Document:

EX-10.2

 

Exhibit 10.2

Form
of Horsehead Holding Corp. Stock Option

Grant Agreement

This Grant Agreement (the “Grant Agreement”), dated as of January 16, 2007 (the “Effective Date”),
evidences the grant of an option pursuant to the provisions of the 2006 Long-Term Equity Incentive
Plan (the “Plan”) of Horsehead Holding Corp. (the “Company”) to the individual whose name appears
below (the “Optionee”), covering the specific number of shares of the Common Stock, par value $0.01
per share, of the Company (the “Shares”) set forth below and on the following terms and conditions:

	1.	 	Name of the Optionee:
	 
	2.	 	Number of Shares subject to this option:
	 
	3.	 	Exercise price per Share subject to this option:
	 
	4.	 	Date of grant of this option:
	 
	5.	 	Type of option: Non-qualified Option
	 
	6.	 	Vesting:

	 	a.	 	Except as otherwise expressly provided in Section 6 b hereof, 20% of the total
number of Shares subject to this option shall vest as of
[                  ] of each year
(commencing on the first such date occurring after the Effective Date and becoming
fully vested on the fifth such date occurring after the Effective Date).
	 
	 	b.	 	Notwithstanding anything to the contrary contained in Section 6 a hereof, 100%
of the total number of Shares subject to this option shall vest immediately prior to
the consummation of a Change in Control (as defined in Section 6 e below) (i) that is
consummated after November 30, 2007; (ii) in which the consideration paid to the
Company or to its stockholders, as the case may be, consists primarily of cash (as
determined by the Board or the Committee (each as defined in the Plan) in its sole
discretion); and (iii) following which Sun Capital Partners, Inc. and its affiliates
(“Sun Capital”) will hold fewer than 1% of the outstanding shares of the common stock
of the Company.
	 
	 	c.	 	In the event of a Change in Control that is consummated after November 30,
2007, the Committee (as in place immediately prior to the Change in Control) may, in
its sole discretion, terminate (i) any vested Options (including Options that would
vest upon a Change in Control) without payment of any kind provided that the Optionee
shall first be given notice of such termination and of the proposed Change in Control
and shall be given at least 15 days prior to such Change in Control to exercise all
vested Options (and all Options that would vest upon the Change in Control) that are to
be so terminated or (ii) any vested Options (including Options that would vest upon a
Change in Control) for a payment of cash or (iii) without payment of any kind any
vested Option (including Options that would vest upon a Change in Control) that on the
date of such Change in Control has an exercise price that exceeds or is equal to the
Fair Market Value of a share of Common Stock of the Company.

 

 

	 	d.	 	Notwithstanding anything to the contrary contained herein, (i) this option
shall not be exercisable, and shall be void and of no further force and effect, (x)
after the expiration of the option term, and (y) except with respect to Section 9
below, on and after the start of the date on which the Optionee’s employment is
terminated for Cause (as defined in the Plan), (ii) except as provided in Section 7
below, this option shall be exercisable only if the Optionee is, at the time of
exercise, an employee of the Company, (iii) this option shall in no event be
exercisable for more than the total number of Shares provided for in Section 2 hereof
and (iv) vesting shall cease immediately upon termination of
employment for any reason, and any portion of this option that has not vested on or
prior to the date of such termination is forfeited on such date. Once vesting has
occurred, the vested portion of this option can be exercised at the time or times
specified in Section 7 below.
	 
	 	e.	 	For purposes of this Agreement, “Change in Control” shall mean:

	 	(i)	 	if any “person” or “group” as those terms are used in Sections 13(d)
and 14(d) of the Exchange Act or any successors thereto, other than an Exempt
Person (as defined in the Plan), is or becomes the “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act or any successor thereto), directly or
indirectly, of securities of the Company representing 50% or more of the combined
voting power of the Company’s then outstanding securities;
	 
	 	(ii)	 	consummation of a merger or consolidation of the Company with any other
entity, other than a merger or consolidation (A) which would result in all or a
portion of the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 50% of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation or (B) by which
the corporate existence of the Company is not affected and following which the
Company’s chief executive officer and directors retain their positions with the
Company (and constitute at least a majority of the Board); or
	 
	 	(iii)	 	consummation of a plan of complete liquidation of the Company or a
sale or disposition by the Company of all or substantially all the Company’s
assets, other than a sale to an Exempt Person.

	7.	 	The vested portion of this option can be exercised at any time and from time to time after
November 30, 2007 and before the earliest of the following dates:

	 	a.	 	January 24, 2017;
	 
	 	b.	 	the date on which the Optionee’s employment terminates; provided that if the
Optionee’s employment has terminated: (i) other than due to death, Disability,
Retirement (each as defined in the Plan) or Cause, then any portion of the option
exercisable pursuant to this Section 7 b may also be exercised on or after the date of
termination but on or before the 30th day following the date of termination, (ii) due
to death or Disability, then any portion of the option exercisable pursuant to this
Section 7 b may also be exercised on or after the date of termination but on or before
the date that is six months after the date of termination or death or (iii) due to his
or her Retirement, then any portion of the option exercisable pursuant to this Section
7 b may also be exercised on or after the date of termination but on or before the 90th
day after the date of Retirement.

 

 

	8.	 	It is the Company’s intent that the option not be treated as a nonqualified deferred
compensation plan that fails to meet the requirements of Code Sections 409A(2), (3) or (4),
and the Company may make any changes to this Grant Agreement it determines are necessary to
effectuate that intent without the consent of the Optionee.
	 
