assets of the Corporation
immediately before such acquisition or acquisitions; excluding, however, an acquisition by any Person that is an entity controlled
by the shareholders of the Corporation immediately after the transfer (within the meaning of Section 409A).
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Notwithstanding any provision of this definition
to the contrary, in the event that any amount or benefit under the Plan constitutes deferred compensation under Section 409A and
the settlement of or distribution of such amount or benefit is to be triggered by a Change in Control, then such settlement or
distribution shall be subject to the event constituting the Change in Control also constituting a “change in control event”
under Section 409A.
9.
General Restrictions
.
(a) Notwithstanding any other provision of the Plan or agreements made pursuant thereto, the Corporation shall not be required
to issue or deliver any certificate or certificates for shares of Common Stock under the Plan prior to fulfillment of all the following
conditions:
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(i)
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Listing or approval for listing upon notice of issuance of such shares on The New York Stock Exchange,
or such other securities exchange as may at the time be the principal market for the Common Stock;
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(ii)
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Any registration or other qualification of such shares of the Corporation under any state or federal
law or regulation, or maintaining in effect any such registration or other qualification which the Board shall deem necessary or
advisable; and
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(iii)
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Obtaining any other consent, approval or permit from any state or federal governmental agency which
the Board shall determine to be necessary or advisable.
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(b) Nothing contained
in the Plan shall prevent the Corporation from adopting other or additional compensation arrangements for the Participants.
(c) The Corporation
shall not be required to issue or deliver any shares of Common Stock under the Plan if such issuance or delivery would constitute
a violation of any provision of any law or regulation of any governmental authority.
10.
Shares Available
.
(a) Subject to Section 11 below, the maximum number of shares of Common Stock which may be credited as Stock Retainers pursuant
to the Plan is (i) 1,000,000 as of the Effective Date, and (ii) 3,000,000 as of the Corporation’s 2017 Annual Meeting of
Stockholders, subject to the approval of the Stockholders at the 2017 Annual Meeting. Shares of Common Stock issuable under the
Plan shall be taken from authorized but unissued shares or from treasury shares of the Corporation as shall from time to time be
necessary for issuance pursuant to the Plan.
(b) The maximum value
of Stock Retainers credited during any calendar year to any Nonemployee Director, taken together with any cash fees paid to such
Nonemployee Director for Board service during the calendar year and the value of awards granted to the Nonemployee Director under
any other equity compensation plan of the Corporation or an affiliate during the calendar year, shall not exceed the following
in total value (calculating the value of any Stock Retainers or other equity compensation plan awards based on the grant date fair
value for financial reporting purposes): (i) $900,000 for the Chair of the Board and (ii) $675,000 for each Nonemployee Director
other than the Chair of the Board; provided, however, that awards granted to Nonemployee Directors upon their initial election
to the Board or the board of directors of an affiliate shall not be counted against the limits under this paragraph.
11.
Change in
Capital Structure
. Subject to any required action by the Stockholders, in the event of any change in the Common Stock effected
without receipt of consideration by the Corporation, whether by reason of any stock dividend, stock split, split-up, split-off,
spin-off, combination of shares, exchange of shares, warrants or rights offering to purchase Common Stock at a price below its
fair market value, reclassification, recapitalization, reorganization, reincorporation, merger, consolidation or other change in
capitalization, appropriate adjustment shall be made by the Board in the number and kind of shares subject to the Plan and any
other relevant provisions of the Plan, in order to prevent dilution or enlargement of Participants’ rights under the Plan.
12.
Administration;
Amendment
. (a) The Board shall have such powers and authorities related to the administration of the Plan as are consistent
with the Corporation’s certificate of incorporation and bylaws and applicable law. The Board shall have the power and authority
to delegate its responsibilities hereunder to its Compensation Committee or such other committee as determined by the Board (the
“Committee”), which shall have full authority to act in accordance with its charter (as in effect from time to time),
and with respect to the power and authority of the Board to act hereunder, all references to the Board shall be deemed to include
a reference to the Committee, unless such power or authority is specifically reserved by the Board. Except as may be required by
applicable law, regulatory requirement or the certificate of incorporation or the bylaws of the Corporation, the Board shall have
full power and authority to take all actions and to make all determinations required or provided for under the Plan, and shall
have full power and authority to take all such other actions and make all such other determinations that the Board deems to be
necessary or appropriate to the administration of the Plan. All actions, determinations and decisions by the Board or the Committee
under the Plan shall be in the sole discretion of the Board (or the Committee, as applicable) and shall be final, binding and conclusive
on all persons.
(b) The Board may,
at any time and from time to time, amend or suspend the Plan. An amendment shall be contingent on approval of the Stockholders
to the extent stated by the Board, required by applicable law or required by applicable securities exchange listing requirements.
No amendment or suspension of the Plan shall, without the consent of the affected Participant, materially impair rights or obligations
of such Participant.
(c) The Board may
terminate the Plan at any time subject to the requirements of Section 409A.
13.
Grandfathered
Amounts
. Notwithstanding anything in this Plan to the contrary, any amounts accrued and vested by Participants under the Plan
prior to January 1, 2005 will be paid under the terms of the Plan as then in effect.
14.
Miscellaneous
.
(a) Nothing in the Plan shall be deemed to create any obligation on the part of the Board to nominate any Director for reelection
by the Stockholders or to limit the rights of the Stockholders to remove any Director.
(b) The Corporation
shall have the right to require, prior to the issuance or delivery of any shares of Common Stock pursuant to the Plan, payment
by a Participant of any taxes required by law with respect to the issuance or delivery of such shares.
15.
Section 409A
.
