Horsehead Holding DEF 14A 2009
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
HORSEHEAD HOLDING CORP.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
April 2, 2009
To our Stockholders:
You are cordially invited to attend the Horsehead Holding Corp. annual meeting of stockholders at 11:00 a.m. local time on May 14, 2009 at the InterContinental Chicago, 505 North Michigan Avenue, Chicago, Illinois 60611. The attached Notice of Annual Meeting and Proxy Statement describes all known items to be acted upon by stockholders at the meeting and describes certain other details related to the Meeting.
It is important that your shares are represented at the annual meeting, whether or not you plan to attend. To ensure your shares will be represented, we ask that you vote your shares by completing, signing, dating and returning the enclosed proxy card by mail, or you may vote by telephone or electronically through the Internet, as further described on the proxy card. Please vote your shares as soon as possible. This is your annual meeting and your participation is important.
If you are a registered stockholder and plan to attend the annual meeting, you may be required to show evidence of your stockholdings to gain entry to the meeting. If you hold shares through a broker or other nominee, you will be required to present a current statement from that institution showing a Horsehead stockholding or the non-voting portion of the voting instruction form that you may receive through that entity. Please note that the document evidencing your stockholdings to be used to gain entry to the meeting is non-transferable.
Please vote your shares promptly and join us at the meeting.
James M. Hensler
President and Chief Executive Officer
To our Stockholders:
The 2009 annual meeting of stockholders of Horsehead Holding Corp. will be held at the InterContinental Chicago, 505 North Michigan Avenue, Chicago, Illinois 60611, on May 14, 2009, beginning at 11:00 a.m. local time. At the meeting, the holders of the Companys outstanding common stock will act on the following matters:
(1) the election of two Class III directors, each to serve a term of three years; and
(2) any other business as may properly come before the meeting or any adjournment or postponement thereof.
Stockholders of record at the close of business on April 1, 2009 are entitled to notice of and to vote at the annual meeting and any postponements or adjournments thereof.
Whether or not you expect to be present at the meeting, please vote your shares by following the instructions on the enclosed proxy card or voting instruction card. If your shares are held in the name of a bank, broker or other recordholder, their voting procedures should be described on the voting form they sent you. Any person voting by proxy has the power to revoke it at any time prior to its exercise at the meeting in accordance with the procedures described in the accompanying proxy statement.
Please note that space limitations make it necessary to limit attendance to stockholders . Admission to the meeting will be on a first-come, first-served basis. Registration for the meeting will begin at 10:30 a.m. local time, and seating will begin at 10:45 a.m. local time. You may be required to show evidence of your stockholdings. If you hold shares through a broker or other nominee, you will be required to present a current statement from that institution showing a Horsehead stockholding or the non-voting portion of the voting instruction form that you may receive through that entity. Please note that the document evidencing your stockholdings to be used to gain entry to the meeting is non-transferable. Cameras (including cellular phones with photographic capabilities) and recording devices will not be permitted at the meeting.
By order of the Board of Directors,
Vice President Corporate Administration,
General Counsel and Secretary
April 2, 2009
4955 Steubenville Pike
Pittsburgh, Pennsylvania 15205
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 14, 2009
The Board of Directors (the Board) of Horsehead Holding Corp. (the Company or Horsehead) is soliciting proxies from its stockholders to be used at the annual meeting of stockholders to be held on May 14, 2009 (the Annual Meeting), beginning at 11:00 a.m. local time, at the InterContinental Chicago, 505 North Michigan Avenue, Chicago, Illinois 60611, and at any postponements or adjournments thereof. This Proxy Statement contains information related to the Annual Meeting. The notice of annual meeting, a proxy card, this Proxy Statement and the Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 16, 2008 for the fiscal year ended December 31, 2008 (the 2008 Annual Report) are being mailed to stockholders on or about April 9, 2009.
ABOUT THE ANNUAL MEETING
Our Board of Directors is soliciting proxies for the 2009 annual meeting of stockholders. You are receiving a proxy statement because you owned shares of our common stock on April 1, 2009, and that entitles you to vote at the Annual Meeting. By use of a proxy, you can ensure that your vote is counted at the Annual Meeting whether or not you attend the Annual Meeting. This proxy statement describes the matters on which we would like you to vote and provides information on those matters so that you can make an informed decision.
The notice of annual meeting, a proxy card, this Proxy Statement and the 2008 Annual Report are being mailed to stockholders on or about April 9, 2008.
The information in this Proxy Statement relates to the proposals to be voted on at the Annual Meeting, the voting process, our Board, and Board committees, the compensation of directors and executive officers for fiscal 2008 and other information that the SEC requires us to provide annually to our stockholders.
Stockholders can access our 2008 Annual Report, our other filings with the SEC and our corporate governance and other information on the investor relations page of our website at www.horsehead.net.
Stockholders may request an additional free copy of our 2008 Annual Report from:
Horsehead Holding Corp.
Attn: General Counsel
4955 Steubenville Pike
Pittsburgh, Pennsylvania 15205
We will also furnish any exhibit to the 2008 Annual Report if specifically requested.
At the Annual Meeting, stockholders will act upon the matters outlined in the accompanying notice of annual meeting. In addition, management will report on our fiscal 2008 performance and respond to appropriate questions from stockholders.
Only stockholders of record at the close of business on April 1, 2009, the Record Date for the Annual Meeting, are entitled to receive notice of and to participate in the Annual Meeting. If you were a stockholder of record on the Record Date, you will be entitled to vote all of the shares that you held on that date at the Annual Meeting, or any postponements or adjournments of the Annual Meeting.
You will be entitled to one vote for each outstanding share of Horsehead common stock you owned as of the close of business on the Record Date on each matter considered at the Annual Meeting. As of the close of business on the Record Date, there were [35,253,803] shares of the Companys common stock outstanding and eligible to vote. There is no cumulative voting.
Subject to space availability, all stockholders as of the Record Date, or their duly appointed proxies, may attend the Annual Meeting. Registration will begin at 10:30 a.m. local time, and seating will begin at 10:45 a.m. local time. If you attend, please note that you may be asked to present proof of your stockholdings and valid identification. Cameras (including cell phones with photographic capabilities) and recording devices will not be permitted at the Annual Meeting.
Please note that if you hold your shares in street name (that is, through a broker, bank or other nominee), you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the Record Date and check in at the registration desk at the Annual Meeting.
Please let us know if you plan to attend the Annual Meeting by marking the appropriate box on the enclosed proxy card.
The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the aggregate voting power of the common stock outstanding on the Record Date will constitute a quorum, permitting the conduct of business at the Annual Meeting. As of the close of business on the Record Date, 35,253,803 shares of common stock, representing the same number of votes, were outstanding. Thus, the presence, in person or by proxy, of the holders of common stock representing at least 17,626,902 votes will be required to establish a quorum.
Proxies received but marked as abstentions will be included in the calculation of the number of votes considered to be present at the Annual Meeting.
If you are a holder of record (that is, your shares are registered in your own name with our transfer agent), you can vote either in person at the Annual Meeting or by proxy without attending the Annual Meeting. We urge you to vote by proxy even if you plan to attend the Annual Meeting so that we will know as soon as possible that enough votes will be present for us to hold the Annual Meeting. If you attend the Annual Meeting in person, you may vote at the Annual Meeting and your proxy will not be counted. You can vote by proxy by any of the following methods.
Voting by Proxy Card. Each stockholder may vote by proxy by using the enclosed proxy card. When you return a proxy card that is properly signed and completed, the shares of common stock represented by your proxy will be voted as you specify on the proxy card.
Voting by Telephone or Through the Internet. If you are a registered stockholder (that is, if you own common stock in your own name and not through a broker, bank or other nominee that holds common stock for your account in a street name capacity), you may vote by proxy by using either the telephone or Internet methods of voting. Proxies submitted by telephone or through the Internet must be received by 11:59 p.m., Eastern Daylight Savings time, on May 13, 2009. Please see the proxy card provided to you for instructions on how to access the telephone and Internet voting systems.
If you hold your shares in street name, you must either direct the bank, broker or other record holder of your shares as to how to vote you shares, or obtain a proxy from the bank, broker or other record holder to vote at the Annual Meeting. Please refer to the voter instruction cards used by your bank, broker or other record holder for specific instructions on methods of voting, including by telephone or using the Internet.
If you return the proxy card but you do not indicate your voting preferences, then the individuals named on the proxy card will vote your shares in accordance with the recommendations of the Board. The Board and management do not now intend to present any matters at the Annual Meeting other than those outlined in the notice of annual meeting. Should any other matter requiring a vote of stockholders arise, stockholders returning the proxy card confer upon the individuals named on the proxy card discretionary authority to vote the shares represented by such proxy on any such other matter in accordance with their best judgment.