	9.	 	If the Optionee exercises any portion of this option and, within one year thereafter, either
(i) is terminated from the Company or a Subsidiary (as defined in the Plan) for any of the
reasons specified in the definition of Cause, or (ii) breaches any of the covenants or
agreements set forth in Annex A hereto, then the Board or Committee may, in its discretion,
require Optionee to pay the Company the gain represented by the difference between the
aggregate selling price of the shares of Common Stock acquired upon the exercise of options
(or, if such shares of Common Stock were not then sold, their aggregate Fair Market Value (as
defined in the Plan) on the date of exercise) and the aggregate exercise price of the options
exercised (the “Option Gain”), without regard to any subsequent increase or decrease in the
Fair Market Value of the
Common Stock. In addition, the Company may, in its discretion, deduct from any payment of
any kind (including salary or bonus) otherwise due to any such participant an amount equal
to the Option Gain.
	 
	10.	 	The Optionee agrees to abide by the covenants and agreements set forth in Annex A hereto and
incorporated by reference herein, and acknowledges that the option being granted herein
constitutes adequate and sufficient consideration in support of such covenants and agreements.
	 
	11.	 	The Optionee hereby acknowledges, understands, and agrees that by signing this Grant
Agreement, the Optionee voluntarily and irrevocably forfeits any and all rights, title, and
interests the Optionee has or may have had in, to and under (a) any option agreement, option
letter, or other similar document pursuant to which the Company (or any Subsidiary or
affiliate thereof) may have previously granted, or offered to grant, options in the Company
(or any Subsidiary or affiliate thereof) to the Optionee and (b) any oral or written
commitment or promise regarding options that the Company (or any Subsidiary or affiliate
thereof) may have made to the Optionee, except as to any options that have been previously
exercised and paid for by the Optionee.
	 
	12.	 	If the Optionee is entitled to exercise the vested portion of this option, and wishes to do
so, in whole or in part, the Optionee shall submit to the Company a notice of exercise, in the
form attached as Annex B hereto or such other form as may hereinafter be designated by the
Company (in its sole discretion), specifying the exercise date and the number of Shares to be
purchased pursuant to such exercise, and shall remit to the Company in a form satisfactory to
the Company (in its sole discretion) the exercise price, plus an amount sufficient to satisfy
any withholding tax obligations of the Company that arise in connection with such exercise (as
determined by the Company).
	 
	 	 	The Optionee may not exercise this option for a fraction of a share of Common Stock.
	 
	13.	 	Unless the Board or Committee determines otherwise, the Optionee may transfer the option
granted hereunder only by will or the laws of descent and distribution. Unless the context
requires otherwise, references herein to the Optionee are deemed to include any permitted
transferee under this paragraph 13. Unless the Board or Committee determines otherwise, the
option may be exercised only by the Optionee; or by the Optionee’s executor or administrator;
or

 

 

	 	 	by any person to whom the option is transferred by will or the laws of descent and
distribution; or by the guardian or representative of any of the foregoing.
	 
	14.	 	In the event of a reorganization, recapitalization, stock split, stock dividend, combination
of shares, merger, consolidation, distribution of assets, or any other change in the corporate
structure or shares of the Company, the Board or Committee shall make such adjustments as it
deems appropriate in the number and kind of shares reserved for issuance under the Plan, the
number and kind of shares covered by this option and the exercise price specified herein.
Without limitation of the foregoing, in connection with any transaction of the type specified
by clause (iii) of the definition of a Change in Control in paragraph 6 e., the Board or
Committee may, in its discretion, (i) cancel any or all outstanding Option Shares (as defined
in the Plan) in consideration for payment to the Optionee of an amount equal to the portion of
the consideration that would have been payable to the Optionee pursuant to such transaction if
the option had been fully exercised immediately prior to such transaction, less the aggregate
exercise price that would have been payable therefor, or (ii) if the amount that would have
been payable to the Optionee pursuant to such transaction if the option had been fully
exercised immediately prior thereto would be less than the aggregate exercise price that would
have been payable therefor, cancel any or all such Option Shares for no consideration or
payment of any kind. Payment of any amount payable pursuant to the preceding sentence may be
made in cash or, in the event that the consideration to be received in such transaction
includes securities or other property, in cash and/or securities or other property in the
Board’s or Committee’s discretion.
	 
	15.	 	The Optionee hereby acknowledges receipt of a copy of the Plan attached hereto as Annex C as
presently in effect. All of the terms and conditions of the Plan are incorporated herein by
reference and this option is
subject to such terms and conditions in all respects. Capitalized terms that are used but
not otherwise defined herein shall have the meanings given to such terms in the Plan.
Inconsistencies between this Grant Agreement and the Plan shall be resolved in accordance
with the terms of this Grant Agreement. This Grant Agreement and the Plan constitute the
entire agreement of the parties with respect to the subject matter hereof, and supersede any
prior written or oral agreements.
	 
	16.	 	Except as otherwise provided herein and notwithstanding anything to the contrary in the Plan,
any provision of this Grant Agreement may be amended or waived with the prior written consent
of the Company and either (i) the Optionee or (ii) the Plan participants who have been granted
options to purchase a majority of the options under the Plan (based on the number of
underlying shares of Common Stock issuable upon the exercise of all such options) theretofore
granted under the Plan (unless the Optionee will be treated in a manner different from other
Plan participants, in which case the Optionee’s written consent will also be required).
	 
	17.	 	The Optionee hereby acknowledges, agrees and confirms that, upon his or her exercise of this
option, the Optionee will be deemed to be a party to the Securityholders’ Agreement attached
hereto as Annex D and shall have all of the rights and obligations of the “Minority
Securityholders” thereunder as if the Optionee had executed the Securityholders’ Agreement.
The Optionee hereby ratifies, as of the date hereof, and agrees to be bound by, all of the
terms, provisions and conditions contained in the Securityholders’ Agreement.

