SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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HARSCO CORPORATION
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[Harsco Logo]
NOTICE OF
2004 MEETING
AND PROXY
STATEMENT
HARSCO CORPORATION
[Harsco Logo]
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HARSCO CORPORATION
350 Poplar Church Road
Camp Hill, PA 17011 USA
Mail: P.O. Box 8888
Camp Hill, PA 17001-8888 USA
Telephone: 717.763.7064
Fax: 717.763.6424
Web: www.harsco.com
March 23, 2004
To Our Stockholders:
You are cordially invited to attend the 2004 Annual Meeting of Stockholders of
your Company, which will be held on Tuesday, April 27, 2004, beginning at 10
a.m. at the Radisson Penn Harris Hotel and Convention Center, Camp Hill,
Pennsylvania.
Information about the Annual Meeting, including a listing and discussion of the
various matters on which you, as our stockholders, will act, may be found in the
formal Notice of Annual Meeting of Stockholders and Proxy Statement included
with this mailing. We look forward to greeting as many of our stockholders as
possible.
The Company is providing you with the opportunity to vote your shares by calling
a toll-free number or via the Internet as explained in the instructions on your
Proxy Card.
Whether you plan to attend the Annual Meeting or not, we urge you to fill in,
sign, date and return the enclosed Proxy Card, in the postage-paid envelope
provided, or vote by telephone or via the Internet, in order that as many shares
as possible may be represented at the Annual Meeting. The vote of every
stockholder is important and your cooperation in returning your executed Proxy
promptly will be appreciated.
Sincerely,
/s/ Derek C. Hathaway
Derek C. Hathaway
Chairman, President and Chief
Executive Officer
This document is being first mailed to stockholders on or about March 23, 2004.
TABLE OF CONTENTS
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS.................... 1
ANNUAL MEETING INFORMATION.................................. 2
General................................................... 2
Voting.................................................... 2
Revocation of Proxies..................................... 3
Abstentions and Broker Non-Votes.......................... 3
Other Business............................................ 3
CORPORATE GOVERNANCE........................................ 3
BOARD INFORMATION........................................... 4
Structure................................................. 4
Meeting Attendance and Committees......................... 4
Directors' Compensation................................... 6
Shareholder Communications with the Board of Directors.... 7
The Nominating Process.................................... 7
PROPOSAL 1: ELECTION OF DIRECTORS........................... 8
DIRECTOR INFORMATION........................................ 8
Nominees for Terms Expiring in 2007....................... 9
Directors Whose Terms Expire in 2005...................... 10
Directors Whose Terms Expire in 2006...................... 11
NON-DIRECTOR EXECUTIVE OFFICERS............................. 12
SHARE OWNERSHIP OF DIRECTORS, MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS................................. 12
REPORT OF THE AUDIT COMMITTEE............................... 14
FEES BILLED BY THE ACCOUNTANTS FOR AUDIT AND NON-AUDIT
SERVICES.................................................. 16
HARSCO STOCK PERFORMANCE GRAPH.............................. 17
PROPOSAL 2: APPROVE AMENDMENT AND RESTATEMENT OF THE
1995 NON-EMPLOYEE DIRECTORS' STOCK PLAN................... 18
PROPOSAL 3: APPROVE AMENDMENT AND RESTATEMENT OF THE
1995 EXECUTIVE INCENTIVE COMPENSATION PLAN................ 22
EQUITY COMPENSATION PLAN INFORMATION........................ 31
PROPOSAL 4: APPOINTMENT OF INDEPENDENT ACCOUNTANTS.......... 33
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION.............................................. 33
EXECUTIVE COMPENSATION AND OTHER INFORMATION.............................................................. 38
Summary of Cash and Certain Other Compensation.......................................................... 38
Summary Compensation Table.............................................................................. 38
Stock Options Issued During the 2003 Fiscal Year........................................................ 39
Option Exercises and Holdings........................................................................... 40
Retirement Plans........................................................................................ 40
Employment Agreements with Officers of the Company...................................................... 43
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION............................................... 44
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE................................................... 44
OTHER MATTERS............................................................................................. 44
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR PRESENTATION AT
2005 ANNUAL MEETING OF STOCKHOLDERS..................................................................... 44
APPENDIX A: 1995 NON-EMPLOYEE DIRECTORS' STOCK PLAN....................................................... A-1
APPENDIX B: 1995 EXECUTIVE INCENTIVE COMPENSATION PLAN.................................................... B-1
APPENDIX C: AUDIT COMMITTEE CHARTER....................................................................... C-1
HARSCO CORPORATION
P.O. Box 8888
Camp Hill, Pennsylvania 17001-8888
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Harsco Corporation will be held on
Tuesday, April 27, 2004, at 10 a.m. at the Radisson Penn Harris Hotel and
Convention Center, Camp Hill, Pennsylvania to consider and act upon the
following matters:
1. Election of three Directors to serve until the 2007 Annual Meeting of
Stockholders, and until their successors are elected and qualified;
2. Approval of the 1995 Non-Employee Directors' Stock Plan as amended and
restated;
3. Approval of the 1995 Executive Incentive Compensation Plan as amended
and restated;
4. Ratification of the appointment by the Audit Committee of the Board of
Directors of PricewaterhouseCoopers LLP as independent accountants to
audit the accounts of the Company for the fiscal year ending December
31, 2004; and
5. Such other business as may properly come before the Annual Meeting.
The Board of Directors has fixed the close of business on March 4, 2004, as the
record date for the determination of stockholders who are entitled to notice of,
and to vote at, the Annual Meeting and at any adjournments thereof. The polls
will open at 9:30 a.m. on the date of the Annual Meeting and will close at
approximately 10:15 a.m. Proxies will be accepted continuously from the time of
mailing until the closing of the polls.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON ARE
REQUESTED TO FILL IN, DATE, SIGN AND MAIL THE ENCLOSED PROXY CARD IN THE
ENVELOPE PROVIDED OR VOTE BY TELEPHONE OR VIA THE INTERNET, FOLLOWING THE
INSTRUCTIONS ON THE PROXY CARD.
By Order of the Board of Directors,
/s/ Mark E. Kimmel
Mark E. Kimmel
General Counsel and Corporate Secretary
March 23, 2004
PROXY STATEMENT
ANNUAL MEETING INFORMATION
GENERAL
This Proxy Statement has been prepared in connection with the solicitation
by the Board of Directors of Harsco Corporation, a Delaware corporation (the
"Company"), of Proxies in the accompanying form to be used at the Annual Meeting
of Stockholders of the Company, to be held April 27, 2004, or at any adjournment
or adjournments of the Annual Meeting.
The following information relates to the Annual Meeting and the voting of
your shares at the meeting:
Type of shares entitled to
vote at the Annual Meeting: The Company's common stock, par value $1.25
Record date for
stockholders entitled to
notice of, and to vote at,
the Annual Meeting: Close of business on March 4, 2004
Shares of common stock
issued and outstanding as
of the record date: 40,953,630 shares
Number of shares of
treasury stock held by the
Company as of the record
date (Not entitled to
vote): 26,490,977 shares
Proxy Statements, Notice of
Meeting and Proxy Cards
were first mailed to
stockholders: On or about March 23, 2004
Location of Company's
executive offices: 350 Poplar Church Road, Camp Hill, Pennsylvania 17011
VOTING
All shares of common stock entitled to vote at the Annual Meeting are of
one class, with equal voting rights. Each share of common stock held by a
stockholder is entitled to cast one vote on each matter voted on at the Annual
Meeting. In order for the Annual Meeting to be valid and the actions taken
binding, a quorum of stockholders must be present at the meeting, either in
person or by proxy. A quorum is a majority of the issued and outstanding shares
of common stock as of the Record Date. Assuming that a quorum is present, the
affirmative vote by the holders of a plurality of the votes cast at the Annual
Meeting will be required to act on the election of directors. Assuming that a
quorum is present, the affirmative vote of the holders of at least a majority of
the outstanding shares of common stock of the Company entitled to vote, who are
present in person or by proxy, will be required with respect to proposed
amendments to the 1995 Non-Employee Directors' Stock Plan and the 1995 Executive
Incentive Compensation Plan and at least a majority vote of the votes cast will
be required for the ratification of PricewaterhouseCoopers LLP as independent
accountants for the current fiscal year. The vote required to act on all other
matters to come before the Annual Meeting will be in accordance with the voting
requirements established by the Company's By-laws.
2
The shares of common stock represented by each properly executed proxy
received by the Board of Directors will be voted as follows at the Annual
Meeting:
IF INSTRUCTIONS ARE PROVIDED, in accordance with such instructions
specified, or
IF NO INSTRUCTIONS ARE SPECIFIED, those shares of common stock will be
voted FOR the election of nominees for Directors, FOR the approval of the 1995
Non-Employee Directors' Stock Plan as amended and restated, FOR the approval of
the 1995 Executive Incentive Compensation Plan as amended and restated and FOR
the ratification of the appointment of PricewaterhouseCoopers LLP as independent
accountants for the current fiscal year.
REVOCATION OF PROXIES
Any proxy granted pursuant to this solicitation or otherwise, may be
revoked by the person granting the proxy at any time before it is voted at the
Annual Meeting. Proxies may be revoked by (i) delivering a written notice of
revocation bearing a later date than the proxy, (ii) duly executing and
delivering a later dated written proxy relating to the same shares, or (iii)
attending the Annual Meeting and voting in person. If you hold your shares
through a bank, broker or other nominee holder, only they can revoke your proxy
on your behalf.
ABSTENTIONS AND BROKER NON-VOTES
In certain circumstances, a stockholder will be considered to be present at
the Annual Meeting for quorum purposes but will not be deemed to have cast a
vote on a matter. That occurs when a stockholder is present but specifically
abstains from voting on a matter or when shares are represented at the Annual
Meeting by a proxy conferring authority to vote only on certain matters ("broker
non-votes"). In conformity with Delaware law, abstentions and broker non-votes
will not be treated as votes cast with respect to election of directors, and
therefore will not affect the outcome of director elections. With respect to
each other matter presented at the Annual Meeting, abstentions will be treated
as negative votes on such matters, while broker non-votes will not be counted in
determining the outcome.
OTHER BUSINESS
The Board of Directors knows of no other business to come before the Annual
Meeting. However, if any other matters are properly presented at the Annual
Meeting, or any adjournment of the Meeting, the persons voting the proxies will
vote them in accordance with their best judgment.
CORPORATE GOVERNANCE
The Company has a long-standing commitment to good corporate governance
practices. These practices come in many different forms and apply at all levels
of the organization. They provide the Board of Directors and senior management
of the Company with a framework that defines responsibilities, sets high
standards of professional and personal conduct and promotes compliance with the
various financial, ethical, legal and other obligations and responsibilities
applicable to the Company. During 2003, the Board took numerous actions to
strengthen the Company's corporate governance practices, including revising its
Corporate Governance Principles, updating the Company's Code of Conduct and
Board committee charters to comply with new regulatory requirements and
reviewing the Company's executive compensation program. The revised Corporate
Governance Principles, Code of Conduct and Board Commit-
3
tee Charters can be accessed through the Internet at the Governance section of
our website, www.harsco.com.
BOARD INFORMATION
STRUCTURE
Information regarding the structure of the Company's Board of Directors:
Current size: 10 members
Size of Board authorized
in the By-laws: Not less than 5 or more than 12
Number of Independent
Directors: 7 members
Size of Board established
by: Board of Directors
Lead Director: R. C. Wilburn
Classified Board: Adopted in 1986
Number of classes: 3
Term of each class: 3 years
# of Directors' terms
expiring in 2004: 3 members
Individuals nominated for
election: G. D. H. Butler, J. I. Scheiner and R. C. Wilburn
MEETING ATTENDANCE AND COMMITTEES
The Board of Directors met seven times during the fiscal year ended
December 31, 2003. Attendance by Directors at all Board and Committee meetings
was 93.2%. Only Messrs. Jasinowski and Strachan did not attend at least 75% of
the meetings of the Board and all Committees on which they served. Mr.
Jasinowski attended 73.3% of meetings of the Board and Committees of which he
was a member. Mr. Strachan attended 70% of the meetings. Mr. Strachan resigned
from the Board effective August 3, 2003.
AUDIT COMMITTEE Meetings in 2003: 5
Members: Mr. Scheiner, Chairman, Messrs.
Pierce, Jasinowski and Viviano and Ms.
Scanlan
Duties: Oversees the financial reporting
processes of the Company, including meeting
with members of management, the external
auditors and the internal auditors,
reviewing and approving both audit and
non-audit services, reviewing the results of
the annual audit and reviewing the adequacy
of the Company's internal controls. The
Committee is also responsible for managing
the relationship with the external auditors.
The Chairman of the Committee meets
quarterly with management and the
independent accountants to review financial
matters. The Audit Committee recently
completed a review of its charter and the
Board approved a charter revision to clarify
the Committee's responsibilities. A copy of
the new charter is included as Appendix A to
this Proxy Statement. See also the Report of
the Audit Committee found on page 14.
4
EXECUTIVE COMMITTEE Meetings in 2003: 1
Members: Mr. Hathaway, Chairman, Messrs.
Scheiner, Sordoni and Wilburn
Duties: Authorized to exercise all powers
and authority of the Board of Directors when
Board is not in session, except as may be
limited by the General Corporation Law of
the State of Delaware.
MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE Meetings in 2003: 7
Members: Mr. Wilburn, Chairman, Messrs.
Scheiner and Sordoni and Ms. Scanlan
Duties: Administers the Company's executive
compensation policies and plans; advises the
Board regarding management succession and
compensation levels for members of senior
management. See also the Compensation
Committee Report on Executive Compensation
found on page 33. The Board has revised the
Committee's charter as of January 2004 to
clarify its responsibilities. A copy of the
Committee's charter can be viewed at the
Governance section of the Company's website,
www.harsco.com.
NOMINATING AND CORPORATE
GOVERNANCE COMMITTEE Meetings in 2003: 2
Members: Mr. Sordoni, Chairman, Messrs.
Jasinowski, Pierce, Viviano and Wilburn
Duties: Recommends Director candidates to
the Board for election at Annual Meeting;
reviews and recommends potential new
Director candidates, and oversees the
corporate governance program of the Company.
The Board has revised the Committee's
charter as of January 2004 to clarify its
responsibilities in the nominating and
corporate governance areas. A copy of the
Committee's charter can be viewed at the
Governance section of the Company's website,
www.harsco.com.
5
DIRECTORS' COMPENSATION
The current fees for Non-Employee Directors effective January 1, 2004 are
as follows:
Annual Retainer: $35,000
Audit Committee Chair Fee (Annual): $7,500
Management Development and Compensation
Committee Chair Fee and Nominating and
Corporate Governance Committee Chair Fee
(Annual): $5,000
Board Meeting Fee (Per Meeting): $1,500
Committee Meeting Fee (Per Meeting): $1,500
Other Meetings and Duties (Per Day): $1,500
Telephonic Meeting Fee (Per Meeting): $750
Stock Options(1): 2,000 shares annually (issued at
an exercise price equal to the
market value on the date of
grant. Grant date is first
business day of May.)(2)
Plan Participation(3): Deferred Compensation Plan for
Non-Employee Directors
Directors who are actively employed by the Company receive no additional
compensation for serving as Directors and by policy, the Company does not pay
consulting or professional service fees to Directors.
(1) On May 1, 2003 the Company issued stock options for 2,000 shares each to
the Non-Employee Directors. The exercise price of the options was $33.92
per share. The options can be exercised in whole or in part on or after
May 1, 2004 and the options expire April 30, 2013.
(2) A proposal is included in this Proxy Statement to amend the 1995
Non-Employee Directors' Stock Plan to permit the issuance of restricted
stock and restricted stock units. If this proposal is approved by the
stockholders, it is the Company's intention to cease issuing stock options
to Directors and in their place issue 500 restricted stock units per year
to each Non-Employee Director.
(3) The Deferred Compensation Plan for Non-Employee Directors allows each
outside Director to defer all or a portion of their director compensation
until some future date selected by the Director. Pursuant to the
Director's election, the accumulated deferred compensation is held in
either an interest-bearing account or a Harsco phantom share account. The
interest-bearing deferred account accumulates notional interest on the
account balance at a rate equal to the five-year United States Treasury
Note yield rate in effect from time to time. Contributions to the phantom
stock account are recorded as notional shares of Harsco common stock.
Deferred amounts are credited to the Director's account quarterly on the
15th of February, May, August and November. The number of phantom shares
recorded is equal to the number of shares of common stock that the
compensation which is deferred would have purchased at the market price of
the stock on the day the account is credited. Dividends earned on the
phantom shares
6
are credited to the account as additional phantom shares. All phantom
shares are non-voting and payments out of the account are made solely in
cash based upon the market price of the common stock on the date of
payment selected by the Director. Under certain circumstances, the
accounts may be paid out early upon termination of directorship following
a change in control. Directors are also permitted to make early
withdrawals of their deferred accounts subject to a 10% forfeiture
penalty.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The Board of Directors has recently adopted a formal process for
stockholders to communicate directly with its members. Stockholders can contact
the Board through the Chairman and Chief Executive Officer who is located at the
Corporation's headquarters in Camp Hill, Pennsylvania. In addition, stockholders
may contact any member of the Board, including the lead independent director,
Dr. Robert Wilburn, by writing to the specific Board member in care of the
Corporate Secretary at the Corporate Headquarters (350 Poplar Church Road, Camp
Hill, PA 17011). The Corporate Secretary will forward any such correspondence to
the applicable Board member. In addition, Board members can be contacted through
e-mail at BoardofDirectors@Harsco.com.
It is the Company's policy to request that all Board members attend the
Annual Meeting of Stockholders. However, the Company also recognizes that
personal attendance by all directors is not always possible. Ten of eleven
directors attended the 2003 Annual Meeting of Stockholders.
THE NOMINATING PROCESS
The Nominating and Corporate Governance Committee of the Board of Directors
(the "Nominating Committee") is responsible for overseeing the selection of
qualified candidates to serve as members of the Board of Directors and guiding
the corporate governance philosophy and practices of the Company. The Nominating
Committee is composed of five directors each of whom is "independent" under the
rules of the New York Stock Exchange. The Nominating Committee operates
according to a charter that complies with the guidelines established by the New
York Stock Exchange.
The Nominating Committee has not adopted formal procedures in selecting
individuals to serve as members of the Board of Directors. Instead, it utilizes
general guidelines that allow it to adjust the process to best satisfy the
objectives established for any director search. The first step in the general
process is to identify the type of candidate the Nominating Committee may desire
for a particular opening. This may involve locating someone with a specific
background, skill set or experiences. Once identified, the Committee next looks
to the best method of finding a candidate who satisfies the specified criteria.
The Nominating Committee may consider candidates recommended by management, by
other members of the Committee or the Board of Directors, by stockholders or it
may engage a third party to conduct a search for possible candidates. The
Nominating Committee accepts recommendations for director candidates from
stockholders and information regarding the submission of candidates is included
in this Proxy Statement under the heading "STOCKHOLDER PROPOSALS AND NOMINATIONS
FOR PRESENTATION AT 2005 ANNUAL MEETING OF STOCKHOLDERS."
Once candidates are identified, the Committee conducts an evaluation of the
candidate. The evaluation generally includes interviews and background and
reference checks. There is no difference in the evaluation process of a
candidate recommended by a stockholder as
7
compared to the evaluation process of a candidate identified by any of the other
means described above. While the Nominating Committee has not established
minimum criteria for a candidate, it has established important factors to
consider in evaluating a candidate. These factors include: strength of
character, mature judgment, business experience, availability, attendance,
career specialization, relevant technical skills, diversity and the extent to
which the candidate would fill a present need on the Board of Directors.
If the Nominating Committee determines that a candidate should be nominated
as a candidate in the Proxy Statement, the candidate's nomination is then
recommended to the Board of Directors, who may in turn conduct their own review
to the extent they deem it appropriate. When the Board of Directors has agreed
upon a candidate, they are then recommended to the stockholders for election at
an Annual Meeting of Stockholders.
Messrs. Butler, Scheiner and Wilburn, each of whom is a current director,
have been recommended by the Nominating Committee to the Board of Directors for
election as directors of the Company at the 2004 Annual Meeting of Stockholders
and the Board has approved the recommendation. The Company did not engage a
third party search firm to assist with the selection of the director candidates
for the 2004 Annual Meeting of Stockholders. During 2003, the Company received
no recommendation for directors from any stockholders.
PROPOSAL 1: ELECTION OF DIRECTORS
Messrs. G. D. H. Butler, J. I. Scheiner and R. C. Wilburn have been duly
nominated for their positions by the Board of Directors, upon the recommendation
of the Nominating Committee. The term of office for which these directors are
being nominated is until the 2007 Annual Meeting of Stockholders or until their
respective successors have been elected and qualified. Should any of these
nominees become unavailable or prove unable to serve for any reason, proxies
will be voted for the election of such other person or persons as the Board of
Directors may select to replace such nominee. No circumstance is presently known
which would render any nominee named herein unavailable to serve. Each person
named as a nominee for Director has advised the Company of his willingness to
serve if elected.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF MESSRS. BUTLER, SCHEINER AND WILBURN.
DIRECTOR INFORMATION
The information set forth below states the name of each nominee for
Director and of each Director continuing in office, his or her age, a listing of
present and previous employment positions, the year in which he or she first
became a Director of the Company, other directorships held and the Committees of
the Board on which the individual serves.
8
NOMINEES FOR TERMS EXPIRING IN 2007
DIRECTOR
OF THE
POSITION WITH THE COMPANY COMPANY
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
---- --- ----------------------------- --------
G. D. H. Butler 57 Senior Vice President -- Operations of the Corporation 2002
since 2000. Concurrently serves as President of the
MultiServ Division and President of the SGB Division.
President of Heckett MultiServ International and SGB from
2000 to 2003, and from 1994 to 2000 served as President of
the Heckett MultiServ -- East Division. Served as Managing
Director -- Eastern Region of the Heckett MultiServ
Division in 1994. Served in various officer positions
within MultiServ International, N.V. prior to 1994 and
prior to Harsco's acquisition of that corporation in 1993.
J. I. Scheiner 59 President and Chief Operating Officer of Benatec 1995
Associates, Inc. (an engineering and environmental
company) since 1991. Previously, he was President of
Stoner Associates, Inc. (an engineering software company)
and Vice President of Huth Engineers (an engineering
company). Served as Secretary of Revenue for the
Commonwealth of Pennsylvania, and served as Deputy
Secretary for Administration, Pennsylvania Department of
Transportation. He is a member of the Pennsylvania Chamber
of Business and Industry Board.
Chairman of the Audit Committee and member of the
Executive and the Management Development and Compensation
Committees.
R. C. Wilburn 60 President of the Gettysburg National Battlefield Museum 1986
Foundation (a nonprofit educational institution) since
2000. Former President and Chief Executive Officer of the
Colonial Williamsburg Foundation (a historic preservation
and educational outreach organization) between 1992 and
1999. Other former positions include Distinguished Service
Professor at Carnegie Mellon University; President of
Carnegie Institute and Carnegie Library and Secretary of
Education for the Commonwealth of Pennsylvania. He is a
Director of Erie Indemnity Company, Erie Family Life, and
CoManage.
Chairman of the Management Development and Compensation
Committee; Member of the Nominating and Corporate
Governance Committee and the Executive Committee.
9
DIRECTORS WHOSE TERMS EXPIRE IN 2005
DIRECTOR
OF THE
POSITION WITH THE COMPANY COMPANY
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
---- --- ----------------------------- --------
S. D. Fazzolari 51 Senior Vice President, Chief Financial Officer and 2002
Treasurer of the Corporation since 1999. Served as Senior
Vice President and Chief Financial Officer from January
1998 to August 1999. Served as Vice President and
Controller from January 1994 to December 1997 and as
Controller from January 1993 to January 1994.