Yes. If you are a stockholder of record, you may revoke or change your vote at any time before the proxy is exercised by filing with the Secretary of the Company a notice of revocation or another proxy bearing a later date or by attending the Annual Meeting and voting in person. In either case, the powers of the proxy holders will be suspended if you attend the Annual Meeting in person and so request, although attendance at the Annual Meeting will not by itself revoke a previously granted proxy.
We are soliciting this proxy on behalf of our Board of Directors by mail and will pay all expenses associated with this solicitation. In addition to mailing these proxy materials, certain of our officers and other employees may, without compensation other than their regular compensation, solicit proxies by further mailing or personal conversations, or by telephone, facsimile or other electronic means. We will also, upon request, reimburse brokers and other persons holding stock in their names, or in the names of nominees, for their reasonable out-of-pocket expenses for forwarding proxy materials to the beneficial owners of our common stock and for obtaining proxies.
The cost of this solicitation will be borne by the Company. Solicitation will be made by mail, by telecopy and telephone and personally by a few officers and regular employees of the Company who will not receive additional compensation for such solicitation. Brokers, banks and other nominees will, upon request, be reimbursed for out-of-pocket expenses incurred in obtaining proxies or authorizations from the beneficial owners of our common stock. In addition, the Company has engaged Broadridge Financial Solutions, Inc. to assist in the general distribution of this Proxy Statement and the 2008 Annual Report and the tabulation of votes.
Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board. The Boards recommendation is set forth together with the description of each item in this Proxy Statement. In summary, the Board recommends a vote FOR each of the proposals.
To the knowledge of the Company and its management, stockholders will vote only on the matters described in this Proxy Statement. However, if any other matters properly come before the Annual Meeting, the persons named as proxies for stockholders will vote on those matters in the manner they consider appropriate.
Election of Directors. The two director nominees who receive the highest number of properly executed votes will be elected as directors, even if those nominees do not receive a majority of the votes cast. Each share of our common stock is entitled to one vote for each of the director nominees. A properly executed proxy marked withhold authority with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for purposes of determining whether there is a quorum.
A properly executed proxy marked abstain with respect to any matter will not be voted, although it will be counted for purposes of determining whether there is a quorum. Accordingly, an abstention will have the effect of a negative vote.
In the election of directors, you may vote FOR all or some of the nominees or your vote may be WITHHELD with respect to one or more of the nominees. You may not cumulate your votes for the election of directors.
For the other items of business, you may vote FOR, AGAINST or ABSTAIN. If you elect to ABSTAIN, the abstention has the same effect as a vote AGAINST. If you provide specific instructions with regard to certain items, your shares will be voted as you instruct on such items.
If you hold shares beneficially in street name and do not provide your broker with voting instructions, your shares may constitute broker non-votes. Generally, broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner and instructions are not given. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes are not considered votes cast on that proposal. Thus, broker non-votes will not affect the outcome of any matter being voted on at the Annual Meeting, assuming that a quorum is obtained. Abstentions are considered votes cast and thus have the same effect as votes against the matter. The Company has supplied copies of its proxy materials for the Annual Meeting to the broker, bank or other nominee holding your shares of record, and they have the responsibility to send these proxy materials to you.
If you are a beneficial owner and your broker, bank or other nominee holds your shares in its name, the broker, bank or other nominee is permitted to vote your shares on the election of directors, even if the broker, bank or other nominee does not receive voting instructions from you.
If you vote by proxy, and if unforeseen circumstances make it necessary for the Board to substitute another person for a nominee, the individuals named on the proxy card will vote your shares for that other person.
You may receive more than one set of voting materials, including multiple copies of this Proxy Statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please vote your shares applicable to each proxy card and voting instruction card that you receive.
The Company intends to announce the preliminary voting results at the Annual Meeting and publish the final results in its quarterly report on Form 10-Q for the quarter ending June 30, 2009.
How may I obtain a copy of Horseheads By-law provisions regarding stockholder proposals and director nominations?
You may contact the Corporate Secretary at our principal executive offices for a copy of the relevant by-law provisions regarding the requirements for making stockholder proposals and nominating director candidates. Our by-laws are available also on our website at www.horsehead.net.
A list of the stockholders of the Company entitled to attend and vote at the Annual Meeting will be available for viewing during normal business hours during the ten days preceding the date of the Annual Meeting at the Companys offices located at:
4955 Steubenville Pike
Pittsburgh, Pennsylvania 15205
The list will be available for viewing also at the Annual Meeting. You must be a stockholder of the Company and present valid identification to view the list.
This proxy statement and our 2008 Annual Report to stockholders are available at www.proxyvote.com.
Our Certificate of Incorporation provides that the number of directors that constitute the Board of Directors shall be fixed from time to time by resolution adopted by the affirmative vote of a majority of the total number of directors then in office. The number of authorized directors as of the date of this Proxy Statement is five. We have three classes of directors and each class is required by our by-laws to be as equal as possible in number. One class is to be elected at each annual meeting of stockholders. Currently, there are one Class I director, two Class II directors and two Class III directors. At the 2009 annual meeting, to which this Proxy Statement relates, the term of the Class III directors will expire. You are being asked to vote to elect two directors to Class III each to serve for a three-year term expiring in 2012.
We will vote your shares as you specify on the enclosed proxy or voting instruction card. If you do not specify how you want your shares voted, we will vote them FOR the election of the nominees listed below. If unforeseen circumstances (such as death or disability) make it necessary for us to substitute another person for any nominee, we will vote your shares FOR that other person. If you wish to withhold your vote from any nominee, you may so indicate on the proxy card. Proxies cannot be voted for a greater number of persons than the number of nominees named. The two nominees for Class III directors receiving the greatest number of votes will be elected as a directors.
The nominees for director have consented to serve, if elected, and we have no reason to believe that the nominees will be unable to serve. If any nominee named herein for election as a director should for any reason become unavailable to serve prior to the Annual Meeting, the Board will, prior to the Annual Meeting, (i) reduce the size of the Board to eliminate the position for which that person was nominated, (ii) nominate a new candidate in place of such person and vote in favor of the new candidate all shares represented by stockholder proxies received
by the Board, unless authority to vote for all candidates nominated by the Board is withheld, or (iii) leave the position vacant to be filled at a later time.
Our Board has nominated the persons named below for election as Class III directors. Following are the age, principal occupation during the past five years, and certain other information of the nominee. The information presented below for the director nominees has been furnished to the Company by the director nominees.
T. Grant John, 70, Director, was appointed to our Board in May 2007. Since 2003, Mr. John has served as the principal of T.G. John & Associates, Inc., a strategy, search and turnaround consulting firm focused on the primary metals and metalworking industries. From 1999 to 2003, Mr. John was the president and chief executive officer of Special Metals Corporation, a producer of nickel and cobalt alloys. Prior to 1999 and beginning in 1966, Mr. John served in various executive and management roles for companies in the metals industry. Mr. John earned B.A.Sc. and Ph.D. degrees in metallurgical engineering at the University of British Columbia.
Bryan D. Rosenberger, 58, Director, was appointed to our Board in May 2007. Mr. Rosenberger is Of Counsel to the law firm of Eckert Seamans Cherin & Mellott, LLC, engaging in corporate and securities law matters on behalf of both publicly and privately held businesses. Mr. Rosenberger has previously served as Chairman of Eckert Seamans Cherin & Mellott, LLCs Business Division and as a member of that firms Executive Committee and Board of Directors. Mr. Rosenberger has been Of Counsel at Eckert Seamans Cherin & Mellott, LLC since 2006 and was a partner/member from 1983 to 2006. Mr. Rosenberger received a BS in Economics from Juniata College in 1971 and a JD from the College of William and Mary Marshall-Wythe School of Law in 1974.
As of the date of this Proxy Statement, the Company knows of no business that will be presented for consideration at the Annual Meeting other than the items referred to above. If any other matter is properly brought before the Annual Meeting for action by stockholders, proxies in the enclosed form returned to the Company will be voted in accordance with the recommendation of the Board or, in the absence of such a recommendation, in accordance with the best judgment of the proxy holder.
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Set forth below is information concerning our directors, executive officers and key employees.