(a) Notwithstanding any provision of the Plan to the contrary, it is intended that the provisions of the Plan comply with Section
409A, and all provisions of the Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding
taxes or penalties under Section 409A. Each Participant is solely responsible and liable for the satisfaction of all taxes and
penalties that may be imposed on or in respect of such Participant in connection with the Plan (including any taxes and penalties
under Section 409A), and the Corporation shall not have any
obligation to indemnify or otherwise hold
any Participant (or beneficiary) harmless from any or all such taxes or penalties. With respect to any amount under the Plan that
is considered “deferred compensation” subject to Section 409A, references in the Plan to “termination of employment”
(and substantially similar phrases) shall mean “separation from service” within the meaning of Section 409A. For purposes
of Section 409A, each of the payments that may be made under the Plan is designated as a separate payment.
(b) Notwithstanding
anything in the Plan to the contrary, if a Participant is a “specified employee” within the meaning of Section 409A,
no payments under the Plan that are “deferred compensation” subject to Section 409A and that would otherwise be payable
upon the Participant’s “separation from service” (as defined in Section 409A) shall be made to such Participant
prior to the date that is six months after the date of such Participant’s “separation from service” or, if earlier,
the date of the Participant’s death. Following any applicable six-month delay, all such delayed payments will be paid in
a single lump sum on the earliest date permitted under Section 409A that is also a business day.
16.
Governing
Law
. The Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State
of Delaware.
APPENDIX B
CERTIFICATE OF INCORPORATION
ARTICLE V
Bylaws
In furtherance and not
in limitation of the powers conferred by law, the Board is expressly authorized to make, repeal, alter, amend and rescind the Bylaws
of the Corporation by a majority vote of the entire Board at any regular or special meeting of the Board; provided, however that,
notwithstanding anything contained in this Certificate of Incorporation or the Bylaws of the Corporation to the contrary, the affirmative
vote of the holders of at least 80% of the voting power of the then outstanding shares of Voting Stock, voting together as a single
class, shall be required to (i) alter, amend or repeal any provision of the Bylaws which is substantially identical to and/or implements
the last sentence in
Section 4
of Article IV, or Articles VI, VII (
subject to the proviso at the end of this sentence
)
or VIII, of this Certificate of Incorporation, or (ii) alter, amend or repeal any provision of this proviso to Article V;
further
provided that, notwithstanding anything contained in this Certificate of Incorporation or the Bylaws of the Corporation to the
contrary, the affirmative vote of the holders of at least 66.67% of the voting power of the then outstanding shares of Voting Stock,
voting together as a single class, shall be required to (i) alter, amend or repeal any provision of the Bylaws which is substantially
identical to and/or implements the last sentence of Article VII of this Certificate of Incorporation, or (ii) alter, amend or repeal
this further proviso to Article V
.
ARTICLE VII.
Actions by Shareholders
Any action required
or permitted to be taken by the shareholders of the Corporation must be effected at a duly called annual or special meeting of
shareholders of the Corporation and may not be effected by any consent in writing by such shareholders. Special meetings of shareholders
of the Corporation may be called only by the Board pursuant to a resolution approved by a majority of the entire Board.
Except
as set forth in the final sentence of this Article VII, and
N
n
otwithstanding anything
else
contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the voting
power of the then outstanding shares of Voting Stock, voting together as a single class, shall be required to alter, amend or repeal
this Article VII.
Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote
of the holders of at least 66.67% of the voting power of the then outstanding shares of Voting Stock, voting together as a single
class, shall be required to alter, amend or repeal the second and final sentences of this Article VII.
APPENDIX C
BYLAWS
ARTICLE VI.
Amendments
These Bylaws may be
altered or repealed and Bylaws may be made at any annual meeting of shareholders or at any special meeting thereof if notice of
the proposed alteration or repeal of Bylaws to be made be contained in the notice of such meeting, by the affirmative vote of the
holders of a majority of the total voting power of all outstanding shares of the voting stock of the Corporation. These bylaws
may also be altered or repealed and Bylaws may be made by the affirmative vote of a majority of the Board of Directors, at any
annual or regular meeting of the Board of Directors, or at any special meeting of the Board of Directors if notice of the proposed
alteration or repeal, or Bylaw or Bylaws to be made, be contained in the notice of such special meeting.
Notwithstanding anything
contained in these Bylaws to the contrary,
(i)
the affirmative vote of the holders of at least 80% of the voting power of
all of the shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together
as a single class, shall be required to alter, amend or repeal Section 4, (
subject to clause (ii) below
) or 6 of Article
II, Section 1, 2 or 3 of Article III, of these Bylaws,
and (ii) notwithstanding the foregoing, the affirmative vote of the holders
of at least 66.67% of the voting power of all of the shares of the capital stock of the Corporation entitled to vote generally
in the election of directors, voting together as a single class, shall be required to alter, amend or repeal the first sentence
of Section 4 of Article II of these Bylaws.
APPENDIX D
CERTIFICATE OF INCORPORATION
ARTICLE VII.
Actions by Shareholders
Any action required
or permitted to be taken by the shareholders of the Corporation must be effected at a duly called annual or special meeting of
shareholders of the Corporation and may not be effected by any consent in writing by such shareholders. Special meetings of shareholders
of the Corporation may be called only by the Board pursuant to a resolution approved by a majority of the entire Board,
except
as otherwise permitted by the Bylaws of the Corporation
. Notwithstanding anything contained in this Certificate of Incorporation
to the contrary, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of Voting
Stock, voting together as a single class, shall be required to alter, amend or repeal this Article VII.
APPENDIX E
BYLAWS
ARTICLE II.
Meetings of Shareholders
Section 1.