C. F. Scanlan 56 President and Chief Executive Officer of The Hospital and 1998
Healthsystem Association of Pennsylvania since July, 2003.
The Hospital and Healthsystem Association of Pennsylvania
is the successor organization to the combination of the
Health Alliance of Pennsylvania and the Hospital and
Healthsystem Association of Pennsylvania. Was President
and Chief Executive Officer of both The Health Alliance of
Pennsylvania (representation and advocacy organization)
and the Hospital and Healthsystem Association of
Pennsylvania from 1995 to July, 2003. Was Executive Vice
President and Chief Operating Officer of the Health
Alliance of Pennsylvania during 1995-1996. Director of
Health Forum (a knowledge transfer and e-commerce
company), a subsidiary of American Hospital Association.
Served as Chairman of PHICO Insurance Company, a
wholly-owned subsidiary of PHICO Group from 1998 to
November 2001. On August 16, 2001, the Commonwealth Court
of Pennsylvania issued an Order of Rehabilitation for
PHICO Insurance Company which gave the Pennsylvania
Insurance Department statutory control over that company.
On December 14, 2001, PHICO Insurance Company's parent,
PHICO Group, filed a Chapter 11 bankruptcy petition in the
U.S. Bankruptcy Court in Harrisburg, Pennsylvania. On
February 1, 2002, the Pennsylvania Insurance Department
declared the PHICO Insurance Company insolvent and the
Pennsylvania Commonwealth Court issued an order
authorizing the Insurance Department to liquidate that
company. The liquidation is proceeding.
Member of the Management Development and Compensation and
Audit Committees.
A. J. Sordoni, III 60 Chairman of Sordoni Construction Services, Inc. (a 1988
building construction and management services company) and
has been employed by that company since 1967. Former
Chairman and Director of C-TEC Corporation and Mercom,
Inc.
Chairman of the Nominating and Corporate Governance
Committee; Member of the Management Development and
Compensation and Executive Committee.
J. P. Viviano 65 Retired Vice Chairman of Hershey Foods Corporation. Was 1999
President and Chief Operating Officer of Hershey Foods
Corporation from 1994 to 1998 (a confectionery and grocery
products company). Mr. Viviano is a director of Chesapeake
Corporation, Huffy Corporation, R. J. Reynolds Tobacco
Holdings, Inc. and RPM, Inc.
Member of the Audit Committee and the Nominating and
Corporate Governance Committee
10
DIRECTORS WHOSE TERMS EXPIRE IN 2006
DIRECTOR
OF THE
POSITION WITH THE COMPANY COMPANY
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
---- --- ----------------------------- --------
D. C. Hathaway 59 Chairman, President and Chief Executive Officer since July 1991
31, 2000 and also from April 1, 1994 to January 1, 1998.
Was Chairman and Chief Executive Officer from January 1,
1998 to July 31, 2000. Was President and Chief Executive
Officer from January 1, 1994 to April 1, 1994. Was
President and Chief Operating Officer of the Company from
May 1, 1991 to January 1, 1994. Held various executive
positions with the Company prior to 1991. Director of M&T
Bank Corp.
Chairman of the Executive Committee
J. J. Jasinowski 65 President of the National Association of Manufacturers 1999
(business advocacy and policy association) since 1990. Mr.
Jasinowski is also an author and commentator on economic,
industrial and governmental issues. Former positions
include Assistant Professor of Economics at the Air Force
Academy, Director of Research at the Joint Economic
Committee of Congress, Director of the Carter
Administration's Economic transition team, and Assistant
Secretary of Policy at the U.S. Department of Commerce.
Mr. Jasinowski is a director of The Phoenix Companies,
Inc. and WebMethods.
Member of the Audit and Nominating and Corporate
Governance Committees.
D. H. Pierce 62 President and CEO of ABB Inc., the US subsidiary of global 2001
industrial, energy and automation provider ABB from 1999
until his retirement in June 2001. Between 1998 and 1999
he was president of Steam Power Plants and Environmental
Systems of ABB Inc. Between 1996 and 1998 he was Group
Executive Vice President -- The Americas Region and Member
of ABB Ltd. Group Executive Committee. Between 1994 and
1996 he was President of ABB China Ltd. Director of Clyde
Bergemann, Inc.
Member of the Audit and the Nominating and Corporate
Governance Committees.
11
NON-DIRECTOR EXECUTIVE OFFICERS
POSITION WITH THE COMPANY
NAME AGE AND PRIOR BUSINESS EXPERIENCE
---- --- -----------------------------
R. W. Kaplan 52 Vice President of the Corporation effective January 1, 2004.
Concurrently serves as President of the Harsco Gas & Fluid
Control Group. Served as Senior Vice President -- Operations
of the Corporation from July 1, 1998 to December 31, 2003.
Previously, he was President of the Taylor-Wharton Gas
Equipment Division from February 1, 1994 to November 16,
1999. Served as Vice President and Treasurer of the
Corporation from January 1992 to February 1994. Served as
Treasurer of the Corporation from May 1991 to December 1992.
Previously served as Vice President and General Manager of
the Plant City Steel/Taylor-Wharton Division from 1987 to
1991 and Vice President and Controller of the Division from
1985 to 1987. Previously served in various Corporate
treasury/financial positions since 1979.
M. E. Kimmel 44 General Counsel and Corporate Secretary effective January 1,
2004. Served as Corporate Secretary and Assistant General
Counsel from May 1, 2003 to December 31, 2003. Held various
legal positions within the Corporation since he joined the
Company in August, 2001. Prior to joining Harsco, he was
Vice President, Administration and General Counsel, New
World Pasta Company from January 1, 1999 to July 2001.
Before joining New World Pasta, Mr. Kimmel spent
approximately 12 years in various legal positions with
Hershey Foods Corporation.
S. J. Schnoor 50 Vice President and Controller of the Corporation effective
May 15, 1998. Served as Vice President and Controller of the
Patent Construction Systems Division from February 1996 to
May 1998 and as Controller of the Patent Construction
Systems Division from January 1993 to February 1996.
Previously served in various auditing positions for the
Corporation from 1988 to 1993. Prior to joining Harsco, he
served in various auditing positions for
PricewaterhouseCoopers.
SHARE OWNERSHIP OF DIRECTORS, MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 4, 2004, information with
respect to the beneficial ownership of the Company's outstanding voting
securities, stock options and other stock equivalents by:
(a) the Company's Chief Executive Officer and the Company's four most highly
compensated other executive officers (the "Named Executives"),
(b) each Director,
(c) all Directors and executive officers as a group, and
(d) certain beneficial owners holding more than 5% of the common stock.
12
All of the Company's outstanding voting securities are common stock.
NUMBER OF NUMBER OF NUMBER OF OTHER
NAME SHARES(1) EXERCISABLE OPTIONS(2) STOCK EQUIVALENTS
---- --------- ---------------------- -----------------
NAMED EXECUTIVE OFFICER
G. D. H. Butler................... 1,000 76,000 0
S. D. Fazzolari................... 10,758 124,000 1,551(5)
D. C. Hathaway.................... 113,431 437,500 9,228(5)
R. W. Kaplan...................... 10,796(3) 80,300 2,128(5)
S. J. Schnoor..................... 2,806 19,300 350(5)
DIRECTORS WHO ARE NOT NAMED
EXECUTIVE OFFICERS
J. J. Jasinowski.................. 1,200 10,000 7,251(6)
D. H. Pierce...................... 2,000 6,000 3,663(6)
C. F. Scanlan..................... 1,500 12,000 0
J. I. Scheiner.................... 3,526 18,000 3,499(6)
A. J. Sordoni, III................ 105,500(4) 20,000 0
J. P. Viviano..................... 5,400 10,000 7,276(6)
R. C. Wilburn..................... 3,500 20,000 773(6)
All Directors and executive
officers as a group. (13 persons
in total, including those listed
above).......................... 261,785 835,100 35,718
BENEFICIAL OWNER(7)
Mac-Per-Wolf Company
Suite 2600
310 S. Michigan Avenue
Chicago, IL 60604............... 2,367,555
---------------
(1) Includes, in the case of Messrs. Butler, Fazzolari, Hathaway, Kaplan,
Schnoor and all Directors and executive officers as a group, -0- shares,
8,393 shares, 27,872 shares, 4,836 shares, 2,464 shares and 43,933 shares,
respectively, pursuant to the Company's Savings Plan in respect of which
such persons have shared voting power.
(2) Represents all stock options exercisable within 60 days of March 4, 2004
awarded under the 1986 Stock Option Plan, the 1995 Executive Incentive
Compensation Plan and the 1995 Non-Employee Directors' Stock Plan.
Unexercised stock options have no voting power.
(3) Includes 61 shares owned by his daughter as to which Mr. Kaplan disclaims
beneficial ownership.
(4) Includes 14,000 shares owned by his wife as to which Mr. Sordoni disclaims
beneficial ownership.
(5) Includes non-voting phantom shares held under the Supplemental Retirement
Benefit Plan which will ultimately be paid out in cash based upon the value
of shares of common stock at the time of the payout.
(6) Certain Directors have elected to defer a portion of their Directors' fees
in the form of credits for non-voting phantom shares under the terms of the
Company's Deferred
13
Compensation Plan for Non-Employee Directors. These phantom shares are
included. They will ultimately be paid out in cash based upon the value of
the shares at the time of payout.
(7) This information is derived from Schedule 13G filed by such person with the
Securities and Exchange Commission in February, 2004. These holdings
represent 5.8% of the Company's common stock.
Except as otherwise stated, each individual has sole voting and investment
power over the shares set forth opposite his name. As of March 4, 2004, none of
the Directors and executive officers individually beneficially owned more than
1% of the Company's common stock, and the Directors and executive officers of
the Company as a group beneficially owned approximately 2.6% of the Company's
outstanding common stock. The mailing address for the Directors and executive
officers of the Company is c/o Harsco Corporation Corporate Secretary, 350
Poplar Church Road, Camp Hill, PA 17011.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors (the "Audit Committee") is
composed of five Directors each of whom is considered independent under the
Rules of the New York Stock Exchange. The Audit Committee membership currently
does not include an individual who satisfies the literal and exact definition of
a "financial expert", as promulgated by the Securities and Exchange Commission
("SEC"). The Board considers each member of the Audit Committee to be
financially literate and several members have significant "financial"
qualifications. These qualifications in total however are not those specifically
required by the SEC in order to qualify as a "financial expert". The Board has
reviewed the qualification of the Audit Committee and is satisfied that the
current membership is more than sufficiently qualified to carry out its
responsibilities. In addition, the Audit Committee is independently empowered to
engage consultants and experts should it feel necessary to do so to gain
additional expertise on a given matter. The Board is continuing to review its
composition and may look to add to its membership in the future an individual
who satisfies the strict definition of a "financial expert".
The Audit Committee operates pursuant to a written charter which was
adopted in 1992 and which was most recently amended in February of 2004. A copy
of the charter, as revised, is included as Appendix C to this Proxy Statement.
The Audit Committee has adopted a policy for pre-approval of audit,
non-audit and tax services by the independent auditors. The Audit Committee may
pre-approve services on a general basis, such as the annual audit fee and
statutory audits. The services to be provided are to be reviewed with the Audit
Committee and approval is given for a specific dollar amount and for a period of
not greater than 12 months. Services that are not pre-approved in this manner
must be pre-approved on a case-by-case basis throughout the year. Additionally,
if the pre-approved fee is to be exceeded, approval of the Audit Committee must
be obtained. In making its decision regarding the approval of services, the
Audit Committee will consider whether such services are consistent with the
SEC's rules on auditor independence, whether the independent auditors are best
positioned to provide such services and whether the services might enhance the
Company's ability to manage or control risk or improve audit quality. No
services were provided during 2003 pursuant to the de minimis safe harbor
exception from the pre-approval requirements.
The Audit Committee reports to and acts on behalf of the Board of Directors
by monitoring the Company's financial reporting processes and system of internal
controls, and overseeing the independence and performance of the independent
accountants and the Company's
14
internal auditors. In carrying out these responsibilities, the Audit Committee
meets with members of management, the Company's independent auditors and the
Company's internal auditors on a regular basis or as may otherwise be needed.
The Audit Committee Chairman or his designee meets with management and with the
independent accountants each quarter to review and discuss the Company's
Quarterly Report on Form 10-Q or Form 10-K prior to their filing with the
Securities and Exchange Commission.
While the Audit Committee and Board of Directors monitor the Company's
financial record keeping and internal controls, it is the Company's management
that is ultimately responsible for the Company's financial reporting process,
including the Company's system of internal controls, disclosure control
procedures and the preparation of the financial statements. The independent
accountants support the financial reporting process by performing an audit of
the Company's financial statements and issuing a report thereon.
The Audit Committee has reviewed and discussed with management and the
independent accountants the consolidated financial statements for the year ended
December 31, 2003 and related periods. These discussions focused on the quality,
not just the acceptability, of the accounting principles used by the Company,
key accounting policies followed in the preparation of the financial statements
and the reasonableness of significant judgments made by management in the
preparation of the financial statements and alternatives that may be available.
The Audit Committee also discussed with the Company's internal auditors and
independent accountants the overall scope and plans for their respective audits
of the Company's financial statements. In addition, the Audit Committee
discussed with the independent accountants their independence from the Company
and its management and the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit Committees).
PricewaterhouseCoopers, LLP, the Company's independent accountants, has provided
the Audit Committee written disclosures and the letter required by Independence
Standards Board Standard No. 1 (Independence Discussion with Audit Committees)
concerning the accountant's independence from the Company.
Based on the review and discussions referred to above, the Audit
Committee's review of the representations of management and the report of the
independent accountants, the Audit Committee has recommended to the Board of
Directors that the Company's audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2003.
SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS:
J. I. Scheiner, Chairman
J. J. Jasinowski
D. H. Pierce
C. F. Scanlan
J. P. Viviano
15
FEES BILLED BY THE ACCOUNTANTS FOR AUDIT AND NON-AUDIT SERVICES
The following table sets forth the amount of audit fees, audit-related
fees, tax fees and all other fees billed or expected to be billed by
PricewaterhouseCoopers LLP, the Company's principal accountant for the year
ended December 31, 2003 and December 31, 2002.
AMOUNT AMOUNT
2003 2002
---------- ----------
Audit Fees(1)...................................... $2,717,700 $2,514,600
Audit-Related Fees(2).............................. $ 282,600 $ 213,500
Tax Fees(3)........................................ $ 555,400 $ 604,200
All Other Fees(4).................................. $ 24,000 $ 26,300
Total Fees......................................... $3,579,700 $3,358,600
---------------
(1) Includes the consolidated audit as well as statutory audits and quarterly
reviews.
(2) Includes due diligence procedures, accounting consultations, internal
control reviews and employee benefit plans.
(3) Includes services performed in connection with income tax services other
than those directly related to the audit of the income tax accrual.
(4) 2003 includes certain agreed upon procedures. 2002 includes actuarial
services in certain foreign countries.
HARSCO STOCK PERFORMANCE GRAPH
The following performance graph compares the yearly percentage change in
the cumulative total stockholder return (assuming the reinvestment of dividends)
on the Company's common stock against the cumulative total return of the
Standard & Poor's MidCap 400 Index and the Dow Jones Industrial-Diversified
Index for the past five years. The graph assumes an initial investment of $100
on December 31, 1998 in the Company's common stock or in the underlying
securities which comprise each of those market indices. The information
contained in the graph is not necessarily indicative of future Company
performance.
16
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG HARSCO CORPORATION, S&P MIDCAP 400 INDEX AND DOW JONES
INDUSTRIAL-DIVERSIFIED INDEX(1)(2)
FISCAL YEAR ENDING DECEMBER 31
[LINE GRAPH]
--------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
--------------------------------------------------------------------------------
Harsco Corporation 100 108 87 125 120 170
S&P Midcap 400
Index 100 115 135 134 115 155
Dow Jones
Industrial-Diversified 100 135 136 123 80 108
---------------
(1) Peer companies included in the Dow Jones Industrial-Diversified Index are:
Albany International Corp., Ashland Inc., Briggs & Stratton Corp., Capstone
Turbine Corp., Carlisle Companies Inc., Crane Company Inc., Dover
Corporation, Eaton Corp., Emerson Electric Co., Flowserve Corp., General
Electric Co., Honeywell International Inc., Illinois Tool Works, Inc.,
Ingersoll-Rand Company Ltd., ITT Industries Inc., Kaydon Corp., Kennametal
Inc., Mueller Industries Inc., Parker-Hannifin Corporation, Pentair Inc.,
Rockwell International Corp., The Shaw Group Inc., Teleflex Inc., Textron
Inc., The Timken Company and Tyco International Ltd.
(2) In December 2001, Dow Jones restructured its industry classification system.
The net result of this change is that all US indexes will show differences
when compared to the prior index series.
17
PROPOSAL 2: APPROVE AMENDMENT AND RESTATEMENT OF THE 1995
NON-EMPLOYEE DIRECTORS' STOCK PLAN
APPROVAL OF THE 1995 NON-EMPLOYEE DIRECTORS' STOCK PLAN, AS AMENDED AND RESTATED
The Board of Directors recommends that stockholders approve an amendment
and restatement of the Company's 1995 Non-Employee Directors' Stock Plan (the
"Directors' Plan"). The Directors' Plan is the Company's only plan for grants of
equity awards to Directors. It is intended to promote ownership by non-employee
Directors of a proprietary interest in the Company, aligning such Directors'
interests more closely with the interests of stockholders of the Company, and
assist the Company in attracting and retaining highly qualified persons to serve
as non-employee Directors.
The principal changes proposed for the Directors' Plan are:
- Authorize grants of restricted stock, an award of actual shares subject
to forfeiture upon certain terminations of service,
- Authorize grants of restricted stock units, an award which is a contract
obligation of the Company to deliver shares at a future date, subject to
forfeiture upon certain terminations of service,
- Add flexibility by providing that the type, timing and amount of awards
and certain award terms will be set from time to time by the Board (the
initial policy will call for an annual grant of 500 restricted stock
units and no annual grants of options or restricted stock),
- Update the Plan to eliminate provisions referring to regulations no
longer in effect.
The proposal will not increase the aggregate number of shares of common
stock reserved under the Directors' Plan, which was set in 1995 at 300,000
shares (as adjusted for the 1997 stock split). At March 4, 2004, 160,000 shares
remained available for issuance, representing 0.4% of the then outstanding
common stock. If the amendment and restatement is approved, these shares would
be available for all forms of awards under the Directors' Plan.
REASONS FOR STOCKHOLDER APPROVAL
The Board seeks approval of the amendment and restatement of the Directors'
Plan in order to meet listing requirements of the New York Stock Exchange. In
addition, the Board regards stockholder approval of the Plan as desirable and
consistent with corporate governance best practices.
SUMMARY OF THE DIRECTORS' PLAN TERMS
The following is a summary of the material terms of the Directors' Plan, as
amended and restated. It is qualified by reference to the full text of the
Directors' Plan, a copy of which is attached as Appendix A to this Proxy
Statement.
General. As amended and restated, the Directors' Plan will provide for
grants to non-employee Directors of equity awards, in the form of stock options,
restricted stock, and restricted stock units. In addition, the Plan also will
permit non-employee Directors to elect to receive fees otherwise payable in cash
in the form of common stock or defer receipt of such fees in the form of
"deferred stock." To be eligible to participate, a Director must not be an
employee of the Company or any subsidiary at the date an award is to be granted
or cash fees are to be deferred under the Plan. If the nominees for election as
Director named in this Proxy
18
Statement are reelected, seven Directors would currently qualify as non-employee
Directors under the Directors' Plan.
Administration. The Directors' Plan will be administered by the Board of
Directors, provided that any grant of an award or other action conferring
substantial benefits on Directors will be taken only if approved by vote of a
majority of the Directors who are not then eligible to participate in the
Directors' Plan. The Executive Committee or another Committee of the Board can
perform the Board's function under the Plan, and day-to-day administration will
be carried out by Company officers and employees.
Stock Options. The Board can authorize the grant of stock options to
eligible Directors under the Directors' Plan. These will be non-qualified stock
options having an exercise price equal to 100% of the fair market value of the
common stock at the date of grant. Prior to the amendment and restatement, the
Plan provided for automatic annual grants of 2,000 options to each non-employee
Director. As stated above, the amended and restated Plan will permit the Board
to adopt a policy from time to time setting the number of options that will be
granted and other terms. The initial policy under the Plan will call for no
option grants.
Options will become fully exercisable one year after the date of grant of
the Option, unless the Board specifies a different exercise date and subject to
earlier exercisability in the case of death, disability and, if specified by the
Board, other terminations of service as a director. If a participant ceases to
serve as a director for any reason other than due to death, disability or
mandatory retirement before the earlier of the date the option becomes
exercisable or the Annual Meeting of Stockholders in the year following grant, a
pro rata portion of the option will be vested based on the portion of the
one-year period served since the grant, with any unvested portion of the option
forfeited. Options may remain outstanding for up to five years after termination
of service, except that, if the optionee dies during the five-year post-
termination period, the period will be extended until five years after the
optionee's death, but no longer than ten years after the date of grant in any
event. Options may be exercised by payment of the exercise price in cash or by
surrender of shares, which may include withholding of option shares and other
methods of exercise if they do not result in recognition of additional
accounting expense by the Company.
Restricted Stock and Restricted Stock Units. Restricted stock or
restricted stock units may be granted to eligible Directors under the Directors'
Plan. The Plan permits the Board to adopt a policy from time to time specifying
the persons to receive these grants, the number of shares or units granted, the
time of the grant, and other award terms not specified in the Plan.
The Plan sets out the initial policy for these grants. Under this policy,
500 restricted stock units will be automatically granted each year on the first
business day of May to each eligible Director. These restricted stock units will
be settled promptly following termination of the participant's service as a
Director, except that the Board may permit deferral of settlement to a later
date.
The Board can set the times at which restricted stock and restricted stock
units will vest (i.e., become non-forfeitable). Under the initial policy, an
award will vest as to 100% of the shares on the earlier of the first anniversary
of the date of grant or the Annual Meeting of Stockholders in the year following
the year of grant, except it will vest upon the termination of service as a
Director due to death, disability or retirement under a mandatory retirement
policy. In addition, awards under the initial policy will vest on a pro rata
basis upon any other termination of service, based on the portion of the
one-year period served since the grant. The unvested portion of an award will be
forfeited at termination, unless otherwise determined by
19
the Board. Dividends generally will be payable on restricted stock, and dividend
equivalents will be payable on restricted stock units. The Board can determine
the timing, manner of payment, and any restrictions on these amounts, including
whether they will be deemed reinvested in additional awards.
Shares in Lieu of Fees and Deferred Stock. The Directors' Plan also
permits a non-employee Director to elect to receive fees otherwise payable in
cash in the form of common stock, or defer receipt of such fees in the form of
"deferred stock." The Director may make such election for up to 100% of the fees
otherwise payable to him or her, including annual retainer fees, fees for
service on a Board committee and fees for service as chair of a Board committee.
See "Directors' Compensation." If a Director elects to receive fees in the form
of common stock, the Company will issue to the Director or to an account
designated by the Director a number of shares having an aggregate fair market
value equal to the fees that would have been payable at that date but for the
Director's election to receive shares instead. If a Director elects to receive
fees in the form of deferred stock, the Company will credit a deferral account
established for the Director with a number of shares of deferred stock equal to
the number of shares having an aggregate fair market value at that date equal to
the fees that otherwise would have been payable at such date but for Director's
election to receive deferred stock instead. If dividends are declared and paid
on common stock, dividend equivalents will be credited on deferred stock then
credited to a Director's account, which amounts generally will be either paid to
the Director in cash or deemed to be reinvested in additional deferred stock. A
Director's deferred stock account will be settled at such time or times as may
be elected by the Director in his or her original deferral election form by
delivering one share of common stock for each share of deferred stock, together
with cash in lieu of any fractional share. Shares of common stock and deferred
stock acquired under the Directors' Plan are non-forfeitable.
