Hecla Mining Company Exhibit 10.16(a) to Form 10-K



Exhibit 10.16(a) 




HECLA MINING COMPANY 

EXECUTIVE AND SENIOR MANAGEMENT 
 LONG-TERM PERFORMANCE PAYMENT PLAN


(As Amended and Restated January 1, 2005)


Article
I

Introduction


This instrument constitutes the Hecla Mining Company Executive and
Senior Management Long-Term Performance Payment Plan (the “Plan”), established
by Hecla Mining Company (the “Company”) originally effective as of January 1,
2003. The Plan is amended and restated in its entirety effective as of January
1, 2005, in order to comply with Section 409A of the Internal Revenue Code of
1986, as amended (the “Code), created by Congress’ enactment of the American
Jobs Creation Act of 2004, in order to govern the operation and administration
of nonqualified deferred compensation plans. Due to the operation of the Plan,
which may provide employees with benefits under the Plan if they terminate
employment with the Company prior to the completion of the performance period,
the Plan may be viewed by the Internal Revenue Service as deferring
compensation in a manner that causes the Plan to the subject to Section 409A of
the Code. Although these new rules do not materially affect the operation of
the Plan, compliance in this regard must be memorialized. 


Article
II

Plan Purpose and Objectives


Plan
objectives include: 


	
 

	
 


	
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Focusing management attention on key activities and initiatives.
 We want key decision makers to allocate time and energy to those key
 activities that drive the Company’s performance.


	
 

	
 


	
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Encouraging open and frequent communications.
 We want key decision makers to openly communicate with their peers regarding
 their ideas and suggested approaches in order to assist the Company in
 achieving its goals. 


	
 

	
 


	
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Establish meaningful, challenging and achievable performance targets.
 We want to provide a financial incentive for individuals to seek to meet
 achievable performance targets.


	
 

	
 


	
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Recognize contribution to long-term growth objective efforts.
 Every position is important and contributes to the day-to-day success of the
 Company. However, a few individuals hold positions that can have long-term
 and dramatic impact on the future of the Company. Because these efforts are
 so critical, it is important to recognize both the individual contributions
 as well as the team contributions.


	
 

	
 


	
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Attract and retain high caliber executives and senior managers.
 Compensation is an important consideration in a high caliber leader’s
 willingness to join and stay with a top-performing organization. This Plan
 helps meet this important objective by providing key 





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leaders the opportunity to earn above industry standard total
 compensation through personal and organizational performance.


	
 

	
 


	
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Link Participant interests to those of the Company’s shareholders.
 Our entire compensation philosophy is based on achieving performance results
 that are in the best interest of our shareholders and provides them the
 opportunity to realize wealth through our performance.





Article III

Duration of the Plan


The Plan commenced effective on January 1, 2003 and shall remain in
effect, subject to the right of the Board of Directors to amend or terminate
the Plan at any time. Under this Plan, a new performance period begins each
calendar year and runs for multiple year periods. The following table provides
an example of how the Plan works using overlapping three-year performance
periods. 


Example Overlapping Performance Periods





For example, the first performance period will run from January 1, 2003
through December 31, 2005. The first performance payout, if earned, would be
made approximately the first quarter 2006. The next performance period, if approved
by the Board to be a three year period, would include January 1, 2004 through
December 31, 2006. The payout for this period, if earned, would be made
approximately the first quarter 2007. 


The purpose of having multiple year performance periods is to recognize
that some activities require significant periods of time to be implemented and
for measurable results to accrue. Multiple year periods also provide the
opportunity to adjust performance activities to keep on track toward
performance targets. Starting a new plan period each year provides the
opportunity to adjust for new conditions and circumstance or priorities. For
example, a merger or acquisition could change the nature and level of
subsequent year targets. Such an event would not change non-matured plan
periods target but would be taken into account in future Plan periods. 


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Article IV

Eligibility


Upon the recommendation of the Chief Executive Officer, the
Compensation Committee of the Board of Directors (the “Compensation Committee”)
will establish participation eligibility requirements. Initially, eligibility
will be restricted to those key executives and senior managers whose activities
and decisions have a direct impact on the long-term strategic performance of
the Company. These individuals constitute “Eligible Employees” for purposes of
the Plan. As used hereunder, “Participant” shall mean any Eligible Employee
approved for participation by the Compensation Committee. The Compensation
Committee, with the recommendation of the Chief Executive Officer, shall have
the sole discretionary authority to determine which employees shall be Eligible
Employees for purposes of participation in the Plan. 


A.          New
Eligible Employees 


Eligible Employees hired after a performance period has commenced will
be eligible to participate in the Plan on a prorated basis, and participate
fully as of the beginning of the next new performance period that begins after
their date of hire with the Company. 


B.          Promotion
and/or Salary Changes 


Promotion and/or salary changes that may affect the basis for
determining the targeted number of performance units a Participant may be
eligible to receive will be adjusted on a pro-rated basis for non-matured
plans. 


C.          Reassignment
and/or Relocation 


Position reassignment, change in job scope or relocation that may
affect the basis for determining the number of performance units a Participant
may be eligible to receive may be adjusted on a pro-rated basis for any
non-matured plans. 


D.          Leaves
of Absence 


Eligibility to continue participation in any non-matured or future
performance periods on a pro-rata basis preceding and after the effective dates
of an approved leave of absence will be at the sole discretion of the Chief
Executive Officer. 


E.          Death



Beneficiaries of a Participant who dies during a performance period,
and who has participated in prior performance periods not reaching maturity,
will be entitled to a pro-rated share of target performance award if earned. 


F.          Retirement



A Participant
who retires during a performance period will be eligible to receive a pro-rated
share of target awards, if earned, for any performance period for which the
Participant was eligible and which have not reached maturity. 


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G.          Disability



Eligibility to continue participation in any non-matured performance
periods on a pro-rata basis preceding and after the dates of a disability will
be at the sole discretion of the Chief Executive Officer. Effective as of and
after January 1, 2005, a Participant is deemed as being Disabled if they meet
one of the following requirements: (A) 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 twelve (12) months;
(B) 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 twelve (12) months, receiving
income replacement benefits for a period of not less than three (3) months
under the Company’s long-term disability plan; or (C) the Participant is
determined to be totally disabled by the Social Security Administration. As of
and after January 1, 2005, the determination of whether any Participant has
become Disabled (within the meaning of this Paragraph G), shall be made in
accordance with Section 409A of the Code and Treasury Regulations
§1.409A-3(i)(4) issued thereunder. 


H.          Voluntary
Separation from Service 


Participants who separate from the service of the Company will not be
eligible to receive any long-term incentive award from any non-matured performance
plan periods. Effective as of January 1, 2005, the determination of whether any
Participant has separated from the service of the Company shall be made in
accordance with Section 409A of the Code, and Treasury Regulations §1.409A-1(h)
issued thereunder. 


I.          Involuntary
Separation from Service 


Eligible Participants, whose separation from the service of the Company
is involuntary, other than as provided in this description, will not be
eligible to receive any long-term incentive award from any non-matured
performance periods. The Chief Executive Officer retains the authority to
review each such instance and may make pro-rata awards under non-matured plans
at his sole discretion.


J.          Change
of Control 


Eligible Participants will receive a pro-rated share of targeted awards
upon the event of a change of control as currently defined in other benefit
plans of the Company. Effective as of January 1, 2005, a change of control
shall be deemed to have occurred upon the change in ownership of the Company, a
change in effective control of the Company or change in the ownership of a
substantial portion of the assets of the Company, as defined under Treasury
Regulations §1.409A-3(i)(5). 