Annual
Meetings
. Annual meetings of shareholders for the election of directors and for such other business as may be stated in the
notice of the meeting, shall be held at such place, either within or without the State of Delaware, and at such time and date as
the Board of Directors by resolution, shall determine and as set forth in the notice of the meeting. In the event the Board of
Directors fails so to determine the time, date and place of meeting, the annual meeting of shareholders shall be held at the principal
executive office of the Corporation at 10:00 a.m. on the first Wednesday in May. If the date of the annual meeting shall fall upon
a legal holiday, the meeting shall be held on the next succeeding business day. The annual meeting may be adjourned by the chairman
of the meeting from time to time and place to place. At any adjourned annual meeting the Corporation may transact any business
which might have been transacted at the original annual meeting. The Board of Directors acting by resolution may postpone and reschedule
any previously scheduled annual meeting of shareholders upon public notice or disclosure given prior to the date previously scheduled
for such meeting of shareholders.
Section 2.
Voting
.
Each shareholder who is entitled to vote pursuant to the terms of the Certificate of Incorporation and these Bylaws, or who is
entitled to vote pursuant to the laws of the State of Delaware, shall be entitled to vote in person or by proxy, but no proxy shall
be voted after three years from its date unless such proxy provides for a longer period. All elections for directors and all other
questions shall be decided by majority vote except as otherwise provided by the Certificate of Incorporation, these Bylaws or the
laws of the State of Delaware.
A
complete list of the shareholders entitled to vote at any meeting of shareholders at which directors are to be elected, arranged
in alphabetical order, with the address of each, and the number of shares held by each, shall be open to the examination of any
shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to
the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be inspected by any shareholder who is present.
The
CEO shall appoint three Inspectors of Election prior to each meeting of shareholders. Upon his or her appointment, each such Inspector
shall take and sign an oath faithfully to execute the duties of Inspector at such meeting with strict impartiality and to the best
of his or her ability. Such Inspectors shall determine the number of shares
outstanding,
the voting power of each such share, the number of shares present at the meeting and whether a quorum is present at such meeting.
The Inspectors shall receive votes and ballots and shall determine all challenges and questions as to the right to vote and shall
thereafter count and tabulate all votes and ballots and determine the result. Such Inspectors shall do such further acts as are
proper to conduct the elections of directors and the vote on other matters with fairness to all shareholders. The Inspectors shall
make a certificate of the results of the elections of directors and the vote on other matters. No Inspector shall be a candidate
for election as a director of the Corporation nor shall any such candidate be appointed an Inspector.
Section 3.
Quorum
.
Except as otherwise required by law, by the Certificate of Incorporation or by these Bylaws, the presence, in person or by proxy,
of shareholders holding a majority of the voting power of the outstanding stock of the Corporation shall constitute a quorum at
all meetings of the shareholders. In case a quorum shall not be present at any meeting, a majority in interest of the shareholders
entitled to vote thereat, present in person or by proxy or the chairman of the meeting, shall have the power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until the requisite amount of stock entitled to vote
shall be present; provided, however, that if such adjournment is for more than thirty days, or if after such adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record
entitled to vote at such adjourned meeting. At any such adjourned meeting at which the requisite amount of stock entitled to vote
shall be represented, any business may be transacted which might have been transacted at the meeting as originally noticed; but
only those shareholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments
thereof unless the Board of Directors shall have fixed a new record date for such adjournment or adjournments pursuant to Section
4 of Article V of these Bylaws.
|
|
|
Section 4.
Special Meetings
.
|
Special
meetings of shareholders may be called only by
(i)
the Board of Directors pursuant to a resolution approved by a majority
of the entire Board of Directors
, or (ii) solely to the extent required by Section 4(B), the Secretary of the Corporation
.
Special meetings of shareholders may be held at such place, either within or without the State of Delaware, and at such time and
date as shall be stated in the notice of the meeting. The special meeting may be adjourned by the chairman of the special meeting
from time to tie and place to place. At any adjourned special meeting the Corporation may transact any business which might have
been transacted at the original special meeting. The Board of Directors acting by resolution approved by a majority of the entire
Board of Directors may postpone and reschedule any previously scheduled special meeting of shareholders upon public notice or disclosure
given prior to the date previously scheduled for such meeting of shareholders.
|
|
(B)
|
Shareholder Requested Special Meetings
.
|
(1) Special
meetings of the shareholders (each a “Shareholder Requested Special Meeting”) shall be called by the Secretary upon
the written request of a shareholder (or a group of shareholders formed for the purpose of making such request) who or which has
held at least 25% Net Long Beneficial Ownership (as defined below) of the outstanding common stock of the Corporation continuously
for at least 120 days as of the date of submission of the request (the “Requisite Percent”). Compliance by the requesting
shareholder or group of shareholders with the requirements of this section and related provisions of these bylaws shall be determined
in good faith by the Board of Directors, which determination shall be conclusive and binding on the Corporation and the shareholders.
“Net
Long Beneficial Ownership” (and its correlative terms), when used to describe the nature of a shareholder’s ownership
of common stock of the Corporation, shall mean those shares of common stock of the Corporation as to which the shareholder in question
possesses (x) the sole power to vote or direct the voting, (y) the sole economic incidents of ownership (including the sole right
to profits and the sole risk of loss), and (z) the sole power to dispose of or direct the disposition. The number of shares calculated
in accordance with clauses (x), (y) and (z) shall not include any shares (1) sold by such shareholder in any transaction that has
not been settled or closed, (2) borrowed by such shareholder for any purposes or purchased by such shareholder pursuant to an agreement
to resell or (3) subject to any option, warrant, derivative or other agreement or understanding, whether any such arrangement is
to be settled with shares of common stock of the Corporation or with cash based on the notional amount of shares subject thereto,
in any such case which has, or is intended to have, the purpose or effect of (A) reducing in any manner, to any extent or at any
time in the future, such shareholder’s rights to vote or direct the voting and full rights to dispose or direct the disposition
of any of such shares or (B) offsetting to any degree gain or loss arising from the sole economic ownership of such shares by such
shareholder.
(2) A
request for a Shareholder Requested Special Meeting must be signed by the Requisite Percent of the record holders (or their duly
authorized agents) and be delivered to the Secretary at the principal executive offices of the Corporation by registered mail,
return receipt requested.