Plan Amendments. The Directors' Plan may be amended, altered, suspended,
discontinued, or terminated by the Board without further stockholder approval,
unless such approval is required by law or regulation or under the rules of the
New York Stock Exchange. Thus, stockholder approval will not necessarily be
required for amendments that might increase the cost of the Plan. Stockholder
approval will not be deemed to be required under laws or regulations that
condition favorable treatment of Plan participants on such approval, although
the Board may, in its discretion, seek stockholder approval in any circumstance
in which it deems such approval advisable.
Adjustments. If any award under the Directors' Plan expires or terminates
without having been exercised or settled in full, the shares subject to the
award but not delivered will again be available for issuance under the
Directors' Plan. Likewise, if an award of restricted stock is forfeited, the
forfeited shares will be again available for awards under the Plan. The
aggregate number and kind of shares issuable under the Directors' Plan, subject
to automatic annual grants of awards under policies then in effect, subject to
outstanding awards, to be issued in payment of fees and to be issued in
settlement of deferred stock will be appropriately adjusted by the Board (as
will the exercise price of options and related award terms) in the event of a
recapitalization, reorganization, merger consolidation, spin-off, combination,
repurchase, exchange of shares or other securities of the Company, stock split
or reverse split, stock dividend, certain other extraordinary dividends,
liquidation, dissolution, or other similar corporate transaction or event
affecting common stock, in order to prevent dilution or enlargement of
Directors' rights under the Directors' Plan.
20
Effectiveness and Other Plan Information. The amendment and restatement of
the Directors' Plan will become effective upon its approval by stockholders. If
stockholders do not approve the proposal, the Directors' Plan will remain in
effect on its existing terms. Unless earlier terminated by the Board, the
Directors' Plan will terminate when no shares remain available and the Company
and Directors have no further rights and obligations under the Plan.
Directors generally pay no cash consideration for awards granted in the
discretion of the Board, except the Board may require cash consideration to
satisfy technical requirements for the issuance of restricted stock. Awards
under the Directors' Plan generally are not transferable by the Director other
than by will or by the laws of descent and distribution or to a designated
beneficiary in the event of death, and only the Director may exercise rights
under awards during his or her lifetime, except that transfers of options for
estate planning purposes are permitted in accordance with applicable SEC
regulations.
Shares delivered under the Plan may be authorized and unissued shares or
treasury shares. On March 4, 2004, the reported closing price of the Company's
common stock in New York Stock Exchange composite transactions was $47.02 per
share.
NEW PLAN BENEFITS TABLE
The following table sets forth the number of restricted stock units that
would have been automatically granted to non-employee Directors as a group under
the Directors' Plan in 2003 had the Directors' Plan, as proposed to be amended
and restated, been in effect during that year:
NEW PLAN BENEFITS
1995 NON-EMPLOYEE DIRECTORS' STOCK PLAN
NUMBER OF RESTRICTED
NAME AND POSITION STOCK UNITS
----------------- --------------------
Non-employee Director Group (8 in number)................ 4,000
It is not possible at present to determine the number of shares that will
be issuable under the Directors' Plan, as amended and restated, to non-employee
Directors as other equity awards or as common stock in lieu of fees or as
deferred stock in payment of fees.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the federal income tax consequences
generally arising with respect to equity awards that may be granted and
acquisitions of stock or deferred stock in payment of fees under the Directors'
Plan. This discussion is intended for the information of stockholders
considering how to vote at the Annual Meeting and not as tax guidance to
Directors who participate in the Directors' Plan.
The grant of an option will create no tax consequences for the optionee or
the Company. Upon exercise of an option, the optionee must generally recognize
ordinary income equal to the fair market value of the common stock acquired on
the date of exercise minus the exercise price, and the Company will be entitled
to a deduction equal to the amount recognized as ordinary income by the
optionee. A disposition of shares acquired upon the exercise of an option
generally will result in short-term or long-term capital gain or loss measured
by the difference between the sale price and the Director's tax basis (such
basis is generally the
21
exercise price plus the amount recognized as ordinary income) in such shares.
Generally, there will be no tax consequences to the Company in connection with a
disposition of option shares.
A Director granted restricted stock generally must recognize ordinary
income equal to the then-fair market value of the shares at the earliest time
either the transferability restriction or the risk of forfeiture lapses. A
Director granted restricted stock units generally must recognize ordinary income
equal to the then-fair market value of the shares delivered at settlement (which
may be later but cannot be earlier than the time the risk of forfeiture lapses;
certain employment taxes may be due at the time the risk of forfeiture lapses).
The Company can claim a tax deduction in an amount equal to the ordinary income
recognized by the Director. A Director may elect to be taxed at the time of
grant of restricted stock rather than upon lapse of restrictions on
transferability or the risk of forfeiture, but upon any subsequent forfeiture of
the shares, he or she would not be entitled to any tax deduction, including as a
capital loss, in connection with the forfeiture of the shares.
If a Director acquires common stock in lieu of cash fees, he or she will
recognize ordinary income equal to the fair market value of the common stock
acquired on the date of acquisition. If a Director acquires deferred stock in
payment of cash fees, he or she will not recognize ordinary income at the date
the fees would otherwise have been paid or as a result of the crediting of
deferred stock to his or her account (including upon deemed reinvestment of
dividend equivalents). The Director will, however, at the date of settlement of
the deferred stock by issuance of common stock to the Director, recognize
ordinary income equal to the fair market value of the common stock acquired at
that date, and any dividend equivalents paid in cash will constitute ordinary
income as well. The Company generally will be entitled to a tax deduction equal
to any amount that constitutes ordinary income to the Director.
VOTE REQUIRED
Adoption of the proposal to approve amendment and restatement of the
Directors' Plan requires the affirmative vote of holders of a majority of the
shares present in person or by proxy and entitled to vote at the Annual Meeting,
subject to a requirement that votes cast represent more than 50% in interest of
all securities entitled to vote on the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
1995 NON-EMPLOYEE DIRECTORS' STOCK PLAN, AS AMENDED AND RESTATED.
PROPOSAL 3: APPROVE AMENDMENT AND RESTATEMENT OF THE 1995
EXECUTIVE INCENTIVE COMPENSATION PLAN
APPROVAL OF THE 1995 EXECUTIVE INCENTIVE COMPENSATION PLAN, AS AMENDED AND
RESTATED
The Board of Directors recommends that stockholders approve an amendment
and restatement of Harsco Corporation 1995 Executive Incentive Compensation Plan
(the "EICP"). The EICP is the Company's only plan for grants of equity awards to
employees. It is intended to provide a means to attract, retain, and reward
executive officers and other key employees, to link compensation to measures of
the Company's performance by providing for incentive awards to be settled in
cash and/or stock, and to promote the creation of stockholder value. By helping
such employees acquire a greater proprietary interest in the Company, the EICP
is intended to promote a closer identity of interests between the employees and
stockholders.
22
The principal changes proposed for the amended and restated EICP are to:
- Add provisions so that stock awards already authorized under the EICP can
qualify as "performance-based" compensation which is tax deductible by
the Company without limitation under Section 162(m) of the Internal
Revenue Code, and
- Update the EICP to eliminate references to regulations no longer in
effect and to reflect changes in business practices since 1995.
The proposal will not increase the aggregate number of shares of common
stock reserved under the EICP, which was set in 1995 at 4 million shares (as
adjusted for the 1997 stock split). At March 4, 2004, 1,308,831 shares remained
available for issuance, representing 3.2% of the then outstanding common stock.
These shares are available for all forms of awards under the EICP.
REASONS FOR STOCKHOLDER APPROVAL. The Board seeks approval of the
amendment and restatement of the EICP by stockholders in order to meet
requirements of the New York Stock Exchange and to satisfy requirements of tax
law to help preserve the Company's ability to claim tax deductions for
compensation to executive officers. In addition, the Board regards shareholder
approval of the amendment and restatement as desirable and consistent with
corporate governance best practices.
Section 162(m) of the Internal Revenue Code limits the deductions a
publicly held company can claim for compensation in excess of $1 million in a
given year paid to the chief executive officer and the four other most highly
compensated executive officers serving on the last day of the fiscal year
(generally referred to as the "named executive officers"). "Performance-based"
compensation that meets certain requirements is not counted against the $1
million deductibility cap, and therefore remains fully deductible. As stated
above, the EICP is being amended and restated in order that certain awards
already authorized under the EICP -- restricted stock, deferred stock, and stock
granted as a bonus -- can qualify as "performance-based" compensation under Code
Section 162(m). This requires the following changes:
- The annual per-person limit will apply to awards of restricted stock,
deferred stock, and stock granted as a bonus. Currently, the EICP limits
only option and SAR grants. Aggregate limit will remain at 150,000 shares
per calendar year per participant, but restricted stock, deferred stock
and stock granted as a bonus will count along with options and SARs
against this limit.
- A new provision will authorize the Management Development and
Compensation Committee (the "Committee") to set performance objectives
required for earning grants or vesting of restricted stock, deferred
stock and bonus stock. For a performance objective that is intended to
qualify such an award under 162(m), the business criteria used will be
the same as the business criteria already specified for annual incentive
awards under the EICP.
- A new provision will specify that awards with performance conditions will
become vested upon a Change in Control (as defined) only to the extent
that the award agreement so provides. This will give the Committee
flexibility to determine the appropriate treatment of performance-based
awards in a change in control.
For purposes of Section 162(m), approval of the amendment and restatement
of the EICP also will be deemed to include reapproval of the general business
criteria that may be used to set performance objectives for awards, including
Annual Incentive awards, intended to qualify
23
under Section 162(m). These business criteria are described below under the
caption "Performance Objectives under Section 162(m)". Shareholder approval of
the general business criteria, without specific targeted levels of performance,
will permit qualification of awards for full tax deductibility for a period of
five years under Section 162(m). Shareholder approval of the performance goal
inherent in stock options and SARs (increases in the market price of stock from
the date of grant) is not subject to a time limit under Section 162(m).
RESTRICTION ON REPRICING. The Company is subject to requirements of the
Listed Company Manual of the New York Stock Exchange that shareholder approval
be obtained for any "repricing" of outstanding options. A "repricing" means
amending the terms of an option after it is granted to lower its exercise price,
any other action that is treated as a repricing under generally accepted
accounting principles, and canceling an option at a time when its strike price
is equal to or greater than the fair market value of the underlying shares, in
exchange for another option (including on a delayed basis), restricted stock, or
other equity, unless the cancellation and exchange occurs in connection with a
merger, acquisition, spin-off or other similar corporate transaction.
Adjustments to the exercise price or number of shares subject to an option to
reflect the effects of a stock split or other extraordinary corporate
transaction will not constitute a "repricing," however.
SUMMARY OF EICP TERMS
The following is a summary of the material terms of the EICP, as amended
and restated. It is qualified by reference to the full text of the EICP Plan, a
copy of which is attached as Appendix B to this Proxy Statement.
General. The flexible terms of the EICP provide for grants of a range of
awards:
- stock options,
- stock appreciation rights ("SARs"),
- restricted stock, a grant of actual shares subject to a risk of
forfeiture and restrictions on transfer,
- deferred stock, a contractual commitment to deliver shares at a future
date; forfeitable deferred stock may be referred to as "restricted stock
units",
- dividend equivalents,
- cash-denominated annual incentive awards tied to achievement of specific
performance objectives and
- shares issuable as a bonus or in lieu of rights to cash compensation.
- As stated above, performance conditions can be applied to any award,
including restricted stock, deferred stock, or a Company commitment to
grant bonus shares.
The EICP provides flexible terms to permit the Committee to enter into
compensatory arrangements that promote the compensation goals and policies
discussed above in the "Board Compensation Committee Report on Executive
Compensation."
Shares Subject to the EICP. As stated above, the amendment and restatement
of the EICP will not increase the 1,308,831 shares remaining available for
grants of awards. Shares subject to a forfeited or expired award or to an award
that is settled in cash or otherwise terminated without issuance of shares to
the participant again become available for grants
24
under the EICP, but shares surrendered to or withheld by the Company to cover
the exercise price of an option or to satisfy withholding tax obligations are
not added back to the pool of available shares. Shares issued under the EICP may
be either newly issued shares or treasury shares. On March 4, 2004, the last
reported sale price of shares in New York Stock Exchange composite transactions
was $47.02 per share.
Per-Person Limitations. During any calendar year, no participant may be
granted options, SARs, restricted stock, deferred stock, and stock as a bonus or
in lieu of other awards with respect to more than 150,000 shares under the EICP.
If a potential grant is authorized subject to performance conditions, this limit
will apply in the year of the authorization rather than in the year any
resulting grant. The maximum value of any cash-denominated Annual Incentive
Award that may be earned by satisfaction of performance conditions in any
calendar year may not exceed $2,000,000 under the EICP.
Adjustments. The Committee is authorized to adjust the number and kind of
shares subject to the aggregate share limitations and annual limitations under
the EICP and subject to outstanding awards (including adjustments to exercise
prices of options and other affected terms of awards) in the event that a
dividend or other distribution (whether in cash, shares, or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event affects the shares such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of participants under the EICP. The Committee is also authorized to
adjust performance conditions and other terms of awards in response to these
kinds of events or to changes in applicable laws, regulations, or accounting
principles, except that adjustments to performance conditions relating to awards
intended to qualify under Section 162(m) must conform to the requirements of
Section 162(m).
Eligibility. Executive officers and other key employees of the Company and
its subsidiaries, including any director or officer who is also an employee, are
eligible to be granted awards under the EICP. At present, approximately 36
Corporate and Division Officers would be considered to be eligible for awards
under the EICP. In addition, the Board may, in its discretion, grant awards to
key employees, other than officers.
Administration. The EICP is administered by the Committee. The Board may,
however, itself perform the functions of the committee or may appoint a
different committee to administer the EICP (references to the "Committee" in
this discussion mean the committee then serving or the Board if it is then
performing committee functions). The composition and governance of the Committee
will be governed by the charter of the Committee, as approved by the Board from
time to time. Subject to the terms and conditions of the EICP, the Committee is
authorized to select participants, determine the type and number of awards
granted and the number of shares to which awards will relate, specify times at
which awards will be exercisable or settled and performance conditions that may
be attached to awards, set other terms and conditions of awards, prescribe award
agreements, interpret and specify rules and regulations relating to the EICP,
and make all other determinations which may be necessary or advisable for the
administration of the EICP. Nothing in the EICP precludes the Committee from
authorizing payment of any other compensation, including bonuses based on
performance, to officers or employees, including the executive officers. The
EICP provides that Committee members shall not be personally liable, and shall
be fully indemnified, in connection with any action, determination, or
interpretation taken or made in good faith under the EICP.
25
Stock Options and SARs. The Committee is authorized to grant stock
options, including both incentive stock options which can result in potentially
favorable tax treatment to the participant ("ISOs") and nonqualified stock
options (i.e., options not qualifying as ISOs), and SARs entitling the
participant to receive the excess of the fair market value of a share on the
date of exercise over the grant price of the SAR. The exercise price per share
subject to an option and the grant price of an SAR is determined by the
Committee, but must not be less than the fair market value of a share on the
date of grant. The maximum term of each option or SAR, the times at which each
option or SAR will be exercisable, and provisions requiring forfeiture of
unexercised options at or following termination of employment is fixed by the
Committee, except no option or SAR may have a term exceeding ten years. Options
may be exercised by payment of the exercise price in cash, shares (including
shares issuable upon exercise of the option, if that would not result in
additional accounting expense to the Company), outstanding awards, or other
property having a fair market value equal to the exercise price (this may
include broker-assisted "cashless exercise" procedures), as the Company may
determine from time to time. Methods of exercise and settlement and other terms
of the SARs are determined by the Committee. SARs granted under the EICP may
include "limited SARs" exercisable for a stated period of time following a
"change in control" of the Company, as discussed below.
Restricted and Deferred Stock. The Committee is authorized to grant
restricted stock and deferred stock. Restricted stock is a grant of shares which
may not be sold or disposed of, and which may be forfeited in the event of
certain terminations of employment, prior to the end of the specified restricted
period. The restricted period generally is established by the Committee, but
restricted stock must be forfeitable for at least three years, in the event of
voluntary termination of employment by the participant or involuntary
termination by the Company for cause, if the grant or lapse of restrictions is
not conditioned upon achievement of a performance objective. A participant
granted restricted stock generally has all of the rights of a stockholder of the
Company, including the right to vote the shares and to receive dividends
thereon, unless otherwise determined by the Committee. An award of deferred
stock confers upon a participant the right to receive shares at the end of a
specified deferral period, subject to possible forfeiture of the award in the
event of certain terminations of employment prior to the end of a specified
restricted period (which restricted period need not extend for the entire
duration of the deferral period). Prior to settlement, an award of deferred
stock carries no voting or dividend rights or other rights associated with share
ownership (although dividend equivalents may be granted, as discussed below).
Annual Incentive Awards. The Committee is authorized to grant annual
incentive awards, in the form of cash and/or restricted stock, upon achievement
of preestablished performance objectives during a specified one-year period.
Annual incentive awards granted to named executive officers are intended to
constitute "performance-based compensation" not subject to the limitation on
deductibility under Code Section 162(m). The Committee generally must establish
the performance objectives, amounts payable, other terms of settlement, and all
other terms of such awards not later than the first quarter of the Company's
fiscal year. The performance objectives to be achieved as a condition of
settlement of annual incentive awards will consist of (i) one or more business
criteria, (ii) minimum, targeted and maximum levels of performance with respect
to each such business criteria, and (iii) amounts payable upon achievement of
such levels of performance and at other levels of performance between the
specified minimum and maximum levels.
Subject to the requirements of the EICP, the Committee will determine other
annual incentive award terms, including the required levels of performance with
respect to the
26
business criteria, the corresponding amounts payable upon achievement of such
levels of performance (subject to per-person limits), and the extent to which
such awards will be settled in cash and in restricted stock. If restricted stock
is granted in settlement of an annual incentive award in respect of a given
performance year, 50% of such restricted stock shall have a restricted period
ending not earlier than the end of the year following such performance year and
50% of such restricted stock shall have a restricted period ending not earlier
than the end of the third year following such performance year. In the event of
the participant's voluntary termination of employment or involuntary termination
by the Company for "cause" prior to the end of the restricted period, such
restricted stock will be forfeited.
Bonus Stock and Awards in Lieu of Cash Obligations. The Committee is
authorized to grant shares as a bonus free of restrictions or to grant shares or
other awards in lieu of Company obligations to pay cash under other plans or
compensatory arrangements, subject to such terms as the Committee may specify.
Performance Objectives under Section 162(m). If the Committee intends that
an annual incentive award or restricted stock, deferred stock or stock granted
as a bonus will qualify as "performance-based" compensation under Section
162(m), it will base the performance objective on achievement of a targeted
level of performance with respect to the following business criteria:
- Annual return on capital
- Annual earnings per share
- Annual cash flow provided by operations
- Annual sales
- Strategic business criteria, consisting of one or more objectives based
on meeting specified sales, market penetration, geographic business
expansion goals, cost targets, safety goals, goals relating to
acquisitions or divestitures, research and development and product
development goals
- Economic value-added measures
The Committee may specify other business criteria for participants other
than named executive officers. In addition, the Committee may exercise negative
discretion to reduce the amount of an award to a named executive officer that
otherwise has been earned based on performance with respect to one of the
specified business criteria, and the Committee may take into account other
measures of performance in exercising this negative discretion.
Dividend Equivalents. The Committee is authorized to grant dividend
equivalents conferring on participants the right to receive, currently or on a
deferred basis, cash, shares, other awards, or other property equal in value to
dividends paid on a specific number of shares. Dividend equivalents may be
granted on a free-standing basis or in connection with another award, may be
paid currently or on a deferred basis, and, if deferred, may be deemed to have
been reinvested in additional shares, awards, or other investment vehicles
specified by the Committee.
Other Terms of Awards. Awards may be settled in cash, shares, other
awards, or other property, in the discretion of the Committee. The Committee may
require or permit participants to defer the settlement of all or part of an
award in accordance with such terms and conditions as the Committee may
establish, including payment or crediting of interest or dividend
27
equivalents on deferred amounts, and the crediting of earnings, gains, and
losses based on deemed investment of deferred amounts in specified investment
vehicles. The Committee is authorized to place cash, shares, or other property
in trusts or make other arrangements to provide for payment of the Company's
obligations under the EICP. The Committee may condition any payment relating to
an award on the withholding of taxes and may provide that a portion of any
shares or other property to be distributed will be withheld (or previously
acquired shares or other property surrendered by the participant) to satisfy
withholding and other tax obligations. Awards granted under the EICP generally
may not be pledged or otherwise encumbered and are not transferable except by
will or by the laws of descent and distribution, or to a designated beneficiary
upon the participant's death, except the Committee may permit transfers for
estate planning purposes to the extent consistent with SEC regulations.
The Committee may specify the consideration to be paid for awards under the
EICP, although awards generally do not require any payment of consideration for
the grant (as distinguished from the exercise) except to the extent required by
law. Subject to applicable limitations on repricing options, the Committee may
grant awards in substitution for other awards under the EICP, awards under other
Company plans, or other rights to payment from the Company, and may grant awards
in addition to and in tandem with such other awards or other rights.
Acceleration of Vesting. The Committee may, in its discretion, accelerate
the exercisability, the lapsing of restrictions, or the expiration of deferral
periods of any award (subject to certain limitations relating to restricted
stock, discussed above), and such accelerated exercisability, lapse, and
expiration shall occur automatically in the case of a "change in control" of the
Company (including cash settlements of SARs and "limited SARs" which may be
exercisable only in the event of a change in control) for outstanding awards,
except the Committee has authority to specify the treatment of performance-based
awards in the applicable award agreement. Subject to certain exceptions, the
EICP defines a "change in control" as (i) any person becoming a beneficial owner
of securities representing 20% or more of the outstanding voting power of the
company's voting securities, (ii) members of the Board serving at the beginning
of any two-year period, together with members first elected in such period with
the approval of two-thirds of the original members and new members previously so
approved, ceasing to constitute at least a majority of the Board, or (iii) a
transaction occurring which would be required to be reported as a "change in
control" under specified Securities and Exchange Commission disclosure rules.
Amendment and Termination of the EICP. The Board of Directors may amend,
alter, suspend, discontinue, or terminate the EICP or the Committee's authority
to grant awards without further stockholder approval, except stockholder
approval must be obtained if required by law or regulation. Under a recently
adopted rule of the New York Stock Exchange, a "material revision" to the EICP
will be subject to stockholder approval as well. Under these rules, stockholder
approval will be required for any material increase in the number of shares
available under the EICP, but will not necessarily be required for other types
of amendments which might increase the cost of the EICP. Stockholder approval
will not be deemed to be required under laws or regulations, such as those
relating to ISOs, that condition favorable treatment of participants on such
approval, although the Board may, in its discretion, seek stockholder approval
in any circumstance in which it deems such approval advisable. The EICP does not
specify a fixed termination date, although ISOs cannot be granted after the
applicable ten-year expiration date under Section 422 of the Code. Thus, the
EICP will terminate at such
28
time as no shares remain available for issuance and the Company has no further
rights or obligations with respect to outstanding awards, unless earlier
terminated by the Board.
