AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 31, 1995
REGISTRATION NO. 33-59659
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 2
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HECLA MINING COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 82-0126240
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION ORGANIZATION)
6500 MINERAL DRIVE
COEUR D'ALENE, IDAHO 83814
(208) 769-4100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MICHAEL B. WHITE, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
HECLA MINING COMPANY
6500 MINERAL DRIVE
COEUR D'ALENE, IDAHO 83814
(208) 769-4100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
DAVID A. KATZ, ESQ. BRICE T. VORAN, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ SHEARMAN & STERLING
51 WEST 52ND STREET COMMERCE COURT WEST, SUITE 4405
NEW YORK, NEW YORK 10019 199 BAY STREET
(212) 403-1000 TORONTO, ONTARIO, M5L 1E8 CANADA
(416) 360-2975
<PAGE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO
THE PUBLIC: From time to time after this Registration State-
ment becomes effective as determined by market conditions.
If the only securities being registered on this Form
are to be offered pursuant to dividend or interest reinvestment
plans, please check the following box. / /
If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis pursu-
ant to Rule 415 under the Securities Act of 1933, other than
securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED UNIT<F1> PRICE<F1> REGISTRATION FEE
<S> <C> <C> <C> <C>
Debt Securities<F3>......
Preferred Stock, par value
$0.25 per share<F4><F5>
Depositary Shares<F5>.... <F2> <F2> <F2> N/A
Common Stock, par value
$0.25 per share<F6><F7>
Warrants<F8>.............
Total.................... U.S.$100,000,000<F9> 100% U.S.$100,000,000<F9>U.S.$34,482.76<F10>
<FN>
<F1> Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o)
under the Securities Act of 1933, as amended, and exclusive of accrued interest, if any.
<F2> Not applicable pursuant to Form S-3 General Instruction II.D.
<F3> Subject to note (9) below, there are being registered hereunder an indeterminate principal
amount of Debt Securities. If any Debt Securities are being issued at an original issue
discount, then the offering price shall be in such greater principal amount as shall result
in an aggregate initial offering price not to exceed U.S.$100,000,000, less the dollar
amount of any securities previously issued hereunder.
<F4> Subject to note (9) below, there are being registered hereunder an indeterminate number of
shares of Preferred Stock as may be sold, from time to time, by the Registrant.
<F5> Subject to note (9) below, there are being registered hereunder an indeterminate number of
Depositary Shares to be evidenced by Depositary Receipts issued pursuant to a Deposit
Agreement. In the event the Registrant elects to offer to the public fractional interests
in shares of Preferred Stock registered hereunder, Depositary Receipts will be distributed
to those persons purchasing such fractional interests, and the shares of Preferred Stock
will be issued to the depositary under the Deposit Agreement.
<F6> Includes the preferred stock purchase rights associated with the Common Stock.
<F7> Subject to note (9) below, there are being registered hereunder an indeterminate number of
shares of Common Stock as may be sold, from time to time, by the Registrant. There are also
being registered hereunder an indeterminate number of shares of Common Stock as shall be
issuable upon conversion or redemption of Preferred Stock or Debt Securities registered
hereby or upon exercise of Warrants registered hereby.
<F8> Subject to note (9) below, there are being registered hereunder an indeterminate amount and
number of Warrants, representing rights to purchase Debt Securities, Preferred Stock or
Common Stock registered hereby.
<F9> In no event will the aggregate initial offering price of all securities issued from time to
time pursuant to this Registration Statement exceed $100,000,000, or its equivalent if some
or all of the securities are denominated in one or more foreign currencies, foreign currency
units or composite currencies. Any securities registered hereunder may be sold separately
or as units with other securities registered hereunder.
<F10> The amount of registration fee, calculated in accordance with Section 6(b) of the Securities
Act of 1933, as amended, and Rule 457(o) promulgated thereunder, is 1/29th of 1 per centum
of the maximum aggregate offering price at which the securities registered pursuant to this
Registration Statement are proposed to be offered. Fee was paid upon initial filing of the
Registration Statement on May 26, 1995.
</FN>
/TABLE
<PAGE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE>
[LEGEND]
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMEND-
MENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE AC-
CEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
[END LEGEND]
SUBJECT TO COMPLETION, DATED AUGUST 31, 1995
PROSPECTUS
HECLA MINING COMPANY
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK
WARRANTS
Hecla Mining Company ("Hecla" or the "Company") may
offer from time to time (i) unsecured debt securities ("Debt
Securities") consisting of debentures, notes and/or other evi-
dences of unsecured indebtedness in one or more series, (ii)
shares of preferred stock, par value $0.25 per share ("Pre-
ferred Stock"), in one or more series, or fractional interests
in shares of Preferred Stock represented by depositary shares
("Depositary Shares"), (iii) shares of common stock, par value
$0.25 per share ("Common Stock"), or (iv) warrants ("Warrants")
to purchase Debt Securities, Preferred Stock or Common Stock
(the Debt Securities, Preferred Stock, Depositary Shares, Com-
mon Stock and Warrants are collectively referred to as "Securi-
ties"), or any combination of the foregoing, at an aggregate
initial offering price not to exceed U.S.$100,000,000, or its
equivalent if some or all of the Securities are denominated in
one or more foreign currencies, foreign currency units, or com-
posite currencies, at prices and on terms to be determined at
or prior to the time of sale in light of market conditions at
the time of sale. The Debt Securities may be senior ("Senior
Securities"), senior subordinated ("Senior Subordinated Securi-
ties") or subordinated ("Subordinated Securities"). The Senior
Securities will rank equally with all other unsubordinated and<PAGE>
unsecured indebtedness of the Company. The Senior Subordinated
Securities will be subordinate to all existing and future
Senior Indebtedness of the Company, as defined in the Senior
Subordinated Indenture described herein. The Subordinated
Securities will be subordinate to all existing and future
Senior Indebtedness (including any Senior Subordinated Securi-
ties) as defined in the Subordinated Indenture described here-
in. The Debt Securities of any series and Preferred Stock of
any series may be convertible into or exchangeable for Debt
Securities of another series or other securities of the Com-
pany.
<PAGE>
Specific terms of the particular Securities in re-
spect of which this Prospectus is being delivered will be set
forth in one or more accompanying Prospectus Supplements (each
a "Prospectus Supplement"), together with the terms of the of-
fering of the Securities and the initial price and the net pro-
ceeds to Hecla from the sale thereof. The Prospectus Supple-
ment will set forth with regard to the particular Securities,
without limitation, the following: (i) in the case of Debt
Securities, the specific designation, aggregate principal
amount, ranking as senior debt or subordinated debt, authorized
denomination, maturity, rate or method of calculation of in-
terest and dates for payment thereof, any exchangeability, con-
version, redemption, prepayment or sinking fund provisions, the
currency or currencies or currency unit or currency units in
which principal, premium, if any, or interest, if any, is pay-
able, any modification of the covenants and any other specific
terms thereof; (ii) in the case of Preferred Stock, the desig-
nation, number of shares, liquidation preference per share,
initial public offering price, dividend rate (or method of cal-
culation thereof), dates on which dividends will be payable and
dates from which dividends will accrue, any redemption or sink-
ing fund provisions, any conversion or exchange rights, any
other relative rights and whether Hecla has elected to offer
fractional interests in the Preferred Stock in the form of De-
positary Shares evidenced by depositary receipts; (iii) in the
case of Common Stock, the number of shares of Common Stock and
the terms of the offering and sale thereof; and (iv) in the
case of Warrants, the number and terms thereof, the designation
and the number of Securities issuable upon their exercise, the
exercise price, the terms of the offering and sale thereof and,
where applicable, the duration and detachability thereof. The
amounts payable by the Company in respect of Securities may be
calculated by reference to the value, rate or price of one or
more specified commodities, currencies or indices as set forth
in the Prospectus Supplement. The Prospectus Supplement will
also contain information, where applicable, about certain
United States federal income tax considerations relating to the
Securities covered by the Prospectus Supplement.
-2-<PAGE>
The Debt Securities, Debt Warrants and Common Stock
Warrants may be issued only in registered form, including in
the form of one or more global securities ("Global Securi-
ties"), unless otherwise set forth in the Prospectus Supple-
ment.
See "Risk Factors" at page 5 for a discussion of cer-
tain considerations relevant to an investment in the Securi-
ties.
The outstanding Common Stock is listed on the New
York Stock Exchange (the "NYSE") under the symbol "HL". On
August 30, 1995, the last reported sale price of the Common
Stock on the NYSE was U.S.$11.25 per share. Any Common Stock
offered will be listed, subject to notice of issuance, on the
NYSE. The applicable Prospectus Supplement will contain in-
formation about any listing of the other Securities on a se-
curities exchange.
The Securities may be sold directly, through agents
designated from time to time, or through underwriters or deal-
ers. If any agents of Hecla or any underwriters or dealers are
involved in the sale of the Securities, the names of such
agents, underwriters or dealers, any applicable commissions and
discounts, and the net proceeds to the Company will be set
forth in the applicable Prospectus Supplement. Such under-
writers may include Merrill Lynch & Co. and Salomon Brothers
Inc. See "Plan of Distribution" for possible indemnification
arrangements for agents, underwriters and dealers.
This Prospectus may not be used to consummate sales
of Securities unless accompanied by a Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMIS-
SION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PRO-
SPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS AUGUST __, 1995
-3-<PAGE>
[Inside Cover]
No person is authorized to give any information or to
make any representations, other than those contained or incor-
porated by reference in this Prospectus or the accompanying
Prospectus Supplement, in connection with the offering contem-
plated hereby, and, if given or made, such information or rep-
resentations must not be relied upon as having been authorized
by the Company. Neither this Prospectus nor the accompanying
Prospectus Supplement constitutes an offer to sell or a solic-
itation of an offer to buy any securities in any jurisdiction
to any person to whom it is unlawful to make such offer or so-
licitation in such jurisdiction. Neither the delivery of this
Prospectus or the accompanying Prospectus Supplement, nor any
sale made hereunder or thereunder, shall, under any circum-
stances, create any implication that there has been no change
in the affairs of the Company since the date hereof or thereof
or that the information contained or incorporated by reference
herein or therein is correct as of any time subsequent to its
date.
AVAILABLE INFORMATION
Hecla is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy state-
ments and other information with the Securities and Exchange
Commission (the "Commission"), which can be inspected and cop-
ied at the public reference facilities maintained by the Com-
mission at 450 Fifth Street, N.W., Judiciary Plaza, Room 1024,
Washington, D.C. 20549; and at regional offices of the Commis-
sion at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and at 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies of such materials can
be obtained at prescribed rates from the Public Reference Sec-
tion of the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Room 1024, Washington, D.C. 20549. Such reports, proxy
statements and other information concerning Hecla also may be
inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005, on which exchange certain of the Com-
pany's securities are listed.
This Prospectus constitutes a part of a Registration
Statement on Form S-3 (together with all amendments thereto,
the "Registration Statement") filed by the Company with the
Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus omits certain of the infor-
mation contained in the Registration Statement, and reference
is hereby made to the Registration Statement and to the ex-
hibits thereto for further information with respect to the<PAGE>
Company and the shares of Common Stock offered hereby. Any
statements contained herein concerning the provisions of any
document are not necessarily complete, and in each instance
reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with
the Commission. Each such statement is qualified in its
entirety by such reference.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the
Commission (File No. 1-8491) are incorporated in this Prospec-
tus by reference and hereby made a part hereof: (i) the Com-
pany's Annual Report on Form 10-K for the year ended December
31, 1994, as amended by the Company's Form 10-K/A (Amendment
No. 1); (ii) the Company's Proxy Statement, dated March 27,
1995, for the Annual Meeting of Stockholders held on May 5,
1995 (except for pages 5 through 10 thereof relating to the
Company's compensation committee report and performance graph);
(iii) the description of Common Stock contained in the Regis-
tration Statement on Form 8-B, dated May 6, 1983, filed under
Section 12 of the Exchange Act, including any amendment or re-
port filed for the purpose of updating such description; (iv)
the description of the Company's Preferred Share Purchase
Rights contained in the Registration Statement on Form 8-A,
dated May 19, 1986, filed under Section 12 of the Exchange Act,
as amended by the description contained in the Current Report
on Form 8-K, dated November 9, 1990, including any other amend-
ment or report filed for the purpose of updating such descrip-
tion; (v) the description of the Company's Series B Cumulative
Convertible Preferred Stock contained in the Registration
Statement on Form 8-A, dated June 18, 1993, filed under Section
12 of the Exchange Act; (vi) the Company's Current Reports on
Form 8-K dated January 19, 1995, January 25, 1995, February 2,
1995, March 8, 1995, May 17, 1995 and June 6, 1995, (vii) the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995, as amended by the Company's Form 10-Q/A (Amend-
ment No. 1), and (viii) the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995.
All reports and other documents subsequently filed by
the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act, prior to the termination of the offering of
the shares of Common Stock, shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of
the filing of such reports and documents. Any statement con-
tained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or super-
seded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed
-2-<PAGE>
document which also is incorporated or deemed to be incorpo-
rated by reference herein modifies or supersedes such state-
ment. Any such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.
The Company will provide without charge to each per-
son to whom a copy of this Prospectus is delivered, on the
written or oral request of any such person, a copy of any or
all of the documents incorporated herein by reference, other
than exhibits to such documents (except for exhibits that are
specifically incorporated by reference herein). Requests for
such copies should be directed to the Company's principal ex-
ecutive offices located at 6500 Mineral Drive, Coeur d'Alene,
Idaho 83814-8788, to the attention of Mr. Michael B. White,
Secretary (telephone number (208) 769-4100).
IN CONNECTION WITH THE OFFERING OF CERTAIN SECURI-
TIES, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF SUCH SECURI-
TIES OR OTHER SECURITIES OF HECLA AT LEVELS ABOVE THOSE WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
-3-<PAGE>
THE COMPANY
The Company, originally incorporated in 1891, is
principally engaged in the exploration, development, mining and
processing of precious and non-ferrous metals, including gold,
silver, lead and zinc, and certain industrial minerals. During
1994, the Company produced 127,878 ounces of gold and 1,642,913
ounces of silver. At December 31, 1994, the Company had ap-
proximately 2.1 million and 75.9 million contained ounces of
proven and probable gold and silver reserves, respectively.
The Company's principal metals properties include the
Grouse Creek gold mine (in which the Company owns an 80% in-
terest), located near Challis, Idaho, which began operations in
December 1994; the La Choya gold mine, located in Sonora, Mex-
ico, which began operations in January 1994; the American Girl
gold mine and the Oro Cruz gold project (in which the Company
owns a 47% interest), both located in Imperial County, Califor-
nia, which were acquired in 1994; the Rosebud gold project,
located in Pershing County, Nevada, which was acquired in 1994;
the Lucky Friday silver and lead mine, located near Mullan,
Idaho, which is a significant primary producer of silver in the
United States, and the related Gold Hunter silver project for
which the first phase of development was approved in 1994; and
the Greens Creek mine (in which the Company owns a 29.7% inter-
est), located near Juneau, Alaska, a polymetallic mine cur-
rently under redevelopment with commercial production estimated
to recommence by early 1997.
The Company's industrial minerals businesses consist
of Kentucky-Tennessee Clay Company (ball clay and kaolin divi-
sions), K-T Feldspar Corporation, Mountain West Products, Inc.
(bark and scoria) and Colorado Aggregate Company of New Mexico.
Hecla's industrial minerals segment is a leading producer of
three of the four basic ingredients required to manufacture
ceramic and porcelain products, including sanitaryware, pot-
tery, dinnerware, electric insulators and ceramic tile. At
current production rates, the Company has over 20 years of
proven and probable reserves of ball clay, kaolin and feldspar.
The Company has experienced losses from operations
for the first six months of 1995 and each of the last five
years. For the six months ended June 30, 1995, the Company
reported a net loss of approximately $0.2 million (before pre-
ferred dividends of $4.0 million) or $0.01 per share of Common
Stock. The year to date June 30, 1995 net loss resulted prima-
rily from start up related expenses at the Grouse Creek mine
which commenced operations in December 1994, partially offset
by a gain of $3.4 million on the sale of common stock invest-
ments and a $1.1 million gain recognized as the final insurance
-4-<PAGE>
settlement for business interruption that resulted from the
Lucky Friday hoist accident in August 1994. For the year ended
December 31, 1994, the Company reported a net loss of approxi-
mately $24.6 million (before preferred dividends of $8.0 mil-
lion) or $0.56 per share of Common Stock compared to a net loss
of $17.8 million or $0.47 per share of Common Stock for 1993.
The 1994 net loss resulted primarily from non-recurring asset
write-downs and increases in the Company's provision for closed
operations and environmental matters, partially offset by
improved results from both the metals and industrial minerals
segments. See "Risk Factors -- Recent Losses".
During the next several years, the Company intends to
concentrate its exploration efforts at or in the vicinity of
its existing and proposed mining properties, including Grouse
Creek, La Choya, Greens Creek, Rosebud, American Girl and Lucky
Friday. The Company and its joint venture partners own or con-
trol significant land positions surrounding these existing and
proposed mining operations. In addition, the Company will con-
tinue to evaluate acquisition and exploration opportunities,
primarily in the United States and Mexico.
The Company's principal executive offices are located
at 6500 Mineral Drive, Coeur d'Alene, Idaho 83814, and its tel-
ephone number at such address is (208) 769-4100.
RISK FACTORS
Prospective purchasers of Securities should carefully
read this Prospectus, any Prospectus Supplement delivered here-
with, and the documents incorporated by reference herein and
therein. Ownership of Securities involves certain risks. In
determining whether to purchase Securities, prospective in-
vestors should consider carefully the following risk factors
and other information contained in this Prospectus, in addition
to the other risk factors and information set forth in any Pro-
spectus Supplement delivered herewith.
RECENT LOSSES
The Company has experienced losses from operations
for the first six months of 1995 and each of the last five fis-
cal years. For the six months ended June 30, 1995, the Company
reported a net loss of approximately $0.2 million (before pre-
ferred dividends of $4.0 million) or $0.01 per share of Common
Stock. The year to date June 30, 1995 net loss resulted prima-
rily from start up related expenses at the Grouse Creek mine
which commenced operations in December 1994, partially offset
by a gain of $3.4 million on the sale of common stock invest-
ments and a $1.1 million gain recognized as the final insurance
-5-<PAGE>
settlement for business interruption that resulted from the
Lucky Friday hoist accident in August 1994. For the year ended
December 31, 1994, the Company reported a net loss of approxi-
mately $24.6 million (before preferred dividends of $8.0 mil-
lion) or $0.56 per share of Common Stock compared to a net loss
of $17.8 million or $0.47 per share of Common Stock for 1993.
The 1994 net loss resulted primarily from non-recurring asset
write-downs and increases in the Company's provision for closed
operations and environmental matters, partially offset by im-
proved results from both the metals and industrial minerals
segments. The 1993 net loss resulted primarily from decreases
in the Company's gold and silver production and the continued
depressed average prices of lead and zinc. If the average met-
als prices for the first six months of 1995 remain constant for
the balance of the year, the Company is anticipating net income
(loss) applicable to shareholders of Common Stock in the range
of $(3.0) to $3.0 million after the expected dividends to pre-
ferred shareholders totaling approximately $8.0 million for the
year ending December 31, 1995. Due to the volatility of metals
prices and the significant impact metals price changes have on
the Company's operations, there can be no assurance that the
actual results of operations for the year ending December 31,
1995 will be as forecasted. However, even if metals prices
remain at present levels, the Company's operating cash flows
are expected to increase now that anticipated production levels
have been achieved at the Grouse Creek mine. The Grouse Creek
mine commenced operations in December 1994. Steady-state pro-
duction levels were achieved during the second quarter of 1995.
There can be no assurance the Company will be profitable in the
future.
METAL PRICE VOLATILITY
Because a significant portion of the Company's rev-
enues are derived from the sale of gold, silver, lead and zinc,
the Company's earnings are directly related to the prices of
these metals. Gold, silver, lead and zinc prices fluctuate
widely and are affected by numerous factors beyond the Com-
pany's control, including expectations for inflation, specula-
tive activities, the relative exchange rate of the U.S. dollar,
global and regional demand and production, political and eco-
nomic conditions and production costs in major producing re-
gions. The aggregate effect of these factors, all of which are
beyond the Company's control, is impossible for the Company to
predict. If the market price for these metals falls below the
Company's full production costs and remains at such level for
any sustained period, the Company will experience additional
losses and may determine to discontinue the development of a
project or mining at one or more of its properties. While the
Company has periodically used limited hedging techniques to
-6-<PAGE>
reduce a portion of the Company's exposure to the volatility of
gold, silver and zinc prices, there can be no assurance that it
will be able to do so as effectively in the future. See
"-- Hedging Activities."
The following table sets forth the average closing
prices of the following metals for 1980, 1985, 1990, and each
year thereafter and the present year through July 31, 1995.
-7-<PAGE>
<TABLE>
The following table sets forth the average closing
prices of the following metals for 1980, 1985, 1990, and each
year thereafter and the present year through July 31, 1995.
<CAPTION>
1980 1985 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gold<F1>
(per oz.)....... $612.56 $317.26 $383.46 $362.18 $343.73 $359.77 $384.30 $383.91
Silver<F2>
(per oz.)....... 20.63 6.14 4.82 4.04 3.94 4.30 5.29 5.10
Lead<F3>
(per lb.)....... 0.41 0.18 0.37 0.25 0.25 0.18 0.22 0.28
Zinc<F4>
(per lb.)....... 0.34 0.36 0.69 0.51 0.56 0.44 0.44 0.48
<FN>
<F1> London Final.
<F2> Handy & Harman.
<F3> London Metals Exchange -- Cash.
<F4> London Metals Exchange -- Special High Grade -- Cash.
</FN>
/TABLE
<PAGE>
On August 29, 1995, the closing prices of these met-
als were: gold -- $383.00 per oz.; silver -- $5.57 per oz.;
lead -- $0.28 per lb.; and zinc -- $0.46 per lb. For more cur-
rent information regarding metals prices, reference is made to
the Prospectus Supplement.
VOLATILITY OF METALS PRODUCTION
The Company's future gold production will be depen-
dent upon the Company's success in developing new reserves,
including the continued development of the Rosebud gold project
mine as well as exploration efforts at the Grouse Creek, La
Choya and the American Girl gold mines. See "-- Project De-
velopment Risks" and "-- Exploration." The Company's future
silver production will be dependent upon the Company's success
in developing new reserves, including the continued development
of the Lucky Friday Gold Hunter project and the Greens Creek
mine. If metals prices decline, the Company could determine
that it is not economically feasible to continue development of
a project or continue commercial production at some of its
properties. See "-- Metal Price Volatility."
Although the Company's gold production increased ap-
proximately 32,000 ounces from 95,907 ounces in 1993 to 127,878
ounces in 1994, resulting principally from the commencement of
operations at the La Choya and Grouse Creek mines in February
and December 1994, respectively, the Company's silver, lead and
zinc production has declined recently. This decline is due
primarily to the suspension of operations at the Greens Creek
and Lucky Friday mines in April 1993 and August 1994, respec-
tively. The Lucky Friday mine resumed operations in December
1994, and, the Company and its joint venture partner, Kennecott
Minerals, have agreed to redevelop the Greens Creek mine, with
commercial production expected to recommence in early 1997. If
metals prices decline, however, the Company could determine
that it is not economically feasible to continue development of
a project or continue commercial production at some of its
properties. See "-- Metal Price Volatility."
PROJECT DEVELOPMENT RISKS
The Company from time to time engages in the develop-
ment of new ore bodies both at newly acquired properties and
presently existing mining operations (collectively "Development
Projects"). The Company's ability to sustain or increase its
present level of metals production is dependent in part on the
successful development of such new ore bodies and/or expansion
of existing mining operations. The economic feasibility of any
-8-<PAGE>
individual Development Project and all such projects collec-
tively is based upon, among other things, estimates of re-
serves, metallurgical recoveries, and capital and operating
costs of such Development Projects, and future metal prices.
Development Projects are also subject to the successful com-
pletion of final feasibility studies, issuance of necessary
permits and receipt of adequate financing.
Development Projects may have no operating history
upon which to base estimates of future operating costs and cap-
ital requirements. Particularly for Development Projects,
estimates of reserves, metal recoveries, and cash operating
costs are to a large extent based upon the interpretation of
geologic data obtained from drill holes and other sampling
techniques and feasibility studies which derive estimates of
cash operating costs based upon anticipated tonnage and grades
of ore to be mined and processed, the configuration of the ore
body, expected recovery rates of metals from the ore, compar-
able facility and equipment costs, anticipated climate condi-
tions and other factors. As a result, it is possible that ac-
tual cash operating costs and economic returns of any and all
Development Projects may materially differ from the costs and
returns currently estimated.
The Company's current development projects include
the Rosebud project, the Gold Hunter project located adjacent
to the Company's Lucky Friday mine, the Greens Creek mine and
the American Girl gold mine related to the Oro Cruz gold pro-
ject. Development and construction cost requirements to bring
the Rosebud project into commercial production are estimated to
be in the $45.0-$55.0 million range; $6.0-$7.0 million in 1995,
$38.0-$45.0 million in 1996, and $1.0-$3.0 million in 1997.