Such
request shall (A) set forth a statement of the specific purpose or purposes of the meeting and the matters proposed to be acted
on at such special meeting, (B) bear the date of signature of each shareholder (or duly
authorized agent) signing
the request, (C) include (w) the name and address, as they appear in the Corporation’s stock ledger, of each shareholder
signing such request (or on whose behalf the Shareholder Special Meeting Request is signed), (x) the class, if applicable, and
the number of shares of common stock of the Corporation that are owned of record and beneficially by each such shareholders, (y)
documentary evidence of such shareholder’s record and beneficial ownership of such stock and (z) a certification from each
such shareholder that the shareholders signing the request in the aggregate satisfy the Net Long Beneficial Ownership requirement
of these Bylaws, (D) set forth all information relating to each such shareholder (and if the matter proposed to be acted on at
such special meeting involves the election of directors, each person whom the shareholder proposes to nominate for election) that
must be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is
not involved), or is otherwise required, in each case, pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), (E) describe any material interest of each such shareholder in the specific purpose or
purposes of the meeting, and (F) include an acknowledgement by each shareholder and any duly authorized agent that any disposition
of shares of common stock of the Corporation as to which such shareholder has Net Long Beneficial Ownership as of the date of delivery
of the special meeting request and prior to the record date for the proposed meeting requested by such shareholder shall constitute
a revocation of such request with respect to such shares. In addition, the shareholder and any duly authorized agent shall promptly
provide any other information reasonably requested by the Corporation to allow it to satisfy its obligations under applicable law.
Any requesting
shareholder may revoke a request for a special meeting at any time by written revocation delivered to the Secretary at the principal
executive offices of the Corporation. If, following such revocation at any time before the date of the Shareholder Requested Special
Meeting, the remaining requests are from shareholders holding in the aggregate less than the Requisite Percent, the Board of Directors,
in its discretion, may cancel the Shareholder Requested Special Meeting.
(3) Notwithstanding
the foregoing, the Secretary shall not be required to call a special meeting of shareholders if (A) the request for such special
meeting does not comply with this Section 4(B), (B) the Board of Directors has called or calls an annual or special meeting of
shareholders to be held not later than ninety (90) days after the date on which a valid request has been delivered to the Secretary
(the “Delivery Date”), (C) the request is received by the Secretary during the period commencing ninety (90) days prior
to the first anniversary of the date of the immediately preceding annual meeting and ending on the date of the next annual meeting,
(D) the request contains an identical or substantially similar item (a “Similar Item”) to an item that was presented
at any meeting of shareholders held within one
hundred and twenty (120)
days prior to the Delivery Date (and, for purposes of this clause (D) the election of directors shall be deemed a “Similar
Item” with respect to all items of business involving the election or removal of
directors), (E) the request relates
to an item of business that is not a proper subject for action by the shareholders of the Corporation under applicable law, or
(F) the request was made in a manner that involved or would involve a violation of Regulation 14A under the Exchange Act or other
applicable law.
(4) Any
Shareholder Requested Special Meeting shall be held at such date, time and place within or without the state of Delaware as may
be fixed by the Board of Directors; provided, however, that the date of any Shareholder Requested Special Meeting shall be not
more than sixty (60) days after the record date for such meeting (the “Meeting Record Date”), which shall be fixed
in accordance with Article V, Section 4 of these Bylaws, provided that, in no event shall the Meeting Record Date be more than
twenty (20) days after the date on which a valid request for a Shareholder Requested Special Meeting, which complies with the requirements
of this section and related provisions of these Bylaws, is delivered to the Secretary of the Corporation. In fixing a date and
time for any Shareholder Requested Special Meeting, the Board of Directors may consider such factors as it deems relevant within
the good faith exercise of business judgment, including, without limitation, the nature of the matters to be considered, the facts
and circumstances surrounding any request for the special meeting and any plan of the Board of Directors to call an annual meeting
or a special meeting.
(5) Business
transacted at any Shareholder Requested Special Meeting shall be limited to the purpose(s) stated in the request; provided, however,
that nothing herein shall prohibit the Corporation from submitting additional matters to a vote of the shareholders at any Shareholder
Requested Special Meeting.
Section 5.
Notice
of Meetings
. Written notice, stating the place, date and time of any annual or special meeting of shareholders, and the general
nature of the business to be considered thereat, shall be given to each shareholder entitled to vote at such meeting at his address
as it appears on the records of the Corporation, not less than ten nor more than sixty days before the date of the meeting.
Section 6.
Shareholder
Action
. Any action required or permitted to be taken by the shareholders of the Corporation must be effected at a duly called
annual or special meeting of shareholders of the Corporation and may not be effected by any consent in writing by such shareholders.
Section 7.
Chairman
of a Meeting
. At each meeting of the shareholders the Chairman of the Board, or if he shall be absent therefrom, the President,
or if he shall be
absent therefrom, another officer of the
Corporation chosen by the Board of Directors, shall act as chairman of the meeting or preside thereat.
Section 8.