James M. Hensler, Chairman of the Board of Directors, President and Chief Executive Officer, joined us in April 2004. He has over 29 years of experience working in the metals industry. From 2003 to April 2004, Mr. Hensler was a consultant to various companies in the metals industry. From 1999 to 2003, Mr. Hensler was Vice President of Global Operations and Vice President and General Manager of the Huntington Alloys Business Unit for Special Metals Corp., a leading international manufacturer of high performance nickel and cobalt alloys. Prior to that, Mr. Hensler was the Executive Vice President for Austeel Lemont Co., General Manager of Washington Steel Co. and Director of Business Planning for Allegheny Teledyne Inc. He received a BS in Chemical Engineering from the University of Notre Dame in 1977, an MSE in Chemical Engineering from Princeton University in 1978 and an MBA from the Katz Graduate School of Business at the University of Pittsburgh in 1987.
Robert D. Scherich, Vice President and Chief Financial Officer, joined us in July 2004. From 1996 to 2004, Mr. Scherich was the Chief Financial Officer of Valley National Gases, Inc. Prior to that, he was the Controller and General Manager at Wheeling-Pittsburgh Steel Corp. and an accountant at Ernst & Whinney. Mr. Scherich received a BS in Business Administration from The Pennsylvania State University in 1982.
Robert Elwell, Vice President Operations, joined us in June 2006 with 31 years of industry experience. For the previous eight years, he was the President of Greenville Metals, a division of Precision Castparts Corporation. Previous positions include Vice President of Manufacturing for Cannon-Muskegon Corporation (also a Precision Castparts Corporation), Vice President of Quality and Technology for Freedom Forge Corporation, Manufacturing Manager for Haynes International, Inc. and several operating and technical positions at Lukens Steel Co. Mr. Elwell has a BS in Metallurgical Engineering from Lafayette College in 1975 and an MBA from Widener University in 1979.
James A. Totera, Vice President Sales and Marketing, joined us in 1997. Prior to that, he was the Vice President of Sales for Steel Mill Products, where he worked in, among other things, electric arc furnace (EAF) dust recycling and also spent over 15 years working in sales positions, including as General Manager of Sales, at Insul Company. Mr. Totera received a BA in Economics, Administrative Management Science and Psychology from Carnegie Mellon University in 1979.
Thomas E. Janeck, Vice President Environment, Health and Safety, has worked for us and our predecessors since 1964. Prior to his current position, Mr. Janeck served in a number of capacities and was most recently Vice President of Environmental Services and Director of Regulatory Affairs. Mr. Janeck is a member of the Board of Directors of the National Mining Association and serves as Chairman of its Environment Committee. Mr. Janeck received a BS in Chemical Engineering from the University of Pittsburgh in 1967.
Ali Alavi, Vice President Corporate Administration, General Counsel and Secretary, joined us in 1996. Mr. Alavi previously served as our Director & Counsel of Environment, Health & Safety and Director of Environmental Performance. Prior to joining us, Mr. Alavi worked as Assistant General Counsel of Clean Sites, Inc., Senior Regulatory Analyst of the American Petroleum Institute and Project Manager/Engineer for the U.S. Army Toxic & Hazardous Materials Agency. Mr. Alavi received a BA in Geography/Environmental Studies from the University of Pittsburgh in 1983, an MS in Petroleum Engineering from the University of Pittsburgh School of Engineering in 1985 and a JD from the University of Maryland Law School in 1993.
Daryl K. Fox, Vice President Human Resources, joined us in October 2005. He has over 35 years of Human Resources experience working in the metals and transportation industries. Prior to joining us, from August 2004 to February 2005, Mr. Fox served as a consultant to Allegheny Technologies Incorporated. Previously, Mr. Fox served as Vice President Human Resources for J&L Specialty Steel, LLC, a producer of stainless steel, from June 1993 until it was acquired by Allegheny Technologies Incorporated in July 2004. Mr. Fox received a BA in Sociology from Duke University in 1973.
John van Roden was appointed to our Board in April 2007. From 2006 to 2007, Mr. van Roden served as Executive Vice President of P.H. Glatfelter Company, an New York Stock Exchange (NYSE)-listed producer of engineered paper products, and served as Executive Vice President and Chief Financial Officer of P.H. Glatfelter Company from 2003 to 2006. From 1998 to 2003, Mr. van Roden was Senior Vice President and Chief Financial Officer of Conectiv Corp. From 1992 to 1998, Mr. van Roden was Senior Vice President and Chief Financial Officer of Lukens Inc. Mr. van Roden is a director of (i) H.B. Fuller Company, an NYSE-listed global manufacturer and marketer of adhesives and specialty chemical products, (ii) PVG GP, LLC, the general partner of Penn Virginia G.P. Holdings, L.P., an NYSE-listed limited partnership engaged in the management of coal properties and the gathering and processing of natural gas, and (iii) Airgas, Inc., an NYSE-listed distributor of industrial, medical and specialty gases and welding, safety and related products. Mr. van Roden received a BA in Economics from Denison University in 1971 and an MBA from Drexel University in 1974.
T. Grant John was appointed to our Board in May 2007. Since 2003, Mr. John has served as the principal of T.G. John & Associates, Inc., a strategy, search and turnaround consulting firm focused on the primary metals and metalworking industries. From 1999 to 2003, Mr. John was the president and chief executive officer of Special Metals Corporation, a producer of nickel and cobalt alloys. Prior to 1999 and beginning in 1966, Mr. John served in various executive and management roles for companies in the metals industry. Mr. John earned B.A.Sc. and Ph.D. degrees in metallurgical engineering at the University of British Columbia.
Bryan D. Rosenberger was appointed to our Board in May 2007. Mr. Rosenberger is Of Counsel to the law firm of Eckert Seamans Cherin & Mellott, LLC, engaging in corporate and securities law matters on behalf of both publicly and privately held businesses. Mr. Rosenberger has previously served as Chairman of Eckert Seamans Cherin & Mellott, LLCs Business Division and as a member of that firms Executive Committee and Board of Directors. Mr. Rosenberger has been Of Counsel at Eckert Seamans Cherin & Mellott, LLC since 2006 and was a partner/member from 1983 to 2006. Mr. Rosenberger received a BS in Economics from Juniata College in 1971 and a JD from the College of William and Mary Marshall-Wythe School of Law in 1974.
Jack Shilling, was appointed to our Board in September 2007. From July 2001 through April 2007, Mr. Shilling served as an Executive Vice President and Chief Technology Officer of Allegheny Technologies Incorporated, an NYSE-listed producer of specialty metals (ATI), where his responsibilities included working closely with several individual ATI businesses on strategic growth opportunities. Prior to such positions with ATI, beginning in 1973, Mr. Shilling worked for a subsidiary of ATI, Allegheny Ludlum Corporation, of which he became president in 1998 after holding positions of increasing responsibility in technical and operations management. He then became president of the high performance metals segment of ATI in 2000. Mr. Shilling has served also as the chairman of the Specialty Steel Industry of North America, a trade association representing the producers of stainless steel and other specialty metals in North America. Mr. Shilling received a BA in Physics from Franklin & Marshall College in 1965, an MS in Physics from Cornell University in 1967 and a PhD in Metallurgical Engineering from the University of Pittsburgh in 1975.
Our Board of Directors consists of five members. Our Certificate of Incorporation provides for a classified board of directors consisting of three classes of directors, with directors in each class serving staggered three-year terms. As a result, stockholders elect a portion of our Board each year. Class I directors terms expire at the annual meeting of stockholders to be held in 2010, Class II directors terms expire at the annual meeting of stockholders being held in 2011, and Class III directors terms expire at the annual meeting of stockholders to be held in 2009, to which this Proxy Statement relates. The Class I director is Mr. Hensler, the Class II directors are Messrs. van Roden and Shilling and the Class III directors are Messrs. John and Rosenberger.
At each annual meeting of stockholders, the successors to directors whose terms will then expire will be elected to serve from the time of election until the third annual meeting following election. Any vacancies or additional directorships resulting from an increase in the number of directors may only be filled by a majority vote of the directors then in office. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the total number of directors. The division of our Board into three classes with staggered terms may delay or prevent a change of our management or a change in control.
The composition, duties and responsibilities of the committees of our Board are set forth below. Our Board adopted a written charter for each of its committees, each of which is available on the investor relations page of our website at www.horsehead.net. Committee members will hold office for a term of one year. In the future, our Board may establish other committees, as it deems appropriate, to assist with its responsibilities.
Audit Committee. The audit committee is responsible for (1) selecting the independent auditors, (2) approving the overall scope of the audit, (3) assisting the Board in monitoring the integrity of our financial statements, the independent auditors qualifications and independence, the performance of the independent auditors and our internal audit function and our compliance with legal and regulatory requirements, (4) annually reviewing an independent auditors report describing the auditing firms internal quality-control procedures and any material issues raised by the most recent internal quality-control review, or peer review, of the auditing firm, (5) discussing the annual audited financial and quarterly statements with management and the independent auditor, (6) discussing earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies from time to time, (7) discussing policies with respect to risk assessment and risk management, (8) meeting separately, periodically, with management, internal auditors and the independent auditor, (9) reviewing with the independent auditor any audit problems or difficulties and managements response, (10) setting clear hiring policies for employees or former employees of the independent auditors, (11) handling such other matters that are specifically delegated to the audit committee by the Board from time to time, (12) reviewing related party transactions and (13) reporting regularly to the full Board.