Nothing in this Agreement shall interfere with or limit in any way the right of the Company to
terminate the Optionee’s employment or other performance of services at any time (with or without
Cause), nor confer upon the Optionee any right to continue in the employ or as a director or
officer of, or in the performance of other services for, the Company or a Subsidiary for any period
of time, or to continue the

 

 

Optionee’s present (or any other) rate of compensation or level of
responsibility, and in the event of termination of employment or other performance of services
(including, but not limited to, termination without Cause and other than termination due to death,
Disability or, if the Board or Committee so provides, Retirement), any portion of the Option that
was not previously vested and exercisable shall expire and be forfeited. Nothing in this Agreement
shall confer upon the Optionee any right to be selected again as a Plan participant, and nothing in
the Plan or this Agreement shall provide for any adjustment to the number of Option Shares subject
to the Option upon the occurrence of subsequent events except as provided in paragraph 15 above.

[Signature page follows.]

 

 

	 	 	 	 	 	 	 	 	 	 	 
	Accepted and Agreed:

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Horsehead Holding Corp.
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Signature of Optionee

	 	 	 	Name:	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 	 	 

	 	 	 
	Attachments:

	 	Annex A (Covenants and Agreements of Optionee)
	 

	 	Annex B (Form of Exercise Notice)
	 

	 	Annex C (The Plan)
	 

	 	Annex D (Securityholders’ Agreement)

 

 

ANNEX A

COVENANTS AND AGREEMENTS OF OPTIONEE

1. Optionee acknowledges the time and expense incurred by the Company in connection with developing
proprietary and confidential information in connection with the Company’s business and operations.
Optionee agrees that Optionee will not, whether during Optionee’s service as an employee of the
Company or its Subsidiaries or at any time thereafter, divulge, communicate, or use to the
detriment of Sun Capital or the Company and their respective Subsidiaries and affiliates (the
“Group”) or any other person, firm or entity, confidential information or trade secrets relating to
any member of the Group, including, without limitation, business strategies, operating plans,
acquisition strategies (including the identities of (and any other information concerning) possible
acquisition candidates), financial information, market analyses, acquisition terms and conditions,
personnel information, know-how, customer lists and relationships, supplier lists and
relationships, or other non-public proprietary and confidential information relating to any member
of the Group. The foregoing confidentiality agreement shall not apply if the communication (i) is
required in the course of performing Optionee’s duties as an employee of the Company or its
Subsidiaries, (ii) is made with the Board of Directors’ written consent, (iii) relates to
information that is or becomes generally known by the public other than as a result of a breach
hereof, or (iv) is required by law or judicial or administrative process.

2. During Optionee’s service as an employee of the Company or its Subsidiaries and for the
period thereafter, Optionee shall not, to the detriment of any member of the Group, directly or
indirectly, for Optionee or on behalf of any other person, firm or entity: (i) solicit, hire,
employ, engage, retain or enter into a business affiliation with any person who at any time during
the preceding 12 month period was an employee of, the Company or any of its Subsidiaries, or (ii)
encourage, induce or attempt to encourage or induce any person who at any time during the preceding
12 month period was a supplier or customer of the Company or any of its Subsidiaries to cease doing
business with the Company or any of its Subsidiaries or to decrease the amount of business such
supplier or customer does with the Company or any of its Subsidiaries.

3. During Optionee’s service as an employee of the Company or its Subsidiaries and for the
period (or for such period during which Optionee receives severance from the Company, if longer)
thereafter, Optionee shall not, directly or indirectly, engage in, or serve as a principal,
partner, joint venturer, member, manager, trustee, agent, stockholder, director, officer or
employee of, or advisor to, or in any other capacity, or in any manner, own, control, manage,
operate, or otherwise participate, invest, or have any interest in, or be connected with, any
person, firm or entity that engages in any activity which competes directly or indirectly with any
business of the Company or its subsidiary or parent companies (collectively, the “Company
Business”) anywhere in the United States of America or any other country in which the Company
Business was conducted or related sales were effected during the preceding two years. THIS
PARAGRAPH 4 WILL NOT APPLY AND WILL NOT BE ENFORCED BY THE COMPANY WITH RESPECT TO POST-TERMINATION
ACTIVITY BY OPTIONEE THAT OCCURS IN CALIFORNIA OR IN ANY OTHER STATE IN WHICH THIS PROHIBITION IS
NOT ENFORCEABLE UNDER APPLICABLE LAW.

4. Whether during or after the term of Optionee’s employment or service, Optionee shall not
disparage, defame or discredit any member of the Group or engage in any activity which would have
the effect of disparaging, defaming or discrediting any member of the Group.

5. Optionee acknowledges that Optionee’s service as an employee of the Company or its Subsidiaries,
as the case may be, and the agreements herein are reasonable and necessary for the protection of
Sun Capital and the Company and its Subsidiaries and affiliates and are an essential inducement to
the Company’s grant of the

 

 

Option. Accordingly, Optionee shall be bound by the provisions hereof
to the maximum extent permitted by law, it being the intent and spirit of the parties that the
foregoing shall be fully enforceable. However, the parties further agree that, if any of the
provisions hereof shall for any reason be held to be excessively broad as to duration, geographical
scope, property or subject matter, such provision shall be construed by limiting and reducing it so
as to be enforceable to the extent compatible with the applicable law as it shall herein pertain.

6. Optionee acknowledges that the services to be rendered by Optionee to the Company or its
Subsidiaries are of a unique nature and that it would be difficult or impossible to replace such
services and that by reason thereof Optionee agrees and consents that if Optionee violates the
provisions of this Annex A, Sun Capital and the Company or its Subsidiaries and affiliates, in
addition to any other rights and remedies available under this Grant Agreement or otherwise, shall
be entitled to an injunction to be issued or specific performance to be required restricting
Optionee from committing or continuing any such violation.

 

 

ANNEX B

Stock Option Plan of Horsehead Holding Corp.

Notice of Exercise of Stock Option

     1. Exercise of Option. Pursuant to the 2006 Long-Term Equity Incentive Plan of
Horsehead Holding Corp. (the “Plan”) and my agreement with Horsehead Holding Corp. (the
“Company”) dated January 24, 2007 (the “Grant Agreement”), I hereby elect to exercise my
nonqualified stock option (the “Option”) to the extent of                      shares of Common Stock of
the Company (the “Shares”).