The timing and amount of development and construction costs at
the Rosebud project are dependent upon the Company receiving
certain required regulatory approvals from the federal govern-
ment. The Company estimates development and construction costs
of $18.0 million; $2.0 million in 1995, $3.5 million in 1996,
and $12.5 for 1997 through 1999 for the Gold Hunter project,
and $26.0 million; $13.0 in 1995, and $13.0 million in 1996,
for the Company's 29.7% share of the development expenditures
at the Greens Creek mine. The Company's 47% share of the
development costs at the American Girl gold mine related to the
Oro Cruz project is currently estimated at $3.8 million in
1995, $0.5 million in 1996 and $0.2 million in 1997. The Com-
pany's estimated capital expenditures are based upon currently
available data and could increase or decrease depending upon a
number of factors. One such factor is that construction
activities for certain Development Projects may not commence
until the Company has secured additional financing and/or envi-
ronmental approvals. If capital expenditures exceed current
-9-<PAGE>
estimates, secondary financing may be required. Moreover,
there can be no assurance that such additional or secondary
financing will be available. The commencement of construction
activities at such Development Projects also depends on the
receipt of all necessary permits and regulatory approvals.
There can be no assurance, however, that all of the necessary
permits and regulatory approvals required for such Development
Projects will be issued in the time frame contemplated by the
Company. Should the Company incur project development and con-
struction costs as estimated, the Company anticipates that it
will fund a substantial portion of its currently estimated cap-
ital requirements for 1995 through 1997 with operating cash
flow and borrowings under its credit facility. The Company is
also currently evaluating other financing options including the
issuance of debt or equity and certain project financing alter-
natives. There can be no assurance that the Company will be
able to obtain the necessary financing, or, if the necessary
financing is obtained, that it will be obtained on favorable
terms.
EXPLORATION
Mineral exploration, particularly for gold and sil-
ver, is highly speculative in nature, involves many risks and
frequently is nonproductive. For 1995, the Company has bud-
geted exploration expenditures of approximately $6.7 million.
There can be no assurance that the Company's mineral explora-
tion efforts will be successful. Once mineralization is dis-
covered, it may take a number of years from the initial phases
of drilling until production is possible, during which time the
economic feasibility of production may change. Substantial
expenditures are required to establish ore reserves through
drilling to determine metallurgical processes to extract the
metals from the ore, and, in the case of new properties, to
construct mining and processing facilities. As a result of
these uncertainties, no assurance can be given that the Com-
pany's exploration programs will result in the expansion or
replacement of existing reserves that are being depleted by
current production. Should the Company incur exploration costs
as budgeted, the Company anticipates that it will fund a sub-
stantial portion of its currently estimated capital require-
ments for 1995 through 1997 with operating cash flow and
borrowings under its credit facility. The Company is also
currently evaluating other financing options including the
issuance of debt or equity and certain project financing al-
ternatives. There can be no assurance that the Company will be
able to obtain the necessary financing, or, if the necessary
financing is obtained, that it will be obtained on favorable
terms.
-10-<PAGE>
RESERVES
The ore reserve figures presented or incorporated by
reference in this Prospectus and accompanying Prospectus Sup-
plement are, in large part, estimates made by the Company's
technical personnel, and no assurance can be given that the
indicated level of recovery of these metals will be realized.
Reserves estimated for properties that have not yet commenced
production may require revision based on actual production ex-
perience. Market price fluctuations of the various metals
mined by the Company, as well as increased production costs or
reduced recovery rates, may render ore reserves containing
relatively lower grades of mineralization uneconomic and may
ultimately result in a restatement of reserves. Moreover,
short-term operating factors relating to the ore reserves, such
as the need for sequential development of ore bodies and the
processing of new or different ore grades, may adversely affect
the Company's profitability in any particular accounting pe-
riod.
The metal prices used to determine mineral reserves
at a particular mine are typically set by the company managing
the mine. These metal prices may vary, depending on each com-
pany's assessment of metal prices over the near term and other
factors that such company believes relevant. Hecla sets metal
prices for its mineral reserve calculations, which approximate
current market prices, but these metal prices may vary from
current market prices based on a number of factors likely to
influence metal prices over the near term. The Company's es-
timates of proven and probable reserves at December 31, 1994
for the properties it operates are based on a gold price of
$395 per ounce, a silver price of $5.60 per ounce, a zinc price
of $0.46 per pound and a lead price of $0.28 per pound. Proven
and probable reserves at the American Girl mine at December 31,
1994, which are calculated by the mine manager, are based upon
a gold price of $400 per ounce. Proven and probable reserves
at December 31, 1994 at the Greens Creek mine, which are cal-
culated by the mine manager, are based upon a gold price of
$350 per ounce, a silver price of $4.70 per ounce, a zinc price
of $0.57 per pound, and a lead price of $0.28 per pound.
Declines in the market price of gold may also render
ore reserves containing relatively lower grades of gold min-
eralization uneconomic to exploit unless the utilization of
forward sales contracts or other hedging techniques is suffi-
cient to offset the effects of a drop in the market price of
the gold expected to be mined from such reserves. If the Com-
pany's realized price per ounce of gold, including hedging ben-
efits, were to decline substantially below the levels set for
calculation of reserves for an extended period, there could be
-11-<PAGE>
material delays in the development of new projects, increased
net losses, reduced cash flow, reductions in reserves and asset
write-downs.
In February 1995, the Company completed operations
and commenced reclamation and closure efforts at its Republic
Mine located in the Republic Mining District near Republic,
Washington. The Company made such determination when the eco-
nomic ore body at Republic was depleted. In the fourth quarter
of 1994, based on its periodic reviews of the status of various
mining properties, the Company recognized a $7.2 million write-
down of property, plant, equipment and supplies inventory at
the Republic Mine. See Note 5 to Consolidated Financial
Statements in the Company's Form 10-K for the year ended Decem-
ber 31, 1994, as amended by the Company's Form 10-K/A (Amend-
ment No. 1), incorporated herein by reference. See "Informa-
tion Incorporated by Reference."
In March 1995, the Financial Accounting Standards
Board Issued Statement of Financial Accounting Standards No.
121 ("SFAS #121") - "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of".
This statement, which is effective for periods beginning after
December 15, 1995, establishes new accounting standards for,
among other things, the impairment of tangible long-lived as-
sets. The standard requires a company to review the recover-
ability of its assets by estimating the future undiscounted
cash flows expected to result from the use and eventual dispo-
sition of the asset. It is the opinion of the Company's man-
agement that the adoption of SFAS #121 will not have a material
effect on the consolidated results of operations or financial
condition of the Company.
COMPETITION FOR PROPERTIES
Because mines have limited lives based on proven ore
reserves, the Company is continually seeking to replace and
expand its reserves. The Company encounters strong competition
from other mining companies in connection with the acquisition
of properties producing or capable of producing gold, silver,
lead, zinc and industrial minerals. As a result of this com-
petition, some of which is with companies with greater finan-
cial resources than the Company, the Company may be unable to
acquire attractive mining properties on terms it considers ac-
ceptable. In addition, there are a number of uncertainties
inherent in any program relating to the location of economic
ore reserves, the development of appropriate metallurgical pro-
cesses, the receipt of necessary governmental permits and the
construction of mining and processing facilities. Accordingly,
-12-<PAGE>
there can be no assurance that the Company's programs will
yield new reserves to replace and expand current reserves.
JOINT VENTURE ARRANGEMENTS
The Grouse Creek gold mine, the Greens Creek mine,
the American Girl gold mine (including the Oro Cruz gold proj-
ect) are operated through joint ventures. The Company owns an
undivided interest in the assets of the ventures. Under the
joint venture agreements, the joint venture participants, in-
cluding the Company, are entitled to indemnification from the
other joint venture participants and are severally liable only
for the liabilities of the joint venturers in proportion to
their interest therein. If a joint venture participant de-
faults on its obligations under the terms of a joint venture
agreement (including as a result of insolvency), the Company
could incur losses in excess of its pro rata share of the joint
venture. In the event any joint venture participant so de-
faults, each agreement provides certain rights and remedies to
the remaining joint venture participants. These include the
right to force a dilution of the percentage interest of the
defaulting participant and the right to utilize the proceeds
from the sale of the defaulting parties' share of products
from, or its joint venture interest in the joint venture prop-
erties to satisfy the obligations of the defaulting partici-
pant. Based on the information available to the Company, the
Company has no reason to believe that any of its joint venture
participants in the above-described projects will be unable to
meet its financial obligations under the terms of the respec-
tive joint venture agreements.
The Company currently estimates its 29.7% share of
development and construction costs at the Greens Creek mine to
be $13.0 million in 1995 and $13.0 million in 1996. The Com-
pany's 47% share of development costs at the American Girl gold
mine related to the Oro Cruz gold project is currently esti-
mated at $3.8 million in 1995, $0.5 million in 1996, and $0.2
million in 1997. Development costs at the Grouse Creek gold
mine are complete and the Company intends to fund its 80% share
of future capital requirements, which are estimated at $5.3
million in 1995. The Company's estimates of its development
costs and capital expenditures assume that its joint venture
participants will not default in their obligations to contrib-
ute their respective portions of such costs and expenditures.
If there is such a default, there can be no assurance that the
Company's financial resources will be sufficient to achieve
planned levels of expenditures at the joint ventures. Gener-
ally, the manager for a particular project controls day-to-day
operating decisions and most other major decisions for the pro-
ject. Disagreement with a joint venture participant as to the
-13-<PAGE>
major decisions affecting a project's operations may have an
adverse impact on the project. Should the Company incur joint
venture development and construction costs as estimated, the
Company anticipates that it will fund a substantial portion of
its currently estimated capital requirements for 1995 through
1997 with operating cash flow and borrowings under its credit
facility. The Company is also currently evaluating other
financing options including the issuance of debt or equity and
certain project financing alternatives. There can be no assur-
ance that the Company will be able to obtain the necessary
financing, or, if the necessary financing is obtained, that it
will be obtained on favorable terms.
REGULATION OF MINING ACTIVITY
The mining operations of the Company are subject to
inspection and regulation by the Mine Safety and Health Admin-
istration of the Department of Labor ("MSHA") under provisions
of the Federal Mine Safety and Health Act of 1977. It is the
Company's policy to comply with the directives and regulations
of MSHA. In addition, the Company takes such necessary actions
as, in its judgment, are required to provide for the safety and
health of its employees. MSHA directives have had no material
adverse impact on the Company's results of operations or finan-
cial condition, and the Company believes that it is substan-
tially in compliance with the regulations promulgated by MSHA.
All of the Company's exploration, development, and
production activities in the United States, Mexico, and Canada
are subject to regulation under one or more of the various en-
vironmental laws. These laws address emissions to the air,
discharges to water, management of wastes, management of haz-
ardous substances, protection of natural resources, protection
of antiquities and reclamation of lands which are disturbed.
The Company believes that it is in substantial compliance with
applicable environmental regulations. Many of the regulations
also require permits to be obtained for the Company's activi-
ties; these permits normally are subject to public review pro-
cesses resulting in public approval of the activity. While
these laws and regulations govern how the Company conducts many
aspects of its business, management of the Company does not
believe that they have a material adverse effect on its results
of operations or financial condition at this time. The Com-
pany's projects are evaluated considering the cost and impact
of environmental regulation on the proposed activity. New laws
and regulations are evaluated as they develop to determine the
impact on, and changes necessary to, the Company's operations.
It is possible that future changes in these laws or regulations
could have a significant impact on some portion of the Com-
pany's business, causing those activities to be economically
-14-<PAGE>
reevaluated at that time. The Company believes that adequate
provision has been made for disposal of mine waste and mill
tailings at all of its operating and nonoperating properties in
a manner which complies with current federal and state envi-
ronmental requirements.
Environmental laws and regulation may also have an
indirect impact on the Company, such as increased cost for
electricity due to acid rain provisions of the Clean Air Act
Amendments of 1990. Charges by smelters to which the Company
sells its metallic concentrates and products have substantially
increased over the past several years because of requirements
that smelters meet revised environmental quality standards.
The Company has no control over the smelters' operations or
their compliance with environmental laws and regulations. If
the smelting capacity of the United States is significantly
reduced from its present level because of environmental re-
quirements or otherwise, it is possible that the Company's op-
erations could be adversely affected.
The Company is also subject to regulations under (i)
the Comprehensive Environmental Response, Compensation and Li-
ability Act of 1980 ("CERCLA" or "Superfund") which regulates
and establishes liability for the release of hazardous sub-
stances, and (ii) the Endangered Species Act ("ESA") which
identifies endangered species of plants and animals and regu-
lates activities to protect these species and their habitats.
Revisions to CERCLA and ESA are being considered by Congress;
the impact on the Company of these revisions is not clear at
this time.
PENDING LEGISLATION
During the past three years, the U.S. Congress con-
sidered a number of proposed amendments to the General Mining
Law of 1872, as amended (the "General Mining Law"), which gov-
erns mining claims and related activities on federal lands. In
1992, a holding fee of $100 per claim was imposed upon unpat-
ented mining claims located on federal lands. In October 1994,
a one year moratorium on processing of new patent applications
was approved. In addition, a variety of legislation is now
pending before the United States Congress to further amend the
General Mining Law. The proposed legislation would, among
other things, change the current patenting procedures, impose
royalties, and enact new reclamation, environmental controls
and restoration requirements. The royalty proposals range from
a 2% royalty on "net profits" from mining claims to an 8% roy-
alty on the modified gross income/net smelter returns. The
-15-<PAGE>
extent of any such changes is not presently known and the po-
tential impact on the Company as a result of congressional ac-
tion is difficult to predict. Although a majority of the Com-
pany's existing mining operations occur on private or patented
property, the proposed changes to the General Mining Law could
adversely affect the Company's ability to economically develop
mineral resources on federal lands. Approximately 46% of the
proven and probable gold reserves and approximately 21% of the
proven and probable silver reserves located at the Grouse Creek
project are located on fully patented mining claims. The bal-
ance of such proven and probable mineral reserves are located
within mineral claims for which the Company has applied for
patents and has received a first half of Mineral Entry Final
Certificate. Upon the determination of the mineral character
of these claims by a Federal Mine Examiner, the Company be-
lieves patents will be issued to the Company covering these
claims. Although there can be no assurance as to the ultimate
impact of legislative action on these claims or the Company's
ability to patent these claims under the existing General Min-
ing Law, the Company believes that the pending legislation to
amend the General Mining Law will not adversely affect the
ability of the Company to receive patents for the Grouse Creek
unpatented mining claims. The proven and probable mineral
reserves at the Oro Cruz and Rosebud properties are located on
claims that are unpatented.
ENVIRONMENTAL MATTERS AND LEGAL PROCEEDINGS
As further described in Note 8 of Notes to Consoli-
dated Financial Statements included in the Company's Form 10-K
for the year ended December 31, 1994, as amended by the Com-
pany's Form 10-K/A (Amendment No. 1), the Company has settled
the terms of its rights and liabilities with respect to the
Bunker Hill Superfund site near Kellogg, Idaho. As of December
31, 1994, the Company has accrued Superfund site remedial ac-
tion costs of $9.1 million based on current estimates of ag-
gregate costs. As also described in Note 8, the Company is a
defendant in a legal action filed in November 1990 by Star
Phoenix Mining Company ("Star Phoenix") and certain principals
of Star Phoenix, asserting that the Company breached the terms
of Star Phoenix's lease agreement for the Company's Star Morn-
ing Mine and that the Company interfered with certain contrac-
tual relationships of Star Phoenix relating to the Company's
1990 termination of such lease agreement. In June 1994, judg-
ment was entered by the Idaho State District Court against the
Company in the legal proceeding in the amount of $10.0 million
in compensatory damages and $10.0 million in punitive damages
based on a jury verdict rendered in the case in May 1994. The
Company's post-trial motions were denied by the District Court,
and the Company has appealed the judgment to the Idaho State
-16-<PAGE>
Supreme Court. Post-judgment interest will accrue during the
appeal period; the current interest rate is 10.875%. In order
to stay the ability of Star Phoenix to collect on the judgment
during the pending of the appeal, the Company posted an appeal
bond in the amount of $27.2 million representing 136% of the
District Court judgment. The Company pledged U.S. Treasury
Notes totaling $10.0 million as collateral for the $27.2 mil-
lion bond. The Company intends to vigorously pursue its appeal
to the Idaho Supreme Court and, it has been the Company's posi-
tion and at the current time it remains the Company's position
that it will not enter into a settlement with Star Phoenix for
any material amount. Although the ultimate outcome of the ap-
peal of the judgment is subject to the inherent uncertainties
of any legal proceeding, based on the Company's analysis of the
factual and legal issues associated with the proceeding before
the District Court and based upon the opinions of Hawley Trox-
ell Ennis & Hawley, the Company's special appellate counsel,
and Evans, Keane, the Company's trial counsel, as of the date
hereof, it is management's belief that the Company should ul-
timately prevail in this matter, although there can be no as-
surance of such an outcome.
Although there can be no assurance as to the ultimate
outcome of these matters and the proceedings disclosed above,
it is the opinion of the Company's management, based upon the
information available at this time, that, as of the date here-
of, the outcome of these matters, individually or in the
aggregate, will not have a material adverse effect on the re-
sults of operations and financial condition of the Company and
its subsidiaries.
TITLE TO PROPERTIES
The validity of unpatented mining claims, which con-
stitute a significant portion of the Company's undeveloped
property holdings in the United States, is often uncertain and
may be contested. Although the Company has attempted to ac-
quire satisfactory title to its undeveloped properties, the
Company, in accordance with mining industry practice, does not
generally obtain title opinions until a decision is made to
develop a property, with the attendant risk that some titles,
particularly titles to undeveloped properties, may be defec-
tive.
MINING RISKS AND INSURANCE
The business of mining is generally subject to a num-
ber of risks and hazards, including environmental hazards, in-
dustrial accidents, labor disputes, encountering unusual or
unexpected geologic formations, cave-ins, rockbursts, flooding
-17-<PAGE>
and periodic interruptions due to inclement or hazardous
weather conditions. Such risks could result in damage to, or
destruction of, mineral properties or producing facilities,
personal injury, environmental damage, delays in mining, mone-
tary losses and possible legal liability. Although the Company
maintains insurance within ranges of coverage consistent with
industry practice, no assurance can be given that such insur-
ance will be available at economically feasible premiums. In-
surance against environmental risks (including potential for
pollution or other hazards as a result of disposal waste prod-
ucts occurring from exploration and production) is not gener-
ally available to the Company or to other companies within the
industry. To the extent the Company is subject to environ-
mental liabilities, the payment of such liabilities would re-
duce the funds available to the Company. Should the Company be
unable to fund fully the cost of remedying an environmental
problem, the Company might be required to suspend operations or
enter into interim compliance measures pending completion of
the required remedy.
HEDGING ACTIVITIES
In the normal course of its business, the Company
uses forward sales commitments and commodity put and call op-
tion contracts to manage its exposure to fluctuations in the
prices of certain metals which it produces. Contract positions
are designed to ensure that the Company will receive a defined
minimum price for certain quantities of its production. Gains
and losses, and the related costs paid or premiums received,
for option contracts which hedge the sales prices of commodi-
ties are deferred and included in income as part of the hedged
transaction. Revenues from the aforementioned contracts are
recognized at the time contracts are closed out by either de-
livery of the underlying commodity or settlement of the net
position in cash. The Company is exposed to certain losses on
forward sales contracts, generally the amount by which the con-
tract price exceeds the spot price of a commodity, in the event
of nonperformance by the counterparties to these agreements.
None of the aforementioned activities have been entered into
for speculative purposes as of December 31, 1994 and June 30,
1995.
-18-<PAGE>
<TABLE>
At December 31, 1994 and June 30, 1995 the Company's
significant metal contract hedging positions were as follows:
<CAPTION>
DECEMBER 31, AVERAGE CONTRACT ESTIMATED ASSET (DEFERRED REV-
1994 PRICE AMOUNT FAIR VALUE ENUE) CARRYING VALUE
(THOUSANDS) (THOUSANDS)
<S> <C> <C> <C> <C>
Forward Sales:
Gold $375/oz 3,500 ozs <F1> --
Lead $684/MTon 3,600 MTons <F1> --
Purchased gold
put options $390/oz 102,240 ozs $621 $1,527
Sold gold call
options $464/oz 102,240 ozs ($599) ($1,527)
AVERAGE CONTRACT ESTIMATED ASSET (DEFERRED REV-
JUNE 30, 1995 PRICE AMOUNT FAIR VALUE ENUE) CARRYING VALUE
(THOUSANDS) (THOUSANDS)
Forward Sales:
Gold $407/oz 22,500 ozs $263 --
Lead $684/MTon 3,600 MTons $152 --
Purchased gold $389/oz 76,680 ozs $549 $1,175
put options
Sold gold call $465/oz 76,680 ozs ($168) ($1,175)
options
___________
<FN>
<F1> It was not practicable for the Company to obtain or
calculate the estimated fair value of these contracts.
</FN>
/TABLE
<PAGE>
SMELTING CAPACITY
The Company sells substantially all of its metallic
concentrates to smelters that are subject to extensive regu-
lations, including environmental protection laws. The Company
has no control over the smelters' operations or their compli-
ance with environmental laws and regulations. If the smelting
capacity available to the Company was significantly further
reduced because of environmental requirements or otherwise, it
is possible that the Company's operations could be adversely
affected.
FOREIGN OPERATIONS
The Company's La Choya gold mine is located in So-
nora, Mexico and the Company's K-T Mexico clay slurry plant is
located in Monterey, Mexico. The Company also has exploration
projects and mining investments in Mexico, Canada and Bolivia.
Such projects and investments could be adversely affected by
exchange controls, currency fluctuations, taxation and laws or
policies of either foreign countries or the United States af-
fecting foreign trade, investment and taxation, which, in turn,
could affect the Company's current or future foreign opera-
tions.
USE OF PROCEEDS
Hecla intends to apply the net proceeds from the sale
of the Securities to its general funds to be used for general
corporate purposes, including development of its metals and in-
dustrial minerals properties. The Company in the ordinary
course of its business regularly reviews the potential acqui-
sition of precious metal and industrial mineral properties and
companies that own precious metal and industrial mineral prop-
erties. Any specific allocations of the proceeds to a partic-
ular purpose that has been made at the date of any Prospectus
Supplement will be described therein. Pending the application
of the net proceeds, the Company expects to invest such pro-
ceeds in short-term, interest-bearing instruments or other
investment-grade securities.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges was
inadequate to cover fixed charges by $1.0 million in 1990,
$18.2 million in 1991, $57.6 million in 1992, $22.3 million in
1993, $26.0 million in 1994, $6.0 million in the first six
months of 1994 and $0.5 million in the first six months of
1995. However, earnings for these periods reflect write-downs
-20-<PAGE>
and other non-cash charges of $30.9 million in 1990, $25.7 mil-
lion in 1991, $59.0 million in 1992, $19.1 million in 1993,
$34.0 million in 1994, $7.3 million in the first six months of
1994 and $12.0 million in the first six months of 1995. For
purposes of computing the ratio of earnings to fixed charges,
earnings consist of earnings before the cumulative effect of
accounting changes, income taxes and fixed charges, adjusted to
exclude capitalized interest. Fixed charges consist of total
interest, whether expensed or capitalized, dividends on pre-
ferred stock, amortization of debt expense and one-third of
rents, which is deemed representative of an interest factor.
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets
forth certain general terms and provisions of the Debt Securi-
ties to which any Prospectus Supplement may relate ("Offered
Debt Securities"). The particular terms of the Offered Debt
Securities and the extent to which such general provisions may
apply will be described in a Prospectus Supplement relating to
such Offered Debt Securities.
The Debt Securities will be general unsecured obliga-
tions of Hecla and will constitute either senior debt securi-
ties or subordinated debt securities. In the case of Debt
Securities that will be senior debt securities ("Senior Debt
Securities"), the Debt Securities will be issued under an In-
denture (the "Senior Indenture") to be entered into between
Hecla and the party to be named as trustee in a Prospectus Sup-
plement, as trustee under the Senior Indenture. In the case of
Debt Securities that will be subordinated debt securities
("Subordinated Debt Securities"), the Debt Securities will be
issued under an Indenture (the "Subordinated Indenture") to be
entered into between Hecla and the party to be named as trustee
in a Prospectus Supplement, as trustee under the Subordinated
Indenture. The Senior Indenture and the Subordinated Indenture
are sometimes hereinafter referred to individually as an "In-
denture" and collectively as the "Indentures". Copies of the
forms of the Indentures have been filed as exhibits to the Reg-
istration Statement. The party who will serve as trustee under
each of the Indentures (and any successor thereto under each
Indenture) and who will be named in a Prospectus Supplement
relating to Offered Debt Securities, is referred to herein as
the "Trustee". The forms of the Senior Indenture and the Sub-
ordinated Indenture are filed as exhibits to the registration
statement of which this Prospectus is a part. See "Available
Information". The Indentures are subject to and governed by
the Trust Indenture Act of 1939, as amended. The statements
under this caption relating to the Debt Securities and the In-
dentures are summaries only and do not purport to be complete
-21-<PAGE>
although all material terms of the Debt Securities and the
Indentures will be described herein or in a Prospectus Sup-
plement. Such summaries make use of terms defined in the In-
dentures. Wherever such terms are used herein or particular
provisions of the Indentures are referred to, such terms or
provisions, as the case may be, are incorporated by reference
as part of the statements made herein, and such statements are
qualified in their entirety by such reference. Certain defined
terms in the Indentures are capitalized herein. The italicized
references below apply to the section numbers in each of the
Indentures, unless otherwise indicated.