Our audit committee consists of Mr. van Roden, as chairman, and Messrs. Rosenberger, John and Shilling. Our Board has determined that each of these members is an independent director according to the rules and regulations of the SEC and the NASDAQ Stock Market and that Mr. van Roden qualifies as an audit committee financial expert as such term is defined in Item 407(d) of Regulation S-K. During 2008, our audit committee held nine meetings.
Compensation Committee. The compensation committee is responsible for (1) reviewing key employee compensation policies, plans and programs, (2) reviewing and approving the compensation of our executive officers, (3) reviewing and approving employment contracts and other similar arrangements between us and our executive officers, (4) reviewing and consulting with our Chief Executive Officer on the selection of officers and evaluation of executive performance and other related matters, (5) administering our stock plans and other incentive compensation plans and (6) such other matters that are specifically delegated to the compensation committee by the Board from time to time. Our compensation committee consists of Mr. John, as chairman, and Messrs. Rosenberger, van Roden and Shilling, each of whom satisfies the independence requirements of the NASDAQ Marketplace Rules. During 2008, our compensation committee held seven meetings.
Nominating and Corporate Governance Committee. Our nominating and corporate governance committees purpose is to assist our Board by identifying individuals qualified to become members of our Board consistent with criteria set by our Board and to develop our corporate governance principles. This committees responsibilities include: (1) evaluating the composition, size and governance of our Board and its committees and making recommendations regarding future planning and the appointment of directors to our committees, (2) establishing a policy for considering stockholder nominees for election to our Board, (3) evaluating and recommending candidates for election to our Board, (4) overseeing the performance and self-evaluation process of our Board and developing continuing education programs for our directors, (5) reviewing our corporate governance principles and providing recommendations to the Board regarding possible changes and (6) reviewing and monitoring compliance with our code of ethics and our insider trading policy. Our nominating and corporate governance committee consists of Mr. Rosenberger, as chairman, and Messrs. John, van Roden and Shilling, each of whom satisfies the independence requirements of the NASDAQ Marketplace Rules. During 2008, our nominating and corporate governance committee held two meetings.
The nominating and corporate governance committee seeks a diverse group of director candidates who possess the background, skills and expertise to make a significant contribution to the Board, to the Company and our stockholders. Desired qualities to be considered include: high-level leadership experience and significant accomplishment in business or administrative activities; breadth of knowledge about issues affecting the Company; proven ability and willingness to contribute special competencies to Board activities; personal integrity; loyalty to the Company and concern for its success and welfare; willingness to apply sound and independent business judgment; awareness of a directors vital role in assuring the Companys good corporate citizenship and corporate image; no present conflicts of interest; availability for meetings and consultation on Company matters; enthusiasm about the prospect of serving; willingness to assume broad fiduciary responsibility; and willingness to become a Company stockholder.
The nominating and corporate governance committee will consider all nominees for election as directors of the Company, including all nominees recommended by stockholders, in accordance with the mandate contained in its charter. The Company has not paid a fee to any third party to identify or assist in identifying or evaluating potential nominees. In evaluating candidates, the nominating and corporate governance committee reviews all candidates in the same manner, regardless of the source of the recommendation. The policy of the nominating and corporate governance committee is to consider individuals recommended by stockholders for nomination as a director in accordance with the procedures described under Stockholder Proposals and Director Nominations for the 2010 Meeting.
The Board held twelve meetings during 2008. Directors are expected to attend Board meetings and meetings of committees on which they serve and to spend time as needed and meet as frequently as necessary to properly discharge their responsibilities. Each director attended at least 95% of the aggregate number of meetings of the Board and the applicable committees of the Board held during 2008.
All directors and director nominees are encouraged to attend the annual meeting of the stockholders. All of our then directors attended our 2008 annual meeting of stockholders in person. All are currently expected to be in attendance at the Annual Meeting.
Certain rules of The Nasdaq Global Select Market require that a majority of the members of the Board be independent directors and that the audit committee, the compensation committee and the nominating and corporate governance committee of the Board each comprise only independent directors, in each case as defined under the NASDAQ Marketplace Rules.
Based upon the information submitted by each of our directors, and following the recommendation of the nominating and corporate governance committee, the Board has determined that each of our directors, except
Mr. Hensler, our President and Chief Executive Officer, and including the director nominees standing for election, Messrs. John and Rosenberger, has no relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each, except Mr. Hensler, is an independent director as defined in NASDAQ Marketplace Rule 4200(a)(15) and Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). In determining the independence of our directors, the Board has adopted independence standards that mirror exactly the criteria specified by applicable laws and regulations of the SEC and the rules of The Nasdaq Global Select Market.
The Company requires the non-management directors to meet in executive sessions on a periodic basis without management. The presiding director, for purposes of leading these meetings, is the chairman of the nominating and corporate governance committee. In 2008, our non-management directors held seven executive sessions.
Stockholders may send communications to the Companys directors as a group or individually, by writing to those individuals or the group: c/o the Secretary of Horsehead Holding Corp., 4955 Steubenville Pike, Suite 405, Pittsburgh, Pennsylvania 15205. The Companys Secretary will review all correspondence received and will forward all correspondence that is relevant to the duties and responsibilities of the Board or the business of the Company to the intended director(s).
The Board has adopted a policy for submitting concerns regarding the Companys accounting or auditing matters. Reports may be sent to the audit committee through one of the following means: (1) telephoning the Secretary of the Company, (2) writing to: Audit Committee, c/o the Secretary of Horsehead Holding Corp., 4955 Steubenville Pike, Suite 405, Pittsburgh, Pennsylvania 15205, or (3) emailing the audit committee, by way of the Secretary of Horsehead Holding Corp., at email@example.com. In each case, reports will be received by the Companys Secretary who will forward the message to the audit committee. In addition, the Company has engaged The Network to provide an Independent Accounting, Internal Accounting Controls and Auditing Matters Hotline, which can be reached through one of the following means: (1) by telephone at (866) 835-6347, which is available 24 hours per day, 365 days per year for leaving a recorded message; (2) by writing to The Network, ATTN: Horsehead Corporation, 333 Research Court, Norcross, GA 30092; or (3) by e-mail via the website www.tnwinc.com/reportline or the e-mail address Reportline@tnwinc.com. The confidentiality of all reports will be maintained to the extent consistent with law.
No member of our compensation committee is an officer or employee of us, and no member has been an officer or employee of us at any prior time. There are no interlocking relationship between any of our executive officers and compensation committee, on the one hand, and the executive officers and compensation committee of any other companies, on the other hand.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our legal and finance departments bear primary responsibility for developing and implementing processes and controls to obtain information from our directors, executive officers and significant stockholders regarding related-party transactions and then determining, based on the facts and circumstances, whether we or a related-party has a direct or indirect material interest in these transactions. Our audit committee is responsible for the review, approval or ratification of related-person transactions between us or our subsidiaries and related persons. Related person refers to a person or entity who is, or at any point since the beginning of the last fiscal year was, a director, officer, nominee for director or 5% stockholder of us or is or was an immediate family member of such person or entity. The audit committee does not have a written policy regarding the approval of related party transactions. The audit
committee applies its review procedures as a part of its standard operating procedures. In the course of its review and approval or ratification of a related-party transaction, the audit committee will consider:
Any member of the audit committee who is a related party with respect to a transaction under review may not participate in the deliberations or vote on the approval or ratification of the transaction. However, such a director may be counted in determining the presence of a quorum at a meeting of the audit committee at which the transaction is considered.
Since January 1, 2008, we have not been a party to, and we have no plans to be a party to, any transaction or series of similar transactions in which the amount involved exceeded or will exceed $120,000 and in which any current director, executive officer, holder of more than 5% of our capital stock, or any member of the immediate family of any of the foregoing, had or will have a direct or indirect material interest, other than in connection with compensation as described in Compensation Discussion and Analysis below.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to us regarding beneficial ownership of our common stock, as of the Record Date, by each person known by us to own more than 5% of our common stock, each director and each of our named executive officers and by all of our directors and executive officers as a group (seven persons). The table lists the number of shares and percentage of shares beneficially owned based on 35,253,803 shares of common stock outstanding as of the close of business on the Record Date. In calculating the number of shares beneficially owned by an individual or entity and the percentage ownership of that individual or entity, shares underlying options held by that individual or entity that are either currently exercisable or exercisable within 60 days following the Record Date are deemed outstanding. These shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other individual or entity. Information in the table is derived from SEC filings made by such persons on Schedule 13G and/or under Section 16(a) of the Exchange Act and other information received by the Company. Except as indicated in the footnotes to this table, and subject to applicable community property laws, the persons or entities named have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them.
The following table sets forth certain information for each of our equity compensation plans.
Section 16(a) of the Exchange Act requires that executive officers, directors and greater than 10% owners file reports of ownership and changes of ownership of common stock with the SEC and the Nasdaq Global Select Market. Based on a review of the ownership reports filed with the SEC during fiscal 2008, we believe that all Section 16(a) filing requirements were met during the year except that a Form 4 was filed late on behalf of each of our non-employee directors with respect to the May 2008 grant of 14,365 RSUs to each such director and a Form 4 was filed late on behalf of each of our named executive officers with respect to the April 2008 grant of time-vesting RSUs to each such officer.
COMPENSATION DISCUSSION AND ANALYSIS
The compensation committee of our Board (the Committee) is responsible for directing our executive compensation philosophy, policies, plans and programs and for determining the compensation elements and amounts paid to our named executive officers. The Committee reviews compensation elements and amounts for our named executive officers on an annual basis, at the time of a promotion or other change in level of responsibilities, as well as when competitive circumstances may require. Our current executive officers, Messrs. Hensler, Scherich and Alavi, are responsible for matters of company policy and are our named executive officers. Many of the elements of compensation are set forth in the employment agreements we entered into with each of our named executive officers in connection with the completion of the private placement of approximately 16.0 million shares of our common stock in November 2006 (the 2006 Private Placement), which agreements were negotiated by affiliates of Sun Capital Partners, Inc. (together with its affiliates, Sun Capital), who then held a majority of our capital stock and controlled our Board. Each employment agreement has a term of five years, unless terminated earlier by the employee or by us, and is discussed throughout this Compensation Discussion and Analysis.
Since 2007, the Committee has worked with Buck Consultants to review and implement compensation policies for our named executive officers that encourage our named executive officers to operate the business in a manner that enhances stockholder value. To that end, in 2007, Buck Consultants and the Committee created a peer group of companies to help benchmark compensation practices for our top management. Buck Consultants began with metal and materials companies having market capitalization of less than $3.0 billion and from that group identified companies that are similar in focus and operations to us. The companies selected were: Amcol International Corporation, Brush Engineered Materials, Carpenter Technology Corporation, Century Aluminum Company, Gibraltar Industries Inc., Haynes International Inc., Metal Management, Inc., Minerals Technologies, Olympic Steel, OM Group, Quanex Group, RTI International Metals, Schnitzer Steel Industries, Stillwater Mining Company and Universal Stainless & Alloy Products. As part of its responsibilities, the Committee continues to review the peer group to determine if any companies should be added or removed.
Using this peer group, along with proprietary surveys of total compensation practices, Buck Consultants conducted an assessment of total direct compensation practices for executives in companies that are similar in size and operations to us. Buck Consultants identified our existing pay position relative to the 25th percentile, median, and 75th percentile of the peer group and the more broadly surveyed executive compensation marketplace. Buck Consultants used the additional surveys in order to minimize the effect of any anomalies that might arise from relying solely on the peer group and to limit any gaps in the peer group data. The surveys were not as company-specific as the peer group and generally included industrial surveys of companies similar in size (e.g., revenue) to us. The Committee expects to have this or similar information compiled annually and will consider the recommendations of Buck Consultants (or other compensation consultants engaged by the Company) with respect to the establishment of compensation package parameters, such as base salary targets and performance-based compensation, as needed and appropriate. Due to the upheaval in the markets and the economy in general, which has exacerbated the relative differences between members of the peer group and our company, the Committee currently expects to rely more on published compensation data, focused on companies with revenue of $250 million to $500 million, in evaluating compensation for our named executive officers in 2009.
In April 2008, following the assessments described above and several meetings with management, the Board and the Committee, Buck Consultants presented recommendations to the Board and the Committee with respect to compensation of our named executive officers for the year 2008 and thereafter. The plan provided by Buck Consultants was designed to support the overall compensation philosophy of the Committee and, in particular, to further improve retention and recruitment of talented executives, provide a clear focus on the creation of stockholder value and promote successful implementation of our strategic plans. In adopting the recommendations of Buck Consultants, the Committee determined also that management should be compensated in part for performance against measures that are not necessarily dependent on the market price of zinc, which management cannot influence or control.
The Committee considers the information described above and determines base salary and other compensation package parameters, such as annual incentive and long-term incentive opportunities, for the chief executive officer, subject to final approval by our Board. The chief executive officer makes compensation recommendations to the Committee for each of the other named executive officers based on:
The Committee discusses these recommendations with the chief executive officer and makes final recommendations to the Board, which the Board considers and, if appropriate, approves.
The primary objectives of our executive compensation program are to:
The foremost objective of our compensation program is to align the interests of our executive officers with our stockholders short- and long-term interests. To that end, a substantial portion of our executive officers total compensation is tied to the achievement of performance measures important to our business and to the price of our stock. We believe this focuses the efforts of our executive officers on managing the aspects of our business that are key to our success and aligns the interests of our executive officers more broadly with those of our stockholders.
Our executive compensation consists of the following components:
In April 2008, the Committee and the Board revised the manner in which our compensation for our named executive officers is provided. Working with Buck Consultants, the Committee determined that our total executive compensation package should be structured to place our named executive officers between the 50th and 75th percentiles of the peer group, depending on good to excellent performance. The guaranteed portion of the executive compensation package (i.e., base salary) is targeted at the 25th percentile of the peer group, which we believe is competitive within our peer group as our Company has tended to rank lower in terms of size compared to the companies for which Buck Consultants provided data. The remaining portion of the executive compensation
package is contingent (e.g., annual cash bonus incentives and long-term incentive awards) and allows our named executive officers to significantly increase their overall compensation relative to the peer group for achievement of superior results and sustained success in achieving strategic goals. As described below, we changed the equity component of our executive officers compensation from annual grants of stock options to annual grants of restricted stock units (RSUs) that vest based upon a mix of time-based vesting and performance-based vesting.
Under our revised compensation program, performance-vesting RSUs may be issued each year that are tied to clearly defined performance objectives over three-year performance periods, thus recognizing the importance of long-term performance and attempting to reduce the impact of cyclical business conditions and changes in the market price of zinc. By starting new three-year measurement periods for performance awards each year, the Committee will be able to adapt performance measures that are appropriate for then current market and industry conditions and also adjust the mix of performance measures based on previous years experience. In addition, by providing time-vesting awards that vest over a five-year period, the Committee can provide incentives to our named executive officers to set long-term value-creating goals and to continue to work to achieve those goals. Because much of the compensation package is contingent on performance and largely structured as equity awards and because we believe achievement of the performance objectives will enhance stockholder value, we feel that our compensation philosophy properly aligns managements incentives with the interests of our stockholders.
Elements of Compensation
Our base salary structure and practice of periodic salary reviews are designed to reward individual achievement and performance and our overall performance. Base salary is established based on the experience, skills, knowledge and responsibilities required of the executive officers in their roles. When establishing the 2008 base salaries of the executive officers, the Committee considered a number of factors, including the years of service of the individual, the individuals duties and responsibilities, the ability to replace the individual, market data on similar positions with competitive companies, the desired range of our overall compensation for our various management team members and our desired balance of cash and long-term incentive compensation. We seek to maintain base salaries that, particularly when combined with our other elements of compensation, are competitive with the marketplace and that allow us to attract and retain executive talent.
Salaries for executive officers are reviewed by the Committee and the Board on an annual basis, at the time of a promotion or other change in level of responsibilities, as well as when competitive circumstances may require. Increases in salary are based on factors such as the individuals level of responsibility and performance, our companys performance and expected performance and the levels of compensation provided by metals companies similar to us in size and operation, including the benchmark companies identified above in Overview.
Based on this review, in 2008 we increased the base salaries of our executive officers as set forth below in the Executive Compensation Tables.
The objective of the annual cash bonus awards is to reward executive officers for achieving individual and company level performance goals. These awards are determined initially as a percentage of each executive officers base salary for the fiscal year and are based primarily on the achievement of financial targets such as budgeted levels of net income and/or cash flow. The Committee may consider other operational targets, such as safety and production and shipping performance, as well as the impact of changes in the market price of zinc. Each annual cash bonus is generally paid in a single installment in the first quarter following the completion of a given fiscal year once the annual audit report is issued or, if earlier, following the Boards determination that the earnings targets for the fiscal year have been met.
For 2008, the Committee developed an annual cash bonus incentive plan for our named executive officers (the MIP). Under the MIP, each named executive officer was provided an overall target amount for his annual cash bonus (the Overall Target Bonus), which was established as a percentage of his base salary: 80% in Mr. Henslers case, or $384,000; 50% in Mr. Scherichs case, or $131,250; and 30% in Mr. Alavis case, or $48,000. Under the
MIP, for each named executive officer, 80% of the annual cash bonus amount depended on our net income for the year, excluding amounts recorded as expenses in connection with the MIP. The remaining 20% of the annual cash bonus amount for each executive depended on the achievement of operational performance measures identified by our Board for each executive.
For Messrs. Hensler and Alavi, the operational performance measures were based on:
For Messrs. Hensler and Alavi, the measures were weighted equally as 25% of the individual portion of the annual cash bonus amount, or 5% of the overall bonus amount.
For Mr. Scherich, the operational performance measures were based on:
The net income measure and the operational performance measures were judged by our Board against Threshold, Target and Distinguished levels. If the results with respect to a given measure failed to meet the Threshold level, then nothing was to be paid to the respective named executive officer with respect to the portion of the Overall Target Bonus allocated to that measure. If the Threshold level for a given measure was met, then an amount equal to 50% of the portion of the Overall Target Bonus allocated to that measure was to be paid. If the Target level for a given measure was met, then 100% of the portion of the Overall Target Bonus allocated to that measure was to be paid, and if the Distinguished level for a given measure was met, then 200% of the portion of the Overall Target Bonus allocated to that measure was to be paid. If performance for a given measure fell between two levels, the portion of the bonus allocated to that measure was to be pro rated accordingly.
The Distinguished, Target and Threshold levels for the net income performance measure depended on the average London Metals Exchange (LME) price for zinc in 2008. For higher LME zinc prices, the Committee established higher Distinguished, Target and Threshold net income levels, and for lower LME zinc price, the net income levels were lower under the MIP. Because the average LME price of zinc for 2008 was $0.85 per pound, for 2008 under the MIP, the Threshold level for the net income performance measure was $30.8 million, the Target level was $38.5 million and the Distinguished level was $48.1 million. In 2008, we reported net income, excluding expenses with respect to the MIP, of $39.5 million, which was between the Target and Distinguished levels for the net income measure. In addition, we achieved between the Target and Distinguished levels with respect to Mr. Henslers and Mr. Alavis frequency of OSHA reportable events measure, and we achieved between the Target and Distinguished levels with respect to Mr. Scherichs days payable outstanding measure. As a result, the Board awarded Mr. Hensler an annual cash bonus of $363,321, Mr. Scherich an annual cash bonus of $127,860 and Mr. Alavi an annual cash bonus of $45,415 under the MIP.
As noted above, in 2008 we changed our historic practice of granting long-term incentive awards in the form of stock options and instead began granting these awards in the form of RSUs. This change was implemented in connection with the review of our compensation practices by Buck Consultants and was designed to better align the
interests of our executive officers with our stockholders long-term interests by providing them with equity-based awards that vest over a period of time, upon achievement of certain operational performance measures and/or upon the occurrence of certain events, as well as to reward executive officers for performance. We believe this arrangement benefits our equityholders by providing adequate incentives to retain our executive officers and to focus their efforts on the operational goals key to our success and by aligning their broader interests with our equityholders by having the ultimate value of this compensation dependent upon the value of our stock. In determining the number of RSUs to be granted to an executive, we take into account the individuals position, scope of responsibility, ability to affect profits and stockholder value, the individuals historic and recent performance and the value of stock options and RSUs in relation to other elements of the individual executives total compensation.
For 2008, the Committee determined that 50% of the RSUs granted to our executive officers would be time-vesting and 50% of the RSUs would be performance vesting. The time-vesting RSUs vest ratably on the third, fourth and fifth anniversary of the date of grant. The performance-vesting RSUs vest over a three-year period based on the achievement of specified performance goals. The Board granted 31,250, 12,500 and 6,250 time-vesting RSUs to Messrs. Hensler, Scherich and Alavi, respectively, and the same respective number of performance-vesting RSUs to each executive officer. Within each grant of performance-vesting RSUs, one third of the RSUs are allocated to each of the following three measures.
The Committee and the Board selected a three-year performance period for the performance-vesting RSUs because it is consistent with our strategic planning cycle. The Committee and Board selected the three criteria above due primarily to their flexibility, the degree to which they broadly cover the goals of our strategic plans and the ability to compare them against our strategic plans and budgets. The Committee and Board selected these measures for the first cycle of the long-term incentive awards also because they represent clearly defined operational strategic goals that embrace critical challenges facing the company.
Following December 31, 2010, the Committee will assess the Companys performance against each of the measures above based on three levels: Threshold, Target and Distinguished. If the Companys performance with respect to any of the three measures fails to reach the Threshold level, none of the performance-vesting RSUs allocated to that measure will vest. Upon satisfaction of the Threshold level with respect to any performance measure, 25% of the performance-vesting RSUs allocated to that measure will vest. If the Company achieves the Target level with respect to any performance measure, 100% of the performance-vesting RSUs allocated to that measure will vest. If the Company achieves the Distinguished level with respect to any performance measure, 200% of the performance-vesting RSUs allocated to that measure will vest.
The three performance levels that were set for the performance-vesting RSUs were based on the Boards estimations and goals with respect to our growth and improvement through 2010. At the time that the performance-vesting RSUs were granted, the Committee and the Board viewed the Threshold level of each performance measure as a reasonably attainable floor, below which no RSUs should vest. The Target level for each performance measure was viewed by the Committee and the Board as representing challenging but not unattainable expectations for the growth and improvement of our company, and the Distinguished level was viewed by the Committee and the Board as representing significant achievement in excess of likely expectations but not impossible. Due in large part to the nature of the economy in general, attainment of each of the levels is now substantially less likely, and we did not record a compensation expense in 2008 with respect to the performance-vesting RSUs. Due to the significant uncertainty in current economic conditions and the resulting difficulty in projecting our future operating performance, the Committee does not currently expect to grant any performance-vesting RSUs to our named executive officers in 2009.
In the past, we have granted one-time bonuses to reward our management for completing specific transactions, such as the 2006 Private Placement, and to give them incentives to achieve specific goals. Messrs. Hensler, Scherich and Alavi received retention bonuses of $409,290, $102,327 and $102,327, respectively, upon each of the first two anniversaries of the completion of the 2006 Private Placement: in November 2007 and November 2008. We entered into the retention bonus arrangements because we wanted to provide our management with incentives to remain with us as we transitioned from a private company to a public company. There are no other retention bonuses remaining to be paid in connection with the 2006 Private Placement. One-time bonuses have not been subject to, and have not constituted a portion of the annual bonus for purposes of, the maximum bonus percentages set forth in our named executive officers employment agreements.
We provide post-termination benefits to our named executive officers in the form of severance payments, a 401(k) plan and change of control arrangements. We provide severance benefits to our executive officers to afford them financial protection in the event of certain terminations of their employment and also to secure their cooperation following such a separation. We offer our executive officers participation in our 401(k) plan because we feel it is an important retirement benefit to offer to all of our 401(k) plan participants. The stock option grant agreements we entered into in connection with the January 2007 grants to our executive officers and the RSU award agreements we entered into in connection with the April 2008 grants of time-vesting RSUs to our executive officers provide for accelerated vesting upon certain change of control events to reward them in the event we are able to sell our company to a buyer acceptable to management and the Board and to retain our executive officers during the process of negotiating and consummating such a transaction. The RSU award agreements we entered into in connection with the April 2008 grants of performance-vesting RSUs to our executive officers permit the Committee to pro-rate each level of the performance measures described above and to determine the Companys performance with respect to such pro-rated measures for the purposes of potentially vesting performance-vesting RSUs in connection with a change of control that occurs after on or after the first anniversary of the grant date.
For the stock options, the accelerated vesting depends on cash being the primary consideration received in a change of control transaction because at the time of granting these options Sun Capital was still our largest stockholder, was represented on our Board and wanted to reward management for transactions that provided liquidity for its investment in us. For the time-vesting RSUs, the accelerated vesting depends on the executive remaining employed by us for six months following the change of control event, or being terminated other than for death, disability or cause because the Committee wanted to provide an incentive for the executive officer to remain with the Company through the change of control process and subsequent transition, whether such transition took up to six months or was determined to be shorter by us or an acquirer. The details of these post-termination benefits are described below.
Severance Payments The employment agreements of Messrs. Hensler, Scherich and Alavi provide that if the executives employment is terminated by use without cause, or in the case of Mr. Hensler he resigns for good reason, the executive is entitled to continue to receive his base salary for a severance period following termination. The severance periods for Messrs. Hensler, Scherich and Alavi are two years, eighteen months and six months, respectively. Each employment agreement provides that the executive will receive severance payments through the severance period as long as certain conditions are met, including that the executive sign a general release of Horsehead from any claims and that the executive has not breached any of the terms or provisions of the non-competition and non-solicitation provisions of his employment agreement. The non-competition period set forth in the employment agreements are through the later of the end of any severance period and twelve months following termination of employment. The non-solicitation period in the employment agreements is 24 months.
The employment agreements define cause as: (i) a breach of the employees obligations under the agreement; (ii) any felony or crime involving moral turpitude by the employee which our Board determines would have an adverse effect on (a) our reputation or relationships with suppliers, customers, employees or others, (b) the employees ability to effectively perform his duties or (c) our business, operations or financial condition; (iii) fraud or embezzlement; (iv) failure to comply with the directives and policies of our Board; (v) gross
negligence or recklessness by the employee in the conduct of our business; (vi) material abandonment of duties or (vii) willful action to harm us. Mr. Henslers employment agreement defines good reason as a substantial diminution in Mr. Henslers responsibilities to us.
Retirement Benefits. We sponsor a tax-qualified employee savings and retirement plan, or 401(k) plan, that covers most employees who satisfy certain eligibility requirements relating to minimum age and length of service. Under the 401(k) plan, eligible employees may elect to contribute, with no minimum, up to the maximum allowed by the Internal Revenue Code. In 2007, we made a matching contribution to the executives 401(k) plan with an annual limit equal to the lesser of 3% of the participants annual salary and $3,000. In 2008, we began providing to each salaried employee (401(k) terms for hourly employees are governed under collective bargaining agreements) a non-elective contribution equal to 3% of the employees eligible compensation and offering a matching contribution equal to 50% of the portion of the employees elective contribution that is equal to 4% of his or her eligible compensation, in each case subject to limits under applicable tax laws.
Change of Control Arrangements. The option grant agreements we entered into with Messrs. Hensler, Scherich and Alavi in January 2007 in connection with their option grants under our 2006 Long-Term Equity Incentive Plan included provisions pursuant to which the options would become fully vested upon the consummation of certain change of control events. In connection with a change of control where the consideration paid to us or our stockholders consists primarily of cash (as determined by the Committee or the Board), all of the options granted to our named executive officers in January 2007 will be come fully vested and exercisable.
The RSU award agreements we entered into with Messrs. Hensler, Scherich and Alavi in April 2008 in connection with their time-vesting RSU grants under our 2006 Long-Term Equity Incentive Plan included provisions pursuant to which the time-vesting RSUs would become fully vested upon the date that is six months after the consummation of certain change of control events, provided that the executive was still employed by us at such time, or, if earlier, the date of such executives termination (if not for death, disability or cause) following consummation of the applicable change of control event.
The RSU award agreements we entered into with Messrs. Hensler, Scherich and Alavi in April 2008 in connection with their performance-vesting RSU grants under our 2006 Long-Term Equity Incentive Plan included provisions pursuant to which the Committee may pro-rate each of the Threshold, Target and Distinguished levels with respect to each of the three performance measures for the period ending immediately prior to the consummation of a change of control event that occurs on or after the first anniversary of the grant date. The Committee may then assess the Companys performance against such pro-rated levels, and any performance-vesting RSUs that would have vested in accordance with such levels will vest immediately prior to the consummation of the applicable change of control event.
We do not provide material perquisites that are not, in the Committees view, directly related to the executives duties. The only material perquisite that we provide to any of our named executive officers is payment of the initiation fee and annual dues for Mr. Hensler at one private social club, based on the belief that the use of such facilities in the course of his employment is in our interest and will further our business purposes. Nor do we otherwise maintain retirement, pension or deferred compensation programs for executives other than participation in our 401(k) plan as described above. Our executive officers are entitled, pursuant to their employment agreements, to receive employee benefits consistent with those received by other employees of the company. Consistent with our compensation philosophy, we intend to continue to maintain our current benefits for our executive officers, including health, dental, disability, paid vacation and participation in our 401(k) plan. The Board in its discretion may revise, amend or add to the officers executive benefits if it deems it advisable. We believe these benefits are generally equivalent to benefits provided by comparable companies. We have no current plans to change either the employment agreements (except as required by law or as required to clarify the benefits to which our executive officers are entitled as set forth herein) or levels of benefits provided thereunder.
In determining which elements of compensation are to be paid, and how they are weighted, we take into account whether a particular form of compensation will be deductible under Section 162(m) of the Code. Section 162(m) generally limits the deductibility of compensation paid to our named executive officers to $1 million during any fiscal year unless such compensation is performance-based under Section 162(m). However, under a Section 162(m) transition rule for compensation plans of corporations which are privately held and which become publicly held in an initial public offering, compensation paid under a plan that existed prior to the initial public offering will not be subject to Section 162(m) until the earlier of (1) a material modification of the plan; (2) the issuance of all employer stock and other compensation that has been allocated under the plan; or (3) the first meeting of stockholders at which directors are to be elected that occurs after the close of the third calendar year following the year of the initial public offering (the Transition Date). After the Transition Date, rights or awards granted under the plan, other than options and stock appreciation rights, will not qualify as performance-based compensation for purposes of Section 162(m) unless such rights or awards are granted or vest upon pre-established objective performance goals, the material terms of which are disclosed to and approved by our stockholders.
Our compensation program is intended to maximize the deductibility of the compensation paid to our named executive officers to the extent that we determine it is in our best interests. Consequently, we may rely on the exemption from Section 162(m) afforded to us by the transition rule described above for compensation paid pursuant to our pre-existing plans. In addition, our 2006 Equity Incentive Plan has been designed to permit our compensation committee to grant stock options and other awards which will qualify as qualified performance-based compensation under Section 162(m).
Many other Code provisions, SEC regulations and accounting rules affect the delivery of executive compensation and are generally taken into consideration as programs are developed. Our goal is to create and maintain plans that are efficient, effective and in full compliance with these requirements.
The Committee will continue to review applicable accounting and tax considerations to determine their impact on our Company and the named executive officers with respect to compensation and achieving the goals and objectives of our executive compensation program.
The Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Committee has recommended to the Board of directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
The Compensation Committee:
T. Grant John
Bryan D. Rosenberger
John van Roden
EXECUTIVE COMPENSATION TABLES
Summary Compensation Table
The following table summarizes the total compensation earned in 2008, 2007 and 2006 by our named executive officers.
In addition, in connection with the 2006 Private Placement, we made an arrangement with our option holders, including our named executive officers, to cancel 20% of their fully vested and exercisable options and pay an amount equal to the net purchase price of our shares of common stock in the 2006 Private Placement minus the exercise price of their options. Mr. Hensler received $1,066,804, Mr. Scherich received $266,712 and Mr. Alavi received $234,215 in respect of this option cancellation.
During 2008, we granted RSUs to our named executive officers under our 2006 Equity Incentive Plan, as set forth in the table below. In the following table, one estimated possible payout is indicated for the time-vesting RSUs, the Target amount, and three estimated possible payouts are indicated for the performance-vesting RSUs, depending on the Companys achievement against the performance measures established for the performance-vesting RSUs. In the case of the time-vesting and performance-vesting RSUs, no payout would occur with respect to RSUs that do not vest.
Outstanding Equity Awards at Fiscal Year-End
The following table summarizes the outstanding equity awards as of December 31, 2008 held by our named executive officers. The market value of RSUs that have not vested is based on the closing price of our common stock on the Nasdaq Global Select Market on December 31, 2008.
The following table summarizes the options exercised by our named executive officers during 2008. The exercise price for such options was $1.01 per share, in the case of Messrs. Hensler and Scherich, and $2.36 per share, in the case of Mr. Alavi. The value realized upon exercise is based on the average per share price for which the individual sold the shares of stock acquired on exercise, which shares were sold in each case on the date of such exercise. None of the RSUs granted to our named executive officers have vested.
We do not maintain pension plans. Our Board may in the future elect to provide officers and other employees with pension benefits if the Board determined that doing so is in our best interests.
Non-Qualified Deferred Compensation
We do not maintain defined contribution plans or other deferred compensation plans. The Committee may in the future elect to provide officers and other employees with defined contribution or deferred compensation benefits if the Board determines that doing so is in our best interests.