(A)
Annual Meetings of Shareholders
.
|
|
(1)
|
Nominations of persons for election to the Board of Directors
of the Corporation and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders
(a) pursuant to the Corporation’s notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any shareholder
of the Corporation who was a shareholder of record at the time of giving of notice provided for in this By-Law, who is entitled
to vote at the meeting and who complied with the notice procedures set forth in this By-Law.
|
|
|
(2)
|
For nominations or other business to be properly brought before an annual meeting by a shareholder
pursuant to clause (c) of paragraph (A)(1) of this By-Law, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a shareholder’s notice shall be delivered to the Secretary of the Corporation
at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary
of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced
by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the shareholder to be timely must be
so delivered not earlier than the 120
th
day prior to such annual meeting and not later than the close of business on
the later of the 90
th
day prior to such annual meeting or the 10
th
day following the day on which public
announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual
meeting commence a new time period for the giving of a shareholder’s notice as described above. Such shareholder’s
notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election or reelection as a director,
all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors
in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the
Securities
Exchange Act
of 1934, as amended (the “Exchange Act’)
and Rule 14a-11 thereunder (including such person’s
written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to any other
business that the shareholder proposes to bring before the meeting, a brief description of the
|
business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such
shareholder and the beneficial owner, if any, on whose behalf the proposal is made; (c) as to the shareholder giving the notice
and the beneficial owner, if any, on whose behalf of the nomination or proposal is made (i) the name and address of such shareholder,
as they appear on the Corporation’s books, and of such beneficial owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such shareholder and such beneficial owner.
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|
(3)
|
Notwithstanding anything in the second sentence of paragraph (A)(2) of this By-Law to the contrary,
in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for Director or specifying the size of the increased Board of Directors made
by the Corporation at least 100 days prior to the first anniversary of the preceding year’s annual meeting, a shareholder’s
notice required by this By-Law shall also be considered timely, but only with respect to nominees for any new positions created
by such increase, if it shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation
not later than the close of business on the 10
th
day following the day on which such public announcement is first made
by the Corporation.
|
(B)
Special Meetings
of Shareholders
. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before
the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors
may be made at a special meeting of shareholders at which directors are to be elected pursuant to the Corporation’s notice
of meeting (1) by or at the direction of the Board of Directors or (2)
provided that the Board of Directors has determined
that directors shall be elected at such special meeting,
by any shareholder of the Corporation who is a shareholder of
record at the time of giving of notice provided for in this By-Law, who shall be entitled to vote at the meeting and
who (y)
in the case of a special meeting of shareholders called pursuant to clause (i) of the first sentence of Section (4)(A) of Article
II of these Bylaws,
complies with the notice procedures set forth in this By-Law
, or (z) in the case of a Shareholder Requested
Special Meeting, complies with the requirements set forth in section 4(B) of Article II of these Bylaws.
In the event the Corporation
calls a special meeting of shareholders for the purpose of electing one or more directors, any such shareholder may nominate a
person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting,
if
(i) in the case of a special meeting of shareholders called pursuant to clause (i) of the first sentence of Section (4)(A)
of Article II of these Bylaws,
the shareholder’s notice required by paragraph (A)(2) of this By-Law shall be delivered
to the Secretary at the principal executive offices of the Corporation not earlier than the 120
th
day prior to such
special meeting and not later than the close of business on the later of the 90
th
day prior to such special meeting
or the 10
th
day following the day on which public announcement is first made of the date of the special meeting and
of the nominees proposed by the Board of
Directors to be elected at such meeting
,
or (ii) in the case of a Shareholder Requested Special Meeting, the shareholder complies with the requirements set forth in Section
4(b) of Article II of these Bylaws.
In no event shall the public announcement of an adjournment of a special meeting commence
a new time period for the giving of a shareholder’s notice as described above.
(C)
General
.
|
|
(1)
|
Only such persons who are nominated in accordance with the procedures
set forth in this By-Law shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders
as shall have been brought before the meeting in accordance with the procedures set forth in this By-Law. The Chairman of the meeting
shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made
in accordance with the procedures set forth in this By-Law and, if any proposed nomination or business is not in compliance with
this By-Law, to declare that such defective proposal shall be disregarded.
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|
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(2)
|
For purposes of this By-Law,
“public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.
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|
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(3)
|
Notwithstanding the foregoing
provision of this By-Law, a shareholder shall also comply with all applicable requirements of the Exchange Act with respect to
the matters set forth in this By-Law. Nothing in this By-Law shall be deemed to affect any rights of (i) shareholders to request
inclusion of the proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) the
holders of any series of Preferred Stock to elect directors under specified circumstances.
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APPENDIX F
Reconciliation of Non-GAAP Measures to
GAAP
Reconciliation of Net Income (Loss) (GAAP) to Earnings
Before Interest, Taxes, Depreciation, and Amortization (non-GAAP) to Net Income (Loss) (GAAP)
The non-GAAP measure
of earnings before interest, taxes, depreciation, and amortization (“EBITDA”) is calculated as net income (loss) before
the following items: interest expense, income tax provision (benefit), and depreciation, depletion, and amortization expense. Management
believes that, when presented in conjunction with comparable GAAP measures, EBITDA is useful to investors in evaluating our operating
performance. The table below presents reconciliations between the GAAP measure of net income (loss) to the non-GAAP measure EBITDA
to the GAAP measure of net income (loss)
for the years ended December 31, 2016, 2015 and 2014
(in thousands).
|
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) (GAAP)
|
|
$
|
69,547
|
|
|
$
|
(86,968
|
)
|
|
$
|
17,824
|
|
|
Interest expense, net of amount capitalized
(1)
|
|
|
21,796
|
|
|
|
25,389
|
|
|
|
26,775
|
|
|
Income tax provision (benefit)
|
|
|
27,428
|
|
|
|
56,310
|
|
|
|
(5,240
|
)
|
|
Depreciation, depletion, and amortization
|
|
|
117,413
|
|
|
|
112,585
|
|
|
|
112,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
236,184
|
|
|
$
|
107,316
|
|
|
$
|
151,532
|
|
|
|
(1)
|
On April 12, 2013, we completed an offering of $500 million in aggregate principal amount of our
Senior Notes due May 1, 2021 (the “Notes”), and issued additional Notes in 2014 to fund one of our defined benefit
pension plans. See
Note 6
of
Notes to Consolidated Financial Statements
in our Form 10-K for the calendar year ended
December 31, 2016, for more information. The Notes bear interest at a rate of 6.875% per year from the date of original issuance
or from the most recent payment date to which interest has been paid or provided for. Interest on the Notes is payable on May 1
and November 1 of each year, commencing November 1, 2013.