PROVISIONS APPLICABLE TO BOTH SENIOR
AND SUBORDINATED DEBT SECURITIES
General. The Indentures do not limit the aggregate
principal amount of Debt Securities which can be issued there-
under and provide that Debt Securities may be issued from time
to time thereunder in one or more series, each in an aggregate
principal amount authorized by Hecla prior to issuance. The
Debt Securities may be issued at various times with different
maturity dates and different principal repayment provisions,
may bear interest at different rates, may be payable in cur-
rencies other than United States dollars, in composite curren-
cies, in currency units or in amounts determined by reference
to the price, rate or value of one or more specified commodi-
ties, currencies or indices, and may otherwise vary, all as
provided in the Indentures. The Company has from time to time
entered into, and will in the future enter into, credit agree-
ments to fund its operations. Such credit agreements may be
secured by the assets of the Company, secured by the assets of
the Company's subsidiaries or guaranteed by the Company's sub-
sidiaries. To the extent that such credit agreements are so
secured or guaranteed, the lenders under such credit agreements
will have priority over the Holders of the Debt Securities with
respect to the assets of the Company or its subsidiaries which
secure such credit agreements. In addition, there are no limi-
tations on (or current intentions to limit) the amount of debt
that will rank senior to the Offered Debt Securities. As of
August 30, 1995, there was $28.0 million of Company indebted-
ness that would rank senior to any Offered Debt Securities.
Unless otherwise indicated in a Prospectus Supple-
ment, the Debt Securities will not benefit from any covenant or
other provision that would afford Holders of such Debt Securi-
ties special protection in the event of a highly leveraged
transaction involving Hecla.
Reference is made to the applicable Prospectus Sup-
plement for the following terms of the Offered Debt Securities:
-22-<PAGE>
(i) the title and aggregate principal amount of the Offered
Debt Securities; (ii) the date or dates on which the Offered
Debt Securities will mature; (iii) the rate or rates (which may
be fixed or floating) per annum, if any, at which the Offered
Debt Securities will bear interest or the method of determining
such rate or rates; (iv) the date or dates from which such in-
terest, if any, will accrue and the date or dates at which such
interest, if any, will be payable; (v) the terms for redemption
or early payment, if any, including any mandatory or optional
sinking fund or analogous provision; (vi) the terms for con-
version or exchange, if any, of the Offered Debt Securities;
(vii) whether such Offered Debt Securities will be issued in
fully registered form or in bearer form or any combination
thereof; (viii) whether such Offered Debt Securities will be
issued in the form of one or more global securities and whether
such global securities are to be issuable in temporary global
form or permanent global form; (ix) information with respect to
book-entry procedures, if any; (x) the currency, currencies or
currency unit or units in which such Offered Debt Securities
will be denominated and in which the principal of, and premium
and interest, if any, on such Offered Debt Securities will be
payable; (xi) whether, and the terms and conditions on which,
Hecla or a Holder may elect that, or the other circumstances
under which, payment of principal of, or premium or interest,
if any, on such Offered Debt Securities is to be made in a cur-
rency or currencies or currency unit or units other than that
in which such Offered Debt Securities are denominated; (xii)
any index or formula to be used to determine the amount of pay-
ments of principal of (and premium, if any) and interest on
such Offered Debt Securities, and any commodities, currencies,
currency units or indices, or value, rate or price, relevant to
such determination; and (xiii) any other specific terms of the
Offered Debt Securities. (Section 301). Reference is also
made to the applicable Prospectus Supplement for information
with respect to (x) the classification of the Offered Debt Se-
curities as Senior Debt Securities or Subordinated Debt Securi-
ties, (y) the price (expressed as a percentage of the aggregate
principal amount of the Offered Debt Securities) at which the
Offered Debt Securities will be issued, if other than 100 per-
cent, and (z) any additional covenants that may be included in
the terms of the Offered Debt Securities.
No service charge will be made for any registration
of transfer or exchange of the Debt Securities, but Hecla may
require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. (Section
305).
Hecla currently conducts substantial operations
through subsidiaries, and the Holders of Debt Securities will
-23--<PAGE>
have a junior position to any claims of creditors and any pre-
ferred stockholders of the Company's subsidiaries. Claims of
creditors of such subsidiaries, including trade creditors, se-
cured creditors, taxing authorities and creditors holding guar-
antees, and claims of holders of any preferred stock will gen-
erally have priority as to the assets of such subsidiaries over
the claims and equity interest of the Company and, thereby in-
directly, the holders of indebtedness of the Company, including
the Debt Securities.
Offered Debt Securities may be sold at a discount
(which may be substantial) below their stated principal amount
bearing no interest or interest at a rate which at the time of
issuance is below market rates. Any material United States
federal income tax consequences and other special consider-
ations applicable thereto will be described in the Prospectus
Supplement relating to any such Offered Debt Securities.
If any of the Offered Debt Securities are sold for
any foreign currency or currency unit or if the principal of,
or premium or interest, if any, on any of the Offered Debt Se-
curities is payable in any foreign currency or currency unit,
the restrictions, elections, tax consequences, specific terms
and other information with respect to such Offered Debt Secu-
rities and such foreign currency or currency unit will be set
forth in the Prospectus Supplement relating thereto.
Covenants. The Indentures require the Company to
covenant, among other things, with respect to each series of
Debt Securities: (i) to duly and punctually pay the principal
of (and premium, if any) and interest, if any, on such series
of Debt Securities; (ii) to maintain an office or agency in
each Place of Payment where Debt Securities may be presented or
surrendered for payment, transferred or exchanged and where
notices to the Company may be served; (iii) if the Company
shall act as its own Paying Agent for any series of Debt Secu-
rities, to segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal
(and premium, if any) or interest, if any, so becoming due;
(iv) to deliver to the Trustee, within 120 days after the end
of each fiscal year, a written statement to the effect that the
Company has fulfilled all its obligations under the Indenture
throughout such year; (v) to preserve its corporate existence;
(vi) to maintain its properties; and (vii) to pay its taxes and
other claims, in each case, as required by the Indentures.
(Article Ten). Any other covenants governing a particular se-
ries of Debt Securities will be set forth in an applicable Pro-
spectus Supplement and supplemental indenture.
-24-<PAGE>
Events of Default. Unless otherwise provided with
respect to any series of Debt Securities, the following are
Events of Default under each Indenture with respect to the Debt
Securities of such series issued under such Indenture: (a)
failure to pay principal of (or premium, if any, on) any Debt
Security of such series when due; (b) failure to pay any in-
terest on any Debt Security of such series when due, continued
for 30 days; (c) failure to deposit any mandatory sinking fund
payment, when due, in respect of the Debt Securities of such
series; (d) failure to perform any other covenant of Hecla in
the applicable Indenture (other than a covenant included in the
applicable Indenture for the benefit of a series of Debt Secu-
rities other than such series), continued for 60 days after
written notice as provided in the applicable Indenture; (e)
certain events of bankruptcy, insolvency or reorganization; and
(f) any other Event of Default as may be established with re-
spect to Debt Securities of such series (including, without
limitation, any Event of Default arising out of a default which
results in the acceleration of certain indebtedness or a de-
fault in the payment of any amounts due on certain indebted-
ness). (Sections 301 and 501). If an Event of Default with
respect to any outstanding series of Debt Securities occurs and
is continuing, either the Trustee or the Holders of at least
25% in principal amount of the outstanding Debt Securities of
such series (subject to the following sentence, in the case of
an Event of Default described in clause (a), (b), (c) or (f)
above) or at least 25% in principal amount of all outstanding
Debt Securities under the applicable Indenture (subject to the
following sentence, in the case of other Events of Default) may
declare the principal amount of all the Debt Securities of the
applicable series (or of all outstanding Debt Securities under
the applicable Indenture, as the case may be) to be due and
payable immediately. If an Event of Default described in
clause (e) shall occur, the principal amount of the Debt Secu-
rities of all series ipso facto shall become and be immediately
due and payable without any declaration or other act on the
part of the Trustee or any Holder. At any time after a decla-
ration of acceleration has been made, but before a judgment has
been obtained, the Holders of a majority in principal amount of
the outstanding Debt Securities of such series (or of all out-
standing Debt Securities under the applicable Indenture, as the
case may be) may, under certain circumstances, rescind and an-
nul such acceleration. (Section 502). Depending on the terms
of other indebtedness of Hecla outstanding from time to time,
an Event of Default under an Indenture may give rise to cross
defaults on such other indebtedness of Hecla. If there is an
Event of Default, there can no assurance that the Company will
be financially capable of satisfying its obligations under the
Indenture.
-25-<PAGE>
Each Indenture provides that the Trustee will, within
90 days after the occurrence of a default in respect of any
series of Debt Securities, give to the Holders of the Debt Se-
curities of such series notice of all uncured and unwaived de-
faults known to it; provided, however, that, except in the case
of a default in the payment of the principal of (or premium, if
any) or any interest on, or any sinking fund installment with
respect to, any Debt Securities of such series, the Trustee
will be protected in withholding such notice if it in good
faith determines that the withholding of such notice is in the
interest of the Holders of the Debt Securities of such series;
and provided, further, that such notice shall not be given un-
til at least 30 days after the occurrence of a default in the
performance, or breach, of any covenant or warranty of Hecla
under such Indenture other than for the payment of the princi-
pal of (or premium, if any) or any interest on, or any sinking
fund installment with respect to, any Debt Securities of such
series. For the purpose of this provision, "default" with re-
spect to Debt Securities of any series means any event which
is, or after notice or lapse of time, or both, would become, an
Event of Default with respect to the Debt Securities of such
series. (Section 602).
The Holders of a majority in principal amount of the
outstanding Debt Securities of any series (or, in certain
cases, all outstanding Debt Securities under the applicable
Indenture) have the right, subject to certain limitations, to
direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee with respect to the Debt Se-
curities of such series (or of all outstanding Debt Securities
under the applicable Indenture). (Section 512). Each Inden-
ture provides that in case an Event of Default shall occur and
be continuing with respect to the Debt Securities of any se-
ries, the Trustee shall exercise such of its rights and powers
under the applicable Indenture and use the same degree of care
and skill in their exercise as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs.
(Section 601). Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers
under either Indenture at the request of any of the Holders of
the Debt Securities unless they shall have offered to the
Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in com-
pliance with such request. (Section 603).
The Holders of a majority in principal amount of the
outstanding Debt Securities of any series (or, in certain
cases, all outstanding Debt Securities under the applicable
Indenture) may on behalf of the Holders of all Debt Securities
-26-<PAGE>
of such series (or of all outstanding Debt Securities under the
applicable Indenture) waive any past default under the appli-
cable Indenture, except a default in the payment of the prin-
cipal of (or premium, if any) or interest on any Debt Security
or in respect of a provision which under the applicable Inden-
ture cannot be modified or amended without the consent of the
Holder of each outstanding Debt Security affected. (Section
513). The Holders of a majority in principal amount of the
outstanding Debt Securities affected thereby may on behalf of
the Holders of all such Debt Securities waive compliance by
Hecla with certain restrictive provisions of the Indentures.
(Section 1008).
Hecla is required to furnish to the Trustee annually
a statement as to the performance by Hecla of certain of its
obligations under each Indenture and as to any default in such
performance. (Section 1007).
Modification. Modifications and amendments of each
Indenture may be made by Hecla and the Trustee with the consent
of the Holders of a majority in principal amount of the out-
standing Debt Securities under the applicable Indenture af-
fected thereby; provided, however, that no such modification or
amendment may, without the consent of the Holder of each out-
standing Debt Security affected thereby, (a) change the stated
maturity date of the principal of, or any installment of in-
terest on, any Debt Security, (b) reduce the principal amount
of, or the premium (if any) or interest on, any Debt Security,
(c) change the Place of Payment or coin, currency, currencies
(including composite currencies), or currency unit or units of
payment of principal of, or premium (if any) or interest on,
any Debt Security, (d) impair the right to institute suit for
the enforcement of any payment on or with respect to any Debt
Security or (e) reduce the percentage in principal amount of
outstanding Debt Securities the consent of whose Holders is
required for modification or amendment of the Indentures or for
waiver of compliance with certain provisions of the Indentures
or for waiver of certain defaults. (Section 902).
Each Indenture provides that Hecla and the Trustee
may, without the consent of any Holders of Debt Securities,
enter into supplemental indentures for the purposes, among
other things, of adding to Hecla's covenants, securing the Debt
Securities, adding additional Events of Default, establishing
the form or terms of Debt Securities or curing ambiguities or
inconsistencies in the applicable Indenture, provided such ac-
tion to cure ambiguities or inconsistencies shall not adversely
affect the interests of the Holders of the Debt Securities in
any material respect. (Section 901). The Indentures do not
-27-<PAGE>
provide any remedy or appraisal right for a minority holder and
no such right is required by the Trust Indenture Act.
Consolidation, Merger and Sale of Assets. Hecla,
without the consent of any Holders of outstanding Debt Securi-
ties, may consolidate with or merge into, or convey, transfer
or lease its assets substantially as an entirety, to any Per-
son, provided that the Person formed by such consolidation or
into which Hecla is merged or which acquires or leases the as-
sets of Hecla substantially as an entirety is a corporation,
partnership or trust organized under the laws of any United
States jurisdiction and assumes by supplemental indenture
Hecla's obligations on the Securities and under the Indentures,
that after giving effect to the transaction, no Event of De-
fault, and no event which, after notice or lapse of time or
both, would become an Event of Default, shall have occurred and
be continuing, and that certain other conditions are met. Upon
compliance with these provisions by a successor Person, Hecla
will (except in the case of a lease) be relieved of its obli-
gations under the Indentures and the Debt Securities. (Article
Eight).
Discharge and Defeasance. Hecla may terminate its
obligations under each Indenture with respect to Debt Securi-
ties of any series, other than its obligation to pay the prin-
cipal of (and premium, if any) and interest on such Debt Secu-
rities and certain other obligations, if it (i) irrevocably
deposits or causes to be irrevocably deposited with the Trustee
as trust funds money or U.S. Government Obligations maturing as
to principal and interest sufficient to pay the principal of,
any interest on, and any mandatory sinking funds in respect of,
all outstanding Debt Securities of such series on the stated
maturity of such payments or on any redemption date, (ii) has
delivered to the Trustee an opinion of counsel to the effect
that the Holders of Debt Securities of such series will not
recognize income, gain or loss for United States federal income
tax purposes as a result of such discharge and will be subject
to United States federal income tax on the same amount and in
the same manner and at the same time as would have been the
case if such discharge had not occurred, and (iii) complies
with any additional conditions specified to be applicable with
respect to the covenant defeasance of Debt Securities of such
series, and no Default or Event of Default with respect to the
Debt Securities of such issue shall have occurred and be con-
tinuing on the date of such deposit or, in so far as they re-
late to certain events of bankruptcy or insolvency, at any time
in the period ending on the 91st day after the date of such
deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period). (Sec-
tion 401).
-28-<PAGE>
The terms of any series of Debt Securities may also
provide for legal defeasance pursuant to each Indenture. In
such case, if Hecla (a) irrevocably deposits or causes to be
irrevocably deposited money or U.S. Government Obligations as
described above and complies with the other provisions de-
scribed above (except that the opinion referred to in clause
(ii) in the preceding paragraph must be based on a ruling by
the Internal Revenue Service or other change under applicable
federal income tax law), (b) makes a request to the Trustee to
be discharged from its obligations on the Debt Securities of
such series and (c) complies with any additional conditions
specified to be applicable with respect to legal defeasance of
Securities of such series, then Hecla shall be deemed to have
paid and discharged the entire indebtedness on all the out-
standing Debt Securities of such series and the obligations of
Hecla under the applicable Indenture and the Debt Securities of
such series to pay the principal of (and premium, if any) and
interest on the Debt Securities of such series shall cease,
terminate and be completely discharged, and the Holders thereof
shall thereafter be entitled only to payment out of the money
or U.S. Government Obligations deposited with the Trustee as
aforesaid, unless Hecla's obligations are revived and rein-
stated because the Trustee is unable to apply such trust fund
by reason of any legal proceeding, order or judgment. (Sec-
tions 403 and 404).
Form, Exchange, Registration and Transfer. Debt Se-
curities are issuable in definitive form as Registered Debt
Securities, as Bearer Debt Securities or both. Debt Securities
are also issuable in temporary or permanent global form. Un-
less otherwise indicated in an applicable Prospectus Supple-
ment, Bearer Debt Securities will have interest coupons at-
tached, and unless otherwise indicated in an applicable Pro-
spectus Supplement, Debt Securities (issued either as Bearer or
Registered Debt Securities) issued in temporary or permanent
global form will be issued without interest coupons attached.
(Sections 201 and 301).
Registered Debt Securities of any series will be ex-
changeable for other Registered Debt Securities of the same
series and of a like aggregate principal amount and tenor of
different authorized denominations. In addition, with respect
to any series of Bearer Debt Securities, at the option of the
Holder, subject to the terms of the applicable Indenture,
Bearer Debt Securities (with all unmatured coupons, except as
provided below, and all matured coupons in default) of such
series will be exchangeable into Registered Securities of the
same series of any authorized denominations and of a like ag-
gregate principal amount and tenor. Bearer Debt Securities
surrendered in exchange for Registered Debt Securities between
-29-<PAGE>
a Regular Record Date or a Special Record Date and the relevant
date for payment of interest shall be surrendered without the
coupon relating to such date for payment of interest, and in-
terest accrued as of such date will not be payable in respect
of the Registered Debt Security issued in exchange for such
Bearer Debt Security, but will be payable only to the Holder of
such coupon when due in accordance with the terms of the ap-
plicable Indenture. (Section 305).
In connection with its sale during the restricted
period (as defined below), no Bearer Debt Security (including a
Debt Security in permanent global form that is either a Bearer
Debt Security or exchangeable for Bearer Debt Securities) shall
be mailed or otherwise delivered to any location in the United
States (as defined under "-- Limitations on Issuance of Bearer
Debt Securities") and a Bearer Debt Security may be delivered
outside the United States in definitive form in connection with
its original issuance only if prior to delivery the Person en-
titled to receive such Bearer Debt Security furnishes written
certification, in the form required by the applicable Inden-
ture, to the effect that such Bearer Debt Security is owned by:
(a) a Person (purchasing for its own account) who is not a
United States Person (as defined under "-- Limitations on Is-
suance of Bearer Debt Securities"); (b) a United States Person
who (i) is a foreign branch of a United States financial in-
stitution purchasing for its own account or for resale or (ii)
acquired such Bearer Debt Security through the foreign branch
of a United States financial institution and who for purposes
of the certification holds such Bearer Debt Security through
such financial institution on the date of certification and, in
either case, such United States financial institution certifies
to Hecla or the distributor selling the Bearer Debt Security
within a reasonable time stating that it agrees to comply with
the requirements of Section 165(j)(3)(A), (B) or (C) of the
United States Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations thereunder, or (c) a United States
or foreign financial institution for purposes of resale within
the "restricted period" as defined in United States Treasury
Regulations Section 1.163-5(c)(2)(i)(D)(7). A financial in-
stitution described in clause (c) of the preceding sentence
(whether or not also described in clauses (a) and (b)) must
certify that it has not acquired the Bearer Debt Security for
purpose of resale, directly or indirectly, to a United States
person or to a person within the United States or its posses-
sions. In the case of a Bearer Debt Security in permanent glo-
bal form, such certification must be given in connection with
notation of a beneficial owner's interest therein in connection
with the original issuance of such Debt Security or upon ex-
change of a portion of a temporary global Security. (Section
-30-<PAGE>
303). See "-- Limitations on Issuance of Bearer Debt Securi-
ties".
Debt Securities may be presented for exchange as pro-
vided above, and Registered Debt Securities may be presented
for registration of transfer (with the form of transfer en-
dorsed thereon duly executed), at the office of the Security
Registrar or at the office of any transfer agent designated by
Hecla for such purpose with respect to any series of Debt Secu-
rities and referred to in an applicable Prospectus Supplement,
without a service charge and upon payment of any taxes and
other governmental charges as described in the applicable In-
denture. Such transfer or exchange will be effected upon the
Security Registrar or such transfer agent, as the case may be,
being satisfied with the documents of title and identity of the
Person making the request. Hecla has appointed the Trustee as
Security Registrar. (Section 305). If a Prospectus Supplement
refers to any transfer agents (in addition to the Security Reg-
istrar) initially designated by Hecla with respect to any se-
ries of Debt Securities, Hecla may at any time rescind the des-
ignation of any such transfer agent or approve a change in the
location through which any such transfer agent acts, except
that, if Debt Securities of a series are issuable solely as
Registered Debt Securities, Hecla will be required to maintain
a transfer agent in each Place of Payment for such series and,
if Debt Securities of a series are issuable as Bearer Debt Se-
curities, Hecla will be required to maintain (in addition to
the Security Registrar) a transfer agent in a Place of Payment
located outside the United States for Registered Securities of
such series. Hecla may at any time designate additional trans-
fer agents with respect to any series of Debt Securities.
(Section 1002).
In the event of any redemption in whole or in part,
Hecla shall not be required to (i) issue or register the trans-
fer of or exchange Debt Securities of any series during a pe-
riod beginning at the opening of business 15 days prior to the
selection of Debt Securities of that series for redemption and
ending on the close of business on (A) if Debt Securities of
the series are issuable only as Registered Debt Securities, the
day of mailing of the relevant notice of redemption and (B) if
Debt Securities of the series are issuable as Bearer Debt Secu-
rities, the day of the first publication of the relevant notice
of redemption except that, if Securities of the series are also
issuable as Registered Debt Securities and there is no publica-
tion, the day of mailing of the relevant notice of redemption;
(ii) register the transfer of or exchange any Registered Debt
Security, or portion thereof, called for redemption, except the
unredeemed portion of any Registered Debt Security being re-
deemed in part; or (iii) exchange any Bearer Debt Security
-31-<PAGE>
called for redemption, except to exchange such Bearer Debt Se-
curity for a Registered Debt Security of that series and like
tenor which is simultaneously surrendered for redemption.
(Section 305).
Payment and Paying Agents. Unless otherwise indi-
cated in an applicable Prospectus Supplement, payment of prin-
cipal of and any premium and interest on Bearer Debt Securities
will be payable, subject to any applicable laws and regulations
in the designated currency or currencies (including composite
currencies) or currency unit or units, at the offices of such
Paying Agents outside the United States as Hecla may designate
from time to time or, at the option of the Holder, by check or
by transfer to an account maintained by the payee with a bank
located outside the United States; provided, however, that the
written certification described above under "-- Form, Exchange,
Registration and Transfer" has been delivered prior to the
first actual payment of interest. (Sections 307 and 1002).
Unless otherwise indicated in an applicable Prospectus Supple-
ment, payment of interest on Bearer Debt Securities on any In-
terest Payment Date will be made only against surrender to the
Paying Agent of the coupon relating to such Interest Payment
Date. (Section 1001). No payment with respect to any Bearer
Debt Security will be made at any office or agency of Hecla in
the United States or by check mailed to any address in the
United States or by transfer to any account maintained with a
bank located in the United States, nor shall any payments be
made in respect of Bearer Debt Securities upon presentation to
Hecla or its designated Paying Agents within the United States.
Notwithstanding the foregoing, payments of principal of and any
premium and interest on Bearer Debt Securities denominated and
payable in U.S. dollars will be made at the office of Hecla's
Paying Agent in the Borough of Manhattan, The City of New York,
if (but only if) payment of the full amount thereof in U.S.
dollars at all offices or agencies outside the United States is
illegal or effectively precluded by exchange controls or other
similar restrictions. (Section 1002).
Unless otherwise indicated in an applicable Prospec-
tus Supplement, payment of principal of and any premium and
interest on Registered Debt Securities will be made in the des-
ignated currency or currencies (including composite currencies)
or currency unit or units at the office of such Paying Agent or
Paying Agents as Hecla may designate from time to time, except
that at the option of Hecla payment of any interest may be made
by check mailed to the address of the Person entitled thereto
as such address shall appear in the Security Register. Unless
otherwise indicated in an applicable Prospectus Supplement,
payment of any installment of interest on Registered Debt Secu-
rities will be made to the Person in whose name such Registered
-32-<PAGE>
Debt Security is registered at the close of business on the
Regular Record Date for such interest. (Sections 101 and 307).
Unless otherwise indicated in an applicable Prospec-
tus Supplement, the Corporate Trust Office of the Trustee in
the Borough of Manhattan, The City of New York will be desig-
nated as a Paying Agent for Hecla for payments with respect to
Debt Securities which are issuable solely as Registered Debt
Securities, and Hecla will maintain a Paying Agent outside the
United States for payments with respect to Debt Securities
(subject to limitations described above in the case of Bearer
Debt Securities) which are issuable solely as Bearer Debt Se-
curities, or as both Registered Debt Securities and Bearer Debt
Securities. Any Paying Agents outside the United States and
any other Paying Agents in the United States initially desig-
nated by Hecla for the Debt Securities will be named in an ap-
plicable Prospectus Supplement. Hecla may at any time desig-
nate additional Paying Agents or rescind the designation of any
Paying Agent or approve a change in the office through which
any Paying Agent acts, except that, if Debt Securities of a
series are issuable solely as Registered Debt Securities, Hecla
will be required to maintain a Paying Agent in each Place of
Payment for such series and, if Debt Securities of a series are
issuable as Bearer Securities, Hecla will be required to main-
tain (i) a Paying Agent in the Borough of Manhattan, The City
of New York for principal payments with respect to any Regis-
tered Debt Securities of the series (and for payments with re-
spect to Bearer Debt Securities of the series in the circum-
stances described above, but not otherwise), and (ii) a Paying
Agent in a Place of Payment located outside the United States
where Securities of such series and any coupons appertaining
thereto may be presented and surrendered for payment; provided
that if the Debt Securities of such series are listed on the
International Stock Exchange of the United Kingdom and the Re-
public of Ireland Limited, the Luxembourg Stock Exchange or any
other stock exchange located outside the United States and such
stock exchange shall so require, Hecla will maintain a Paying
Agent in London, Luxembourg or any other required city located
outside the United States, as the case may be, for the Securi-
ties of such series. (Section 1002).
All moneys paid by Hecla to a Paying Agent for the
payment of principal of and any premium or interest on any Debt
Security which remain unclaimed at the end of three years after
such principal, premium or interest shall have become due and
payable will (subject to applicable escheat laws) be repaid to
Hecla and the Holder of such Debt Security or any coupon will
thereafter look only to Hecla for payment thereof. (Section
1003).
-33-<PAGE>
Temporary Global Securities. If so specified in an
applicable Prospectus Supplement, all or any portion of the
Debt Securities of a series which are issuable as Bearer Debt
Securities will initially be represented by one or more tempo-
rary global Debt Securities, without interest coupons, to be
deposited with a common depositary in London for the Euroclear
System ("Euroclear") and CEDEL S.A. ("CEDEL") for credit to the
designated accounts. On and after the date determined as pro-
vided in any such temporary global Debt Security and described
in an applicable Prospectus Supplement, each such temporary
global Debt Security will be exchangeable for definitive Bearer
Debt Securities, definitive Registered Debt Securities or all
or a portion of a permanent global security, or any combination
thereof, as specified in an applicable Prospectus Supplement,
but, unless otherwise specified in an applicable Prospectus
Supplement, only upon written certification in the form and to
the effect described under "-- Form, Exchange, Registration and
Transfer". No Bearer Debt Security delivered in exchange for a
portion of a temporary global Security will be mailed or oth-
erwise delivered to any location in the United States in con-
nection with such exchange. (Section 304).
Unless otherwise specified in an applicable Prospec-
tus Supplement, interest in respect of any portion of a tempo-
rary global Debt Security payable in respect of an Interest
Payment Date occurring prior to the issuance of definitive Debt
Securities or a permanent global Debt Security will be paid to
each of Euroclear and CEDEL with respect to the portion of the
temporary global Debt Security held for its account. Each of
Euroclear and CEDEL will undertake in such circumstances to
credit such interest received by it in respect of a temporary
global Debt Security to the respective accounts for which it
holds such temporary global Debt Security only upon receipt in
each case of written certification in the form and to the ef-
fect described above under "-- Form, Exchange, Registration and
Transfer" as of the relevant Interest Payment Date regarding
the portion of such temporary global Debt Security on which
interest is to be so credited. (Section 304).
Permanent Global Securities. If any Debt Securities
of a series are issuable in permanent global form, the appli-
cable Prospectus Supplement will describe the circumstances, if
any, under which beneficial owners of interests in any such
permanent global Debt Securities may exchange such interests
for Debt Securities of such series and of like tenor and prin-
cipal amount in any authorized form and denomination. No
Bearer Debt Security delivered in exchange for a portion of a
permanent global Debt Security shall be mailed or otherwise
delivered to any location in the United States in connection
-34-<PAGE>
with such exchange. (Section 305). A Person having a benefi-
cial interest in a permanent global Debt Security will, except
with respect to payment of principal of and any premium and
interest on such permanent global Debt Security, be treated as
a Holder of such principal amount of Outstanding Debt Securi-
ties represented by such permanent global Debt Security as
shall be specified in a written statement of the Holder of such
permanent global Debt Security or, in the case of a permanent
global Debt Security in bearer form, of the operator of Euro-
clear or CEDEL which is provided to the Trustee by such Person.
Principal of and any premium and interest on a permanent global
Debt Security will be payable in the manner described in the
applicable Prospectus Supplement. (Section 203).
Book-Entry Debt Securities. Debt Securities of a
series may be issued in whole or in part in global form that
will be deposited with, or on behalf of, a depository identi-
fied in the applicable Prospectus Supplement. Global securi-
ties may be issued in either registered or bearer form and in
either temporary or permanent form (each a "Global Security").
Unless otherwise provided in the applicable Prospectus Supple-
ment, Debt Securities that are represented by a Global Security
will be issued in denominations of $1,000 and any integral mul-
tiple thereof, and will be issued in registered form only,
without coupons. Payments of principal of (and premium, if
any) and interest, if any, on Debt Securities represented by a
Global Security will be made by the Company to the applicable
Trustee and then by such Trustee to the depository.
The Company anticipates that any Global Securities
will be deposited with, or on behalf of, The Depository Trust
Company ("DTC"), New York, New York, that such Global Securi-
ties will be registered in the name of DTC's nominee, and that
the following provisions will apply to the depository arrange-
ments with respect to any such Global Securities. Additional
or differing terms of the depository arrangements will be de-
scribed in the applicable Prospectus Supplement.
So long as DTC or its nominee is the registered owner
of a Global Security, DTC or its nominee, as the case may be,
will be considered the sole holder of the Debt Securities rep-
resented by such Global Security for all purposes under the
applicable Indenture. Except as provided below, owners of ben-
eficial interests in a Global Security will not be entitled to
have Debt Securities represented by such Global Security regis-
tered in their names, will not receive or be entitled to re-
ceive physical delivery of Debt Securities in certificated form
and will not be considered the owners or holders thereof under
the applicable Indenture. The laws of some states require that
certain purchasers of securities take physical delivery of such
-35-<PAGE>
securities in certificated form; accordingly, such laws may
limit the transferability of beneficial interest in a Global
Security.
If (i) DTC is at any time unwilling or unable to con-
tinue as depository and a successor depository is not appointed
by the Company within 90 days following notice to the Company,
(ii) the Company determines, in its sole discretion, not to
have any Debt Securities represented by one or more Global Se-
curities, or (iii) an Event of Default under the applicable
Indenture has occurred and is continuing, then the Company will
issue individual Debt Securities in certificated form in ex-
change for beneficial interests in such Global Securities. In
any such instance, an owner of a beneficial interest in a Glo-
bal Security will be entitled to physical delivery of indi-
vidual Debt Securities in certificated form of like tenor and
rank, equal in principal amount to such beneficial interest and
to have such Debt Securities in certificated form registered in
its name. Unless otherwise provided in the Prospectus Supple-
ment, Debt Securities issued in certificated form will be is-
sued in denominations of $1,000 or any integral multiple
thereof, and will be issued in registered form only, without
coupons.
The following is based on information furnished by
DTC:
DTC will act as securities depository for the Debt
Securities. The Debt Securities will be issued as fully
registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One fully registered Debt
Security certificate is issued with respect to each $150
million of principal amount of the Debt Securities of a
series, and an additional certificate will be issued with
respect to any remaining principal amount of such series.
DTC is a limited-purpose trust company organized un-
der the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act
of 1934. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates
the settlement among Participants of securities transac-
tions, such as transfers and pledges, in deposited secu-
rities through electronic computerized book-entry changes
in Participants' accounts, thereby eliminating the need
for physical movement of securities certificates. Direct
-36-<PAGE>
Participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain
other organizations ("Direct Participants"). DTC is owned
by a number of its Direct Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc.
and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to others such
as securities brokers and dealers, banks and trust compa-
nies that clear through or maintain a custodial relation-
ship with a Direct Participant, either directly or indi-
rectly ("Indirect Participants"). The rules applicable to
DTC and its Participants are on file with the Commission.
Purchases of Debt Securities under the DTC system
must be made by or through Direct Participants, which will
receive a credit for the Debt Securities on DTC's records.
The ownership interest of each actual purchaser of each
Debt Security ("Beneficial Owner") is in turn recorded on
the Direct and Indirect Participants' records. A Benefi-
cial Owner does not receive written confirmation from DTC
of its purchaser, but such Beneficial Owner is expected to
receive a written confirmation providing details of the
transaction, as well as periodic statements of its hold-
ings, from the Direct or Indirect Participant through
which such Beneficial Owner entered into the transaction.
Transfers of ownership interests in Debt Securities are
accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners
do not receive certificates representing their ownership
interest in Debt Securities, except in the event that use
of the book-entry system for the Debt Securities is dis-
continued.
To facilitate subsequent transfers, the Debt Securi-
ties are registered in the name of DTC's partnership nom-
inee, Cede & Co. The deposit of the Debt Securities with
DTC and their registration in the name of Cede & Co. ef-
fects no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Debt Se-
curities; DTC records reflect only the identity of the
Direct Participants to whose accounts Debt Securities are
credited, which may or may not be the Beneficial Owners.
The Participants remain responsible for keeping account of
their holding on behalf of their customers.
Delivery of notices and other communications by DTC
to Direct Participants, by Direct Participants to Indirect
-37-<PAGE>
Participants, and by Direct Participants and Indirect Par-
ticipants to Beneficial Owners are governed by arrange-
ments among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If
less than all of the Securities within an issue are being
redeemed, DTC's practice is to determine by lot the amount
of the interest of each Direct Participant in such issue
to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with
respect to the Debt Securities. Under its usual proce-
dures, DTC mails a proxy (an "Omnibus Proxy") to the is-
suer as soon as possible after the record date. The Om-
nibus Proxy assigns Cede & Co.'s consenting or voting
rights to those Direct Participants to whose accounts the
Debt Securities are credited on the record date (identi-
fied on a list attached to the Omnibus Proxy).
Payment of principal (and premium, if any) and in-
terest, if any, on the Debt Securities will be made to
DTC. DTC's practice is to credit Direct Participants'
accounts on the payable date in accordance with their re-
spective holdings as shown on DTC's records unless DTC has
reason to believe that it will not receive payment on the
payable date. Payments by Participants to Beneficial Own-
ers will be governed by standing instructions and cus-
tomary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in
"street name" and will be the responsibility of such Par-
ticipant and not of DTC, the Paying Agent or the Company,
subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of principal (and
premium, if any) and interest to DTC is the responsibility
of the Company or the Paying Agent, disbursement of such
payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Par-
ticipants.
DTC may discontinue providing its services as securi-
ties depository with respect to the Debt Securities at any
time by giving reasonable notice to the Company or the
Paying Agent. Under such circumstances, in the event that
a successor securities depository is not appointed, Debt
Security certificates are required to be printed and de-
livered.
-38-<PAGE>
The information in this section concerning DTC and
DTC's book-entry system has been obtained from sources (in-
cluding DTC) that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
The Company may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor
securities depository). In that event, Debt Security cer-
tificates will be printed and delivered.
Unless stated otherwise in the Prospectus Supplement,
the underwriters or agents with respect to a series of Debt
Securities issued as Global Securities will be Direct Partici-
pants in DTC.
None of the Company, any underwriter or agent, the
applicable Trustee or any applicable Paying Agent will have any
responsibility or liability for any aspect of the records re-
lating to, or payments made on account of beneficial interests
in a Global Security, or for maintaining, supervising or re-
viewing any records relating to such beneficial interest.
Limitations on Issuance of Bearer Debt Securities.
In compliance with United States federal tax laws and regula-
tions, Bearer Debt Securities (including securities in perma-
nent global form that are either Bearer Debt Securities or ex-
changeable for Bearer Debt Securities) will not be offered or
sold during the restricted period (as defined in United States
Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)) (gener-
ally, the first 40 days after the closing date, and, with re-
spect to unsold allotments, until sold) within the United
States or to United States Persons (each as defined below)
other than to an office located outside the United States of a
United States financial institution (as defined in Section
1.165-12(c)(1)(v) of the United States Treasury Regulations),
purchasing for its own account or for resale or for the account
of certain customers, that provides a certificate stating that
it agrees to comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the Code and the United States
Treasury Regulations thereunder, or to certain other Persons
described in Section 1.163-5(c)(2)(i)(D)(1)(iii)(B) of the
United States Treasury Regulations. Moreover, such Bearer Debt
Securities will not be delivered in connection with their sale
during the restricted period within the United States. Any
underwriters, agents and dealers participating in the offering
of Bearer Debt Securities must covenant that they will not of-
fer or sell during the restricted period any Bearer Debt Secu-
rities within the United States or to United States Persons
-39-<PAGE>
(other than the persons described above) or deliver in connec-
tion with the sale of Bearer Debt Securities during the re-
stricted period any Bearer Debt Securities within the United
States and that they have in effect procedures reasonably de-
signed to ensure that their employees and agents who are di-
rectly engaged in selling the Bearer Debt Securities are aware
of the restrictions described above. No Bearer Debt Security
(other than a temporary global Bearer Debt Security) will be
delivered in connection with its original issuance nor will
interest be paid on any Bearer Debt Security until receipt by
Hecla of the written certification described above under "Form,
Exchange, Registration and Transfer". (Section 303). Each
Bearer Debt Security, other than a temporary global Bearer Debt
Security, will bear a legend to the following effect: "Any
United States person who holds this obligation will be subject
to limitations under the United States income tax laws, includ-
ing the limitations provided in Sections 165(j) and 1287(a) of
the Internal Revenue Code."
As used herein, "United States Person" means any cit-
izen or resident of the United States, any corporation, part-
nership or other entity created or organized in or under the
laws of the United States and any estate or trust the income of
which is subject to United States federal income taxation
regardless of its source, and "United States" means the United
States of America (including the states and the District of
Columbia) and its possessions.
Conversion Rights. The terms and conditions, if any,
on which Offered Debt Securities are convertible into Common
Stock of the Company will be set forth in the Prospectus Sup-
plement relating thereto. Such terms will include the con-
version price, the conversion period, provisions as to whether
conversion will be at the option of the holder or the Company,
the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption
of the Convertible Debt Securities, and such terms may include
provisions under which the number of shares of Common Stock to
be received by the holders of the Offered Debt Securities would
be calculated according to the market price of the Common Stock
as of a time stated in the Prospectus Supplement.
Meetings. The Indentures contain provisions for con-
vening meetings of the Holders of Debt Securities of a series.
A meeting may be called at any time by the Trustee, and also,
upon request, by Hecla or the Holders of at least 10% in prin-
cipal amount of the Outstanding Debt Securities of such series,
in any such case upon notice given as described under "-- No-
tices" below. Except for any consent that must be given by the
Holder of each Outstanding Debt Security affected thereby, as
-40-<PAGE>
described under "-- Modification" above, any resolution pre-
sented at a meeting or adjourned meeting at which a quorum is
present may be adopted by the affirmative vote of the Holders
of a majority in principal amount of the Outstanding Debt Secu-
rities of that series; provided, however, that, except for any
consent that must be given by the Holder of each Outstanding
Debt Security affected thereby, as described under "-- Mod-
ification" above, any resolution with respect to any request,
demand, authorization, direction, notice, consent, waiver or
other action that may be made, given or taken by the Holders of
a specified percentage, which is less than a majority in prin-
cipal amount of the Outstanding Debt Securities of a series,
may be adopted at a meeting or adjourned meeting duly recon-
vened at which a quorum is present by the affirmative vote of
the Holders of such specified percentage in principal amount of
the Outstanding Debt Securities of that series. Subject to the
proviso set forth above, any resolution passed or decision
taken at any meeting of Holders of Debt Securities of any se-
ries duly held in accordance with the Indenture will be binding
on all Holders of Debt Securities of that series and any re-
lated coupons. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be Persons
holding or representing a majority in principal amount of the
Outstanding Debt Securities of a series. (Article Thirteen of
the Senior Indenture and Article Fourteen of the Subordinated
Indenture).
Notices. Except as otherwise provided in the Inden-
tures, notices to Holders of Bearer Debt Securities will be
given by publication at least twice in a daily newspaper in The
Borough of Manhattan, The City of New York and London or other
capital city in Western Europe and in such other city or cities
as may be specified in such Securities. Notices to Holders of
Registered Debt Securities will be given by mail to the ad-
dresses of such Holders as they appear in the Security Regis-
ter. (Section 107).
The Trustee. Each Indenture contains certain limi-
tations on the right of the Trustee, as a creditor of Hecla, to
obtain payment of claims in certain cases and to realize on
certain property received with respect to any such claims, as
security or otherwise. (Section 613). The Trustee is permit-
ted to engage in other transactions, except that, if it ac-
quires any conflicting interest and there is a default under
the Debt Securities, it must eliminate such conflict or resign.
(Section 608).
To the extent that the Trustee has any material rela-
tionship with Hecla, such relationship shall be disclosed in
the Prospectus Supplement.
-41-<PAGE>
Governing Law. The Indentures are, and the Debt Se-
curities will be, governed by and construed in accordance with
the laws of the State of New York.
PROVISIONS APPLICABLE SOLELY TO SENIOR DEBT SECURITIES
Senior Debt Securities will be issued under the Se-
nior Indenture and will rank pari passu with all other unse-
cured and unsubordinated debt of Hecla, and will be senior in
right of payment to all existing and future debt of Hecla that
is, by its terms, expressly subordinated to the Senior Debt
Securities.
PROVISIONS APPLICABLE SOLELY TO SUBORDINATED DEBT SECURITIES
General. Subordinated Debt Securities will be issued
under the Subordinated Indenture and will rank pari passu with
certain other subordinated debt of Hecla that may be outstand-
ing from time to time and will rank junior to all Senior In-
debtedness of Hecla (including any Senior Debt Securities) that
may be outstanding from time to time.
Subordination. The payment of the principal (and
premium, if any) and interest on the Subordinated Debt Securi-
ties is expressly subordinated, to the extent and in the manner
set forth in the Subordinated Indenture, in right of payment to
the prior payment in full of all Senior Indebtedness of Hecla.
(Section 1301 of the Subordinated Indenture).
In the event of any dissolution or winding-up, or
total or partial liquidation or reorganization of Hecla,
whether in bankruptcy, reorganization, insolvency, receivership
or similar proceeding, the holders of Senior Indebtedness will
be entitled to receive payment in full of all amounts due or to
become due on or in respect of all Senior Indebtedness before
the Holders of the Subordinated Debt Securities are entitled to
receive any payment on account of principal (or premium, if
any) or interest on the Subordinated Debt Securities. (Section
1302 of the Subordinated Indenture).
Unless otherwise indicated in the applicable Pro-
spectus Supplement, no payment in respect of the Subordinated
Debt Securities shall be made if, at the time of such payment,
there exists a default in payment of all or any portion of any
Senior Indebtedness, and such default shall not have been cured
or waived in writing or the benefits of such subordination in
the Subordinated Indenture shall not have been waived in writ-
ing by or on behalf of the holders of such Senior Indebtedness.
In addition, unless otherwise provided in the applicable Pro-
spectus Supplement, during the continuance of any event of
-42-<PAGE>
default (other than a default referred to in the immediately
preceding sentence) with respect to any Senior Indebtedness
permitting the holders to accelerate the maturity thereof and
upon written notice thereof given to the Trustee, with a copy
to Hecla (the delivery of which shall not affect the validity
of the notice to the Trustee), by any holder of Senior Indebt-
edness or its representative, then, unless and until such an
event of default shall have been cured or waived or shall have
ceased to exist, no payment shall be made by Hecla with respect
to the principal of or interest on the Subordinated Debt Secu-
rities or to acquire any of the Subordinated Debt Securities or
on account of the redemption provisions for the Subordinated
Debt Securities; provided, however, that if the holders of the
Senior Indebtedness to which the default relates have not de-
clared such Senior Indebtedness to be immediately due and pay-
able within 180 days after the occurrence of such default (or
have declared such Senior Indebtedness to be immediately due
and payable and within such period have rescinded such decla-
ration of acceleration), then Hecla will be required to resume
making any and all required payments in respect of the Subor-
dinated Debt Securities (including any missed payments). Only
one such payment blockage period may be commenced within any
consecutive 365-day period with respect to the Subordinated
Debt Securities. No event of default which existed or was con-
tinuing on the date of the commencement of any 180-day payment
blockage period with respect to the Senior Indebtedness initi-
ating such payment blockage period shall be, or be made, the
basis for the commencement of a second payment blockage period
by a holder or representative of such Senior Indebtedness,
whether or not within a period of 365 consecutive days, unless
such event of default shall have been cured or waived for a
period of not less than 90 consecutive days (and, in the case
of any such waiver, no payment shall be made by Hecla to the
holders of Senior Indebtedness in connection with such waiver
other than amounts due pursuant to the terms of the Senior In-
debtedness as in effect at the time of such default). (Section
1302 of the Subordinated Indenture).
The term "Senior Indebtedness" is defined in the Sub-
ordinated Indenture as Indebtedness, either outstanding as of
the date of the Subordinated Indenture or issued subsequent to
the date of the Subordinated Indenture, that is not subordi-
nated by its terms in right of payment to any other Indebt-
edness of Hecla or pari passu with Subordinated Debt Securities
of any series, provided that the term "Senior Indebtedness"
shall not include (i) Indebtedness of Hecla to any Subsidiary
for money borrowed or advanced from such Subsidiary or (ii)
amounts owed (except to banks and other financial institutions)
for goods, materials or services purchased in the ordinary
-42-<PAGE>
course of business. (Section 101 of the Subordinated Inden-
ture).
The term "Indebtedness", as applied to any Person, is
defined in the Subordinated Indenture as all indebtedness,
whether or not represented by bonds, debentures, notes or other
securities, created or assumed by such Person for the repayment
of money borrowed, and obligations, computed in accordance with
generally accepted accounting principles, as lessee under
leases that should be, in accordance with generally accepted
accounting principles, treated as capital leases. All Indebt-
edness of others guaranteed as to payment of principal by such
Person or in effect guaranteed by such Person through a con-
tingent agreement to purchase such Indebtedness shall also be
deemed to be Indebtedness of such Person. (Section 101 of the
Subordinated Indenture).
If Subordinated Debt Securities are issued under the
Subordinated Indenture, the aggregate principal amount of Se-
nior Indebtedness outstanding as of a recent date will be set
forth in the applicable Prospectus Supplement. The Subordi-
nated Indenture does not restrict the amount of Senior Indebt-
edness that Hecla may incur.
DESCRIPTION OF PREFERRED STOCK
As stated below under "Current Capital Structure",
pursuant to the Company's Amended and Restated Certificate of
Incorporation, the Board of Directors of Hecla may provide for
the issuance of up to 5,000,000 shares of Preferred Stock in
one or more series. As of December 31, 1994, there were
2,300,000 shares of Convertible Preferred Stock issued and out-
standing and an additional 2,000,000 shares of Series A Junior
Participating Preferred Stock initially reserved for issuance
upon exercise of the Rights described below. Hecla's Board of
Directors is authorized, without any further vote or action by
Hecla's stockholders, to divide the Preferred Stock into series
and, with respect to each series, to determine the dividend
rights, dividend rates, conversion rights, voting rights (which
may be greater or lesser than the voting rights of the Common
Stock), redemption rights and terms, liquidation preferences,
sinking fund rights and terms, the number of shares constitut-
ing the series and the designation of each series. Upon issu-
ance against full payment of the purchase price therefor,
shares of Preferred Stock offered hereby will be fully paid and
nonassessable. The descriptions of the Preferred Stock set
forth below and the description of the terms of a particular
series of Preferred Stock that will be set forth in a Prospec-
tus Supplement do not purport to be complete and are qualified
in their entirety by reference to Hecla's Amended and Restated
-44-<PAGE>
Certificate of Incorporation, and the certificate establishing
designation, preferences and rights relating to such series or
the Rights Agreement referred to below. All material terms of
the Preferred Stock will be described herein or in a Prospectus
Supplement.
The specific terms of a particular series of Pre-
ferred Stock offered hereby will be described in a Prospectus
Supplement relating to such series and will include the fol-
lowing:
(i) The maximum number of shares to constitute the
series and the distinctive designation thereof;
(ii) The annual dividend rate, if any, on shares of
the series, whether such rate is fixed or variable or
both, the date or dates from which dividends will begin to
accrue or accumulate and whether dividends will be cumu-
lative;
(iii) Whether the shares of the series will be re-
deemable and, if so, the price at and the terms and con-
ditions on which the shares of the series may be redeemed,
including the time during which shares of the series may
be redeemed and any accumulated dividends thereon that the
holders of shares of the series shall be entitled to re-
ceive upon the redemption thereof;
(iv) The liquidation preference, if any, applicable
to shares of the series;
(v) Whether the shares of the series will be subject
to operation of a retirement or sinking fund and, if so,
the extent and manner in which any such fund shall be ap-
plied to the purchase or redemption of the shares of the
series for retirement or for other corporate purposes, and
the terms and provisions relating to the operation of such
fund;
(vi) The terms and conditions, if any, on which the
shares of the series shall be convertible into, or ex-
changeable for, shares of any other class or classes of
capital stock of Hecla or any series of any other class or
classes, or of any other series of the same class, in-
cluding the price or prices or the rate or rates of con-
version or exchange and the method, if any, of adjusting
the same;
(vii) The voting rights, if any, on the shares of the
series;
-45-<PAGE>
(viii) The currency or units based on or relating to
currencies in which such series is denominated and/or in
which payments will or may be payable;
(ix) The methods by which amounts payable in respect
of such series may be calculated and any commodities, cur-
rencies or indices, or price, rate or value, relevant to
such calculation;
(x) Whether fractional interests in shares of the
series will be offered in the form of Depositary Shares as
described below under "Description of Depositary Shares";
and
(xi) Any other preferences and relative, participat-
ing, optional or other special rights or qualifications,
limitations or restrictions thereof.
The name of the transfer agent, registrar, dividend
disbursing agent and redemption agent, as applicable, will be
disclosed in a Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
Subject to the prior rights of any shares of Pre-
ferred Stock that may from time to time be outstanding, holders
of Common Stock are entitled to share ratably in such dividends
as may be lawfully declared by the Board of Directors and paid
by Hecla and, in the event of liquidation, dissolution or
winding-up of Hecla, are entitled to share ratably in all as-
sets remaining after payment of liabilities.
The Common Stock is entitled to one vote per share
held of record on each matter submitted to a vote of stock-
holders. The holders of Common Stock have no preemptive rights
to purchase any securities of Hecla or cumulative voting
rights. Preferred stock purchase rights are issuable in re-
spect of all shares of Common Stock issued prior to certain
events. See "Current Capital Structure -- Rights". All out-
standing shares of Common Stock are validly issued, fully paid
and nonassessable. Hecla is not prohibited by its Amended and
Restated Certificate of Incorporation from repurchasing shares
of its Common Stock. Any such repurchases would be subject to
any limitations on the amount available for such purpose under
applicable corporate law, any applicable restrictions under the
terms of any outstanding Preferred Stock or indebtedness and,
in the case of market purchases, such restrictions on the tim-
ing, manner and amount of such purchases as might apply in the
circumstances under applicable securities laws.
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The outstanding Common Stock is listed on the NYSE
under the symbol "HL". Any Common Stock offered will be
listed, subject to notice of issuance, on the NYSE.
The transfer agent, registrar and dividend disbursing
agent for the Common Stock is American Stock Transfer & Trust
Company.
All material terms of the Common Stock will be dis-
closed herein or in a Prospectus Supplement.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus
Supplement of certain provisions of the Deposit Agreement (as
defined below) and of the Depositary Shares (as defined below)
and Depositary Receipts (as defined below) does not purport to
be complete and is subject to and qualified in its entirety by
reference to the forms of Deposit Agreement and Depositary Re-
ceipts relating to each series of Preferred Stock which have
been or will be filed with the Commission in connection with
the offering of such series of Preferred Stock. All material
terms of the Deposit Agreement, the Depositary Shares and the
Depositary Receipts will be described herein or in a Prospectus
Supplement.
GENERAL
Hecla may, at its option, elect to offer fractional
interests in shares of Preferred Stock, rather than shares of
Preferred Stock. In the event such option is exercised, Hecla
will provide for the issuance by a Depositary to the public of
receipts for depositary shares ("Depositary Shares"), each of
which will represent fractional interests of a particular se-
ries of Preferred Stock (which will be set forth in the Pro-
spectus Supplement relating to a particular series of Preferred
Stock).
The shares of any series of Preferred Stock under-
lying the Depositary Shares will be deposited under a separate
Deposit Agreement (the "Deposit Agreement") between Hecla and a
bank or trust company selected by Hecla having its principal
office in the United States and having a combined capital and
surplus of at least $50,000,000 (the "Depositary"). The Pro-
spectus Supplement relating to a series of Depositary Shares
will set forth the name and address of the Depositary. Subject
to the terms of the Deposit Agreement, each owner of Depositary
Shares will be entitled, in proportion to the applicable frac-
tional interests in shares of Preferred Stock underlying such
Depositary Shares, to all the rights and preferences of the
-47-<PAGE>
Preferred Stock underlying such Depositary Shares (including
dividend, voting, redemption, conversion and liquidation
rights).
The Depositary Shares will be evidenced by depositary
receipts issued pursuant to the Deposit Agreement (the "Depos-
itary Receipts"). Depositary Receipts will be distributed to
those persons purchasing the fractional interests in shares of
the related series of Preferred Stock in accordance with the
terms of the offering for Preferred Stock described in the re-
lated Prospectus Supplement.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or
other cash distributions received in respect of Preferred Stock
to the record holders of Depositary Shares relating to such
Preferred Stock in proportion, as nearly as practicable, to the
numbers of such Depositary Shares owned by such holders on the
relevant record date, subject to any applicable tax withhold-
ing. The Depositary shall distribute only such amount, how-
ever, as can be distributed without attributing to any holder
of Depositary Shares a fraction of one cent, and any balance
not so distributed shall be added to and treated as part of the
next sum received by the Depositary for distribution to record
holders of Depositary Shares.
In the event of a distribution other than in cash,
the Depositary will distribute property received by it to the
record holders of Depositary Shares entitled thereto, unless
the Depositary determines that it is not feasible to make such
distribution, in which case the Depositary may, with the ap-
proval of Hecla, adopt such method as it deems equitable and
practicable for the purpose of effecting such distribution,
including the sale of such property and distribution of the net
proceeds from such sale to such holders, subject to any ap-
plicable tax withholding.
Any subscription or similar rights offered by Hecla
to holders of Preferred Stock will be made available to the
holders of Depositary Shares in such manner as the Depositary
may determine, with the approval of Hecla.
REDEMPTION OF DEPOSITARY SHARES
If a series of the Preferred Stock underlying the
Depositary Shares is subject to redemption, the Depositary
Shares will be redeemed from the proceeds received by the De-
positary resulting from the redemption, in whole or in part, of
such series of the Preferred Stock held by the Depositary. The
-48-<PAGE>
Depositary shall mail notice of redemption not less than 30 and
not more than 60 days prior to the date fixed for redemption to
the record holders of the Depositary Shares to be so redeemed
at their respective addresses appearing in the Depositary's
books. The redemption price per Depositary Share will be equal
to the applicable fraction of the redemption price per share
payable with respect to such series of the Preferred Stock.
Whenever Hecla redeems shares of Preferred Stock held by the
Depositary, the Depositary will redeem as of the same redemp-
tion date the number of Depositary Shares relating to shares of
Preferred Stock so redeemed. If less than all of the Deposi-
tary Shares are to be redeemed, the Depositary Shares to be
redeemed will be selected by lot or pro rata as may be deter-
mined by the Depositary.
After the date fixed for redemption, the Depositary
Shares so called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the Depositary
Shares will cease, except the right to receive the moneys, se-
curities or other property payable upon such redemption and any
money, securities or other property to which the holders of
such Depositary Shares were entitled, including any accrued and
unpaid dividends payable in connection with such redemption,
upon such redemption upon surrender to the Depositary of the
Depositary Receipts evidencing such Depositary Shares.
VOTING OF PREFERRED STOCK
Upon receipt of notice of any meeting at which the
holders of the applicable Preferred Stock are entitled to vote,
the Depositary will mail the information contained in such no-
tice of meeting to the record holders of the Depositary Shares
relating to such Preferred Stock. Each record holder of such
Depositary Shares on the record date (which will be the same
date as the record date for the Preferred Stock) will be en-
titled, subject to any applicable restrictions, to instruct the
Depositary as to the exercise of the voting rights pertaining
to the number of shares of Preferred Stock underlying such
holder's Depositary Shares. The Depositary will endeavor, in-
sofar as practicable, to vote the number of shares of Preferred
Stock underlying such Depositary Shares in accordance with such
instructions, and Hecla will agree to take all action which may
be deemed necessary by the Depositary in order to enable the
Depositary to do so.
AMENDMENT AND TERMINATION OF DEPOSITARY AGREEMENT
The form of Depositary Receipt evidencing the Depos-
itary Shares and any provision of the Deposit Agreement may at
-49-<PAGE>
any time be amended by agreement between Hecla and the Deposi-
tary. However, any amendment which materially and adversely
alters the rights of the existing holders of Depositary Shares
will not be effective unless such amendment has been approved
by the record holders of at least a majority of the Depositary
Shares then outstanding. A Deposit Agreement may be terminated
by Hecla or the Depositary only if (i) all outstanding Deposi-
tary Shares relating thereto have been redeemed or (ii) there
has been a final distribution in respect of the Preferred Stock
of the relevant series in connection with any liquidation, dis-
solution or winding up of Hecla and such distribution has been
distributed to the holders of the related Depositary Shares.
CHARGES OF DEPOSITARY
Hecla will pay all transfer and other taxes and gov-
ernmental charges arising solely from the existence of the de-
positary arrangements. Hecla will pay charges of the Deposi-
tary in connection with the initial deposit of any Preferred
Stock and any redemption of such Preferred Stock. Holders of
Depositary Shares will pay transfer and other taxes and gov-
ernmental charges and such other charges as are expressly pro-
vided in the Deposit Agreement to be for their accounts.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering
to Hecla notice of its election to do so, and Hecla may at any
time remove the Depositary, any such resignation or removal to
take effect upon the appointment of a successor Depositary and
its acceptance of such appointment. Such successor Depositary
must be appointed within 60 days after delivery of the notice
of resignation or removal and must be a bank or trust company
having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
MISCELLANEOUS
The Depositary will forward to the holders of Depos-
itary Shares all reports and communications from Hecla which
are delivered to the Depositary and which Hecla is required to
furnish to the holders of the applicable Preferred Stock.
Neither the Depositary nor Hecla will be liable if it
is prevented or delayed by law or any circumstance beyond its
control in performing its obligations under the Deposit Agree-
ment. The obligations of Hecla and the Depositary under the
Deposit Agreement will be limited to performance in good faith
of their duties thereunder and they will not be obligated to
-50-<PAGE>
prosecute or defend any legal proceeding in respect of any
Depositary Shares or Preferred Stock unless satisfactory in-
demnity is furnished. They may rely upon written advice of
counsel or accountants, or information provided by persons pre-
senting Preferred Stock for deposit, holders of Depositary
Shares or other persons believed to be competent and on docu-
ments believed to be genuine.
DESCRIPTION OF WARRANTS
Hecla may issue Warrants to purchase Debt Securities
("Debt Warrants") and Warrants to purchase Common Stock or Pre-
ferred Stock ("Stock Warrants"). Warrants may be issued inde-
pendently of or together with any other Securities and may be
attached to or separate from such Securities. Each series of
Warrants will be issued under a separate Warrant Agreement
(each a "Warrant Agreement") to be entered into between Hecla
and a Warrant Agent ("Warrant Agent"). The Warrant Agent will
act solely as an agent of Hecla in connection with the Warrant
of such series and will not assume any obligation or relation-
ship of agency for or with holders or beneficial owners of War-
rants. The following sets forth certain general terms and pro-
visions of the Warrants offered hereby. Further terms of the
Warrants and the applicable Warrant Agreement will be set forth
in the applicable Prospectus Supplement. All material terms of
the Warrants and the applicable Warrant Agreement will be de-
scribed herein or in a Prospectus Supplement.
DEBT WARRANTS
The applicable Prospectus Supplement will describe
the terms of any Debt Warrants, including the following: (i)
the title of such Debt Warrants; (ii) the offering price for
such Debt Warrants, if any; (iii) the aggregate number of such
Debt Warrants; (iv) the designation and terms of such Debt Se-
curities purchasable upon exercise of such Debt Warrants; (v)
if applicable, the designation and terms of the Securities with
which such Debt Warrants are issued and the number of such Debt
Warrants issued with each such Security; (vi) if applicable,
the date from and after which such Debt Warrants and any Secu-
rities issued therewith will be separately transferable; (vii)
the principal amount of Debt Securities purchasable upon exer-
cise of a Debt Warrant and the price at which such principal
amount of Debt Securities may be purchased upon exercise;
(viii) the date on which the right to exercise such Debt War-
rants shall commence and the date on which such right shall
expire; (ix) if applicable, the minimum or maximum amount of
such Debt Warrants which may be exercised at any one time; (x)
whether the Debt Warrants represented by the Debt Warrant cer-
tificates or Debt Securities that may be issued upon exercise
-51-<PAGE>
of the Debt Warrants will be issued in registered or bearer
form; (xi) information with respect to book-entry procedures,
if any; (xii) the currency or currencies (including composite
currencies) or currency unit or units in which the offering
price, if any, and the exercise price are payable; (xiii) if
applicable, a discussion of certain United States federal in-
come tax considerations; (xiv) the antidilution provisions of
such Debt Warrants, if any; (xv) the redemption or call provi-
sions, if any, applicable to such Debt Warrants; and (xvi) any
additional terms of the Debt Warrants, including terms, proce-
dures and limitations relating to the exchange and exercise of
such Debt Warrants.
STOCK WARRANTS
The applicable Prospectus Supplement will describe
the terms of any Stock Warrants, including the following: (i)
the title of such Stock Warrants; (ii) the offering price, if
any, of such Stock Warrants; (iii) the aggregate number of such
Stock Warrants; (iv) the designation and terms of the Common
Stock or Preferred Stock purchasable upon exercise of such
Stock Warrants; (v) if applicable, the designation and terms of
the Securities with which such Stock Warrants are issued and
the number of such Stock Warrants issued with each such Secu-
rity; (vi) if applicable, the date from and after which such
Stock Warrants and any Securities issued therewith will be sep-
arately transferrable; (vii) the number of shares of Common
Stock or Preferred Stock purchasable upon exercise of a Stock
Warrant and the price at which such shares may be purchased
upon exercise; (viii) the date on which the right to exercise
such Stock Warrants shall commence and the date on which such
right shall expire, including Hecla's right to accelerate the
exercisability of Stock Warrants to purchase Common Stock; (ix)
if applicable, the minimum or maximum amount of such Stock War-
rants which may be exercised at any one time; (x) the currency
or currencies (including composite currencies) or currency unit
or units in which the offering price, if any, and the exercise
price are payable; (xi) if applicable, a discussion of certain
United States federal income tax considerations; (xii) the an-
tidilution provisions, if any, of such Stock Warrants; (xiii)
the redemption or call provisions, if any, applicable to such
Stock Warrants; and (xiv) any additional terms of such Stock
Warrants, including terms, procedures and limitations relating
to the exchange and exercise of such Stock Warrants.
CURRENT CAPITAL STRUCTURE
As of the date of this Prospectus, Hecla is autho-
rized by its Amended and Restated Certificate of Incorporation
to issue 100,000,000 shares of Common Stock and 5,000,000
-52-<PAGE>
shares of Preferred Stock. As of July 31, 1995, there were
2,300,000 shares of Series B Cumulative Convertible Preferred
Stock ("Series B Preferred Stock") issued and outstanding and
an additional 2,000,000 shares of Preferred Stock designated by
the Board of Directors of Hecla as Series A Junior Participat-
ing Preferred Stock (the "Series A Preferred Stock"). Shares
of Series A Preferred Stock have been initially reserved for
issuance upon exercise of the Rights hereinafter described.
See "-- Rights". As of July 31, 1995, there were (i)
48,235,864 shares of Common Stock issued and outstanding and
(ii) 7,395,420 shares of Common Stock reserved for issuance
upon conversion of the Convertible Preferred Stock. In ad-
dition, as of July 31, 1995, 2,792,979 shares of Common Stock
were authorized and remained available for issuance under
Hecla's stock option plans, other employee benefit plans and
stock warrants.
SERIES B PREFERRED STOCK
The Series B Preferred Stock ranks senior to the Com-
mon Stock and any shares of Series A Junior Participating Pre-
ferred Shares issued pursuant to the Rights with respect to
payment of dividends and amounts upon liquidation, dissolution
or winding-up. While any shares of Series B Preferred Stock
are outstanding, Hecla may not authorize the creation or issue
of any class or series of stock that ranks senior to the Series
B Preferred Stock as to dividends or upon liquidation, disso-
lution or winding-up without the consent of the holders of at
least 66 2/3% of the outstanding shares of Series B Preferred
Stock and any other series of Preferred Stock ranking on a par-
ity with the Series B Preferred Stock as to dividends and upon
liquidation, dissolution or winding-up (a "Parity Stock"), vot-
ing as a single class without regard to series.
Holders of shares of Series B Preferred Stock are
entitled to receive, when, as and if declared by the Board of
Directors of Hecla out of assets of Hecla legally available
therefor, cumulative cash dividends at the rate per annum of
$3.50 per share of Series B Preferred Stock.
Hecla will not (i) declare, pay or set apart funds
for the payment of any dividend or other distribution with re-
spect to any Junior Stock (as defined below) or (ii) redeem,
purchase or otherwise acquire for consideration any Junior
Stock or Parity Stock through a sinking fund or otherwise (ex-
cept by conversion into or exchange for shares of Junior Stock
and other than a redemption or purchase or other acquisition of
shares of Common Stock of Hecla made for purposes of an em-
ployee incentive or benefit plan of Hecla or any subsidiary),
unless all accrued and unpaid dividends with respect to the
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Series B Preferred Stock and any Parity Stock at the time such
dividends are payable have been paid or funds have been set
apart for payment of such dividends. As used herein, (i) the
term "dividend" does not include dividends payable solely in
shares of Junior Stock on Junior Stock, or in options, warrants
or rights to holders of Junior Stock to subscribe for or pur-
chase any Junior Stock, and (ii) the term "Junior Stock" means
the Common Stock, any Series A Junior Participating Preferred
Shares issued pursuant to the Rights, and any other class of
capital stock of Hecla now or hereafter issued and outstanding
that ranks junior as to the payment of dividends or amounts
payable upon liquidation, dissolution and winding-up to the
Series B Preferred Stock.
The Series B Preferred Stock is not redeemable prior
to July 1, 1996. On and after such date, the Series B Pre-
ferred Stock is redeemable at the option of Hecla, in whole or
in part, at $52.45 per share if redeemed during the twelve-
month period beginning July 1, 1996 declining to $50.00 per
share July 1, 2003 and thereafter, plus, in each case, all div-
idends accrued and unpaid on the Convertible Preferred Stock up
to the date fixed for redemption.
The holders of shares of Series B Preferred Stock
will be entitled to receive, in the event of any liquidation,
dissolution or winding-up of Hecla, whether voluntary or in-
voluntary, $50.00 per share of Series B Preferred Stock plus an
amount per share of Series B Preferred Stock equal to all div-
idends (whether or not earned or declared) accrued and unpaid
thereon to the date of final distribution to such holders (the
"Liquidation Preference"), and no more. Until the holders of
the Series B Preferred Stock have been paid the Liquidation
Preference in full, no payment will be made to any holder of
Junior Stock upon the liquidation, dissolution or winding-up of
Hecla.
Except as indicated below or in the Series B Pre-
ferred Certificate of Designations, or except as otherwise from
time to time required by applicable law, the holders of Series
B Preferred Stock will have no voting rights and their consent
shall not be required for taking any corporate action. When
and if the holders of Series B Preferred Stock are entitled to
vote, each holder will be entitled to one vote per share. If
the equivalent of six quarterly dividends payable on the Series
B Preferred Stock have not been declared and paid or set apart
for payment, whether or not consecutive, the number of direc-
tors then constituting the Board of Directors of Hecla shall be
increased by two and the holders of the Series B Preferred
Stock and any other series of Parity Stock similarly affected,
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voting as a single class without regard to series, will be en-
titled to elect such two additional directors at the next an-
nual meeting and each subsequent meeting, until such time as
all cumulative dividends have been paid in full.
Each share of Series B Preferred Stock will be con-
vertible, in whole or in part at the option of the holders
thereof, into shares of Common Stock at a conversion price of
$15.55 per share of Common Stock (equivalent to a conversion
rate of approximately 3.2154 shares of Common Stock for each
share of Series B Preferred Stock), subject to adjustment as
described below (the "Conversion Price").
The Conversion Price is subject to adjustment upon
certain events, including (i) dividends (and other distribu-
tions) payable in Common Stock on any class of capital stock of
Hecla, (ii) the issuance to all holders of Common Stock of cer-
tain rights or warrants (other than the Rights or any similar
rights issued under any successor shareholders rights plan)
entitling them to subscribe for or purchase Common Stock or
securities which are convertible into Common Stock, (iii) sub-
divisions, combinations and reclassifications of Common Stock,
and (iv) distributions to all holders of Common Stock of evi-
dences of indebtedness of Hecla or assets (including securi-
ties, but excluding those dividends, rights, warrants and dis-
tributions referred to above and dividends and distributions
paid in cash out of the profits or surplus of Hecla).
WARRANTS TO PURCHASE COMMON STOCK
As a result of the Company's acquisition of Equinox
Resources Ltd. in March 1994, warrants issued by Equinox on
December 8, 1992 in connection with Equinox's acquisition of
another company ("Equinox Warrants") were assumed by Hecla.
The Equinox Warrants are exercisable for a total of 226,131
shares of Common Stock at an exercise price of Canadian $11.33
per share (equivalent to U.S.$8.31 using the exchange rate on
July 31, 1995). The Equinox Warrants expire on August 31,
1996. If the Common Stock trades higher than Canadian $16.67
for 20 consecutive trading days, upon Hecla's election and no-
tice to warrantholders, the holders of Equinox Warrants must
exercise their warrants or lose the right to exercise. The
terms of the Equinox Warrants are set forth in the warrant
transfer agency agreement made as of December 8, 1992 between
Equinox and Montreal Trust Company of Canada, which agreement
has been assumed by the Company.
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RIGHTS
Upon the terms and subject to the conditions of the
Rights Agreement, a holder of a Right is entitled to purchase
one one-hundredth of a Series A Preferred Share at an exercise
price of $47.50. The Rights are currently represented by the
certificates for the Common Stock and are not transferable
apart therefrom. Transferable Rights certificates will be is-
sued at the earlier of (i) the tenth day after the public an-
nouncement that any person or group has acquired beneficial
ownership of 15% or more of the Common Stock (an "Acquiring
Person") or (ii) the tenth day after a person commences, or
announces an intention to commence, a tender or exchange offer
the consummation of which would result in any person or group
becoming an Acquiring Person. The 15% threshold for becoming
an Acquiring Person may be reduced by the Board of Directors of
Hecla to not less than 10% prior to any such acquisition.
The Rights are subject to adjustment in several cir-
cumstances. In particular, (i) in the event Hecla is acquired
in a merger or other business combination transaction, each
Right will entitle its holder to purchase, at the exercise
price of the Right, that number of shares of common stock of
the acquiror which at the time of such transaction would have a
market value of two times the exercise price of the Rights and
(ii) in the event any person or group becomes an Acquiring Per-
son, each holder of a Right (other than Rights beneficially
owned by the Acquiring Person, which will become void) will
thereafter have the right to receive upon exercise that number
of shares of Common Stock having a market value of two times
the exercise price of the Right.
All the outstanding Rights may be redeemed by Hecla
for $0.05 per Right prior to the tenth day following the date
on which it was announced that a person or group became an Ac-
quiring Person. Under certain circumstances, the Board of Di-
rectors of the Company may decide to exchange each Right (ex-
cept Rights held by an Acquiring Person) for one share of Com-
mon Stock. The Rights will expire on May 19, 1996 unless ear-
lier redeemed.
As long as the Rights are attached to and evidenced
by the certificates representing the Common Stock, Hecla will
continue to issue one Right with each share of Common Stock
that shall become outstanding. A Right is presently attached
to each issued and outstanding share of Common Stock. So long
as the Rights are outstanding, the Company will issue one Right
with each new share of Common Stock issued.
-56-<PAGE>
The Rights have certain antitakeover effects. The
Rights may cause substantial dilution to a person or group that
attempts to acquire the Company on terms not approved by the
Board of Directors of the Company. The Rights should not in-
terfere with any merger or other business combination approved
by the Board of Directors of the Company since the Rights may
be redeemed by the Company prior to the consummation of such
transactions.
The Rights Agreement is attached as an exhibit to the
Company's Registration Statement on Form 8-A dated May 19,
1986. The Rights Agreement was amended effective November 29,
1990 and such amendment is attached as an exhibit to the Com-
pany's Current Report on Form 8-K dated November 9, 1990 (as
amended, the "Rights Agreement"). The description of the
Rights found in each of the foregoing Form 8-A and Form 8-K has
been incorporated by reference herein and copies of such Forms
can be obtained in the manner set forth under "Information In-
corporated By Reference."
CERTAIN PROVISIONS OF THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION AND BY-LAWS
Certain provisions in the Company's Amended and Re-
stated Certificate of Incorporation and By-Laws may in certain
circumstances have an antitakeover effect. These provisions
(1) classify the Board of Directors into three classes, as
nearly equal in number as possible, each of which serve for
three years, with one class being elected each year; (2) pro-
vide that directors may be removed only for cause and only with
the approval of the holders of at least 80% of the voting power
of the capital stock of the Company entitled to vote generally
in the election of directors (the "Voting Stock"); (3) provide
that any vacancy on the Board of Directors shall be filled only
by the remaining directors then in office, though less than a
quorum; (4) require that shareholder action be taken at an an-
nual or special meeting of shareholders and prohibit share-
holder action by consent; (5) provide that special meetings of
shareholders of the Company may be called only by the Board of
Directors pursuant to a resolution adopted by a majority of the
entire Board of Directors; and (6) provide that the shareholder
vote required to alter, amend or repeal the foregoing provi-
sions is 80% of the then-outstanding Voting Stock.
It would be possible, within the limitations imposed
by applicable law and the applicable rules of the New York
Stock Exchange upon which the Common Stock is listed, for the
Board of Directors to authorize the issuance of one or more
series of Preferred Stock with voting rights (including class
voting rights) or other rights, powers and preferences which
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could impede the success of a proposed merger, tender offer,
proxy contest or other attempt to gain control of the Company.
In a takeover or similar situation, the issuance by the Board
of Directors of Preferred Stock having voting rights could di-
lute the voting power of the shares of Common Stock held by a
potential acquiror. Moreover, if the Preferred Stock were to
be issued with class voting rights such an issuance could po-
tentially confer veto power over the proposed transaction on a
party friendly to the Company's management.
The Amended and Restated Certificate of Incorporation
also requires the approval by the holders of 80% of the then-
outstanding Voting Stock as a condition for mergers and certain
other business combinations of the Company ("Business Combina-
tions") with any holder of more than 12 1/2% of such Voting
Stock (an "Interested Shareholder") unless the transaction is
either approved by at least a majority of the members of the
Board of Directors who are unaffiliated with the Interested
Shareholder and were directors before the Interested Share-
holder became an Interested Shareholder (the "Continuing Di-
rectors") or certain minimum price and procedural requirements
are met.
While the foregoing provisions contained in the Cer-
tificate of Incorporation and By-Laws as well as those in the
Rights Plan are intended to encourage persons seeking to ac-
quire control of the Company to initiate such an acquisition
through arm's-length negotiations with the Board of Directors,
they could also have the effect of discouraging a third party
from making a tender offer (including an offer at a substantial
premium over the then-current market value of the Common Stock)
or otherwise attempting to obtain control of the Company even
though such an attempt might be beneficial to the Company and
its shareholders. Since such provisions may have the effect of
giving the Board of Directors more bargaining powers in nego-
tiations with potential acquirors, they could also result in
the Board of Directors using such bargaining power not only to
try to negotiate a favorable price for an acquisition but also
to negotiate more favorable terms for the management or the
Board of Directors.
THE DELAWARE GENERAL CORPORATION LAW
The Company is a Delaware corporation subject to Sec-
tion 203 of the Delaware General Corporation Law (the "Delaware
Law"). Section 203 provides that, subject to certain excep-
tions specified therein, a corporation shall not engage in any
business combination with any "interested stockholder" for a
three-year period following the date that such stockholder be-
comes an interested stockholder unless (i) prior to such date,
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the board of directors of the corporation approved either the
business combination or the transaction which resulted in the
stockholder becoming an interested stockholder, (ii) upon con-
summation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation out-
standing at the time the transaction commenced (excluding cer-
tain shares), or (iii) on or subsequent to such date, the busi-
ness combination is approved by the board of directors of the
corporation and by the affirmative vote of at least 66-2/3% of
the outstanding voting stock which is not owned by the inter-
ested stockholder. Except as specified in Section 203 of the
Delaware Law, an interested stockholder is defined to include
(x) any person that is the owner of 15% or more of the out-
standing voting stock of the corporation, or is an affiliate or
associate of the corporation and was the owner of 15% or more
of the outstanding voting stock of the corporation, at any time
within three years immediately prior to the relevant date and
(y) the affiliates and associates of any such person. Under
certain circumstances, Section 203 of the Delaware Law makes it
more difficult for an "interested stockholder" to effect vari-
ous business combinations with a corporation for a three-year
period, although the stockholders may elect to exclude a corpo-
ration from the restrictions imposed thereunder. The Company's
Amended and Restated Certificate of Incorporation does not ex-
clude the Company from the restrictions imposed under Section
203 of the Delaware Law.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. fed-
eral income tax consequences of the acquisition, ownership and
disposition of Debt Securities by a U.S. Holder (as defined be-
low). Except where otherwise expressly indicated, this summary
deals only with initial purchasers of Debt Securities at the
issue price that are U.S. Holders and that will hold Debt Secu-
rities as capital assets. The discussion does not cover all
aspects of federal taxation that may be relevant to, or the
actual tax effect that any of the matters described herein will
have on, the acquisition, ownership or disposition of Debt Se-
curities by particular investors, and does not address state,
local, foreign or other tax laws. In particular, this summary
does not discuss all of the tax considerations that may be rel-
evant to certain types of investors subject to special treat-
ment under the federal income tax laws (such as banks, insur-
ance companies, investors liable for the alternative minimum
tax, individual retirement accounts and other tax-deferred ac-
counts, tax-exempt organizations, dealers in securities or cur-
rencies, investors that will hold the Debt Securities as part
of straddles, hedging transactions or conversion transactions
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for federal tax purposes or investors whose functional currency
is not the U.S. dollar). Additional United States federal in-
come tax consequences applicable to particular Debt Securities
may be set forth in the applicable Prospectus Supplement.
As used herein, the term "U.S. Holder" means a ben-
eficial owner of Debt Securities that is (i) a citizen or resi-
dent of the United States for U.S. federal income tax purposes,
(ii) a corporation created or organized under the laws of the
United States or any State thereof, (iii) a person or entity
that is otherwise subject to U.S. federal income tax on a net
income basis in respect of income derived from Debt Securities,
or (iv) a partnership to the extent the interest therein is
owned by a person who is described in clause (i), (ii) or (iii)
of this paragraph.
The summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), its legislative history, exist-
ing and proposed regulations thereunder, published rulings and
court decisions, all as currently in effect and all subject to
change at any time, perhaps with retroactive effect.
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR TAX
ADVISORS AS TO THE PRECISE FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX CONSEQUENCES OF ACQUIRING, OWNING AND DISPOSING OF
THE DEBT SECURITIES.
PAYMENTS OF INTEREST
General. Interest on a Debt Security, whether pay-
able in U.S. dollars or a currency, composite currency or bas-
ket of currencies other than U.S. dollars (a "foreign cur-
rency"), other than interest on a "Discount Debt Security" that
is not "qualified stated interest" (each as defined below under
"Original Issue Discount -- General"), will be taxable to a
U.S. Holder as ordinary income at the time it is received or
accrued, depending on the holder's method of accounting for tax
purposes.
Foreign Currency Denominated Interest. If an inter-
est payment is denominated in, or determined by reference to, a
foreign currency, the amount of income recognized by a cash
basis U.S. Holder will be the U.S. dollar value of the interest
payment, based on the exchange rate in effect on the date of
receipt, regardless of whether the payment is in fact converted
into U.S. dollars.
An accrual basis U.S. Holder may determine the amount
of income recognized with respect to an interest payment de-
nominated in, or determined by reference to, a foreign currency
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in accordance with either of two methods. Under the first
method, the amount of income accrued will be based on the av-
erage exchange rate in effect during the interest accrual pe-
riod (or, with respect to an accrual period that spans two tax-
able years of a U.S. Holder, the part of the period within the
taxable year).
Under the second method, the U.S. Holder may elect to
determine the amount of income accrued on the basis of the ex-
change rate in effect on the last day of the accrual period or,
in the case of an accrual period that spans two taxable years,
the exchange rate in effect on the last day of the part of the
period within the taxable year. Additionally, if a payment of
interest is actually received within five business days of the
last day of the accrual period or taxable year, an electing
accrual basis U.S. Holder may instead translate such accrued
interest into U.S. dollars at the exchange rate in effect on
the day of actual receipt. Any such election will apply to all
debt instruments held by the U.S. Holder at the beginning of
the first taxable year to which the election applies or there-
after acquired by the U.S. Holder, and will be irrevocable
without the consent of the Internal Revenue Service (the
"IRS").
Upon receipt of the interest payment (including a
payment attributable to accrued but unpaid interest upon the
sale or retirement of a Debt Security) denominated in, or de-
termined by reference to, a foreign currency, the U.S. Holder
will recognize ordinary income or loss measured by the differ-
ence between the exchange rate used to accrue interest income
pursuant to one of the two above methods and the exchange rate
in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars.
ORIGINAL ISSUE DISCOUNT
General. The following is a summary of the principal
federal income tax consequences of the ownership of Notes is-
sued at an original issue discount. It is based in part upon
the rules governing original issue discount that are set forth
in Sections 1271 through 1275 of the Internal Revenue Code of
1986, as amended (the "Code") and in Treasury regulations
thereunder (the "OID Regulations"). On December 15, 1994, the
IRS issued proposed Treasury regulations relating to contingent
payment debt instruments, which also contained proposed amend-
ments to the OID Regulations with regard to variable rate debt
instruments (the "Proposed Regulations"). In general, the Pro-
posed Regulations are proposed to be effective for debt instru-
ments issued on or after the date that is 60 days after final
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regulations are published. The following summary does not dis-
cuss the application of the Proposed Regulations to, or address
the federal income tax consequences of, an investment in con-
tingent payment debt instruments. In the event the Company
issues contingent payment debt instruments the applicable Pric-
ing Supplement will describe the material federal income tax
consequences thereof.
A Debt Security, other than a Debt Security with a
term of one year or less (a "short-term Debt Security"), will
be treated as issued at an original issue discount (a "Discount
Debt Security") if the excess of the Debt Security's "stated
redemption price at maturity" over its issue price is more than
a "de minimis amount" (as defined below). Generally, the issue
price of a Debt Security will be the first price at which a
substantial amount of Debt Securities included in the issue of
which the Debt Security is a part is sold to other than bond
houses, brokers, or similar persons or organizations acting in
the capacity of underwriters, placement agents, or wholesalers.
The stated redemption price at maturity of a Debt Security is
the total of all payments provided by the Debt Security that
are not payments of "qualified stated interest". A qualified
stated interest payment is generally any one of a series of
stated interest payments on a Debt Security that are uncondi-
tionally payable at least annually at a single fixed rate (with
certain exceptions for lower rates paid during some periods)
applied to the outstanding principal amount of the Debt Secu-
rity. Special rules for "Floating Rate Debt Securities" (as
defined below under "Original Issue Discount -- Floating Rate
Debt Securities") are described below under "Original Issue
Discount -- Floating Rate Debt Securities".
In general, if the excess of a Debt Security's stated
redemption price at maturity over its issue price is less than
1/4 of 1 percent of the Debt Security's stated redemption price
at maturity multiplied by the number of complete years to its
maturity (the "de minimis amount"), then such excess, if any,
constitutes "de minimis original issue discount" and the Debt
Security is not a Discount Debt Security. Unless the election
described below under "Election to Treat All Interest as Origi-
nal Issue Discount" is made, a United States Holder of a Debt
Security with de minimis original issue discount must include
such de minimis original issue discount in income as stated
principal payments on the Debt Security are made. The includ-
ible amount with respect to each such payment will equal the
product of the total amount of the Debt Security's de minimis
original issue discount and a fraction, the numerator of which
is the amount of the principal payment made and the denominator
of which is the stated principal amount of the Debt Security.
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U.S. Holders of Discount Debt Securities having a
maturity of more than one year from their date of issue must
include original issue discount ("OID") in income calculated on
a constant-yield method before the receipt of cash attributable
to such income, and generally will have to include in income
increasingly greater amounts of OID over the life of the Debt
Security. The amount of OID includible in income by a U.S.
Holder of a Discount Debt Security is the sum of the daily por-
tions of OID with respect to the Discount Debt Security for
each day during the taxable year or portion of the taxable year
on which the U.S. Holder holds such Discount Debt Security
("accrued OID"). The daily portion is determined by allocating
to each day in any "accrual period" a pro rata portion of the
OID allocable to that accrual period. Accrual periods with
respect to a Debt Security may be of any length selected by the
U.S. Holder and may vary in length over the term of the Debt
Security as long as (i) no accrual period is longer than one
year and (ii) each scheduled payment of interest or principal
on the Debt Security occurs on either the final or first day of
an accrual period. The amount of OID allocable to an accrual
period equals the excess of (a) the product of the Discount
Debt Security's adjusted issue price at the beginning of the
accrual period and such Debt Security's yield to maturity (de-
termined on the basis of compounding at the close of each ac-
crual period and properly adjusted for the length of the ac-
crual period) over (b) the sum of the payments of qualified
stated interest on the Debt Security allocable to the accrual
period. The "adjusted issue price" of a Discount Debt Security
at the beginning of any accrual period is the issue price of
the Debt Security increased by (x) the amount of accrued OID
for each prior accrual period and decreased by (y) the amount
of any payments previously made on the Debt Security that were
not qualified stated interest payments. For purposes of deter-
mining the amount of OID allocable to an accrual period, if an
interval between payments of qualified stated interest on the
Debt Security contains more than one accrual period, the amount
of qualified stated interest payable at the end of the interval
(including any qualified stated interest that is payable on the
first day of the accrual period immediately following the in-
terval) is allocated pro rata on the basis of relative lengths
to each accrual period in the interval, and the adjusted issue
price at the beginning of each accrual period in the interval
must be increased by the amount of any qualified stated inter-
est that has accrued prior to the first day of the accrual pe-
riod but that is not payable until the end of the interval.
The amount of OID allocable to an initial short accrual period
may be computed using any reasonable method if all other ac-
crual periods other than a final short accrual period are of
equal length. The amount of OID allocable to the final accrual
period is the difference between (x) the amount payable at the
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maturity of the Debt Security (other than any payment of quali-
fied stated interest) and (y) the Debt Security's adjusted is-
sue price as of the beginning of the final accrual period.
Acquisition Premium. A U.S. Holder that purchases a
Debt Security for an amount less than or equal to the sum of
all amounts payable on the Debt Security after the purchase
date other than payments of qualified stated interest but in
excess of its adjusted issue price (any such excess being "ac-
quisition premium") and that does not make the election de-
scribed below under "Election to Treat All Interest as Original
Issue Discount" is permitted to reduce the daily portions of
OID by a fraction, the numerator of which is the excess of the
U.S. Holder's adjusted basis in the Debt Security immediately
after its purchase over the adjusted issue price of the Debt
Security, and the denominator of which is the excess of the sum
of all amounts payable on the Debt Security after the purchase
date, other than payments of qualified stated interest, over
the Debt Security's adjusted issue price.
Pre-Issuance Accrued Interest. If (i) a portion of
the initial purchase price of a Debt Security is attributable
to pre-issuance accrued interest, (ii) the first stated inter-
est payment on the Debt Security is to be made within one year
of the Debt Security's issue date and (iii) the payment will
equal or exceed the amount of pre-issuance accrued interest,
then the U.S. Holder may elect to decrease the issue price of
the Debt Security by the amount of pre-issuance accrued inter-
est. In that event, a portion of the first stated interest
payment will be treated as a return of the excluded pre-
issuance accrued interest and not as an amount payable on the
Debt Security.
Debt Securities Subject to Contingencies Including
Optional Redemption. In general, if a Debt Security provides
for an alternative payment schedule or schedules applicable
upon the occurrence of a contingency or contingencies and the
timing and amounts of the payments that comprise each payment
schedule are known as of the issue date, the yield and maturity
of the Debt Security are determined by assuming that the pay-
ments will be made according to the Debt Security's stated pay-
ment schedule. If, however, based on all the facts and circum-
stances as of the issue date, it is more likely than not that
the Debt Security's stated payment schedule will not occur,
then, in general, the yield and maturity of the Debt Security
are computed based on the payment schedule most likely to oc-
cur.
Notwithstanding the general rules for determining
yield and maturity in the case of Debt Securities subject to
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contingencies, if the Company has an unconditional option or
options to redeem a Debt Security, or the Holder has an uncon-
ditional option or options to cause a Debt Security to be re-
purchased, prior to the Debt Security's stated maturity, then
(i) in the case of an option or options of the Company, the
Company will be deemed to exercise or not exercise an option or
combination of options in the manner that minimizes the yield
on the Debt Security and (ii) in the case of an option or op-
tions of the Holder, the Holder will be deemed to exercise or
not exercise an option or combination of options in the manner
that maximizes the yield on the Debt Security. For purposes of
those calculations, the yield on the Debt Security is deter-
mined by using any date on which the Debt Security may be re-
deemed or repurchased as the maturity date and the amount pay-
able on such date in accordance with the terms of the Debt Se-
curity as the principal amount payable at maturity.
If a contingency (including the exercise of an op-
tion) actually occurs or does not occur contrary to an assump-
tion made according to the above rules (a "change in circum-
stances") then, except to the extent that a portion of the Debt
Security is repaid as a result of a change in circumstances and
solely for purposes of the accrual of OID, the yield and matu-
rity of the Debt Security are redetermined by treating the Debt
Security as reissued on the date of the change in circumstances
for an amount equal to the Debt Security's adjusted issue price
on that date.
Election to Treat All Interest as Original Issue Dis-
count. A U.S. Holder may elect to include in gross income all
interest that accrues on a Debt Security using the constant-
yield method described above under the heading "Original Issue
Discount -- General", with the modifications described below.
For purposes of this election, interest includes stated inter-
est, OID, de minimis original issue discount, market discount,
de minimis market discount and unstated interest, as adjusted
by any amortizable bond premium (described below under "Debt
Securities Purchased at a Premium") or acquisition premium.
In applying the constant-yield method to a Debt Secu-
rity with respect to which this election has been made, the
issue price of the Debt Security will equal the electing U.S.
Holder's adjusted basis in the Debt Security immediately after
its acquisition, the issue date of the Debt Security will be
the date of its acquisition by the electing U.S. Holder, and no
payments on the Debt Security will be treated as payments of
qualified stated interest. This election will generally apply
only to the Debt Security with respect to which it is made and
may not be revoked without the consent of the IRS. If this
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election is made with respect to a Debt Security with amortiz-
able bond premium, then the electing U.S. Holder will be deemed
to have elected to apply amortizable bond premium against in-
terest with respect to all debt instruments with amortizable
bond premium (other than debt instruments the interest on which
is excludible from gross income) held by the electing U.S.
Holder as of the beginning of the taxable year in which the
Debt Security with respect to which the election is made is
acquired or thereafter acquired. The deemed election with re-
spect to amortizable bond premium may not be revoked without
the consent of the IRS.
If the election to apply the constant-yield method to
all interest on a Debt Security is made with respect to a Mar-
ket Discount Debt Security, the electing United States Holder
will be treated as having made the election discussed below
under "Market Discount" to include market discount in income
currently over the life of all debt instruments held or there-
after acquired by such U.S. Holder.
Floating Rate Debt Securities. Debt Securities that
bear interest at a floating rate ("Floating Rate Debt Securi-
ties") generally will bear interest at a "qualified floating
rate" and thus will be treated as "variable rate debt instru-
ments" under the OID Regulations. A Floating Rate Debt Secu-
rity will qualify as a "variable rate debt instrument" under
the OID Regulations if (a) its issue price does not exceed the
total noncontingent principal payments due under the Floating
Rate Debt Security by more than a specified de minimis amount
and (b) it provides for stated interest, paid or compounded at
least annually, at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more quali-
fied floating rates, (iii) a single objective rate, or (iv) a
single fixed rate and a single objective rate that is a quali-
fied inverse floating rate.
A "qualified floating rate" is any variable rate
where variations in the value of such rate can reasonably be
expected to measure contemporaneous variations in the cost of
newly borrowed funds in the currency in which the Floating Rate
Debt Security is denominated. Although a multiple of a quali-
fied floating rate will generally not itself constitute a qual-
ified floating rate, a variable rate equal to the product of a
qualified floating rate and a fixed multiple that is greater
than zero but not more than 1.35 will constitute a qualified
floating rate. A variable rate equal to the product of a qual-
ified floating rate and a fixed multiple that is greater than
zero but not more than 1.35, increased or decreased by a fixed
rate, will also constitute a qualified floating rate. In addi-
tion, under the OID Regulations, two or more qualified floating
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rates that can reasonably be expected to have approximately the
same values throughout the term of the Floating Rate Debt Secu-
rity (e.g., two or more qualified floating rates with values
within 25 basis points of each other as determined on the
Floating Rate Debt Security's issue date) will be treated as a
single qualified floating rate. Notwithstanding the foregoing,
a variable rate that would otherwise constitute a qualified
floating rate but which is subject to one or more restrictions
such as a maximum numerical limitation (i.e., a cap) or a
minimum numerical limitation (i.e., a floor) may, under certain
circumstances, fail to be treated as a qualified floating rate
under the OID Regulations unless such cap or floor is fixed
throughout the term of the Note.
An "objective rate" is a rate that is not itself a
qualified floating rate but which is determined using a single
fixed formula and which is based upon (i) one or more qualified
floating rates, (ii) one or more rates where each rate would be
a qualified floating rate for a debt instrument denominated in
a currency other than the currency in which the Floating Rate
Debt Security is denominated, (iii) either the yield or changes
in the price of one or more items of actively traded personal
property (other than stock or debt of the issuer or a related
party) or (iv) a combination of objective rates. The OID Regu-
lations also provide that other variable interest rates may be
treated as objective rates if so designated by the IRS in the
future. Despite the foregoing, a variable rate of interest on
a Floating Rate Debt Security will not constitute an objective
rate if it is reasonably expected that the average value of
such rate during the first half of the Floating Rate Debt Secu-
rity's term will be either significantly less than or signifi-
cantly greater than the average value of the rate during the
final half of the Floating Rate Debt Security's term. A "qual-
ified inverse floating rate" is any objective rate where such
rate is equal to a fixed rate minus a qualified floating rate,
as long as variations in the rate can reasonably be expected to
inversely reflect contemporaneous variations in the cost of
newly borrowed funds. The OID Regulations also provide that if
a Floating Rate Debt Security provides for stated interest at a
fixed rate for an initial period of less than one year followed
by a variable rate that is either a qualified floating rate or
an objective rate and if the variable rate on the Floating Rate
Debt Security's issue date is intended to approximate the fixed
rate (e.g., the value of the variable rate on the issue date
does not differ from the value of the fixed rate by more than
25 basis points), then the fixed rate and the variable rate
together will constitute either a single qualified floating
rate or objective rate, as the case may be.
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A qualified floating rate or objective rate in effect
at any time during the term of the instrument must be set at a
"current value" of that rate. A "current value" of a rate is
the value of the rate on any day that is no earlier than 3
months prior to the first day on which that value is in effect
and no later than 1 year following that first day.
If a Floating Rate Debt Security that provides for
stated interest at either a single qualified floating rate or a
single objective rate throughout the term thereof qualifies as
a "variable rate debt instrument" under the OID Regulations,
then any stated interest on such Note which is unconditionally
payable in cash or property (other than debt instruments of the
issuer) at least annually will constitute qualified stated in-
terest and will be taxed accordingly. Thus, a Floating Rate
Debt Security that provides for stated interest at either a
single qualified floating rate or a single objective rate
throughout the term thereof and that qualifies as a "variable
rate debt instrument" under the OID Regulations will generally
not be treated as having been issued with OID unless the Float-
ing Rate Debt Security is issued at a "true" discount (i.e., at
a price below the Note's stated principal amount) in excess of
a specified de minimis amount. OID on such a Floating Rate Debt
Security arising from "true" discount is allocated to an ac-
crual period using the constant yield method described above by
assuming that the variable rate is a fixed rate equal to (i) in
the case of a qualified floating rate or qualified inverse
floating rate, the value as of the issue date, of the qualified
floating rate or qualified inverse floating rate, or (ii) in
the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is
reasonably expected for the Floating Rate Debt Security.
In general, any other Floating Rate Debt Security
that qualifies as a "variable rate debt instrument" will be
converted into an "equivalent" fixed rate debt instrument for
purposes of determining the amount and accrual of OID and qual-
ified stated interest on the variable Note. The OID Regula-
tions generally require that such a Floating Rate Debt Security
be converted into an "equivalent" fixed rate debt instrument by
substituting any qualified floating rate or qualified inverse
floating rate provided for under the terms of the Floating Rate
Debt Security with a fixed rate equal to the value of the qual-
ified floating rate or qualified inverse floating rate, as the
case may be, as of the Floating Rate Debt Security's issue
date. Any objective rate (other than a qualified inverse
floating rate) provided for under the terms of the Floating
Rate Debt Security is converted into a fixed rate that reflects
the yield that is reasonably expected for the Floating Rate
Debt Security. In the case of a Floating Rate Debt Security
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that qualifies as a "variable rate debt instrument" and pro-
vides for stated interest at a fixed rate in addition to either
one or more qualified floating rates or a qualified inverse
floating rate, the fixed rate is initially converted into a
qualified floating rate (or a qualified inverse floating rate,
if the Floating Rate Debt Security provides for a qualified
inverse floating rate). Under such circumstances, the quali-
fied floating rate or qualified inverse floating rate that re-
places the fixed rate must be such that the fair market value
of the Floating Rate Debt Security as of the Floating Rate Debt
Security's issue date is approximately the same as the fair
market value of an otherwise identical debt instrument that
provides for either the qualified floating rate or qualified
inverse floating rate rather than the fixed rate. Subsequent
to converting the fixed rate into either a qualified floating
rate or a qualified inverse floating rate, the Floating Rate
Debt Security is then converted into an "equivalent" fixed rate
debt instrument in the manner described above.
Once the Floating Rate Debt Security is converted
into an "equivalent" fixed rate debt instrument pursuant to the
foregoing rules, the amount of OID and qualified stated inter-
est, if any, are determined for the "equivalent" fixed rate
debt instrument by applying the general OID rules to the "equi-
valent" fixed rate debt instrument and a U.S. Holder of the
Floating Rate Debt Security will account for such OID and qual-
ified stated interest as if the U.S. Holder held the "equiva-
lent" fixed rate debt instrument. Each accrual period appro-
priate adjustments will be made to the amount of qualified
stated interest or OID assumed to have been accrued or paid
with respect to the "equivalent" fixed rate debt instrument in
the event that such amounts differ from the actual amount of
interest accrued or paid on the Floating Rate Debt Security
during the accrual period.
If a Floating Rate Debt Security, such as a Debt Se-
curity the payments on which are determined by reference to any
index, does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Floating Rate Debt Security
would be treated as a contingent payment debt obligation. It
is not entirely clear under current law how a Floating Rate
Debt Security would be taxed if such Note were treated as a
contingent payment debt obligation. The proper United States
Federal income tax treatment of Floating Rate Debt Securities
that are treated as contingent payment debt obligations will be
more fully described in the applicable Pricing Supplement.
Short-Term Debt Securities. In general, an indi-
vidual or other cash basis United States Holder of a short-term
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Debt Security is not required to accrue OID (as specially de-
fined below for the purposes of this paragraph) for United
States federal income tax purposes unless it elects to do so
(but may be required to include any stated interest in income
as the interest is received). Accrual basis U.S. Holders and
certain other U.S. Holders, including banks, regulated invest-
ment companies, dealers in securities, common trust funds, U.S.
Holders who hold Debt Securities as part of certain identified
hedging transactions, certain pass-thru entities and cash basis
U.S. Holders who so elect, are required to accrue OID on short-
term Debt Securities on either a straight-line basis or under
the constant-yield method (based on daily compounding), at the
election of the U.S. Holder. In the case of a U.S. Holder not
required and not electing to include OID in income currently,
any gain realized on the sale or retirement of the short-term
Debt Security will be ordinary income to the extent of the OID
accrued on a straight-line basis (unless an election is made to
accrue the OID under the constant-yield method) through the
date of sale or retirement. U.S. Holders who are not required
and do not elect to accrue OID on short-term Debt Securities
will be required to defer deductions for interest on borrowings
allocable to short-term Debt Securities in an amount not ex-
ceeding the deferred income until the deferred income is real-
ized.
For purposes of determining the amount of OID subject
to these rules, all interest payments on a short-term Debt Se-
curity, including stated interest, are included in the short-
term Debt Security's stated redemption price at maturity.
Foreign Currency Discount Debt Securities. OID for
any accrual period on a Discount Debt Security that is denomi-
nated in, or determined by reference to, a foreign currency
will be determined in the foreign currency and then translated
into U.S. dollars in the same manner as stated interest accrued
by an accrual basis U.S. Holder, as described under "Payments
of Interest". Upon receipt of an amount attributable to OID
(whether in connection with a payment of interest or the sale
or retirement of a Debt Security), a U.S. Holder may recognize
ordinary income or loss.
MARKET DISCOUNT
A Debt Security, other than a short-term Debt Secu-
rity, will be treated as purchased at a market discount (a
"Market Discount Debt Security") if (i) the amount for which a
United States Holder purchased the Debt Security is less than
the Debt Security's issue price (as determined above under
"Original Issue Discount -- General") and (ii) the Debt Secu-
rity's stated redemption price at maturity or, in the case of a
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Discount Debt Security, the Debt Security's "revised issue
price", exceeds the amount for which the U.S. Holder purchased
the Debt Security by at least 1/4 of 1 percent of such Debt
Security's stated redemption price at maturity or revised issue
price, respectively, multiplied by the number of complete years
to the Debt Security's maturity. If such excess is not suf-
ficient to cause the Debt Security to be a Market Discount Debt
Security, then such excess constitutes "de minimis market dis-
count". The Code provides that, for these purposes, the "re-
vised issue price" of a Debt Security generally equals its is-
sue price, increased by the amount of any OID that has accrued
on the Debt Security.
Any gain recognized on the maturity or disposition of
a Market Discount Debt Security will be treated as ordinary in-
come to the extent that such gain does not exceed the accrued
market discount on such Debt Security. Alternatively, a U.S.
Holder of a Market Discount Debt Security may elect to include
market discount in income currently over the life of the Debt
Security. Such an election shall apply to all debt instruments
with market discount acquired by the electing United States
Holder on or after the first day of the first taxable year to
which the election applies. This election may not be revoked
without the consent of the IRS.
Market discount on a Market Discount Debt Security
will accrue on a straight-line basis unless the United States
Holder elects to accrue such market discount on a constant-
yield method. Such an election shall apply only to the Debt
Security with respect to which it is made and may not be re-
voked without the consent of the IRS. A United States Holder
of a Market Discount Debt Security that does not elect to in-
clude market discount in income currently generally will be
required to defer deductions for interest on borrowings al-
locable to such Debt Security in an amount not exceeding the
accrued market discount on such Debt Security until the matu-
rity or disposition of such Debt Security.
DEBT SECURITIES PURCHASED AT A PREMIUM
A U.S. Holder that purchases a Debt Security for an
amount in excess of its principal amount may elect to treat
such excess as "amortizable bond premium", in which case the
amount required to be included in the U.S. Holder's income each
year with respect to interest on the Debt Security will be re-
duced by the amount of amortizable bond premium allocable
(based on the Debt Security's yield to maturity) to such year.
In the case of a Debt Security that is denominated in, or de-
termined by reference to a foreign currency, bond premium will
be computed in units of foreign currency, and amortizable bond
-71-<PAGE>
premium will reduce interest income in units of the foreign
currency. At the time amortized bond premium offsets interest
income, exchange gain or loss (taxable as ordinary income or
loss) is realized measured by the difference between exchange
rates at that time and at the time of the acquisition of the
Debt Securities. Any election to amortize bond premium shall
apply to all bonds (other than bonds the interest on which is
excludible from gross income) held by the U.S. Holder at the
beginning of the first taxable year to which the election ap-
plies or thereafter acquired by the U.S. Holder, and is ir-
revocable without the consent of the IRS. See also "Original
Issue Discount -- Election to Treat All Interest as Original
Issue Discount".
PURCHASE, SALE AND RETIREMENT OF THE DEBT SECURITIES
A U.S. Holder's tax basis in a Debt Security will
generally be its U.S. dollar cost (as defined below), increased
by the amount of any OID or market discount included in the
U.S. Holder's income with respect to the Debt Security and the
amount, if any, of income attributable to de minimis original
issue discount and de minimis market discount included in the
U.S. Holder's income with respect to the Debt Security, and
reduced by (i) the amount of any payments that are not quali-
fied stated interest payments, and (ii) the amount of any amor-
tizable bond premium applied to reduce interest on the Debt
Security. The U.S. dollar cost of a Debt Security purchased
with a foreign currency will generally be the U.S. dollar value
of the purchase price on the date of purchase or, in the case
of Debt Securities traded on an established securities market,
as defined in the applicable Treasury Regulations, that are
purchased by a cash basis U.S. Holder (or an accrual basis U.S.
Holder that so elects), on the settlement date for the pur-
chase.
A U.S. Holder will generally recognize gain or loss
on the sale or retirement of a Debt Security equal to the dif-
ference between the amount realized on the sale or retirement
and the tax basis of the Debt Security. The amount realized on
a sale or retirement for an amount in foreign currency will be
the U.S. dollar value of such amount on the date of sale or
retirement or, in the case of Debt Securities traded on an es-
tablished securities market, as defined in the applicable Trea-
sury Regulations, sold by a cash basis U.S. Holder (or an ac-
crual basis U.S. Holder that so elects), on the settlement date
for the sale. Except to the extent described above under
"Original Issue Discount -- Short-Term Debt Securities" or
"Market Discount" or described in the next succeeding paragraph
or attributable to accrued but unpaid interest, gain or loss
recognized on the sale or retirement of a Debt Security will be
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capital gain or loss and will be long-term capital gain or loss
if the Debt Security was held for more than one year.
Gain or loss recognized by a U.S. Holder on the sale
or retirement of a Debt Security that is attributable to
changes in exchange rates will be treated as ordinary income or
loss. However, exchange gain or loss is taken into account
only to the extent of total gain or loss realized on the trans-
action.
EXCHANGE OF AMOUNTS IN OTHER AND U.S. DOLLARS
Foreign currency received as interest on a Debt Secu-
rity or on the sale or retirement of a Debt Security will have
a tax basis equal to its U.S. dollar value at the time such
interest is received or at the time of such sale or retirement.
Foreign currency that is purchased will generally have a tax
basis equal to the U.S. dollar value of the foreign currency on
the date of purchase. Any gain or loss recognized on a sale or
other disposition of a foreign currency (including its use to
purchase Debt Securities or upon exchange for U.S. dollars)
will be ordinary income or loss.
AMORTIZING DEBT SECURITIES
The applicable Pricing Supplement will contain a dis-
cussion of special United States federal income tax rules ap-
plicable to Debt Securities that provide for partial principal
payments prior to Stated Maturity.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States
Alien Holder" is any holder who or that is not a U.S. Holder.
Under present United States federal income and estate
tax law and subject to the discussion of real property holding
corporations and backup withholding below:
(i) payments of principal, premium (if any) and in-
terest (including OID) by the Company or any of its paying
agents to any holder of a Debt Security who or which is a
United States Alien Holder will not be subject to United
States federal withholding tax if, in the case of interest
or OID, (a) the beneficial owner of the Debt Security does
not actually or constructively own 10% or more of the to-
tal combined voting power of all classes of stock of the
Company entitled to vote, (b) the beneficial owner of the
Debt Security is not a controlled foreign corporation that
is related to the Company through stock ownership, (c) the
-73-<PAGE>
interest on the Debt Security is not contingent interest
to which Section 871(h)(4)(A) of the Code is applicable,
and (d) either (A) the beneficial owner of the Debt Secu-
rity certifies to the Company or its agent, under penal-
ties of perjury, that it is not a U.S. Holder and provides
its name and address or (B) a securities clearing organi-
zation, bank or other financial institution that holds
customers' securities in the ordinary course of its trade
or business (a "financial institution") and holds the Debt
Security certifies to the Company or its agent under pen-
alties of perjury that such statement has been received
from the beneficial owner by it or by a financial institu-
tion between it and the beneficial owner and furnishes the
payor with a copy thereof;
(ii) a United States Alien Holder of a Debt Security
will not be subject to United States federal withholding
tax on any gain realized on the sale or exchange of a Debt
Security; and
(iii) a Debt Security held by an individual who at
death is not a citizen or resident of the United States
will not be includible in the individual's gross estate
for purposes of the United States federal estate tax as a
result of the individual's death if the individual did not
actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Com-
pany entitled to vote, the income on the Debt Security
would not have been effectively connected with a United
States trade or business of the individual at the individ-
ual's death and in the case of a Debt Security on which
all or a portion of the interest payments are contingent
interest to which Section 871(h)(4)(A) is applicable, only
to the extent that the value of such Debt Security is not
allocable to such interest.
FEDERAL TAX CONSIDERATIONS AS A
REAL PROPERTY HOLDING CORPORATION
The Company believes that the Company would likely
constitute a United States real property holding corporation
within the meaning of the Code. Under certain provisions of
the Code and Treasury Regulations thereunder, gain realized by
a United States Alien Holder who would not ordinarily be sub-
ject to U.S. federal income tax on gains would, under certain
circumstances, be subject to tax (the "special tax") on gain
realized on the disposition (and possible withholding tax on
the proceeds from such disposition (the "withholding tax")) of
Securities, notwithstanding such United States Alien Holder's
lack of other connections with the United States. However,
-74-<PAGE>
because the Common Stock of the Company is "regularly traded on
an established securities market" (within the meaning of Sec-
tion 897(c)(3) of the Code), under the Code and Temporary Trea-
sury Regulations now in effect, the special tax and the with-
holding tax would apply to the disposition by a non-U.S. person
of an interest in a class of Securities that is not regularly
traded on an established securities market only if on the date
such interest was acquired by such person it had a fair market
value greater than the fair market value on that date of 5% of
the regularly traded class of Securities with the lowest fair
market value. However, if such non-regularly traded class of
Securities is convertible into a regularly traded class of Se-
curities, the special tax and the withholding tax would apply
to the disposition of an interest in such non-regularly traded
class of Securities only if on the date such interest was ac-
quired by such person it had a fair market value greater than
the fair market value on that date of 5% of the regularly
traded class of Securities into which it is convertible. The
special tax (but, except in certain circumstances, not the
withholding tax) would likewise apply to a disposition of an
interest in a class of Securities that is regularly traded on
an established securities market by a non-U.S. person who ben-
eficially owns, directly or indirectly, more than 5% of such
class of Securities at any time during the five-year period
immediately preceding the disposition of the interest.
BACKUP WITHHOLDING AND INFORMATION REPORTING
U.S. Holders. In general, information reporting re-
quirements will apply to payments of principal, any premium and
interest on a Debt Security and the proceeds of the sale of a
Debt Security before maturity within the United States to, and
to the accrual of OID on a Discount Debt Security with respect
to, non-corporate U.S. Holders, and "backup withholding" at a
rate of 31% will apply to such payments and to payments of OID
if the United States Holder fails to provide an accurate tax-
payer identification number or to report all interest and divi-
dends required to be shown on its federal income tax returns.
United States Alien Holders. Information reporting
and backup withholding will not apply to payments of principal,
premium (if any) and interest (including OID) made by the Com-
pany or a paying agent to a United States Alien Holder on a
Debt Security if the certification described in clause (i)(c)
under "United States Alien Holders" above is received, provided
that the payor does not have actual knowledge that the holder
is a United States person.
Payments of the proceeds from the sale by a United
States Alien Holder of a Debt Security made to or through a
-75-<PAGE>
foreign office of a broker will not be subject to information
reporting or backup withholding, except that if the broker is a
United States person, a controlled foreign corporation for
United States tax purposes or a foreign person 50% or more of
whose gross income is effectively connected with a United
States trade or business for a specified three-year period,
information reporting may apply to such payments. Payments of
the proceeds from the sale of a Debt Security to or through the
United States office of a broker is subject to information re-
porting and backup withholding unless the holder or beneficial
owner certifies as to its non-United States status or otherwise
establishes an exemption from information reporting and backup
withholding.
THE SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES SET
FORTH ABOVE IS FOR GENERAL INFORMATION ONLY. ALL INVESTORS
SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES OF THE DEBT SECURITIES TO THEM, INCLUDING THE APP-
LICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS AND POSSIBLE CHANGES IN TAX LAW.
PLAN OF DISTRIBUTION
Hecla may sell the Securities in and/or outside the
United States: (i) through underwriters or dealers which may
include Merrill Lynch & Co. and Salomon Brothers Inc; (ii) di-
rectly to a limited number of purchasers or to a single pur-
chaser; or (iii) through agents. The applicable Prospectus
Supplement with respect to the Offered Securities will set
forth the terms of the offering of the Offered Securities, in-
cluding the name or names of any underwriters or agents, if
any, the purchase price of the Offered Securities and the pro-
ceeds to Hecla from such sale, any delayed delivery arrange-
ments, any underwriting discounts and other items constituting
underwriters' compensation, any initial public offering price
and any discounts or concessions allowed or reallowed or paid
to dealers. Any initial public offering price and any dis-
counts or concessions allowed or reallowed or paid to dealers
may be changed from time to time.
If underwriters are used in the sale, the Offered
Securities will be acquired by the underwriters for their own
account and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the
time of sale. The Securities may be offered to the public ei-
ther through underwriting syndicates represented by one or more
managing underwriters or directly by one or more firms acting
as underwriters. The underwriter or underwriters with respect
to a particular underwritten offering of Securities to be named
-76-<PAGE>
in the Prospectus Supplement relating to such offering and, if
an underwriting syndicate is used, the managing underwriter or
underwriters will be set forth on the cover of such Prospectus
Supplement. Unless otherwise set forth in the Prospectus Sup-
plement relating thereto, the obligations of the underwriters
to purchase the Offered Securities will be subject to condi-
tions precedent and the underwriters will be obligated to pur-
chase all the Offered Securities if any are purchased.
If dealers are utilized in the sale of Offered Secu-
rities in respect of which this Prospectus is delivered, Hecla
will sell such Offered Securities to the dealers as principals.
The dealers may then resell such Offered Securities to the pub-
lic at varying prices to be determined by such dealers at the
time of resale. The names of the dealers and the terms of the
transaction will be set forth in the Prospectus Supplement re-
lating thereto.
If an agent is used in an offering of Offered Secu-
rities, the agent will be named, and the terms of the agency
will be set forth, in the Prospectus Supplement relating
thereto. Unless otherwise indicated in such Prospectus Sup-
plement, an agent will act on a best efforts basis for the pe-
riod of its appointment.
The Securities may be sold directly by Hecla or
through agents designated by Hecla from time to time. Any
agent involved in the offer or sale of the Offered Securities
in respect to which this Prospectus is delivered will be named,
and any commissions payable by Hecla to such agent will be set
forth, in the Prospectus Supplement relating thereto. Unless
otherwise indicated in the Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of
its appointment.
The Securities may be sold directly by Hecla to in-
stitutional investors or others, who may be deemed to be under-
writers within the meaning of the Securities Act with respect
to any resale thereof. The terms of any such sales, including
the terms of any bidding or auction process, will be described
in the Prospectus Supplement relating thereto.
Agents, dealers and underwriters may be entitled un-
der agreements entered into with Hecla to indemnification by
Hecla against certain civil liabilities, including liabilities
under the Securities Act, or to contribution with respect to
payments which such agents, dealers or underwriters may be re-
quired to make in respect thereof. Agents, dealers and under-
writers may be customers of, engage in transactions with, or
perform services for Hecla in the ordinary course of business.
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The Debt Securities, the Preferred Stock, the
Depositary Shares and the Warrants will each be a new issue of
Securities ("New Issues") with no established trading market.
Underwriters, dealers and agents to whom New Issues are sold by
the Company for public offering and sale may make a market in
such New Issues, but such underwriters, dealers and agents will
not be obligated to do so and may discontinue any market making
at any time without notice. The Securities (other than shares
of Common Stock) may or may not be listed on a national
securities exchange. No assurances can be given as to the
future liquidity of the trading market, if any, for any
Securities issued.
LEGAL OPINIONS
Certain legal matters in connection with the Securi-
ties offered hereby will be passed upon for Hecla by Wachtell,
Lipton, Rosen & Katz, New York, New York, and, unless otherwise
specified in the applicable Prospectus Supplement, for any un-
derwriters or agents by Shearman & Sterling, Toronto, Canada
and New York, New York.
EXPERTS
The consolidated balance sheets as of December 31,
1993 and 1994 and the consolidated statements of operations,
changes in shareholders' equity and cash flows for each of the
three years in the three-year period ended December 31, 1994
included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1994, as amended by the Company's Form
10-K/A (Amendment No. 1), incorporated by reference in this
Prospectus have been incorporated herein in reliance on the
report, which includes an explanatory paragraph concerning
changes in accounting for income taxes and post-retirement ben-
efits other than pensions in 1992, and accounting for invest-
ments in 1994 of Coopers & Lybrand L.L.P., independent accoun-
tants, given on the authority of that firm as experts in
accounting and auditing.
The report of Coopers & Lybrand on the consolidated
financial statements of the Company as of December 31, 1993 and
for each of the two years in the period ended December 31, 1993
is based in part on the report of Deloitte & Touche, chartered
accountants, on the financial statements of Equinox Resources,
Ltd., as of December 31, 1993, and for the year then ended, the
two months ended December 31, 1992, and the year ended October
31, 1992, given on the authority of that firm as experts in
accounting and auditing.
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TABLE OF CONTENTS
Page
PROSPECTUS
Available Information.............................. 1
Information Incorporated by Reference.............. 2
The Company........................................ 4
Risk Factors....................................... 5
Use of Proceeds.................................... 20
Ratio of Earnings to Fixed Charges................. 20
Description of Debt Securities..................... 21
Description of Preferred Stock..................... 44
Description of Common Stock........................ 46
Description of Depositary Shares................... 47
Description of Warrants............................ 51
Current Capital Structure.......................... 52
Certain Provisions of the Amended and Restated
Certificate of Incorporation and By-Laws......... 57
Certain U.S. Federal Income Tax Considerations..... 59
Plan of Distribution............................... 76
Legal Opinions..................................... 78
Experts............................................ 78
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
The expenses payable by Hecla in connection with the
offering described in this Registration Statement (other than
underwriting discounts and commissions) are estimated (other
than the Commission's registration fee) as follows:
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee.. $ 34,482.76
Printing expenses.................................... 100,000.00
Accounting fees and expenses......................... 70,000.00
Legal fees and expenses.............................. 80,000.00
Blue Sky qualification fees and expenses............. 15,000.00
Trustee's and Warrant Agent's fees................... 30,000.00
Fees of rating agencies.............................. 60,000.00
Miscellaneous........................................ 12,517.24
Total...................................... $402,000.00
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article IX of the registrant's Certificate of Incor-
poration provides:
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section I. Limitation of Liability. A director of the
Company shall not be personally liable to the Company or its
shareholders for monetary damages for breach of fiduciary duty
as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its shareholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, or
(iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation
Law is amended after approval by the shareholders of this ar-
ticle to authorize corporate action further eliminating or lim-
iting the personal liability of directors, then the liability
of a director of the Company shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corpora-
tion Law, as so amended. This paragraph shall not eliminate or
limit the liability of a director for any act or omission which
occurred prior to the effective date of its adoption. Any re-
peal or modification of this paragraph by the shareholders of
II-1<PAGE>
the Company shall not adversely affect any right or protection
of a director of the Company existing at the time of such re-
peal or modification.
SECTION II. Indemnification and Insurance. A. Right to
Indemnification of Director, Officers and Employees. Each per-
son who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or pro-
ceeding, whether civil, criminal, administrative or investiga-
tive (hereinafter a "proceeding"), by reason of the fact that
he or she is or was a director, officer or employee of the Com-
pany or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such pro-
ceeding is alleged action in an official capacity as a direc-
tor, officer or employee or in any other capacity while serving
as a director, officer or employee, shall be indemnified and
held harmless by the Company to the fullest extent authorized
by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amend-
ment only to the extent that such amendment permits the Company
to provide broader indemnification rights than permitted prior
thereto), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penal-
ties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith and such
indemnification shall continue as to an indemnitee who has
ceased to be a director, officer or employee and shall inure to
the benefit of the indemnitee's heirs, executors and adminis-
trators; provided, however, that, except as provided in para-
graph (b) hereof with respect to proceedings to enforce rights
to indemnification, the Company shall indemnify any such indem-
nitee in connection with a proceeding (or part thereof) initi-
ated by such indemnitee only if such proceeding (or part
thereof) was authorized by the board of directors of the Com-
pany. The right to indemnification conferred in this Section
shall be a contract right and shall include the right to be
paid by the Company the expenses incurred in defending any such
proceeding in advance of its final disposition (hereinafter an
"advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a
director or officer (and not in ay other capacity in which ser-
vice was or is rendered such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made
only upon delivery to the Company or an undertaking (hereinaf-
ter an "undertaking"), by or on behalf of such indemnitee, to
II-2<PAGE>
repay all amounts so advanced if it shall ultimately be deter-
mined by final judicial decision from which there is no further
right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses
under this Section or otherwise.