     2. Delivery of Payment. I hereby deliver to the Company a cashier’s check in the
amount of $                     in full payment of the purchase price of the Shares determined by multiplying
(a) the exercise price per Share as set forth in my Grant Agreement, by (b) the number of Shares as
to which I am exercising the Option and in satisfaction of my obligation to remit to the Company an
amount sufficient to satisfy any withholding tax obligations of the Company that arise in
connection with this exercise, or through such other payment method agreed to by the Company and
permitted under the terms of the Plan.

     3. Representations. In connection with my exercise of the Option, I hereby represent
to the Company as follows:

          (a) I am acquiring the Shares solely for investment purposes, with no present intention of
distributing or reselling any of the Shares or any interest therein. I acknowledge that the Shares
have not been registered under the Securities Act of 1933, as amended (the “Securities Act”).

          (b) I am aware of the Company’s business affairs and financial condition and have acquired
sufficient information about the Company to reach an informed and knowledgeable decision to acquire
the Shares.

          (c) I understand that the Shares are “restricted securities” under applicable U.S. federal and
state securities laws and that, pursuant to these laws, I must hold the Shares indefinitely unless
they are registered with the Securities and Exchange Commission and qualified by state authorities,
or unless an exemption from such registration and qualification requirements is available. I
acknowledge that the Company has no obligation to register or qualify the Shares for resale. I
further acknowledge that if an exemption from registration or qualification is available, it may be
conditioned on various requirements including, but not limited to, the time and manner of sale, the
holding period for the Shares, and requirements relating to the Company which are outside of my
control, and which the Company is under no obligation to and may not be able to satisfy.

          (d) I understand that there is no public market for the Shares, that no market may ever
develop for them, and that the Shares have not been approved or disapproved by the Securities and
Exchange Commission or any other federal, state or other governmental agency.

          (e) I understand that the Shares are subject to certain restrictions on transfer set forth in
the Plan. Both the Plan and the Grant Agreement are incorporated herein by reference.

          (f) I understand that any Shares purchased hereunder shall be subject to the Securityholders’
Agreement of the Company dated as of December 23, 2003, as it may be amended from time to time
(“Securityholders’ Agreement”), a copy of which has been provided to me, and that it is a condition
to the exercise of my Option that I execute the attached signature page of the Securityholders’

 

 

          Agreement, agreeing to be bound thereby. I have had a full and fair opportunity to review the
Securityholders’ Agreement prior to exercising the Option.

          (g) I understand that the certificate representing the Shares will be imprinted with the
following legends:

THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THE SECURITIES,
REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.

THIS CERTIFICATE AND THE SECURITIES REPRESENTED HEREBY ARE HELD SUBJECT TO
THE TERMS, COVENANTS AND CONDITIONS OF A SECURITYHOLDERS’ AGREEMENT DATED AS
OF DECEMBER 23, 2003, AS SUCH AGREEMENT MAY BE AMENDED, BY AND AMONG THE
STOCKHOLDERS OF HORSEHEAD HOLDING CORP., AND MAY NOT BE TRANSFERRED OR
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A
COPY OF SAID AGREEMENT AND ALL AMENDMENTS THERETO IS ON FILE AND MAY BE
INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.

          (h) I have consulted my own tax advisors in connection with my exercise of this Option and I
am not relying upon the Company for any tax advice.

          (i) I am presently an employee of the Company.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Submitted by the Optionholder:
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	By:	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Print Name:	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Address:	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Social Security No.	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Received and Accepted by the Company:
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Holding Corp.	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Print Name:	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 

Note: If options are being exercised on behalf of a deceased Plan participant, then this
Notice must be signed by such participant’s personal representative and must be accompanied by a
certificate issued by an appropriate authority evidencing that the individual signing this Notice
has been duly appointed and is currently serving as the participant’s personal representative under
applicable local law governing decedents’ estates.

 

 

ANNEX C

2006 LONG-TERM EQUITY INCENTIVE PLAN

(See attached.)

 

 

ANNEX D

SECURITYHOLDERS’ AGREEMENT

(See attached.)EX-10.3

 

Exhibit 10.3

SECOND AMENDED AND RESTATED 2004 STOCK OPTION PLAN

OF

HORSEHEAD HOLDING CORP.

          1. Purposes of the Plan. This Second Amended and Restated 2004 Stock Option Plan (the
“Plan”) is designed to provide an incentive to key employees (including managers and
officers who are key employees) of Horsehead Holding Corp., a Delaware corporation (the “Company”),
or any of its Subsidiaries (as defined in Paragraph 21) and consultants and board members
who are not employees of the Company, and to offer an additional inducement in obtaining the
services of such persons. The Plan provides for the grant of options to acquire shares of Common
Stock (as defined in Paragraph 21 hereof) of the Company which may be subject to
contingencies or restrictions.

          2. Subject to the Plan. Subject to the provisions of Paragraph 13, the aggregate
number of shares of Common Stock for which options may be granted under the Plan shall not exceed
1,684,944 shares. Such shares of Common Stock may, in the discretion of the Board of Directors of
the Company (the “Board of Directors” or the “Board”), consist either in whole or
in part of authorized but unissued shares of Common Stock or shares of Common Stock held in the
treasury of the Company. Subject to the provisions of Paragraph 14, any share of Common
Stock underlying an option granted under this Plan which for any reason expires, is canceled,
forfeited, or is terminated unexercised or which ceases for any reason to be exercisable, shall
again become available for the granting of options under the Plan. The Company shall at all times
during the term of the Plan reserve and keep available such number of shares of Common Stock as
will be sufficient to satisfy the requirements of the Plan.