K.          Special
Rule for Specified Employees


Effective as of January 1, 2005, any performance units awarded to a
“Specified Employee” (as herein defined) due to their termination of employment
shall not be made available to such 


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individual until six (6) months after the date of their separation from
the service of the Company. For purposes of this Paragraph K, the term
Specified Employee means any individual who at any time during the year: (i) is
an officer of the Company having annual compensation greater than $135,000
($160,000 for 2009); (ii) a five percent (5%) owner of the Company; or (iii) a
one percent (1%) owner of the Company with annual compensation in excess of
$150,000. 


L.          No
Acceleration or Additional Deferral


No Participant in the Plan shall be entitled to accelerate the payment
of their performance awards hereunder to a date that precedes the otherwise
applicable payment dates. Once a Participant, or their Beneficiary, becomes
entitled to receive a performance hereunder, distribution of such amount cannot
be deferred for any reason except as provided hereunder. 


Article V

Plan Value Potential


Each Participant will receive a number of performance units at the
beginning of each performance period. Performance units will be
dollar-denominated units whose payment and/or value ($0 - $200) is contingent
upon performance as determined by the Board. The nominal target value for each
performance unit will be $100. 


Article VI

Performance Measures


Long-term performance targets, measures, or objectives should reflect
the long-term strategic objectives of the Company as determined from time to
time. For all Participants other than the Chief Executive Officer, performance
targets and their measurement criteria will be recommended for each performance
period by the Chief Executive Officer to the Compensation Committee, and in
turn must be recommended by the Compensation Committee to the Board of
Directors, and then ultimately approved by the Board of Directors. The process
is the same for the Chief Executive Officer, with the exception that the
performance targets and measurement criteria for the Chief Executive Officer
must be approved by the independent members of the Board of Directors. Specific
performance targets and measurement criteria may change from one performance
period to the next. For the first performance period (2003-5), there will be
two performance targets, as follow: 


	
 

	
 

	
 


	
 

	
(i)

	
Cash flow from operations – This represents the value of metals sold
 less production cost from direct operations. For purposes of this objective,
 gold and silver prices are assumed to remain constant. 


	
 

	
 

	
 


	
 

	
(ii)

	
Gold equivalent resources – This represents gold equivalent resources
 as determined by the Company as of the end of each calendar year.





Once set for a performance period, performance targets, measurers, or objectives
are not expected to change. It is expected that significant events causing the
Company’s long-term strategy to change will change the targets, measurers or
objectives to change subsequent 


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performance periods. However, it is in the discretion of the Board to
change targets, measurers, or objectives.


Article VII

Performance Award Value


Periodically, the Board of Directors may establish a procedure, target
or range of outcomes that could provide the basis for determining the value of
the units. Meeting the performance targets (which, for the first performance
period are cash flow from operations and gold equivalent resources) will create
a performance unit nominal value of $100. However, the value of performance
units can range between $0 and $200, depending upon performance as determined
by the Board. 


Article VIII

Performance Award Distribution


The primary determination on the number of performance units awarded
will reflect the objective of providing the potential for a Participant to
realize targeted total compensation levels. However, there will be other
factors considered including scope of position responsibilities,
accountabilities and involvement with specific strategic initiatives, ability
to influence outcomes and other factors. In addition, the Board of Directors,
in its sole discretion, may make adjustments to awards earned by Participants
in connection with achieving performance targets, and may also make awards to
Participants in the event performance targets are not met. 


Performance awards will be distributed as soon as practical after the
end of the performance period upon recommendation by the Compensation Committee
to the Board of Directors, and then approval by the Board of Directors (with
respect to the Chief Executive Officer, approval must be made by the
independent members of the Board of Directors). Performance awards may be in
the form of cash and/or stock, with any shares of stock being granted under any
of the Company’s stock plans 


Participants may elect to defer any performance unit award amounts up
to 100% of the award through the Company’s Key Employee Deferral Plan if an
election to do so has been made no later than July of the third performance
period for the plan period for which the award is being made. For example, if a
Participant wants to defer some or 100% of the 2006 award (for performance
period 2003-2005), the Participant would have to make such election no later
than July 1, 2005. Effective as of and after January 1, 2005, in no event may a
Participant make a decision to defer any performance unit award less than six
(6) months prior to the end of the performance period for which the performance
unit award will be payable. Further, in no event may an election to defer the
receipt of the performance unit award be made by any Participant after the
amount of the Participant’s performance unit award has become ascertainable.
Any Elections to defer performance unit awards, as of and after January 1,
2005, shall comply with the requirements of Treasury Regulations §1.409A-2(a)(8).



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Article IX

Other Information


A.          Regulatory
Compliance


Effective as of and after January 1, 2005, the Plan is intended to
comply with the provisions of Section 409A of the Code, including the rules,
regulations and interpretations issued thereunder. To the extent any provision
of the Plan is inconsistent with the aforementioned regulatory requirements,
said provisions shall be superseded and the requirements of Section 409A of the
Code shall govern and control.


B.          Designation of
Beneficiary


Each Participant may provide a written designation of the person(s) or
entity(ies) who will be the Beneficiary or contingent Beneficiary, to whom any
benefit under the Plan will be paid in the event of the Participant’s death. A
Participant may change this written designation at any time. The written
Beneficiary designation most recently filed before the Participant’s death will
govern in all cases. The Compensation Committee has the right, but not the
obligation, to require that the spouse of the Participant join in the
designation of any Beneficiary who is a person other than the Participant’s
spouse. In the absence of an effective, written, Beneficiary designation, any
amount payable to the Participant will be paid to the individual to whom the
Participant is married at death, or if the Participant was not married at
death, to the Participant’s surviving children in equal shares, or if none, to
the Participant’s estate. 


C.          Amendment
or Termination of the Plan


The Company, by action of the Board of Directors upon recommendation of
the Compensation Committee, reserves the right to amend, modify, terminate, or
discontinue the Plan at any time; and to make or not make any awards, such
action shall be final, binding, and conclusive as to all parties.


D.          Correction
of Errors


The Compensation Committee may correct errors that occur in the
administration of the Plan, which may require the adjustment of a Participant’s
award. The Compensation Committee has no obligation to notify any affected
Participant of such correction. With respect to any power of authority which
the Compensation Committee has authority to exercise under the Plan, such
discretion shall be exercised in a nondiscriminatory manner. 


E.          No
Employment Guarantee


Nothing in this Plan or in related Plan documents shall confer the
Participant any right to continue in the employ of the Company or any
subsidiary, or shall interfere with or restrict in any way the rights of the
Company of its subsidiaries, which are expressly reserved, to discharge the
Participant at an time for any reason whatsoever, with or without cause. 


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F.          No
Assignment


Subject to a Participant’s right to name a Beneficiary under the terms
of the Plan, a Participant may not assign, pledge or encumber his or her
interest, if any, under the Plan. 


G.          Governing
Law


The Plan will be governed by the laws of the State of Idaho. 


H.          Unfunded
Status 


The benefits hereunder are unfunded and payable solely from the general
assets of the Company. No Participant in the Plan has any interest whatsoever
in any specific asset of the Company.


I.          Claim
Process


The Compensation Committee has the sole discretion to decide all issues
of fact, law or interpretation arising under this Plan. Any decision of the
Compensation Committee that is not an abuse of discretion must be upheld by a
court of law. 


J.          No
Employment Contract


Nothing contained herein shall be construed to constitute an employment
contract. 


K.          No
Exclusivity 


The adoption of the Plan by the Board of Directors shall not be
construed as creating any limitations on the power or authority of the Company
to adopt such other or additional incentive or compensation arrangements as the
Board of Directors may deem necessary or desirable.


	
 

	
 


	
 

	
HECLA MINING COMPANY


	
 

	
 


	
 

	
By:




	
 

	
 


	
 

	
Its:




	
 

	
 


	
 

	
Date:







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