B. Right of Indemnitee to Bring Suit. If a claim under
paragraph (a) of this Section is not paid in full by the Com-
pany within sixty days after a written claim has been received
by the Company, except in the case of a claim for an advance-
ment of expenses, in which case the applicable period shall be
twenty days, the indemnitee may at any time thereafter bring
suit against the Company to recover the unpaid amount of the
claim. If successful in whole or in part in any such suit, or
in a suit brought by the Company to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemni-
tee shall be entitled to be paid also the expense of prosecut-
ing or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but
not in a suit brought by the indemnitee to enforce a right to
an advancement of expenses) it shall be a defense that, and
(ii) in any suit by the Company to recover an advancement of
expenses pursuant to the terms of an undertaking the Company
shall be entitled to recover such expenses upon a final adjudi-
cation that, the indemnitee has not met the applicable standard
of conduct set forth in the Delaware General Corporation Law.
Neither the failure of the Company (including its board of di-
rectors, independent legal counsel, or its shareholders) to
have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the
circumstances because the indemnitee has met the applicable
standard of conduct set forth in the Delaware General Corpora-
tion Law, nor an actual determination by the Company (including
its board of directors, independent legal counsel, or its
shareholders) that the indemnitee has not met such applicable
standard of conduct, shall create a presumption that the indem-
nitee has not met the applicable standard of conduct or, in the
case of such a suit brought by the indemnitee, be a defense to
such suit. In any suit brought by the indemnitee to enforce a
right to indemnification or to an advancement of expenses here-
under, or by the Company to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving
that the indemnitee is not entitled to be indemnified, or to
such advancement of expenses, under this Section or otherwise
shall be on the Company.
C. Non-Exclusivity of Rights. The rights to indemnifi-
cation and to the advancement of expenses conferred in this
Section shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, this
II-3<PAGE>
Certificate of Incorporation, By-Law, agreement, vote of share-
holders or disinterested directors or otherwise. The Company
is authorized to enter into contracts of indemnification.
D. Insurance. The Company may maintain insurance, at
its expense, to protect itself and any director, officer, em-
ployee or agent of the Company or another corporation, partner-
ship, joint venture, trust or other enterprise against any ex-
pense, liability or loss, whether or not the Company would have
the power to indemnify such person against such expense, li-
ability or loss under the Delaware General Corporation Law.
E. Indemnification of Agents of the Corporation. The
Company may, to the extent authorized from time to time by the
board of directors, grant rights to indemnification, and to the
advancement of expenses, to any agent of the Company to the
fullest extent of the provisions of this Section with respect
to the indemnification and advancement of expenses of direc-
tors, officers and employees of the Company.
Article VII of the registrant's By-laws provides identi-
cally.
The registrant also maintains a directors' and officers'
liability insurance policy for directors and officers of the
Company and its subsidiaries.
II-4<PAGE>
ITEM 16. EXHIBITS
EXHIBIT
NO. DOCUMENT
3.1(a) Certificate of Incorporation of the Registrant as
amended to date.*
3.1(b) Certificate of Amendment of Certificate of Incor-
poration of the Registrant, dated as of May 16,
1991.*
3.2 By-Laws of the Registrant as amended to date.*
4.1(a) Certificate of Designations, Preferences and
Rights of Series A Junior Participating Preferred
Stock.*
4.1(b) Certificate of Designations, Preferences and
Rights of Series B Cumulative Convertible Pre-
ferred Stock.*
4.2(a) Rights Agreement dated as of May 9, 1986 between
Hecla Mining Company and Manufacturers Hanover
Trust Company, which includes the form of Certifi-
cate of Designation setting forth the terms of the
Series A Junior Participating Preferred Stock of
Hecla Mining Company as Exhibit A, the form of
Right Certificate as Exhibit B and the summary of
Rights to Purchase Preferred Shares as Exhibit C.*
4.2(b) Amendment, dated as of November 9, 1990 to the
Rights Agreement dated as of May 9, 1986 between
Hecla Mining Company and Manufacturers Hanover
Trust Company.*
4.2(c) Second Amendment to Rights Agreement dated Septem-
ber 30, 1991, between Hecla Mining Company and
Manufacturers Hanover Trust Company.*
4.2(d) Hecla Mining Company Notice Letter to Sharehold-
ers, being holders of Rights Certificates, ap-
pointing American Stock Transfer & Trust Company
as Rights Agent, successor to Manufacturers
Hanover Trust Company, effective September 30,
1991, pursuant to Section 21 of the Rights Agree-
ment.*
4.3(a) Form of Deposit Agreement.+
4.3(b) Form of Depositary Receipt (included in Exhibit
4.3(a)).+
II-5<PAGE>
4.3(c) Form of Indenture between Hecla and _____________,
Trustee, with respect to Senior Debt Securities
("Senior Indenture").+
4.3(d) Form of Indenture between Hecla and
____________________, Trustee, with respect to
Subordinated Debt Securities ("Subordinated Inden-
ture").+
4.3(e) Form of Debt Warrant Agreement.+
4.3(f) Form of Debt Warrant Certificate (included as
Exhibit A to Exhibit 4.3(e) hereto).+
4.3(g) Form of Preferred Stock Warrant Agreement.+
4.3(h) Form of Preferred Stock Warrant Certificate
(included as Exhibit A to Exhibit 4.3(g) hereto).+
4.3(i) Form of Common Stock Warrant Agreement.+
4.3(j) Form of Common Stock Warrant Certificate (included
as Exhibit A to Exhibit 4.3(i) hereto).+
5. Legal opinion of Wachtell, Lipton, Rosen & Katz.
12. Statement of Computation of Ratio of Earnings to
Fixed Charges.
23.1 Consent of Coopers & Lybrand L.L.P. to incorpora-
tion by reference of their report dated February
3, 1995 on the consolidated financial statements
of the Registrant.
23.2 Consent of Wachtell, Lipton, Rosen & Katz
(included in Exhibit 5).
23.3 Consent of Deloitte & Touche, Chartered Accoun-
tants.
23.4 Consent of Hawley Troxell Ennis & Hawley.
23.5 Consent of Evans, Keane.
24. Power of Attorney.+
+Previously filed as an exhibit to this Registration State-
ment.
*These exhibits were filed as indicated on the following
table and are incorporated herein by this reference thereto:
II-6<PAGE>
CORRESPONDING EXHIBIT IN ANNUAL REPORT ON FORM
10-K, QUARTERLY REPORT ON FORM 10-Q, CURRENT
EXHIBIT IN REPORT ON FORM 8-K, PROXY STATEMENT OR
THIS REPORT REGISTRATION STATEMENT, AS INDICATED
3.1(a) 3.1 (10-K for 1987 -- File No. 1-849110)
3.1(b) 3.1(b) (10-K for 1991 -- File No. 1-8491)
3.2 2 (Current Report on Form 8-K Dated November 9,
1990 -- File No. 1-8491)
4.1(a) 4.1(d)(e) (Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993 -- File No. 1-8491)
4.1(b) 4.5 (Quarterly Report on Form 10-Q for the quar-
ter ended June 30, 1993 -- File No. 1-8491)
4.2(a) 1 (Current Report on Form 8-K Dated May 23, 1986
-- File No. 1-8491)
4.2(b) 1 (Current Report on Form 8-K Dated November 9,
1990 -- File No. 1-8491)
4.2(c) 4.1(c) (10-K for 1991 -- File No. 1-8491)
4.2(d) 4.1(d) (10-K for 1991 -- File No. 1-8491)
II-7<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual
report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide of-
fering thereof.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by sec-
tion 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the reg-
istration statement (or the most recent post-
effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in
the information set forth in the registration state-
ment;
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any mate-
rial change to such information in the registration
statement;
provided, however, that paragraphs (i) and (ii) above
do not apply if the information required to be in-
cluded in a post-effective amendment by those para-
graphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of
the Exchange Act that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any lia-
bility under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration state-
ment relating to the securities offered therein, and the
II-8<PAGE>
offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) that, for purposes of determining any liability
under the Securities Act of 1933, each filing of the reg-
istrant's annual report pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 (and, where appli-
cable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Ex-
change Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
(5) if securities to be registered are to be offered
to existing security holders pursuant to warrants or
rights and any securities not taken by security holders
are to be offered to the public, to supplement the pro-
spectus, after the expiration of the subscription period,
to set forth the results of the subscription offer, the
transactions by the underwriters during the subscription
period, the amount of unsubscribed securities to be pur-
chased by the underwriters, and the terms of any subse-
quent reoffering thereof. If any public offering by the
underwriters is to be made on terms differing from those
set forth on the cover page of the prospectus, a post-
effective amendment will be filed to set forth the terms
of such offering.
(6) if securities to be registered are to be offered
at competitive bidding:
(i) to use its best efforts to distribute prior
to the opening of bids, to prospective bidders, un-
derwriters, and dealers, a reasonable number of cop-
ies of a prospectus which at that time meets the re-
quirements of Section 10(a) of the Act, and relating
to the securities offered at competitive bidding, as
contained in the registration statement, together
with any supplements thereto, and
(ii) to file an amendment to the registration
statement reflecting the results of bidding, the
terms of the reoffering and related matters to the
II-9<PAGE>
extent required by the applicable form, not later
than the first use, authorized by the issuer after
the opening of bids, of a prospectus relating to the
securities offered at competitive bidding, unless no
further public offering of such securities by the
issuer and no reoffering of such securities by the
purchasers is proposed to be made.
(7) For purposes of determining any liability under
the Securities Act of 1933, the information omitted from
the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement
as of the time it was declared effective.
(8) For the purpose of determining any liability
under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such se-
curities at that time shall be deemed to be the initial
bona fide offering thereof.
(9) to file an application for the purpose of deter-
mining the eligibility of the trustee to act under subsec-
tion (a) of Section 310 of the Trust Indenture Act in ac-
cordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Act.
II-10<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds
to believe that it meets all of requirements for filing on Form
S-3, and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly autho-
rized, in the City of Coeur d'Alene, State of Idaho, on the 31
day of August, 1995.
HECLA MINING COMPANY
By: /s/ ARTHUR BROWN
Arthur Brown
Chairman, President and
Chief Executive Officer
II-11<PAGE>
<TABLE>
Pursuant to the requirements of the Securities Act of
1933, this registration statement has been signed by the fol-
lowing persons in the capacities and on the dates indicated:
<CAPTION>
NAME CAPACITY DATE
<S> <C> <C>
/s/ ARTHUR BROWN Chairman, President August 31, 1995
Arthur Brown and Chief Executive
Officer (principal
executive officer)
/s/ JOHN P. STILWELL Vice President Finance August 31, 1995
John P. Stilwell and Treasurer (princi-
pal financial officer)
/s/ JOSEPH T. HEATHERLY Vice President -- August 31, 1995
Joseph T. Heatherly Controller (chief
accounting officer)
* Director August 31, 1995
John E. Clute
* Director August 31, 1995
Joseph Coors, Jr.
* Director August 31, 1995
Leland O. Erdahl
* Director August 31, 1995
William A. Griffith
* Director August 31, 1995
Charles L. McAlpine
* Director August 31, 1995
Jorge E. Ordonez
/s/ MICHAEL B. WHITE Attorney-in-fact for
Michael B. White the persons marked
above with an *
</TABLE>
II-12<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DOCUMENT
5. Legal Opinion of Wachtell, Lipton, Rosen & Katz.
12. Statement of Computation of Ratio of Earnings to
Fixed Charges.
23.1 Consent of Coopers & Lybrand L.L.P. to incorpora-
tion by reference of their report dated February
3, 1995 on the consolidated financial statements
of the Registrant.
23.2 Consent of Wachtell, Lipton, Rosen & Katz
(included in Exhibit 5).
23.3 Consent of Deloitte & Touche, Chartered Accoun-
tants.
23.4 Consent of Hawley Troxell Ennis & Hawley.
23.5 Consent of Evans, Keane.
Exhibit 5
[WACHTELL, LIPTON, ROSEN & KATZ LETTERHEAD]
August 30, 1995
Hecla Mining Company
6500 Mineral Drive
Coeur d'Alene, Idaho 83814
Ladies and Gentlemen:
This opinion is delivered in connection with the Reg-
istration Statement on Form S-3, File No. 33-59659, as amended
(the "Registration Statement"), filed with the Securities and
Exchange Commission under the Securities Act of 1933, as
amended (the "Act"), for the registration of the sale by Hecla
Mining Company (the "Company"), from time to time, of up to
$100,000,000 maximum aggregate initial offering price of senior
and subordinated debt securities (the "Debt Securities"), Pre-
ferred Stock, par value $0.25 per share (the "Preferred
Stock"), depositary shares representing fractional interests in
shares of Preferred Stock (the "Depositary Shares"), Common
Stock, par value $0.25 per share, including the preferred stock
purchase rights attached thereto (the "Common Stock"), and war-
rants to purchase Debt Securities, Preferred Stock or Common
Stock (collectively, the "Warrants"). The Debt Securities, the
Preferred Stock, the Depositary Shares, the Common Stock, and
the Warrants are hereinafter referred to collectively as the
"Securities". Capitalized terms not otherwise defined herein
shall have the meaning ascribed to them in the Registration
Statement.
The Debt Securities will constitute either senior or
subordinated debt of the Company and will be issued under, in
the case of the senior Debt Securities, an indenture to be<PAGE>
between the Company and a bank or trust company as trustee (the
"Senior Debt Indenture"), and in the case of the subordinated
Debt Securities, an indenture to be between the Company and a
bank or trust company as trustee (the "Subordinated Debt Inden-
ture"). The Senior Debt Indenture and the Subordinated Debt
Indenture are hereinafter referred to collectively as the
"Indentures". Drafts of the forms of the Indentures have been
filed as exhibits to the Registration Statement.
Depositary Shares will be deposited under a Deposit
Agreement between the Company and a bank or trust company and
evidenced by Depositary Receipts. A draft of the form of the
Depositary Agreement has been filed as an exhibit to the Regis-
tration Statement.
Warrants will be issued either independently or
together with other Securities and will be issued pursuant to a
Warrant Agreement between the Company and a bank or trust com-
pany as Warrant Agent. Drafts of three forms of the Warrant
Agreements have been filed as exhibits to the Registration
Statement.
We have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents,
corporate records, certificates of public officials, and other
instruments as we have deemed necessary or advisable for pur-
poses of this opinion.
Based upon the foregoing, we are of the opinion that,
except as limited by (i) in the case of paragraphs 1 and 5,
bankruptcy, insolvency, reorganization, moratorium, or other
similar laws now or hereafter in effect relating to creditors'
rights generally, (ii) in the case of paragraphs 1 and 5, gen-
eral principles of equity (regardless of whether enforceability
is considered in a proceeding in equity or at law), (iii) in
the case of paragraph 1, requirements that a claim with respect
to any Debt Securities denominated other than in United States
dollars (or a judgement denominated other than in United States
dollars with respect of such a claim) be converted into United
States dollars at a rate of exchange prevailing on a date
determined pursuant to applicable law, and (iv) in the case of
paragraphs 1 and 5, governmental authority to limit, delay, or
prohibit the making of payments outside the United States or in
foreign currency or currencies, or currency unit or units, or
composite currency or currencies:
1. With respect to the Debt Securities, when the
specific terms of a particular Debt Security (includ-
ing any Debt Security duly issued upon a conversion
for any other Debt Securities, the conversion or<PAGE>
exchange of any shares of Preferred Stock or upon
exercise of any Warrants) and its issuance and sale
have been duly established in accordance with the
Senior Indenture or the Subordinated Indenture, as
the case may be, and such Debt Security has been duly
executed and authenticated in accordance with the
Senior Indenture or Subordinated Indenture, as the
case may be, and duly issued and sold as contemplated
by the Registration Statement and applicable Prospec-
tus Supplement or upon exchange, conversion or exer-
cise in accordance with the terms of any other Secu-
rity that has been validly issued, paid for and
delivered, such Debt Security will constitute the
valid and binding obligation of the Company.
2. With respect to shares of Common Stock, when
certificates representing the shares of Common Stock
have been duly executed, countersigned, registered
and delivered either (i) in accordance with the
applicable definitive purchase, underwriting or simi-
lar agreement approved by the Board of Directors of
the Company upon payment of the consideration there-
for (not less than the par value of the Common Stock)
provided for therein or (ii) upon conversion,
exchange or exercise of any other Security, in
accordance with the terms of such Security, or the
instrument governing such Security providing for such
conversion, exchange or exercise, as approved by the
Board of Directors of the Company, for the consider-
ation approved by the Board of Directors of the Com-
pany (not less than the par value of the Common
Stock), the shares of Common Stock will be legally
issued, fully paid and nonassessable.
3. With respect to shares of Preferred Stock, when (i)
the Board of Directors of the Company has taken all
necessary corporate action to adopt a Certificate of
Designation, Preferences and Rights (a
"Certificate") relating to such Preferred Stock and
the filing of such Certificate with the Secretary of
State of the State of Delaware, and (ii) certificates
representing the shares of Preferred Stock have been
duly executed, countersigned, registered and
delivered either (a) in accordance with the
applicable definitive purchase, underwriting or
similar agreement approved by the Board of Directors
of the Company upon payment of the consideration
therefor (not less than the par value of the
Preferred Stock) provided for therein or (b) upon
conversion, exchange or exercise of any other<PAGE>
Security, in accordance with the terms of such Secu-
rity, or the instrument governing such Security pro-
viding for such conversion, exchange or exercise, as
approved by the Board of Directors of the Company,
for the consideration approved by the Board of Direc-
tors of the Company (not less than the par value of
the Preferred Stock), the shares of Preferred Stock
will be legally issued, fully paid and nonassessable.
4. With respect to the Depositary Shares, when the terms
of Depositary Shares evidenced by Depositary Receipts
are duly established and such Depositary Shares are
issued and sold, in each case, in accordance with the
terms of the Deposit Agreement against the deposit of
validly issued, fully paid and nonassessable shares
of Preferred Stock, and when the Depositary Shares as
evidenced by Depositary Receipts are issued and sold
as contemplated by the Registration Statement and
applicable Prospectus Supplement, such Depositary
Shares will entitle the persons in whose names the
Depositary Receipts evidencing such Depositary Shares
are registered to the rights specified therein and in
the Deposit Agreement.
5. With respect to the Warrants, when the specific terms
of a particular Warrant have been duly established in
conformity with the Warrant Agreement and such
Warrant has been duly executed and countersigned in
accordance with the Warrant Agreement and issued and
sold as contemplated by the Registration Statement
and applicable Prospectus Supplement, such Warrant
will constitute the valid and binding obligation of
the Company.
In connection with the opinions expressed above, we
have assumed with your consent that, at or prior to the time of
the delivery of any such Security, (i) the Board of Directors
of the Company, themselves or as so delegated, shall have
approved the specific sale and issuance of such Security
(including the terms thereof) and shall not have modified or
rescinded the duly authorized issuance and sale of such Secu-
rity, (ii) the Registration Statement shall have been declared
effective and such effectiveness shall not have been terminated
or rescinded, (iii) with respect to paragraph 1, the applicable
Trustee and the applicable Indentures shall have been qualified
under the Trust Indenture Act of 1939, as amended, and the rule
and regulations thereunder (iv) with respect to paragraphs 1 to
5, the Company (a) shall have full power and authority to
execute, deliver and perform the obligations set forth in the<PAGE>
applicable documents, (b) the applicable documents shall have
been duly authorized, executed and delivered by the Company and
(c) the execution and delivery of the applicable documents and
the performance by the Company of its obligations thereunder
shall not have violated, breached or otherwise given rise to a
default under the terms or provisions of its Certificate of
Incorporation or by-laws or of any material contract,
commitment or other obligation to which the Company is a party
and so as to comply with any requirement or restriction imposed
by any court or governmental body having jurisdiction over the
Company, and (v) there will not have occurred any change in law
affecting the validity or enforceability of such Security. We
have also assumed that none of the terms of any Security to be
established subsequent to the date hereof nor the issuance and
sale of such Security, nor the compliance by the Company with
the terms of such Security, will violate any applicable law or
will result in a violation of any provision of any instrument
or agreement then binding upon the Company, or any restriction
imposed by any court or governmental body having jurisdiction
over the Company.
We are members of the Bar of the State of New York,
and the foregoing opinion is limited to the laws of the State
of New York, the General Corporation Law of the State of Dela-
ware, and the federal laws of the United States of America.
We hereby consent to the use of this opinion as an
Exhibit to the Registration Statement of the Company relating
to the Securities and to the reference to our name in the Pro-
spectus contained therein. In giving such consent, we do not
thereby admit that we are in the category of persons whose con-
sent is required under Section 7 of the Act.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
Exhibit 12
HECLA MINING COMPANY
FIXED CHARGE COVERAGE RATIO CALCULATION
For the years ended December 31, 1994, 1993, 1992, 1991, 1990
and the six months ended June 30, 1994 and 1995
(In thousands, except ratios)
<TABLE>
<CAPTION>
six six
months months
1990 1991 1992 1993 1994 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before extraordinary
item, income taxes and cumulative
effect of changes in accounting
principles.............................. $(398) $(18,077) $(55,518) $(18,720) $(24,248) $(4,239) $ (85)
Add: Fixed Charges...................... 6,224 7,136 7,036 9,385 10,857 6,136 4,862
Less: Capitalized Interest.............. (591) (145) (2,070) (3,533) (1,751) (1,751) (376)
------ ------- ------- ------- ------- ------- -------
Income (loss) before extra-
ordinary item, income taxes
and cumulative effect of changes
in accounting principles & fixed
charges................................. $5,235 $(11,086) $(50,552) $(12,868) $(15,142) $ 146 $4,401
------ -------- -------- -------- -------- ------ ------<PAGE>
Fixed charges:
Preferred stock dividends................ $ -- $ -- $ -- $4,070 $8,050 $4,025 $4,025
Interest portion of rentals.............. -- -- -- -- 166 30 251
Interest expense......................... 6,073 6,985 6,905 5,224 2,606 2,047 586
Amortization of Lyons.................... 151 151 131 91 35 34 --
------ ------- ------- ------- ------- ------- -------
Total fixed charges...................... 6,224 7,136 7,036 9,385 10,857 6,136 4,862
====== ======= ======= ======= ======= ======= =======
Fixed Charge Ratio....................... <FN1> <FN1> <FN1> <FN1> <FN1> <FN1> <FN1>
Inadequate coverage...................... 989 18,222 57,588 22,253 25,999 5,990 461
====== ======= ======= ======= ======= ======= =======
Writedowns & other non-cash charges:
Depreciation, depletion and
amortization (mining activity).......... 25,688 21,161 13,774 13,526 14,233 6,276 11,565
Depreciation, depletion and
amortization (corporate)................ 794 737 851 669 524 362 168
Provision for closed operations......... 3,916 3,764 13,608 2,327 11,353 624 227
Reduction in carrying value of
mining properties .................... 502 41 30,791 2,561 7,864 -- --
------ ------- ------- ------- ------- ------ ------
$30,900 $25,703 $59,024 $19,083 $33,974 $7,262 $11,960
======= ======= ======= ======= ======= ======= =======
<FN>
<FN1> Earnings for period inadequate to cover fixed charges.
</FN>
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registra-
tion statement on Form S-3 (File No. 33-59659) of our report,
which includes an explanatory paragraph concerning changes in
accounting for income taxes and post-retirement benefits other
than pensions in 1992, and accounting for investments in 1994,
dated February 3, 1995, except for the penultimate paragraph of
Note 8 as to which the date is March 1, 1995, on our audits of
the consolidated financial statements of Hecla Mining Company
and subsidiaries. We also consent to the reference to our firm
under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
Spokane, Washington
August 31, 1995
Exhibit 23.3
[Deloitte & Touche Letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registra-
tion statement on Form S-3 (File No. 33-59659) of our report
dated February 28, 1994 on our audits of the consolidated fi-
nancial statements of Equinox Resources Ltd. We also consent
to the reference to our firm under the caption "Experts".
/s/ Deloitte & Touche
CHARTERED ACCOUNTANTS
Vancouver, Canada
August 25, 1995
Exhibit 23.4
CONSENT OF HAWLEY TROXELL ENNIS & HAWLEY
We hereby consent to the reference to our firm in the
Prospectus constituting part of the Registration Statement on
Form S-3 (Registration No. 33-59659). In giving such consent,
we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Secu-
rities Act of 1933, as amended, or the rules and regulations of
the Securities and Exchange Commission thereunder.
HAWLEY TROXELL ENNIS & HAWLEY
By /s/ Albert P. Barker
Boise, Idaho
August 8, 1995
Exhibit 23.5
CONSENT OF EVANS, KEANE
We hereby consent to the reference to our firm in the
Prospectus constituting part of the Registration Statement on
Form S-3 (Registration No. 33-59659). In giving such consent,
we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Secu-
rities Act of 1933, as amended, or the rules and regulations of
the Securities and Exchange Commission thereunder.
EVANS, KEANE
By /s/ Fred M. Gibler
Kellogg, Idaho
August 9, 1995