Effect of Stockholder Approval on Awards. Except as described below, all
awards granted to date have been granted under the EICP as currently in effect,
and therefore such awards will be unaffected by the action of stockholders
relating to the EICP at the 2004 Annual Meeting of Stockholders. Annual
incentive awards and equity awards granted with respect to the 2001-2003 period
to the named executive officers as of December 31, 2003, are shown in the
Summary Compensation Table, and other information relating to such awards is set
forth in the "Management Development and Compensation Committee Report on
Executive Compensation," in the section titled "Stock Options Issued During the
2003 Fiscal Year," and in the footnotes to the Company's financial statements
for the year ended December 31, 2003, in the Annual Report which accompanies
this Proxy Statement. EICP awards are granted in the discretion of the
Committee, so the type, number, recipients and other terms of future awards
under the EICP cannot be determined at this time.
The Committee has authorized grants of performance-based restricted stock
units (i.e., forfeitable deferred stock) under the EICP as a component of
long-term compensation of senior executives for 2004. The Committee intends that
compensation to the executive officers named below resulting from such awards be
fully tax deductible by the Company without limitation under Section 162(m).
Accordingly, these awards have been granted subject to approval of the amendment
and restatement of the EICP, so that the provisions allowing for qualification
of restricted stock unit (deferred stock) awards as performance-based under
Section 162(m) will apply to such awards. The vesting of the awards at the
threshold, target and maximum levels is subject to the Company or specified
business units achieving specified levels of "earnings per share" in 2004.
Restricted stock units that are earned by such 2004 performance will require an
additional three years of service in order to fully vest, subject to accelerated
vesting of all or part of the award in the event of death, disability, and
certain other terminations of employment that are involuntary and not for cause.
NEW PLAN BENEFITS
HARSCO CORPORATION 1995 EXECUTIVE INCENTIVE COMPENSATION PLAN
AS AMENDED AND RESTATED
(ONLY AWARDS SUBJECT TO SHAREHOLDER APPROVAL OF AMENDMENT AND RESTATEMENT ARE
SHOWN)
NUMBER OF RESTRICTED STOCK UNITS
THAT MAY BE EARNED
----------------------------------
PERFORMANCE LEVEL FOR 2004
----------------------------------
NAME AND POSITION THRESHOLD TARGET MAXIMUM
----------------- ----------- -------- ---------
D. C. Hathaway.............................................. 10,000 10,000 10,000
Chairman, President & Chief Executive Officer
G. D. H. Butler............................................. 5,000 5,000 5,000
Senior Vice President -- Operations
S. D. Fazzolari............................................. 5,000 5,000 5,000
Senior Vice President, Chief Financial Officer & Treasurer
R. W. Kaplan................................................ 1,250 1,250 1,250
Vice President
S. J. Schnoor............................................... 1,250 1,250 1,250
Vice President & Controller
29
NUMBER OF RESTRICTED STOCK UNITS
THAT MAY BE EARNED
----------------------------------
PERFORMANCE LEVEL FOR 2004
----------------------------------
NAME AND POSITION THRESHOLD TARGET MAXIMUM
----------------- ----------- -------- ---------
All Executive Officers as a Group (6 in number)............. 23,750 23,750 23,750
Non-Executive Officer Employee Group (including current
officers who are not executive officers).................. 21,000 21,000 21,000
In the event stockholders disapprove this Proposal, the awards shown in the
above table will not be granted or earned to the extent required under Treasury
Regulation 1.162-27(e)(4) so that shareholder approval of the Proposal would
have met the requirements of that Regulation.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the federal income tax consequences
generally arising with respect to awards under the EICP.
The grant of an option or SAR will create no tax consequences for the
participant or the Company. A participant will not have taxable income upon
exercising an option that is an ISO, except that the alternative minimum tax may
apply. Upon exercise of an option other than an ISO, the participant generally
must recognize ordinary income equal to the fair market value of the shares
delivered to the participant on the date of exercise minus the exercise price.
Upon exercise of an SAR, the participant generally must recognize ordinary
income equal to the cash or the fair market value of the shares received.
Upon a sale of shares acquired upon exercise of an ISO before the end of
the applicable ISO holding periods, the participant must generally recognize
ordinary income equal to the lesser of (i) the fair market value of the shares
at the date of exercise of the ISO minus the exercise price or (ii) the amount
realized upon the disposition of the ISO shares minus the exercise price (any
appreciation in the ISO shares from the date of exercise to the date of sale
will represent capital gain). If ISO shares are sold when the holding periods
have been met, and upon any sale of shares acquired by exercise of a
non-qualified option (that is, a non-ISO) or LSAR, the sale generally will
result in short-term or long-term capital gain or loss to the participant equal
to the sale price minus the participant's tax basis in the shares (the tax basis
being, generally, the exercise price plus any amount previously recognized as
ordinary income in connection with the exercise of the option or LSAR).
The Company generally will be entitled to a tax deduction equal to the
amount recognized as ordinary income by the participant in connection with an
option or SAR, but generally will not be entitled to a tax deduction relating to
amounts that represent a capital gain to a participant. Accordingly, the Company
will not be entitled to any tax deduction with respect to an ISO if the
participant holds the shares for the ISO holding periods prior to disposition of
the shares.
A participant granted restricted stock under the EICP generally will not be
subject to taxation at grant or during the period the award is restricted as to
transferability and subject to a substantial risk of forfeiture. If the shares
have been delivered to the participant, he or she generally must recognize
ordinary income equal to the fair market value of the shares at the time the
restricted stock becomes transferable or not subject to a substantial risk of
forfeiture. Tax rules permit a participant to elect to be taxed on restricted
stock at the time of grant, but if the participant subsequently forfeits such
shares he would not be entitled to any tax deduction, including as a capital
loss, for the value of the shares on which he previously paid tax. Stock
30
granted as a bonus will represent ordinary income to the participant equal to
the fair market value of the shares at the time of grant. With respect to
deferred stock, taxation of the participant generally is deferred until stock is
delivered to the participant in settlement of the award. In each of these cases,
the Company generally will be entitled to a tax deduction in an amount equal to
the ordinary income recognized by the participant (except as limited under Code
Section 162(m), discussed above and below), in the year in which the participant
recognizes such income.
As discussed above, the Company generally intends that options, SARs,
performance-based restricted stock, deferred stock and stock granted as a bonus,
and annual incentive awards under the EICP qualify as "performance-based
compensation," so that such awards will not be subject to the $1 million
deductibility cap of Code Section 162(m). A number of requirements must be met
in order for particular compensation to so qualify, however, so there can be no
assurance that such compensation under the EICP will be fully deductible under
all circumstances. In addition, other awards under the EICP, including
restricted stock, deferred stock or bonus stock not subject to performance
conditions, will not so qualify, so that compensation paid to persons who are
covered employees in connection with such awards, to the extent such
compensation and other compensation subject to Section 162(m)'s deductibility
cap in a given year exceeds $1 million, will not be tax deductible by the
Company for federal income tax purposes. (See "Compensation Committee Report.")
The foregoing discussion, which is general in nature, is intended for the
information of stockholders considering how to vote at the Annual Meeting and
not as tax guidance to participants in the EICP. Different tax rules may apply,
including in the case of variations in transactions that are permitted under the
EICP (such as payment of the exercise price of an option by surrender of
previously acquired shares). This discussion does not address the effects of
other federal taxes (including possible "golden parachute" excise taxes) or
taxes imposed under state, local, or foreign tax laws. Accordingly, participants
are urged to consult a tax advisor as to their individual circumstances.
VOTE REQUIRED
Adoption of the proposal to approve amendment and restatement of the EICP
requires the affirmative vote of holders of a majority of the shares present in
person or by proxy and entitled to vote at the Annual Meeting, subject to a
requirement that votes cast represent more than 50% in interest of all
securities entitled to vote on the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
1995 EXECUTIVE INCENTIVE COMPENSATION PLAN, AS AMENDED AND RESTATED.
EQUITY COMPENSATION PLAN INFORMATION
The Company maintains the 1995 Executive Incentive Compensation Plan and
the 1995 Non-Employee Directors' Stock Plan, which allow the Company to grant
equity awards to eligible persons. Upon shareholder approval of these two plans
in 1995, the Company terminated the use of the 1986 Stock Option Plan for
granting stock option awards.
The Company also assumed options under the SGB Group Plc Discretionary
Share Option Plan 1997 (the "SGB Plan") upon Harsco's acquisition of SGB Group
Plc ("SGB") in 2000. At the time of the acquisition, various employees of the
U.K.-based SGB held previously granted stock options under the SGB Plan. Harsco
authorized the issuance of Harsco common stock to fulfill these SGB Plan stock
options upon exercise from time to time. Harsco has not made any
31
additional stock option grants under the SGB Plan since the acquisition and will
not make any further grants in the future.
The following table gives information about equity awards under these plans
as of December 31, 2003. All securities referred to are shares of Harsco common
stock.
(C)
-----------------------
(A) NUMBER OF SECURITIES
-------------------- (B) REMAINING AVAILABLE FOR
NUMBER OF SECURITIES -------------------- FUTURE ISSUANCE UNDER
TO BE TO ISSUED UPON WEIGHTED-AVERAGE EQUITY COMPENSATION
EXERCISE OF EXERCISE PRICE OF PLANS (EXCLUDING
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN(A))
------------- -------------------- -------------------- -----------------------
Equity compensation plans approved
by security holders(1).......... 1,679,028 $30.74 1,468,831
Equity compensation plans not
approved by security holders.... 16,052(2) $28.01(3) 0
Total............................. 1,695,080 $30.72 1,468,831
---------------
(1) Plans include the 1986 Stock Option Plan as amended, the 1995 Executive
Incentive Compensation Plan as amended and the 1995 Non-Employee Directors'
Stock Plan.
(2) Represents the shares of Harsco common stock issuable as replacement option
shares in satisfaction of the exercise of stock options granted by SGB under
the SGB Plan as described below. This plan is not a material equity
compensation plan of the Company.
(3) These stock options denominate the exercise price in U.K. pounds sterling.
The price shown is translated into U.S. dollars at an exchange rate of
$1.7859 effective December 31, 2003.
DESCRIPTION OF THE EQUITY COMPENSATION PLAN NOT APPROVED BY SECURITY HOLDERS
Upon the acquisition of SGB in June 2000, Harsco authorized the assumption
of outstanding options granted under the SGB Plan and the issuance of options
("Harsco Replacement Options") exercisable for shares of Harsco common stock in
exchange for options granted by SGB pursuant to the SGB Plan and exercisable for
shares of SGB common stock ("SGB Options"). On June 30, 2000, Harsco commenced
an offer ("Option Exchange Offer") to the holders of SGB Options for an
equivalent Harsco Replacement Options. Upon completion of the Option Exchange
Offer, each SGB Option exercisable for one SGB share was exchanged for a Harsco
Replacement Option exercisable for a fraction, equal to 0.1362, of one share of
Harsco common stock. The Company has authorized the issuance of Harsco common
stock from treasury or from authorized but unissued shares as necessary to
fulfill the terms of the Harsco Replacement Options. The maximum number of
shares of Harsco common stock that were issuable upon exercise of the Harsco
Replacement Options was 61,097. Only those SGB participants who accepted the
Option Exchange Offer and received Harsco Replacement Options are eligible to
continue participation in the SGB Plan. SGB Options were granted under the Plan
on five different dates prior to the acquisition. The exercise prices of the
Harsco Replacement Options vary depending on the original SGB Option date of
grant and range from 1145.0 U.K. pence to 2092.0 U.K. pence. The options are
exercisable during the period commencing on the third anniversary of the date
the original SGB Options were granted and ending on the day before the tenth
anniversary of the date the SGB Options were granted. If a participant ceases to
be an Eligible Employee (as defined under the Plan), the participant's
32
Harsco Replacement Options will lapse, except in the event that the participant
ceases to be an Eligible Employee due to death or injury, disability, redundancy
or retirement.
PROPOSAL 4: APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Audit Committee has designated PricewaterhouseCoopers LLP as
independent accountants to audit the Company's financial statements for the
fiscal year ending December 31, 2004. This firm has audited the financial
statements of the Company and its predecessors since 1929. Although not required
to do so by law or otherwise, the Audit Committee desires that stockholders
ratify its selection of PricewaterhouseCoopers LLP as the Company's independent
accountants. Therefore, the Audit Committee's choice of independent accountants
will be submitted for ratification or rejection at the Annual Meeting. In the
absence of contrary direction from stockholders, all proxies that are submitted
will be voted in favor of the confirmation of PricewaterhouseCoopers LLP as the
Company's independent accountants. A representative of PricewaterhouseCoopers
LLP will attend the Annual Meeting, with the opportunity to make a statement and
answer questions of stockholders.
If this proposal is not ratified by a majority of the shares entitled to
vote at the Annual Meeting, the appointment of the independent accountants will
be reevaluated by the Audit Committee. Due to the difficulty and expense of
making any substitution of accountants, it is unlikely that their appointment
for the audit of the financial statements for the fiscal year ending December
31, 2004 would be changed. However, the Audit Committee may review whether to
seek new independent accountants for the fiscal year ending December 31, 2005.
The Audit Committee, at its meeting held on November 18, 2003, reviewed the
fee estimate for the annual audit of the Company's fiscal 2003 financial
statements and, taking into consideration the possible effect of non-audit
services on the accountants' independence, also reviewed specific non-audit
services to be rendered for income tax services. The Committee authorized the
Committee Chairman to finalize and sign the engagement agreement with
PricewaterhouseCoopers LLP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Management Development and Compensation Committee ("Compensation Committee") of
the Board of Directors. The Compensation Committee is currently composed of the
four non-employee Directors listed below this Report. Each member of the
Compensation Committee is considered to be independent in accordance with the
guidelines established by the New York Stock Exchange and no member has any
interlocking or other relationships with the Company that are subject to
disclosure under the Securities and Exchange Commission rules relating to proxy
statements. All decisions of the Compensation Committee relating to the salaries
and grade levels of the Company's Executive Officers are approved by the full
Board.
The Compensation Committee believes that the Company benefits from a broad
based executive compensation program with approximately 30 division officers,
five executive officers and two other corporate officers participating in the
program as of December 31, 2003.
33
PROGRAM GOALS
In administering the Companies executive compensation program, the
Compensation Committee looks to accomplish the following goals:
- Incentivize management to achieve the Company's annual and long-term
performance goals, which are specifically designed to reinforce the
creation and enhancement of shareholder value;
- Promote individual initiative and achievement;
- Provide levels of compensation that are fair, reasonable and competitive
with comparable industrial companies; and
- Attract and retain qualified executives who are critical to the Company's
long-term success.
OTHER KEY GUIDING PRINCIPLES
In addition to the above goals, the Compensation Committee administers the
Company's executive compensation programs with these guiding principles in mind:
- In general, the Committee strives to maintain total compensation packages
which range from moderately below to moderately above the industry
medians.
- The executives most able to affect the performance of the Company should
have a significant portion of their potential total compensation at risk
and dependent upon the Company's performance.
- The executive officers of the Company should share in the gains and
losses of common stock experienced by stockholders in order to reinforce
the alignment of their respective interests.
- The Company has not reset the exercise price on any existing stock
options in the past, and as a matter of sound compensation policy, does
not foresee doing so in the future.
PROGRAM COMPONENTS
The Compensation Committee carries out the executive compensation program
through various compensation methods and programs. The primary compensation
methods used and the manner in which they are administered, include the follow:
- Annual Salary, which is based upon grade levels that reflect the degree
of responsibility associated with the executive's position and the
executive's past achievement;
- Annual cash incentive compensation awarded under the 1995 Executive
Incentive Compensation Plan (the "1995 Incentive Plan"), the amount of
which is based upon achievement of specific economic value-added
("EVA(R)") goals established for the relevant business unit. The
Compensation Committee believes that attainment of specific, measurable
EVA goals is an important determinant of total return to stockholders
over the long-term and has the advantage of not being subject to period
vagaries of the common stock price;
- Some form of equity compensation issued under the 1995 Incentive Plan. In
the past, stock options were granted. The issuance of options has been
suspended and the Committee is currently reviewing long-term compensation
alternatives. Grants (in whatever form the Committee determines
appropriate) are made by the Compensation
34
Committee on the basis of the Committee's evaluation of each unit's
strategic performance and the contribution of the executive to that unit;
and
- Various retirement and other benefits commonly found in similar
companies.
In establishing the weight of these various compensation components, the
Compensation Committee believes that as an executive's level of responsibility
increases, a greater portion of his or her potential total compensation
opportunity should be based on performance incentives and a lesser portion on
salary. The Compensation Committee also believes that as executives rise to
positions that can have a greater impact on the Company's performance, the
compensation program should place more emphasis on the value of the common
stock.
Salaries
The Compensation Committee completed its annual review of officer salaries
at the December 17, 2002 Committee meeting. In establishing 2003 salaries, the
Committee considered an analysis of compensation survey data that the Company's
compensation consultant, Towers Perrin, had prepared at the Compensation
Committee's request.
Each year, the Compensation Committee considers adjustments to the salary
of each executive officer based upon the available salary budget, the
performance of each officer, comparison survey data provided by one or more
major consulting firms, comparison to other internal salaries and the Company's
salary range structure for various grade levels. The salary range structure for
various grade levels is also revised from time to time based upon industry
survey data provided by Towers Perrin. The Towers Perrin industry compensation
survey considered by the Committee is a broad based survey of companies selected
by the consulting firm which are not limited to the companies within the Dow
Jones Industrial-Diversified Index referenced elsewhere in the Proxy Statement,
though some of those companies may have been included in the survey.
Annual Incentive Compensation Plan
Payments for executive officers under the 1995 Incentive Plan for calendar
year 2003 were dependent upon achievement of EVA targets for their respective
business units in the case of Messrs. Butler and Kaplan, and the achievement of
an EVA objective for the Company, in the case of the other executive officers.
These EVA objectives were established by the Compensation Committee prior to the
beginning of the year.
Payments under this Plan are a function of the executive's annual salary
multiplied by the bonus percentage, which in turn is multiplied by a performance
percentage. The bonus percentage is determined for each individual executive and
is a function of the individual's level of responsibilities and their ability to
impact the overall results of the Company. The percentage is calculated by
multiplying the individual's salary grade by .02. The bonus percentage for 2003
for Mr. Hathaway was 60% and the bonus percentages for the other executive
officers ranged from 34% to 46%.
The performance percentage is determined based on achievement of EVA
objectives and can range from 0 to 200%. The EVA objectives include various
performance levels. The 2003 EVA objectives, which were developed with input
from Stern Stewart & Company, include a minimum, target and maximum performance
level. Performance which is below the minimum performance level results in a
zero performance percentage and therefore, no incentive payments being made. The
performance percentage increases above zero once the minimum
35
performance level is obtained and increases as results increase above the
minimum level. For 2003, the performance percentage for achieving the target
level of EVA performance results is 100%. If the maximum performance level is
obtained or surpassed, the performance percentage is capped at 200%.
The Compensation Committee, again with the input of Stern Stewart &
Company, has established minimum, target and maximum objectives for overall
Company EVA performance for 2004 and has allocated that target objective among
the divisions. Thus, the annual incentive compensation awards of the corporate
officers are closely related to the overall performance of the divisions against
their EVA goals.
Based on their business unit's achievements against the established EVA
targets, Messrs. Butler and Kaplan attained 142% and 87% of target achievement
respectively. The other four executive officers attained 119% of target
achievement for the 2003 based on the overall EVA achievement of the Company.
The amounts of the awards to the named executive officers under the Plan are
summarized in the Summary Compensation Table.
Long-term Compensation
Stock options have been the vehicle through which the long-term incentive
compensation was granted to employees. No stock options were issued by the
Company during 2003. The Compensation Committee, on the recommendation of
management, decided to take a one year leave in the issuance of options to study
the impact options issuance were having on the Company, stockholders and
employees. In December of 2003, the Compensation Committee again decided not to
issue options in 2004, but instead have asked management to develop a long-term
equity compensation program for key senior managers in the Company. The
Compensation Committee expects that any awards under this long-term equity
compensation program will be made pursuant to the terms of the 1995 Incentive
Plan.
The 1995 Incentive Plan was approved by the stockholders in 1995, was
renewed by the stockholders in 1998 and 2001, and has been used to make grants
of options to other corporate officers and key employees, division officers as
well as the executive officers. The guidelines for the maximum annual number of
options granted for each grade level were established in January 2001 based upon
a recommendation from Towers Perrin, and that firm's year 2000 survey of the
long-term incentive compensation and total compensation practices of major
United States companies. Towers Perrin used a Black-Scholes valuation of the
Company's options to make comparisons of compensation value. The number of
options granted to a particular officer was determined by grade level and the
Committee's evaluation of the strategic performance of the individual and the
individual's business unit. Thus, the Chairman, President and Chief Executive
Officer, Mr. Hathaway, who has the highest grade level, received the largest
award. The absolute maximum stock option award as provided in the 1995 Incentive
Plan is 150,000 shares for any single participant in a calendar year. In
addition to options, the 1995 Incentive Plan permits the issuance of stock
appreciation rights, restricted stock and deferred stock.
Other Compensation
The Company has certain other broad based employee benefit plans in which
the executive officers participate on the same terms as non-executive employees,
including health insurance, a defined benefit pension plan, a 401(k) savings
plan and the term life insurance benefit equal to two times the individual's
salary up to a maximum benefit of $500,000. In addition, the
36
executive officers participate in the Supplemental Retirement Benefit Plan as
described elsewhere in this Proxy Statement, which supplements both the
qualified pension plan and the Company's 401(k) Savings Plan. During 2003, the
Company amended most of its defined-benefit pension plans to end further
accruals under the plan for additional service with the Company. After 2003,
benefits paid under these amended plans will take into account future salary
increases of participants.
THE CHIEF EXECUTIVE OFFICER'S 2003 COMPENSATION
The incentive plan cash and salary awarded or paid to Mr. Hathaway with
respect to 2003 are discussed in the Summary Compensation Table on page 38 in
this Proxy Statement with respect to amounts, and in this Report with respect to
the factors considered by the Compensation Committee. Mr. Hathaway's 2003 salary
was determined by the Committee utilizing the same factors as are explained in
the "Salaries" section above. The Committee particularly considered the progress
that was being made on various matters of strategic concern to the Company,
including the disposal of underperforming assets, the addressing of pension cost
increases and significant increase in the Company's cash flow and reduction of
debt. As was stated above, Mr. Hathaway's annual incentive payment was primarily
a function of the Company's overall EVA performance. Of the total $1,504,892 in
cash compensation paid to Mr. Hathaway for 2003 as reflected in the Summary
Compensation Table, 41.7% was contingent and dependent upon the achievement of
the EVA performance objectives established by the Compensation Committee. This
is consistent with the Compensation Committee's view that those executives most
able to affect the performance of the Company should have a significant portion
of their potential total compensation at risk and dependent upon the Company's
performance.
RELATIONSHIP OF PERFORMANCE TO COMPENSATION
The Company currently ties executive pay to corporate performance primarily
through the 1995 Incentive Plan annual awards that are based upon achievement of
objectives adopted by the Compensation Committee. Stock option grants have been
made in the past to executives and they only provide realizable compensation
through increases in the stock price.
POLICY REGARDING IRC SECTION 162
Section 162(m) of the Internal Revenue Code limits the deductibility of
executive compensation for individuals in excess of $1 million per year paid by
publicly traded corporations to the chief executive officer and the four other
executives named in the compensation table of the Proxy Statement. The Company
has determined that given the rates of compensation currently in effect and the
exemption under Internal Revenue Service regulations applicable to income
derived from stock options granted under the Harsco 1986 Stock Option Plan or
the 1995 Incentive Plan, and the exemption applicable to the performance based
incentive compensation bonuses under the 1995 Incentive Plan, the Company should
not be exposed to any non-deductibility of executive compensation expense under
Section 162(m) in the 2003 tax year. In 1995, the Company obtained stockholder
approval of the 1995 Incentive Plan, which was designed to preserve the
deductibility to the extent possible, of executive compensation resulting from
performance based awards under that Plan. The Company obtained renewal of that
approval by the stockholders in 1998 and again in 2001.