          3. Administration of the Plan. The Plan shall be administered by the Board of Directors or a
committee of the Board of Directors that is composed solely of two or more Non-Employee Directors
as that term is defined in the rules and regulations promulgated under Section 16(b) of the
Exchange Act (the Board of Directors and such committee being referred to collectively as the
“Committee”). A majority of the members of the Committee shall constitute a quorum, and
the acts of a majority of the members present at any meeting at which a quorum is present, and any
acts approved in writing by all members of the Committee without a meeting, shall be the acts of
the Committee.

               Subject to the express provisions of the Plan and the grant agreement referred to in
Paragraph 12 hereof (the “Agreement”), the Committee shall have the authority, in
its sole discretion, to make all determinations relating to the Plan, including, but not limited
to, the right to determine: the key employees of the Company (or its Subsidiaries), consultants and

1

 

members of the Board, who shall be granted options; the type of option to be granted; the
times when an option shall be granted; whether the options comply with the requirements of Code
Section 409A; the number of shares of Common Stock to be subject to each option; the term of each
option; the date each option shall vest and become exercisable; whether an option shall be
exercisable in whole, in part or in installments and, if in installments, the number of shares of
Common Stock to be subject to each installment, whether the installments shall be cumulative, the
date each installment shall become exercisable and the term of each installment; whether to
accelerate the date of exercise of any option or installment; whether shares of Common Stock may be
issued upon the exercise of an option as partly paid and, if so, the dates when future installments
of the exercise price shall become due and the amounts of such installments; the exercise price of
each option; the form of payment of the exercise price; whether to restrict the sale or other
disposition of the shares of Common Stock acquired upon the exercise of an option and, if so,
whether and under what conditions to waive any such restriction; whether and under what conditions
to subject all or a portion of the grant or exercise of an option or the shares of Common Stock
acquired pursuant to the exercise of an option to the fulfillment of certain restrictions or
contingencies as specified in the Agreement, including without limitation, restrictions or
contingencies relating to entering into a covenant not to compete with the Company, any of its
Subsidiaries or a Parent (as defined in Paragraph 21), to financial objectives for the
Company, any of its Subsidiaries or a Parent or any of its affiliates, a division of any of the
foregoing, a product line or other category, and/or to the period of continued employment of the
optionee with the Company, any of its Subsidiaries or a Parent or any of its affiliates, and to
determine, in each case, whether such limitations, restrictions or contingencies have been met;
whether an optionee is Disabled (as defined in Paragraph 21); the amount, if any, necessary
to satisfy the obligation of the Company, a Subsidiary or Parent to withhold taxes or other
amounts; the fair market value (as defined in Paragraph 21 hereof) of a share of Common
Stock; to construe the respective Agreement and the Plan; with the consent of the optionee, to
cancel or modify an option, provided, that the modified provision is permitted to be
included in an option granted under the Plan on the date of the modification, and further,
provided, that in the case of a modification, such option as modified would be permitted to
be granted on the date of such modification under the terms of the Plan; to prescribe, amend and
rescind rules and regulations relating to the Plan; and to make all other determinations necessary
or advisable for administering the Plan. Any controversy or claim arising out of or relating to
the Plan, any option granted under the Plan or any Agreement shall be determined unilaterally by
the Committee in its sole discretion. The determinations of the Committee on the matters referred
to in this Paragraph 3 shall be conclusive and binding on the parties. No member or former
member of the Committee shall be liable for any action, failure to act or determination made in
good faith with respect to the Plan, any Agreement or any option hereunder.

               The Company may establish a committee of outside directors meeting the requirements of Code
Section 162(m) to (i) approve the grant of options that might reasonably be anticipated to result
in the payment of employee remuneration that would otherwise exceed the limit on employee
remuneration deductible for income tax purposes by the Company pursuant to

2

 

Code Section 162(m) and (ii) administer the Plan. In such event, the powers reserved to the
Committee in the Plan shall be exercised by such compensation committee. In addition, options under
the Plan shall be granted upon satisfaction of the conditions to such grants provided pursuant to
Code Section 162(m) and any Treasury Regulations promulgated thereunder.

          It is the Company’s intent that the options not be treated as a nonqualified deferred
compensation plan that fails to meet the requirements of Section 409A(a)(2), (3) or (4) of the Code
and that any ambiguities in construction be interpreted in order to effectuate such intent.
Options under the Plan shall contain such terms as the Committee determines are appropriate to
comply with the requirements of Section 409A of the Code. In the event that, after the issuance of
an option under the Plan, Section 409A of the Code or regulations thereunder are issued or amended,
or the Internal Revenue Service or Treasury Department issues additional guidance interpreting
Section 409A of the Code, the Committee may modify the terms of any such previously issued option
to the extent the Committee determines that such modification is necessary to comply with the
requirements of Section 409A of the Code.

          4. Eligibility. The Committee may from time to time, in its sole discretion, consistent with
the purposes of the Plan, grant options to (a) key employees (including officers and managers or
directors who are key employees) of the Company or any of its Subsidiaries, (b) consultants to the
Company or any of its Subsidiaries or (c) members of the Board. Such options granted shall cover
such number of shares of Common Stock as the Committee may determine, in its sole discretion, as
set forth in the applicable Agreement.

          5. Non-qualified Options. It is the Company’s intent that only Non-qualified Stock Options,
and not “incentive stock options” within the meaning of Section 422A of the Code, be granted under
the Plan and that any ambiguities in construction be interpreted in order to effectuate such
intent. The Committee may from time to time grant to eligible participants Non-qualified Stock
Options. The options granted shall take such form as the Committee shall determine, subject to the
terms and conditions herein.

          6. Exercise Price. The exercise price of the shares of Common Stock under each option shall
be determined by the Committee, in its sole discretion, and set forth in the applicable Agreement.