Assuming each named executive officers employment was terminated under each of the circumstances set forth below, or a change in control occurred, on December 31, 2008, the estimated values of payments and benefits to each named executive officer are set forth in the following table.
Options granted to Messrs. Hensler, Scherich and Alavi under our 2004 Stock Option Plan became fully vested upon the closing of the 2006 Private Placement. If the employment of any executive officer is terminated by us other than for cause, his vested options may be exercised after the date of termination but on or before the 15th day of the third calendar month following the date of termination. If the employment of any executive officer terminates due to death or disability, his vested options may be exercised after the date of termination but on or before the later of (a) December 31 of that year or (B) the 15th day of the third calendar month after the date of termination.
The grant agreements governing the options granted to Messrs. Hensler, Scherich and Alavi in January 2007 provide that all such options will vest and become exercisable in connection with a change of control for which the consideration received by the Company or the stockholders is primarily cash, as determined by our Board or the Committee. As of December 31, 2008, one fifth of the options have vested and are exercisable. Had such a change of control occurred on December 31, 2008, all of the options would have vested, and the value of such vested options is shown in the table above and is based upon the closing price of our common stock on the Nasdaq Global Select Market on December 31, 2008, which was less than the exercise price for such options.
The RSU award agreements governing the time-vesting RSUs granted to Messrs. Hensler, Scherich and Alavi in April 2008 provide that all such time-vesting RSUs will vest on the date that is six months after the consummation of a change of control provide that the individual remains employed by the Company through such date, provided that in the event the individuals employment is terminated prior to such date, other than for death, disability or cause, such vesting will occur on the date of such termination. The value of such vested time-vesting RSUs is shown in the table above and based upon the closing price of our common stock on the Nasdaq Global Select Market on December 31, 2008.
The RSU award agreements governing the performance-vesting RSUs granted to Messrs. Hensler, Scherich and Alavi in April 2008 provide for pro-ration and potential accelerated vesting. See Elements of Compensation-Post-Termination Benefits-Severance Payments Change of Control Payments. The assumed date of December 31, 2008 would occur prior to the first anniversary of the grant date, and as such, no pro-ration would occur under the terms of the award agreements.
In 2008, each of our non-employee directors received a fee at a rate of $40,000 per year for service as a director, our audit committee chairman received an additional fee at a rate of $20,000 per year and beginning in August 2008, the chairs of each of our compensation committee and nominating and corporate governance committee began
receiving an additional fee at a rate of $10,000 per year. In May 2008, we issued to each of Messrs. John, van Roden, Shilling and Rosenberger 14,365 RSUs, vesting one third each anniversary of May 14, 2008. All of our directors are reimbursed for out-of-pocket expenses incurred in connection with attending all Board and committee meetings. The following table summarizes the compensation of our directors in 2008.
The following table presents fees for professional services rendered by Grant Thornton LLP for fiscal 2007 and fiscal 2008.
Audit Fees: Consists of fees billed for professional services rendered in connection with the audit of the consolidated financial statements of Horsehead Holding Corp. for fiscal 2007 and 2008, our April 2007 private placement of common stock and our August 2007 initial public offering.
Audit-Related Fees: Consists of fees billed for assurance and related services that are not reported under Audit Fees. These services include audits of employee benefit plans.
Tax Fees: Consists principally of fees for services provided in connection with tax planning, advice, diligence and compliance services.
All Other Fees: Consists of fees for services other than those reported above.
All audit, audit-related and tax services performed by Grant Thornton LLP in fiscal 2008 were pre-approved by the audit committee of our board of directors, which concluded that the provision of such services by Grant Thornton LLP was compatible with the maintenance of that firms independence in the conduct of its auditing functions.
Pursuant to the audit committee charter, the audit committee must approve all audit engagement fees and other significant compensation to be paid to the independent auditor and the terms of such engagement. The audit committees charter provides also that individual engagements must be separately approved. Additionally, the audit committee is required to pre-approve any non-audit services to be provided to the Company by the independent auditor. The policy requires also specific approval by the audit committee if total fees for audit-related and tax services would exceed total fees for audit services in any fiscal year. The policy authorizes the audit committee to delegate to one or more of its members pre-approval authority with respect to permitted services.
We expect representatives of Grant Thornton LLP to be present at the 2009 annual meeting.
The audit committee of our board of directors has reviewed and discussed the audited financial statements with management, which has represented that the financial statements were prepared in accordance with accounting principles generally accepted in the United States. The audit committee discussed with management the quality and acceptability of the accounting principles employed including all critical accounting policies used in the preparation of the financial statements and related notes, the reasonableness of judgments made, and the clarity of the disclosures included in the statements.
The audit committee also reviewed our consolidated financial statements for fiscal 2008 with Grant Thornton LLP, our independent auditors for fiscal 2008, who are responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States. The audit committee has discussed with Grant Thornton LLP, the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees.
The audit committee has received the written disclosures and the letter from Grant Thornton LLP required by Independence Standards Board Standard No. 1 (Independence Discussion with Audit Committees) and has discussed with Grant Thornton LLP its independence and has considered whether the provision of non-audit services by Grant Thornton LLP to us is compatible with maintaining Grant Thornton LLPs independence.
In reliance on the reviews and discussions referred to above, the audit committee recommended to the Board that the audited financial statements be included in our Annual Report Form 10-K for the year ended December 31, 2008 for filing with the Securities and Exchange Commission.
This report is submitted by the members of the audit committee:
John van Roden
Bryan D. Rosenberger
T. Grant John
Our By-laws permit stockholders to make proposals for, and to nominate directors for election at, an annual stockholder meeting. Stockholder proposals intended for inclusion in the Companys proxy statement relating to the next annual meeting in May 2010 must be received by the Company no later than December 3, 2009. Any such proposal must comply with Rule 14a-8 of Regulation 14A of the proxy rules of the SEC. Under the Companys by-laws, proposals of stockholders not intended for inclusion in the proxy statement, but intended to be raised at the Companys regularly scheduled annual meeting of stockholders to be held in 2010, including nominations for election as directors of persons other than nominees of the Board of Directors, must comply with the procedures outlined in the Companys by-laws, which are described below, and must be received, by the Corporate Secretary at the address noted below, no earlier than January 14, 2010 and no later than February 13, 2010. In the event the annual meeting for 2010 is scheduled to be held on a date more than 30 days prior to or delayed by more than 60 days after May 15, 2010, notice of such proposals or nominations must be so received not later than the close of business on the 10th day following the earlier of the day on which notice of the date of the 2010 annual meeting was mailed or public disclosure of the 2010 annual meeting was made. A copy of the Companys by-laws may be found on the Companys website www.horsehed.net, and is available upon request from the Corporate Secretary, 4955 Steubenville Pike, Suite 405, Pittsburgh, Pennsylvania 15205.
Notice of a stockholder proposal must include, as to each matter proposed, (i) a brief description of the business desired to be brought before the annual meeting, (ii) the name and address, as it appears on the Companys books, of the stockholder proposing such business, (iii) the class and number of shares of the Companys capital stock which are beneficially owned by the stockholder and (iv) any material interest of the stockholder in such business.
A notice of a stockholder nomination for election to the Board shall set forth (i) as to each person whom the stockholder proposes to nominate for election as a director at such meeting (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and number of shares of capital stock of the Company which are owned beneficially or of record by the person and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Regulation 14A under the Exchange Act; and (ii) as to the stockholder giving the notice (A) the name and record address of such stockholder, (B) the class or series and number of shares of capital stock of the Company which are owned beneficially or of record by such stockholder, (C) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (D) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (E) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Regulation 14A under the Exchange Act. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.
We evaluate director nominees recommended by stockholders in the same manner in which we evaluate other director nominees. We have established through our Corporate Governance and Nominating Committee selection criteria that identify desirable skills and experience for prospective Board members, including consideration of the potential candidates qualification as independent, as well as consideration of diversity, age, skills, expertise and experience in the context of the Board and other criteria determined by the Corporate Governance and Nominating Committee determines from time to time.
We will bear the cost of the Annual Meeting and the cost of this proxy solicitation, including mailing costs. In addition to solicitation by mail, our directors, officers, and regular employees may solicit proxies by telephone or otherwise, with no specific additional compensation to be paid for such services.
The Board knows of no matter to be brought before the Annual Meeting other than the matters identified in this proxy statement. If, however, any other matter properly comes before the Annual Meeting, the individuals named in the proxy solicited by the Board intend to vote on it on behalf of the stockholders they represent in accordance with their best judgment.
By order of the Board of Directors
Dated: April 2, 2009
HORSEHEAD HOLDING CORP.
4955 STEUBENVILLE PIKE
PITTSBURGH, PA 15205
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
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