37
SUMMARY
In summary, the Committee believes that the Company's total compensation
program achieves the objective of providing meaningful and appropriate rewards,
recognizing both current performance contributions and the attainment of
long-term strategic business goals of critical importance to the future growth
of Harsco Corporation.
SUBMITTED BY THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS:
R. C. Wilburn, Chairman
C. F. Scanlan
J. I. Scheiner
A. J. Sordoni, III
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth information concerning the compensation
awarded to, earned by or paid to the Named Executives for services rendered to
the Company in all capacities during each of the last three fiscal years.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
NAME AND ------------------------ UNDERLYING COMPEN-
PRINCIPAL SALARY BONUS OPTIONS SATION
POSITION YEAR ($) ($) (#)(1) ($)(2)
--------- ---- ------- ------- ------------ ---------
D. C. Hathaway.............................. 2003 878,000 626,892 -0- 6,000
Chairman, President & 2002 852,500 378,510 100,000 37,084
Chief Executive Officer 2001 852,500 215,290 125,000 220,806
G. D. H. Butler(3).......................... 2003 441,664 288,495 -0- -0-
Senior Vice President -- Operations 2002 402,000 159,031 24,000 -0-
2001 375,200 258,888 40,000 -0-
S. D. Fazzolari............................. 2003 335,000 183,379 -0- 6,000
Senior Vice President, Chief 2002 309,000 105,184 24,000 12,468
Financial Officer & Treasurer 2001 309,000 59,827 40,000 63,864
R. W. Kaplan(4)............................. 2003 335,000 134,067 -0- 6,000
Vice President 2002 325,000 149,500 24,000 13,114
2001 325,000 62,925 40,000 66,766
S. J. Schnoor............................... 2003 220,000 99,484 -0- 6,000
Vice President & Controller 2002 185,000 46,546 6,000 6,965
2001 185,000 47,175 8,000 9,164
---------------
(1) Represents stock options granted in the respective years. The Company
granted these options, relating to shares of its common stock, to certain
employees, including executive officers, of the Company under its 1995
Executive Incentive Compensation Plan. Options granted are not exercisable
for twelve months following the date of grant, unless a change
38
in control of the Company occurs, nor are they exercisable ten years after
the date of grant. The options granted in 2002 are not exercisable until two
years after the grant date. The exercise price per share of options granted
under the Plan was one hundred percent (100%) of the fair market value of
common stock at the date of grant. No stock options were granted during
2003. See "Stock Options Issued During the 2003 Fiscal Year" below.
(2) For 2003, represents Company Savings Plan contributions made on behalf of
the Named Executives. The Company maintains the Harsco Corporation Savings
Plan which includes the "Salary Reduction" feature afforded by Section
401(k) of the Internal Revenue Code. Eligible employees may authorize the
Company to contribute from 1% to 16% of their pre-tax compensation to the
Savings Plan. In October of 2002, the contribution limit was raised to 75%
of an employee's pre-tax compensation subject to IRS and Plan limitations.
The Company makes matching contributions for the account of each
participating employee equal to 50% of the first 1% to 6% of such employee's
"Salary Reduction" contribution. Under the Supplemental Savings Benefit
portion of the Supplemental Retirement Benefit Plan, if the IRS-imposed
limitations on Section 401(k) Savings Plan contributions are reached by a
Named Executive for a given year, so that he is unable to make the maximum
6% of pre-tax compensation "Salary Reduction" contribution that would be
subject to the Company's matching contributions under the Savings Plan, the
Company will make contributions on behalf of the Named Executive to the
Supplemental Savings Benefit portion of the Supplemental Retirement Benefit
Plan in an amount equal to the amount of the matching contributions that it
would have made under the Savings Plan if the Executive could have
contributed the full 6% of his pre-tax compensation, less the amount of
matching contributions that the Company actually made for his benefit under
the Savings Plan. Such Company contributions to the Supplemental Retirement
Benefit portion of the Supplemental Retirement Benefit Plan are credited in
the form of phantom shares based upon the value of common stock on the date
of the Company's contributions. Dividends that would have been paid on
common stock are credited as additional phantom shares, and all phantom
shares will ultimately be paid out in cash based upon the value of shares of
common stock at the time of payment. The Company terminated this
Supplemental Savings Benefit effective December 31, 2002. For 2001, includes
a special cash bonus for successful integration of the SGB Group business
after acquiring it in 2000.
(3) Mr. Butler was elected Senior Vice President -- Operations effective
September 26, 2000. He serves concurrently as President of the MultiServ and
SGB Division. Mr. Butler's salary and bonus are designated in U.S. dollars,
but he is paid in British pounds at conversion rates that were in effect
during the respective periods.
(4) Mr. Kaplan was appointed Vice President -- Harsco effective January 1, 2004
and is concurrently President of the Harsco Gas & Fluid Control Group.
STOCK OPTIONS ISSUED DURING THE 2003 FISCAL YEAR
The Board of Directors, on the recommendation of Senior Management, decided
not to issue any stock options during 2003 to Company management or employees.
It was the Board's intention to review, during 2003, the appropriateness of the
use of stock options as the vehicle for long-term compensation within the
Company. In December 2003, the Board decided again not to issue any stock
options in 2004 to Company management or employees. Instead, the Board has
decided that restricted stock or restricted stock units should be the long-term
39
compensation method for the Company. A proposal is included in this Proxy
Statement requesting stockholders to approve an amendment to the Company's 1995
Executive Incentive Compensation Plan which could qualify future grants of
restricted stock or restricted stock units as performance-based compensation
under Section 162(m) of the Internal Revenue Code.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information, with respect to the Named
Executives, concerning the exercise of options during fiscal year 2003 and
unexercised options at December 31, 2003:
AGGREGATED OPTION EXERCISES IN 2003
AND OPTION VALUES AT 12/31/03
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS AT 12/31/03(#)(2) OPTIONS AT 12/31/03($)(3)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
D. C. Hathaway --........... -0- -0- 337,500 100,000 4,891,950 1,117,000
Chairman, President &
Chief Executive Officer
G. D. H. Butler --.......... 15,000 192,040 52,000 24,000 805,470 268,080
Senior Vice President --
Operations
S. D. Fazzolari --.......... -0- -0- 100,000 24,000 1,411,460 268,080
Senior Vice President,
Chief Financial Officer &
Treasurer
R. W. Kaplan --............. 52,700 590,982 56,300 24,000 763,332 268,080
Vice President
S. J. Schnoor --............ -0- -0- 13,300 6,000 172,388 67,020
Vice President &
Controller
---------------
(1) Represents the difference between the exercise price and the market price of
common stock on the date of exercise.
(2) Options granted during a particular year are not exercisable for twelve
months following the date of grant (two years for 2002 grants) unless a
change in control of the Company occurs.
(3) Represents the difference between the exercise price and the market price of
common stock on December 31, 2003, multiplied by the number of in-the-money
unexercised options contained in the respective category. Average market
price at December 31, 2003 was $43.82 per share. Options are in-the-money
when the market price of the underlying securities exceeds the exercise
price.
RETIREMENT PLANS
The Company provides retirement benefits for each officer under the
Supplemental Retirement Benefit Plan ("Supplemental Plan"). All executive
officers are covered by the Supplemental Plan excepting G.D.H. Butler who is
covered by the U.K. pension plan described below. Until December 31, 2002, the
Supplemental Plan replaced the 401(k) Company match lost due to government
limitations on such contributions. The replacement was in the form of phantom
shares as more fully described in footnote 2 on page 39. The Plan was amended
40
effective January 1, 2003, to eliminate any future replacement of lost company
match and any further granting of phantom shares. A new non-qualified
restoration plan was established January 1, 2004 to provide for the
discretionary and matching contribution that would be otherwise provided under
the qualified 401(k) Plan for salaried employees' contributions made after
December 31, 2003, but for IRS Code limitations under Section 402(g), Section
401(a)(17), Section 415 or Section 401 (m) providing however that such eligible
participants shall receive matching contribution under the restoration plan only
by deferring before tax dollars to the qualified plan. All U.S. executive
officers are also covered by the qualified pension plan. Each plan is a defined
benefit plan providing for normal retirement at age 65. Early retirement may be
taken commencing with the first day of any month following the attainment of age
55, provided at least 15 years of service have been completed. Early retirement
benefits commencing prior to age 65 are reduced. The Supplemental Plan also
provides for unreduced pension benefits if retirement occurs after age 62,
provided at least 30 years of service have been completed. The Supplemental Plan
provides for a preretirement death benefit payable in a monthly benefit to a
beneficiary designated by the participant for participants who die after
qualifying for benefits. The Supplemental Plan also includes provisions which
fully vest participants upon termination of employment following a "change in
control" of the Company as defined in the Supplemental Plan.
Total pension benefits are based on final average compensation and years of
service. The normal retirement benefit under the Supplemental Plan is equal to a
total of .8% of final average compensation up to the "Social Security Covered
Compensation" as defined in the Supplemental Plan plus 1.6% of the final average
compensation in excess of the "Social Security Covered Compensation" multiplied
by up to 33 years of service, reduced by the benefits under the qualified plan.
Final average compensation is defined as the aggregate compensation (base salary
plus nondiscretionary incentive compensation) for the 60 highest consecutive out
of the last 120 months prior to date of retirement or termination of employment
for any reason prior to normal retirement date. The Plan was amended in 2002 to
provide that for any retirements on or after January 1, 2003, the 1.6% factor in
the benefit formula is reduced to 1.5% and the definition of Final Average
Compensation was amended to reduce the amount of nondiscretionary incentive
compensation included in the benefit calculation from 100% to 50%, for such
amounts paid on or after January 1, 2003. Notwithstanding these amendments, no
participant's retirement benefit shall be reduced by reason of these amendments,
below the benefit accrued at December 31, 2002. The Plan was amended December
31, 2003 to provide that pension benefit accrual service shall not be granted to
any Company employee after December 31, 2003, provided, however, compensation
earned for services performed for the Company for current Supplemental Plan
participants through December 31, 2003, shall be included in determining their
Final Average Compensation under the Supplemental Plan.
The following table shows estimated total annual pension benefits payable
to the U.S. executive officers of the Company under the qualified pension plan
and the Supplemental Plan, including the Named Executives upon retirement at age
65, in various remuneration and year-of- service classifications, assuming the
total pension benefit was payable as a straight life annuity guaranteed for ten
years and retirement took place on January 1, 2004.
41
PENSION PLAN TABLE -- U.S. EXECUTIVES
YEARS OF SERVICE
---------------------------------------------------------
REMUNERATION(1) 10 15 20 25 30 35*
--------------- ------- ------- ------- ------- ------- -------
300,000....................... 41,921 62,881 83,841 104,801 125,762 138,338
400,000....................... 56,921 85,381 113,841 142,301 170,762 187,838
500,000....................... 71,921 107,881 143,841 179,801 215,762 237,338
600,000....................... 86,921 130,381 173,841 217,301 260,762 286,838
700,000....................... 101,921 152,881 203,841 254,801 305,762 336,338
800,000....................... 116,921 175,381 233,841 292,301 350,762 385,838
900,000....................... 131,921 197,881 263,841 329,801 395,762 435,338
1,000,000...................... 146,921 220,381 293,841 367,301 440,762 484,838
1,100,000...................... 161,921 242,881 323,841 404,801 485,762 534,338
1,200,000...................... 176,921 265,381 353,841 442,301 530,762 583,838
1,300,000...................... 191,921 287,881 383,841 479,801 575,762 633,338
1,400,000...................... 206,921 310,381 413,841 517,301 620,762 682,838
1,500,000...................... 221,921 332,881 443,841 554,801 665,762 732,338
1,600,000...................... 236,921 355,381 473,841 592,301 710,762 781,838
---------------
* The Supplemental Plan has a 33-year service maximum.
(1) Final average compensation for the U.S. Named Executives as of the end of
the last calendar year is: Mr. Hathaway: $1,341,665; Mr. Fazzolari:
$440,985; Mr. Kaplan: $458,055; and Mr. Schnoor $247,985. As of December 31,
2003, the credited years of service are frozen for each Named Executive and
are as follows: Mr. Hathaway: 37.5 years; Mr. Fazzolari: 23.5 years; Mr.
Kaplan: 24.5 years and Mr. Schnoor 15.667 years.
The Company does not provide retiree medical benefits to its executive
officers.
The following table shows estimated total annual pension benefits payable
to the U.K. executive officer of the Company, Mr. Butler, for life, under the
Harsco Pension Scheme, a qualified pension plan in the U.K., upon retirement at
age 60, which is normal retirement age under the Scheme, in various remuneration
and year-of-service classifications, assuming the total pension benefit was
payable and retirement took place on January 1, 2004. The benefit would be paid
in British pounds and all amounts in the table below are stated in U.S. dollars
at a conversion rate of $1.7859 = L1.00. The Scheme provides that if the
participant dies within five years after starting to receive a pension, a lump
sum will be paid equal to the pension payments that would have been made during
the remainder of the five year period. The annual pension benefit is based on
the highest annual total of salary and bonus within the last five years (or the
highest average amount of annual salary plus bonus received in any three
consecutive scheme years within the last ten years, if higher) ("Final
Pensionable Salary") and the years of service, subject to various deductions for
service prior to April 6, 1989, and a statutory limitation of two thirds of the
Final Pensionable Salary. The Plan was amended in 2002 to provide that for any
retirements on or after January 1, 2003, the benefit accrual rate is reduced,
and the definition of Final Pensionable Salary is amended to reduce the amount
of incentive bonus included in the calculation from 100% of 50% for such amounts
paid on or after January 1, 2003. The Plan was amended in 2003 to provide that,
in respect of service after January 1, 2004 only, normal retirement age is
increased to 65, and the definition of Final Pensionable Salary is amended so as
to be equal to the average salary and 50% of bonus over the last five scheme
years prior to retirement.
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PENSION PLAN TABLE -- U.K. EXECUTIVE
YEARS OF SERVICE
---------------------------------------------------------
REMUNERATION(1) 10 15 20 25 30 35
--------------- ------- ------- ------- ------- ------- -------
300,000....................... 54,900 83,340 111,810 140,280 168,750 197,220
400,000....................... 73,320 111,120 149,080 187,040 225,000 262,960
500,000....................... 91,650 138,900 186,350 233,800 281,250 328,700
600,000....................... 109,980 166,680 223,620 280,560 337,500 394,440
700,000....................... 128,310 194,460 260,890 327,320 393,750 460,180
800,000....................... 146,640 222,240 298,160 374,080 450,000 525,920
900,000....................... 164,970 250,020 335,430 420,840 506,250 591,660
1,000,000...................... 183,300 277,800 372,700 467,600 562,500 657,400
---------------
(1) Final Pensionable Salary for G.D.H. Butler as of the end of the last
calendar year is $808,870. The estimated credited years of service for Mr.
Butler is 34.25 years.
EMPLOYMENT AGREEMENTS WITH OFFICERS OF THE COMPANY
On September 25, 1989, the Board of Directors authorized the Company to
enter into employment agreements with certain officers, including Messrs.
Hathaway and Kaplan, and subsequently with Messrs. Fazzolari and Butler (the
"Agreements"). Pursuant to those authorizations, the Company entered into
individual Agreements with each of these individuals. The Agreements are
designed as an inducement to retain the services of the officers and provide for
continuity of management during the course of any threatened or attempted change
in control of the Company. The Agreements are also intended to ensure that, if a
possible change in control should arise and the officer should be involved in
deliberations or negotiations in connection with the possible change in control,
the officer would be in a position to consider as objectively as possible
whether the possible change in control transaction is in the best interests of
the Company and its stockholders without concern for his position or financial
well-being. Should a change in control occur, the Agreements provide for
continuity of management following the change by imposing certain obligations of
continued employment on the officers.
Under the Agreements, the Company and the officers agree that in the event
of a change in control, such officer will remain in the Company's employ for a
period of three years from the date of the change in control (or to such
officer's normal retirement date, if earlier), subject to such officer's right
to resign during a thirty-day period commencing one year from the date of the
change in control or for good reason, as defined in the Agreement. If such
officer's employment terminates within three years after a change in control for
any reason other than cause as defined in the Agreements, resignation without
good reason as defined in the Agreements, or disability or death, such officer
will be paid a lump sum amount equal to such officer's average annual gross
income reported on Form W-2 (P-60 for Mr. Butler) for the most recent five
taxable years prior to the change in control, multiplied by the lesser of 2.99
or the number of whole and fractional years left to such executive officer's
normal retirement date, plus interest. The payment may be subject to reduction
to avoid adverse tax consequences.
For purposes of the Agreements, a "change in control" would be deemed to
have occurred if (i) any person or group acquires 20% or more of the Company's
issued and outstanding shares of common stock; (ii) the members of the Board as
of the date of the Agreements (the "Incumbent Board") including any person
subsequently becoming a Director whose election, or nomination for election by
the Company's stockholders, was approved by a majority of the
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Directors then comprising the Incumbent Board, cease to constitute a majority of
the Board of the Company as a result of the election of Board members pursuant
to a contested election; (iii) the stockholders approve of a reorganization,
merger or consolidation that results in the stockholders of the Company
immediately prior to such reorganization, merger or consolidation owning less
than 50% of the combined voting power of the Company; or (iv) the stockholders
approve the liquidation or dissolution of the Company or the sale of all or
substantially all of the Company's assets.
If such provisions under the applicable Agreements had become operative on
January 1, 2004, the Company would have been required to pay Messrs. Hathaway,
Butler, Fazzolari, and Kaplan the following termination payments based on
compensation information available at December 31, 2003: $3,965,105, $2,025,486,
$1,323,849, and $1,376,357, respectively.
On September 26, 1988, the Company entered into an agreement with Mr.
Hathaway which provides that for purposes of calculating his retirement
benefits, his years of service will be deemed to have commenced June 20, 1966.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Wilburn, Scheiner, Sordoni and Ms. Scanlan served as members of the
Management Development and Compensation Committee during 2003 and none of them
was an officer or employee of the Company during that time and did not serve as
an executive officer of any entity for which any executive officer of the
Company serves as a director or a member of its compensation committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and certain of its officers to send reports of their ownership of
Harsco Corporation stock and changes in ownership to the Company and the
Securities and Exchange Commission (the "SEC"), The New York Stock Exchange,
Inc. and The Pacific Exchange, Inc. SEC regulations also require the Company to
identify in this Proxy Statement any person subject to this requirement who
failed to file any such report on a timely basis and the Company is not aware of
any such failure during 2003.
OTHER MATTERS
The cost of this solicitation of proxies will be borne by the Company. In
addition to solicitation by use of mail, employees of the Company may solicit
proxies personally or by telephone or facsimile but will not receive additional
compensation for these services. Arrangements may be made with brokerage houses,
custodians, nominees and fiduciaries to send proxies and proxy materials to
their principals and the Company may reimburse them for their expense in so
doing. The Company has retained Morrow & Co. to assist in the solicitation at a
cost that is not expected to exceed $10,000 plus reasonable out-of-pocket
expenses.
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR PRESENTATION AT 2005 ANNUAL MEETING OF
STOCKHOLDERS
If a stockholder of the Company wishes to submit a proposal for
consideration at the 2005 Annual Meeting of Stockholders, such proposal must be
received at the executive offices of the Company no later than November 22,
2004, to be considered for inclusion in the Company's Proxy Statement and Proxy
Card relating to the 2005 Annual Meeting. Although a stockholder
44
proposal received after such date will not be entitled to inclusion in the
Company's Proxy Statement and Proxy Card, a stockholder can submit a proposal
for consideration at the 2005 Annual Meeting in accordance with the Company's
By-laws if written notice is given to the Secretary of the Company not less than
60 days nor more than 90 days prior to the Meeting. In the event that the
Company gives less than 70 days notice of the Meeting date to stockholders, the
stockholder must give notice of the proposal within ten days after the mailing
of notice or announcement of the Meeting date. In order to nominate a candidate
for election as a Director at the 2005 Annual Meeting, a stockholder must
provide written notice and supporting information to the Secretary of the
Company by personal delivery or mail not later than January 27, 2005.
45
APPENDIX A
HARSCO CORPORATION
1995 NON-EMPLOYEE DIRECTORS' STOCK PLAN
AS AMENDED AND RESTATED AT JANUARY 27, 2004
1. PURPOSE. The purpose of this 1995 Non-Employee Directors' Stock Plan
(the "Plan") of Harsco Corporation (the "Company") is to advance the interests
of the Company and its stockholders by providing a means to attract and retain
highly qualified persons to serve as non-employee directors and to promote
ownership by non-employee directors of a greater proprietary interest in the
Company, thereby aligning such directors' interests more closely with the
interests of stockholders of the Company.
2. DEFINITIONS. In addition to terms defined elsewhere in the Plan, the
following terms shall be defined as set forth below:
(a) "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code include regulations
thereunder and successor provisions and regulations thereto.
(b) "Deferred Stock" means the credits to a Participant's deferral
account under Section 8, each of which represents the right to receive one
share of Stock upon settlement of the deferral account. Deferral accounts,
and Deferred Stock credited thereto, are maintained solely as bookkeeping
entries by the Company evidencing unfunded obligations of the Company.
(c) "Exchange Act" means the Securities Exchange Act of 1934, as
amended. References to any provision of the Exchange Act include rules
thereunder and successor provisions and rules thereto.
(d) "Fair Market Value" of Stock means, as of any given date, the
average of the high and the low sale prices of a share of common stock
reported in the table entitled "New York Stock Exchange Composite
Transactions" contained in The Wall Street Journal (or an equivalent
successor table) for such date or, if no such prices are reported for such
date, on the most recent trading day prior to the date of grant with
respect to which such prices were reported.
(e) "Option" means the right, granted to a Participant under Section
6, to purchase Stock at the specified exercise price for a specified period
of time under the Plan.
(f) "Participant" means a director who is granted Options or who
receives fees in the form of Stock or defers fees in the form of Deferred
Stock under the Plan.
(g) "Restricted Stock" means an award of shares of Stock to a
Participant under Section 7, subject to a risk of forfeiture,
non-transferability and other conditions until the vesting date specified
for such award.
(h) "Restricted Stock Unit" means an award granted to a Participant
under Section 7 which represents the right to receive one share of Stock
for each Unit upon settlement, subject to conditions providing for
forfeiture upon certain terminations of service until the vesting date and
other conditions, including deferral of settlement, until the vesting date
or a later specified date.
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(i) "Stock" means the Common Stock, $1.25 par value, of the Company
and such other securities as may be substituted for Stock or such other
securities pursuant to Section 10.
3. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as provided in
Section 10, the total number of shares of Stock reserved and available for
delivery under the Plan is 300,000(1). Such shares may be authorized but
unissued shares, treasury shares, or shares acquired in the market for the
account of the Participant. If any Option expires or terminates for any reason
without having been exercised in full, the shares subject to the unexercised
portion of such Option will again be available for delivery under the Plan. If
any award of Restricted Stock or Restricted Stock Unit is forfeited, the shares
of forfeited Restricted Stock or shares not delivered to the Participant in
connection with the forfeited Restricted Stock Unit will again be available for
awards under the Plan.
4. ADMINISTRATION OF THE PLAN. The Plan will be administered by the Board
of Directors of the Company, provided that any grant of an award or other action
conferring substantial benefits on Participants by the Board relating to the
Plan will be taken only if, in addition to any other required vote, approved by
the affirmative vote of a majority of the directors who are not then eligible to
participate under the Plan. The Executive Committee or other Board Committee may
perform the functions of the Board hereunder, to the extent authorized under
such Committee's charter; in such case, references herein to the Board shall be
deemed to include such Committee. Day-to-day administration of the Plan shall be
carried out by officers and employees of the Company.
5. ELIGIBILITY. Each director of the Company who, on any date on which an
Option is to be granted under Section 6, Restricted Stock or Restricted Stock
Units are to be granted under Section 7, or fees are to be paid, is not an
employee of the Company or any subsidiary of the Company will be eligible, at
such date, to receive a grant of Options under Section 6, Restricted Stock or
Restricted Stock Units under Section 7, or fees in the form of Stock or defer
fees in the form of Deferred Stock under Section 8. No person other than those
specified in this Section 5 will participate in the Plan.
6. STOCK OPTIONS. Options may be granted to directors who are then
eligible under Section 5 in accordance with policies established from time to
time by the Board specifying the directors or classes of directors to be granted
Options, the number of shares to be subject to each Option granted, the time or
times at which Options will be granted, and other Option terms not specified in
this Plan. The initial policy with respect to grants of Options under this
Section 6, effective as of the date of shareholder approval of the amended and
restated Plan in 2004 and continuing until modified or revoked by the Board,
shall provide for no automatic option grants. Options granted under the Plan
will be non-qualified stock options, which will be subject to the following
terms and conditions:
(a) Exercise Price. The exercise price per share of Stock purchasable
under an Option will be equal to 100% of the Fair Market Value of Stock on
the date of grant of the Option.
(b) Option Term. Each Option will expire at such time as shall be
specified by the Board, but in no event later than the earlier of (i) ten
years after the date of grant or (ii) five years after the Participant
ceases to serve as a director of the Company for any reason, provided that,
if the Participant dies during such five-year post-termination exercise
period, such period shall be extended until not later than the date five
years after the Participant's death (but in no event more than ten years
after the date of grant).
(1 )Pursuant to two-for-one stock split on February 14, 1997.
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(c) Exercisability. Unless otherwise determined by the Board, each
Option will become fully exercisable one year after the date of grant of
the Option; provided, however, that an Option previously granted to a
Participant will be fully exercisable after the Participant ceases to serve
as a director of the Company due to death or disability or retirement under
the Company's then-applicable mandatory retirement policy. If a Participant
ceases to serve as a director of the Company for any reason other than due
to death, disability or mandatory retirement prior to the earlier of the
time the Option has become exercisable or the Annual Meeting of
Stockholders in the year following the year of grant, the Option shall be
forfeited on a pro rata basis based on the portion of the one-year period
served since the date of grant.
(d) Method of Exercise. Each Option may be exercised, in whole or in
part, at such time as it is exercisable and prior to its expiration by
giving written notice of exercise to the Company specifying the Option to
be exercised and the number of shares to be purchased, and accompanied by
payment in full of the exercise price in cash (including by check) or by
surrender of shares of Stock of the Company already owned by the
Participant (except for shares acquired from the Company by exercise of an
option less than six months before the date of surrender) having a Fair
Market Value at the time of exercise equal to the exercise price, or a
combination of a cash payment and such surrender of Stock. In addition, the
Board may permit other methods of payment of the exercise price so long as
such other methods will not result in the recognition of additional expense
by the Company under then applicable accounting rules.
7. RESTRICTED STOCK AND RESTRICTED STOCK UNITS. Restricted Stock and/or
Restricted Stock Units may be granted to directors who are then eligible under
Section 5 in accordance with policies established from time to time by the Board
specifying the directors or classes of directors to be granted such awards, the
number of shares of Restricted Stock or Restricted Stock Units to be granted,
the time or times at which such awards shall be granted and settled, and other
award terms not specified in this Plan.
(a) Initial Policy. The initial policy with respect to awards under
this Section 7, effective as of the date of shareholder approval of the
amended and restated Plan in 2004 and continuing until modified or revoked
by the Board, shall be to grant 500 Restricted Stock Units on the first
business day of May in each year to each director who is then eligible,
subject to adjustment as provided in Section 10. Such RSUs shall be settled
as promptly as practicable following termination of the Participant's
service as a director, and in no event more than 60 days after termination
of such service. The Board may permit deferral of settlement to a later
date, but no acceleration of the settlement will be permitted.
(b) Terms of Restricted Stock and Restricted Stock Unit. Restricted
Stock and Restricted Stock Units granted under this Section 7 shall be
subject to the following terms and conditions:
(i) Vesting and Forfeiture. The Board may establish terms regarding
the times at which Restricted Stock and Restricted Stock Units
shall become vested and non-forfeitable. Unless otherwise
determined by the Board, an award granted under this Section 7, if
not previously forfeited, shall become vested and non-forfeitable
as to 100% of the shares of Restricted Stock or Restricted Stock
Units at the close of business on the earlier of the first
anniversary of the date of grant of such award or the Annual
Meeting of Stockholders in the year following the year of
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grant; provided, however, that if such award was not previously
vested or forfeited, (A) it shall vest and become non-forfeitable
on an accelerated basis upon the termination of the Participant's
service as a director due to death or disability, and (B), in the
case of an award of Restricted Stock Units, such award shall vest
and become non-forfeitable in full upon the directors retirement
under the Company's then-applicable mandatory retirement policy and
as to a pro rata portion of the award in the event of any other
termination of service, such portion to be determined by
multiplying the number of Restricted Stock Units that would become
vested at the next vesting date following termination by a fraction
the numerator of which is the number of days from the grant date
or, if later, the latest vesting date preceding the date of
termination and the denominator of which is the sum of the
numerator plus the number of days until the next vesting date.
Unless otherwise determined by the Board, an award of Restricted
Stock not previously vested or forfeited will cease to vest and
will be forfeited upon the termination of the Participant's service
as a director for any reason other than death, disability or
retirement.
(ii) Dividends on Restricted Stock. The Board may determine whether to
pay cash dividends on Restricted Stock in the form of unrestricted
cash, cash deferred as to delivery until the lapse of the risk of
forfeiture on the Restricted Stock, or additional Restricted Stock
the amount of which shall be determined by deeming cash dividends
to be automatically reinvested in additional shares of Restricted
Stock. Such additional shares of Restricted Stock, and deferred
cash if so determined by the Board, shall be subject to the same
terms, including risk of forfeiture, as the Restricted Stock on
which the dividends were paid. The Secretary may, in his
discretion, delay any deemed reinvestment of cash dividends in
additional shares of Restricted Stock in order that such
transactions take place at the same time as other transactions
reportable under Section 16 of the Exchange Act, to promote
administrative efficiency in filing Form 4s with the Securities
and Exchange Commission.
(iii) Dividend Equivalents. Dividend equivalents shall be credited on
Restricted Stock Units in accordance with Section 9(a). Unless
otherwise determined by the Board, additional Restricted Stock
Units credited as a result of dividend equivalents shall be
subject to the same terms, including risk of forfeiture and time
of settlement, as the Restricted Stock Units with respect to which
the dividend equivalents were credited.
(iv) Consideration for Restricted Stock. If shares to be granted as
Restricted Stock are not treasury shares, the Board or Secretary of
the Company may impose additional conditions upon the grant of the
Restricted Stock, possibly including a requirement that cash
consideration be paid by the Participant, if and to the extent
necessary to ensure that the Company will receive lawful
consideration equal to the aggregate par value of the shares being
granted as Restricted Stock.
(v) Restricted Stock Units Subject to Other Terms. The Company will
establish a Restricted Stock Units account for each Participant to
whom Restricted Stock Units are granted under this Section 7. This
account may be combined or made part of other accounts, including
deferral accounts, maintained for the Participant
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under this or other Company plans, for administrative convenience.
Restricted Stock Units shall be subject to other terms and
conditions specified under Section 9(b) and (c).
8. RECEIPT OF STOCK OR DEFERRED STOCK IN LIEU OF FEES. Each director of
the Company may, in lieu of receipt of fees in his or her capacity as a director
(including annual retainer fees for service on the Board, fees for service on a
Board committee, and fees for service as chairman of a Board committee) in cash,
receive such fees in the form of Stock or defer receipt of such fees in the form
of Deferred Stock in accordance with this Section 8, provided that such director
is eligible under Section 5 to receive fees in the form of Stock or defer fees
in the form of Deferred Stock at the date any such fee is otherwise payable.
(a) Elections. Each director who elects to receive fees in the form
of Stock or defer fees in the form of Deferred Stock for any calendar year
must file an irrevocable written election with the Secretary of the Company
no later than the June 30 of the preceding year; provided, however, that
any newly elected or appointed director may file an election for any year
not later than 30 days after the date such person first became a director.
The foregoing notwithstanding, the Secretary may specify different
deadlines for the filing of any such election, so long as the specified
deadline is effective to ensure deferral of federal income taxation of the
participant. An election by a director shall be deemed to be continuing and
therefore applicable to subsequent Plan years unless the director revokes
or changes such election by filing a new election form by the due date for
such form specified in this Section 8(a). The election must specify the
following:
(i) A percentage, not to exceed an aggregate of 100% of the
Participant's fees, to be received in the form of Stock or deferred
in the form of Deferred Stock under the Plan;
(ii) In the case of a deferral, whether dividend equivalents on
Deferred Stock credited to the Participant's deferral account will
be paid directly to the Participant in cash or credited to his or
her deferral account in cash or deemed to be reinvested in
additional Deferred Stock (subject to Section 9(a)); and
(iii) In the case of a deferral, the period during which settlement of
the Deferred Stock will be deferred.
In the event directors' fees are increased during any year, a Participant's
elections in effect for such year will apply to the amount of such increase.
(b) Payment of Fees in the Form of Stock. At any date on which fees
are payable to a Participant who has elected to receive fees in the form of
Stock, the Company will issue or transfer to such Participant, or to an
account designated by such Participant, a number of shares of Stock having
an aggregate Fair Market Value at that date equal to the fees, or as nearly
as possible equal to the fees, that would have been payable at such date
but for the Participant's election to receive Stock in lieu thereof. If the
Stock is to be credited to an account maintained by the Participant and to
the extent reasonably practicable without requiring the issuance or
delivery of fractional shares, the Company shall cause fractional shares to
be credited to the Participant's account. If fractional shares are not so
credited, any part of the Participant's fees not paid in the form of Stock
will be paid in cash to the Participant.
(c) Deferral of Fees in the Form of Deferred Stock. The Company will
establish a deferral account for each Participant who elects to defer fees
in the form of Deferred Stock
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under this Section 8. At any date on which fees are payable to a
Participant who has elected to defer fees in the form of Deferred Stock,
the Company will credit such Participant's deferral account with a number
of shares of Deferred Stock equal to the number of shares of Stock having
an aggregate Fair Market Value at that date equal to the fees that
otherwise would have been payable at such date but for the Participant's
election to defer receipt of such fees in the form of Deferred Stock.
Unless otherwise determined by the Company, the amount of Deferred Stock so
credited shall include fractional shares calculated to at least three
decimal places.
(d) Vesting. The interest of each Participant in any fees paid in the
form of Stock or in any Deferred Stock (and any deferral account relating
thereto) shall be at all times fully vested and non-forfeitable.
9. CERTAIN TERMS OF RESTRICTED STOCK UNITS AND DEFERRED STOCK.
(a) Payment or Crediting of Dividend Equivalents. Whenever dividends are
paid or distributions made with respect to Stock, a Participant to whom
Restricted Stock Units or Deferred Stock is then credited in an account shall be
entitled to dividend equivalents in an amount equal in value to the amount of
the dividend paid or property distributed on a single share of Stock multiplied
by the number of Restricted Stock Units or shares of Deferred Stock (including
any fractional share) credited to his or her account as of the record date for
such dividend or distribution. The Board may determine whether to pay such
dividend equivalents in the form of unrestricted cash, cash deferred as to
delivery until the settlement of the Restricted Stock Units or Deferred Stock to
which the dividend equivalents related, or additional Restricted Stock Units or
Deferred Stock the amount of which shall be determined by dividing the amount of
dividend equivalents by the Fair Market Value of a share of Stock at the
dividend payment date or another date specified by the Company. Such additional
Restricted Stock Units or Deferred Shares, and deferred cash if so determined by
the Board, shall be subject to the same terms, including risk of forfeiture in
the case of Restricted Stock Units and date of settlement in all cases, as the
Restricted Stock Units or Deferred Stock to which the dividend equivalents
related. The Secretary may, in his discretion, delay the timing of any
conversion of dividend equivalents into additional Restricted Stock Units or
Deferred Stock in order that such transactions take place at the same time as
other transactions reportable under Section 16 of the Exchange Act, to promote
administrative efficiency in filing Form 4s with the Securities and Exchange
Commission.
(b) Settlement of Accounts. The Company will settle the Participant's
Restricted Stock Units account and/or deferral account to which Deferred Stock
is then credited by delivering to the Participant (or his or her beneficiary)
the number of shares of Stock equal to the number of whole Restricted Stock
Units and the number of whole shares of Deferred Stock then credited to the
account (or a specified portion in the event of any partial settlement),
together with cash in lieu of any fractional share remaining at a time that less
than one whole Restricted Stock Unit or one whole share of Deferred Stock is
credited to such deferral account.
(c) Designation of Beneficiary. Each Participant may designate one or more
beneficiaries to receive the amounts distributable from the Participant's
Restricted Stock Units account or deferral account under the Plan in the event
of such Participant's death, on forms provided by the Company. The Company may
rely upon the beneficiary designation last filed in accordance with the terms of
the Plan.
10. ADJUSTMENT PROVISIONS. In the event any recapitalization,
reorganization, merger, consolidation, spin-off, combination, repurchase,
exchange of shares or other securities of the
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Company, stock split or reverse split, extraordinary dividend (not in the form
of stock) that is large, special and non-recurring, liquidation, dissolution, or
other similar corporate transaction or event affects Stock such that an
adjustment is determined by the Board of Directors to be appropriate in order to
prevent dilution or enlargement of Participants' rights under the Plan, then the
Board will, in a manner that is proportionate to the change to the Stock and is
otherwise equitable, adjust (i) any or all of the number or kind of shares of
Stock reserved for issuance under the Plan, (ii) the number or kind of shares of
Stock to be subject to each automatic grant of Options under Section 6 and
subject to automatic grants of Restricted Stock and/or Restricted Stock Units
under Section 7, (iii) the number and kind of shares of Stock issuable upon
exercise of outstanding Options, and/or the exercise price per share thereof
(provided that no fractional shares will be issued upon exercise of any Option),
(iv) the number and kind of shares subject to outstanding Restricted Stock or
issuable in settlement of outstanding Restricted Stock Units, and (v) the number
of kind of shares of Stock to be delivered upon settlement of Deferred Stock
under Section 8. The foregoing notwithstanding, no adjustment may be made
hereunder except as shall be necessary to maintain the proportionate interest of
a Participant under the Plan and to preserve, without exceeding, the value of
outstanding awards and potential grants of awards. If at any date an
insufficient number of shares are available for the automatic grant of awards as
then authorized under the Plan or the receipt of fees in the form of Stock or
deferral of fees in the form of Deferred Stock at that date, Restricted Stock or
Restricted Stock Units will first be automatically granted under Section 7
proportionately to Participants, to the extent shares are available, followed by
Options next automatically granted under Section 6 proportionately to
Participants, and then, if any shares remain available, fees shall be paid in
the form of Stock or deferred in the form of Deferred Stock proportionately
among Participants under Section 8, to the extent shares are available.
11. CHANGES TO THE PLAN. The Board of Directors may amend, alter,
suspend, discontinue, or terminate the Plan or authority to grant awards or pay
fees in the form of Stock or Deferred Stock under the Plan without the consent
of stockholders or Participants, except that any such action will be subject to
the approval of the Company's stockholders at the next annual meeting of
stockholders having a record date after the date such action was taken if such
stockholder approval is required by any federal or state law or regulation or
the rules of any stock exchange or automated quotation system on which the Stock
may then be listed or quoted, or if the Board of Directors determines in its
discretion to seek such stockholder approval; provided, however, that, without
the consent of an affected Participant, no such action may materially impair the
rights of such Participant with respect to any previously granted Option, share
of Restricted Stock or Restricted Stock Unit or any previous payment of fees in
the form of Stock or deferral of fees in the form of Deferred Stock.
12. GENERAL PROVISIONS.
(a) Consideration; Agreements. Awards will be granted under the Plan in
order to obtain for the Company the benefit of the services of Participants. The
lawful consideration for Stock issued or delivered in lieu of payment of fees or
in settlement of Deferred Stock will be the director's services during the
period to which the fees paid in the form of Stock or Deferred Stock related.
Grants of Options, Restricted Stock and Restricted Stock Units will be evidenced
by agreements executed by the Company and the Participant containing the terms
and conditions set forth in the Plan together with such other terms and
conditions not inconsistent with the Plan as the Board of Directors may from
time to time approve.
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(b) Compliance with Laws and Obligations. The Company will not be
obligated to issue or deliver Stock in connection with any award in a
transaction subject to the registration requirements of the Securities Act of
1933, as amended, or any other federal or state securities law, any requirement
under any listing agreement between the Company and any national securities
exchange or automated quotation system, or any other law, regulation, or
contractual obligation of the Company, until the Company is satisfied that such
laws, regulations, and other obligations of the Company have been complied with
in full. Certificates representing shares of Stock delivered under the Plan will
be subject to such stop-transfer orders and other restrictions as may be
applicable under such laws, regulations, and other obligations of the Company,
including any requirement that a legend or legends be placed thereon.
(c) Limitations on Transferability. Options, Restricted Stock (prior to
the lapse of the risk of forfeiture), Restricted Stock Units, Deferred Stock,
and related rights under the Plan will not be transferable by a Participant
except by will or the laws of descent and distribution (or to a designated
beneficiary in the event of a Participant's death), and will be exercisable
during the lifetime of a Participant only by such Participant or his or her
guardian or legal representative; provided, however, that Options may be
transferred to one or more trusts or other beneficiaries during the lifetime of
the Participant in connection with the Participant's estate planning, and may be
exercised by such transferees in accordance with the terms of such Option , but
only if and to the extent then consistent with the registration of the offer and
sale of Stock on Form S-8 or a successor registration form of the Securities and
Exchange Commission. Options, Restricted Stock, Restricted Stock Units, Deferred
Stock, and other rights under the Plan may not be pledged, mortgaged,
hypothecated, or otherwise encumbered, and shall not be subject to the claims of
creditors.
(d) Compliance with Rule 16b-3. It is the intent of the Company that this
Plan comply in all respects with applicable provisions of Rule 16b-3 under the
Exchange Act in connection with any grant of Options, Restricted Stock, or
Restricted Stock Units, payment of fees in the form of Stock, or deferral of
fees in the form of Deferred Stock. Accordingly, the Plan shall be construed in
a manner consistent with Rule 16b-3, unless the context otherwise requires.
(e) Continued Service as an Employee. If a Participant ceases serving as a
director and, immediately thereafter, is employed by the Company or any
subsidiary, then, solely for purposes of Sections 6(b) and (c) and 7(b) of the
Plan, such Participant will not be deemed to have ceased service as a director
at that time, and his or her continued employment by the Company or any
subsidiary will be deemed to be continued service as a director; provided,
however, that such former director will not be eligible for additional grants of
Options, Restricted Stock, or Restricted Stock Units or receipt of fees in the
form of Stock or deferral of fees in the form of Deferred Stock under the Plan.
(f) No Right to Continue as a Director. Nothing contained in the Plan or
any agreement hereunder will confer upon any Participant any right to continue
to serve as a director of the Company.
(g) No Stockholder Rights Conferred. Nothing contained in the Plan or any
agreement hereunder will confer upon any Participant any rights of a stockholder
of the Company unless and until shares of Stock are in fact issued or
transferred to such Participant upon exercise or settlement of the award,
following the grant of Restricted Stock or upon issuance of Stock under Section
8.
(h) Governing Law. The validity, construction, and effect of the Plan and
any agreement hereunder will be determined in accordance with the Delaware
General Corporation Law, to the
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extent applicable, other laws (including those governing contracts) of the State
of Pennsylvania, without giving effect to principles of conflicts of laws, and
applicable federal law.
13. STOCKHOLDER APPROVAL, EFFECTIVE DATE, AND PLAN TERMINATION. The Plan
became effective upon approval by stockholders on April 25, 1995. This amendment
and restatement of the Plan will be effective if, and at such time as, the
stockholders of the Company have approved it in 2004 by the affirmative votes of
the holders of a majority of the voting securities of the Company present, or
represented, and entitled to vote on the subject matter at a duly held meeting
of stockholders. Unless earlier terminated by action of the Board of Directors,
the Plan will remain in effect until such time as no Stock remains available for
delivery under the Plan and the Company has no further rights or obligations
under the Plan with respect to outstanding Options, Restricted Stock, Restricted
Stock Units or Deferred Stock under the Plan.
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APPENDIX B
HARSCO CORPORATION
1995 EXECUTIVE INCENTIVE COMPENSATION PLAN
AS AMENDED AND RESTATED
1.Purposes. The purposes of this 1995 Executive Incentive Compensation
Plan (the "Plan") of Harsco Corporation, a Delaware corporation (the
"Company"), are to advance the interests of the Company and its
stockholders by providing a means to attract, retain, and reward
executive officers and other key employees of the Company and its
subsidiaries, to link compensation to measures of the Company's
performance by providing for incentive awards to be settled in cash
and/or stock in order to promote the creation of stockholder value, and
to enable such employees to acquire or increase a proprietary interest in
the Company in order to promote a closer identity of interests between
such employees and the Company's stockholders.
2.Definitions. The definitions of awards under the Plan, including
Options, SARs (including Limited SARs), Restricted Stock, Deferred Stock,
Stock granted as a bonus or in lieu of other awards, Dividend
Equivalents, and Annual Incentive Awards are set forth in Section 6 of
the Plan. Such awards, together with any other right or interest granted
to a Participant under the Plan, are termed "Awards." The definitions of
terms relating to a Change in Control of the Company are set forth in
Section 8 of the Plan. In addition to such terms and the terms defined in
Section 1, the following terms shall be defined as set forth below:
(a) "Award Agreement" means any written agreement, contract, notice to a
Participant, or other instrument or document evidencing an Award.
(b) "Beneficiary" means the person, persons, trust, or trusts which have
been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the
benefits specified under this Plan upon such Participant's death or
to which Awards or other rights are transferred if and to the extent
permitted under Section 9(b). If, upon a Participant's death, there
is no designated Beneficiary or surviving designated Beneficiary,
then the term Beneficiary means person, persons, trust, or trusts
entitled by will or the laws of descent and distribution to receive
such benefits.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time
to time. References to any provision of the Code include regulations
thereunder and successor provisions and regulations thereto.
(e) "Committee" means the Management Development and Compensation
Committee of the Board, or such other Board committee as may be
designated by the Board to administer the Plan. The composition and
governance of the Committee shall be governed by the charter of the
Committee, as approved by the Board from time to time.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time. References to any provision of the Exchange Act
include rules thereunder and successor provisions and rules thereto.
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(g) "Fair Market Value" means, with respect to Stock, Awards, or other
property, the fair market value of such Stock, Awards, or other
property determined by such methods or procedures as shall be
established from time to time by the Committee. Unless otherwise
determined by the Committee, the Fair Market Value of Stock as of
any given date means the average of the high and the low sale prices
of a share of common stock, as reported by a reputable information
service for such date or, if no such prices are reported for such
date, on the most recent trading day prior to such date for which
such prices were reported.
(h) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the
Code.
(i) "Participant" means a person who, as an executive officer or key
employee of the Company or a subsidiary, has been granted an Award
under the Plan.
(j) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the
Securities and Exchange Commission under Section 16 of the Exchange
Act.
(k) "Stock" means the Common Stock, $1.25 par value, of the Company and
such other securities as may be substituted for Stock or such other
securities pursuant to Section 4.
3. Administration.
(a)Authority of the Committee. The Plan shall be administered by the
Committee. The Committee shall have full and final authority to take
the following actions, in each case subject to and consistent with
the provisions of the Plan:
(i) to select Participants to whom Awards may be granted;
(ii) to determine the type or types of Awards to be granted to each
Participant;
(iii) to determine the number of Awards to be granted, the number of
shares of Stock to which an Award will relate, the terms and
conditions of any Award granted under the Plan (including, but
not limited to, any exercise price, grant price, or purchase
price, any restriction or condition, any schedule or
performance conditions for the lapse of restrictions or
conditions relating to transferability, forfeiture,
exercisability, or settlement of an Award, and waivers,
accelerations, or modifications thereof, based in each case on
such considerations as the Committee shall determine), and all
other matters to be determined in connection with an Award;
(iv) to determine whether, to what extent, and under what
circumstances an Award may be settled, or the exercise price of
an Award may be paid, in cash, Stock, other Awards, or other
property, or an Award may be canceled, forfeited, or
surrendered;
(v) to determine whether, to what extent and under what
circumstances cash, Stock, other Awards, or other property
payable with respect to an Award will be deferred either
automatically, at the election of the Committee, or at the
election of the Participant;
(vi) to prescribe the form of each Award Agreement, which need not
be identical for each Participant;
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(vii) to adopt, amend, suspend, waive, and rescind such rules and
regulations and appoint such agents as the Committee may deem
necessary or advisable to administer the Plan;
(viii) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan and to construe and interpret the
Plan and any Award, rules and regulations, Award Agreement, or
other instrument hereunder; and
(ix) to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee may
deem necessary or advisable for the administration of the Plan.
(b)Manner of Exercise of Committee Authority. Unless authority is
specifically reserved to the Board under the terms of the Plan, the
Company's Certificate of Incorporation or Bylaws, or applicable law,
the Committee shall have full discretion in exercising authority
under the Plan; provided, however, that the Board may perform any
function of the Committee under the Plan, in which case references to
the "Committee" shall be deemed to include the Board. Any action of
the Committee with respect to the Plan shall be final, conclusive,
and binding on all persons, including the Company, subsidiaries of
the Company, Participants, any person claiming any rights under the
Plan from or through any Participant, and stockholders. The express
grant of any specific power to the Committee, and the taking of any
action by the Committee, shall not be construed as limiting any power
or authority of the Committee. The Committee may delegate to officers
or managers of the Company or any subsidiary of the Company the
authority, subject to such terms as the Committee shall determine, to
perform administrative functions and such other functions of the
Committee as the Committee may determine, to the fullest extent
permitted under Section 157(c) and other applicable provisions of the
Delaware General Corporation Law.
(c)Limitation of Liability. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other
information furnished to him by any officer or other employee of the
Company or any subsidiary, the Company's independent certified public
accountants, or any executive compensation consultant, legal counsel,
or other professional retained by the Company to assist in the
administration of the Plan. No member of the Committee, nor any
officer or employee of the Company acting on behalf of the Committee,
shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan,
and all members of the Committee and any officer or employee of the
Company acting on behalf of the Committee or members thereof shall,
to the extent permitted by law, be fully indemnified and protected by
the Company with respect to any such action, determination, or
interpretation.
4.Stock Available Under Plan; Per-Person Award Limitations; Adjustments.
(a)Stock Reserved for Awards. Subject to adjustment as hereinafter
provided, the total number of shares of Stock reserved and available
for delivery to Participants in connection with Awards under the Plan
shall be 4,000,000(1). No Award may be granted if the number of
shares to which such Award relates, when added to the
---------------
(1) Pursuant to two-for-one stock split on February 14, 1997.
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number of shares to which other then-outstanding Awards relate, exceeds the
number of shares then remaining available for delivery under this Section 4.
If all or any portion of an Award is forfeited, settled in cash, or
otherwise terminated without delivery of shares to the Participant, the
shares to which such Award or portion thereof related shall again be
available for Awards under the Plan. The Committee may adopt procedures for
the counting of shares relating to any Award to ensure appropriate counting
and avoid double counting (in the case of tandem or substitute awards). Any
shares of Stock delivered pursuant to an Award may consist, in whole or in
part, of authorized and unissued shares or treasury shares.
(b)Annual Individual Limitations. During any calendar year, no
Participant may be granted Options, SARs, Restricted Stock, Deferred
Stock, and Stock as a bonus or in lieu of other awards under the Plan
with respect to more than 150,000(2) shares of Stock. If a potential
grant is authorized subject to performance conditions, this limit
will apply at the time of such authorization rather than at the time
of any resulting grant. In addition, the maximum value of any
cash-denominated Annual Incentive Award that may be earned by
satisfaction of performance conditions in any calendar year shall not
exceed $2,000,000(2).
(c)Adjustments. In the event that the Committee shall determine that
any dividend or other distribution (whether in the form of cash,
Stock, or other property), recapitalization, forward or reverse
split, reorganization, merger, consolidation, spin-off, combination,
repurchase, or share exchange, or other similar corporate transaction
or event, affects the Stock such that an adjustment is appropriate in
order to prevent dilution or enlargement of the rights of
Participants under the Plan, then the Committee shall, in such manner
as it may deem equitable, adjust any or all of (i) the number and
kind of shares of Stock reserved and available for Awards under
Section 4(a), (ii) the number and kind of shares of outstanding
Restricted Stock or other outstanding Award in connection with which
shares have been issued or transferred to Participants, (iii) the
number and kind of shares that may be issued or delivered in respect
of other outstanding Awards, (iv) the exercise price, grant price, or
purchase price relating to any Award (or, if deemed appropriate, the
Committee may make provision for a cash payment with respect to any
outstanding Award), and (v) the number of shares with respect to
which Awards may be granted to a Participant in any calendar year, as
set forth in Section 4(b). In addition, the Committee is authorized
to make adjustments in the terms and conditions of, and any
performance goals and other criteria included in, Awards in
recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence) affecting the
Company or any subsidiary or the financial statements of the Company
or any subsidiary, or in response to changes in applicable laws,
regulations, or accounting principles. The foregoing notwithstanding,
no adjustments shall be authorized under this Section 4(c) with
respect to ISOs or SARs in tandem therewith to the extent that such
authority would cause the Plan to violate Section 422(b)(1) of the
Code, and no such adjustment shall be authorized with respect to
Awards relating to Stock or Annual Incentive Awards to the extent
that such authority would cause such Awards intended to qualify as
"qualified performance-based compensation" under
---------------
(2) Approved by the stockholders at the Annual Meeting held on April 29, 1998.
B-4
Section 162(m)(4)(C) of the Code and regulations thereunder to fail to so
qualify.
5.Eligibility. Executive officers and other key employees of the Company
and its subsidiaries, including any director or officer who is also such
an employee, are eligible to be granted Awards under the Plan. The
foregoing notwithstanding, no member of the Committee shall be eligible
to be granted Awards under the Plan.
6.Specific Terms of Awards.
(a)General. Awards may be granted on the terms and conditions set forth
in this Section 6. In addition, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter (subject
to Section 9(e)), such additional terms and conditions not
inconsistent with the provisions of the Plan, as the Committee shall
determine, including terms requiring forfeiture of Awards in the
event of termination of employment by the Participant or upon the
occurrence of other events. Awards will be granted under the Plan in
order to obtain for the Company and its subsidiaries the benefit of
the services of Participants. The Committee may require the payment
of other consideration for Awards, including in order to ensure that
lawful consideration is paid for Stock in accordance with the
Delaware General Corporation Law.
(b)Options. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i)Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee;
provided, however, that such exercise price shall be not less
than the Fair Market Value of a share on the date of grant of
such Option.
(ii)Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in
part, the methods by which such exercise price may be paid or
deemed to be paid, the form of such payment, including, without
limitation, cash, Stock (including Stock deliverable upon
exercise, if such withholding will not result in additional
accounting expense to the Company), other Awards or awards
granted under other Company plans, or other property (including
through "cashless exercise" arrangements, to the extent
permitted by applicable law), and the methods by which Stock
will be delivered or deemed to be delivered to Participants;
provided, however, that Participants shall be permitted to
specify that Stock issued upon exercise of Options shall be
registered in the name of a person other than the Participant.
(iii)Expiration Date of Options. No Option shall expire later than
ten years after the date of its grant.
(iv)ISOs. The terms of any ISO granted under the Plan shall comply
in all respects with the provisions of Section 422 of the Code,
including but not limited to the requirement that no ISO shall be
granted more than ten years after the effective date of the Plan.
B-5
(c)Stock Appreciation Rights ("SARs"). The Committee is authorized to
grant SARs to Participants on the following terms and conditions:
(i)Right to Payment. An SAR shall confer on the Participant to whom
it is granted a right to receive, upon exercise thereof, the
excess of (A) the Fair Market Value of one share of Stock on the
date of exercise, over (B) the grant price of the SAR as
determined by the Committee as of the date of grant of the SAR,
which shall be not less than the Fair Market Value of one share
of Stock on the date of grant.
(ii)Other Terms. The Committee shall determine the time or times at
which an SAR may be exercised in whole or in part, the method of
exercise, method of settlement, form of consideration payable in
settlement, method by which Stock will be delivered or deemed to
be delivered to Participants, whether or not an SAR shall be in
tandem with any other Award, and any other terms and conditions
of any SAR. Limited SARs that may only be exercised upon the
occurrence of a Change in Control (as such term is defined in
Section 8(b) or as otherwise defined by the Committee) may be
granted on such terms, not inconsistent with this Section 6(c),
as the Committee may determine. Such Limited SARs may be either
freestanding or in tandem with other Awards.
(iii)Expiration Date of SARs. No SAR shall expire later than ten
years after the date of its grant.
(d)Restricted Stock. The Committee is authorized to grant Restricted
Stock to Participants on the following terms and conditions:
(i)Grant and Restrictions. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions, if
any, as the Committee may impose, which restrictions may lapse
separately or in combination at such times, under such
circumstances, in such installments, or otherwise as the
Committee may determine; provided, however, that Restricted Stock
the grant of which is not conditioned upon achievement of any
performance objective shall be subject to a restriction on
transferability and a risk of forfeiture for a period of not less
than three years after the date of grant (except that the
Committee may accelerate the lapse of such restrictions in the
event of the Participant's termination of employment due to
death, disability, normal or approved early retirement, or
involuntary termination by the Company or a subsidiary without
"cause," as defined by the Committee). Except to the extent
restricted under the terms of the Plan and any Award Agreement
relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of the rights of a stockholder
including, without limitation, the right to vote Restricted Stock
or the right to receive dividends thereon.
(ii)Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment during the applicable restriction
period, Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the Company;
provided, however, that the Committee may provide by rule or
regulation or in any Award Agreement, or may determine in any
individual case, that restrictions or forfeiture conditions
relating to Restricted Stock will be waived in whole or in part
in the event of terminations resulting from specified causes,
except as otherwise provided in Section 6(d)(i).
B-6
(iii)Certificates for Stock. Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee shall
determine. If certificates representing Restricted Stock are
registered in the name of the Participant, such certificates
shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Restricted
Stock, the Company shall retain physical possession of the
certificate, and the Participant shall have delivered a stock
power to the Company, endorsed in blank, relating to the
Restricted Stock.
(iv)Dividends and Distributions. Dividends paid on Restricted Stock
shall be either paid at the dividend payment date in cash or in
shares of unrestricted Stock having a Fair Market Value equal to
the amount of such dividends, or the payment of such dividends
shall be deferred and/or the amount or value thereof
automatically reinvested in additional Restricted Stock, other
Awards, or other investment vehicles, as the Committee shall
determine or permit the Participant to elect. To this end, the
Committee may require or permit such dividends to be
automatically reinvested through any dividend reinvestment plan
or program of the Company, subject to such terms and conditions
as the committee may specify. Stock distributed in connection
with a Stock split or Stock dividend, and other property
distributed as a dividend, shall be subject to restrictions and a
risk of forfeiture to the same extent as the Restricted Stock
with respect to which such Stock or other property is
distributed.
(e)Deferred Stock. The Committee is authorized to grant Deferred Stock
to Participants, subject to the following terms and conditions:
(i)Award and Restrictions. Delivery of Stock will occur upon
expiration of the deferral period specified for an Award of
Deferred Stock by the Committee (or, if permitted by the
Committee, as elected by the Participant.) In addition, Deferred
Stock shall be subject to such restrictions as the Committee may
impose, if any, which restrictions may lapse at the expiration of
the deferral period or at earlier specified times, separately or
in combination, under such circumstances, in such installments,
or otherwise as the Committee may determine.
(ii)Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment during the applicable deferral
period or portion thereof to which forfeiture conditions apply
(as provided in the Award Agreement evidencing the Deferred
Stock), all Deferred Stock that is at that time subject to such
risk of forfeiture shall be forfeited; provided, however, that
the Committee may provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Deferred Stock
will be waived in whole or in part in the event of terminations
resulting from specified causes. Deferred Stock subject to a
risk of forfeiture may be called "restricted stock units" or
otherwise designated by the Committee.
(f) Bonus Stock and Awards in Lieu of Cash Obligations. The Committee
is authorized to grant Stock as a bonus, or to grant Stock or other
Awards in lieu of Company obligations to pay cash under other plans
or compensatory arrange-
B-7
ments. Stock or Awards granted hereunder shall be subject to such
other terms as shall be determined by the Committee.
(g)Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive
cash, Stock, other Awards, or other property equal in value to
dividends paid with respect to a specified number of shares of Stock.
Dividend Equivalents may be awarded on a freestanding basis or in
connection with another Award. The Committee may provide that
Dividend Equivalents shall be paid or distributed when accrued or
shall be deemed to have been reinvested in additional Stock, Awards,
or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee may
specify.
(h)Annual Incentive Awards. The Committee is authorized to grant Annual
Incentive Awards, which Awards shall represent a conditional right to
receive cash and/or Restricted Stock upon achievement of
preestablished performance objectives, subject to the following terms
and conditions:
(i)Status of Awards under Section 162(m) of the Code. It is the
intent of the Company that Annual Incentive Awards under this
Section 6(i) granted to persons who are "covered employees"
within the meaning of Code Section 162(m) and regulations
thereunder (including Proposed Regulation 1.162-27 until such
time as successor proposed regulations or final regulations may
be adopted) shall constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and
regulations thereunder. Accordingly, this Section 6(i), and the
definition of "covered employee" and other terms used herein,
shall be interpreted in a manner consistent with Code Section
162(m) of the Code and regulations thereunder. The foregoing
notwithstanding, because the Committee cannot determine with
certainty whether a given Participant will be a "covered
employee" with respect a fiscal year that has not yet been
completed, the term "covered employee" as used in this Section
6(i) shall mean only a person determined by the Committee, at the
time of grant of an Annual Incentive Award, likely to be a
"covered employee" with respect to that fiscal year.
(ii)Grants of Annual Incentive Awards. If the Committee determines
to grant Annual Incentive Awards with respect to any fiscal
year, the Committee shall select the Participants to be granted
such Awards and establish the performance objectives, amounts
payable and other terms of settlement, and all other terms of
such Awards. Such determinations by the Committee shall be made,
in the case of any covered employee, not later than the end of
the first quarter of that fiscal year or such earlier date as
may be necessary to comply with Code Section 162(m) and
regulations thereunder.
(iii)Performance Objectives and Amounts Payable. The performance
objectives relating to an Annual Incentive Award shall consist
of (A) one(3) or more business criteria, (B) minimum, targeted,
and maximum levels of performance with respect to each such
business criteria, and (C) amounts payable upon achievement of
such levels of performance and at other levels of performance
---------------
(3) Approved by the stockholders at the Annual Meeting held on April 24, 2001.
B-8
between the specified minimum and maximum levels, as specified by the
Committee subject to this Section 6(i). In the case of persons determined by
the Committee to be covered employees, performance objectives shall be
objective and shall otherwise meet the requirements of Section 162(m)(4) (C)
of the Code and regulations thereunder, and the business criteria used by
the Committee in establishing performance objectives necessary to qualify
the Award as "performance-based" under Section 162(m) shall be selected from
among the following:
(1) Annual return on capital;
(2) Annual earnings per share;
(3) Annual cash flow provided by operations;
(4) Annual sales;
(5) Strategic business criteria, consisting of one or more
objectives based on meeting specified sales, market
penetration, geographic business expansion goals, cost
targets, safety goals, goals relating to acquisitions or
divestitures, research and development and product
development goals; and/or
(6) Economic value-added measures.(4)
The Committee may, in its discretion, specify business criteria
other than those stated above in establishing business objectives
for such Awards to Participants other than covered employees, but
may not specify business criteria other than those stated above
in establishing the business objectives necessary to qualify the
Award as "performance-based" under Section 162(m) for such Awards
to covered employees. The levels of performance required with
respect to such business criteria may be expressed in absolute or
relative levels. Achievement of performance objectives necessary
to qualify the Award as "performance-based" under Section 162(m)
with respect to such Awards shall be measured over a period of
one year. Performance objectives may differ for such Awards to
different Participants, including such Awards to different
covered employees. The Committee shall specify the weighting to
be given to each performance objective for purposes of
determining the final amount payable with respect to any such
Award.
(iv)Payment of Cash and/or Restricted Stock in Settlement. The
Committee shall specify whether and to what extent an Annual
Incentive Award shall be settled in cash, in shares of Restricted
Stock, or in a combination thereof. With respect to covered
employees, the Committee shall specify the form or forms of
settlement at the time of grant of such Award. If any Restricted
Stock is awarded in settlement of such an Award, at least 50% of
such Restricted Stock shall be subject to a restriction on
transferability and a risk of forfeiture for a period extending
until the end of the third fiscal year following the year to
which such Award related (except that the Committee may
accelerate the lapse of such restrictions in the event of the
Participant's termination of
---------------
(4) Approved by the stockholders at the Annual Meeting held on April 24, 2001.
B-9
employment due to death, disability, normal or approved early retirement, or
involuntary termination by the Company or a subsidiary without "cause," as
defined by the Committee). The Committee may specify additional or longer
restrictions on transferability and risks of forfeiture with respect to such
Restricted Stock.
(v) Committee Determinations and Adjustments to Amounts Payable. As
promptly as practicable following completion of the year or other
period with respect to which performance objectives relating to
Annual Incentive Awards are to be achieved, the Committee shall
determine whether and to what extent such performance objectives
have in fact been achieved. All such determinations by the
Committee shall be made in writing. The Committee may, in its
discretion, increase or reduce the amounts payable in settlement
of such an Award after the date of grant and prior to settlement
(including upon consideration by the Committee of other
performance criteria), except that the Committee may not exercise
discretion to increase the amounts payable in settlement of such
an Award to a covered employee. The Committee may not delegate
any responsibility under this Section 6(i).
(i)Other Performance Awards. The Committee is authorized to grant
Restricted Stock, Deferred Shares, and bonus Stock in the form of
performance Awards. Such Awards may be authorized by the Committee,
with the grant subject to achievement of performance objectives, or
the Awards in the form of Restricted Stock or Deferred Shares may be
granted with terms that require achievement of performance objectives
as a condition of vesting, in whole or in part. The Committee may use
such business criteria and other measures of performance as it may
deem appropriate in establishing any performance objectives; provided
that, in the case of persons determined by the Committee to be
covered employees, performance objectives shall be objective and
shall otherwise meet the requirements of Section 162(m)(4)(C) of the
Code and regulations thereunder, and the business criteria used by
the Committee in establishing performance objectives necessary to
qualify the Award as "performance-based" under Section 162(m) shall
be selected from among those set forth in Section 6(h)(iii).
Performance Awards may measure performance over such period or
periods as the Committee may select. Performance objectives may be
established at such times as the Committee may select, except that in
the case of Awards intended to qualify as "performance-based" under
Section 162(m) the Committee shall establish the qualifying
performance objectives by the deadline applicable under the Section
162(m) regulations. Determinations as to whether performance
objectives have been met and performance Awards earned shall be made
in writing and otherwise consistent with the requirements of Section
6(h)(v).
7.Certain Provisions Applicable to Awards.
(a)Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be
granted either alone or in addition to, in tandem with, or in
substitution for, any other Award granted under the Plan or any award
granted under any other plan of the Company, any subsidiary, or any
business entity to be acquired by the Company or a subsidiary, or any
other right of a Participant to receive payment from the Company or
any
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subsidiary. Awards granted in addition to or in tandem with other
Awards or awards may be granted either as of the same time as or a
different time from the grant of such other Awards or awards.
(b)Term of Awards. The term of each Award shall be for such period as
may be determined by the Committee, subject to Sections 6(b)(iii) and
6(c)(iii).
(c)Form of Payment Under Awards. Subject to the terms of the Plan and
any applicable Award Agreement, payments to be made by the Company or
a subsidiary upon the grant or exercise of an Award may be made in
such forms as the Committee shall determine, including without
limitation, cash, Stock, other Awards, or other property, and may be
made in a single payment or transfer, in installments, or on a
deferred basis. Such payments may include, without limitation,
provisions for the payment or crediting or reasonable interest on
installment or deferred payments or the grant or crediting of
Dividend Equivalents in respect of installment or deferred payments
denominated in Stock.
(d)Rule 16b-3 Compliance.
It is the intent of the Company that grants and other acquisition transactions
under this Plan shall be covered by exemptions under Rule 16b-3 under the
Exchange Act in the case of a Participant who is subject to Section 16 of the
Exchange Act, and therefore the Plan shall be construed and interpreted in a
manner consistent with Rule 16b-3. Unless otherwise specified by the Participant
or the Committee, equity securities or derivative securities acquired under the
Plan which are disposed of by a Participant shall be deemed to be disposed of in
the order acquired by the Participant.
(e)Awards to Participants Outside the United States. The Committee may
modify the terms of any Award under the Plan made to or held by a
Participant who is then resident or primarily employed outside of the
United States in any manner deemed by the Committee to be necessary
or appropriate in order that such Award shall conform to laws,
regulations, and customs of the country in which the Participant is
then resident or primarily employed, or so that the value and other
benefits of the Award to the Participant, as affected by foreign tax
laws and other restrictions applicable as a result of the
Participant's residence or employment abroad, shall be comparable to
the value of such an Award to a Participant who is resident or
primarily employed in the United States. An Award may be modified
under this Section 7(e) in a manner that is inconsistent with the
express terms of the Plan, so long as such modifications will not
contravene any applicable law or regulation or result in actual
liability under Section 16(b) for the Participant whose Award is
modified.
8.Change in Control Provisions.
(a) In the event of a "Change in Control," as defined in this Section,
the following acceleration provisions shall apply, unless otherwise
provided in the applicable Award Agreement (subject to Section
9(e)):
(i) any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and
vested, subject only to the restrictions set forth in Sections
7(d)(i) and 9(a); and
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(ii) In the case of any other type of Award, if it is not then
subject to performance conditions, the restrictions, deferral
of settlement, and forfeiture conditions applicable to such
Award shall lapse and such Award shall be deemed fully vested,
subject to the restrictions set forth in Sections 7(d)(i) and
9(a).
(iii) In the case of any other type of Award then subject to
performance conditions, the Award Agreement and other
document(s) governing the Award shall specify whether and the
extent to which the performance conditions will be deemed met
and restrictions, deferral of settlement, and forfeiture
conditions applicable to any other Award granted under the Plan
shall lapse and the Award be deemed fully vested, subject to
the restrictions set forth in Sections 7(d)(i) and 9(a).
(b) For purposes of the Plan, a "Change in Control" shall have occurred
if:
(i)Stock Acquisition. Any "person" (as such term is used in Section
13(d) and 14(d)(2) of the Exchange Act), other than the Company
or a corporation a majority of whose outstanding stock entitled
to vote is owned, directly or indirectly, by the Company, is or
becomes, other than by purchase from the Company or such a
corporation, the "beneficial owner" (as such term is defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding voting
securities. Such a Change in Control shall be deemed to have
occurred on the first to occur of the business day immediately
preceding the date securities are first purchased by a tender or
exchange offer, or the date on which the Company first learns of
the acquisition of 20% of such securities, or the earlier of the
business day immediately preceding the effective date of an
agreement for the merger, consolidation or other reorganization
of the Company or the date of approval thereof by the
stockholders of the Company, as the case may be.
(ii)Change in Board. During any period of two consecutive years,
individuals who at the beginning of such period were members of
the Board of Directors, (and any new director whose election by
the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
( 2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved,) cease for
any reason to constitute at least a majority of the Board of
Directors. Such a Change in Control shall be deemed to have
occurred on the date upon which the requisite majority of
directors fail to be elected by the stockholders of the Company.
(iii)Other Events. There occurs a change in control of the Company
of a nature that would be required to be reported as such in
response to Item 1(a) of the Current Report of Form 8-K pursuant
to Section 13 or 15(d) of the Exchange Act, or any successor
provision to such Item relating to a "change in control," or in
any other filing under the Exchange Act.
9. General Provisions.
(a)Compliance with Laws and Obligations. The Company shall not be
obligated to issue or deliver Stock in connection with any Award or
take any other action under
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the Plan in a transaction subject to the registration requirements of
the Securities Act of 1933, as amended, or any other federal or state
securities law, any requirement under any listing agreement between
the Company and any national securities exchange or automated
quotation system, or any other law, regulation, or contractual
obligation of the Company, until the Company is satisfied that such
laws, regulations, and other obligations of the Company have been
complied with in full. Certificates representing shares of Stock
delivered under the Plan will be subject to such stop-transfer orders
and other restrictions as may be applicable under such laws,
regulations, and other obligations of the Company, including any
requirement that a legend or legends be placed thereon.
(b)Limitations on Transferability. Awards and other rights under the
Plan, including any Award or right which constitutes a derivative
security as generally defined in Rule 16a-1(c) under the Exchange
Act, will not be transferable by a Participant except by will or the
laws of descent and distribution (or to a designated Beneficiary in
the event of the Participant's death), and, if exercisable, shall be
exercisable during the lifetime of a Participant only by such
Participant or his guardian or legal representative; provided,
however, that such Awards and other rights (other than ISOs and SARs
in tandem therewith) may be transferred to one or more Beneficiaries
during the lifetime of the Participant in connection with the
Participant's estate planning, and may be exercised by such
transferees in accordance with the terms of such Award, but only if
and to the extent then consistent with the registration of the offer
and sale of Stock on Form S-8 or a successor registration form of the
Securities and Exchange Commission, and permitted by the Committee.
Awards and other rights under the Plan may not be pledged, mortgaged,
hypothecated, or otherwise encumbered, and shall not be subject to
the claims of creditors.
(c)No Right to Continued Employment. Neither the Plan nor any action
taken hereunder shall be construed as giving any employee the right
to be retained in the employ of the Company or any of its
subsidiaries, nor shall it interfere in any way with the right of the
Company or any of its subsidiaries to terminate any employee's
employment at any time.
(d)Taxes. The Company and any subsidiary is authorized to withhold from
any Award granted or to be settled, any delivery of Stock in
connection with an Award, any other payment relating to an Award, or
any payroll or other payment to a Participant amounts of withholding
and other taxes due or potentially payable in connection with any
transaction involving an Award, and to take such other action as the
Committee may deem advisable to enable the Company and Participants
to satisfy obligations for the payment of withholding taxes and other
tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make
cash payments in respect thereof in satisfaction of a Participant's
tax obligations; in such case, the shares withheld shall be deemed to
have been delivered for purposes of Section 4(a).
(e)Changes to the Plan and Awards. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of stockholders or
Participants, except that any such action shall be subject to the
approval of the Company's stockholders at or before
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the next annual meeting of stockholders for which the record date is
after such Board action if such stockholder approval is required by
any federal or state law or regulation or the rules of any stock
exchange or automated quotation system on which the Stock may then be
listed or quoted, and the Board may otherwise, in its discretion,
determine to submit other such changes to the Plan to stockholders
for approval; provided, however, that, without the consent of an
affected Participant, no such action may materially impair the rights
of such Participant under any Award theretofore granted to him. The
Committee may waive any conditions or rights under, or amend, alter,
suspend, discontinue, or terminate, any Award theretofore granted and
any Award Agreement relating thereto; provided, however, that this
authority does not override any express limitation in the Plan, so
that the Committee may not waive any condition or right that would be
mandatory under the Plan if the same Award were then being newly
granted, and provided further, that, without the consent of an
affected Participant, no such action may materially impair the rights
of such Participant under such Award.
(f) No Rights to Awards; No Stockholder Rights. No Participant or
employee shall have any claim to be granted any Award under the
Plan, and there is no obligation for uniformity of treatment of
Participants and employees. No Award shall confer on any Participant
any of the rights of a stockholder of the Company unless and until
Stock is duly issued or transferred to the Participant in accordance
with the terms of the Award or, in the case of an Option, the Option
is duly exercised.
(g)Unfunded Status of Awards; Creation of Trusts. The Plan is intended
to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a
Participant pursuant to an Award, nothing contained in the Plan or
any Award shall give any such Participant any rights that are greater
than those of a general creditor of the Company; provided, however,
that the Committee may authorize the creation of trusts or make other
arrangements to meet the Company's obligations under the Plan to
deliver cash, Stock, other Awards, or other property pursuant to any
Award, which trusts or other arrangements shall be consistent with
the "unfunded" status of the Plan unless the Committee otherwise
determines with the consent of each affected Participant.
(h)Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power
of the Board to adopt such other compensatory arrangements as it may
deem desirable, including, without limitation, the granting of stock
options otherwise than under the Plan, and such arrangements may be
either applicable generally or only in specific cases.
(i) No Fractional Shares. No fractional shares of Stock shall be issued
or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards, or other property shall be
issued or paid in lieu of such fractional shares or whether such
fractional shares or any rights thereto shall be forfeited or
otherwise eliminated.
(j) Compliance with Code Section 162(m). It is the intent of the
Company that Options, SARs, Annual Incentive Awards, and other
performance-based Awards granted under Section 6(i) to covered
employees shall constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m)
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and regulations thereunder (including Proposed Regulation 1.162-27).
Accordingly, if any provision of the Plan or any Award Agreement
relating to such an Award does not comply or is inconsistent with
the requirements of Code Section 162(m) or regulations thereunder,
such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements, and no provision shall be
deemed to confer upon the Committee or any other person discretion
to increase the amount of compensation otherwise payable in
connection with any such Award upon attainment of the performance
objectives.
(k)Governing Law. The validity, construction, and effect of the Plan,
any rules and regulations under the Plan, and any Award Agreement
will be determined in accordance with the Delaware General
Corporation Law, to the extent applicable, other laws (including
those governing contracts) of the Commonwealth of Pennsylvania,
without giving effect to principles of conflicts of laws, and
applicable federal law.
(l)Effective Date, Stockholder Approval, and Plan Termination. The
Plan became effective on January 1, 1995, and was approved by
stockholders on April 25, 1995. Unless earlier terminated by action
of the Board of Directors, the Plan will remain in effect until such
time as no Stock remains available for delivery under the Plan and
the Company has no further rights or obligations under the Plan with
respect to outstanding Awards under the Plan.
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APPENDIX C
HARSCO CORPORATION (THE "CORPORATION")
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
(AS AMENDED AND RESTATED FEBRUARY 18, 2004)
I. PURPOSE
The Audit Committee (the "Committee") shall:
A. Provide assistance to the Board of Directors of the Corporation (the
"Board") in fulfilling its responsibility to the stockholders, potential
stockholders and investment community with respect to its oversight of:
(i) The quality and integrity of the Corporation's financial statements;
(ii) The Corporation's compliance with legal and regulatory
requirements;
(iii) The independent auditor's qualifications and independence;
(iv) The performance of the Corporation's internal audit function and
independent auditors; and
(v) The establishment and maintenance of processes to assure that an
adequate system of internal control is functioning within the
Corporation.
B. Prepare the audit committee report that SEC rules require be included in
the Corporation's annual proxy statement.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities outlined in Section IV of this Charter.
II. ORGANIZATION
The Committee shall be comprised of three or more directors as determined
by the Board, each of whom is affirmatively determined by the Board to be an
"independent" director under the rules of the New York Stock Exchange. No member
of the Committee may serve on the audit committee of more than three public
companies, including the Corporation, unless the Board (i) determines that such
simultaneous service would not impair the ability of such member to effectively
serve on the Committee and (ii) discloses such determination in the annual proxy
statement.
All members of the Committee shall be financially literate (or become
financially literate within a reasonable period after his or her appointment),
as such qualification is interpreted by the Board in its business judgment, and
there should be at least one member that has accounting or related financial
management expertise, as such qualification is interpreted by the Board in its
business judgment. The Board may also determine, in the exercise of its business
judgment, to require at least one member of the Committee (which may include the
member that has accounting or related financial management expertise) be an
"audit committee financial expert" as determined by the Board under the rules
and regulations of the Securities and Exchange Commission ("SEC").
No member of the Committee shall receive any compensatory fees other than
in his or her capacity as a member of the Committee, the Board or any other
Board committee. Compensa-
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tory fees shall not include the receipt of fixed amounts of compensation under a
retirement plan (including deferred compensation) for prior service that is in
no way contingent on continued service. No member of the Committee shall be an
"affiliate" of the Corporation under the rules and regulations of the SEC.
The Chairman of the Board shall submit his recommendation to the Nominating
and Corporate Governance Committee for the appointment of members of the Audit
Committee and the Chairman of the Committee. The Board shall elect the members
and Chairman of the Committee at the annual organizational meeting of the Board
to serve until the next annual organizational meeting or until their successors
shall be duly elected and qualified.
III. MEETINGS
The Committee shall meet at least four times annually, or more frequently
as circumstances dictate. The Committee will fully discuss with management any
questions which it may have regarding matters within the scope of its
responsibilities. As part of its job to foster open communication, the Committee
shall periodically meet separately with each of management, the internal
auditors and the independent auditors to discuss any matters that the Committee
or each of these groups believe should be discussed privately. In addition, the
Committee or a member of the Committee designated by the Chairman, shall meet
with management and the independent auditors quarterly to review the financial
statements of the Corporation as outlined in Section IV of this Charter.
IV. RESPONSIBILITIES AND DUTIES
The Audit Committee shall report Committee actions regularly to the full
Board and may make appropriate recommendations. The Committee, in discharging
its oversight role, is empowered to study or investigate any matter of interest
or concern that the Committee deems appropriate. In this regard, the Committee
shall have the authority to retain outside legal, accounting or other advisors
for this purpose, including any terms of retention. The Committee shall have the
authority to approve the fees and expenses payable to such advisors and the
independent auditors and for ordinary administrative expenses of the Committee
that are necessary or appropriate in carrying out its duties.
The Committee shall be given full access to the Corporation's internal
audit group, the Board, corporate executives and independent auditors as
necessary to carry out these responsibilities. While acting within the scope of
its stated purpose, the Committee shall have all the authority of the Board.
To fulfill its responsibilities and duties, the Committee shall:
DOCUMENTS/REPORTS REVIEW
1. Review and update this Charter annually, or more frequently as conditions
dictate.
2. Review with management and the independent auditors prior to public
dissemination the Corporation's annual audited financial statements and
quarterly financial statements, including the Corporation's disclosures
under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and a discussion with the independent auditors of the
matters required to be discussed by Statement of Auditing Standards No. 61.
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3. Discuss with management and the independent auditors the Corporation's
earnings press releases, as well as additional financial information and
earnings guidance that management may provide to analysts and rating
agencies. The Committee's discussion in this regard may be general in nature
(i.e., discussion of the types of information disclosed and the type of
presentation made). The discussions need not take place in advance of each
earnings release or cover each instance in which the Corporation may provide
earnings guidance.
4. Review summaries of the regular internal reports to management prepared by
the internal auditing department and management's response.
INDEPENDENT AUDITORS
5. Appoint, retain and terminate independent auditors and approve all audit
engagement fees and terms.
6. Inform each registered public accounting firm performing work for the
Corporation that such firm shall report directly to the Committee.
7. Oversee the work of any registered public accounting firm employed by the
Corporation, including the resolution of any disagreement between management
and the auditor regarding financial reporting, for the purpose of preparing
or issuing an audit report or performing other audit, review or attest
services.
8. Approve in advance any engagement of the independent auditors for audit or
non-audit services, other than "prohibited non-audit services."
The following shall be "prohibited non-audit services": (i) bookkeeping or
other services related to the accounting records or financial statements of
the Corporation; (ii) financial information systems design and
implementation; (iii) appraisal or valuation services, providing fairness
opinions or preparing contribution-in-kind reports; (iv) actuarial services;
(v) internal audit outsourcing services; (vi) management functions; (vii)
human resources; (viii) broker or dealer, investment adviser, or investment
banking services; (ix) legal services; (x) expert services unrelated to the
audit; and (xi) any other service that the Public Company Accounting
Oversight Board prohibits through regulation.
Notwithstanding the foregoing, pre-approval is not necessary for services
other than audit, review or attest services if: (i) the aggregate amount of
all such services provided to the Corporation constitutes not more than five
percent of the total amount of revenues paid by the Corporation to the
auditors during the fiscal year in which such services are provided; (ii)
such services were not recognized by the Corporation at the time of the
engagement to be non-audit services; and (iii) such services are promptly
brought to the attention of the Committee and approved prior to the
completion of the audit by the Committee or by one or more members of the
Committee who are members of the Board to whom authority to grant such
approvals has been delegated by the Committee.
The Committee may delegate to one or more of its members the authority to
approve in advance all significant audit or non-audit services to be
provided by the independent auditors so long as it is presented to the full
Committee at a later time. The Committee may establish pre-approval policies
and procedures, provided the policies and procedures are detailed as to the
particular service and the Committee is informed of each service, and such
policies and procedures do not include delegation of the Committee's
responsibilities to management.
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9. Review, at least annually, the qualifications, performance and independence
of the independent auditors. In conducting its review and evaluation, the
Committee should:
(a) Obtain and review a report by the Corporation's independent auditors
describing: (i) the auditing firm's internal quality-control procedures;
(ii) any material issues raised by the most recent internal
quality-control review, or peer review, of the auditing firm, or by any
inquiry or investigation by governmental or professional authorities,
within the preceding five years, respecting one or more independent
audits carried out by the auditing firm, and any steps taken to deal
with any such issues; and (iii) (to assess the auditor's independence)
all relationships between the independent auditor and the Corporation;
(b) Review and evaluate the lead audit partner.
(c) Ensure the rotation of the lead audit partner and the concurring audit
partner at least every five years, and the rotation of audit team
members performing certain services at least every seven years, in
accordance with the rules and regulations of the SEC. In addition, the
Committee should consider whether there should be regular rotation of
the audit firm itself.
(d) Confirm with any independent accountant retained to provide audit
services for any fiscal year that the lead (or coordinating) audit
partner (having primary responsibility for the audit), or the audit
partner responsible for providing a second level of review of the audit
(the concurring or reviewing audit partner), has not performed audit
services for the Corporation in each of the five previous fiscal years
of that Corporation.
(e) Take into account the opinions of management and the Corporation's
internal auditors (or other personnel responsible for the internal audit
function).
FINANCIAL REPORTING PROCESSES
10. In consultation with the independent auditors and the internal auditors,
review the integrity of the organization's financial reporting processes,
both internal and external. In that connection, the Committee should obtain
and discuss with management and the independent auditors reports from
management and the independent auditors regarding: (i) all critical
accounting policies and practices to be used by the Corporation; (ii)
analyses prepared by management and/or the independent auditors setting
forth significant financial reporting issues and judgments made in
connection with the preparation of the financial statements, including all
alternative treatments of financial information within generally accepted
accounting principles that have been discussed with management, the
ramifications of the use of the alternative disclosures and treatments, and
the treatment preferred by the independent auditors; (iii) major issues
regarding accounting principles and financial statement presentations,
including any significant changes in the Corporation's selection or
application of accounting principles; (iv) major issues as to the adequacy
of the Corporation's internal controls and any specific audit steps adopted
in light of material control deficiencies; and (v) any other material
written communications between the independent auditors and management.
11. Review periodically the effect of regulatory and accounting initiatives, as
well as off-balance sheet structures, on the financial statements of the
Corporation.
12. Review with the independent auditors (i) any audit problems or other
difficulties encountered by the auditor in the course of the audit process,
including any restrictions on the
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scope of the independent auditor's activities or on access to requested
information, and any significant disagreements with management (which the
Committee will work with management to resolve in accordance with Section
IV. 7 of this Charter) and (ii) management's responses to such matters.
Without excluding other possibilities, the Committee may wish to review with
the independent auditors (i) any accounting adjustments that were noted or
proposed by the auditor but were "passed" (as immaterial or otherwise), (ii)
any communications between the audit team and the audit firm's national
office respecting auditing or accounting issues presented by the engagement
and (iii) any "management" or "internal control" letter issued, or proposed
to be issued, by the independent auditors to the Corporation.
13. Review and discuss with the independent auditors the responsibilities,
budget and staffing of the Corporation's internal audit function.
INTERNAL CONTROL FRAMEWORK, CODE OF CONDUCT, AND LEGAL COMPLIANCE
14. Evaluate whether management is setting the appropriate tone at the top by
communicating the importance of the Harsco Internal Control Framework and
ensuring that all individuals possess an understanding of their roles and
responsibilities.
15. Review periodically the Harsco Code of Conduct and ensure that management
has established a system to enforce this Code.
16. Review activities, organizational structure, and qualifications of the
internal audit department.
17. Review, with the organization's counsel, legal compliance matters including
corporate securities trading policies.
18. Review, with the organization's counsel, any legal matter that could have a
significant impact on the Corporation.
19. Discuss with management and the independent auditors the Corporation's
guidelines, policies and controls with respect to risk assessment and risk
management. The Committee should discuss the Corporation's major financial
risk exposures and the steps management has taken to monitor and control
such exposures. The Committee is not the sole body of the Board responsible
for reviewing risk assessment and control, and the Committee will support
the Board's shared oversight of these matters.
20. Set clear hiring policies for employees or former employees of the
independent auditors. At a minimum, these policies should provide that any
registered public accounting firm may not provide audit services to the
Corporation if the CEO, controller, CFO, chief accounting officer or any
person serving in an equivalent capacity for the Corporation was employed by
the registered public accounting firm and participated in the audit of the
Corporation within one year of the initiation of the current audit.
21. Maintain procedures under or supplemental to the Harsco Code of Conduct for:
(i) the receipt, retention and treatment of complaints received by the
Corporation regarding accounting, internal accounting controls, or auditing
matters; and (ii) the confidential, anonymous submission by employees of the
Corporation of concerns regarding questionable accounting or auditing
matters.
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22. Perform any other activities consistent with this Charter, the Corporation's
By-laws and governing law, as the Committee or the Board deems necessary or
appropriate to fulfill the purposes of the Charter.
REPORTS
23. Provide the report of the Committee required by the rules of the SEC to be
included in the Corporation's proxy statement for each annual meeting.
24. Report regularly to the full Board including:
(i) with respect to any issues that arise with respect to the quality or
integrity of the Corporation's financial statements, the Corporation's
compliance with legal or regulatory requirements, the performance and
independence of the Corporation's independent auditors or the
performance of the internal audit function;
(ii) following all meetings of the Committee; and
(iii) with respect to such other matters as are relevant to the Committee's
discharge of its responsibilities.
The Committee shall provide such recommendations as the Committee may deem
appropriate. The report to the Board may take the form of an oral or written
report by the Chairman or any other member of the Committee designated by
the Committee to make such report.
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Corporation's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditors.
Nothing contained in this Charter is intended to alter or impair the
operation of the "business judgment rule" as interpreted by the courts under the
Delaware General Corporation Law. Further, nothing contained in this Charter is
intended to alter or impair the right of the members of the Committee to rely,
in discharging their oversight role, on the records of the Corporation and on
other information presented to the Committee, the Board or the Corporation by
its officers or employees or by outside experts such as the independent
auditors.
V. ANNUAL PERFORMANCE EVALUATION
The Committee shall discuss annually, its evaluation of the Committee's
effectiveness in performing its responsibilities under this Charter. The
Committee shall conduct such evaluation and reviews in such manner as it deems
appropriate.
C-6
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS Mark Here
INDICATED, WILL BE VOTED "FOR" THE PROPOSALS. for Address |_|
Change or
Comments
ITEM 1. ELECTION OF DIRECTORS
Nominees:
01 G. D. H. Butler
02 J. I. Scheiner
03 R. C. Wilburn
FOR WITHHELD
FOR ALL
|_| |_|
Withheld for the nominees you list below: (Write that nominee's name in the
space provided below.)
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ITEM 2-APPROVE THE 1995 NON-EMPLOYEE DIRECTORS' STOCK PLAN, AS AMENDED AND
RESTATED
FOR AGAINST ABSTAIN
|_| |_| |_|
ITEM 3-APPROVE THE 1995 EXECUTIVE INCENTIVE COMPENSATION PLAN, AS AMENDED AND
RESTATED
FOR AGAINST ABSTAIN
|_| |_| |_|
ITEM 4-RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT ACCOUNTANTS
FOR AGAINST ABSTAIN
|_| |_| |_|
Consenting to receive all future annual meeting materials and shareholder
communications electronically is simple and fast! Enroll today at
www.melloninvestor.com/ISD for secure online access to your proxy materials,
statements, tax documents and other important shareholder correspondence.
Signature _______________________ Signature ____________________ Date __________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
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FOLD AND DETACH HERE
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
------------------------------------ -------------------------------- -------------------------------
Internet Telephone Mail
http://www.eproxy.com/hsc 1-800-435-6710
Mark, sign and date
Use the Internet to vote your proxy. OR Use any touch-tone telephone to OR your proxy card
Have your proxy card in hand when vote your proxy. Have your proxy and
you access the web site. card in hand when you call. return it in the
enclosed postage-paid envelope.
------------------------------------ -------------------------------- -------------------------------
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
You can view the Annual Report and Proxy Statement
on the internet at www.harsco.com
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
HARSCO CORPORATION
The undersigned hereby appoints D.C. Hathaway, S.D. Fazzolari and A.J.
Sordoni, III and each of them, with power to act without the other and with
power of substitution, as proxies and attorneys-in-fact and hereby authorizes
them to represent and vote, as provided on the other side, all the shares of
Harsco Corporation Common Stock which the undersigned is entitled to vote, and,
in their discretion, to vote upon such other business as may properly come
before the Annual Meeting of Stockholders of the company to be held April 27,
2004 or at any adjournment or postponement thereof, with all powers which the
undersigned would possess if present at the Meeting.
(Continued and to be marked, dated and signed, on the other side)
________________________________________________________________________________
Address Change/Comments (Mark the corresponding box on the reverse side)
________________________________________________________________________________
________________________________________________________________________________
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FOLD AND DETACH HERE
You can now access your Harsco Corporation account online.
Access your Harsco Corporation shareholder account online via Investor
ServiceDirect(R) (ISD).
Mellon Investor Services LLC, Transfer Agent for Harsco Corporation, now makes
it easy and convenient to get current information on your shareholder account.
o View account status
o View certificate history
o View book-entry information
o View payment history for dividends
o Make address changes
o Obtain a duplicate 1099 tax form
o Establish/change your PIN
Visit us on the web at http://www.melloninvestor.com
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect(R) is a registered trademark of
Mellon Investor Services LLC