          7. Term. The term of each option granted pursuant to the Plan shall be such term as is
established by the Committee, in its sole discretion, as set forth in the applicable Agreement;
provided, however, that the term of each option granted pursuant to the Plan shall
be for a period not exceeding 10 years from the date of grant thereof; and further,
provided, that options shall be subject to earlier termination as hereinafter provided.

          8. Exercise. An option (or any part or installment thereof), to the extent then exercisable,
shall be exercised by giving written notice to the Company at 300 Frankfort Road,

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Monaca, Pennsylvania 15601, Attention: Ali Alavi, in the form established by the Committee and
accompanied by payment in full of the aggregate exercise price therefor (a) in cash or by certified
check or (b) in such other form as the Committee may approve. The Company shall not be required to
issue any shares of Common Stock pursuant to any such option until all required payments, including
any required withholding, have been made and all required actions have been taken.

               A person entitled to receive shares of Common Stock upon the exercise of an option shall not
have the rights of a stockholder of the Company with respect to such stock until the date of
issuance of a certificate for such shares of Common Stock, or in the case of uncertificated shares
of Common Stock, an entry is made on the books of the Company’s transfer agent representing such
shares.

               In no case may a fraction of a share of Common Stock be purchased or issued under the Plan.

     9. Termination of Relationship.

               (a) Employees and Consultants. Except as may otherwise be expressly provided in the
applicable Agreement, an optionee whose relationship with the Company, its Parent or Subsidiaries
as an employee or a consultant has terminated for any reason (other than as a result of the death
or Disability of the optionee) may exercise his options, to the extent exercisable on the date of
such termination, on the date of termination or at any time on or before the 15th day of
the third calendar month following the date of termination, but not thereafter and in no event
after the date the option would otherwise have expired; provided, however, that (i)
if such relationship is terminated for Cause (as defined in Paragraph 21), such option
shall terminate on the day immediately before the date of such termination and (ii) if such
relationship is terminated without the consent of the Company, such option shall terminate on the
day of such termination. Except as may otherwise be expressly provided in the applicable
Agreement, options granted under the Plan to an employee or consultant shall not be affected by any
change in the status of the optionee so long as the optionee continues to be an employee of, or a
consultant to, the Company, or any of the Subsidiaries or a Parent (regardless of having changed
from one to the other or having been transferred from one corporation to another).

               (b) Board Members. Except as may otherwise be expressly provided in the applicable
Agreement, an optionee whose relationship with the Company as a Board member ceases for any reason
(other than as a result of his death or Disability) may exercise his options, to the extent
exercisable on the date of such termination, on the date of termination or at any time on or before
the 15th day of the third calendar month following the date of termination, but not
thereafter and in no event after the date the option would otherwise have expired;
provided, however, that (i) if such relationship is terminated for Cause, such
option shall terminate on the day immediately before the date of such termination and (ii) if such
relationship is terminated

4

 

without the consent of the Company, such option shall terminate on the day of such termination.
Except as may otherwise be expressly provided in the applicable Agreement, options granted to a
Board member shall not be affected by the optionee becoming an employee of, or consultant to, the
Company, any of its Subsidiaries or a Parent.

               (c) General. Nothing in the Plan or in any option granted under the Plan shall confer
on any optionee any right to continue in the employ of, or as a consultant to, the Company, any of
its Subsidiaries or a Parent, or as a manager or director of the Company, or interfere in any way
with any right of the Company, any of its Subsidiaries or a Parent to terminate the optionee’s
relationship at any time for any reason whatsoever without liability to the Company, any of its
Subsidiaries or a Parent.

          10. Death or Disability of an Optionee.

               (a) Employees and Consultants.

                    (i) Except as may otherwise be expressly provided in the applicable Agreement, if an optionee
dies while he is an employee of, or consultant to, the Company, any of its Subsidiaries or a
Parent, the options that were granted to him as an employee or consultant may be exercised, to the
extent exercisable on the date of his death, by his Legal Representative (as defined in
Paragraph 21) on the date of death or at any time before the later of (A) December 31 of
the year in which the optionee dies or (B) the 15th day of the third calendar month
following the date on which the optionee dies, but not thereafter and in no event after the date
the option would otherwise have expired.

                    (ii) Except as may otherwise be expressly provided in the applicable Agreement, any optionee
whose relationship as an employee of, or consultant to, the Company, its Parent and Subsidiaries
has terminated by reason of such optionee’s Disability may exercise the options that were granted
to him as an employee or consultant, to the extent exercisable upon the effective date of such
termination, on the date of termination or at any time before the later of (A) December 31 of the
year in which termination occurs or (B) the 15th day of the third calendar month
following the date on which termination occurs, but not thereafter and in no event after the date
the option would otherwise have expired.

               (b) Board Members. Except as may otherwise be expressly provided in the applicable
Agreement, any optionee whose relationship as a Board member ceases as a result of his death or
Disability may exercise the options that were granted to him as a Board member, to the extent
exercisable on the date of such termination, on the date of termination or at any time on or before
the 15th day of the third calendar month following the date of termination, but not
thereafter and in no event after the date the option would otherwise have expired. In the case of
the death of the Board member, the option may be exercised by his Legal Representative.

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          11. Compliance with Securities Laws. The Committee may require, in its sole discretion, as a
condition to the exercise of any option that either (a) a Registration Statement under the
Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of
Common Stock to be issued upon such grant or exercise shall be effective and current at the time of
grant or exercise, or (b) there is an exemption from registration under the Securities Act for the
issuance of the shares of Common Stock upon such grant or exercise. Nothing herein shall be
construed as requiring the Company to register the shares of Common Stock subject to any option
under the Securities Act or to keep any Registration Statement effective or current.

               The Committee may require, in its sole discretion, as a condition to the receipt of an option
or the exercise of any option hereunder that the optionee execute and deliver to the Company his
representations and warranties, in form, substance and scope satisfactory to the Committee, which
representations and warranties the Committee determines are necessary or convenient in connection
with qualifying for an exemption from the registration requirements of the Securities Act,
applicable state securities laws or satisfying other legal requirements.

               In addition, if at any time the Committee shall determine, in its sole discretion, that the
listing or qualification of the shares of Common Stock subject to any option on any securities
exchange or under any applicable law, or the consent or approval of any governmental agency or
regulatory body, is necessary or desirable as a condition to, or in connection with, the granting
of an option or the issuing of shares of Common Stock thereunder, such option may not be granted
and such option may not be exercised in whole or in part unless such listing, qualification,
consent or approval shall have been effected or obtained free of any conditions not acceptable to
the Committee.

          12. Agreements. Each option shall be evidenced by an appropriate Agreement which shall be
duly executed by the Company and the optionee, and shall contain such terms, provisions and
conditions not inconsistent herewith as may be determined by the Committee. The terms of each
option and Agreement need not be identical.

          13. Adjustments Upon Changes in Interests. Notwithstanding any other provision of the Plan, in
the event of:

               (a) A dividend, recapitalization, or a spin-off, split-up, combination or exchange of shares
of Common Stock or the like which results in a change in the number or kind of shares of Common
Stock outstanding immediately prior to such event, the Committee shall appropriately adjust the
aggregate number and kind of shares of Common Stock subject to the Plan, the aggregate number and
kind of shares of Common Stock subject to each outstanding option and the exercise price thereof.
Such adjustments shall be conclusive and binding on all

6

 

parties and may provide for the elimination of fractional shares of Common Stock which might
otherwise be subject to options without payment therefor.

               (b) A merger, consolidation, or sale by the Company of all or substantially all of its assets,
in which the Company is not the surviving corporation, except as set forth below or in the
Agreement, the options granted hereunder as of the date of such event shall continue to be
outstanding and the optionee shall be entitled to receive in exchange therefor an option in the
surviving corporation for the same number of shares of Common Stock as he would have been entitled
to receive if he had exercised the options granted hereunder immediately prior to the transaction
and actually owned the shares of Common Stock subject to such option. The exercise price of the
option in the surviving corporation shall be such that the aggregate consideration for the shares
of Common Stock subject to the option in the surviving corporation shall be equal to the aggregate
consideration payable with respect to the option granted under the Plan.

               Notwithstanding the foregoing, the Company shall have the right, by written notice, provided
to an optionee sent no later than 5 days prior to the proposed sale of assets, merger or
consolidation (as determined by the Board of Directors in its sole discretion) or by inclusion in
the applicable Agreement, to advise the optionee that upon consummation of the transaction all
options granted to any optionee under the Plan and not therefore exercised (or which are not then
currently exercisable) shall terminate and be void, in which event, the optionee shall have the
right to exercise all options then currently exercisable in accordance with the terms of the
applicable Agreement within 2 days after the date of the notice from the Company or as otherwise
provided in the Agreement.

          14. Amendments and Termination of the Plan. The Plan was adopted by the Board of Directors as
of September 15, 2004, amended and restated as of December 7, 2005 and further amended and restated
as of November [ ], 2006. The Board of Directors, without further approval of the Company’s
stockholders, may at any time suspend or terminate the Plan, in whole or in part, or amend it from
time to time in such respects as it may deem advisable, including, without limitation, to comply
with any change in applicable law, regulations, rulings or interpretations of any administrative
agency; provided, however, that no amendment for which applicable regulation
related to the listing, registration or qualification of the shares subject to the Plan upon any
securities exchange or applicable law requires stockholder approval shall be effective without the
requisite prior or subsequent stockholder approval. No termination, suspension or amendment of the
Plan shall, without the consent of the optionees holding a majority of all options granted under
the Plan (based on the number of underlying shares of Common Stock issuable upon the exercise of
all such options), adversely affect their rights under any option granted under the Plan. The
power of the Committee to construe and administer any option granted under the Plan prior to the
termination or suspension of the Plan nevertheless shall continue after such termination or during
such suspension.

7

 

          15. Non-Transferability. No option granted under the Plan shall be transferable other than by
will or the laws of descent and distribution, and options may be exercised, during the lifetime of
the optionee, only by the optionee or his Legal Representatives. Except to the extent provided
above, options may not be assigned, transferred, pledged, hypothecated or disposed of in any way
(whether by operation of law or otherwise) and shall not be subject to execution, attachment or
similar process, and any such attempted assignment, transfer, pledge, hypothecation or disposition
shall be null and void ab initio and of no force or effect.

          16. Withholding Taxes. The Company, a Subsidiary or Parent may withhold (a) cash, (b) shares
of Common Stock to be issued upon exercise of an option having an aggregate fair market value on
the relevant date, or (c) any combination thereof, in an amount equal to the amount which the
Committee determines is necessary to satisfy the obligation of the Company, a Subsidiary or Parent
to withhold Federal, state and local income taxes or other amounts incurred by reason of the grant,
vesting, exercise or disposition of an option, or the disposition of the underlying shares of
Common Stock. Alternatively, the Company may require the holder to pay to the Company such
amount, in cash, promptly upon demand.

               The Company may require, as a condition to any grant or exercise under the Plan, that the
grantee make provision for the payment to the Company of federal, state or local taxes of any kind
required by law to be withheld with respect to any grant, vesting, exercise or disposition of any
option. Participants shall be required to indemnify or reimburse the Company with respect to any
federal, state or local taxes of any kind that the Company is required by law to withhold with
respect to any grant, vesting, exercise or disposition of any option, to the extent the Company
does not or cannot withhold such amount. Without limiting the generality of the foregoing, the
Company, to the extent permitted or required by law, shall have the right to deduct from any
payment(s) of any kind (including salary or bonus) otherwise due to a grantee, a total amount not
to exceed the amount of any federal, state or local taxes of any kind required by law to be
withheld with respect to any grant, vesting, exercise or disposition of any option.