|
Reconciliation of Net Income (Loss) (GAAP) to Adjusted
EBITDA (non-GAAP) to Net Income (Loss) (GAAP)
The non-GAAP measure
of Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) is calculated as net
loss before the following items: interest expense, income tax provision, depreciation, depletion, and amortization expense, exploration
expense, pre-development expense, acquisition costs, foreign
exchange gains, gains on derivative contracts,
provisional price gains, provisions for closed operations expense, stock-based compensation, unrealized losses on investments,
interest and other income, and loss on sale of investments. Management believes that, when presented in conjunction with comparable
GAAP measures, Adjusted EBITDA is useful to investors in evaluating our operating performance. The following table reconciles net
(loss) to Adjusted EBITDA (in thousands):
|
|
|
Year Ended
|
|
|
|
|
December
|
|
|
|
|
31, 2016
|
|
|
Net (loss)
|
|
$
|
69,547
|
|
|
|
|
|
|
|
|
Plus: Interest expense, net of amount capitalized
|
|
|
21,796
|
|
|
Plus: Income taxes
|
|
|
27,428
|
|
|
Plus: Depreciation, depletion and amortization
|
|
|
115,468
|
|
|
Plus: Exploration expense
|
|
|
14,720
|
|
|
Plus: Pre-development expense
|
|
|
3,137
|
|
|
Plus: Acquisition costs
|
|
|
2,695
|
|
|
Plus: Foreign exchange loss
|
|
|
2,926
|
|
|
Less: Gains on derivative contracts
|
|
|
(4,423
|
)
|
|
Plus: Provisional price losses
|
|
|
918
|
|
|
Plus: Provision for closed operations and environmental matters
|
|
|
4,813
|
|
|
Plus: Stock-based compensation
|
|
|
5,932
|
|
|
Plus: Unrealized losses on investments
|
|
|
177
|
|
|
Less: Other
|
|
|
(507
|
)
|
|
Adjusted EBITDA
|
|
$
|
264,627
|
|
Reconciliation of Cost of Sales and
Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to Cash Cost, Before By-product Credits Per Silver/Gold
Ounce and Cash Cost Per Silver/Gold Ounce, After By-product Credits (non-GAAP)
The tables below present
reconciliations between the GAAP measure of cost of sales and other direct production costs and depreciation, depletion and amortization
to the non-GAAP measures of Cash Cost per Silver/Gold Ounce, Before By-product Credits and Cash Cost, After By-product Credits
per Silver/Gold Ounce for our operations for the year ended December 31, 2016 (in thousands, except costs per ounce and gold ounces
produced).
Cash Cost, After By-product
Credits per Silver/Gold Ounce is an important operating statistic that we utilize to measure each mine’s operating performance.
It also allows us to benchmark the performance of each of our mines versus those of our competitors. As a primary silver mining
company, we also use the statistic on an aggregate basis - aggregating the Greens Creek, Lucky Friday and San Sebastian mines,
but not Casa Berardi, which is a primary gold mine - to compare our performance with
that of other primary silver mining companies.
Similarly, the statistic is useful in identifying acquisition and investment opportunities as it provides a common tool for measuring
the financial performance of other mines with varying geologic, metallurgical and operating characteristics.
Cash Cost, Before By-product
Credits per Silver/Gold Ounce include all direct and indirect operating cash costs related directly to the physical activities
of producing metals, including mining, processing and other plant costs, third-party refining expense, on-site general and administrative
costs, royalties and mining production taxes. By-product credits include revenues earned from all metals other than the primary
metal produced at each unit. Cash Cost, After By-product Credits, per Silver/Gold Ounce, provides management and investors an indication
of operating cash flow, after consideration of the average price, received from production. Management also uses this measurement
for the comparative monitoring of performance of our mining operations period-to-period from a cash flow perspective. Cash Cost,
After By-product Credits, per Silver/Gold Ounce is a measure developed by precious metals companies (including the Silver Institute)
in an effort to provide a uniform standard for comparison purposes. There can be no assurance, however, that our reporting of this
non-GAAP measure is the same as that reported by other mining companies.
The Casa Berardi section
below reports Cash Cost, After By-product Credits, per Gold Ounce for the production of gold, its primary product, and by-product
revenues earned from silver, which is a by-product at Casa Berardi. Only costs and ounces produced relating to units with the same
primary product are combined to represent Cash Cost, After By-product Credits, per Ounce. Thus, the gold produced at our Casa Berardi
unit is not included as a by-product credit when calculating Cash
Cost, After By-product Credits, per Silver Ounce
for the total of Greens Creek, Lucky Friday and San Sebastian, our combined silver properties.