          17. Legends; Payment of Expenses. The Company may endorse such legend or legends upon the
certificates for shares of Common Stock issued upon exercise of an option under the Plan and may
issue such “stop transfer” instructions to its transfer agent in respect of such shares as it
determines, in its discretion, to be necessary or appropriate to (a) prevent a violation of, or to
qualify for an exemption from, the registration requirements of the Securities Act and any
applicable state securities laws, or (b) implement the provisions of the Plan or any agreement
between the Company and the optionee with respect to such shares of Common Stock. Each optionee
may, in the Committee’s discretion, be required either to execute a stockholders’ agreement as a
condition to receiving a grant of options hereunder or to exercising any options granted hereunder.

8

 

               The Company shall pay all issuance taxes with respect to the issuance of shares of Common
Stock upon the exercise of an option granted under the Plan, as well as all fees and expenses
incurred by the Company in connection with such issuance.

          18. Use of Proceeds. The cash proceeds received upon the exercise of an option under the Plan
shall be added to the general funds of the Company and used for such corporate purposes as the
Board of Directors may determine.

          19. Substitutions and Assumptions of Options of Certain Constituent Corporations. Anything in
this Plan to the contrary notwithstanding, the Board of Directors may, without further approval by
the stockholders, substitute new options for prior options of a Constituent Corporation (as defined
in Paragraph 21) or assume the prior options of such Constituent Corporation;
provided, however, that no substitution or assumption for which applicable
regulation or applicable law requires stockholder approval shall be effective without the requisite
prior or subsequent stockholder approval.

          20. Definitions. For purposes of the Plan, the following terms shall be defined as set forth
below:

               (a) “Board” or “Board of Directors” shall mean the Board of Directors of the Company.

               (b) “Cause” shall mean (i) in the case of an employee or consultant, if there is a written
employment or consulting agreement between the optionee and the Company, any of its Subsidiaries or
a Parent which defines termination of such relationship for cause, “cause” as defined in such
agreement, and (ii) in the absence of such agreement, (A) conviction of the employee or consultant
of any felony, or the conviction of the employee or consultant of a misdemeanor which involves
moral turpitude, or the entry by the employee or consultant of a plea of guilty or nolo contendere
with respect to any of the foregoing, (B) the commission of any act or failure to act by such
employee or consultant that involves moral turpitude, dishonesty, theft, destruction of property,
fraud, embezzlement or unethical business conduct, or that is otherwise injurious to the Company or
any of its affiliates, whether financially or otherwise, (C) any violation by such employee or
consultant of any rule or policy of the Company or any of its affiliates, or (D) any violation by
such employee or consultant of the requirements of any other contract or agreement between the
Company (or any of its affiliates) and such employee or consultant, and the failure of such
employee or consultant to cure such violation within ten (10) days after receipt of written notice
from the Company; in each case, with respect to subsections (A) through (E), as determined in good
faith by the Board of Directors of the Company in the exercise of its reasonable business judgment.

               (c) “Code” shall mean the Internal Revenue Code of 1986, as amended, and any successor
thereto.

9

 

               (d) “Common Stock” means shares of common stock, par value $.01 per share, of the Corporation.

               (e) “Constituent Corporation” shall mean any corporation which engages with the Company, any
of its Subsidiaries or a Parent in a transaction to which Section 424(a) of the Code applies, or
any Parent, Subsidiary or affiliate of such corporation.

               (f) “Disabled” or “Disability” shall mean a permanent and total disability within the meaning
of Section 22(e)(3) of the Code.

               (g) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and any
successor thereto.

               (h) “Fair Market Value” shall mean as of any applicable date, (i) if the principal securities
market on which the Common Stock is traded is a national securities exchange, The Nasdaq National
Market (“NNM”) or The Nasdaq SmallCap Market (“NSM”), the closing price of the Common Stock on such
exchange, the NNM or the NSM, as the case may be, as of the applicable date, or if no sale of the
Common Stock shall have occurred on such date, on the next preceding date on which there was a
reported sale; (ii) if the principal securities market on which the Common Stock is traded is not a
national securities exchange, the NNM or the NSM, the average of the bid and asked prices reported
by the National Quotation Bureau, Inc.; (iii) if not reported by the National Quotation Board, the
closing price of a share of Common Stock on the date of grant as reported on the OTC Bulletin
Board; or (iv) if the price of the Common Stock is not so reported, the Board of Directors’ good
faith determination of the fair value of one share of Common Stock as of the applicable reference
date, which determination shall be consistent with the requirements of Section 422(c) of the Code.

               (i) “Legal Representative” shall mean the executor, administrator or other person who at the
time is entitled by law to exercise the rights of a deceased or incapacitated optionee with respect
to an option granted under the Plan.

               (j) “Non-qualified Stock Option” means any stock option other than an incentive stock option
as defined in Section 422 of the Code and any successor thereto.

               (k) “Parent” shall have the same definition as “parent corporation” in Section 424(e) of the
Code.

               (l) “Subsidiary” shall have the same definition as “subsidiary corporation” in Section 424(f)
of the Code.

10

 

          21. Governing Law; Construction. The Plan, the options and any Agreement hereunder and all
related matters shall be governed by, and construed in accordance with, the laws of the State of
Delaware, without regard to conflict of law provisions.

               Neither the Plan nor any Agreement shall be construed or interpreted with any presumption
against the Company by reason of the Company causing the Plan or Agreement to be drafted. Whenever
from the context it appears appropriate, any term stated in either the singular or plural shall
include the singular and plural, and any term stated in the masculine, feminine or neuter gender
shall include the masculine, feminine and neuter.

          22. Partial Invalidity. The invalidity, illegality or unenforceability of any provision in
the Plan, any option or Agreement shall not affect the validity, legality or enforceability of any
other provision, all of which shall be valid, legal and enforceable to the fullest extent permitted
by applicable law.

11

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