As depicted in the Total,
Greens Creek, Lucky Friday and San Sebastian Unit tables below, by-product credits comprise an essential element of our silver
unit cost structure distinguishing our silver operations due to the polymetallic nature of their orebodies. By-product credits
included in our presentation of Cash Cost, After By-product Credits, per Silver Ounce include:
|
|
|
Total, Greens Creek. Lucky Friday and San Sebastian Units
|
|
|
In thousands (except per ounce amounts)
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
By-product value, all silver properties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zinc
|
|
$
|
92,277
|
|
|
$
|
87,383
|
|
|
$
|
95,701
|
|
|
Gold
|
|
|
99,905
|
|
|
|
59,019
|
|
|
|
61,871
|
|
|
Lead
|
|
|
62,989
|
|
|
|
55,955
|
|
|
|
66,082
|
|
|
Total by-product credits
|
|
$
|
255,171
|
|
|
$
|
202,357
|
|
|
$
|
223,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By-product credits per silver ounce, all silver properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zinc
|
|
$
|
5.38
|
|
|
$
|
7.56
|
|
|
$
|
8.65
|
|
|
Gold
|
|
|
5.83
|
|
|
|
5.10
|
|
|
|
5.59
|
|
|
Lead
|
|
|
3.67
|
|
|
|
4.84
|
|
|
|
5.97
|
|
|
Total by-product credits
|
|
$
|
14.88
|
|
|
$
|
17.50
|
|
|
$
|
20.21
|
|
By-product credits included
in our presentation of Cash Cost, After By-product Credits, per Gold Ounce for our Casa Berardi Unit include:
|
|
|
Casa Berardi Unit (3)
|
|
|
In thousands (except per ounce amounts)
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
Silver by-product value
|
|
$
|
572
|
|
|
$
|
457
|
|
|
$
|
464
|
|
|
Silver by-product credits per gold ounce
|
|
$
|
3.92
|
|
|
$
|
3.57
|
|
|
$
|
3.62
|
|
Cost of sales and other
direct production costs and depreciation, depletion and amortization is the most comparable financial measure calculated in accordance
with GAAP to Cash Cost, After By-product Credits. The sum of the cost of sales and other direct production costs and depreciation,
depletion and amortization for our operating units in the tables below is presented in our Consolidated Statement of Operations
and Comprehensive (Loss) (in thousands) included in our audited financial statements which are included in our Annual Report on
Form 10-K for the calendar year ended December 31, 2016.
|
In thousands (except per ounce amounts)
|
|
Total, Greens Creek, Lucky Friday
and San Sebastian Units
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP)
|
|
$
|
298,740
|
|
|
$
|
260,498
|
|
|
$
|
267,536
|
|
|
Depreciation, depletion and amortization
|
|
|
(68,156
|
)
|
|
|
(67,815
|
)
|
|
|
(72,936
|
)
|
|
Treatment costs
|
|
|
84,535
|
|
|
|
80,239
|
|
|
|
82,639
|
|
|
Change in product inventory
|
|
|
(1,429
|
)
|
|
|
(1,632
|
)
|
|
|
1,649
|
|
|
Reclamation and other costs
|
|
|
(5,406
|
)
|
|
|
(1,319
|
)
|
|
|
(2,046
|
)
|
|
Cash Cost, Before By-product Credits
(1)
|
|
|
308,284
|
|
|
|
269,971
|
|
|
|
276,842
|
|
|
By-product credits
|
|
|
(255,171
|
)
|
|
|
(202,357
|
)
|
|
|
(223,654
|
)
|
|
Cash Cost, After By-product Credits
|
|
|
53,113
|
|
|
|
67,614
|
|
|
|
53,188
|
|
|
Divided by silver ounces produced
|
|
|
17,144
|
|
|
|
11,562
|
|
|
|
11,065
|
|
|
Cash Cost, Before By-product Credits, per Silver Ounce
|
|
|
17.98
|
|
|
|
23.35
|
|
|
|
25.02
|
|
|
By-product credits per silver ounce
|
|
|
(14.88
|
)
|
|
|
(17.50
|
)
|
|
|
(20.21
|
)
|
|
Cash Cost, After By-product Credits, per Silver Ounce
|
|
$
|
3.10
|
|
|
$
|
5.85
|
|
|
$
|
4.81
|
|
|
|
|
Greens Creek Unit
|
|
|
In thousands (except per ounce amounts)
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP)
|
|
$
|
191,297
|
|
|
$
|
195,276
|
|
|
$
|
199,682
|
|
|
Depreciation, depletion and amortization
|
|
|
(52,564
|
)
|
|
|
(56,553
|
)
|
|
|
(63,505
|
)
|
|
Treatment costs
|
|
|
62,754
|
|
|
|
63,284
|
|
|
|
63,313
|
|
|
Change in product inventory
|
|
|
(1,866
|
)
|
|
|
(4,222
|
)
|
|
|
1,706
|
|
|
Reclamation and other costs
|
|
|
(2,327
|
)
|
|
|
(1,342
|
)
|
|
|
(1,949
|
)
|
|
Cash Cost, Before By-product Credits
(1)
|
|
|
197,294
|
|
|
|
196,443
|
|
|
|
199,247
|
|
|
By-product credits
|
|
|
(161,782
|
)
|
|
|
(163,394
|
)
|
|
|
(176,650
|
)
|
|
Cash Cost, After By-product Credits
|
|
|
35,512
|
|
|
|
33,049
|
|
|
|
22,597
|
|
|
Divided by silver ounces produced
|
|
|
9,254
|
|
|
|
8,452
|
|
|
|
7,826
|
|
|
Cash Cost, Before By-product Credits, per Silver Ounce
|
|
|
21.32
|
|
|
|
23.24
|
|
|
|
25.46
|
|
|
By-product credits per silver ounce
|
|
|
(17.48
|
)
|
|
|
(19.33
|
)
|
|
|
(22.57
|
)
|
|
Cash Cost, After By-product Credits, per Silver Ounce
|
|
$
|
3.84
|
|
|
$
|
3.91
|
|
|
$
|
2.89
|
|
|
|
|
Lucky Friday Unit
|
|
|
In thousands (except per ounce amounts)
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP)
|
|
$
|
76,210
|
|
|
$
|
65,222
|
|
|
$
|
67,854
|
|
|
Depreciation, depletion and amortization
|
|
|
(11,810
|
)
|
|
|
(11,262
|
)
|
|
|
(9,431
|
)
|
|
Treatment costs
|
|
|
20,277
|
|
|
|
16,915
|
|
|
|
19,326
|
|
|
Change in product inventory
|
|
|
(1,162
|
)
|
|
|
1,154
|
|
|
|
(57
|
)
|
|
Reclamation and other costs
|
|
|
(822
|
)
|
|
|
23
|
|
|
|
(97
|
)
|
|
Cash Cost, Before By-product Credits
(1)
|
|
|
82,693
|
|
|
|
72,052
|
|
|
|
77,595
|
|
|
By-product credits
|
|
|
(50,722
|
)
|
|
|
(38,035
|
)
|
|
|
(47,004
|
)
|
|
Cash Cost, After By-product Credits
|
|
|
31,971
|
|
|
|
34,017
|
|
|
|
30,591
|
|
|
Divided by silver ounces produced
|
|
|
3,596
|
|
|
|
3,028
|
|
|
|
3,239
|
|
|
Cash Cost, Before By-product Credits, per Silver Ounce
|
|
|
23.00
|
|
|
|
23.79
|
|
|
|
23.95
|
|
|
By-product credits per silver ounce
|
|
|
(14.11
|
)
|
|
|
(12.56
|
)
|
|
|
(14.51
|
)
|
|
Cash Cost, After By-product Credits, per Silver Ounce
|
|
$
|
8.89
|
|
|
$
|
11.23
|
|
|
$
|
9.44
|
|
|
|
|
San Sebastian Unit (2)
|
|
|
In thousands (except per ounce amounts)
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP)
|
|
$
|
31,233
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Depreciation, depletion and amortization
|
|
|
(3,782
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Treatment costs
|
|
|
1,504
|
|
|
|
40
|
|
|
|
—
|
|
|
Change in product inventory
|
|
|
1,599
|
|
|
|
1,436
|
|
|
|
—
|
|
|
Reclamation and other costs
|
|
|
(2,257
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Cash Cost, Before By-product Credits
(1)
|
|
|
28,297
|
|
|
|
1,476
|
|
|
|
—
|
|
|
By-product credits
|
|
|
(42,667
|
)
|
|
|
(928
|
)
|
|
|
—
|
|
|
Cash Cost, After By-product credits
|
|
|
(14,370
|
)
|
|
|
548
|
|
|
|
—
|
|
|
Divided by silver ounces produced
|
|
|
4,294
|
|
|
|
82
|
|
|
|
—
|
|
|
Cash Cost, Before By-product Credits, per Silver Ounce
|
|
|
6.59
|
|
|
|
18.07
|
|
|
|
—
|
|
|
By-product credits per silver ounce
|
|
|
(9.94
|
)
|
|
|
(11.36
|
)
|
|
|
—
|
|
|
Cash Cost, After By-product Credits, per Silver Ounce
|
|
$
|
(3.35
|
)
|
|
$
|
6.71
|
|
|
$
|
—
|
|
|
|
|
Casa Berardi Unit (3)
|
|
|
In thousands (except ounce and per ounce amounts)
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP)
|
|
$
|
155,711
|
|
|
$
|
144,558
|
|
|
$
|
148,043
|
|
|
Depreciation, depletion and amortization
|
|
|
(47,312
|
)
|
|
|
(43,674
|
)
|
|
|
(38,198
|
)
|
|
Treatment costs
|
|
|
1,264
|
|
|
|
670
|
|
|
|
564
|
|
|
Change in product inventory
|
|
|
2,890
|
|
|
|
(1,970
|
)
|
|
|
(3,151
|
)
|
|
Reclamation and other costs
|
|
|
(459
|
)
|
|
|
(455
|
)
|
|
|
(820
|
)
|
|
Cash Cost, Before By-product Credits
(1)
|
|
|
112,094
|
|
|
|
99,129
|
|
|
|
106,438
|
|
|
By-product credits
|
|
|
(572
|
)
|
|
|
(457
|
)
|
|
|
(464
|
)
|
|
Cash Cost, After by-product credits
|
|
|
111,522
|
|
|
|
98,672
|
|
|
|
105,974
|
|
|
Divided by gold ounces produced
|
|
|
145,975
|
|
|
|
127,891
|
|
|
|
128,244
|
|
|
Cash Cost, Before By-product Credits, per Gold Ounce
|
|
|
767.90
|
|
|
|
775.11
|
|
|
|
829.97
|
|
|
By-product credits per gold ounce
|
|
|
(3.92
|
)
|
|
|
(3.57
|
)
|
|
|
(3.62
|
)
|
|
Cash Cost, After By-product Credits, per Gold Ounce
|
|
$
|
763.98
|
|
|
$
|
771.54
|
|
|
$
|
826.35
|
|
|
|
|
Total, All Locations
|
|
|
In thousands
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
Reconciliation to GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP)
|
|
$
|
454,451
|
|
|
$
|
405,056
|
|
|
$
|
415,580
|
|
|
Depreciation, depletion and amortization
|
|
|
(115,468
|
)
|
|
|
(111,489
|
)
|
|
|
(111,134
|
)
|
|
Treatment costs
|
|
|
85,799
|
|
|
|
80,909
|
|
|
|
83,203
|
|
|
By-product credits
|
|
|
(255,743
|
)
|
|
|
(202,814
|
)
|
|
|
(224,118
|
)
|
|
Change in product inventory
|
|
|
1,461
|
|
|
|
(3,602
|
)
|
|
|
(1,502
|
)
|
|
Reclamation and other costs
|
|
|
(5,865
|
)
|
|
|
(1,774
|
)
|
|
|
(2,867
|
)
|
|
Cash Cost, After By-product Credits
|
|
$
|
164,635
|
|
|
$
|
166,286
|
|
|
$
|
159,162
|
|
|
|
(1)
|
Includes all direct and indirect operating costs related directly to the physical activities of producing metals, including
mining, processing and other plant costs, third-party refining and marketing expense, on-site general and administrative costs,
royalties and mining production taxes, after by-product revenues earned from all metals other than the primary metal produced at
each unit.
|
|
|
(2)
|
Commercial production began at the San Sebastian unit in the fourth quarter of 2016. See the
San Sebastian Segment
section
of our Form 10-K for the calendar year ended December 31, 2016 for further discussion.
|
INSERT MAP
Meeting to be held
at: